2021 (5) TMI 327 - HC - Customs

Validity of detention and seizure of goods - allegation is that scraps in different forms seized from the premises were found to be imported without payment of appropriate customs duty - classification of goods - discarded and non-serviceable semi-broken/broken motor under CTH 7204 49 00 under the Other Ferrous Waste and scrap or not - jurisdiction to entertain this petition in wake of the availability of the alternative efficacious remedy - HELD THAT - The law on the point if is regarded, it is quite clear that jurisdiction under Article 226 of the Constitution of India is not to be resorted to ordinarily when the alternative and efficacious remedy is available, unless of course the very issuance of notice is not sustainable under the law - The writ jurisdiction under Article 226 is not to be entertained against the show cause notice when statute provides for mechanism which is efficacious, alternative and productive as the very purpose of issuance of show cause notice to afford opportunity of hearing to the party concerned and on showing of the cause to the statutory authority, a final decision is to be rendered, it is pre-matured to interfere with the show cause notice by the court. Although, the Court has wide powers under Article 226 of the Constitution and it can also exercise in certain circumstances at the stage of issuance of show cause notice (when the show cause notice is totally non est etc.) Accordingly such powers are not to be exercised by the Court and this approach of self restraint and self limitation is adopted by the High Court always and that being a well settled position of law, no further dilation is needed. The writ jurisdiction under Article 226 is not to be entertained against the show cause notice when statute provides for mechanism which is efficacious, alternative and productive as the very purpose of issuance of show cause notice to afford opportunity of hearing to the party concerned and on showing of the cause to the statutory authority, a final decision is to be rendered, it is pre-matured to interfere with the show cause notice by the court. Although, the Court has wide powers under Article 226 of the Constitution and it can also exercise in certain circumstances at the stage of issuance of show cause notice (when the show cause notice is totally non est etc.) Accordingly such powers are not to be exercised by the Court and this approach of self restraint and self limitation is adopted by the High Court always and that being a well settled position of law, no further dilation is needed. Here is the case where the petitioner has filed Electronic Bill of Entry in the EDI system, where it can claim a particular exemption or a particular classification. On subsequently having noticed that the Copper and Aluminum elements would not permit the exemption under the Notification at the rate of 2.5% by itself would not make the import of the goods as clandestinely having been done, the least that could have been done was to term the same as mala fide when otherwise the relevant material had been already placed with the department - the communication dated 03.08.2020 in post clearance audit of Bill of Entry was on the basis of various documents including the certificate of analysis, when it was realized by the department that the product consists of the Copper scrap also to the extent of around 10%. The DRI has firstly detained the goods, which later on had been seized. Assuming that the stage of adjudication of show cause notice is yet to come, this Court has no intent to go into the issue of classification at all as it would be for the proper officer to workout the same on following the due procedure and on requisite scrutiny however, noticing that the order of detention and seizure by the DRI itself is unsustainable, we allow the petition by quashing and setting aside the seizure and the panchnama. Petition allowed.

Issues Involved:
1. Legality and validity of the seizure of goods.
2. Availability of alternative remedy.
3. Classification of the imported goods.
4. Provisional release of seized goods.
5. Jurisdiction of the Directorate of Revenue Intelligence (DRI) to issue seizure orders.

Detailed Analysis:

1. Legality and Validity of the Seizure of Goods:
The petitioners challenged the seizure of goods under the Customs Act, 1962, arguing that the seizure was illegal due to incorrect classification of goods. The Department's case was based on the allegation that the goods were imported without paying appropriate customs duty by wrongfully availing of a concessional rate under Notification No. 50/17-CUS. The petitioners contended that the seizure itself was illegal, as wrong classification cannot lead to confiscation. The court held that the seizure by the DRI was invalid, relying on the Supreme Court’s decision in Canon India Pvt. Ltd. v. Commissioner of Customs, which stated that reassessment and recovery of duties must be conducted by the same officer who initially assessed the goods or his successor, not by another officer from a different department.

2. Availability of Alternative Remedy:
The respondents argued that the writ application was not maintainable due to the availability of an alternative remedy under the Customs Act, 1962. They contended that the order of seizure and provisional release of goods was appealable. However, the court noted that the petitioners could invoke writ jurisdiction under Article 226 of the Constitution of India, especially when the seizure was alleged to be without jurisdiction. The court emphasized that while generally, writ petitions are not entertained when an alternative remedy is available, exceptions exist when the action is without jurisdiction.

3. Classification of the Imported Goods:
The petitioners declared their goods as "discarded and non-serviceable semi-broken/broken motor" under CTH 7204 49 00, availing a concessional duty rate of 2.5%. The DRI alleged that the goods contained copper and aluminum, which should have been classified differently, attracting a higher duty rate of 5%. The court found that the petitioners had disclosed all relevant details at the time of import, and it was the responsibility of the Customs authorities to verify the classification. The court held that mere wrong classification or claim for exemption does not amount to misdeclaration or suppression of facts.

4. Provisional Release of Seized Goods:
The court noted that the petitioners had applied for the provisional release of the seized goods, which was granted on the condition of furnishing a bank guarantee. The petitioners argued that the conditions for provisional release were overly harsh and burdensome. The court balanced the equities by directing the petitioners to furnish a running bank guarantee of ?2 crores and ordered the DRI to retain raw materials worth ?10 crores. The rest of the goods were to be released provisionally upon furnishing the bank guarantee.

5. Jurisdiction of the Directorate of Revenue Intelligence (DRI) to Issue Seizure Orders:
The court questioned the jurisdiction of the DRI to issue seizure orders, referring to the Supreme Court's decision in Canon India Pvt. Ltd. v. Commissioner of Customs. The court held that the DRI officers were not the "proper officers" to reassess and seize the goods, as they were not the officers who initially assessed the goods at the time of import. The court invalidated the seizure orders issued by the DRI, emphasizing that only the officer who assessed the goods or his successor could undertake reassessment and recovery of duties.

Conclusion:
The court allowed the petition, quashing the detention and seizure orders dated 29.07.2020, 03.08.2020, and 11.08.2020. The court directed the return of the detained raw materials/goods to the petitioners within two weeks from the date of receipt of the judgment. The court clarified that this decision would not affect the pending classification issue before the proper officer. The petition was disposed of with no order as to costs.

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