Customs Cannot Indefinitely Detain Goods Through Panchnama To Reset Limitation: Gujarat High Court

The Gujarat High Court on 25 August held that Customs authorities cannot use a Panchnama to indefinitely restrain goods and later issue a formal seizure order to bypass the time limits under Section 110 of the Customs Act, 1962, ruling that the limitation period starts from the date of detention if the mandatory order under the provision was not passed.

A Division Bench comprising Justices A.S. Supehia and Vaibhavi D. Nanavati held that the vehicle belonging to petitioner Pranavbhai Ambalal Patel had effectively remained under restraint for more than a year, even though the Department had not passed the requisite seizure order. The judges held:

“The customs authority cannot indefinitely seize the goods in the garb of detention, without passing any order under the provisos to Section 110(1) of the Act. In absence of any order, when there is actual detention of goods, the time will start running from detention of goods vide panchanama dated 07.02.2025.”

The Directorate of Revenue Intelligence (DRI) had restrained Patel from dealing with his vehicle on 7 February 2025. However, it issued a formal seizure memo only on 17 April 2026, followed by a notice under Section 124 of the Customs Act on 8 May 2026.

The Court held that merely recording the restraint in a Panchnama could not confer the statutory consequences of a seizure or postpone commencement of the limitation period. The Panchnama itself could not be treated as the statutory order required under Section 110. It observed:

“The panchanama cannot satisfy the ingredients of the Section 110 of the Act, and an order is mandatory under the proviso to Section 110 of the Act for paving the way for issuance of notice under Section 124(a) within a period of 6 months unless extended.”

The Bench noted that although the vehicle had initially been cleared after assessment and payment of customs duty, the Department subsequently restrained Patel from dealing with it during the investigation. It held that such restraint could not continue indefinitely while the Department delayed taking the formal statutory step of seizure.

It further held that the statutory limitation under Section 110(2) could not be rendered meaningless by allowing the Department to postpone the formal seizure indefinitely. Once there was actual detention of the goods and no order contemplated under Section 110(1) had been passed, the Department could not subsequently reset the limitation period by issuing a seizure memo after a substantial lapse of time. It said:

“The consequential effect is that, when the seizure memo travels beyond the period of one year, the time limit of six months as mentioned in the provisions of Section 110(2) and the further period of six months as envisaged under the proviso to sub-section (2) of Section 110 will get consumed, and the DRI thereafter cannot be allowed to reap the fruits of its inaction.”

The judges also considered the Department's attempt to justify the continued restraint and the subsequent provisional-release conditions. They found that the authorities could not rely on administrative instructions in a manner that defeated the statutory scheme or the judicial safeguards governing seizure and provisional release.

Since the statutory period had already run out by the time the formal seizure was effected, the consequential proceedings under Section 124 could not be sustained.

Accordingly, the High Court directed release of the vehicle and imposed costs of Rs. 10,000 on the Department, while leaving the underlying merits of the Department's allegations open in accordance with law.

Counsel for the Petitioner: Anjali Jha Manish, Paras Aneja and Chetan K. Pandya, Advocates

Counsel for the Respondents: Utkarsh R. Sharma, Advocate