The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh Bench, has held that goods alleged to be “restricted” under the Foreign Trade Policy cannot be denied provisional release solely on that ground, observing that Section 110A of the Customs Act, 1962 confers broad discretionary powers to permit provisional release pending adjudication.
The bench of S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that even the DRI had earlier communicated that it had no objection to consideration of re-export, and observed that permitting re-export would satisfy the policy objective underlying the import restrictions while preventing unnecessary commercial loss to the importer.
The dispute arose after the importer brought into India two consignments of 92.5% silver jewellery studded with synthetic stones from Thailand under Bills of Entry dated December 2, 2025. The consignments, weighing over 12.22 lakh grams and valued at ₹25.16 crore, were declared under Customs Tariff Item (CTI) 71131145.
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The Customs Department, however, took the view that the goods were correctly classifiable under CTI 71131149, a tariff entry covered by import restrictions introduced through DGFT Notification No. 34/2025-26 dated September 24, 2025. On this basis, the authorities seized the consignments and rejected the importer’s request for provisional release, a decision that was subsequently affirmed by the Commissioner (Appeals).
Appearing for the importer, counsel contended that the controversy was fundamentally one of tariff classification, not an instance of prohibited imports or deliberate misdeclaration. It was argued that the goods had always been declared as silver jewellery studded with synthetic stones; laboratory reports confirmed the presence of synthetic cubic zirconia and synthetic ruby; no allegations existed regarding undervaluation, concealment, forged documentation, or misdeclaration of quantity; the customs authorities had denied provisional release despite not initially furnishing the laboratory reports relied upon.
The importer further argued that Chapter Note 9 to Chapter 71 expressly recognises jewellery set with natural, synthetic, or reconstructed precious and semi-precious stones, and therefore synthetic stones could not automatically push the goods into the residual tariff entry. According to the appellant, the classification issue remained debatable and could not justify continued detention of the consignments.
The appellant also pointed out that another importer facing a similar dispute had been granted provisional release, making the denial discriminatory and commercially damaging because mounting detention and demurrage charges continued to accumulate.
The Customs Department maintained that intelligence gathered by the Directorate of Revenue Intelligence (DRI) revealed that the importer had historically classified identical goods under CTI 71131149 before the DGFT restrictions came into force, but subsequently shifted to CTI 71131145 after the notification.
According to the Department, laboratory testing established that the jewellery contained synthetic cubic zirconia and synthetic ruby rather than natural precious or semi-precious stones, making the declared classification incorrect. The Department argued that the change in classification was intended to circumvent import restrictions and that such goods, being imported in violation of the Foreign Trade Policy, should not be released into the domestic market.
The Tribunal clarified that the appeal did not require it to decide the correctness of the competing tariff classifications, as adjudication on classification was still pending.
Instead, the Bench held that the only issue before it was whether the goods could be provisionally released under Section 110A of the Customs Act pending completion of adjudication.
The Tribunal observed that treating the goods as conclusively prohibited at the provisional stage would effectively prejudge the dispute before adjudication was completed. Whether the goods ultimately fell within the restricted tariff entry remained an issue to be decided separately during adjudication.
The Bench undertook an extensive review of judicial precedents governing provisional release of seized goods.
It referred to the Delhi High Court’s landmark judgment in Its My Name Pvt. Ltd., which declared portions of CBIC Circular No. 35/2017-Cus ultra vires for unduly restricting the statutory discretion available under Section 110A. The Tribunal also relied upon subsequent decisions including Shanus Impex, Shreehari Ananta Overseas Pvt. Ltd., Sidharth Vijay Shah, Tasha Gold Pvt. Ltd., S.K. Enterprises, and the Punjab and Haryana High Court’s decision in JB Jewels and Metals LLP, all recognising that even goods alleged to be prohibited or restricted are not automatically excluded from provisional release.
The Bench emphasised that Section 110A itself contains no statutory prohibition preventing provisional release merely because the Department alleges that the goods are restricted or prohibited.
During the hearing, the importer expressed willingness to re-export the goods, citing substantial commercial losses and mounting detention charges.
Holding that the department would suffer no prejudice if the goods were exported out of India instead of entering the domestic market, the Bench directed that the consignments be released exclusively for the purpose of re-export.
Partly allowing the appeal, the Tribunal ordered the customs authorities to release the imported silver jewellery covered by the two Bills of Entry for re-export, subject to the importer furnishing a bond equivalent to the value of the goods, namely ₹25,16,49,066. The Tribunal further directed that the order be complied with within seven days.
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