2007 (3) TMI 588 - AT - Customs

Tribunal overturns confiscation decision under Customs Act, emphasizes fair procedures

WORLDWIDE TRADE EST. PVT. LTD. Versus COMMISSIONER OF CUSTOMS, CHENNAI

WORLDWIDE TRADE EST. PVT. LTD. Versus COMMISSIONER OF CUSTOMS, CHENNAI - 2007 (219) E.L.T. 588 (Tri. - Chennai) Issues Involved:1. Confiscation of goods under the Customs Act.2. Ownership and entitlement to the sale proceeds of the confiscated goods.3. Applicability of the Supreme Court's judgment in Sampath Raj Dugar case.4. Compliance with principles of natural justice.Issue-wise Detailed Analysis:1. Confiscation of Goods Under the Customs Act:The Commissioner of Customs, Chennai, confiscated 3917 kgs of raw silk imported by M/s. Pariston Exim, Rajkot, under the DEEC scheme, citing the cancellation of relevant Advance Licenses. The Tribunal, in its remand order, noted that the goods were imported under valid licenses and could not be held as tainted goods at the time of filing the Bills of Entry. Consequently, the Tribunal ruled out the applicability of Section 111(d) of the Customs Act, which provides for confiscation of goods imported contrary to any prohibition. The Commissioner's decision to confiscate the goods under Section 111(d) was beyond the scope of the remand order.2. Ownership and Entitlement to the Sale Proceeds:M/s. Worldwide Trading Est. Pvt. Ltd. (WTL) claimed ownership of 2633 kgs of the seized mulberry silk, which they asserted was transferred to them by M/s. Sunchan Trading Co. (STC), the supplier. The Commissioner rejected this claim, alleging collusion and fraudulent intent between M/s. STC and M/s. Pariston Exim. The Tribunal found no firm evidence of fraud or collusion and held that M/s. STC retained ownership of 1339 kgs of raw silk, for which they had not received payment. The Tribunal directed the Commissioner to consider the claims for sale proceeds in light of Section 150 of the Customs Act, which outlines the procedure for applying sale proceeds of goods not confiscated in accordance with the law.3. Applicability of the Supreme Court's Judgment in Sampath Raj Dugar Case:The Tribunal's remand order directed the Commissioner to consider the claims in light of the Supreme Court's judgment in Sampath Raj Dugar, which held that an exporter is entitled to seek re-export of goods if the import was covered by a valid license at the time of importation. The Commissioner, however, attempted to distinguish the facts of Sampath Raj Dugar from the present case, which the Tribunal found to be beyond the scope of the remand order. The Tribunal reiterated that the facts of both cases were almost identical and that the Commissioner should have followed the Supreme Court's decision.4. Compliance with Principles of Natural Justice:The Tribunal found that the Commissioner violated the principles of natural justice by not notifying the parties of the grounds for rejecting their claims for sale proceeds. The Commissioner's decision was based on findings of fraud and collusion without providing prior notice or an opportunity for the parties to respond. The Tribunal emphasized the necessity of adhering to natural justice principles, particularly when serious allegations are involved.Conclusion:The Tribunal set aside the Commissioner's order and remanded the case with specific directions:- M/s. STC's claim for sale proceeds of 1339 kgs of raw silk should be allowed to the extent permissible under Section 150 of the Customs Act, after providing an effective hearing on the quantification aspect.- M/s. WTL's claim for sale proceeds of 1294 kgs of raw silk should be reconsidered afresh, ensuring compliance with natural justice principles. Any grounds for rejection must be communicated in advance.The appeals were thus allowed by remand, with the Commissioner instructed to follow the Tribunal's directions and the relevant legal provisions.