Customs cannot Demand Disproportionate Bank Guarantee for Provisional Release: CESTAT cuts 70% to 30% [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Ahmedabad has modified the bank guarantee amounting to nearly 70% of the value of the goods, and restricted it to 30% of the differential duty.

Shreeji Agri Commodity Pvt. Ltd., the appellant imported coriander seeds valued at over ₹9.11 crore.

The customs department seized the same alleging violation of the actual user condition under Notification No. 21/2023-Customs, on the ground that the goods were allegedly diverted into the domestic market without processing.

While granting provisional release, Customs directed the appellant to execute a bond for the full value of the goods and furnish a bank guarantee of ₹6.31 crore in terms of Circular No. 35/2017-Customs.

Aggrieved by the demand, the importer approached the Tribunal.

According to the appellant’s counsel, Adv. Manish Jain, the condition requiring furnishing of a bank guarantee for provisional release of goods solely based on the departmental circulars is legally not sustainable as circulars are administrative instructions.

Dr. Ajaya Krishna Vishvesha, Member (Judicial), observed the Supreme Court’s ruling in Commissioner of Customs v. Navshakti Industries Pvt. Ltd., where the apex court directed the respondents to furnish bank guarantee of 30% of the differential duty to the satisfaction of the Commissioner of Customs for the release of goods in question.

Therefore, the bench noted that the “impugned order has demanded an excessive and disproportionate amount of bank guarantee for the provisional release of goods which stands in contradiction with the decisions of Hon’ble Supreme Court and High Court.”

Accordingly, the Tribunal sustained the condition requiring execution of a bond for the full value of the goods, but modified the bank guarantee requirement.

It ordered Customs to accept a bank guarantee limited to 30% of the differential duty instead of the earlier demand of ₹6.31 crore.

The appeal was thus partly allowed, and the impugned provisional release order was modified to the above extent.

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