2022 (4) TMI 216 - AT - Customs

Tribunal adjusts excessive security deposit under Customs Act, emphasizing proportionality in setting bond amounts.

The Tribunal partially allowed the appeal by M/s Mukesh Steel challenging the terms of provisional release under Section 110A of the Customs Act, 1962. ... Provisional release under Section 110A of the Customs Act - bond for full value of seized goods - bank guarantee/security for provisional release - discretion under Circular No. 35/2017-Cus to increase or decrease security - differential duty, fine and penalties as components of security - excessive security reducedProvisional release under Section 110A of the Customs Act - bank guarantee/security for provisional release - discretion under Circular No. 35/2017-Cus to increase or decrease security - differential duty, fine and penalties as components of security - bond for full value of seized goods - excessive security reduced - Appropriateness of the terms of provisional release imposed by the Competent Authority, specifically (a) bond equal to value of goods and (b) bank guarantee fixed at 2.5 times the differential duty. - HELD THAT: - The Circular No. 35/2017-Cus contemplates provisional release under Section 110A subject to a bond for the full/estimated value of seized imported goods and a Bank Guarantee or security to cover differential duty, potential fine in lieu of confiscation and penalties, with express discretion to increase or decrease the security depending on case-specific reasons. In the present case the goods had been cleared from Customs and were lying in the appellant's premises; part were further processed and 75% of the detained quantity was found to be of domestic origin, while proceedings in respect of the balance were pending investigation. The seizure itself was not challenged before the authorities and the appeal relates solely to relaxation of provisional release conditions. Applying the Circular and exercising the discretion recorded in writing, the Tribunal found the security fixed at 2.5 times the differential duty excessive in these factual circumstances and reduced the bank guarantee/security requirement to an amount equal to the quantified differential duty, while preserving the requirement of a bond equal to the value of the goods. [Paras 6, 8]Bank guarantee/security fixed at 2.5 times the differential duty is excessive and is reduced to an amount equal to the differential duty; bond to remain equal to the value of the goods; appeal partly allowed.Final Conclusion: The appeal is partly allowed: the Competent Authority's requirement of bank guarantee equal to 2.5 times the differential duty is reduced to a bank guarantee equal to the quantified differential duty, while the bond equal to the value of the goods is upheld. Issues:1. Challenge to terms of provisional release under Section 110A of the Customs Act, 1962.2. Discretion of Competent Authority in fixing the security amount for provisional release.3. Delay in issuing a notice post-seizure.4. Quantum of security deposit in relation to differential duty amount.Analysis:1. The appeal filed by M/s Mukesh Steel challenges the terms of provisional release set by the Deputy Commissioner under Section 110A of the Customs Act, 1962. The appellant contests the stringent conditions imposed, arguing that the Circular No. 35/2017-Cus does not provide specific guidelines for determining the bond and bank guarantee amounts. The appellant relies on precedents where lower security amounts were accepted for release of goods. The appellant asserts that a significant portion of the detained goods were domestically procured, emphasizing the undue delay in releasing them.2. The Competent Authority's discretion in setting the security deposit is a key issue. The Authorized Representative highlights Circular No. 35/2017-Cus, which grants flexibility to the authority in fixing provisional release conditions. The representative cites a Tribunal case where a high bank guarantee was set relative to the duty amount, emphasizing the authority's power to determine security amounts based on case specifics. The ongoing investigation status is mentioned to justify the delay in issuing a Show Cause Notice.3. The appellant raises concerns regarding the delay in issuing a notice post-seizure, citing a Bombay High Court case to support the argument that in such instances, the seizure should be vacated. However, the Tribunal notes that the challenge in the present appeal solely pertains to the terms of provisional release and not the seizure itself, as no challenge to the seizure was made before lower authorities.4. Evaluating the quantum of security deposit, the Tribunal finds the 2.5 times differential duty amount as excessive. Considering that a significant portion of the detained goods were of Indian origin and the remaining goods were yet to receive a Show Cause Notice, the Tribunal reduces the security amount to match the differential duty quantified in the order. The bond amount remains unchanged at the value of the goods, and the appeal is partly allowed based on these adjustments.This comprehensive analysis of the judgment delves into the issues raised by the appellant, the Competent Authority's discretion, the delay in issuing a notice post-seizure, and the Tribunal's decision on the quantum of security deposit, providing a detailed overview of the legal reasoning and precedents considered in reaching the final decision.