TMI Blog2013 (7) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Authority - the department would be at liberty to initiate recovery proceedings in accordance with the circular - It was not proper on the part of the respondents to encash the Bank Guarantees even before the period of appeal was over or the conditions stipulated in circular was not attracted – department’s action in invoking the Bank Guarantees was contrary to their own declared policy – petition decided partly in favour of assessee - WRIT PETITION NO. 21752/2013 (T-TAR) - - - Dated:- 18-6-2013 - Aravind Kumar, J. For the Appellants : Sri K G Raghavan, Sr. Counsel for Sri Ajay, J N, Adv. for M/s Pragathi Law Chambers, Associates For the Respondents : Sri N R Bhaskar, Advocate a/w Sri. Jeevan J Neeralgai, Advocate for R-2; Sri Shivayogiswamy, AGA for R-1) ORDER:- PER : Aravind Kumar Petitioner is seeking for quashing of notices dated 21.05.2013 issued by respondent No.4 to its bankers as per Annexures-A1 and A2 and for a mandamus to respondent No.4 to refrain them from initiating any recovery proceedings based on impugned notice till the expiry of statutory period of appeal and thereafter, till the disposal of stay application to be filed befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined in Order-in- Original dated 29.03.2012. 5. The goods imported during the period 11.05.2007 to 31.03.2008 had been provisionally assessed pending finalization and as already noted hereinabove in Order-in-Original dated 29.03.2012, provisional assessment orders were directed to be finalized. Pursuant to same, provisional assessment came to be finalized and an Order-in-Original came to be passed on 20.05.2013, Annexure-F, whereunder the value of goods came to be re-determined on the basis of United States of America's list price as Rs. 1,54,74,52,291/- under Rule 9 of the Customs Valuation Rules, 2007 and the differential duty payable was determined at Rs. 19,85,21,756/- and affirmed the demand of duty short paid as Rs. 19,85,21,756/- and demanded payment of interest on the short collected duty above referred to by an order of even date. The bank guarantees furnished for an amount of Rs. 24,50,00,000/- at the time of provisional assessment came to be invoked by respondent No.3 on 21.05.2013 and realised the proceeds thereof. On such Order-in Original being passed affirming the provisional assessment, communication dated 21.05.2013 came to be issued by respondent No.4 to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary jurisdiction, but on the other hand the consequential acts of the respondents in invoking the bank guarantees pursuant to said finalization of provisional assessment have forced the petitioner to prefer the present writ petition. He would elaborate his submission in this regard by contending that after finalization of provisional assessment by passing Order-in-Original dated 20.05.2013, respondent No.4 has proceeded to encash the bank guarantee on very next day i.e., on 21.05.2013 without even issuing the copy of the Order-in-Original at the first instance and has ensured that copy of said order dated 20.05.2013 is forwarded to the petitioner after encashment of Bank Guarantees, ignoring the fact that statutory period of filing an appeal was available to the petitioner under Section 128 read with Section 129E of the Customs Act and seeks stay on recovery of such demand and to preempt such order of stay being obtained, Bank Guarantees have been invoked and thus, the provision of Section 129E of the Act is being made nugatory and otiose. Hence, he contends that said act of respondents is also hit by Article 265 of the Constitution of India. 8. He would further contend that reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circular dated 01.01.2013 mandates that till appeal period is over or the stay application is disposed of within a reasonable time, as the case may be, no recovery can be initiated by the department as it would nullify the very provisions of the Act and hence, under the impugned notices the respondents were not justified in invoking the Bank Guarantees and appropriating the proceeds thereof towards the adjudicated amounts and thereby preempt the assessee from seeking any order of stay before the appellate authority and as such, he prays for necessary directions to be issued as prayed for. 10. He would further submit that at the time of goods being provisionally released, petitioner had executed bonds as required under the Customs (Provisional Duty Assessment) Regulations, 2011 made under Section 18 of the Customs Act and had got released the goods by executing the bond and had also furnished the Bank Guarantee, which were undisputedly alive and valid as on date of passing of the Order-in-Original on 20.05.2013, Annexure-F and the first Bank Guarantee was due to expire only on 26.07.2013 and as such the respondent at the most could have called upon the petitioner to renew the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Melting Wire Industries (12) 1992 (59) E.L.T. 505 (Bom.): Mahindra Mahindra Ltd. vs. Union of India (13) 2007 (208) E.L.T. 490 (Bom.): Castrol India Limited vs. Union of India (14) 2005 (187) E.L.T. 438 (Bom.): Noble Asset Company Ltd. vs. Union of India (15) 2005 (180) E.L.T. 313 (Bom.): Ocean Driving Center Ltd. vs. Union of India (16) 2007 (216) E.L.T. 678 (Bom.): Legrand (India) Pvt. Ltd. vs. Union of India (17) AIR 1952 Nag 139: Chhotabhai Jethabhai Patel and Co. vs. The Union of India and Others 13. Per contra Sri N.R.Bhskar, Learned Counsel appearing for the respondent would support the action taken by the respondent authorities. In support of said stand taken, he would draw the attention of Court to the detailed statement of objections filed contending that when the Order-in-Original dated 29.03.2012 came to be passed, it was ordered that provisionally assessed Bills of Entry are to be finalized and in pursuance thereof provisionally assessed Bills of Entry have been finalized on 20.05.2013 Annexure-F the copy of said order at the request of petitioner was despatched by fax on 21.05.2013, which has been suppressed by the petitioner and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard the learned Advocates appearing for the parties and on perusal of the pleadings, I am of the view that following point would arise for my consideration in this writ petition: Whether respondent-Department was entitled to invoke Bank Guarantees after passing the Order-in-Original and finalizing the provisional assessment even before said order is communicated to the assessee or even before completion of the statutory period as prescribed in the Circular dated 01.01.2013 issued by the Board? 15. Petitioner is the successor in interest of M/s.Sun Micro Systems India Pvt. Ltd., which was issued with show cause notice on 27.02.2009 on the basis of the investigation conducted by the Department of Revenue Intelligence (DRI) demanding differential customs duty based on the assessable value redetermined at the US List price. Under the said show cause notice duty was demanded on the clearances made even for the period post May 2007 which came to be provisionally assessed and as such, there was no adjudication of these Bills of Entry in the Order- in original No.1/2012 dated 29.03.2012 on the ground that said assessments were provisional and they were pending finalization. As such, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Order-in-Original No.1/2012 dated 29.03.2012 (Annexure-B) the adjudicating authority has finalized the provisional assessment of Bills of Entry by Order-in- Original No.554/2013 on 20.05.2013 vide Annexure-F. 17. Though learned Advocates appearing for petitioner has contended that non issuance of notice and/or not affording the petitioner - assessee opportunity of personal hearing before passing of order in original dated 20.05.2013 (Annexure-F) is vitiated since it is in violation of principles of natural justice and same is rebutted by Sri N R Bhaskar, learned Advocate appearing for respondents. I am not inclined to consider the rival contentions raised in this regard or examine the said issue, inasmuch as, there is no challenge to the said order nor it is the scope of the present writ petition. In the present petition, only validity of invocation of Bank Guarantees and its encashment thereof by the respondents is questioned, which requires to be considered. Hence, this order is limited to the examination of the said issue and contentions raised in this regard. 18. Under Section 18 of Customs Act, 1962 proper officer is empowered to direct the duty leviable on such goods w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r officer can call upon the importer or exporter as the case may be, to execute the bond with such surety or security or both at the time of provisional assessment. 20. The Board had issued circulars from time to time with regard to final recovery proceedings, which were subject matter of consideration by various High Courts. The Division Bench of High Court of Judicature at Bombay in the case of MAHINDRA MAHINDRA LTD vs. UNION OF INDIA reported in 1992 (59) ELT 505 (Bombay) opined that it was improper on the part of the Collector and Assistant Collector of Customs to encash the Bank Guarantees furnished by the assessee even before expiry of statutory period of three months for filing appeal. In the said case petitioner had specifically informed the authorities that stay application had been fixed for hearing on 17.02.1992 and despite such request respondents therein encashed the Bank Guarantees on 03.02.1992. Hence, Division Bench directed the respondents to pay back the entire amount recovered by encashing the bank guarantees and also directed the petitioner therein to execute fresh bank guarantee. 21. Pursuant to the said judgment of Bombay High Court, office of the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls Appeal filed with a stay application against an order-in-original Recovery to be initiated 30 days after the filing of appeal, if no stay is granted or after the disposal of stay petition in accordance with the conditions of stay, if any specified,whichever is earlier. 23. There is no dispute that at the time of release of goods Bills of Entry were provisionally assessed in the facts on hand and the petitioner's predecessors in title had executed Provisional Duty Bond in terms of Regulation 4 of the Customs (Provisional Duty Assessment) Regulations, 2011 and simultaneously it had furnished the Bank Guarantees in favour of respondents. 24. Show cause notices which had been issued to the petitioner on account of investigations conducted during October 2006 by Department of Revenue Intelligence (DRI) to ascertain the correct value of the spares imported by M/s Sun Micro Systems India (P) Ltd., at Bangalore and Chennai, Additional Director General, DRI issued show cause notices on 27.02.2009 interalia seeking to demand the differential customs duties based on the assessable value re-determined at US List price and same was the subject matter of adjudication b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in dispute that Bank Guarantees which were furnished by the petitioner-assessee at the time of provisional assessment was in force, vogue and alive as also on the date of the Order-in-Original No.554/2013 dated 20.05.2013 (Annexure-F) came to be passed. As already noticed herein above, petitioner had furnished Bank Guarantees for a total sum of Rs. 24,50,00,000/- and first amongst the said Bank Guarantees was to expire on 26.07.2013. When the petitioner had a right of appeal against said Order-in- Original passed under Section 18(2) of the Act by invoking appellate jurisdiction under Section 128 of the Act and when the interest of the revenue is secured by bank guarantees already having been furnished same could not have been encashed for the following reasons. Though plethora of cases are relied upon by learned advocate appearing for petitioner, I am of the considered view that judgment of High Court of Mumbai in the case of LARSEN TOUBRO LTD vs UNION OF INDIA reported in 2013 (288) E.L.T. 481 (Bom) wherein constitutional validity of the circular dated 01.01.2013 issued by the Board came to be considered and answered, has a direct bearing on the facts of the present case. A p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r view, the circular which is issued by the Board is in terrorem and its plain effect and consequence is to deprive the assessee of the remedy which is provided under the law of moving, as the case may be, the CESTAT, the High Court or the Supreme Court against an order of adjudication of the competent appellate forum. Initiating recovery proceedings because a stay application has not been disposed of within thirty days of the filing of an appeal would be to penalize an assessee for the inability of the judicial or, as the case may be, quasi-judicial authority to conclude the disposal of the stay application within that period. If the assessee is not responsible for the delay in the disposal of the stay application and the application remains pending for reasons not attributable to the conduct of the assessee, initiation of recovery proceedings would be arbitrary and unfair. However, if the failure to dispose of an application for stay is because of the conduct of the assessee, such as by a resort to dilatory tactics, the revenue would in such a situation be justified in commencing recovery action. Moreover, there is no justification to commence recovery immediately following an or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirmed demand after 30 days after filing of the appeal and if no stay is granted or after disposal of the stay application in accordance with conditions for stay if any that may be specified. 28. Now turning my attention back to the facts on hand, it can be noticed that Order-in-Original dated 20.05.2013 (Annexure-F) finalizing the provisional assessment came to be passed under Section 18(2) of the Act undisputedly without issuing any notice to the petitioner. Infact, respondents in their statement of objections have no where stated that notice of personal hearing or notice of hearing was issued to assessee before finalization of provisional assessment. On the other hand it is the specific stand of the respondents that when there is no stay of Order-in-Original dated 29.03.2012 which directed finalization of provisional assessment or an injunction restraining respondents from finalizing provisional assessment the authorities were bound to pass such order. It is also asserted that no personal hearing needs to be extended to an assessee (Vide Paragraph 10 of their statement of objections). Additional documents produced by the respondents along with I.A.3/13 which has been allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 129E of the Act and such appropriate relief in appellate proceedings. Said bonds executed and the Bank Guarantees furnished by assessee pursuant to provisional assessment is to ensure that interest of the revenue is secured and its right to recover the duty and interest is not frustrated. Though on account of provisional assessment getting merged with the final assessment, as such bond would come to an end will not relieve the assessee of its obligation particularly when Bank Guarantees have also been executed. When it is a declared policy of the department not to resort to coercive recovery proceedings during the appeal period, plea of the respondents that by virtue of provisional assessment having been finalized under the final assessment it would entitle them to invoke the Bank Guarantee cannot be accepted as it would virtually take away the right of the assessee to pursue its remedy in accordance with the provisions of the Act. The very circular dated 01.01.2013 issued by the Board would be a complete answer to the acts of the respondents. 30. In the present case the sequential events as narrated hereinabove would clearly indicate that at the time of passing Order-in-Origina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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