2018 (7) TMI 927 - HC - Customs

Provisional release of seized goods - whether the petitioner is ready and willing to execute a bond as demanded by the authorities and in addition, furnish a bank guarantee so as to secure at least part of the duty demand, which eventually may be raised? - Held that - In the facts and circumstances of the present case, we think it just, fair and proper and when the duty demand is substantially secured by a bank guarantee as also bond in favor of the Government of India that the following order will meet ends of justice - On the petitioner executing a bond equal to 100% of the value of the goods and furnishing a bank guarantee in the sum of ₹ 1.40 crores both within a period of two weeks as stated and undertaken, the competent authority shall pass an order on the pending application seeking a detention certificate and release the goods in favour of the petitioner. The bank guarantee shall be kept alive till final orders of the Competent Authority. Petition disposed off.

Summary

Issues:
1. Legality of conditions imposed for provisional release of goods.
2. Validity of seizure memo and power of seizure.
3. Interpretation of India Sri Lanka Free Trade Agreement (ISFTA).
4. Authority to question certificates of origin.
5. Fairness of conditions imposed for release of goods.
6. Justification of bank guarantee and bond requirement for securing duty demand.
7. Impact of resolution on ongoing investigations and duty evasion.

Analysis:
1. The petitioner challenged the condition of furnishing a bank guarantee for 100% of the assessable value for provisional clearance of imported goods. The petitioner sought quashing of this condition and requested clearance of goods without such requirements. The petitioner argued that the action from the seizure memo's inception was questionable, emphasizing that the goods were of Sri Lankan origin as certified by competent authorities. The petitioner contended that the conditions imposed were unfair, unjust, and violated Article 14 of the Constitution of India.

2. The respondents defended the seizure by asserting that there was material indicating the goods were not of Sri Lankan origin but of Indonesian origin, falsely routed through Sri Lanka to evade duty. They argued that the investigations should continue without interference and that the conditions imposed for goods release were reasonable. The court acknowledged the ongoing investigations and balanced the rights of both parties without expressing a final opinion on the legality of the seizure.

3. The interpretation of the India Sri Lanka Free Trade Agreement (ISFTA) was crucial in determining the goods' origin and the applicability of duty exemptions. The petitioner relied on the treaty to support the goods' clearance as duty-free under the agreement. Conversely, the respondents alleged that the goods were falsely declared as Sri Lankan to evade duty, highlighting a potential misuse of the treaty provisions.

4. The authority to question certificates of origin issued by statutory authorities was a key point of contention. The petitioner argued that once certificates were issued, their genuineness and authenticity could not be doubted by customs authorities. On the other hand, the respondents claimed that preliminary investigations raised doubts about the goods' actual origin, justifying the seizure and further scrutiny.

5. The fairness of the conditions imposed for the goods' release was debated, with the petitioner labeling them as unreasonable and unjust. The respondents defended the conditions as necessary to prevent duty evasion and argued that they were not arbitrary or illegal. The court considered these arguments while ensuring a balance between the parties' rights.

6. The court addressed the issue of securing the duty demand through a bank guarantee and bond. The petitioner agreed to execute a bond and provide a bank guarantee to secure the duty amount. The court deliberated on the adequacy of this resolution in securing the revenue and preventing duty evasion, ultimately issuing directions for the release of goods subject to the provided security.

7. The potential impact of the resolution on ongoing investigations and duty evasion concerns was discussed. The respondents expressed apprehensions that easing the conditions might encourage further duty evasion practices. However, the court found the resolution just and fair in the circumstances of the case, ensuring the duty demand was adequately secured while maintaining the investigation's integrity.