Pre-deposit condition under Customs law satisfied through bank guarantees, so rejection of settlement application was set aside.

Where the dispute was confined to valuation of innocuous Christmas decoration items and the importer had kept alive bank guarantees for the disputed amount, appropriation of those guarantees was treated as satisfying the pre-deposit condition for entertaining the settlement application under the Customs Act. The rejection of the application had rested only on alleged noncompliance with that statutory precondition and not on the merits. The Madras HC therefore set aside the rejection order and directed the settlement commission to entertain and decide the application on merits after appropriation of the bank guarantees.

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Issues: Whether the rejection of the settlement application for noncompliance with the pre-deposit condition under the Customs Act, 1962 was liable to be set aside and whether the bank guarantees furnished by the importer could be appropriated towards that condition.

Analysis: The goods were undisputedly innocuous Christmas decoration items, with no dispute on importability, classification, or rate of duty, and the controversy was confined to valuation. The importer had already furnished and kept alive bank guarantees for the disputed amount. In these peculiar facts, the Court held that appropriation of the subsisting bank guarantees by the Customs Department would satisfy the statutory precondition for entertaining the settlement application under the first proviso to Section 127-B(1) of the Customs Act, 1962. The rejection order had proceeded only on noncompliance with that condition and not on merits.

Conclusion: The rejection order was set aside and the settlement commission was directed to entertain and decide the importer's application on merits after appropriation of the bank guarantees.

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