CESTAT Quashes Provisional Release Order of Seized Goods based on Furnishing Bank Gurantee as Circular not require furnishing same for Star Export Houses [Read Order]

The Allahabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has quashed the provisional release order of seized goods which required the furnishing of bank guarantee on finding that Circular 32/2009-Cus dated 25.11.2009 is justified as this does not require furnishing of bank Guarantee for any category for Star Export Houses.

M/s B.P. Wire Industry, the appellant challenged the Provisional Release Order passed by the Commissioner, Customs (Preventive), Commissionerate Lucknow. On the grounds, interalia, the Commissioner has vide his order for provisional release of the seized goods i.e imported Betel Nuts and Betel Nuts Power to be exported has imposed a condition of furnishing Bank Guarantee.

Further, the Appellant has also filed miscellaneous Application seeking early hearing of the above mentioned appeal on the ground interalia the subject goods are perishable in nature and are highly susceptible to fungal infestation due to atmospheric humidity. It was argued that the market value is deprecating with each passing day and the prolonged seizure is severely impacting their export-worthiness due to deterioration over time and the Appellant is having financial hardship due to demurrage charges.

While taking up the application for Early Hearing the Departmental Representative has raised preliminary objection for hearing the appeal by the Single Member Bench. In support of his submission the Departmental Representative has relied upon the decision of the Allahabad High Court in the case of Commissioner of C.Ex. & S.T., Lucknow V/s Aimr Jewels Pvt. Ltd. reported in 2017 whereby the High Court while dealing with the issue in a case where the goods had already been ordered to be confiscated.

The High Court examined Section 129C(4) of the Customs Act and held that a bare reading of the said provision that any case, which is assigned to a Bench can be decided by one of the members sitting singely if the value of the goods confiscated without option to redeem under Section 125 does not exceed Rs 50 lakhs.

The Appellant contended that there are three stages, namely, detention, seizure and confiscation. In the present case, the present appeal relates to only first two conditions, i.e. detention and seizure, which comes under Section 110A of the Customs Act, for which the goods are required to be provisionally released pending adjudication. Furthermore, it is the submission of the Appellant that 3rd stage i.e. confiscation, would arise only after the final adjudication of the case, which would be covered under Section 129C(4)(a) of the Customs Act, which is not the subject matter of the present appeal.

A single bench of P.K. Choudhary, Member (Judicial) found that these two provisions operate into two different fields inasmuch as Section 110 mandates seizure of the goods for the reason that the goods are liable for confiscation. Section 110A mandates provisional release of the seized goods pending adjudication.

A separate provision i.e. Section 111 deals with confiscation of inappropriately imported goods for the conditions mentioned in the said section. In the present case, I find that neither the Panchanams under which the subject goods were detained nor the seizure memo under which the goods have been seized mention Section 111 of the Customs Act. This is sufficient to arrive at a conclusion that the present case before hand is not a case under Section 111 instead, is a case pertaining to Section 110A of the Customs Act.

The Appellant has Private Bonded Warehouse at Shed No. 1 and 2 situated at Aligarh. The Appellant had imported Betel Nuts under Warehouse Bill of Entry (without payment of customs duty) declaring that it will export Flavoured Supari manufactured after processing the imported goods under Manufacturing and Other Operation Warehouse Regulation Scheme (MOOWR).

The subject goods were seized by passing seizure orders dated 09.08.2024 and 13.09.2024. Furthermore, the Appellant also requested the DRI to de-seal its business premises registered under MOOWER Scheme so as to enable it to commence its business. The DRI by its letter dated 25.09.2024 had intimated that it had no objection for provisional release of goods under above seizure memos. Consequently, the Appellant had addressed various letters requesting for release of its goods and de-sealing of its business premises.

The Commissioner of Customs (Preventive) has passed the impugned order directing provisional release of subject goods on furnishing PD Bonds and Bank Guarantees, and, as such, the Appellant being aggrieved by the direction for furnishing Bank Guarantee and the value of PD Bonds.

The Tribunal found that the case of seizure which comes under Section 110A of the Customs Act. Also, it is an admitted and undisputed fact that the SCN dated 28.05.2025 having been issued after filing of the present appeal is still pending for adjudication. The tribunal viewed that the subject seized goods are liable for provisional release to the Appellant.

As regards the arbitrary condition for furnishing Bank Guarantees, as ordered in the impugned order,it was observed that this condition has been struck down by the Delhi High Court in the case of Its My Name Pvt. Ltd . It was observed that the only condition in accordance with law which is sustainable is furnishing of PD Bond of the value of the imported goods and goods meant to be exported. Counsel placed reliance on Circular 32/2009-Cus dated 25.11.2009 is justified inasmuch as this does not require furnishing of bank Guarantee for any category for Star Export Houses.

On the other hand, the Circular No. 01/2011-Cus dated 04.01.2011 as relied upon in the impugned order is general in nature. It is settled law that conditions stipulated under specific provision has to be complied with in totality and the said provision shall prevail over the general provision.

The Tribunal that the impunged order is liable to be quashed and set aside to the extent it orders for furnishing of Bank Guarantees for provisionally releasing the seized imported goods as well as seized goods meant to be exported. Consequently,allowed the appeal directing the Appellant to furnish the PD bond for value of the goods in respect of imported goods as well as goods meant to be exported.

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