Section 110 of the Customs Act, 1962 deals with seizure of goods.
Under sub section (1) the proper officer is entitled to seize goods,
which he has reason to believe, are liable to confiscation under the
Act. If the goods are capable of being seized the proper officer may
serve on the owner of the goods, an order prohibiting him from removing,
parting with or otherwise dealing with the goods, except with the
previous permission of such Officer. If the goods are of perishable or
hazardous nature, then the Government may order their disposal, by
following the procedure. But Section 110(2) prescribes a period of
limitation for the proper Officer to take action and for the return of
the goods if no action is taken within the prescribed period.
Section 110(2) provides that where any goods are seized under sub section (1) and no notice in respect thereof is given 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. The above said
six month period may, on sufficient cause being shown, be extended by the Commissioner of Customs for a period not exceeding six months.
Section 124 provides that no order confiscating any goods or imposing any penalty on any person shall be made unless the owner of the goods or such person is given a notice in writing informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty.
The Department issued a circular No. 22/2004-Cus, dated 3.3.2004 in response to the representations received from the trade that the items received in classification disputes should not be withheld but should be released by resorting to provisional assessment. In the said circular the Department informed that in case of classification disputes, by and large, option is given for provisional clearance/assessment, if the inquiries are going to take time. However the Board desires that a disputed or offending consignment should also not be held up unless its import/clearance is totally prohibited or banned under any law for the time being in force or where prosecution is contemplated. Samples should be drawn and consignment should be allowed to be cleared on provisional basis as a matter of right. This will prevent congestion at ports and warehouses. Adequate bank guarantee/security may be taken to safeguard the revenue. In case where it is decided to detain the consignment action should be taken to shift the same to a Customs Warehouse under Section 49 of the Customs Act, 1962.
In `Om Udyog V. Union of India' – 2010 (5) TMI 168 (HC) it was held that the question as to whether the detention of goods for a period for more than two months can be taken to be justified or not. After looking at Sections 17, 18, 47 and 110 of the Customs Act, the Court held that non clearance of goods seriously affects the rights of lawful importer and that no authority can plead unlimited power of non clearance on account of its own incompetence.
In `Amit Enterprises V. Union of India' – 2011 (5) TMI 375 (HC) the Court reiterated that the power of detention is a drastic power and that its exercise has to be hedged by safeguards to check the abuse. The authority exercising such power must strictly justify the same.
In `S.J. Fabrics Limited V. Union of India' – 2011 (2) TMI 417 (HC) it was held that consignments cannot be held indefinitely without any valid order or detention under Section 110. If no show cause notice under Section 124(a) is issued within 6 months from the date of detention, the consignments are liable to be released.
In `Sree Rajendra Textiles V. Commissioner of Customs, Tuticorin' – 2011 (12) TMI 208 (HC) the petitioner imported three consignments of silk fabric from a Malaysian company and also filed three Bills of Entry in Tuticorin port. Pending assessment of the goods, the office premises of the petitioner was searched on 8.11.2010. In response to the summon the partners of the petitioner appeared before the Department of Revenue Intelligence at Tuticorin on 3.1.2011 and 4.1.2011. Ever since then the goods are lying under the custody of the respondents and no order of assessment has been passed. Therefore the petitioner filed a writ petition before the High Court, Madras. The Department pointed out that the goods appeared to have been imported from Malaysia, the origin of the goods was suspected to be China and therefore there was a likelihood of anti dumping duty was to be levied. The petitioner agreed to offer bank guarantee for the suspected amount of anti dumping duty. But the petitioner could not get a bank guarantee as promised. The petitioner prayed for release of goods without the bank guarantee.
The petitioner contended that the goods are neither prohibited nor banned items and so the detention of the goods was unlawful. A consignment should not be held up unless its import or clearance is totally prohibited or banned. The Department submitted the following contentions before the High Court:
With a view to protect the Indian Silk Industry, the Government of India issued a Notification No. 121/2006, dated 26.12.2006, imposing Anti Dumping duty for silk fabric imported from China;
The petitioner had routed the material in question through Malaysia, though they were of China origin;
The cartons as well as the fabrics did not contain any marking about the description, brand or manufacturer's name;
The partner of the petitioner admitted that he had no direct contact with the Malaysian supplier, but ordered the fabric from a person by name Jerry Yuan of China;
The petitioner could not furnish either K1/K2 certificate or evidence for payment of money to the Malaysian party;
Since the anti dumping duty payable is very high the goods had to be detained;
The goods are kept only in CWC CFS Bonded Warehouse and hence the petitioner is not incurring any demurrage and therefore the writ petition is liable to be dismissed.
The High Court held that from the provisions of Section 110(2) it is clear that without passing an order of assessment, it is not open to the Department to keep the goods detained. The onlyreason stated by the Department for not issuing a notice under Section 124(a) for the past more than one year, is that the petitioner failed to furnish two documents called for by them. The petitioner has produced proof to show that he had in fact furnished those documents. Even assuming without admitting such documents were not furnished by the petitioner, the Department was not left without a remedy. For issuing a notice under Section 124(a) there was no necessity for insisting upon the production of those documents. There is no prohibition for the Department to draw adverse inference, when the documents called for were not produced. The Act empowers the proper officer to proceed to complete the assessment on the basis of the available records, if the importer fails or refuses to co-operate. Therefore, the excuse given by the Department for not issuing a notice under Section 124(a) is just like the excuse given by a person who does not know dancing, but who blames the stage for failure to perform.
Section 110(2) provides that where any goods are seized under sub section (1) and no notice in respect thereof is given 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. The above said
six month period may, on sufficient cause being shown, be extended by the Commissioner of Customs for a period not exceeding six months.
Section 124 provides that no order confiscating any goods or imposing any penalty on any person shall be made unless the owner of the goods or such person is given a notice in writing informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty.
The Department issued a circular No. 22/2004-Cus, dated 3.3.2004 in response to the representations received from the trade that the items received in classification disputes should not be withheld but should be released by resorting to provisional assessment. In the said circular the Department informed that in case of classification disputes, by and large, option is given for provisional clearance/assessment, if the inquiries are going to take time. However the Board desires that a disputed or offending consignment should also not be held up unless its import/clearance is totally prohibited or banned under any law for the time being in force or where prosecution is contemplated. Samples should be drawn and consignment should be allowed to be cleared on provisional basis as a matter of right. This will prevent congestion at ports and warehouses. Adequate bank guarantee/security may be taken to safeguard the revenue. In case where it is decided to detain the consignment action should be taken to shift the same to a Customs Warehouse under Section 49 of the Customs Act, 1962.
In `Om Udyog V. Union of India' – 2010 (5) TMI 168 (HC) it was held that the question as to whether the detention of goods for a period for more than two months can be taken to be justified or not. After looking at Sections 17, 18, 47 and 110 of the Customs Act, the Court held that non clearance of goods seriously affects the rights of lawful importer and that no authority can plead unlimited power of non clearance on account of its own incompetence.
In `Amit Enterprises V. Union of India' – 2011 (5) TMI 375 (HC) the Court reiterated that the power of detention is a drastic power and that its exercise has to be hedged by safeguards to check the abuse. The authority exercising such power must strictly justify the same.
In `S.J. Fabrics Limited V. Union of India' – 2011 (2) TMI 417 (HC) it was held that consignments cannot be held indefinitely without any valid order or detention under Section 110. If no show cause notice under Section 124(a) is issued within 6 months from the date of detention, the consignments are liable to be released.
In `Sree Rajendra Textiles V. Commissioner of Customs, Tuticorin' – 2011 (12) TMI 208 (HC) the petitioner imported three consignments of silk fabric from a Malaysian company and also filed three Bills of Entry in Tuticorin port. Pending assessment of the goods, the office premises of the petitioner was searched on 8.11.2010. In response to the summon the partners of the petitioner appeared before the Department of Revenue Intelligence at Tuticorin on 3.1.2011 and 4.1.2011. Ever since then the goods are lying under the custody of the respondents and no order of assessment has been passed. Therefore the petitioner filed a writ petition before the High Court, Madras. The Department pointed out that the goods appeared to have been imported from Malaysia, the origin of the goods was suspected to be China and therefore there was a likelihood of anti dumping duty was to be levied. The petitioner agreed to offer bank guarantee for the suspected amount of anti dumping duty. But the petitioner could not get a bank guarantee as promised. The petitioner prayed for release of goods without the bank guarantee.
The petitioner contended that the goods are neither prohibited nor banned items and so the detention of the goods was unlawful. A consignment should not be held up unless its import or clearance is totally prohibited or banned. The Department submitted the following contentions before the High Court:
With a view to protect the Indian Silk Industry, the Government of India issued a Notification No. 121/2006, dated 26.12.2006, imposing Anti Dumping duty for silk fabric imported from China;
The petitioner had routed the material in question through Malaysia, though they were of China origin;
The cartons as well as the fabrics did not contain any marking about the description, brand or manufacturer's name;
The partner of the petitioner admitted that he had no direct contact with the Malaysian supplier, but ordered the fabric from a person by name Jerry Yuan of China;
The petitioner could not furnish either K1/K2 certificate or evidence for payment of money to the Malaysian party;
Since the anti dumping duty payable is very high the goods had to be detained;
The goods are kept only in CWC CFS Bonded Warehouse and hence the petitioner is not incurring any demurrage and therefore the writ petition is liable to be dismissed.
The High Court held that from the provisions of Section 110(2) it is clear that without passing an order of assessment, it is not open to the Department to keep the goods detained. The onlyreason stated by the Department for not issuing a notice under Section 124(a) for the past more than one year, is that the petitioner failed to furnish two documents called for by them. The petitioner has produced proof to show that he had in fact furnished those documents. Even assuming without admitting such documents were not furnished by the petitioner, the Department was not left without a remedy. For issuing a notice under Section 124(a) there was no necessity for insisting upon the production of those documents. There is no prohibition for the Department to draw adverse inference, when the documents called for were not produced. The Act empowers the proper officer to proceed to complete the assessment on the basis of the available records, if the importer fails or refuses to co-operate. Therefore, the excuse given by the Department for not issuing a notice under Section 124(a) is just like the excuse given by a person who does not know dancing, but who blames the stage for failure to perform.
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