Madras High Court Sets Aside Bank Guarantee Condition For Provisional Release Of ASC Impex Goods

The Madras High Court on 18 September set aside a bank guarantee condition imposed for provisional release of imported Polyester Woven Fabric with PVC Coating detained from ASC Impex over a classification dispute.

Justice Hemant Chandangoudar directed Customs to release the goods on payment of applicable duty and execution of a personal bond for the differential duty. The Bench held:

“The purpose of provisional release is to ensure that the goods are not unnecessarily detained during the pendency of investigation or adjudication, while at the same time adequately protecting the interest of the Revenue. The conditions imposed for provisional release must therefore be reasonable and proportionate to the circumstances of the case.”

ASC Impex, the petitioner had imported the goods under Bill of Entry No.2565459 dated 10 June 2025. Customs detained the consignment after raising an issue regarding its classification.

Authorities required the petitioner to furnish a bank guarantee equivalent to the total differential duty along with 20% of the assessable value of the goods, relying on Circular No.35/2017-Cus. dated 16 August 2017.

The petitioner challenged the condition as arbitrary and onerous and sought release of the goods on reasonable terms. It had already paid 5% of the applicable duty and undertaken to execute a personal bond for the balance duty, if any.

The Court referred to the Supreme Court's order in Civil Appeal No.3940 of 2011, where provisional release of the goods was directed subject to a bank guarantee for 30% of the differential duty.

It also referred to the Division Bench judgment in Commissioner of Customs, Tuticorin v. Empire Exports, where provisional release was directed on payment of the declared duty, 30% of the differential duty and execution of a personal bond for the remaining amount.

Further, the Bench noted that the final duty liability in the present case was yet to be determined. It held that the interests of the Revenue could be adequately protected through payment of the applicable duty on the declared value and execution of a personal bond for the differential duty. It observed:

“...the petitioner has already paid 5% of the applicable duty and has undertaken to execute a personal bond for the balance duty, if any. The final duty liability is yet to be determined in the adjudication proceedings. Therefore, at this stage, the differential duty payable by the petitioner cannot be treated as finally determined.”

Accordingly, the High Court set aside the bank guarantee condition and directed provisional release of the goods on the above terms. It clarified that the classification of the goods and the ultimate duty liability were left open for determination in the adjudication proceedings.

It also directed the Customs authority to consider the petitioner's request for issuance of a detention certificate under Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009.

Lastly, it directed that the exercise be completed within three weeks.

For Petitioner: Mr.S.Baskaran, Advocate 

For Respondent: Mr.S.Gurumoorthy, Senior Panel Counsel