Customs Dept can demand bank guarantee for differential duty of Rs. 213.79 Cr on import of Concentrates of Alcoholic Beverages: Bombay HC [Read Order]

A division bench of the Bombay High Court recently observed that, the Customs can demand bank guarantee in lieu of the differential duty on import of concentrates of alcoholic beverages, denying relief to the Indian made foreign liquor manufacturer Pernod Ricard India Private Limited.

The Petitioner has challenged the direction issued by The Principal Commissioner of Customs, Mumbai to Pernod Ricard Pvt Ltd on the ICEGATE Portal demanding bank guarantee for differential duty on bills of entry for imports of the Petitioner of concentrates of alcoholic beverages from 1 April 2022 onwards.

In case of import of goods by an Indian buyer from a foreign supplier, who is related, there is a possibility that the goods are imported at a lower value than the market price, thus causing a loss in customs duty levied on the value of the imported goods as per the provisions of the Customs Act. The differential duty is calculated by the Special Valuation Branch (SVB).

SVB investigates the impact of the such relationship on the invoice value of the imported goods.

On 28 February 2012, the Petitioner filed an annexure along with documents for the proposed import of concentrates of alcoholic beverages in view of a Supply Agreement. The Directorate of Revenue Intelligence (DRI), New Delhi, initiated an investigation that the Petitioner has been importing concentrates from Chivas Brothers, a related party and DRI suspected undervaluation of goods.

The department subsequently raised a demand of bank guarantee for the differential duty.

For several bills of entry, the Petitioner submitted bank guarantees for a total amount of Rs.213,79,76,000/-.

The Court observed that, “There is no dispute that the power to direct furnishing security exists under Section 18 of the Customs Act.”.

According to the Petitioner, in the facts of the Petitioner's case, the Circulars  No.5/2016 dated 9 February 2016 and Circular No. 38/2016 issued by Central Board of Excise and Customs, which are binding on the Respondents, prohibit the Respondents from demanding bank guarantees for the differential value and the imports pending further proceedings will have to be cleared only on a personal bond.

According to the Respondents, there is no absence of power for demanding security as sought to be argued by the Petitioner.

Differentiating between investigation by SVB and assessment, the bench of Justice Gauri Godse and Justice Nitin Jamdar held that, “the demand for bank guarantee of 100% of differential duty is just and proper.”

It was further stated that, “no direction can be issued to the Respondents to return the bank guarantee, which the Petitioner has submitted.”

To Read the full text of the Order CLICK HERE

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