2024 (1) TMI 197 - AT - Customs

Provisional release granted for seized garlic imports under SAFTA benefit pending origin investigation

CESTAT Chandigarh allowed provisional release of seized garlic imported under SAFTA benefit notification. The court found goods were perishable and ... Seeking provisional release of seized garlic imported - availing the benefit of Notification No.99/2011-CUS dated 09.11.2011, applicable to the imports under South Asia Free Trade Area Agreement (SAFTA) - HELD THAT:- The goods are of perishable nature and it will not be anybody’s gain to keep the goods rotting under seizure. It is found that, prima facie, the evidence available with the Department is in the form of transcripts of messages and the investigation is in progress and the Department is yet to negate the certificate issued by the authorities in Afghanistan. Understandably, the enquiry as per the procedure laid down under the Notification regarding the rules of origin is likely to take some time. Therefore, there is nothing wrong in releasing the goods provisionally as has been ordered by the competent authority. However, the only difference of opinion lies in the quantum of Bond and Bank Guarantee to be furnished for such release. In the instant case, the goods have been cleared by the jurisdictional Customs Authorities after satisfying themselves about the conditions of import and the same were seized by DRI at a later date; the goods are of perishable nature and the exact origin of the goods is yet to be ascertained. Therefore, considering the facts and circumstances of the case, we find that the following conditions would suffice in the interest of justice: (i) The importers shall furnish a Bond covering the full value of goods and bind themselves to pay the differential duty along with fine, penalty and interest that may be levied on adjudication of the case. (ii) The importers shall furnish Bank Guarantee equal to 30% of the alleged differential duty. Petition disposed off. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether provisional release of seized imported perishable goods is appropriate where investigation into origin is ongoing and the importer claims benefit under a preferential origin notification. 2. What conditions - specifically the quantum of bond and bank guarantee - are lawful and proportionate for provisional release where differential duty, fines and penalties are alleged but adjudication is pending. 3. Whether higher security measures (e.g., full duty bank guarantee or larger percentages) imposed by the adjudicating authority are justified where the importer is a trader (not a manufacturer) and the goods have deteriorating/perishable character. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Provisional release of seized perishable imported goods while origin investigation is ongoing Legal framework: Provisional release is an administrative relief permitting release of seized goods subject to conditions ensuring recovery of dues if adjudication goes against the importer; rules of origin under the preferential trade notification prescribe a procedure for enquiry into origin. Precedent treatment: High Courts have granted provisional release in cases where seizure risked deterioration of goods and where origin/investigation was yet to be finally determined; authorities have been directed to adopt reasonable conditions rather than oppressive securities. Interpretation and reasoning: The Tribunal found that the goods are perishable and prolonged seizure would lead to deterioration, producing no benefit to Revenue or importer. The Department's evidence on origin is prima facie limited to message transcripts and the certificate of origin issued by foreign authorities has not been negated; thus enquiry under rules of origin will take time. In these circumstances provisional release is appropriate. Ratio vs. Obiter: Ratio - provisional release may be granted for perishable goods during an origin investigation where the Revenue has not conclusively negated the claimed origin; Obiter - observations on the quality of the Department's evidence (message transcripts) as prima facie material). Conclusion: Provisional release of the seized perishable goods was justified subject to appropriate securities to protect Revenue's interest. Issue 2 - Lawful and proportionate conditions for provisional release: quantum of bond and bank guarantee Legal framework: Conditions for provisional release must balance Revenue's interest in recovery of alleged differential duty/fines/penalties and the importer's right not to be subjected to oppressive pre-adjudicatory security; precedents guide acceptable quantum of bond and bank guarantee (bond for full value; bank guarantee as percentage of alleged differential duty). Precedent treatment (followed/distinguished): The Tribunal relied on High Court jurisprudence (e.g., decisions endorsing bond for full value and bank guarantee in the range of approximately 25-30% of differential duty) and distinguished decisions relied upon by the Department that concerned non-perishable or smuggled goods where higher security was permitted. Interpretation and reasoning: The Tribunal considered that unconditional imposition of bond equal to full value of goods and bank guarantee for 100% of differential duty (and additional BG for penalties) is harsh, particularly for perishable goods and where the origin is not finally determined. Citing consistent High Court practice, the Tribunal held that a bond covering full value of goods (binding importer to pay differential duty, fines, penalty and interest if adjudication so directs) together with a bank guarantee equal to 30% of alleged differential duty is sufficient to protect Revenue while avoiding oppressive pre-adjudicatory conditions. Ratio vs. Obiter: Ratio - requirement of a bond for full value and a BG of 30% of alleged differential duty as a proportionate condition for provisional release of perishable imported goods pending adjudication of origin; Obiter - criticism of higher securities in cases involving traders and perishable goods, and remarks distinguishing facts of cited contrary authorities. Conclusion: The conditions imposed by the adjudicating authority were excessive; the Tribunal substituted them with (i) a bond covering full value of goods (undertaking to pay differential duty, fines, penalties and interest) and (ii) a bank guarantee equal to 30% of the alleged differential duty. Issue 3 - Applicability of higher security for trader-importers and availability of alternative securities (e.g., pledge of property) Legal framework: Security conditions may take various forms (bond, bank guarantee, pledge) but must be commensurate with risk of non-recovery; identity of importer (trader vs manufacturer) and locus of control over goods are relevant to assessing recovery risk. Precedent treatment: Authorities have in some instances required higher securities where goods were non-perishable or where risk of evasion was high; courts have moderated conditions where facts showed perishable goods, ongoing origin disputes or potential hardship. Interpretation and reasoning: The Tribunal observed that trader-importers may present recovery difficulties, but in the present factual matrix - goods already cleared by customs originally, perishable nature, and unresolved origin enquiry - the imposition of excessively large bank guarantees was not warranted. The Tribunal did not decide on alternative security forms (e.g., property pledge) as a general rule, but set a proportionate BG threshold (30%) and sustained bond for full value, thereby addressing Revenue's recovery concern without requiring unduly onerous BGs. The Tribunal expressly refrained from opining on the ultimate merits of the origin dispute. Ratio vs. Obiter: Ratio - identity as trader does not automatically justify imposition of full-duty bank guarantee where other facts (perishability, unsettled origin) justify moderated security; Obiter - comments on practical difficulties in recovery from trader-importers and on alternative modes of security (pledge) were not adjudicated as binding rules. Conclusion: A modulated security regime (bond for full value; BG 30% of alleged differential duty) suitably balances Revenue protection and fairness to importer-traders; alternative securities were not mandated but may be considered by authorities consistent with these principles. Conclusion of the Tribunal on provisional-release conditions The Tribunal allowed provisional release subject to (i) bond covering full value of goods binding payment of differential duty, fines, penalties and interest, and (ii) bank guarantee equal to 30% of alleged differential duty, directing release within two working days upon fulfillment of these conditions and without expressing any opinion on the substantive adjudication of origin or liability.