1996 (5) TMI 96 - HC - Central Excise

Summary

Issues Involved:
1. Enforceability of Bank Guarantees post-Apex Court judgment.
2. Validity of Bank Guarantees under the Supreme Court's interim order.
3. Impact of unequal bargaining power on the enforceability of Bank Guarantees.
4. Applicability of Section 11A of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Enforceability of Bank Guarantees post-Apex Court judgment:
The petitioners argued that the Bank Guarantees should not be enforced following the disposal of the case by the Apex Court. The Court rejected this contention, stating that the Bank Guarantees were enforceable as per the terms of the Apex Court's interim order. The interim order required the petitioners to furnish Bank Guarantees for the arrears, and upon the disposal of the case, these guarantees became enforceable.

2. Validity of Bank Guarantees under the Supreme Court's interim order:
The petitioners contended that the Bank Guarantees were not in consonance with the Supreme Court's interim order. The Court examined the interim order, which mandated furnishing Bank Guarantees for the arrears within six weeks. The Court found that the Bank Guarantees were indeed in compliance with the interim order and thus valid. This contention was rejected.

3. Impact of unequal bargaining power on the enforceability of Bank Guarantees:
The petitioners argued that the Bank Guarantees should not be enforced due to unequal bargaining power between the parties. The Court dismissed this argument, noting that the petitioners were aware that the Bank Guarantees were for the arrears due. The Court referenced the Supreme Court decision in AIR 1981 S.C. Page-1426, emphasizing that Bank Guarantees must be honored according to their terms, and courts should not interfere except in cases of fraud or special equities.

4. Applicability of Section 11A of the Central Excise Act, 1944:
The petitioners claimed that recovery proceedings were barred under Section 11A of the Central Excise Act. The Court clarified that Section 11A applies to situations where duty has not been levied, paid, or has been short-levied, short-paid, or erroneously refunded. In this case, the duty was assessed and demanded, and thus, Section 11A did not apply. The Court referenced the case of Gokak Patel v. Collector and J.K. Spinning and Weaving Mills Ltd. v. Union of India, distinguishing the facts and confirming that Section 11A did not support the petitioners' case.

Conclusion:
The Court found no merit in the writ applications and dismissed them. The stay order was vacated, and each petitioner was ordered to pay costs of Rs. 3000/-. The petitioners' request for a stay of this order was rejected. The writ applications were accordingly dismissed.