Customs Cannot Insist On Excessive Bank Guarantee For Provisional Release Of Seized Imports; CESTAT Reduces From 70% To 30%
Pranav B Prem
The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has modified the conditions imposed by Customs authorities for provisional release of seized imported goods, holding that insistence on an excessive bank guarantee was disproportionate and contrary to settled law. The Bench comprising Dr. Ajaya Krishna Vishvesha (Judicial Member) held that while Customs is entitled to insist upon execution of a bond for the full value of the seized goods, the requirement of furnishing a bank guarantee must be restricted to 30% of the differential duty, in line with binding decisions of the Supreme Court and High Courts.
The case arose from the import of coriander seeds by Shreeji Agri Commodity Pvt. Ltd. under the Advance Authorisation Scheme, availing duty exemption under Customs Notification No. 21/2023-Cus dated 01.04.2023. The imports were made during the period from February 2024 to February 2025 for the purpose of processing and export.
Customs authorities alleged that the importer had diverted the duty-free imported coriander seeds into the domestic market without processing, thereby violating the actual user condition attached to the exemption notification. It was further alleged that the importer fulfilled its export obligation using domestically procured coriander instead of the imported goods. On these allegations, the coriander seeds stored in various warehouses were seized in June 2025.
Upon the importer seeking provisional release of the seized goods, Customs granted release subject to execution of a bond equivalent to the full value of the goods amounting to over ₹9.11 crore and furnishing of a bank guarantee of approximately ₹6.32 crore, relying on Circular No. 35/2017-Customs dated 16.08.2017.
Aggrieved by the quantum of the bank guarantee, which it described as excessive and onerous, the importer approached the Tribunal, clarifying that it was not challenging the seizure itself but only the conditions imposed for provisional release under Section 110A of the Customs Act, 1962.
The importer contended that the imported coriander seeds were always processed by cleaning and sorting before export or storage and were never sold “as such” in the domestic market. It was further argued that the Advance Authorisation Scheme does not mandate that export obligations must be fulfilled strictly using the imported duty-free inputs, as long as the export obligation is met. Reliance was placed on settled jurisprudence, including the Supreme Court decision in Commissioner of Customs v. Navshakti Industries Pvt. Ltd. and the Gujarat High Court ruling in Printwell Offset, which limit bank guarantees for provisional release to 30% of the differential duty.
The Customs department defended the impugned order, contending that the conditions were imposed in accordance with departmental circulars and were justified in view of the alleged misuse of the exemption. The Tribunal noted that the issue before it was confined to provisional release of goods under Section 110A and did not involve final adjudication on confiscation or duty liability. Relying on the Supreme Court’s ruling in Navshakti Industries, the Tribunal reiterated that demanding a bank guarantee for the entire duty or a substantial portion of the value of the goods at the provisional stage is unsustainable.
The Tribunal also referred to the Gujarat High Court’s decision in Printwell Offset, which followed the Supreme Court’s ruling and held that while a bond for the full value of the goods can be insisted upon, the bank guarantee must be restricted to 30% of the duty amount.
Holding that departmental circulars cannot override binding judicial precedents, the Tribunal concluded that the bank guarantee demanded by Customs was excessive and disproportionate. Accordingly, the appeal was partly allowed and the impugned order was modified by sustaining the requirement of a bond for the full value of the goods while reducing the bank guarantee from approximately ₹6.31 crore to 30% of the differential duty, in accordance with settled law.
Appearance
For Appellant: Manish Jain, Advocate
For Respondent: Sunita Menon, Superintendent (AR)
Cause Title: Shreeji Agri Commodity Pvt Ltd Versus Assistant Commissioner Of Customs, Import Assessment, Mundra
Case No: Customs Appeal No. 11590 Of 2025
Coram: Dr. Ajaya Krishna Vishvesha (Judicial Member)
