2025 (3) TMI 1361 - HC - Customs

Seeking provisional release of containers pending clearance by securing the differential duty claimed by the Department - Section 110A of the Customs Act 1962 - HELD THAT - As far as securing the differential duty is concerned there are no difficulty in the said condition being imposed. In fact the learned counsel appearing on behalf of the Petitioner fairly conceded that the Petitioner is willing to secure the differential duty by furnishing a bank guarantee. As far as this aspect is concerned there are no difficulty in the condition imposed by the Department. Redemption fine - HELD THAT - The Department is also justified in asking the Petitioner to secure redemption fine because admittedly this would be payable for release of the goods (of course subject to the fact that they were properly seized). The condition to secure the redemption fine is also justified. Penalty - HELD THAT - Before adjudication of the show cause notice there is no justification on the part of the Department to ask the Petitioner to secure the penalty. It is not as if that in every single case penalty has to be imposed. Considering these facts and circumstances it is directed that the goods of the Petitioner covered under Bill of Entry No. 6517826 dated 6th November 2024 and Bill of Entry No. 7587153 dated 3rd January 2025 shall be provisionally released on the Petitioner securing the differential duty as well as the redemption fine as more particularly set out in the emails dated 16th January 2025 and 28th February 2025 respectively. Conclusion - The provisional release of goods ordered upon securing the differential duty and redemption fine without requiring the securing of penalties. The demand for securing differential duty for past cases not upheld. Petition disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the conditions imposed by the Customs Department for the provisional release of goods, specifically the requirement to secure penalties and redemption fines, are consistent with the provisions of the Customs Act, 1962.

2. Whether the Customs Department can demand securing of differential duty for goods that have already been released in past cases.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Conditions for Provisional Release of Goods

- Relevant legal framework and precedents: The Customs Act, 1962, particularly Section 110A, provides the legal framework for the provisional release of goods. The guidelines issued by the Ministry of Finance, Department of Revenue, Central Board of Excise and Customs, dated 16th August 2017, are also relevant.

- Court's interpretation and reasoning: The Court examined the conditions imposed by the Customs Department for the provisional release of goods, which included securing the differential duty, redemption fine, and penalties. The Court found that securing the differential duty and redemption fine is justified as these are necessary for the release of goods. However, the Court held that requiring the Petitioner to secure penalties before the adjudication of the show cause notice is unjustified.

- Key evidence and findings: The emails dated 16th January 2025 and 28th February 2025 from the Customs Department outlined the conditions for provisional release. The Court found that the requirement to secure penalties was not supported by the Customs Act, 1962, as penalties are not automatically imposed in every case.

- Application of law to facts: The Court applied the provisions of the Customs Act, 1962, and the guidelines to determine that the requirement to secure penalties was not consistent with the law. The Court directed that the goods be released upon securing only the differential duty and redemption fine.

- Treatment of competing arguments: The Respondent argued that the guidelines allowed for securing penalties, but the Court found this interpretation inconsistent with the statutory framework, particularly since penalties are subject to adjudication.

- Conclusions: The Court concluded that the goods should be provisionally released upon securing the differential duty and redemption fine, without the need to secure penalties.

Issue 2: Securing Differential Duty for Past Cases

- Relevant legal framework and precedents: The Customs Act, 1962, particularly Section 110A, governs the provisional release of goods and the securing of differential duty.

- Court's interpretation and reasoning: The Court found that the demand for securing differential duty for past cases, where goods have already been released, is contrary to the Customs Act, 1962. The Act does not support holding current consignments to secure duties for previously released goods.

- Key evidence and findings: The Petitioner argued that the demand for securing differential duty for past cases is illegal. The Court agreed, noting that the Customs Act does not provide for such a condition.

- Application of law to facts: The Court applied the statutory provisions to determine that the demand for securing differential duty for past cases is not justified under the Customs Act, 1962.

- Treatment of competing arguments: The Respondent did not provide a convincing legal basis for securing differential duty for past cases, and the Court found the Petitioner's argument more persuasive.

- Conclusions: The Court concluded that the demand for securing differential duty for past cases is not supported by the Customs Act, 1962, and should not be imposed as a condition for the provisional release of goods.

SIGNIFICANT HOLDINGS

- Preserve verbatim quotes of crucial legal reasoning: "As far as the penalty is concerned, we find that before adjudication of the show cause notice, there is no justification on the part of the Department to ask the Petitioner to secure the penalty."

- Core principles established: The Court established that securing penalties before adjudication is not justified under the Customs Act, 1962. The requirement to secure differential duty for past cases is also unsupported by the Act.

- Final determinations on each issue: The Court ordered the provisional release of goods upon securing the differential duty and redemption fine, without requiring the securing of penalties. The demand for securing differential duty for past cases was not upheld.