2022 (6) TMI 1094 - HC - Customs

Seeking release of seized goods - Jurisdiction - violation of principles of natural justice - violation of articles 14 and 19(1)(g) of the Constitution of India and provisions of Customs Act, 1962, notifications thereof, and provisions of Foreign Trade Policy and allow the goods to be further exported - conduct of investigation against the petitioner - seeking defreezing of bank account of the petitioner - Section 110 of the Customs Act - HELD THAT - It is evident 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 - Section 113 of the Customs Act mentions the instances when exportable goods can be confiscated. In the instant case, the seizure memo are not on record. However, the panchnama which has been placed on record along with the counteraffidavit says that officers of the Customs Department had informed that the exportable goods of the petitioner appear to be liable for confiscation and, therefore, they intended to seize the said goods. The expression appear to be liable for confiscation is clearly distinguishable from the expression reason to believe which are briefly analysed. Courts have held that section 110A provides a pragmatic mechanism to facilitate provisional release of seized goods, etc., to the owner, pending adjudication, but at the same time, protecting the interest of the Revenue - Insofar the present case is concerned, the petitioner had already made an application on January 18, 2022 before the respondent No. 1 for provisional release of the goods. At the time of making the application, the exportable goods of the petitioner were yet to be seized. Though initially the goods were detained by respondent No. 1, it is now stated that the goods were subsequently seized on February 9, 2022 by the Hyderabad Customs Commissionerate. Thus, a prima facie case is made out for provisional release of the goods under section 110A of the Customs Act, more particularly, considering the fact that the goods are not included in the prohibited list - provisional release of the exportable goods of the petitioner covered by the seven bills of export dated December 31, 2021, ordered, subject to the petitioner complying with the conditions imposed - let the petitioner furnish a bond for the total value of the export able goods - lhe petitioner shall also furnish bank guarantee to the extent of 20 per cent. of the duty drawbacks relatable to the exportable value of the goods - application disposed off.

Summary

Issues Involved:
1. Release of seized goods.
2. Quashing of summons and halting further investigation.
3. Defreezing of the petitioner’s bank accounts.

Detailed Analysis:

1. Release of Seized Goods:
- Petitioner's Claim: The petitioner, a manufacturer and supplier of handcrafted leather products, sought the release of goods valued at Rs. 8,50,47,384, which were seized by respondent No. 1. The petitioner argued that the seizure was illegal, arbitrary, and violated principles of natural justice and constitutional rights under Articles 14 and 19(1)(g).
- Respondents' Stand: The respondents contended that the goods were detained based on information from the Special Commissioner of State Tax, Ahmedabad, alleging that the goods were mis-declared and grossly overvalued to fraudulently avail export incentives. The investigation revealed that the goods were of inferior quality and overvalued at Rs. 8.36 crores against a departmental valuation of Rs. 1.76 crores.
- Court's Analysis: The court noted that the seizure was conducted by the Hyderabad Customs Commissionerate post-filing of the writ petition. Under Section 110 of the Customs Act, goods can be seized if the proper officer has reason to believe they are liable for confiscation. The court highlighted that the expression "reason to believe" requires a basis in information and not mere suspicion.
- Judgment: The court directed the provisional release of the goods under Section 110A of the Customs Act, subject to the petitioner furnishing a bond for the total value of the goods, a bank guarantee for 20% of the duty drawbacks, and an undertaking not to claim export benefits until adjudication is concluded.

2. Quashing of Summons and Halting Further Investigation:
- Petitioner's Claim: The petitioner sought to quash the summons dated January 17, 2022, and prevent further investigation, arguing that it was initiated without jurisdiction.
- Respondents' Stand: The respondents argued that the investigation was ongoing into the alleged overvaluation of goods to obtain higher duty drawbacks and other export incentives.
- Court's Analysis: The court noted that the investigation was still in progress and that the petitioner had been directed to cooperate with the investigation. The court had previously ordered that no coercive action should be taken against the petitioner’s authorized representative during the investigation.
- Judgment: The court found that the petitioner’s interests were sufficiently protected by the previous order and that setting aside the summons at this stage was not warranted.

3. Defreezing of Bank Accounts:
- Petitioner's Claim: The petitioner requested the defreezing of its bank accounts, which had been attached by the GST Commissionerate, Noida.
- Respondents' Stand: The respondents stated that the bank accounts were attached due to the petitioner’s alleged non-cooperation with the GST investigation.
- Court's Analysis: The court observed that the pleadings regarding the attachment of bank accounts were inadequate and noted that the GST Commissionerate, Noida, which ordered the attachment, was not a party to the proceedings.
- Judgment: The court granted liberty to the petitioner to amend the writ petition or file a separate petition challenging the attachment of bank accounts under Section 83 of the CGST Act.

Conclusion:
The court issued a notice and directed the provisional release of the petitioner’s exportable goods, subject to specific conditions, while denying the request to quash the summons and halt the investigation. The court also allowed the petitioner to challenge the attachment of bank accounts in a separate proceeding. The case was listed for further hearing on March 30, 2022.