2011 (8) TMI 947 - HC - Customs

Court orders bank guarantee & PD bond for crane release in Customs Act case. bond

The Court ruled in favor of the Revenue, directing the Petitioner to furnish a bank guarantee of Rs. 40,00,000 and a P.D. bond for the provisional release ... Provisional release of seized goods under Section 110A of the Customs Act, 1962 - requirement of bond and furnishing of security to safeguard revenue interests - imposition of a bank guarantee as a condition for provisional release where goods are to be sold - assessment and adjudication pending: safeguarding revenue by conditions on releaseProvisional release of seized goods under Section 110A of the Customs Act, 1962 - requirement of bond and furnishing of security to safeguard revenue interests - imposition of a bank guarantee as a condition for provisional release where goods are to be sold - Provisional release of the remaining seized cranes subject to conditions to secure the revenue - HELD THAT: - Section 110A confers jurisdiction on the adjudicating authority to permit release of seized goods pending adjudication subject to the owner furnishing a bond together with such security and conditions as the authority may deem fit. The Court accepted the Revenue's material indicating prima facie serious undervaluation and suppression of freight components in import declarations, and observed that unconditional release could not be permitted at this stage. The purpose of Section 110A is to safeguard the interests of the Revenue while allowing provisional release. Given that the petitioner intends to sell the seized cranes in the normal course of business, the deposit already made would be insufficient to secure potential duty, redemption fine and penalty. Applying the principle that the adjudicating authority may demand appropriate security and conditions, the Court directed that provisional release of the remaining seven cranes be made contingent upon the petitioner furnishing a P.D. bond to the satisfaction of the adjudicating authority and a bank guarantee from a nationalised bank for the security of the Revenue. Upon furnishing the directed bond and bank guarantee the authority was to provisionally release the goods, with the guarantee to be kept alive during the pendency of adjudication. [Paras 8, 9]Petition allowed to the extent that the petitioner shall furnish a P.D. bond and a bank guarantee of Rs. 40,00,000 of a Nationalised Bank; upon such furnishing the respondent shall provisionally release the remaining seven cranes, the bank guarantee to be kept alive during adjudication; no order as to costs.Final Conclusion: The Court directed provisional release of seven seized cranes only upon the petitioner furnishing a P.D. bond to the adjudicating authority's satisfaction and a bank guarantee of Rs. 40,00,000 from a nationalised bank to secure potential duty, redemption fine and penalty; otherwise unconditional release was refused. Issues:1. Unconditional or provisional release of seized cranes.2. Allegations of gross undervaluation and fraud in crane import.3. Amount deposited by the Petitioner under duress.4. Dispute over conditions imposed for provisional release.5. Interpretation of Section 110A of the Customs Act, 1962.Issue 1: Unconditional or Provisional Release of Seized Cranes:The Petitioner sought unconditional or provisional release of 7 cranes seized by the Respondent. The dispute arose from the seizure of 9 cranes due to alleged undervaluation of import prices. The Petitioner had already cleared 2 cranes but contested the release of the remaining 7 cranes.Issue 2: Allegations of Gross Undervaluation and Fraud in Crane Import:The Revenue alleged serious undervaluation in the import prices of cranes by the Petitioner, citing discrepancies in declared values and actual transaction values. Investigations revealed potential under-valuation ranging from 50%-80% of the actual value. The Revenue also accused the Petitioner of using a dummy Import Export Code and engaging in fraudulent practices.Issue 3: Amount Deposited by the Petitioner Under Duress:The Petitioner deposited Rs. 80,00,000 with the Respondents during the investigation. The Petitioner claimed the deposits were made under duress, disputing the voluntary nature of the payments.Issue 4: Dispute Over Conditions Imposed for Provisional Release:The Petitioner contested the conditions imposed for the provisional release of the cranes as arbitrary and harsh. The Petitioner argued against the requirement of a bank guarantee and objected to the directive to produce the cranes for inspection, citing the intention to sell them in the normal course of business.Issue 5: Interpretation of Section 110A of the Customs Act, 1962:The judgment referred to Section 110A, which allows for the provisional release of seized goods pending adjudication, subject to conditions imposed by the adjudicating authority to secure the interests of the Revenue. The Court emphasized the authority's discretion in demanding security and setting conditions for release, as highlighted in a prior judgment.In conclusion, the Court ruled in favor of the Revenue, directing the Petitioner to furnish a bank guarantee of Rs. 40,00,000 and a P.D. bond for the provisional release of the remaining 7 cranes. The bank guarantee was deemed necessary to secure duty, redemption fine, and potential penalties during the adjudication proceedings. The judgment highlighted the importance of safeguarding the Revenue's interests while allowing for the provisional release of seized goods under Section 110A of the Customs Act, 1962.