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M/s Santosh Handloom Versus The Commissioner of Customs (Import) & Others

2015 (11) TMI 1234 - DELHI HIGH COURT

Detention of Imported goods - Detention beyond the period of six (6) months without issuing a show cause notice as contemplated under Section 110(2) - Held that:- Legislature has consciously done away with the service of orders, decisions, summons and notices on the agent. The CHA, is an agent, who operates under a special contract with an importer or exporter, and in this context is authorized to perform various functions to clear the goods from customs. It is no part of the general duty cast u .....

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ught to have been issued in his favour. The scope of the duties of an agent, and in that sense, the authority of the CHA, is provided for in the definition of customs broker, in regulation 2(c) of the Customs Brokers Licensing Regulations, 2013

It is no part of the usual and ordinary duty of the CHA to accept service of orders, summons, decisions or notices issued by the custom authorities. In case CHA represents, he has such an authority, he would have to produce the same before the .....

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o to sub-section (3) of Section 147, which in a sense protects the agent, save and except against his wilful act, negligence or default. The proviso is indicative of the fact that where any duty is not levied, or is short levied, or is erroneously refunded, for any reason, then such duty shall not be recovered from the agent unless in the opinion of the Asstt. Commissioner of Customs or Deputy Commissioner of Customs, it cannot be recovered from the owner, importer or exporter. - if the agent is .....

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be served in the first instance on the person for whom they are intended. It is after the intended person is served, that he could take a decision as to who would thereafter be entitled or authorized to appear for him before the concerned statutory authority. The amendment in that sense lends greater clarity qua the scope of the provision. - while the order passed under the proviso to Section 110(2) is held invalid, it would not in any manner affect the investigation, which is presently underwa .....

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Justice Rajiv Shakdher, J. For the Petitioner: Mr Priyadarshi Manish, Mrs Anjali J. Manish, Mr Rahul Ranjan & Mr Piyus Kumar, Advs For the Respondents: Mr Kamal Nijhawan & Ms Shreya Sinha, Advocates for R- 1 & 2. Mr Satish Aggarwala & Mr Amish Aggarwala, Advocates for R-3 JUDGMENT Rajiv Shakdher, J 1. In this writ petition the principal grievance, which has been raised, is that, there has been a failure on the part of the respondents to comply with the statutory provisions of Sec .....

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no legal sanctity, according to the petitioner, for the following reasons: (i) Firstly, the show cause notice seeking extension of time for compliance of the requirements of Section 124 of the Act, is ante-dated. (ii) Secondly, the service of show cause notice effected on the Customs House Clearing Agent (in short the CHA), is no service in the eyes of law, being contrary to the provisions of Section 153 of the Act. 2. The aforesaid are the broad contours of the issues which arise for considera .....

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are as follows: 3.1 The petitioner vide commercial invoice dated 25.05.2014 had placed an order for polyester quilt covers (in short quilt covers) and 100% polyester bed sheet sets. The price per quilt cover was shown as USD 1.25 per piece, while in so far as the polyester bed sheets were concerned, each set was priced at USD 1 per set. The goods under the said invoice were shipped, on 03.06.2014. 3.2 A second order was placed by the petitioner vide commercial invoice dated 30.05.2014. This time .....

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7.2014 was filed and a duty in the sum of ₹ 4,17,550/- was paid against a declared value of ₹ 14,46,626.23/-. 3.4 The Department of Revenue Intelligence (in short the DRI) detained the goods on 25.07.2014, on the ground that the goods imported were not quilt covers. The officers of the DRI were of the view that the goods imported were in fact ….a running length of printed fabric which has been folded at mid length having loose stitching on two sides… . Accordingly, two .....

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fficers of the Customs. These representations are dated : 04.08.2014, 07.10.2014, 22.10.2014, 29.10.2014 and 17.11.2014. Pertinently, while, in the first two representations the petitioner simply asked for release of goods, in the representations which followed, a request in the alternative, was made, that they be released based upon provisional assessment. 3.7 In the interregnum, the petitioner obtained a report of the Textile Committee; a body set up by the Ministry of Textiles, Government of .....

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icated in the said communication), the petitioner was required to submit two PD Bonds in the sum of ₹ 19,59,246/- and ₹ 28,03,294/-, and two bank guarantees, in the sum of ₹ 11,22,453/- and ₹ 16,49,178/-. 3.9 The bank guarantees, as indicated in the communication, were of a value which was equivalent to 20% of the differential duty as the goods were assessed under CTH 54077400. 4. The aforementioned communication went on to state that the DRI had already granted permissio .....

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d/ seized by the DRI on 25.07.2014, and no show cause notice under Section 124(a) of the Act had been issued within the prescribed statutory period of six (6) months, a decision was taken by the respondents to trigger the extended period of six (6) months, as investigation in the matter had not concluded. 4.3 Accordingly, on 23.01.2015, a show cause notice under the proviso to sub-section (2) of Section 110 was served on the petitioner s CHA. The CHA, apparently, acknowledged the receipt of the .....

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indicated above, have also filed writ petitions in this court. 4.5 Notably, the show cause notice dated 23.01.2015 for extension of time, which was adjudicated upon on that very date by effecting service on the petitioner s CHA, was dispatched only on 30.01.2015. 4.6 The order, which was passed on 23.01.2015, was also dispatched to the petitioner by post on 31.01.2015. 5. The petitioner, being aggrieved by the aforementioned actions of the respondents, moved this court by way of a writ petition .....

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ir counter affidavits. A perusal of the counter affidavit would show that it deals with all submissions including the submissions made in the writ petition with regard to violation of the provisions of Section 110(2) and 124(a) of the Act. This fact is being highlighted by me, as during the course of submissions, erroneously, the counsel for respondent no. 1 and 2 had conveyed that because of the limited nature of the notice, the counter affidavits filed were confined to only aspects which relat .....

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assessment and, therefore, were required to pass a speaking order under Section 17(5) of the Act. 5.4 In other words, it was argued by the counsel for the petitioner that the order for provisional release was required to be made under Section 18 of the Act, while that for re-assessment was required to be passed under Section 17(5) of the Act. Since in the letter dated 26.11.2014 the re-assessed value of the quilt had been indicated, albeit without articulation of any reasons, the said communicat .....

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(c) and (d) of the writ petition. The writ petition is, accordingly, confined to relief sought in prayer clause (a) and (b). SUBMISSIONS OF COUNSELS 7. On behalf of the petitioner, Mr. Manish argued that the show cause notice dated 23.01.2015 and the consequent order of even date i.e. 23.01.2015 was unsustainable, in law, for the following reasons: (i) That the show cause notice was ante-dated. This he sought to demonstrate by placing reliance on the original postal cover which bore the date of .....

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hich is that the service on the CHA was service in consonance with the provisions of the Act, Mr Manish, placed reliance on Section 153 of the Act, to contend that the service could only have been made on the petitioner (i.e. the importer) by either having it physically tendered or by having it sent by registered post and, in the alternative, if it was not possible to serve in the aforesaid manner, it had to be affixed on the notice board of the customs house. In other words, it was the submissi .....

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respondent no. 1 and 2, on the other hand, submitted that the goods of the petitioner along with those of 14 others, were seized, as the DRI, had a genuine concern that goods, which were printed fabric, were being imported as made up quilt covers by having the fabric folded at mid-length with loose stitching on two sides. 8.1 It was submitted that the respondents had obtained the opinion of the Apparel Export Promotion Council (in short the AEPC), as also that of the Textile Committee. Learned .....

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sel that the service of show cause notice dated 23.01.2015, which was effected on the CHA on the same date i.e. 23.01.2015, was valid in the eyes of law. 8.4 For this purpose, learned counsel for respondent no.1 and 2, relied upon provisions of Section 146A and 147 of the Act. The submission of the learned counsel, in fact, was that, the legal requirement of effecting service of notice prior to the prescribed period of time stood complied with, once the said show cause notice was handed over to .....

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it via their agent, was done without their knowledge and consent. It was submitted that the petitioner, in this case, had not discharged its burden as required under Section 147(2) of the Act. 8.6 As regards the allegation of the petitioner that the show cause notice dated 23.01.2015 contained interpolation, Mr Nijhawan submitted that the said allegation was baseless. The CHA was, in fact, given a choice of appearing either at 1230 hours or 1430 hours, as per his convenience. The CHA, according .....

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on charges. 8.8 The learned counsel further submitted that order dated 23.01.2015 is an appealable order and, therefore, an alternative remedy being available to the petitioner, the instant writ petition ought not to be entertained. REASONS 9. Having perused the record and heard the learned counsels for the parties, what has emerged, is as follows: (i) The petitioner has imported goods which have been classified as quilt covers. The bill of entries were filed accordingly, and requisite duty, was .....

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ile Committee to the petitioner, the conclusion reached was that the sample could be classified as polyester woven printed quilt case under HSN 6302.22. (iv) The period of six (6) months from the date of seizure by the DRI would come to an end on 24.01.2015 (v) The show cause notice dated 23.01.2015 was dispatched by post on 30.01.2015, at 1511 hours from Kalkaji Head Quarters, which was delivered on 03.02.2015 at 1437 hours. (vi) The order dated 23.01.2015, passed qua the show cause notice of t .....

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umber of recipients, the details, are typed out and pasted on the dispatch register. (vii)(a). In this case as well, I am told, such methodology was followed, though admittedly, the dispatch of the show cause notice and the order, as indicated above, took place on 30.01.2015 and 31.01.2015, respectively. (viii) The petitioner, it appears, had preferred an appeal against the communication dated 26.11.2014, in respect of which, the Addl. Commissioner of Customs addressed a communication dated 21.0 .....

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e respondents where it has reason to believe that goods are liable to be confiscated under the Act, to seize such goods. This power is contained under sub-section (1) of Section 110 of the Act. However, sub-section (2) of Section 110 provides, quite clearly, that when goods are seized under sub-section (1) of Section 110 and no notice in respect thereof is given under clause (a) of Section 124, within six (6) months of the seizure of the goods, the goods so seized, are required to be returned to .....

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his case, if the date of dispatch, by post, of the show cause notice dated 23.01.2015 is taken into account, then, clearly, on a plain reading of provisions of Section 110(2) read with Section 124(a), the respondents would have to return the goods to the petitioner. The reason for the same being, that the show cause notice dated 23.01.2015, seeking to trigger the extended period provided for in the proviso to sub-section (2) of Section 110, was dispatched only on 30.01.2015. 10.4 The respondents .....

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ay, the respondents in paragraph 7 of the show cause notice, make the following averments: ....7. In case, the noticees are interested to be heard in person, they may appear before the Commissioner of Customs, ICD, Tughlakabad, New Delhi on 23.01.2015 at 12:30 hrs. Or 14:30 hrs. Whichever is convenient to them. If no cause is shown against the action proposed to be taken as mentioned herein above, by the noticees or through their authorised representative and they do not appear for personal hear .....

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e. There is nothing in the record which would show that the noticees sought an accommodation. There is no dispute about the fact that the noticees were the importers themselves i.e. the petitioner in this case. It is important to note that this was a common show cause notice issued to the petitioner along with 14 other entities. 10.7 It appears, by some strange coincidence, the respondents managed to persuade CHA of the petitioner, as well as those engaged by other entities, to submit a letter t .....

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10.9 The reason given for triggering the extending period, is that, the test reports had not been received from the Textile Committee in respect of all samples sent to it save and except in two cases, one of which involved the petitioner and the reference in this regard is given to bill of entry no. 6097566 dated 15.07.2014, and the other involving an entity by the name of Balaji Handloom; concerning bill of entry no. 6209855 dated 23.07.2014. It is further stated that likewise expert opinion of .....

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he goods. 11. Though, whether this reason, would constitute a sufficient ground for extension of time appears to be weak as in the petitioner s case, the AEPC s opinion was received on 14.08.2014, while the Textile Committee report was generated on 04.09.2014 - even if one were to accept these reasons necessitating extension of time, the manner of its extension is clearly not in accordance with the law. The reason, that I have come to this conclusion is as follows. 11.1 Section 153 of the Act pr .....

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to the amendment 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 of notice cannot be served in the manner provided in clause (a), by affixing it on the notice board of the customs house.... (emphasis is mine) 11.2 Post amendment the .....

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order, decision, summons of notice cannot be served in the manner provided in clause (a), by affixing it on the notice board of the customs house.... 11.3 A bare reading of the amended Section would show that the legislature has consciously done away with the service of orders, decisions, summons and notices on the agent. The CHA, is an agent, who operates under a special contract with an importer or exporter, and in this context is authorized to perform various functions to clear the goods fro .....

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uthority, a specific authorization in that behalf ought to have been issued in his favour. The scope of the duties of an agent, and in that sense, the authority of the CHA, is provided for in the definition of customs broker, in regulation 2(c) of the Customs Brokers Licensing Regulations, 2013 (in short the 2013 Regulations). The said definition reads as follows: ..... (c) Customs Broker means a person licensed under these regulations to act as agent for the transaction of any business relating .....

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m Broker shall - (a) obtain an authorisation from each of the companies, firms or individuals by whom he is for the time being employed as a Customs Broker and produce such authorisation whenever required by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be;... 11.5 A conjoint reading of the definition of a custom Broker in regulation 2(c) along with regulation 11(a) of the 2013 regulation, would show, that it is no part of the usual and ordinary duty of .....

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ustoms authorities were required to follow the provisions of Section 153 of the Act, which required the service to be effected on the importer i.e. the petitioner in this case. 12. The respondents reliance on Section 146 and Section 147 of the Act will not help their cause for the following reasons; but before I do so, it is important to understand the broad scope of the said provisions. 12.1 Section 146(1) of the Act generally provides that no person shall carry on business as an agent relating .....

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esentative by a person who is entitled to or is required to appear before an officer of customs or Appellate Tribunal in connection with proceedings under the Act, save and except in respect of proceedings under Section 108 of the said Act. In the category of authorized representatives, there is a reference to a CHA, who has obtained his licence under Section 146 of the Act. The other persons, who have been included in the definition are a relative; or a regular employee, a legal practitioner, w .....

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exporter of any goods, it may be done on his behalf by his agent. 12.4 Sub-section (2) provides that any act done by the agent of the owner, importer or exporter of any goods, shall unless contrary is proved, be deemed to have been an act done, with the knowledge and consent of such owner, importer or exporter, so that, in any proceedings, the owner, importer or exporter shall also be liable as if things had been done by him. 12.5 Sub-section (3) of Section 147 provides that when any person is .....

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viso is indicative of the fact that where any duty is not levied, or is short levied, or is erroneously refunded, for any reason, then such duty shall not be recovered from the agent unless in the opinion of the Asstt. Commissioner of Customs or Deputy Commissioner of Customs, it cannot be recovered from the owner, importer or exporter. 12.7 As indicated above, if the agent is negligent or in default, or his wilful act results in any of the situation referred to above, then recovery can be made .....

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n a CHA can act as an authorized representative. Meaning thereby, that merely because a CHA has a licence in consonance with the regulations, it does not empower him to act as an authorized representative for those persons who are entitled to or required to appear before an officer of customs or the Appellate Tribunal in connection with any proceedings under the Act. In so far as proceedings under Section 108 of the Act are concerned, even with authority a CHA cannot appear for his principal. As .....

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ure to make a provision for that purpose, and thereby, specifically, include CHA in sub-section (2), clause (b) of Section 146A of the Act. 13.2 In so far as Section 147 is concerned, it statutorily recognizes the principle of agency. Therefore, sub-section (1) of Section 147 statutorily recognizes the fact that anything which an owner, importer or exporter of goods is required to do, it can be done on his behalf by an agent. Therefore, quite logically, sub-section (2) of Section 147 provides th .....

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nd, therefore, provides that when any person is expressly or impliedly authorized by an owner, importer or exporter of any goods, to be his agent, he is deemed to be the owner, importer or exporter of such goods, albeit without prejudice to the liability of the principal i.e. the owner, importer and exporter. This deeming fiction comes with a caveat that if, it involves aspects related to non-levy of duty or short-levy of duty or even duty which is erroneously refunded, then the agent will not b .....

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olve business of entry or departure of conveyance or import or export of goods at the custom stations, would be covered under Section 147 of the Act. Other acts would also be covered, provided there is due authorization conferred on the agent to act on behalf of the owner, importer or exporter of goods. The CHA has no general authority, to my mind, to act in respect of every act that the owner, importer or exporter is called upon to do or may be required to do under the provisions of the Act. It .....

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he legislature has done away with the service on the agent completely, by recognizing the fact that orders, decisions passed, summons or notices issued, need to be served in the first instance on the person for whom they are intended. It is after the intended person is served, that he could take a decision as to who would thereafter be entitled or authorized to appear for him before the concerned statutory authority. The amendment in that sense lends greater clarity qua the scope of the provisio .....

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