2011 (12) TMI 208 - HC - Customs

Court orders issuance of notice and assessment completion, goods released upon bond execution. Respondents' delay deemed unjustified.

The court allowed the writ petition, directing the respondents to issue a notice within two weeks and complete the assessment within four weeks ... Right to release of detained imported goods under Section 110(2) of the Customs Act - limitation on detention pending assessment and obligation to issue notice under Section 124(a) - provisional assessment and release against security / bond - Mandamus directing completion of assessment within time frame - insufficiency of non-production of documents to postpone assessment indefinitelyRight to release of detained imported goods under Section 110(2) of the Customs Act - limitation on detention pending assessment and obligation to issue notice under Section 124(a) - Respondents' obligation to release detained consignments where no notice under Section 124(a) has been issued within the statutory period prescribed by Section 110(2). - HELD THAT: - Section 110(2) prescribes that where goods are seized and no notice under clause (a) of Section 124 is issued within six months of seizure, the goods shall be returned to the person from whose possession they were seized, subject only to an extension by the Commissioner for up to a further six months. The Court found that the Bills of Entry were filed on 25/26.11.2010 and that no notice under Section 124(a) had been issued even by December 2011. The statutory periods (six months and the possible further six months) had therefore lapsed, and the respondents had no legal basis to continue detaining the consignments indefinitely. The Court relied on the object of Section 110(2) and on precedents emphasising that detention powers are drastic and must be exercised with safeguards against abuse. [Paras 14, 20, 21]Respondents are obliged to release the goods in terms of Section 110(2) as the statutory period for issuance of notice under Section 124(a) has expired.Mandamus directing completion of assessment within time frame - Court's power to direct issuance of notice and completion of assessment within specified timelines by mandamus. - HELD THAT: - The Court concluded there was no impediment to directing the respondents to proceed to assessment: the petitioner produced or undertook to produce the documents called for and the respondents could proceed on available records if documents were not supplied. Exercising its supervisory jurisdiction, the Court ordered the respondents to issue a notice within two weeks, allowed the petitioner two weeks to file a reply to that notice, and required the proper Officer to pass an order of assessment within four weeks of the petitioner's reply. The direction flows from the statutory duty to avoid prolonged detention and to complete assessment without undue delay. [Paras 9, 23]Notice to be issued within two weeks; petitioner to file reply within two weeks of notice; assessment to be completed within four weeks of the petitioner's reply.Provisional assessment and release against security / bond - provisional assessment and release against security / bond - Permissibility of provisional release of goods pending assessment on execution of bonds and the form of security accepted in the circumstances of the case. - HELD THAT: - The CBEC Circular and the Provisional Duty Assessment Regulations recognise provisional clearance/assessment and release of consignments by taking adequate security to safeguard revenue. Given the passage of time and the statutory obligation to release detained goods, the Court directed interim release of the consignments upon the petitioner executing personal bonds of all partners undertaking to abide by the eventual order of assessment, rather than insisting on the earlier bank guarantee which the petitioner stated he could not furnish. [Paras 15, 16, 23]Goods to be released within one week of receipt of the order upon the petitioner executing personal bonds of all partners, subject to the final assessment.Insufficiency of non-production of documents to postpone assessment indefinitely - Whether the respondents could defer issuing a notice under Section 124(a) solely on the ground that the petitioner had not produced certain documents. - HELD THAT: - The Court held that the respondents' stated reason for inaction - non-production of details of payment and Malaysian Customs clearance - did not justify withholding issuance of a Section 124(a) notice. The Act empowers the proper Officer to proceed with assessment on the basis of available records and to draw adverse inferences where appropriate. Thus the respondents could not lawfully rely on the lack of those documents to justify indefinite detention or failure to issue statutory notice. [Paras 22]Non-production of the two documents called for does not permit respondents to defer issuance of a notice under Section 124(a) indefinitely; they must proceed on available records or draw appropriate inferences.Final Conclusion: Writ petition allowed: respondents directed to issue notice under Section 124(a) within two weeks, petitioner to file reply within two weeks thereafter, assessment to be completed within four weeks of the reply, and the consignments to be released within one week of this order on execution of personal bonds by all partners; no order as to costs. Issues Involved:1. Assessment of imported goods.2. Detention of goods by the respondents.3. Requirement of bank guarantee for provisional release.4. Compliance with Section 110(2) of the Customs Act.5. Legal authority to detain goods beyond the statutory period.Issue-wise Detailed Analysis:1. Assessment of Imported Goods:The petitioner sought a Mandamus directing the second respondent to assess the goods covered by Bill of Entry Nos. 2363919, 2366129, and 2367779 dated 25.11.2010 and 26.11.2010. The petitioner had imported three consignments of Silk Fabric in 440 cartons from a Malaysian company, valued at US$ 431,695.86. The assessment of these goods was pending, and the petitioner's office was searched by the Department of Revenue Intelligence (DRI) on 8.11.2010. Despite the petitioner's compliance with the inquiry by DRI, the goods remained unassessed and under the respondents' custody.2. Detention of Goods by the Respondents:The petitioner argued that since the goods were neither prohibited nor banned, their detention was unlawful. The petitioner relied on CBEC Circular No.22/2004-Cus., which stipulates that consignments should not be held up unless their import or clearance is totally prohibited or banned. The respondents contended that the goods were of Chinese origin, routed through Malaysia to avoid Anti-Dumping Duty, and hence, they were detained.3. Requirement of Bank Guarantee for Provisional Release:Initially, the court directed the provisional release of goods upon the petitioner furnishing a bank guarantee of Rs.1,79,00,000/-. However, the petitioner failed to secure the bank guarantee and sought modification of the order, which was dismissed. The petitioner argued that the respondents had lost the legal authority to detain the goods due to the efflux of time prescribed by the statute.4. Compliance with Section 110(2) of the Customs Act:Section 110(2) mandates that if no notice under Section 124(a) is given within six months of the seizure, the goods must be returned. The respondents failed to issue such a notice within the prescribed period, nor extended it. The court noted that the goods had been detained beyond the statutory period without issuing the necessary notice, thereby obligating the respondents to release the goods.5. Legal Authority to Detain Goods Beyond the Statutory Period:The court referred to various judgments, including Om Udyog vs. Union of India and Amit Enterprises vs. Union of India, emphasizing that the detention of goods without issuing a notice under Section 124(a) within six months is unlawful. The court concluded that the respondents' failure to issue the notice or extend the period rendered the detention illegal.Conclusion:The court allowed the writ petition, directing the respondents to issue a notice within two weeks and complete the assessment within four weeks thereafter. The goods were to be released upon the petitioner executing personal bonds of all partners. The court emphasized that the respondents' excuse for not issuing the notice was unjustified and that they should have proceeded with the assessment based on available records. The connected miscellaneous petition was closed with no order as to costs.