1998 (9) TMI 87 - HC - Customs

Summary

Issues Involved:
1. Legality of detaining imported silver under Notification No. 172/94.
2. Compliance with conditions of Notification No. 172/94.
3. Allegations of smuggling and misuse of Notification No. 172/94.
4. Authority of customs to retain goods post-duty payment.
5. Requirement to establish the source of foreign currency used for duty payment.
6. Adjudication proceedings and cooperation by petitioners.

Issue-wise Detailed Analysis:

1. Legality of detaining imported silver under Notification No. 172/94:
The petitioners sought a Writ of Mandamus to direct the respondents to release the silver imported under Notification No. 172/94. The respondents argued that the notification was being misused for smuggling silver, and the silver was detained for further investigation. The court held that the detention of silver was legal and necessary for verifying the nature of the transactions.

2. Compliance with conditions of Notification No. 172/94:
The petitioners claimed they complied with all conditions of Notification No. 172/94, including staying abroad for more than six months, importing less than 100 kgs of silver, and paying duties in foreign currency. The court noted that the petitioners met the basic conditions but emphasized the need to ensure the genuineness of the transactions and the source of foreign currency used for duty payment.

3. Allegations of smuggling and misuse of Notification No. 172/94:
The respondents alleged that traders were using the scheme to smuggle silver by hiring eligible passengers' passports and paying duties with locally procured foreign currency. The court acknowledged these allegations and supported the need for thorough investigation and adjudication to prevent misuse of the notification.

4. Authority of customs to retain goods post-duty payment:
The petitioners argued that once customs authorities accepted duty payment, they were obliged to release the goods. The court disagreed, stating that customs authorities have the right to retain goods until they are satisfied with the legitimacy of the transactions, especially in cases involving potential violations of the Foreign Exchange Regulations Act and the Customs Act.

5. Requirement to establish the source of foreign currency used for duty payment:
The court highlighted that while the petitioners did not need to prove the source of the silver, they were required to establish the source of the foreign currency used to pay the duty. The possession of unauthorized foreign currency in India is an offense, and the authorities must ensure that the foreign currency used for duty payment was legally obtained.

6. Adjudication proceedings and cooperation by petitioners:
The court noted that the petitioners were evading service of summons and avoiding participation in adjudication proceedings. The court directed the petitioners or their authorized agents to meet with the Additional Commissioner of Customs, receive the summons, and cooperate fully in the adjudication process. The court ordered the adjudication proceedings to be completed within three months from the date of service of notices to the petitioners.

Conclusion:
The court dismissed all writ petitions, emphasizing the necessity of completing adjudication proceedings to ascertain the legitimacy of the transactions and the source of foreign currency used for duty payment. The petitioners were directed to cooperate with customs authorities to facilitate the adjudication process.