TMI Blog2023 (12) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... s is conferred by Section 110 of the Customs Act and its application was subject matter of debate in the present proceedings - On a plain reading of Section 110 of the Customs Act, it is quite clear that it is a provision in relation to seizure of goods, documents and things. It provides that if the proper officer has a reason to believe that any goods are liable to confiscation under the Customs Act, he may seize such goods. What manner Section 110 of the Customs Act would be applicable to the seizure of the petitioners gold jewellery as seized on 14 January 2018? - HELD THAT:- There is something more fundamental in the present proceedings inasmuch as on 14 January, 2018 the gold jewellery in question was seized from the petitioners. Sub-section (2) of Section 110 provides that where any goods are seized under sub-section (1) and no notice in respect thereof is issued under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized. Thus, the seizure having taken place on 14 January, 2018, six months period was to end on 14 July, 2018, however, what is significant is that a show cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the reason for the Customs Officers to dispose of the goods hurriedly and with such lightening speed and by throwing to the wind the norms of fairness and reasonableness. This is not acceptable even from the reading of the provisions of Section 110. Any reading of Section 110 otherwise than what has been discussed, would amount to foisting draconian, reckless and/or unfettered authority on the Customs Officers conferring a licence to commit illegality - such substantive provisions of the Customs Act cannot be rendered nugatory, by recognizing unguided and unfettered powers being conferred under Section 110 on the Customs Officers, to dispose of the seized property, till the orders of any confiscation attains finality, unless there are strong reasons which would justify any such action when tested on such constitutional and legal parameters, and that too on the satisfaction of the officers to be reached only after hearing the owner of the property. There are no manner of doubt that the petition needs to succeed. The question, however, is as to what can be the relief which can be granted to the petitioners in these circumstances, when there is no iota of doubt, in regard to illeg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records of seized gold jewellery and return gold equal to 1028 grams of gold of which was disposed by the Respondents to enable the Petitioners to re-export the same in terms of the order dated 19.09.2022, passed by the Revisionary Authority, Government of India. (b) in the alternative to the Prayer Clause (a) above, this Hon ble Court be pleased to issue a writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ or order or direction under Article 226 of the Constitution of India ordering and directing the Respondents themselves, its officers, subordinates, servants, and agents to forthwith pay the amount equivalent to the value of the seized/confiscated 1028 grams of Gold Jewellery as per the current market value. (c) pending the hearing of the above Petition, this Hon ble Court, by an interim order be pleased to direct the Respondents, to forthwith deposit an amount equivalent to the current market value of the seized 1028 grams of gold jewellery, with liberty to the Petitioners to withdraw the same on such terms and conditions as may deem fit to this Hon ble Court. (d) for ad-interim reliefs in terms of prayer clause (c) above; (e) for costs of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such fact of the notice be informed to the Consulate, and if no reply is received it may be disposed off according to law. 6. It appears that the Assistant Commissioner initiated proceedings under Section 110(1B) of the Customs Act so as to obtain an order from the Court of Metropolitan Magistrate for the identity of the gold jewellery for disposal of the gold jewellery. Such an application came to be allowed by the learned Metropolitan Magistrate, 66th Court by an order dated 18 May 2018 (page 132) which reads thus:- No. SD/INT/AIU/21/2018 APD It is hereby Certified that the application U/Section 110(1B) was allowed and on 17/05/2018, I have personally verified the seized property listed below:- File No. Description of goods seized SD/INT/AIU/21/2018 APD Assorted Gold jewellery (from Pax no. 1 3 Crude Gold spiral Bangles 24kt- 576 gms. Rs. 15,41,808/- and from pax no. 2- Crude Gold kada 24kt. 320 gms- Rs. 8,56,560/- Gold Kada- 18 Kt- 132 gms-2,64,998/-) collectively weighing 1028 gms (i) The above listed property has been personally verified and found to be correct. (ii) The above property was photographed in my presence and the said photographs are attested by me. (iii) This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption Weight (in gms) Value (in Rs.) Remarks 1 9 SD/INT/AIU/21/2018 AP D 1 One sealed pkg stc Assorted gold jewellery totally weighing 1028 grams 1028 26,63,366.00 Action under section 110 completed on 18.05.2018. Disposal order dated 01.06.2018. (emphasis supplied) 9. On 6 July 2018 a show cause notice is stated to have been issued to the petitioners calling upon the petitioners as to why the seized gold jewellery ought not to be confiscated and penalty imposed. However, it appears that before the show cause notice could be taken to its logical conclusion and an adjudication order to be passed thereon, on 1 August 2018 the said gold jewellery belonging to the petitioners was sold by State Bank of India and an intimation to that effect was issued by the State Bank of India vide letter dated 1 August 2018 addressed to the Commissioner of Customs (Airport). The contents of the said letter read thus:- Date : 01.08.2018 Ref. No. BBM/2018-19/97 To, The Commissioner of Customs (Airport) Terminal 2, Level-II Chhatrapati Shivaji International Airport, Sahar, Andheri (East), Mumbai 400 099. Dear Sir, DISPOSAL OF 75,520 KG. CONFISCATED GOLD-AUCTION LO NO-17, DATED 26.07.2018 With reference t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g aggrieved by the order-in-original dated 18 January 2019 preferred an appeal before the Commissioner of Customs (Appeal). In the appeal, the petitioners stated that they have received a copy of the order through the Consulate of Iran on 27 February 2019. The petitioners categorically contended that they had no intimation of the proceedings of the show cause notice, as initiated by the Customs Officer, as also they were not aware of the order-in-original passed on the show cause notice. It was contended that the Consulate General of Islamic Republic of Iran, Mumbai was representing the petitioners who were based in Iran. The petitioners stated that they were the owners of the seized goods and also produced the purchase invoices dated 20 June 2017 and that the gold was dutiable and not prohibited and hence, reexport of the goods may be allowed. The petitioners were represented by the Vice Consul of the Consulate General of the Islamic Republic of Iran, who argued on the grounds as raised in the appeal. The Commissioner of Customs (Appeal) passed an order on the appeal (order-in-appeal) dated 28 January 2020 inter alia observing that the intention of the petitioner was nothing but t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the individual case of the petitioners, the quantum of gold jewellery being small and considering the position in law, the absolute confiscation of the gold jewellery was harsh and not justified. It was thus held that in the facts of the case, the petitioners being foreign nationals, an option to re-export the gold jewellery, on payment of redemption fine should have been allowed. It was hence observed that the gold jewellery be permitted to be reexported on payment of a redemption fine. Also it was observed that the reduced penalty was commensurate and was not required to be interfered. Accordingly, following order was passed by the revisional authority disposing of the petition:- 18. In view of the above, the Government modifies the impugned order of the Appellate Authority to the extent of the absolute confiscation of the impugned gold jewellery detailed at Table No. 1 above, collectively weighing 1028 grams and valued at Rs. 26,63,366/-. The impugned gold jewellery mentioned at Table No. 1 above, having total net weight of 1028 grams, and market value of Rs. 26,63,366/- is allowed to be re-exported on payment of a redemption fine of Rs. 5,25,000/- (Rupees Five Lakhs T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as noted above. (C) Reply Affidavits 17. The respondents have filed two reply affidavits. The first reply affidavit is of Mr. G. B. Tilve, Assistant Commissioner of Customs, which does not dispute that the petitioners were carrying the gold jewellery in question, when they reached Mumbai Airport by Oman Air Flight, on 14 January, 2018. The affidavit sets out the facts in relation to the adjudication of the show cause notice, the orders passed on the show cause notice, the appeal preferred by the petitioners, orders passed by the appellate authority and thereafter in regard to the orders passed by the revisional authority on the petitioners revision. As the said facts are already discussed and subject matter of record, they need not be detailed any further, suffice it to observe that there is no dispute that the orders passed by the Revenue Authority would direct the Department to permit the petitioners to re-export the gold and such order has attained finality. 18. In so far as the availability of the gold is concerned, the challenge as raised to the approach of the Department in not reverting the petitioners repeated queries that the gold be made available, so that the redemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the gold which contained the gold seized from the petitioners. In so far as the return of the gold to the petitioners is concerned, in paragraph 16 of the affidavit, it is stated as under:- 16. With reference to Ground M, I submit that the sale proceeds of seized gold after adjusting the liabilities of the Petitioners i.e redemption fine and penalties can be returned to the Petitioners as the Revisionary Authority has upheld the confiscation of seized gold and penal action against the Petitioners. However interest is not applicable under the provisions of Section 27 A of the Customs Act, 1962 as the case does not pertain to duty. 20. There is a second affidavit filed on behalf of the Department also of Mr. G. B. Tilve, Assistant Commissioner of Customs dated 07 October, 2023. The said affidavit is nothing but a replica of the first reply affidavit which seeks to justify the confiscation and disposal of the gold jewellery of the petitioners. 21. A rejoinder affidavit has been filed by the Constituted Attorney of the petitioners, reiterating the contentions as urged in the petition. The contentions are inter alia that the sale of the petitioners jewellery is illegal being contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meaning of perishable or hazardous goods. Therefore, any action on the part of the respondents to dispose of the said goods under Section 110 would amount to illegality. In this context, it is submitted that it is held by the Delhi High Court in the case Zhinet Banu Nazir Dadany Vs. Union of India 2019(367) ELT 385 (Del.) that in case of seizure of gold or gold ornaments / items, such goods are neither perishable nor hazardous as per Section 110(1A) of the Customs Act and that such goods are required to be disposed of only after issuing a notice to the person from whom the gold was seized. It is next submitted that without admitting that Section 150 was applicable in the present facts, no notice under Section 150 of the Customs Act was issued to the petitioners before the disposal of the gold jewellery. It is strongly contended that the fact of disposal of seized confiscated goods, was also not brought to the knowledge of the appellate authority or the Revisional Authority at any point of time. 23. It is next submitted that the Revenue s Circular Reference F. No. 711/4/2006-Cus.(AS) New Delhi dated 14 February 2006, the Board had stressed upon the requirement of issuing notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other hand Mr. Devang Vyas, learned ASG has made the following submissions: At the outset Mr. Vyas has fairly submitted that the gold jewellery subject matter of the proceedings in the present case, after its seizure was disposed of / sold. He however submits that the provisions of Section 150 of the Customs Act are not applicable as in the facts of the present case, the gold was already sold although later on confiscated. It is however submitted that proper procedure was followed inasmuch as after seizure a show cause notice was issued to the petitioners and an order adjudicating the show cause notice came to be passed on 6 July 2018 whereby the goods were directed to be confiscated. It is his submission that Section 110 with its sub-sections are applicable so as to justify the orders passed by the respondents to dispose of the petitioners gold jewellery. Mr. Vyas has placed reliance on the Notification dated 22 December 1997 (Notification No. 72/97-Cus.(N.T.), to submit that as per the provisions of Section 110(1A) of the Customs Act, by such notification, gold, in all forms including bullion, ingot, coin, ornament, crude jewellery, has been notified under the said provision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the proper officer may serve an order on the owner of the goods or the beneficial owner or any person holding himself out to be importer, or any other person from whose custody such goods have been found, directing that such person shall not remove, part with, or otherwise deal with such goods except with the previous permission of such officer. (1A) The Central Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification in the Official Gazette, specify the goods or class of goods which shall, as soon as may be after its seizure under subsection (1), be disposed of by the proper officer in such manner as the Central Government may, from time to time, determine after following the procedure hereinafter specified. (1B) Where any goods, being goods specified under subsection(1A), have been seized by a proper officer under subsection(1), he shall prepare an inventory of such goods containing such details relating to their description, quality, quantity, mark, numbers, country of origin and other particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Customs or Commissioner of Customs, by order in writing, provisionally attach any bank account for a period not exceeding six months: Provided that the Principal Commissioner of Customs or Commissioner of Customs may, for reasons to be recorded in writing, extend such period to a further period not exceeding six months and inform such extension of time to the person whose bank account is provisionally attached, before the expiry of the period so specified. (emphasis supplied) 30. On a plain reading of Section 110 of the Customs Act, it is quite clear that it is a provision in relation to seizure of goods, documents and things. It provides that if the proper officer has a reason to believe that any goods are liable to confiscation under the Customs Act, he may seize such goods. Subsection (1), sub-sections (1A), (1B) and (1D) are required to be cumulatively read inasmuch as Section (1A) is the the power of Central Government to issue a notification in the Official Gazette to specify the goods or class of goods which shall, as soon as may be after its seizure under sub-section (1) be disposed of by the proper officer in such manner as the Central Government may, from time to ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when permits disposal of a seized item like gold, it cannot be without subjective satisfaction to be recorded in writing specifying the reason, the gold required to be disposed of, for any reason as specified in sub-section (1A). We would test this proposition. Sub-section (1A) provides for eventualities which would empower the Central Government to specify the goods or class of goods which can be disposed of by the proper officer as soon as may be after its seizure having regard to the nature of such goods, namely in the event the goods are perishable or hazardous or there is likely to be depreciation in the value of the goods with the passage of time, or there are constraints of storage space for the goods and/or any other relevant considerations. This can be done by the Central Government by issuing a notification to be published in the Official Gazette specifying such goods. Thus, each of such eventualities as contemplated under sub-section (1A) necessarily would be required to be applied to the goods seized, so as to test, as to which of such stipulations become applicable to the category of goods. The reason being that a particular class of goods may invite all the ingredient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on record, much less brought to our notice, as to why it was felt necessary by the proper officer that the petitioners gold was required to be disposed of hurriedly on 1 June, 2018 even prior to the issuance of show cause notice, which was issued on 6 July, 2018, i.e. one month and 5 days after the disposal order. 35. Insofar as the applicability of sub-section (1D) is concerned, in the present case, sub-section (1D) was not applicable, as an application was made to the Magistrate and no such application was made, as provided under sub-section (1D), to the Commissioner (Appeals). 36. There is something more fundamental in the present proceedings inasmuch as on 14 January, 2018 the gold jewellery in question was seized from the petitioners. Sub-section (2) of Section 110 provides that where any goods are seized under sub-section (1) and no notice in respect thereof is issued under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized. Thus, the seizure having taken place on 14 January, 2018, six months period was to end on 14 July, 2018, however, what is significant is that a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of the said provisions interalia informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty and an opportunity of making a representation in writing is given to him within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty and a reaonsable opportunity of being heard. The object of the provision making an allowance of representation is to permit such person who has been issued such notice to show cause against non-confiscation. In the event, the case of the noticee is to be accepted, the only consequence which the law would recognize would be that the confiscation of goods, subject matter of show cause notice, itself would be dropped. The corollary to this would be that the seized goods are required to be released to the owner. If they are not to be released, then Chapter XIV makes another provision, namely, in Section 125 which provides for Option to pay fine in lieu of confiscation . Section 125 reads thus: 125. Option to pay fine in lieu of confiscation. 1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted above such show cause notice in effect was meaningless as the gold jewellery itself was not available for confiscation. 40. It is quite glaring that the respondents have failed to follow the basic procedure, the law would recognize, namely, that knowing well that the petitioners are foreign nationals, no attempt was made to serve show cause notice on the petitioners through the Consulate General of the Islamic Republic of Iran, when the respondents were fully aware that the petitioners were not available in India. The concerned officer nonetheless proceeded to adjudicate the show cause notice and passed an Order-in-Original on 18 January, 2019 without hearing the petitioners. 41. Be that as it may, as noted above, now the proceedings which had arisen under the show cause notice dated 6 July, 2018 issued to the petitioners have attained finality in view of the Revisional Authority passing an order on 19 September, 2022, whereby it has been held that absolute confiscation was not justified in the present case and the petitioners be permitted to re-export the gold jewellery on payment of a redemption fine. Such order as seen from the facts as noted above is incapable of complianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his for the reason that prior to the goods being confiscated, rights in the goods, the corporeal ownership of the goods remain with the owner of the goods and such rights do not stand vested and/or transferred in favour of the Customs department / Government. 44. Now applying such basic principles to the case in hand, we find that in the notice dated 4 April 2018 albeit not received by the petitioners, no reason whatsoever was set out as to why a decision is being taken to dispose of the goods. The contents of the said notice are required to be noted which read thus:- OFFICE OF THE COMMISSIONER OF CUSTOMS (AIRPORT) TERMINAL-2, LEVEL-II, CHHATRAPATI SHIVAJI INTERNATIONAL AIRPORT, SAHAR, ANDHERI (EAST), MUMBAI 400099. F.No.SD/INT/AIU/21/2018 AP-D Date: 04.04.2018 NOTICE The officers of this Commissionerate had seized assorted gold jewellery totally weighing 1028 grams valued at Rs. 26,63,366/- from Mrs. Leyla Mahmoodi and Mr. Mojtaba Gholami, holding Iranian Passport No. M42123461 and F29961431, on their arrival from Muscat by flight no. WY203 on 14.01.2018. The same was seized under panchanama in the reasonable belief that it was smuggled into India and hence liable for confiscation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also in the manner in which the gold jewellery has been disposed of. If such is the consequence of the actions, as taken by the respondents and the same cannot be recognized in law on any parameters, then the only conclusion to be reached by the Court is that the disposal / sale of the gold jewellery belonging to the petitioner, is per se illegal, void, ab initio and unconstitutional. Once such action on the part of the respondents is being regarded as a brazen illegality, the mandate of law would be to restore to status quo ante which is the legitimate corollary to remedy such illegality. The legal principle in this regard can be discussed. 48. In State of Gujarat Vs. Memon Mahomed Haji Hasam AIR 1967 SC 1889., involved an issue in regard to illegal seizure of the vehicles as belonging to the respondents therein, leading to an order of confiscation being finally set aside and a claim for return of the vehicles being made. It so transpired that the vehicles were sold and the amounts were paid to the creditors of the respondents. It is in such context the Supreme Court observed that the order of confiscation was not the final order and was subject to appeal / further proceedings an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that of a bailee. If that is the correct position once the Revenue Tribunal set aside the order of the Customs Officer and the Government became liable to return the goods the owner had the right either to demand the property seized or its value, if, in the meantime the State Government had precluded itself from returning the property either by its own act or that of its agents or servants. This was precisely the cause of action on which the respondent's suit was grounded. The fact that an order for its disposal was passed by a Magistrate would not in any way interfere with or wipe away the right of the owner to demand the return of the property or the obligation of the Government to return it. The order of disposal in any event was obtained on a false representation that the property was an unclaimed property. Even if the Government cannot be said to be in the position of a bailee, it was in any case bound to return the said property by reason of its statutory obligation or to pay its value if it had disabled itself from returning it either by its own act or by any act of its agents and servants. In these circumstances, it is difficult to appreciate how the contention that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to be refunded to the petitioner with interest. The relevant observations of the Court in para 22 and 23 which reads thus: 22. There is no explanation offered by the Respondents as to why they were constrained to dispose of the seized gold, when it was neither perishable nor hazardous. Also, there is no answer why it had to be disposed of without notice being issued to the person from whom it was seized. This irrespective of whether the SCN was served or not. The SBEC has issued a circular dated 14th February 2006 in this regard where it was impressed upon the field formations as under: An instance has recently been brought to the notice of the Board where seized goods were disposed of without issuing notice to the owner of the goods. The seizure having been set aside by the adjudicating authority, the owner of the goods sought their return but was advised to obtain the sale proceeds, which were significantly lower than the seizure value. In subsequent proceedings, the High Court has directed the refund of an amount higher than the Sale proceeds, as well as payment of interest. The loss of the exchequer has resulted from a failure to comply with the requirements of Section 150 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her manner after notice to the owner of the goods. It is further clarified that the requirement to issue notice to the owner of the goods shall also obtain in case of goods that have been confiscated but in respect of which all appeal/legal remedies have not been exhausted by the owner of the goods. 52. We are also of the opinion that the concerned officer of the respondents in the present case has completely overlooked that the gold jewellery in question was sold / disposed of at the stage of the seizure, in fact, prior to the issuance of a show cause notice under Section 124 of the Customs Act, being issued to the petitioners, much less prior to any order of confiscation being passed, which came to be passed on 18 January 2019. Such order was certainly subjected to an appeal as per the provisions of Section 128 of the Customs Act, before the Appellate Authority and thereafter, a revision being maintainable under the provisions of Section 129DD before the Central Government. It was thus an obligation on the concerned Customs officials as conferred by law to preserve the gold jewellery belonging to the petitioner unless the circumstances for justified reasons or otherwise were agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 110 otherwise than what has been discussed above, would amount to foisting draconian, reckless and/or unfettered authority on the Customs Officers conferring a licence to commit illegality. In fact the recognition of any such power with the Custom Officers would lead to an anomalous situation of the substantive provisions and procedure for confiscation and the appellate/revisional remedy being rendered meaningless, only to be realized that any order for return of property at any stage of such proceedings, would merely remain a paper order, impossible of implementation/ execution. Thus, such substantive provisions of the Customs Act cannot be rendered nugatory, by recognizing unguided and unfettered powers being conferred under Section 110 on the Customs Officers, to dispose of the seized property, till the orders of any confiscation attains finality, unless there are strong reasons which would justify any such action when tested on such constitutional and legal parameters, and that too on the satisfaction of the officers to be reached only after hearing the owner of the property. 56. In so far as the reliance on on behalf of the respondents on the decision of this Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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