Customs Dept Cannot Encash Bank Guarantee Furnished By Trader During Pendency Of Appeal If Pre-Deposit Is Made: Delhi HC Affirms

Based on a circular issued by the Finance Ministry, the Delhi High Court has affirmed that the Customs Department cannot encash the bank guarantee furnished by a trader, whose import/export transactions are in dispute, if the latter has made a pre-deposit with his appeal against the demand and penalty.

A division bench of Justices Prathiba M. Singh and Dharmesh Sharma observed,

“A perusal of the Circular and the clauses extracted above would show 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.”

In the case at hand, Petitioner was permitted to import “Walnut Inshell of Chandler Variety” at nil rate of duty with the condition that the Petitioner would fulfil the export obligations under the said advance authorisation by exporting walnut kernels.

As per the Customs, 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.

Accordingly, proceedings against him were initiated and a penalty was imposed upon him under Section 112(a)(ii) of the Customs Act, 1962.

The Petitioner’s counsel submitted that the Petitioner is in the process of filing an appeal however, there is an apprehension that the Department could encash the subject bank guarantee which is lying with it, even prior to the filing of the appeal and the listing of the same.

He thus sought a stay on encashment of the subject bank guarantee. Reliance was placed on Clause 4 of the Circular dated 16th September, 2024 issued by the FInance Ministry to contend 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 noted that the impugned Order was passed on 6th December, 2024 and the period for filing the appeal is three months in terms of Section 129A of the Customs Act, 1962.

Thus, considering the fact that a substantial sum was already appropriated by the Department, the Court restrained it from encashing the bank guarantee, “subject to the Petitioner keeping the said bank guarantee alive.”

Appearance: Mr. Pradeep Singh Rawat & Mr. Pankaj Pandey, Advs. for Petitioner; Mr. Harpreet Singh, Sr. SC. With Ms. Suhani Mathur and Mr. Shivang Chawla, Advs. for Department

Case title: Amar Singh And Sons Tree Nuts LLP v. The Superintendent Of Customs, Epm, Import & Ors.

Case no.: W.P.(C) 149/2025

Click Here To Read/Download The Order

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