2022 (8) TMI 1122 - HC - Customs

Refund claim - monies obtained by the respondents/revenue, against the encashment of three bank guarantees furnished by the petitioner - HELD THAT - Admittedly, the bank guarantees were invoked on 04.12.2020. The amount against the said bank guarantees was received by the respondents/revenue via a demand draft dated 29.12.2020. Given the fact that there is a stay on the demand raised by the respondents/revenue, as also the undisputed fact which has emerged, that the provisional release of goods was not, ultimately, taken recourse to by the petitioner, to our minds, the aforementioned bank guarantees could not have been encashed - having regard to the state of affairs, it is clear that the respondents/revenue will have to remit the amount to the petitioner, as reflected in the aforementioned bank guarantees. The respondents/revenue, concededly, can recover the demand raised, only if the petitioner were to ultimately fail in the appeal or in any other proceedings taken out thereafter, before a superior forum - the instant writ petition is disposed of, with the direction that the impugned order dated 16.07.2021 shall stand quashed.

Summary

Issues:
1. Quashing of order declining refund of encashed bank guarantees
2. Provisional release of goods and issuance of detention certificate
3. Appeal with the Customs, Excise, and Service Tax Appellate Tribunal
4. Encashment of bank guarantees without extension of validity
5. Circular regarding recovery stay during appeal pendency
6. Justification for encashment of bank guarantees
7. Remittance of amount by respondents/revenue

Analysis:
1. The petitioner sought the quashing of an order declining the refund of monies obtained by the respondents through the encashment of three bank guarantees. The impugned order dated 16.07.2021 was challenged based on the denial of the refund sought by the petitioner.

2. The petitioner had furnished three bank guarantees but did not seek provisional release of goods despite a detention certificate being issued. Subsequently, a show-cause notice was issued, leading to an adjudication order against which the petitioner appealed with the Tribunal by depositing a pre-deposit amount.

3. The respondents justified the encashment of the bank guarantees due to the non-extension of their validity. However, a circular highlighted by the petitioner's counsel indicated that a stay on recovery should operate during the appeal's pendency, as long as the pre-deposit amount is made.

4. The Court noted that there was a stay on the demand raised by the respondents during the appeal process. Since the provisional release of goods was not availed by the petitioner, the encashment of the bank guarantees was deemed unjustified.

5. The Court directed the respondents to remit the amount of the bank guarantees to the petitioner within three weeks, emphasizing that recovery of dues could only occur if the petitioner failed in the appeal or subsequent proceedings before a superior forum. The writ petition was disposed of with the quashing of the impugned order.