2021 (7) TMI 688 - AT - Customs

Provisional release of seized goods - various types of imported fabrics - 100% Polyester Knitted Fabric - goods appeared to be of higher quality than what was declared - goods were made of elastomeric yarn or not - seizure of goods under section 110 of the Customs Act - enhancement of declared value - non-related parties. HELD THAT - Section 110A provides that any goods seized under section 110, may, pending the order of the adjudicating authority, be released to the owner on taking a bond from him with such security and conditions as the adjudicating authority may require - Discretion is, therefore, cast upon the adjudicating authority for determining the value of the bond to be taken and the security deposit as also the conditions to be imposed while passing an order for provisional release of the goods. The exercise of this discretion has to be fair and reasonable and should not be exercised on irrelevant considerations. It needs to be noticed that the goods involved in the present two appeals were valued at US 2.83 per kg and, therefore, the said assessment order may not have any relevance. The appellant had also pointed out to the adjudicating authority that similar goods were allowed to be imported by other importers at much lower value at US 1.55 per kg by the Customs Authority after enhancement of the value of the goods. There is no discussion of this fact in the impugned orders. In the instant case, the appellants had declared the transaction value of the impugned goods in the Bill of Entries at 0.95 US per Kg as per the sales contract between the supplier and the appellant. It is important to note that the appellants and the supplier are not related parties. However, the transaction value declared by the appellant was sought to be re-determined by the Customs department without providing any reasons - In the impugned order, the differential duty has been calculated at the rate of US 2.83 per kg solely on the basis of the DRI letter dated 17.12.2020, which has not been provided to the appellant - The same goods, it has been stated by the appellants, were allowed to be imported by other importers at much lower value at US 1.55/kg by the Customs Authorities after enhancement of value, in comparison to the value at US 2.83 Per Kg enhanced for the impugned goods. Details of these imports were also brought to the notice of the Customs Authorities, but they have not been discussed. The provisional release order is modified - Elvance shall execute a bond for ₹ 2 crores and furnish a bank guarantee or a cash security (as decided by the appellant) for ₹ 20 lakhs - Sedna shall execute a bond for ₹ 1 crore and furnish a bank guarantee or a cash security (as decided by the appellant) for ₹ 10 lakhs - Upon execution of the bond and furnishing the bank guarantee/cash security, as directed above, the goods shall forthwith be released and not later than ten days from the date of executing the bond and furnishing security. Appeal allowed in part.

Summary

Issues Involved:
1. Conditions for provisional release of seized goods under Section 110A of the Customs Act.
2. Determination of the transaction value of imported goods.
3. Calculation of differential duty and penalties.
4. Adherence to procedural fairness and guidelines for provisional release.

Issue-wise Detailed Analysis:

1. Conditions for Provisional Release of Seized Goods Under Section 110A of the Customs Act:
The appellants, Elvance Overseas LLP and Sedna Impex India Pvt. Ltd., challenged the orders dated 17.12.2020 by the Commissioner of Customs, Indore, which mandated the provisional release of seized goods on execution of bonds and security deposits. Section 110A of the Customs Act allows the release of seized goods on taking a bond with such security and conditions as required by the adjudicating authority. The Tribunal noted that the discretion exercised by the adjudicating authority must be fair and reasonable, as observed by the Delhi High Court in Mala Petrochemical & Polymers vs. The Additional Director General, DRI & Anr. The Madras High Court in P. Pandithurai vs. Joint Commissioner of Customs also emphasized the need for discretion to be exercised in a manner known to law, with an opportunity of being heard.

2. Determination of the Transaction Value of Imported Goods:
Both Elvance and Sedna had declared the transaction value of 100% Polyester Knitted Fabric at US$0.95 per kg based on sales contracts with M/s. Dauer International Limited, London. The goods were seized under Section 110 of the Customs Act on the belief that they were of higher quality than declared. The Textile Committee Laboratory found no elastomeric yarn in the goods. The Commissioner, based on a DRI letter dated 17.12.2020, re-determined the value at US$2.83 per kg without providing this letter to the appellants, thereby denying them an opportunity to comment. The Tribunal found that similar goods were allowed to be imported by other importers at much lower values, which was not considered in the impugned orders.

3. Calculation of Differential Duty and Penalties:
The Commissioner calculated the differential duty based on the re-determined value of US$2.83 per kg and imposed penalties under Sections 112 and 114A of the Customs Act. The appellants argued that the differential duty was wrongly calculated without considering the benefit of the Notification dated 30.06.2018, which provides a tariff concession. The Tribunal noted that penalties under Section 112 are linked to confiscation under Section 111 and that no case for confiscation arises if the transaction value is accepted. The Tribunal also observed that Section 114A provides that no penalty can be imposed under it as well as under Section 112 simultaneously.

4. Adherence to Procedural Fairness and Guidelines for Provisional Release:
The Tribunal emphasized that the exercise of discretion under Section 110A must be fair and reasonable. The Board Circular dated 16.08.2017 provides guidelines for provisional release, stating that the competent authority may adjust the amount of security deposit depending on the specific nature of the case. The Tribunal found that the Commissioner had mechanically reproduced paragraphs from the Circular without examining the specific facts of the case or exercising discretion. The Tribunal modified the provisional release orders, determining the value of the goods at US$1.5 per kg on a prima facie basis.

Conclusion:
The Tribunal modified the provisional release conditions as follows:
- Elvance: Execute a bond for ?2 crores and furnish a bank guarantee or cash security for ?20 lakhs.
- Sedna: Execute a bond for ?1 crore and furnish a bank guarantee or cash security for ?10 lakhs.

The goods were to be released forthwith upon compliance with these conditions. The appeals were allowed to the extent indicated above.