Case Law Details
FCI OEN Connectors Limited Vs Union of India (Karnataka High Court)
The limited point that arises for consideration is, whether the respondents were justified in encashing the bank guarantee and invoking the continuity bonds before expiry of the statutory appeal period of 60 days from the date of the order dated 10.03.2021.
As rightly contended by the learned counsel for the petitioner and as held by this Court in Oracle’s case (supra), invocation of the continuity bonds and encashment of the Bank guarantee by the respondents on 11.03.2021 and 16.03.2021, much before the expiry of the period of 60 days from 10.03.2021 as has been expressly stated by the respondent No.2 himself in the Order-in-Original and as provided in Section 128 of the said Act of 1962 is clearly illegal, arbitrary and the same deserves to be quashed, particularly in the light of the Circular dated 16.09.2014 issued by the respondents. Under these circumstances, I am of the considered opinion that in the light of the undisputed fact that the Order-in-Original dated 10.03.2021 itself states that the petitioner had a period of 60 days to prefer an appeal under Section 128 of the said Act of 1962 coupled with the aforesaid Circular dated 16.09.2014 and the decision of this Court in Oracle’s case (supra), the impugned letters dated 11.03.2021 and 16.03.2021, whereby the respondents have encashed the bank guarantee and invoked the continuity bonds in respect of the entire disputed amount as directed in the impugned order is not only contrary to law and the facts and probabilities of the case but also opposed to the principles of natural justice, in that no opportunity, much less reasonable or sufficient opportunity was provided to the petitioner to prefer an appeal within the statutory period of 60 days and the respondents have hastily and hurriedly proceeded to issue the impugned letters which cannot be countenanced under any circumstances whatsoever and the same deserve to be quashed.
So also, learned counsel for the petitioner is right in his contention that the maximum liability to deposit the disputed amount in the appeal already preferred by the petitioner, which is pending adjudication is 7.5% of the disputed amount out of the total sum of Rs.34,09,343/- as directed in the Order-in-Original; it follows therefrom that in view of my finding that the impugned letters / orders are illegal and arbitrary and deserve to be quashed, by also applying the principles of restitution, it is necessary to direct the respondents to refund / repay any sum in excess of Rs.34,09,343/- back to the petitioner pending disposal of the appeal and by issuing necessary directions in this regard.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
In this petition, petitioner seeks quashing of the impugned letters at Annexure – A dated 11.03.2021 and Annexure – A1 dated 16.03.2021, both issued by respondent No.2 and for other reliefs.
2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record.
3. In addition to reiterating the various contentions urged in the petition and rejoinder as well as referring to the documents produced by the petitioner, learned counsel for the petitioner submits that the petitioner imported oxygen sensors and loud speakers for use and inputs in the manufacture of ICU ventilators without payment of customs duty availing the benefit of exemption Notification No.20/2020-CUS dated 09.04.2020 read with Customs (Import of goods at Concession rate of duty) Rules, 2017. Prior to import of the goods, petitioner furnished Bank guarantee dated 08.05.2020 issued by ICICI Bank in a sum of Rs.5,25,000/-; petitioner also executed continuity bonds dated 27.05.2020, 27.05.2020 and 10.06.2020 towards the said import as per the Act and the Rules.
4. It is submitted that pursuant to the import of the goods, petitioner filed his returns and on 10.08.2020 requested the respondents for closure of the Bonds and sought return of the Bank guarantee furnished by him; the respondent No.2 issued a letter dated 08.09.2020 seeking clarification regarding eligibility of the petitioner to avail exemption and in response to the same, petitioner furnished the details vide letter dated 01.10.2020 submitted by him to the respondent No.2. However, vide letter dated 29.01.2021, respondent No.2 informed the petitioner that he had incorrectly claimed the benefit of exemption under the said Notification dated 09.04.2020 and therefore informed the petitioner that he was liable to pay customs duty in a sum of Rs.34,09,343/- availed by him as exemption. The petitioner responded to the said letter by submitting a letter dated 08.02.2021 along with all relevant details and documents. It is contended that pursuant thereto, respondent No.2 passed an erroneous and incorrect Order-in-Original No.4/2021 dated 10.03.2021 wrongly holding that the petitioner was liable to pay the aforesaid sum of Rs.34,09,343/-; under the said order, respondent No.2 directed recovery of the aforesaid sum by enforcing the continuity bonds and by encashing the Bank guarantee executed and furnished by the petitioner.
5. It is the grievance of the petitioner that though Section 128 of the Customs Act, 1962 (for short, ‘the said Act of 1962’) provides for an appeal to be filed by the petitioner within a period of 60 days from the date of the Order-in-Original dated 10.03.2021, the respondents have illegally and high handedly proceeded to recover the aforesaid sum of Rs.34,09,343/- by encashing the bank guarantee on 11.03.2021 in a sum of Rs.5,25,000/- and invoking the continuity bonds executed by the petitioner for the balance of Rs.28,84,343/- without waiting for the statutory period of 60 days to expire within which the petitioner was entitled to prefer an appeal before the Appellate Authority.
(i) It is pointed out that a perusal of the Order-in-Original will also indicate that the respondent No.2 himself having stated that the petitioner would have a period of 60 days to prefer an appeal from the date of communication of the order dated 10.03.2021 did not have jurisdiction or authority of law either to recover the amounts by enforcing the bank guarantee or invoking the continuity bonds before expiry of the said period of 60 days and without providing an opportunity to the petitioner to prefer an appeal. My attention is also invited to the Circular dated 16.09.2014 issued by the respondents clarifying and reiterating that the maximum amount of pre-deposit for the purpose of preferring the appeal by the petitioner was only 7.5% of the disputed amount and consequently, any amount in excess of the said 7.5% could not have been recovered by the respondents from the petitioners, particularly before expiry of the statutory appeal period.
(ii) It is also submitted that though the present petition was filed on 19.03.2021 itself, i.e., 9 days after passing of the Order-in-Original dated 10.03.2021, the petitioner has preferred a statutory appeal within the prescribed period of 60 days, which is pending before the Appellate Authority. It is therefore submitted that since the maximum liability of pre-deposit payable by the petitioner in the appeal preferred by him is only 7.5% of Rs.34,09,343/-, it is necessary that in addition to quashing the impugned letters / orders, the remaining amount is directed to be refunded / repaid to the petitioner and necessary directions are issued to the Appellate Authority to dispose of the appeal in accordance with law. In support of his contentions, learned counsel places reliance upon the following decisions:
i) M/s. Oracle India Pvt. Ltd. Vs. Union of India and others – 2013 – TIOL – 544 – HC – KAR – CUS;
ii) Dharampal Lalchand Chug Vs. Commissioner of C.Ex., Nashik – 2015 (323) ELT 753 (BOM);
ii) Rajuram Purohit Vs. Union of India – 2018 – TIOL – 591 – HC – MUM – CUS;
iii) Skoda Export Company Vs. Commissioner of Customs – 2016 (343) ELT 140 (DEL);
iv) Tamil Trading Corporation Vs. CCE, Tuticorin – 2005 – VIL – 18 – CESTAT – CHE – CU ;
v) M/s. Flextronics Technologies India Pvt. Ltd., Vs. The Assistant Commissioner (CT) – 2014 – VIL – 171 – MAD.
6. Per contra, learned counsel for the respondents, in addition to reiterating the various contentions urged in the statement of objections and reply and referring to the documents produced by the respondents, submit that there is no merit in the petition and that the same is liable to be dismissed. It is submitted that since the petitioner had not preferred an appeal before the Appellate Authority nor obtained any stay of the Order-in-Original, the respondents were fully justified in invoking the continuity bonds and encashing the bank guarantee pursuant to the impugned order. It is also submitted that in view of the undisputed fact that the petitioner has already preferred an appeal which is pending before the Appellate Authority, the question of directing any refund of the amount recovered from the petitioner does not arise. It is therefore submitted that there is no merit in the petition and that the same is liable to be dismissed. In support of his contentions, learned counsel places reliance on the following decisions:
I) Chand Fruits Company P Ltd., Vs. Commissioner of Central Excise – 2020 (371) ELT 883 (TRI –MUMBAI);
ii) Balasubramanian Vs.CCEC and ST, Hyderabad – 2019 (370) ELT 1412 (TRI – HYD)
iii) Kirloskar Pneumatic Co. Ltd., Vs. Collector of Central Excise and Customs – 1992 (58) ELT 212 (TRI – MUMBAI);
iv) HDFC Bank Ltd., Vs. Commissioner of Customs – 2005 (100) ECC 533;
v) Union of India Vs. Valecha Engineering Ltd., – 2010 (249) ELT 167 (BOM)
7. I have given my anxious consideration to the rival submission and perused the material on record.
8. Though several contentions have been urged by both sides with regard to the exemption claimed by the petitioner, the alleged liability of the petitioner to pay the amount stated in the Order-in-Original dated 10.03.2021, the right of the respondents to encash the bank guarantee furnished by the petitioner and to invoke the continuity bonds executed by the petitioner etc., the limited point that arises for consideration is, whether the respondents were justified in encashing the bank guarantee and invoking the continuity bonds before expiry of the statutory appeal period of 60 days from the date of the order dated 10.03.2021.
9. As rightly contended by the learned counsel for the petitioner and as held by this Court in Oracle’s case (supra), invocation of the continuity bonds and encashment of the Bank guarantee by the respondents on 11.03.2021 and 16.03.2021, much before the expiry of the period of 60 days from 10.03.2021 as has been expressly stated by the respondent No.2 himself in the Order-in-Original and as provided in Section 128 of the said Act of 1962 is clearly illegal, arbitrary and the same deserves to be quashed, particularly in the light of the Circular dated 16.09.2014 issued by the respondents. Under these circumstances, I am of the considered opinion that in the light of the undisputed fact that the Order-in-Original dated 10.03.2021 itself states that the petitioner had a period of 60 days to prefer an appeal under Section 128 of the said Act of 1962 coupled with the aforesaid Circular dated 16.09.2014 and the decision of this Court in Oracle’s case (supra), the impugned letters dated 11.03.2021 and 16.03.2021, whereby the respondents have encashed the bank guarantee and invoked the continuity bonds in respect of the entire disputed amount as directed in the impugned order is not only contrary to law and the facts and probabilities of the case but also opposed to the principles of natural justice, in that no opportunity, much less reasonable or sufficient opportunity was provided to the petitioner to prefer an appeal within the statutory period of 60 days and the respondents have hastily and hurriedly proceeded to issue the impugned letters which cannot be countenanced under any circumstances whatsoever and the same deserve to be quashed.
10. So also, learned counsel for the petitioner is right in his contention that the maximum liability to deposit the disputed amount in the appeal already preferred by the petitioner, which is pending adjudication is 7.5% of the disputed amount out of the total sum of Rs.34,09,343/- as directed in the Order-in-Original; it follows therefrom that in view of my finding that the impugned letters / orders are illegal and arbitrary and deserve to be quashed, by also applying the principles of restitution, it is necessary to direct the respondents to refund / repay any sum in excess of Rs.34,09,343/- back to the petitioner pending disposal of the appeal and by issuing necessary directions in this regard.
11. In the result, I pass the following:
ORDER
(i) The petition hereby allowed.
(ii) The impugned letters at Annexure – A dated 11.03.2021 and Annexure – A1 dated 16.03.2021, both issued by respondent No.2 are hereby quashed.
(iii) The respondents are directed to retain a sum of Rs.2,55,701/- (being 7.5% of the total amount of Rs.34,09,343/-) and refund the balance of Rs.31,53,642/-to the petitioner within a period of four weeks from the date of receipt of a copy of this order.
(iv) The respondents as well as the Appellate Authority before whom the appeal preferred by the petitioner against the Order-in-Original dated 10.03.2021 is pending, are directed to treat the aforesaid sum of Rs.2,55,701/- (being 7.5% of the total amount of Rs.34,09,343/-) as the pre-deposit of 7.5% payable by the petitioner towards the appeal.
(v) The appellate authority is directed to consider and dispose of the said appeal on merits in accordance with law.
