IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE ANTONY DOMINIC TUESDAY, THE 16TH AUGUST 2011 / 25TH SRAVANA 1933 WP(C).No. 21596 of 2011(Y) ------------------------------------------ PETITIONER(S): ------------------------ JOSLIN.T.A,PROPRIETOR,CARMEL EXPORTS AND IMPORTS,43/2599,TAGORE LANE,SRM ROAD, COCHIN-682 018. BY ADV. SRI.GEORGE POONTHOTTAM RESPONDENT(S): ---------------------------- 1. THE COMMISSIONER OF CUSTOMS,CUSTOMS HOUSE, COCHIN-09. 2. THE ASSISTANT COMMISSIONER OF CUSTOMS (SIIB-IPR CELL),OFFICE OF THE COMMISSIONER OF CUSTOMS,CUSTOMS HOUSE,COCHIN-9. R1 & R2 BY ADV. SRI.JOHN VARGHESE,SC,CEN.BOARD OF EXCISE THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 16/08/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Kss WPC.NO.21596/2011 Y APPENDIX PETITIONER'S EXHIBITS: P1: COPY OF THE COMMUNICATION F.NO.SIIB/MISC/34/2011-CUS DTD.16/5/2011. P2: COPY OF THE REQUEST DTD. 7/06/2011 GIVEN BY THE PETITIONER. P3: COPY OF THE JUDGMENT IN W.A.NO.956/2011 DTD. 21/07/2011. P4: COPY OF THE COMMUNICATION NO.F.NO.SIIB/MISC/34/2011-CUS DTD. 3/08/11. P5: COPY OF ORDER FORM NO.036 DTD. 10/03/2011. P6: COPY OF THE MAHAZAR DTD. 11/07/2011. RESPONDENT'S EXHIBITS: N I L /TRUE COPY/ P.S.TO JUDGE Kss ANTONY DOMINIC, J. ---------------------------------------------------- W.P.(C) No. 21596 OF 2011 ----------------------------------------------------- Dated this the 16th day of August , 2011 J U D G M E N T The challenge in this writ petition is against Ext.P4, a communication issued by the 2nd respondent, which reads as under: “Your attention is invited to the order dated 21.07.2011 passed by the Hon'ble High Court of Kerala in W.A.No.956 of 2011 regarding clearance of the above consignment. As you/your associates have not appeared in response to the 4 summons issued by the Department to appear on 11, 14, 21 and 28 July 2011 and did not co-operate with the investigations, department could not complete the investigations so far. In compliance of the orders passed by the Hon'ble Court, the competent authority has ordered the provisional release of the goods(except items covered under IPR Rules. Items at S.Nos.19, 28 & 37 of the Inv.No.AST 2187/11 dated W.P.(C) No. 21596 OF 2011 :2 : 17.3.2011) subject to the following conditions. i) Execution of PD bond for the estimated assessable value(Revised) of Rs.25,87,916/-. ii) Payment of duty on admitted value. iii) Payment of Revenue Deposit equal to the estimated difference in duty of Rs.8,25,000/-. iv) Furnishing of Bank guarantee for an amount of Rs.10,35,166/- from a nationlised Bank to cover the possible Redemption Fine and Penalty. You are therefore requested to comply with the aforesaid requirements for the release of the goods on provisional basis.” 2. The case of the petitioner is that this Ext.P4 is against the directions in Ext.P3 judgment of this court, S.18 of the Customs Act and also the Customs (Provisional Duty Assessment) Regulations 1963. W.P.(C) No. 21596 OF 2011 :3 : 3. Petitioner had imported various consumer items. They had claimed provisional assessment of customs duty and this led to Ext.P3 judgment in W.A.956/2011. In that judgment, following directions were issued by the Division Bench of this Court; “In either case the respondents are required to take a decision expeditiously either to make a regular assessment or a provisional assessment or a decision to confiscate the goods in question if it is permissible under law after following appropriate procedure or provisionally release the goods under Section 110-A of the Customs Act.” 4. It is in pursuance of the said directions Ext.P4 is issued. 5. The relevant averments contained in paragraph 11 of the writ petition reads as under: “Even assuming that the estimated value shown in Ext.P4 is on the basis of the contemporaneous value gathered based on W.P.(C) No. 21596 OF 2011 :4 : data bank of value, the provisional duty assessable is 26% of Rs.25,87,916/-. That will work out Rs.6,72,858/-. The duty payable on admitted value thereon is Rs.2,60,508/-. In terms of the Regulation 2 of the Customs (Provisional Duty Assessment) Regulations 1963 Rs.2,60,508/- has to be reduced from out of the estimated provisional duty of Rs.6,72,858/- for determining the bond value. Thus the bond value can only be Rs.4,12,350/-. The deposit of security can only be at the most 20% of Rs.4,12,350/-. The deposit of security can only be at the most 20% of Rs.4,12,350/- which would come to Rs.82,470/-. It can therefore be seen that the revenue deposit demanded in Ext.P4 is without authority and a conscious attempt to defeat the direction as contained in Ext.P3 judgment.” 6. A statement has been filed by the respondents and according to them, the quantification made in Ext.P4 is on the following basis; W.P.(C) No. 21596 OF 2011 :5 : “The total duty liability comes to Rs.10,63,324/-. Duty on admitted value by the importer comes to Rs.2,43,224/-. The total assessable value for all the 130 items is Rs.25,87,916/-. The differential duty to be paid is Rs.8,20,100/- in cash. The bank guarantee to be furnished to cover the possible fine and penalty is for Rs.10,35,166/-. The redemption fine is equivalent to the market price of the goods less the duty chargeable thereon.” 7. Though the counsel for the petitioner argued that the directions in Ext.P4 are against the provisions of the Act and the Regulations referred to above, Standing Counsel for the Respondents relied on the judgment of this court in Mohammed Fariz & Co. v. Commissioner (2011 (2) KHC 841), paragraph 13 of which, reads as under. “What is clear from Section 18(1) read with the above Regulations is that the officer could make provisional assessment and release goods under Section 18 of the Act pending final adjudication only after W.P.(C) No. 21596 OF 2011 :6 : ensuring that the actual duty that could be levied later will be recoverable from the party. For this purpose, the provisions of the Act and the Regulations above referred provide for determination of duty based on available documents, evidence and claim made by the party and also estimation of duty which according to the officer is likely to be levied finally. So much of the duty determined based on the documents and claim of the party is the admitted duty which the party has to straightly remit. The duty provisionally determined is nothing but the duty which the officer estimates over the duty admitted by the party as payable based on his estimation on the value, classification or the rate applicable, which is essentially a matter to be determined by the Officer. Regulation 2 makes it clear that besides remittance of the admitted duty in terms of the claim of the importer/exporter the officer can demand payment of duty up to 20% of the duty provisionally determined by him which is over and above the W.P.(C) No. 21596 OF 2011 :7 : admitted duty payable in accordance with the claim of the party and assessed by the Officer. After remitting the duty in terms of the claim made by the party (admitted duty) and up to 20% of the provisional duty demanded by the Officer, the Officer is bound to collect security for the balance of the provisional duty which under Regulation 4 is through execution of bond supported by surety or security or both as the Officer deems fit. But we feel from the past follies of the Department stated by the learned Standing Counsel that the proper Officers provisionally assessing duty are under misunderstanding on the scope of Regulation (4) which requires surety or security in support of the bond executed which is noting but an undertaking to pay duty on demand. However, a surety bond should be valid only when it is supported by proper security, which may be by way of mortgage of immovable property or Bank Guarantee in favour of the Department or otherwise, and bond W.P.(C) No. 21596 OF 2011 :8 : executed without proper security would serve only as a document to claim the amount. The Officer should realise that the best and safest course open to the Department is to demand Bank Guarantee from the local branch of a Nationalised Bank for balance provisional duty determined, so that recovery is ensured without any necessity for the Department to chase the parties and looking for their assets. In fact, credentials of the importer/exporter and such other matters should weigh with the Department in relaxing the condition for security, which is in the normal course should be Bank Guarantee.” 8. According to the Standing Counsel, in view of the provisions of the Regulations and the judgment, respondents are entitled to insist on the conditions imposed in Ext.P4. A reading of the above said judgment shows that this court has recognized the right of the respondents to insist on the remittance of 20% of the duty as assessed by the Department in W.P.(C) No. 21596 OF 2011 :9 : addition of remittance of duty on the admitted value declared by the importer. Further, the Department should also take adequate security for the balance due as quantified by them. 9. In the light of the above, in so far as this case is concerned, the demand for payment of duty on the admitted value is unassailable. In addition to this, demand for duty as assessed by the Department is also permissible. Once such remittances are demanded, revenue deposit equal to the estimated balance dues of Rs.8,25,000/- could not have been asked for. On the other hand, since according to the respondents the total duty liability is Rs.10,63,324/-, and deposit of 20% and duty on admitted value has been demanded, in terms of the judgment, respondent could have demanded security only for balance, either by way of property or Bank guarantee. 10. The requirement of Bank guarantee for Rs.10,35,166/- is sought to be justified by the counsel for the respondent by stating that it is to cover the possible redemption fine and penalty. The specific case of the respondents about the W.P.(C) No. 21596 OF 2011 :10 : importer and the persons involved, as contained in paragraph 4 of the statement filed by them reads as under; “It is submitted that Ext.P4 is also issued for the following reasons: (i) The importer on record does not have sufficient financial capacity as revealed during investigations and on perusing his income tax returns. (ii) The actual persons behind the scene are not bound legally to bear any financial consequences on adjudication. (iii) The importer and the persons involved have weak credentials.” 11. In the light of their entitlement to insist on adequate safeguards and in view of the above averments, I do not find any illegality on the aforesaid condition in Ext.P4. 12. However, in so far as the execution of P.D. bond for the assessable value of Rs.25,87,916/- is concerned, with the deposits made and security furnished, the interest of the Department is fully safeguarded, there is no need for any further bond from the importer. The said condition in Ext.P4 W.P.(C) No. 21596 OF 2011 :11 : should be deleted. In such circumstances, this writ petition is disposed of directing the respondents to issue fresh orders duly adverting to the aforesaid findings in this judgment. This shall be done as expeditiously as possible at any rate within three days from the date of receipt of a copy of this judgment and if the petitioner complies with the conditions, goods will be released to him. ANTONY DOMINIC, JUDGE ul/-