Customs Act Does Not Prescribe Uniform Security For Provisional Release; Amount Must Be Reasonable: Bombay High Court

The Bombay High Court has held that Section 110A of the Customs Act does not prescribe a uniform security for provisional release of seized goods and that the quantum must be determined reasonably based on the facts of each case.

“Section 110A of the Customs Act does not prescribe a uniform security for any case and the quantum depends on the facts and circumstances of each case including the nature of the offence, goods/cargo, value of the seized conveyance, revenue exposure, confiscation/fine/penalty implications, role of the person seeking release and other relevant factors,” a Division Bench of Justice M.S. Karnik and Justice Sandesh D. Patil held.

The court made the observation while reducing the ₹6 crore bank guarantee imposed for provisional release of M.T. Bay III, a barge chartered by Richa Shipping Private Limited, to ₹50 lakh.

The barge was seized during a Customs investigation into the alleged transfer of around 208 KL of blackish liquid, purported to be Very Low Sulphur Fuel Oil (VLSFO), to M.V. Angara.

Customs later agreed to provisionally release the barge subject to a ₹12 crore bond and a ₹6 crore bank guarantee. The September 9 order stated that the ₹12 crore bond represented the value of the barge.

The petitioner challenged the financial conditions before the High Court. It argued that the order did not disclose the basis for fixing the barge's value at ₹12 crore or the bank guarantee at ₹6 crore.

The court noted that M.V. Angara had been provisionally released on an e-Bond of ₹16.12 crore and a bank guarantee of ₹30 lakh. The VLSFO had been seized from M.V. Angara and was later provisionally released.

The court also noted that a ₹50 lakh demand draft had already been deposited as voluntary part-payment towards fine or penalty in connection with the provisional release of the barge.

Customs argued that the petitioner had an alternative statutory remedy of appeal. The court acknowledged that such a remedy was available but held that the conditions imposed were “ex facie excessive and unreasonable” and therefore entertained the writ petition.

The court also considered competing valuations of the barge. Customs relied on a valuation report placing its value at ₹12 crore, while material produced by the petitioner indicated a value of ₹2.80 crore.

The court said the terms for provisional release of M.T. Bay III should have been somewhat similar to those imposed on M.V. Angara, since the VLSFO had been seized from that vessel.

The court further held that while the adjudicating authority has discretion to impose security and other conditions for provisional release, that discretion must be exercised reasonably on relevant material to safeguard the interest of the Revenue.

The court partly allowed the petition and reduced the bank guarantee from ₹6 crore to ₹50 lakh. The remaining conditions for provisional release were kept intact.

For Petitioner: Pratik Karande, along with Aditya Talpade, Akash Sable, Diksha Talpade and Prajwal Padole

For Respondents: Ram Ochani, along with Sangeeta Yadav