2025 (5) TMI 1054 - HC - Customs

Validity of directions for revaluation of seized foreign liquor goods - smuggling - DRI s valuation grossly inflated the real value of the goods and lacked any defensible basis in the Customs Valuation (Determination of Value of Imported Goods) Rules 2007 - arbitrary and mechanical nature of the DRI s valuation exercise - HELD THAT - It is also pertinent to note that the directions for revaluation were issued in the criminal proceedings at a stage when no complaint had yet been filed by the DRI and the investigation was still underway. In the absence of any specific power conferred either under the Customs Act or the Code of Criminal Procedure to order revaluation during investigation and particularly after the conclusion of quasi-judicial adjudication on the same subject the Magistrate in the opinion of this Court exceeded the permissible limits of jurisdiction. It may be added that Section 110 (1B) of the Customs Act empowers a Magistrate to certify the inventory and the description of the goods seized thereby facilitating evidentiary purposes at trial. However this provision cannot be stretched to confer upon the Magistrate the authority to order a fresh revaluation of goods at the preliminary stage. Thus the Court is of the view that the impugned direction for revaluation of the goods is unsustainable in law. Accordingly the present petition is allowed. The direction for revaluation of the goods as contained in the impugned order dated 27 th September 2012 is hereby set aside.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the Additional Chief Metropolitan Magistrate (ACMM) was justified in directing the revaluation of seized foreign liquor goods through an appraiser in terms of the international market value, as ordered on 27th September, 2012.

- Whether the Magistrate had jurisdiction and authority under the Customs Act, 1962 and the Code of Criminal Procedure, 1973 to order such revaluation during criminal proceedings.

- Whether the valuation issue had already been conclusively settled by the adjudication proceedings under the Customs Act and thus revaluation was unnecessary and impermissible.

- Whether the Directorate of Revenue Intelligence (DRI) was estopped from challenging the revaluation order given its prior withdrawal of a petition before the High Court on the basis that adjudication had settled the valuation dispute.

- The scope and applicability of Section 110(1B) of the Customs Act regarding certification of the panchnama and whether it confers power to order revaluation.

- The proper interpretation of "market price" and "international market value" in the context of valuation of seized goods under the Customs Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification and legality of the ACMM's direction for revaluation of seized goods

Relevant legal framework and precedents: The Customs Act, 1962 governs the valuation of imported goods, with Section 14 and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 providing the statutory basis for valuation. Section 110(1B) empowers a Magistrate to certify the panchnama of seized goods. The Code of Criminal Procedure, 1973, particularly Section 482, confers inherent powers on the High Court to prevent abuse of process or to secure ends of justice.

Court's interpretation and reasoning: The ACMM's order directing revaluation was primarily based on an observed discrepancy between two valuations furnished by the DRI: an initial estimate exceeding INR 1 crore at the time of remand and a subsequent reduction to approximately INR 83.94 lakhs during bail proceedings. The ACMM considered this "anomaly" significant because the valuation threshold of INR 1 crore attracts different penal consequences under the Customs Act. Consequently, the ACMM ordered revaluation through an appraiser in terms of "International Market Value."

Key evidence and findings: The Court noted that the initial higher valuation was a preliminary estimate based on immediate market inputs, while the revised valuation was based on official price lists from the Alpha Duty Free Shop at IGI Airport, exclusive of customs duty and incidental charges. The DRI's written submissions during bail proceedings clarified that the gross value, including duties, remained above INR 1 crore. This explained the apparent discrepancy and negated the "anomaly" cited by the ACMM.

Application of law to facts: Given that valuation had been refined and explained, the Court found no justification for revaluation. The adjudication proceedings under the Customs Act had already confirmed the valuation exceeding INR 1 crore after issuance of show cause notice and hearing. The Court held that the Magistrate's direction for revaluation during criminal proceedings, especially post-adjudication, was beyond jurisdiction and impermissible.

Treatment of competing arguments: The Respondent argued that the adjudication order did not conclusively settle valuation for criminal proceedings and that the ACMM had jurisdiction to ensure authenticity of evidentiary material, including ordering revaluation. The Court rejected this, noting that adjudication and criminal proceedings are distinct but valuation confirmed by adjudication prima facie complies with law, and Magistrate's powers under Section 110(1B) do not extend to revaluation.

Conclusion: The direction for revaluation was legally unsustainable and exceeded the Magistrate's jurisdiction.

Issue 2: Jurisdiction of Magistrate under Section 110(1B) of Customs Act and Code of Criminal Procedure

Relevant legal framework and precedents: Section 110(1B) authorizes a Magistrate to certify the panchnama of seized goods to ensure correctness of the inventory for evidentiary purposes. The Supreme Court decisions cited (Sakiri Vasu v. State of UP, T.C. Thangaraj v. V. Engammal, Directorate of Enforcement v. Deepak Mahajan) establish principles on the scope of judicial powers and implied powers doctrine.

Court's interpretation and reasoning: The Court held that Section 110(1B) empowers the Magistrate only to certify the inventory and description of seized goods, not to conduct fresh valuation or investigation. The doctrine of implied powers does not extend to conferring authority to revalue goods during investigation or criminal trial, especially when valuation has been conclusively adjudicated.

Key evidence and findings: The Magistrate's dismissal of the DRI's application for certification due to absence of the arrested person was set aside on revision, emphasizing procedural fairness. However, the extension of this procedural power to substantive revaluation was not supported by statute.

Application of law to facts: The Court distinguished between certification of inventory and valuation, holding that the Magistrate's role is limited to the former. The impugned order's direction for revaluation was beyond the scope of Section 110(1B).

Treatment of competing arguments: While Respondent argued that revaluation was necessary to ensure reliability of evidence, the Court held that this function lies with the investigating and adjudicating authorities, not the Magistrate.

Conclusion: Magistrate's jurisdiction under Section 110(1B) does not extend to ordering revaluation.

Issue 3: Whether valuation dispute was conclusively settled by adjudication proceedings

Relevant legal framework and precedents: Adjudication proceedings under the Customs Act involve quasi-judicial determination of valuation and related issues following investigation and issuance of show cause notice. Although criminal and adjudication proceedings are distinct, adjudication findings are relevant and carry evidentiary weight.

Court's interpretation and reasoning: The Court noted that the adjudication order dated 29th August, 2010 confirmed the valuation exceeding INR 1 crore after due process. The Respondent's argument that adjudication did not re-evaluate or authenticate the panchnama valuation was rejected as the adjudication conclusively addressed valuation for the purpose of customs duty and penalties.

Key evidence and findings: The adjudication order was passed after hearing the parties and issuance of show cause notice. The DRI's withdrawal of earlier petition before the High Court was based on the adjudication order, indicating acceptance of its conclusiveness.

Application of law to facts: The Court held that the valuation issue was settled by adjudication, and revaluation in criminal proceedings was unnecessary and impermissible.

Treatment of competing arguments: Respondent contended that adjudication and criminal proceedings are independent and that valuation in criminal trial can be separately challenged. The Court acknowledged the distinction but emphasized the finality and statutory weight of adjudication findings in valuation matters.

Conclusion: Valuation dispute was conclusively settled by adjudication; revaluation was unwarranted.

Issue 4: Maintainability of the present petition given prior withdrawal by DRI

Relevant legal framework and precedents: Principles of estoppel and abuse of process are relevant to petitions withdrawn on specific grounds.

Court's interpretation and reasoning: The Court observed that the DRI's earlier withdrawal of CRL.M.C. No. 226/2010 was conditional upon the adjudication order settling valuation. However, Respondent No. 2 subsequently filed an application seeking compliance with the revaluation order, reviving the issue.

Key evidence and findings: The withdrawal order dated 18th August, 2011 was on record, and Respondent was represented at that time without objection. The fresh application filed by Respondent in 2012 reopened the valuation controversy.

Application of law to facts: The Court held that the DRI cannot be estopped from challenging the revived revaluation direction, as the controversy was effectively reopened by Respondent's application.

Treatment of competing arguments: Respondent argued that withdrawal barred challenge; Court rejected this.

Conclusion: The present petition is maintainable.

3. SIGNIFICANT HOLDINGS

"The direction for revaluation of the goods, as contained in the impugned order dated 27th September, 2012, is hereby set aside."

"Section 110(1B) of the Customs Act empowers a Magistrate to certify the inventory and description of the goods seized, thereby facilitating evidentiary purposes at trial. However, this provision cannot be stretched to confer upon the Magistrate the authority to order a fresh revaluation of goods at the preliminary stage."

"The valuation issue had already been subjected to adjudication proceedings under the Customs Act, which confirmed the valuation exceeding INR 1 crore. In such circumstances, the necessity for an independent revaluation exercise was not warranted."

"The so-called 'anomaly' in valuation, which weighed with the ACMM, had a reasonable explanation arising from the natural progression of investigation and refinement of valuation based on official data."

"The Magistrate, in the opinion of this Court, exceeded the permissible limits of jurisdiction by directing revaluation of the goods during criminal proceedings after conclusion of adjudication."

"The present petition challenging the revaluation direction is maintainable notwithstanding the earlier withdrawal of a petition by the DRI, as the valuation controversy was revived by Respondent's fresh application."

Core principles established include the limited scope of Magistrate's powers under Section 110(1B) of the Customs Act, the finality and primacy of adjudication proceedings in valuation disputes, and the inadmissibility of revaluation directions during criminal proceedings once adjudication is complete.

Final determinations:

- The ACMM's direction for revaluation of seized goods is quashed.

- The Magistrate shall proceed expeditiously with certification of the panchnama under Section 110(1B) without ordering revaluation.