2025 (2) TMI 641 - HC - Customs

Seeking release of detained goods - Smuggling of 1065.10 grams of gold - disposing of the detained gold without proper intimation to the Petitioner - HELD THAT - Upon a query from the Court as to whether any intimation was given to the Petitioner prior to the disposal of the detained goods an undated letter has been handed over to the Court on behalf of the Customs Department - A perusal of the said letter would show that the Petitioner s Passport number and e-mail id are mentioned therein. However there is no clarity as to how this letter was communicated to the Petitioner. There is no copy of the e-mail communicating the said letter to the Petitioner attached to this letter handed over by the ld. Counsel for the Customs Department. It is noted that the letter also is signed by an official whose name is not clear and along with the signatures the date 7th November 2022 has been mentioned. The disposal of the detained gold without intimation to the Petitioner is also contrary to law. Clause 3.1.2 of the Circular dated 6th September 2022 would therefore have no application in the present case. The entire process followed by the Customs Department for the disposal of the detained gold collecting the redemption fine and penalty as also deducting customs duty before payment of the value of the detained gold to the Petitioner would therefore not be tenable. This Court is of the opinion that the Petitioner is entitled to the entire value of the detained gold as on the market rate prevalent today which would be liable to be paid by the Customs Department within a period of three weeks. If the said amount is not paid within three weeks costs of Rs. 1, 00, 000/- would be liable to be paid by the Customs Department to the Petitioner - Registry is directed to communicate this order to the OSD (Legal) Central Board of Indirect Taxes Customs (CBIC) through email ([email protected]) for necessary information and compliance. Conclusion - i) The disposal of the gold was unlawful and not communicated properly to the Petitioner. ii) The Petitioner was entitled to the full value of the detained gold at the current market rate. Petition disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

1. Whether the Customs Department's actions in disposing of the detained gold without proper intimation to the Petitioner were lawful.

2. Whether the Customs Department was justified in issuing the impugned Refund Order and Corrigendum Order, which altered the refund amount due to the Petitioner.

3. Whether the Petitioner is entitled to the full value of the detained gold at the current market rate, given the circumstances surrounding the disposal of the gold.

4. The applicability of the Circular dated 6th September, 2022, regarding the return of seized gold when it has already been disposed of.

ISSUE-WISE DETAILED ANALYSIS

1. Legality of the Disposal of Detained Gold

- Relevant Legal Framework and Precedents: The Customs Act, 1962, and the Order-in-Appeal dated 26th July, 2022, which directed the release of the detained gold upon payment of a redemption fine and penalty.

- Court's Interpretation and Reasoning: The Court found that the Customs Department's disposal of the detained gold without notifying the Petitioner was unlawful. The Order-in-Appeal mandated the release of the gold, subject to conditions which the Petitioner fulfilled. The lack of communication about the disposal was deemed contrary to law.

- Key Evidence and Findings: The Customs Department failed to inform the Petitioner about the disposal of the gold and continued to accept the redemption fine and penalty after the gold had been disposed of.

- Application of Law to Facts: The Court applied the principles of fairness and adherence to procedural requirements, emphasizing that the Customs Department's actions were arbitrary and lacked transparency.

- Treatment of Competing Arguments: The Customs Department's reliance on a Circular for calculating refunds was rejected due to the improper disposal of the gold.

- Conclusions: The Court concluded that the disposal of the gold was unlawful and not communicated properly to the Petitioner.

2. Justification of the Refund and Corrigendum Orders

- Relevant Legal Framework and Precedents: The Customs Act, 1962, and the Order-in-Appeal which provided specific directives for the release and re-export of the gold.

- Court's Interpretation and Reasoning: The Court found the Refund and Corrigendum Orders to be unjustified as they were based on an erroneous premise of deducting customs duty after the gold had been disposed of.

- Key Evidence and Findings: The Orders were issued without considering the chronology of events and the Petitioner's compliance with the Order-in-Appeal.

- Application of Law to Facts: The Court held that the Orders were inconsistent with the legal provisions and the facts of the case, particularly the Petitioner's compliance with the Order-in-Appeal.

- Treatment of Competing Arguments: The Customs Department's argument for deducting customs duty was dismissed due to the procedural lapses in the disposal of the gold.

- Conclusions: The Orders were deemed arbitrary and were set aside by the Court.

3. Entitlement to Full Value of the Detained Gold

- Relevant Legal Framework and Precedents: The principles of restitution and the Order-in-Appeal which favored the Petitioner.

- Court's Interpretation and Reasoning: The Court reasoned that the Petitioner should not be disadvantaged due to the Customs Department's actions and was entitled to the full market value of the gold.

- Key Evidence and Findings: The Petitioner had complied with all conditions for the release of the gold, and the Customs Department did not challenge the Order-in-Appeal.

- Application of Law to Facts: The Court applied the principle of restitution to ensure the Petitioner was compensated for the full value of the gold.

- Treatment of Competing Arguments: The Customs Department's failure to communicate the disposal nullified their claim to deduct customs duty.

- Conclusions: The Petitioner was entitled to the full value of the detained gold at the current market rate.

SIGNIFICANT HOLDINGS

- Preserve Verbatim Quotes of Crucial Legal Reasoning: "The above conduct of the Customs Department is completely unreasonable, arbitrary and untenable."

- Core Principles Established: The importance of procedural fairness and transparency in the disposal of detained goods, and the entitlement of parties to restitution when procedural lapses occur.

- Final Determinations on Each Issue: The Court ordered the Customs Department to pay the full market value of the detained gold to the Petitioner within three weeks, without any deduction for customs duty, as the Petitioner had already fulfilled the conditions set by the Order-in-Appeal.