2022 (3) TMI 952 - AT - Customs

Provisional release of seized goods - opportunity of hearing not provided to the appellants - violation of the principle of natural justice - reliance placed on CBIC Circular No 35/2017 dated 16.08.2017 for rejecting the request made by the appellants - HELD THAT - From the reading of the communication dated 12.11.2021 and the referred circular, it is quite evident that ADG, has even while considering the request made by the appellant for the provisional release has concluded that the goods need to be absolutely confiscated, as the same are in his view covered by the definition of prohibited goods as per Section 2(33) of the Customs Act, 1962. Arriving at such a finding even without hearing the appellant is not only flagrant violation of the principle of natural justice but also suffers from the vice of reasonableness to be exercised by the administrative/ adjudicating authorities while exercising the discretion vested in them. In both the decisions which are backbone of the Board Circular, MALABAR DIAMOND GALLERY PVT. LTD. VERSUS THE ADDITIONAL DIRECTOR GENERAL DIRECTORATE OF REVENUE INTELLIGENCE, THE COMMISSIONER OF CUSTOMS (IMPORT) , THE COMMISSIONER OF CUSTOMS (AIR) 2016 (8) TMI 530 - MADRAS HIGH COURT and MALA PETROCHEMICALS POLYMERS VERSUS THE ADDITIONAL DIRECTOR GENERAL, DIRECTORATE OF REVENUE INTELLIGENCE ANR. 2017 (5) TMI 1234 - DELHI HIGH COURT , it is found that both Hon ble Madras High Court and Hon ble Delhi High Court have cautioned that the discretion vested in terms of the Section 110A needs to be tested against the test of relevance and reasonableness. In the communication dated 12.11.2021, in para 2, ADG observes that some of the seized goods in the same proceedings for the same violations have been disposed of by the jurisdictional officers even prior to adjudication, and in para 3.4 observes that these goods would pose threat to safety and security of the power industry within the country. He also ignores the fact that Show Cause Notice dated 20.08.2019, which proposes the confiscation of these good under Section 111(d), (l) (m) of Customs Act, 1962, also demand the differential duty in respect of the past clearance of 213 consignments of the same goods. The order/ communication dated 12.11.2021 of the Additional Director General (Adjudication) DRI Mumbai cannot be sustained and the same is set aside. Matter remanded back to the original authority for consideration of the request for provisional release considering the test reports, policy provisions and other submissions made by the appellant - Appeal allowed by way of remand.

Summary

Issues Involved:
1. Provisional release of seized goods.
2. Violation of principles of natural justice.
3. Compliance with statutory conditions for import.
4. Adherence to CBIC Circular No. 35/2017.
5. Discretionary powers under Section 110A of the Customs Act, 1962.
6. Test of reasonableness and relevance in discretionary decisions.

Detailed Analysis:

1. Provisional Release of Seized Goods:
The appeal challenges the communication denying the provisional release of seized goods. The Additional Director General (Adjudication) DRI Mumbai refused the request based on statutory conditions and guidelines, citing the import of CRGO steel sheets from suppliers without BIS licenses, making them non-compliant with the Steel and Steel Products (Quality Control) Orders of 2012 and 2014. The goods were deemed "prohibited" under Section 2(33) of the Customs Act, 1962, thus not eligible for provisional release as per CBIC Circular No. 35/2017.

2. Violation of Principles of Natural Justice:
The tribunal noted that the ADG did not provide an opportunity for the appellant to be heard before making the decision, which constitutes a violation of the principles of natural justice. The lack of a hearing before arriving at a conclusion on the provisional release is a significant procedural lapse.

3. Compliance with Statutory Conditions for Import:
The ADG's decision highlighted that the imported goods did not meet the statutory compliance requirements as they were imported from suppliers without BIS licenses. This non-compliance with the Steel Ministry's Orders rendered the goods "prohibited" under the Customs Act, 1962, and thus not eligible for provisional release.

4. Adherence to CBIC Circular No. 35/2017:
The ADG relied on CBIC Circular No. 35/2017, which outlines that provisional release should not be allowed for goods prohibited under the Customs Act or any other law, goods not fulfilling statutory compliance, and goods posing a threat to safety. The tribunal noted that the ADG concluded the goods needed to be absolutely confiscated without a hearing, which was against the principles of fairness and reasonableness.

5. Discretionary Powers under Section 110A of the Customs Act, 1962:
The tribunal emphasized that the exercise of discretion under Section 110A should be judicious and based on relevant considerations. The ADG's decision to deny provisional release without hearing the appellant and without proper consideration of the facts was deemed unreasonable and arbitrary.

6. Test of Reasonableness and Relevance in Discretionary Decisions:
The tribunal referred to judgments from the Hon'ble Madras High Court and Hon'ble Delhi High Court, which stress that discretion must be exercised with relevance and reasonableness. The ADG's decision did not meet these criteria, as it was made without proper consideration of the appellant's submissions and test reports.

Conclusion:
The tribunal set aside the ADG's communication dated 12.11.2021 and remanded the matter back to the original authority. The authority is directed to reconsider the request for provisional release, taking into account the test reports, policy provisions, and other submissions by the appellant. The authority must provide a reasonable opportunity for the appellant to present their case and issue a speaking order within a month from the receipt of this order. The appeal is allowed, and the order was pronounced in the open court.