2013 (7) TMI 943 - HC - VAT and Sales Tax

- distinction between the word suspicion and the word reasons to believe . The statute when such authority is satisfied that conditions exist for exercise of that power the satisfaction has to be based on the existence of grounds mentioned in the statute .

Issues Involved:
1. Legality of the seizure of goods under the Customs Act, 1962.
2. Requirement and existence of "reasons to believe" for seizure.
3. Compliance with statutory provisions for transport vouchers.
4. Allegations of misbranding under the Drugs and Cosmetics Act, 1940.
5. Maintainability of the writ petition in light of alternative remedies.

Detailed Analysis:

1. Legality of the Seizure of Goods:
The petitioner, a registered dealer under the Tripura Value Added Tax Act, 2004 (TVAT Act) and a licensee under the Drugs and Cosmetics Act, 1940, challenged the seizure of a consignment of medicines by the customs authorities. The seizure was conducted on the grounds of an alleged illegal attempt to export the goods through a non-prescribed route, violating several sections of the Customs Act, 1962, and related notifications. The petitioner argued that the seizure was illegal as there was no "reason to believe" that the goods were liable to be confiscated under the Act.

2. Requirement and Existence of "Reasons to Believe":
The petitioner contended that the customs authorities did not have a valid "reason to believe" that the goods were meant for illegal export, as required under Section 110 of the Customs Act, 1962. The distinction between "suspicion" and "reasons to believe" was emphasized, with the petitioner arguing that the seizure was based on mere suspicion rather than well-founded reasons. The court referred to several judicial precedents, including decisions from the Patna High Court and the Apex Court, which established that the satisfaction for exercising power must be based on relevant material, and the existence of conditions for such satisfaction is subject to judicial review.

3. Compliance with Statutory Provisions for Transport Vouchers:
The petitioner argued that there was no allegation of non-production of the transport voucher as required under Section 11K(1) of the Customs Act, 1962, and no transport voucher had been prescribed by the rules to operationalize this statutory provision. The court noted that the customs authorities failed to provide any material basis for their belief that the goods were meant for illegal export and that no transport voucher had been prescribed by framing the rules as required.

4. Allegations of Misbranding under the Drugs and Cosmetics Act, 1940:
The customs authorities also alleged that the seized goods were misbranded, as the name of the drug was not properly labeled, violating Section 17 of the Drugs and Cosmetics Act, 1940. The court observed that the misbranding issue falls under the jurisdiction of the Drugs and Cosmetics Act, 1940, which provides specific penalties and authorities for such violations. The customs authorities had no authority to seize the goods on the grounds of misbranding under the Customs Act, 1962.

5. Maintainability of the Writ Petition:
The respondents argued that the writ petition was not maintainable due to the existence of an alternative remedy under Section 124 of the Customs Act, 1962, which mandates issuing a show cause notice before confiscation. However, the court held that the writ petition was maintainable, as the seizure was carried out without compliance with the statutory requirement of having "reasons to believe," thereby infringing the petitioner's statutory rights.

Conclusion:
The court declared the seizure conducted on 14-12-2012 as illegal and inoperative, quashing the seizure Customs Case No. 11/CL/EXP/CPF/TLM/2012. The respondents were directed to release the seized goods to the petitioner within one week. The court also clarified that the competent authority under the Drugs and Cosmetics Act, 1940, could carry out any prosecution or action on misbranding of the drugs if they intended to do so. The petition was allowed to the extent indicated, with no order as to costs.

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