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2025 (4) TMI 77 - HC - CustomsChallenge to seizure memo u/s 110 read with Section 121 of the Customs Act 1962 on the ground that the same was sale proceeds of smuggled goods - HELD THAT - In the overall facts it is observed that though a notice under Section 121 of the Customs Act 1962 has already been issued to the Petitioner in respect of the amounts seized from the Petitioner the issue would still not be resolved unless and until show cause notice is issued qua the under valuation which is the main grievance of the Customs Department. Therefore let the show cause notice be issued in accordance with law in respect to the alleged under valuation of the Petitioner. The same be issued within the time frame prescribed under the said Act. The notice already issued to the Petitioner under Section 121 of the Customs Act 1962 with respect to the amount seized shall also be taken up along with the said notice for adjudication and a comprehensive order shall be passed by the Department. Considering the amount seized from the Petitioner is alleged to be the customs duty evaded by the Petitioner this Court is of the opinion that bearing in mind the amount of pre-deposit which is usually charged in terms of Section 129E of the Customs Act 1962 the interest of justice would be served by directing the Department to retain Rs.5 lakhs and a refund of Rs. 37 lakhs to the Petitioner subject to the condition that if there is any adjudication by the Customs Department in respect of the alleged under valuation the Petitioner would be bound to pay the duty that may be levied on the Petitioner in respect of the said imports. The said sum of Rs. 5 lakhs shall be maintained by the Department in a FDR on auto-renewal mode so that interest is earned on the same. Conclusion - The Respondent must issue a show cause notice concerning the alleged under-valuation within the prescribed time frame. Petition disposed off.
ISSUES PRESENTED and CONSIDERED
The primary issue considered was whether the seizure of Rs. 42,00,000/- by the Directorate of Revenue Intelligence (DRI) from the Petitioner was justified under the Customs Act, 1962. This involved examining if the seized amount was indeed the sale proceeds of smuggled goods due to alleged under-valuation of imported goods. Additionally, the Court considered whether the Petitioner was entitled to the release of the seized amount, subject to any conditions. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The seizure was conducted under Section 110 read with Section 121 of the Customs Act, 1962, which pertains to the confiscation of goods believed to be smuggled. The Respondent alleged that the seized amount was linked to the sale proceeds of undervalued goods, potentially making it liable for confiscation under Section 111(m) read with Section 2(39) of the Customs Act, 1962. The Petitioner relied on the precedent set in Euroasia Global vs. Commissioner of Customs, which established that a dispute over the valuation of goods does not automatically classify them as smuggled, thus impacting the legitimacy of the seizure. Court's interpretation and reasoning: The Court noted that while a notice under Section 121 had been issued regarding the seized amount, no show cause notice had been issued concerning the alleged under-valuation of goods. This lack of procedural completion was critical in assessing the legality of the seizure. Key evidence and findings: The Respondent's counter affidavit suggested that the Petitioner had imported goods valued at approximately Rs. 4 crores and that there was suspicion of under-valuation leading to customs duty evasion of around Rs. 1 crore. However, no concrete evidence linking the seized cash directly to the alleged under-valuation was presented. Application of law to facts: The Court applied the principles from the Euroasia Global case, emphasizing that the mere suspicion of under-valuation without a formal adjudication process does not justify the seizure of cash as proceeds of smuggled goods. The Court highlighted the need for a comprehensive adjudication process, including the issuance of a show cause notice regarding the under-valuation. Treatment of competing arguments: The Petitioner argued for the release of the seized amount, citing financial constraints and the lack of evidence directly linking the cash to smuggled goods. The Respondent maintained that the seizure was justified based on the suspicion of under-valuation and potential duty evasion. The Court balanced these arguments by considering the procedural deficiencies in the Respondent's actions and the Petitioner's financial situation. Conclusions: The Court concluded that the Respondent's failure to issue a show cause notice regarding the under-valuation undermined the justification for the seizure of the cash. It directed the Respondent to issue the necessary notices and conduct a comprehensive adjudication process. SIGNIFICANT HOLDINGS The Court held that the Respondent must issue a show cause notice concerning the alleged under-valuation within the prescribed time frame. It further directed that the notice under Section 121 regarding the seized amount should be adjudicated alongside the under-valuation issue. The Court ordered the release of Rs. 37 lakhs to the Petitioner, with Rs. 5 lakhs retained by the Department as a pre-deposit, pending adjudication. This decision was subject to the condition that the Petitioner would be liable to pay any duty levied upon adjudication. The retained amount was to be maintained in a fixed deposit with auto-renewal to accrue interest. The Court recorded the Petitioner's undertaking to comply with any future adjudication outcomes, treating it as an undertaking to the Court, while preserving the Petitioner's right to legal remedies.
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