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2013 (7) TMI 217 - HC - CustomsCancellation of the auction sale and return of the plant and machinery that was sold to the auction purchaser - allegation of auction sale of goods that were confiscated by the Customs Department in 1997 - Held that - The proceedings that took place before the Court from time to time reveal that the Customs Department was unable to produce before the Court any inventory of the goods of YMIL which was drawn up at the time of confiscation in 1997. This is critical for considering the plea of the Customs Department for cancellation of the auction sale. What has been produced are B/Es and packing lists dated 1990 and 1991 regarding capital goods and raw materials . In the absence of any inventory prepared by the Customs Department at the time of confiscation in 1997 it is not possible to verify whether the capital goods described in the B/Es and packing lists nearly six years earlier to the confiscation, were the ones that were in fact confiscated. Secondly, in the absence of any mark on such capital goods to indicate that they have been confiscated by the Customs Department, it is not possible to conclude that they were the plant and machinery which were sold to and handed over to the auction purchaser in February 2007. In other words, there is nothing to verify that the goods which have been sold by auction sale in 2007 were in fact the very goods that were confiscated by the Customs Department in 1997. This Court is not inclined to entertain the prayer of the Customs Department for cancellation of the auction sale and return of the auction goods to the Customs Department. Correspondingly, petition filed by the auction purchaser is allowed. The auction purchaser is permitted to further sell the plant and machinery purchased by him in the auction sale and hand over possession thereof to the purchaser.
Issues Involved:
1. Legality of the auction sale of YMIL's capital goods and raw materials. 2. Claims by the Customs Department regarding the confiscated goods. 3. Auction purchaser's request to further sell the purchased plant and machinery. 4. Admission and settlement of the Customs Department's claims as a preferential creditor. Detailed Analysis: 1. Legality of the Auction Sale of YMIL's Capital Goods and Raw Materials: The Customs Department filed CA No. 910 of 2008 seeking the setting aside of the auction sale of YMIL's capital goods and raw materials, as well as the possession memo dated 7th February 2007. The auction sale was confirmed by the Court on 7th December 2006, with Mr. Vilas Gupta being the highest bidder at Rs. 1,35,50,000. The Customs Department argued that the goods sold belonged to them due to prior confiscation and that the sale was conducted without their knowledge, violating legal provisions. 2. Claims by the Customs Department Regarding the Confiscated Goods: The Customs Department claimed that the goods auctioned were confiscated by them in 1997 and thus belonged to the Central Government. They provided documents like Bills of Entry (B/E) and packing lists from 1990 and 1991 but failed to produce an inventory from the time of confiscation. The Court noted the absence of any inventory or markings that could verify the identity of the goods sold in the auction as those confiscated by the Customs Department. 3. Auction Purchaser's Request to Further Sell the Purchased Plant and Machinery: Mr. Vilas Gupta, the auction purchaser, filed CA No. 1297 of 2008 seeking permission to further sell the plant and machinery to generate capital for his company. He argued that he was a bona fide purchaser and had paid the full bid amount. The Court noted that there was no response from the Deputy Commissioner of Customs to the auction purchaser's letter seeking permission for the sale of the plant and machinery. 4. Admission and Settlement of the Customs Department's Claims as a Preferential Creditor: The Customs Department's claim was admitted by the Deputy Official Liquidator to the extent of Rs. 2,19,55,000 towards customs and central excise duty, in addition to a penalty of Rs. 10 lakhs. The Customs Department contended that their claim for interest on the duty amounting to Rs. 4,73,15,816 was overlooked. The Court directed the OL to make pro rata payments to the Customs Department and other creditors in accordance with the law. Conclusion: The Court dismissed CA No. 910 of 2008 filed by the Customs Department, stating that there was no sufficient evidence to verify that the goods auctioned were the same as those confiscated by the Customs Department. The Court noted the lack of vigilance by the Customs Department in segregating and marking the confiscated goods, leading to the current situation. Consequently, the Court allowed CA No. 1297 of 2008 filed by the auction purchaser, permitting him to further sell the plant and machinery. The OL was directed to make pro rata payments to the Customs Department and other creditors and file a fresh status report. Orders: - CA No. 910 of 2008: Dismissed. - CA No. 1297 of 2008: Allowed. - Company Petition No. 183 of 2001: OL to make pro rata payments and file a fresh status report by the next hearing date.
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