TMI Blog2021 (11) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the Tri-Partite Agreement, invoices before the respondent No.4, in support of its case. Whether the continuance of the seizure is in accordance with the provisions of the said Act and whether the petitioner is entitled to a direction to the respondent No.4 for release of the consignments seized? - HELD THAT:- The first consignment which is seized was imported vide Bill of Entry dated June 1, 2020. The other consignment was imported vide Bill of Entry dated October 7, 2020. Both these consignments were placed under seizure by respondent No.4. The seizure memo dated October 19, 2020 in respect of goods imported vide Bill of Entry dated June 1, 2020 records that based on the examination and investigation initiated, it appeared that goods were mis-declared with respect to value. Therefore, under the reasonable belief that the above mentioned goods have been imported into India in contravention of Customs Act, 1962, and appear to be liable for confiscation under 111(m) of the Customs Act, 1962, in exercise of the powers conferred on me under section 110(1) of the Customs Act, 1962. The amendment to sub-section 2 of Section 110 of the said Act gives power to the appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oil without furnishing bank guarantee of ₹ 2 Crores as directed by respondent No.3 and closure of investigation into alleged undervaluation by respondent No.4 against the petitioner. 2. It is the respondents case that the petitioner imported Mercedes-Benz Engine Oil ('engine oil' for short) in retail packs of one litre and 5 litres from Sinopec Lubricant (Singapore) Pte Ltd through Shanfari and Partners, Oman by payment of Customs duty on a very nominal price as compared to the price declared on the MRP label affixed on the retail packs, which in turn was supplied by the petitioner to Mercedes-Benz India Private Limited and sold by them at a very high price to authorised service centre/dealer. It is the case of the respondents that the said import is from related parties and that the restriction on sale of the imported engine oil only to Mercedes-Benz India Private Limited is a situation covered by the proviso to sub-rule (2) of Rule 3 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (hereinafter referred to as 'the Customs Valuation Rules' for short). 3. It is the petitioner's case that they imported the engine oil i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the officers of Group I/IA of Customs at Nhava Sheva on the ground that there is misdeclaration of value. The petitioner vide their letter dated September 16, 2020 informed the officers of Customs that the MRP value cannot be compared with the transaction value. The matter was referred to respondent No.4Deputy/Assistant Commissioner of Customs, Special Investigation and Intelligence Branch (Import), Nhava Sheva-V for investigation into alleged undervaluation of price. During the course of investigation, the petitioner imported another consignment of Mercedes-Benz Engine Oil for which Bill of Entry No.9094841 dated October 7, 2020 was filed. Both these consignments were placed under seizure by the respondent No.4 but allowed to be warehoused under Section 49 of the Customs Act, 1962 (hereinafter referred to as the said Act for short). 5. At the request of the petitioner vide their letter dated September 24, 2020 and November 4, 2020, provisional release was granted of the consignments vide letter dated November 11, 2020 of the Assistant Commissioner of Customs. As per this letter the petitioner was required to execute a bond equivalent to the re-determined value of ₹ 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Benz India Private Limited the brand value thereof would be available for exploitation and that too for Mercedes-Benz India Private Limited being from the Daimler Group. He therefore submits that this reason alone is not sufficient enough for rejection of the transaction value. Learned counsel invited our attention to the various provisions of the said Act, the Customs Tariff Act, 1975, the Central Excise Act, 1962, the Integrated Goods and Services Tax Act, 2017, the Customs Valuation Rules, 2007 to contend that the Customs authorities are bound to assess the duty on the transaction value alone. Learned counsel submits that the continued seizure of the goods is contrary to the provisions of Section 110(2) of the said Act and the petitioner is entitled to the release of the goods seized. 7. Mr. Jetly, learned Senior Advocate for the Revenue defended the initiation of the investigation and the continued seizure of the goods. Learned Senior Advocate submitted that the petitioner has approached this Court at the stage of initiation of investigation. In his submission there is a serious dispute with regard to the duty payable and therefore the gross undervaluation which is a subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 into the aspect of undervaluation at this stage, as it is always open for the petitioner to resort to appropriate remedies under the Act, for satisfying the authorities that the duty has to be paid on the transaction value and not on the basis of the MRP label affixed on the retail packs. It is for the petitioner to place all the materials including the Tri-Partite Agreement, invoices before the respondent No.4, in support of its case. 9. Let us now consider the next point, i.e., whether the continuance of the seizure is in accordance with the provisions of the said Act and whether the petitioner is entitled to a direction to the respondent No.4 for release of the consignments seized. To put the controversy in perspective, it would be appropriate to reiterate a couple of relevant facts. The first consignment which is seized was imported vide Bill of Entry dated June 1, 2020. The other consignment was imported vide Bill of Entry dated October 7, 2020. Both these consignments were placed under seizure by respondent No.4. The seizure memo dated October 19, 2020 in respect of goods imported vide Bill of Entry dated June 1, 2020 records that based on the examination and investigat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on from whom such goods were seized before the expiry of the period so specified: Provided further that where any order for provisional release of the seized goods has been passed under section 110-A, the specified period of six months shall not apply. 13. It is pertinent to mention that the first proviso to subsection (2) of Section 110 of the said Act was substituted by the Finance Act, 2018 (Act of 2018), dated August 29, 2018 with effect from August 29, 2018. Prior to substitution the proviso read as under :- Provided that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Principal Commissioner of Customs or Commissioner of Customs for a period not exceeding six months . 14. It is also relevant to refer to clause (a) of Section 124 which reads thus :- No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person- (a) is given a notice in writing with the prior approval of the officer of customs not below the rank of a Deputy Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period upto one year, the consequence that ought to follow is release of the seized consignments. 16. We however must make a reference to the second proviso to sub-section 2 of Section 110 of the said Act. As narrated earlier, the first and second proviso was substituted with effect from March 29, 2018. Learned counsel referred to Finance Bill 2018 as introduced in Lok Sabha pursuant whereto the provisos are substituted. The Finance Bill, 2018 reads thus : THE FINANCE BILL, 2018 (AS INTRODUCED IN LOK SABHA) CHAPTER IV INDIRECT TAXES Customs NOTES ON CLAUSES Clause 90 of the Bill seeks to amend section 110 of the Customs Act so as to give power to extend the period for issuing show cause notice in the case of seized goods by a further period of six months and also to provide exemption from application of time limit of six months to cases in which an order for provisional release of seized goods has been passed. MEMORANDUM EXPLAINING PROVISIONS Section 110 of the Customs Act, 1962 is being amended so as to : (a) substitute the existing proviso to sub-section (2) to provide that the Principal Commissioner of Customs or Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27. A conjoint reading of the above provisions along with the above instructions dated 08.02.2017 issued by the Central Board of Indirect Taxes and Customs would go to show that the concerned authority is required to issue show cause notice within six months of seizure failing which the seized goods shall be returned to the person from whose possession those were seized. In the instant case vehicle of the petitioner was seized on 04.11.2019. Respondents issued show cause notice dated 29.09.2020 to the importer and Clearing House Agent (CHA) but failed to issue show cause notice to the petitioner. Petitioner has been issued letter dated 21.12.2020 being corrigendum to the show cause notice issued to the importer, calling upon the petitioner to show cause as to why the vehicle should not be confiscated. Therefore, the show-cause notice was not only not issued to the petitioner within six months but also within the extended period of six months. Though the amendment is of the year 2018, the dictum in the case of Haresh S. Bhanushali (supra) will have an application in the present facts. 18. We may also usefully refer to the decision of this Court in the case of Exim Incorporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seizure. This being the position, in our opinion, the rigors of sub-section (2) of Section 110 of the said Act will continue to apply as the character of the goods continue to be goods seized under sub-section (1). The proper officer then is obliged to follow the procedure prescribed in sub-section (2) of Section 110 of the said Act, in that he has to issue notice under clause (a) of section 124 of the said Act within six months of the seizure of the goods. We have already observed that the notice under clause (a) of Section 124 within six months of the seizure is not issued and therefore the consequence of release must follow. 20. Assuming that the competent authority in exercise of the powers conferred by the first proviso extends period so specified by sub-section (2) of Section 110 by a further period of six months, the maximum period during which the goods shall remain under seizure is 12 months from the date of seizure. The effect of non compliance of the provisions of sub-section (2) of Section 110 would only be that the seized goods are to be returned to the persons from whose possession they were seized. It would not render the initial seizure of the goods illegal. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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