2009 (9) TMI 606 - HC - Customs

Duty liability relinquishment of title of the imported goods - Company relinquish title without demur - auction was held and the goods were purchased back from the auction purchaser by the petitioner - goods have not only lost its character as imported goods but the petitioner-Company had also lost their character as an importer in respect of these imported goods - auction purchaser is son-in-law of the petitioner and the petitioner-Company had purchased it from him would pale into insignificance - Customs Department has allowed the auction of warehoused goods after deducting the warehouse charges and duty etc. then the goods have come in the hands of auction purchaser in accordance with law - Company, not exigible to Custom Duty as the goods had been auctioned after obtaining permission from the proper officer

Issues Involved:
1. Legality of the seizure of goods and freezing of bank accounts.
2. Compliance with procedural requirements under Sections 110, 110A, 124, and 153 of the Customs Act, 1962.
3. Validity of the extension of the period for issuance of a show-cause notice.

Issue-wise Detailed Analysis:

1. Legality of the Seizure of Goods and Freezing of Bank Accounts:

The petitioner-Company challenged the seizure of goods and freezing of bank accounts by the Directorate of Revenue Intelligence (DRI) under Article 226 of the Constitution. The petitioner argued that it had a clean track record of importing goods and complied with Sections 17, 46, and 47 of the Customs Act, 1962. The DRI conducted a search on 23-1-2009, alleging mis-declaration of the value of imported goods, leading to the seizure of goods, cash, and mutual fund receipts. The petitioner claimed that the goods were purchased from M/s. Excel Packages, which had acquired them through an auction by the Punjab State Warehousing Customs (PSWC). The respondents contended that the goods were originally imported by the petitioner and later relinquished, with the auction purchaser being a close relation of the petitioner. The court held that once the goods were auctioned by PSWC with the permission of the proper officer, they lost their character as "imported goods," and the petitioner was not liable for customs duty on these goods.

2. Compliance with Procedural Requirements under Sections 110, 110A, 124, and 153 of the Customs Act, 1962:

The petitioner argued that the respondents failed to follow the procedure under Section 110 of the Act, as no reasons were provided in the seizure memos. The respondents contended that the goods were detained and later seized after the petitioner failed to produce documentary evidence. The court noted that the show-cause notice dated 15-7-2009 granted a week's time for the petitioner to respond, but the order extending the period was passed on 20-7-2009, which was legally unsustainable. The court emphasized that the order extending the period must be communicated to the petitioner as per Section 153 of the Act, which was not done. Therefore, the order dated 20-7-2009 was set aside due to the violation of procedural requirements under Sections 124 and 153 of the Act.

3. Validity of the Extension of the Period for Issuance of a Show-Cause Notice:

The petitioner argued that the period of six months for issuing a show-cause notice expired on 21/22-7-2009, and the respondents were in a hurry to pass the extension order. The court held that the period of six months should be reckoned from the date of detention (22/23-1-2009) and not from the date of seizure orders (18/23-3-2009). The court also noted that the order extending the period beyond six months was not communicated to the petitioner within the prescribed time, making it ineffective. The court relied on the principles laid down by the Supreme Court and other High Courts, emphasizing that an order must be communicated to the affected party to assume its character. Consequently, the court ruled that the extension order was invalid, and the goods were liable to be returned to the petitioner.

Conclusion:

The court concluded that the petitioner-Company was not liable for customs duty on the auctioned goods and that the extension order was invalid due to procedural violations. The court directed the respondents to release the seized goods and unfreeze the bank accounts of the petitioner-Company. The writ petition was disposed of accordingly.

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