2024 (9) TMI 716 - HC - Customs

Customs detention of platinum alloy sheets quashed for lack of recorded reasons and improper bank guarantee demand

M/s. Ausil Corporation Pvt. Ltd. And M/s. M.D. Overseas Private Limited Versus Union of India & Ors.

Delhi HC allowed petition challenging detention of platinum alloy sheets consignment. Court held that impugned orders failed to record reasons for ... Detention of a consignment of goods comprising of platinum alloy sheets - no reasons assigned in the impugned orders for formation of a reasonable belief or opinion that the COO certificate or the imported articles were non-compliant with the statutory prescriptions - violation of principles of natural justice - HELD THAT:- The validity of the action would have to be necessarily tested on the basis of the reasons recorded and assigned. It is by now well-settled that the requirement of reasons being recorded forms the core of our jurisprudential doctrine of fairness, constitutes an important safeguard against arbitrary exercise of power and serves as validation of due application of mind. It constitutes a fundamental component of the rule of law itself. All that the respondents assert is that although the SIB has concluded its investigation, they have been advised to assess the Bill of Entry under a PD Bond and the furnishing of a Bank Guarantee. The impugned orders woefully fail to record any reason which may be reflective of consideration having been accorded to the various factors which would be relevant to an exercise of verification being initiated, for a COO certificate being doubted or the action being necessitated under any provision of the Act, CEPA Rules or CAROTAR. The respondents did not even dispute the assertion of the writ petitioners that such a verification exercise can, in fact, be initiated and completed by way of an online verification process and in real-time. If those certificates were to be loosely brushed aside, it would shake the very edifice of a Trade Agreement and be contrary to the reciprocal arrangement agreed upon by respective States. The stipulation of a Bank Guarantee as security has been applied ostensibly in light of clause 6(b) of Paragraph 3 of the Guidelines. Clause 6(b) of Paragraph 3 would have been attracted provided the proper officer had found it necessary to order a provisional assessment for the purposes of a chemical test, a felt a need for further information being called for from the importer or causing further inquiries. Even these situations and conditions which would have justified a demand for a Bank Guarantee are neither spelt out nor are they discernible from the reasons assigned. The respondents are directed to reconsider the release of the imported articles with due expedition bearing in mind the observations made - petition allowed. Issues Involved1. Detention of consignment and requirement of PD Bond and Bank Guarantee.2. Compliance with Section 28DA of the Customs Act, 1962 and relevant rules.3. Verification of the Country-Of-Origin (COO) certificate.4. Justification for provisional assessment under Section 18 of the Customs Act, 1962.5. Validity of the impugned orders based on statutory compliance and procedural fairness.Detailed Analysis1. Detention of Consignment and Requirement of PD Bond and Bank GuaranteeThe petitioners challenged the detention of their consignment of platinum alloy sheets and the requirement to submit a PD Bond equivalent to 100% of the assessable value along with a Bank Guarantee of differential duty at 10.712%. The Court found that the detention was unsustainable as the proper officer did not record any reasons suggesting that the goods did not conform to the COO criteria. The respondents failed to justify the detention based on any statutory provisions or guidelines.2. Compliance with Section 28DA of the Customs Act, 1962 and Relevant RulesSection 28DA outlines the procedure for claiming a preferential rate of duty under trade agreements. The Court noted that the proper officer must have reasons to believe that the COO criteria have not been met to justify detention. In this case, the information sought from the petitioners was duly provided, and no valid reasons were recorded for detaining the goods. The Court emphasized that the statutory scheme requires a detailed procedure for verification, which was not followed by the respondents.3. Verification of the Country-Of-Origin (COO) CertificateThe Court examined the CEPA Rules and CAROTAR, which provide a detailed procedure for verifying the COO certificate. The respondents did not initiate any process of reciprocal verification as envisaged under these rules. The Court highlighted that the proper officer must form a requisite opinion based on reasonable suspicion or doubt regarding the COO certificate. The impugned orders failed to specify any such reasons, rendering the detention unjustifiable.4. Justification for Provisional Assessment under Section 18 of the Customs Act, 1962Section 18 allows for provisional assessment of duty in specific situations. The Court found that the respondents did not justify the provisional assessment based on any of the grounds stipulated in Section 18(1). The requirement of a Bank Guarantee was imposed mechanically without considering the relevant guidelines and statutory provisions. The Court referred to previous judgments, emphasizing that onerous conditions for provisional release must be justified and cannot be imposed arbitrarily.5. Validity of the Impugned Orders Based on Statutory Compliance and Procedural FairnessThe Court underscored the importance of recording reasons for detention and provisional assessment. The impugned orders failed to reflect any consideration of the statutory criteria or the reasons for initiating verification. The Court reiterated that the requirement of reasons forms the core of fairness and due application of mind, constituting a fundamental component of the rule of law. The respondents' actions were found to be arbitrary and lacking in procedural fairness.ConclusionThe Court quashed the impugned orders dated 31 July 2024, directing the respondents to reconsider the release of the imported articles with due expedition. The proper officer was cautioned to bear in mind the aspect of onerous conditions as explained in the Bullion and Jewellers Association case. The judgment emphasized the need for statutory compliance, procedural fairness, and the recording of reasons for any detention or provisional assessment actions.