2020 (1) TMI 411 - HC - Customs

Jurisdiction - power of DRI to draw samples - Clearance of goods under provisional assessment - Section 18 of the Customs Act, 1962 - basic arguments of the petitioner is that the Directorate of Revenue Intelligence, has in fact no jurisdiction to draw the samples, after clearance of goods in view of the mandate of Section 144 of the Customs Act, 1962. HELD THAT - It has not been disputed between the parties that admittedly the samples can only be and were drawn under Section 144 of the Act. It is further evident that samples can be drawn only before the imported goods are cleared/removed from the customs area. In the present case, at the time of clearance of imported goods, provisional assessment was framed as the declared description of imported goods was in doubt. The Proper Officer in terms of the provisions of Section 144 of the Customs Act, 1962, drew samples, while permitting the clearance of goods, after provisional assessment under Section 18 of the Customs Act, 1962, against a bond supported with a bank guarantee. Subsequently, upon receipt of the test report(s) from official laboratories vindicating the description of goods as disclosed by the petitioner in his Bill of Entry, the Proper Officer framed final assessment in terms of the declared description and valuation of goods and the customs duty already paid by the petitioner. Consequently, the Proper Officer cancelled the bond and returned the bank guarantee furnished earlier for securing the additional demand, if any. In the present case, after the release of imported goods approximately by April 2016 from the custom area, there was no power with the authorities, much less under Section 144 of the Act, to draw samples at a subsequent stage i.e. on 11.08.2016 from the factory premises. The Panchnama effecting the seizure of imported stock of the petitioner(s) are quashed - Respondent No.2/DRI is directed to release the seized material of the petitioners and also return the resumed documents of the petitioners.

Summary

Issues:
1. Jurisdiction of Directorate of Revenue Intelligence to draw samples after clearance of goods under Section 144 of the Customs Act, 1962.
2. Legality of seizing imported stock and documents by the authorities post-clearance of goods.
3. Interpretation of Section 144 of the Customs Act, 1962 regarding the power to draw samples.
4. Compliance with procedural requirements for provisional and final assessment of customs duty.

Issue 1: Jurisdiction of Directorate of Revenue Intelligence (DRI) to draw samples post-clearance under Section 144 of the Customs Act, 1962.
The petitioner contended that the DRI had no authority to draw samples after goods were cleared as per Section 144 of the Act. The respondents argued that they had the power to draw samples post-clearance based on notifications authorizing such actions. The court accepted the petitioner's legal plea, emphasizing that samples can only be drawn under Section 144 before goods are cleared from the customs area.

Issue 2: Legality of seizing imported stock and documents post-clearance.
The petitioner's goods were seized by authorities on 11.08.2016, alleging misdeclaration and short payment of duty. The petitioner argued that the seizure was unwarranted as final assessment had been completed based on test reports vindicating the goods' description. The court found the seizure without jurisdiction and quashed the panchnamas, directing the release of seized material and documents to the petitioners.

Issue 3: Interpretation of Section 144 of the Customs Act, 1962.
The court referred to Section 144, which allows sampling for examination or testing before goods are cleared. It clarified that once goods are assessed and cleared, no fresh samples can be drawn. The court held that drawing samples post-clearance, as done by the authorities, was unauthorized under Section 144.

Issue 4: Compliance with procedural requirements for provisional and final assessment of customs duty.
The court explained the procedural requirements under the Customs Act, where provisional assessment is followed by final assessment based on test reports. In this case, the authorities had already completed final assessment and returned the bank guarantee. The court found the actions of the respondents, including seizing goods post-assessment, to be without jurisdiction and directed the immediate release of the seized material and documents to the petitioners.

In conclusion, the court allowed both writ petitions, quashing the seizure of imported stock and directing the release of the material and documents to the petitioners. Failure to comply with the court's directions within the stipulated time would result in contempt proceedings and costs. No costs were awarded in the judgment.