Case Note & Summary
The petitioner, M/s. AVG Impex Pvt. Ltd., filed a writ petition before the Bombay High Court seeking the return of a bank guarantee furnished to the Customs Department with the endorsement 'cancelled'. The petitioner argued that the purpose of the security was over and the department ought to have returned the bank guarantee duly cancelled, enabling the petitioner to return it to its banker and get it discharged. The respondents, Union of India and the Assistant Commissioner of Customs, opposed the petition on the ground that the Revenue had filed an appeal against an earlier order, and therefore the bank guarantee should be retained pending the appeal. The court, after hearing both sides, held that mere pendency of an appeal filed by the Revenue cannot be a ground to refuse the return of the bank guarantee, especially when there is no financial recovery against the petitioner as on date. The court observed that it is obligatory on the part of the respondents to return the bank guarantee within a reasonable period with proper endorsement once the purpose of the security is over, so that the guarantor can be discharged from liability. The bank guarantee can only be withheld subject to an order of a competent tribunal or superior court. Accordingly, the court directed the respondents to return the duly cancelled or discharged bank guarantee to the petitioner within seven days from the date of the order. In case of non-compliance, the department would be liable to pay a penalty of Rs. 1,000 per day until the guarantee is returned, recoverable from the salary of the officer responsible for implementing the order. The petition was allowed with costs quantified at Rs. 5,000 to be paid to the petitioner.
Headnote
A) Customs Law - Bank Guarantee - Return of Bank Guarantee - Customs Act, 1962 - The petitioner sought return of bank guarantee with 'cancelled' endorsement. The department refused citing pendency of Revenue's appeal. The court held that mere pendency of appeal is not a ground to refuse return, especially when no financial recovery is outstanding. The bank guarantee must be returned within a reasonable period after the purpose is over, unless withheld by order of a competent tribunal or court. (Paras 4-5) B) Customs Law - Penalty for Non-Compliance - Customs Act, 1962 - The court directed return of bank guarantee within seven days, failing which a penalty of Rs. 1,000 per day would be recoverable from the salary of the responsible officer. Costs of Rs. 5,000 also awarded to the petitioner. (Paras 6-7)
Issue of Consideration
Whether the Customs Department can withhold the return of a bank guarantee after the purpose of security is over, merely because the Revenue has filed an appeal.
Final Decision
The petition is allowed. The respondents are directed to return the duly cancelled or discharged bank guarantee to the petitioner within seven days from the date of the order. In case of non-compliance, the department shall be liable to pay a penalty of Rs. 1,000 per day until the guarantee is returned, recoverable from the salary of the responsible officer. Costs of Rs. 5,000 awarded to the petitioner.
Law Points
- Bank guarantee must be returned within reasonable time after purpose is over
- mere pendency of appeal not a ground to withhold
- penalty for non-compliance
