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TMI Blog2004 (9) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... Liquidator attached to this Court as Liquidator and directed him to take possession of the assets of the company. In pursuance of the said order, on 11-2-2004, the Official Liquidator deputed his officers to take possession of the assets of the company in liquidation, who reported that the machinery stored in 128 wooden cases is under seizure and custody of the Central Excise and Customs Department. Pursuant thereto, he addressed a letter dated 23-2-2004 to the authorities of the Central Excise and Customs Department, Kurnool, to furnish him the details relating to the seizure proceedings. Complaining that the respondents failed to furnish the details, he filed the present application, seeking a direction to the respondent to furnish him the details relating to the alleged seizure and custody of the machinery in question and to handover possession of the machinery to him on the grounds to be recorded infra. 3.Before proceeding to make a note of the rival submissions and contentions, it is appropriate to record the events that preceded the seizure of machinery by the Central Excise and Customs Department, and they run thus : M/s. Sri Vishnupriya Industries Limited (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 10-1-2002. Subsequently, on the basis of the instructions dated 22-2-2002 issued by the Deputy Commissioner, respondent No. 1, on 27-2-2002 once again passed order of detention, purportedly exercising powers under Section 72(2) of the Customs Act, for detention and sale of the warehoused wooden cases for recovery of customs duty of Rs. 22,20,38,112/-. When the company did not pay the demanded duty due, the wooden cases warehoused by it were seized under two different panchanamas - one containing 81 wooden cases and the other containing 47 wooden cases on 14-3-2002, and steps for auctioning the machinery were initiated. Therefore, respondent No. 1 vide O.C. No. 402/2002, dated 17-6-2002 informed the company that if they fail to pay the customs duty due, he would be compelled to proceed ahead with the auction of the detained machinery for recovery of the customs duty and interest thereon. Even after receipt of the said letter, when the company failed to pay the customs duty, respondent No. 1 proposed to conduct auction of the detained wooden cases for sale, and accordingly conducted the first auction on 30-10-2002 and the second auction on 30-12-2002, through the authorized Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son v. Collector of Customs - 1997 (96) E.L.T. 23 (S.C.) = (1998) 1 SCC 198. (3) He submits that if the amount allegedly demanded under Section 72(1) (a) to (d) of the Customs Act is not paid by the company, the proper officer is empowered to cause to detain and sell the goods, only after notice to the owner of the goods. Inasmuch as no notice whatsoever calling upon the owner to explain as to why the machinery should not be caused to be detained and sold, has been issued to the owner of the goods, the Assistant Commissioner of Central Excise could not have passed, and at any rate two orders of detention one on 19-12-2000 under Section 72(2) read with Section 142 of the Customs Act, in relation to the 1st and 2nd consignments of 81 wooden cases, and another on 27-2-2002 under Section 72(2) of the Act, in relation to the 1st, 2nd and 3rd consignments of 128 wooden cases and, without there being any show cause notice nor order-in-original in relation to the 3rd consignment, and, proceeded in pursuance thereof to put the machinery to public auction, and therefore, the alleged orders of detention, ab initio are void, and non est in the eyes of law. (4) He submits that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the machinery to be held at any time in the warehouse shall be such that the duty leviable thereon does not exceed Rs. 4,00,00,000/-, it is not known how the 2nd consignment of 45 wooden cases imported by company and warehoused on 9-10-1998, whose value is Rs. 22,35,16,017/- and involves a duty of Rs. 10,48,29,017/-, was allowed to be warehoused by the company whose duty is far higher than what is allowed by Warehouse Licence. (8) He submits that as per the provisions of Rule 272 of the Rules, any sale of the properties of the company in liquidation shall only be subject to sanction and confirmation by this Court, and inasmuch as the sale of the machinery alleged to be under seizure and custody of the respondents has not been effected, the company having gone into liquidation, the respondents have no right whatsoever to sell the machinery, which vests in the custody of the Official Liquidator. (9) He submits that since the company went into liquidation, the sale and confirmation of sale of the machinery, alleged to have been seized by the respondents, shall only be done by the Official Liquidator with prior sanction of this Court, and the proceeds realized throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o auction. (3) He denied the contention of the Official Liquidator, that there was no demand, as required under sub-section (1) of Section 72 of the Customs Act, before passing order of detention under Section 72(2) of the Customs Act. According to him, no notice is required to be given to the owner of the goods before passing order of detention. He submitted that since the company failed to pay the excise duty in terms of the bonds executed by them, wherein they undertook that they shall on or before the date or dates specified in the notices of the demand pay to the proper officer of Central Excise, all duties, rent and charges claimable whether by way of customs duties etc., the respondents passed the detention order dated 27-2-2002 under Section 72(2) of the Customs Act, and no exception can be taken thereto. (4) He submitted that since the duty leviable on the company have been confirmed in the orders-in-original dated 15-9-2000 and 10-10-2000 and the order of detention has been passed on 19-12-2000 and 27-2-2002 as required in terms of Section 72(2) of the Customs Act, no order of attachment of the machinery in terms of the CBEC Circular dated 15-12-1997, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 72 of the Customs Act, is required to issue notice to the owner of the goods? (3) Whether the orders of detention passed without complying the provisions of Section 72 of the Customs Act, would render the proceedings ab initio void and non est in the eye of law? (4) Whether in the sale of the machinery allegedly detained, the respondents are required to follow the procedure contemplated under Sec. 72(2) read with Section 142 of the Customs Act and the guidelines in the CBEC Circular issued thereunder, or are required to merely follow the procedure contemplated under Sec. 72(2) of the Customs Act? and (5) Whether upon an order of winding up being passed under Section 456 of the Companies Act, the properties of the company vest in the Official Liquidator, and whether he is entitled to take delivery of the allegedly detained goods from the respondents since the sale of the goods has not been effected, and whether the respondents in respect of their claim of duty dues, are required to prove their claim before the Official Liquidator? 8.Before proceeding to answer the aforementioned five points one by one, to wit, the sequence of the events that precede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of the Customs Act, 1962 read with Section 142(1) of the Customs Act, 1962 so as to recover the amounts due from them. 9.Though in the aforesaid orders-in-original, it was ordered that if the duty and interest as specified in (i) and (ii) is not paid within one week, the impugned goods would be liable for detention and sale under Section 72(2) read with Section 142(1) of the Customs Act, to recover the amounts due from them, the respondents have not taken any steps till 19-12-2000, when the Assistant Commissioner of Central Excise, passed an order styled as "detention order", purporting to be under Section 72(1) read with Sec. 142 of the Customs Act. The said order reads : M/s. Sri Vishnupriya Industries Ltd., Panyam Village were demanded Rs. 3,27,22,191/- and Rs. 10,48,29,017/- with interest @ 20% vide Orders-in-Original Nos. 1/2000-Cus., dated 15-9-2000 and 2/2000-Cus., dated 10-10-2000 respectively. The said orders were served on them on 20-9-2000 and 13-10-2000 respectively. But till date, they have failed to pay the duty and interest as demanded. I therefore, order for detention of 81 cases of warehoused goods of M/s. Sri Vishnupriya Industries Ltd., Panyam Village, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of 1st and 2nd consignments and the other panchnama comprising the 3rd consignment. Thereafter, the Superintendent of Central Excise, addressed letter to the company, informing that if the duty amount demanded along with interest is not paid immediately, they will be compelled to go ahead with auction of the machinery detained for recovery of duty and interest. Inasmuch, as there was no demand notice issued under Section 72(1) of the Customs Act, by the proper officer, the consequential proceedings under Section 72(2) of the Customs Act, and the steps taken by the respondents for sale of the warehoused goods, detained and seized, get vitiated, and more so when there was no notice issued to the owner of the goods, under Section 72(2) of the Customs Act, before seeking to detain and sell the goods. IN RE-POINT NOS. 1, 2 AND 3 : 12.Point Nos. 1, 2 and 3 are intertwined and interconnected, and as such, they are answered under one heading. In order to consider the question whether or not, there is proper demand made by the proper officer under sub-section (1) of Section 72 of the Customs Act, to the owner of the goods to pay the amount demanded thereunder, and in the event of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfaction of the proper officer, the proper officer may demand, and the owner of such goods shall forthwith pay, the amount of duty chargeable on account of such goods together with all penalties, rent, interest and other charges payable in respect of such goods, and if any owner fails to pay the amount demanded under sub-section (1), under sub-section(2), the proper officer may, without prejudice to any other remedy, cause to be detained and sold, after notice to the owner (any transfer of the goods notwithstanding) such sufficient portion of his goods, if any, in the warehouse, as the said officer may select. 14.The intendment of Section 72 of the Customs Act is that before an order causing to detain and sell the goods warehoused for violation of any of the provisions of Section 72(1) (a) to (d) of the Customs Act is passed, there should be a demand made by the proper officer to the owner of the goods, and if the owner of such goods, fails to pay forthwith, the amount of duty chargeable on account of such goods together with all penalties, rent and other charges payable in respect of such goods, then the proper officer under sub-section (2) of Section 72 of the Customs Act, af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned therein along with interest as applicable are pending recovery for the capital goods imported without paying customs duty, and that if the dues along with interest are not paid within ten days of its receipt, appropriate action will be initiated as per law. Here, it is required to notice that under sub-section (1) of Section 72 of the Customs Act, the proper officer shall make demand to the owner of the goods, who shall forthwith pay, the full amount of duty chargeable on account of such goods together with all penalties, rent, interest and other charges payable in respect of such goods. The proceedings dated 7-1-2002, which according to the respondents is a demand notice under Section 72(1) of the Customs Act, neither mentions the provision under which it has been issued nor reflects the future course of action that is to be followed if the amounts mentioned therein are not paid within ten days. The proper officer, in the said proceedings, merely referred to B/E No., order-in-original No./date and duty involved, and what are the amounts that are payable by the owner of the goods, as referred to in sub-section (1) of Section 72 of the Customs Act, are not reflected in the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n est in the eye of law for the reason that there was neither any demand notice nor any notice issued to the owner of the goods before passing the detention order for sale. As such, any steps taken in pursuance of the said orders, including seizure under panchanams and the subsequent proceedings of sale, get vitiated. IN RE-POINT NO. 4 : 18.In view of my findings on point Nos. 1, 2 and 3, that there is no proper demand made under sub-section (1) of Section 72 of the Customs Act nor is there any notice issued to the owner of the goods under sub-section (2) of Section 72 of the Customs Act, and as such, the entire detention orders, are ab initio void and non est in the eye of law, the necessity of answering point No. 4 does not arise, for the reason that the question whether the procedure contemplated under Section 72(2) read with Section 142 of the Customs Act and the instructions issued by the Board of CBEC in their Circular No. 365/81/1997-CX., dated 15-12-1997 or the procedure under Section 72(2) of the Customs Act alone, for detention and sale of the warehoused goods for realizing their dues, would have been necessary if point Nos. 1, 2 and 3 were answered positively in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th respect to sale of movable/immovable properties by Central Excise Officers for recovery of Central Excise dues, and that mere compliance of the provisions under Section 72(2) of the Customs Act, is sufficient for selling the detained goods. IN RE-POINT NO. 5 : 20.Though the respondents pursuant to the orders of detention, which were held to be ab initio void and non est in the eye of law, conducted auction of the detained goods, the fact remains as on 1-12-2003; when this Court passed the order of winding up against the company, no sale was effected. It is required to be noticed that under Section 456(1) of the Companies Act where a winding up order has been made or where a provisional liquidator has been appointed, the liquidator or the provisional liquidator, as the case may be, shall take into his custody or under his control, all the property, effects and actionable claim to which the company is or appears to be entitled. Inasmuch as no sale of the goods has been effected, having regard to the provisions of 456(1) of the Companies Act, the assets of the company, on an order of winding up being passed, stand vested in the Official Liquidator, and the Official Liquidator a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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