2015 (8) TMI 937 - SC - Customs

Benefit of Indo-Sri Lanka Free Trade Agreement Detention of Consignment Customs authorities detained consignment of Respondent, as it was alleged that goods were manufactured in China and had been imported to India via Sri Lankan route to avail the benefit of Indo-Sri Lanka Free Trade Agreement High Court vide impugned judgment directed respondent to deposit customs duty and to furnish bank guarantee of 20 per cent in order to release goods Held that - Admitted that show cause notice was issued by authorities In view of stand taken by respondent in show cause notice, it would be appropriate for customs authorities to proceed with said show cause notice and decide case on merit Respondent contested averments that certificate which was received from Sri Lankan authorities pertains to some other party, respondent has also filed some more documents on basis of which it was claimed that matter to be given quietus Thus, adjudicating authority to decide matter after hearing respondent Matter remanded back for re-consideration decided against revenue.

Summary

Issues:
1. Interpretation of Indo-Sri Lanka Free Trade Agreement (ISFTA) regarding the origin of goods.
2. Validity of High Court's direction to release goods on provisional basis.
3. Customs authorities' issuance of show cause notice and respondent's defense.

Analysis:

1. The respondent imported Compact Fluorescent Lamps from Sri Lanka under the Indo-Sri Lanka Free Trade Agreement (ISFTA). Customs authorities doubted the origin of the goods, suspecting they might have been manufactured in China and routed through Sri Lanka. The respondent filed a writ petition in the High Court of Rajasthan seeking release of the goods, challenging the authorities' claim. The High Court directed the release of goods on a provisional basis, subject to conditions of depositing customs duty, furnishing a bank guarantee, and providing a personal bond. The High Court's decision was based on the documents submitted by both parties, including a communication from Sri Lankan authorities stating the goods' Chinese origin, which was disputed by the respondent.

2. The High Court's judgment allowing the release of goods on a provisional basis was challenged in the present appeal. The Supreme Court noted that the respondent had already complied with the High Court's directions and obtained the release of goods. The Court found no reason to interfere with the provisional order, emphasizing it was an interim arrangement. The customs authorities had issued a show cause notice, prompting the respondent to inform them about the pending appeal. The Court directed the customs authorities to proceed with the show cause notice and decide the case on merit, considering the respondent's defenses, including the plea of limitation and additional documents submitted to support their position.

3. The Supreme Court instructed the respondent to file a reply to the show cause notice within six weeks, allowing them to contest the notice on all legal grounds. The adjudicating authority was tasked with deciding the matter after hearing the respondent's arguments. The appeal was disposed of under these terms, ensuring a fair opportunity for the respondent to present their case and respond to the show cause notice effectively.