2017 (12) TMI 628 - HC - Customs

Court sets aside order requiring personal bond and bank guarantee, emphasizes fairness and due process under Customs Act.

The court set aside the impugned order demanding a personal bond and bank guarantee without clear quantification, directing the petitioner to execute a ... Provisional release of seized goods under Section 110A of the Customs Act - mis-declaration of retail selling price and valuation - adjudication levies pending quantification - recovery of duty for past imports without initiation of proceedings - requirement of bank guarantee and personal bond as condition for release - pre-judging pending adjudication - principles of natural justice - judicial review of discretionary ordersRecovery of duty for past imports without initiation of proceedings - requirement of bank guarantee and personal bond as condition for release - principles of natural justice - Validity of demanding bank guarantee to cover alleged duty liability in respect of earlier imports for which no proceedings have been initiated - HELD THAT: - The Court held that the Customs Department cannot withhold the live consignment by insisting security to cover duty liability purportedly arising out of earlier imports for which no show-cause notice or re-opening proceedings have been issued. Demanding recovery of duties for past importations, without initiation of statutory proceedings and without affording the importer an opportunity of being heard, would amount to pre-judging and would violate principles of natural justice. The Court relied on reasoning in analogous decisions criticising revenue practice of compelling importers to meet past demands in provisional-release communications and found the conditions insofar as they seek to cover alleged past liabilities to be unsustainable and illegal. [Paras 5, 11, 14, 15]Demand for bank guarantee to cover duty liability in respect of earlier imports (for which no proceedings have been initiated) is not sustainable and cannot be insisted upon at the provisional-release stage.Adjudication levies pending quantification - provisional release of seized goods under Section 110A of the Customs Act - pre-judging pending adjudication - judicial review of discretionary orders - Whether adjudication levies can be quantified and demanded as part of conditions for provisional release before adjudication is completed - HELD THAT: - The Court observed that although Board Circular contemplates adjudication levies, the quantum of such levies cannot be finally fixed at the provisional stage without affording the importer an opportunity in adjudication. Quantifying and demanding adjudication levies in advance would amount to pre-judging the matter. The scope of judicial review is to ensure that discretion is exercised on relevant materials and not in a manner that pre-empts statutory adjudication. Accordingly, the Court held that adjudication levies must await the adjudicatory process and cannot be summarily quantified and recovered as a condition for provisional release. [Paras 10, 14]Adjudication levies cannot be quantified and exacted at the provisional-release stage prior to adjudication; they cannot be demanded as a pre-judgment condition.Requirement of bank guarantee and personal bond as condition for release - provisional release of seized goods under Section 110A of the Customs Act - judicial review of discretionary orders - Appropriate judicial relief modifying the conditions imposed for provisional release of the live consignment - HELD THAT: - Applying the foregoing conclusions, the Court exercised its supervisory jurisdiction to modify the impugned communication. It directed that the petitioner execute a personal bond and furnish a reduced bank guarantee (the original bank guarantee less the amount claimed for past imports which could not be insisted upon), and made clear that amounts already paid by the petitioner would abide the outcome of adjudication in respect of the live consignment. The Court directed release of the goods upon compliance with these modified conditions within stipulated timelines and directed the authorities to consider any application for waiver of detention and demurrage charges and to issue a detention/demurrage certificate for the period of detention until release. [Paras 15]Impugned conditions modified: petitioner to execute personal bond and furnish reduced bank guarantee; goods to be released on compliance; payments already made to abide adjudication; demurrage/detention certificate to be considered.Final Conclusion: The Court interfered with the provisional-release conditions to the extent that Customs could not be permitted to exact security for alleged past import liabilities or to quantify adjudication levies before adjudication; it directed furnishing of a personal bond and a reduced bank guarantee, ordered release of the goods on compliance, and required consideration of the petitioner's application for waiver and issuance of a detention/demurrage certificate. Issues:Challenge to order under Section 110(A) of the Customs Act for provisional release of goods.Analysis:1. The petitioner imported goods from China, detained due to suspicion of mis-declaration of retail selling price. The petitioner paid substantial amounts as directed, totaling &8377; 17.71 lakh.2. The impugned order demanded a personal bond of &8377; 50,39,326 and a bank guarantee of &8377; 46,69,783 without clear quantification. The petitioner sought details and release without further payment.3. The court noted that adjudication is pending, and demanding quantification prematurely would prejudge the matter. No notice was issued for duty liability on earlier imports, making current conditions unsustainable.4. The respondent argued based on legal precedents from Delhi High Court and Madras High Court, emphasizing compliance with import conditions and penalty provisions for misdeclaration under the Act.5. The court differentiated the case from Delhi High Court judgments, stating the issue was retail price misdeclaration, not prohibition of imports. The correctness of conditions imposed by the respondent was under scrutiny.6. Referring to a Bombay High Court case, the court emphasized the need for clear principles and reasonableness in demanding duties for past imports without due process.7. The court set aside the impugned communication, directing the petitioner to execute a personal bond and furnish a bank guarantee within two weeks. The goods were to be released upon compliance.8. The court directed the Customs Department to consider the petitioner's application for waiver of demurrage and detention charges, issuing a certificate for the period of detention till release.Conclusion:The Writ Petition was disposed of with the above directions, emphasizing the need for fairness, reasonableness, and adherence to due process in matters of provisional release of goods under the Customs Act.