Bank Guarantee
SC asks customs dept to refund encashed bank guarantee to Patanjali Foods
This story was originally published at 20:40 IST on 19 May 2025
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Informist, Monday, May 19, 2025
NEW DELHI – The Supreme Court on Monday asked the customs department to immediately refund the bank guarantee amount, which the department had encashed for seeking payment of the differential duty, to Patanjali Foods Ltd. Since retention of such amounts is "unjust and unlawful", the same would carry interest at the rate of 6% from the date of encashment till repayment, the court said, ordering its payment within four months.
The top court said that the customs department had recovered the differential duty amount by adopting a "coercive method", by encashing the bank guarantees, which were offered as security for the differential amount on the orders of the Gujarat High Court. "In the facts of the present case, encashment of bank guarantees offered as security cannot be treated as payment of customs duty," the apex court said.
The customs department resorted to the arbitrary encashment of the bank guarantee, the court said. "It is evidently clear that respondents are holding on to money of the appellant which they are not authorised to do," the court said.
The case has its genesis in Glychem Industries importing edible crude degummed soybean oil in bulk at Jamnagar in Gujarat. The customs department did not clear the goods of Glychem Industries on the ground that the latter was required to pay a higher customs duty based on the tariff value fixed for the imported goods. Glychem Industries, however, contested this, saying the government's notification to fix the tariff value had not come into effect at the time of import.
When the case reached the high court, it passed an interim order in 2002 that for the clearance of the goods in question, Glychem Industries should furnish a bank guarantee for the difference in customs duty. After Glychem Industries furnished the bank guarantee, the goods were allowed to be cleared by the customs department.
In the meantime, Glychem Industries merged with Ruchi Soya Industries in 2006. Thereafter, the high court dismissed Ruchi Soya Industries' petition against the department. While the appeal by Ruchi Soya Industries was pending before the Supreme Court, the customs department encashed the bank guarantee towards the payment of differential duty in 2013. In 2015, the Supreme Court ruled that it was not justified and lawful on the part of the department to claim the differential amount of duty.
In 2016, Ruchi Soya Industries filed refund applications before the customs department seeking a refund of the differential duty amounts. After it did not get the refund from the customs department due to a lack of some documents, Ruchi Soya moved the high court and then the Supreme Court. In 2019, Patanjali Foods acquired Ruchi Soya Industries through a corporate insolvency resolution process.
On Monday, the shares of Patanjali Foods ended 3.0% lower at INR 1,732.10 on the National Stock Exchange. End
Reported by Surya Tripathi
Edited by Saji George Titus
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