2018 (1) TMI 1027 - HC - Customs

Court quashes seizure memo, orders release of goods, emphasizes Advance Rulings' binding nature.

M/s. Isha Exim Versus The Additional Director General, Directorate of Revenue Intelligence, The Senior Intelligence Officer, The Commissioner of Customs, The Deputy Commissioner of Customs

The court quashed the seizure memorandum and directed the release of detained goods, emphasizing the binding nature of Advance Rulings. It found the ... Jurisdiction - Seizure of goods - unflavoured supari - mis-declaration/mis-classification of goods - whether the Officers of the D.R.I., especially, in the rank of the Senior Intelligence Officer can act against the Advance Ruling issued by the Advance Ruling Authority? Held that: - the primordial requirement before an order of seizure is passed is that, the proper Officer has to have reason to believe that the goods are liable to confiscation - No such reasons are explicit in the impugned seizure memorandum, dated 11.01.2018, except, to rely upon a report stated to have been obtained from M/s. Arecanut Research and Development Foundations, Mangalore, which appears to be a private Organization, and not a accredited Laboratory by the Central Government. Thus, without recording the reasons that the goods are liable for confiscation, the second respondent could not have passed the impugned seizure memorandum. In the instant case, the seizure memorandum of the second respondent only refers to the test report of the Private Organisation and not a Central Laboratory to state that the correct classification of goods is CTH No.08028090. Thus, the finding of the second respondent, though prima facie in nature, is clearly contrary to the order/Ruling passed by the Advance Ruling Authority, dated 31.03.2017 as well as the stand by the Commissioner of Customs, in his reply to the Advance Ruing Authority, dated 25.10.2016. Thus, the impugned seizure memorandum and the detention of the cargo by the respondents is wholly unjustified. Petition allowed. Issues:1. Quashing of Mahazar drawal and goods detention2. Quashing of seizure memorandum for misdeclaration3. Conflict between D.R.I. and Advance Ruling Authority4. Binding nature of Advance Ruling5. Validity of seizure under Section 110 of Customs Act6. Release of detained goods and Demurrage CertificateIssue 1: Quashing of Mahazar drawal and goods detentionThe petitioner sought to quash the Mahazar drawal and detention of goods imported, citing it as contrary to the Advance Ruling. The petitioner imported unflavoured supari from Indonesia, classified under Customs Tariff Heading 21069030. Despite paying duties and having an out of charge order, the goods were not cleared by the Directorate of Revenue Intelligence (D.R.I.) alleging misclassification. The petitioner relied on an Advance Ruling classifying the goods under CTH 2106 90 30, which was supported by the Commissioner of Customs. The court found the detention unjustified due to the binding nature of the Advance Ruling.Issue 2: Quashing of seizure memorandum for misdeclarationThe second issue involved the quashing of a seizure memorandum issued by the second respondent for alleged misdeclaration of goods resulting in wrong classification under the Customs Tariff Act. The court noted that the seizure was based on a report from a private organization, not a government-accredited laboratory, which lacked explicit reasons for confiscation. The court emphasized the requirement for proper reasons to believe goods are liable for confiscation before passing a seizure order, as per Section 110 of the Customs Act.Issue 3: Conflict between D.R.I. and Advance Ruling AuthorityThe court deliberated on whether the D.R.I. could act against the Advance Ruling issued by the Advance Ruling Authority. The Revenue Department expressed reservations about the ruling but failed to provide valid reasons for challenging it. The court rejected the Revenue's stance, emphasizing the binding nature of the Advance Ruling unless there is a change in law or facts. The court cited a Supreme Court case to establish the authority of Advance Rulings and the lack of grounds for challenging them without a stay or injunction.Issue 4: Binding nature of Advance RulingThe judgment highlighted the binding nature of Advance Rulings, citing a circular from the Government of India explaining the benefits and procedures for seeking such rulings. The court referenced a Supreme Court case to reinforce that Advance Rulings are not merely advisory but legally binding. It emphasized that the respondents were bound by the ruling given to the petitioner and could not act contrary to it without a valid challenge supported by legal grounds.Issue 5: Validity of seizure under Section 110 of Customs ActThe court examined the validity of the seizure under Section 110 of the Customs Act, emphasizing the necessity for proper reasons to believe goods are liable for confiscation. It criticized the lack of explicit reasons in the seizure memorandum and the reliance on a report from a private organization instead of a government-accredited laboratory. The court stressed that the seizure was unjustified due to the absence of valid grounds for confiscation.Issue 6: Release of detained goods and Demurrage CertificateThe final issue addressed the release of the detained goods and the petitioner's entitlement to a Demurrage and Detention Certificate for waiver of warehousing and demurrage charges. The court directed the respondents to release the cargo and issue the certificate, holding the Directorate of Revenue Intelligence responsible for bearing charges due to the illegal detention. It also highlighted the need for compliance with such orders to prevent them from being reduced to mere formalities.In conclusion, the court quashed the seizure memorandum, directed the release of the detained goods, and emphasized the binding nature of Advance Rulings, ensuring the petitioner's rights were upheld in accordance with the law.