2015 (12) TMI 476 - HC - Customs

Import of Gold jewellery under the bilateral agreement (FTA) at concessional rate of duty - doubt has been entertained with regard to the origin of the goods as emanating from Indonesia - Provisional assessment of goods - Held that - There is a specific procedure notified under FTA and in every aspect, the method and manner of issuance of certificate of origin, the method and manner of authentication and verification of the same and the terms framed within which is required to be made, have all been specified in detail. The respondent Authorities, without following the procedure as prescribed in the Regulations, merely on suspicion, had issued the impugned communication, thereby putting the onerous condition on the petitioners, which is otherwise unwarranted. The action of the respondents is totally contrary to the notified procedure and thus is in contravention of the Regulations affects the right to carry on the trade, apart from being arbitrary, is liable to be interfered with as offending Article 14 of the Constitution of India. Bill of entry was filed on 23.06.2015 and time within which the Customs Authorities could have refused the certificate and commenced the request for retroactive check would be 22.08.2015. - there is no requirement of rejection (in fact there is no rejection of the Certificate of Origin in the present case), but there being a doubt that is required to be verified into, the same ought to have been commenced as soon as the bill of entry was presented or within a reasonable time of presentation of the bill of entry. Whereas in the present case to a specified query that was put by the Court to the learned Additional Solicitor General submitted, on instructions, that as on date the only action which has been taken by the authorities are the letters written by the 3rd respondent to the Commissioner and who in turn addressed a letter to the Director, International Customs Division, seeking an enquiry to be conducted. In other words even as on today, there are no steps which have been taken in terms of Rule 16(a) for the purpose of retroactive enquiry. Specific aspect that Indonesia has the production capacity of only 65 tons of gold is being disputed by the petitioners by making a reference to the information available in public domain, particularly by placing on record a document titled GFMS Gold Survey 2014, update 2 prepared by Thomson Reuters, wherein Indonesia was stated to have produced 109 tons of gold. However, even a well intended action is to be taken to prevent unwarranted and excessive gold in to the country on a preferential treatment basis the same would have to be done in accordance with law and by adhering to the prescribed procedure. Mere entertaining of suspicion cannot be basis to put a citizens right to do business in jeopardy, which is a guaranteed freedom under Article 19(1)(g) of the Constitution of India. In the present set of facts, we are satisfied that the Authorities though acted in good faith, unfortunately the same is not being in conformity with the procedure prescribed, the demanding of 100% security cannot be justified. Authorities have failed to adhere to the procedure with respect to entertaining of the doubt within the timeframe which is allowed under the Regulations. In the result, impugned communication is set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the communication dated 06.07.2015 issued by the Deputy Commissioner of Customs.
2. Compliance with procedural requirements under various customs regulations and notifications.
3. Validity of demanding financial guarantees for provisional assessment.
4. Maintainability of the writ petition under Article 226 of the Constitution of India.
5. Relief and directions to be granted by the court.

Issue-Wise Detailed Analysis:

1. Legality of the Communication Dated 06.07.2015:
The writ petitions challenge the communication which directed the petitioner to produce a bond along with full financial guarantee to cover the differential duty for the purpose of making a provisional assessment. The petitioner contends that this demand is unauthorized and beyond the scope of making a provisional assessment under Section 18 of the Customs Tariff Act, 1975.

2. Compliance with Procedural Requirements:
The petitioner argues that all necessary formalities required under notification No.189/2009 dated 31.12.2009 have been complied with, entitling them to the benefits of notification No.46/2011. The respondents, however, cite Rule 16 of the Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Government of Member States of ASEAN and the Republic of India Rules, 2009) and state that a provisional release of goods requires a demand bank guarantee pending enquiry regarding the origin of goods due to doubts about the authenticity of the documents.

3. Validity of Demanding Financial Guarantees:
The respondents justify the demand for a financial guarantee by referring to the excessive import of gold jewellery from Indonesia and Malaysia, which raised doubts about the origin of the goods. They argue that this measure is necessary to safeguard revenue and ensure uniform treatment across all cases. The petitioner counters that such a demand is onerous and unwarranted, especially since the FTA notification allows for the import of gold jewellery at nil duty, and the prescribed procedures for verification have not been followed.

4. Maintainability of the Writ Petition:
The respondents argue that the writ petition is premature as the communication is not an order under Section 18 of the Act but an offer to release the goods subject to conditions. The court, however, rejects this argument, stating that the petitioner is entitled to challenge the communication under Article 226 of the Constitution of India, as it imposes an arbitrary and onerous condition not contemplated under the Act and Rules.

5. Relief and Directions by the Court:
The court concludes that the authorities failed to adhere to the procedural requirements within the allowed timeframe. The impugned communication is set aside, and the court directs the respondents to release the goods on the condition that the petitioner pays 30% of the duty on the goods and furnishes a surety bond for the balance 70% of the differential duty. The release of goods is subject to the final orders that may be passed by the authorities under Section 18 of the Act. The entire exercise is to be completed within 10 days from the date of receipt of the order.

Conclusion:
The writ petitions are disposed of with directions to release the goods under specified conditions, and the miscellaneous petitions, if any, are dismissed.