2023 (9) TMI 1298 - HC - Customs

Seeking release of seized goods - goods purchased by the petitioner from an importer - privity of contract - banned goods or not - Allegation of undervaluation on the basis that other importers have imported the same goods at higher rate - HELD THAT - As per definition under Section 2(25) of the Act, the term imported goods clearly changes the nature, once the same are cleared for home consumption. Admittedly, in this case, the goods were duly cleared in favour of the importer and were subsequently sold to the present petitioner for home consumption. Coupled with the above, the authorities have not challenged the sale made by the said importer in favour of the present petitioner. Therefore, the respondents were not within their rights to seize/ confiscate the said goods. Principle of Natural Justice - HELD THAT - No notice was served upon the petitioner before such an action was taken - It is not a case where the petitioner was dealing in some illegal or banned goods, which had to be confiscated - where the goods are not banned or against any violation of any other law, a business transaction cannot be ruined at the whims and fancies of the respondents. Merely because one of the importer was successful in clicking a deal for a lesser amount of price, cannot be a reason for such a bizarre action. Allegation of undervaluation on the basis that other importers have imported the same goods at higher rate - HELD THAT - There is nothing on record to show that the price at which the said importer had imported the said goods was wrong and it may be a case that the other importers are purposefully importing the said goods on a higher price for higher profits. Fixation of price of the goods is absolutely relative and based on multiple factors, which two businessmen take a call before entering into an agreement. It is not a case where diamond worth Rs. 100 Crores has been imported at Rs. 100/- to avoid tax. However, in case it is found to be a fake diamond then probably Rs. 100/- could also be a higher price. The seizure memo dated 14.02.2023 (Annexure P-1) is quashed and the respondents are directed to release the goods seized vide seizure memo dated 14.02.2023, forthwith - Petition allowed.

Summary

Issues involved:
The issues involved in the judgment are the legality of the seizure of goods under the Customs Act, 1962 and the definition of "imported goods" under Section 2(25) of the Act.

Seizure of Goods:
The petitioner filed a writ petition seeking to quash the seizure memo dated 14.02.2023 and to release the goods seized from an importer. The petitioner argued that there was no privity of contract between him and the authorities and that the goods did not fall under the category of banned goods as per the Customs Act, 1962.

Legal Interpretation - Imported Goods:
The petitioner contended that once goods are cleared for home consumption, they lose the status of being imported goods and cannot be confiscated. The authorities had seized the goods due to alleged under-valuation by the importer, who had already deposited excess tax. The petitioner argued that even if the importer was liable for tax, it had been duly cleared.

Court's Analysis:
The court examined the provisions of the Customs Act, particularly Section 110 and Section 111(m), which deal with the seizure and confiscation of goods. The court noted that the term "imported goods" changes once goods are cleared for home consumption, as defined in Section 2(25) of the Act.

Principles of Natural Justice:
The court found that no notice was served on the petitioner before the goods were seized, violating principles of natural justice. It was observed that the authorities were aware of the importer and the subsequent sale to the petitioner for home consumption. The court emphasized that in the absence of banned goods or legal violations, a business transaction should not be disrupted arbitrarily.

Decision and Direction:
The court allowed the petition, quashing the seizure memo and directing the release of the seized goods. However, it specified that the findings in the order should not impact the decision on the show cause notice issued to the importer by the department.

Separate Judgment:
The judgment was delivered by Hon'ble Mr. Justice Alok Jain.