TMI Blog2013 (1) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... present proceedings arise out of the original proceedings before the DRT, the Customs Department cannot be permitted to stake a claim on the said recovered gold, either at the appellate stage or in these proceedings. So far as the Indian Bank is concerned, the said bank did not act in good faith and with due care and diligence while granting loan to Sh.S.S. Kanda, on the basis of security of the imported gold. He submits that the Indian Bank should have required Sh.S.S. Kanda to produce documents of title to the said imported gold.Since that was not done, the said bank cannot claim any charge or lien over the imported gold. While acting as a canalizing agency, had loaned the gold to Sh.S.S. Kanda with the condition that the same would not be sold or hypothecated by him. He further submits that the Indian Bank did not put the MMTC to notice before granting credit facilities to Sh.S.S. Kanda against the gold loaned by MMTC. Thus der cannot be sustained and the finding returned by the DRAT that the first charge over the recovered gold is that of the Indian Bank, is liable to be set aside. Confiscation of imported goods (import whereof is not prohibited in law) is done only as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies on merit, we wish to place on record our anguish about the failure of the parties concerned, i.e. the Customs Department, the MMTC and the Indian Bank to resolve the issues as raised in these petitions on their own, even though they all represent the State. On 14.11.2011, we had put it to counsel for the parties as to why the concerned Secretaries of the Govt. of India in the Ministry of Finance and the Ministry of Commerce should not sit together to resolve the issues. On 07.12.2011, we directed that the concerned Secretaries of the two Ministries should endeavor to work out an amicable resolution of the disputes, as all the parties are under the control of one or the other Ministries. In fact, the petitioners had sought time for the said purpose repeatedly, and on 20.07.2012 we had expressed the hope that since the matter is not complicated, a decision would be taken soon, as sufficient time had already lapsed. We had observed that the only issue is as to which pocket of the Government would be enriched, and judicial time should not be wasted on such matters. However, on 24.08.2012 we were informed that the committee of three Secretaries of the Govt. of India had failed to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Surjit Singh Kanda, (respondent No. 1 in WP(C) No. 2063/2011), who was carrying on his business under several business names, viz., Pearl Jewellers, Ramson Jewellers and Raja Jewellers Limited, for manufacture and export of gold jewellery. Out of the said quantity, it appears that Sh.S.S. Kanda exported gold ornaments of 26 kgs., but failed to export ornaments of the remaining about 19 kgs. It also appears that S.S. Kanda in breach of the conditions imposed by the MMTC, pledged the gold with Indian Bank respondent No. 4 in WP(C) No. 2063/2011, and respondent No. 1 in WP(C) No. 4553/2011, to obtain credit facilities. The exporter Shri S.S. Kanda also hypothecated the plant and machinery, apart from the gold and gold jewellery with Indian Bank for obtaining the credit facilities. Shri S.S. Kanda was a Non-Resident Indian settled in Canada and after failing to meet his obligations, as aforesaid, he vanished from the scene leaving the Customs Department, MMTC and the Indian Bank to fight it out amongst themselves to claim whatever was left at the factory premises. 6. It appears that on 08.10.1992, stock verification was conducted by the Customs Department and 6700.700 gms of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the defendant nos.4, it has been stated that the defendant no.4 (MMTC) after satisfying that Shri Surjit Singh Kanda is a manufacturer and exporter of gold and is registered by the NOIDA Export Processing Zone, issued gold on loan to Shri Surjit Singh Kanda from time to time. MMTC issued gold to him on the recommendations of the Development Commissioner, NEPZ, NOIDA and the present claim is only with respect to 19 kgs of gold. On issuance of gold, Shri Surjit Singh Kanda signed and executed letters of undertaking‟ each time. It has been further stated that Shri Surjit Singh Kanda was issued 45 Kgs of gold out of which he manufactured jewellery of 26 kgs. Of gold and executed letters of undertaking‟ from time to time. The jewellery manufactured out of remaining 19 Kgs of gold was never exported. MMTC realized payment with respect to 26 Kgs of gold but a sum of Rs.1,05,62,770/- is due and payable as on 31.12.1996 inclusive of interest and other charges with respect to remaining 19 kgs of gold. Copies of various undertakings have been annexed as Exhibits AW-1/1 to AW-1/10. The gold issued by the MMTC was the property of foreign supplier being on loan basis and no charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is decided in favour of the applicant bank. 9. The DRAT in the three appeals preferred by the MMTC (Appeal No.166/2005), Indian Bank (Appeal No.126/2005) and the Customs Department through the Assistant Commissioner of Customs (Appeal No. 13/2008) held that the claim of the Indian Bank will get precedence over the claims made by the MMTC and the Customs Department and that the Indian Bank has the first charge over the gold, silver and plant machinery. While holding so, the DRAT has sought to place reliance on two decisions in Central Bank of India Vs. Siriguppa Sugars Chemicals Ltd. Another, (2007) 8 SCC 353; and, UTI Bank Ltd. Vs. Deputy Commissioner of Central Excise Another, (2007) 135 Comp Cas 329 (Mad) (Full Bench). It is this finding which is assailed before us by the MMTC and by the Customs Department in their respective writ petitions. 10. The submission of the learned ASG is that upon the confiscation of the goods under the said Act, the property in the goods vested in the Central Government. In this case the confiscation order dated 20.06.2000 passed by the Commissioner of Customs has attained finality, as it was not appealed against by any person. It is ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tems, whose import was prohibited under the law at the relevant time. The import of the gold was valid and legal. It was only on account of the then prevalent governmental scheme vide the aforesaid exemption notification that duty free import was permitted on the condition that the manufactured goods would be exported. The consequence of failure to export the goods would only be that the Customs Department would recover the customs duty, penalty and interest. It is submitted by Mr. Chhabra that the Customs Department has already recovered the aforesaid amounts, amounting to Rs.2.27 Crores towards the component of customs duty, penalty and interest and, consequently, they have no justification for staking claim over the recovered gold. 13. Mr. Chhabra points out that the Customs Department did not even bother to contest the proceedings before the DRT despite them being a party. They did not stake any claim over the said recovered gold before the DRT. Since the present proceedings arise out of the original proceedings before the DRT, the Customs Department cannot be permitted to stake a claim on the said recovered gold, either at the appellate stage or in these proceedings. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions and perused the impugned order, we are of the view that the said order cannot be sustained and the finding returned by the DRAT that the first charge over the recovered gold is that of the Indian Bank, is liable to be set aside. We are also of the view that the finding returned by the DRT that the first charge over the said gold is that of the MMTC is a correct finding and, accordingly, we restore the same. 19. So far as the claim of the Customs Department is concerned, we fail to appreciate as to how the Customs Department can seek to pursue their writ petition. Not only the prayers made by them in their writ petition are vague, the submissions of the learned ASG are equally meritless considering the fact that the entire customs duty, penalty and interest in respect of the said gold already stands fully recovered. 20. We repeatedly called upon the learned ASG to point out to us any provision in the Customs Act, which entitles the Customs Department to appropriate the property in the imported goods-the import of which is not prohibited in law in the aforesaid factual background. Merely because the Customs Department has the right to recover the customs duty, penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be read in isolation and has to be read in conjunction with section 125 of the said Act, as aforesaid. Confiscation of imported goods (import whereof is not prohibited in law) is done only as a means to recover its dues by the Customs Department. It does not mean that the Department can appropriate the said goods forever, even when the penalty, duty and other charges are paid by the importer. Admittedly, the Customs Department has already recovered its entire customs duty, penalty interest amounting to Rs.2.27 Crores from the MMTC in respect of the 19 Kgs. of gold which was not utilized by Shri S.S.Kanda for export of jewellery. 23. That being the position, no further claim of the Customs Department in respect of the said gold can survive. Moreover, the Customs Department did not even bother to appear before the DRT to stake their claim on the recovered gold and they were proceeded ex-parte. Not having put up their claim before the original adjudicating authority, it was not open to the Customs Department to straightaway stake their claim before the DRAT and thereafter before us. Consequently, we find no merit in the writ petition preferred by the Customs Department and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank Ltd. (supra) are both decisions, which proceed on the basis that the borrower has the ownership in the goods which are pawned/charged with the creditor bank. In these circumstances, the Courts examined the issue of priority of rights of the bank vis- -vis the other creditors and held that the bank had the first charge over even crown debts. However, that principle cannot be applied in the present case as Sh.S.S. Kanda did not have ownership rights in the gold and did not create a valid pledge/hypothecation over the said gold in favour of the Indian Bank. 27. Since the only issue considered by us is with regard to the right over the said gold, we have not been called upon to adjudicate the rights of the Auction Purchaser in respect of the other assets of Sh.S.S. Kanda and his three firms. 28. Accordingly, we set aside the impugned order passed by the DRAT dated 04.02.2011 and restore the order of the DRT dated 22.02.2005 insofar as it holds that the MMTC has the first charge over the recovered gold. The writ petition filed by the MMTC, accordingly, stands allowed while the writ petition of the Customs Department stands dismissed, leaving the parties to bear their own respect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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