2022 (8) TMI 508 - HC - Customs

Maintainability of petition - availability of alternate and efficacious remedy of appeal - Denial of refund - Non adhering to the instruction given by the CBEC - seeking refund/restoration of the bank guarantee and maintenance of the status quo till final disposal of the appeal pending in the Customs Excise and Service Tax appellate Tribunal - HELD THAT - In the undisputed facts from the record the remedy of appeal can hardly be regarded as efficacious to seek redress against the coercive action of encashment of the Bank Guarantee - Admittedly the Order in Original dated 30.06.2020 was issued on 06.07.2020 but served on the petitioner only on 15.07.2020. The order states that any person aggrieved by the same may prefer an appeal to the Appellate Tribunal under Section 129(3) of Customs Act 1962 within three months from the date of the communication of the order with the Assistant Registrar Customs Excise and Service Tax Appellate Tribunal (CESTAT) Western Bench Mumbai. In NG. ENTERPRISES VERSUS COMMISSIONER OF CUSTOMS (APPEALS) NEW DELHI 2000 (5) TMI 53 - HIGH COURT OF DELHI the Division Bench of the Delhi High Court by referring to the Board s circular dated 02.06.1998 held that the revenue could not be permitted to take a stand contrary to the instructions issued by the Board. It is a different matter that an assessed can contest the validity or legality of a departmental instruction. But that right cannot be conceded to the Department more so when others have acted according to such instructions. The circular in terms provided that coercive measures to recover duty demanded as a result of adjudication ought not to be taken until the Commissioner s disposal of the stay application. Moreover the Circular took cognizance of the Bombay High Court ruling that no coercive action should be taken to realize the dues during the pendency of the stay application before appellate authorities. In the present case the respondents have acted not only in breach of the Circular of CBEC which was binding on them but also in breach of the law laid down by the several decisions referred to above. The CBEC circular and the instructions bind the Customs Authorities. In any case the Customs Authorities are bound by the various decisions referred above not to mention the solemn assurance on behalf of the Union of India that in the future adequate care would be taken to follow the law laid down by this Court scrupulously. Therefore the impugned action is unsustainable. The Commissioner of Customs (respondent no.2) are directed to circulate this judgment and order to all Assistant Commissioners or adjudicating Officers so that in future there are no similar instances of breach of CBEC instructions or the disobedience of judicial orders - appeal disposed off.

Summary

Issues:
1. Challenge to coercive measures and encashment of Bank Guarantee before appeal
2. Maintainability of the petition due to alternate remedy of appeal

Analysis:
1. Challenge to Coercive Measures and Bank Guarantee Encashment:
The petitioners sought to quash an order directing encashment of a Bank Guarantee by the respondents before the petitioners could appeal an Order in Original dated 30.06.2020. The petitioners argued that this action contradicted a circular by the Central Board of Excise and Customs (CBEC) and cited previous cases where similar actions were deemed illegal. The respondents contended that the petitioners had an alternate remedy of appeal and could be refunded if successful. The court found that the appeal remedy was not efficacious in this case as the coercive action of encashment was premature, breaching CBEC circulars and legal precedents.

2. Maintainability of the Petition:
The respondents argued that the petition was not maintainable due to the availability of an alternate remedy through appeal. However, the court disagreed, noting that the appeal remedy was insufficient to address the coercive encashment of the Bank Guarantee. The court highlighted the timeline discrepancies where the encashment occurred before the petitioners were even served the Order in Original. Referring to relevant CBEC circulars, the court emphasized that coercive measures should not be taken during the pendency of an appeal and recovery actions should only follow a disposal in favor of the department.

3. Precedents and Circulars:
The court cited various legal precedents and CBEC circulars to support its decision. Previous judgments like Mahindra & Mahindra Ltd. and N.G. Enterprises emphasized the need to adhere to circulars preventing coercive actions before appeal resolution. The court also mentioned cases from the High Courts of Karnataka and Delhi where similar views were upheld. Despite assurances from the Customs department to follow legal guidelines, the court found the respondents in breach of CBEC circulars and legal precedents, leading to the quashing of the impugned order and restoration of the Bank Guarantee.

4. Court's Decision and Directions:
Ultimately, the court quashed the order directing Bank Guarantee encashment and instructed the respondents to restore the petitioner's Bank Guarantee, maintaining the status quo until the appeal was disposed of. The court directed the Commissioner of Customs to circulate the judgment to prevent future breaches of CBEC instructions or judicial orders. The respondents were given a deadline to restore the Bank Guarantee, and the court made the rule absolute without any costs awarded.