ORDER
P.V. Sanjay Kumar, J.
1. The petitioner challenges the invocation of its Bank Guarantee during the pendency of the stay petition in the statutory appeal filed by it under the Customs Act, 1962 (for brevity, 'the Act of 1962').
2. The petitioner, a power generation and distribution company, was subjected to levy of customs duty, interest and penalty in respect of certain product imports by the order-in-original dated 05.05.2008 passed by the Commissioner of Central Excise and Customs, Visakhapatnam, respondent 3 herein. Aggrieved thereby, the petitioner took recourse to the statutory remedy available to it, filing an appeal before the Customs, Excise and Service Tax Appellate Tribunal (for brevity, 'CESTAT'), Bangalore, under Section 129-A of the Act of 1962. The petitioner also filed a petition for stay and dispensation of the deposit of the duty, interest and penalty payable, under the provisions of Section 129-E of the Act of 1962 and the said stay application is stated to be pending consideration on the file of the CESTAT till date.
3. While so, the Assistant Commissioner of Customs, Kakinada, respondent 2 herein, addressed letter dated 20.10.2008 to the Shinhan Bank Limited, Mumbai, respondent 4 herein, seeking to invoke the petitioner's Bank Guarantee bearing No. 5020863001 dated 27.03.2002 for a sum of Rs. 7.15 crores in connection with the amounts payable under the order-in-original dated 05.05.2008.
4. Even prior to the issuance of the above communication dated 20.10.2008, the petitioner under its letters dated 22.09.2008 and 26.09.2008 informed the Commissioner of Central Excise and Customs, Visakhapatnam, of the filing of its statutory appeal and stay application against the order-in-original dated 05.05.2008. Upon coming to know of the proposed invocation of its Bank Guarantee under the letter dated 20.10.2008, the petitioner addressed letter dated 31.10.2008 through its counsel requesting the Assistant Commissioner of Customs, Kakinada, to withdraw the letter dated 20.10.2008 and desist from proceeding further in the matter till the disposal of its stay application before the CESTAT.
5. Apprehending that the Customs authorities would not stay their hands, the petitioner approached this Court by way of the present writ petition on 01.11.2008 and the same was taken on file on 03.11.2008. This Court, by order dated 05.11.2008, directed stay of encashment of the Bank Guarantee, if not already encashed, and interdicted the respondent authorities from taking coercive steps for encashment of the Bank Guarantee. However the subject Bank Guarantee for the sum of Rs. 7.15 crores was encashed on 04.11.2008 by the Customs authorities. Accordingly the petitioner sought amendment of its pleadings and prayer in this writ petition which was permitted by this Court on 04.12.2008. Thereby the petitioner now seeks refund of the amount of Rs. 7.15 crores which was appropriated by the Customs authorities by encashing the subject Bank Guarantee.
6. Heard Sri D. Prakash Reddy, learned senior counsel appearing for the petitioner and Sri A. Rajashekhar Reddy, learned Assistant Solicitor General for India. Both the learned Counsel placed reliance upon catenae of decisions in support of their rival contentions.
7. It is an admitted position of fact that the petitioner preferred the statutory appeal available to it under Section 129-A of the Act of 1962 within the stipulated limitation period and also filed a stay application in terms of the proviso to Section 129-E of the Act of 1962.
8. The short issue that falls for consideration in this writ petition is whether the Customs authorities were entitled to invoke the Bank Guarantee furnished by the petitioner before the hearing and disposal of its stay application by the CESTAT?
9. The learned senior counsel appearing for the petitioner placed reliance upon the circulars issued by the Central Board of Excise and Customs, New Delhi, which proscribe initiation of coercive measures during the limitation period for invoking appellate remedies and during the pendency of the stay applications filed in such appellate remedies. He placed reliance upon various Judgments to support his contention in this regard.
10. Per contra, the learned Assistant Solicitor General for India laid a challenge to the maintainability of the writ petition and cited a plethora of decisions in that regard. He also contended that the circulars relied upon by the petitioner had no application to the present case as invocation of a Bank Guarantee would not amount to 'coercive action' against the petitioner. He placed before us various Judgments in support of the proposition that the Courts would not normally injunct the invocation of Bank Guarantees.
The issue squarely turns upon the circulars of the Central Board of Excise and Customs, New Delhi, which lay down the norms to be followed during the pendency of stay petitions in statutory appeals.
11. Under Circular No. 396/29/98-CX dated 02.06.1998, the Central Board directed that no coercive action should be taken to realize the dues under a particular decision till the disposal of the stay application by the Commissioner (Appeals) in an appeal filed against such decision. Thereafter, the Central Board under its Circular No. 788/21/2004-CX dated 25.05.2004, acting upon references received with regard to the course of action to be taken when such stay applications against orders-in-original passed by the Commissioner were pending before the appellate tribunal, stated as hereunder:
2. The matter has been examined. The Board has taken the following decisions:
(a) ...
(b) ...
(c) In respect of stay applications pending against the Orders-in-Original of the Commissioners before the CESTAT a view similar to Board's Circular No. 396/29/98-CX, dated 02.06.1998 should be taken. The two provisos to Section 35C(2A) of the Central Excise Act, 1944 read as follows:
Provided that where an order of stay is made in any proceeding relating to an appeal filed under Sub-section (1) of Section 35B, the Appellate Tribunal shall dispose of the appeal within a period of one hundred and eighty days from the date of such order:
Provided further that if such appeal is not disposed of within the period specified in the first proviso, the stay order shall, on the expiry of that period, stand vacated.
In view of the above stated legal position, the field officers should refrain from taking coercive action till the period of six months of filing a stay petition before the CESTAT, or till the disposal of the stay petition, whichever is earlier.
The instructions in this clause relate to only stay application filed with first stage appeals not to those with further appeals i.e. only in respect of stay applications filed with appeals filed against the Orders-in-Original of the Commissioners.
Needless to state, the circulars issued by the Central Board are binding upon the Revenue (Collector of Central Excise, Patna v. Usha Martin Industries Ltd.) : 1997ECR257(SC) . There is no dispute that the invocation of the petitioner's Bank Guarantee was within the six month period after the filing of its stay petition before the CESTAT. The issue then would be whether invocation of a Bank Guarantee would fall within the ambit of the prohibited 'coercive action' during the pendency of the petitioner's stay petition. The Judgments of the Bombay High Court in Castrol India Limited v. Union of India 2007 (208) ELT 490 (Bom.); Ocean Driving Center Ltd. v. Union of India : 2005(180)ELT313(Bom) ; Mahindra & Mahindra Ltd. v. Union of India : 1992(59)ELT505(Bom) ; Legrand (India) Pvt. Ltd. v. Union of India 2007 (216) ELT 678 (Bom); and K.N. Guruswami Oil Mills Ltd. v. Union of India : 2000(120)ELT57(Bom) all proceeded on the view that encashment of a Bank Guarantee amounted to a 'coercive measure'. Similar was the view taken by the Delhi High Court in Delhi Acrylic Mfg. Co. Pvt. Ltd. v. Commr. of Cus. (Appeals), New Delhi 2002 (144) ELT 24 (Delhi) and by the Rajasthan High Court in Shree Cement Ltd. v. Union of India .
12. There can be no dispute with the fact that the invocation of its Bank Guarantee would have an adverse effect upon the petitioner. Shinhan Bank Limited, Mumbai, would have furnished a Bank Guarantee to the Customs authorities on behalf of the petitioner only after taking sufficient security and upon invocation of the guarantee, it would liquidate such security. Inevitably, the invocation of the Bank Guarantee would cause loss and adversity to the petitioner. Though the learned Assistant Solicitor General for India disputes that such invocation would amount to a coercive step, he is not in a position to either substantiate such contention or support it with authority. In the cases aforestated the Bombay, the Delhi and the Rajasthan High Courts took the view that the invocation of a Bank Guarantee during the period of limitation available for filing an appeal or during the pendency of the stay application pending such appeal would amount to a 'coercive measure' proscribed by the circulars issued by the Central Board, which were binding upon the Revenue. In P.M. Strips Ltd. v. Commissioner of Central Excise & Customs, Hyderabad 2008 (223) ELT 581 (AP) a Division Bench of this Court took the view that the action of the Revenue in seeking to auction property even during the pendency of the stay application filed in the statutory appeal was not proper.
13. We are inclined to agree with the view taken by the Bombay, Delhi and Rajasthan High Courts in the aforestated decisions. The Central Board's circular dated 25.05.2004 clearly posited that the Customs authorities should refrain from taking coercive action till the expiry of a period of six months from the date of filing of stay petition before the appellate tribunal or till the disposal of the petition whichever is earlier. In spite of being put on notice by the petitioner through its letters dated 22.09.2008, 26.09.2008 and 31.10.2008 that it had already invoked the appellate remedy and had moved a stay petition therein under Section 129E of the Act of 1962, the Customs authorities invoked and encashed the subject Bank Guarantee in utter violation of the norms prescribed under the binding circulars of the Central Board of Excise and Customs, New Delhi.
14. Such action on their part was bereft of the authority of law and merely because they are in a position to present a fait accompli before this Court as they have already appropriated the amount encashed under the Bank Guarantee, it does not fetter the power of this Court to undo the injustice done to the petitioner.
15. Reference may be made to the Judgments of the Bombay High Court in Mahindra & Mahindra Ltd.'s case (4 supra), Legrand (India) Pvt. Ltd.'s case (5 supra) and K.N. Guruswami Oil Mills Ltd.'s case (6 supra) where the court directed refund of the amount unlawfully encashed under the Bank Guarantee. We are therefore of the opinion that the petitioner is entitled to refund of the amount of Rs. 7.15 crores encashed under the subject Bank Guarantee.
Apropos the various contentions urged by the learned Assistant Solicitor General for India with regard to the maintainability of this writ petition, we are not impressed. He contended that disputes relating to contracts cannot be agitated under Article 226 of the Constitution of India. He placed reliance upon the Judgment of the Supreme Court in National Highways Authority of India v. Ganga Enterprises and Anr. : AIR2003SC3823 to support this contention. However, we find that the issue before the Supreme Court in that case was as to the maintainability of a claim arising out of a breach of contract, in a writ petition filed under Article 226 of the Constitution of India. In the present case, we are not concerned with any breach of contract or claim arising therefrom. The issue here is with regard to the propriety and correctness of the Customs authorities in acting in violation of the binding circulars of the Central Board of Excise and Customs, New Delhi. The Judgment relied upon by the learned Assistant Solicitor General for India therefore has no application to this case.
16. The next contention of the learned Assistant Solicitor General for India is that this Court ought not to grant an injunction restraining the enforcement of a Bank Guarantee, unless fraud or irreparable injury was established. He placed before us an abundance of case law on this aspect. The Judgments of the Supreme Court in Vinitec Electronics Private Limited v. HCL Info Systems Limited : (2008)1SCC544 ; Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co. : AIR2007SC2798 ; Mahatma Gandhi Sahakra Sakkare Karkhane v. National Heavy Engg. Co. Ltd. and Anr. : AIR2007SC2716 ; Centax (India) Ltd. v. Vinmar Impex Inc. and Ors. : AIR1986SC1924 ; State Trading Corporation of India Ltd. v. Jainsons Clothing Corporation and Anr. : AIR1994SC2778 ; Bses Ltd. (Now Reliance Energy Ltd.) v. Fennar India Ltd. and Anr. : AIR2006SC1148 ; Oil and Natural Gas Corporation Ltd. v. SBI, Overseas Branch Bombay : AIR2000SC2548 ; Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. and Anr. : AIR1997SC2477 ; U.P. State Sugar Corporation v. Sumac International Ltd. : AIR1997SC1644 ; Maharashtra State Electricity Board, Bombay v. Official Liquidator, High Court, Ernakulam and Anr. : [1983]1SCR561 and Svenskahandels Banken v. Indian Charge Crome and Ors. (1994) 1 SCC 503 are relied upon. There is no doubting the legal proposition stated supra and reiterated in the aforestated decisions. However, we are not dealing with a case of an injunction against the invocation of a Bank Guarantee here. At the cost of repetition, the present case turns upon the violation of the binding instructions embodied in the circulars of the Central Board and the invocation of the petitioner's Bank Guarantee is only a manifestation of such violation. The legal principles applicable to injunctions against encashment of Bank Guarantees have no role to play in the present case. The aforestated Judgments are wholly inapplicable to the fact situation before us.
17. The learned Assistant Solicitor General for India relied upon a Judgment of a learned Judge of this Court in Canara Bank, Secunderabad v. Power Grid Corporation Of India Ltd., New Delhi and Ors. : 2007(1)ALD496 , wherein the learned Judge held that the claim of the Bank therein for recovery of the amount covered by a Bank Guarantee was nothing but a money claim for which Article 226 of the Constitution of India could not be invoked. It is however relevant to note that the learned Judge also observed that no case had been made out therein to show failure in the performance of a statutory obligation or that the inaction complained about resulted in infringement of a legal right. The present case, as stated supra, turns upon the violation of the binding norms of conduct prescribed under the circulars of the Central Board, by the Customs authorities which resulted in the infringement of the legal right of the petitioner to be treated in accordance with such circulars. The Judgment relied upon therefore does not lend support to the contention urged.
18. The learned Assistant Solicitor General for India sought to rely upon the Judgment of a Division Bench of this Court in Ashok Sharda v. Small Industries Development Bank of India, Hyderabad and Ors. : 2007(5)ALD866 , wherein the learned Division Bench held that the High Court could not exercise jurisdiction under Article 226 of the Constitution of India for interlocutory inventions when the main matter was pending before a competent adjudicatory forum created under a special statute. Trite to state, the present writ petition does not invite us to exercise any interlocutory invention in the matter. We are called upon to examine the conduct of the Customs authorities, which we find to be in flagrant disregard of the binding instructions issued by the Central Board under its circulars. Such uncaring violation of binding norms by the Revenue justifies, nay, mandates the exercise of jurisdiction by this Court in the present writ petition and the principle laid down in Ashok Sharda's case (23 supra) has no role to play here.
19. The learned Assistant Solicitor General for India drew our attention to the Judgment of a Division Bench of Bombay High Court in Union of India v. Dabhol Power Co. : 2006(199)ELT782(Bom) , wherein the Court permitted encashment of Bank Guarantees by way of interim relief to protect the interests of the Revenue. However, a reading of the Judgment of the Bombay High Court would show that it turned upon the peculiar facts of the case and did not lay down any principle or ratio of binding effect. We are not inclined to accept the argument of the learned Assistant Solicitor General for India that the refund of the amount encashed under the petitioner's Bank Guarantee should not be ordered so as to protect the interest of the Revenue. Such encashment was demonstrably in violation of the binding circulars issued by the Central Board and it would be putting a premium on this illegality to allow the Customs authorities to retain the amount unlawfully appropriated by them through this illegal action.
20. The Judgment of the Supreme Court in Assistant Collector of Central Excise, West Bengal v. Dunlop India Ltd. : 1985ECR4(SC) is relied upon for the proposition that Article 226 of the Constitution of India is not meant to short-circuit or circumvent statutory procedures. The Supreme Court held therein that where matters of public revenue were concerned, interim orders ought not to be granted merely because a prima facie case had been shown. The Court further held that balance of convenience must clearly be in favour of the making of 'an interim order'. It is relevant to note that the above Judgment pertained to the passing of interim orders by the High Court. By this order we propose to dispose of the main writ petition itself and the principles applicable to the passing of interim orders as laid down by the Supreme Court in the aforesaid Judgment have no application. Further, it is relevant to note that the present writ petition was not filed with the intention of circumventing any statutory proceedings. On the contrary the complaint of the petitioner before this Court appears to be that the statutory proceeding was not permitted to proceed as per its ordained course, due to the violation of the binding circulars by the Customs authorities. The Judgment of the Supreme Court therefore is of no guidance to us in the present case.
21. The learned Assistant Solicitor General for India also contended that the writ petition was not maintainable in view of the fact that the petitioner had already invoked an alternative remedy by filing a statutory appeal and a stay application before the CESTAT. The petitioner's stay application before the CESTAT, Bangalore is pending disposal on its file. We do not propose to pass any orders upon the stay application. All that is complained of before this Court is the breach of the expected conduct of the Customs authorities pending disposal of such stay application, in the light of the binding circulars of the Central Board. This contention is therefore liable to be rejected.
22. Lastly, the learned Assistant Solicitor General for India drew our attention to the Judgment of the Supreme Court in Ashwani Kumar Singh v. U.P. Public Service Commission and Ors. : AIR2003SC2661 . The Supreme Court observed therein that reliance on decisions by the Courts should be on the basis of identicity of the fact situation of the cases. The Court held that observations of the Courts should neither be read as Euclid's theorems nor as statutory provisions and that they are to be read in the context in which they appear. We have in fact applied this very doctrine while considering and applying the plethora of precedents placed before us by the learned Assistant Solicitor General for India.
23. We are therefore not inclined to agree with the learned Assistant Solicitor General for India that the present writ petition is not maintainable on facts or in law.
24. For the reasons aforestated, the writ petition is allowed. There shall be a direction to respondents 2 and 3 to refund the amount of Rs. 7.15 crores encashed under Bank Guarantee No. 5020868001 dated 27.03.2002 within two weeks from the date of receipt of a copy of this order. There shall be a further direction to the petitioner to execute a fresh Bank Guarantee of sufficient longevity for the like amount in favour of the Assistant Commissioner of Customs, Division-I, Customs House, Kakinada, within one week thereafter. In view of this order, no further orders are required in WPMP Nos. 31352, 31353, 32035, 32036 and 32037 of 2008 and WVMP No. 3903 of 2008. The said applications are accordingly closed. There shall be no order as to costs.