Facts of the Case

The petitioner, M/s Food Mart, approached the Gujarat High Court seeking a direction to the concerned authority to immediately order provisional release and re-export of imported goods seized under a Seizure Memo-cum-No Objection for Provisional Release dated 13 April 2022.

The controversy concerned imported food products including Instant Coffee Nescafe, Chewing Gum Trident, Samyang Mix Noodles, Waffer Chocolate Ferrero, Kinder Bueno Chocolate Bars, Nutella Chocolate Paste, Fruitella Sugar Confectionery Candy, Bounty Chocolate Bars, Snickers, Mars, Twix, Cadbury Chocolate Bars and other similar products.

The goods were being transported by the petitioner from Mundra Port to Mumbai in a truck bearing registration No. HR-38-W-7629. On 24 March 2022, the truck was intercepted with the assistance of Customs authorities. The truck trailer was carrying container No. PONU 7385635, which was sealed with a bottle seal.

Following seizure of the goods, a Seizure Memo-cum-No Objection dated 13 April 2022 for provisional release was issued to the petitioner. The grounds of seizure were detailed in the seizure memo.

The imported goods were valued under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 at approximately Rs. 1,48,67,363, while the vehicle was valued at approximately Rs. 21,71,250.

The authorities exercised powers under Section 110(1) of the Customs Act, 1962 and treated the truck and goods as liable to confiscation under Section 111 read with Section 115 of the Customs Act, 1962. The seized imported goods were handed over to the custodian at ICD, Sanand under a Supratnama dated 25 April 2022, with restrictions against removal, parting with, or otherwise dealing with the goods.

The goods were seized on the allegation of non-observance of conditions prescribed under the Food Safety and Standards Act, 2006, the relevant Rules, the Food Safety and Standards (Import) Regulations, 2017, applicable FSSAI norms and other safeguarding conditions.

The seizure memo itself provided that the importer or transporter could approach the Principal Commissioner or another competent authority for provisional release under Section 110A of the Customs Act, 1962.

Issues Involved

The principal issues before the High Court were:

  1. Whether the petitioner was entitled to a direction for immediate provisional release of the seized imported food goods under Section 110A of the Customs Act, 1962.
  2. Whether the High Court could direct the authorities to permit re-export of the seized goods, particularly when the goods had already been transported away from Mundra Port, intercepted near Sanand and subsequently stored in a warehouse near Ahmedabad.
  3. Whether the earlier decision in Zip Zap Exim (P) Ltd. vs Union of India [2020 (35) GST 387 (Guj.)] could be applied to the petitioner’s case for release and re-export of goods on furnishing security equivalent to 25% of Customs Duty.
  4. Whether the competent Customs authority should independently decide the petitioner’s pending applications dated 4 June 2022 and 1 July 2022 seeking provisional release of the seized goods.
  5. What nature of security and conditions could appropriately be imposed by the competent authority while considering provisional release under Section 110A.

Petitioner’s Arguments

The petitioner sought a direction requiring the concerned authority to immediately order provisional release and re-export of the goods seized under the Seizure Memo-cum-No Objection dated 13 April 2022.

In support of the prayer for provisional release, the petitioner relied upon the Division Bench decision of the Gujarat High Court in Zip Zap Exim (P) Ltd. vs Union of India [2020 (35) GST 387 (Guj.)].

The petitioner submitted, on the basis of the said decision, that the Court had directed release of goods and permitted re-export upon furnishing 25% of the Customs Duty. The petitioner also relied upon the interim order dated 4 October 2018 passed in that matter.

The record further showed that the petitioner had already submitted letters/applications dated 4 June 2022 and 1 July 2022 seeking provisional release of the goods.

According to the affidavit referred to by the Court, while seeking provisional release, the petitioner had expressed inability to furnish a bank guarantee as required for safeguarding the interests of Customs.

Respondent’s Arguments

The petition was contested through an affidavit-in-reply filed by respondent No. 2.

The respondents maintained that the goods transported by the petitioner and intercepted by the authorities did not satisfy essential requirements under the Food Safety and Standards Act and the applicable Regulations.

The alleged non-compliances included:

  • absence of the Food Safety and Standards Logo;
  • absence of the required licence number;
  • absence of importer details or absence of accurate importer particulars;
  • absence of the prescribed vegetarian or non-vegetarian logo; and
  • other alleged failures to comply with applicable Food Safety Standards norms.

The Customs authorities also referred to the need for appropriate security to safeguard the interests of the Revenue while considering provisional release.

Court’s Findings and Order

The Gujarat High Court examined Section 110A of the Customs Act, 1962, which empowers the adjudicating authority, pending adjudication, to provisionally release seized goods to the owner upon execution of a bond in proper form and subject to such security and conditions as the adjudicating authority may require.

Finding on Re-Export

The Court found that the part of the petitioner’s prayer seeking permission to re-export the goods could hardly be granted on the admitted facts.

The Court noted that the goods had already been transported away from Mundra Port, were intercepted near Sanand and were thereafter kept by the authorities in a warehouse near Ahmedabad.

Accordingly, the High Court did not express any opinion on the petitioner’s claim for re-export. The Court clarified that the petitioner could take such legal recourse in relation to re-export by approaching the appropriate authorities as might be available and permissible under law.

Finding on Provisional Release Under Section 110A

As regards provisional release, the Court observed that the petitioner had already submitted applications/letters dated 4 June 2022 and 1 July 2022 seeking provisional release of the seized goods.

The Court held that, under Section 110A of the Customs Act, 1962, the competent authorities are empowered to consider the question of provisional release and impose appropriate conditions for such release.

The Court considered it proper that the pending letters-cum-applications seeking provisional release should be decided by the competent authorities in exercise of powers under Section 110A.

Finding on Nature of Security

The High Court held that where applications seeking provisional release were already pending, it was entirely for the competent authorities to consider those applications and assess the requirements regarding the nature of security to be obtained for provisional release.

The Court therefore refrained from prescribing the precise security or conditions itself.

Final Direction

The High Court directed the competent authority of the Customs Department to consider the petitioner’s pending applications/letters seeking provisional release of the goods and to impose such appropriate conditions as might be considered fit.

The competent authority was directed to decide the matter within one week from the date of the Court’s order.

The High Court expressly clarified that it had not expressed any opinion on the merits of the case, including the nature of conditions to be imposed for provisional release.

The petition was accordingly disposed of.

Important Clarification

The judgment does not amount to an unconditional judicial order releasing the seized goods.

The High Court did not itself prescribe a fixed amount of bond, bank guarantee, Customs Duty percentage or any other security condition. Instead, it left the question of provisional release and the appropriate conditions entirely to the competent Customs authority under Section 110A of the Customs Act, 1962.

The Court also did not grant the petitioner’s prayer for re-export. It expressly left the petitioner free to pursue legal recourse before the appropriate authorities, as permissible under law.

Therefore, the central principle emerging from the order is that where an importer’s applications for provisional release are pending, the competent Customs authority should decide them under Section 110A and may impose appropriate security and conditions depending upon the facts of the case.

Sections Involved

  • Section 110(1) of the Customs Act, 1962 – Power of seizure of goods, documents and things.
  • Section 110A of the Customs Act, 1962 – Provisional release of seized goods, documents and things, or provisionally attached bank account, pending adjudication.
  • Section 111 of the Customs Act, 1962 – Confiscation of improperly imported goods.
  • Section 115 of the Customs Act, 1962 – Confiscation of conveyances.
  • Food Safety and Standards Act, 2006
  • Food Safety and Standards Rules, 2011
  • Food Safety and Standards (Import) Regulations, 2017
  • Other applicable FSSAI norms and safeguarding conditions

Link to download the order - https://www.mytaxexpert.co.in/uploads/1783504554_2102compressed.pdf

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