2009 (6) TMI 69 - HC - Customs

Seized Goods Non issuance of Notice within prescribed period return of seized goods held that - There is no dispute that the said 598 Rolls of Fabric were seized on 13-11-2002, even though initial panchnama was made on 31-7-2002. Section 124 of the Customs Act requires issuance of show cause notice before confiscation of goods - a show cause notice under Section 124 is required to be issued within six months from the date of seizure but period for issuance of show cause notice may be extended by further period of six months if the Commissioner is satisfied that there are sufficient reasons for the delay - Admittedly, the show cause notice was issued about 31/2 years after the seizure. In view of this, under the provisions of Section 110(2), the respondents are bound to return the goods to the petitioners from whose possession the same were seized

Summary

Issues:
1. Seizure of imported fabric under Customs Act.
2. Failure to issue a show cause notice within the specified period.
3. Request for release of seized goods by the petitioners.
4. Allegations of evasion of Customs duty by the respondents.

Issue 1: Seizure of imported fabric under Customs Act
The Customs Officers raided premises in Mumbai on information about imported polyester knitted fabric. 598 Rolls of fabric were found during the raid, with specific markings. A seizure memo and panchnama were prepared on different dates. The petitioners claimed ownership of the Rolls and requested their release by offering to pay the custom duty. Despite repeated requests to various Customs officials, including the Commissioner and Chairman, the goods were not released. The petitioners sought a Writ of Mandamus to lift the seizure.

Issue 2: Failure to issue a show cause notice within the specified period
Section 124 of the Customs Act mandates the issuance of a show cause notice before confiscation of goods. Section 110(1) allows the seizure of goods if there is a reason to believe they are liable for confiscation. Sub-section (2) states that if no notice is given within six months of seizure, the goods must be returned to the owner. The Commissioner can extend this period by another six months. However, there is no provision for further extension. A show cause notice for the seized Rolls was issued after about 31/2 years, which exceeded the statutory period for notice issuance.

Issue 3: Request for release of seized goods by the petitioners
The petitioners rightfully argued that due to the non-issuance of the notice within the specified period, the goods should be returned to them as per the law. The delayed issuance of the show cause notice, after more than 31/2 years, obligated the respondents to return the goods to the petitioners as per Section 110(2) of the Customs Act.

Issue 4: Allegations of evasion of Customs duty by the respondents
The respondents contended that the petitioners were involved in evading Customs duty by misusing the DEEC Scheme and diverting imported fabrics to the local market instead of fulfilling export obligations. They claimed that a show cause notice had been issued, including the Rolls of fabric, and therefore, the goods were not liable for release. However, the delayed issuance of the notice and the statutory requirements under the Customs Act favored the petitioners' request for the release of the seized goods.

In conclusion, the High Court ruled in favor of the petitioners, making the Rule absolute in terms of their prayer clause (a) for the immediate lifting and vacation of the seizure of the imported fabric rolls.