Reasonable customs security conditions required for provisional release and re-export of seized goods under discretionary powers.

Customs authorities must impose provisional release and re-export security conditions on seized imported goods in a reasonable and proportionate manner. Under Section 110A of the Customs Act, the discretion to demand security cannot be exercised mechanically or in a way that makes release impracticable, and a circular cannot replace an independent assessment. Applying that principle, the security conditions for provisional release and re-export were moderated because they were found unduly harsh and insufficiently justified, with the bank guarantees reduced and bonds ordered for the full value of the goods. Partial relief was therefore granted.

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Issues: (i) Whether the conditions imposed for provisional release of the seized imported goods, particularly the quantum of bank guarantee, were excessive and warranted modification. (ii) Whether the conditions imposed for permission to re-export the seized goods, including bank guarantee towards redemption fine and penalties, were justified and required reduction.

Issue (i): Whether the conditions imposed for provisional release of the seized imported goods, particularly the quantum of bank guarantee, were excessive and warranted modification.

Analysis: The power under Section 110A of the Customs Act, 1962 is discretionary and must be exercised judiciously. While security can be demanded, the conditions cannot be imposed routinely or in a manner that makes release practically impossible. Reliance on the CBIC circular could not override the need for an independent and reasonable exercise of discretion. The conditions imposed for the first set of goods were found to be unduly harsh in the facts of the case.

Conclusion: The conditions for provisional release were modified and the bank guarantee was reduced to Rs. 20,00,000/- along with execution of bond for 100% of the value of the goods.

Issue (ii): Whether the conditions imposed for permission to re-export the seized goods, including bank guarantee towards redemption fine and penalties, were justified and required reduction.

Analysis: The requirement of security for re-export also had to bear a reasonable nexus to the purpose sought to be secured. Without entering into the merits of leviability of redemption fine on re-export, the conditions securing penalties at this stage were considered capable of moderation. The impugned conditions were treated as having been imposed mechanically and without adequate application of mind.

Conclusion: The re-export conditions were modified and the bank guarantee was reduced to Rs. 15,000,000/- along with execution of bond for the full value of the goods.

Final Conclusion: The impugned orders were modified by substantially reducing the security conditions, and the appeals were disposed of with partial relief to the appellant.

Ratio Decidendi: Security conditions for provisional release or re-export under customs law must be reasonable, proportionate, and the result of a judicious exercise of discretion; an executive circular cannot fetter that discretion or justify onerous conditions without adequate basis.

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