2025 (7) TMI 579 - HC - Customs

Challenge to issuance of the SCN by the Commissioner of Excise - illegal possession and transportation of liquor without any valid permit/documents - violation of provisions of Sections 4 5 8 15 12 13 and 13A read with Rule 16 and 19 of the Goa Excise Duty Act and Rules 1964 - HELD THAT - It is not in dispute that the petitioner has purchased foreign liquor from M/s Discovery Beverages Pvt. Ltd. vide two invoices dated 30.04.2025 which are produced on record as customs bonded warehouse to custom bonded warehouse transfer. Section 73A of the Customs Act provides that all the warehoused goods shall remain in the custody of the person who has been granted license under Section 57 or Section 58 or Section 58A until they are cleared from home consumption and/or are transferred to another warehouse or are exported or removed/disposed of. It is difficult to fathom as to how the State Excise Department come into picture as the goods of the petitioner were not being imported into the State of Goa as the petitioner is armed with the consignment bond issued under Section 59(1) of the Customs Act 1962 which is a warehousing bond clearly providing that the importer of any goods in respect of which a bill of entry for warehousing has been presented and assessed to duty under Section 17 or 18 shall execute a bond by himself stating that there shall be compliance with all the provisions of the Act rules and regulations made thereunder and to pay on or before the date specified in the notice of demand and all duties and interest payable under sub section (2) of Section 61 i.e. the period for which goods remain in warehouse. The petitioner executed such consignment bond declaring itself to be importer and binding himself in the sum set out therein upon having been filed a bill of entry of warehouse under Section 46 of the Customs Act in respect of the goods mentioned in the bond which has been assessed to duty under Section 17 or 18. In Garden Silk Mills Ltd. 1999 (9) TMI 88 - SUPREME COURT where the appellant had imported goods from abroad and the nature of the transaction between supplier and the company were in the nature of CIF contracts i.e. the price included costs insurance and freight charges and the contract providing CIF price for the port of discharge when the customs authorities added to the CIF price the landing charges which were paid to the port trust authorities the Apex Court clarified the dutiable event. The goods of the petitioner could have said to have crossed the customs barriers when it actually cleared the custom duty and since in the facts before us it is evidently clear that the vehicle carrying goods was affixed with one-time lock number by the Superintendent of Customs Gurugram and the Form under Regulation 3 of Warehoused Goods (Removal) Regulations 2016 was attached to the vehicle the interference by the Excise Department was completely unwarranted and by no stretch of imagination did the Excise Authority assumed jurisdiction to himself under Section 4 of the Goa Excise Duty Act 1964. Therefore the action initiated by respondent No. 2 in issuing show cause notice is without jurisdiction and also malafide as despite knowing the fact that the vehicle was sealed and annexed with the requisite Form by the Customs Department the Excise Department attempted to remove the goods by unsealing the same and even registered an FIR against the driver and the transport company. It is inclined to entertain the petition challenging the show cause notice issued to the petitioner on 14.05.2025 the said notice quashed and set aside on the ground that the provisions of the Goa Excise Duty Act 1964 are not applicable to the goods in question. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

• Whether the goods seized by the Excise Department at the Excise Check-Post in Goa were being illegally imported into the State of Goa by the petitioner without valid permits under the Goa Excise Duty Act, 1964.
• Whether the petitioner's transfer of foreign liquor from one customs bonded warehouse to another, pursuant to the Customs Act, 1962 and associated regulations, was lawful and exempt from the jurisdiction of the Goa Excise Department.
• Whether the issuance of the show cause notice by the Commissioner of Excise was valid or was issued without jurisdiction or mala fide.
• Whether the writ petition challenging the show cause notice was premature or maintainable at this stage.
• Whether the actions of the Excise Department, including detention, seizure, and registration of FIR against the driver and transport company, were justified under the applicable law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdiction of the Goa Excise Department over the goods in question

Relevant legal framework and precedents: The Goa Excise Duty Act, 1964 governs the levy of excise duty on excisable articles within Goa. Section 4 of the Act mandates that no excisable article shall be brought into the State without a permit issued by the Commissioner of Excise. Foreign liquor is specifically regulated under Section 4(2), requiring a permit or no objection certificate for import from customs stations outside the State. The Customs Act, 1962 and Warehoused Goods (Removal) Regulations, 2016 regulate bonded warehouse goods and their transfer.

Court's interpretation and reasoning: The Court noted that the petitioner lawfully purchased foreign liquor from a supplier in Haryana through invoices evidencing a customs bonded warehouse to customs bonded warehouse transfer. The petitioner possessed a valid Importer-Exporter Code and had obtained a Space Availability Certificate from the Customs authorities for storage in a public bonded warehouse in Goa. The transfer complied with Regulation 3 of the Warehoused Goods (Removal) Regulations, 2016, and was authorized by the Deputy Commissioner of Customs under Section 59 of the Customs Act.

The Court emphasized that under Section 73A of the Customs Act, warehoused goods remain in the custody of the licensee until cleared for home consumption or transferred according to prescribed procedures. The goods were sealed with a Customs one-time lock and accompanied by the requisite transfer form, evidencing lawful transfer within customs control.

Key evidence and findings: The petitioner produced invoices, Importer-Exporter Code, Space Availability Certificate, consignment bond under Section 59 of the Customs Act, and the transfer form with customs seals. The Excise Department's own officer recorded that the vehicle's seal had not been broken and the transfer form was present.

Application of law to facts: The Court held that the goods were still under customs control and had not been imported into Goa for excise purposes since customs duty had not been paid and the goods had not crossed customs barriers. Thus, the Goa Excise Department had no jurisdiction over the goods at that stage.

Treatment of competing arguments: The Excise Department contended that the petitioner had not produced import permits under the Goa Excise Act and that the vehicle was transporting liquor without valid documents. However, the Court found this contention untenable as the petitioner had complied with Customs Act procedures and possessed valid customs permits. The Customs Department supported the petitioner's position, confirming the lawful bonded warehouse transfer and storage.

Conclusions: The Court concluded that the Excise Department's jurisdiction did not extend to goods lawfully transferred under customs bonded warehouse procedures and that the show cause notice issued under the Goa Excise Duty Act was without jurisdiction and mala fide.

Issue 2: Maintainability of the writ petition challenging the show cause notice

Relevant legal framework and precedents: The Court referred to established principles that ordinarily writ petitions challenging show cause notices are premature since the statutory authority must first adjudicate the matter. However, exceptions exist where the notice is issued without jurisdiction, mala fide, or is an abuse of process. The Court relied on precedents including Siemens Ltd. vs State of Maharashtra and Union of India vs Vicco Laboratories, which clarify when interference at the notice stage is justified.

Court's interpretation and reasoning: The Court found that the present case falls within the exception to the general rule because the show cause notice was issued without jurisdiction and mala fide, despite the petitioner complying with customs procedures and possessing valid documentation. The issuance of an FIR and seizure despite the presence of customs seals and forms demonstrated premeditation and abuse of process.

Key evidence and findings: The petitioner's documentation and the Customs Department's confirmation of lawful transfer supported the petitioner's case. The Excise Department's failure to acknowledge these documents at the time of detention was critical.

Application of law to facts: The Court exercised its discretionary jurisdiction under Article 226 of the Constitution to entertain the writ petition at this stage, given the exceptional circumstances.

Treatment of competing arguments: The Excise Department's argument of prematurity was rejected on the basis of the petitioner's prima facie entitlement and the mala fide nature of the notice issuance.

Conclusions: The writ petition challenging the show cause notice was held maintainable.

Issue 3: Legality of the Excise Department's actions including detention, seizure, and FIR registration

Relevant legal framework and precedents: The Goa Excise Duty Act requires permits for import of excisable goods into the State. However, goods under customs bonded warehouse regime remain under customs control until cleared. Precedents such as Garden Silk Mills Ltd. and Kiran Spinning Mills clarify that the taxable event for customs duty occurs when goods cross customs barriers, not merely upon arrival or physical possession.

Court's interpretation and reasoning: The Court observed that the petitioner's goods were sealed with a customs one-time lock and accompanied by the requisite customs transfer form. The Excise Department's detention and attempt to break the seal despite these facts was unwarranted. The registration of FIR against the driver and transport company was an overreach, given the absence of violation of excise laws.

Key evidence and findings: The customs seal, transfer form, and the petitioner's valid importer-exporter code and bonded warehouse license were key evidence. The Excise Department's own record acknowledged the presence of the customs transfer form and seal.

Application of law to facts: Since the goods had not legally entered the State's excise domain, the Excise Department's actions were without legal basis and constituted an abuse of power.

Treatment of competing arguments: The Excise Department argued absence of import permits under the Goa Excise Act and failure of the driver to produce documents at the check post. The Court found that the customs documentation was sufficient and that the Excise Department's demand for additional permits was inconsistent with the customs bonded warehouse regime.

Conclusions: The actions of the Excise Department were illegal and mala fide, and the FIR and seizure were quashed.

3. SIGNIFICANT HOLDINGS

The Court held:

"The petitioner's company was legally entitled to purchase foreign liquor as per customs bonded warehouse to customs bonded warehouse transfer in the wake of the license granted to it by the Ministry of Commerce and Industry in the form of importer-exporter code, and it was a valid license."

"Once this permission existed in favour of the petitioner from the Deputy Commissioner of Customs, the goods were dispatched to the Public Bonded Warehouse... secured with a Customs one-time seal... as mandated under Section 67 of the Customs Act."

"The Excise Department has erred in exercising its jurisdiction in respect of the said goods on the premise that they have been imported and therefore, must be subjected to excise duty."

"The goods of the petitioner could have said to have crossed the customs barriers, when it actually cleared the custom duty... the taxable events being day of crossing the customs barriers and not the day of the goods imported in India and/or entered into the territorial waters."

"The action initiated by respondent No. 2 in issuing show cause notice is without jurisdiction and also mala fide as despite knowing the fact that the vehicle was sealed and annexed with the requisite Form by the Customs Department, the Excise Department attempted to remove the goods by unsealing the same and even registered an FIR against the driver and the transport company."

Core principles established include:

• The Goa Excise Duty Act does not apply to goods lawfully under customs bonded warehouse control until customs duty is paid and goods are cleared for home consumption.
• The taxable event for customs duty and excise duty on imported goods occurs only when goods cross customs barriers and are cleared, not at the point of physical transfer between bonded warehouses.
• Show cause notices issued without jurisdiction or mala fide may be challenged by writ petition even at the notice stage.
• Excise authorities cannot interfere with goods lawfully transferred under the Customs Act and regulations, and attempts to do so constitute abuse of process.

Final determinations:

• The show cause notice dated 14.05.2025 issued by the Commissioner of Excise was quashed and set aside as without jurisdiction and mala fide.
• The writ petition challenging the show cause notice was held maintainable and allowed.
• The goods seized were directed to be resealed in the presence of the Commissioner of Customs and returned to the petitioner to continue their journey.
• Relief for exemplary costs was declined.