Madras High Court Directs Release of New Zealand Apples with Bank Guarantee

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Court recognized the nature of the imported goods, which were highly perishable and destined for consumption, as a crucial factor in its decision

The Madras High Court has recently issued an order directing the customs department to release a consignment of fresh apples imported from New Zealand. The apples, being perishable and intended for human consumption, were subjected to confiscation due to a dispute over import regulations.

The bench of Justice R. Mahadevan and Justice Mohammed Shaffiq, recognized the nature of the imported goods, which were highly perishable and destined for consumption, as a crucial factor in its decision to order the release of the apples. However, the release is subject to the condition that the importer must furnish a bank guarantee to cover the value of the differential duty, which will be determined by the authorities to safeguard the interests of the customs department.

The dispute revolved around the classification of the apples into two categories based on their Cost Insurance Freight (CIF) prices. The classification was made into apples with CIF prices above Rs. 50 per kg and apples with CIF prices below Rs. 50 per kg.

As per DGFT Notification No. 5 of 2023, dated May 8, 2023, when the CIF value is below Rs. 50 per kg, the import of "fresh apples" is treated as "prohibited." Relying on this notification, the authorities had confiscated the goods and assessed them at a value of Rs. 18,61,610.02 under Section 111(d) of the Customs Act, 1962.

The respondent, the importer, sought the release of the imported goods and the issuance of detention certificates to waive demurrage and container detention charges under Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009.

The court's decision took into account a stay order against Notification No. 5/2023, passed by both the Kerala High Court and the Madras High Court. As of the date of the Bill of Entry, the notification had been in force, and the stay order was granted by the Kerala High Court only on July 11, 2023.

The appellant, the customs department, contended that the respondent had imported fresh apples with full knowledge of the prohibition against apples with a CIF value below Rs. 50 per kg. The appellant argued that the import was in violation of the notification, and the stay order issued by the high courts did not negate the notification's validity.

In response, the assessee, the importer, argued that a stay order issued by one High Court has pan-India effect and is not limited to the territorial jurisdiction of the issuing court. They highlighted that the notification prohibiting the import of fresh apples had been stayed by two high courts.

In light of these circumstances, the court directed the appellant to release the imported goods contingent on the importer furnishing a bank guarantee of Rs. 2,25,000 to cover the differential duty. The court clarified that this interim arrangement is intended to protect the interests of both parties and that the bank guarantee would remain valid until a final decision is reached regarding the validity of Notification No. 5/2023, dated May 8, 2023.

Case Title: The Additional Commissioner of Customs Vs. M/s.N.C.Alexander