2010 (7) TMI 456 - HC - Customs

Advance licence - Invocation of bank guarantee - As long as the export obligation discharge certificate is not produced before the Customs authority they are entitled to invoke the provisions of the bond executed by the petitioner. However in the instant case the fact appears that there has been violation of conditions of the notification itself as it is stated that the office premises of the petitioner does not exist in the place given in the licence which would obviously mean that there were no manufacturing factories - if there was no manufacturing unit available or any such manufacturing unit as would have the capacity to manufacture the goods worth crores of rupees how was the imported stainless steel utilized. The question would not only be misrepresentation while getting the Advance Licence but also about the utilization of the imported material which would squarely fall under Section 111(o) of the Customs Act. - decision in Titan case (2002 -TMI - 46461 - SUPREME COURT OF INDIA) also does not help the Appellants. There can be a scope of enquire and the summons issued under Section 108 of the Customs Act for effecting the enquiry such as these cannot be bad for the lack of jurisdiction. The Tribunal fell in error in permitting the clearance of the goods on merit rate. By doing so the Tribunal has virtually set at naught the purpose behind issuance of an exemption notification. If the Respondent is not an actual user he would not be entitled to utilize the license. The license having been secured by adopting fraudulent method would not confer any right on the importer and as such he cannot be allowed to plead any equity. Therefore we find that the order passed by the Tribunal is not sustainable and liable to be set aside. basis for discharge of the export obligation was existence of a factory which does not exists address given was a false address - false declaration and obtained a license the importer cannot be permitted to say that the imported material is freely importable under OGL - Tribunal fell in error in permitting the clearance of the goods on merit rate - Respondent not an actual user he was not entitled to utilize the license - violation of a notification issued under the Customs Act - no error in the action of the respondent in invoking the Bank Guarantee

Summary

Issues:
- Petitioner seeking writ of certiorarified mandamus to quash order invoking Bank Guarantee for advance licenses.
- Justification of second respondent in invoking Bank Guarantee.
- Violation of notification under Customs Act leading to action by second respondent.

Analysis:
1. The petitioner, an exporter, sought writs to quash the order invoking the Bank Guarantee for advance licenses granted for stainless steel import without duty payment. The petitioner claimed completion of 90% export obligation and challenged the authority of the second respondent to invoke the Bank Guarantee without proper notice or instructions from the first respondent. The petitioner argued that the second respondent lacked the authority under relevant laws to take such action.

2. The second respondent contended that the petitioner failed to fulfill the export obligation and did not produce necessary certificates. The Bank Guarantee was invoked based on a statutory bond executed by the petitioner pursuant to customs Notification No. 30/1997. The respondent alleged misuse of duty-free imported material and diversion of stainless steel, leading to show cause notices for license cancellation and duty payment demand. The petitioner did not respond adequately to the notices, resulting in the order demanding duty.

3. The court deliberated on whether the second respondent was justified in invoking the Bank Guarantee. It noted the obligation to export against duty-free imports and the authority of Customs to enforce statutory bonds. The court emphasized the violation of notification conditions, including the absence of manufacturing facilities at the given premises. Referring to a previous judgment, the court highlighted the importance of genuine manufacturing units for license compliance and the consequences of misrepresentation in obtaining licenses.

4. The court cited the Division Bench's decision and the subsequent Supreme Court confirmation regarding the Customs Authorities' power to investigate violations even after export obligation discharge. It emphasized the significance of adherence to notification clauses and the consequences of false declarations in license procurement. The court upheld the action of the second respondent in invoking the Bank Guarantee due to the violation of notification terms.

5. Consequently, the writ petition was dismissed, allowing the petitioner to pursue legal remedies against the order-in-original if desired. The court clarified that the second respondent's action was justified based on the violation of the Customs Act notification. The judgment highlighted the importance of compliance with statutory obligations and the repercussions of misrepresentation in obtaining trade licenses.