Bench Upholds Indemnity-Based Release Amid Conflicting Views on Seizure Extension Period Under Customs Act, 1962
In a significant judgment dated September 28, 2026, the Madras High Court (Division Bench comprising Dr. Anita Sumanth and S. Raveekumar, JJ.) directed the immediate release of a detained consignment of Agricultural Rejected Nut Pieces, Residue, and Waste imported as cattle feed, while simultaneously referring a crucial legal question regarding the Customs Act to a Larger Bench.
The case arose when the Deputy Commissioner of Customs (DIU) detained a consignment imported by S.R. Rajarajendiran on suspicion that the goods were cashew kernels fit for human consumption, contrary to the declaration of the importer that the goods were cattle feed unfit for human consumption. The detention was based on an alert from the National Customs Targeting Centre (NCTC), citing instances of misdeclaration in similar consignments.
Three test reports played a pivotal role in the Court's decision. The first, conducted by Vinacontrol Ho Chi Minh City on September 26, 2025, concluded that the goods were unfit for human consumption. A subsequent test by the Referral Food Laboratory in Mysuru found the goods did not meet the required standards for human food, specifically noting excessive acidity of extracted fat. Finally, the Central Revenue Control Laboratory in New Delhi reported that the goods conformed to standards for compounded cattle feed under IS 2052:2023 and could not be confirmed fit for human consumption.
Rejecting the Customs authorities' contention that the goods were undervalued and potentially diverted for human consumption, the Court noted the absence of any notification specifying minimum import prices for such goods. It also observed that the importer submitted a purchase order from a recognized milk producers' cooperative society for cattle feed, reinforcing the bona fide nature of the consignment.
Importantly, the Court upheld the writ court's earlier direction to release the goods forthwith upon the importer furnishing a sufficient indemnity bond, while permitting the customs authorities to continue adjudication proceedings under Section 28 of the Customs Act.
The judgment also addressed a contentious legal question concerning the interpretation of Section 110(2) of the Customs Act, 1962, which mandates the issuance of a seizure notice within six months of seizure unless extended in writing by the Commissioner. The dispute centers on whether the six-month period for issuing an extension should be calculated from the date of detention or the date of actual seizure.
The Court highlighted conflicting Division Bench decisions:
- In ALM Enterprises v. Commissioner of Customs (Imports), Chennai (2017), the period was held to run from the date of seizure.
- In K.Steamship Agencies Pvt. Ltd. v. Balaji Dekors (2024), detention and seizure were held to be synonymous, thus starting the period from detention.
Given this conflict, the Court directed the Registry to place the matter before the Chief Justice of the Madras High Court for consideration of constituting a Larger Bench to conclusively decide the issue.
The authorities' further extension of seizure beyond the court-allowed period was declared infructuous, and related appeals were dismissed.
This ruling reinforces procedural safeguards for importers and clarifies evidentiary standards regarding goods declared as non-human consumption items like cattle feed. It also sets the stage for authoritative interpretation of seizure and detention timelines under the Customs Act.
Bottom Line:
Customs Act - Imported goods declared as cattle feed - Where test reports indicated goods were unfit for human consumption and intended for cattle feed, direction for release of goods on furnishing indemnity upheld - Conflict between two Division Bench decisions on whether six months under proviso to Section 110(2) of Customs Act is to be reckoned from date of detention or date of seizure - Issue referred for consideration by Larger Bench.
Statutory provision(s):
Customs Act, 1962 Section 110(2), Section 28, Section 124(a), Section 45, Section 47, DGFT Notification No.59/2015-20220
