Madras High Court
The Commissioner Of Customs vs M/S. A.S. Enterprises on 9 June, 2022
WA No. 891 of 2016
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 09.06.2022
CORAM :
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
and
THE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD
Writ Appeal No. 891 of 2016
and
CMP. No. 11371 of 2016
1. The Commissioner of Customs
Group-6, Custom House
No.60, Rajaji Salai
Chennai - 600 001
2. The Deputy Commissioner of Customs (SIIB)
Customs House
No.60, Rajaji Salai
Chennai - 600 001
3. The Assistant/Deputy Commissioner of Customs (Group-6)
Customs House
No.60, Rajaji Salai
Chennai - 600 001 .. Appellants
Versus
M/s. A.S. Enterprises
rep. by its Proprietor
V.A. Sahul Hameed
No.3/5, Sulthan Street
Mannady
Chennai - 600 001 .. Respondent
Appeal filed under Clause 15 of Letters Patent against the order of this
court dated 02.06.2016 passed in W.P. No. 34581 of 2015.
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WA No. 891 of 2016
For Appellants : Mr. R. Sankara Narayanan
Additional Solicitor General of India
assisted by Mr. A.P. Srinivas
Senior Standing Counsel
For Respondent : Mr. B. Sathish Sundar
JUDGMENT
R. MAHADEVAN, J.
This intra-court appeal is filed by the appellants / Revenue, assailing the
order dated 02.06.2016 passed in W.P. No. 34581 of 2015, in and by which,
the learned Judge has allowed the said writ petition filed by the respondent
herein with a direction to the appellants to release the imported goods covered
under the Bill of Entry No.8915658 dated 15.04.2015, within a week's time.
2. The necessary facts leading to the filing of this appeal are as
follows:
2.1. The respondent/writ petitioner is engaged in the business of
trading various commodities including electronic goods and spare parts, for
which purpose, they import goods from abroad, besides purchasing locally.
They obtained Import Export Code No. 0413045153 from the office of the
Director General of Foreign Trade. They also registered themselves with
Commercial Taxes Department under the Tamil Nadu Value Added Tax Act,
2006 and were allotted TIN No.33761243844.
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WA No. 891 of 2016
2.2. During the course of their business, the respondent/writ petitioner
sought to import “LED spare parts for lighting fixtures, spare parts for lighting
fixtures and capacitor for lighting fixtures” from M/s.Zhongshan Zeda
Lighting Co. Ltd., China and the said goods were loaded vide Bill of Lading
dated 04.04.2015, duly covered by Invoice No.ZEDA20150318 dated
02.04.2015 for a value of US$ 10153.92. On arrival of such goods, the
respondent/writ petitioner filed Bill of Entry No.8915658 dated 15.04.2015
with the office of the third appellant for assessment and clearance of the
goods. After examining the same, the second appellant opined that the goods
were found to be in order and as declared.
2.3. However, after a period of two months, the Appraiser attached to
the office of the second appellant issued summons dated 26.06.2015 under
Section 108 of the Customs Act, 1962 (in short, “the Act”) for appearance of
the Director of the respondent/writ petitioner company for enquiry on
04.07.2015, which was a Saturday. Immediately, the respondent /writ
petitioner by a communication dated 07.07.2015, sought for provisional
release of the goods under Section 110A of the Act r/w Customs (Provisional
Duty Assessment) Regulations, 1963, pointing out that the goods are likely to
be diminished of its value, but the said requisition was not considered.
Therefore, the respondent / writ petitioner filed a writ petition in WP
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WA No. 891 of 2016
No.22173 of 2015 for a Mandamus directing the appellants herein to assess
and clear the imported goods. By order dated 17.08.2015, the aforesaid writ
petition was disposed of, directing the respondent/writ petitioner to submit a
fresh application within one week and on receipt of the same, the appellants
herein were directed to decide the claim of the respondent/writ petitioner for
release of the goods within a period of three weeks thereafter.
2.4. Pursuant to the aforesaid order dated 17.08.2015 made in
WP.No.22173/2015, the respondent/writ petitioner approached the third
appellant for provisional release of the goods. Following the same, they were
issued with a communication dated 07.10.2015 in F.No.S.Misc.165/2015-Gr.6,
informing that the Adjudicating Authority accepted for provisional release of
the goods in terms of Section 110A of the Act, subject to the conditions that
the respondent would execute a bond for full value of the goods viz.,
Rs.96,12,271/-, besides furnishing a bank guarantee for Rs.28,61,358/-
representing 110% of estimated duty evasion amount. Stating that the
conditions so imposed by the appellants were onerous and unreasonable, the
respondent/writ petitioner filed another writ petition bearing No.34581 of
2015 praying to issue a Writ of Mandamus directing the appellants to release
the subject goods covered under Bill of Entry No. 8915658 dated 15.04.2015
in terms of Section 110 (2) of the Act. By order dated 02.06.2016 the learned
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WA No. 891 of 2016
Judge allowed the said writ petition as prayed for, on the premise that no
action was initiated by way of issuance of show cause notice under section
124(a) of the Act, within six months or extended period stipulated under
section 110(2) of the Act and hence, the person from whose possession the
goods were seized, becomes entitled to their return. Aggrieved over the same,
the appellants / Revenue are before this court with this intra-court appeal.
3.1. The learned Additional Solicitor General appearing for the
appellants would contend that the imported goods were arrived on 15.04.2015.
While so, based on a specific intelligence received to the effect that the
importer was resorting for undervaluation of the goods whereby the value
declared was only 10% of the actual value, the consignment was taken up by
Special Intelligence and Investigation Branch (SIIB), Customs House, Chennai
for investigation. Upon investigation conducted on 21.05.2015 in the presence
of the importer's representative and the customs broker, it was found that there
were 990 cartons as against the declared 972 cartons; and the parts of LED
bulb plastic Housing set - bottom and top, bulb holder and screws, LED PCB,
Capacitor and wire sets, as declared goods. Further, a carton box containing
base machine, Foot Valve Model No.VF200-08 with compressor 0.75KW
Model No.YL80L2 JB/T95421999, which was undeclared, was also found.
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WA No. 891 of 2016
Therefore, permission was granted to warehouse the said goods on 01.06.2015
as contemplated under Section 49 of the Act. Adding further, the learned
counsel would contend that summons dated 04.06.2015 under Section 108 of
the Act, was issued, calling upon the Director of the respondent company to
appear for enquiry on 04.07.2015. Following the same, two more summons
dated 16.07.2015 and 27.07.2015 were issued, as the date (04/07/2015) given
was inadvertently a Saturday, to which, the respondent by communication
dated 31.07.2015 replied that they had filed a writ petition and hence, they
were unable to appear before the authorities on 31.07.2015. Thus, according to
the learned counsel, the observation of the learned Judge that non-issuance of
show cause notice within a period of six months as per section 124(a) of the
Act, would vitiate the provisional order passed by the third appellant on
07.10.2015 for release of the imported goods, cannot be allowed to be
sustained. The learned counsel also placed reliance on the following decisions:
(i)Chaganlal Gainmull v. Collector of Central Excise [1999 (109)
E.L.T. 21 (SC)] wherein it was held by the Hon'ble Supreme Court that “the
delay beyond six months in the issue of the show cause notice goes to and
affects the power to detain the seized goods beyond six months and does not
denude the adjudicating authority of the power to initiate proceedings even
thereafter”.
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WA No. 891 of 2016
(ii)Jayant Hansraj Shah v. Union of India [2008 (229) E.L.T. 339
(Bom)], in which, it was categorically observed by the Bombay High Court
that “it is only in the case where no provisional order is passed for release of
seized goods and if no notice is issued under section 124(a) of the Customs
Act, 1962, for confiscation of goods, then only would section 110(2) ibid apply
and Department would be bound to release goods”.
3.2. The learned Additional Solicitor General appearing for the
appellants also contended that while passing an order for provisional release of
the goods, it is open to the appellants to impose any condition as may be
necessary for protecting the interest of the revenue. Even Section 110 (2) of
the Act does not stipulate that the goods can be released unconditionally
without imposing any condition. Further, as per the guidelines contained in
para 2.2 (c) of Chapter 15 of the Customs Manual, the provisional clearance of
the goods shall be considered upon furnishing a bond for full value of the
goods supported by adequate bank guarantee as may be determined by the
proper officer. Therefore, based on the report of SIIB, the third appellant
passed the order dated 07.10.2015 to provisionally release the goods, subject
to execution of bond for full value of goods of Rs.96,12,271/- and bank
guarantee for Rs.28,61,359/- i.e., 110% of the estimated duty evasion by the
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WA No. 891 of 2016
respondent / writ petitioner. Thus, according to the learned counsel, such a
provisional order passed by the third appellant cannot be found fault with.
3.3. It is further contended by the learned Additional Solicitor General
appearing for the appellants that the respondent / writ petitioner had already
invoked the writ jurisdiction by filing WP.No.22173 of 2015 seeking a
mandamus directing the appellants to release the goods imported, which was
disposed of, by order dated 17.08.2015. Pursuant to the said direction, the third
appellant passed the provisional order of release of the goods on 07.10.2015
imposing certain conditions, in terms of section 110A of the Act. However, the
respondent / writ petitioner did not comply with the said provisional order of
release of the subject goods nor challenged the same, but they made a second
attempt by filing the instant writ petition viz., WP.No.34581 of 2015, for the
very same prayer of issuance of a Writ of Mandamus to release the imported
goods, which cannot be maintainable and the question of further release of the
goods as contemplated under section 110(2) of the Act will not arise. Without
considering the said fact, the learned Judge allowed the second writ petition
and directed the appellants to release the goods unconditionally, by the order
impugned herein, which is per se illegal and contrary to the provisions of law.
Stating so, the learned counsel sought to quash the order passed by the learned
Judge in the second writ petition.
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WA No. 891 of 2016
4.1. Per contra, the learned counsel for the respondent/writ petitioner
would contend that the subject goods reached Chennai during April 2015 and
the bill of entry along with other documentary details were immediately
submitted by the respondent and the goods, upon examination by the second
appellant, were found to be in order and as declared, but the same were not
permitted to be cleared by the appellants. While so, the Appraiser attached to
the office of the second appellant issued summons on 26.06.2015 for
appearance of the Director of respondent/writ petitioner company on
04.07.2015, which was a Saturday. Thereafter, no show cause notice was
issued by the appellants under the relevant provisions of the Act. Since there
was enormous delay on the part of the appellants in clearing the goods in
question and the same had caused prejudice to the respondent / writ petitioner
in honouring their business commitments, they filed WP.No.22173/2015 for a
mandamus directing the appellants to release the goods and the said writ
petition was disposed of on 17.08.2015, based on which, the respondent / writ
petitioner made repeated requests for release of the goods. Ultimately, the third
appellant by communication dated 07.10.2015, informed that the Adjudicating
Authority agreed for provisional release of the goods subject to execution of
bond and bank guarantee, which were onerous and could not be executable
and hence, the respondent / writ petitioner again approached this court under
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WA No. 891 of 2016
Article 226 of the Constitution of India for a mandamus to the appellants for
release of the goods imported in terms of section 110(2). The said writ petition
was rightly considered by the learned Judge and a direction was issued to the
appellants for absolute release of the goods, for want of issuance of show
cause notice under section 124(a) of the Act.
4.2. Referring to a decision of the Bombay High Court rendered on
29.10.2021 in WP.No.5593 of 2021 [Indosheel Mould Limited v. Union of
India], the learned counsel for the respondent/writ petitioner pointed out that
the goods have been detained for more than a year without there being any
show cause notice as contemplated under section 124(a) of the Act and hence,
the same ought to have been released by the appellants unconditionally.
Taking note of the same, the learned Judge passed the order impugned herein,
directing the appellants to release the goods without any condition. For better
appreciation, the relevant portion of the said Bombay High Court decision is
extracted below:
"19. No doubt, the amendment to sub-section 2 of Section 110
of the said Act gives power to the appropriate authority to extend the
period for issuing show cause notice in the case of seized goods by a
further period of six months and also to provide exemption from
application of time limit of six months to cases in respect whereof an
order of provisional release of seized goods has been passed. We have
already observed that within a period of six months from the date of
seizure, no notice is given under clause (a) of section 124. In view of
the submissions of learned Senior Advocate, we now consider the effect
of the order passed by the competent authority provisionally releasing
the goods under Section 110-A of the said Act on the release of goods
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WA No. 891 of 2016
proviso to sub-section (2) of Section 110 provides exemption from
application of time limit of six months to cases in which an order of
provisional release of seized goods has been passed. Factually, in view
of the onerous conditions, the petitioner did not avail the release of the
goods pursuant to the passing of the order of provisional release. The
consequence is that the goods remain under seizure. This being the
position, in our opinion, the rigors of sub-section (2) of section 110 of
the said Act will continue to apply as the character of the goods continue
to be goods seized under sub-section (1). The proper officer then is
obliged to follow the procedure prescribed in sub-section (2) of section
110 of the said Act, in that he has to issue notice under clause (a) of
section 124 of the said Act within six months of the seizure of the
goods. We have already observed that the notice under clause (a) of
section 124 within six months of the seizure is not issued and therefore
the consequence of release must follow.
20. Assuming that the competent authority in exercise of the
powers conferred by the first proviso extends period so specified by sub-
section (2) of section 110 by a further period of six months, the
maximum period during which the goods shall remain under seizure is
12 months from the date of seizure. The effect of non compliance of the
provisions of sub-section (2) of section 110 would only be that the
seized goods are to be returned to the persons from whose possession
they were seized. It would not render the initial seizure of the goods
illegal. Thus, under sub-section (2) of section 110, time limit is fixed for
retaining the goods seized by the customs authority. In case the
confiscatory proceedings are not initiated, custody of the goods to the
persons from whom they were seized are to be handed over."
Therefore, according to the learned counsel, in the absence of any show cause
notice as mandated under the Act, the learned Judge is wholly justified in
allowing the writ petition thereby directing the appellants to release the goods
and such a well considered order need not be interfered with by this court.
5. We have heard both sides and also perused the materials available
on record.
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WA No. 891 of 2016
6. It could be seen that in the course of business, the respondent /
writ petitioner imported the subject goods viz., LED spare parts for lighting
fixtures, spare parts for lighting fixtures and capacitor for lighting fixtures by
Bill of Entry No.8915658 dated 15.04.2015. The said goods were not
permitted to be cleared by the appellants alleging that the respondent / writ
petitioner undervalued the same in order to evade from the payment of
customs duty and that, the declared value was only 10% of the actual value.
Admittedly, permission to ware house the said goods imported under section
49 of the Act, was given on 01.06.2015 and summons dated 04.06.2015 under
section 108 of the Act, came to be issued, calling upon the Director of the
respondent / writ petitioner to appear for enquiry on 04.07.2015, which was a
Saturday. Thereafter, no communication / show cause notice was issued nor
the goods detained were released, according to the respondent / writ petitioner
and therefore, they preferred WP.No.22173 of 2015 seeking a mandamus to
the appellants to release the subject goods in terms of section 110A of the Act.
This Court by order dated 17.08.2015, disposed of the said writ petition
bearing no.22173 of 2015, in the following terms:
“4. ...the petitioner is permitted to file an application within one
week from the date of receipt of a copy of this order and also directed to
appear before the respondent on the date and time so specified so as to
assess as provided by law. The matter shall be decided within 3 weeks
from the date of receipt of the application submitted by the petitioner.”
Consequent to the aforesaid order, by a communication dated 07.10.2015 sent
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WA No. 891 of 2016
by the third appellant / Assistant Commissioner of Customs, Group-6,
Chennai, the respondent / writ petitioner was informed as follows:
“Please refer to your letter dated 17.08.2015 on the above subject.
In this regard, the Adjudicating Authority has accepted your
request for provisional release of goods in terms of section 110A of the
Customs Act subject to following conditions:
(i)Execution of bond for full value of goods i.e., for Rs.96,12,271/-
(ii)Execution of Bank Guarantee for Rs.28,61,359/- i.e., 110% of
estimated duty evasion amount.”
Concededly, the aforesaid order dated 07.10.2015 was neither complied with
nor challenged by the respondent / writ petitioner, till date. Without doing so,
they came forward with another writ petition, viz., WP.No.34581 of 2015 to
issue a writ of mandamus for the release of the subject goods in terms of
section 110(2) of the Act. By order dated 02.06.2016, which is impugned
herein, the learned Judge allowed the aforesaid writ petition and directed the
appellants to release the imported goods within one week from the date of
receipt of the copy of the order, with the following findings:
“17.It can be gathered from the above that the provisions of
Section 110(2) in so far as the prescription of a time limit for holding
seized goods is deemed mandatory and the consequence of not issuing a
show cause notice within the period or extended period specified is
clearly spelt out to be that the "goods shall be returned to the person from
whose possession they were seized", which is apparent from the combined
reading of Section 110(2) and its proviso. The corollary is not that the
Customs authorities lose jurisdiction to issue show cause notice. The
object of enacting Section 110(2) of the Act is that the Officer of the
Customs Department may not deprive the right to property for indefinite
period to the person from whose possession the goods are seized under
Sub-section (1) thereof. Sub-section (2) strikes a balance between the
Revenue's power of seizure and an individual's right to get the seized
goods released by prescribing a limitation period of six months from the
date of seizure if no show cause notice has been issued under Section
124(a) for confiscation of the goods. Proviso to Section 110 (2) provides
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WA No. 891 of 2016
for extended period of limitation to validate the detention of the goods for
another period of six months on grant of extension by the Commissioner
of Customs. Section 110 (2) of the Act nowhere envisages the period of
limitation for issuing show cause notice. Therefore, a plain and combined
reading of Sections 110(2), 124 and 110-A spells out that any order of
provisional release shall not take away the right of the assessee under
Section 110(2) read with Section 124 of the Act. When no action is
initiated by way of issuance of show cause notice under Section 124(a) of
the Act within six months or extended period stipulated under Section
110(2) of the Act, the person from whose possession the goods were
seized, becomes entitled to their return. The remedy of provisional release
is independent of remedy of claiming unconditional release in the absence
of issuance of any valid show cause notice during the period of limitation
or extended limitation prescribed under Section 110(2) of the Act.
Therefore, merely because a request has been made for provisional
release of goods under Section 110-A of the Customs Act and the same
has been acceded to by the respondent, the same would not take away the
right of the petitioner for unconditional release of the goods under
Section 110(2) of the Customs Act. The right under Section 110(2) of the
Customs Act is absolute and cannot be curtailed or prevented by the
Department. That apart, the Circular issued by the Ministry of Finance
dated 19.02.2013 also supports the case of the petitioner.”
Questioning the aforesaid order passed by the learned Judge in
WP.No.34581 of 2015, the instant intra-court appeal came to be filed by the
appellants/ revenue.
7. During the course of hearing, the learned counsel appearing for
both sides made elaborate arguments, citing case laws, for and against the
impugned order passed by the learned Judge, in directing the appellants to
release the subject goods unconditionally. Ultimately, they fairly submitted
that the same were raised only for academic interest and the Act was
subsequently, amended and the subject matter in issue is pending
consideration before the Hon'ble Supreme Court. It is also submitted that the
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WA No. 891 of 2016
subject goods lying in the custody of the Department, which are perishable in
nature, have now, become obsolete and therefore, the same are of negligible
value.
8. In view of the aforesaid submissions made on both sides, this
court is of the opinion that no further orders need be passed with respect to
release of the subject goods at this stage, except directing the appellants to
complete the adjudication proceedings, if not completed earlier, and pass
appropriate orders, on merits and in accordance with law, as expeditiously as
possible. This writ appeal stands disposed of accordingly. No costs.
Consequently, connected miscellaneous petition is closed.
(R.M.D., J.) (J.S.N.P., J.)
09.06.2022
rsh
Internet : Yes / No
Index : Yes / No
R. MAHADEVAN, J.
https://www.mhc.tn.gov.in/judis
and
WA No. 891 of 2016
J.SATHYA NARAYANA PRASAD, J.
rsh/rk
To
1. The Commissioner of Customs
Group-6, Custom House
No.60, Rajaji Salai, Chennai - 600 001
2. The Deputy Commissioner of Customs (SIIB)
Customs House, No.60, Rajaji Salai
Chennai - 600 001
3. The Assistant/Deputy Commissioner of Customs (Group-6)
Customs House, No.60, Rajaji Salai
Chennai - 600 001
WA No. 891 of 2016
09.06.2022
https://www.mhc.tn.gov.in/judis
