Manik Chand And Sons (Jewellers) Pvt. Ltd. Vs Union of India And 5 Ors (Gauhati High Court)
The matter before the Gauhati High Court involved a writ appeal filed by a jewellery company challenging actions taken by the Customs Department in relation to seizure of jewellery. The incident arose in 2017 when an employee of the company was intercepted at Guwahati airport while carrying old gold and diamond-studded jewellery claimed to belong to customers and intended for repair, polishing, and cutting. Although the employee possessed delivery challans and related documents, the Customs authorities found discrepancies and proceeded to detain the employee and seize the jewellery under the Customs Act, 1962.
The appellant contended that the seizure was invalid as there was no evidence to suggest that the jewellery was imported or not of domestic origin, and further argued that the seizure occurred beyond the customs area. The seizure was initially challenged in a writ petition, where an interim order dated 22.09.2017 directed release of the jewellery upon furnishing security. Accordingly, the jewellery was released against security of Rs. 11,17,530/- based on a valuation of Rs. 44,70,121/-.
Subsequently, during pendency of proceedings, the Customs Department issued a show cause notice dated 16.08.2018 proposing confiscation of the seized goods. This notice was challenged by the appellant on grounds including limitation and jurisdiction; however, the challenge was dismissed on 18.03.2019, with the court holding that there was no jurisdictional or legal defect in the notice and directing the authorities to proceed with a personal hearing.
The appellant also challenged the seizure through another writ petition, which was dismissed by the Single Judge primarily on the ground that the challenge to the show cause notice had already failed and attained finality. The Single Judge observed that once the notice proposing confiscation was upheld, the seizure could not be examined independently.
In appeal, it was argued that such an approach denied the appellant an opportunity to contest the legality of the seizure itself. The appellant submitted that the sequence of proceedings created a situation where it was unclear whether the validity of the seizure could be examined independently or only as part of the confiscation proceedings.
The High Court examined the reasoning of the Single Judge and observed that the challenge to the seizure had not been considered on merits. It noted that the confiscation proceedings initiated through the show cause notice were subsequent to the seizure and could not preclude examination of the legality of the seizure. The Court held that denying the appellant an opportunity to question the seizure would effectively prevent them from presenting their case.
The Court further observed that the appellant should be allowed to raise all relevant issues, including the validity of the seizure, in response to the show cause notice. It emphasized that the appellant must be given an opportunity to explain that the seizure was improper, including arguments that the goods were old, used ornaments belonging to customers and not liable for confiscation.
Accordingly, the Court disposed of the appeal with directions that the appellant be permitted to challenge the correctness of the seizure in the confiscation proceedings. It also directed that if the appellant sought additional time to respond meaningfully to the show cause notice, such request should be granted to ensure adequate opportunity of hearing.
FULL TEXT OF THE JUDGMENT/ORDER OF GAUHATI HIGH COURT
We have heard Mr. D. Saikia, learned Senior Advocate for the appellant and Mr. S.C. Keyal, learned Standing Counsel, Customs Department for the respondents.
2. This writ appeal has been filed by the appellant, which is a Company run by a well established Jewellery family, which has been operating for several years and is registered under the GST and other tax laws.
In the year 2017, while an employee of the company was flying domestically from Guwahati to Kolkata, he was purportedly intercepted at the airport at Guwahati on the ground of carrying some old gold and diamond-studded jewelleries, which were claimed to be belonging to the customers of the company. The purpose of the transport was stated to be repairing, polishing and cutting work of the jewellery. The employee, in question was having in his possession delivery challans and other documents, which apparently did not exactly match with the demands of papers by the Customs department. The employee was detained, questioned and the entire consignment of jewellery was seized under the Customs Act, 1962.
3. According to the appellant, the seizure was bad as there was no evidence of the ornaments not being domestic or used items and having been imported. The seizure also was questioned on the ground of it having been made beyond the customs area.
4. The records reveal that the seizure of the afore-noted jewellery was challenged by the appellant vide WP(C) 6204/2017 wherein, on 22.09.2017, an interim order of release of the articles, on furnishing security, was passed. The seized jewellery was returned to the appellant on furnishing a security of Rs.11,17,530/- against the valuation of the jewellery at Rs.44,70,121/-. While the writ petition was pending, in the meantime, the respondents/Customs department issued a show-cause notice dated 16.08.2018 to the appellant, proposing confiscation of the afore-noted goods. This notice was questioned by the appellant in WP(C) 1788/2019 on the grounds of limitation as also on the issue of jurisdiction.
However, WP(C) 1788/2019 was dismissed vide order dated 18.03.2019 on the ground that there was no jurisdictional or legal defect in the show-cause notice dated 16.08.2018. This order was passed at the motion stage itself with a direction to the respondents to fix another date for personal hearing of the appellant after issuing notice to them in that regard.
5. This Court has been informed today that the next date for the appellant to appear pursuant to the notice is 08.04.2026, i.e. tomorrow.
6. Mr. Saikia, learned Senior Advocate for the appellant has submitted that WP(C) 6204/2017 challenging the seizure was dismissed primarily on the ground of a Coordinate Bench not interfering with the issuance of notice proposing confiscation, thus making the seizure not liable to be challenged.
7. While dismissing the afore-noted writ petition, the learned Single Judge, in this instance, observed that with the dismissal of the writ petition challenging the issuance of notice for confiscation, which order had not been assailed by the appellant, with the effect of such order having attained finality, there could be no consideration on the merits of the seizure.
8. The appellant has submitted that this is a situation where it could not be decided by the authorities whether the cart is before the horse or the horse is before the cart.
9. A bare reading of the judgment impugned in the present appeal reflects the opinion of the learned Single Judge that the appellant shall have an opportunity of questioning the seizure too in the proceeding initiated and show-cause notice issued to the appellant proposing confiscation of the goods. Without permitting the appellant of doing that, we are of the view, the appellant would stand choked and strangulated without any opportunity to him to explain that the seizure was bad.
10. The observations of the learned Single Judge in the impugned judgment clearly reflects that no consideration was made with respect to the correctness of the seizure on the ground that the appellant has already been noticed against the proposed confiscation which, in our opinion, is only a subsequent proceeding.
11. Since the arguments raised on behalf of the appellant against the seizure were not entertained by the learned Single Judge, in all fitness of things, we are of the view that while responding to the notice for confiscation, the appellant ought to be entitled to question the very seizure of old used ornaments belonging to the customers of the appellant company.
12. We, thus, dispose off this appeal with an observation that since the issue regarding the correctness of the seizure proceeding was not entertained by the learned Single Judge in WP(C) 6204/2017 on the sole ground of the challenge to the issuance of notice having failed in the first instance, the appellant shall be given an opportunity of explaining his cause, i.e. to question the correctness of the seizure and ultimately, the decision to proceed for confiscating the same.
13. We order accordingly.
14. To provide reasonable opportunity to the appellant to present his cause, it is expected that if any request is made before the authorities for extension of time for the appellant to meaningfully appear in the confiscation proceeding, the same shall be granted.
