2022 (6) TMI 1226 - AT - Customs

Demand of bank guarantee to the extent of 15% of the value of seized goods - provisional release order already passed - power of department to review an order passed under Section 110A - review of the order to the extent it requires the Appellant to furnish a bank guarantee of 15% of value of the seized goods - HELD THAT - In the present case, once the provisional release order was passed, the Office of the Deputy Commissioner of Customs, Ahmedabad, had no jurisdiction under the Customs Act to review the earlier order dated 4th February 2022 granting provisional release to the goods imported vide the Bills of Entry impugned in the present case. The correct approach would have been for the Respondent to challenge the correctness of the said provisional release order before this Tribunal. Further, there have been no reasons provided in the order dated 6th April 2022 as to why the department has changed its stand by directing the appellant to furnish a bank guarantee to the extent of 15% of the value of the seized goods as against the original condition mentioned in the provisional order dated 4th February 2022 which was to provide a bank guarantee to the extent of 15% of the duty payable. In TG ENTERPRISE VERSUS UNION OF INDIA , the Hon ble Gujarat High court, in a case relating to alleged mis-declaration of country of Origin, was looking into the challenge to the provisional release condition by which the Petitioner was directed to furnish a Bank Guarantee to the extent of 25% of differential duty amount. The High court was pleased to set aside the said condition by observing that Of course further investigation is going on and we cannot foresee what further evidence may be collected. Be that as it may, when yet show-cause notice for final adjudication has not been issued and even after issuance of show-cause notice, completion of the adjudication is bound to consume time, it would not be in anyone's interest to stop the clearance of goods when it is not the case of the department that the import of such materials has any other legal impediment. In the present case undisputedly, nothing has been placed on record showing any undervaluation of goods. While the department has submitted before the Commissioner (Appeals) that the issue of valuation is under investigation, however what cannot be ignored is that the goods imported are copper cathodes and the value of the same is determined basis the LME price. Also the provisional release order dated 06.04.2022 and the seizure memo dated 02.02.2022 is totally silent on the aspect of undervaluation. The seizure memo in fact gives the complete history of the matter but does not contain any allegation about the undervaluation of goods. Given the above it is submitted that the condition to furnish BG of 15% of value is extremely onerous, more so when the Appellant has shown his will to deposit entire amount of duty on value declared by it. In the present case, as evident from the Bills of entry, the appellant was always willing to deposit the entire duty of BCD IGST which is over 25 crores and therefore, the condition to direct the appellant to furnish a bank guarantee of 15% of the value of the goods which is over 100 crores is excessive and arbitrary more importantly when the appellant is willing to deposit the duty payable on the seized goods. There is no dispute on the valuation or classification of the goods as is clear from the impugned provisional order. The provisional release order dated 06.04.2022 and the seizure memo dated 02.02.2022 does not mention anything about undervaluation as has been argued by the department before the Commissioner (Appeals) - Even before this Hon ble Tribunal no evidence has been placed to show any under valuation of goods. It is also found that a perusal of the seizure memo clarifies that it is the case of the department that the goods in the present case were imported from Iran as against the declared country viz., Zambia. Keeping the allegation in mind, the department had seized the goods imported vide 4 impugned Bills of Entry. The argument of the appellant that no benefit is accrued to the appellant by allegedly mis-declaring the Country of Origin as they were always willing to pay the entire duty payable on these goods without even the considering the said COO cannot be ruled out and have to borne in mind when conditions for provisional release was decided under the approval of the Respondent - Further it is a settled law that an importer unless proven otherwise beyond doubt cannot be said to have any role in the issuance of a COO as the same is issued by the competent authority of the originating country. However, at this point in time, it is also important to note that the investigation is ongoing and country of origin of the goods will be determined only after the investigation is concluded. At this point of time, it cannot be said with certainty that the goods were imported from Iran. Be that as it may, the issue before this Tribunal is limited to the provisional release of goods and the same be decided keeping in mind the fact that the Appellant never intended to avail any benefit basis the COO and were and are willing to pay the duty on the goods imported vide the 4 bills of entry. The order of Commissioner (Appeals) is liable to be set aside to the extent it directs provision of BG of 15% of value of goods - the ends of justice shall be met if the appellant is allowed the provisional release of the subject imported goods on execution of Bond of full value of such goods and furnishing the bank guarantee of Rs.1 Crore - Appeal allowed.

Summary

Issues Involved:
1. Legality of the requirement for the appellant to furnish a bank guarantee of 15% of the value of seized goods for provisional release.
2. Authority and jurisdiction of customs officials to review and modify provisional release orders.
3. Validity and enforceability of the provisional release conditions under the Customs Act, 1962.

Detailed Analysis:

1. Legality of the Requirement for Bank Guarantee:
The appellant challenged the condition to provide a bank guarantee of 15% of the value of the seized goods, arguing it was excessive and arbitrary. The appellant cited several precedents, including *T.G. Enterprise vs. Union of India* and *Veer Impex vs. Union of India*, where courts had set aside similar conditions or modified them to be less onerous. The appellant contended that since they were willing to pay the entire duty amount without claiming any benefit under any Free Trade Agreement (FTA), the additional requirement of a bank guarantee was unnecessary and contrary to established legal principles. The Tribunal agreed, noting that there was no evidence of undervaluation or misclassification of the goods, and the condition to provide a bank guarantee of 15% of the value of the goods was excessive.

2. Authority and Jurisdiction of Customs Officials:
The appellant argued that once the provisional release order was issued on 04.02.2022, the customs officials became functus officio and had no jurisdiction to review or alter the order. The Tribunal supported this view, citing the decision in *Dharampal Satyapal Limited vs. Union of India*, which held that an adjudicating authority could not review its own order unless explicitly empowered by law. The Tribunal found that the withdrawal of the provisional release order by the Additional Commissioner of Customs was without jurisdiction and contrary to the principles of law.

3. Validity and Enforceability of Provisional Release Conditions:
The Tribunal examined whether the conditions for provisional release imposed by the Commissioner (Appeals) were justified. It noted that the initial provisional release order required a bank guarantee of 15% of the duty payable, which was later changed to 15% of the value of the goods without any substantial reasoning. The Tribunal referred to the decision in *Gaurav Pharma Limited*, which established that orders under Section 110A of the Customs Act are quasi-judicial and appealable. The Tribunal concluded that the revised conditions were not only excessive but also lacked legal justification, especially when the appellant was willing to pay the full duty amount.

Conclusion:
The Tribunal set aside the order of the Commissioner (Appeals) to the extent it required a bank guarantee of 15% of the value of the goods. Instead, it directed the appellant to execute a bond for the full value of the goods and furnish a bank guarantee of Rs. 1 crore. This decision was based on the principles of proportionality and reasonableness, ensuring that the appellant's interests were balanced with the need to protect revenue. The Tribunal emphasized that the provisional release of goods should not be hindered by arbitrary and excessive conditions, especially when the appellant was willing to comply with the duty requirements.