2016 (2) TMI 388 - AT - Customs

Detention of live consignment - request for extension of inquiry - Mis-declaration of import of processed/polished pearls as raw pearls - Claim of exemption against Replenishment License issued - Held that - As the investigation requires time to verify records of past imports in the office of the PCCCC, I hold that there is no specific reason for extension of time with respect to live consignment dated 8-4-2014. The live consignment cannot be kept under further detention for making the inquiry into past imports as the goods are neither restricted nor prohibited. It has further come on record that the Revenue has issued show cause notice dated 25-5-2015 to the appellant herein, with respect to the live Bill of Entry dated 8-4-2014 on the ground of misdeclaration and/or undervaluation. I find that there is no facts and/or details about the past imports and/or inquiry made in the matter for which time has been sought for, extension under the provisions of Section 110(2). The show cause notice dated 25-5-2015 only requires the appellant to show cause as to why benefit under Notification No. 60/2002 should not be denied and further disputing the description and valuation of the pearls under the live consignment. The learned Commissioner is in error in holding that there is sufficient cause for extension of time for issue of show cause notice under the provisions of Section 110(2). - The Revenue directed to return the pearls seized after retaining samples - Decided in favor of assessee.

Summary

Issues Involved:
1. Misdeclaration and/or undervaluation of imported raw pearls.
2. Extension of time for issuing a show cause notice under Section 110(2) of the Customs Act.
3. Procedural fairness and sufficiency of notice for the appellant to respond.

Analysis:

1. Misdeclaration and/or Undervaluation of Imported Raw Pearls:
The appellant, a regular importer and re-seller of pearls, imported a consignment of raw pearls on 8-4-2014, declaring them as unprocessed and valued at Rs. 31,08,070/-. The consignment was examined and initially found to be raw and unprocessed. However, further examination by Pangem Testing Laboratory suggested the pearls were processed/polished, leading the Revenue to enhance the value to Rs. 83,10,863/-. The appellant contended that the pearls were imported in the same manner as previous consignments and were not misdeclared. The appellant provided extensive documentation and explanations, asserting that there was no fraud or misdeclaration involved.

2. Extension of Time for Issuing a Show Cause Notice under Section 110(2) of the Customs Act:
The Commissioner of Customs extended the time limit for issuing a show cause notice by six months beyond 28-11-2014, citing ongoing investigations. The appellant challenged this extension, arguing that the investigation regarding the live consignment was complete by May-June 2014. The Tribunal found that the request for extension was vague and primarily based on the need to investigate past imports, which should not delay the clearance of the current consignment. The Tribunal held that there was no sufficient cause for the extension, as the live consignment was not restricted or prohibited, and the inquiry into past imports did not justify further detention of the goods.

3. Procedural Fairness and Sufficiency of Notice:
The appellant received the show cause notice on the evening of 25-11-2014, requiring them to appear the next day, which was deemed insufficient time to prepare a proper response. The Tribunal found this lack of adequate notice to be procedurally unfair. Additionally, the Tribunal noted that the Commissioner had adopted a colorable exercise of powers by not providing a reasonable opportunity for the appellant to respond.

Conclusion:
The Tribunal set aside the impugned order, directing the Revenue to return the seized pearls within seven days and to proceed with the show cause notice dated 25-5-2015 as per the Supreme Court ruling in Harbans Lal. The Tribunal emphasized the need for procedural fairness and sufficient cause for any extension of time under Section 110(2) of the Customs Act.