2022 (6) TMI 929 - AT - Customs

Provisional release of seized imported goods - determination of redemption fine - Copper cathode - mis-declaration with regard to origin of goods - goods are of Zambian origin or of Iranian Origin - section 110A of Customs Act, 1962 - HELD THAT - Though power to seize has inhered, and as it should, in Customs Act, 1962 from the very beginning, and, indeed, as legacy carried over from section 178 of Sea Customs Act, 1878, for close to a century and half, it was only by section 26 of Taxation Laws (Amendment) Act, 2006, incorporating section 110A in Customs Act, 1962, that provisional release of seized goods by Commissioner of Customs pending order of the adjudicating officer found acknowledgment in law. The transition from statutorily mandated continuation of unilateral deprivation of custody till conclusion of adjudication to that of reverting custody can only be described as facilitating. Undoubtedly, it was intended to benefit the importer but it was not at the cost of advantage to the State - The law does not intend that the State is enriched by fines arising from breach of the law or by substituting for the importer to trade in goods seized or even confiscated. The judicial approval was not forthcoming for the several strands of deployment of section 110A of Customs Act, 1962 that was manifested in ways and means of retention of seized goods till adjudication and beyond, upon confiscation, till appellate remedy was exhausted. The implementation of the incorporation for provisional release appeared to be founded on the belief that the said mechanism for conditional restoration of possession to the owner was restrictive and a measure to safeguard revenue. Before section 110A was incorporated in Customs Act, 1962, seized goods, upon confiscation, were offered for redemption on payment of fine and goods, subject to confiscation proceedings without the preliminary of retention by operation of common practice , could be saddled with fine in lieu thereof. Over the years, the quantification of fine has been placed within the practical framework of offsetting the potential for windfall deriving from the breach for which the goods are confiscated. Rarely would it be the value of goods; some proportion thereof suffices. There can be no golden formula for it and it is here that the discretion of the authority is called for - It is moot if a tentative estimation prior to adjudication can hold a candle to the assured accrual to the State after adjudication, subject, of course, to appellate determination - the extent of mandatory pre-deposit should, in most cases, be the benchmark for quantification of reasonable security. At least, as far as the impugned goods are concerned. The provisional release of the seized goods is permitted subject to furnishing of bond for the value of the goods and execution of bank guarantee of ₹ 50,00,000 - appeal disposed off.

Issues Involved:
1. Misdeclaration of the origin of imported goods.
2. Terms of provisional release of seized goods.
3. Discretionary power under Section 110A of the Customs Act, 1962.
4. Judicial interpretation of the provisional release mechanism.
5. Applicability of CBEC Circular No. 35/2017-Customs.

Detailed Analysis:

1. Misdeclaration of the Origin of Imported Goods:
M/s Amglo Resources Pvt Ltd imported consignments of 'copper cathode' purportedly of Zambian origin, supported by certificate no. N 2741/08.11.2021. However, investigators concluded that the goods were of Iranian origin, leading to the seizure of the consignments under Section 110 of the Customs Act, 1962. The misdeclaration was considered a violation under Section 111(m) of the Customs Act, 1962.

2. Terms of Provisional Release of Seized Goods:
The initial terms for provisional release required a bond for five times the value of the goods and a bank guarantee for 15% of the value. Upon appeal, the Tribunal modified these terms to a bond for the value of the goods and a bank guarantee of ?1,00,00,000. Later, for another consignment, the terms included a bond for the revised value of the goods and a bank guarantee covering estimated differential duty, probable redemption fine, and penalty. The appellant challenged these terms as excessively onerous and sought modification.

3. Discretionary Power under Section 110A of the Customs Act, 1962:
The Tribunal emphasized that the power to seize goods under Section 110 must be followed by proceedings under Section 124, leading to a decision under Section 125. The Tribunal cited judicial precedents to highlight that provisional release under Section 110A is discretionary and should be exercised fairly and equitably. The Tribunal noted that the circulars and administrative instructions should not supplant statutory provisions.

4. Judicial Interpretation of the Provisional Release Mechanism:
The Tribunal referred to various judicial decisions, including those of the Hon'ble Supreme Court and High Courts, to assert that provisional release is an interlocutory measure and does not adjudicate liability. The Tribunal noted that harsh conditions for provisional release could effectively deny access to goods, contrary to legislative intent. The Tribunal emphasized that the exercise of discretion under Section 110A must align with the principles of fairness and equity.

5. Applicability of CBEC Circular No. 35/2017-Customs:
The Tribunal scrutinized the CBEC Circular No. 35/2017-Customs, which prescribed conditions for provisional release. The Tribunal observed that the circular could not override statutory provisions and should not impose conditions that effectively deny provisional release. The Tribunal held that the circular's restrictions on provisional release were void and unenforceable, as they contravened Section 110A of the Customs Act, 1962.

Conclusion:
The Tribunal allowed the appeal, modifying the terms for provisional release. The seized goods were permitted to be released upon furnishing a bond for the value of the goods and a bank guarantee of ?50,00,000. The Tribunal emphasized the need for fair and equitable exercise of discretion under Section 110A and held that administrative instructions should not supplant statutory provisions. The order was pronounced in the open court on 17/06/2022.

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