2025 (2) TMI 1123 - HC - Customs

Seizure order - condition precedent of reason to believe under Section 110(1) of the Customs Act 1962 - extension of the time limit for issuing a show cause notice under Section 124 of the Customs Act 1962 without granting an opportunity to be heard - violation of principles of natural justice - HELD THAT - On a bare reading of sub-section (1) of Section 110 it is crystal clear that the proper officer must form reason to believe that the goods which he is looking to cease are liable to be confiscated. Chapter XIV of the Act of 1962 contains the provisions for confiscation of improperly imported goods goods attempted to be improperly exported etc. confiscation of conveyance confiscation of goods used for concealing smuggled goods adjudication of confiscations and penalties and adjudication procedure. The learned co-ordinate Bench In case of Assam Supari Traders 2024 (9) TMI 1617 - PATNA HIGH COURT held that what has been assigned as reason for seizure is that there are violation of the aforementioned statutory provisions. In what manner is not forthcoming in the seizure memo. The Court observed Prima-facie none of the cited provisions are attracted in the present case having regard to the factual aspect of the matter read with documents relating to purchase of goods and its transportation and traders are registered and they are fulfilling all the criteria for purchase of dried Areca nuts transportation and sale etc. It has been held that what would constitute the reason to believe are to be recorded and for invoking the powers under Section 110 of the Act of 1962 the Seizing Officer has to record his reason to believe in writing. In Santosh Kumar Murarka 2024 (8) TMI 1161 - PATNA HIGH COURT the learned co-ordinate Bench held that there was disputed issue as to whether driver of the vehicle had produced relevant document at 21 00 Hours on 19.06.2021 or not. It was found that the RUD-05 E-way Bill was generated on 19.06.2021 at 09 26 PM and seizure was at 09 30 PM. Finding some discrepancies the learned co-ordinate Bench was of the view that under Article 226 Court cannot examine disputed issues among the parties. A conjoint reading of sub-section (2) of Section 110 and Clause (a) of Section 124 of the Act of 1962 would make it clear that where no notice in respect of the seized goods under sub-section (1) of Section 110 is given under Clause (a) of Section 124 within six months of the seizure of the goods or within the extended period under the first proviso to sub-section (2) of Section 110 the goods shall be returned to the person from whose possession they were seized. The effect of not giving notice under Clause (a) of Section 124 within six months of the seizure of the goods is stipulated under sub-section (2) of Section 110 and according to this the consequence would be that the goods shall be returned to the person from whose possession they were seized - In this case admittedly the goods have been provisionally released on 16.06.2020 i.e. after a period of six months twice this period has been extended by three months each. It is apparent from a bare reading of the order of the Hon ble Supreme Court in UNION OF INDIA ORS. VERSUS M/S. OM SAI TRADING COMPANY ANR. ETC. 2022 (9) TMI 1656 - SC ORDER that it was passed after granting leave against the Division Bench judgments of this Court and the effect of the order of the Hon ble Supreme Court may be clearly seen. The principle of merger will apply. Despite quashing of the seizure memo it cannot be said that the appellants cannot investigate and proceed in accordance with law under the provisions of the Act of 1962. Conclusion - Seizure memos must contain specific reasons to believe for confiscation mere citation of statutory provisions is insufficient. The seizure memo is quashed; however the show cause notice was upheld - application allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The Court considered several core legal questions in this case:

• Whether the seizure order/seizure memo dated 26.11.2019 satisfied the condition precedent of "reason to believe" under Section 110(1) of the Customs Act, 1962.
• Whether the extension of the time limit for issuing a show cause notice under Section 124 of the Customs Act, 1962, was valid without granting the petitioners an opportunity to be heard.
• Whether the show cause notice issued beyond the initial six-month period and within the extended period was valid.
• Whether the provisional release of goods and the vehicle was justified under Section 110A of the Customs Act, 1962.

ISSUE-WISE DETAILED ANALYSIS

1. "Reason to Believe" under Section 110(1) of the Customs Act, 1962

• Relevant Legal Framework and Precedents: Section 110(1) of the Customs Act, 1962, requires that the proper officer must have "reason to believe" that any goods are liable to confiscation to seize them. The Court referenced prior judgments, including Assam Supari Traders and Krishna Kali Traders, which emphasized the necessity for the Seizing Officer to record reasons to believe in writing.
• Court's Interpretation and Reasoning: The Court found that the seizure memo did not satisfy the requirement of recording reasons to believe, as it merely mentioned violations of certain sections without providing specific reasons or evidence.
• Key Evidence and Findings: The seizure memo listed sections of the Customs Act and other acts but failed to detail the basis for the belief that the goods were liable to confiscation.
• Application of Law to Facts: The Court concluded that the absence of a detailed reason to believe in the seizure memo rendered it non-compliant with Section 110(1).
• Treatment of Competing Arguments: The respondents argued that the mere mention of violated sections sufficed, but the Court disagreed, citing prior judgments requiring specific reasons.
• Conclusions: The seizure memo was quashed due to non-compliance with the requirement to record reasons to believe.

2. Extension of Time for Issuing Show Cause Notice

• Relevant Legal Framework and Precedents: Section 110(2) of the Customs Act allows for an extension of the time limit for issuing a show cause notice, provided reasons are recorded in writing.
• Court's Interpretation and Reasoning: The Court noted that the amended provision did not require a hearing for the person from whom goods were seized, only that reasons be recorded and communicated.
• Key Evidence and Findings: The extension was granted twice, and reasons were recorded as required.
• Application of Law to Facts: The Court found the extensions valid as they complied with the statutory requirement of recording reasons.
• Treatment of Competing Arguments: Petitioners argued for a hearing, but the Court held that the current law does not mandate it.
• Conclusions: The extensions were upheld as valid under the amended provisions of the Act.

3. Validity of Show Cause Notice Issued Beyond Initial Six-Month Period

• Relevant Legal Framework and Precedents: Section 124 of the Customs Act requires a show cause notice before confiscation, and Section 110(2) provides for extensions.
• Court's Interpretation and Reasoning: The Court held that the notice issued within the extended period was valid and did not contravene the Act's provisions.
• Key Evidence and Findings: The notice was issued within the extended period, with proper extensions granted.
• Application of Law to Facts: The Court found that the issuance of the notice complied with the statutory framework.
• Treatment of Competing Arguments: Petitioners' argument that notices could not be issued beyond six months was rejected based on statutory provisions allowing extensions.
• Conclusions: The show cause notice was validly issued within the extended timeframe.

4. Provisional Release of Goods and Vehicle

• Relevant Legal Framework and Precedents: Section 110A of the Customs Act allows for provisional release of seized goods.
• Court's Interpretation and Reasoning: The Court noted that the goods and vehicle had been provisionally released, and this was consistent with the Act's provisions.
• Key Evidence and Findings: The goods and vehicle were released provisionally after the prescribed period.
• Application of Law to Facts: The release was found to be in compliance with the Customs Act.
• Treatment of Competing Arguments: The provisional release was not contested.
• Conclusions: The provisional release was upheld as compliant with the law.

SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The proper officer must form reason to believe that the goods which he is looking to seize are liable to be confiscated."
• Core Principles Established: Seizure memos must contain specific reasons to believe for confiscation; mere citation of statutory provisions is insufficient.
• Final Determinations on Each Issue: The seizure memo was quashed; however, the show cause notice was upheld, allowing for continued investigation and proceedings under the Customs Act.