2019 (6) TMI 30 - HC - Customs

Instructions to Withhold Bank Guarantee Quashed, Security Amount to be Released

Ambika Vikas Udyog Versus Directorate of Revenue Intelligence Delhi Zonal Unit & Anr.

The Court found no legal justification for the Directorate of Revenue Intelligence's instructions to withhold the bank guarantee/security deposited by the ... Release of security - Fraudulent diversion of gold jewellery meant for export - grievance of the Petitioner is that for more than three years since the above instruction, the MMTC has been constrained not to release the BG/ security furnished by the Petitioner to the extent of ₹ 81,70,000/- - Section 110 (3) of Customs Act - HELD THAT:- even assuming that the Petitioner failed to appear on the dates fixed in those proceedings, the Adjudicating Officer was supposed to proceed and pass the adjudication order in accordance with law. - Consequently, the failure by the Petitioner to appear in those proceedings cannot be an excuse to delay the adjudication order. The Court finds no justification in law for continuation of the impugned instructions of the DRI to the MMTC by its letters dated 29th October, 2015 and 17th December, 2015. The said instructions are hereby quashed. MMTC will now proceed in the matter as if the two instructions dated 29th October, 2015 and 17th December, 2015 of the DRI are no longer operational. MMTC shall release the security/BG amount to the Petitioner, to the extent it is entitled in accordance with law, forthwith and in any event not later than 10 days from today. As far as the SCN is concerned, if no further hearings are contemplated, the Adjudication Officer should proceed to pass the adjudication order not later than three months from today in accordance with law - petition allowed. Issues Involved:1. Direction to the Directorate of Revenue Intelligence (DRI) to issue a no objection certificate (NOC) for the release of the bank guarantee (BG) furnished by the Petitioner to MMTC Limited (MMTC).2. Legality of the DRI’s instructions to MMTC to withhold the BG/security deposited by the Petitioner.3. Justification for the continuation of the DRI’s instructions to MMTC in the absence of adjudication of the show cause notice (SCN).Issue-Wise Detailed Analysis:1. Direction to the Directorate of Revenue Intelligence (DRI) to issue a no objection certificate (NOC) for the release of the bank guarantee (BG) furnished by the Petitioner to MMTC Limited (MMTC):The Petitioner, engaged in the export of gold jewellery, procured gold from MMTC against a security deposit in the form of a BG. The Petitioner sought a direction to the DRI to issue an NOC to MMTC for the release of the BG/security. The Petitioner argued that despite fulfilling their obligations and depositing a total security of Rs. 81,70,000/- with MMTC, the DRI’s instructions to MMTC to withhold the BG/security were unjustified.2. Legality of the DRI’s instructions to MMTC to withhold the BG/security deposited by the Petitioner:The DRI commenced an investigation into alleged fraudulent diversion of gold jewellery meant for export and issued instructions to MMTC to withhold the BG/security deposited by the Petitioner. The DRI justified its actions under Section 110 (3) of the Customs Act, 1962, which authorizes the 'Proper Officer' to seize any documents or things useful for any proceedings under the Act. However, the Court noted that the DRI did not explicitly treat the instructions as a 'seizure' under Section 110 (3) and failed to provide a legal basis for such instructions.3. Justification for the continuation of the DRI’s instructions to MMTC in the absence of adjudication of the show cause notice (SCN):The Petitioner contended that the DRI’s instructions to MMTC to withhold the BG/security were unjustified, especially since the SCN issued on 27th November 2017 had not yet been adjudicated. The Court observed that the mere pendency of the SCN proceedings did not justify the continuation of the DRI’s instructions to MMTC. The Court emphasized that the DRI had not pointed out any provision in the Act that permitted the issuance of such instructions. The Court also referenced the Bombay High Court’s decision in Lawson Tours and Travels (India) P. Ltd. v. Dy. Director, which quashed similar actions of freezing bank accounts pending the adjudication of SCNs.Conclusion:The Court found no legal justification for the continuation of the DRI’s instructions to MMTC to withhold the BG/security deposited by the Petitioner. The instructions dated 29th October 2015 and 17th December 2015 were quashed. MMTC was directed to release the security/BG amount to the Petitioner forthwith, and the Adjudication Officer was instructed to pass the adjudication order within three months if no further hearings were contemplated. The petition was allowed in the above terms.