2016 (12) TMI 1592 - HC - Customs

Provisional release of goods - Circular No.01/2011-Customs dated 04.01.2011 - communication to SIIB according to Let Export Order - whether it is a fit case to allow provisional release of the subject goods by relaxing the rigour of the condition contained in clause (i) of paragraph 6 of the impugned order? - Held that - taking notice of the fact that the goods in question are newsprint which is perishable in nature we issue a direction that the goods of the respondents shall be cleared by the appellants herein on the respondents furnishing a bank guarantee of 30% of the differential duty to the satisfaction of the Commissioner of Customs. The goods shall be released in terms of this order immediately on furnishing of the aforesaid bank guarantee and satisfaction of the concerned Commissioner of Customs. Clause 2.2. (c) of the Board s Customs Manual clearly says that save and except in exceptional cases pending investigation wherever importer or exporter is willing he should be allowed provisional clearance of goods by furnishing a bond for full value of the goods supported by an adequate Bank Guarantee as may be determined by the proper Officer. The condition imposed sub clause (i) of paragraph 6 of the impugned order can be relaxed by substituting the said condition with an option being given to the petitioners to seek release of the subject goods/consignments by furnishing a Bank Guarantee of a nationalised bank equivalent to 30% of the export duty. This is so as finished leather as per the extant policy is freely exportable while generally unfinished leather i.e. hides skins leather - tanned and untanned are subject to export duty at the rate of 60%. Petition allowed - decided in favor of petitioner.

Issues Involved:

1. Provisional release of goods.
2. Conditions for provisional release.
3. Classification of goods as finished or unfinished leather.
4. Validity of the second CLRI report.
5. Applicability of Board's Circulars.
6. Onerous conditions imposed by the impugned order.
7. Legal precedents and their applicability.

Issue-wise Detailed Analysis:

1. Provisional Release of Goods:
The petitioners challenged a common order dated 23.11.2016, which directed the provisional release of goods on conditions they deemed onerous. The conditions included payment of appropriate export duty, execution of a bond for the value of the goods, and collection of adequate samples before release. The petitioners had no issue with the conditions except for the payment of export duty.

2. Conditions for Provisional Release:
The impugned order specified conditions for provisional release based on Board Circular No.01/2011-Cus dated 04.01.2011, including payment of export duty, execution of a bond, and sample collection. The petitioners argued that these conditions were more rigorous than usual and sought relaxation, especially concerning the export duty.

3. Classification of Goods as Finished or Unfinished Leather:
The petitioners claimed the goods were "finished leather," supported by a CLRI report dated 07.10.2016. However, the respondents doubted this classification based on intelligence inputs and ordered a second set of samples, which purportedly indicated the goods were not finished leather. The petitioners argued that minor deficiencies should not reclassify the goods as unfinished.

4. Validity of the Second CLRI Report:
The respondents drew a second set of samples and sent them to CLRI for testing. The second report, which was not in favor of the petitioners, was not provided to them despite requests. The court noted the existence of two reports, one favoring the petitioners and the other not, and highlighted the respondents' failure to provide the second report to the petitioners.

5. Applicability of Board's Circulars:
The petitioners relied on Board Circular No.01/2011-Cus, which allows provisional release of goods on execution of a bond and appropriate security. The respondents cited the Facility Circular No.01/2014, which the court found did not override the 2011 Circular. The court emphasized that provisional release should be the rule, not the exception, to avoid port congestion and demurrage charges.

6. Onerous Conditions Imposed by the Impugned Order:
The court found the conditions imposed in the impugned order onerous, particularly the requirement to pay the entire export duty. It cited legal precedents where courts allowed provisional release based on furnishing a bond or bank guarantee instead of full duty payment.

7. Legal Precedents and Their Applicability:
The court referred to several judgments, including:
- Navshakti Industries Ltd. (2011): Supreme Court allowed provisional release on furnishing a bank guarantee for 30% of the differential duty.
- Zest Aviation Pvt. Ltd. (2013) and Aban Exim Pvt. Ltd. (2015): Delhi High Court followed similar parameters.
- Malabar Diamond Gallery Pvt. Ltd. (2016): Division Bench of Madras High Court emphasized the need for competent authority satisfaction for provisional release.
The court distinguished the present case from Malabar Diamond Gallery, noting the latter involved smuggling of gold, unlike the current case.

Conclusion:
The court concluded that the condition requiring payment of export duty could be relaxed. It ordered the provisional release of goods on furnishing a bank guarantee equivalent to 30% of the export duty, while other conditions remained unchanged. The court directed the respondents to comply with the order within one week and clarified that the observations would not affect the final case outcome. The writ petitions were disposed of without costs.

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