Delhi High Court: Customs Must Be Sensitive In Proceedings Against Start-Ups And MSMEs | Govt Policy Promotes Start-Up Culture | Court Orders Release Of Goods On Duty Payment Under Customs Act
Safiya Malik
The High Court of Delhi Division Bench of Justice Prathiba M. Singh and Justice Shail Jain directed the immediate release of goods belonging to a recognised start-up operating in the Micro, Small, and Medium Enterprises sector. The Bench ordered that the release be affected within twenty-four hours upon payment of differential customs duty determined in an Order-in-Original. The Court held that the redemption fine and penalty imposed in the said order shall not be payable at this stage. Further, the Court directed the Central Board of Indirect Taxes and Customs and the Commissioner of Customs to consider framing timelines and preferential treatment for start-ups and MSMEs in matters relating to warehousing and provisional release of consignments.
The petitioner, a recognised start-up under the Micro, Small, and Medium Enterprises sector, is engaged in the business of baby care products under the brand name ‘Fabie Baby.’ The dispute arose from the import of packaging materials for cosmetic products. The goods, loaded in Dubai, were transported to Mundra Port and subsequently moved to ICD Tughlakabad. Upon arrival, an alert was issued against the containers, leading to an inspection by Customs officials. A panchnama was prepared recording that two extra cartons were found which had not been declared by the importer. The petitioner claimed that the bill of entry was agreed to be amended immediately.
According to the petitioner, repeated visits were made to the Customs Department seeking release of the consignment, but the containers remained unreleased. The petitioner alleged incurring substantial warehousing and container handling charges in addition to operational losses. The prayer before the Court was for the release of the goods covered under Bill of Entry No. GSLJEATKD000393 dated 14 June 2025, refund of demurrage and warehousing charges, and compensation.
On 25 August 2025, notice was issued in the matter and counsel for the respondents accepted notice. The Court was informed on 28 August 2025 that an Order-in-Original had been passed on 22 August 2025. A copy of the same was produced before the Bench.
The Order-in-Original determined the value of the offending goods at Rs. 62,983, involving differential duty of Rs. 24,249 under Rule 5 of the Customs Valuation Rules read with Section 14 of the Customs Act, 1962. It ordered confiscation of the goods under Section 111(1) of the Customs Act, while offering the importer the option to redeem them on payment of Rs. 10,000 as redemption fine under Section 125(1). A penalty of Rs. 5,000 was also imposed under Section 112(a)(ii), and re-assessment of the Bill of Entry was directed under Section 17(4).
The Order-in-Original recorded that the goods declared were 80,240 pieces, while actual examination revealed 1,01,100 pieces, leading to an excess of 20,860 pieces. Discrepancies included differences in declared and found weights, and additional quantities of plastic caps and bottles. The authority proceeded on the basis that there was under-declaration and misdeclaration in violation of Section 46(4) of the Customs Act.
The petitioner contended that as early as 24 July 2025, Customs had decided to impose basic customs duty at 20 percent, which was accepted by the petitioner on 30 July 2025, along with the obligation to pay duty and penalty. Despite this, the Order-in-Original was not passed until 22 August 2025. It was submitted that for goods worth approximately Rs. 4,00,000, the petitioner incurred demurrage charges of Rs. 3,88,000.
The timeline of events submitted included examination of goods on 24 July 2025, notice of discrepancies on 28 July 2025, issuance of summons on 29 July 2025, acceptance of discrepancies and agreement to pay on 30 July 2025, seizure memo on 1 August 2025, permission for warehousing on 7 August 2025, movement of container to warehouse on 10 August 2025, and delivery on 12 August 2025. The writ petition was filed as the goods were not released despite assurances.
The Customs Department stated that the petitioner had failed to present goods for examination promptly, the bill of entry was inconsistent with the invoice and packing list, complete documents were not uploaded, and physical examination revealed under-declaration.
The Bench recorded: “While there can be no doubt that there has to be truthful declaration in the bills of entry, however, all misdeclarations cannot be treated similarly. The nature of the goods and the extent of the under declaration or misdeclaration cannot be lost sight of. The goods in this case were caps for cosmetic products as also the bottles for filling cosmetics. These are not goods which are damaging or prohibited in any manner.”
The Court noted: “The submissions made by the Petitioner also reveal a concerning situation where an allegation has been made that the officials of the Customs Department were not at all cooperative with the Petitioner.”
The Court further stated: “The Order-in-Original itself recognises the fact that the Petitioner had agreed for the classification which was given by the Customs Department on 30th July, 2025. Despite that, after being aware of the amount of demurrage that is paid by small importers, there was no reason for the Customs Department to delay in passing of the Order-in-Original by almost a month.”
The Bench observed: “Considering the prevailing policy in India to encourage start-ups and MSMEs, the Customs Department also needs to be sensitized to ensure that such parties are given some consideration, especially, when the goods are not prohibited goods. In this case, as reflected in the portal itself, on 24th July, 2025, the Petitioner had accepted the proposed classification of the Customs Department. Thereafter, it has taken the Customs Department almost one month to pass the Order-in-Original. The delay is completely inexplicable.”
On timelines, the Court recorded: “A perusal of Section 110 of the Customs Act, 1962 would show that the timelines prescribed in the said provision are six months plus an additional six months. The said timeline would be too long in cases involving small businesses, especially, when there are no prohibited goods which are involved.”
The Court directed that the petitioner’s goods be released upon payment of differential duty of Rs. 24,249 as determined in the Order-in-Original. It ordered that the redemption fine of Rs. 10,000 and penalty of Rs. 5,000 shall not be liable to be paid at this stage. The release of goods was mandated within twenty-four hours of such payment.
“Accordingly, the Central Board of Indirect Taxes and Customs (hereinafter, ‘CBIC’) as also Commissioner of Customs shall take a look at this matter and consider whether some preferential treatment ought to be given to Start-ups and MSMEs in terms of timelines, warehousing and provisional release in such cases, especially in case of low value consignments.”
The Court directed that a copy of the order be served upon CBIC at the specified email address and to the Commissioner of Customs. It ordered filing of affidavits by the said authorities by the next date of hearing. Respondents were directed to file a counter affidavit within two weeks. The Court noted that issues relating to redemption fine, penalty, compensation, and waiver of demurrage charges would be considered after completion of pleadings. The matter was listed for 28 October 2025.
Advocates Representing the Parties
For the Petitioners: Ms. Riya Soni and Mr. Sunil Kumar Tripathi, Advocates
For the Respondents: Ms. Anushree Narain, Senior Standing Counsel with Mr. Naman Choula, Advocate
Case Title: Mitraj Business Private Limited Through Its Director Mr Manoj Kankane v. Union of India Represented by The Secretary Ministry of Finance & Ors.
Neutral Citation: 2025: DHC:7612-DB
Case Number: W.P.(C) 12907/2025 & CMAPPL. 52724/2025
Bench: Justice Prathiba M. Singh, Justice Shail Jain
