2021 (5) TMI 740 - HC - Customs

IGST refunds - allegation of exported to avail undue export benefits - Provisional release of goods - grievance of the petitioner pertains to withholding of IGST refund and instructions/directives issued to the petitioner s banker not to accept related remittances - HELD THAT - it is now clear that the subject goods/consignment have been released provisionally. Now the grievance of the petitioner pertains to withholding of IGST refund and instructions/directives issued to the petitioner s banker not to accept related remittances. The above grievances are directly relatable to validity of the seizure dated 28.08.2020. From a reading of section 110, more particularly sub section (1) thereof, it is discernible that seizure is not an end in itself. Seizure can be made only if the proper officer has reason to believe that any goods are liable to confiscation under the Customs Act. Thus, a discretionary power is vested upon the proper officer to seize such goods if he has reason to believe that those goods are liable to confiscation under the Customs Act. Petitioner has contended that the subject goods were imported from China to India by M/s. HP India Sales Pvt. Ltd. and petitioner had purchased the same from M/s. Connect Info Solutions after five stages of trading. No action was taken by the respondents against M/s. HP India Sales Pvt. Ltd. at the time of import if at all there was any violation. This provision cannot be invoked after five stages of trading that too at the stage when petitioner had purchased the goods, paid the IGST to the seller and on completion of all formalities obtained let export order for export. It is seen that in every case in which anything is liable to confiscation or any person is liable to a penalty, such confiscation or penalty must be preceded by an adjudicatory process in which principles of natural justice are required to be followed but before initiation of such adjudicatory process show-cause notice under section 124 is required to be given to the owner or to the concerned person mentioning therein the grounds of proposed confiscation or penalty whereafter an opportunity of making representation is required to be given followed by reasonable opportunity of hearing. In the instant case, the impugned seizure memo is dated 28.08.2020. Already sufficient time has elapsed. Therefore, it would be in the interest of justice if the same is adjudicated early - the jurisdictional Principal Commissioner of Customs may authorize an appropriate officer of the customs department to adjudicate on the impugned seizure memo dated 28.08.2020 and the consequences which would follow by issuance of notice under section 124(a) of the Customs Act. The said notice shall be issued within a period of three weeks from the date of receipt of a copy of this judgment and order. The entire proceeding of adjudication shall thereafter be completed within a period of eight weeks from the date of issue of notice under section 124(a) of the Customs Act. Petition disposed off.

Summary

Issues Involved:

1. Legality of the seizure memo dated 28.08.2020.
2. Withholding of IGST refund.
3. Instructions to petitioner's banker to withhold remittances.
4. Validity of the circulars dated 02.08.2005 and 04.01.2011.
5. Refund of IGST paid on various consignments.

Detailed Analysis:

1. Legality of the Seizure Memo Dated 28.08.2020:

The petitioner challenged the seizure memo issued under Section 110(1) of the Customs Act, 1962, arguing that the goods were not liable for confiscation under Sections 111(o) and 113(i) of the Customs Act. The seizure was based on the suspicion of over-valuation and mis-declaration to claim ineligible IGST refunds. The respondents justified the seizure by highlighting discrepancies in the export consignment, such as misleading marking/labelling and incorrect customs tariff heading. The court noted that seizure under Section 110(1) requires the proper officer to have "reason to believe" that the goods are liable for confiscation. The court directed the jurisdictional Principal Commissioner of Customs to authorize an appropriate officer to adjudicate the seizure memo and issue a notice under Section 124(a) within three weeks, with the adjudication process to be completed within eight weeks.

2. Withholding of IGST Refund:

The petitioner argued that the withholding of IGST refunds was illegal, especially for consignments unrelated to the disputed one. The respondents contended that the withholding was justified under Rule 96(4) of the Central Goods and Services Tax Rules, 2017, due to ongoing investigations. The court did not delve into the merits of this issue, stating that the refund issue would be subject to the outcome of the adjudication process.

3. Instructions to Petitioner's Banker to Withhold Remittances:

The petitioner contended that the respondents were unjustified in instructing their banker to withhold foreign inward remittances for export. The court noted that this issue was directly related to the validity of the seizure. The court directed that the adjudication process should address this grievance as well.

4. Validity of the Circulars Dated 02.08.2005 and 04.01.2011:

The petitioner challenged the validity of certain portions of the circulars dated 02.08.2005 and 04.01.2011, arguing that they were ultra vires Sections 110 and 110A of the Customs Act, 1962. The court did not find it necessary to address this issue separately, as it was contingent on the outcome of the adjudication process regarding the seizure.

5. Refund of IGST Paid on Various Consignments:

The petitioner sought a refund of ?85,30,191 (later corrected to ?1,63,58,598) pertaining to IGST paid on various consignments. The respondents argued that the refund could not be processed due to the ongoing investigation. The court deferred this issue to be decided based on the outcome of the adjudication process.

Conclusion:

The court directed the jurisdictional Principal Commissioner of Customs to authorize an appropriate officer to adjudicate the impugned seizure memo dated 28.08.2020 and issue a notice under Section 124(a) within three weeks. The adjudication process should be completed within eight weeks from the date of the notice. The court did not express any opinion on the merits and kept all contentions open. The writ petition was disposed of without any order as to costs.