2013 (10) TMI 1261 - HC - Customs

Confiscation - classification and valuation - conditions for release of goods - The petitioner filed seven bills of entry for clearing the said goods in 31 containers on different dates in January 2011 but the custom authorities did not allow clearance on the ground that the material so imported was not scrap but re-rollable metal attracting 5% basic custom duty - On furnishing a declaration in the form of an affidavit that the party will not challenge the value and identity of the seized goods during the course of adjudication or prosecution proceedings, if any As the Department is already retaining a sum of Rs. 2 crores, the interest of the revenue stands protected. In the facts and circumstances, the conditions imposed in the present order under clauses No.2 to 5 providing furnishing of bank guarantees to the tune of the determined FOB value in the case of both the petitioners and for submission of solvency certificate and thirdly, the condition of furnishing of undertaking that the identity and quantity of the goods would not be disputed are onerous and are hereby quashed. The respondents are directed to release the goods to the petitioners within a period of 2 weeks from the date of receipt of a certified copy of this order after ignoring the conditions imposed in clauses No.2 to 5. - Following decision of AMIT ENTERPRISES Versus UNION OF INDIA 2011 (5) TMI 375 - PUNJAB & HARYANA HIGH COURT and Era International Versus UOI and Ors. 2011 (8) TMI 885 - Punjab and Haryana High Court , decided in favor of assessee.

Issues Involved:
1. Legality of conditions imposed for provisional release of goods.
2. Alternative remedy of appeal under Section 129A of the Customs Act, 1962.
3. Allegations of fraudulent duty drawback claims and ongoing investigation.
4. Judicial precedents on similar conditions imposed for provisional release.

Detailed Analysis:

1. Legality of Conditions Imposed for Provisional Release of Goods:
The writ petition challenges the conditions Nos.2 to 5 imposed in the order dated 25.08.2012 for the provisional release of goods. The conditions required furnishing bank guarantees covering the amount of excess drawback, personal penalty, redemption fine, submission of solvency certificate, and an undertaking regarding the identity and quantity of goods. The petitioners argued that these conditions were onerous and against the directions given by the Court in various cases. The Court found these conditions to be unreasonable and arbitrary, noting that the requirement of furnishing bank guarantees and the undertaking not to dispute the identity and quantity of goods amounted to a denial of justice. The Court referenced previous judgments, including Amit Enterprises and Era International, which held that such conditions could not be justified and were an abuse of power.

2. Alternative Remedy of Appeal under Section 129A of the Customs Act, 1962:
The respondents argued that the petitioners had an efficacious alternative remedy of appeal under Section 129A of the Customs Act, 1962, and thus, the Court should be reluctant to exercise its extraordinary writ jurisdiction. However, the Court observed that the alternative remedy was not efficacious in the present circumstances, especially given the onerous nature of the conditions imposed and the ongoing investigation. The Court referenced previous cases, including M/s Shilpi Crafts and M/s Om Udyog, where similar objections were rejected, and it was held that the availability of an alternative remedy did not bar the exercise of writ jurisdiction.

3. Allegations of Fraudulent Duty Drawback Claims and Ongoing Investigation:
The respondents claimed that the petitioners were involved in fraudulent duty drawback claims and that the investigation was ongoing. The Court noted that more than seven months had passed since the issuance of the show cause notice dated 25.10.2012, and there was no conclusion of the investigation or fixation of liability. The Court emphasized that the mere allegation of fraud and ongoing investigation could not justify the imposition of onerous conditions for the provisional release of goods. The Court also noted that a sum of Rs. 2 crores was already retained by the revenue, safeguarding its interest.

4. Judicial Precedents on Similar Conditions Imposed for Provisional Release:
The Court relied on several precedents where similar conditions for provisional release were quashed. In Amit Enterprises, the Court held that the imposition of conditions requiring bank guarantees and undertakings not to dispute the value or identity of goods was arbitrary and amounted to a denial of justice. Similarly, in Era International, the Court set aside conditions requiring bank guarantees and declarations as a condition for the release of goods. The Court reiterated that the imposition of such conditions could not be justified on mere allegations of liability for confiscation and that the circumstances justifying such conditions were open to judicial scrutiny.

Conclusion:
The Court quashed the conditions Nos.2 to 5 imposed in the provisional release order dated 25.08.2012, directing the respondents to release the goods to the petitioners within two weeks. The Court emphasized that the observations made would not affect the merits of the controversy to be adjudicated in accordance with the law. The decision underscores the importance of ensuring that conditions imposed for provisional release are reasonable and not arbitrary, aligning with judicial precedents that protect the rights of parties against unjust and onerous conditions.

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