Court rules enforcement of bank guarantees under Customs Act unsustainable due to circular, orders continuity until stay resolved.

The Court held that the Deputy Commissioner's enforcement of bank guarantees under the Customs Act, 1962 was unsustainable in light of Circular No. 396/29/98-CX. It ruled that the bank guarantees should remain in force until the stay application is resolved by the Appellate Authority, emphasizing adherence to departmental circulars for procedural fairness in customs duty recovery matters. The writ petition was allowed in favor of the petitioner to maintain the continuity of the bank guarantees until the stay application's conclusion.

---

---

Issues:
Enforcement of bank guarantees under the Customs Act, 1962 based on a duty demand and the applicability of Circular No. 396/29/98-CX.

Analysis:
The judgment in this case revolves around the enforcement of bank guarantees by the Deputy Commissioner of Customs under the Customs Act, 1962. The petitioner had filed Bills of Entry seeking clearance of goods and furnished bank guarantees against provisional assessment of Customs duty. Subsequently, a duty demand was confirmed, and the Deputy Commissioner directed the enforcement of the bank guarantees. The key contention was whether this enforcement was justified in light of Circular No. 396/29/98-CX, dated 2nd June, 1998. The petitioner argued that the direction for enforcement was unwarranted, citing the Circular, which emphasized refraining from coercive actions for duty recovery pending appeal/stay applications.

The Circular highlighted the procedure for recovering excise dues during the pendency of stay applications before the Commissioner (Appeals), emphasizing a period for payment before resorting to coercive measures. It also referenced a Bombay High Court order directing timely disposal of stay applications without coercive actions for revenue recovery. The Court acknowledged the binding effect of the Circular, citing previous judgments that deemed departmental circulars as binding on Revenue authorities. It emphasized that the Revenue cannot act contrary to such instructions, maintaining that the bank guarantees should remain operative until the disposal of the stay application.

Consequently, the Court held that the action of seeking enforcement of bank guarantees by the Deputy Commissioner was unsustainable. It ruled that the bank guarantees should remain in force until the stay application is disposed of by the Appellate Authority. However, it clarified that the decision on the stay application rests with the Appellate Authority and is not influenced by the Court's ruling on the bank guarantees. The writ petition was allowed in favor of the petitioner to uphold the continuity of the bank guarantees until the stay application's resolution.

In conclusion, the judgment underscores the importance of adhering to departmental circulars like Circular No. 396/29/98-CX to regulate the enforcement of bank guarantees in customs matters. It upholds the principle that coercive actions for duty recovery should be restrained pending the disposal of stay applications, ensuring procedural fairness and compliance with established guidelines.

---