2025 (7) TMI 1274 - HC - Customs

Provisional release of the goods - total non-application of mind while imposing conditions for release of goods - violation of principles of natural justice - Reliance on the circular which was quashed - According to the petitioner the cargo imported by him is unfit for human consumption as it is going to be used as an animal feed and therefore customs duty cannot be levied - HELD THAT - Under Section 110-A of the Customs Act conditions can be imposed by the Customs Department for granting provisional release of cargo. The discretion is vested with the Customs Department for imposing conditions for provisional release of the cargo. However the conditions imposed must not be arbitrary and should be reasonable after giving due consideration to the nature of the cargo as well as the previous antecedents of the importer with regard to the imports made earlier by the very same importer involving identical goods. On a prima facie consideration this Court finds that the conditions imposed by the respondents under the impugned order are onerous in view of the fact that the value of the goods according to the petitioner is only Rs. 18, 30, 000/- approximately. However under the impugned order the petitioner has been directed to furnish the Bank Guarantee for an amount of Rs. 1, 00, 00, 000/- and a bond for an amount of Rs. 1, 76, 80, 000/- - It is also to be noted that as seen from the test report dated 31.10.2025 obtained by the respondents pertaining to the subject goods it reveals that the subject goods are unfit for human consumption. The test report is dated 31.01.2025. When the subject goods are unfit for human consumption no reasons have been given as to how the said goods will fall under Chapter 8 of the Customs Tariff Act which is applicable only for edible nuts and not for non-edible nuts. This Court considering the nature of the cargo and considering the facts that the said cargo had arrived at Chennai Port on 29.11.2024 deems it fit to direct the respondents to reconsider the impugned order within a period of three weeks from the date of receipt of a copy of this order. Since the impugned order has been passed without considering the contentions of the petitioner as raised in this writ petition and without affording any personal hearing to the petitioner and also by not providing an opportunity for the petitioner to submit his explanation and has been passed in violation of principles of natural justice this Court has to necessarily quash the impugned order by remanding the matter back to the fourth respondent for a fresh consideration on merits and in accordance with law. Petition disposed off.

Summary

ISSUES:

Whether conditions imposed under Section 110-A of the Customs Act for provisional release of goods are arbitrary and onerous.Whether the imported cargo should be classified under Chapter VIII or Chapter 23 of the Customs Tariff Act for customs duty purposes.Whether minimum import price provisions under Chapter VIII apply to the subject cargo used as animal feed and unfit for human consumption.Whether reliance on a quashed Circular for imposing conditions under Section 110-A of the Customs Act is valid.Whether principles of natural justice were violated by not affording personal hearing before imposing conditions for provisional release.Whether the quantum of Bank Guarantee and bond required as conditions for provisional release is reasonable in proportion to the value of the goods.

RULINGS / HOLDINGS:

The conditions imposed under Section 110-A of the Customs Act must not be arbitrary and should be reasonable, considering the nature of the cargo and previous import history; the impugned conditions were found to be onerous and arbitrary.The imported goods, being agricultural rejected nuts used as animal feed and unfit for human consumption, ought to be classified under Chapter 23 (Tariff Item No. 2309) and not under Chapter VIII of the Customs Tariff Act, which applies only to edible nuts.The minimum import price provisions under Chapter VIII do not apply to the subject cargo, as it is classified under animal feed and not edible nuts; hence, imposition of minimum import price was erroneous.The Circular relied upon by the respondents for imposing conditions under Section 110-A has been quashed by the Delhi High Court and therefore cannot be validly relied upon.The impugned order was passed without affording personal hearing or opportunity to submit explanations, violating principles of natural justice.The Bank Guarantee and bond amounts demanded (Rs. 1,00,00,000/- and Rs. 1,76,80,000/- respectively) were disproportionate and onerous compared to the approximate value of the goods (Rs. 18,30,000/-).The impugned order is quashed and remanded for fresh consideration after affording personal hearing and opportunity to submit explanations within a stipulated timeframe.

RATIONALE:

The Court applied the statutory framework of Section 110-A of the Customs Act, which vests discretion in the Customs Department to impose conditions for provisional release, subject to reasonableness and non-arbitrariness.Classification under the Customs Tariff Act was analyzed with reference to the nature and use of the goods, emphasizing that Chapter VIII applies only to edible nuts, whereas animal feed falls under Chapter 23.The Court noted reliance on a Circular quashed by a coordinate High Court as invalid, thereby undermining the legal basis for imposing the challenged conditions.Principles of natural justice require that before imposing onerous conditions, a personal hearing and opportunity to present explanations must be provided.The disproportionate financial conditions imposed were inconsistent with the value of the goods and lacked justification on the record.The Court's order reflects a doctrinal emphasis on balancing administrative discretion with fairness and procedural safeguards in customs provisional release cases.