1999 (8) TMI 92 - HC - Customs

Summary

Issues Involved:
1. Legality of search and seizure conducted on 8-11-1986, 9-11-1986, and 10-11-1986.
2. Validity of summons issued on 12-11-1986 under Section 108 of the Customs Act, 1962.
3. Compliance with the conditions of the Duty Exemption Scheme by the petitioner.
4. Justification for the actions taken by the D.R.I. authorities based on the information received.
5. The right to cross-examine witnesses in the adjudication proceedings.
6. The impact of interim orders on the adjudication proceedings and the final judgment.

Detailed Analysis:

1. Legality of Search and Seizure:
The learned trial Judge allowed the writ petition challenging the legality of the search and seizure conducted on 8-11-1986, 9-11-1986, and 10-11-1986. The court found that the petitioner had fulfilled the entire export obligation under the licence and that the goods were lawfully imported. The trial Judge held that there was no basis to believe that the importation of the goods was illegal or in violation of law, and thus, the condition precedent for holding the belief for making the search and seizure was absent. Consequently, the search and seizure were quashed and set aside.

2. Validity of Summons Issued:
The summons issued on 12-11-1986 under Section 108 of the Customs Act, 1962, was also challenged. The trial Judge's decision to quash the search and seizure extended to all proceedings, orders, and notices, including the show-cause notice dated 21-11-1986, which were also quashed and set aside.

3. Compliance with Duty Exemption Scheme:
The petitioner had obtained an advance licence under the Duty Exemption Scheme for the import of G.P. Sheets/Coils. The conditions of the licence required the petitioner to export goods of a specified value and quantity. The petitioner exported materials and earned substantial amounts of U.S. dollars, which were deposited with the Reserve Bank of India. The trial Judge found that the petitioner complied with the terms and conditions of the licence.

4. Justification for Actions by D.R.I. Authorities:
The D.R.I. authorities justified their actions based on secret information that the petitioner was wrongfully selling duty-free imported G.P. Sheets within the country. They maintained a watch on the goods and conducted search and seizure based on this information. The trial Judge, however, found that the information did not constitute "reasonable grounds to believe" that the goods were liable to confiscation. The appellate court disagreed with the trial Judge, stating that the suspicion arising from the information hardened into reasonable belief, justifying the search and seizure.

5. Right to Cross-Examine Witnesses:
The right to cross-examine witnesses in the adjudication proceedings was a significant issue. The trial Judge took serious exception to the refusal of the adjudicating officer to allow cross-examination of witnesses whose statements were used against the petitioner. The appellate court noted that the Division Bench had directed that the respondents could request the adjudicating authority to produce witnesses for cross-examination, and if such a request was made, the adjudicating officer had to consider it and pass suitable orders.

6. Impact of Interim Orders:
The interim orders made by the trial court and the Division Bench allowed the seized goods to be sold in auction, with the sale proceeds invested in fixed deposits. The appellate court noted that these interim orders had rendered the proceedings infructuous to some extent, as no order of release of the goods could now be passed. The appellate court held that the adjudication proceedings should continue, and any illegality in the final order could be challenged before an appropriate forum.

Conclusion:
The appellate court set aside the judgment and orders passed by the learned trial Judge, dismissing the writ petition without any order as to costs. The court held that the validity of the search and seizure had become academic due to the interim orders and subsequent events. The adjudication proceedings were directed to continue in accordance with law, and any illegality in the final order could be questioned before an appropriate forum.