2019 (7) TMI 1433 - HC - Customs

Time limit for issuance of SCN - Seizure/Detention of goods - Did the CESTAT fall into error in holding that goods had to be released in the circumstances of the case since no notice preceded extension of detention under Proviso to Section 110(2) of the Customs Act, 1962? HELD THAT - There is no time limit for issuing a show cause notice, under Section 124 of the Customs Act. However, in case a show cause notice is not issued, for some reason, Section 110 would operate. Section 110 (2) states that goods cannot be detained for more than six months, unless a show cause notice (i.e. under Section 124) is issued; the proviso clothes the revenue with the power of extending the period by another six months. Under the pre-amended law, the power under the proviso could be exercised, for sufficient cause - Now, the amendment has done away with that expression; the power to extend (the period of detention) after amendment states that, if the Commissioner of Customs may, for reasons to be recorded in writing, extend such period to a further period not exceeding six months and inform the person from whom such good were seized before the expiry of the period so specified. The change in the statute, in the opinion of this court, is a significant one. The previous provision required the Commissioner to show sufficient cause, which meant that such cause had to be based on objective considerations. The amended provision merely requires the Commissioner to record the reasons in writing and inform the person from whom such good were seized before the expiry of the period so specified . In this court s considered view, the amended provision deliberately sought to overbear the previous view that a notice before extension was necessary. Now two conditions are to be satisfied one, the Commissioner has to record his reasons in writing, why the extension is necessary, and two, inform the person from whom such good were seized before the expiry of the period so specified. The latter condition is equally important, in the opinion of this court, because it is a pre-requisite for the exercise of the power of extension. The pre-amended provision was silent on this aspect. This Court is of opinion that the impugned order cannot be sustained - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the CESTAT erred in holding that goods had to be released since no notice preceded the extension of detention under Proviso to Section 110(2) of the Customs Act, 1962.

Detailed Analysis:

1. Background and Legal Context:
The respondents imported rough diamonds from Hong Kong and filed Bills of Entry for clearance through ICD, Jaipur. The Directorate of Revenue Investigation (DRI) alleged overvaluation and seized the goods under Section 110 of the Customs Act, 1962, suspecting they were liable for confiscation under Section 111. No show cause notices were issued within six months from the date of detention, prompting the DRI to request an extension under Proviso to Section 110(2).

2. Respondents' Argument:
The respondents argued before CESTAT that they were not given notice or an opportunity to be heard before the extension of the time limit for issuing a show cause notice. They relied on the Supreme Court's decision in I.J. Rao, Assistant Collector of Customs Vs. Bibhuti Bhushan Bagh, which held that the Commissioner could not extend the period without hearing the affected parties. They also cited Harbans Lal Vs. Collector of Customs and other similar judgments supporting the need for a hearing before extending the period.

3. Revenue's Argument:
The revenue supported the extension granted by the Commissioner, arguing that the amendment to Section 110(2) by the Finance Act, 2018, changed the requirement from "sufficient cause being shown" to "reasons to be recorded in writing." They contended that the amendment did away with the need for a show cause notice before extending the time period and that the Commissioner had appropriately extended the time after considering the circumstances.

4. CESTAT's Decision:
The CESTAT compared the pre-amended and amended provisions of Section 110(2) and relied on various judgments, including S.R.K. Metal & Industries, which held that an order extending the period for issuing a show cause notice without giving an opportunity to the affected party is illegal. The CESTAT concluded that the right to notice and hearing before extending the time period remained unchanged even after the amendment.

5. High Court's Analysis:
The High Court analyzed the pre-amended and amended provisions of Section 110(2) and the relevant case law, including The Asstt. Collector of Customs and Ors. v. Charan Das Malhotra and J.K. Bardolia Mills v Dy. Collector and Ors. The court noted that the amended provision requires the Commissioner to record reasons in writing and inform the person from whom the goods were seized before the expiry of the specified period. The court held that the amendment brought about a significant change, eliminating the need for a show cause notice before extending the period.

6. Conclusion:
The High Court concluded that the CESTAT's order was not sustainable. The court held that the amended provision of Section 110(2) does not require a separate notice before extending the period for issuing a show cause notice, provided the Commissioner records reasons in writing and informs the concerned party. The impugned order of CESTAT was set aside, and the appeals were allowed.