1988 (6) TMI 47 - HC - Customs

Issues Involved:
1. Withholding of delivery and clearance of P.V.C. Leather Lining.
2. Confiscation of Flock Cotton Lining.
3. Refusal to release non-offending goods (P.V.C. Leather Lining).
4. Application of Sections 118 and 150 of the Customs Act, 1962.

Detailed Analysis:

1. Withholding of Delivery and Clearance of P.V.C. Leather Lining:
The petitioners challenged the Customs Authority's decision to withhold the delivery and clearance of P.V.C. Leather Lining covered by Bill of Lading No. CU-21 dated 13th December, 1986. The petitioners, engaged in the manufacture and export of leather goods, had imported P.V.C. Leather Lining under an Advance General Licence issued by the concerned authority. Upon arrival of the goods, the Customs Authorities refused clearance without drawing samples for chemical tests. Despite requests from the petitioners, the Customs Authorities did not release the goods, leading to the goods being kept in a Bonded Warehouse.

2. Confiscation of Flock Cotton Lining:
The Customs Authorities found that the imported Flock Cotton Lining contained polyester and viscose, which was not covered under the petitioners' licence. Consequently, the Collector of Customs issued an order on 1st May, 1987, confiscating the goods under Sections 111(d) and 111(m) of the Customs Act, 1962. The petitioners were given the option to clear the goods upon payment of a fine of Rs. 3,00,000 and the duty leviable. Additionally, a personal penalty of Rs. 5,000 was imposed under Section 112 of the Customs Act, 1962.

3. Refusal to Release Non-Offending Goods (P.V.C. Leather Lining):
Despite the confiscation order being specific to Flock Cotton Lining, the Customs Authorities refused to release the P.V.C. Leather Lining, citing difficulties in segregating the items and concerns about revenue loss if the petitioners failed to take delivery of the confiscated goods. The petitioners argued that the order of confiscation was confined to Flock Cotton Lining and that the Customs Authorities had no jurisdiction to retain the non-offending goods. The Court noted that the importation of P.V.C. Leather Lining was in order and that the refusal to release these goods was arbitrary and without any authority of law.

4. Application of Sections 118 and 150 of the Customs Act, 1962:
The Customs Authorities contended that under Section 118 of the Customs Act, 1962, where any goods imported in any package are liable to be confiscated, the entire package and any other goods imported in that package are also liable to confiscation. However, the Court found that Section 118 did not apply as the offending and non-offending goods were not imported in a single package but were separately identifiable. The Customs Authorities also referred to Section 150 of the Customs Act, which provides the procedure for the sale of goods not being confiscated goods. The Court clarified that Section 150 was not applicable as no duty was demanded from the petitioners, and the penalty had already been deposited.

Judgment:
The Court concluded that the refusal to release non-offending goods (P.V.C. Leather Lining) was arbitrary and without any authority of law. The order dated 21st December, 1987, was set aside, and the Customs Authorities were directed to release the P.V.C. Leather Lining forthwith upon payment of duty and other charges, irrespective of whether the petitioners took delivery of the confiscated goods upon payment of the redemption fine. The assessment and release of the goods were to be completed within a week from the date of communication of the order.

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