2011 (3) TMI 1417 - HC - Customs

Seizure of goods - Provisional release - petitioner imported scrap under the Open General Licence Scheme in February, 2011 Held that - respondents submits that Show Cause Notice is proposed to be issued under Section 24 and pending consideration, though there is no objection to order of provisional release being passed under Section 110A of the Act, such an order could be passed only after an application was moved and not otherwise, respondents directed to pass an order of provisional release, petition is disposed of

Issues:
1. Quashing of seizure of goods and direction for clearance.
2. Allegation of misdeclaration and evasion of duty.
3. Power to order provisional release of goods.
4. Duty of authorities to prevent unnecessary harassment and loss to the assessee.
5. Justifiability of seizure and power to effect seizure.
6. Calculation of duty and further actions by authorities.

Analysis:

Issue 1: Quashing of seizure of goods and direction for clearance
The petitioner sought quashing of the seizure of goods and a direction for the clearance of goods kept at the Container Freight Station, Ludhiana. The petitioner imported scrap under the Open General Licence Scheme, declared as Heavy Melting Scrap. However, the goods were seized on the allegation of a higher rate of duty payable. The petitioner argued that the seizure was unjustified as the goods could not be held liable for confiscation. The petitioner contended that the goods were scrap, supported by Chapter Note 8 of Section XV of the Customs Tariff Act.

Issue 2: Allegation of misdeclaration and evasion of duty
In response to the notice, the Directorate of Revenue Intelligence raised objections, stating that the goods were misdeclared as Heavy Melting Scrap, leading to duty evasion. The goods were found to be stuffed with used machinery parts, leading to the belief of misdeclaration. The authorities conducted a search at the petitioner's premises and seized the goods based on this suspicion.

Issue 3: Power to order provisional release of goods
The petitioner argued for the power of provisional release of goods under Section 110A of the Customs Act, stating that the heavy financial burden of storage charges should be avoided. The petitioner contended that the power of detention of goods to prevent revenue loss should be coupled with the duty to pass a provisional release order to prevent unnecessary harassment and loss to the assessee.

Issue 4: Duty of authorities to prevent unnecessary harassment and loss to the assessee
The court emphasized the duty of authorities to prevent unnecessary harassment and loss to the assessee. It noted that fairness in action is a constitutional obligation of an administrator. The court highlighted that the power of seizure should be exercised for valid reasons and not arbitrarily, and that the order of provisional release should be passed if justified to avoid unnecessary loss to the assessee without compromising revenue safeguarding.

Issue 5: Justifiability of seizure and power to effect seizure
The court found no justification for the inaction of the authorities in ordering provisional release. It emphasized that the power of provisional release is coupled with a duty when a case for release exists to prevent heavy storage charges being paid merely on an allegation of misdeclaration. The court deemed the contention that an application must be made for provisional release as untenable and ordered the respondents to pass an order of provisional release forthwith.

Issue 6: Calculation of duty and further actions by authorities
The court directed the authorities to take further actions in accordance with the law regarding the calculation of duty. It allowed the petition, directing the respondents to pass an order of provisional release subject to specified conditions, ensuring the petitioner's compliance with assessed duties and other obligations within a specified timeline.

In conclusion, the court allowed the petition, directing the provisional release of goods and emphasizing the duty of authorities to prevent unnecessary harassment and loss to the assessee while ensuring compliance with legal obligations.

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