DRI Cannot Keep Imported Goods Detained Indefinitely, Gujarat High Court Rules; Orders Release of Toyota Land Cruiser

The petitioner purchased a Toyota Land Cruiser from Japan for USD 54,000 on 13 December 2024. The vehicle was shipped on 23 December 2024 and imported under Bill of Entry No. 7472252 dated 26 December 2024. Customs duty of Rs.99,78,795/- was paid, and the vehicle was granted out-of-charge on 2 January 2025 after assessment and examination

On 7 February 2025, the Directorate of Revenue Intelligence (“DRI”) searched the petitioner’s residence and prepared a panchnama directing him not to deal with or part with the vehicle pending inquiry. Summons were thereafter issued to the petitioner, and documents and explanations were furnished to the authorities

The petitioner filed the writ petition challenging the continued detention. During its pendency, the DRI issued a seizure memo under Section 110(1) of the Customs Act, 1962 on 17 April 2026 and a show-cause notice under Section 124 read with Section 28(4) on 8 May 2026. An order for provisional release was passed on 18 May 2026, requiring execution of a bond and furnishing of a bank guarantee based on paragraph 2 of Circular No.35/2017-Customs dated 16 August 2017

1. Whether the DRI’s direction through the panchnama dated 7 February 2025 that the petitioner should not deal with or part with the vehicle amounted to detention attracting the statutory safeguards and limitation under Section 110 of the Customs Act, 1962?

2. Whether a panchnama, without a separate seizure order recording reasons to believe that the goods were liable to confiscation, could constitute a valid seizure under Section 110(1) of the Customs Act?

3. Whether the show-cause notice dated 8 May 2026 was issued within the period prescribed under Section 110(2) read with Section 124(a) of the Customs Act?

4. Whether the conditions imposed for provisional release of the vehicle, based on paragraph 2 of Circular No.35/2017-Customs, were legally sustainable?

Section 110(1) of the Customs Act, 1962 permits seizure where the proper officer has reason to believe that goods are liable to confiscation; its provisos prescribe the procedure where physical seizure or removal is impracticable, including an appropriate order restraining the owner from dealing with the goods

Under Section 110(2), notice under Section 124(a) must be issued within six months of seizure, extendable by a further period of up to six months for recorded reasons, provided the person concerned is informed before expiry of the original period

The Supreme Court in Union of India v. Jatin Ahuja, (2025) 36 Centax 301 (SC), held that failure to issue the Section 124(a) notice within the prescribed period results in return of the seized goods

Relying on Worldline Tradex Pvt. Ltd. v. Commissioner of Customs (Import), 2016 (340) E.L.T. 174 (Del), the Court held that detention through a panchnama cannot be treated as a valid seizure without the statutory order and recorded reasons to believe

The Court also relied on Instruction No.1/2017-Cus. dated 8 February 2017, requiring a separate seizure order in addition to the panchnama, and on Shanus Impex v. Union of India, 2024 (388) E.L.T. 78 (Del), which set aside paragraph 2 of Circular No.35/2017 to the extent that it curtailed the adjudicating authority’s discretion in fixing provisional-release conditions

The Court distinguished between a search, detention and valid seizure. The panchnama dated 7 February 2025 restrained the petitioner from dealing with the vehicle and therefore constituted actual detention, notwithstanding the respondents’ later description of the action as something short of seizure

Since the DRI had not passed a contemporaneous order under Section 110(1) or its provisos recording reasons to believe that the vehicle was liable to confiscation, the subsequent seizure memo dated 17 April 2026 could not postpone the commencement of the statutory period. The DRI had effectively retained control over the vehicle for more than a year before issuing the seizure memo and show-cause notice, and could not use the later formal seizure to avoid the consequences of its earlier inaction

The Court further found that the writ proceedings had not prevented the DRI from conducting the investigation or initiating proceedings under Section 110; the record instead showed repeated directions to complete the investigation promptly

Finally, the provisional-release order was legally unsustainable because it relied on paragraph 2 of Circular No.35/2017, which had already been set aside to the relevant extent by the Delhi High Court

The respondents could not rely on the seizure memo dated 17 April 2026 and the show-cause notice dated 8 May 2026 to validate or extend the detention retrospectively

The provisional-release order dated 18 May 2026 was also held illegal because it was based on the invalidly applied paragraph 2 of Circular No.35/2017

The respondents were directed to release the Toyota Land Cruiser covered by Bill of Entry No.7472252 dated 26 December 2024 within two weeks, and costs of Rs.10,000/- were imposed on the respondents, payable to the High Court Registry within the same period