1. The point in issue in these writ petitions are as follows:-

"a) Whether the Department was justified in demanding bank guarantee for re-export of the goods

b) Whether the Department should issue a detention certificate for demurrage and container detention charges in terms of Regulation 6(1)(l) of Handling of Cargo in Customs Areas Regulation, 2009 r/w Regulation 10 (1)(l) of Sea Cargo Manifest Transhipment Regulations, 2018"

Oral arguments have been made extensively by the petitioners only on the first issue; though there is a reference to it in the written submissions of the petitioners and the respondents.

2. The facts in these writ petitions are more or less identical and the relief claimed in each of these writ petitions are herein below set out.

RELIEF CLAIMIED:-

3. W.P.(MD) No.1250 of 2023 is filed by M/s.Genuine Spices for the following relief:

“For the issue of a Writ of Certiorarified Mandamus, to call for the records of the order passed by the respondent vide Order dated 16.12.2022 bearing reference No.C.No.VIII/06/115/2022-IA, and quash the same consequently directing the respondent to permit the petitioner to re-export the goods namely 'Boiled Supari' (Betelnut Product) classifiable under ITC (HS) code 21069030 covered under Bills of Entry Nos.7101263 and 7102157 dated 16.01.2022 and 17.01.2022 without insisting on Bank Guarantee in terms of the said order, and direct the respondent to issue a 'Detention Certificate' for waiver of demurrage and container detention charges in terms of Regulations 6(1)(l) of the Handling of Cargo in Customs Areas Regulations 2009 read with Regulation 10(1)(l) of the Sea Cargo Manifest Transhipments Regulations 2018.”

3.1. W.P.(MD) No.1252 of 2023 is filed by M/s.Sri Shunmuga Traders for the following relief:

“For the issue of a Writ of Certiorarified Mandamus to call for the records of the order dated 22.12.2022 bearing reference in C.No.VIII/06/114/2022-IA, passed by the respondent and quash the same consequently directing the respondent to permit the petitioner to re-export the goods namely 'Unflavored Supari' (Betelnut Product) classifiable under ITC (HS) code 21069030 covered under Bills of Entry Nos.7200431 dated 23.01.2022 and 7556557 dated 18.02.2022, without insisting on Bank Guarantee in terms of the said order, and direct the respondent to issue a 'Detention Certificate' for waiver of demurrage and container detention charges in terms of Regulations 6(1)(l) of the Handling of Cargo in Customs Areas Regulations 2009 read with Regulation 10(1)(l) of the Sea Cargo Manifest Transhipments Regulations 2018.”

3.2. W.P.(MD) No.1391 of 2023 is filed by M/s.Shimala Fruit Agency for the following relief:

“For the issue of a Writ of Certiorarified Mandamus, calling for the records of the seconds respondent made in C.No.VIII/06/116/2022-1A dated 19.12.2022, quash the same and direct the respondents to permit re-export of the consignment of betel nut product known as supari imported under Bill of Entry No.7985049 dated 23.03.2022 without insisting on bank guarantee of Rs.94,00,000/- and for further direction for issuance of a detention cum demurrage, container detention waiver certificates in terms of Regulation 6(1)(I) of Handing of Cargo in Customs Area Regulation, 2009 10(1)(I) of Sea Cargo Manifest, Transhipment Regulations, 2018.”

FACTS OF THE CASE:-

4. The facts in common are as follows:

The petitioners in all the three writ petitions are importers and exporters of various commodities which includes Areca Nuts/Betelnuts. The petitioners imported betelnut product commonly known as 'supari', of an unflavored variety. According to the petitioners, these goods fall under Chapter Heading 21069030.

5. It is the case of all these petitioners that they have been exporting and importing these products earlier and at that point in time they have been assessed and cleared under the very same classification. However, with reference to the shipment which has formed the basis for the dispute for the first time, a dispute with reference to the classification has been raised by the respondents. While the petitioners would contend that the classification of the goods fall under Chapter 21069030, however it is the case of the Department/respondent that it falls within the classification Chapter 08028020.

6. It appears from the pleading that the goods were detained for a prolonged period and therefore, the petitioner in W.P.(MD) No.1250 of 2023 had filed W.P.(MD) Nos.13643 and 13644 of 2022 for a provisional release of the goods. These writ petitions were disposed of by an order dated 07.07.2022, wherein this Court had directed the petitioner to make an application under Section 110A of the Customs Act, 1962 seeking a provisional release. On such application being filed, the adjudicating authority was directed to dispose of the same, after hearing the petitioners and after a prima facie determination of the classification of the commodity within two weeks. The goods covered under the respective bill of entry were to be released provisionally subject to the petitioners furnishing personal bond for the full value of the goods and furnishing bank guarantee at 50% of the differential duty considering the Duty Free Tariff Preference Scheme for Least Developed Countries benefit. The adjudication process was directed to be continued and concluded within a period of three weeks.

7. Pursuant to the order of this Court, the impugned orders challenged in all the writ petitions were passed in and by which the respondents had held that the re-export would be granted subject to the petitioners' furnishing the bank guarantee to the tune of the amounts as set out in each of the writ petitions. Therefore, aggrieved by the same, the petitioners have approached this Court.

8. In the grounds of challenge to the impugned order, the petitioners have mainly raised two grounds;

a) that the impugned order is against the language of the order in W.A.No.556 of 2022; and

b) the notification number 20/2015-20 dated 25.07.2018, which prohibits the import of Areca nuts/Betelnuts falling under Chapter 0802 of the CTH, has been stayed by the High Court of Karnataka by its order dated 10.02.2022 in W.P.No.2898 of 2022. It is their contention that since the order has been stayed, the impugned order passed on the basis of this notification has to necessarily be set aside. The petitioners have pleaded that they are ready and willing to participate in the adjudication process.

9. With reference to the petitioner in W.P.(MD) No.1391 of 2023, apart from raising similar grounds, the facts being more or less identical, the petitioner has stated that in their case, the re-export has been granted on the execution of a bond for Rs.3,48,13,322/- and bank guarantee for a sum of Rs.94,00,000/- and it is only that portion demanding bank guarantee that is challenged. In this writ petition, the petitioner has raised the following additional grounds:-

a) that the condition is an onerous one;

b) the imposition of the bank guarantee on the ground that the petitioner is a habitual offender is per se erroneous; and

c) when redemption fine and penalty cannot be imposed, the direction to furnish the bond and bank guarantee is wrong;

10. The respondents have filed their counter, which is more or less identical for all the three writ petitions except in the case of W.P.(MD) No. 1391 of 2023, wherein additional reasons have been given. The common defence of the respondents in these writ petitions are that the goods fall under the classification of CTH 0802 and not CTH 21069030 as projected by the petitioners. Further, these goods have been prohibited for import as per G.O.Ms.No.20/2015-20 (this is the notification that has been stayed by the High Court of Karnataka). The respondents would further submit that the order in W.A.No.935 to 942 of 2002 has been complied with and the bank guarantee has been asked only as security for the provisional release. It is their case that Section 110A of the Act empowers them to collect security in addition to the furnishing of a bond.

11. The respondents would further state that it is only a show cause notice that has been issued for the following reasons:-

a) A correct description and classification of the goods have not been provided.

b) Confiscation is proposed for contravening the provisions of Section 111 (d) and 111 (m) of the Act and consequently imposition of penalty under Section 112 and 114 (a) of the Act was also proposed.

12. The petitioners, who had been granted two personal hearings, have not attended the same. It is the case of the respondents that the bank guarantee has been demanded only to cover the redemption fine and penalty, which can be imposed at the time of adjudication. It is the fear of the respondents that once the goods are released, the Department would be left without any hold on the petitioners for recovering the redemption fine and penalty. It is their case that though no duty is payable since the goods have been reexported, however the importer has committed an offence under the Custom Laws, which makes them liable to pay redemption fine and penalty and therefore, the respondents would submit that there is no error in the order passed by the respondents for furnishing the bank guarantee.

13. In W.P.(MD) No.1391 of 2023, the respondents would further add that bank guarantee has been sought for in this case, since there are serious allegations against the petitioner, who had clandestinely removed the goods which had been confiscated on an earlier occasion and therefore, the respondents are justified in demanding an additional security in the form of a bank guarantee.

SUBMISSIONS:-

14. On the side of the petitioner, arguments were advanced by Dr.S.Krishnanandh in the case of W.P.(MD) Nos.1250 and 1252 of 2023 and Mr.B.Sathish Sundar in the case of W.P.(MD) No.1391 of 2023. The legal submission with reference to the issue above is extracted herein below:-

The reason that the bank guarantee has been sought for to cover the redemption fine and penalty which may be imposed after adjudication, is totally misconceived. Admittedly, the adjudication process is pending disposal and there has been no determination of fine or the penalty.

15. Dr.S.Krishnanandh, learned counsel would rely upon a judgment of the Hon'ble Supreme Court in Siemens Ltd., Vs. Collector of Customs reported in 1999 (113) ELT 776 (SC) in support of his contention that no redemption fine is leviable on re-export. This judgment is followed by this Court in the judgment reported in 2002 (141) ETT 635 (Mad) (Sankar Pandi Vs. Union of India). He would further rely upon the judgment passed by the Customs, Excise and Service Tax Appellate Tribunal, Chennai in Customs Appeal No.40400 of 2021 (M/S.Perfect Trading Company Vs. Commissioner of Customs (AIR) with particular reference to para 5.

16. He would also point out the judgment of the Customs, Excise and Service Tax Appellate Tribunal, Chennai in Customs Appeal No.40060 of 2020 (M/S.Selvam Industries Ltd., Vs Commissioner of Customs), where the Tribunal relied upon the judgment in Sankar Pandi's case in para 6 of its judgment.

17. He would also submit that with regard to classification no penalty is leviable unless the Department is able to show that the assessee has acted dishonestly or with the distinct object of breaching the law and in support of this argument, he would rely upon the judgment reported in 1990 (47) E.L.t. 161 (SC) (Akbar Badruddin Jiwani Vs. Collector of Customs) and the judgment reported in 2015 (321) E.L.T. 29 (Mad) (Novel Digital Electronics Vs. Commissioner of Customs (Imports), Chennai), which follows the earlier judgment of Akbar Badruddin Jiwani.

18. He would conclude his arguments by contending that the judgment of the Division Bench of this Court in W.A.(MD) No.1782 of 2021 and W.A.(MD) No.586 of 2022 and M.P.(MD) No.4839 of 2022 would be binding on this Court for the reason that the respondents have accepted and followed the aforesaid judgment by permitting the provisional release of the goods for home consumption/re-export on executing of a simple bond and waiving the requirement of executing a bank guarantee for the same. These arguments have also been more or less adopted by Mr.B.Sathish Sundar, who would add that the removal of goods in the matter of the petitioner in W.P.(MD) No.1391 of 2023 pertains to an earlier period that is still awaiting orders. As regards the 2nd issue, the petitioner would rely on earlier judgments of this Court to justify the request for issuance of detention cum demurrage waiver certificates.

19. Per contra, Mr.Dilip Kumar, learned counsel appearing for the respondents would make the following submissions which he has put in context under distinct headings. With reference to the first issue, it is his primary contention that the power to order a provisional release of the seized goods pending adjudication falls only within the discretionary power vested in the Department. Further, the statute gives the power to the Department to impose conditions it deems fit for ordering the provisional release. He would submit that a mere reading of the provisions of Section 110A of the Customs Act would prove the same. It is also his argument that once the very power to provisionally release the goods is granted to the Authorities then a fetter cannot be placed on the exercise of this power. He would further submit that the conduct of the petitioner in W.P.(MD) No. 1391 of 2023 further emphasis the need for obtaining adequate security before releasing the goods. The petitioner in W.P.(MD) No.1391 of 2023 had earlier exported goods which were confiscated with an option to redeem the goods for re-export, fine and penalty were levied, when the goods were transferred to the public bonded warehouse the petitioner had clandestinely removed the goods to divert it in the domestic market. Now criminal cases are pending against him.

20. The learned counsel for the respondents would draw support to this argument from the unreported judgment in W.A.(MD) Nos.935 to 942 of 2022 (The Commissioner of Customs, Tuticorin and another Vs. M/S.Sri Shunmuga Traders, represented by its Partner, T.Manoharan, Tuticorin and another), wherein this Court had directed the Adjudicating Authority to dispose of the applications for provisional release under Section 110A of the Act “on merits and in accordance with law”. He would therefore submit that Section 110A gives them the power to take security in any form in addition to the bond. Further, the instant case has not attained finality as the Adjudicating Authority is yet to determine the correct description of the goods, its classification, redetermine the assessable value, to decide if the goods have to be confiscated for contravening the law and for arriving at the penalty.

21. He would submit that in W.A.(MD) No.556 of 2022 (The Assistant Commissioner of Customs – Imports, Custom House, Tuticorin and another Vs. M/S.Mahadev Enterprises, represented by its Proprietor, Shri Sohil Suchak, Nagpur 440 002), the Division Bench while directing the importer to execute a bond has also hastened to protect the Department's interest by permitting them to collect any additional charge permissible under law. He would also draw strength from the very provisions of Section 110A. The bank guarantee has been called for only as security for any redemption fine or penalty that may become payable at the time of adjudication. He would counter the argument and distinguish the judgments submitted by the petitioners in support of their case that no redemption fine was leviable in case of re-export by contending that in the cases cited on the side of the petitioners final adjudication had been completed, whereas in the instant case it is still pending adjudication. He would submit that the quantum of redemption fine is fixed at the discretion of the Adjudicating Authority and would rely upon the judgment reported in 2021 SCC Online SC 429 (Union of India and others Vs. Raj Grow Impex LLP and others) and the case reported in (2000) 1 Supreme Court Cases 565 (Weston Components Ltd Vs. Commissioner of Customs, New Delhi). The past conduct of the petitioner in W.P.(MD) No.1391 of 2023 would also justify the levy of bank guarantee.

22. As regards the 2nd issue relating to the detention certificate reliance is placed on the fact that the classification is wrong and as per Notification No.20/2015-2020 dated 25.07.2018 import of Betelnuts/ Areca Nuts with a CIF value of less than Rs.251/- per kg., are “prohibited”. Since they are prohibited goods, they are liable for confiscation under Section 111(d) of the Act. Therefore, it would not be possible for issuing the detention certificate. To buttress this argument, the learned counsel would rely upon the judgment reported in (1995) 3 Supreme Court Cases 151 (International Airports Authority and others Vs. Grand Slam International and others).

DISCUSSION:-

23. Before discussing the factual matrix of the case and its bearing on the provisions of the Act, it would make useful reading to extract Section 110A which forms the basis for passing the impugned orders.

“110A.Provisional release of goods, documents and things seized or bank account provisionally attached pending adjudication.—

Any goods, documents or things seized or bank account provisionally attached under section 110, may, pending the order of the adjudicating authority, be released to the owner or the bank account holder on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require.”

ISSUE NO.1:-

24. The facts of all the 3 writ petitions involve the dispute with regard to its classifications. The petitioners would classify the goods under Tariff Heading 2106 9030 whereas it is the plea of the Department that the classification of “Betelnuts/Areca Nuts” is Tariff Heading 0802. If the classification is as contemplated by the Department, then the import of this product with CIF value of less than Rs.251/- per kg is “prohibited” as per Notification 20/2015-2020. The pricing is so fixed in order to protect our farmers. However, it has to be borne in mind that the above referred Notification which forms the basis for the show cause has been stayed by the Karnataka High Court and the same has not been varied or set aside.

25. The issue of confiscation would arise only if the goods are “prohibited” and the issue of classification is still pending adjudication. Another factor that engages the attention of this Court is the fact that in all the earlier imports the Department had not raised this issue of classification. The records would further show that although in the earlier writ petitions and appeals the petitioners had requested for a provisional release of the goods, after the disposal of the writ appeals the petitioners have requested to re-export the goods. Therefore, the direction to consider the provisional release in terms of Section 110A of the Customs Act now stands converted to the issue as to whether 're-export' can be granted by just receiving a bond.

26. In this regard, reference need to be made to the judgment in W.A.No.556 of 2022, which was an appeal filed by the Department challenging the order in W.P.(MD) No.8916 of 2022. The writ petitioners therein had only sought to re-export the very same product which is the subject matter of these writ petitions. The learned single Judge had permitted the re-export making it very clear that the order was without prejudice to the appellate authorities' right to levy penalty or any other charge that may be imposed depending upon the circumstances. The Division Bench while dismissing the appeal after observing that “It will be in the interest of both to permit the respondent to re-export the goods subject to reasonable conditions to protect the Revenue” ultimately held as follows:-

“15.In view of the above, this Court while dismissing the Writ Appeal, directs appellants to permit the respondent to exercise their option as per the order of learned Single Judge upon the respondent executing a bond to the full value of the goods that is sought to be re- exported and this order or direction is issued without prejudice to the rights or authority of the appellants to proceed further with the investigation and to impose or collect whatever charges that may be permissible under law. No Costs. Consequently, connected Miscellaneous Petition is closed.”

27. This order has not been challenged by the Department. Further, a reading of the impugned order would show that no reason has been given for imposing the condition for furnishing the bank guarantee. The petitioners have set out in detail in their application the fact that earlier imports of the similar product has not been questioned the Authority has not dealt with this submission. The decision to direct re-export is purely at the discretion of the Authority, however from a reading of the order impugned it cannot be inferred that the authority had exercised discretion in the case of the petitioners in W.P.(MD) Nos.1250 and 1252 of 2023. As regards the petitioner in W.P.(MD) No.1391 of 2023, this exercise is evident from a reading of the order.

28. The respondent in the case of W.P.(MD) No.1250 of 2023 has after extracting the contents of the petitioner's application for provisional release stated as follows:-

“I have gone through the facts, evidence of the case available on record & submissions made by the importer during the personal hearing.

The Hon'ble High Court of Madurai Bench of Madras High court had ordered for provisional release of goods under Section 110A of the Customs Act,1962. The plea of the importer before the Hon'ble High Court was for provisional release of goods. But the importer vide E-mail dated 13.12.2022 requested for re-export of goods based on the release order for Re-export granted to M/s.Mahadev Enterprises, Nagpur vide this officer letter C.No.VIII/10/28/2022 – Adjn. Dated 29.07.2022. But I find that in the said case, the importer I.e., M/s.Mahadev Enterprises, Nagpur had requested the Hon'ble High Court only for re-export of imported goods, which was accepted by the Hon'ble High Court and the orders of the Hon'ble High Court were duly followed by the department. However, in this case, I find that importer had initially requested for provisional release of goods and Hon'ble High Court directed the department to consider the application of the importer for provisional release under section 110A of Customs Act,1962 and dispose the same on merits in accordance with law. However, in view of the present request of the importer, I am inclined to allow re-export of the imported goods on execution of a bond for an amount of Rs.4,28,83,177/- ( Rupees Four Crores Twenty eigh lakhs eighty three thousand One hundred & Seventy Seven only) along with Bank guarantee for and amount of Rs. 1,32,00,000/- ( Rupees One Crore and Thirty Two Lakhs Only).

ORDER

Hence I allow re-export of imported goods imported vide BE Nos.70101263 dated 16.01.2022 & 7102157 dated 17.01.2022 on execution of a bond for Rs.4,28,83,177/- ( Rupees Four Crores Twenty eight Lakhs eighty three thousand One hundred & Seventy Seven only) and on execution of Bank Guarantee equal to Rs. 1,32,00,000/- ( Rupees One Crore and Thirty Two Lakhs Only).”

29. In the case of W.P.(MD) No.1252 of 2023, the respondent has not discussed the contents of the application filed by the petitioner or their arguments but has passed the following order:-

“3.The importer submitted again a letter dated 06.12.2022 in which they have acknowledged the receipt of the provisional release order as cited above. Further they have stated that they are not in a position to accept the terms and conditions given in the above order and to release and to release their goods. Further they requested to give permission to send back the goods to the supplier itself. They have reiterated to permit them to do re- export of the goods considering the loss and difficulties occurred. Further they have stated that they will abide with department's term for re-export.”

30. In the case of W.P.(MD) No.1391 of 2023 the order clearly that the petitioner is a habitual offender, which allegation has not been emphatically denied by the petitioner. The order does not contain any details about the basis for the conclusion. It is only in the counter that there is an explanation given as to why bank guarantee is sought.

31. In the case of Union of India and others Vs. Raj Grow Impex LLP and others reported in 2021 SCC Online SC 429, the Hon'ble Supreme Court after discussing the earlier case laws on the exercise of discretion has observed as follows in para 164 and 165 therein:-

“164. Thus, when it comes to discretion, the exercise thereof has to be guided by law; has to be according to the rules of reason and justice; and has to be based on the relevant considerations. The exercise of discretion is essentially the discernment of what is right and proper; and such discernment is the critical and cautious judgment of what is correct and proper by differentiating between shadow and substance as also between equity and pretence. A holder of public office, when exercising discretion conferred by the statute, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power. The requirements of reasonableness, rationality, impartiality, fairness and equity are inherent in any exercise of discretion; such an exercise can never be according to the private opinion.

165. It is hardly of any debate that discretion has to be exercised judiciously and, for that matter, all the facts and all the relevant surrounding factors as also the implication of exercise of discretion either way have to be properly weighed and a balanced decision is required to be taken. ”

32. Therefore, it is evident that on a reading of the order one must be able to infer the exercise of discretion which in the case of W.P.(MD) Nos.1250 and 1252 of 2023 is absent.

33. In the case of the petitioners in W.P.(MD) Nos.1250 and 1252 of 2023 there is no adverse comments as in the case of the petitioner in W.P. (MD) No.1391 of 2023, who is alleged to be a habitual offender violating the provisions of the Customs Act by removing the confiscated goods on an earlier occasion. The petitioners in the other two writ petitioners have been importing the very same product on earlier occasions and it is also not the case of the Department that they are “fly by night operator”.

ISSUE NO.2:-

34. Since the detention is on the orders of the Department applying the ratio laid in Balaji Dekors Vs. Commissioner of Customs, Commissionerate-III, Chennai reported in 2017 (356) E.L.t. 219 (Mad), detention certificate should be issued to the petitioners in W.P.(MD) Nos. 1250 and 1252 of 2023. The argument of the Department against its issue is the Central Government Notification No.20/2015-2020 dated 25.07.2018. This notification, as already stated, is stayed by the Karnataka High Court. The 2nd issue is therefore to be answered in favour of the above referred petitioners viz; W.P.(MD) Nos.1250 and 1252 of 2023.

35. In fine;

i) W.P.(MD) Nos.1250 and 1252 of 2023 are allowed and the petitioners shall be permitted to re-export upon executing a bond to the full value of the goods that are sought to be exported without prejudice to the rights or authority of the appellants to proceed with the adjudication and impose or collect whatever charges/fine/penalty that are permissible under laws; and they shall be issued with the detention certificate for demurrage and container detention charges.

ii) W.P.(MD) No.1391 of 2023 is dismissed.

36. However, there shall be no order as to costs.