No Bank Guarantee Without Proof of Undervaluation: Bombay HC Orders Release of Imported Walnuts

The Bombay High Court has held that customs authorities cannot impose coercive conditions such as furnishing a bank guarantee for provisional release of imported goods in the absence of tangible incriminating material, and that detention of goods based on sweeping and general allegations unrelated to the importer’s consignment is arbitrary and unsustainable.

The Court ruled that where duty has already been assessed and paid, and no material exists to justify allegations of undervaluation, goods must be released on execution of a bond alone, without insistence on a bank guarantee.

A Division Bench of Justices G.S. Kulkarni and Aarti Sathe disposed of a writ petition filed by Santa Monica Farm Produce Pvt. Ltd., directing the customs authorities to release imported consignments of in-shell walnuts within three days, subject only to execution of a bond. The Bench set aside the condition requiring the petitioner to furnish a bank guarantee of Rs. 60 lakh for provisional release and further directed the authorities to issue a certificate waiving demurrage, holding that there was no justification for detention of the goods in the first place

The petitioner had imported approximately 8,000 kilograms of USA-origin in-shell walnuts for commercial sale in India.

The consignments arrived at Jawaharlal Nehru Port, Navi Mumbai, in December, 2025 and were covered by four Bills of Entry filed for home consumption. The Bills of Entry were duly assessed by customs authorities on 11.12.2025, and the assessed customs duty was paid in full without any objection, query, or reservation. Following assessment and payment, the goods became eligible for clearance under Section 47 of the Customs Act, 1962.

Despite this, the goods were placed on hold without issuance of any detention memo, show cause notice, or written order. The petitioner made multiple representations highlighting the perishable nature of the goods and the mounting demurrage, but received no response.

Eventually, after the writ petition was filed, the customs authorities issued a detention memo and seized the goods under Section 110 of the Customs Act, alleging undervaluation.

The seizure memo relied entirely on general intelligence inputs developed by the Directorate of Revenue Intelligence (DRI), Delhi Zonal Unit, in respect of other importers allegedly importing in-shell walnuts at undervalued prices.

The memo made no specific allegation against the petitioner based on any search, recovery of parallel invoices, or contemporaneous evidence. Nonetheless, the authorities alleged that the petitioner had undervalued the goods and estimated a differential duty of over Rs. 92 lakh.

Subsequently, an order for provisional release was passed under Section 110A of the Customs Act, permitting release of the goods subject to execution of a bond equal to the assessable value and furnishing of a bank guarantee of Rs. 60 lakh. The petitioner challenged this condition before the High Court, contending that there was no material to justify imposition of such a coercive requirement.

The Court examined the scope of Section 110A and reiterated that while the provision empowers authorities to impose conditions for provisional release, such discretion must be exercised based on facts and material specific to the importer. The Bench held that there is no straight-jacket formula requiring imposition of a bank guarantee in every case and that the nature of conditions must correspond to the existence of tangible material justifying protection of revenue interests.

On facts, the Court found that there was not “an iota” of incriminating material against the petitioner.

No search was conducted at the petitioner’s premises, no parallel invoices were recovered, and no discrepancy was found at the time of assessment.

The only basis for detention and seizure was reference to alleged irregularities by other importers in unrelated cases before DRI Delhi, which the Court held could not be used to paint all importers of similar goods with the same brush.

The Bench noted that the entire statutory procedure for assessment had been followed, declarations were made, and duty was paid. In such circumstances, the continued detention and seizure of goods was found to be arbitrary, violative of Article 14, and an unwarranted interference with the petitioner’s right to property and trade under Article 300-A of the Constitution.

Rejecting the respondents’ argument that the petitioner should pursue alternate remedies, the Court held that where arbitrary state action impacts constitutional and statutory rights, writ jurisdiction under Article 226 is clearly attracted.

The Court emphasised that customs enforcement must be based on legitimate material and cannot rest on presumptive or generalized allegations.

Accordingly, the Court directed that the goods be released on execution of a bond alone, without any bank guarantee, and ordered the respondents to issue a waiver of demurrage, holding that the detention itself was unjustified.

Case Title: Santa Monica Farm Produce Pvt. Ltd. v. Union of India & Ors.

Bench: Justices G.S. Kulkarni and Aarti Sathe

Date of Judgment: 05.02.2026