1992 (7) TMI 72 - HC - Customs

Summary

Issues Involved:
1. Validity of Public Notices dated 11th June 1990 and 15th January 1992.
2. Applicability of Section 67 and Warehoused Goods (Removal) Regulations, 1963.
3. Requirement of furnishing bonds and bank guarantees for warehousing goods.

Detailed Analysis:

Validity of Public Notices:
The petitioners challenged the Public Notices issued by the Collector of Customs, Bombay, dated 11th June 1990 and 15th January 1992. The first Public Notice mandated that transfers of goods in bond to other warehousing stations under Section 67 of the Customs Act be covered by a transfer bond backed by a bank guarantee for an equivalent amount. The second Public Notice relaxed the requirement of a 100% bank guarantee for non-defaulting importers, introducing a tiered system of bank guarantees based on the type of importer.

The court examined the background in which these Public Notices were issued, noting that they were a response to large-scale evasion of customs duty detected in cases of transfer of warehoused goods. The Central Board of Excise and Customs had issued guidelines to ensure adequate security for customs duty and proper monitoring of re-warehousing of imported goods. The Public Notices were found to be in line with these guidelines and aimed at preventing evasion of customs duty.

The court concluded that the Public Notices were not arbitrary or unreasonable. They provided a reasonable classification of different categories of importers and did not take away the discretion of the proper officer to demand a bank guarantee in suitable cases. Hence, the Public Notices were held to be valid.

Applicability of Section 67 and Warehoused Goods (Removal) Regulations, 1963:
The petitioners contended that Section 67 and the Warehoused Goods (Removal) Regulations, 1963, were not applicable to them as their goods were directly warehoused for the first time outside Bombay, and not removed from one warehouse to another. The court examined the factual position and found that the petitioners had been required to have their goods warehoused at Bombay, but this requirement was waived to avoid double handling. The bonds executed by the petitioners indicated that the goods were considered as warehoused in Bombay and then transferred to another warehouse outside Bombay.

The court held that the provisions of Section 67 and the Warehoused Goods (Removal) Regulations, 1963, were applicable to the petitioners. The settled practice since 1975, where initial warehousing in Bombay was waived to facilitate the transfer of goods to another warehouse, was upheld.

Requirement of Furnishing Bonds and Bank Guarantees:
The petitioners argued that the requirement of furnishing bonds and bank guarantees under the Public Notices was beyond the scope of the Warehoused Goods (Removal) Regulations, 1963. They contended that the proper officer had the discretion to decide whether any security should be asked for in addition to a bond, and this discretion could not be fettered by the Board or the Collector through Public Notices.

The court noted that the term "proper officer" is defined under Section 2(34) of the Customs Act, 1962, and the Collector of Customs, being a superior officer, could exercise powers under Regulation 5. The Board's guidelines were intended to ensure uniformity and prevent arbitrariness in the exercise of discretion under Regulation 5. The Public Notices were deemed to be guidelines for the proper officers in exercising their discretion and did not take away their powers.

The court also found that the Public Notices were not ultra vires Section 67, as they were issued pursuant to the guidelines of the Central Board of Excise and Customs under Section 5(1) of the Customs Act, 1962. The requirement of bank guarantees, as modified by the Public Notice of 15th January 1992, was reasonable and based on a classification of different categories of importers.

Conclusion:
The court dismissed all the writ petitions, upholding the validity of the Public Notices dated 11th June 1990 and 15th January 1992. The provisions of Section 67 and the Warehoused Goods (Removal) Regulations, 1963, were found to be applicable to the petitioners, and the requirement of furnishing bonds and bank guarantees was held to be valid and reasonable. The court granted liberty to the respondents to apply for appropriate orders in case of any deficiency or shortfall in the quantity of goods reaching the warehouse outside Bombay.