2016 (9) TMI 223 - HC - Customs

Demand alongwith interest - Section 28(2) of the Customs Act, 1962 - clearance of consignment as project contract, but failure to produce the required documents as per section 7 of the Project Import Regulations, 1986 for finalisation of the project - goods were bonded in the warehouse and a Bank Guarantee was given by the petitioner - goods having not been cleared within the statutory period, the Customs Authorities have brought the goods for sale and the sale was completed and taken delivery by the bidder. Held that - an interim order was granted on the ground that the petitioner had furnished a Bank Guarantee covering the entire amount. However, it was subsequently, brought to the notice of the Court by the third respondent that the petitioner s Bank Guarantee dated 06.07.1990 was valid only upto 26.01.1991 and the same stand cancelled on 28.01.1993. Thus, the respondent Department cannot make a claim against the third respondent Bank and this observation would protect the interest of the third respondent Bank. Therefore, this Court is inclined to issue appropriate directions to the second respondent to take note of the subsequent events, the fact that the goods in question were sold and the sale proceeds have been remitted to the Customs Department, for which purpose the order passed by the second respondent requires to be set aside. - Matter remanded back

Summary

Issues: Challenge to detention notice under Customs Act, 1962; Conflicting orders due to goods being sold by Customs Authorities; Validity of Bank Guarantee; Setting aside detention notice and remanding for fresh consideration.

In this case, the petitioner challenged a detention notice dated 25.11.2004 issued under section 28(2) of the Customs Act, 1962. The petitioner had registered a project contract for import of goods, which were warehoused but not cleared due to the project not taking off. The second respondent issued notices regarding non-compliance with project import regulations, leading to a demand of ?1,10,00,000. The proceedings were finalized ex parte as the petitioner did not respond. However, the Customs Department under the first respondent sold the goods due to non-clearance. The petitioner had provided a Bank Guarantee, but it was found to be invalid. The court noted the conflicting orders and directed the second respondent to consider the sale of goods and set aside the detention notice for fresh consideration within three months.

The court observed that since the goods were already sold by the Customs Department, the second respondent cannot insist on compliance with the demand mentioned in the detention notice issued earlier. The sale proceeds had been deposited with the Customs, making it inappropriate for parallel proceedings to be initiated. The court emphasized that both proceedings cannot run simultaneously, as it would lead to contradictory outcomes. This necessitated setting aside the order confirming the demand and remanding the matter for fresh consideration in light of the sale of goods.

Regarding the Bank Guarantee provided by the petitioner, the court noted that it had expired and was no longer valid. This revelation protected the interest of the bank involved, as the Customs Department could not make a claim against the bank due to the expired Bank Guarantee. The court's observation ensured that the bank's interests were safeguarded, and the Customs Department could not hold the bank liable for the petitioner's obligations.

In conclusion, the court molded the relief sought by the petitioner by setting aside the order under section 28(2) of the Customs Act and the detention notice. The matter was remanded to the second respondent for fresh consideration, taking into account the sale of goods. The second respondent was directed to afford the petitioner a personal hearing and pass fresh orders within three months. Additionally, a specific date for the first personal hearing was set to ensure the petitioner's presence without the need for a separate notice.