Customs Act | 210% Bank Guarantee For Provisional Release Of Imported Goods Disproportionate: CESTAT Delhi

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi, has recently held that requiring an importer to furnish a bank guarantee of 210% of the proposed differential customs duty for provisional release of goods is disproportionate.

It reduced the ₹4.63 crore bank guarantee imposed on Columbia Developers Pvt. Ltd. for the release of its imported Cadillac Escalade V to 50% of the proposed differential duty, while retaining the ₹5.80 crore bond requirement.

The bench, comprising Officiating President Dr. Rachna Gupta and Technical Member P.V. Subba Rao observed that security for provisional release must balance revenue interests with the hardship faced by the importer.

“Demanding the same at the stage of provisional release is the unreasonable use of discretionary power for the simple reason that the condition of bank guarantee has to be proportionate balancing out the revenue interest with the importer's hardships.”

The DRI began investigating the import of a Cadillac Escalade V after finding a difference between the value declared by Columbia Developers and the value mentioned in the Dubai Customs export declaration. The company had declared the vehicle's value as USD 78,000, while the Dubai declaration showed an FOB value of USD 1,99,414.

The vehicle was seized on June 13, 2025. The DRI later issued a show cause notice proposing to reject the declared value, reassess the vehicle's value and recover the differential customs duty.

The Customs Department subsequently allowed provisional release of the vehicle against a bond of ₹5.80 crore and a bank guarantee of ₹4.63 crore.

Challenging these conditions, Columbia Developers argued that the bank guarantee was 210% of the proposed differential duty. It relied on the Supreme Court's decision in Commissioner of Customs, ICD, TKD, New Delhi v. Navshakti Industries Pvt. Ltd. and the CESTAT Chandigarh decision in Ventura Global Inc. v. Commissioner of Customs, Ludhiana. In these cases, the tribunal had considered a bond for the full value of the goods and a bank guarantee of 30% of the estimated duty sufficient to protect revenue.

The department opposed the appeal, arguing that the case involved massive undervaluation of a luxury vehicle. It maintained that the security was necessary to protect revenue and that provisional release conditions had to be decided based on the facts of each case.

The tribunal observed that Section 110A of the Customs Act gives the adjudicating authority discretion to decide the nature and amount of security required for provisional release. However, this discretion must be exercised fairly and reasonably.

Examining the bank guarantee, the tribunal found that the Commissioner had included the proposed fine and penalties along with the differential duty while calculating the amount. It observed that this represented the maximum amount that could be recovered from the importer if the final adjudication went against it.

Demanding the entire amount at the provisional release stage was unreasonable, the tribunal held. It observed that the security must balance the interests of revenue with the hardship faced by the importer.

Consequently, the tribunal reduced the bank guarantee to 50% of the proposed differential duty while retaining the bond requirement of ₹5.80 crore. The appeal was partly allowed.

For Appellant: Advocate Sambhav Jain,

For Respondent: Girijesh Kumar, Authorised Representative