2016 (3) TMI 430 - HC - Customs

Writ petition - Provisional release of goods - As per Circular No. 34/2015 dated 29/30th December 2015, petitioner is required to furnish 100% bank guarantee for the duty element - Held that - in relation to the alert Circular No. 34/2015 dated 29/30th December 2015, the court has observed that, to the extent that it curtails discretion of the quasi judicial authority exercising powers under the Customs Act, 1962 to order provisional release of goods subject to conditions, it cannot be sustained in law. In other words, it is not open to the Directorate of Revenue Intelligence ( DRI ) to issue a circular to insist that in all cases of provisional release, the quasi judicial authority considering such request must impose a condition of providing a bank guarantee equivalent to differential duty. To that extent the alert Circular dated 29/30th December 2015 is directed not to be given effect to. Therefore, following the aforementioned order of the Court, it is directed that the provisional release of the goods will be allowed in favour of the Petitioner subject to the Petitioner executing a bond for a sum equivalent to the 100% of the value of goods and furnishing a security in the form of a bank guarantee for a sum equivalent to 30% of the differential duty, with an auto renewal clause and as per RBI guidelines. - Petition disposed of

Summary

Issues:
1. Exemption from customs duty under India-Sri Lanka Free Trade Agreement.
2. Circular No. 34/2015-CI issued by Customs Authorities regarding due diligence for imports.
3. Provisional release of goods subject to bank guarantee and bond requirements.

Exemption from Customs Duty:
The petitioner imported Areca Nuts from Sri Lanka under the India-Sri Lanka Free Trade Agreement, enjoying exemption from customs duty as per Notification No. 43/2003-Customs. However, an alert Circular No. 34/2015-CI emphasized the need for due diligence in examining the certificate of origin for imports from Sri Lanka. The Circular stated that in cases where evidence indicates imports from a third country, appropriate action should be taken. The petitioner was required to furnish a 100% bank guarantee for the duty element, which the petitioner found objectionable.

Circular No. 34/2015-CI:
The Court noted that Circular No. 34/2015-CI restricted the discretion of the quasi-judicial authority under the Customs Act, 1962 in ordering provisional release of goods by mandating a bank guarantee equivalent to the differential duty. The Court ruled that such a restriction on discretion was not legally sustainable. The Court held that the Directorate of Revenue Intelligence cannot insist on imposing a bank guarantee in all cases of provisional release, thereby directing that the circular should not be enforced in this manner.

Provisional Release of Goods:
Referring to a previous case, the Court directed the provisional release of goods in favor of the petitioner. The petitioner was required to execute a bond equal to 100% of the goods' value and provide a bank guarantee for 30% of the differential duty, with an auto-renewal clause following RBI guidelines. The Court's decision was based on the principle that the quasi-judicial authority should have the discretion to order provisional release subject to specific conditions, without being bound by a mandatory requirement for a bank guarantee. The petition and application were disposed of accordingly, with the order to be provided to the parties' counsel.