2010 (4) TMI 136 - HC - Customs

Court sets aside differential duty demands, upholds release conditions, orders costs. Emphasizes fair action by authorities.

The court set aside the communications demanding differential duty, bonds, and bank guarantees for past imports. It upheld the provisional release ... Provisional release of goods - reassessment and show cause notice - safeguarding Government revenue by bond and bank guarantee - arbitrariness and Article 14 - assessment on basis of entry and documents with power of subsequent reassessmentReassessment and show cause notice - safeguarding Government revenue by bond and bank guarantee - arbitrariness and Article 14 - Validity of demands and conditions imposed by respondents in respect of past 28 bills of entry assessed and cleared during 2009 without issuance of any show cause notice. - HELD THAT: - The Court held that the Revenue cannot, by way of conditioning provisional release of current consignments, demand differential CVD or require execution of bond and bank guarantee in respect of past imports already assessed and released, in the absence of a positive action by issuing a show cause notice and providing the assessee an opportunity to be heard. The petitioner's deposition of certain CVD under protest did not justify treating the past assessed entries as a basis for immediate demand without following the statutory mode of proceeding. The practice of withholding clearance to coerce payment or security in respect of past, finally assessed imports is arbitrary and contrary to principles of natural justice; any action in respect of those past entries must, if the Revenue so advises, be taken in accordance with law by issuing show cause notices and adjudicating after hearing. [Paras 15, 16, 20, 21]Communications quashed and set aside to the extent they demanded CVD, bond and bank guarantee in respect of the past 28 bills of entry; respondents may, if advised, initiate proceedings by issuing show cause notices in accordance with law.Provisional release of goods - assessment on basis of entry and documents with power of subsequent reassessment - Validity of conditions imposed for provisional release of the consignments covered by bills of entry Nos. 649199 and 650812 dated 26th and 27th August, 2009. - HELD THAT: - The Court accepted that provisional release of goods can be conditioned to safeguard revenue where examination or other processes disclose misdeclaration or where statutory provisions permit provisional release subject to conditions. The communication of 1st October, 2009 insofar as it imposed conditions relating exclusively to the two impugned bills of entry was maintained. The Court clarified that provisional release may be governed by the relevant statutory scheme and that reassessment is permissible where documents or examination thereafter show misstatements relevant to assessment. [Paras 15, 20]Conditions for provisional release insofar as they relate solely to the two consignments under the subject bills of entry are sustained; the petition is allowed only to the extent of quashing demands relating to past 28 imports.Final Conclusion: The writ petition is partly allowed: the demands and security conditions imposed by the impugned communications in respect of the past 28 bills of entry are quashed as arbitrary and unsustainable in law, while the departmental conditions for provisional release of the two subject consignments are maintained; revenue is at liberty to initiate lawful proceedings by issuing show cause notices if so advised; costs quantified. Issues Involved:1. Validity of the communications dated 29th September 2009 and 1st October 2009 issued by the Deputy Commissioner of Customs.2. Legality of withholding clearance of goods covered by the Bills of Entry Nos. 649199 and 650812.3. Justification of the demand for bank guarantees and bonds related to past imports.4. Compliance with the principles of natural justice and statutory powers.Detailed Analysis:1. Validity of the Communications Dated 29th September 2009 and 1st October 2009:The petitioner challenged the communications dated 29th September 2009 and 1st October 2009, issued by the Deputy Commissioner of Customs, which demanded a bank guarantee equivalent to Rs. 88,30,137 for the two bills of entry and a bond for Rs. 15,75,33,199 for CVD and basic customs duty for past 28 bills of entry. The court was called upon to decide the validity of these communications.2. Legality of Withholding Clearance of Goods Covered by the Bills of Entry Nos. 649199 and 650812:The petitioner argued that the respondents had no power or jurisdiction to refuse clearance of goods covered by the bills of entry dated 26th and 27th August 2009. The petitioner had already deposited the CVD under protest and requested the release of the goods. The court noted that the respondents were withholding the clearance to pressurize the petitioner to comply with their demands, which was deemed impermissible in law.3. Justification of the Demand for Bank Guarantees and Bonds Related to Past Imports:The court examined the respondents' demand for bank guarantees and bonds concerning past imports covered under 28 bills of entry filed during 2009. The petitioner contended that there was no connection between the past bills and the current consignments. The court found that in the absence of a show cause notice, the demand for past imports was unjustified. The respondents' action was deemed arbitrary and illegal, as it breached the principles of natural justice.4. Compliance with the Principles of Natural Justice and Statutory Powers:The court emphasized that statutory authorities must act without bias and arbitrariness. The respondents' failure to issue a show cause notice and their arbitrary demands were found to violate the principles of natural justice. The court highlighted that statutory powers must be exercised with reasonableness and fairness, and the respondents' actions did not meet these standards.Conclusion:The court set aside the impugned communications to the extent they demanded differential duty, execution of bonds, and bank guarantees for past imports. The court maintained the conditions for the provisional release of the consignments covered by the bills of entry dated 26th and 27th August 2009. The respondents were directed to pay costs of Rs. 25,000 to the petitioner for their unjustifiable and arbitrary actions. The judgment clarified that the Revenue could take lawful action in respect of past imports if advised. The petition was partly allowed, and the related Civil Application was dismissed.