Bombay High Court Orders Release of Imported Walnuts, Says No Bank Guarantee Without Proof of Undervaluation
Court Protects Importer Against Arbitrary Customs Action
Evidence Required Before Imposing Coercive Conditions
By Our Legal Reporter
New Delhi: February 17, 2026:
In a significant judgment reinforcing the principles of fairness in trade regulation, the Bombay High Court has ordered the release of imported walnuts detained by customs authorities, ruling that no bank guarantee can be demanded without proof of undervaluation. The decision, delivered on February 9, 2026, by a division bench of Justices G.S. Kulkarni and Aarti Sathe, underscores that customs cannot impose coercive conditions such as bank guarantees in the absence of tangible evidence of wrongdoing.
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The Case: Santa Monica Farm Produce Pvt. Ltd. vs. Customs
The dispute involved Santa Monica Farm Produce Pvt. Ltd. (SMFPPL), which had imported around 8,000 kilograms of in-shell walnuts. Customs authorities detained the consignment alleging undervaluation and possible duty evasion.
The importer challenged the detention, arguing that there was no incriminating material against them and that customs was relying on general allegations against other importers.
Court’s Observations
The High Court made several critical observations:
- No blanket rules: Customs cannot detain goods merely because other importers are suspected of undervaluation.
- Evidence is essential: Coercive conditions like bank guarantees require specific proof against the concerned importer.
- Bond instead of guarantee: The court directed that the goods be released against a bond, keeping the investigation open.
- Arbitrary detention invalid: Detaining goods without direct evidence is unsustainable and violates trade fairness.
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Impact on Importers and Trade
The ruling has major implications for importers across India:
- Protection against arbitrary action: Importers cannot be forced to furnish bank guarantees without evidence.
- Encouragement for fair trade: Ensures smoother clearance of goods and reduces harassment.
- Legal precedent: Strengthens judicial oversight on customs practices, especially in valuation disputes.
Industry experts note that the judgment will boost confidence among traders and exporters, ensuring that legitimate businesses are not penalized due to generalized suspicions.
Wider Context: Customs and Valuation Disputes
Valuation disputes are common in India’s import-export sector. Customs authorities often allege undervaluation to impose higher duties or demand guarantees. However, courts have repeatedly stressed that specific evidence is necessary before taking coercive steps.
This ruling aligns with earlier judgments that emphasized the need for transparency and accountability in customs procedures, particularly under the Customs Act, 1962.
Reactions to the Verdict
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- Importers and trade bodies welcomed the decision, calling it a relief against arbitrary customs practices.
- Legal experts highlighted that the ruling strengthens the principle of natural justice in trade regulation.
- Customs officials noted that while investigations will continue, the judgment limits their ability to impose blanket conditions.
What Lies Ahead
The case is expected to influence future customs disputes involving valuation. Key developments to watch include:
- Whether customs authorities adopt stricter evidence-based procedures.
- How other High Courts interpret similar disputes.
- Possible policy changes to streamline valuation and clearance processes.
Conclusion
The Bombay High Court’s ruling in the walnut import case marks a significant step in protecting traders from arbitrary customs actions. By declaring that bank guarantees cannot be demanded without proof of undervaluation, the court has reinforced the principles of fairness, accountability, and evidence-based regulation. The judgment not only benefits the importer in this case but also sets a precedent for the wider trade community, ensuring smoother and more transparent import processes.
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