Introduction:

In a significant judgment, the Delhi High Court has affirmed that the imposition and severity of conditions by the Customs Department for the provisional release of seized goods are discretionary. The court addressed a case where an importer challenged the requirement to furnish a bank guarantee amounting to 130% of the differential duty for the release of their goods. The division bench, comprising Justices Prathiba M. Singh and Dharmesh Sharma, reduced this condition, mandating instead a bank guarantee of 30% of the differential duty.

Case Background:

The petitioner, Rocktek Infra Services Pvt. Ltd., imported self-drilling bars under four Bills of Entry. These goods were seized by the Customs Department on the grounds that they were wrongly classified under Entry No. 82.07 instead of 73.04 HSN. As a result, the Customs authorities imposed conditions for their provisional release, requiring the importer to furnish a UT Bond equivalent to the assessable value and a Bank Guarantee of 130% of the differential duty. The petitioner contended that these conditions were excessively onerous and approached the Delhi High Court, arguing that the prolonged detention of goods was causing financial losses.

Petitioner’s Arguments:

The petitioner challenged the imposed conditions as being arbitrary and excessive, particularly the requirement to furnish a Bank Guarantee of 130% of the differential duty. The petitioner argued that the classification dispute had not been resolved by the Customs Department, yet the goods had been held for nearly nine months without a final decision. This prolonged detention was causing undue financial hardship. It was further contended that while the Customs Act, 1962 provides for appellate remedies, the High Court could intervene under its extraordinary writ jurisdiction when fundamental rights were at stake. The petitioner sought a modification of the conditions, asserting that such a high bank guarantee was unjustified in proportion to the total value of the goods.

Customs Department’s Arguments:

The Customs Department opposed the petition, arguing that the petitioner should have availed the appellate remedy rather than directly approaching the High Court. Relying on the precedent set in Hind Global Enterprises vs. The Commissioner of Customs & Anr., the Department contended that merely labeling conditions as “onerous” did not warrant bypassing statutory remedies. The Department also justified the requirement for a 130% Bank Guarantee, asserting that it was necessary to safeguard revenue interests in cases involving classification disputes.

Court’s Judgment:

The Delhi High Court acknowledged that, as a general principle, litigants should follow the prescribed appellate mechanism before approaching the High Court under Article 226 of the Constitution. However, given the facts of the case, the Court found that relegating the petitioner to an alternative remedy would be inequitable, as the goods had already been detained for an extended period. The Court observed that the calculated amount for the Bank Guarantee would be substantial, constituting approximately 70-80% of the value of the goods. Given this, the Court exercised its discretionary power and held that it would be just and fair to reduce the Bank Guarantee requirement from 130% to 30% of the differential duty.

The Court further emphasized that while the Customs Department has discretionary powers in determining conditions for provisional release, such discretion must be exercised reasonably and proportionately. In this case, the imposed conditions were deemed excessive, and the Court accordingly directed the petitioner to furnish a revised Bank Guarantee of 30% instead of 130%.