Seized jewellery can be released pending ownership adjudication when revenue is secured by an unconditional bank guarantee.
Seized jewellery may be released pending adjudication where ownership remains disputed, if the revenue is fully secured by an unconditional and irrevocable bank guarantee. The Bombay HC held that the department's interest was protected by the guarantee and that release would not prejudice the revenue despite the pending ownership dispute. It also held that a circular requiring unconditional acceptance of ownership did not bar release on the peculiar facts, because the ownership question was still undecided and the security offered was adequate. The impugned orders were set aside and release was directed, leaving title to be determined in the assessment proceedings.
Issues: (i) Whether seized jewellery could be released pending adjudication of ownership on furnishing of an unconditional and irrevocable bank guarantee; (ii) whether the requirement of an unconditional acceptance of ownership in the departmental circular barred release in the peculiar facts of the case.
Issue (i): Whether seized jewellery could be released pending adjudication of ownership on furnishing of an unconditional and irrevocable bank guarantee.
Analysis: The jewellery had been seized in search proceedings and the question of ownership was still pending before the tax authorities. The petitioners offered a bank guarantee of a nationalised bank for the value of the jewellery, and the Court accepted that such security would adequately protect the revenue. Since the jewellery admittedly belonged to one of the three petitioners and the revenue itself claimed ownership in the individual, release of the assets would not prejudice the department if secured appropriately.
Conclusion: Yes. The seized jewellery was directed to be released against an unconditional and irrevocable bank guarantee.
Issue (ii): Whether the requirement of an unconditional acceptance of ownership in the departmental circular barred release in the peculiar facts of the case.
Analysis: The circular contemplated release where the assessee unconditionally accepted ownership, but the Court found that the ownership question was itself in dispute. In the special facts of the case, strict insistence on prior acceptance of ownership was treated as unnecessary because the revenue's interests were protected by the bank guarantee and by the undertaking that the guarantee would enure to the revenue even if assessment was ultimately made in the hands of the HUFs.
Conclusion: No. The circular did not prevent release in the peculiar facts of the case.
Final Conclusion: The impugned orders were set aside and the seized jewellery was ordered to be released on furnishing of adequate bank security, leaving the ownership dispute to be decided in the assessment proceedings.
Ratio Decidendi: Where ownership of seized jewellery is genuinely disputed and the revenue's interest is fully secured by an unconditional bank guarantee, the assets may be released pending adjudication notwithstanding a circular requiring prior acceptance of ownership.
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