2022 (9) TMI 447 - HC - Customs

Seeking provisional release of the seized goods - to whom / any person - iPhones - Respondent s ownership of such goods itself is seriously disputed - contravention of Section 110 A of the Customs Act, 1962 - HELD THAT - On a perusal of the provision of Section 124 of Customs Act, it can be seen that issuance of a show cause notice in terms of Section 124 does not necessarily establish that the person in whose name it is issued, is necessarily the owner. The phrases penalty on any person and the owner of goods or such person suggests that before an order of confiscation is passed, an owner or any other person shall have to be given a notice of the proposed confiscation of goods. Therefore, the mere fact that a show cause notice has been issued in the name of the Respondent does not necessarily imply that he is to be treated as an owner of the goods seized, which are sought to be confiscated. A reading of Section 110 A makes it abundantly clear that goods seized may be released to the owner. The said section does not include or envisage release of goods provisionally in favour of an importer of goods much less does it envisage, a release in favour of any person , in addition to the owner as mentioned in Section 124 of the Act, who has been served a notice under the said section - the Tribunal has in fact committed an error in importing the definition of an importer as defined under Section 2(26) of the Act and reading the same in Section 110A of the Act. Appeal allowed.

Summary

Issues:
Appeal under Section 130 of the Customs Act, 1962 against the order for provisional release of seized iPhones under Section 110A of the Act.

Analysis:
The case involved an appeal against the Customs, Excise and Service Tax Appellate Tribunal's order for the provisional release of seized iPhones under Section 110A of the Customs Act, 1962. The seized goods, misdeclared as Memory Modules, were found to be iPhones worth approximately Rs. 42 Crores. The adjudicating authority rejected the release application due to lack of evidence regarding ownership. The Tribunal, however, allowed the release, stating that ownership could be claimed by an importer as per Section 2(26) of the Act, despite ownership not being defined in the Act. The Tribunal emphasized that ownership could be asserted at any stage and was attached to the importer by default. It further highlighted that customs authorities could not determine lack of ownership except in cases of rival claims for clearance purposes.

The Appellant argued that the Respondent denied ownership of the seized goods, even claiming in a writ petition that the consignment was mistakenly sent to India. The Appellant contended that releasing the goods to the Respondent, who denied ownership, would reward illegal activities. The Respondent's Counsel argued that issuance of a show cause notice did not establish ownership. The Court noted that Section 110A allowed goods to be released only to the owner, importer, or beneficial owner. The Tribunal's reliance on the definition of an importer in Section 2(26) was deemed erroneous. The Court highlighted that Section 125 allowed release to a person other than the owner only when confiscation was authorized, contrasting with Section 110A's requirement for ownership proof for provisional release. As the Respondent failed to prove ownership, the Court held that the goods could only be released to the owner, rendering the Tribunal's decision unsustainable in law.

In conclusion, the Court answered in favor of the Appellant, allowing the appeal and disposing of the Interim Application. The judgment clarified the legal requirements for provisional release of seized goods under Section 110A, emphasizing the necessity of establishing ownership for such release.