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2013 (1) TMI 10 - HC - CustomsRight of appropriation of the gold and gold jewellery recovered and confiscated by the Customs Department - 45 kg. of gold was loaned by the MMTC to Mr. S S Kanda (NRI) who failed to export ornaments of about 19 kgs - S.S. Kanda in breach of the conditions imposed by the MMTC pledged the gold with Indian Bank & vanished - who has its first charge/lien over the hypothecated stocks of gold and jewellery? - Held that - The confiscation of the the imported gold can only be for the purpose of recovering the aforesaid amounts. Confiscation of the goods does not mean that the Customs Department can appropriate the property in the imported goods, even after recovering the entire duty, penalty and interest. It is submitted that the goods imported were not contraband items, whose import was prohibited under the law at the relevant time. The import of the gold was valid and legal. It was only on account of the then prevalent governmental scheme vide the aforesaid exemption notification that duty free import was permitted on the condition that the manufactured goods would be exported. Since the present proceedings arise out of the original proceedings before the DRT, the Customs Department cannot be permitted to stake a claim on the said recovered gold, either at the appellate stage or in these proceedings. So far as the Indian Bank is concerned, the said bank did not act in good faith and with due care and diligence while granting loan to Sh.S.S. Kanda, on the basis of security of the imported gold. He submits that the Indian Bank should have required Sh.S.S. Kanda to produce documents of title to the said imported gold.Since that was not done, the said bank cannot claim any charge or lien over the imported gold. While acting as a canalizing agency, had loaned the gold to Sh.S.S. Kanda with the condition that the same would not be sold or hypothecated by him. He further submits that the Indian Bank did not put the MMTC to notice before granting credit facilities to Sh.S.S. Kanda against the gold loaned by MMTC. Thus der cannot be sustained and the finding returned by the DRAT that the first charge over the recovered gold is that of the Indian Bank, is liable to be set aside. Confiscation of imported goods (import whereof is not prohibited in law) is done only as a means to recover its dues by the Customs Department. It does not mean that the Department can appropriate the said goods forever, even when the penalty, duty and other charges are paid by the importer. Admittedly, the Customs Department has already recovered its entire customs duty, penalty & interest amounting to ₹ 2.27 Crores from the MMTC in respect of the 19 Kgs. of gold which was not utilized by Shri S.S.Kanda for export of jewellery.That being the position, no further claim of the Customs Department in respect of the said gold can survive. As Sh.S.S. Kanda did not have ownership rights in the gold and did not create a valid pledge/hypothecation over the said gold in favour of the Indian Bank set aside the impugned order passed by the DRAT dated 04.02.2011 and restore the order of the DRT dated 22.02.2005 insofar as it holds that the MMTC has the first charge over the recovered gold.
Issues Involved:
1. Failure of parties to resolve the dispute internally. 2. Right of appropriation of the gold and gold jewellery recovered and confiscated by the Customs Department. 3. Validity of the order dated 20.06.2000 passed by the Commissioner of Customs. 4. Claims of MMTC and Indian Bank over the recovered gold. 5. Claims of the Customs Department over the recovered gold. Detailed Analysis: 1. Failure of Parties to Resolve the Dispute Internally: The court expressed its disappointment over the failure of the Customs Department, MMTC, and Indian Bank to resolve the issues internally, despite being state representatives. The court had previously directed the concerned Secretaries of the Ministry of Finance and the Ministry of Commerce to work towards an amicable resolution, but the efforts were unsuccessful. The court criticized the indecisiveness and lack of maturity exhibited by senior bureaucrats, which led to unnecessary judicial intervention and wastage of judicial time. 2. Right of Appropriation of the Recovered Gold and Gold Jewellery: The primary issue was the right of appropriation of the gold and gold jewellery recovered and confiscated by the Customs Department. The court noted that the MMTC had loaned 45 kg of gold to a manufacturer, who failed to export jewellery made from 19 kg of the gold and instead pledged it with Indian Bank to obtain credit facilities. The DRT had earlier held that MMTC had the first charge over the gold, but the DRAT reversed this decision, giving precedence to the Indian Bank's claim. 3. Validity of the Order Dated 20.06.2000 Passed by the Commissioner of Customs: The MMTC challenged the validity of the order dated 20.06.2000 by the Commissioner of Customs, which confiscated the goods. However, the court did not entertain this challenge as the order had attained finality and was an appealable order. The court focused on the issue of the right over the confiscated gold rather than the validity of the confiscation order itself. 4. Claims of MMTC and Indian Bank Over the Recovered Gold: The court found that the Indian Bank acted with gross negligence by advancing loans against the hypothecation of the gold without verifying the title of the manufacturer. The MMTC had loaned the gold with the condition that it would not be encumbered, and the manufacturer had no ownership rights over the gold to create a valid pledge in favor of the bank. The court held that the MMTC had the first charge over the recovered gold, restoring the DRT's decision and setting aside the DRAT's order. 5. Claims of the Customs Department Over the Recovered Gold: The Customs Department's claim was dismissed as they had already recovered the entire customs duty, penalty, and interest amounting to Rs.2.27 Crores from the MMTC. The court found no provision in the Customs Act that allowed the Customs Department to appropriate the property in the imported goods once the dues were fully recovered. The court emphasized that confiscation under the Customs Act is meant to recover dues and does not vest unconditional ownership in the Customs Department. Conclusion: The court allowed the writ petition filed by the MMTC, restoring the DRT's decision that MMTC had the first charge over the recovered gold. The writ petition of the Customs Department was dismissed. The court refrained from imposing costs despite finding the Customs Department's claim frivolous. The judgment emphasized the need for bureaucratic decisiveness and the proper application of legal principles regarding the appropriation of confiscated goods.
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