ORDER

1. Rule returnable forthwith. Mr. Jaimin Gandhi, the learned counsel waives service of notice of rule for and on behalf of the respondents.

2. By this writ­-application under Article­ 226 of the Constitution of India, the the petitioner has prayed for the following reliefs:­

9(A) be pleased to issue a writ of Certiorari or writ in the nature of certiorari calling for the records of the case and after examining legality and validity of the communications dated 7.9.2018 (Annexure­ ‘A’) and be pleased to quash and set aside to the extent it seeks to demand from the petitioner bank guarantee of 25 per cent of the IGST;

(B) be pleased to issue a writ of mandamus or writ in the nature of mandamus ordering and directing the respondents their subordinates, servants and agents to forthwith (I) permit the petitioner to export/re-export the goods without including amount of IGST in the calculation of the amount of bank guarantee and (ii) to accept the bank guarantee as furnished by the petitioner on the undertaking of the petitioner that the said guarantee will be renewed from time to time till the completion of adjudication;

(C) during the pendency and final disposal of the present petition, be pleased to direct the respondents to allow the petitioner to export the seized goods and accept the Bank Guarantee of ₹ 9,18,723/­ already furnished by the petitioner on the undertaking of the petitioner to renew the same from time to time till completion of adjudication proceedings;

(D) any other further relief as may be deemed fit in the facts and circumstances of the case may also please be granted;

3. The facts of the case may be summarized as under:­

3.1 The petitioner is a private limited company and is an approved SEZ unit under the Special Economic Zones Act, 2005 [for short ‘The SEZ Act’] for trading activity, which also includes export of 11 items viz. rechargeable battery for torch and emergency light etc. A Letter of Approval dated 12th January, 2017 was issued by the Development Commissioner of the Kandla Special Economic Zone [For short ‘KASEZ’].

3.2 A search was conducted by the officers of the DRI at the premises of the petitioner on 08th January, 2018 and various documents and goods were detained/resumed on the allegation of mis­declaration of value. Thereafter, a letter was issued by the DRI on 07th March, 2018 stating the same to be Seizure­cum­No Objection for provisional release of goods mentioned in Annexures-­A & B to the seizure memo. The DRI seized the goods imported by the petitioner on the ground of under valuation of the goods, which were imported by the petitioner being rechargeable battery for torch and emergency light etc.

3.3 The petitioner by letter dated 09th March 2018 requested the DRI to permit for re-­export of the goods.

3.4 As the request of the petitioner was not considered by the authority, the Special Civil Application No.9128 of 2018 was preferred by the petitioner. The said petition was disposed of vide order dated 20th June, 2018 by directing the respondent no.2 to decide the petitioner’s request for re­-export of the goods.

3.5 The respondent no.2 by communication dated 03rd July, 2018, ordered to release the seized goods for re-­exports on the condition that the petitioner furnish the bond for the re­determined value of seized goods by DRI with security of 25% of the bank guarantee of the re-determined/enhanced value of the goods.

3.6 The petitioner, thereafter, by letter dated 04th July, 2018, requested the respondent no.2 to waive the condition of the bank guarantee, as it was not possible for the petitioner to meet with such condition of furnishing the bank guarantee at the rate of 25% of the redetermined/enhanced value of the goods,

3.7 The petitioner, thereafter, approached this Court by preferring Special Civil Application No.11209 of 2018 with a prayer to permit the petitioner to furnish the bank guarantee at the rate of 25% of the customs duty that may be leviable on the re­determined/enhanced value of the goods. The order dated 09th August, 2018 passed in the Special Civil Application No.11209 of 2018 reads as under:­

“1. The petitioner has challenged a condition contained in the communication dated 03.07.2018 to enable the petitioner to re-export the consignment of goods which the petitioner desired to import. The litigation has longish history. We may record only relevant facts.

2. The petitioner is a private limited company and has a manufacturing unit in SEZ, Kandla. The petitioner had imported a consignment of various kinds of dried batteries and other electronic items. The Customs authorities, Kandla however, detained the goods on 08.01.2018 on prima facie doubt about its correct valuation as declared by the petitioner. After attempting to secure the provisional release thereof for sometime, the petitioner finally conveyed to the departmental authorities that the petitioner no longer wishes to clear the goods. The same may be permitted to be re-­exported. The competent authority by the impugned communication conveyed to the petitioner its permission to do so however, subject to the condition that the petitioner executes a bond for the full value of the goods in question re-determined by the DRI and of furnishing a bank guarantee equivalent to 25% of the its value on such re­determination.

3. Having heard learned counsel for the parties and having perused the materials on record it appears that according to the petitioner, the total value of the imported goods was ₹ 14.29 lacs (rounded off). The DRI authorities estimated the value thereof at ₹ 253.38 lacs (rounded off). This was, primarily, on the basis of investigation carried out by the authorities. Such investigation is still going on. According to the authorities, however, the Director of the petitioner-company had attempted to undervalue the correct value being nine times the declared value. The pointed out that the statement of the Director is not retracted. They also relied on the independent valuation report obtained by them.

4. Learned counsel for the petitioner submitted that the petitioner is a SEZ unit and has been in existence since quite sometime. The valuation declared cannot be substituted at his stage without proper basis. In any case, when the petitioner does not desire to import the goods and permission for re­-export is granted, there would be no question of customs duty on differential value. At best, even if the department succeeds, ultimately, there may be a question of imposition of penalty under section 112 of the Customs Act.

5. On the other hand learned advocates for the respondents submitted that investigation is going on. At this stage, there is strong prima facie evidence to suggest gross undervaluation of the goods in question. To evade customs duty, since part of the imported goods would be diverted, DRI undervaluation would lead to loss of customs duty.

6. We have considered the relevant facts. Since investigation is still going on, the petitioner would also have full liberty to defend its position in adjudication that may be initiated. We would not make any observations as to prejudice one side or the other. Nevertheless, what prima facie appears is that now that the goods are allowed to be re-­exported, the question of payment of customs duty, on revised valuation even if it were to be ultimately established, would not survive. Of course there would be question of penalty and personal penalties in case the charges of mis­declaration while attempting to import the goods are established. Section 112 of the Act Customs Act prescribes different penalties under different situations. The prescription of penalties is by maximum permissible ceiling. It is not necessary to impose maximum possible penalties in every case.

7. Considering such facts and circumstances of the case, we modify the condition of Bank Guarantee to 25% of the customs duty that may be leviable on the re­determined value of the goods. The condition for providing bond for the remaining value of the goods remains unchanged upon which condition being fulfilled within three weeks, the petitioner may be permitted to re-export the goods.

Petition is disposed of.”

3.8 Thus, the respondent no.2 could not have asked for any other amount or bank guarantee except 25% of the customs duty as directed by this Court that may be leviable on the re­determined value of the goods. However, vide communication dated 07th September, 2018, the respondent no.3 insisted for payment of 25% bank guarantee on the amount of IGST leviable on the re­determined value of goods. The letter dated 07th September, 2018 reads as under:­

OFFICE OF THE COMMISSIONER OF CUSTOMS,

CUSTOM HOUSE,

NEAR BALAJI TEMPLE, KANDLA

Phone:02836­271468/9

Fax: 02836­271467

Speed Post/Regd. AD

Date:07.09.2018

 F.No.S/10­45/ADJ/Pro­release/Zip Zap/2017­19

To,

M/s. Zip Zap Exim Pvt. Ltd.,

Plot No.397, sec-­IV & Plot No.406, Sec­1,

KASEZ, Gandhidham.

Gentlemen,

Sub: Re­export of Seized Goods – R/SCA/ No.11209/2018 filed by M/s. Zip Zap Exim Pvt. Ltd., KASEZ Unit in the Hon’ble Court of Gujarat ­reg.

Please refer to your letter dated 28.08.2018 on the above subject matter.

In this context, it is to inform that as per Annexure ‘B’ to the seizure memo dated 07.03.18 showing details of goods imported by M/s. Zip Zap Exim Pvt. Ltd., KASEZ by resorting to undervaluation but no DTA Bill of Entry has been filed in respect of the same by domestic buyers/actual importers and the same is detained by DRI vide Panchnama dtd.09.01.2018 drawnat M/s.Zip Zap Exim Pvt. Ltd., Plot No.397, Sec-­IV & Plot No.406, Sec­I, KASEZ.

You have sought or re­export o the goods covering at Sr. No.1 to 6 of the Annexure­-B as shown above. Being a case of undervaluation, in order to secure the interest of revenue, the Commissioner of Customs has imposed Bank Guarantee o 25% of the re­determined assessable value.

Being aggrieved by the above said BG condition, you have preferred R/SCA No.11209 of 2018 in the Hon’ble High Court of Gujarat at Ahmedabad. After taking into facts and circumstances of the case, the Hon’ble High Court vide oral Order dated 09.08.2018 has modified the condition of Bank Guarantee to 25% of the Custom Duty that may be leviable on the re­determined value of the goods. The condition for providing bond for the remaining value of the goods remains unchanged upon which condition being fulfilled within three weeks, the petitioner may be permitted to re­-export the goods.

However, vide letter dated 28.08.2018, you have sought for re-export of the goods by way of furnishing Bank Guarantee of ₹ 9,18,723/­. It is further submitted that you are being a SEZ Unit, you are not liable to IGST and also informed that in any case, the goods being re­exported, there is no question of levy of IGST.

Whereas as per the Order of the Hon’ble High Court of Gujarat, you are required to furnish Bank Guarantee of 25% of the Custom Duty that may be leviable on the re­determined value of the goods for re­-export. The re­determined Custom Duty comes to ₹ 97,55,625/­ for Sr. No.1 to 6 o the Annexure ‘B’ to the seizure memo dated 07.03.18 and its 25% comes to ₹ 24,38,906/­, however, you have furnished Bank Guarantee of ₹ 9,18,723/­ by way of not adding the element of IGST part which makes them short of ₹ 15,20,183/­. The said Bank Guarantee submitted by you does not contain the necessary auto renewal clause; hence, the BG is not acceptable.

In view of the above, you are required to furnish Bank Guarantee for remaining amount of ₹ 15,20,183/­ for releasing the goods provisionally for re­-export and further, you are requested to furnish Bank Guarantee with a condition of auto renewal clause without any over­riding clause till the issue involved gets finality from the concerned Bank.

Therefore, it is requested to do needful in the matter as earliest.

Yours Sincerely,

 sd/­

(Yatish G. Patil)

Deputy Commissioner (Adj.)

3.9 The petitioner, therefore, has approached this Court challenging the communication dated 07th September, 2018.

4. A co­ordinate bench of this Court by order dated 04th October, 2018 permitted the petitioner to re-­export the goods on filing an undertaking. The order dated 04th October, 2018 reads as under:­

“1. The petitioner wants to re-export the consignment of Dry Batteries, the import of which had run into controversies.

2. In our order dated 09.08.2018 passed in Special Civil Application No.11209 of 2018, while modifying partially the conditions imposed by the authorities to permit the petitioner to re-export the goods, the following order was passed;

“6. We have considered the relevant facts. Since investigation is still going on, the petitioner would also have full liberty to defend its position in adjudication that may be initiated. We would not make any observations as to prejudice one side or the other. Nevertheless, what prima facie appears is that now that the goods are allowed to be re-­exported, the question of payment of customs duty, on revised valuation even if it were to be ultimately established, would not survive. Of course there would be question of penalty and personal penalties in case the charges of mis-declaration while attempting to import the goods are established. Section 112 of the Act Customs Act prescribes different penalties under different situations. The prescription of penalties is by maximum permissible ceiling. It is not necessary to impose maximum possible penalties in every case.

7. Considering such facts and circumstances of the case, we modify the condition of Bank Guarantee to 25% of the customs duty that may be leviable on the re-determined value of the goods. The condition for providing bond for the remaining value of the goods remains unchanged upon which condition being fulfilled within three weeks, the petitioner may be permitted to re-export the goods. Petition is disposed of.”

2. Pursuant to such order, the petitioner furnished Bank Guarantee of ₹ 9,18,723/, which, the Deputy Commissioner of Customs thought was inadequate. According to him, the Customs Duty on the re-determined value of goods comes to ₹ 97,55,625/and therefore, 25% thereof would come to ₹ 24,38,906/. According to him, thus, the petitioner had to provide further Bank Guarantee of the difference amount of ₹ 15,20,183/. On 07.09.2018, therefore, he passed the impugned order asking the petitioner to provide further Bank Guarantee for the said sum.

3. Learned counsel for the petitioner submitted that on the import of goods, no IGST was to be levied since the petitioner Unit was situated in a SEZ. The competent authority has completely ignored this aspect of the matter while computing the Customs Duty on the re-determined value of goods. Hence, the difference. He further submitted that the goods are lying unutilized since long and are fast deteriorating.

4. Considering the issues arising, let there be Notice, returnable on 25.10.2018. By way of ad­-interim relief, the respondents are directed to permit re-export of the goods in question on condition that the Director of the petitioner Company files an Undertaking before this Court latest by 09.10.2018 that eventually, if the Court does not accept the petitioner’s contention noted above, then the petitioner shall furnish the remaining Bank Guarantee.

5. Direct service for respondent nos.2 & 3 is permitted.”

5. The learned counsel appearing for the petitioner submitted that there is no provision for levy of IGST either on the imported goods or the exported goods under the provision of Integrated Goods and Services Tax Act, 2017. He therefore submitted that the insistence on the part of the respondent no.3 to furnish the bank guarantee of 25% on the amount of IGST is without any basis.

6. On the other­ hand, Mr. Jaimin Gandhi, the learned counsel appearing for the respondents submitted the adjudication proceedings is not yet completed and whether the IGST is leviable on imported goods is yet to be decided by the authority.

7. Be that as it may be, as this Court vide order dated 09th August, 2018 has directed the respondent no.2 to permit the petitioner to re-export the goods on furnishing the 25% of the customs duty leviable on re­determined value of goods, then the respondent no.2 is not entitled to ask for bank guarantee on the amount of IGST on redetermined value of goods.

8. In that view of the matter, the petition is allowed. The impugned communication dated 07th September, 2018 is hereby quashed and set aside. It is declared that the petitioner is not liable to furnish the bank guarantee of ₹ 15,20,183/­ for releasing the goods for re-­export, as asked by the respondent no.3. However, it is clarified that respondent – authority may adjudicate the issue of levy of IGST in the pending proceedings in accordance with law.

9. Rule is made absolute to the aforesaid extent with no order as to cost.