V.C. Daga, J.
1. Rule, returnable forthwith. Heard by consent of parties.
2. Petitioner is seeking directions to the respondent Nos. 1 to 3 not to encash the bank guarantee furnished by the petitioners on the basis of the order of provisional assessment, to secure customs duty. Now, the respondents on final assessment of duty have invoked the bank guarantee and requested the bank to remit the guaranteed amount. This action of the respondents is a subject matter of challenge in this petition.
3. The contention of petitioner is that the respondent Nos. 1 to 3 should not be allowed to encash the bank guarantee before the expiry of the statutory period of 60 days available for filing appeal against the order of respondent Nos. 2 & 3 to the CESTAT along with a application for stay and/or waiver of predeposit.
THE FACTS
4. The facts in short are that petitioner had imparted second-hand Pontoon upgraded Accommodation Barge from Singapore. The petitioners had claimed classification of the said goods under Heading No. 8901 of the Customs Tariff Act, 1975 and claimed that the said goods imported by it was fully exempt from payment of customs duty in terms of entry No. 350 to Notification No. 21/2002 dated 1.3.2002. The said goods were released on furnishing bank guarantee for Rs. 80,61,184/- being the duty payable under. Heading No. 8905.9090 of the Customs Tariff Act.
5. The Assistant Commissioner of Customs, the authorities in original, passed an order-in-original on 27.2.2004 holding that the goods imported by the petitioner were classifiable under Sub-heading No. 8905.0909 and chargeable to duty @5% Basic Customs Duty plus nil CVD plus 4% SAD. The Assistant Commissioner of Customs ordered that the bank guarantee executed by the petitioners should be encashed to realise the customs duty.
6. The aforesaid order dated 1.3.2004 was received by the petitioner on 2.3.2004. The Assistant Commissioner of Customs on 3.3.2004 written to the Dena Bank, Mumbai to forthwith pay the amount covered by the bank guarantee. In other words, no sooner the aforesaid order-in-original was issued to the petitioner, the office of respondent Nos. 2 & 3 invoked the bank guarantees by sending an intimation-cum-request to pay to the respondent No. 4 the amount of bank guarantee. The petitioner, thus is seeking directions to the respondents, as stated in the opening para of this order and Judgment.
THE SUBMISSIONS
7. Shri. Shah, learned Counsel appearing for the petitioner contends that the petitioner has a statutory right of appeal before the Appellate authority and at the same time, the petitioner has also a right to move an application to get the pre-deposit waived in terms of the Section 129E of the Customs Act, 1975. He further submits that the petitioner has an arguable case on classification. According to him, debatable question has resulted in the release of goods subject to the furnishing of the bank guarantee at the stage of the provisional assessment. Had it not been a debatable issue, according to him, the petitioner would not have been allowed to claim release of the goods on furnishing the bank guarantee. The bank guarantee was furnished to secure dues of department. The same is valid and shall be kept alive till the dispute is finally resolved. According to him, order of assessment as on date is not final and conclusive.
8. Mr. Shah, learned Counsel further submitted that as per the policy of the respondents engrafted in the Circular No. 396/29/98-CX dated 2nd June, 1993 the respondents are expected not to resort to coercive action so long as the appeal period is not over as such the action of respondents complained of in this petition is contrary to their own policy.
9. The learned Counsel for petitioner placer reliance on the Judgment of Mahindra & Mahindra Ltd. v. Union of India C1992(59) E.L.T. 505 (Bom.)], wherein this Court had ruled that it was highly improper on the part of the Collector and Assistant Collector to encash the bank guarantees before expiry of the statutory period of three months. The Division Bench of this Court in that case had directed the respondent Nos. 2 & 3 to return the entire amount recovered by them through encashment of bank guarantees to the petitioners within 10 days from the date of the order.
10. On the similar lines, the view taken by the Delhi High Court is also relied upon by Mr. Shah. In the case of N.G. Enterprises v. Commissioner of Customs (Appeals), New Delhi [2002(144) E.L.T. 512 (Del.)] and Harayana Acrylic Mfg. Co. Pvt. Ltd. v. Commr. of Cus.(A), New Delhi [2002(144) E.L.T. 503 (Del.)], the High Court of Delhi did not permit coercive recovery till appeal period was over.
11. Mr. Shah, relying on these Judgments, contends that applying the same ratio of the above Judgments till the application for stay is considered by the Appellate Authority on its own merits, the respondents be refrained from encashing the bank guarantee.
12. Per Contra Mr. A.J. Rana, learned Senior Counsel appearing for the Revenue contends that as per the terms of the bank guarantee, the respondents were entitled to encash the bank guarantee. The respondents are not obliged to wait till the expiry of the appeal period. He further submits that in terms of the bank guarantee, once the assessment is finalised by the concerned department, it is open to the said department to invoke the bank guarantee. In this view of the matter, he submits no fault can be found with the action of the respondents.
13. Mr. Rana placed reliance on the case of Daewoo Motors India Ltd. v. Union of India [2003 (153) E.L.T. 32 (S.C.)]. He also pressed into service another Judgment of Gujarat High Court in the case of Elecon Engineering Co.Ltd. v. Union of India [2002 (146) E.L.T. 301 (Guj.)] in support of his submissions to justify the action of the respondents.
CONSIDERATION
14. Having heard the parties, it is not in dispute that the appeal period is yet to expire. It is not in dispute that the order is an appealable order. It is not in dispute that the policy of the respondents is not to resort to coercive recovery during the appeal period. In this view of the matter, Judgments relied upon by Mr. Shah are squarelly applicable to the facts of the case in hand. So far as the Judgment of the Apex Court in the case of Daewoo Motors (supra) is concerned, the facts involved in that case were the plant of the appellant-Company had been closed. The production of the appellant-Company had come to an and. The order extending the export obligation had already been revoked. Under the circumstances, even on facts, Daewoo Motors had no case to seek injunction to prevent encashment of the bank guarantees. So far as the present case is concerned, a statutory remedy of appeal is still available to the petitioner. The petitioner can very well file an appeal and move an application for seeking waiver of predeposit. The Appellate Authority has a power to waive pre-deposit or pass suitable order in that behalf.
15. The terms of bank guarantee reads, “The bond and Bank Guarantee shall be kept valid until the assessment has been finalised by the concerned department.” Mr. Rana submitted that so far as this clause is concerned, it unequivocally makes it clear that upon the finalisation of the assessment by the concerned department, it would be open for the department to invoke the bank guarantee. As against this, learned Counsel for the petitioner submits that finalisation of assessment means finalisation of assessment by the Appellate authority under the Act. We do not propose to enter into this debatable issue as the same is not necessary to decide this petition.
16. The petitioner has statutory right to appeal. Appeal period is yet to expire. Declared policy of the respondents is not to resort to coercive recovery during the appeal period. In this view of the matters it was not proper on the part of the respondents to encash the bank guarantee before the expiry of the statutory period provided for filing appeal. The action of the respondents is contrary to their declared policy.
17. In the above facts and circumstances of the case, we quash and set aside the action of the respondents seeking to encash the bank guarantee and direct that the bank guarantee shall not be encashed until an appeal along with an application for stay or to dispense with pre-deposit is not moved by the petitioner which petitioner undertakes to file within two weeks from today along with necessary applications. In the event of an appeal with necessary stay application is within two weeks from today, the Appellate Authority shall consider the application for stay and /or waiver of pre-deposit within two weeks thereafter. The petitioner shall keep the bank guarantee alive till the application far stay and/or waiver of pre-deposit is heard and decided on its own merits. In the event Tribunal rejects application for stay or waiver of pre-deposit, the order shall not be executed for a period of two weeks from the date of its order on the petitioner. In the event of failure on the part of the petitioner to file an appeal within the period of two weeks, then the respondents shall be entitled to encash the bank guarantee.
18. In the result, petition is allowed. Rule is made absolute in terms of this order with no order as to costs.
Parties to act on an ordinary copy of this order duly authenticated by the Shirestedar/C.S.
C.C. expedited.