Madras HC Eases Provisional Release Conditions for Imported Fabric, Substitutes Rs. 22 Lakh Bank Guarantee with Bond [Read Order]

In a recent ruling, the Madras High Court modified a provisional release order and replaced a Rs. 22 lakh Bank Guarantee condition with a bond in connection with an imported fabric consignment.

Shree Sai Impex, the petitioner, had imported 24,893 kilograms of Viscose Knitted Fabric from China under a Bill of Entry. The goods reached Chennai Port and were moved to a SEZ warehouse. The petitioner filed documents seeking clearance for home consumption. Customs authorities initiated an investigation alleging misclassification and undervaluation.

The petitioner’s husband was summoned to New Delhi, where his statement was recorded. To secure release of the goods, the department demanded differential duty of Rs. 29 lakh, which the petitioner paid by demand draft.

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Despite this, the petitioner later received a provisional release order dated 16 July 2025 from the Additional Commissioner of Customs. The order required payment of duty on the re-determined value, execution of a bond for Rs. 91 lakh, and furnishing of a Bank Guarantee for Rs. 22 lakh.

Aggrieved by these conditions, the petitioner filed a writ petition before the Madras High Court.

The petitioner’s counsel argued that the conditions imposed were arbitrary and unenforceable, as they were based on CBIC Circular No. 35/2017, which had already been struck down by the Delhi High Court in Its My Name Pvt. Ltd. and affirmed by the Supreme Court.

They argued that requiring a Bank Guarantee in addition to a bond and duty payment was excessive and beyond the scope of Section 110A of the Customs Act.

The respondents’ counsel argued that adjudication was still pending, and the department needed security to safeguard revenue in case additional duty, fine, or penalty was imposed. They explained that the Supreme Court had not struck down the circular itself but had only modified conditions in the case before it, and insisted that a Bank Guarantee was necessary.

The single-judge comprising Justice N. Anand Venkatesh observed that the issue before the court was limited to the provisional release conditions and not the merits of the customs case.

The court referred to earlier rulings of the Madras High Court, including Green Line v. Commissioner of Customs and Sri Venkateshwara Paper Boards v. Commissioner of Customs, where similar conditions were relaxed in cases involving non-prohibited goods.

The court observed that imposing both a bond for Rs. 91 lakh and a Bank Guarantee for Rs. 22 lakh was disproportionate.

The court held that the department’s interests could be protected without insisting on a Bank Guarantee. It directed the petitioner to pay the declared duty, deposit 50 percent of the differential duty assessed by the department, execute a bond for Rs. 91 lakh, and furnish a bond for Rs. 22 lakh in place of the Bank Guarantee.

The court directed Customs to release the goods within seven days of compliance. The department was allowed to proceed with adjudication, and the petitioner was directed to cooperate. The writ petition was disposed of with these modifications.

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