2025 (7) TMI 291 - HC - Customs

Seeking issuance of an appropriate writ directing the Respondent to provisionally release the Roasted Areca Nuts of the Petitioner - to be classified under Customs Tariff Heading 2008 specifically under CTI 2008 19 20- Other roasted nuts seed of Chapter 20 of the First Schedule or not - HELD THAT - The Court has considered the matter. The goods have been released only for industrial use. The impugned order requires a personal bond for more than Rs. 4.10 crores along with a Bank Guarantee for a sum of over Rs. 5.81 crores i.e. the overall security demanded is almost Rs. 10 crores. Even if the value as stated by the Department is taken into consideration bearing in mind the value of goods itself the conditions for provisional release are clearly onerous. Accordingly it is directed that the Petitioner shall furnish a bond of Rs. 4, 10, 67, 000/- along with a Bank Guarantee of Rs. 50, 00, 000/- to the concerned authorities within a period of two weeks subject to which the goods shall be released. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

(a) Whether the impugned order of the Joint Commissioner of Customs imposing conditions for provisional release of the imported roasted areca nuts is legally valid and reasonable;

(b) Whether the classification of the goods under Customs Tariff Heading 2008, specifically under CTI 2008 19 20 ('Other roasted nuts & seed'), as per the Advance Ruling obtained by the Petitioner, is binding and should be accepted by the Customs Department;

(c) Whether the Customs Department's reliance on inconsistent test reports from the Central Revenues Control Laboratory (CRCL), which declared some samples unfit for consumption, justifies the delay and conditions imposed on the release of the goods;

(d) Whether the conditions imposed by the Customs Department, including the requirement of a substantial bond and bank guarantee for provisional release, are onerous and disproportionate to the value of the goods;

(e) The extent to which the Petitioner's undertaking that the goods will be used only for industrial purposes, and not for human consumption, should influence the provisional release and the conditions imposed;

(f) The procedural propriety and timelines for the Customs Department to pass orders on provisional assessment in light of the Court's earlier directions.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Validity and Reasonableness of the Impugned Order Imposing Conditions for Provisional Release

The legal framework governing provisional release of imported goods under customs law involves the Customs Act and allied regulations, which empower authorities to impose conditions such as bonds and bank guarantees to secure revenue and ensure compliance. The Court examined the impugned order dated 29th May 2025, which allowed provisional release subject to execution of a bond of Rs. 4,10,67,000/- and a bank guarantee of Rs. 5,81,20,350/-, along with an undertaking restricting use to industrial purposes.

The Court noted that the order was passed pursuant to its earlier direction dated 22nd April 2025, which mandated consideration of provisional release on such terms and conditions as appropriate in accordance with law. The Customs Department's reliance on the Court's direction to impose conditions was acknowledged. However, the Court undertook a reasonableness inquiry, balancing the Department's interest in safeguarding revenue and regulatory compliance against the Petitioner's right to timely release of goods.

The Court found that the combined security demanded, nearly Rs. 10 crores, was disproportionate given the value of the goods as stated by the Petitioner (approximately Rs. 1 crore) and even by the Department's own minimum import price valuation (approx. Rs. 4.10 crores). The Court thus held the conditions to be onerous and modified them accordingly.

(b) Classification of Goods under Customs Tariff Heading 2008

The Petitioner had obtained an Advance Ruling from the Customs Authority of Advance Ruling (CAAR), New Delhi, classifying the roasted areca nuts under Customs Tariff Heading 2008 19 20, which pertains to 'Other roasted nuts & seed'. The binding nature of such an Advance Ruling is recognized under customs law to provide certainty and predictability in classification and duty liability.

The Customs Department's subsequent testing of the goods at CRCL, which yielded inconsistent results about fitness for human consumption, did not directly challenge the classification but raised concerns about the nature and use of the goods. The Court acknowledged the Petitioner's position that the goods were to be used only for industrial purposes, not human consumption, thereby mitigating concerns arising from the test reports.

The Court did not disturb the classification as per the Advance Ruling, implicitly affirming its binding effect and the Petitioner's right to rely on it.

(c) Reliance on CRCL Test Reports and Delay in Release

The Customs Department sent the goods for testing at CRCL, which issued reports with inconsistent findings-some samples fit for consumption, others unfit. The Petitioner requested retesting, but the re-test reports mirrored the original inconsistencies.

The Court noted that such inconsistent reports contributed to delay and uncertainty. It recognized the Petitioner's willingness to accept provisional release for industrial use only, thereby addressing the concerns raised by the test results. The Court's earlier order dated 22nd April 2025 had already directed the Customs Department to consider provisional release subject to an undertaking restricting use.

The Court emphasized that the delay from September 2024 onwards was substantial and that warehousing permission had been granted, further underscoring the need for timely resolution. The Court's directions aimed to balance regulatory caution with the Petitioner's right to avoid undue detention.

(d) Onerousness and Proportionality of Conditions Imposed for Provisional Release

The impugned order required a personal bond exceeding Rs. 4.10 crores and a bank guarantee exceeding Rs. 5.81 crores, cumulatively amounting to nearly Rs. 10 crores, despite the Petitioner asserting the value of goods to be around Rs. 1 crore.

The Customs Department justified the security on the basis of the minimum import price, approximately Rs. 4.10 crores. The Court acknowledged this valuation but found the aggregate security excessive and disproportionate to the goods' value and the nature of provisional release.

Balancing the interests, the Court directed the Petitioner to furnish the bond of Rs. 4,10,67,000/- and a bank guarantee of Rs. 50,00,000/- only, significantly reducing the bank guarantee amount. This modification was intended to alleviate the financial burden on the Petitioner while ensuring adequate security for the Department.

(e) Undertaking Regarding Use of Goods and Its Impact on Provisional Release

The Petitioner undertook that the goods would be used solely for specified industrial purposes and not for human consumption. The Customs Department required an undertaking in the form of an affidavit ("Annex. A") and an 'End Use Certificate' after consumption.

The Court accepted this undertaking as a crucial mitigating factor that justified provisional release despite the concerns raised by the test reports. The Court emphasized that any deviation from the declared use would invite legal action, thereby safeguarding regulatory interests.

(f) Procedural Timelines and Compliance with Court Directions

The Court's earlier order dated 22nd April 2025 had directed the Customs Department to pass an order on provisional assessment by 31st May 2025. The impugned order dated 29th May 2025 complied with this timeline.

The Court underscored the importance of adherence to procedural timelines to prevent undue delay in release of goods. The Court's directions aimed to expedite resolution while allowing the Department to impose reasonable conditions.

3. SIGNIFICANT HOLDINGS

The Court made several key determinations and established important principles:

"The goods have been released only for industrial use. The impugned order requires a personal bond for more than Rs. 4.10 crores along with a Bank Guarantee for a sum of over Rs. 5.81 crores i.e., the overall security demanded is almost Rs. 10 crores. Even if the value as stated by the Department is taken into consideration, bearing in mind the value of goods itself, the conditions for provisional release are clearly onerous."

This holding clarifies that while Customs authorities may impose conditions for provisional release, such conditions must be proportionate and reasonable in relation to the goods' value and circumstances.

The Court further held:

"Accordingly, it is directed that the Petitioner shall furnish a bond of Rs. 4,10,67,000/- along with a Bank Guarantee of Rs. 50,00,000/- to the concerned authorities within a period of two weeks, subject to which the goods shall be released."

This establishes a principle of judicial intervention to moderate excessive financial conditions imposed by administrative authorities.

Additionally, the Court emphasized the binding effect of Advance Rulings obtained under customs law, implicitly affirming the Petitioner's right to classify goods as per such rulings unless legally challenged on valid grounds.

The Court also recognized the legitimacy of provisional release subject to an undertaking restricting use, balancing regulatory concerns with commercial realities.

Finally, the Court underscored the need for timely disposal of matters relating to provisional assessment and release, directing compliance with procedural timelines.