Bombay High Court
Leyla Mahmoodi Through Ca Sandip Kadam vs The Additional Commissioner Of Customs on 21 December, 2023
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2023:BHC-OS:15115-DB
902-wp-467-2023reserved-19-12-23.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 467 OF 2023
1. Leyla Mohmoodi, through
Constituted Attorney Sandip D. Kadam.
2. Mojtaba Ebrahim Gholami through
Constituted Attorney Sandip D. Kadam ...Petitioners
Versus
1. The Additional Commissioner of Customs
2. The Commissioner of Customs (Appeals)
3. The Principal Commissioner of Customs
4. The Assistant Commissioner of Customs
5. The Union of India. ...Respondents
__________
Mr. Anil Balani a/w Mr. Jas Sanghavi, Mr. Prakash Shringrani, Ms. Priyasha
Pawar, Mr. Alekshendra Sharma, Ms. Revati Nansi, i/b PDS Legal, for
Petitioner.
Mr. Devang Vyas, ASG a/w Ms. Neeta Masurkar and Mr. Ram Ochani for
Respondent.
Ms. Nithee Punde a/w Mr. Harshad Shingnapurkar for R. No. 2.
__________
CORAM : G. S. KULKARNI &
JITENDRA JAIN, JJ.
Reserved on :DECEMBER 13, 2023.
Pronounced on :DECEMBER 21, 2023
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Judgment: (Per G. S. Kulkarni, J.)
The judgment has been divided into the following parts:
Contents Paragraphs Nos.
A Preface 1 to 3
B Facts 4 to 16
C Reply Affidavits 17 to 21
D Submissions on behalf of the petitioners 22 to 25
E Submissions on behalf of the respondents 26
F Analysis and Conclusion. 27 to 59
A. Preface:-
1. This petition under Article 226 of the Constitution of India raises an
important issue as to whether the action of the respondents to sell / dispose of
the gold jewellery of the ownership of the petitioners, as seized from them,
without notice to the petitioners, and before an order of confiscation under
Section 111 of the Customs Act, 1962 (for short 'the Customs Act') can be said
to be legal and valid.
2. The contention of the petitioners is that the impugned action of the
respondents of seizure of petitioners' gold jewellery and its disposal was patently
illegal being in breach of the provisions of not only the Customs Act, but the
rights guaranteed to the petitioners under Article 300A read with Article 14 of
the Constitution of India.
3. The prayers as made in the petition are required to be noted which read
thus:-
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(a) This Hon'ble Court be pleased to issue a writ of Mandamus or a
writ in the nature of Mandamus or any other appropriate writ, order
or direction, ordering and directing the Respondents themselves, its
officers, subordinates, servants, and agents to forthwith provide the
records of seized gold jewellery and return gold equal to 1028 grams
of gold of which was disposed by the Respondents to enable the
Petitioners to re-export the same in terms of the order dated
19.09.2022, passed by the Revisionary Authority, Government of
India.
(b) in the alternative to the Prayer Clause (a) above, this Hon'ble
Court be pleased to issue a writ of Mandamus or a writ in the nature
of Mandamus or any other appropriate writ or order or direction
under Article 226 of the Constitution of India ordering and directing
the Respondents themselves, its officers, subordinates, servants, and
agents to forthwith pay the amount equivalent to the value of the
seized/confiscated 1028 grams of Gold Jewellery as per the current
market value.
(c) pending the hearing of the above Petition, this Hon'ble Court,
by an interim order be pleased to direct the Respondents, to
forthwith deposit an amount equivalent to the current market value
of the seized 1028 grams of gold jewelry, with liberty to the
Petitioners to withdraw the same on such terms and conditions as
may deem fit to this Hon'ble Court.
(d) for ad-interim reliefs in terms of prayer clause (c) above;
(e) for costs of this Petition; and
(f) for such further and other reliefs as this Hon'ble Court may
deem fit in the facts and circumstances of the case."
B. Facts:-
4. It is the case of the petitioners that they are Iranian nationals. On 14
January 2018, they arrived at Chhatrapati Shivaji Maharaj International
Airport , Mumbai by the Oman Air Flight. The petitioners were wearing gold
ornaments (bangles) having net weight of 1028 grams. They were intercepted
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by the Customs officials at Mumbai Airport and the gold bangles (for short 'the
gold jewellery') worn by them, were seized by the Customs officials.
5. It appears that at the departmental level and which was not to the
knowledge of the petitioners that the respondents initiated an action for disposal
of the seized gold jewellery for which on 4 April 2018 a notice was issued by the
Assistant Commissioner of Customs, Air Intelligence Unit, C.S.I. Airport, inter
alia recording that the officers of the Commissionerate had seized assorted gold
jewellery totally weighing 1028 grams valued at Rs.26,63,366/- from the
petitioners who were holding Iranian passport, on their arrival from Muscat. It
was recorded that the jewellery was seized under the panchanama in the
reasonable belief that it was smuggled into India and hence, liable for
confiscation under the provisions of the Customs Act,1962. Such notice was
being issued without prejudice to any person(s) to bring on record the objection,
if any, for disposal of the seized assorted gold jewellery totally weighing 1028
grams within fifteen days from the date of issue of the notice, failing which the
same would be disposed of without further reference to the department. Such
notice is stated to be forwarded to the petitioners, as also put up on the notice
board of the C.S.I. Airport. It is alleged that it was also forwarded to Mr. Prakash
Singrani and Mr. Prassad Kamble, Advocate. However, it appears that there is no
record with the Customs of the same being received by the petitioners. Insofar
as the notice being addressed to the Advocates was concerned, at the relevant
time, the said Advocates were not the petitioners' Advocate before the
department. In this regard on 13 April 2018, Shri. Prakash K. Shingrani
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informed the Assistant Commissioner of Customs that he had no instructions
from the petitioners as after released on bail, the petitioners had not contacted
him. He recorded that such fact of the notice be informed to the Consulate, and
if no reply is received it may be disposed off according to law.
6. It appears that the Assistant Commissioner initiated proceedings under
Section 110(1B) of the Customs Act so as to obtain an order from the Court of
Metropolitan Magistrate for the identity of the gold jewellery for disposal of the
gold jewellery. Such an application came to be allowed by the learned
Metropolitan Magistrate, 66th Court by an order dated 18 May 2018 (page 132)
which reads thus:-
"No. SD/INT/AIU/21/2018 APD
It is hereby Certified that the application U/Section 110(1B) was allowed
and on 17/05/2018, I have personally verified the seized property listed below:-
File No. Description of goods seized
Assorted Gold jewellery (from Pax
SD/INT/AIU/21/2018 APD no. 1 - 3 Crude Gold spiral Bangles -
24kt- 576 gms. Rs. 15,41,808/- and
from pax no. 2- Crude Gold kada-
24kt. 320 gms- Rs. 8,56,560/- &
Gold Kada- 18 Kt- 132 gms-
2,64,998/-) collectively weighing
1028 gms
(i) The above listed property has been personally verified and found to be
correct.
(ii) The above property was photographed in my presence and the said
photographs are attested by me.
(iii) This certificate is not concerned with sealed condition of the above listed
property.
Place: Mumbai sd/-
Date: 18/05/2018 (I.R. Shaikh)
Metropolitan Magistrate,
66th Court, Andheri.
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7. On 1 June 2018 a disposal order came to be passed to dispose of the
petitioner's gold jewellery. The said order reads thus:
"DISPOSAL ORDER
To: The Dy. Commissioner of Customs, Disposal Unit.
Chhatrapati Shivaji International Airport, Sahar, Mumbai-99
The goods listed below may be disposed of at the earliest. After disposal, full
particulars of disposal should be intimated to this unit with reference to this
Disposal :
Sr. File No. PAX Name W/H Entry Description Value in Remarks
No. No. of goods Rupees
01 SD/INT/AIU/21/2018 Mrs. Leyla DS-I/R2/76/ Assorted gold Rs.26,63,366/- Certificate dated
AP 'D' Mahmoodi 2018 D jewellery 18.05.2018
and Mr. Location- totally regarding
Mojtaba CBT-II weighing completion of
Gholami 1028 grams action u/s. 110 of
the Customs Act,
1962, is enclosed
herewith
Sd/- 01.06.18
(Girish Kumar Sharma) (R.B. Mishra) (Subrat Rout)
I.O. AIU/'D' Batch ACS/AIU 'D' Batch Asst. Commissioner of Customs
AIU,CSI Airport, Mumbai"
8. On 13 June 2018 the Deputy Commissioner of Customs issued a letter of
authority, authorizing Shri. D. P. Kshirsagar, Air Customs Superintendent, Gold
Disposal Section, inter alia to withdraw the gold jewellery packages from the
strong room for the purpose of depositing in India Government Mint, Mumbai.
The gold jewellery belonging to the petitioner was indicated under the
following entry. The relevant contents of the said authority letter are required to
be noted which read thus:-
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"OFFICE OF THE COMMISSIONER OF CUSTOMS (AIRPORT)
TERMINAL-2, LEVEL-II, CHHATRAPATI SHIVAJI INTERNATIONAL AIRPORT
SAHAR, ANDHERI (EAST), MUMBAI - 400 099.
F. No. AirCus/71-01/2018-19/Pt-I Date 13.06.2018
AUTHORITY LETTER
I, J. P. Singh, Asstt. Commissioner of Customs, Gold Disposal Section, CSI Airport,
Mumbai hereby authorize Shri D. P. Kshirsagar, Air Customs Superintendent-Gold Disposal
Section, to withdraw the following packages, said to contain gold/gold jewellery from Strong
Room for the purpose of depositing in the India Government Mint, Mumbai under escort of
Shri R. M. Salvi, Head Hawaldar, under supervision of Shri D.P. Kshirsagar, ACS-Gold
Disposal Section and Shri Prasad S. Pednekar, ACO-Gold disposal Section, CSI Airport,
Mumbai
Sr. File No. No. Description Weight Value (in Rs.) Remarks
No. of (in
Pkg gms)
s.
1 ......
9 SD/INT/AIU/21/2018 1 One sealed pkg stc 1028 26,63,366.00 Action under
AP D Assorted gold section 110
jewellery totally completed on
weighing 1028 18.05.2018.
grams Disposal order
dated
01.06.2018.
(emphasis supplied)
9. On 6 July 2018 a show cause notice is stated to have been issued to the
petitioners calling upon the petitioners as to why the seized gold jewellery ought
not to be confiscated and penalty imposed. However, it appears that before the
show cause notice could be taken to its logical conclusion and an adjudication
order to be passed thereon, on 1 August 2018 the said gold jewellery belonging
to the petitioners was sold by State Bank of India and an intimation to that
effect was issued by the State Bank of India vide letter dated 1 August 2018
addressed to the Commissioner of Customs (Airport). The contents of the said
letter read thus:-
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Date : 01.08.2018
Ref. No. BBM/2018-19/97
To,
The Commissioner of Customs (Airport)
Terminal - 2, Level-II
Chhatrapati Shivaji International Airport,
Sahar, Andheri (East),
Mumbai - 400 099.
Dear Sir,
DISPOSAL OF 75,520 KG. CONFISCATED GOLD-AUCTION LO
NO-17, DATED 26.07.2018
With reference to your letter no. F.No. Aircus/71-01/2018-19/Pt-1-
Disposal, we sold your confiscated gold through auction dated
01.08.2018 of total 75520 gms gold of 995 purity deposited with us, as
per average market price per gram based on closing market price reported
in three economic dailies dated 01.08.2018, i.e. Rs.2967.50 per gram.
The details are as under:
A
Price of Gold (Highest bid price per 75520 gms 224105600.00
1 gm. rate Rs.2967.5/gm) 2967.5
2 Add - CGST @ 1.5% 3361584.00
3 Add - SGST @1.5% 3361584.00
4 Total price of Gold 230828768.00
(Inclusive of GST)
1 Price of Gold (Highest bid price per 75520 gms 224105600.00
gm. Rs.2967.5/gm) 2967.5
2 Less out of pocket expenses @ 1% 2241056.00
Less - CGST @ 9% on out of pocket 201695.00
expenses
Less - SGST @ 9% on out of pocket 201695.00
expenses
Net Amount Payable to Customs 221461154.00
Authority vide DD No.- 319233 dated
02.08.2018
GST amount recovered as mentioned above has been deposited with the
concerned Govt. authorities.
Yours faithfully,
Sd/-
For Asst. General Manager"
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10. It may be observed that, as to whatever had happened within the
department from the date of the seizure of the gold jewellery that is on 14
January 2018 till the disposal of the gold jewellery which had taken place on 1
August 2018, as informed by State Bank of India, the petitioners were never put
to any notice whatsoever, much less, in a manner the law would mandate that
the petitioners' gold jewellery as seized was disposed of / sold. Surprisingly the
petitioners were kept in complete darkness either personally or through their
country's consulate, in regard to the disposal of their gold jewellery.
11. On 18 January 2019 an order-in-original came to be passed by the
Additional Commissioner of Customs. It clearly appears that before such orders
could be passed, the petitioners were not heard, the petitioners were not
furnished with the copy of the show cause notice in a manner known to law. By
such order-in-original, for the reasons as recorded in such order, the Additional
Commissioner of Customs ordered absolute confiscation of the gold jewellery as
also imposed personal penalty of Rs.1,75,000/- of petitioner No.1 and personal
penalty of Rs.1,25,000/- of petitioner No.2.
12. Significantly the order-in-original does not record that the gold jewellery
belonging to the petitioner was already sold and disposed of.
13. The petitioners being aggrieved by the order-in-original dated 18 January
2019 preferred an appeal before the Commissioner of Customs (Appeal). In the
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appeal, the petitioners stated that they have received a copy of the order through
the Consulate of Iran on 27 February 2019. The petitioners categorically
contended that they had no intimation of the proceedings of the show cause
notice, as initiated by the Customs Officer, as also they were not aware of the
order-in-original passed on the show cause notice. It was contended that the
Consulate General of Islamic Republic of Iran, Mumbai was representing the
petitioners who were based in Iran. The petitioners stated that they were the
owners of the seized goods and also produced the purchase invoices dated 20
June 2017 and that the gold was dutiable and not prohibited and hence, re-
export of the goods may be allowed. The petitioners were represented by the
Vice Consul of the Consulate General of the Islamic Republic of Iran, who
argued on the grounds as raised in the appeal. The Commissioner of Customs
(Appeal) passed an order on the appeal (order-in-appeal) dated 28 January 2020
inter alia observing that the intention of the petitioner was nothing but to
smuggle the gold jewellery. However, while confirming the order-in-original,
the Commissioner (Appeals) reduced the penalty imposed on the petitioner
from Rs.1,75,000/- to Rs.1,25,000/- for petitioner No.1 and from Rs.1,25,000/-
to Rs.1,00,000/- to petitioner No.2 and to that extent, modified the order-in-
original.
14. The petitioners being aggrieved by the order-in-appeal, approached the
Revisional Authority namely the Principal Commissioner and Ex-officio
Additional Secretary to the Government of India, by filing a revision application
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under Section 129DD of the Customs Act. In the revision application, the
petitioners contended that a panchanama was drawn in English, a language not
familiar to them. They also sought an opportunity to cross-examine the
panchas. The petitioners contended that the petitioners were tourists and were
eligible to carry gold including personal jewellery for the stay in India. They
contended that they were not involved in any smuggling activity in the past.
The petitioners contended that the jewellery under absolute confiscation was
not dutiable as personal gold jewellery was not prohibited items and were only
restricted items. Another significant contention as urged by the petitioners was
that they were not given reasonable opportunity to defend the proceedings of
the show cause notice, which was in violation of the principles of natural justice.
The respondents submitted their written reply.
15. The Revisional Authority passed final orders on the petitioners' Revision
Application dated 19 September, 2022 inter alia observing that the quantity of
the gold jewellery was not large and that the petitioners were wearing the gold
jewellery as seized. It was observed that there were no allegations that the
petitioners were habitual offenders and of being involved in similar offences
earlier. It was also observed that the quantity and facts of the case indicated that
it was a case of non-declaration of gold jewellery and not smuggling. The
Revisional Authority hence observed that in the facts and circumstances, the
misdemeanour would be required to be kept in mind, while using discretion
under Section 125 of the Customs Act and while imposing quantum of penalty.
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The prayer of the petitioners that they, being foreign nationals, be allowed to re-
export the gold jewellery, was also considered. The revisional authority
observed that considering the individual case of the petitioners, the quantum of
gold jewellery being small and considering the position in law, the absolute
confiscation of the gold jewellery was harsh and not justified. It was thus held
that in the facts of the case, the petitioners being foreign nationals, an option to
re-export the gold jewellery, on payment of redemption fine should have been
allowed. It was hence observed that the gold jewellery be permitted to be re-
exported on payment of a redemption fine. Also it was observed that the
reduced penalty was commensurate and was not required to be interfered.
Accordingly, following order was passed by the revisional authority disposing of
the petition:-
"18. In view of the above, the Government modifies the impugned
order of the Appellate Authority to the extent of the absolute
confiscation of the impugned gold jewellery detailed at Table No.1
above, collectively weighing 1028 grams and valued at Rs.
26,63,366/-. The impugned gold jewellery mentioned at Table No.
1 above, having total net weight of 1028 grams, and market value of
Rs. 26,63,366/- is allowed to be re-exported on payment of a
redemption fine of Rs. 5,25,000/- (Rupees Five Lakhs Twenty Five
Thousand only). The reduced penalty imposed on A1 and A2 of Rs.
1,25,000/- and Rs.1,00,000/- respectively is proper and judicious and
the Government upholds the same.
19. The OIA passed by the AA is modified in the above terms
only to the extent of modifying the absolute confiscation and
granting an option to the applicants to re-export the gold jewellery on
payment of a redemption fine. The penalties imposed by AA are
sustained.
20. Revision Application is disposed of on the above terms."
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16. In pursuance of the orders passed by the Revisional Authority, the
petitioners through their Advocate approached the Principal Commissioner of
Customs vide letter dated 23 January, 2022 requesting that the Revisional
Authority, having granted redemption of gold jewellery in question 1028 grams
valued on payment of Rs. 5,25,000/- for re-export, requested that necessary
directions be issued to the concerned authority to inform the petitioners as to
whether the gold jewellery is available with the Department for redemption to
the petitioners. On 13 October, 2022, a reminder letter was addressed by the
Advocate for the petitioner to the Joint Commissioner, that reply to the earlier
letter was not received and the details were not furnished, so as to execute the
orders passed on the revision application. However, as no reply was received, a
detailed reminder dated 02 November, 2022 was addressed inter alia recording
that Consulate General of Islamic Republic of Iran, Mumbai was following up
the matter, and the correct position was required to be informed to the Embassy
Officials, as no information in regard to the availability of the confiscated gold
was being furnished. It was, therefore, requested that the authorities ought to
look into the matter and inform whether the confiscated goods were available.
As no reply was received, another letter dated 24 November, 2023 came to be
addressed by the petitioners' Advocate to the Principal Commissioner of
Customs. Making a reference to the earlier letters, it was requested that no
sooner it is confirmed that the gold jewellery was available for re-export, the
petitioners would deposit the redemption fine and the penalties failing which
the petitioners would have no alternative, but to approach the High Court. As
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no response was received to such letter, the petitioners have filed the present
petition making the prayers as noted above.
(C) Reply Affidavits
17. The respondents have filed two reply affidavits. The first reply affidavit
is of Mr. G. B. Tilve, Assistant Commissioner of Customs, which does not
dispute that the petitioners were carrying the gold jewellery in question, when
they reached Mumbai Airport by Oman Air Flight, on 14 January, 2018. The
affidavit sets out the facts in relation to the adjudication of the show cause
notice, the orders passed on the show cause notice, the appeal preferred by the
petitioners, orders passed by the appellate authority and thereafter in regard to
the orders passed by the revisional authority on the petitioners' revision. As the
said facts are already discussed and subject matter of record, they need not be
detailed any further, suffice it to observe that there is no dispute that the orders
passed by the Revenue Authority would direct the Department to permit the
petitioners to re-export the gold and such order has attained finality.
18. In so far as the availability of the gold is concerned, the challenge as
raised to the approach of the Department in not reverting the petitioners'
repeated queries that the gold be made available, so that the redemption fine can
be paid, the case of the department can be noted. It is stated in the affidavit that
Notification No.31 of 86 dated 05 February, 1986 as amended from time to
time, issued under Section 110(1A) of the Customs Act authorizes the Central
Government, to issue a notification for disposal of gold on considerations as
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provided in sub-section (1A), namely having regard to the perishable, hazardous
nature of any goods, depreciation in the value of goods with the passage of time,
constraints of storage space for the goods or any other relevant
considerations, as soon as, may be after its seizure, by following the procedure
prescribed under Section 110(1B) of the Customs Act, 1962. It is stated that
the jewellery seized from both the petitioners fell under item No.AA specified
under the said Notification No.31 of 86 as amended, which pertains to "gold in
all forms including bullion, ingot, coin, ornament, crude jewellery". It is stated
that in view of the said provision and as gold being a precious item having high
value, there are constraints on the storage of the same in the office for longer
duration. Hence, in view of the specific provision for disposal of goods, as
soon as after seizure, after following due procedure, a n action was taken by
respondents to dispose of the gold jewellery belonging to the petitioners, which
was justified and legal. It is stated that the ownership of the seized gold had
stood vested with the Central Government post confiscation. Hence, there
was no question of depriving the petitioners of their own property.
19. In paragraph 7 of the affidavit, it is contended that Section 110 of the
Customs Act provides for a notice, such notice dated 04 April, 2018 was issued
to both the petitioners and their Advocates Mr. Prakash Shingrani and Mr.
Prasad Kamble, as also the same was put on the n otice board at the a irport. It
is further contended that as per the provisions of Section 110(1B), an
application was made before the Court of the learned Metropolitan Magistrate,
for identification of the petitioners' gold jewellery, t he same was allowed and
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Certificate of verification was issued by the learned Metropolitan Magistrate
on 18 May, 2018. It is stated that the jewellery was sold in auction through
State Bank of India as per the procedure, and to that effect a letter dated 01
August, of State Bank of India was issued informing auction of the gold which
contained the gold seized from the petitioners. In so far as the return of the gold
to the petitioners is concerned, in paragraph 16 of the affidavit, it is stated as
under:-
"16. With reference to Ground M, I submit that the sale proceeds of
seized gold after adjusting the liabilities of the Petitioners i.e
redemption fine and penalties can be returned to the Petitioners as
the Revisionary Authority has upheld the confiscation of seized gold
and penal action against the Petitioners. However interest is not
applicable under the provisions of Section 27 A of the Customs Act,
1962 as the case does not pertain to duty."
20. There is a second affidavit filed on behalf of the Department also of Mr.
G. B. Tilve, Assistant Commissioner of Customs dated 07 October, 2023. The
said affidavit is nothing but a replica of the first reply affidavit which seeks to
justify the confiscation and disposal of the gold jewellery of the petitioners.
21. A rejoinder affidavit has been filed by the Constituted Attorney of the
petitioners, reiterating the contentions as urged in the petition. The contentions
are inter alia that the sale of the petitioners jewellery is illegal being contrary to
the provisions of the Customs Act and Article 300A of the Constitution.
D Submissions on behalf of the petitioners:-
22. Having considered the pleadings, we now turn to the submissions as
advanced on behalf of the petitioners. It is submitted that in the present case
gold jewellery was seized by the respondents from the petitioners, exercising
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powers under the Customs Act. It is submitted that when the gold jewellery was
seized, there was a legal obligation on the part of the respondents to preserve the
property of the petitioners and keep the same intact. Also there was an
obligation to take reasonable care of the seized jewellery so as to enable the
respondents to return the gold jewellery to the petitioners, in the same
condition in which it was seized. The position was that the government was a
bailee until the confiscation order attained finality. It is submitted that the order
passed by the adjudicating authority in adjudicating the show cause notice is not
a final order, as it is subject to an appeal and revision. There is a likelihood that,
in such further proceedings, the confiscation order in a given case may be
reversed or modified, in such event the seized gold could no longer be retained.
It is hence submitted that there would be a statutory obligation on the
respondents to return the goods to the owner. It is next submitted that once it
was decided in favour of the petitioners who are the owners of the gold jewellery
that the same be returned either for re-export or otherwise and the said order is
not stayed by any Court, it becomes an absolute liability of the respondents to
return the goods to the petitioners. In such case, the petitioners being the
owners of the goods, have the right to demand the seized jewellery. It is
submitted that the respondents would not have any legal right to dispose of the
goods without following due procedure in law. It is further submitted that an
order for its disposal passed by the Magistrate would not in any manner
extinguish the right of the owner to demand the return of the property and the
obligation of the respondents to return the gold jewellery to the petitioner and
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in its absence, the respondents are liable to pay the market value of the seized
gold jewellery to the petitioner. It is submitted that applying the provisions of
Section 110(1A) of the Customs Act was illegal as gold does not fall within the
meaning of perishable or hazardous goods. Therefore, any action on the part of
the respondents to dispose of the said goods under Section 110 would amount to
illegality. In this context, it is submitted that it is held by the Delhi High Court
in the case Zhinet Banu Nazir Dadany Vs. Union of India 1 that in case of
seizure of gold or gold ornaments / items, such goods are neither perishable nor
hazardous as per Section 110(1A) of the Customs Act and that such goods are
required to be disposed of only after issuing a notice to the person from whom
the gold was seized. It is next submitted that without admitting that Section
150 was applicable in the present facts, no notice under Section 150 of the
Customs Act was issued to the petitioners before the disposal of the gold
jewellery. It is strongly contended that the fact of disposal of seized confiscated
goods, was also not brought to the knowledge of the appellate authority or the
Revisional Authority at any point of time.
23. It is next submitted that the Revenue's Circular Reference
F.No.711/4/2006-Cus.(AS) New Delhi dated 14 February 2006, the Board had
stressed upon the requirement of issuing notice to the owner of the goods, under
any provision of the Customs Act before the disposal of the confiscated goods in
respect of which appeals / legal remedies have not been exhausted by the owner
of the goods. It is submitted that such instruction was issued by the Board
realising that the seized goods were disposed of without issuing notice to the
1 2019(367) ELT 385 (Del.)
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owner of the goods, which resulted in a loss to the exchequer on failure to
comply with the requirements of Section 150 of the Customs Act. It is
submitted that the customs authorities have failed to adhere to the instructions
issued by the Board in regard to issuance of a notice before the disposal of the
gold jewellery in question, which has resulted in undue financial loss and serious
prejudice to the petitioner. It is submitted that in the present case, the order
passed by the Revisional Authority has attained finality which is required to be
implemented in its letter and spirit. The respondents cannot be heard to say that
such order would not be complied with and/or that the petitioners' gold
jewellery would not be returned and made available to the petitioners for re-
export. It is submitted that the petitioners in the present case have been put to
undue loss and are deprived of their property, apart from serious harassment.
Such actions on the part of respondents is violative of the petitioners right
guaranteed under Article 300A of the Constitution.
24. It is next submitted that the Circular dated 6 September 2022 is
misconceived as the said circular is not binding on the petitioner. It is submitted
that such circular cannot override the statutory provisions. In support of such
contentions, reliance is placed on the decision of the Madras High Court in the
case Carista Herbal Products (P) Ltd. vs. Commissioner of Central Excise,
Pondicherry2; Union of India Vs. Amalgamated Plantations (P) Ltd. 3; Kalyani
Packaging Industry Vs. Union of India4.
2 2019(370)ELT 223(Mad.)
3 2016(340)ELT 310 (Gau.)
4 2004(168) ELT 145 (S.C.)
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25. In support of the submissions on illegal disposal of the gold and that the
petitioners have become entitled to return of the jewellery and / or for payment
of market value of the goods, reliance is placed on the decisions in Union of
India Vs. Shambhunath Karmakar5; State of Gujarat Vs. M.M.Hazi Hasan6.
E. Submissions on behalf of the respondents:-
26. On the other hand Mr. Devang Vyas, learned ASG has made the
following submissions:
At the outset Mr. Vyas has fairly submitted that the gold jewellery subject
matter of the proceedings in the present case, after its seizure was disposed of /
sold. He however submits that the provisions of Section 150 of the Customs Act
are not applicable as in the facts of the present case, the gold was already sold
although later on confiscated. It is however submitted that proper procedure
was followed inasmuch as after seizure a show cause notice was issued to the
petitioners and an order adjudicating the show cause notice came to be passed
on 6 July 2018 whereby the goods were directed to be confiscated. It is his
submission that Section 110 with its sub-sections are applicable so as to justify
the orders passed by the respondents to dispose of the petitioners gold jewellery.
Mr. Vyas has placed reliance on the Notification dated 22 December 1997
(Notification No.72/97-Cus.(N.T.), to submit that as per the provisions of
Section 110(1A) of the Customs Act, by such notification, gold, in all forms
including bullion, ingot, coin, ornament, crude jewellery, has been notified
5 1986(26) ELT 719 (Cal.)
6 AIR 1967 SC 1885
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under the said provision. It is submitted that Section 110(1B) of the Customs
Act confers an absolute power on the department to dispose of the gold
jewellery in the manner as set out in the said provision which would include
power to dispose of even prior to adjudication. It is his submission that the
department has strictly followed the provisions of Section 110. It is next
submitted that disposal of the gold jewellery in question would not amount to
sale. Mr. Vyas would next submit that the power conferred on the Customs
Authorities to dispose of gold has not been assailed by the petitioners. The
notifications as issued by the Customs Authorities are fully applicable. He has
further submitted that neither the circular nor the statutory provisions are
assailed by the petitioners and on this count, the petition ought not to be
entertained. In support of such submissions, reliance is placed on a decision of
this Court in Shabir Ahmed Abdul Rehman vs The Union Of India7.
F. Analysis and Conclusion
27. We have heard learned Counsel for the parties, we have also perused the
record.
28. At the outset, we may note some of the admitted facts. It is not in dispute
that on 14 January 2018 the petitioners arrived in India and were apprehended
at the Mumbai Airport. The jewellery belonging to the petitioners which were
gold bangles came to be seized by the Customs officials.
7 2009(235) ELT 402(Bom)
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29. The power of the Customs Authorities to seize the goods is conferred by
Section 110 of the Customs Act and its application was subject matter of debate
in the present proceedings. We thus note the said provision which reads thus:-
"110. Seizure of goods, documents and things.--
(1) If the proper officer has reason to believe that any goods are
liable to confiscation under this Act, he may seize such goods:
Provided that where it is not practicable to remove, transport,
store or take physical possession of the seized goods for any reason,
the proper officer may give custody of the seized goods to the
owner of the goods or the beneficial owner or any person holding
himself out to be the importer, or any other person from whose
custody such goods have been seized, on execution of an
undertaking by such person that he shall not remove, part with, or
otherwise deal with the goods except with the previous permission
of such officer:
Provided further that where it is not practicable to seize any such
goods, the proper officer may serve an order on the owner of the
goods or the beneficial owner or any person holding himself out to
be importer, or any other person from whose custody such goods
have been found, directing that such person shall not remove, part
with, or otherwise deal with such goods except with the previous
permission of such officer.
(1A) The Central Government may, having regard to the
perishable or hazardous nature of any goods, depreciation in the
value of the goods with the passage of time, constraints of storage
space for the goods or any other relevant considerations, by
notification in the Official Gazette, specify the goods or class of
goods which shall, as soon as may be after its seizure under sub-
section (1), be disposed of by the proper officer in such manner as
the Central Government may, from time to time, determine after
following the procedure hereinafter specified.
(1B) Where any goods, being goods specified under sub-
section(1A), have been seized by a proper officer under sub-
section(1), he shall prepare an inventory of such goods containing
such details relating to their description, quality, quantity, mark,
numbers, country of origin and other particulars as the proper
officer may consider relevant to the identity of the goods in any
proceedings under this Act and shall make an application to a
Magistrate for the purpose of--
(a) certifying the correctness of the inventory so prepared; or
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(b) taking, in the presence of the Magistrate, photographs of
such goods, and certifying such photographs as true; or
(c) allowing to draw representative samples of such goods, in
the presence of the Magistrate, and certifying the correctness of
any list of samples so drawn.
(1C) Where an application is made under sub-section (1B), the
Magistrate shall, as soon as may be, allow the application.
(1D) Where the goods seized under sub-section (1) is gold in any
form as notified under sub-section (1A), then, the proper officer
shall, instead of making an application under sub-section (1B) to
the Magistrate, make such application to the Commissioner
(Appeals) having jurisdiction, who shall, as soon as may be, allow
the application and thereafter, the proper officer shall dispose of
such goods in such manner as the Central Government may
determine.
(2) Where any goods are seized under sub-section(1) and no notice
in respect thereof is given under clause(a)of section 124 within six
months of the seizure of the goods, the goods shall be returned to
the person from whose possession they were seized:
Provided that the Principal Commissioner of Customs or
Commissioner of Customs may, for reasons to be recorded in
writing, extend such period to a further period not exceeding six
months and inform the person from whom such goods were seized
before the expiry of the period so specified:
Provided further that where any order for provisional release of
the seized goods has been passed under section 110A, the specified
period of six months shall not apply.
(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 therefrom in the presence of an officer of customs.
(5) Where the proper officer, during any proceedings under the Act,
is of the opinion that for the purposes of protecting the interest of
revenue or preventing smuggling, it is necessary so to do, he may,
with the approval of the Principal Commissioner of Customs or
Commissioner of Customs, by order in writing, provisionally attach
any bank account for a period not exceeding six months:
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Provided that the Principal Commissioner of Customs or
Commissioner of Customs may, for reasons to be recorded in
writing, extend such period to a further period not exceeding six
months and inform such extension of time to the person whose
bank account is provisionally attached, before the expiry of the
period so specified."
(emphasis supplied)
30. On a plain reading of Section 110 of the Customs Act, it is quite clear
that it is a provision in relation to seizure of goods, documents and things. It
provides that if the proper officer has a reason to believe that any goods are
liable to confiscation under the Customs Act, he may seize such goods. Sub-
section (1), sub-sections (1A), (1B) and (1D) are required to be cumulatively
read inasmuch as Section (1A) is the the power of Central Government to issue
a notification in the Official Gazette to specify the goods or class of goods which
shall, as soon as may be after its seizure under sub-section (1) be disposed of by
the proper officer in such manner as the Central Government may, from time to
time, determine after following the procedure as specified in the said provision.
This having regard to the perishable or hazardous nature of any goods,
depreciation in the value of the goods with the passage of time, constraints of
storage space for the goods or any other relevant considerations. Sub-section
(1B) provides that any goods specified under sub-section (1A), having been
seized by a proper officer under sub-section (1), he shall prepare an inventory of
such goods containing such details relating to their description, quality, quantity,
marks, numbers, country of origin and other particulars as the proper officer
may consider relevant to the identity of the goods in any proceedings under the
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Customs Act and shall make an application to a Magistrate for the purpose
interalia of certifying the correctness of the inventory so prepared; or taking, in
the presence of the Magistrate, photographs of such goods, and certifying such
photographs as true; or allowing to draw representative samples of such goods,
in the presence of the Magistrate and certifying the correctness of any list of
samples so drawn. Sub-Section (1C) provides that when an application is made
under sub-section (1B), the Magistrate shall, as soon as may be, allow the
application. Sub-section (1D) provides that when the goods seized under sub-
section (1) is gold in any form as notified under sub-section (1A), then, the
proper officer shall, instead of making an application (1B) to the Magistrate,
make such application to the Commissioner (Appeals) having jurisdiction, who
shall, as soon as may be, allow the application and thereafter, the proper officer
shall dispose of such goods in such manner as the Central Government may
determine.
31. The question is as to how and in what manner Section 110 of the
Customs Act would be applicable to the seizure of the petitioners' gold jewellery
as seized on 14 January 2018.
32. Considering the effect of the provisions of sub-section (1A) to (1C) of
Section 110 of the Customs Act, even assuming that such provisions apply to the
seizure in question, we may observe that there is no reason available on record
which would justify that there was a need to dispose of/sell the gold jewellery of
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the petitioners, merely because a Notification dated 22 December, 1997 under
sub-section (1A) of Section 110 of the Customs Act was issued to include gold.
Section 110 when permits disposal of a seized item like gold, it cannot be
without subjective satisfaction to be recorded in writing specifying the reason,
the gold required to be disposed of, for any reason as specified in sub-section
(1A). We would test this proposition. Sub-section (1A) provides for
eventualities which would empower the Central Government to specify the
goods or class of goods which can be disposed of by the proper officer as soon as
may be after its seizure having regard to the nature of such goods, namely in the
event the goods are perishable or hazardous or there is likely to be depreciation
in the value of the goods with the passage of time, or there are constraints of
storage space for the goods and/or any other relevant considerations. This can be
done by the Central Government by issuing a notification to be published in the
Official Gazette specifying such goods. Thus, each of such eventualities as
contemplated under sub-section (1A) necessarily would be required to be
applied to the goods seized, so as to test, as to which of such stipulations become
applicable to the category of goods. The reason being that a particular class of
goods may invite all the ingredients/eventualities whereas another category of
goods may attract only one of the ingredients. In the event if only one of the
ingredients is to become applicable, then at the place of the seizure, such an
eventuality is required to have factually existed and ascertained, and the proper
officer would be required to record reasons, that a factual situation as falling
under sub-section (1A) existed at such place of seizure and the place of the
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seized goods, and hence, it would be imperative to dispose of the goods. In
short, such reasons are required to be present and recorded by the proper officer
before any steps are taken to deal with the goods to be disposed of, as per the
procedure as set out in sub-sections (1B), (1C) or (1D) of the Customs Act.
33. Mere issuance of a notification under sub-section (1A) of Section 110 of
the Customs Act would not suffice and enable the proper officer to have instant
disposal of the goods unless a subjective satisfaction as noted by us is emenintly
present on any of the eventualities for such action to be resorted and the owner
of the goods is informed in that regard. To take a situation converse to what we
have observed, namely mere issuance of notification under sub-section (1A) of
Section 110 would suffice and enable the proper officer to dispose of the goods,
would be a difficult proposition to be accepted, in as much as, it would certainly
lead to patent arbitrariness as also may defeat the other provisions of the Act.
We are thus, of the opinion that even after recourse to the provisions of sub-
sections (1A) to (1D) is to be taken, the same would be required to be taken
only after a subjective satisfaction is reached by the Customs officers and the
same is brought to the knowledge of the owners of the goods that the goods are
required to be disposed of. Failing this, the action to dispose of the goods would
be unilateral action leading to an unguided and arbitrary exercise of powers by
the customs officials. Such is not intention of Section 110 read with its sub-
sections. It is well settled that any action of the government officials is required
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to be supported by cogent reasons as borne out by record, failing which it would
be arbitrary and illegal and more so when it deals with the property of persons.
34. Now applying such legitimate requirements to the facts of the present
case, we find that no reasons whatsoever are placed on record, much less brought
to our notice, as to why it was felt necessary by the proper officer that the
petitioners' gold was required to be disposed of hurriedly on 1 June, 2018 even
prior to the issuance of show cause notice, which was issued on 6 July, 2018, i.e.
one month and 5 days after the disposal order.
35. Insofar as the applicability of sub-section (1D) is concerned, in the
present case, sub-section (1D) was not applicable, as an application was made to
the Magistrate and no such application was made, as provided under sub-section
(1D), to the Commissioner (Appeals).
36. There is something more fundamental in the present proceedings
inasmuch as on 14 January, 2018 the gold jewellery in question was seized from
the petitioners. Sub-section (2) of Section 110 provides that where any goods
are seized under sub-section (1) and no notice in respect thereof is issued under
clause (a) of section 124 within six months of the seizure of the goods, the goods
shall be returned to the person from whose possession they were seized. Thus,
the seizure having taken place on 14 January, 2018, six months period was to
end on 14 July, 2018, however, what is significant is that a show cause notice for
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confiscation of such gold came to be issued to the petitioners on 6 July, 2018,
however, the same was never served on the petitioners in a manner known to
law.
37. Be that as it may, it is surprising as to how such notice to confiscate the
gold jewellery could be issued, when the gold jewellery stood disposed of by the
Assistant Commissioner by an order dated 1 June, 2018, which was preceded by
notice dated 4 April, 2018 as noted above, although all this was not to the
knowledge of the petitioners. Once the gold itself was not available for
confiscation, it is surprising as to what was the need and purpose for issuing
such notice. This inasmuch as the confiscation of the gold jewellery in question
would be required to be understood in terms of what Chapter XIV of the
Customs Act would provide, which contains provisions in relation to
confiscation of goods. In the said Chapter, provisions of Section 124 would
have significant bearing on the facts of the present case, inasmuch as Section
124 provides for issuance of show cause notice before confiscation of goods.
Section 124 reads thus:
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 an Assistant
Commissioner of Customs, informing] him of the grounds on
which it is proposed to confiscate the goods or to impose a
penalty;
(b) is given an opportunity of making a representation in writing
within such reasonable time as may be specified in the notice
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against the grounds of confiscation or imposition of penalty
mentioned therein; and
(c) is given a reasonable opportunity of being heard in the
matter:
Provided that the notice referred to in clause (a) and the
representation referred to in clause (b) may, at the request of the
person concerned be oral.
Provided further that notwithstanding issue of notice under this
section, the proper officer may issue a supplementary notice
under such circumstances and in such manner as may be
prescribed."
38. On a plain reading of Section 124 what would be implicit is that an order
confiscating any goods or imposing any penalty can be passed only after the
owner of the goods is issued a notice in terms of the said provisions interalia
informing him of the grounds on which it is proposed to confiscate the goods or
to impose a penalty and an opportunity of making a representation in writing is
given to him within such reasonable time as may be specified in the notice
against the grounds of confiscation or imposition of penalty and a reaonsable
opportunity of being heard. The object of the provision making an allowance of
representation is to permit such person who has been issued such notice to show
cause against non-confiscation. In the event, the case of the noticee is to be
accepted, the only consequence which the law would recognize would be that
the confiscation of goods, subject matter of show cause notice, itself would be
dropped. The corollary to this would be that the seized goods are required to be
released to the owner. If they are not to be released, then Chapter XIV makes
another provision, namely, in Section 125 which provides for 'Option to pay
fine in lieu of confiscation'. Section 125 reads thus:
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125. Option to pay fine in lieu of confiscation.
1) Whenever confiscation of any goods is authorised by this Act, the
officer adjudging it may, in the case of any goods, the importation or
exportation whereof is prohibited under this Act or under any other
law for the time being in force, and shall, in the case of any other
goods, give to the owner of the goods or, where such owner is not
known, the person from whose possession or custody such goods
have been seized, an option to pay in lieu of confiscation such fine as
the said officer thinks fit:
Provided that where the proceedings are deemed to be concluded
under the proviso to sub-section (2) of section 28 or under clause (i)
of sub-section (6) of that section in respect of the goods which are
not prohibited or restricted, the provisions of this section shall not
apply:
Provided further that, without prejudice to the provisions of the
proviso to sub-section (2) of section 115, such fine shall not exceed
the market price of the goods confiscated, less in the case of
imported goods the duty chargeable thereon.
(2) Where any fine in lieu of confiscation of goods is imposed under
sub-section (1), the owner of such goods or the person referred to in
sub-section (1), shall, in addition, be liable to any duty and charges
payable in respect of such goods.
(3) Where the fine imposed under sub-section (1) is not paid within
a period of one hundred and twenty days from the date of option
given thereunder, such option shall become void, unless an appeal
against such order is pending.
Explanation.--For removal of doubts, it is hereby declared that in
cases where an order under sub-section (1) has been passed before
the date on which the Finance Bill, 2018 receives the assent of the
President and no appeal is pending against such order as on that
date, the option under said sub-section may be exercised within a
period of one hundred and twenty days from the date on which such
assent is received."
39. Now applying such provision to the facts of the case, the situation is
quite alarming, inasmuch as, on one hand, the Assistant Commissioner had
already disposed of the gold jewellery of the petitioners before the period of six
months as contemplated under sub-section (2) of Section 110 would come into
play, that is, almost at the fag end of such period of six months would come to
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an end (8 days before such period would expire), the petitioners were
purportedly issued a show cause notice under section 124 as to why the gold
jewellery of the petitioners ought not to be confiscated. As noted above such
show cause notice in effect was meaningless as the gold jewellery itself was not
available for confiscation.
40. It is quite glaring that the respondents have failed to follow the basic
procedure, the law would recognize, namely, that knowing well that the
petitioners are foreign nationals, no attempt was made to serve show cause
notice on the petitioners through the Consulate General of the Islamic Republic
of Iran, when the respondents were fully aware that the petitioners were not
available in India. The concerned officer nonetheless proceeded to adjudicate
the show cause notice and passed an Order-in-Original on 18 January, 2019
without hearing the petitioners.
41. Be that as it may, as noted above, now the proceedings which had arisen
under the show cause notice dated 6 July, 2018 issued to the petitioners have
attained finality in view of the Revisional Authority passing an order on 19
September, 2022, whereby it has been held that absolute confiscation was not
justified in the present case and the petitioners be permitted to re-export the
gold jewellery on payment of a redemption fine. Such order as seen from the
facts as noted above is incapable of compliance, inasmuch as, the gold jewellery
itself is not available for the petitioners to re-export it. This more significantly as
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the Revisional Authority having observed that this was not the case where the
petitioners have attempted to smuggle the gold.
42. As rightly urged on behalf of the petitioners, the Assistant Commissioner
who disposed of the gold never informed either the Appellate Authority or the
Revisional Authority that the seized gold jewellery of the petitioners itself was
not available and was disposed of. This, in our opinion, is something which
raises a serious doubts on the method and manner in which the Custom officers
discharge their duties under the Act. In our opinion, even if there is a power to
dispose of the gold, it has to be exercised fairly, reasonably and transparently.
Disposal of the property belonging to the persons like the petitioners and / or to
sell the seized goods at the ipse dixit of the officers, is not what the law would
recognise. The procedure to dispose of such valuable commodities is required to
withstand the test of law and more particularly, the constitutional requirement
of reasonableness, non-arbitrariness, fairness and transparency as enshrined
under Article 14 of the Constitution coupled with safeguarding the valuable
rights of property recognized by the Constitution, under Article 300A. It
cannot be otherwise, as Section 110(1A) would be required to be read,
interpreted and applied only in a manner the basic law of land under the
provisions of Articles 14 and 300A of the Constitution of India, would permit
the department to so apply.
43. As noted above sub-section (1A) of Section 110 cannot be read as as
absolute entitlement or authority with the proper officer to dispose of the items
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like gold in the absence of any cogent reasons, which would attract the
ingredients of sub-section (1A) of Section 110. Such reasons as falling under
sub-section (1A) are required to be intimated to the owner of the goods for the
reason that ultimately the disposal of the goods would entail serious
consequences of affecting the constitutional rights of the owner of the goods
guaranteed under Article 300A of the Constitution, as the owner would be
deprived of his property. This would be the basic requirement of law the proper
officer dealing with any goods, which are merely seized and not confiscated
would be required to be followed. This for the reason that prior to the goods
being confiscated, rights in the goods, the corporeal ownership of the goods
remain with the owner of the goods and such rights do not stand vested and/or
transferred in favour of the Customs department / Government.
44. Now applying such basic principles to the case in hand, we find that in
the notice dated 4 April 2018 albeit not received by the petitioners, no reason
whatsoever was set out as to why a decision is being taken to dispose of the
goods. The contents of the said notice are required to be noted which read thus:-
"OFFICE OF THE COMMISSIONER OF CUSTOMS (AIRPORT)
TERMINAL-2, LEVEL-II, CHHATRAPATI SHIVAJI
INTERNATIONAL AIRPORT, SAHAR, ANDHERI (EAST), MUMBAI
- 400099.
F.No.SD/INT/AIU/21/2018 AP-D Date: 04.04.2018
NOTICE
The officers of this Commissionerate had seized assorted gold
jewellery totally weighing 1028 grams valued at Rs.26,63,366/- from
Mrs. Leyla Mahmoodi and Mr. Mojtaba Gholami, holding Iranian
Passport No. M42123461 and F29961431, on their arrival from
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Muscat by flight no.WY203 on 14.01.2018. The same was seized
under panchanama in the reasonable belief that it was smuggled into
India and hence liable for confiscation under the provisions of
Customs Act, 1962.
Further, in terms of Section 110 of the Customs Act, 1962, a
notice is being issued without prejudice to any person(s) to bring on
record the objection, if any, for disposal of the seized assorted gold
jewellery totally weighing 1028 grams within fifteen (15) days from
the date of issue of this Notice, failing which the same will be
disposed off without any further reference to them.
(SUBRAT ROUT)
ASSTT. COMMISSIONER OF CUSTOMS,
AIR INTELLIGENCE UNIT
C.S.I. AIRPORT.
To,
1. Mrs. Leyla Mahmoodi,
Mottahari 28, Hosslenzadeh 5,
Palak 86, Mashhad, Iran
2. Mr. Mojtaba Gholami,
Mottahari 28, Hosslenzadeh 5,
Palak 86, Mashhad, Iran.
3. Notice Board of C.S.I. Airport (through CHS)
4. Mr. Prakash Singrani & Prassad Kamble, Advocate."
45. It is abundantly clear from the record that the gold jewellery belonging to
the petitioners was not merely disposed of but sold by the respondents, which is
clear from the respondents' own showing in the reply affidavit as also
compounded by a letter of the State Bank of India dated 1 August 2018. Once
the property of the ownership of the petitioners was being disposed of and / or
sold, in our opinion, certainly the provisions of Article 300A of the Constitution
would stand attracted. Article 300A of the Constitution reads thus:-
"300A Persons not to be deprived of property save by
authority of law - No person shall be deprived of his property save
by authority of law."
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46. It is well settled that the provisions of Article 300A of the Constitution
are available to any person including a juristic person and not confine to only
citizen and that the illegal seizure would amount to the owner being deprived of
his right of property as contained under Article 300A of the Constitution of
India. (See: Paragraph 55 of Dharam Dutt & Ors vs Union Of India & Ors. 8;
paragraph 25 of State Of West Bengal And Ors vs Sujit Kumar Rana9).
47. In the present case the gold jewellery belonging to the petitioners has
been dealt, disposed of and sold in patent disregard to the basic principles of law
as Articles 14 and 300A of the Constitution would ordain. This apart, even the
provisions of the Customs Act, which we have discussed, stand violated not only
in taking away the substantial statutory rights as the law would guarantee to the
petitioners, on seizure of the petitioners gold jewellery but also in the manner in
which the gold jewellery has been disposed of. If such is the consequence of the
actions, as taken by the respondents and the same cannot be recognized in law
on any parameters, then the only conclusion to be reached by the Court is that
the disposal / sale of the gold jewellery belonging to the petitioner, is per se
illegal, void, ab initio and unconstitutional. Once such action on the part of the
respondents is being regarded as a brazen illegality, the mandate of law would be
to restore to status quo ante which is the legitimate corollary to remedy such
illegality. The legal principle in this regard can be discussed.
8 (2004)1 SCC 712
9 (2004) 4 SCC 129
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48. In State of Gujarat Vs. Memon Mahomed Haji Hasam. 10 involved an
issue in regard to illegal seizure of the vehicles as belonging to the respondents
therein, leading to an order of confiscation being finally set aside and a claim for
return of the vehicles being made. It so transpired that the vehicles were sold
and the amounts were paid to the creditors of the respondents. It is in such
context the Supreme Court observed that the order of confiscation was not the
final order and was subject to appeal / further proceedings and if the appellate
authority found that there was no good ground for exercising of power of
confiscation, the property could no longer be retained under the Act and was
required to be returned to the owner, which was the statutory obligation to
return the property. It was held that there was a legal obligation to preserve the
property in tact, also an obligation to take reasonable care of the same so as to
enable the property to be returned in the same condition in which it was seized.
It was held that the respondent was entitled to return of the property or to the
value of the property. The observations of the Supreme Court in such context
are required to be noted, which read thus:-
"6. There can, therefore, be bailment and the relationship of a
bailor and a bailee in respect of specific property without there being
an enforceable contract. Nor is consent indispensable for such a
relationship to arise. A finder of goods of another has been held to be
a bailee in certain circumstances.
7. On the facts of the present case, the State Government no
doubt seized the said vehicles pursuant to the power under the
Customs Act. But the power to seize and confiscate was dependent
upon a customs offence having been committed or a suspicion that
such offence had been committed. The order of the Customs Officer
was not final as it was subject to an appeal and if the appellate
authority found that there was no good ground for the exercise of
that power, the property could no longer be retained and had under
10 AIR 1967 SC 1889
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the Act to be returned to the owner. That being the position and the
property being liable to be returned there was not only a statutory
obligation to return but until the order of confiscation became final
an implied obligation to preserve the property intact and for that
purpose to take such care of it as a reasonable person in like
circumstances is expected to take. Just as a finder of property has to
return it when its owner is found and demands it, so the State
Government was bound to return the said vehicles once it was found
that the seizure and confiscation were not sustainable. There being
thus a legal obligation to preserve the property intact and also the
obligation to take reasonable care of it so as to enable the
Government to return it in the same condition in which it was
seized, the position of the State Government until the order became
final would be that of a bailee. If that is the correct position once the
Revenue Tribunal set aside the order of the Customs Officer and the
Government became liable to return the goods the owner had the
right either to demand the property seized or its value, if, in the
meantime the State Government had precluded itself from returning
the property either by its own act or that of its agents or servants.
This was precisely the cause of action on which the respondent's suit
was grounded. The fact that an order for its disposal was passed by a
Magistrate would not in any way interfere with or wipe away the
right of the owner to demand the return of the property or the
obligation of the Government to return it. The order of disposal in
any event was obtained on a false representation that the property
was an unclaimed property. Even if the Government cannot be said
to be in the position of a bailee, it was in any case bound to return
the said property by reason of its statutory obligation or to pay its
value if it had disabled itself from returning it either by its own act or
by any act of its agents and servants. In these circumstances, it is
difficult to appreciate how the contention that the State Government
is not liable for any tortious act of its servants can possibly arise. The
decisions in State of Rajasthan v. Mst. Vidhyawati, (AIR 1962 SC
933) and Kasturi Lal v. The State of U.P. (AIR 1965 SC 1039), to
which Mr. Dhebar drew our attention, have no relevance in view of
the pleadings of the parties and the cause of action on which the
respondent's suit was based."
49. In "Union of India Vs. Shambhunath Karmakar & Ors." (supra) the
Division Bench of the Calcutta High Court on a plea of the respondents therein
for return of the gold ornaments, which were seized from them which were
forwarded for melting, it was observed that the owner of the goods was entitled
to claim damages for disposal of the seized gold. It was observed that the cause
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of action for return of the gold accrued on the date the confiscation order was
set aside and the owner became entitled to obtain return of the seized gold. It
was observed that the seized gold was not sold to a third party for value and that
if the seized gold has been forwarded for melting to the Government of India, it
really amounted to appropriation of the gold by another department of the
Government. It was also observed that if the gold and gold ornaments were
melted, the same resulted only in the change of form. The Court observed the
Government would continue to hold the melted gold in some form or other and
therefore, the Government was bound to return the said gold or the value. It was
also observed that at the time when the confiscation order was set aside, both in
equity and law status quo ante prior to the passing of the consfication order
ought to be restored.
50. In Zhinet Banu Nazir Dadany (supra) a Division Bench of the Delhi
High Court was dealing with a similar situation, as in the present case, wherein
the gold as seized by the respondent was disposed of when the same was neither
perishable nor hazardous. In such context, the Division Bench held that the gold
could not have been hurriedly disposed of and in the absence of a show cause
notice being served on the petitioners. It was held that there was no reason to
proceed to the disposal of the seized gold without notice, and that too without
passing any order on adjudication and accordingly set aside the seizure of the
gold with a direction that the proceeds which were collected in the auction
which were equal to the vary of the gold ought to be refunded to the petitioner
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with interest. The relevant observations of the Court in para 22 and 23 which
reads thus:
"22. There is no explanation offered by the Respondents as to why they
were constrained to dispose of the seized gold, when it was neither perishable
nor hazardous. Also, there is no answer why it had to be disposed of without
notice being issued to the person from whom it was seized. This irrespective
of whether the SCN was served or not. The SBEC has issued a circular dated
14th February 2006 in this regard where it was impressed upon the field
formations as under:
"An instance has recently been brought to the notice of the Board
where seized goods were disposed of without issuing notice to the
owner of the goods. The seizure having been set aside by the
adjudicating authority, the owner of the goods sought their return but
was advised to obtain the sale proceeds, which were significantly lower
than the seizure value. In subsequent proceedings, the High Court has
directed the refund of an amount higher than the Sale proceeds, as well
as payment of interest. The loss of the exchequer has resulted from a
failure to comply with the requirements of Section 150 of the Customs
Act, 1962.
2. It is impressed upon field formations that where any goods, not
being confiscated goods, are to be sold under any provision of the
Customs Act, they shall be sold by public auction or by tender or in any
other manner after notice to the owner of the goods.
3. It is further clarified that the requirement to issue notice to the
owner of the goods shall also obtain in case of goods that have been
confiscated but in respect of which all appeal/legal remedies have not
been exhausted by the owner of the goods."
23. In the present case with the seized material not being perishable,
being gold bars there was no reason for the Respondents to have hurriedly
disposed it off and that too without notice to the Petitioner. When it was
plain that even the SCN was not served upon the Petitioner, there was no
reason to proceed with disposal of the seized gold without notice. It also
appears that the Respondents hurriedly went ahead and passed an
adjudication order more than four years after the gold was seized only after
the present petition was filed. ... ... .. ... ..."
51. In our opinion, the petitioners would also be correct in contending that
the impugned action of the respondents in the present case was in the teeth of
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the CBEC instructions dated 14 February 2006. The relevant extract as relied
on behalf of the petitioners reads thus:
"8. As per CBEC instructions vide letter F. No. 711/4/2006-Cus.
(AS), dated 14.02.2006, before selling the goods Notice must be
given to the owner/importer. The text of the circular is reproduced
herewith-
As instance has recently been brought to the notice of the
Board where seized goods were disposed of without issuing notice to
the owner of the goods. The seizure having been set aside by the
adjudicating authority, the owner of the goods sought their return
but was advised to obtain the sale proceeds, which were significantly
lower than the seizure value. In subsequent proceedings, the High
Court has directed the refund of an amount higher than the sale
proceeds, as well as payment of interest. The loss to the exchequer
has resulted from a failure to comply with the requirements of
Section 150 of the Customs Act, 1962.
It is impressed upon filed formations that where any goods, not
being confiscated goods, are to be sold under any provision of the
Customs Act, they shall be sold by public auction or by tender or in
any other manner after notice to the owner of the goods.
It is further clarified that the requirement to issue notice to the
owner of the goods shall also obtain in case of goods that have been
confiscated but in respect of which all appeal/legal remedies have not
been exhausted by the owner of the goods."
52. We are also of the opinion that the concerned officer of the respondents
in the present case has completely overlooked that the gold jewellery in question
was sold / disposed of at the stage of the seizure, in fact, prior to the issuance of a
show cause notice under Section 124 of the Customs Act, being issued to the
petitioners, much less prior to any order of confiscation being passed, which
came to be passed on 18 January 2019. Such order was certainly subjected to an
appeal as per the provisions of Section 128 of the Customs Act, before the
Appellate Authority and thereafter, a revision being maintainable under the
provisions of Section 129DD before the Central Government. It was thus an
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obligation on the concerned Customs officials as conferred by law to preserve
the gold jewellery belonging to the petitioner unless the circumstances for
justified reasons or otherwise were against preservation of the said goods that for
no reason whatsoever the goods ought not to be preserved, till the proceedings
attain finality. In the present case there are none.
53. We may also sound a note of caution that it would be travesty of justice,
as also a patent illegality if in the teeth of the well settled principle of law and
constitutional provisions conferring right to property, any authority being
conferred on the Customs officials purportedly under Section 110 to dispose of
the seized goods, can be recognized, merely because the goods are seized under
the Customs Act. The Customs official without recording cogent and acceptable
reasons and without a prior notice being issued to the owner of the goods or the
persons from whom the goods are seized, would not wield a power / authority to
sell and/or dispose of the seized goods, and more particularly, valuable items like
gold. Such unbridled power cannot be recognized under the provisions of
Section 110 of the Customs Act, and if any action contrary to the legitimate
principles of law as applicable and discussed by us hereinabove, is sought to be
taken, the same would be rendered illegal.
54. In other words, the scheme as envisaged under Section 110 cannot be
read to mean that mere seizure of the gold by the Customs Officer can be
construed to confer any power, authority to sell the goods without following the
due procedure in law namely of a prior notice of hearing being granted to the
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owner of the goods, or to the person from whom the goods are seized, when the
property of the ownership of a person is sought to be deprived to him by sale or
disposal of the goods. It would be fallacious to read into the scheme of Section
110(1) read with (1A) to (1D) any power to be exercised by the Customs
officials which is not based on cogent reasons and which can be exercised
without due procedure being not followed, apart from such action satisfying the
test of lack of any illegal motives, non arbitrariness, reasonableness and fairness,
on the part of the Customs Officials.
55. In the present case, it is difficult to imagine as to what could be the
reason for the Customs Officers to dispose of the goods hurriedly and with such
lightening speed and by throwing to the wind the norms of fairness and
reasonableness. This is not acceptable even from the reading of the provisions of
Section 110. Any reading of Section 110 otherwise than what has been
discussed above, would amount to foisting draconian, reckless and/or unfettered
authority on the Customs Officers conferring a licence to commit illegality. In
fact the recognition of any such power with the Custom Officers would lead to
an anomalous situation of the substantive provisions and procedure for
confiscation and the appellate/revisional remedy being rendered meaningless,
only to be realized that any order for return of property at any stage of such
proceedings, would merely remain a paper order, impossible of implementation/
execution. Thus, such substantive provisions of the Customs Act cannot be
rendered nugatory, by recognizing unguided and unfettered powers being
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conferred under Section 110 on the Customs Officers, to dispose of the seized
property, till the orders of any confiscation attains finality, unless there are strong
reasons which would justify any such action when tested on such constitutional
and legal parameters, and that too on the satisfaction of the officers to be
reached only after hearing the owner of the property.
56. In so far as the reliance on on behalf of the respondents on the decision
of this Court in the case of Shabbir Ahmed Abdul Rehman (supra). In our view,
the said decision does not take the case of the respondents any further for more
than one reason. The Court in para 9 of such decision has observed that the
Revenue Authorities were not justified in selling the gold, during the pendency
of the appeal. In the present case, we have held that action of the respondent in
selling gold pending the appeal/revisional proceeding was bad in law. Secondly,
in such case, the revenue had informed the assessee that gold has been handed
over to the New House of Customs for disposal, which is not the case before us,
inasmuch as no such notice was given to the petitioner before disposal of the
gold. Thirdly, on the issue as to whether the assessee was justified in claiming
the market value of the said gold, this Court observed that the market value of
gold was diminishing, at the relevant time, hence in the fact situation, the claim
of the petitioner in seeking market value of the gold was not accepted. Whereas
in the proceedings before us there is no such contention that the value of the
gold is falling. Lastly the said decision did not decide on the petitioners
entitlement to the return of the gold, but decided the claim with respect to
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market value of the gold when prices were going down. In the case before us
there is specific prayer for return of gold.
57. For the aforesaid reasons, we have no manner of doubt that the petition
needs to succeed. The question, however, is as to what can be the relief which
can be granted to the petitioners in these circumstances, when there is no iota of
doubt, in regard to illegality which has been committed by the respondents in
depriving the petitioners of their valuable rights to property. In such
circumstances, in our considered opinion, the principles of law which would be
required to be applied, is that once the action of the respondents is held to be
void, ab initio, illegal and unconstitutional, there can be no second opinion that
the rights of the petitioners in regard to illegal seizure would be required to be
restituted. In such context, we also cannot be oblivious to the directions as
issued by the Central Government in passing the orders dated 19 September
2022 on the petitioners' revision, whereby the Central Government has
permitted the petitioners to re-export the gold jewellery.
58. In the light of the above discussion, interest of justice would require that
the petition be allowed by granting the following reliefs to the petitioners:-
ORDER
(i) It is declared that the action on the part of the Assistant Commissioner of
Customs in disposing of / selling the gold jewellery belonging to the petitioners
subject matter of the present proceedings, is illegal and unconstitutional.
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(ii). The respondents are directed, to restore to the petitioners, equivalent
amount of gold namely 1028 gms. and / or to compensate the petitioners by
making payment of amounts equivalent to the market value of the said gold, as
on date.
(iii) The above directions be complied by the respondents within a period of
three weeks from today.
(iv) In the event the petitioners are granted payment of the amounts as
directed in (iii) above, the amount of redemption fine and penalty as directed by
the Revisional Authority in its order, be deducted.
59. The petition is accordingly, disposed of in the above terms. No costs.
[JITENDRA JAIN, J.] [G. S. KULKARNI, J.]
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