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2026 Supreme(Online)(Mad) 40714
IN THE HIGH COURT OF JUDICATURE AT MADRAS
S.M. Subramaniam, K. Surender, JJ
Commissioner Custom House – Appellant
Versus
Balaji Trading Company – Respondent
W.A.No. 902 of 2026|C.M.P.No.9562 of 2026
For the Appellants/Petitioners: Divya Shree, Rajnish Pathiyil SPC
For the Respondents: B.Satish Sundar
Courts must follow circular guidelines requiring 100% security for provisional release pending origin verification under trade agreements; judicial review in revenue matters demands restraint to protect public funds with time-bound verification orders.
Headnote:(A) Customs Act, 1962 - Sections 17 and 28DA - Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 - Rule 6(1)(b) - Central Board of Indirect Taxes and Customs Circular No.38/2016-Customs dated 22.08.2016 - Provisional assessment of imports - Verification of certificate of origin for preferential tariff claims under trade agreements - Quantum of security for differential duty.
(B) Writ appeal - Interim orders in revenue matters - Judicial review and restraint in protection of state revenue - Adherence to circular guidelines to prevent loss of public funds.
Facts of the case:
An importer claimed preferential duty exemption on consignment under a free trade agreement based on certificate of origin. Customs authorities made provisional assessment requiring 100% bank guarantee pending verification as per applicable circular. Writ court allowed release on 10% bank guarantee and 90% indemnity bond. Authorities preferred intra-court appeal challenging the reduced security.
Findings of Court:
Authorities directed to complete verification of origin from place of import within three weeks. Goods to be released without further security if claim found correct. If origin claim found incorrect or false then 100% bank guarantee to be furnished as per circular.
Issues: Whether interim order permitting reduced security contrary to circular guidelines is sustainable; extent of court's power to modify security requirements while protecting revenue interests pending verification.
Ratio Decidendi: Courts exercising judicial review in revenue matters must exercise restraint and follow statutory rules and circulars prescribing security quantum scrupulously; liberal approach may result in irrecoverable loss to public funds if origin claim later found false; time-bound verification with conditional release directions balances importer plight with revenue protection.
Result: Writ Appeal disposed of with directions for time-bound verification and conditional provisional release of goods. No costs. Connected miscellaneous petition closed.
| Table of Content |
|---|
| 1. factual background of import assessment and interim order (Para 1 , 2 , 3 , 4 , 5) |
| 2. arguments on 100% bank guarantee requirement under circular (Para 6 , 7) |
| 3. judicial restraint and strict adherence to revenue protection rules (Para 8 , 9 , 10 , 11 , 12) |
| 4. directions for origin verification with conditional bank guarantee (Para 13) |
(Judgment of the Court was delivered by S.M.Subramaniam J.)
The present Intra Court Appeal under Clause 15 of the Letters Patent has been instituted by the Commissioner of Customs (Imports) along with competent authorities of Customs Department, challenging the interim order dated 26.12.2025 made in W.M.P.No.56394 of 2025 in W.P.No.50387 of 2025.
2. The respondent, namely, M/s.Balaji Trading Company is a proprietary concern engaged in the import and local sale of food products, including areca nuts and the respondent imported a consignment described as split betel nuts (areca nuts) from Bangladesh and filed Bill of Entry No.6230018 dated 11.12.2025, claiming classification under CTH08028090 and exemption from Basic Customs Duty under Notification No.99/2011-Cus dated 09.11.2011, on the strength of a SAFTA Certificate of Origin issued by the competent authority in Bangladesh.
3. At the time of assessment, the Customs authorities, in exercise of their statutory powers under Section 17 of the Customs Act, 1962 (in short the 'Customs Act, 1962'), provisionally assessed the Bill of Entry, citing the need for verification of the Certificate of Origin under the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (in short 'CAROTAR,2020). Under Rule 6(1)(b) of CAROTAR, 2020, the respondent was required to furnish a bond and Bank Guarantee to safeguard the interest of the revenue, pending verification. The guidelines for provisional assessment and the quantum of suitable security to be taken is stipulated in CBIC Circular 38/2016- Customs dated 22.08.2016. As per the said circular, the respondent has to furnish a Bank Guarantee equal to 100% of the value of goods.
4. The Deputy Commissioner of Customs, vide communication dated 23.12.2025, reiterated the legal requirement under CAROTAR, 2020 in view of Circular dated 22.08.2016 and ordered provisional assessment accordingly. The respondent has not availed statutory remedies available under the Customs Act, 1962 and filed the writ petition.
5. Writ Court passed an interim order, directing the appellant / authorities to provisionally release the goods in question forthwith on furnishing Bank Guarantee for 10% and execute indemnity bond for 90% of the differential duty by the assessees.
6. Learned counsel for the appellant would mainly contend that as per Ministry of Finance Circular No.38/2016-Customs dated 22.08.2016, which was issued in exercise of powers conferred under the Customs Act, 1962, cases related to verification of origin under FTAs based on the reasonable belief that the matter involves misdeclaration of origin / value addition, 100% of Bank Guarantee or Cash Deposit to be obtained as "security" of the differential duty. Since Writ Court has granted an interim order, permitting the respondent herein to furnish Bank Guarantee for 10% and execute indemnity bond for 90% of the differential duty, the Department has preferred the present Writ Appeal, stating that in the event of non-furnishing of 100% Bank Guarantee as stipulated in the Circular, there is a possibility of loss of revenue to the State and the Circular being protective measure undertaken by the Ministry of Customs and Excise in exercise of the powers under the Act, the said interim order is to be set aside and direction is to be issued to the respondent to furnish 100% Bank Guarantee as contemplated under the Circular dated 22.08.2016.
7. Learned counsel for the respondent would oppose, by stating that the Circular is not binding on the respondent as well as High Court. In view of Section 28DA of the Customs Act, 1962, it is not mandatory to furnis
