Court rules against Circular mandating bank guarantee for goods release under India-Sri Lanka FTA

The Court ruled in favor of the petitioner in a case concerning exemption from customs duty under the India-Sri Lanka Free Trade Agreement. The Court held that Circular No. 34/2015-CI restricting the discretion of the quasi-judicial authority in ordering provisional release of goods by mandating a bank guarantee was not legally sustainable. The Court directed the provisional release of goods subject to the petitioner executing a bond and providing a bank guarantee, emphasizing that the authority should have discretion in imposing specific conditions for release without a mandatory bank guarantee requirement.

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Issues:
1. Exemption from customs duty under India-Sri Lanka Free Trade Agreement.
2. Circular No. 34/2015-CI issued by Customs Authorities regarding due diligence for imports.
3. Provisional release of goods subject to bank guarantee and bond requirements.

Exemption from Customs Duty:
The petitioner imported Areca Nuts from Sri Lanka under the India-Sri Lanka Free Trade Agreement, enjoying exemption from customs duty as per Notification No. 43/2003-Customs. However, an alert Circular No. 34/2015-CI emphasized the need for due diligence in examining the certificate of origin for imports from Sri Lanka. The Circular stated that in cases where evidence indicates imports from a third country, appropriate action should be taken. The petitioner was required to furnish a 100% bank guarantee for the duty element, which the petitioner found objectionable.

Circular No. 34/2015-CI:
The Court noted that Circular No. 34/2015-CI restricted the discretion of the quasi-judicial authority under the Customs Act, 1962 in ordering provisional release of goods by mandating a bank guarantee equivalent to the differential duty. The Court ruled that such a restriction on discretion was not legally sustainable. The Court held that the Directorate of Revenue Intelligence cannot insist on imposing a bank guarantee in all cases of provisional release, thereby directing that the circular should not be enforced in this manner.

Provisional Release of Goods:
Referring to a previous case, the Court directed the provisional release of goods in favor of the petitioner. The petitioner was required to execute a bond equal to 100% of the goods' value and provide a bank guarantee for 30% of the differential duty, with an auto-renewal clause following RBI guidelines. The Court's decision was based on the principle that the quasi-judicial authority should have the discretion to order provisional release subject to specific conditions, without being bound by a mandatory requirement for a bank guarantee. The petition and application were disposed of accordingly, with the order to be provided to the parties' counsel.

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