2019 (5) TMI 1252 - HC - Customs

Smuggling - Gold - Illegal importation into India - Baggage rules - release of seized Gold - service of SCN not made to petitioner - seized Gold disposed off without issuing SCN to petitioner - HELD THAT - The record reveals that the seizure of the gold was made on 5th January, 2015. An SCN had to be served within a period of six months thereafter in terms of Section 110 (2) read with Section 124 (1) (a) of the Act. This is a mandatory requirement as has been explained in several decisions of this Court including Iqbal Hussain v. Union of India 2017 (3) TMI 704 - DELHI HIGH COURT . It was further explained in Chaganlal Gainmull v. Collector of Central Excise 1989 (11) TMI 59 - SUPREME COURT that if the SCN was not issued within six months from the date of seizure the consequence would be that the person from whom the gold was seized would become entitled to its return - Even the adjudication order in the present case would be illegal as the Commissioner passed the same ex parte without the SCN having been actually served upon the present Petitioner at all in the present case. The second illegality committed is the disposal of the seized gold without notice having been issued to the Petitioner - There is no explanation offered by the Respondents as to why they were constrained to dispose of the seized gold, when it was neither perishable nor hazardous. Also, there is no answer why it had to be disposed of without notice being issued to the person from whom it was seized. This is irrespective of whether the SCN was served or not - In the present case with the seized material not being perishable, being gold bars, there was no reason for the Respondents to have hurriedly disposed it off and that too without notice to the Petitioner. When it was plain that even the SCN was not served upon the Petitioner, there was no reason to proceed with disposal of the seized gold without notice. As far as the return of the seized gold is concerned, the Court has been presented with a fait accompli, with the Respondents already having hurriedly disposed of the said gold. Mr. Satish Aggarwala on instructions states that the proceeds collected during the auction were equal to the value of the gold being an amount of ₹ 93,34,783/- - Court accordingly directs that the Respondents will refund to the Petitioner the sum of ₹ 93,34,783/- (or the precise amount recovered by the Respondents by auction/sale proceedings) not later than 30th June 2019 failing which the Respondents will pay simple interest at 6% p.a. on the said sum for the period of delay. Petition allowed.

Summary

Issues Involved:
1. Legality of the seizure of gold by Customs Authority.
2. Issuance and service of Show Cause Notice (SCN).
3. Adjudication order and its validity.
4. Disposal of seized gold without notice.

Detailed Analysis:

Legality of the Seizure of Gold:
The Petitioner, a Kenyan National, brought gold weighing about 3732.48 gm to India, which was seized by the Customs Authority on 5th January 2015 at the IGI International Airport, New Delhi. The gold was seized under Section 110 of the Customs Act, 1962, on the grounds that it was attempted to be imported into India illegally and cleared without payment of customs duty, making it liable for confiscation under Sections 118 and 119 of the Act. The Petitioner maintained that the gold was purchased in Kenya by selling a car and taking loans from friends and relatives.

Issuance and Service of Show Cause Notice (SCN):
The Petitioner argued that no SCN was issued, which led her to file the present petition. The Customs Authority contended that an SCN dated 30th June 2015 was issued and forwarded through diplomatic channels to the Ministry of Home Affairs and the High Commission of India in Kenya. However, it was revealed that the Petitioner no longer resided at the provided address, and the SCN was not served. The Court found that the SCN was not served within the mandatory period of six months from the date of seizure, as required under Section 110 (2) read with Section 124 (1) (a) of the Act. This failure rendered the seizure and subsequent proceedings illegal.

Adjudication Order and Its Validity:
An adjudication order was passed on 15th January 2019 by the Commissioner of Customs, confiscating the seized gold and imposing a penalty of ?18 lacs on the Petitioner under Sections 112 and 114 AA of the Act. The Court found that the adjudication order was passed ex parte without the SCN being served on the Petitioner, violating the principles of natural justice. The adjudication order was set aside due to this procedural lapse.

Disposal of Seized Gold Without Notice:
The seized gold was disposed of without issuing notice to the Petitioner, which is a violation of the procedure specified under Section 110 (1) (a) of the Act. The Court noted that the gold was neither perishable nor hazardous, and there was no justification for its hurried disposal without notice. The Central Board of Excise and Customs (CBEC) circular dated 14th February 2006 mandates issuing notice to the owner before disposing of seized goods. The Respondents failed to follow this procedure, rendering the disposal illegal.

Conclusion:
The Court set aside the adjudication order dated 15th January 2019 and directed the Respondents to refund the proceeds from the auction of the gold, amounting to ?93,34,783/-, to the Petitioner by 30th June 2019. Failing this, the Respondents would be liable to pay simple interest at 6% per annum on the said sum for the period of delay. The petition was allowed, and the Petitioner was granted the liberty to seek other remedies for any further grievances in accordance with the law.