2009 (12) TMI 119 - HC - Customs

Export obligation discharge certificates- whether the customs authorities are justified in coercively collecting the custom duty demand with interest on the ground that the petitioner has not produced the export obligation discharge certificate (EODC) firstly the application for EODC filed by the petitioner are pending before DGFT and secondly the period of limitation for filing appeal before CESTAT against the order of Commissioner (Appeals) has not expired? Held that allow the writ petition by directing the respondent to return the amount of Rs. 2, 85, 47, 277/- with interest at the rate of 6% per annum illegally collected from the petitioner from the date of realization till payment. Registry directed to initiate contempt proceedings against the commissioner of customs (Pune) for illegal recovery.

Issues Involved:
1. Justification of coercive collection of customs duty with interest by Customs authorities.
2. Compliance with Board Circulars and legal precedents.
3. Validity of coercive action before the expiry of the statutory period for filing an appeal.

Detailed Analysis:

1. Justification of Coercive Collection of Customs Duty with Interest:
The primary issue is whether the Customs authorities were justified in coercively collecting customs duty with interest from the petitioner, who had not yet produced the Export Obligation Discharge Certificates (EODC). The petitioner argued that the export obligations were substantially fulfilled and the applications for EODC were pending before the Director General of Foreign Trade (DGFT). Despite this, the Customs authorities issued detention notices and collected the duty amount under protest. The court found that the coercive action was unjustified, especially since the petitioner had substantially complied with the export obligations and the applications for regularization were pending.

2. Compliance with Board Circulars and Legal Precedents:
The petitioner cited various Board Circulars and legal precedents to argue that the Customs authorities' actions were high-handed and contrary to established law. The court examined several judgments, including Mahindra & Mahindra Limited v. Collector, Noble Asset Company Limited v. Union of India, and Legrand (India) Private Limited v. Union of India, which established that coercive recovery actions during the pendency of stay applications or before the expiry of the statutory period for filing appeals are improper. The court reiterated that the law laid down by the High Court must be followed by all authorities and subordinate tribunals, and any willful disregard would amount to civil contempt.

3. Validity of Coercive Action Before the Expiry of the Statutory Period for Filing an Appeal:
The court emphasized that neither Section 142 of the Customs Act, 1962, nor the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995, authorize the recovery of customs duty before the expiry of the statutory period for filing an appeal. In this case, the statutory period for filing an appeal against the Commissioner (Appeals) order had not expired when the coercive action was taken. The court held that coercively collecting customs duty before the expiry of this period, especially when the export obligations were substantially fulfilled and applications for EODC were pending, was highly improper and contrary to the decisions of the court.

Conclusion:
The court allowed the writ petition, directing the respondents to return Rs. 2,85,47,277/- with interest at the rate of 6% per annum, which was illegally collected from the petitioner. The court also issued a show-cause notice to the Commissioner of Customs, Pune, to explain why action should not be taken against him under the Contempt of Courts Act, 1971, for coercively collecting the customs duty in violation of the court's decisions and the pending status of the EODC applications. The writ petition was disposed of with no order as to costs.

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