9911796707
TMI Blog2009 (9) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment per : M.M. Kumar, J.]. This petition filed under Article 226 of the Constitution challenges orders dated 18-3-2009 and 23-3-2009 (P-7 P-8), passed by the Directorate of Revenue Intelligence, Ludhiana, seizing the goods of the petitioner-Company. A further prayer has been made for directing the Joint Director, Directorate of Revenue Intelligence-respondent No. 2 to defreeze the bank accounts of the petitioner-Company and allow it to withdraw funds therefrom. Still further it has been prayed that goods, cash, mutual funds and record etc. belonging to the petitioner-Company be also released. 2. The case of the petitioner-Company is that it used to import various types of yarn and blankets fromChinaand sell the imported yarn as such or would sell it after converting the same into fabrics. It is claimed that the petitioner-Company has neat and clean track record of importing goods. During the last five years the Custom Officers never raised any objection at the time of clearance of their goods. It has been averred that it has always complied with the requirements of Sections 17, 46 and 47 of the Customs Act, 1962 (for brevity, the Act ). These provisions relate to ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of the petitioner-Company. The yarn weighing 18360 Kgs. was not imported by the petitioner-Company (P-7 P-8). A perusal of order dated18-3-2009(P-7) shows that the goods mentioned therein have been seized on the pretext that the same were found misdeclared and undervalued. With regard to the request of the petitioner-Company for release of yarn detained at Sr. No. 1 of the detention memo, dated 23-1-2009, it has been stated in para 2 of the order dated 23-3-2009 (P-8) that as per the documents submitted by the petitioner-Company on 4-2-2009 the yarn has been claimed to be auctioned material i.e. Blended Acrylic Yarn, whereas in the panchnama the detained goods mentioned at Sr. No. 1 were Acrylic Yarn having marking as 15/2 100% A Boucle Yarn RW . It has further been pointed out that the samples drawn from different lots of detained consignment of 18360 Kgs., after testing in the Central Revenue Control Laboratory,New Delhi, have been found to be composed of Acrylic and are special type of yarn having complex construction. The claim of the petitioner-company that the detained Yarn was purchased from Shri Karan Chaudhary of M/s. Excel Packages,Ludhiana, who purchased the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act after submitting bonds with such security and condition as the competent authority may prescribed, therefore, the writ petition is mis-conceived and liable to be dismissed. 9. It has also been pointed out that the officers of the DRI, Ludhiana, on the basis of intelligence found that some of the importers have imported various types of yarn such as 100% polyester yarn, 100% nylon yarn, nylon viscose blended yarn, feather yarn etc. from China and Singapore. In order to evade Customs Duty they have misdeclared the value and description of the such imported yarn. Accordingly, search operations were carried out on the premises of five importers firms based inLudhiana. The respondents have further given details regarding modus operandi of such importers, investigation conducted by the DRI and unearthing of hawala transaction and channel etc. 10. The factual matrix regarding search made on 22/23-1-2009 on the business/residence premises of the directors of the petitioner-Company under Section 105 of the Act, detaining of goods, records, cash of Rs. 1.50 lacs, mutual fund receipts etc. and passing of seizure orders dated18-3-2009and23-3-2009, has been admitted. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r been submitted that the respondents have shown the date of seizure as 18/23-2-2009 with a view to gain more time. Furthermore, there is no specific provision concerning detention of goods under the Act. It has been asserted that the detention and seizure is one and the same thing. In response to the preliminary objections raised by the respondents it has been stated that relinquishment of title of goods by the petitioner-Company has nothing to do with the present case. It has been specifically denied that the petitioner-company has concealed any material facts from the Court. After relinquishing of title by the petitioner-Company, M/s. Exel Packages purchased the goods in an open auction, from whom the petitioner-Company has again purchased the goods. 13. A short affidavit dated 3-8-2009, has also been filed by Shri H.N. Meena, Deputy Director, DRI, Ludhiana, stating that a show cause notice for extension was issued by DRI on 15-7-2009, which was personally handed over to Shri Padam Dalmia, Director of the petitioner Company on 16-7-2009. In response to the said notice, counsel for the petitioner appeared on20-7-2009and filed written submissions before the Commissioner of Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered post in accordance with the procedure prescribed under Section 153 of the Act. From the perusal of photo copy of the dispatch register (A/3) some doubt cropped up because at the first instance it was stated that the order was sent by speed post and then the aforesaid statement was improved upon by stating that it was sent by ordinary post. Since the procedure of sending orders by ordinary post is unknown to Section 153 of the Act, which postulates that orders are to be served on the petitioner by tendering a copy of the order to him or by sending the same by registered post, it became necessary to examine the original record including the dispatch register. 17. On1-9-2009, learned counsel for the respondents produced original file of Case No. VIII (Hqrs.)10/CUS/ Order/24/09. A bare perusal of the file shows that the show cause notice for extension of time period beyond six months in respect of seizure of goods and cash, bearing DRI F.No. 856(3)LDH/09/Pt-I/1727, dated15-7-2009, is available at page No. 25 of the file. In para 11 of the show cause notice, the noticee-petitioner Company was called upon to appear for personal hearing on 20-7-2009 at 1400 hrs before the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was granted to show cause for extension of time period beyond six months in respect of seizure of goods and cash, which means that the petitioner-Company could file its reply upto 23-7-2009 because the notice was served on 16-7-2009. On the contrary, in para 11 of the notice the date of personal hearing before the Commissioner was fixed as20-7-2009ahead of the period of seven days. Accordingly, the petitioner-Company was represented through its advocate before the Commissioner on20-7-2009and submitted a written request for supply of test reports and documents, which were referred in the notice but not supplied, so that an effective reply could be given. It was also requested to give ten days time to file the reply. However, the Commissioner without extending the time or waiting up to23-7-2009, passed the impugned Order-in-Original on20-7-2009itself. 19. Learned counsel then submitted that the goods were detained on 22/23-1-2009 and since the period of six months was going to expire on 21/22-7-2009, therefore, the respondents were in a hurry to pass the order extending the period for another six months. He has emphasised that the period of six months is to be reckoned from the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, learned counsel for respondent Nos. 1 to 4 on the other hand has vehemently argued that there is a lot of difference between the terms detention and seizure . According to the learned counsel at the time of conducting of search operations by the officers of the DRI any doubtful material/goods found at the spot which is taken into custody through panchnamma is detention of goods/material. Thereafter opportunity is provided to the concerned person for production of evidence/documents in support of such goods/material and if the competent authority is satisfied after furnishing of documents, the detained goods/material is released otherwise the same are seized after passing of appropriate seizure orders, as has been done in the present case. In support of his submissions, learned counsel has placed reliance on the judgment of Madras High Court in the case of Pro Musicals v. Joint Commissioner of Customs (Prev.), Mumbai, 2008 (227) E.L.T. 182 (Mad.). 22. From the pleadings of the parties and the rival contentions raised by their respective counsel we are of the view that the following questions of law would emerge for determination of this Court :- (A) Whether the goods in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under Section 47 or an order for permitting the deposit of goods in a warehouse under Section 60 is made. If he (owner) adopts the aforesaid course then such a person would not be liable to pay any duty. However, there is a proviso appended to sub-section (2) of Section 23 of the Act, which provides that the relinquishment of title shall not be permitted if an offence appears to have been committed under the Act or any other law for the time being in force. 25. Chapter IX of the Act (from Sections 57 to 73) is devoted to Warehousing apart from dealing with the rights and duties of the proper officer of Custom, owner of the goods and warehouse. Section 68 deals with clearance of warehoused goods for home consumption . There are two provisos to Section 68, which provide for relinquishment of title. These two provisos in terms are similar to Section 23(2) and its proviso. Accordingly it follows that there can be relinquishment of title in respect of warehoused imported goods also. 26. When the aforesaid provisions are applied to the facts of the present case, it becomes evident that the petitioner-Company had relinquished the title of the imported goods in question. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding. - If any goods brought into India from a place outside India are not cleared for home consumption or warehoused or transshipped within thirty days from the date of the unloading thereof at a customs station or within such further time as the proper officer may allow or if the title to any imported goods is relinquished, such goods may, after notice to the importer and with the permission of the proper officer, be sold by the person having the custody thereof : Provided that- (a) animals, perishable goods and hazardous goods, may, with the permission of the proper officer, be sold at any time; (b) arms and ammunition may be sold at such time and place and in such manner as the Central Government may direct. Explanation.- In this section, arms and ammunition have the meanings respectively assigned to them in the Arms Act, 1959 (54 of 1959). 28. A perusal of the aforesaid provision shows that once the goods are not cleared for home consumption or warehoused then such goods after notice to the importer and with the permission of the proper officer, who has control over such goods under Section 62 of the Act, could be sold by the person having the custody th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chaser in accordance with law. The subsequent buyer from him like the petitioner then would stand in the same shoes. Otherwise, proceedings under the Act can never attain finality and bona fide purchaser would always be at risk. Therefore, we are of the view that the petitioner-Company, in respect of the goods in dispute, is not exigible to Custom Duty as the goods had been auctioned by PSWC after obtaining permission from the proper officer on as is where is basis . 29. In view of the aforesaid discussion, the answering to question No. (A) is in the negative. Re : Question No. (B) : 30. After answering question No. (A) in the aforesaid manner, there was hardly any need to answer question No. (B). Arguments, however, have also been addressed in respect of question No. (B), therefore, we proceed to answer the aforesaid question as well by assuming that the petitioner-Company continues to retain its character as importer of the goods and not as purchaser from an auction purchaser. 31. In order to answer question (B), it may be necessary at the outset to refer to the relevant statutory provisions of the Act. Accordingly, Section 110, 110A, 124 and 153 of the Act are reproduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) The proper officer may seize any documents or things which, in his opinion, will be useful for, or relevant to, any proceeding under this Act. (4) The person from whose custody any documents are seized under sub-section (3) shall be entitled to make copies thereof or take extracts there from in the presence of an officer of customs. (emphasis added) _____________ 110A. Provisional release of goods, documents and things seized pending adjudication. - Any goods, documents or things seized under section 110, may, pending the order of the adjudicating officer, be released to the owner on taking a bond from him in the proper form with such security and conditions as the Commissioner of Customs may require. _____________ 124. Issue of show-cause notice before confiscation of goods, etc. - No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person - (a) is given a notice in writing with the prior approval of the officer of customs not below the rank of a Deputy Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made to the documents which were required like test reports and copy of reasons recorded before search. The petitioner also understood the show cause notice to mean that reply was to be filed within seven days from the date of receipt of notice as per the language of para 13 and accordingly it was submitted that time was very short and week s time was not sufficient. It is, thus, evident that the order dated20-7-2009granting extention of time suffers from patent defect. The show cause notice vide para 13 has granted a week s time from the date of receipt of notice stipulating that if no cause is shown then adjudicating authority shall proceed to decide the matter on merit and on the basis of the material available on record. The show cause notice was received on16-7-2009and the order granting the extension was passed on20-7-2009, which is legally unsustainable. The petitioner-Company is entitled to sit back and think that no order would be passed for one week from the date of receipt of the show cause notice but order has been passed within four days. Moreover, the petitioner-Company has not been granted any opportunity by supplying the documents, which included the test repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the order extending the period beyond six months has not been served on the petitioner-Company by registered post or by tendering the same to them or to their agent till date. An order would not assume the character of an order until and unless it is communicated to the petitioner as per the prescribed mode. The aforesaid proposition of law has been laid down by a Constitution Bench in Bachittar Singh s case (supra) on which reliance has been rightly placed by the learned counsel for the petitioner-Company. Therefore, as on date the period of six months has expired from the date of detention of the goods i.e. 22/23-1-2009. Once the period of six months has expired then time barred order cannot be re-opened by passing any fresh order. In any case, no such new order has been passed. Accordingly, the provisions of Section 110(2) of the Act would come in operation which provides for extension of period of six months by another period of six months. It is well settled that the order extending the period of six months is required to be passed and communicated to the petitioner when initial period of six months had not expired. In that regard reliance may be placed on the principles la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Lala Shri Bhagwan and another v. Ram Chand and another, reported in AIR 1965 SC 1767, it was held that the authorities or bodies which are given jurisdiction by statutory provisions to deal with rights of citizens should act judicially in dealing with matters entrusted to them. An obligation to act judicially may also in some cases, be inferred from the scheme of the relevant statute and its material provisions. In such a case, the authority or body must act in accordance with the principles of natural justice before exercising its jurisdiction and its powers; the obligations to follow the principles of natural justice need not be expressly imposed. Power to determine questions affecting the rights of citizens, would impose the limitation that the power should be exercised in conformity with the principles of natural justice. 36. Similar principles have been followed by the Division Bench judgment ofGujaratand Delhi High Courts in the cases of Vadilal Industries Ltd. (supra) and Neha Cosmetics (supra) in respect of similar provisions of Section 37(C)(a)(b) (c) of the Central Excise Act, 1944. However, there is a direct judgment of Madras High Court in the case of Redi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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