2009 (12) TMI 611 - HC - Customs

Search and seizure - Defreezing of bank accounts and D-mat account - Provisional release of the goods - Evasion of duty - Violation of section 124 - principle of natural justice - Held that - a notice in terms of Section 124(c) of the Act was issued on 15-7-2009 to the petitioner to provide a reasonable opportunity of being hear, which stipulated a week s time. It was received by the petitioner on 16-7-2009 and a period of one week was to expire on 23-7-2009. The petitioner was to appear on 20-7-2009 when it has requested for supplying copies of the documents. However, the order was passed on 20-7-2009 itself. Like in the earlier case, it has to be held in this case as well that the opportunity to make representation within the meaning of Section 124(c) of the Act has been rendered illusory as the order has been passed prior to the expiry of seven days and no effective opportunity of hearing has been afforded. The order extending the period of six months has not been communicated to the petitioner in the instant case also. - Since the period of six months has already expired, therefore, the detention Memo, dated 22-1-2009 (P-2), order of seizure dated 20-2-2009 (P-6) and order of confiscation of case dated 9-6-2009, under Section 111 read with Section 2(22) and 2(39), 120 and 121 of the Act (P-7) are also quashed.

Issues Involved:
1. Legality of detention/seizure of 5400 Kgs. yarn and Rs. 4.2 lacs cash.
2. Freezing of bank and D-Mat accounts.
3. Compliance with Sections 17, 46, and 47 of the Customs Act, 1962.
4. Validity of show cause notice and extension of six-month period under Section 110(2) of the Act.
5. Requirement of reasons for seizure under Section 110 of the Act.
6. Burden of proof under Section 123 of the Act.
7. Communication of extension order under Section 110(2) of the Act.
8. Non-supply of documents for filing a reply.

Detailed Analysis:

1. Legality of Detention/Seizure of 5400 Kgs. Yarn and Rs. 4.2 Lacs Cash:
The petitioner challenged the orders of detention and seizure of yarn and cash by the Directorate of Revenue Intelligence (DRI). The petitioner argued that they had a clean track record of importing goods and had always complied with Sections 17, 46, and 47 of the Customs Act, 1962. Despite this, the DRI conducted searches and detained the goods and cash under the provisions of the Act. The petitioner contended that the seized goods were assessed at an inflated value and requested a reconsideration based on the actual market price.

2. Freezing of Bank and D-Mat Accounts:
The petitioner also sought the defreezing of their bank and D-Mat accounts, which were frozen by the revenue-respondent. The petitioner argued that no show cause notice was issued within the stipulated six months, and thus, the cash in the accounts should be released.

3. Compliance with Sections 17, 46, and 47 of the Customs Act, 1962:
The petitioner claimed compliance with Sections 17, 46, and 47, which pertain to the assessment of duty, entry of goods on importation, and clearance of goods for home consumption. Despite this, the DRI detained and seized the goods and cash, leading to the petitioner's challenge.

4. Validity of Show Cause Notice and Extension of Six-Month Period Under Section 110(2) of the Act:
The petitioner received a show cause notice on 16-7-2009, proposing an extension of the six-month period for issuing a show cause notice under Section 110(2) of the Act. The petitioner argued that the extension order was not served within the stipulated period, and thus, the seized goods and cash should be returned.

5. Requirement of Reasons for Seizure Under Section 110 of the Act:
The petitioner contended that under Section 110 of the Act, the goods could only be seized if the seizing officer had reasons to believe that the goods were liable to confiscation. The petitioner argued that no reasons were provided in the seizure memos, depriving them of their right to utilize the goods.

6. Burden of Proof Under Section 123 of the Act:
The respondents argued that the petitioner had imported yarn from China using misdeclaration and undervaluation. The DRI conducted searches and detained goods, which were later confirmed to be synthetic yarn. Under Section 123 of the Act, the petitioner had the burden of proving that the synthetic yarn was not smuggled. The petitioner failed to provide documents showing licit possession, making the goods liable for confiscation.

7. Communication of Extension Order Under Section 110(2) of the Act:
The respondents admitted that the order extending the period for issuing a show cause notice was passed on 21-7-2009 and dispatched on the same day by ordinary post. However, the petitioner argued that the order was not communicated within the stipulated period, making the detention and seizure invalid.

8. Non-Supply of Documents for Filing a Reply:
The petitioner requested documents to file a reply to the show cause notice, which were not provided. The respondents argued that the documents were not relevant for the merits of the case and would be provided for the final show cause notice after the investigation.

Judgment:
The court found that the issues raised in the petition were already addressed in a similar case, M/s. Abhaas Spinners Private Limited v. Union of India and Others. The court held that the opportunity to make a representation under Section 124(c) of the Act was illusory as the order was passed before the expiry of the stipulated period. The court also found that the extension order was not communicated to the petitioner within the required time, rendering the detention and seizure invalid. Consequently, the court quashed the detention memo, seizure order, and confiscation order and allowed the petition in terms of the Division Bench judgment in the case of M/s. Abhaas Spinners Private Limited.

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