2019 (10) TMI 337 - HC - Customs

Seizure of vessel - FC Maria Laura - evasion of customs duty - extension of Bank Guarantee for further period of three months - HELD THAT - We are satisfied that the bank guarantee is required to be discharged by accepting undertaking on behalf of Fomento that the vessel will not be taken out of the jurisdiction of the Customs (in Goa) pending Fomento's appeal before CESTAT, without seeking leave from CESTAT. This is because the material on record makes it clear that Fomento was required to give this bank guarantee, in the first place, only because Fomento desired to take this vessel beyond the jurisdiction of Customs, in variation of our interim order dated 16.01.2018. The bank guarantee, was to really operate until Fomento returns the vessel within the jurisdictional limits of the Customs within the time stipulated. There is no dispute that the vessel was returned, though, with some marginal delay which was also deemed to be condoned. Today, admittedly, Fomento has appealed the adverse order dated 28.05.2019 by making requisite pre-deposit. In terms of the Circulars dated 16.09.2014 and 10.03.2017, even the Customs does not dispute that the demand pending appeal is not to be recovered by coercive means. In such a situation, it will not be appropriate to require Fomento to maintain the bank guarantee as a precondition for Customs not initiating coercive proceedings to enforce demand. Application dismissed.

Summary

Issues:
1. Discharge of bank guarantee and return of the same sought by Fomento.
2. Customs seek extension of bank guarantee or disposal of appeal instituted by Fomento before CESTAT.

Analysis:

Issue 1: Discharge of Bank Guarantee
In M.C.A. No.739 of 2019, Fomento sought the discharge of a bank guarantee dated 26.07.2019 and the return of the same, along with relief from the undertaking furnished to the Court. The vessel "FC Maria Laura" was seized by Customs for alleged evasion of customs duty. Fomento challenged this seizure through a Writ Petition, which granted interim relief allowing the vessel's use subject to certain conditions. Fomento later sought permission to move the vessel beyond Customs' jurisdiction, which was granted with conditions, including the furnishing of a bank guarantee. The bank guarantee was to be kept alive for a specific period. The Court, after considering various orders and circumstances, concluded that the bank guarantee was required due to Fomento's desire to move the vessel beyond Customs' jurisdiction. As the vessel was returned within the stipulated time, the Court found no reason to keep the bank guarantee active beyond the appeal process before CESTAT. Thus, the Court dismissed M.C.A. No.667 of 2019 and allowed M.C.A. No.739 of 2019, subject to Fomento's undertaking not to move the vessel without CESTAT's permission.

Issue 2: Extension of Bank Guarantee
In M.C.A. No.667 of 2019, Customs sought an extension of the bank guarantee until the disposal of Fomento's appeal before CESTAT. The demand of over ?6 crores, confirmed by Customs, was linked to the bank guarantee. Customs argued that the bank guarantee was necessary for immediate recovery if Fomento's appeal was dismissed. However, Fomento contended that the bank guarantee was initially furnished to move the vessel beyond Customs' jurisdiction, and with the seizure orders set aside and an appeal pending at CESTAT, maintaining the bank guarantee was unnecessary. The Court considered Circulars prohibiting coercive recovery pending appeals and ruled in favor of Fomento. It held that Fomento should not be burdened with the bank guarantee's maintenance post their success in the Writ Petition and return of the vessel. The Court dismissed M.C.A. No.667 of 2019 and allowed M.C.A. No.739 of 2019, subject to Fomento's undertaking regarding the vessel's movement and the filing of a formal undertaking within seven days.

In conclusion, the Court dismissed the Customs' request for an extension of the bank guarantee and allowed Fomento's plea for the discharge of the bank guarantee, emphasizing the importance of Fomento's compliance with the undertaking regarding the vessel's movement within Customs' jurisdiction.