July 24, 2024
Quashment - Customs: Demand of Bank Guarantee
Our client recently faced a challenging legal battle involving the provisional release of seized goods by the customs authorities. This case study details the legal proceedings, the arguments presented, and the favorable judgment issued by the Hon’ble High Court of Delhi, ultimately leading to a significant win for our client.
Our client is a reputed name in the electronics industry, specializing in the import and distribution of high-quality electro components. The company encountered a major setback when its consignment was seized by the customs authorities. The provisional release of the goods was initially conditioned upon the furnishing of a bond and a bank guarantee equivalent to the amount payable as penalty and other charges.
The legal team, led by Mr. Alankar Narula filed a writ petition before the Hon’ble High Court of Delhi, challenging the conditions imposed for the provisional release of the goods. The petition was primarily focused on the imposition of a bank guarantee, which was deemed onerous and unnecessary given the circumstances.
The case was heard by Hon’ble Mr. Justice Yashwant Varma and Hon’ble Mr. Justice Ravinder Dudeja. The court took into account the differential duty already paid by the petitioner and evaluated the reliance placed by the respondents on the Central Board of Indirect Taxes and Customs (CBIC) Circular No. 35/2017.
Key Arguments
1. Excessive Conditions Imposed: The legal team argued that the conditions imposed by the respondents, particularly the requirement of a bank guarantee, were excessive and not justified by the circumstances.
2. Violation of Customs Act: It was contended that the CBIC Circular No. 35/2017, which curtailed the discretion of the adjudicating authority by imposing mandatory conditions for provisional release, was contrary to Section 110A of the Customs Act, 1962. This section grants the adjudicating authority the discretion to determine appropriate conditions for provisional release.
3. Judicial Precedents: The legal team cited relevant judicial precedents, including the case of M/s. Shanus Impex vs. Union of India & Ors. [2023 SCC OnLine Del 7827], where the court had previously invalidated similar provisions of the CBIC Circular No. 35/2017 as ultra vires.
Court's Judgment
After careful consideration, the Hon’ble High Court of Delhi ruled in favor of our client. The court quashed the impugned order dated 01 July 2024, which required the furnishing of a bank guarantee for the provisional release of the goods. The key points from the judgment are as follows:
1. Quashing of Bank Guarantee Requirement: The court ruled that the requirement for a bank guarantee was not justified and quashed the impugned order to that extent.
2. Fresh Examination of Application: The court directed the concerned authority to reconsider the application for provisional release, bearing in mind the observations made during the proceedings. The authority was instructed to expedite the process.
3. Affirmation of Discretion under Section 110A: The court reaffirmed that the discretion to impose conditions for provisional release is vested with the adjudicating authority under Section 110A of the Customs Act, 1962, and cannot be overridden by executive directives from the CBIC.
This judgment is a significant victory for our client and sets a vital precedent for similar cases in the future. It underscores the importance of judicial oversight in ensuring that executive actions do not exceed their statutory limits. The case also highlights the critical role of legal counsel in challenging arbitrary conditions imposed by authorities.
The legal team at Narula & Narula Law Offices successfully demonstrated their expertise in customs law, providing a robust defense for their client and ensuring the protection of their client’s rights.
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