2014 (12) TMI 1163 - HC - Central Excise

Export of goods without following procedure under Central Excise - exporter claims to be SSI unit - goods were detained on the ground that prohibited or restricted goods is attempted to be exported and/or a person without having an IEC is attempting to export the goods. - Held that - in case of an export, the authority should not unreasonably withheld the export unless the export is made to a prohibited goods or to a restricted goods and have not been permitted to leave the country. An exporter is obliged to adhere to the schedule to the export and if any disruption to such schedule is made by any such agency it may invite the cancellation of the said order and ultimately have the resultant effect on the economy of the country. If the Foreign Trade Policy itself provides for an export to be made upon obtaining the undertaking, this Court does not find that there is any justification on the part of the authority to continue with the order of detention. Customs authorities directed to allow the export to be effected and shall proceed with the investigation and/or the proceedings already initiated against the petitioner - Decided in favor of petitioner.

Issues: Alleged detention of goods meant for export; Challenge against summons issued by excise authorities.

The petitioner alleged that the goods meant for export were unnecessarily detained and challenged various summons issued by the excise authorities. The petitioner contended that the authorities wrongly and illegally prevented the export, citing reasons unrelated to the export itself. The summons required the petitioner to provide various documents related to different entities, including a proprietorship concern and a corporation. The petitioner argued that there was no manufacturing activity in the company in question, and the goods were imported in bulk from U.A.E. and exported in smaller packages. The petitioner also relied on a notification to claim Small Scale Industries (S.S.I.) exemption up to a certain amount. Despite possessing an Import/Export Code (IEC) certificate, the authorities issued a detention order under Section 110 of the Customs Act.

The Customs Authority justified the detention under Section 110 by stating that it can be done if there is a reason to believe that the goods are liable to confiscation under Section 111, which primarily applies to imported goods. However, the authority did not claim that prohibited or restricted goods were being exported without the necessary IEC. The authority's stance was that the petitioner failed to pay excise duty, leading to the detention memo. The court clarified that seizure under Section 110 must align with the conditions for confiscation under Section 111 and cannot be extended beyond what the legislators intended. The excise authority had the power to act if there was a belief that excise duty evasion was attempted, as per Section 12F of the Central Excise Act, allowing for the seizure of goods or relevant documents.

The petitioner argued that they were an S.S.I. unit enjoying exemptions and were only involved in importing lubricating oil in bulk for repackaging and export, with no manufacturing process involved. The court noted that if the department's interpretation was correct, the petitioner would be liable for duty payment and penalties. The court highlighted that even Section 110A of the Customs Act allowed provisional release of goods despite shortcomings, emphasizing the importance of not unreasonably detaining exported goods, which contribute to the economy. Referring to the Foreign Trade Policy, the court emphasized that consignments meant for export should not be unduly withheld, and any seizure should be lifted promptly to avoid disrupting manufacturing activities and export schedules.

In conclusion, the court directed the appropriate authority to allow the export to proceed, provided all formalities were met and an undertaking was given by the exporter within seven days to rectify any breaches and pay duties if required under Section 110A. The authority was instructed to continue with any ongoing investigations or proceedings against the petitioner without any implication of the order's observations on the case's merits. The writ petition was disposed of with no costs, and parties could obtain a certified copy of the order upon compliance with necessary formalities.

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