2020 (12) TMI 138 - HC - Customs

Legality and validity of such seizure of goods - Provisional release of goods - allegation is that impugned seizure memo does not comply with the requirements of section 110 of the Customs Act, 1962 - petitioner is also prejudiced as it is incurring heavy detention and demurrage charges every day since the seizure - HELD THAT - What is relevant here is the parent or main provision of sub-section (1). Sub-section (1) makes it abundantly clear that if the proper officer has reason to believe that any goods are liable to confiscation under the Customs Act, he may seize such goods. Thus, it is the proper officer who must have reason to believe that the goods in question are liable to confiscation under the Customs Act. Once he forms such a belief then he i.e., the proper officer who has formed the belief may seize such goods - Therefore, formation of reason to believe by the proper officer that the goods in question are liable to confiscation under the Customs Act is the condition precedent for invoking the jurisdiction under section 110 to seize such goods. Having reason to believe by the proper officer that any goods are liable to confiscation is the sine qua non for exercise of the power of seizure. The expression 'reason to believe' is an expression of considerable import and in the context of the Customs Act, confers jurisdiction upon the proper officer to seize goods. It cannot be that seizure is made by one officer and the reasons to believe are recorded by another officer. Secondly, the proper officer who made the seizure must have reasons to believe that the seized goods are liable to confiscation. Seizure of goods is not an end in itself. It is a discretionary power vested upon the proper officer who has reasons to believe that the goods to be seized are liable to confiscation. No such reasons to believe is discernible in the panchnama, not to speak of in the seizure memo. It is apparent that on the date of seizure, the bills of entry were in the name of the petitioner and the petitioner had not (and still has not) claimed any benefit under the Notification No.25/99Customs dated 28.02.1999. It may be mentioned that office of the Commissioner of Customs had informed DRI authorities that the amendments were allowed because NOC was submitted by both the parties i.e., buyer and seller of the high seas sale. It was also mentioned that amendment was allowed as there was no change in the original bills of lading and IGM. At this stage, we may refer to Standing Order No.10 of 2017 dated 03.05.2017 issued by the Commissioner of Customs, Nhava Sheva-IV which has been placed on record by respondent No.3 as Exhibit-E to his affidavit. This Standing Order prescribes the essential documents necessary for registration of high seas sale contract / transaction - there could not have been any reason to believe that the said imported goods had contravened any of the provisions of section 111 dealing with confiscation and hence liable to seizure under section 110. That apart, all the developments mentioned above are post seizure developments which could have no bearing on the validity or invalidity of the impugned seizure. It is evident from the seizure memo as well as the materials as on that date i.e., 09.01.2020 that there could not have been any reason to believe by the proper officer that the goods seized were liable to confiscation. Therefore, the very action of seizure is devoid of jurisdiction and hence illegal. If the very act of seizure is illegal, all consequential actions would have no legal sanction - Also, subsequent cancellation of the amendments to the two bills of entry would make no material difference at all to the illegality of the seizure. Petition allowed.

Summary

Issues Involved:
1. Legality and validity of the seizure memo dated 09.01.2020.
2. Compliance with Section 110 of the Customs Act, 1962.
3. Validity of amendments to the bills of entry.
4. Jurisdiction and procedural fairness in the cancellation of amendments to the bills of entry.

Detailed Analysis:

1. Legality and Validity of the Seizure Memo:
The petitioner challenged the seizure memo dated 09.01.2020, issued by the Directorate of Revenue Intelligence (DRI), claiming it did not comply with Section 110 of the Customs Act, 1962. The petitioner argued that the seizure memo did not record any "reason to believe" that the goods were liable to confiscation, a mandatory requirement under Section 110. The court examined the seizure memo and the accompanying panchnama and found no mention of any reasons to believe that the goods were liable to confiscation. The court held that the seizure was devoid of jurisdiction and hence illegal.

2. Compliance with Section 110 of the Customs Act, 1962:
Section 110(1) of the Customs Act requires that the proper officer must have "reason to believe" that the goods are liable to confiscation before seizing them. The court emphasized that this belief must be held in good faith and based on reasonable grounds. The court referred to various precedents, including Calcutta Discount Company Limited v. Income Tax Officer and Tata Chemicals Limited v. Commissioner of Customs, to underscore that the belief must be of an honest and reasonable person based upon reasonable grounds. The court concluded that the seizure memo did not meet this requirement, rendering the seizure illegal.

3. Validity of Amendments to the Bills of Entry:
The petitioner and respondent No.4 had initially entered into an oral agreement for the high seas sale of the imported goods. Subsequently, the bills of entry were amended to reflect the petitioner as the importer. The court noted that a high seas sale must be in writing and duly notarized, which was not the case here. Despite this, the customs authorities had allowed the amendments based on NOCs from both parties. The court found that as of the date of seizure, the bills of entry were in the petitioner's name, and the petitioner had not claimed any benefit under Notification No.25/99-Customs. Therefore, there could not have been any reason to believe that the goods were liable to confiscation.

4. Jurisdiction and Procedural Fairness in the Cancellation of Amendments:
The amendments to the bills of entry were later canceled by the customs authorities based on directions from DRI, Ahmedabad, without giving notice or an opportunity to the petitioner. The court held that such cancellation resulted in adverse civil consequences and could not be done unilaterally without following due process. The cancellation was deemed a nullity and without legal sanctity. The court referenced the Division Bench decision in WASP Pump Private Limited v. Union of India, which held that an order that is a nullity can be challenged anywhere and everywhere.

Conclusion:
The court set aside and quashed the seizure memo dated 09.01.2020, declaring it illegal and devoid of jurisdiction. Consequently, the seized goods were ordered to be released to the petitioner upon payment of requisite duty and completion of necessary formalities. The writ petition was allowed to this extent, with no order as to costs.