2025 (6) TMI 1683 - HC - Customs

Challenge to seizure memo and the consequent seizure of the Petitioner s goods under Bills of Entry - description of the goods - classification of imported goods - plain Cashew Kernels or roasted Cashew Kernels? - prohibited goods or not - detention demurrage charges - HELD THAT - The offer for the bank guarantee of Rs. 1/- Crore cannot be accepted. The interest of justice would be served if the Petitioner furnishes a bank guarantee of Rs. 2.5 Crores and a bond of Rs. 3.25 Crores as a condition for provisional release. This will secure the interest of the Respondents and at the same time will prevent the perishing of the goods. Considering the material placed on record by the Petitioner it would not be proper to let the goods perish. As noted earlier the Petitioner is armed with the decision of the Advance Ruling Authority and a report from the Mumbai Lab. The other material on which the Respondents rely will certainly require consideration which can be examined while disposing of the show cause notice. Regarding detention demurrage it is left to the Petitioner to represent to the Respondents for waiver etc. If such representation is made the same should be disposed of following the law. Again all contentions in this regard are also left open. The Respondents are directed to release the goods which are the subject matter of impugned seizure memos dated 7 March 2025 and 3 April 2025 within seven days of the Petitioner furnishing a bank guarantee from HDFC bank in an amount of Rs. 2.5/- Crores and a bond in an amount of Rs. 3.25/- Crores - petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the seizure memos dated 7 March 2025 and 3 April 2025, which resulted in the seizure of the Petitioner's goods, were validly issued and justified under the relevant customs laws and notifications.

- The legal characterization of the seized goods, specifically whether they are "roasted Cashew Kernels" or "plain Cashew Kernels (Raw Kernels) of the grade Baby Bits," and the consequent applicability of the Advance Ruling Authority's decision relied upon by the Petitioner.

- Whether the seized goods qualify as "prohibited goods" under the notification dated 21 February 2023, particularly in light of the CIF value threshold of Rs. 680 per kilogram for the import of broken Cashew Kernels.

- The propriety of provisional release of the seized goods pending the issuance and disposal of the show cause notice, including the adequacy of security in the form of bank guarantees and bonds to protect the revenue interest.

- The entitlement of the Petitioner to seek waiver or relief from demurrage charges accrued due to detention of the perishable goods.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity and Justification of the Seizure Memos

The Petition challenges the seizure memos dated 7 March 2025 and 3 April 2025, which led to the confiscation of goods imported under specified Bills of Entry. The Court noted that investigations were ongoing and that a show cause notice was proposed to be issued by 15 July 2025. The Court refrained from adjudicating on the merits of the seizure at this stage, leaving all contentions open for determination upon disposal of the show cause notice. This approach respects procedural fairness and the statutory framework governing customs seizures and adjudication.

Issue 2: Classification and Description of the Goods

The core dispute revolves around whether the goods seized are roasted Cashew Kernels, as claimed by the Petitioner, or raw Cashew Kernels (Baby Bits), as contended by the Respondents based on Kerala Lab reports. The Petitioner relies on the Advance Ruling Authority's prior decision and the Mumbai Lab report, both of which favor the Petitioner's classification. The Respondents counter that the Kerala Lab, being a specialized facility for cashew analysis, has provided contrary results. The Court observed that the Mumbai Lab report pertains to previously imported goods and not the seized goods under the impugned memos, but the Petitioner maintains there is no difference between the goods.

The Court held that these factual disputes and the applicability of the Advance Ruling Authority's decision are contentious and premature to resolve at this interlocutory stage. The Court deferred the examination of these issues to the adjudication process under the show cause notice, thereby preserving the parties' rights to present evidence and arguments fully.

Issue 3: Applicability of the "Prohibited Goods" Notification

The Respondents argued that the seized goods are "prohibited goods" under the notification dated 21 February 2023, which restricts the import of broken Cashew Kernels unless the CIF value exceeds Rs. 680 per kilogram. The Petitioner denies that the goods fall within this prohibition, asserting the similarity with previously imported goods that were not subject to prohibition. The Court noted that the prohibition is conditional on the CIF value and that the case does not involve contraband imports.

The Court again deferred the determination of this issue to the adjudication of the show cause notice, emphasizing the need to avoid premature conclusions in a fact-intensive dispute.

Issue 4: Provisional Release of Seized Goods and Security Conditions

The Petitioner urged provisional release of the perishable goods to prevent their deterioration, offering a bank guarantee of Rs. 1 crore and a bond for the balance amount. The Respondents opposed this, contending that a bank guarantee or cash deposit of the entire duty is generally required for provisional release, especially since the goods are allegedly prohibited.

The Court acknowledged the perishable nature of the goods and the Petitioner's offer but found the proposed bank guarantee insufficient to protect the revenue interest. It ordered provisional release subject to a bank guarantee of Rs. 2.5 crores and a bond of Rs. 3.25 crores, balancing the interests of both parties. The Court underscored that this arrangement would prevent the goods from perishing while safeguarding the Respondents' fiscal interests pending final adjudication.

Issue 5: Demurrage Charges

The Petitioner raised the issue of additional demurrage charges amounting to approximately Rs. 50 lakhs, incurred due to detention of the goods through no fault of the Petitioner. The Court declined to adjudicate on this issue at the present stage but left it open for the Petitioner to make a representation to the Respondents for waiver or relief. The Court directed that any such representation be disposed of in accordance with law, preserving the Petitioner's right to seek redress.

3. SIGNIFICANT HOLDINGS

- "Since a show cause notice is proposed to be issued by 15 July 2025 at the latest, we do not propose to examine the rival contentions now raised in this Petition. All contentions regarding the imported goods and the applicability of the Advance Ruling Authority's decision are therefore kept open to be decided while disposing of the show cause notice."

- "Considering the material placed on record by the Petitioner, it would not be proper to let the goods perish."

- "The offer for the bank guarantee of Rs. 1/- Crore cannot be accepted. The interest of justice would be served if the Petitioner furnishes a bank guarantee of Rs. 2.5 Crores and a bond of Rs. 3.25 Crores as a condition for provisional release. This will secure the interest of the Respondents and, at the same time, will prevent the perishing of the goods."

- "All contentions of all parties in this regard are left open."

- "The Respondents are directed to release the goods which are the subject matter of impugned seizure memos dated 7 March 2025 and 3 April 2025 within seven days of the Petitioner furnishing a bank guarantee from HDFC bank in an amount of Rs. 2.5/- Crores and a bond in an amount of Rs. 3.25/- Crores."

The Court established the principle that interlocutory relief in customs seizure matters involving perishable goods may be granted subject to adequate security to protect revenue interests. It emphasized procedural propriety by deferring substantive disputes to the show cause notice adjudication, ensuring that the parties' rights to a full hearing and evidence presentation are preserved. The Court also recognized the importance of balancing the risk of goods perishing against the need to safeguard government revenue.