2022 (11) TMI 62 - AT - Customs

Refund of sale proceeds of Gold - Gold disposed off without following the procedure under Section 110(1A) of the Customs Act - whether appellants are entitled to receive the differential value of the seized gold between the value prevailing on the date of melting i.e. 01.08.2018 and value as on the date of which the cheque was given to the Appellant? HELD THAT - Admittedly, against the order-in-original dated 09-03-2018 the appellants had filed the appeals before the Tribunal challenging / questioning the correctness of the entire impugned order passed by Ld. Adjudicating authority ordering for absolute confiscation of gold and imposing penalties on Appellants. During the pendency of the appeal, it appears that the department took steps to dispose of the said disputed Gold, through the SBI Bullion Branch - the Department has to necessarily await the decision of the Tribunal and abide by the direction that has been issued by the Tribunal. In the instant case, during the disputed period the matter was sub judice before the Tribunal, but the Department in a haste manner has disposed of the goods without seeking permission from the appellate court where the matter was sub judice. Thus, the Department has committed a serious mistake by disposing the disputed goods which was a subject matter of an appeal. In the present matter department also not intimated the Appellants regarding the disposal of confiscated gold. The act of the department ex-part cannot be held as proper and legal. In the KAILASH RIBBON FACTORY LTD. VERSUS COMMR. OF CUS. C. EX., NEW DELHI 2002 (3) TMI 57 - HIGH COURT OF DELHI , the Hon ble Delhi High Court held that it is a serious lapse on the part of the department when it auctioned confiscated goods without permission of the Tribunal during pendency of the appeal without even giving notice to the appellants. It was held that the department has to refund the declared value of the goods with interest per annum from the date of auction of the goods. It is very clear that the department has disposed of /sold the goods on the understanding that the first order of the adjudicating authority is the final order. At the same time the department was well aware about the pendency of the appeals before this Tribunal. Therefore the action of the department is clearly in gross violation of principles of natural justice, hence the same cannot be allowed to sustain. The appellants are entitled for the refund of differential value of the gold as claimed by them alongwith interest - Appeal allowed.

Summary

Issues:
Challenge to letters/orders granting refund of sale proceeds of Gold, Violation of Section 110(1A) of the Customs Act, Proper procedure for sale of goods under Section 150 of the Customs Act, Premature auction of confiscated gold, Entitlement to differential value of gold, Disposal of goods during appeal pendency, Legal basis for seeking refund, Compliance with departmental instructions during appeal pendency.

Analysis:

Issue 1: Challenge to letters/orders granting refund of sale proceeds of Gold

The Appellants challenged the letters/orders issued by the revenue granting refund of the sale proceeds of Gold, which led to the present Appeals before the Tribunal. The dispute arose from the confiscation of gold by the DRI and subsequent actions taken by the department regarding the confiscated gold.

Issue 2: Violation of Section 110(1A) of the Customs Act

The Appellants argued that the department violated Section 110(1A) of the Customs Act by disposing of the confiscated gold without following due process. They contended that the procedure prescribed under the Act, including the requirement of issuing notice to the owner, was not adhered to, leading to a violation of the provisions of Section 110(1A) read with Section 150 of the Customs Act.

Issue 3: Proper procedure for sale of goods under Section 150 of the Customs Act

The Appellants emphasized the importance of following the proper procedure for the sale of goods under Section 150 of the Customs Act. They referenced Circular No. 711/4/2006-Cus, which clarified the requirement of issuing notice to the owner of confiscated goods, even if legal remedies have not been exhausted. The failure to follow these procedures was highlighted as a violation by the department.

Issue 4: Premature auction of confiscated gold

The Appellants argued that the auction of the confiscated gold was premature, as they had filed an appeal before the CESTAT challenging the order of confiscation. They contended that the Customs Department should have awaited the outcome of the appeal before taking such actions.

Issue 5: Entitlement to differential value of gold

The central question revolved around whether the Appellants were entitled to receive the differential value of the seized gold between the value at the time of melting and the value when the cheque was handed over to them. This issue required a detailed examination of the circumstances and legal provisions governing such refunds.

Issue 6: Disposal of goods during appeal pendency

The Tribunal noted that the department disposed of the disputed gold during the pendency of the appeal before the Tribunal. This action was deemed inappropriate, especially considering that the Appellants had challenged the impugned order of confiscation, and the department was aware of the pending appeal.

Issue 7: Compliance with departmental instructions during appeal pendency

The Tribunal highlighted the department's failure to comply with existing departmental instructions regarding the disposal of confiscated goods during the pendency of an appeal. Citing relevant circulars and legal precedents, the Tribunal emphasized the importance of following due process and seeking permission before disposing of goods subject to appeal.

In conclusion, the Tribunal held that the department's actions were in violation of principles of natural justice and ordered the refund of the differential value of the gold to the Appellants, along with interest. The appeals were allowed with consequential relief, if any, in accordance with the law.