2020 (9) TMI 809 - HC - Customs

Legality and validity of the seizure of goods - the case of the Department against the writ applicants is that the goods, i.e, scraps in different forms seized from the premises were found to be imported without payment of appropriate customs duty by wrongfully availing the benefit of the notification - HELD THAT - The larger issues, more particularly the legality and validity of the seizure, shall be examined on the next date of the hearing including the preliminary objection raised on behalf of the respondents as regards the alternative remedy available to the writ applicants. However, having regard to the submissions made by Mr. Parikh, we would like to balance the equities at this stage. We would like to see that the writ applicants do not have to suffer a huge loss in their business, and at the same time, we must also ensure that the interest of the Revenue is also protected. The writ applicants are directed to furnish a running Bank Guarantee of any Nationalized Bank to the tune of ₹ 2.00 Crores, and at the same time, the DRI shall retain with them the raw-goods/materials upto the value of ₹ 10 Crore. If the writ applicants furnish the Bank Guarantee, then the respondents shall provisionally release the rest of the goods (raw materials/finished) at the earliest. Post the matter for further hearing on 12-10-2020.

Issues Involved:
1. Legality and validity of the seizure of goods.
2. Classification of goods and its impact on customs duty.
3. Alternative remedy available under the Customs Act, 1962.
4. Provisional release of seized goods and conditions for the same.
5. Financial impact on the petitioners due to the seizure.

Detailed Analysis:

1. Legality and Validity of the Seizure of Goods:
The writ applicants, private limited companies engaged in recycling/dismantling imported old unserviceable electric motors, challenged the legality of the seizure of their goods. The Department alleged that the goods were imported without paying appropriate customs duty by wrongfully availing the benefit of a notification. The principal argument from the petitioners was that wrong classification of goods under a particular head cannot justify confiscation, rendering the seizure illegal.

2. Classification of Goods and Its Impact on Customs Duty:
The Department's case was based on the classification of the goods as "discarded and non-serviceable semi-broken/broken motor" under CTH 7204 49 00, which falls under "Other Ferrous Waste and scrap." The raw materials and finished goods were seized under four different Seizure Memos, and the Department directed the petitioners to pay a differential duty of ?2,51,13,372/- plus interest, arguing that the benefit of Notification No.50/17-CUS dated 30th June 2017 was not applicable.

3. Alternative Remedy Available Under the Customs Act, 1962:
The respondents raised a preliminary objection regarding the maintainability of the writ application, suggesting that the petitioners had an alternative remedy in the form of a statutory appeal under the Customs Act, 1962. The petitioners contended that the order of seizure was not appealable, leaving them no option but to invoke the writ jurisdiction of the High Court under Article 226 of the Constitution of India.

4. Provisional Release of Seized Goods and Conditions for the Same:
The petitioners applied for the provisional release of the seized goods, which was processed with conditions including the furnishing of bonds and bank guarantees. The petitioners argued that the requirement to furnish a bank guarantee of ?8.46 Crore was financially burdensome, given their current financial situation. The court balanced the equities by directing the petitioners to furnish a running bank guarantee of ?2.00 Crores and allowed the Department to retain raw materials worth ?10 Crores. Upon furnishing the bank guarantee, the respondents were directed to provisionally release the rest of the goods.

5. Financial Impact on the Petitioners Due to the Seizure:
The petitioners highlighted the severe financial impact caused by the seizure, which brought their business operations to a standstill and affected 250 workers. The court acknowledged the financial distress and aimed to balance the interests of both the petitioners and the revenue by modifying the conditions for the provisional release of the goods.

Conclusion:
The court decided to examine the larger issues, including the legality and validity of the seizure and the availability of alternative remedies, in the next hearing. Meanwhile, an interim arrangement was made to mitigate the financial loss to the petitioners while protecting the revenue's interest. The matter was posted for further hearing on 12-10-2020.

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