Banarasi Paper and Synthetics Pvt. Ltd. vs Union of India

Rule; by consent returnable forthwith. With the consent of Counsel and at their request the petition is taken up for hearing and final disposal.

In these proceedings under Article 226 of the Constitution, the Petitioner inter alia seeks unconditional release or the provisional release of 7 cranes seized by the Respondent and challenges the action of the Respondent. Between 2007 and 2010, the Petitioner claims to have imported 49 cranes. The exact figure is a matter of dispute because, according to the Revenue, a total of 61 cranes were imported. There is no dispute about the fact that all the cranes which were imported, were subject to orders of assessment and were cleared against the payment of duty. On 23 November 2010, the Investigating Officers of the Directorate of Revenue Intelligence seized 9 cranes which were lodged in a warehouse acting on information that there had been a gross undervaluation of the import price declared. On 22 December 2010, 29 December 2010, 22 February 2011 and 23 February 2011, the Petitioner sought the provisional release of 9 cranes. On 1 April 2011, an order was passed by the Deputy Commissioner of Customs ordering the provisional release of 9 cranes subject to the payment of differential duty of Rs. 53,80,382.00 and interest of Rs. 13,54,386.66. In addition, the Petitioner has been called upon to furnish an undertaking to produce the cranes for inspection whenever required and not to dispose of the cranes without prior intimation. The Petitioner, since cleared 2 of the seized cranes mentioned at Sr. No. 8 and 9 of the tabulated statement contained in the 2nd Respondent''s letter dated 1 April 2011. The dispute now relates to the balance 7 that remain.

From the material on record, it has also emerged before the Court that the Petitioner has deposited an amount of Rs. 80,00,000/- with the Respondents when he was called for investigation by the Directorate of Revenue Intelligence. Details of these payments are recorded in letters dated 29 March 2011 and 6 June 2011 addressed by the Petitioner to the Additional Director General in the Directorate of Revenue Intelligence.

An affidavit-in-reply has been filed in these proceedings by the Deputy Commissioner of Customs. The allegation against the Petitioner is that the Petitioner used a dummy Import Export Code for the import of 61 cranes between 2007 and 2010. Moreover, it has been submitted that Shri Natwar Dalmia who has verified the petition is on paper shown as an Advisor of the Petitioner but, in reality, he is a benami owner of the Petitioner. According to the Revenue, investigations have revealed under valuation in the declared prices of the imported cranes and that the freight component which forms part of the CIF value has been suppressed or fraudulently not disclosed. The Revenue states that the investigations have inter alia revealed a serious and dis-proportionate under valuation of the cranes imported. According to the Revenue, the documents show that the cranes were imported at highly under valued prices ranging from Rs. 40/- to Rs. 45/- per kg of the weight of the cranes as opposed to the actual transaction value. According to the Revenue, the original purchase invoices would indicate under valuation to the extent of 50%-80% of the actual value. Reliance has been placed on the statements of the Customs House Agent, of the buyers of the cranes imported by the Petitioner admitting payment in cash over and above invoice value and of the payments made by the Petitioner of the differential amount of the value of cranes and of the freight to overseas parties through un-official channels.

The Petitioner has filed a rejoinder controverting the allegations of the Revenue. The contention of the Petitioner is that the amounts deposited were under duress. The Petitioner also claims that the statement of Shri Natwar Dalmiya was recorded on 29 March 2011 under duress but was sought to be retracted on 31 March 2011.

On behalf of the Petitioner, it has been submitted that the conditions which have been imposed for the provisional release of the goods are arbitrary and harsh. There was no warrant to require any bank guarantee. The learned Counsel submitted that no notice to show cause has been issued as yet for adjudication. Moreover, the Petitioner has already deposited an amount of Rs. 88,00,000/- with the Revenue and hence an order of provisional release should, it was urged, be passed without any further condition. Moreover, Learned Counsel submitted that the authority has arbitrarily directed that the Petitioner should produce the cranes when required when, as a matter of fact, the authority was duly informed that the cranes have to be sold to third parties in the normal course of business.

On the other hand, learned Counsel on behalf of the Revenue has placed extensive reliance on the contents of the affidavit and on the sur-rejoinder which has been filed in these proceedings on 16 August 2011. The contention of the Revenue is that the statements which were recorded on 29 March 2011 and 30 March 2011 are voluntary. The fact that the Petitioner has deposited an amount of Rs. 80,00,000/- is not disputed though it is contended that the aforesaid amount must be considered in the context of the over-all liability to the payment of duty which may be attracted in respect of a future adjudication in respect of 61 cranes. Learned Counsel submitted that this is a case involving a serious fraud by Shri Natwar Dalmia; the Petitioner has used a dummy Import Export Code; the alleged Directors are of no standing and it is Natwar Dalmia who is the prime moving factor. Counsel urged that the authorities are justified in demanding security and the amount of Rs. 88,00,000/- deposited would not secure duty, redemption fine and penalty. Counsel urges that u/s 110A, the adjudicating authority can require a bond and security while permitting release of seized goods. Since the Petitioner now seeks to sell the goods in the course of business, the requirement of a bank guarantee was all the more necessary to secure the Revenue.

Section 110A of the Customs Act, 1962 provides for provisional release of goods pending adjudication. u/s 110A, the adjudicating authority can impose a condition requiring a bond and furnishing of security while ordering the release of seized goods. Conditions can be imposed to secure the interests of the Revenue. The provisions of Section 110A have been recently construed in a judgment of the Division Bench of this Court in Apollo Cranes Pvt. Ltd. and Another Vs. Union of India (UOI) and Others, , where the Court observed as follows :-

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 imposed in the Customs (Provisional Duty Assessment) Regulations 1963. Those Regulations operate in a different field.

Section 110A permits the adjudicating authority to release seized goods pending an order of adjudication subject to the owner furnishing a bond with such security and conditions as the adjudicating authority may require, On the material which has emerged during the course of investigation and which has been adverted to in the affidavit in reply, the Petitioner cannot be allowed to seek unconditional release of the seized goods. The Revenue has demonstrated before the Court that prima facie, at this stage, investigations have revealed a serious undervaluation of the declared price of imports. We do not render any finding at this stage since that is a matter for adjudication after a show cause notice is issued. The purpose of Section 110A is that while releasing the goods which are seized, the interests of the Revenue should be adequately safeguarded. The Petitioner has specifically stated that it would be selling the seized cranes in the normal course of business. Two of the nine cranes were released on the furnishing of a guarantee and bond as directed. Especially since the remaining cranes are intended to be sold, the deposit which has been effected would have to be supplemented by a bank guarantee to secure duty, redemption fine and a possible penalty. The Petitioner has deposited an amount of Rs. 88,60,000/-. In our view, the ends of justice would be met, if a direction is issued to the effect that the Petitioner shall furnish a bank guarantee of Rs. 40,00,000/- of a Nationalised Bank, and a P.D. bond to the satisfaction of the adjudicating authority, as a condition precedent for the provisional release of the goods. Upon furnishing of a bank guarantee and bond as directed hereinabove, the Respondent shall provisionally release the balance 7 cranes. The bank guarantee shall be kept alive during the pendency of the adjudication proceedings in addition to the execution of the PB Bond for the entire value as directed. The petition is allowed to the aforesaid extent. There shall be no order as to costs.