2019 (10) TMI 430 - HC - Customs

Court Upholds Revenue's Bank Guarantee Directive Pending Appeal

The court upheld the Revenue's direction for the petitioner to maintain the remaining bank guarantees pending appeal, deeming it necessary to protect the ... Maintainability of petition - compliance with the requirement of pre-deposit - Maintaining the Bank guarantees further - direction to the respondents 2 & 3 to discharge the remaining bank guarantees to the petitioner. Whether the petitioner is entitled to seek for return of the remaining bank guarantees over and above the sum representing 7.5% of the duty demand towards pre-deposit as contemplated under Section 129E of the Customs Act, 1962, while preferring the appeal before the CESTAT? HELD THAT:- It is seen that as against the order of adjudication, the petitioner has already approached CESTAT and filed the appeal. There is no dispute to the fact that pending disposal of the appeal, the mandatory requirement for the petitioner is to make pre-deposit of 7.5% of the duty demand. It is also not in dispute that the said mandatory requirement of pre-deposit of 7.5% of the duty demand has also been met with by the petitioner by enforcement of three bank guarantees to the tune of ₹ 1,08,40,000/- and also by appropriation of ₹ 26 Lakhs, already paid by the petitioner on 16.02.2009 - Therefore, it is evident that the statutory requirement of making pre-deposit pending disposal of the appeal has been met with by the petitioner. When such being the factual position, it is to be seen as to whether the respondent/Revenue is entitled to direct the petitioner to keep the remaining bank guarantees alive pending disposal of the appeal. The claim made by the petitioner before this Court that the respondents are not entitled to seek for keeping remaining bank guarantees alive, cannot be sustained for the simple reason that the order of adjudication put to challenge before the Tribunal includes a direction for enforcement of all 29 bank guarantees totally valued at ₹ 3,44,16,000/-, which has to be considered and decided only by the Tribunal. At this juncture, it is relevant to note that making a pre-deposit of 7.5% of the duty demand is the statutory obligation of the appellant/petitioner to maintain the appeal before the appellate forum. Compliance of such statutory requirement itself, cannot be stated as the reason for returning any balance money lying in the hands of the Revenue, which was collected during pendency of the adjudication proceedings, especially, when the Revenue has succeeded, before the Adjudicating Authority in confirming the demand. Therefore, the Revenue cannot be faulted in either retaining the money pending disposal of the appeal or asking the appellant/petitioner to keep the bank guarantees alive. The very agreement of the Revenue to make adjustment of the sum equivalent to 7.5% of pre-deposit out of such bank guarantees itself, is a concession shown and therefore, the petitioner should be satisfied with the same. Petition dismissed. Issues Involved:1. Legality of the communication directing the petitioner to keep the remaining bank guarantees alive.2. Entitlement of the petitioner to seek discharge of the remaining bank guarantees.3. Compliance with the statutory requirement of pre-deposit pending appeal before the CESTAT.4. Justification of the Revenue's action to retain the bank guarantees.Detailed Analysis:1. Legality of the Communication Directing the Petitioner to Keep the Remaining Bank Guarantees Alive:The petitioner challenged the communication dated 07.05.2018, wherein the third respondent directed the petitioner to keep the remaining bank guarantees alive until further orders. The court examined whether this direction was legally justified. It was noted that the adjudication order dated 28.04.2018 included a directive to enforce all 29 bank guarantees totaling Rs. 3,44,16,000/- towards the duty confirmed. The court found that this directive was part of the adjudication order and thus fell within the purview of the Tribunal to decide upon. Consequently, the court held that the direction to keep the bank guarantees alive was not arbitrary or unreasonable, as it aimed to safeguard the interest of the Revenue pending the appeal.2. Entitlement of the Petitioner to Seek Discharge of the Remaining Bank Guarantees:The petitioner sought a direction to discharge the remaining bank guarantees after complying with the pre-deposit requirement. The court noted that the petitioner had filed an appeal before the CESTAT and had complied with the pre-deposit requirement of 7.5% of the duty demand, amounting to Rs. 1,32,84,728/-. This included the encashment of three bank guarantees totaling Rs. 1,08,40,000/- and the appropriation of Rs. 26 Lakhs already paid by the petitioner. However, the court held that the petitioner was not entitled to seek the discharge of the remaining bank guarantees, as the adjudication order included a directive to enforce all 29 bank guarantees, which was subject to the Tribunal's decision.3. Compliance with the Statutory Requirement of Pre-Deposit Pending Appeal Before the CESTAT:The court acknowledged that the petitioner had complied with the statutory requirement of pre-deposit of 7.5% of the duty demand as mandated under Section 129E of the Customs Act, 1962. This compliance was necessary to maintain the appeal before the appellate forum. The court emphasized that compliance with this statutory requirement did not entitle the petitioner to the return of any balance money or the discharge of the remaining bank guarantees, especially when the Revenue had succeeded in the adjudication proceedings.4. Justification of the Revenue's Action to Retain the Bank Guarantees:The court found that the Revenue's action to retain the bank guarantees and direct their renewal was justified. The adjudication order confirmed the demand of differential duty, redemption fine, penalty, and interest, amounting to several crores of rupees. The court held that retaining the bank guarantees was necessary to safeguard the Revenue's interest pending the appeal. The court also noted that the Revenue's agreement to adjust the sum equivalent to 7.5% of the pre-deposit out of the bank guarantees was a concession shown to the petitioner.Conclusion:The court dismissed the writ petition, holding that the Revenue's direction to keep the remaining bank guarantees alive was neither arbitrary nor unreasonable. The court found no ground to exercise its discretionary jurisdiction under Article 226 of the Constitution of India to interfere with the impugned order. The petitioner's compliance with the pre-deposit requirement did not entitle them to the discharge of the remaining bank guarantees, as the adjudication order, which included the enforcement of all 29 bank guarantees, was pending appeal before the CESTAT.