2015 (12) TMI 1435 - HC - Customs

Release of bank guarantee - Petitioner already surrendered its warehousing licence and is currently not holding any of the license - Held that - The record of the case reveals that in connection with the warehousing activities, three cases came to be instituted against the petitioner which culminated into orders against the petitioner whereby the demand and/or the penalty came to be confirmed. The petitioner challenged the orders either before the first appellate authority or the Tribunal, as the case may be, and against the order passed by the first appellate authority, before the Tribunal. In all the three cases, the Tribunal has granted stay subject to pre-deposit of the amount stipulated in such orders, which the petitioner has already deposited. Therefore, in relation to all the three orders which have been passed against the petitioner, proceedings are pending before the Tribunal and such orders had been stayed. - If the respondents are permitted to retain the bank guarantees, it would amount to negating the stay orders granted by the Tribunal because the amount under the bank guarantee would be in addition to the amount directed by the Tribunal to be deposited by way of predeposit. Moreover, once the licence has been surrendered and no amount is outstanding and payable by the petitioner towards the warehousing licence and the bonds executed by the petitioner have been cancelled, the respondents are not justified in retaining the bank guarantees. Petitioner has also placed on record a copy of the undertaking given by the petitioner to the respondents assuring the Customs Department that they would discharge any liability that may be finalised or arise against the petitioner and have also sought release of the bank guarantees aggregating to ₹ 10,00,000/-. Thus, the warehousing licence stands surrendered, the warehousing bonds stand cancelled, the demands raised by the orders passed against the petitioner in the three proceedings stand stayed by the Tribunal. Moreover, the petitioner has also given an undertaking to the respondents that it will discharge all liabilities that may be finalised or arise against the petitioner. In these circumstances, in the opinion of this court, the respondents are not justified in withholding the bank guarantees. - Decided in favour of appellant.

Summary

Issues:
Petitioner's entitlement to return bank guarantees post surrender of private bonded warehouse license.

Analysis:
The petitioner was granted a license for a private bonded warehouse under the Customs Act, 1962, and executed a warehousing bond supported by two bank guarantees. The petitioner surrendered the license for the warehouse, and the customs authorities accepted the surrender, releasing the warehouse keys and lifting control. The petitioner requested the return of bank guarantees, but the authorities refused due to pending cases against the petitioner. The petitioner argued that the guarantees should be returned as the purpose no longer exists, citing stay orders granted by the Tribunal. The respondents contended that the liabilities were connected to warehousing activities, and hence, the guarantees should not be released pending appeals. The petitioner emphasized that the Tribunal's stay was not conditional on the guarantees and all bonds had been canceled. The court considered whether the guarantees should be retained in light of the surrendered license and canceled bonds.

The court noted that the petitioner had surrendered the warehouse license, and all warehousing bonds were canceled. Three cases were pending before the Tribunal with stay orders granted. Retaining the guarantees would contradict the Tribunal's stay orders, as the guarantee amount would be in addition to the pre-deposit stipulated by the Tribunal. With no outstanding amount and canceled bonds, the court found no justification for the authorities to hold the guarantees.

Section 73 of the Customs Act provides for the cancellation and return of warehousing bonds. The petitioner had submitted documents showing cancellation of all bonds and had given an undertaking to discharge any liabilities. The court concluded that the authorities were not justified in withholding the bank guarantees. Consequently, the petition was allowed, directing the return of the original bank guarantee papers to the petitioner.

In conclusion, the court found in favor of the petitioner, emphasizing the surrender of the warehouse license, cancellation of bonds, and pending Tribunal cases with stay orders. The court directed the authorities to return the bank guarantees, citing the lack of justification for withholding them.