Punjab-Haryana High Court
M/S Aabhas Spinners Pvt. Ltd vs Union Of India And Others on 23 September, 2009
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH.
C.W.P. No. 7972 of 2009
Date of Decision: September 23, 2009
M/s Aabhas Spinners Pvt. Ltd.
...Petitioner
Versus
Union of India and others
...Respondents
CORAM: HON'BLE MR. JUSTICE M.M. KUMAR
HON'BLE MR. JUSTICE JASWANT SINGH
Present: Mr. Jagmohan Bansal, Advocate,
for the petitioner.
Mr. Kamal Sehgal, Advocate,
for respondent Nos. 1 to 4.
Mr. S.C. Pathela, Advocate,
for respondent No. 5.
1. To be referred to the Reporters or not?
2. Whether the judgment should be reported in
the Digest?
M.M. KUMAR, J.
This petition filed under Article 226 of the Constitution challenges orders dated 18.3.2009 and 23.3.2009 (P-7 & P-8), passed by the Directorate of Revenue Intelligence, Ludhiana, seizing the goods of the petitioner-Company. A further prayer has been made for directing the Joint Director, Directorate of Revenue Intelligence- respondent No. 2 to defreeze the bank accounts of the petitioner- Company and allow it to withdraw funds therefrom. Still further it has been prayed that goods, cash, mutual funds and record etc. C.W.P. No. 7972 of 2009 2 belonging to the petitioner-Company be also released.
2. The case of the petitioner-Company is that it used to import various types of yarn and blankets from China and sell the imported yarn as such or would sell it after converting the same into fabrics. It is claimed that the petitioner-Company has neat and clean track record of importing goods. During the last five years the Custom Officers never raised any objection at the time of clearance of their goods. It has been averred that it has always complied with the requirements of Sections 17, 46 and 47 of the Customs Act, 1962 (for brevity, 'the Act'). These provisions relate to assessment of duty, entry of goods on importation and clearance of goods for home consumption.
3. During the later part of 2008 the petitioner-Company imported goods, which were cleared after passing of an assessment order under Section 47 of the Act. As per prescribed procedure under the Act before permitting clearance of goods for home consumption, goods are physically examined, samples are drawn and assessment order is passed under Section 17 read with Section 47 of the Act. However, on 23.1.2009, the officers of the Directorate of Revenue Intelligence (DRI) conducted a search of the business premises as well as residence of the Director of the petitioner-Company. The DRI alleged that the petitioner-Company has mis-declared the value of the imported goods at the time of filing bill of entry and it has paid less duty as compared to the actual liability. The officers of DRI found 416 bales of nylon/acrylic/ polyester yarn and few cartons of blankets as detailed in para 5 of the petition. The goods and the record which C.W.P. No. 7972 of 2009 3 was lying in the business premises of the petitioner-Company were detained. Apart from this, an amount of Rs. 1.5 lacs and mutual fund receipts were also detained from the residence of the Director of the petitioner-Company vide panchnama dated 22.1.2009 and 23.1.2009 (P-1 to P-3). It has been alleged that the revenue-respondent has even issued directions to the bankers to freeze the bank accounts of the petitioner-Company, its Director as well as their relatives. The said action of the respondents came to the notice of the petitioner- Company upon receipt of communications dated 24.1.2009 and 27.1.2009 from the Bank of India, Ludhiana (P-4).
4. On 4.2.2009, the petitioner-Company addressed a letter to the Deputy Director, DRI, Ludhiana, and requested for release of the goods. They also furnished documents in proof of purchase of detained goods along with the letter (P-6). On 23.2.2009, the petitioner-Company made a request to the Director General of Revenue Intelligence for de-freezing of their bank accounts (P-5).
5. The Deputy Director, DRI, Ludhiana, instead of releasing the goods and other material passed orders dated 18.3.2009 and 23.3.2009. He seized the detained goods and other material including 18360 Kgs. of yarn which was purchased by the petitioner-Company from M/s Excel Packages. The firm M/s Excel Packages is under the son-in-law of the Director of the petitioner-Company. The yarn weighing 18360 Kgs. was not imported by the petitioner-Company (P-7 & P-8). A perusal of order dated 18.3.2009 (P-7) shows that the goods mentioned therein have been seized on the pretext that the same were found mis-declared and undervalued. With regard to the C.W.P. No. 7972 of 2009 4 request of the petitioner-Company for release of yarn detained at Sr. No. 1 of the detention memo. dated 23.1.2009, it has been stated in para 2 of the order dated 23.3.2009 (P-8) that as per the documents submitted by the petitioner-Company on 4.2.2009 the yarn has been claimed to be auctioned material i.e. Blended Acrylic Yarn, whereas in the panchnama the detained goods mentioned at Sr. No. 1 were Acrylic Yarn having marking as '15/2 100% A Boucle Yarn RW'. It has further been pointed out that the samples drawn from different lots of detained consignment of 18360 Kgs., after testing in the Central Revenue Control Laboratory, New Delhi, have been found to be composed of Acrylic and are special type of yarn having complex construction. The claim of the petitioner-company that the detained Yarn was purchased from Shri Karan Chaudhary of M/s Excel Packages, Ludhiana, who purchased the same in an auction conducted by the port authorities of Punjab State Warehousing Customs (PSWC), has also been turned down on that premise. It has further been mentioned that the seized goods could be provisionally released under Section 110A of the Act after submitting bond with such security and conditions as the Competent Authority may prescribe.
6. The petitioner-Company has also claimed that under Section 110(A) of the Act the respondents were required to follow the procedure as envisaged under Section 110(1B) of the Act, whereas they have detained/seized the goods under Section 110 of the Act. It has been submitted that under Section 110 of the Act the goods could be seized only if the seizing officer has reasons to believe that goods are liable to confiscation, whereas no reasons have been given in the C.W.P. No. 7972 of 2009 5 seizure memos and, therefore, the petitioner-Company has been deprived of its valuable right to utilise the goods in question.
7. In the written statement filed on behalf of the respondents various preliminary submissions and objections have been raised in addition to the reply given on merits. The first objection raised by the respondents is with regard to concealment of facts by the petitioner-Company from this Court. It has been asserted that the goods in question were originally imported by the petitioner- Company in its own name i.e. M/s Aabhas Spinners (P) Ltd., Ludhiana. The title of the goods was relinquished as they failed to file the bill of entry of the goods. Subsequently, the respondents auctioned the goods, which were purchased by Shri Karan Choudhary of M/s Exel Packages, who happens to be son-in-law of Shri Padam Dalmia, the main promoter/director of the petitioner-Company. The description of the yarn was never challenged either by Shri Karan Choudhary or by the petitioner-Company. It has also been pointed out that the respondents approached PSWC, Ludhiana, for providing details of drawl of sample from the auctioned goods, testing of the same in the Laboratory and result thereof, vide letter dated 1.4.2009. In response thereto, it has been intimated that PSWC had not drawn any sample or sent to any laboratory before conducting the auction as the goods were disposed of on 'as is where is basis'.
8. It has been further asserted that as the petitioner- Company has not exercised the option of provisional release of the goods under Section 110A of the Act after submitting bonds with such security and condition as the competent authority may C.W.P. No. 7972 of 2009 6 prescribed, therefore, the writ petition is mis-conceived and liable to be dismissed.
9. It has also been pointed out that the officers of the DRI, Ludhiana, on the basis of intelligence found that some of the importers have imported various types of yarn such as 100% polyester yarn, 100% nylon yarn, nylon viscose blended yarn, feather yarn etc. from China and Singapore. In order to evade Customs Duty they have mis-declared the value and description of the such imported yarn. Accordingly, search operations were carried out on the premises of five importers' firms based in Ludhiana. The respondents have further given details regarding modus operandi of such importers, investigation conducted by the DRI and unearthing of hawala transaction and channel etc..
10. The factual matrix regarding search made on 22/23.1.2009 on the business/residence premises of the directors of the petitioner-Company under Section 105 of the Act, detaining of goods, records, cash of Rs. 1.50 lacs, mutual fund receipts etc. and passing of seizure orders dated 18.3.2009 and 23.3.2009, has been admitted. However, it has been submitted that the petitioner- Company could not produce any documentary evidence in support of purchase of yarn and blankets in question lying in the factory-cum- godown premises at the time of search/investigation by the officers of the DRI on 23.1.2009. It has been denied that the seized material includes 18360 Kgs. 100% Boucle Yarn. In that regard test reports of the laboratory have been referred which are to the effect that detained yarn was composed of Acrylic and special type of yarn having C.W.P. No. 7972 of 2009 7 complex construction.
11. It has also been denied that any directions were issued to the bankers of the petitioner-Company to stop operation of the bank account and the only direction issued was to freeze the balance in the bank accounts so as to facilitate the seizure and subsequent confiscation of the goods in terms of the proceedings under Section 121 of the Act. With regard to the seized amount of Rs. 1.50 lacs it has been stated that the said amount pertains to sale proceeds of the smuggled goods and liable for confiscation. With regard to return of documents, mutual fund receipts, CPUs/laptop etc. it has been mentioned that the CPUs' and Laptop were returned on 2.2.2009 and 28.3.2009 after retaining the original hard discs. Even copy of the hard disc of the laptop was given on 28.3.2009. Besides this 48 files containing photocopies of import documents were also handed over on 7.2.2009, whereas photocopies of mutual fund subscription made by the family members of the Director of the petitioner-Company were handed over on 24.6.2009. The contention raised by the petitioner-Company regarding non-compliance of the provisions of Section 110(1A), 110(1B) and 110(1C) of the Act, which pertains to disposal of the goods during the pendency of investigation, has been denied by stating that these provisions are not mandatory in nature.
12. In the replication filed on behalf of the petitioner- Company, apart from reiterating the factual position pleaded in the petition, it has been asserted that the goods as well as cash in question were detained on 22/23.1.2009 and as per the provisions of Section 110 read with Section 124 of the Act, if no show cause notice is C.W.P. No. 7972 of 2009 8 issued within six months from the date of seizure, the goods are liable to be released. According to the petitioner-Company the period of six months in the present case expired on 21/22.7.2009. It has further been submitted that the respondents have shown the date of seizure as 18/23.2.2009 with a view to gain more time. Furthermore, there is no specific provision concerning detention of goods under the Act. It has been asserted that the detention and seizure is one and the same thing. In response to the preliminary objections raised by the respondents it has been stated that relinquishment of title of goods by the petitioner-Company has nothing to do with the present case. It has been specifically denied that the petitioner-company has concealed any material facts from the Court. After relinquishing of title by the petitioner-Company, M/s Exel Packages purchased the goods in an open auction, from whom the petitioner-Company has again purchased the goods.
13. A short affidavit dated 3.8.2009, has also been filed by Shri H.N. Meena, Deputy Director, DRI, Ludhiana, stating that a show cause notice for extension was issued by DRI on 15.7.2009, which was personally handed over to Shri Padam Dalmia, Director of the petitioner Company on 16.7.2009. In response to the said notice, counsel for the petitioner appeared on 20.7.2009 and filed written submissions before the Commissioner of Customs, Amritsar. The Commissioner of Customs, Amritsar, after hearing the petitioner adjudicated the matter and passed an Order-in-Original, bearing No. 08/CUS/09, dated 20.7.2009, issued vide C.No. VIII(Hqrs.)10/CUS/ Order/24/09/4653-56, dated 21.7.2009, and extended the time period C.W.P. No. 7972 of 2009 9 for issuance of show cause notice by a period of six months i.e. upto 20.1.2010, as per the provisions of sub-section (2) of Section 110 of the Act. However, along with the said affidavit copies of the show cause notice dated 15.7.2009 and order dated 20.7.2009 were not placed on record. The averments already made in the written statement were also reiterated in the affidavit dated 3.8.2009.
14. On 4.8.2009, when the case was taken up for hearing learned counsel for the petitioner-Company argued that in accordance with sub-section (2) of Section 110 of the Act if no notice in respect of seized goods is given within a period of six months from the date of the seizure then the goods have to be returned to the person from whose possession such goods were seized. On the other hand, learned counsel for the respondents reiterated the contents of short affidavit dated 3.8.2009 with regard to issuance of show cause notice dated 15.7.2009 and passing of order dated 20.7.2009 within a period of six months. Learned counsel for the respondents further apprised the Court that the said order was communicated to the petitioner- Company by speed post. Learned counsel had sought and was granted time to file an affidavit and to bring on record all the events and documents so that the petitioner may have an opportunity to file a counter to the aforesaid affidavit.
15. In compliance with the order dated 4.8.2009, an additional affidavit dated 20.8.2009 has been filed along with show cause notice dated 15.7.2009, reply dated 20.7.2009 filed by the counsel for the petitioner-Company before the Commissioner of Customs, Amritsar, Order-in-Original dated 20.7.2009, photocopy of C.W.P. No. 7972 of 2009 10 dispatch register and a communication dated 19.8.2009 sent by the Superintendent (Adj.) to the Deputy Director intimating that the Order-in-Original dated 20.7.2009 was sent through ordinary post instead of Registered A.D. (Annexures A/1 to A/5 respectively).
16. On 27.8.2009, when the case came up for consideration it transpired that the Order-in-Original, dated 20.7.2009, has not been sent to the petitioner-Company by speed post or by registered post in accordance with the procedure prescribed under Section 153 of the Act. From the perusal of photo copy of the dispatch register (A/3) some doubt cropped up because at the first instance it was stated that the order was sent by speed post and then the aforesaid statement was improved upon by stating that it was sent by ordinary post. Since the procedure of sending orders by ordinary post is unknown to Section 153 of the Act, which postulates that orders are to be served on the petitioner by tendering a copy of the order to him or by sending the same by registered post, it became necessary to examine the original record including the dispatch register.
17. On 1.9.2009, learned counsel for the respondents produced original file of Case No. VIII(Hqrs.)10/CUS/ Order/24/09. A bare perusal of the file shows that the show cause notice for extension of time period beyond six months in respect of seizure of goods and cash, bearing DRI F.No. 856(3)LDH/09/Pt-I/1727, dated 15.7.2009, is available at page No. 25 of the file. In para 11 of the show cause notice, the noticee-petitioner Company was called upon to appear for personal hearing on 20.7.2009 at 1400 hrs before the Commissioner of Customs, Amritsar, to explain their stand. C.W.P. No. 7972 of 2009 11 However, in para 13 it has been mentioned that "if no cause is shown against the action proposed to be taken within a week of the receipt of this notice of (or?) if they do not appear before the adjudicating authority on dates when the case is posted for hearing, the case will be decided on merits and on the basis of materials available on record". It is claimed that the said notice was served upon the petitioner-Company by hand on 16.7.2009. At page No. 8 of the file, a sheet containing 'record of personal hearing' is available, which shows that on 20.7.2009, Shri Naveen Bindal, Advocate, had put in appearance on behalf of the petitioner-Company. It has been further recorded in the sheet as under:-
" The Advocate submitted written request dated 20.07.2009 to supply them the required documents and at least ten days time to file reply.
He reiterated the request already submitted. He has nothing more to say."
The said sheet of 'record of personal hearing' also bears the signature of the Commissioner as well as counsel. The written request dated 20.7.2009, submitted by the counsel is also available at page No. 7 of the file. The Order-in-Original passed by the Commissioner is available at page Nos. 14 to 19 of the said file, which is purported to be passed on 20.7.2009. The original of communication dated 19.8.2009 (Annexure A/5) is also available in the file, perusal of which shows that the Order-in-Original, dated 20.7.2009 was never sent through Registered Post whereas the same was dispatched through ordinary post by the concerned official vide C.No. VIII(HQ) C.W.P. No. 7972 of 2009 12 10/CUS/Adj./ 24/09/4653-56 dated 21/07/09. The order has been sent by Registered Post to other authorities on 22.7.2009.
18. Mr. Jagmohan Bansal, learned counsel for the petitioner- Company has argued that the Order-in-Original, dated 20.7.2009, passed by the Commissioner is liable to be set aside because the same has not been sent to the petitioner-Company within six months from detention/seizure of the goods. He has further argued that in the present case the Commissioner has passed the Order-in-Original in haste without affording proper opportunity of hearing to the petitioner-Company. He has drawn our attention to para Nos. 11 and 13 of the show cause notice dated 15.7.2009 (Annexure A/1) and submitted that as per para 13 of the notice, a week's time was granted to show cause for extension of time period beyond six months in respect of seizure of goods and cash, which means that the petitioner- Company could file its reply upto 23.7.2009 because the notice was served on 16.7.2009. On the contrary, in para 11 of the notice the date of personal hearing before the Commissioner was fixed as 20.7.2009 ahead of the period of seven days. Accordingly, the petitioner-Company was represented through its advocate before the Commissioner on 20.7.2009 and submitted a written request for supply of test reports and documents, which were referred in the notice but not supplied, so that an effective reply could be given. It was also requested to give ten days time to file the reply. However, the Commissioner without extending the time or waiting up to 23.7.2009, passed the impugned Order-in-Original on 20.7.2009 itself.
C.W.P. No. 7972 of 2009 13
19. Learned counsel then submitted that the goods were detained on 22/23.1.2009 and since the period of six months was going to expire on 21/22.7.2009, therefore, the respondents were in a hurry to pass the order extending the period for another six months. He has emphasised that the period of six months is to be reckoned from the date of detention of goods and not from the date of passing of seizure orders dated 18/23.3.2009. He has emphatically stated that the Order-in-Original was never communicated to the petitioner- Company within a period of six months, which makes it incomplete and ineffective. He has maintained that no order could assume the character of a government order unless it is communicated to the party concerned. In that regard reliance has been placed on a judgment of Hon'ble the Supreme Court in the case of Bachittar Singh v. State of Punjab, AIR 1963 SC 395. According to him the date of order is to be construed the date on which it is made known to the affected party. In support of his arguments, learned counsel has placed reliance on the judgments of Calcutta High Court rendered in the cases of Bibhuti Bhusan Bag and another v. I.J. Rao and others, 1968-1969 (73) Calcutta Weekly Notes; and A.S. Narayana v. State of West Bengal, [1973] 32 STC 505. Regarding service of orders, the learned counsel has also placed reliance on the judgments rendered by the Gujarat, Madras, Delhi and Bombay High Courts in the cases of Vadilal Industries Ltd. v. Union of India, 2006 (197) E.L.T. 160 (Guj.); Redington India Limited v. Commissioner of Customs (Appeals), Chennai, 2007 (212) E.L.T. 187 (Mad.); Neha Cosmetics v. Commissioner of Central Excise, 2007 (208) E.L.T. C.W.P. No. 7972 of 2009 14 494 (Del.); and Suresh Bafna v. Commissioner of Customs and Central Excise (Appeals), Goa, 2009 (234) E.L.T. 606 (Bom.).
20. On the issue of distinction between detention and seizure of goods, learned counsel has argued that detention virtually amounts to seizure of goods. According to the learned counsel there is no specific provision under the Act which lays down any distinction between detention and seizure of goods. In support of his contention, reliance has been placed on the judgments rendered by the Kerala and Delhi High Courts in the cases of M. Mohammed v. Collector of Customs and Central Excise, Cochin, 1999 (110) E.L.T. 451 (Ker.) and Rajesh Arora v. Collector of Customs, 1998 (101) E.L.T. 246 (Del.). With regard to freezing of bank account by the DRI, reliance has been placed on the judgment rendered by the Calcutta High Court in the case of Anil Kumar Mahensaria v. Commissioner of Customs (Port), 2003 (155) E.L.T. 18 (Cal.).
21. Mr. Kamal Sehgal, learned counsel for respondent Nos. 1 to 4 on the other hand has vehemently argued that there is a lot of difference between the terms 'detention' and 'seizure'. According to the learned counsel at the time of conducting of search operations by the officers of the DRI any doubtful material/goods found at the spot which is taken into custody through panchnamma is detention of goods/material. Thereafter opportunity is provided to the concerned person for production of evidence/documents in support of such goods/material and if the competent authority is satisfied after furnishing of documents, the detained goods/material is released otherwise the same are seized after passing of appropriate seizure C.W.P. No. 7972 of 2009 15 orders, as has been done in the present case. In support of his submissions, learned counsel has placed reliance on the judgment of Madras High Court in the case of Pro Musicals v. Joint Commissioner of Customs (Prev.), Mumbai, 2008 (227) E.L.T. 182 (Mad.).
22. From the pleadings of the parties and the rival contentions raised by their respective counsel we are of the view that the following questions of law would emerge for determination of this Court:-
(A) Whether the goods in question continues to attract the provisions of the Customs Act, 1962 after the petitioner-Company had relinquished its title under Section 23(2) of the Act and purchased the goods from the auction purchaser after the same were auctioned in an open auction conducted by the port authorities of Punjab State Warehousing Customs (PSWC) after obtaining permission from its proper officer?
(B) Whether in the facts and circumstances of the case, order dated 23.7.2009, granting extension beyond the period of six months could be passed without communicating the same to the petitioner-
Company as per the requirement of Section 153 of the Act?
Re: Question No. (A):
23. In order to appreciate the controversy it may first be C.W.P. No. 7972 of 2009 16 profitable to read Section 23 of the Act, which is as under:-
"23. Remission of duty on lost, destroyed or abandoned goods - (1) Without prejudice to the provisions of section 13, where it is shown to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs that any imported goods have been lost (otherwise than as a result of pilferage) or destroyed, at any time before clearance for home consumption, the Assistant Commissioner of Customs or Deputy Commissioner of Customs shall remit the duty on such goods.
(2) The owner of any imported goods may, at any time before an order for clearance of goods for home consumption under section 47 or an order for permitting the deposit of goods in a warehouse under section 60 has been made, relinquish his title to the goods and thereupon he shall not be liable to pay the duty thereon:
Provided that the owner of any such imported goods shall not be allowed to relinquish his title to such goods regarding which an offence appears to have been committed under this Act or any other law for the time being in force."
24. A perusal of the Section 23 of the Act would show that in respect of any imported goods which have been lost or destroyed at any time before clearance for home consumption to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of C.W.P. No. 7972 of 2009 17 Customs, he may remit the duty on such goods. In the present case we are concerned with sub-section (2) of Section 23 of the Act, which reads that the owner of any imported goods is entitled to relinquish the title of the goods at any time before an order of clearance of the goods for home consumption under Section 47 or an order for permitting the deposit of goods in a warehouse under Section 60 is made. If he (owner) adopts the aforesaid course then such a person would not be liable to pay any duty. However, there is a proviso appended to sub-section (2) of Section 23 of the Act, which provides that the relinquishment of title shall not be permitted if an offence appears to have been committed under the Act or any other law for the time being in force.
25. Chapter IX of the Act (from Sections 57 to 73) is devoted to 'Warehousing' apart from dealing with the rights and duties of the proper officer of Custom, owner of the goods and warehouse. Section 68 deals with 'clearance of warehoused goods for home consumption'. There are two provisos to Section 68, which provide for relinquishment of title. These two provisos in terms are similar to Section 23(2) and its proviso. Accordingly it follows that there can be relinquishment of title in respect of warehoused imported goods also.
26. When the aforesaid provisions are applied to the facts of the present case, it becomes evident that the petitioner-Company had relinquished the title of the imported goods in question. It is evident that such a relinquishment of title could have been declined by the revenue if the importer had committed an offence under the Act. The C.W.P. No. 7972 of 2009 18 fact remains that the petitioner-Company relinquish title without demur. It is entirely different matter that thereafter auction was held and the goods were purchased back from the auction purchaser by the petitioner-Company. The aforesaid factual position has been disclosed by the respondents in the preliminary objections of their written statement. The relevant extract of the preliminary objections reads thus:-
"1. ......It is submitted here that as per documents, the goods were originally imported by the petitioner in its own name i.e. M/s Aabhas Spinners (P) Ltd. Ludhiana only and thereafter they relinquished the title of the goods and did not file the bill of entry of the goods. Since the goods were relinquished by the petitioner, the answering respondents auctioned the goods. Further during the auction proceedings, the goods were purchased back by the petitioner from its front man Karan Choudhary through M/s Exel Packages, who happens to be no body as but the son-in-law of Shri Padam Dalmia, the main promoter/director of the company. Since the yarn was originally imported by the petitioner, it is not surprising that the description of the yarn was not even challenged by Shri Karan Choudhary at any stage or by the petitioner who has purchased the goods from Karan Choudhary son-in-law of the main promoter. It is further submitted here that the respondent department has also approached Punjab State C.W.P. No. 7972 of 2009 19 Warehousing Corporation, Focal Point, Dandari Kalan, Ludhiana vide letter dated 1.4.2009 for providing the details of drawl of sample from the goods which were auctioned by them, i.e. the date of drawl of sample, lab from which samples were got tested, date of receipt of test results and copy of the test reports. In response the Chief Port Manager, PSWC, Ludhiana vide his letter dated 8.4.2009 intimated that PSWC had not drawn any sample or sent to any laboratory before conducting the auction as the disposal was effected on 'as is where is basis'. ......"
27. The procedure for dealing with the goods of which title has been relinquished by its owner, has been provided by Section 48 of the Act, which reads thus:-
"48. Procedure in case of goods not cleared, warehoused or transshipped within thirty days after unloading.- If any goods brought into India from a place outside India are not cleared for home consumption or warehoused or transshipped within thirty days from the date of the unloading thereof at a customs station or within such further time as the proper officer may allow or if the title to any imported goods is relinquished, such goods may, after notice to the importer and with the permission of the proper officer, be sold by the person having the custody thereof:
Provided that-
(a) animals, perishable goods and C.W.P. No. 7972 of 2009 20 hazardous goods, may, with the permission of the proper officer, be sold at any time;
(b) arms and ammunition may be sold at such time and place and in such manner as the Central Government may direct.
Explanation.- In this section, "arms" and "ammunition" have the meanings respectively assigned to them in the Arms Act, 1959 (54 of 1959)."
28. A perusal of the aforesaid provision shows that once the goods are not cleared for home consumption or warehoused then such goods after notice to the importer and with the permission of the proper officer, who has control over such goods under Section 62 of the Act, could be sold by the person having the custody thereof. It is, thus, obvious that the petitioner-Company had imported the goods in question, the goods were warehoused, then it relinquished the title and the goods were sold by the PSWC with the permission of the proper officer. Those goods were purchased by a close relation of the petitioner and in turn purchased by the petitioner-Company. The question would be whether such goods could continue to retain the character of 'imported goods'. According to the definition of 'imported goods' as given in Section 2(25) of the Act, the 'imported goods' are those goods which have been brought to India from a place outside India but would not include the goods which have been cleared for home consumption. It is further pertinent to notice the definition of expression 'importer'. As per the provision of Section 2 C.W.P. No. 7972 of 2009 21 (26) of the Act, the expression of 'importer' has been defined to mean in relation to any goods at any time between their importation and the time when they are cleared for home consumption. It would thus follow that once the warehoused goods are sold in open auction such goods would be deemed to have clearance for home consumption because auction could be held by the warehouse authorities after permission from proper officer. The goods would not remain 'imported goods' in the hands of auction purchaser. From the stand taken by the respondent department it is crystal clear that the petitioner-Company had relinquished its title to the goods in dispute which were sold in an open auction by PSWC after obtaining permission from the proper officer. The goods have not only lost its character as 'imported goods' but the petitioner-Company had also lost their character as an 'importer' in respect of these imported goods. If the aforesaid analysis is correct in law then merely because the auction purchaser is son-in-law of the petitioner and the petitioner-Company had purchased it from him would pale into insignificance. Supposing the auction purchaser is not a close relation of the petitioner and the goods were purchased by someone else then could it be said that the goods continue to fall within the four-corners of the Act attracting imposition of Custom Duty. The answer is obviously in the negative. If Customs Department has allowed the auction of warehoused goods after deducting the warehouse charges and duty etc. then the goods have come in the hands of auction purchaser in accordance with law. The subsequent buyer from him like the petitioner then would stand in the same C.W.P. No. 7972 of 2009 22 shoes. Otherwise, proceedings under the Act can never attain finality and bona fide purchaser would always be at risk. Therefore, we are of the view that the petitioner-Company, in respect of the goods in dispute, is not exigible to Custom Duty as the goods had been auctioned by PSWC after obtaining permission from the proper officer on 'as is where is basis'.
29. In view of the aforesaid discussion, the answering to question No. (A) is in the negative.
Re: Question No. (B):
30. After answering question No. (A) in the aforesaid manner, there was hardly any need to answer question No. (B). Arguments, however, have also been addressed in respect of question No. (B), therefore, we proceed to answer the aforesaid question as well by assuming that the petitioner-Company continues to retain its character as importer of the goods and not as purchaser from an auction purchaser.
31. In order to answer question (B), it may be necessary at the outset to refer to the relevant statutory provisions of the Act. Accordingly, Section 110, 110A, 124 and 153 of the Act are reproduced as under:-
"110. Seizure of goods, documents and things - (1) If the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods:
Provided that where it is not practicable to seize any such goods, the proper officer may serve on the owner of the goods an order that he shall not remove, C.W.P. No. 7972 of 2009 23 part with, or otherwise deal with the goods except with the previous permission of such officer.
(1A) The Central Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification in the Official Gazette, specify the goods or class of goods which shall, as soon as may be after its seizure under sub-section (1), be disposed of by the proper officer in such manner as the Central Government may, from time to time, determine after following the procedure hereinafter specified.
(1B) Where any goods, being goods specified under sub-section (lA), have been seized by a proper officer under sub-section (1), he shall prepare an inventory of such goods containing such details relating to their description, quality, quantity, mark, numbers, country of origin and other particulars as the proper officer may consider relevant to the identity of the goods in any proceedings under this Act and shall make an application to a Magistrate for the purpose of -
(a) certifying the correctness of the inventory so
prepared; or
(b) taking in the presence of the Magistrate,
photographs of such goods, and certifying
such photographs as true; or
C.W.P. No. 7972 of 2009 24
(c) allowing to draw representative samples of
such goods, in the presence of the
Magistrate and certifying the correctness of any list of samples so drawn.
(1C) Where an application is made under sub-sec-
tion (lB), the Magistrate shall, as soon as may be, allow the application.
(2) Where any goods are seized under sub-sec-
tion (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized.
Provided that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Commissioner of Customs for a period not exceeding six months.
(3) The proper officer may seize any documents or things which, in his opinion, will be useful for, or relevant to, any proceeding under this Act.
(4) The person from whose custody any documents are seized under sub-section (3) shall be entitled to make copies thereof or take extracts there from in the presence of an officer of customs." (emphasis added) "110A. Provisional release of goods, documents and things seized pending adjudication. - Any goods, C.W.P. No. 7972 of 2009 25 documents or things seized under section 110, may, pending the order of the adjudicating officer, be released to the owner on taking a bond from him in the proper form with such security and conditions as the Commissioner of Customs may require."
"124. Issue of show-cause notice before confiscation of goods, etc. - No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person -
(a) is given a notice in writing with the prior approval of the officer of customs not below the rank of a Deputy Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty;
(b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and
(c) is given a reasonable opportunity of being heard in the matter.C.W.P. No. 7972 of 2009 26
Provided that the notice referred to in clause (a) and the representation referred to in clause (b) may at the request of the person concerned be oral."
"153. Service of order, decision, etc.- Any order or decision passed or any summons or notice issued Under this Act, shall be served, -
(a) by tendering the order, decision, Summons or notice or sending it by registered post to the person for whom it is intended or to his agent; or
(b) if the order, decision, summons or notice cannot be served in the manner provided in clause (a), by affixing it on the notice board of the customs house." (emphasis added)
32. The undisputed facts are that search was conducted on the premises of the petitioner-Company on 22/23.1.2009 under Section 105 of the Act and in the search goods, record, cash, mutual fund receipts etc. were detained. Orders seizing the aforesaid items were passed on 18.3.2009 and 23.3.2009. Section 110(2) of the Act provide for returning of goods to the person from whose possession goods were seized unless period of six months is extended. Accordingly, a show cause notice was issued proposing confiscation of seized goods and Indian currency under Section 124 of the Act on 15.7.2008. In paras 11 and 13 of the show cause notice (A/1), the following clauses have been inserted:-
"11. The Noticee is also called upon to appear for C.W.P. No. 7972 of 2009 27 personal hearing on 20.07.2009 at 1400 hrs before the Commissioner of Customs, The Mall, Amritsar to explain their stand.
12. xxx xxx xxx
13. If no cause is shown against the action proposed to be taken within a week of the receipt of this notice of (or?) if they do not appear before the adjudicating authority on dates when the case is posted for hearing, the case will be decided on merits and on the basis of materials available on record."
33. On 20.7.2009, the counsel for the petitioner-Company had appeared before the Commissioner of Customs and requested for supply of relied upon documents for filing an effective reply to the show cause notice. A detailed reference was made to the documents which were required like test reports and copy of reasons recorded before search. The petitioner also understood the show cause notice to mean that reply was to be filed within seven days from the date of receipt of notice as per the language of para 13 and accordingly it was submitted that time was very short and week's time was not sufficient. It is, thus, evident that the order dated 20.7.2009 granting extention of time suffers from patent defect. The show cause notice vide para 13 has granted a week's time from the date of receipt of notice stipulating that if no cause is shown then adjudicating authority shall proceed to decide the matter on merit and on the basis of the material available on record. The show cause notice was received on 16.7.2009 and the order granting the extension was C.W.P. No. 7972 of 2009 28 passed on 20.7.2009, which is legally unsustainable. The petitioner- Company is entitled to sit back and think that no order would be passed for one week from the date of receipt of the show cause notice but order has been passed within four days. Moreover, the petitioner- Company has not been granted any opportunity by supplying the documents, which included the test reports of the goods and copy of the reasons for search under Section 105 of the Act etc. along with others. All these developments have taken place after the filing of the petition which was filed in May 2009. On this count alone, the order dated 20.7.2009, extending the period is liable to be set aside.
34. There is another aspect of the matter. A perusal of Section 124 of the Act would show that before confiscation of goods or imposition of any penalty, a show cause notice is required to be issued to such a person informing him of the ground on which it is proposed to confiscate the goods or to impose a penalty and also granting him an opportunity to make a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty. Under Section 124((c) of the Act, a reasonable opportunity of being heard is also required to be given. The sequence of events, as noticed in the preceding para, would show that there is flagrant violation of Section 124 of the Act. Despite the fact that a show cause notice was given stipulating a week's time from the date of receipt of the notice, which was to end on 23.7.2009, the order extending the period beyond 6 months was passed on 20.7.2009. The opportunity of making representation within the meaning of Section 124(c) has also been C.W.P. No. 7972 of 2009 29 defeated because in their application the petitioner-Company requested for supply of documents. As noticed in the preceding para, the aforesaid documents were not supplied and the Commissioner proceeded to pass the order of extension. Therefore, there is wholesome violation of Section 124 of the Act and the order is liable to be set aside.
35. The matter does not end here. The respondents having passed the order on 20.7.2009, were required to communicate the same by virtue of mandatory provision of Section 153 of the Act. According to the aforesaid provision any order made or decision taken under the Act, is required to be served either by tendering the order/decision or sending it by registered post to the person to whom it is intended or to his agent. Clause (b) of Section 153 of the Act further states that if the order or decision etc. could not be served in the manner prescribed by clause (a) i.e. by tendering etc. then it can be served by affixing it on the notice board of the customs house. It has remained undisputed that the order extending the period beyond six months has not been served on the petitioner-Company by registered post or by tendering the same to them or to their agent till date. An order would not assume the character of an order until and unless it is communicated to the petitioner as per the prescribed mode. The aforesaid proposition of law has been laid down by a Constitution Bench in Bachittar Singh's case (supra) on which reliance has been rightly placed by the learned counsel for the petitioner-Company. Therefore, as on date the period of six months has expired from the date of detention of the goods i.e. 22/23.1.2009. C.W.P. No. 7972 of 2009 30 Once the period of six months has expired then time barred order cannot be re-opened by passing any fresh order. In any case, no such new order has been passed. Accordingly, the provisions of Section 110(2) of the Act would come in operation which provides for extension of period of six months by another period of six months. It is well settled that the order extending the period of six months is required to be passed and communicated to the petitioner when initial period of six months had not expired. In that regard reliance may be placed on the principles laid down by Hon'ble the Supreme Court in the case of S.S. Gadgil v. Ms. Lal Chand and Company, AIR 1965 SC 171 and a Division Bench judgment of this Court rendered in the case of Shreyans Industries Ltd. v. State of Punjab, (2008) 18 VAT and Service Tax Cases 493 (Punjab and Haryana). We also find support from the judgment of Calcutta High Court rendered in the case of Bibhuti Bhusan Bag (supra). In somewhat similar circumstances the Calcutta High Court in para 14 has observed as under:-
"14. The said purported order extending the aforesaid period of six months on 3rd November, 1966 was not communicated to or served upon the petitioners until December 16, 1966. In the case of Nripendra Nath Mazumdar v. N.M. Bardhan and others, reported in AIR 1959 Calcutta 219, it was held that where an order is made which affects the rights of a person the order must be communicated to such person in order to make it complete and effective. The date of the order is the date C.W.P. No. 7972 of 2009 31 onwhich it is made known to the affected party. In the instant case the said order dated 3rd of November, 1966, extending the period of six months under the aforesaid proviso was certainly an order which affected the rights of the petitioners. In that view of the matter the said order could not become effective until the said order was communicated to the petitioners. The said order was communicated to the petitioners only on the 16th of December, 1966, i.e., after the expiry of the period of six months from the date of seizure. In the premises, I am of the view that the said order was made on the day when it was communicated to the said petitioners, i.e., on the 16th December, 1966, i.e., after a right to get back the goods seized became vested in the petitioners. In the case of Director of Supplies and Disposals, Calcutta v. Member, Board of Revenue, Government of West Bengal, reported in 11 Sales Tax Cases 589, a Division Bench of this Court consisting of Lahiri, C.J. and Bachawat, J. approved of the aforesaid decision of Nripendra Nath Mazumdar v. M.N. Bardhan, (supra), and observed as follows:
"* * * * where the order of the Board of Revenue was not pronounced in open court, the date of passing of the order is the date on which the order was communicated to the parties and not the date on which the order was actually signed by the C.W.P. No. 7972 of 2009 32 Member, Board of Revenue without notice to the assessee."
In the case of Lala Shri Bhagwan and another v.
Ram Chand and another, reported in AIR 1965 SC 1767, it was held that the authorities or bodies which are given jurisdiction by statutory provisions to deal with rights of citizens should act judicially in dealing with matters entrusted to them. "An obligation to act judicially may also in some cases, be inferred from the scheme of the relevant statute and its material provisions. In such a case, the authority or body must act in accordance with the principles of natural justice before exercising its jurisdiction and its powers; the obligations to follow the principles of natural justice need not be expressly imposed. Power to determine questions affecting the rights of citizens, would impose the limitation that the power should be exercised in conformity with the principles of natural justice."
36. Similar principles have been followed by the Division Bench judgment of Gujarat and Delhi High Courts in the cases of Vadilal Industries Ltd. (supra) and Neha Cosmetics (supra) in respect of similar provisions of Section 37(C)(a)(b) &(c) of the Central Excise Act, 1944. However, there is a direct judgment of Madras High Court in the case of Redington India Limited (supra) in respect of Section 153.
37. The argument of the learned counsel for the revenue is C.W.P. No. 7972 of 2009 33 that the period of six months has to be counted from the date of seizure. He has vehemently contended that the period of six months shall be taken from 18.3.2009 and 23.3.2009 (P-7 & P-8). The aforesaid argument would not in any case survive because till today no order extending the period beyond the period of six months in terms of Section 110(2) read with Section 153 of the Act has been communicated to the petitioner and the period of six months expired on 22.9.2009 even if the argument is taken to be sustainable in law. Therefore, we are of the view that the argument is wholly without substance and is liable to be rejected. Moreover, the record shows that the revenue has all along thought that the period of six months has to commence from the date of detention i.e. 23.1.2009 and not from the date of seizure. Had it been thought there was hardly any necessity for the Commissioner to hurriedly pass an order on 20.7.2009 whereas in the show cause notice itself period of seven days from the date of receipt of show cause notice was given. This all looks to be after thought and, therefore, the argument has no substance.
38. The writ petition stands disposed of in the above terms.
(M.M. KUMAR)
JUDGE
(JASWANT SINGH)
September 23, 2009 JUDGE
Pkapoor