2014 (4) TMI 1065 - HC - Customs

Confiscation of vessels and barges allegedly used for smuggling activities - discharge of bank guarantees as ordered by Tribunal - Held that - judgement of the Tribunal is required to be stayed. If no protection is granted, the respondents would be entitled to seek discharge of the bank guarantees or refund of the amount if the bank guarantee is already encashed. Ultimately, if the department s appeals are allowed, it would be difficult to recover the amount without any bank guarantee being available with the department. Under the circumstances, it is provided that pending these appeals, the respondents shall not be entitled to seek discharge of the bank guarantee or refund of the amount, if the bank guarantee is already encashed. It is provided that such bank guarantees/bonds shall be kept alive if not already encashed till the final disposal of the appeals - Decided in favor of revenue.

Summary

Issues:
1. Stay of implementation of a common judgment challenged in tax appeals.
2. Confiscation of vessels and barges used for smuggling activities.
3. Provision of redemption fines by the Commissioner.
4. Reversal of Commissioner's judgment by the Tribunal.
5. Appearance of the respondent and dispute regarding lack of show cause notice.
6. Necessity of staying the Tribunal's judgment to protect bank guarantees.

Analysis:
1. The Tax Appeals were admitted, and the department filed civil applications seeking a stay on the implementation of a common judgment challenged in these appeals. The vessels and barges allegedly used for smuggling activities were confiscated by the Commissioner, who also provided for redemption fines. The Tribunal subsequently reversed the Commissioner's judgment.
2. The Commissioner ordered the confiscation of vessels and provided for redemption fines for each vessel involved in the smuggling activities. The Tribunal's judgment reversed this decision, leading to the current legal proceedings seeking a stay on the Tribunal's judgment to protect the interests of the department.
3. Despite being served, only one respondent appeared and highlighted the lack of a show cause notice issued by the Commissioner. The respondent, who had provided a bank guarantee for the release of a barge, mentioned that the bank guarantee had been encashed by the department. This raised concerns about the potential discharge of bank guarantees or refunds if the Tribunal's judgment is not stayed.
4. The High Court determined that staying the Tribunal's judgment was necessary to prevent the respondents from seeking the discharge of bank guarantees or refunds already encashed. The court emphasized the importance of keeping the bank guarantees/bonds alive until the final disposal of the appeals to ensure the department's ability to recover amounts if the appeals are allowed. The Civil Applications seeking a stay were disposed of, and the rule was made absolute.