2015 (11) TMI 689 - HC - Customs

Attachment of property - Garnishee order - Freezing of bank account - Auction of goods without prior permission - Held that - cargo containing sheets cutting belonging to the second respondent was lying with the petitioner s CFS and thereupon, by conducting E-auction, the petitioner s Company sold the goods in question for a sum of ₹ 40,77,000/-. As per Section 150 of the Customs Act, the petitioner Company has to pay necessary fees to the customs department. - in the event of a public auction under the Act, the proceeds of the sale shall be applied in the above said order. Accordingly, in the present case, the petitioner Company had incurred ₹ 1,50,000/- towards E-auction, ₹ 9,27,303/- towards the customs duty and ₹ 2,03,850/- towards VAT arising from sale and ₹ 30,20,940/- towards storage, handling and overdue charges. These expenses have been supported by the various documents. Therefore, when the petitioner Company has sold away the goods belonging to the second respondent legally in E-auction only after issuing notices to both the respondents and thereby they have also realised a sum of ₹ 42,80,850/-, after adjusting all these amount as per Section 150 of the Customs Act, yet they have incurred additional expenses of ₹ 21,243/- and thus, they were ultimately left with no money from the sale proceeds of E-auction. Hence, since nothing has been left with the petitioner Company as balance money from the proceeds of the auction sale, the respondent is not legally entitled to attach the amount deposited in the third respondent Bank. Even before bringing the goods belonging to the second respondent to sell in E-auction, the petitioner Company had issued notice dated 22.07.2013 under Section 48 of the Customs Act requesting the second respondent to clear the said cargo, otherwise, necessary steps would be taken to dispose of the said goods. Again, finding no reply, the petitioner issued another notice dated 08.08.2013 under Section 48 of the Customs Act for disposal of the said goods and finally, since there was no response from the second respondent, the petitioner Company, with due intimation to the first respondent, sold the goods belonging to the second respondent for a sum of ₹ 40,77,000/- vide E-auction dated 28.11.2014, therefore, I do not find any irregularity in selling the goods as they admittedly issued notices to both the respondents before selling the goods. - Decided in favour of appellant.

Summary

Issues:
Challenging impugned notices for sales tax arrears and bank account freeze.

Analysis:
1. The petitioner challenged notices demanding payment of sales tax arrears and freezing the bank account. The petitioner, specialized in Container Freight Services, received goods from the second respondent for storage. Despite multiple notices, the second respondent failed to clear the goods, leading to an E-auction where the petitioner sold the goods for Rs. 40,77,000. The petitioner complied with Customs Act requirements by paying VAT, customs duty, and handling charges from the auction proceeds.

2. The petitioner argued that no money was due to the second respondent after the auction, questioning the application of Section 45 of the TNVAT Act to attach the bank account. The petitioner contended that any remaining amount should have been debited, not the entire sum of Rs. 75,27,657. The petitioner emphasized the lack of a personal hearing before the bank account freeze.

3. The respondent argued that the petitioner sold goods belonging to the second respondent in the E-auction, justifying the recovery of sales tax arrears under Section 42(2) of the TNVAT Act. The respondent claimed the right to recover the proceeds due to the second respondent's outstanding tax liabilities, rejecting the petitioner's challenge to the notices.

4. The court examined the Customs Act's provisions, particularly Section 150, which outlines the procedure for sale of goods and application of sale proceeds. The court noted that the petitioner correctly followed the Act by applying the auction proceeds to expenses, duties, charges, and amounts due, leaving no balance from the sale proceeds after additional expenses.

5. The court found no merit in applying Section 45(1)(b) of the TNVAT Act, as the petitioner had incurred additional expenses after the auction, making the respondent's attachment of the bank account unjustified. The court highlighted the petitioner's compliance with issuing notices before the auction, concluding that the impugned order should be set aside.

6. Consequently, the court directed the respondent to refund the amount of Rs. 75,27,657 to the petitioner within two weeks and allowed the writ petition. The court granted the respondent the option to pursue recovery from the second respondent for sales tax arrears, closing the case without costs.