The Gujarat High Court has directed the Directorate of Revenue Intelligence (DRI) to release an imported Toyota Land Cruiser after holding that customs authorities cannot indefinitely keep goods under detention without passing a valid seizure order under Section 110 of the Customs Act, 1962 and imposed costs of ₹10,000 on the authorities and strongly deprecated their attempt to justify the prolonged detention by citing the pendency of court proceedings.
The bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati observed that a panchnama directing an importer not to deal with a vehicle cannot substitute the statutory seizure order required under Section 110 and ruled that the department could not detain the vehicle for more than a year and subsequently issue a seizure memo merely to avoid the limitation prescribed for issuing a confiscation notice.
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According to the case record, the vehicle was shipped from Japan under a Sea Waybill/Bill of Lading dated December 23, 2024. A Bill of Entry was filed on December 26, 2024, declaring the vehicle’s description and an assessable value of USD 54,000.
The importer paid stamp duty of ₹14,621 on December 30, 2024, and customs duty amounting to ₹99,78,795 on December 31, 2024. After assessment and examination, customs authorities granted the vehicle an “out-of-charge” clearance on January 2, 2025. The vehicle was also insured, although its registration number was awaited.
On February 7, 2025, DRI officers searched the petitioner’s residential premises and prepared a panchnama. Through the panchnama, the petitioner was directed not to deal with or part with the vehicle until completion of the inquiry.
The DRI subsequently issued summons on February 14 and March 3, 2025. The petitioner authorised his son to appear in response to the summons. Another summons was issued on March 21, 2025, and the petitioner later supplied the documents in his possession along with an explanation on April 4, 2025.
During the pendency of the writ petition, the DRI issued a formal seizure memo under Section 110(1) of the Customs Act on April 17, 2026—more than 14 months after the February 2025 panchnama.
A show-cause notice under Section 124 read with Section 28(4) of the Customs Act was thereafter issued on May 8, 2026. The department also passed an order on May 18, 2026, permitting provisional release of the vehicle subject to stringent conditions.
The provisional-release order required the importer to execute a bond for the assessable value of ₹85,95,860, undertake to pay the duty, fine or penalty that might be adjudged and furnish a bank guarantee of ₹1.20 crore to cover the alleged differential duty, potential fine and penalties.
The petitioner argued that the continued detention violated Section 110(2) of the Customs Act and the Supreme Court’s decision in Union of India v. Jatin Ahuja.
It was submitted that a notice under Section 124(a) must ordinarily be issued within six months of seizure. Although this period can be extended by another six months, such an extension requires reasons to be recorded in writing and the affected person must be informed before the original period expires.
The petitioner contended that the vehicle had effectively been detained since February 7, 2025, but no statutory seizure order was passed at that stage. The seizure memo issued on April 17, 2026, and the show-cause notice dated May 8, 2026, could not validate the earlier unlawful detention.
It was also argued that the provisional-release conditions were based on paragraph 2 of CBEC Circular No. 35/2017-Customs dated August 16, 2017, which had been struck down by the Delhi High Court in Shanus Impex v. Union of India to the extent that it curtailed the adjudicating authority’s discretion.
The DRI sought to justify its failure to issue the seizure memo earlier by referring to the interim orders passed in the writ proceedings. It maintained that the pendency of the petition had prevented it from initiating proceedings under Section 110.
The High Court rejected that explanation after examining its previous orders. It found that the Court had never restrained the DRI from investigating the matter or initiating proceedings under the Customs Act. On the contrary, the authorities had repeatedly been directed to complete the investigation expeditiously.
The Bench noted that in its order dated September 18, 2025, the Court had expressly directed the authorities to conduct a thorough investigation. Subsequent orders dated October 9, October 16 and November 6, 2025, also required the department to complete the investigation and submit its report.
The Court observed that the order sheets demonstrated that the delay had been caused by the authorities themselves. The DRI had never informed the High Court that the pendency of the petition was preventing it from passing a seizure order.
The Bench consequently termed as a “bald statement” the submission made before the Supreme Court that the pending writ petition had come in the way of the department initiating proceedings under Section 110.
The High Court explained that where a proper officer believes that goods are liable to confiscation, Section 110 requires the officer to pass a valid seizure order after recording reasons for forming that belief.
Where it is impracticable to physically seize the goods, the second proviso to Section 110(1) permits the proper officer to serve an order directing the owner not to remove, part with or otherwise deal with the goods without prior permission. No such order was served on the petitioner when the vehicle was detained in February 2025.
The Court clarified that a panchnama merely records what transpired in the presence of witnesses and cannot by itself be treated as an order passed by the proper officer under Section 110.
Referring to the Delhi High Court’s ruling in Worldline Tradex Pvt. Ltd. v. Commissioner of Customs (Import), the Bench reiterated that detention and seizure are not interchangeable expressions. A valid seizure requires the proper officer to record reasons to believe that the goods are liable to confiscation.
The High Court held that when goods are actually detained without the required statutory order, the customs authorities cannot postpone the starting point of limitation by issuing a formal seizure memo much later.
In the present case, the vehicle had been under actual restraint since the panchnama dated February 7, 2025. The petitioner had been expressly directed not to deal with or part with it, and summons were issued shortly thereafter.
The Bench observed: “The customs authority cannot indefinitely seize the goods in the garb of detention, without passing any order under the provisos to Section 110(1) of the Act.”
It held that, in the absence of a proper order despite actual detention, the limitation period had to run from February 7, 2025. The department could not consume more than a year in passing a seizure order and then claim that the show-cause notice issued within six months of that belated order was valid.
The Court said that allowing such a course would enable the department to defeat the statutory safeguard under Section 110(2), which requires the return of seized goods if the prescribed notice is not issued within the stipulated period.
The Bench observed that the seizure memo dated April 17, 2026, had crossed even the maximum period of one year available under Section 110(2), comprising the initial six months and a possible extension of another six months.
The DRI had acted only after the Supreme Court’s order dated April 10, 2026, directing the department to proceed promptly because the car was a perishable commodity. The formal seizure memo was passed seven days later, followed by the show-cause notice on May 8, 2026.
The High Court held that the DRI could not be permitted to “reap the fruits of its inaction” after keeping the vehicle under detention for more than a year without complying with the Customs Act.
It further deprecated the authorities’ attempt to use the pendency of the writ petition “as a shield” to justify their failure to pass the necessary statutory orders.
The Court separately found the provisional-release order dated May 18, 2026, to be illegal because its conditions were based on paragraph 2 of Circular No. 35/2017-Customs.
The Bench noted that the Delhi High Court had already struck down that paragraph in Shanus Impex to the extent that it restricted the discretion vested in the adjudicating authority.
Despite that ruling, the department demanded a ₹1.20 crore bank guarantee in addition to a bond for the vehicle’s assessable value. The Gujarat High Court described the department’s reliance on the invalidated circular provision as “contumacious” and strongly deprecated the action.
Allowing the petition, the High Court directed the authorities to release the Toyota Land Cruiser covered by Bill of Entry. The release direction must be complied within two weeks.
The Bench also imposed costs of ₹10,000 on the respondents, directing them to deposit the amount with the High Court Registry within two weeks.
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