Madras High Court modifies conditions for provisional release of goods seized by DRI
DRI’s seizure of PVC Coated Fabrics and the court’s decision on duty and guarantees
In a significant ruling, the Madras High Court addressed the issue of provisional release of goods seized by the Directorate of Revenue Intelligence (DRI), providing a nuanced understanding of the balance between protecting revenue interests and avoiding undue hardship to importers. The court’s decision pertains to the provisional release of PVC Coated Fabrics imported by Exim India Global under multiple Bills of Entry, which had been detained pending an investigation by the DRI. This article analyses the case, its legal context, and the court’s reasoning, as well as its broader implications for future cases in similar circumstances.
Case Overview
Exim India Global, an importer, had imported PVC Coated Fabrics between January and March 2025, moving the goods to a Special Economic Zone (SEZ) unit in Nandiyambakkam, Chennai. The Directorate of Revenue Intelligence (DRI) initiated an investigation on the consignments, which were detained pending test reports. On July 29, 2025, the Additional Commissioner of Customs (SEZ-FTWZ) issued a Provisional Release Order, demanding a bank guarantee of ₹2.78 crore and a bond equivalent to the re-determined value of ₹9.63 crore for the goods.
Legal Context
The legal framework surrounding the provisional release of goods under customs laws is governed by Section 110A of the Customs Act, 1962. This section empowers the authorities to release goods provisionally upon payment of a duty or provision of security, including a bond or bank guarantee, pending the conclusion of investigations and adjudication of the case.
The court’s task, in this case, was to assess whether the conditions imposed by the Customs authorities were reasonable or excessive, given the potential hardship it could cause to the petitioner. The court considered previous legal precedents to guide its decision, particularly focusing on the balance between revenue interests and the protection of businesses from undue hardship.
Petitioner’s Argument
Exim India Global challenged the conditions imposed by the Customs authorities, particularly the demand for a bank guarantee and the re-determined value of the goods. The petitioner’s counsel, S. Baskaran, argued that the conditions were excessive and that the case was similar to the earlier decision in M/s Shree Sai Impex Vs The Principal Commissioner of Customs (Preventive) (W.P. No. 32472 of 2025), where the Madras High Court had relaxed similar conditions under comparable circumstances. The petitioner sought a modification of the conditions based on the precedents cited.
Customs Department’s Counter:
Representing the Customs Department, Revathi Manivannan opposed the plea, asserting that the re-determined value of the goods was ₹9.63 crore, and therefore, the importer was liable to pay the revised duty of ₹2.78 crore or furnish the required bank guarantee. The Customs Department maintained that the imposition of these conditions was necessary to safeguard revenue and prevent any potential evasion of duties.
Court’s Examination and Legal Precedents
Justice N. Anand Venkatesh, while delivering the judgment, carefully examined the legal provisions and the case facts. The core issue revolved around the balance that needs to be struck between protecting the revenue interests of the state and preventing undue hardship to the importer at the stage of provisional release.
The court referred to several precedents, including Green Line v. Commissioner of Customs (2016) and Sri Venkateshwara Paper Boards v. Commissioner of Customs (2022). These rulings highlighted the principle that while customs authorities have the power to impose strict conditions to ensure revenue protection, such conditions should not cause disproportionate hardship to businesses, particularly where the adjudication of the case is still pending.
Key Points from Precedents:
Revenue Protection: The importance of safeguarding the government’s revenue interests through proper security, including the provision of bank guarantees and bonds.
Avoidance of Hardship: The need to avoid imposing conditions that would unduly burden the importer, especially when the adjudication of the case has not yet occurred.
Provisional Release: The provisional release of goods should not be an avenue for penalizing the importer before the final determination of the case.
Court’s Ruling
The Madras High Court, after carefully considering these factors, ruled in favor of modifying the conditions set by the Additional Commissioner of Customs. The court directed that the petitioner, Exim India Global, remit the duty they had originally declared, pay 50% of the differential duty on the re-determined value of ₹9.63 crore, and execute a bond for ₹9.63 crore. Additionally, the petitioner was required to execute a further bond for ₹2.78 crore in lieu of the bank guarantee demanded by the authorities.
Key Modifications in the Court’s Order:
- Payment of the duty declared by the petitioner.
- Remittance of 50% of the differential duty on the re-determined value.
- Execution of bonds for ₹9.63 crore and ₹2.78 crore in lieu of the bank guarantee.
- The Customs authorities were instructed to release the goods within seven days of compliance.
The court disposed of the writ petition with these directions, ensuring a fair balance between revenue interests and the avoidance of excessive hardship for the importer.
Implications of the Ruling
This ruling reaffirms the importance of judicial review in ensuring that customs authorities do not impose excessively harsh conditions on importers at the provisional release stage. The case also underscores the court’s role in safeguarding the interests of businesses, particularly small and medium-sized enterprises, while still upholding the legitimate interests of the state in protecting its revenue.
The court’s reliance on previous precedents sets a clear benchmark for future cases involving provisional release of goods. Importers facing similar situations can now expect courts to consider the broader implications of harsh conditions and weigh them against the necessity of securing revenue.
The Madras High Court’s judgment provides a nuanced approach to balancing the interests of the state and businesses in customs cases. By modifying the conditions for provisional release in the present case, the court has not only alleviated the burden on the petitioner but has also reinforced the principle that provisional release should not be used as a tool for penalizing importers prematurely. This decision serves as an important precedent for future disputes related to customs seizures and provisional releases under the Customs Act, 1962.