2014 (5) TMI 486 - HC - Customs

Auction of confiscated goods when the appeals were pending - Whether the petitioner is entitled to a value of the goods assessed at the time of seizure or the value received by the respondent authorities from selling the said goods to a third party - Valuation of goods - Held that - Merely because it is open to the applicant to initiate such an action it would not be just and proper to refuse the claim made in these applicants as in any case the applicant is entitled to return the money value of the goods which were illegally confiscated by the respondent. Even though the applicant has claimed interest @21% we do not think it proper to award interest at such a high rate andconsidering the facts and circumstances of the case it would be in the interest of justice if the respondent is directed to return the amount of ₹ 33.04 lakhs with interest at the rate of 12% from 1-2-1989 till the date of payment as the Collector by its order dated 31-1-1989 had held that the goods were properly described and the import was legal. During the pendency of the appeal confiscated goods could not have been auctioned without the prior permission of the appellate court - this lapse is being repeated in a large number of cases, therefore, we are constrained to observe that the respondents have not been diligent in discharging their duties. The respondents are directed to issue an official circular within four weeks to all the concerned officials that the confiscated goods which are the subject matter of appeal before any Tribunal or Court shall not be auctioned or disposed of without prior written permission or order from the concerned Tribunal or the court. Since the sale has already been effected it is too late for a day to say that the same was conducted contrary to the provisions or without any reasonable explanation or not. The respondent authorities have not disputed that at the time of seizure the competent authority assessed the value of the goods at ₹ 7,75,792/- and refunded a sum of ₹ 2,28,010/-. By applying the ratio as laid down in reports the respondent authorities are bound to pay the value of the goods assessed at the time of the seizure and not the value which it fetched from the sale of the said goods after the seizure is declared to be illegal by the CESTAT. The authorities are thus directed to pay the petitioner the differential amount within eight weeks from the date of the communication of this order. - Decided in favour of assessee.

Issues Involved:
1. Entitlement to the value of goods assessed at the time of seizure versus the value received from selling the goods.
2. Legality of selling seized goods before the expiration of the statutory period for preferring an appeal.
3. Applicability of Section 150 of the Customs Act regarding the sale of goods.
4. Obligation to compensate for the unauthorized auction of confiscated goods.

Issue-Wise Detailed Analysis:

1. Entitlement to the Value of Goods Assessed at the Time of Seizure:
The petitioner argued that they are entitled to the value of goods assessed at the time of seizure, which was Rs. 7,75,792/-, rather than the Rs. 2,28,010/- received from selling the goods. The petitioner relied on several judgments, including *Shilp Impex vs. Union of India*, *Kailash Ribbon Factory Ltd. vs. Commissioner of Customs & Central Excise*, and *Commissioner of Customs, Amritsar vs. Harinder Singh*, which support the contention that the authorities must refund the value assessed at the time of seizure. The court agreed with this argument, citing the judgment in *Northern Plastics Ltd. vs. Collector of Customs and Central Excise*, which established that once an order of confiscation is declared illegal, the importer becomes entitled to the value of the goods as on the date and time when the goods should have been cleared by customs authorities.

2. Legality of Selling Seized Goods Before the Expiration of the Statutory Period for Preferring an Appeal:
The petitioner contended that the sale of seized goods before the expiration of the statutory period for filing an appeal before the CESTAT was unreasonable, arbitrary, and contrary to law. The court noted that the authorities sold the goods nearly three years after the seizure, which was before the statutory period for appeal expired. The court found this action unjustifiable and emphasized that the authorities should not have proceeded in haste to sell the goods, especially when they had waited for nearly three years.

3. Applicability of Section 150 of the Customs Act:
The petitioner argued that the sale of the goods was conducted in gross violation of Section 150 of the Customs Act, which prescribes the procedure for the sale of goods after giving notice to the owner. The respondent countered by stating that Section 150 relates to non-confiscated goods and is not applicable to confiscated goods. Instead, Section 126 was cited, which vests ownership of confiscated goods in the Central Government. The court, however, did not accept the respondent's explanation and found that the sale was conducted without reasonable explanation or adherence to the statutory provisions.

4. Obligation to Compensate for the Unauthorized Auction of Confiscated Goods:
The court referred to the judgments in *Shilp Impex* and *Harinder Singh*, which held that during the pendency of an appeal, confiscated goods should not be auctioned without the appellate court's permission. The court observed that the respondents had committed a serious lapse by auctioning the goods without prior permission, causing financial loss to the petitioner. Consequently, the court directed the respondent authorities to pay the differential amount between the assessed value at the time of seizure and the amount refunded, with interest.

Conclusion:
The court concluded that the respondent authorities are bound to pay the value of the goods assessed at the time of seizure, Rs. 7,75,792/-, rather than the amount received from the sale, Rs. 2,28,010/-. The authorities were directed to pay the differential amount within eight weeks from the date of communication of the order. The writ petition was disposed of with these observations, and no costs were awarded.

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