2012 (9) TMI 31 - HC - Customs

Detention of the Imported goods - the goods were withheld for recovery of revenue dues from M/s. Geetha Timbers, a partnership firm - Held that - The petitioner has entered into a High Sea Sales Contract with M/s. Geetha Timbers Pvt. Ltd., against whom there is no demand. Further more, even demand against M/s. Geetha Timbers, a partnership firm has also been stayed. Therefore, legally there is no demand, which could give jurisdiction to second respondent to detain the goods imported by the petitioner under the High Sea Sales Contract. The impugned order in refusing to release the goods is also contemptuous, as demand is contrary to the stay granted by the learned Tribunal, and therefore cannot be sustained in law. As the liability of revenue arrears of other persons cannot be fastened on the petitioner , the order of not releasing the goods in violation of statutory provisions and thus, is hit by Article 14 of the Constitution of India, therefore can not be sustained in law - direction to the respondents to release the goods of the petitioner, subject to his payment of custom duty and other charges - in favour of assessee.

Issues:
1. Detention of imported goods under a High Sea Sales Contract.
2. Refusal of customs clearance by Assistant Commissioner.
3. Dispute over liability for customs duties and charges.
4. Challenge to detention order based on lack of demand against petitioner.
5. Interpretation of High Sea Sales Contract clause regarding expenses.
6. Allegation of arbitrary action by customs authorities.
7. Violation of statutory provisions and constitutional rights.

Analysis:
1. Detention of Imported Goods: The petitioner, engaged in import and local trade of plywood sheets, entered into a High Sea Sales Contract for Medium Density Fiber Board. The Assistant Commissioner of Customs refused to clear the goods, citing revenue dues from a related firm, leading to a legal challenge.

2. Refusal of Customs Clearance: The Assistant Commissioner's refusal to clear the goods was based on the alleged need for clearance from the Arrears Section of the Commissionerate due to revenue recovery issues with a related firm. This decision was contested on the grounds of lack of connection between the petitioner and the firm in question.

3. Dispute Over Liability: The dispute centered around the interpretation of the High Sea Sales Contract clause, where the petitioner undertook to pay expenses including customs duties and clearing charges. The customs authorities argued that this clause extended to the liabilities of the related firm, leading to detention of goods.

4. Challenge Based on Lack of Demand: The petitioner challenged the detention order, asserting that there was no pending demand against either the petitioner or the company with which the High Sea Sales Contract was made. The court found that there was no legal basis for detaining the goods in such circumstances.

5. Interpretation of Contract Clause: The court analyzed the High Sea Sales Contract clause and concluded that the petitioner's agreement to pay expenses did not imply liability for the related firm's dues. The authorities' interpretation was deemed incorrect, supporting the petitioner's position.

6. Allegations of Arbitrary Action: The petitioner alleged arbitrary action by the customs authorities, contending that fastening the revenue arrears of others onto the petitioner was not permissible under the Customs Act. The court agreed, finding the detention order arbitrary and in violation of statutory provisions.

7. Violation of Statutory Provisions: The court held that the detention order was not sustainable in law as it contravened statutory provisions and the constitutional right to equality under Article 14. The authorities were directed to release the goods upon payment of assessed duties and charges by the petitioner.

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