Gujarat High Court
M/S Rugs Rural, Through Proprietor ... vs Principal Commissioner Of Customs on 7 January, 2022
Author: Sonia Gokani
Bench: Sonia Gokani
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
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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 ?
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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
TIRTH NAYAK(8563) for the Petitioner(s) No. 1
. for the Respondent(s) No. 3
.... for the Respondent(s) No. 1
..... for the Respondent(s) No. 2
MR DEVANG VYAS(2794) for the Respondent(s) No. 3
MR UTKARSH R SHARMA(6157) for the Respondent(s) No. 1,2
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CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 07/01/2022
CAV JUDGMENT
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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 Page 2 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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. Page 3 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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. Page 4 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022
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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 Page 5 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 6 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 7 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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.
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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 Page 9 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 10 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 11 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 12 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 13 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 14 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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. Page 15 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 C/SCA/14849/2021 CAV JUDGMENT DATED:
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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 Page 16 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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).
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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 Page 18 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 19 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 20 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 21 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 22 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 23 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 24 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 25 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 26 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 27 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 28 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 29 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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 Page 30 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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."Page 31 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022
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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 Page 32 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022 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.Page 33 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022
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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 Page 34 of 34 Downloaded on : Sun Apr 24 08:50:56 IST 2022