Legal principle

Customs duty liability on goods imported into an SEZ/FTWZ for authorised operations arises only when the (manufactured) goods are cleared from the SEZ to the DTA, so a bank guarantee of differential duty cannot be demanded as a condition of provisional release under Section 110A, though a bond equal to the value of the goods may be retained.

Court decision

The Tribunal partly allowed the appeal in favour of the appellant: it retained the condition of furnishing a bond equal to the value of the goods (Rs. 2,82,20,472/-) but set aside the condition requiring a bank guarantee of Rs. 29,24,465/- (50% of differential duty), modifying the provisional release conditions accordingly, with the goods to be used in the FTWZ for authorised operations only and customs duty payable on the manufactured goods when cleared from SEZ to DTA.

Facts

M/s. H R Enterprises imported 'left over tarpaulin fabric for pavilion and tent purposes in mixed colours' through 21 SEZ Bills of Entry (February–April 2025) for warehousing in the FTWZ unit of M/s. Cargo Care Agency at Kandla SEZ, which was permitted cutting, trimming and stitching as authorised operations. DRI placed the goods on hold, samples tested at SIIB Kandla allegedly showed the goods were fabrics of varying specifications rather than 'Tarpaulins', and the consignments were seized for alleged misdeclaration. The Assistant Commissioner (SIIB), with the approval of the Commissioner of Customs, Kandla, by order dated 08.04.2026 allowed provisional release of the 21 seized consignments under Section 110A of the Customs Act, 1962, subject to a bond of Rs. 2,82,20,472/- (approximate value of goods) and a bank guarantee of Rs. 29,24,465/- (50% of differential duty) for DTA clearance. The importer appealed against these conditions.

Key provisions

• Section 12, Customs Act, 1962 — Dutiable goods
• Section 110A, Customs Act, 1962 — Provisional release of goods, documents and things seized