PNP 1 WP1243-25.7.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGNAL CIVIL JURISDICTION WRIT PETITION NO.1243 OF 2011 Apollo Cranes Pvt. Ltd. and another ..Petitioners. versus Union of India and others ..Respondents. ..... Mr. Manoj Sankalecha with Mr. S.P. Mathur and Mr. Ajay Singh i/b Mr. Sagar Kasar for the Petitioners. Mr. Pradeep S. Jetly for the Respondents. ig ...... CORAM : DR.D.Y.CHANDRACHUD & ANOOP V. MOHTA, JJ.
25 July 2011.
ORAL JUDGMENT (PER DR. D.Y.CHANDRACHUD, J.) :
1. Rule, by consent returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal.
2. The Petitioners question in these proceedings under Article 226 of the Constitution, the legality of orders passed by the Commissioner of Customs (Import) on 15 February 2011 and 7 April 2011 granting provisional release of goods seized under Section 110 of the Customs Act 1962 subject to the following conditions :
"1. Payment of differential duty of Rs.1,32,17,036/- in full along with the interest thereon amounting to Rs.62,41,705/- (calculated till 28.02.2011).
2. Furnishing of Bank Guarantee for 20% of the ascertained ::: Downloaded on - 09/06/2013 17:33:14 ::: PNP 2 WP1243-25.7.sxw CIF value i.e. Rs.7,30,44,625/-.
3. Furnishing of a bond for the ascertained CIF value i.e. Rs.
4. Legal undertaking to produce the crane in question for inspection, whenever required till adjudication of the case, and
5. Legal undertaking not to dispose of the crane without prior intimation to the department."
3. The Petitioners imported nine cranes between 17 November 2005 and 6 April 2010 in respect of which bills of entry were lodged and which were assessed. On 10 November 2010 the cranes were seized by the Customs authorities. On 15 February 2011 an order for the provisional release of the goods was passed under Section 110A permitting clearance subject to - (i) payment of differential duty together with interest; (ii) the furnishing of a bank guarantee representing 20% of the ascertained CIF value; (iii) the furnishing of a bond; and (iv) an undertaking to produce the cranes for inspection and not to dispose of the cranes without prior intimation. On 21 March 2011 the Petitioners addressed letters to the Commissioner of Customs stating that two cranes had already been released on the payment of differential duty. However, the Petitioners stated that they were ready to secure the revenue by furnishing bank guarantees of a nationalized bank and hence, the direction for making a deposit be modified accordingly. The Petitioners also stated that the direction to furnish a bank guarantee representing 20% of the enhanced value may be reduced to an amount representing 10% of the enhanced CIF value. By a letter dated 7 April 2011 the Deputy Commissioner of ::: Downloaded on - 09/06/2013 17:33:14 ::: PNP 3 WP1243-25.7.sxw Customs has granted the request made by the Petitioners for clearance of the seized cranes one at a time, as sought.
4. An affidavit in reply has been filed in these proceedings in which it has been submitted that in the present case the investigations are in progress involving the import of 90 cranes by the Petitioners from October 2005 involving a duty evasion of approximately Rs.10.82 Crores. The affidavit sets out that the investigations have thus far revealed that the Petitioners had suppressed the freight component which forms part of the CIF value for determining duty liability and there was an undervaluation in the declared price of the cranes. The case of the Respondents is that this was admitted in a statement made by the Managing Director of the Petitioner which was subsequently retracted. However, the statements of the Customs House Agent handling the clearance of cargo are to the effect that the value of the cranes has been understated.
Similarly the statements of the buyers of the cranes imported by the Petitioners have admitted to payments having been made in cash over and above the invoice value. In respect of 11 cranes imported by the Petitioners, the private records of one of the suppliers indicated that the price declared to the Customs authorities was 1/3rd of the actual price. A letter of the Shipping Agent is stated to have admitted receipt of U.S. $ 542,184 towards freight, though the invoices indicated the price as CIF and the bill of lading had an endorsement of "freight pre-paid". The affidavit also states that there has been an admission by the Petitioners about payments of the differential amounts of the value of the cranes as also freight to overseas parties through unofficial channels.::: Downloaded on - 09/06/2013 17:33:14 :::
PNP 4 WP1243-25.7.sxw
5. On behalf of the Petitioners, it has been submitted that at the present stage, even a notice to show cause has not been issued and an adjudication is to take place. Section 110A contemplates the release of the goods seized pending an order of the adjudicating authority on the owner furnishing a bond, with such security and conditions as the adjudicating authority may require. Learned counsel submitted that the object of an order for provisional release of goods seized cannot be to cripple the business of the importer.
Hence, it was submitted that the conditions which are imposed are extremely harsh. Moreover, it was urged that in the present case the bills of entry were duly assessed between 2005 and 2010 and clearance was granted against the payment of duty. Hence, it was urged that the authority ought to have only required the Petitioners to furnish a bond for the differential duty, particularly having regard to the judgment of the Delhi High Court in Navshakti Industries Pvt. Ltd. v. Commissioner of Customs1 and of a Division Bench of this Court in Vodafone Essar South Ltd. v. Union of India2 On the other hand, Counsel appearing on behalf of the Respondents has extensively relied on the affidavit in reply which has been filed. Learned counsel submitted that in the present case the department would be issuing a notice to show cause under Section 28 of the Customs Act 1962 read with Section 124. Having regard to the material which has been revealed during the course of the investigation, the impugned order which secures the interest of the Revenue cannot, it was urged, be faulted.
1 2011(267) E.L.T. 483 (Del.) 2 2009(237) E.L.T. 35 (Bom.) ::: Downloaded on - 09/06/2013 17:33:14 ::: PNP 5 WP1243-25.7.sxw
6. Sub section (1) of Section 110 empowers the proper officer to seize goods which he has reason to believe are liable to confiscation under the provisions of the Act. Sub section (2) of Section 110 postulates that where any goods are seized under sub section (1) and no notice in respect thereof is given under clause (a) of Section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized. The Petitioners have not asserted an absolute right for the release of the goods under sub section (2) of Section 110 in view of the judgment of the Division Bench in Jayant Hansraj Shah v. Union of India3 The Division Bench has held that it is only in a case where no provisional order has been passed for the release of seized goods and if no notice is issued under Section 124(a) for confiscation that Section 110(2) would come into operation. Be that as it may, Section 110A provides that any goods seized under Section 110 may, pending an order of the adjudicating authority, be released to the owner on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require. The object of Section 110A is to protect the interests of the Revenue while at the same time allowing provisional release of goods pending the decision of the adjudicating authority.
7. The submission of the Petitioners, which relies on the judgment of the Delhi High Court in Navshakti Industries that the goods should be provisionally released in the present case only against the furnishing of a bond cannot be accepted. It cannot be asserted as a 3 2008(229) E.L.T. 339 (Bom.) ::: Downloaded on - 09/06/2013 17:33:14 ::: PNP 6 WP1243-25.7.sxw universal rule that there is any entitlement on the part of an importer to seek provisional release only against a bond. The plain terms of Section 110A contemplate the taking of a bond from the importer with such security and conditions as the adjudicating authority may require. In Navshakti Industries, the Division Bench of the Delhi High Court dealt with a case where certain goods were seized on the ground that they were being diverted for purposes other than newsprint. The importer was directed to pay the differential duty and to execute a bank guarantee representing 25% of the seizure value together with a bond. The Delhi High Court noted that no specific guidelines are available in regard to the exercise of the power under Section 110A. In the facts of that case, the High Court adverted to the provisions of Regulation 2 of the Customs (Provisional Duty Assessment) Regulations 1963. Regulation 2 dealt with a situation where on account of any of the grounds specified in sub section (1) of Section 18 the proper officer is not able to make a final assessment of duty. In that case, the officer is required to make an estimate of the duty most likely to be levied. If the importer or the exporter executes a bond in an amount equivalent to the difference between the duty that may be finally assessed and the provisional duty and deposits with the proper officer such sum not exceeding 20% of the provisional duty as the officer may direct, the Regulation permits the officer to assess the duty on the goods provisionally at an amount equivalent to the provisional duty.
8. We find merit in the submission which has been urged on behalf of the Respondents that the judgment of the Delhi High Court must be read in the context of the facts as they appear in that case ::: Downloaded on - 09/06/2013 17:33:14 ::: PNP 7 WP1243-25.7.sxw and cannot be regarded as laying down a principle of universal application. Section 17 of the Act provides for assessment of duty, while Section 18 makes provisions for a provisional assessment of duty. A provisional assessment of duty is contemplated (a) where the importer or exporter is unable to make a self assessment and makes a request in writing to the proper officer for assessment; or (b) where the proper officer deems it necessary to subject any imported or exported goods to a chemical or other test; or (c ) where the importer or exporter has furnished full information or documents but the proper officer deems it fit to make a further enquiry; or (d) where necessary documents have not been produced or information has not been furnished and the proper officer deems it necessary to make further enquiry. The Customs (Provisional Duty Assessment) Regulations 1963 are intended to effectuate the power to make a provisional assessment under Section 18. Cases such as the present on the other hand would be governed by Section 28 where a provision has been made for the recovery of duties which have not been levied or which have been short levied or erroneously refunded.
Section 110 provides for the seizure of goods. Section 110A provides for the provisional release of the goods pending an adjudication by the adjudicating authority. The effect of Section 110A is to confer jurisdiction upon the adjudicating authority to permit the release of goods, pending an adjudication subject to the owner of the goods furnishing a bond together with such security and conditions as the authority may deem fit to impose. In our view, it would not be either appropriate or proper to restrict or curtail the power of the adjudicating authority to demand security or to impose conditions by confining the exercise of that power along the lines of the conditions ::: Downloaded on - 09/06/2013 17:33:14 ::: PNP 8 WP1243-25.7.sxw imposed in the Customs (Provisional Duty Assessment) Regulations 1963. Those Regulations operate in a different field.
9. In the judgment of the Division Bench of this Court in Vodafone Essar there was an order of the Commissioner (Appeals) in the case of the very Petitioners in regard to the classification of the goods. The bills of entry filed by the Petitioners were duly assessed and the goods were cleared on the payment of duty. In this background, the Division Bench held that till the assessment was set aside, the Customs authorities could not have seized the goods assessed particularly when the goods were assessed in accordance with the order passed by the Commissioner (Appeals).
10. In the present case, the affidavit in reply contains a detailed disclosure of the material which is made available during the course of investigation. Undoubtedly, a notice to show cause is still to be issued to the Petitioners and an adjudication is to take place. At the same time, having regard to the material which has been disclosed during the course of the investigation, the order of the Commissioner of Customs (Import) requiring the Petitioners to furnish security cannot be faulted insofar as the requirement of security is concerned.
At the same time, we are of the view that while it would be necessary to protect the interest of the Revenue, this object could be subserved by directing the Petitioners to furnish a bank guarantee of a nationalized bank. Accordingly, we direct that Condition (1) in the communication dated 15 February 2011 shall stand substituted by a direction that the Petitioner shall furnish a bank guarantee of Rs.1,32,17,036/- after giving due credit for the amount of duty paid in respect of the two cranes ::: Downloaded on - 09/06/2013 17:33:14 ::: PNP 9 WP1243-25.7.sxw which have already been cleared against the payment of duty. Condition (2) shall stand modified by requiring the Petitioners to furnish a bank guarantee representing 10% of the ascertained CIF value of Rs.7,30,44,625/- after giving due credit in respect of the value of two cranes of which clearance has already been granted. In terms of the letter issued by the Deputy Commissioner of Customs on 7 April 2011 the Petitioners have been permitted to clear the seized cranes one at a time. The aforesaid bank guarantees shall be of a nationalized bank and shall be furnished to the satisfaction of the Commissioner of Customs (Import) and shall be kept alive during the pendency of the adjudication proceedings. The bank guarantees would consequently be permitted to be furnished against each clearance to be made by the Petitioners. The Petitioners shall furnish a bond for the amount of interest and for the balance representing 10% of the ascertained CIF value. Conditions (3), (4) and (5) set out in the order dated 15 February 2011 are maintained.
The Petition is accordingly disposed of.
(Dr. D.Y. Chandrachud, J.) (Anoop V. Mohta J.) ::: Downloaded on - 09/06/2013 17:33:14 :::