2017 (10) TMI 223 - HC - Customs

Provisional release of seized goods - Misdeclaration of export goods - finished leather - The department has contended that respondents have misdeclared the description and attempted to export the subject goods, by evading export duty at 60% as per Sl.No.26, of the Export Tariff by availing undue drawback of 6% and also by availing MEIS incentive of 2% on FOB value - seizure of goods u/s 110 of the Customs Act, 1962 with effect from the date of examination i.e. 14.10.2016, vide Seizure Memo dated 16.11.2016 - Section 110A of the Customs Act, 1962 - CBEC Circular No.01/2011 dated 04.01.2011. Held that - an amount equivalent to the value of goods stipulated in Condition No.6(ii), with due respect, we are unable to subscribe to the views of the learned Single Judge that monetary value mentioned in the subsequent communication dated 10.01.2017 is in a sense diluted the very essence of the order dated 22.12.2016. Even taking it for granted, that in the earlier round of writ petitions, respondents therein have not articulated that the exporters have to offer security towards fine and penalty, in the form of a Bank Guarantee, that does not amount to a waiver of exercise of the powers conferred on the department by virtue of Clause No.4(a) of the Board s circular dated 04.01.2011. At the risk of repetition, when condition Nos.6(ii) & 6(iii) remain unaltered, as per the earlier orders made in W.P.Nos.43062 to 43070 of 2016 dated 22.12.2016, it cannot be contended that the department has erred in directing the exporters to offer Bank Guarantee as an appropriate security, in order to cover redemption, fine and penalty. In our view, the department cannot be compelled to follow an earlier interim order, which has merged with a simple closure of writ petitioner, without there being any adjudication on the merits. In State of Orissa Vs. Madan Gopal Rungta 1951 (10) TMI 19 - SUPREME COURT the Hon ble Apex Court held that interim orders are passed in aid of the main relief. The common orders passed in W.P.Nos.7429 and 7430 of 2017 dated 18.07.2017, requires interference - impugned orders set aside - appeal allowed by way of remand.

Summary

Issues Involved:
1. Provisional release of goods.
2. Misdeclaration of goods.
3. Conditions for provisional release.
4. Compliance with earlier court orders.
5. Requirement of bank guarantee for fine and penalty.
6. Legal validity of interim orders.

Detailed Analysis:

1. Provisional Release of Goods:
The appeals challenge the common order in W.P.Nos.7429 and 7430 of 2017, where the Writ Court followed earlier orders, directing provisional release of goods subject to compliance with conditions imposed in previous writ petitions. The respondents, exporters of finished leather, had their goods seized by the Customs Department under Section 110 of the Customs Act, 1962, due to alleged misdeclaration.

2. Misdeclaration of Goods:
The Customs Department contended that the respondents misdeclared the goods as 'finished leather' to evade export duty and avail undue benefits. Initial tests by CLRI certified the goods as 'finished leather,' but subsequent tests indicated they were 'unfinished,' leading to the seizure of goods.

3. Conditions for Provisional Release:
The Principal Commissioner of Customs recommended provisional release under Section 110A of the Customs Act, 1962, subject to conditions including payment of applicable export duty, execution of a bond for the value of the goods, and furnishing appropriate security for fine and penalty. The Writ Court modified the condition regarding export duty, allowing release upon furnishing a bank guarantee equivalent to 30% of the export duty.

4. Compliance with Earlier Court Orders:
The Writ Court's earlier orders in W.P.Nos.43062 to 43070 of 2016 and W.P.Nos.1620 to 1628 of 2017 directed provisional release under specific conditions. The department complied with these orders, releasing the goods upon execution of bonds and bank guarantees. The current appeals argue that the interim orders should not serve as precedents.

5. Requirement of Bank Guarantee for Fine and Penalty:
The department's communication dated 10.01.2017 required exporters to offer a bank guarantee for fine and penalty, which the Writ Court initially stayed. The department argued that this requirement aligns with CBEC Circular No.01/2011, which allows provisional release on execution of a bond and furnishing appropriate security.

6. Legal Validity of Interim Orders:
The court emphasized that interim orders are temporary arrangements and do not constitute final adjudications. They are not precedents and do not conclusively decide issues. The appeals argued that the interim orders merged with the final orders, and hence, the department's requirement for bank guarantees was valid.

Conclusion:
The court set aside the common orders in W.P.Nos.7429 and 7430 of 2017, allowing the department to require bank guarantees for provisional release. The appeals were allowed, emphasizing the department's discretion under the CBEC Circular and the non-precedential nature of interim orders. The decision underscores the importance of compliance with procedural requirements and the provisional nature of interim judicial directions.