M/S Rugs Rural, Through ... vs Principal Commissioner Of ...
2022 Latest Caselaw 222 Guj

C/SCA/14849/2021                                          CAV JUDGMENT DATED:
                                     07/01/2022


            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

            R/SPECIAL CIVIL APPLICATION NO. 14849 of 2021


FOR APPROVAL AND SIGNATURE:


HONOURABLE MS. JUSTICE SONIA GOKANI

and
HONOURABLE MS. JUSTICE NISHA M. THAKORE

==========================================================

1 Whether Reporters of Local Papers may be allowed to see the judgment ?

2 To be referred to the Reporter or not ?

3 Whether their Lordships wish to see the fair copy of the judgment ?

4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?

========================================================== M/S RUGS RURAL, THROUGH PROPRIETOR NASIM AHMED KHAN Versus PRINCIPAL COMMISSIONER OF CUSTOMS & 2 other(s) ========================================================== Appearance:

KURVEN K DESAI(7786) for the Petitioner(s) No. 1

MR DEVANG VYAS(2794) for the Respondent(s) No. 3 MR UTKARSH R SHARMA(6157) for the Respondent(s) No. 1,2 ==========================================================

CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MS. JUSTICE NISHA M. THAKORE

Date : 07/01/2022

CAV JUDGMENT

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 (PER : HONOURABLE MS. JUSTICE SONIA GOKANI)

1. Present petition is preferred under Article 226 of the

Constitution of India seeking to release the

consignment comprising Chinese Knotted Woollen

Carpets allegedly legally detained on 06.01.2021 by

respondent No.2 and thereby causing huge financial

loss to the petitioner, in addition to the loss of

business and incurring of damages with the

following prayers:

"It is, therefore, most respectfully prayed, that in conspectus of the facts, circumstances and grounds mentioned herein supra, this Hon'ble Court may graciously be pleased to:

(a) Issue a Writ of Mandamus or any other appropriate Writ, direction or order directing learned Respondents to release the consignment imported under B/E No.B/E No.4956991 dated 06.08.2021.

(b) Issue a Writ of Mandamus or any other appropriate Writ, direction or Order directing learned Respondents to either pay themselves or to waive the payment of demurrage detention and any other charges.

(c) Issue Rule Nisi in terms of prayers at (a) and (b) above and confirm the same after hearing the parties;

(d) Pass ad-interim ex-parte order in terms of prayer at (a) and above;

(e) Award cost of this Petition; and/or

(f) Pass such other order(s) or direction(s) as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case and in favour of the Petitioner in the interest of justice."

2. Brief facts leading to the filing of the present petition

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 are as follows:

2.1. Petitioner imported consignment comprising

Chinese Knotted Woollen Carpets imported from

United States of America and filed Bill of Entry

No.4956991 dated 06.08.2021 along with import

documents. The consignment was examined by the

group Assessing Officer and samples were also

drawn on 13.08.2021 for further investigation. The

consignment was subjected to 100% examination

under 2nd Check on 16.08.2021. The Bill of Entry

was assessed by the proper office and the assessed

duty of Rs.5,98,862/- was paid vide e-challan dated

20.08.2021. The petitioner requested to release the

goods and he was informed that the goods are kept

on hold as Directorate of Revenue Intelligence (DRI)

which had issued an alert on the consignment.

There is no discrepancy either in description or

quality or in any declaration of consignment

according to the petitioner and yet the respondent

chose not to release the same and continued to

detain the goods without any rhyme or reason.

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 2.2. The petitioner vide its application dated 07.09.2021

requested the respondents to release the goods as

consignments was live and also requested to allow

to de-stuff because of serious issues of demurrage

and shipping line charges mounted, but, to no avail

of his, no release is made. Since no reason also has

been tendered to the petitioner, present petition is

filed. Moreover, it is urged that DRI is not a proper

office of assessment and hence, the exercise of

powers by the DRI is without jurisdiction. Reliance

is placed on the decision of Canon India Pvt. Ltd. vs.

Commissioner of Customs, 2021(3) SCALE 748.

2.3. According to the petitioner, the goods are of

perishable nature and would deteriorate and would

also loose its marketability. Hence, the present

petition is preferred to release the consignment

imported on 06.08.2021 with the aforementioned

prayers.

3. On issuance of notice, the reply is filed by the

Deputy Director, Directorate of Revenue Intelligence,

Mumbai Zonal Unit, denying all averments.

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022

4. According to the respondent, the respondent is

investigating a case of mis-declaration in value and

other particulars of goods exported/attempted to be

exported by Kaka group, M/s.Kaka Carpets,M/s.

Kaka Overseas Limited, M/s. Rugostic Private

Limited, M/s. Rugsotic, M/s. Shobha Woollens

Private Limited. These firms are based on Bhadohi,

Sant Ravidas Nagar, Uttar Pradesh and Delhi.

Intelligence indicated that the said exports have

been exporting low quality of carpets and fabrics by

highly overvaluing their prices with an intention to

avail high rates of duty draw backs and thereby

defrauding the public exchequer.

5. Searches at the registered premises of these

companies were conducted on 07.12.2020 by the

respondent. Simultaneously, the consignments of

three exporters out of five, were to be held and

examined on 7/8.12.2020. According to the

respondents, the exporters are allegedly involved in

circular trading of carpets/ using dummy IECs at

the time of import to avail duty draw backs and

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 other incentives. The evidence indicate that M/s.

Rugs Rural was controlled and used by Directors of

the firms of Kaka Group. The intelligence developed

also corroborated from the fact that the petitioner

was importing the goods having description as

"Chinese Knotted Woollen Carpets" from the

supplier which was one of the consignees of the

goods exported under the IECs of Kaka Group in the

past.

6. Simultaneous searches at the registered address of

the petitioner along with other importers were

conducted on 16.08.2021. The consignment of the

petitioner covered under the Bills of Entry

NO.4956991 dated 06.08.2018 was put on a hold

vide letter dated 18.08.2021 addressed to the office

of respondent No.1. Communication dated

02.09.2021 indicated that the goods covered under

the said Bills of Entry were examined 100% by the

Docks officer and samples were drawn and

forwarded to the Textile Committee, Mumbai to test

its required parameters. Bills of Entry was

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 provisionally assessed after seeing the pending test

reports. Letter dated 01.09.2021 was received from

the importer requesting to give permission for

shifting the goods in bonded warehouse under

section and release the empty container to avoid

detention and demurrage charges. It is further

stated that the summons dated 02.09.2021,

13.09.2021 and 23.09.2021 were issued to the

petitioner and its proprietor Shri Nasim Ahmed

Khan to give evidence and produce document

pertaining to goods imported under IEC of M/s.

Rugs Rural and sale thereof. The petitioner on

28.09.2021 and 05.10.2021 informed the office of

the respondent that he received the summons but

he has chosen not to appear for either giving

evidence or for producing any material pursuant to

the said summons. According to the respondent, the

petitioner has deliberately not approached and has

given evasive replies. He has not cooperated and

thereby willfully delayed the investigation process in

respect of the goods covered under the said Bills of

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 Entry dated 06.08.2021. According to the

respondent, the department has filed Review

Petition No.400-403/2021 on 07.04.2021 in the

Canon India Pvt. Ltd (supra) and the same are

pending before the Apex Court. Therefore, the

reliance on Canon India Pvt. Ltd (supra) would be

premature. Attempt is made to re-argue the case of

Canon India Pvt. Ltd (supra) to urge that the section

2(34) clearly provides proper officer, which would

mean the officer of Customs, who is assigned those

functions by the Board, or the Principal

Commissioner of customs or Commissioner of

Customs. It if further urged that in terms of

Notification 44/2011-Cus(N.T.) dated 06.07.2011,

as amended, the Board has assigned the tasks of

the proper officer to the Additional Director General,

DRI for the purpose of sections 17,28 and 28AAA of

the Act. Notification No.40/2012-Customs(N.T.)

dated 02.05.20212 is for the purpose of assignment

of the functions of the proper officer to the DRI

officers under the Customs Act.

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022

7. The case of Commissioner of Customs vs. Sayed Ali

and another,2011 (265) ELT 17 (SC) has been relied upon by the respondents. Relevant paragraphs are reproduced as under:

"19....It is clear from a mere look at the provision that only such officers of customs who have been assigned specific functions would be "proper officers" in terms of Section 2(34) of the Act. Specific entrustment of function by either the Board or the Commissioner of Customs is therefore, the governing test to determine whether an "officer of customs" is the "proper officer".

20. From a conjoint reading of Sections 2(34) and 28 of the Act, it is manifest that only such a customs officer who has been assigned the specific functions of assessment and re-assessment of duty in the jurisdictional area where the import concerned has been affected, by either the Board or the Commissioner of Customs, in terms of Section 2(34) of the Act is competent to issue notice under Section 28 of the Act.

Any other reading of Section 28 would render the provisions of Section 2(34) of the Act otiose in as much as the test contemplated under Section 2(34) of the Act is that of specific conferment of such functions."

8. Attempt is made to clarify the decision of the Apex

Court by holding that the view taken by the Apex

Court in the case of Canon India Pvt. Ltd. (supra) is

contrary to the scheme of the Act. The Review

Petition being Review Petition No.400-403/2021 has

been filed on 07.04.2021. According to the

respondents, the DRI has been considered as a

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 separate department in Canon India Pvt. Ltd.

(supra), which has not been considered as per the

administrative structure of CBIC. The DRI has been

assigned the enforcement function under the

Customs Act. The DRI officers are fully under the

administrative control of CBIC and have been

appointed as officer of Customs under section 4(1)

of the Act. It is further contended that many of the

High Courts have disposed of the writ petitions

without entertaining the same and they left the

adjudication with the adjudicating authority. The

Courts have also directed the parties to first

approach the adjudicating authority to decide the

issue of jurisdiction as a preliminary issue and

exhaust all statutory remedies. Reliance is placed on

the decision of the learned Single Judge, who after

the decision of Canon India Pvt. Ltd. (supra) has

dismissed the writ petitions by relegating them to

the statutory remedy. According to the respondents,

the goods under consideration are not of perishable

nature. It is a misleading version as goods are not

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 perishable and the petitioner is attempting to abuse

the process. He has not cooperated and is not found

at the registered address, where the summons have

been served.

9. Both the sides have argued at length. The Joint

Director of DRI, Mumbai Zonal Unit had requested,

vide a communication dated 18.08.2021 to the

Additional Commissioner of Customs(Import),

Mundra Port, Mundra, Kutch to hold back the

consignment of M/s. Rugs Rural covered under Bill

of Entry No.4956991 dated 06.08.2021. It has been

done with the approval of Principal ADG, DRI,

Mumbai. The Joint Commissioner (SIIB), Customs

house, Mundra in response to the said

communication dated 18.08.2021 addressed a

communication dated 02.09.2021 stating that the

said Bill of Entry is under first check and the goods

have been examined 100% by the Docks officer. As

per the examination order, samples have been

drawn and forwarded to the Textile Committee,

Mumbai to test for the parameters like (1) Nature

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 and (2) Composition/GSM (3) Whether Tufted

or/not tufted, (4) Whether Knotted or not and (5)

Whether Chinese Knotted Woollen Carpets or not.

9.1. It is further communicated that Bill of Entry has

been provisionally assessed by FAG after

considering the exam report pending the test report.

However, the goods are pending in CFS, pending

Out of Charge Order. The permission was also

sought by the importer as communicated in this

letter for shifting of goods in a bonded warehouse

under section 49 and release the empty container to

avoid detention and demurrage charges.

9.2. The Court notices that the summons came to be

issued under section 108 of the Customs Act

seeking his attendance to give evidence, produce

documents or things on import documents, relevant

to the consignment imported under the ICE of M/s.

Rugs Rural. He has been summoned to appear

before the Superintendent Mr.Om Prakash Meena in

person on 09.09.2021 at the office of the DRI,

Mumbai for inquiry, which is deemed to be a judicial

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 proceeding within the meaning of sections 193 and

220 of the Indian Penal Code.

10. Once again on 13.09.2021, the summons came to

be issued in connection with mis declaration in

value and particulars at the time of export by the

exporter Kaka Group, M/s.Kaka Carpets,M/s. Kaka

Overseas Limited, M/s. Rugostic Private Limited, M/

s. Shobha Woollens Private Limited on the ground

that he has a heart operation fixed and is under

medication. On 28.09.2019 he had sought time.

Once again summons came to be issued on

23.09.2021.

11. It has been urged in the rejoinder affidavit by the

petitioner that the goods have not been seized under

section 110 the Customs Act and in absence of

seizure, the goods cannot be put on hold

perpetually, as there is no provision, much less the

power with investigating officer to detain the goods

without invoking the provisions of section 110 of the

Customs Act. Therefore, the act of detaining the

goods by the respondent is illegal, since it is without

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 any authority of law. The goods have been

provisionally assessed for duty under section 18 of

the Customs Act. It is not their case that the goods

are prohibited and, therefore, the goods cannot be

detained either under section 18 or under section

47 of the Customs Act.

12. The respondent's contention is that the petitioner is

avoiding the summons issued under section 108 of

the Customs Act for investigating some other

matters relating to the exports of goods and as the

respondent is unable to decide, the petitioner has

requested for provisional release of goods under

section 110A of the Customs Act. Since the

respondent has not seized the goods by invoking

section 110 of the Customs Act, the issue of

deciding the provisional release under section 110A

would not arise. It is further the say of the petitioner

that as per section 110A of the Customs Act, the

goods seized under section 110 may be released on

furnishing security or bond. For invocation of this

provision, there shall have to be a seizure under

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 section 110 of the Customs Act. The goods are put

on hold illegally as there has been no seizure. All the

three summons were delivered to the petitioner after

the scheduled date of appearance and the petitioner

replied to them requesting to grant some time on the

ground of his ill-health. According to him, the date

of summons are respectively 02.09.2021,

13.09.2021 and 23.09.2021, whereas the date of

appearance was 09.09.2020 20.09.2021 and

04.10.2021. However, he received the

communications on 10.09.2021, 27.09.2021 and

05.10.2021 respectively. It is further his say that

the request to shift the goods to public warehouse

under section 49 of the Customs Act in order to save

demurrage and detention is not acceded to, which

proves the malafide of respondent No.3, who is

desirous to record the statement of petitioner under

section 108 of the Customs Act. It is hence urged

that without directing the respondent to release the

goods, which have been illegally detained, it would

amount to the statement recorded under duress.

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022

13. It is further averred that ongoing investigation in

some other matters relating to ineligible availment of

duty draw backs by some exporters has nothing to

do with the firm of the petitioner. According to the

petitioner, imported goods can either be mis-

declared or undervalued or the imported goods may

be seized and investigation can be initiated, but the

allegations that the imported goods, which are yet to

be cleared will be used in an activity described as

'circular trading' of carpets and will be exported on

which ineligible duty drawbacks would be claimed,

is merely an attempt to pre-judge the matter.

14. It is further the say of the petitioner that the goods

cannot be put on hold after being provisionally

assessed. Respondent No.1 and respondent No.3

requested the goods to be shifted to public

warehouse under section 49 in order to save

demurrage and detention, which has not been done.

There is no provision under the Customs Act, which

would enable the Investigating Officer to detain the

goods without seizure under section 110 of the

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 Customs Act.

15. It is further the say of the petitioner that respondent

No.3 is seeking to challenge and question the

decision of the Supreme Court and build its own

case on the ground that the judgement passed by

the Apex Court in Canon India Pvt. Ltd. (supra) is

wrong. This being the law established by the Apex

Court, unless reviewed, it simply cannot be so

argued. Filing of the review also would not amount

to the stay of the judgement against which, the

review is preferred.

16. We have heard, Mr.Kurven Desai, learned advocate,

who extensively argued the matter along the line of

pleadings. He has also relied on binding decisions,

which are as follows:

1. Canon India Pvt. Ltd. vs. Commissioner of

Customs, 2021(376) E.L.T.(S.C.).

2. Worldline Tradex Pvt. Ltd. vs. Commissioner of

Customs(Import), 2016 (34) E.L.T.174 (Del.).

          3. Mapsa     Tapes        Pvt.      Ltd.   vs.      Union           of

          India,2006(201)E.L.T.7(P&H).





 C/SCA/14849/2021                                       CAV JUDGMENT DATED:
                                07/01/2022
          4. Om          Udyog                vs.        Union                  of

          India,2010(254)E.L.T.547(P & H).

17. We have heard Mr. Utkarsh Sharma, learned Senior

Standing Counsel for the respondents, who, relying

essentially on affidavit-in-reply has argued in this

matter. Admittedly, there is no order of seizure till

date under section 110 of the Customs Act. The

provisional assessment of the goods, which have

been imported vide Bill of Entry No.4956991 dated

06.08.2021 has been put on hold by respondent

No.2 pursuant to the letter dated 18.08.2021

addressed by respondent No.3. According to the

respondents, the same has been provisionally

assessed. However, it has chosen not to release the

same, because three summons have not been

answered. The petitioner has been avoiding the

inquiry and investigation, which is going on in

relation to other firms, which have been named

viz.Kaka Group, M/s.Kaka Carpets,M/s. Kaka

Overseas Limited, M/s. Rugostic Private Limited, M/

s. Shobha Woollens Private Limited. The question

that arises is as to whether this non-response to the

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022

summons in pending inquiry in relation to the

exports, which have been made and duty draw back

and other incentives having been availed by circular

trading of carpets, would legally permit holding back

of consignment without further recourse of law!

18. According to the respondents, all the three

summons have been received by him beyond the

date on which he was to appear before the

concerned authority. It is the case of circular

trading of carpets, where the inquiry and

investigation is going on against some other firms

and the petitioner is being called by the DRI to

assist this investigation. On the ground that he is

medically not advised to so do it, he sent requests to

the authority. The respondents, if are of the opinion

that he is avoiding the summons and not desirous

of cooperating in the legal process which is going on,

it has other means available which can also include

initiation of prosecution under Chapter X of the

Indian Penal Code under the heading of "Contempt

of Lawful Authority of Public Servants" against Kaka

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 Group, M/s.Kaka Carpets,M/s. Kaka Overseas

Limited, M/s. Rugostic Private Limited, M/s.

Shobha Woollens Private Limited.

19. Section 172 of the Indian Penal Code (IPC) states as

to what punishment can be given to the person

absconding to avoid summons. Section 173 of the

IPC provides for punishment for preventing service

of summons or preventing the publication thereof.

Section 174 provides penalty for non-attendance of

disobedience of order from public servants. These

provisions are reproduced hereinafter:

"172. Absconding to avoid service of summons or other proceeding.--Whoever absconds in order to avoid being served with a summons, notice or order proceeding from any public servant legally competent, as such public servant, to issue such summons, notice or order, shall be punished with simple imprisonment for a term which may extend to one month, or with fine which may extend to five hundred rupees, or with both; or, if the summons or notice or order is to attend in person or by agent, or to 2 [produce a document or an electronic record in a Court of Justice], with simple imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.

173. Preventing service of summons or other proceeding, or preventing publication thereof.--

Whoever in any manner intentionally prevents the serving on himself, or on any other person, of any summons, notice or order proceeding from any public servant legally competent, as such public servant, to issue such summons, notice or order, or intentionally

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 prevents the lawful affixing to any place of any such summons, notice or order, or intentionally removes any such summons, notice or order from any place to which it is lawfully affixed, or intentionally prevents the lawful making of any proclamation, under the authority of any public servant legally competent, as such public servant, to direct such proclamation to be made, 1. The proviso ins. by Act 24 of 2003, s. 5 (w.e.f. 22-9-2003). 2. Subs. by Act 21 of 2000, s. 91 and the First Sch., for "produce a document in a Court of Justice" (w.e.f. 17-10-2000). 46 shall be punished with simple imprisonment for a term which may extend to one month, or with fine which may extend to five hundred rupees, or with both; or, if the summons, notice, order or proclamation is to attend in person or by agent, or 1 [to produce a document or electronic record in a Court of Justice] with simple imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.

174. Non-attendance in obedience to an order from public servant.--Whoever, being legally bound to attend in person or by an agent at a certain place and time in obedience to a summons, notice, order, or proclamation proceeding from any public servant legally competent, as such public servant, to issue the same, intentionally omits to attend at that place or time, or departs from the place where he is bound to attend before the time at which it is lawful for him to depart, shall be punished with simple imprisonment for a term which may extend to one month, or with fine which may extend to five hundred rupees, or with both; or, if the summons, notice, order or proclamation is to attend in person or by agent in a Court of Justice, with simple imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.

[174A .Non-appearance in response to a proclamation under section 82 of Act 2 of 1974.--

Whoever fails to appear at the specified place and the specified time as required by a proclamation published under sub-section (1) of section 82 of the Code of Criminal Procedure, 1973 shall be punished with imprisonment for a term which may extend to

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 three years or with fine or with both, and where a declaration has been made under sub-section (4) of that section pronouncing him as a proclaimed offender, he shall be punished with imprisonment for a term which may extend to seven years and shall also be liable to fine.] 175. Omission to produce document to public servant by person legally bound to produce it.-- Whoever, being legally bound to produce or deliver up any 5 [document or electronic record] to any public servant, as such, intentionally omits so to produce or deliver up the same, shall be punished with simple imprisonment for a term which may extend to one month, or with fine which may extend to five hundred rupees, or with both; or, if the 4 [document or electronic record] is to be produced or delivered up to a Court of Justice, with simple imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both."

20. Section 175 of IPC prescribes penalty for omission

to produce document or electronic report to public

servants by a person legally bond to produce it.

There are other provisions under this Chapter which

included section 179 of IPC of refusing to answer

public servant authorised to question. It is for the

authority to initiate the actions against the person

concerned. According to learned Senior Standing

Counsel Mr. Sharma, what all the petitioner needs

to do is to cooperate in the ongoing inquiry, since

there was some connection which was noticed in

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 relation to the exports made by the firms M/s. Kaka

Group and the petitioner also is importing the goods

having description as "Chinese Knotted Woollen

Carpets" in the past.

21. It is also necessary to note that the request is also

made to permit the shifting of the goods to the

warehouse so that no demurrage is to be incurred.

This request is not being acceded to.

22. It is to be noted that, according to the petitioner, he

has nothing to do with the firms of M/s. Kaka

Group of firms and he is willing to participate in the

investigation. The activity described is circular

trading of carpet, which would allege of export of

carpets on which ineligible draw backs will be

claimed and importing the very carpets by some

group of companies. It is not for the petitioner to say

whether this is the result of an assumption, as only

after due investigation and inquiry, the authority

concerned will come to any conclusion.

23. Section 49, under the heading "Clearance of

imported goods and exported goods", provides for

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 storage of imported goods in warehouse pending the

clearance or removal, whereas in the case of

imported goods, whether dutiable or not, entered for

home consumption and if the Assistant

Commissioner of Customs or the Deputy

Commissioner of Customs is satisfied on the

application of the importer that the goods would be

cleared within a reasonable time, the goods may,

pending the clearance, be permitted to be stored for

a period not exceeding 30 days in public warehouse

or in a private warehouse, if the facilities for

deposits in public warehouses are not available.

However, such goods shall not be deemed to be

warehoused goods.

24. The moot question is as to whether the goods can be

put on hold by issuance of summons under section

108 of the Customs Act. Admittedly, in the instant

case, the summons have been issued to produce

evidence and documents. Under section 108, the

statement made before a Customs Officer is not a

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 statement recorded under section 161 of the Code of

Criminal Procedure, which is a material piece of

evidence, which the Customs Officer can collect. The

summons to produce document or other things for

the production of certain specified documents etc.

also can be called for. Every stage of inquiry is

deemed to be a judicial proceedings.

25. The summons have been issued under section 108

as mentioned hereinabove. If proper officer has

reason to believe that the goods are liable for

confiscation under this Act, he may seize the goods.

Where it is not practicable to so do it, he may serve

upon the owner of the goods an order that he may

not remove the goods, except with previous

permission of the officer. The goods, if they are

hazardous in nature or perishable, appreciation in

the value of the goods with the passage of time even

if arose having regard to the goods, which are

perishable or hazardous in nature or there is a

constraint of storage of space or any other relevant

consideration, the proper officer can dispose of the

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 same in such manner, as the Central Government

may specify. It also speaks of the inventory of such

goods having made in detail relating to the

description , quantity, quality, mark, number etc.

26. Section 110A of the Customs act provides for

provisional release of goods, documents or things

seized pending adjudication. This provision speaks

of the release of goods, documents and things to the

owner on taking a bond from him in a proper form

with securities and conditions. Confiscation of the

goods would come much at a later stage by way of

the provisions of section 124 of the Customs Act.

Section 124 speaks of the show cause notice before

the confiscation of the goods.

27. It is to be noted in the instant case that the goods

have not been seized, as provided under section 110

of the Customs Act. The goods also cannot be called

of a perishable nature, as they are carpets. The

release of the goods has not been made giving a

reason of non-seizure. As contemplated under

section 110 of the Customs Act, it is permissible, if

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 the proper officer has a reason to believe that the

goods are liable to confiscation, but where it is not

practicable to seize, the proper officer may serve the

owner with the order that he shall not remove, part

with or otherwise deal with the goods, except with

the previous permission of the proper officer. Thus,

either he seizes the goods or where seizure is not

practicable, he will direct the owner himself not to

deal with the same. Perishable goods, can, after the

seizure, be disposed of by a proper officer and if

within six months, no notice is given for the seizure

of the goods, the same shall be returned. However,

the period of six months can, with sufficient cause,

be shown to be extended. The provisional release of

the goods is permissible on taking a bond from the

owner in proper form with security and conditions.

28. It is to be examined in these circumstances that

when there are allegations and the investigation is

going on in relation to the other firms, whether the

goods can be put on hold for nearly four months

without seizure and without even acceding to the

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 request of its storage under section 49 of the

warehouse. The petitioner, even if is not complying

with the summons and is not remaining present for

the inquiry or investigation in respect of some other

firms and where there is serious doubt of circular

trading export, whether its import can be put on

hold.

29. The decisions sought to be relied upon deserve

consideration at this stage.

29.1. In the case of Worldline Tradex Pvt.Ltd. vs.

Commissioner of Customs(Import), 2016(340) ELT

174(Del.), where there was no provision to justify

the detention without recording of reason, the

seizure of the goods is distinct than the detention of

the goods. The Court has held that the importer

cannot be saddled with the warehouse expenses

when the DRI is entirely responsible for detaining

the goods.

"22. In Om Udyog v. Union of India (supra), in similar circumstances, the Court directed immediate release of the goods since "the Department had not shown prima facie case for exercise of powers of confiscation and has only relied upon existence of power". The Gujarat High

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 Court in Baboo Ram Hari Chand v. Union of India (supra) negatived the plea of the Department that seizure and confiscation were one and same thing. In that case the panchnama was projected as the seizure order. The Court observed that "such composite order is unheard of". It further observed:

"27. Technically, asking the party to submit fresh PD Bonds for a period of six months on one hand and proceeding to seize the goods on the other hand may not perhaps be faulted with, however, burden lies on the authority to explain rationale to rush into seizure/ confiscation of the goods in such circumstances, the reason is the „proper officer‟ cannot proceed to seize the goods cannot proceed to seize the goods under Section 110 of the Act unless he has reason to believe. The authority would exercise drastic powers to seize the goods only in case wherein it has reason to believe that the goods is liable to be confiscated. The powers to seize and the power to confiscate are quite drastic powers. Little elaboration would show apparent inconsistency in the conduct of the respondent, from which it can be said that formation of belief for seizure by the respondent is vitiated...."

23. The power of seizure under Section 110 of the Act has to obviously be exercised for valid reasons. The proper officer has to record his reasons to believe that the goods that he proposes to seize are liable to confiscation. The said reasons for exercise of the power have to be recorded prior to the seizure. In the present case, as already noticed, apart from the panchnama, there is no separate order passed under Section 110(1) of the Act by the proper officer recording the reasons to believe that the goods are liable for confiscation. Since till date no other order exists and no such order has been communicated to the Petitioner, it is not possible to accept the plea of Mr Agarwala, learned counsel for the DRI, that the 'detention' of the goods by the DRI was with the authority of law and in any event should be

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 treated as a seizure in terms of Section 110(1) of the Act."

29.2. In the case of Om Udyog vs. Union of India, 2010

(254) ELT 547(P&H), the Court struck down the

power of seizure, since there was no reason to

believe that when the action of search and seizure

was undertaken, they were to be considered in

larger interest of the society to check the evasion of

tax. This power also affect the right of personal

liberty under Article 21 of the Constitution and,

hence, procedure for effecting such rights also has

to be fair and reasonable. There was detention of the

goods for more than two months and they were not

covered under the prohibited goods. The duty was

assessed and paid and there was non-clearance of

goods for four months without any justification. The

Court held that the delay in release of goods was

attributable to the department. The detention of

goods beyond reasonable time cannot be allowed, if

verification is not completed due to incompetence.

Relevant paragraphs are reproduced as under:

"9. Question for consideration is whether on facts of the case, detention of goods for a period of more than

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 two months can be held to be justified?

10. We called upon learned Counsel for the respondents to show the provision of law under which the goods were detained. It is not the case of the respondents in the reply or otherwise that power of seizure had been invoked as formation of satisfaction under Section 110 of the Act, which is condition precedent for exercise of such power, has not been shown. As held in Mapsa Tapes, exercise of power of seizure requires recording of reasons before exercise of such power. Only question is whether detention could be justified pending clearance under Chapter VII of the Act. Section 47 of the Act provides for clearance of goods on payment of duty, unless goods are prohibited goods. It is not the case of the respondents that goods are prohibited goods. It is also not their case that duty assessed under Section 17 or 18 has not been paid. In such a situation, non clearance of goods may be justified for minimum period required for assessment. In no case, non clearance of goods for months can be justified. Non clearance seriously affects rights of lawful importer and fair procedure being constitutional mandate, no authority can plead unlimited power of non clearance for its own incompetence as a justification beyond reasonable period. Learned Counsel for the respondents submitted that the petitioners could get the goods released on furnishing requisite bond under Section 110A of the Act. This contention is misconceived as Section 110A applies only when seizure is effected under Section 110.

11. We are of the view that while officers of Custom Department may have justification to verify whether goods were prohibited or were otherwise liable to confiscation or to assess and recover duty, they are not immune from accountability against abuse of power by detaining goods for indefinite period on the ground that they were in the process of checking the value or nature of goods. They are under legal obligation to do so promptly and if by reason of their incompetence they are unable to do so, detention of goods beyond reasonable time cannot be allowed."

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022

30. In absence of any notice of seizure of goods, the

question of release on provisional basis would

naturally not arise. The provisional release of goods

is permissible on taking up a bond from the owner

in proper form and security of conditions. However,

the same has not been done and only because there

are certain inquiries pending, nothing has been

done at the end of the Revenue.

31. We notice that the petitioner, on one hand, has

approached this Court by preferring the petition

under Article 226 of the Constitution of India and he

has chosen not to cooperate to complete the pending

inquiry in relation to M/s. Kaka Carpets and on the

other hand, he has furnished the bond before this

Court and has ensured to cooperate with that

inquiry. Both being separate issues and his medical

condition, since did not permit him to approach in a

fortnight time, with his specific assurance to the

respondent, objection raised is not worth

sustaining. The Court is of the opinion that there is

a sufficient and independent devise and mechanism

under the law for him to

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022

appear and assist the inquiry/investigation.

However, the applicant's non-appearance from

inquiry cannot be a valid ground for the authority

to hold back his goods without following any legal

procedure as contemplated under the law of seizure

and, hence, the release should be made immediately

within one week from the date of receipt of the copy

of this order on following due procedure of law.

32. It is to be noted that there is no dearth of power

with the respondent for it to seize the goods and

provisional release could have been also permitted

in such eventuality. Here neither the seizure is

made nor any other proceedings pursuant to the

lackadaisical approach to the summons is

addressed. And, therefore, this Court needs to show

indulgence without even entering into the binding

decision of Canon India Pvt. Ltd.(supra) of the

Supreme Court.

33. Petition is allowed. Consignment of carpets of the

petitioner shall be released without loss of time

within a week of receipt of the copy of this order.

C/SCA/14849/2021 CAV JUDGMENT DATED:

07/01/2022 The petitioner shall abide by his undertaking

without fail. The petitioner is also permitted to

request for demurrage to the respondent, which

shall consider the said request in wake of the

findings and observations made herein on following

due process of law.

34. The petition stands disposed of accordingly.

(MS. SONIA GOKANI, J. )

(NISHA M. THAKORE,J) SUDHIR