TaxTMI 
TaxTMI 
2013 (7) TMI 720
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....ition. 2. Heard Sri K.G.Raghavan, learned senior counsel appearing on behalf Sri Ajay J. N., learned counsel for petitioner, Sri N.R.Bhaskar, learned counsel appearing on behalf of Sri Jeevan J. Neeralagi, for respondents 1 to 5. Perused the averments made in the petition and annexures appended thereto, as also the statement of objections filed by respondent Nos. 1 to 5. 3. Petitioner is engaged in the business of developing and selling information technology related to hardware support and software products and is having its registered office at New Delhi and also at Bangalore. M/s Sun Microsystems India Pvt. Ltd. became a part of petitioner-company, which is engaged in the activity of importing various information technology related hardware products and spares at Bangalore and Chennai. On an intelligence information received by Department of Revenue Intelligence (DRI) investigations were initiated during October 2006 to ascertain correct value of the spares imported by M/s Sun Microsystems India Pvt. Ltd. in Bangalore and Chennai, pursuant to which show cause notice dated 27.02.2009 came to be issued demanding the differential customs duties based on the assessable value r....
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.... impugned notices dated 21.05.2013 (Annexures A-1 and A-2) are in violation of principles of natural justice since Order-in-Original dated 20.05.2013 came to be passed without intimation to the petitioner and thereafter communications dated 21.05.2013 has been forwarded to petitioner's bankers and it is in blatant violation of principles of natural justice. He would also submit that 3rd respondent without even affording the petitioner an opportunity of hearing, has passed Order-in-Original dated 20.05.2013 (Annexure-F) and said order was not even communicated to the petitioner and as such, there is clear violation of principles of natural justice. He also contends that finalization of provisional assessment without notice to the assessee and without giving an opportunity of personal hearing is in gross violation of Articles 14 and 21 of the Constitution of India and it is diametrically opposite to the principles laid down in the case of COLLECTOR OF CENTRAL EXCISE, PATNA VS I.T.C. LIMITED reported in 1994 (71) E.L.T. 324 (S.C.), whereunder it is held that before finalization of provisional assessment a opportunity has to be extended to the assessee, particularly when a demand is ma....
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....ted statutory right to file an appeal together with application for stay and also seek for dispensing with predeposit of adjudicated duty or interest or penalty levied. Learned counsel for petitioner / assessee would bring to the notice of the Court circular dated 01.01.2013 which came to be issued by the Central Board of Excise and Customs to contend that it has been held therein that when an application for stay has been filed along with an appeal and if same remains pending for reasons not attributable to assessee, recovery proceedings cannot be initiated for 30 days as provided under said circular since it would deprive the assessee of a remedy available under law to challenge such order and also it enables such aggrieved person to obtain order of stay. He would rely upon the judgment of High Court of Mumbai in the case of L & T Ltd. vs. UNION OF INDIA reported in 2013 (288) ELT 481 (Bom) to buttress his arguments that before the period of appeal as provided under the statute comes to an end, respondent-authorities would not be entitled to recover the amount during said period unless the delay is attributable to assessee and contends that impugned notices dated 21.05.2013, Anne....
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.... respondents pursuant to finalization of Provisional Assessment. He submits that by their present acts, respondent-authorities are scuttling the right of the petitioner to file an appeal and challenge the Order-in-Original and seeking appropriate orders of stay at the hands of Appellate Authority and contends that by virtue of invocation of Bank Guarantees respondents have ensured that right of appeal available to the petitioner is taken away. As such, he prays for allowing the writ petition along with suitable directions being issued to refund the proceeds of Bank Guarantee and awarding of costs. 11. He would also contend that even on earlier occasion i.e., when the Order-in-Original dated 29.03.2012 came to be passed, respondent-authorities had indulged in encashing bank guarantees unlawfully contrary to the circulars issued to the departments, which was also brought to the notice of CESTAT and as such, it is contended that respondents be directed to refund the amount encashed by them and pass necessary order or directions by putting the petitioner on terms, if necessary. 12. In support of his submission, he has relied upon the following judgments: (1) 1994 ....
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.... no illegality in the action of the respondents in invoking the Bank Guarantees and receiving the proceeds thereof pursuant to the Order-in-Original dated 20.05.2013 since it was agreed to under the Provisional Duty Bonds that on finalization of provisional Bills of Entry the respondents would be entitled to recover the duty so assessed with interest and as such Bank Guarantees have been rightly invoked. He would further contend that at the time of obtaining the release of goods they were provisionally assessed and petitioner had undertaken to pay the differential duty after finalization of provisional assessment and had executed a bond as per Annexure-R5 and he specifically draws the attention of the Court to Clause 6 of the said Bond, which empowered the respondent authorities to recover the duty finalized pursuant to the provisional assessment being finalized and contends that there has been no violation of any provisions of the Customs Act. He would also contend that Customs Act does not mandate issuance of notice to the assessee before provisional assessment is being finalized nor it would mandate extending any personal hearing to the assessee and as such, he contends that in ....
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....passing the Order-in-Original No.1/2012 dated 29.03.2012 - Annexure-B ordered for finalizing the provisionally assessed Bills of Entry in terms of Section 18(2) of the Customs Act, 1962 (hereinafter referred to as the 'Act') and further directed that on such finalization, the noticee has to pay the duty along with interest in terms of Section 18(3) of the Act. It is not in dispute that at the time of release of the goods when it was provisionally assessed, said company had executed Provisional Duty Bonds (PDB) as contemplated under the Customs (Provisional Duty Assessment) Regulations, 2011. Copies of the said Provisional Duty bonds executed by the petitioner is produced collectively by the respondent along with statement of objections at Annexure-R5. Petitioner had also executed six bank guarantees for a total amount of Rs.24,50,00,000/-, the details of which are as under: Sl. No. BG No. & Date Date of Expiry Amount (Rs.) 1 5571600524_GL 12571 dated 25.2.2013 20.02.2014 5,00,00,000 2 5579600266_GL 11204 dated 29.3.2012 08.02.2014 5,00,00,000 3 557860026_GL 11203 dated 28.3.2012 08.02.2014 5,00,00,000 4 5571600061_GL 10138 dated....
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....the case may be, to furnish security as the proper officer deems fit for the payment of deficiency, if any, between the duty as may be finally assessed or duty provisionally assessed. Under subsection (2) of Section 18 of the Act, final assessment or re-assessment is made by the proper officer under clause (a) or (b) of the said sub-section. Under sub section (3) interest is payable on such amount determined. Against such order passed finalizing the provisional assessment, the assessee would have a right of appeal as provided under Chapter XV of the Act and against an order passed by any Officer of the Customs lower than the rank of Commissioner, appeal would lie to the Commissioner (Appeals). Under Section 129A of the Act, any person aggrieved by an order or decision passed by the authorities enumerated in clause (a) to (d) to sub-section (1) would be entitled to file an appeal to the Appellate Tribunal namely, Customs, Excise and Service Tax Appellate Tribunal (CESTAT) constituted under the Act. Section 129E of the Act mandates that where any such appeal is preferred against any duty and interest demanded in respect of the goods which are not under the control of the customs auth....
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....ntee during the pendency of appeal can be made by authorities. Contents of said circular reads as under: OFFICE OF THE COMMISSIONER OF CUSTOMS (IMPORT) NEW CUSTOM HOUSE, BALLARD, ESTATE, MUMBAI - 01 F.NO.S/26-89/2007 Apprg.(General) Date: 26-4-2007 STANDING ORDER 7967/2007 Subject: Enforcement/encashment of Bank Guarantee during pendency of appeal - reg. As per Board's Circular No.788/21/ 2004 Cx, dated 25-5-2004 coercive measures should not be initiated during the period prescribed in the said circular. It is observed that some officers are enforcing the Bank Guarantees within the appeal period. This mater had come before the Hon'ble Mumbai High Court in the case of Ocean Driving Center Ltd v. Union of India - 2005 (180) E.L.T. 313 (Bom), Noble Asset Company Ltd. v. Union of India - 2005 (187) E.L.T. 438 (Bom) and M/s.Mahindra & Mahindra Ltd. v. Union of India - 1992 (59) E.L.T. 505 (Bom) wherein it has been held that encashment/enforcement of Bank Guarantee tantamount to resorting to coercive measures and this should not be done within the appeal period. 2. This instructions should be strictly complied with. Any....
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....account of said show cause notice having demanded the duty on the imports made at Bangalore even for the period post May, 2007 and certain imports having taken place during July, 2007 to March, 2008 at Chennai, said goods imported under Bills of Entry were provisionally assessed during the relevant period of time and as such it was not adjudicated in Order-in-original No. 1/2012 and as such a direction came to be issued by 2nd respondent for finalization of the said provisional assessments vide order dated 29.03.2012 (Annexure-B). Pursuant to the said direction third respondent proceeded to finalize the provisional assessment by Order-in-Original No.554/2013 dated 20.05.2013 under Section 18(2) of the Act. Said order having been passed by the Additional Commissioner of Customs, Air Cargo Complex Division, Bangalore, an appeal lies to the Commissioner of Customs (Appeals) under Section 128(1) of the Act and said appeal has to be preferred within sixty days from the date of communication of such decision or order. Though issue regarding communication of order is seriously disputed by both the parties and as already opined by me that said issue is not in the realm of the present writ ....
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.... Delhi has clarified to its officers as to the manner and stage at which recovery of confirmed demand is to made and in what situation the recovery can be initiated and the period for which such recovery should not be initiated. Said circular at Sl.No.10 provided for recovery to be initiated against assessee by the department immediately on the issue of Order-in- appeal where the order of Commissioner (Appeals) confirmed the demand made in Order-in-Original was held to be in terrorem as in effect it would deprive the assessee of the remedy provided to under the Law, like moving further appellate forums like CESTAT, the High Court or the Supreme Court against an order of adjudication. Division Bench also considered and answered by holding that if the assessee is not responsible for delay in disposal of stay application within 30 days of the filing of such appeal and where reasons for such delay is not attributable to the conduct of assessee, the initiation of recovery proceedings against the assessee would be arbitrary and unfair. It has been held as under: "14. Sr.No.10 of the circular of the Board deals with an appeal to the CESTAT where the Commissioner (Appeals) ....
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....here is no dispute as already observed herein above that order dated 20.05.2013 (Annexure-F) passed by third respondent under Section 18(2) of the Act is an appealable order under Section 128 of the Act which appeal can be filed within sixty days from the date of decision or communication thereof. Said 60 days is to expire on 26.07.2013 even if it is construed that limitation would commence from 20.05.2013. 27. The Circular dated 01.01.2013 issued by the Board in exercise of its power under Section 151A of the Act requires to be observed and strictly followed. The object of such circulars is to ensure there is uniform approach and to drive home the point to the assessees as to how the officers would take steps to initiate recovery proceedings and as such the said circulars are not only binding on the officers but required to be followed implicitly without giving scope for any infraction in this regard. The undisputed policy of the Department is not to resort to coercive methods for recovering the duty and interest demanded or penalty levied during the currency of appeal period. In the instant case, Bank Guarantees have been furnished at the time of provisional release of the goo....
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....tched about 12:53:45 HRS running into 5 pages. Though it is contended by the respondents that Bank Guarantees were invoked after despatching to petitioner the order dated 20.05.2013 (Annexure-F) records would speak otherwise. As noticed hereinabove order dated 20.05.2013 has been despatched by Fax at about 12.53 p.m. on 21.05.2013 and much prior to it letters have been issued by 4th respondent invoking Bank Guarantees as per communication dated 21.05.2013 - Annexures-A1 & A2 i.e., even before the said order could have been despatched to the petitioner. This I say so, on account of the seal affixed by the two Banks indicating the time at which said communication invoking the Bank Guarantees have been received by them has been indicated in the very same letters in Annexure-A1. The time at which Annexure-A-1 has been received has been reflected by computer generated entry as 11-37 a.m on 21.05.2013. Likewise the time indicated in the seal fixed in Annexure-A2 would indicate that it has been received by Bank of America, Bangalore branch on 21.05.2013 at 11.05 a.m. This would clearly indicate that even prior to despatching the order dated 21.05.2013 to the petitioner by fax at 12:53:45 ....
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.... and even before the said order could be communicated to the petitioner - assessee, Bank Guarantees have been invoked thereby rendering the statutory right available to the petitioner infructuous which cannot be countenanced by this Court. This action of the respondent is contrary to the statutory provisions. Petitioner has a statutory right of appeal, which period is not yet expired. It is the declared policy of the respondent-department not to initiate recovery proceedings during the currency of appeal period. In this view of the matter it was not proper on the part of the respondents to encash the Bank Guarantees even before the period of appeal was over or the conditions stipulated in circular dated 01.01.2013 is not attracted. Respondents' action in invoking the Bank Guarantees is contrary to their own declared policy. As such, I am of the considered view that respondents-authorities are required to be directed to remit the proceeds of the Bank Guarantees so recovered and collected to the respective bank accounts of the petitioner within seven days from today and simultaneously the petitioners shall furnish Bank Guarantees for a sum of Rs.24,50,00,000/- also within seven days ....