CWP No.23685 o”
1. IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH CWP No.23685 of 2012 Date of decision:20.05.2013 M/s Rajesh Hosiery Mills & another .....Petitioners Versus Commissioner of Customs & another ......Respondents CORAM: HON'BLE MR.JUSTICE AJAY KUMAR MITTAL HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Mr.Rajiv Atma Ram, Sr.Advocate, with Mr.Jagmohan Bansal, Advocate, for the petitioners. Mr.Kamal Sehgal, Advocate, for respondent No.1. Mr.Satish Aggarwala, Advocate and Mr.Sunish Bindlish, Advocate, for respondent No.2. ***** G.S.Sandhawalia J.
1. The present writ petition has been filed under Articles 226/227 of the Constitution of India for issuance of a writ of certiorari quashing the condition Nos.2 to 5 imposed in order dated 25.08.2012 (Annexure P-4) passed by respondent No.1 whereby the provisional release of goods was made subject to fulfilling the said conditions apart from condition Nos.1 and 6 as well.
2. According to the petitioners, the onerous conditions required furnishing of bank guarantee to the tune of the amount of excess drawback attempted to be availed amounting to `17,08,516/- in the case of petitioner No.1 and `16,63,007/- in the case of petitioner No.2 apart from another sum of `5,00,000/- each as bank guarantee to cover the personal penalty leviable under Section 114 of the Customs Act, 1962 (for brevity, the 'Act'), bank guarantees of `14,48,093/- to cover redemption fine in the case of petitioner No.1 and for `13,86,906/- in the case of petitioner No.2; solvency certificate and undertaking Sailesh Ranjan 2013.07.23 17:31 I attest to the accuracy and integrity of this document CWP No.23685 o”
2. to be given that identity and quantity of the impounded goods would not be disputed.
3. The pleaded case of the petitioner-Companies are that they are reputed concerns engaged in the manufacture and export of textile garments namely Knitted Gents Shirts and Knitted Track Suits falling under Chapter Heading 6105 of the Customs Tariff Act, 1975. The petitioners are exporting the said goods to various countries and have to file bills in terms of provision of Section 50 of the Act for permission of clearance and loading of goods for export purpose after having satisfied that the goods entered for export are not prohibited goods. The Government has declared different incentive schemes like Advance Licence Scheme, Export Promotion Capital Goods Scheme, Duty Entitlement Pass Book Scheme, Duty Drawback Scheme. In the ordinary course of business, the petitioners brought two containers for export at ICD, New Delhi and filed their shipping bills each in terms of Section 50 of the Act. The Officers of the Directorate of Revenue Intelligence (for short, the 'DRI') examined the shipments of the petitioners and drew samples and detained the goods vide panchnama dated 30.04.2012 and 01.05.2012. The said detention orders were challenged and this Court, vide order dated 01.06.2012, on the issue of release of the two containers and for permission to export the same, directed respondent No.2 therein to recommend the matter to the appropriate authority who would take a decision within 7 days. Resultantly, the order dated 25.08.2012 was passed on provisional release of the goods subject to following conditions: “(A) In view of the above and Board Circular 1/2011 dated 04.01.2011 issued vide F. No.401/179/2009/Cus-III, I allow provisional release of the goods on the following terms and conditions to M/s Century Knitters India Ltd, for 5 shipping bills having the total declared FOB value of RS. 2,45,67,276/- which has been redetermined as Rs.57,92,371/- on the basis of market enquiry:- Sailesh Ranjan 2013.07.23 17:31 1. on execution of Bond equivalent to the declared FOB value I attest to the accuracy and integrity of this document CWP No.23685 o”
3. of the goods covered under the said 5 shipping bills i.e. Rs.2,45,67,276/- 2. On furnishing of Bank Guarantee to the tune of the amount of excess drawback attempted to be availed i.e. Rs.17,08,516/- cover the personal penalty leviable under Section 114 of the Customs Act, 1962. Further, an amount of Rs.5,00,000/- as Bank Guarantee to cover leviable penalty under Section 114(AA) of the CA”
3. on furnishing of Bank Guarantee to the tune of 25% of the determined FOB value i.e. Rs.14,48,093/- to cover the redemption fine 4. on submission of solvency certificate 5. on furnishing an undertaking that the identity and the quantity of the impugned goods will not be disputed and 6. on drawal of representative sample in the presence of DRI officers, if required by DRI. (B) The total declared FOB value of the 5 shipping bills filed by M/s Rajesh Hosiery Mills as per the seizure memo dated 31.04.2012 is Rs.2,38,22,417/- which has been re-determined as Rs.55,47,623/- on the basis of market enquiry. The declared FOB value of the individual shipping bills and the Drawback involved is not available with this office as the shipping bills has been purged and the same have also not been provided by the DRI. In these circumstances, I have no other option but to determine the amount of Bond and Bank Guarantee on pro-rata basis vis-a-vis M/s Century Knitters India Ltd. Hence, in view of the Board Circular 1/2011 dated 04.01.2011, I allow provisional release of the goods on the following terms and conditions to M/s Rajesh Hosiery Mills:- market enquiry:- 1. on execution of Bond equivalent to the declared FOB value of the goods covered under the said 5 shipping bills i.e. Rs.2,38,22,417/- 2. On furnishing of Bank Guarantee to the tune of the amount of excess drawback attempted to be availed i.e. Rs.16,63,007/- to cover the personal penalty leviable under Section 114 of the Customs Act, 1962. Further, an amount of Rs.5,00,000/- as Bank Guarantee to cover leviable penalty under Section 114(AA) of the CA”
3. on furnishing of Bank Guarantee to the tune of 25% of the determined FOB value i.e. Rs.13,86,906/- to cover the Sailesh Ranjan 2013.07.23 17:31 I attest to the accuracy and redemption fine integrity of this document CWP No.23685 o”
4. 4. on submission of solvency certificate 5. on furnishing an undertaking that the identity and the quantity of the impugned goods will not be disputed and 6. on drawal of representative sample in the presence of DRI officers, if required by DRI. (M.S.Arora) Commissioner”.
4. Thereafter, show cause notice dated 25.10.2012 was issued to the petitioners by respondent No.2, Joint Director, DRI. Aggrieved against the said conditions, the present writ petition has been filed challenging the conditions enumerated above especially conditions No.2 to 5, placing reliance upon various judgments passed by this Court in the cases of Amit Enterprises Vs. Union of India 2011 (269) E.L.T. 314 (P & H), Era International Vs. Union of India 2011 (274) E.L.T. 6 (P & H), CWP No.8148 of 2012 titled M/s Shilpi Crafts VS. Union of India & others and CWP No.13136 of 2011 titled M/s Om Udyog Vs. Joint Commissioner of Customs.
5. In the written statement filed by respondent No.1, the plea was taken that there was efficacious alternative remedy of appeal in terms of Section 129A of the Act against the said order passed by respondent No.1 and therefore, this Court would be reluctant to exercise the extraordinary writ jurisdiction. Reference was made to judgment of the Madras High Court in Nivram Pharma Pvt. Ltd. Vs. CEGAT 200 (2005) ELT 9 and the Hon'ble Supreme Court in Tita Nagar Paper Mills Ltd. Vs. State of Orissa AIR 198.SC 60.etc. The conditions imposed in the provisional release order was to be read in consonance with the provisions of Section 110A of the Act and there was no legally tenable ground on which the said conditions would be set aside. Reliance was also placed upon the judgment of this Court in CWP No.13914 of 2008 titled M/s Kundan Rice Mills Vs. Union of India decided on 15.12.2008 and T.L.Verma & Co. Pvt. Ltd. Vs. Union of India 2009 (234) ELT 203.It was stated that the Sailesh Ranjan 2013.07.23 17:31 I attest to the accuracy and integrity of this document CWP No.23685 o”
5. contents of the containers had been inspected and respondent No.1 had re- determined the value of the goods as `57,92,371/- on the basis of the market enquiry against the declared FOB value of `2,45,67,276/- in the case of petitioner No.1. In the case of petitioner No.2, it was re-determined as `55,47,623/- on the basis of market enquiry against the declared FOB value of `2,38,22,417/-. There was also huge difference between the net weight of the consignment as declared by the exporter vis-a-vis the actual weight of the consignments and there was shortage of quantity of goods also. Reference was made to Section 110A of the Act which provided that the provisional release would be subject to the conditions imposed by the Commissioner of Customs. The Director, Sh.Rajesh Dhanda had been called upon by issuance of show cause notice dated 25.10.2012 as to why the goods should not be re-assessed.
6. Similarly, in the reply filed by respondent No.2, it had been alleged that 8 writ petitions have been filed by the petitioners and their associates to derail the investigation and it was pleaded that fraud was being played by the petitioners. The power of the Court to order disposal of the goods was challenged on the ground that it was not the case where the goods were subject to speedy and natural decay. The respondents had a statutory duty to perform and to conclude the investigation. The huge liability is likely to be assessed against the petitioner. It was stated that the petitioner had an alternative remedy and the investigation of the criminal offence was a sensitive issue and investigation had to be concluded.
7. Learned Senior Counsel for the petitioner submitted that the case stands covered by judgments relied upon whereas the stand of the respondents is that in view of the fact that there is an alternative remedy available to the petitioner, it should avail the same and further the matter is under investigation and being looked into regarding the fraudulent duty drawback claims filed by the Sailesh Ranjan 2013.07.23 17:31 I attest to the accuracy and integrity of this document CWP No.23685 o”
6. petitioners.
8. After hearing counsel for the parties and in view the facts and circumstances of the litigation inter se, we are of the opinion that the conditions No.2 to 5, reproduced above, are onerous and against the directions given by this Court in various cases. This Court in Amit Enterprises (supra), while considering the conditions imposed, distinguishing the judgments in T.L.Verma & Co. Pvt. Ltd. (supra) and M/s Kundan Rice Mills (supra) had held that the Court had to be satisfied that the importers had adopted fraudulent tactics and some allegation of liability for confiscation is not enough. Accordingly, it was held that by imposing such conditions, there would be denial of justice as the parties would not be in a position to get their goods released if the said conditions are imposed. Relevant paragraphs reads as under:
11. We find merit in the contention that requirement of giving a declaration that the petitioner will not challenge the value of the goods, in unreasonable and arbitrary. The petitioner cannot be debarred from asserting its version as to the value and classification of goods. If such a condition is allowed to be imposed, the department can unilaterally allege any valuation and continue to keep the goods under detention unless the affected party agrees to withdraw the challenge to the valuation. This will amount to denial of justice. Similarly, requirement of furnishing bank guarantee equal to 25% of the full market value of the seized goods is also, in the facts and circumstances of the case, arbitrary. Mere fact that condition of 10% of bank guarantee was upheld by this Court in T.L.Verma and M/s Kundan Rice Mills cannot be justification to impose such conditions in each and every case. In those cases, this Court was satisfied that the importers had adopted fraudulent tactics which, prima facie, justified opinion for confiscation of goods. The said judgments cannot apply to every case of detention. Mere allegation of liability to confiscation is not enough. Circumstances and grounds justifying opinion about liability to confiscation is open to judicial scrutiny.
9. The said view was followed in Era International Vs. Union of India 2011(274) E.L.T. 6 (P & H) wherein also, similar conditions imposed Sailesh Ranjan 2013.07.23 17:31 I attest to the accuracy and integrity of this document CWP No.23685 o”
7. regarding furnishing of bank guarantee and declaration as a condition for release of goods was set aside by this Court with the under-noted observations:
“7. Similar matter has been earlier dealt with by this Court on 9.5.2011 in CWP No.6732 of 2011 Amit Enterprises v. Union of India 2001(269) ELT 31.and it was held that prima facie there was violation of judgment of the Hon'ble Supreme Court in Commissioner of customs v. Sayed Ali 2011( 265) ELT 17.laying down that seizure can be effected only by an officer specifically authorized to act as such. In the present case, no such authority has been produced by the officer effecting seizure. It has also been held that imposition of a condition to the effect that the value of goods will not be challenged at any stage, is abuse of power, as no person can be debarred from asserting its case. It has been further held that requirement of furnishing bank guarantee equal to 25% of the full market value of the goods could not be justified on a simple dispute of classification and valuation. It has also been held that gross delay in taking decision after seizure without any valid justification was arbitrary. Mere dispute of classification or valuation could not justify power of confiscation and imposing of condition of furnishing of bank guarantee equal to 25% of the value of the goods. The said C.W.P. No.13131 o”
5. judgment is not shown to be distinguishable in its applicability to the present case.
8. Accordingly, we allow this petition and direct immediate provisional release of goods on conditions mentioned in the order of provisional release except the requirement of declaration that the petitioner will not dispute the value of goods and will furnish bank guarantee. In respect of second consignment, the release will be on payment of customs duty as per valuation of the chartered engineer. It is, however, made clear that this order will not affect merits of the controversy to be adjudicated upon in accordance with law.”
10. Following the aforesaid decisions, this Court in M/s Shilpi Crafts (supra), the conditions of imposing bank guarantees and furnishing of similar declarations regarding the identity of goods were quashed. Similarly, the Sailesh Ranjan objections that this Court should not exercise its jurisdiction under Articles 2013.07.23 17:31 I attest to the accuracy and integrity of this document CWP No.23685 o”
8. 226/227 of the Constitution of India on the ground that the appeal lay to the Commissioner was rejected with the observations that it was not an alternative and efficacious remedy. Similar view was also taken in M/s Om Udyog's case (Supra).
11. The respondents have not been able to show whether any liability had been fixed or an investigation has concluded in respect of the show cause notice which was issued on 25.10.20212 and a period of more than 7 months have since passed. It is also pertinent to mention here that in CWP No.10750 of 2012 decided on 14.02.2013, this Court, while partly allowing the writ petition regarding the returning of sum of `10 crores recovered from the Managing Director of the petitioner-Companies had directed that the sum of `8 crores be refunded within a period of 2 weeks and further allowed the revenue to retain the amount of `2 crores till 31.03.2014. The goods were seized on 01.05.2012 and a period of more than one year has expired. In the facts and circumstances as noticed above, it would be onerous to relegate the petitioners to the remedy of appeal under the statute. The matter is yet to be adjudicated by the authorities in pursuance of the show cause notice. The judgments relied upon by learned counsel for the revenue pertain to cases of pre-deposit and therefore, would not help the respondents.
12. Furthermore, the Managing Director and his wife were required to furnish an undertaking in CWP No.10750 of 2012 regarding a plot situated at village Baranhara, near Goudham, Ludhiana having approximate value of `3 crores not to alienate the same for a period of one year so that the respondents could conclude all proceedings in respect of ongoing investigation. The relevant operative portion of the order dated 14.02.2013 reads as under:
“14. In view of the above, while disposing of this petition, we direct the revenue to retain an amount of `2 Crores to safeguard its Sailesh Ranjan 2013.07.23 17:31 interest for being adjusted against any liability that might be created I attest to the accuracy and integrity of this document CWP No.23685 o”
9. on the basis of investigations and/or show cause notice issued to the petitioners and return the balance amount of `8 Crores within a period of two weeks from the date of receipt of certified copy of the order. Needless to say that in case the liability on the basis of the investigations and/or show cause notice issued to the petitioners is less than the amount retained, the respondent shall return the balance amount immediately on finalization of those proceedings. Further, the petitioners shall not create any encumbrance or alienate the plot belonging to Smt. Seema Dhanda referred to hereinabove till 31st March, 2014 or till finalization of proceedings whichever is earlier.”
13. In view of above, more particularly as the Department is already retaining a sum of `2 crores, the interest of the revenue stands protected. In the facts and circumstances, the conditions imposed in the present order under clauses No.2 to 5 providing furnishing of bank guarantees to the tune of the determined FOB value in the case of both the petitioners and for submission of solvency certificate and thirdly, the condition of furnishing of undertaking that the identity and quantity of the goods would not be disputed are onerous and are hereby quashed. The respondents are directed to release the goods to the petitioners within a period of 2 weeks from the date of receipt of a certified copy of this order after ignoring the conditions imposed in clauses No.2 to 5. However, it is made clear that any observations made herein will not affect the merits of the controversy to be adjudicated in accordance with law. (G.S.SANDHAWALIA) JUDGE 20 05.2013 (AJAY KUMAR MITTAL) sailesh JUDGE Sailesh Ranjan 2013.07.23 17:31 I attest to the accuracy and integrity of this document