Encashment Of Bank Guarantee Deserves To Be Restrained Subject To Keeping Bank Guarantee Alive : Delhi High Court 

Date:

The Delhi High Court has held that the encashment of the subject bank guarantee deserves to be restrained subject to the Petitioner keeping the bank guarantee alive. 

The bench of Justice Prathiba M. Singh and Justice Dharmesh Sharma have observed that no coercive measures can be taken against the Appellant during the period when the limitation for filing of the appeal has not expired. In addition, if the pre-deposit has already been made the remaining amount cannot be recovered by encashment of the bank guarantee. Either way, the Order and the period for filing the appeal is three months in terms of Section 129A of the Customs Act, 1962.

The petitioner/assessee has sought the stay on the encashment of the bank guarantee in terms of the Order passed by the Principal Commissioner of Customs (Import).

The matter arises out of three “Advance Authorisation Licenses”. In terms of the said licenses the Petitioner was permitted to import “Walnut Inshell of Chandler Variety” at nilrate of duty with the condition that the Petitioner would fulfil the export obligations under the advance authorisation by exporting walnut kernels.

According to the Petitioner it had fulfilled the export obligations within the time limit as required under the said licenses. An investigation was initiated by the Directorate of Revenue Intelligence (DRAI) which culminated in the Show Cause Notice dated 23rd November, 2023. 

The allegation in the SCN is that the Petitioner had diverted the imported goods to the local market and exported Indian walnut kernels under the garb of walnut kernels of chandler variety.

The show cause notice was finally adjudicated and the order for enforcement of Bank Guarantees of Rs 3,06,77,000 already executed by M/s ASTN, Jammu and lying with EPM section of ICD, Tuglakhabad in respect of Advance Licenses and appropriate towards the balance Customs duty payment.

The petitioner submitted that the Petitioner is in the process of filing the appeal challenging the said Order-in-Original. However, there is an apprehension due to the past history with the Department, that the Department could encash the subject bank guarantee of Rs. 3,06,77,000/- which is lying with it even prior to the filing of the appeal and the listing of the same.

The Petitioner contended that the encashment ought not take place and there is a serious apprehension that the subject bank guarantee would be encashed. Further, in terms of the above clause 4 of the Circular, it is his submission that till the appeal is filed and during the pendency of the appeal if the stipulated amount of pre-deposit is paid, no coercive steps can be taken for recovery of any amounts by the Department.

The court held that the order shall, however, be subject to the final disposal of the appeal which may be filed by the Petitioner before the concerned Appellate Tribunal. If, however, no appeal is filed, the Department is free to approach the Court for vacation of this order.

Read More: CESTAT Quashes Absolute Confiscation To Permit Gold Jewelry To Be Redeemed On Payment Of Fine And Penalty

Case Details

Case Title: Amar Singh And Sons Tree Nuts LLP Versus The Superintendent Of Customs

Case No.: W.P.(C) 149/2025 & CM APPL. 699/2025

Date: 09th January, 2025

Counsel For Petitioner: Pradeep Singh Rawat

Counsel For Respondent: Harpreet Singh

Mariya Paliwala
Mariya Paliwalahttps://jurishour.in/
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.

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