2024 (4) TMI 49 - HC - Customs

Recovery under demand notices based on alert issued 5 years ago - Bonds for Warehoused goods has already expired - For almost ten (10) years from the date of issuance of the said notice, no concrete measures were adopted by the respondents - HELD THAT - Having noted the statutory scheme in regard to the recovery of the amounts in respect of goods warehoused and as relevant in the present context, we may observe that it is not in dispute that there were four bills of entries of the year 2005 and 2010 in respect of which goods were partially cleared and some / balance goods part of the said bills of entry had remained to be cleared and were warehoused. The case of the petitioner is that for certain reasons the goods could not be cleared and removed from the warehouse. In such circumstances, the petitioner has contended that although the demand notice dated 8 March 2013 was issued to the petitioner, the same was not acted upon for a substantial period of time, and what was sought to be done by the respondents was to insert a alert after about five years that is on 23 March 2018, which was certainly not a step to execute the demand notice issued under Section 72(1). Having not executed the demand notice dated 8 August 2013 after almost 10 years, a fresh notice under Section 72(2) of the Customs Act, being the impugned notice, came to be issued on 11 December 2023. From a bare perusal of the notice, it is clearly seen that after issuance of the demand notice dated 8 August 2013, which were four demand notices, in respect of four bills of entries, only in respect of one bill of entry, the impugned notice under Section 72(2) has been issued without any action being taken to recover any duty as subject matter of the earlier demand notices. There is no explanation whatsoever coming forth, in regard to the inaction on the part of the Customs officers in enforcing the earlier notice during the period 2013 to 2023, for any recovery that is under the demand notice dated 8 August 2013 - Once such a position was taken by the petitioner and made clear to the department, it was clearly open to the respondents to proceed in accordance with law and deal with the goods, although, such course of action was immediately and always available with the customs officers immediately after the demand notices dated 8 August 2013 was issued to the petitioner under Section 72(1) of the Customs Act, on which the officers did nothing. It is thus difficult to accept that in such situation the law would permit the respondents to issue a fresh notice, when the earlier demand notice dated 8 August 2013 itself was not acted upon and/or had stood lapsed, as no action was taken for a period of 10 years. Such a course of action would also not to be permissible from the reading of the provisions of Section 72(2) and more particularly from a cumulative reading of Sections 59, 61 and 72 of the Customs Act. Thus, once the recovery under the demand notices dated 8 August 2013 issued under Section 72(1)(b) itself, was rendered redundant, a recovery under the impugned notice dated 11 December 2023 would not have been foisted upon the petitioner. Consequently, any attempt on the part of the respondents to recover such amounts by the impugned Alert notice dated 23 August 2018, and which was reiterated in the impugned communication dated 24 January 2018 would also be required to be held to be illegal and invalid. Petition allowed.

Issues Involved:
1. Legality of the demand notices dated 8 August 2013 and 11 December 2023.
2. Validity of the bond under Section 59 of the Customs Act.
3. Justification for the Alert issued on 23 March 2018.
4. Applicability of Section 142 for recovery of sums due to the government.

Summary:
1. Legality of the Demand Notices:
The petitioner challenged the recovery initiated by the respondents based on a demand notice dated 8 August 2013 issued under Section 72(1) of the Customs Act, 1962. The Court noted that the demand notice was not acted upon for almost ten years, rendering it unenforceable. The issuance of a fresh notice under Section 72(2) on 11 December 2023 was deemed impermissible as the earlier notice had lapsed. The Court observed, "a fresh notice under Section 72(2) could not have been issued, when the earlier demand notice dated 8 August 2013 itself was not acted upon and/or was given up."

2. Validity of the Bond:
The petitioner argued that the bond furnished under Section 59 of the Customs Act had expired and was thus unenforceable. The Court agreed, stating, "the bond had clearly become unenforceable not only by considering the terms of the bond but also for the future period, as the law would make it unenforceable." The Court further noted that any action to recover amounts under the bond would be barred by the Limitation Act, 1963, which prescribes a three-year limitation period.

3. Justification for the Alert:
The respondents issued an Alert on 23 March 2018, which the petitioner contended was unjustified. The Court found that the Alert was not a step to execute the demand notice and was issued after an unreasonable delay. The Court held, "any attempt on the part of the respondents to recover such amounts by the impugned Alert notice dated 23 August 2018, and which was reiterated in the impugned communication dated 24 January 2018 would also be required to be held to be illegal and invalid."

4. Applicability of Section 142:
The respondents justified the Alert under Section 142 of the Customs Act, which provides for the recovery of sums due to the government. The Court rejected this justification, stating, "even under the provisions of Section 142 which is a provision for recovery of sums due to Government, in the facts of the present case, the impugned Alert could not have been issued and/or foisted on the petitioner."

Conclusion:
The petition was allowed, and the demand notices, Alert, and related communications were quashed. The Court ruled in favor of the petitioner, making the rule absolute with no costs.

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