2019 (2) TMI 1375 - AT - Customs

Tribunal sets aside order, requires Show Cause Notice. Seized goods returned.

The Tribunal held that the order extending the period for issuing Show Cause Notices without a personal hearing was not sustainable. The Tribunal set ... Extension of the date for issuing show cause notice after detention/seizure of the goods - appellant submits that in this case, the appellant were not issued the Show Cause Notice and given opportunity to be heard before extending the time limit for issuance of Show Cause Noptice under provisions of Customs Act - whether after the amendment of Section 110(2) of Customs Act by Finance Act, 2018 is there any need for issuance of the Show Cause Notice before the extension is permitted by another six months on the reasonable ground by the Commissioner/adjudicating authority? - Section 110 of the Customs Act, 1962. Held that:- Clause 90 of the Bill seeks, to amend Section 110 of the Customs Act so as to give power to extend the period for issuing Show Cause Notice in case of seized goods by a further period of six months to case in cases where no order for provisional release of goods has been passed. After amendment not only the Show Cause Notice is required to be issued by the Adjudicating Authority, but he has also to give a reasoned order after hearing the Investigation Officer and also taking view of the affected party from whom seizure has been made as his personal right is being deprived of which emanate from the Section 110(1) of the Act that entitled him to got the goods returned which has been seized from his possession. The impugned order is not sustainable and the same are being set aside with consequential benefit, as per law, which includes the return of imported goods to the person from whom the seizure have been made. Issues Involved:1. Overvaluation of imported rough diamonds.2. Seizure of goods under Section 110 of the Customs Act, 1962.3. Extension of the period for issuing Show Cause Notices.4. Requirement of personal hearing before extending the period for Show Cause Notices.5. Application of amended provisions of Section 110(2) of the Customs Act by Finance Act, 2018.Issue-wise Detailed Analysis:1. Overvaluation of Imported Rough Diamonds:The appellants imported consignments of rough diamonds from Hong Kong, which were found to be heavily overvalued during scrutiny by the Directorate of Revenue Intelligence (DRI). Consequently, the goods were seized under Section 110 of the Customs Act, 1962, on the reasonable belief that they were liable for confiscation under Section 111 of the Customs Act, as the Importer Exporter Code (IEC) holders were not the actual importers and truthful declarations were not made as mandated under Section 46 of the Customs Act.2. Seizure of Goods under Section 110 of the Customs Act, 1962:The goods were detained and subsequently seized on 8.8.2018. The DRI initiated further investigation under Section 110 of the Customs Act, 1962. The appellants contended that the Show Cause Notices were not issued within six months from the date of detention, as required by law.3. Extension of the Period for Issuing Show Cause Notices:The DRI requested an extension of the period for issuing Show Cause Notices by another six months under the proviso to sub-section (2) of Section 110 of the Customs Act. The Commissioner of Customs, Jaipur, extended the period based on the reasons provided by the DRI, which included various difficulties in issuing the Show Cause Notices within the prescribed time.4. Requirement of Personal Hearing Before Extending the Period for Show Cause Notices:The appellants argued that they were not given an opportunity to be heard before the extension of the time limit for issuing Show Cause Notices. They relied on the Supreme Court's decision in I.J. Rao, Assistant Collector of Customs vs. Bibhuti Bhushan Bagh, which held that the extension of the period for issuing Show Cause Notices cannot be done without hearing the appellants. The appellants also cited several other cases supporting the requirement of a personal hearing before such an extension.5. Application of Amended Provisions of Section 110(2) of the Customs Act by Finance Act, 2018:The respondents contended that the amended provisions of Section 110(2) of the Customs Act, introduced by the Finance Act, 2018, replaced 'ON SUFFICIENT CAUSE BEING SHOWN' with 'FOR REASONS TO BE RECORDED IN WRITING,' thereby eliminating the requirement for a personal hearing before extending the time period for issuing Show Cause Notices. The Tribunal referred to the amendment and the Finance Minister's speech, which aimed to improve ease of doing business and align certain provisions with the Trade Facilitation Agreement.The Tribunal also cited a coordinate bench's decision in S.R.K. Metal & Industries & Pink Commercial, which held that the requirement of issuing a Show Cause Notice before extending the period remains, even after the amendment. The Tribunal emphasized that the right to a Show Cause Notice emanates from the principle of natural justice, as the affected party's rights are prejudicially affected.Conclusion:The Tribunal concluded that the impugned order extending the period for issuing Show Cause Notices without a personal hearing was not sustainable. The Tribunal set aside the impugned orders and allowed the appeals with consequential relief, including the return of the seized goods to the appellants. The Tribunal reiterated that the amendment to Section 110(2) of the Customs Act does not dispense with the requirement of issuing a Show Cause Notice and providing a reasoned order after hearing the affected party.