2013 (9) TMI 816 - HC - Central Excise

Demand of Cash Security Held that - Prima facie the investigation was still pending and that though the petitioner had co-operated in giving statements, he submitted a letter providing some more inputs and explaining the deficiency - Even if no show cause notice had been issued, since the investigation was still pending, the respondent had not acted arbitrarily in allowing the release of seized goods provisionally subject to furnishing Appropriate Bond in Form B-11 in which a demand of security or surety can be made in Para 3.2 of Chapter XVII of Supplementary Instructions issued under Rule 31 of the Central Excise Rules, 2002. The interest of revenue will be protected in case the demand of cash security was substituted by bank guarantee for provisional release of seized goods subject to other conditions mentioned Decided in favour of Petitioner.

Summary

Issues:
1. Demand of cash security for provisional release of goods.
2. Alleged discrepancies in stocks and seizure of goods.
3. Exorbitant nature of the cash security demand.
4. Petitioner's plea for substitution of cash security with a bank guarantee.

Analysis:
The petitioner, a company, challenged the demand of cash security equal to 25% of the value of the Bond for the provisional release of seized goods. The petitioner contended that the demand was exorbitant and arbitrary. The petitioner's counsel argued that no show cause notice had been issued, and the alleged discrepancies in stocks had been explained. The court noted that the investigation was still pending, and the petitioner had cooperated by providing explanations. The court found that the respondent had not acted arbitrarily in demanding security for the provisional release of goods.

The petitioner highlighted its substantial payment of excise duty in previous years to showcase its compliance with tax obligations. The petitioner expressed concerns about the financial burden of the cash security demand, stating it would block working capital. In response, the court considered the petitioner's plea and decided that the interest of revenue could be protected by substituting the cash security with a bank guarantee for the provisional release of goods. The court directed that upon furnishing a bank guarantee, the goods would be provisionally released to the petitioner, pending final orders in the writ petition.

In conclusion, the court granted time for the respondents to file a counter affidavit and allowed the petitioner to file a rejoinder affidavit. The court acknowledged the petitioner's concerns regarding the cash security demand but found that substituting it with a bank guarantee could address the petitioner's hardships while safeguarding the revenue's interest. The interim measure of provisional release of goods upon furnishing a bank guarantee was deemed appropriate until final orders were issued in the writ petition scheduled for a later date.