Case Note & Summary
The petitioner, Biharilal Singhal, proprietor of HiTech Corporation, imported Printed Thermal Paper Rolls and filed two Bills of Entry in August 2009. The Deputy Commissioner of Customs issued communications dated 29 September 2009 and 1 October 2009 demanding a bank guarantee of Rs.88,30,137 and a bond of Rs.15,75,33,199 for the two current bills and 28 past bills of entry finally assessed during 2009. The petitioner challenged these demands under Article 226 of the Constitution of India. The court held that the past bills of entry had been finally assessed and no show cause notice had been issued alleging fraud or misdeclaration. Therefore, the demand for security for past assessments was without jurisdiction and violated principles of natural justice. The court allowed the petition, quashing the impugned communications and directing the respondents to permit clearance of the goods covered by the two bills of entry without insisting on the bank guarantee and bond for past bills, subject to compliance with usual formalities.
Headnote
A) Customs Law - Final Assessment - Demand of Security - The customs authorities cannot demand bank guarantee or bond for past final assessments without issuing a show cause notice or alleging fraud, as such assessments are final and cannot be reopened unilaterally. (Paras 1-3)
B) Customs Law - Natural Justice - Show Cause Notice - Any demand for differential duty or security must be preceded by a show cause notice under Section 28 of the Customs Act, 1962, affording the importer an opportunity to be heard. (Paras 1-3)
C) Customs Law - Provisional Release - Conditions - While provisional release of goods may be allowed subject to conditions, such conditions cannot include demands for past final assessments without legal basis. (Paras 1-3)
Issue of Consideration
Whether the customs authorities can demand bank guarantee and bond for past final assessments and for current bills of entry without issuing a show cause notice or alleging fraud, and whether such demand is sustainable under the Customs Act, 1962.
Final Decision
The court allowed the writ petition, quashed the impugned communications, and directed the respondents to permit clearance of the goods covered by Bills of Entry Nos.649199 and 650812 without insisting on the bank guarantee and bond for past bills, subject to compliance with usual formalities.
Law Points
- Natural justice
- Show cause notice
- Final assessment
- Provisional release
- Bank guarantee
- Bond
- Customs Act Section 28
- Notification 26/2000-Cus
- Retrospective demand
- Unjust enrichment
Case Details
2010 LawText (BOM) (04) 38
Writ Petition No.8906 of 2009 with Civil Application No.2933 of 2009
Prakash Shah i/b. PDS Legal for petitioner; M.I. Sethna, Senior Advocate with J.B. Mishra for respondents
Biharilal Singhal (proprietor of HiTech Corporation)
Union of India, Chief Commissioner of Customs, Commissioner of Customs (Import), Joint/Deputy Commissioner of Customs (CIU)
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Nature of Litigation
Writ petition challenging communications demanding bank guarantee and bond for clearance of imported goods and for past final assessments.
Remedy Sought
Petitioner sought quashing of communications dated 29 September 2009 and 1 October 2009 and direction to permit clearance of goods covered by Bills of Entry Nos.649199 and 650812 without conditions.
Filing Reason
Customs authorities demanded bank guarantee and bond for current and past bills of entry without show cause notice, which the petitioner contended was illegal.
Issues
Whether the demand for bank guarantee and bond for past final assessments is valid without a show cause notice.
Whether the conditions imposed for provisional release of goods are lawful.
Submissions/Arguments
Petitioner argued that past bills were finally assessed and no show cause notice was issued, so demand for security is illegal.
Respondents argued that the demand was for provisional release and to protect revenue.
Ratio Decidendi
Customs authorities cannot demand security for past final assessments without issuing a show cause notice or alleging fraud, as such assessments are final and cannot be reopened unilaterally. Any demand must be preceded by a show cause notice under Section 28 of the Customs Act, 1962.
Judgment Excerpts
This petition filed under Article 226 of the Constitution of India is directed against the communications dated 29th September, 2009 and 1st October, 2009 issued by the Deputy Commissioner of Customs, CIU, JNCH (respondent NO.4) with further prayer to forthwith permit clearance of the goods covered by the Bills of Entry Nos.649199 dated 26th August, 2009 and 650812 dated 27th August, 2009 by extending the benefit of Notification No. 26/2000Cus dated 1st March,2000 without any conditions.
Procedural History
The petitioner filed a writ petition under Article 226 of the Constitution of India challenging communications dated 29 September 2009 and 1 October 2009 from the Deputy Commissioner of Customs. The court heard the matter and delivered judgment on 6 April 2010.
Acts & Sections
- Constitution of India: Article 226
- Customs Act, 1962: Section 28
