2013 (5) TMI 324 - HC - Customs

Withholding of duty drawback disbursal Admissibility of power of department u/s 110(3) related to seizure - Petition is related to (i) not releasing the payment to the petitioner and (ii) to transfer the amount to the revenue. As per revenue they have a power of seizure of documents and things in terms of the provisions of Section 110(3) of the Act, therefore, the action of the revenue in directing the Bank to transfer the amount to the revenue is in exercise of the jurisdiction conferred under the aforesaid provisions. It is pointed out that in respect of seizure of goods, the revenue has to issue SCN in time bound manner but in respect of seizure of documents or things there is no time limit for the issuance of the SCN. Held that - Following the of Rohit Kumar vs. Union of India, 2001 (12) TMI 79 - HIGH COURT AT CALCUTTA & Commissioner of Customs, New Delhi vs. Euroasia Global, 2009 (3) TMI 199 - SUPREME COURT OF INDIA first part of the communication for withholding the amount of drawback released in favour of the petitioner is legal and within the jurisdiction of the revenue. However second part of the order of remitting the amount to the revenue is not contemplated under Section 110(3) of the Act. Therefore, we do not find that the petitioner is entitled to release of the amount of duty drawback. The said amount shall remain attached till the final decision of the adjudication proceedings.

Summary

Issues:
Challenge to communication directing withholding of drawback disbursal and re-crediting to the revenue without adjudication or show cause notice.

Analysis:
The petitioner, engaged in export of knitted garments, challenged a communication directing the Bank to withhold and re-credit the duty drawback amount without adjudication. Petitioner alleged coercion in statement recording and argued for rightful credit under Customs Act, Section 76, citing lack of adjudication or notice. Referring to a previous judgment, petitioner contended against appropriation without due process.

Respondent argued ongoing investigations against petitioner and others, citing power of seizure under Section 110(3) of the Act for revenue actions. Referring to legal precedents, respondent highlighted the authority to seize documents and funds pending adjudication, emphasizing the lack of time limits for show cause notices in such cases.

The Court analyzed the communication in two parts: withholding and transferring the amount. While acknowledging revenue's power of seizure, the Court found the second part, transferring the amount, not supported by Section 110(3). Citing a previous case, the Court emphasized the need for due process before releasing funds retained by revenue, ensuring protection of revenue's interests pending adjudication.

In conclusion, the Court upheld the withholding of the duty drawback amount but rejected the transfer to revenue, emphasizing the need for adjudication proceedings to determine the fate of the funds. The decision aligned with the previous judgment's principles, ensuring funds remain attached until final adjudication, safeguarding revenue interests and procedural fairness.