Provisional release conditions cannot virtually deny release where existing deposits adequately protect revenue and misdeclaration remains unconfirmed.

Provisional release of imported goods under the Customs Act may be conditioned to protect revenue, but conditions must not operate as a virtual denial of release. Where alleged misdeclaration remained unconfirmed, the goods were not prohibited, the importer had a regular import history, and existing deposits exceeded a substantial part of estimated differential duty, requiring further bank guarantees or security for prospective duty, fine and penalty was considered disproportionate. The additional security requirement was removed, subject to furnishing the stipulated bond, and provisional release was directed within one week.

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Issues: Whether the bank-guarantee/security conditions imposed for provisional release of imported sugar under investigation for alleged misdeclaration were fair and justified.

Analysis: Provisional release under Section 110A of the Customs Act, 1962 permits conditions adequate to protect revenue, but such conditions cannot amount to a virtual denial of release. The alleged misdeclaration had not been confirmed by any conclusive test report; the goods were not per se prohibited; and the importer was a regular importer. The deposits already made, aggregating about Rs.3 crores, exceeded 30% of the estimated differential duty. In these circumstances, insistence on additional bank guarantee/security based on prospective duty, fine and penalty liabilities was disproportionate.

Conclusion: The bank-guarantee/security requirement was set aside; the importer must furnish the bond stipulated in the impugned orders, upon which the goods must be provisionally released within one week. The issue is decided in favour of the assessee.

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