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

Delhi HC allowed petition challenging detention of platinum alloy sheets consignment. Court held that impugned orders failed to record reasons for doubting COO certificate or belief that imported articles were non-compliant with statutory requirements, violating natural justice principles. Respondents couldn't justify verification exercise when online real-time verification was available. Bank guarantee demand under Guidelines clause 6(b) was improper as conditions for provisional assessment weren't established. Court directed respondents to reconsider release of goods expeditiously, emphasizing that recorded reasons form core of jurisprudential fairness doctrine and safeguard against arbitrary power exercise.

---

---

Issues Involved
1. 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 Analysis

1. Detention of Consignment and Requirement of PD Bond and Bank Guarantee
The 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 Rules
Section 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) Certificate
The 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, 1962
Section 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 Fairness
The 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.

Conclusion
The 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.

---