2020 (6) TMI 72 - HC - Customs

CESTAT's Power to Direct Provisional Release & Fix Terms Upheld

The court held that the CESTAT has the power to direct provisional release and fix terms, including modifying terms set by the adjudicating authority. The ... Provisional release under Section 110A - Discretionary jurisdiction of adjudicating authority - Appellate power to confirm, modify or annul and to fix terms of release - Scope of interference under Section 130 - substantial question of law and perversity - Admissibility and evidentiary value of statements recorded under Section 108/138B - Requirement of a registered Bill of Entry for licit import - Executive circulars cannot supplant statuteAppellate power to confirm, modify or annul and to fix terms of release - Provisional release under Section 110A - Whether the Tribunal could itself order provisional release and fix its terms instead of remanding the matter to the adjudicating authority. - HELD THAT: - The Court held that the Tribunal, under its statutory power to 'confirm, modify or annul' the adjudicating authority's order, is competent to direct provisional release and fix terms thereof rather than mandating a remand. Section 129B(1) vests the Tribunal with wide powers and remand is an alternative, not a mandatory course. The Court further found that remand here would have been futile because the ADG's order was effectively a refusal to consider provisional release (rendering Section 110A otiose) and thus the Tribunal did not usurp jurisdiction by fixing terms. Consequently the Tribunal's exercise in directing provisional release and stipulating conditions was within its jurisdiction and not a substitution of discretion impermissibly exercised by it. [Paras 54, 56, 57]Tribunal had power to direct provisional release and fix terms; quashing the ADG's order was upheld.Scope of interference under Section 130 - substantial question of law and perversity - Provisional release under Section 110A - Whether the High Court should interfere with the Tribunal's discretionary grant of provisional release in exercise of Section 130. - HELD THAT: - The Court reiterated that appeals under Section 130 lie only on substantial questions of law and that findings of fact by the Tribunal are final unless perverse. Provisional release under Section 110A is a discretionary, interlocutory exercise; appellate interference is limited to cases of perversity, irrationality, ignoring material evidence or misapplication of law. The Court applied these standards and proceeded to examine whether the Tribunal's discretion in this case suffered from such vices. [Paras 37, 38, 43, 61]Interference is permissible only for perversity or where a substantial question of law arises; ordinary discretionary exercise of provisional release will not be disturbed.Requirement of a registered Bill of Entry for licit import - Provisional release under Section 110A - Validity of provisional release in respect of the seized gold/jewellery where imports were supported by a registered Bill of Entry versus where they were supported by an unregistered/unsigned Bill of Entry. - HELD THAT: - The Court differentiated between two categories of airport-seized jewellery. For the quantity covered by a duly registered, signed and apprised Bill of Entry (25400.06 g), the Tribunal's finding that the assessing officer had examined documents and satisfied himself that the goods were identical to goods earlier exported for exhibition stood unchallenged and was not perverse; provisional release was therefore permissible. By contrast, the quantity covered by an unregistered, undated and unsigned Bill of Entry (25299.68 g) lacked the fundamental statutory prerequisite of a registered Bill of Entry under Section 46; treating that quantity as licit for provisional release by clubbing it with the lawful consignment was legally untenable and amounted to a perverse exercise of discretion. The Court set aside the Tribunal's direction to release the unregistered quantity. [Paras 69, 72, 79, 80, 81]Provisional release upheld for goods covered by a registered Bill of Entry (25400.06 g); provisional release set aside for goods covered only by an unregistered/unsigned Bill of Entry (25299.68 g).Admissibility and evidentiary value of statements recorded under Section 108/138B - Scope of interference under Section 130 - substantial question of law and perversity - Whether statements recorded during investigation (under Section 108) could be used in opposition to provisional release without being admitted in adjudication. - HELD THAT: - The Court observed that statements recorded under Section 108 are subject to the procedural safeguards and relevancy rules in Section 138B; such statements acquire probative value only after being admitted in evidence in adjudication (or when conditions in clause (a) of Section 138B(1) apply). Accordingly, statements recorded in investigation cannot be used as a standalone basis to refuse provisional release. The Tribunal therefore rightly declined to treat those investigative statements as conclusive to deny provisional release of the registered consignment. [Paras 76, 77]Investigative statements not admitted in adjudication cannot, by themselves, justify refusal of provisional release; reliance on them at this interlocutory stage is unsustainable.Executive circulars cannot supplant statute - Provisional release under Section 110A - Whether Circular 35/2017 (restricting provisional release for certain categories) can be applied to deny provisional release when Section 110A contains no such exclusions. - HELD THAT: - The Court held that para 2 of Circular 35/2017 purporting to categorically exclude certain classes of goods from provisional release is contrary to the statutory language of Section 110A, which permits provisional release of 'any goods, documents or things'. An executive instruction cannot curtail a statutory provision; accordingly the Circular insofar as it purports to render categories ineligible for provisional release is void and unenforceable. [Paras 51, 52]Circular 35/2017 cannot be read to override Section 110A; categorical exclusions in the Circular are void.Provisional release under Section 110A - Security and terms for provisional release - Whether the Tribunal's prescribed security (bond and Bank Guarantee) for provisional release was adequate and what modification, if any, was required. - HELD THAT: - The Court noted that the impugned order did not adequately record reasoning for selecting the Bank Guarantee fixed by the Tribunal. Considering the value as reckoned in the Show Cause Notice and precedents dealing with bank guarantees in provisional release matters, the Court found the Bank Guarantee of Rs. 1.25 crores inadequate. In the interests of revenue protection, the Court modified the terms to require a bond for the full value of the goods and a Bank Guarantee with auto-renewal for Rs. 10 crores (over 30% of the reckoned value), and ordered safeguards including open premises and weekly account statements to prevent diversion or misuse. [Paras 83, 84, 86, 87]Terms modified: respondent to furnish bond for full value and a Bank Guarantee of Rs. 10 crores with auto-renewal; premises open to inspection and weekly accounts to be furnished.Final Conclusion: The High Court upheld the Tribunal's power to direct provisional release and to fix terms; it affirmed provisional release of the goods seized from the respondent's workshop and of 25,400.06 g of airport-seized jewellery supported by a registered Bill of Entry, but quashed the Tribunal's direction to release 25,299.68 g of jewellery unsupported by a registered Bill of Entry. The Court held that CBEC Circular 35/2017 cannot override Section 110A, refined the security conditions (full-value bond and a Rs. 10 crore Bank Guarantee with auto-renewal), and imposed safeguards including open premises for inspection and weekly utilization accounts; appeal disposed accordingly. Issues Involved:1. Whether the CESTAT can substitute its view for the discretion of the Adjudicating Authority under Section 110A of the Customs Act.2. Whether the appellate jurisdiction of the CESTAT against an order passed under Section 110A is restricted to examining whether such an order has been passed after duly considering the law in respect of provisional release and not passed arbitrarily.3. Whether the appellant is entitled to provisional release of the seized gold in question in view of the facts and circumstances of this case.Detailed Analysis:Issue 1: Substitution of CESTAT's View for the Adjudicating Authority's DiscretionThe court held that the power and jurisdiction of the CESTAT, hearing an appeal against an order of provisional release, is coequal with the power exercised by the adjudicating authority. The CESTAT, therefore, has the power to direct provisional release and to fix the terms thereof. The court noted that the adjudicating authority, in this case, did not fix any terms for provisional release but held that it would be premature to arrive at any conclusion about provisional release before completion of adjudication proceedings. The court found this view untenable and agreed with the CESTAT's decision to quash the order of the ADG, DRI.Issue 2: Appellate Jurisdiction of CESTATThe court clarified that the CESTAT's jurisdiction is not limited to merely examining the legality of the adjudicating authority's order but extends to passing orders for provisional release if the adjudicating authority's decision is found to be unsustainable. The court held that the CESTAT's power to confirm, modify, or annul the order of the adjudicating authority includes the authority to fix terms for provisional release.Issue 3: Entitlement to Provisional Release of Seized GoldThe court upheld the CESTAT's decision to allow provisional release of the gold, gold jewellery, and silver seized from the warehouse premises of the respondent, as well as 25400.06 grams of gold jewellery covered by a registered Bill of Entry. The court noted that the assessing officer had allowed clearance of this jewellery after satisfying himself that it was the same as that exported for exhibition. The court found no reason to interfere with the CESTAT's decision on this point.However, the court set aside the CESTAT's decision to allow provisional release of 25299.68 grams of gold jewellery, which was not covered by any registered Bill of Entry. The court held that the importation of this quantity was invalid and irregular ab initio, and the exercise of discretion by the CESTAT in allowing provisional release of this quantity was untenable in law.Terms of Provisional ReleaseThe court modified the terms of provisional release set by the CESTAT. It directed the respondent to furnish a bond for the full value of the seized goods, along with a Bank Guarantee for Rs. 10 crores, containing an auto-renewal clause. The court noted that this would sufficiently safeguard the interests of the Revenue.Conclusion1. The CESTAT has the power to direct provisional release and fix the terms thereof.2. The CESTAT's jurisdiction includes passing orders for provisional release if the adjudicating authority's decision is found unsustainable.3. The court upheld the provisional release of certain quantities of gold and set aside the provisional release of gold not covered by a registered Bill of Entry. The terms of provisional release were modified to require a bond for the full value of the goods and a Bank Guarantee for Rs. 10 crores.