2011 (7) TMI 224 - HC - Customs

Penalty - Seizure - Time limitation - it is an admitted position that by an order dated 24 May 2011, the Commissioner of Central Excise and Customs, SuratI has allowed provisional release of the goods against a bond and a Bank Guarantee of Rs.1,81,69,875 - The unit being based in an SEZ, the goods imported were not subject to inspection/examination by Customs and were cleared on the basis of declarations made by the unit - The investigation has also revealed that in order to ostensibly complete the export obligation, the Petitioner exported junk material consisting of metal scrap and cheap ink/phenyl solutions - In the event that any such application is made, the Commissioner of Central Excise, Surat will consider the application in accordance with law and take a decision thereon

Summary

Issues:
1. Declaration of detention of goods after the expiry of the statutory period.
2. Interpretation of Section 110 of the Customs Act, 1962.
3. Validity of the condition of furnishing a bank guarantee for provisional release of goods.
4. Compliance with guidelines for expeditious assessment and provisional release.
5. Allegations of serious fraud and illegal activities by the Petitioner.
6. Application for permission to furnish bank guarantees in part for prorata release of goods.

Issue 1: Declaration of detention of goods after the expiry of the statutory period
The Petitioner sought a declaration that detaining goods after the statutory period of limitation of six months post-seizure is illegal under Section 110 of the Customs Act, 1962. However, the Division Bench's judgment clarified that release of goods is required only in the absence of a provisional order and notice for confiscation, which was not the case here as provisional release was allowed against a bond and bank guarantee.

Issue 2: Interpretation of Section 110 of the Customs Act, 1962
The judgment emphasized the conditions under Section 110(2) for release of seized goods, highlighting the necessity of a provisional order and notice under Section 124(a) for confiscation. The Court noted that in the present case, provisional release against a bond and bank guarantee had been allowed, indicating compliance with statutory requirements.

Issue 3: Validity of the condition of furnishing a bank guarantee for provisional release
The Petitioner contested the requirement of a bank guarantee for provisional release, citing guidelines emphasizing expeditious assessment and provisional release unless involving prohibited goods, non-compliant imports, or serious fraud. The Court found the bank guarantee condition valid, given the serious fraud allegations against the Petitioner, rendering reliance on the guidelines unfounded.

Issue 4: Compliance with guidelines for expeditious assessment and provisional release
The Court examined the Petitioner's activities, involving unauthorized sale of duty-free materials, misdeclaration of imported goods, and routing of illegal proceeds through hawala channels. These actions were deemed serious fraud, exempting the case from the guideline restricting bank guarantee value to twice the duty amount. Consequently, the Petition was dismissed for lack of foundation in seeking relief under the guidelines.

Issue 5: Allegations of serious fraud and illegal activities by the Petitioner
The investigation revealed the Petitioner's unauthorized sale of duty-free materials, misdeclaration of imports, and fraudulent export practices, leading to suspension of approval by the SEZ Development Commissioner. The Court concluded that the Petitioner's actions constituted serious fraud, justifying the denial of relief under the guidelines and dismissal of the Petition.

Issue 6: Application for permission to furnish bank guarantees in part for prorata release of goods
The Petitioner expressed intent to seek permission for partial bank guarantee submission for prorata release of goods. The Court directed the Commissioner of Central Excise, Surat to consider any such application in accordance with the law, indicating a potential avenue for the Petitioner to pursue partial release of goods.