2021 (2) TMI 920 - HC - Customs

Seeking provisional release of goods - stand of the petitioner is that they have already been mutilated and that therefore, their import is free - HELD THAT - When the petitioner is entitled to call upon the customs authority to mutilate the goods and clear them thereafter and when the petitioner has not invoked his right under Section 110 of the Customs Act, 1962, the third respondent could not have passed the impugned order. In this view of the matter, the impugned order is quashed. The respondents are directed to permit the petitioner to have the goods mutilated at the cost of the petitioner, but under the supervision of the third respondent. As agreed by the petitioner, the goods of mutilation will be included in FOB. The entire exercise will be concluded within a period of three weeks from the date of receipt of a copy of this order. The petitioner has to comply with the other formalities and the respondents will also facilitate the implementation of this order. Petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Provisional release of imported consignment.
2. Interpretation of Section 24 of the Customs Act, 1962.
3. Cost of mutilation and clearance of goods.
4. Judicial precedents on denaturing or mutilation of goods.

Analysis:
1. The petitioner imported a consignment which the respondent claimed contained usable paper, while the petitioner argued that the goods were mutilated and therefore duty-free. The respondent ordered provisional release of the goods, which was challenged in the writ petition.

2. Section 24 of the Customs Act, 1962 allows denaturing or mutilation of goods to render them unfit for certain purposes, with applicable duty rates. Despite the absence of specific rules by the Central Government, courts have consistently applied this provision in favor of the assessee, allowing conversion of goods into waste and scrap for clearance.

3. The standing counsel argued that the cost of mutilation should be borne by the petitioner and included in the FOB. The petitioner agreed to bear the cost, leading to the conclusion that the goods would be mutilated at the petitioner's expense but under the supervision of the third respondent, with the cost included in FOB.

4. Judicial precedents, including decisions by tribunals and High Courts, support the view that the customs authority can mutilate goods if deemed necessary, and the petitioner can request such action. The impugned order was quashed as the petitioner had not invoked their right under Section 110 of the Customs Act, and the respondents were directed to permit mutilation of goods at the petitioner's cost within three weeks, with compliance of formalities facilitated by the respondents. The writ petition was allowed without costs.