In W.P.No.15181 of 2023- MADR HC- Madras High Court rules Customs department's letter seeking penalty amount unjustified, in violation of interim orders in force
Justice P.B. Balaji [10-05-2023]

Read Order: Big Bags International Pvt. Ltd v. The Commercial of Customs and Ors

Chahat Varma

New Delhi, May 23, 2023: The Madras High Court has ruled that there was no justification for the respondents to issue the impugned letter dated 03.05.2023, which called upon Big Bags International Pvt. Ltd. (the petitioner) to pay the penalty amount within 7 days, despite the interim orders in force, that prohibited taking coercive steps for the recovery of the demand.

Briefly stated issue involved in the case was that the petitioner, engaged in the manufacture of Flexible Intermediate Bulk Container Bags, faced a penalty imposed by the first respondent under section 114(iii) of the Customs Act, 1962. The petitioner appealed this decision before the Customs, Excise and Service Tax Appellate Tribunal, but the appeal was dismissed. Subsequently, the petitioner filed a petition for the rectification of the mistake before the tribunal, which upheld the penalty. Aggrieved by the Tribunal's decision, the petitioner filed an appeal before the Division Bench of the Court. The Division Bench, through an interim order dated 22.09.2020, directed the respondents not to take any coercive steps for the recovery of the demand raised, as the matter was pending with the Adjudicating Authority.

The court noted that despite the interim order issued on 22.09.2020, which directed the Customs department not to take any coercive steps for the recovery of the demand, some actions were taken against the petitioner. As a result, the petitioner had to approach the Division Bench of the Court. In response to the petitioner's plea, the Division Bench issued an interim order on 21.04.2021. Referring to the earlier interim order granted on 22.09.2020, the Court observed that the action taken to attach the petitioner's bank account was a clear violation of the order passed by the Division Bench. Consequently, the Court directed the respondents to lift the order of attachment without delay.

The court noticed that now the second respondent, by impugned communication dated 03.05.2023, had called upon the petitioner to pay the penalty amount of Rs.2,50,00,000/-, within 7 days from the date of receipt of the notice and informed that in case of failure, action will be initiated against the petitioner in accordance with the provisions of section 142(1)(c)(iii) of the Customs Act, 1962.

The court made it explicitly clear that the interim orders dated 22.09.2020 and 21.04.2021, which were passed by the Division Bench of the Court, must be respected by the respondents. By setting aside the impugned letter, the Court deemed it invalid due to its violation of the previous orders issued by the Division Bench.