Case Law Details

Case Name : Minal Gems Vs Union of India (Bombay High Court)
Appeal Number : Writ Petition (L) No. 7993 of 2021
Date of Judgement/Order : 07/07/2021
Related Assessment Year :

Minal Gems Vs Union of India (Bombay High Court)

The Hon’ble Bombay High Court in case of M/s Minal Gems v. Union of India [WP. No. 7993 of 2021 dated July 07, 2021] directed the Adjudicating Authority to consider the prayers of provisional release of seized goods of the assessee, during the pendency of the proceedings under the Section 124 of the Customs Act, 1962.

Facts:

M/s Minal Gems (“the Petitioner”) is a jewelry manufacturer and exports cut and polished diamonds. The cut and polished diamond which sought to be exported were seized by the Revenue Department.

On February 02, 2021, the Petitioner filed an application for provisional release of seized goods to the Adjudicating Authority (“the AA”). The AA rejected the prayer of the Petitioner and issued a Show Cause Notice (“SCN”) dated April 20, 2021, under Section 124 of the Customs Act, 1962 (“the Customs Act”) questioning the Petitioner to explain why the seized goods should not be confiscated.

Further the Petitioner again on May 20, 2021, prayed for provisional release of the seized goods under Section 110A of the Customs Act to the Joint/Additional Commissioner of Customs (“the Respondent”).

The Petitioner’s contention is that, notwithstanding the pendency of proceedings under section 124 of the Act, there is nothing in the Act that precludes consideration of an application for provisional release of goods under section 110A of the Customs Act.

On the other hand, the Respondent submits that, once proceedings under section 124 of the Act has been initiated, question of considering an application for provisional release of the seized goods does not arise.

Bombay High Court at Mumbai is one of the oldest High Courts of India

Issue:

  • Whether during the pendency of proceedings under section 124 of the Customs Act, the Petitioner’s consideration of an application under Section 110A of the Customs Act for provisional release of seized goods is allowed or not?

Held:

The Hon’ble Bombay High Court in WP. No. 7993 of 2021 dated July 07, 2021, held as under:

  • Noted that, Section 110(1) of the Customs Act empowers a proper officer to seize goods, if he has reason to believe that the same are liable to confiscation under the Act. Section 110(2) of the Customs Act specifies that, if no notice under clause (a) of section 124 of the Customs Act is issued within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized. The second proviso to Section 110(2) of the Customs Act lays down that should there be an order of provisional release of the seized goods under Section 110A of the Customs Act , the specified period of six months shall not apply.
  • Observed that, after perusal of statutory provisions under Section 110 and Section 124 of the Customs Act, is that in default of issuance of notice under section 124 of the Customs Act within six months of seizure, the person from whose possession the goods are seized can claim, as a matter of right, return of the seized goods and in such a case, in view of the second proviso to Section 110(2), the specified period of six months to issue a notice would not apply, meaning thereby that a notice could follow even thereafter.
  • Further observed that, notwithstanding the pendency of proceedings initiated by issuance of a SCN under section 124(a) of the Customs Act, the AA may, in its discretion, allow a provisional release on such conditions as the AA may require fit to impose. Further as per the legislative intent in amended Section 110A of the Customs Act, it’s clear that even during pendency of proceedings before the AA, such authority is conferred the discretionary power to allow provisional release.
  • Held that, the writ petition granting liberty to the AA to carry forward the proceedings initiated under section 124 of the Customs Act is disposed of in accordance with law.
  • Directed that, notwithstanding the pendency of the proceedings under section 124 of the Customs Act, the AA ought to consider the prayers for provisional release of the seized goods made by the Petitioner.

Relevant Provisions:

Section 124 of the Customs Act:

“Issue of show cause notice before confiscation of goods, etc. – 

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 an Assistant Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty;

(b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and

(c) is given a reasonable opportunity of being heard in the matter :

Provided that the notice referred to in clause (a) and the representation referred to in clause (b) may, at the request of the person concerned be oral.

Provided further that notwithstanding issue of notice under this section, the proper officer may issue a supplementary notice under such circumstances and in such manner as may be prescribed.”

Section 110A of the Customs Act:

“Provisional release of goods, documents and things seized or bank account provisionally attached pending adjudication. –

Any goods, documents or things seized or bank account provisionally attached under section 110, may, pending the order of the adjudicating authority, be released to the owner or the bank account holder on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require.”

Section 110(1) and (2) of the Customs Act:

 Seizure of goods, documents and things. –

(1) If the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods :

Provided that where it is not practicable to remove, transport, store or take physical possession of the seized goods for any reason, the proper officer may give custody of the seized goods to the owner of the goods or the beneficial owner or any person holding himself out to be the importer, or any other person from whose custody such goods have been seized, on execution of an undertaking by such person that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer:

Provided further that where it is not practicable to seize any such goods, 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.

(2) 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 :

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 the person 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 110A, the specified period of six months shall not apply.

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FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

1. All these writ petitions involve similar facts and question of law and, as such, they are being disposed of by this common order.

2. Writ Petition (L) No. 7993 of 2021 is directed against the seizure memo dated November 2, 2020 [at page 62], and Writ Petition (L) Nos. 7989, 8014 & 8028 of 2021 are directed against the seizure memos dated October 31, 2020 [at page 56, 101 & 51, respectively]. Cut and polished diamonds, which the petitioners sought to export, were seized on the ground indicated in paragraph 2 of such seizure memos.

3. On February 2, 2021, the petitioner in Writ Petition (L) No. 7993 of 2021 prayed for provisional release of the seized goods. Such prayer was not considered; instead a show-cause notice dated April 20, 2021 under section 124 of the Customs Act, 1962 (hereinafter “the Act” for short) [at page 311] came to be issued calling upon the petitioner to explain why the seized goods shall not be confiscated. Similar show-cause notices were issued to the other petitioners. Although Mr. Chatterji, learned senior advocate appearing in support of the writ petitions, submits that replies to the show-cause notices have been submitted by the petitioners, Mr. Jetly, learned senior advocate for the respondents seems to be right in his contention that such replies are not on record.

4. Be that as it may, the petitioner in Writ Petition (L) No. 7993 of 2021 by a representation dated May 20, 2021 submitted to the Joint/Additional Commissioner of Customs has again prayed for provisional release of the seized goods under section 110A of the Act. Similar such representations by the other petitioners are also on record.

5. It is at this juncture that we are considering Writ Petition (L) No. 7993 of 2021 and the other writ petitions.

6. The contention of Mr. Chatterji is that notwithstanding the pendency of proceedings under section 124 of the Act, there is nothing in the Act that precludes consideration of an application for provisional release of goods under section 110A. On the other hand, Mr. Jetly submits that once proceedings under section 124 of the Act have been initiated, question of considering an application for provisional release of the seized goods does not arise.

7. We are, therefore, tasked to decide the short question as to whether during the pendency of proceedings under section 124 of the Act, consideration of an application for provisional release is barred.

8. Section 110(1) empowers a proper officer to seize goods, if he has reason to believe that the same are liable to confiscation under the Act. Section 110(2) ordains that if no notice under clause (a) of section 124 of the Act is issued within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized. The second proviso to sub-section (2) lays down that should there be an order of provisional release of the seized goods under section 110A, the specified period of six months shall not apply.

9. The legal position emerging from a bare reading of the aforesaid statutory provisions is that in default of issuance of notice under section 124 of the Act within six months of seizure, the person from whose possession the goods are seized can claim, as a matter of right, return of the seized goods; and in such a case, in view of the second proviso to sub-section (2) of section 110, the specified period of six months to issue a notice would not apply, meaning thereby that a notice could follow even thereafter.

10. Section 110A of the Act, inserted by way of amendment with effect from July 13, 2006, reads as under: –

“110A. Provisional release of goods, documents and things seized pending adjudication. – Any goods, documents or things seized under section 110, may, pending the order of the adjudicating authority, be released to the owner on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require.

11. The words “pending the order of the adjudicating authority” are important for the purpose of deciding the question formulated above. We are inclined to the view that notwithstanding the pendency of proceedings initiated by issuance of a show-cause notice under clause (a) of section 124 of the Act, the adjudicating authority may, in its discretion, allow a provisional release on such conditions as he may require fit to impose. We have not been shown any provision by Mr. Jetly which expressly, or even by necessary implication, bars a provisional release once proceedings under section 124 are initiated; on the contrary, the legislative intent in section 110A, introduced by way of an amendment, is clear that even during pendency of proceedings before the adjudicating authority, such authority is conferred the discretionary power to allow provisional release.

12. In such view of the matter, we dispose of all these writ petitions granting liberty to the adjudicating authority to carry forward the proceedings initiated under section 124 of the Act in accordance with law. We also observe that notwithstanding the pendency of the proceedings under section 124 of the Act, the adjudicating authority ought to consider the prayers for provisional release of the seized goods made by the petitioners by representations dated February 2, 2021 and May 20, 2021 in accordance with law. Let a decision be given on such representations as early as possible, but not later than three weeks of receipt of a copy of this order.

13. There shall be no order for costs.

All contentions on the merits of the rival claims are kept open.

*****

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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