CESTAT Relaxes Provisional Release Conditions under Section 110A

In a relief-oriented ruling for importers, the Ahmedabad Bench of CESTAT in Shreeji Agri Commodity Pvt. Ltd. vs. Assistant Commissioner of Customs, Mundra (Final Order No. 1003/2026 dated 21.01.2026) has held that excessive bank guarantee conditions for provisional release cannot be imposed mechanically by relying solely on CBIC Circular No. 35/2017-Cus.

Case in Brief

Shreeji Agri Commodity Pvt. Ltd., engaged in spices and pulses trading, imported coriander seeds duty-free under Notification No. 21/2023-Cus against Advance Authorisations. Alleging diversion of imported goods to the domestic market in violation of the actual user condition, Customs seized goods valued at Rs 9.11 crore.

Provisional release was allowed under Section 110A, subject to:

• Bond for full value of goods (Rs 9.11 crore), and
• Bank guarantee of 70% of the goods value (Rs 6.32 crore).

The importer challenged the steep BG requirement before CESTAT.

Key Findings of CESTAT

• No conclusive evidence was produced to prove sale of unprocessed imported goods in the domestic market.
• Processing of imported goods followed by storage, even in third-party premises, does not amount to violation of actual user condition.
• Export obligation under Advance Authorisation need not be fulfilled only through imported inputs ; indigenous sourcing is permissible.
• For provisional release under Section 110A (pre-adjudication stage) , judicial precedents override rigid application of departmental circulars.

Relief Granted

CESTAT modified the provisional release conditions as follows:

• Full value bond to continue, but
• Bank guarantee reduced to 30% of the differential duty involved (approx. Rs 1.08 crore), instead of 70% of the goods value.

The Tribunal relied on the Supreme Court ruling in Navshakti Industries Ltd. and the Gujarat High Court judgment in Printwell Offset Pvt. Ltd.

Key Takeaways for Importers

• Excessive BG conditions under Section 110A can be successfully challenged.
• CBIC Circular No. 35/2017-Cus is not mandatory where it conflicts with judicial precedents.
• Maintain proper documentation evidencing processing to defend actual user compliance.
• Single Member Bench has jurisdiction for Section 110A provisional release appeals where no confiscation order exists.

The author is a practicing Chartered Accountant specialising in Customs and Indirect Tax matters.