Court Holds Excessive Security Conditions Imposed Under Customs Act Are Unreasonable; Balances Revenue Protection with Fairness in Richa Shipping Pvt. Ltd. Case
In a significant judgment dated 30th September 2026, the Bombay High Court (Division Bench comprising Justices M.S. Karnik and Sandesh D. Patil) intervened to reduce the financial security demanded by Customs authorities for the provisional release of the barge M.T. Bay III seized under the Customs Act, 1962. The petitioner, Richa Shipping Private Limited, had challenged the imposition of a bond of Rs. 12 crore and a bank guarantee of Rs. 6 crore, contending these conditions were excessive and lacked a reasonable basis.
The case arose during an investigation into the alleged illegal transfer and export of Very Low Sulphur Fuel Oil (VLSFO) from the barge M.T. Bay III to the vessel M.V. Angara at Mumbai Port. The Customs authorities seized the barge on 15th June 2026 under Section 110 of the Customs Act. Subsequently, the Customs department allowed provisional release of the barge under Section 110A, subject to the contested financial conditions.
The petitioner argued that the valuation of the barge was overstated by the authorities, with the Customs valuation at Rs. 12 crore significantly higher than the petitioner's valuation of approximately Rs. 2.90 crore based on insurance documents and a valuation report. Further, the petitioner highlighted that the connected vessel M.V. Angara, from which the fuel was seized, was released on a much lower bank guarantee of Rs. 30 lakh, despite having an e-Bond of over Rs. 16 crore.
The Customs authorities defended their decision by emphasizing their discretionary power under Section 110A to impose security conditions based on relevant facts, including the nature of the offence, value of goods, and role of the person seeking release. They also noted the availability of an alternate statutory remedy of appeal before the Commissioner (Appeals) and the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).
Rejecting the contention that the petitioner should be relegated to the appeal remedy, the Court observed that writ jurisdiction can be exercised where the conditions imposed are "ex facie excessive and unreasonable." The Court noted that the security demanded should be reasonable and commensurate with the facts and circumstances, taking into account comparable cases and evidence on record.
After considering the rival valuations, the Court found the Rs. 6 crore bank guarantee to be disproportionate, especially when compared with the conditions imposed on M.V. Angara. Consequently, the Court modified the bank guarantee condition from Rs. 6 crore to Rs. 50 lakh while upholding the rest of the conditions imposed by the Customs authorities.
The judgment underscores the principle that while Customs authorities have wide discretion in imposing security for provisional release of seized goods, such discretion must be exercised on a rational basis with due regard to all relevant factors and fairness. The decision balances the interest of revenue protection with the need to avoid imposing unduly burdensome conditions on parties seeking provisional relief.
Bottom Line:
Customs Act, 1962 - Provisional release under Section 110A - Though alternate remedy of appeal is available, writ petition can be entertained where conditions imposed for provisional release are ex facie excessive and unreasonable - Security conditions must be exercised reasonably on relevant material and with due regard to comparable release conditions imposed in connected matter - Bank guarantee of Rs.6 crore for release of seized barge reduced to Rs.50 lakh.
Statutory provision(s):
Customs Act, 1962 Section 110, Section 110A, Section 128
Richa Shipping Private Limited v. Union of India, (Bombay)(DB) : Law Finder Doc Id # 2989113
