Amount Lying After Wrong Invocation Of The Bank Guarantee: CESTAT Directs Payment of Interest

The bench of Anil Choudhary (Judicial Member) has observed that the appellant is entitled to 12% interest from the date of encashment of the bank guarantee under Section 129EE of the Customs Act.

The appellant is a manufacturer-exporter of leather goods. They had re-imported a consignment of goods, which were earlier exported for the purpose of repair, etc., and thereafter, re-exported. For the re-import, the appellant had filed a Bill of Entry with an undertaking to re-export within a period of six months as per Notification No. 158/95-Cus. The appellant has submitted a re-export bond and a bank guarantee for Rs. 3,10,000. In terms of the notification, they were given the benefit of re-import without payment of customs duty.

The appellant re-exported the goods by filing a shipping bill. After the re-export, they applied for release of their bond and bank guarantee. Then, without providing any opportunity of hearing to the appellant, the department proceeded to encash the bank guarantee by issuing an invocation letter. Subsequently, an order of adjudication was passed against the appellant. The order held that the appellant had failed to comply with the condition of re-export, and the bank guarantee was appropriated, holding failure to export within six months.

The issue came before the Tribunal. The Tribunal held in favour of the appellant, observing that the appellant had applied for an extension of time soon after the re-export of the goods, which had not been rejected by the revenue. The tribunal observed that the notification provides the facility of re-import within three years from the date of exportation. Thus, when the main conditions of the notification have not been violated, no adverse view can be taken on exporting within a period of nine months instead of six months. The bank guarantee executed and the time of re-importation is not required to be confiscated or adjusted.

The appellant, pursuant to the order of the Tribunal, approached the department for a grant of refund along with interest as per rules. The refund application was rejected by the Assistant Commissioner.

The appellant preferred appeal before the Commissioner (Appeals), who allowed the refund of the bank guarantee, which had been credited to the bank account of the appellant. However, there is no finding in terms of interest.

The appellant filed the appeal before the Tribunal for a direction on the respondent for disbursement of interest as per rules. It is also urged that from the date of encashment of the bank guarantee till the date of refund, interest should be allowed. The appellant contended that since the encashment of the bank guarantee, the amount has been lying with the revenue in the nature of a pre-deposit.

The court directed that the interest should be disbursed within a period of 45 days from the date of receipt of a copy of the order.

Case Title: M/s Leather Sellers Versus Commissioner of Customs And Excise, Patparganj

Citation: Customs Appeal No. 50001 of 2017 (SM)

Dated: 08.07.2022

Counsel For Appellant: Advocate Ashish Kumar Shukla

Counsel For Respondent: Authorised Representative Tamanna Alam

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