2021 (3) TMI 742 - HC - Customs

Seeking release of seized consignment - Section 110 (2) read with the proviso thereto - SCN not issued within six month and further extension of six month sought - HELD THAT - In interpretating the same, one has to bear in mind the position that consignments of an assessee are seized by the Department on the basis of apprehensions. The scope and veracity of such apprehensions would have to be crystallized by way of a show cause notice, putting the assessee to notice of all materials available with the department in support of its apprehensions and allegations, for which purpose the Legislature has granted a period of six months. An extension of the period as aforesaid is provided for, conditional upon reasons being recorded and such reasons and being intimated to the assessee, prior to the expiry of the original period of six months. In the case of Swees Gems and Jewellery 2 019 (7) TMI 1433 - RAJASTHAN HIGH COURT , a Division Bench of the Rajasthan High Court has expressed the view that proceedings for extension in terms of the proviso to Section 110(2) of the Act require the recording of reasons and the intimation of such extension to the person from whom the goods were seized before the expiry of the period of seizure and hence, no separate show cause notice was necessary to be issued to the assessee. The proper interpretation of Section 110(2) read with the proviso thereto, would be (i) The Principle Commissioner/Customs of Commissioner is to record reasons in writing as to why the proposed extension by six months is justified/warranted (ii) The reasons as well as intimation of extension should be communicated to the assessee before the expiry of the first six months of the original period as completed under Section 110(2) meaning that the factum of the extension should be known to the assessee before the expiry of the period of six months under Section 110(2). The intimation will suffice as proper opportunity to the assessee in regard to the extension. Thus, any act that would have had to be carried out between the period 20.03.2020 to 29.09.2020 could now be carried out on or before 30.09.2020. In the present case the impugned intimation is dated 30.09.2020, signed on 29.09.2020 by the officer. The date of seizure is 06.03.2020 and the periods of six months (original period of seizure) expires on 05.09.2020. The intimation of extension should have been brought to the knowledge of the petitioner on or before 05.09.2020, accompanied by the reasons recorded for the extension. However, by virtue of the relaxation ordinance, such time stands extended to 30.09.2020. However, and admittedly, the intimation has been received by the petitioner only on 07.10.2020, beyond the date stipulated in the proviso to Section 110(2) and the reasons for extension have also not been supplied. The respondent directed to release the consignment in question within a period of two weeks from today - Petition allowed.

Issues Involved:
1. Validity of the intimation under Section 110(2) of the Customs Act, 1962.
2. Determination of the country of origin of the consignment.
3. Compliance with the principles of natural justice.
4. Timeliness and procedural correctness of the extension notice.
5. Impact of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020.
6. Relevance of precedents cited by the petitioner.

Issue-wise Detailed Analysis:

1. Validity of the Intimation under Section 110(2) of the Customs Act, 1962:
The petitioner sought a certiorarified mandamus to quash the intimation under Section 110(2) of the Customs Act, 1962, and to direct the release of the consignment of dry dates seized on 06.03.2020. The core dispute was the alleged misdeclaration of the country of origin, with the authorities claiming the origin was Pakistan, not Oman. The petitioner argued that there was no misdeclaration or violation of the Act and that the goods should be returned as no show cause notice was issued within six months of the seizure.

2. Determination of the Country of Origin of the Consignment:
The authorities seized the consignment on the grounds that the place of origin was Pakistan, which attracted a higher duty rate of 200% compared to 20% for Oman. The petitioner maintained that the goods originated from Oman. The court noted that the issue of the country of origin was central to the dispute and had directed the designated authority to clarify the origin of the consignments. However, the counter filed by the authorities did not comply with this direction, which the court found unacceptable.

3. Compliance with the Principles of Natural Justice:
The petitioner argued that the extension of time for issuing the show cause notice was not accompanied by proper satisfaction or reasons, and no opportunity was granted to the petitioner before passing the impugned order. The court emphasized that principles of natural justice must be adhered to, even in passing an order under Section 110(2) proviso. The court recorded the respondent's counsel's concession that natural justice principles should be followed.

4. Timeliness and Procedural Correctness of the Extension Notice:
The impugned notice was issued on 30.09.2020 and served on 07.10.2020, beyond the statutory periods. The court concluded that the factum of extension should be known to the assessee before the expiry of the original six-month period. The court found that the extension notice was not timely communicated to the petitioner, and the reasons for the extension were not provided, violating the statutory requirements.

5. Impact of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020:
The authorities relied on the Ordinance 2020 to justify the delayed intimation. The court noted that the ordinance extended the time limit for actions due between 20.03.2020 to 29.09.2020 to 30.09.2020. However, the intimation was received by the petitioner on 07.10.2020, beyond the extended deadline, rendering the extension invalid.

6. Relevance of Precedents Cited by the Petitioner:
The petitioner cited several cases supporting the need for recording satisfaction and providing an opportunity before extending the time for issuing a show cause notice. The court referred to the Rajasthan High Court's decision in Commissioner of Customs (Preventive), Jodhpur Vs. Swees Gems and Jewellery and the Kerala High Court's decision in M.M.Hassan Vs. Superintendent of Customs, Thrissur, which held that reasons for extension must be recorded and communicated to the assessee before the expiry of the original period.

Conclusion:
The court allowed the writ petition, directing the respondent to release the consignment within two weeks, finding that the extension notice was not timely or properly communicated, and the reasons for the extension were not provided as required by law. The MPs were closed with no order as to costs.

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