By TIOL News Service

CHENNAI, OCT 01, 2018: THE appellants imported unbranded imitation accessories and garments accessories of Chinese origin.

The goods were ordered for first check appraisement and subjected to 100% examination on 26.10.2017 and found to be as declared in terms of quantity and description.

However, at the instance of the DRI, the goods were not released and they conducted re-examination of the goods on 01.11.2017.

Although the goods on re-examination were found to be as declared in terms of quantity and value, the DRI, Ahmedabad detained and seized the goods.

The importer knocked the doors of the Madras High Court for release of the goods.

Vide order dt. 21.12.2017, the High Court directed the department to consider the petitioner's (appellant's) application for provisional release and also consider the request of appellants for waiver of demurrages and detention charges as the consignment was detained at the instance of the department.

Pursuant thereto, the Office of Commissioner of Customs, Chennai-II vide letter 19.1.2018 informed the appellants that the impugned goods are allowed to be cleared provisionally on submission of Bond for full value of consignment, i.e. Rs.1,45,44,653/- and submission of Bank Guarantee of Rs.1 Crore.

Again, the importer approached the High Court and they were advised to file appeal before Commissioner of Customs (Appeals), which the importer did.

In the result, an order dated 09.03.2018 came to be passed by the lower appellate authority by taking a view that there is no infirmity in the directions for execution of bond/bank guarantee.

Thereafter, the importer filed an appeal before the CESTAT which by relying upon the precedent decision in Empire Exports [Writ Appeal (MD) no. 548 of 2012 dated 14 August 2012] held thus -

"…the impugned order upholding onerous conditions laid down for provisional release of the goods cannot then sustain and will have to be set aside, which we hereby do, and direct provisional release of the impugned goods on the following terms :

(1) Appellant-importer shall pay the duty on the declared import value, if not already done.

(2) Appellants shall pay 30% of the differential duty between the duty on the declared value and the duty on proposed enhanced value fixed by the department, in the form of a Bank Guarantee;

(3) Appellants shall execute a personal bond for value of balance of 70% differential duty to the satisfaction of competent authority.

(4) On fulfilment of above conditions, the goods shall be released provisionally to the appellants without undue delay.

(5) Demurrage and detention charges are waived in line with the observations of the Hon'ble High Court of Madras in their order dt. 21.12.2017 in W.P.No.31762/2017."

We reported this order dated 13.04.2018 as - 2018-TIOL-2584-CESTAT-MAD.

Now, Revenue is aggrieved by this order and has approached the Madras High Court.

After tracing the history of the litigation involved and the submissions made, the High Court inter alia observed that neither the quantity of goods imported nor their description has been disputed but the dispute is with regard to valuation; that the only question required to be considered is whether the conditions imposed in the order dated 19.01.2018 are fair and reasonable or is it onerous and unreasonable.

The High Court further added -

+ Undoubtedly, there is room for exercise of discretion while considering an application for provisional release exercising powers under Section 110A of the Act. However, such exercise cannot be unguided or unbridled. The exercise of discretion and imposition of conditions should satisfy the test of reasonableness vis-a-vis the factual matrix.

+ What is required to be seen in the instant case is whether there was justification on the part of Customs Department to insist upon Bank Guarantee for Rs.1,00,00,000/-. Admittedly, in the order dated 19.01.2018 no reasons have been assigned by the Customs Department to impose such a condition.

+ Circulars can be guidelines for the officers and such circulars also provide for exercise of discretion by the competent authority as contained in Paragraph 2.3 of  Circular No.35/2017-Cus., dated 16.08.2017, which states that depending on the specific nature of the case, the competent authority may, for reasons to be recorded in writing, increase or decrease the amount of security deposit as indicated in paragraph 2.2 of the circular. Thus, the circular does not foreclose exercise of the discretion by the competent authority, who imposes condition on examination of the Cargo.

+ When the respondent's application for provisional release was considered, they were not informed as to on what basis the value of the cargo was enhanced to Rs.1,45,44,653/-, as admittedly show cause notice was not issued on the said date. Therefore, the Tribunal was right in its observation that investigation was yet to be completed on the date when the order dated 19.01.2018 was passed. It is true, that as on today the respondent has been issued with a show cause notice dated 06.04.2018 proposing to enhance the value of the goods among other things.

+ Since, show cause notice has been issued to the respondent, this Court would be fully justified in considering the allegations made in the show cause notice while considering as to what would be the reasonable conditions to be imposed in the respondent's case, while ordering release.

+ Non-cooperative attitude of the assessee is also to be borne in mind so that ultimately when the adjudication is completed, the amount of duty if determined, should not become irrecoverable.

Conclusion:

The order passed by the Tribunal was modified as follows:-

(i) The respondent shall pay the duty as declared by them on the import value, if not already paid;

(ii) The respondent shall pay 50% of the differential duty between the duty on the declared value and the duty on proposed enhanced value fixed by the Department by furnishing a Bank Guarantee;

(iii) The respondent shall execute a personal bond for value of balance of 50% of differential duty to the satisfaction of the competent authority;

On fulfilment of the conditions stipulated above, the goods shall be released provisionally within a period of two weeks from the date of compliance of the conditions.

Accordingly, the Revenue appeal was partly allowed.

(See 2018-TIOL-2038-HC-MAD-CUS)