2014 (1) TMI 225 - HC - Customs

Release of bank guarantee - Confiscation of goods - Provisional release of goods - Held that - where the goods are provisionally released subject to security, awaiting adjudication the security including the bank guarantee, the security cannot be released, until the adjudication is concluded. Sub-section (2) of Section 110 is not applicable where the provisional release has been made conditionally either in exercise of Section 110 (1A) or Section 110A of the Customs Act - bank guarantee was submitted on a specific condition to safeguard fine and penalty arising in adjudication proceeding. The condition no.3 clearly provided that the bank guarantee shall remain valid upto finalization of the case and should have a self renewal clause. In the circumstances when the notice issued with an extended period of limitation, is not under challenge, and the adjudication is pending, there is no question of release of bank guarantee at this stage - Decided against assessee.

Summary

Issues:
1. Provisional release of goods and bank guarantee.
2. Conditions for release of goods under seizure.
3. Challenge of show cause notice and release of bank guarantee.
4. Applicability of Section 110(2) of the Customs Act.
5. Comparison with judgments in similar cases.

Analysis:
1. The petitioner, a proprietorship firm, imported electronic goods from China in 2010. The goods were retained by custom authorities due to discrepancies. The petitioner applied for provisional release and filed a writ petition. A conditional release order required a bank guarantee and fulfillment of specified conditions.

2. The petitioner submitted the bank guarantee and the goods were released. Subsequently, a show cause notice was issued proposing confiscation, duties, and penalties. The petitioner sought release of the bank guarantee, arguing that the notice was issued after six months, rendering the conditions for guarantee release invalid.

3. The respondents contended that the petitioner lacked cause of action for bank guarantee release due to a delay in filing the writ petition. They argued that the security, including the bank guarantee, cannot be released until adjudication is completed, especially when the extended period of limitation has been invoked.

4. The court analyzed the provisions of Section 110(2) of the Customs Act and held that where goods are provisionally released subject to security pending adjudication, the security cannot be released until adjudication concludes. The court emphasized that the release of security, including bank guarantee, is not applicable under Section 110(2) when provisional release is conditional.

5. The court distinguished the present case from a Delhi High Court judgment where a car was unconditionally released due to a delayed notice. In this case, the bank guarantee was submitted with specific conditions to safeguard against fines and penalties until adjudication is finalized. As the notice with extended limitation period was unchallenged and adjudication was pending, the court dismissed the writ petition, denying the release of the bank guarantee.