Illegal seizure of gold by Customs Authority overturned for failure to serve Show Cause Notice

The Court found that the seizure of gold by Customs Authority was illegal due to failure to serve the Show Cause Notice (SCN) within the mandatory period. The adjudication order confiscating the gold and imposing a penalty was set aside as it was passed ex parte without serving the SCN, violating natural justice principles. Additionally, the disposal of the seized gold without notice was deemed illegal. The Court directed the Customs Authority to refund the auction proceeds of the gold to the Petitioner and granted liberty to seek further remedies if needed.

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Issues Involved:
1. Legality of the seizure of gold by Customs Authority.
2. Issuance and service of Show Cause Notice (SCN).
3. Adjudication order and its validity.
4. Disposal of seized gold without notice.

Detailed Analysis:

Legality of the Seizure of Gold:
The Petitioner, a Kenyan National, brought gold weighing about 3732.48 gm to India, which was seized by the Customs Authority on 5th January 2015 at the IGI International Airport, New Delhi. The gold was seized under Section 110 of the Customs Act, 1962, on the grounds that it was attempted to be imported into India illegally and cleared without payment of customs duty, making it liable for confiscation under Sections 118 and 119 of the Act. The Petitioner maintained that the gold was purchased in Kenya by selling a car and taking loans from friends and relatives.

Issuance and Service of Show Cause Notice (SCN):
The Petitioner argued that no SCN was issued, which led her to file the present petition. The Customs Authority contended that an SCN dated 30th June 2015 was issued and forwarded through diplomatic channels to the Ministry of Home Affairs and the High Commission of India in Kenya. However, it was revealed that the Petitioner no longer resided at the provided address, and the SCN was not served. The Court found that the SCN was not served within the mandatory period of six months from the date of seizure, as required under Section 110 (2) read with Section 124 (1) (a) of the Act. This failure rendered the seizure and subsequent proceedings illegal.

Adjudication Order and Its Validity:
An adjudication order was passed on 15th January 2019 by the Commissioner of Customs, confiscating the seized gold and imposing a penalty of Rs. 18 lacs on the Petitioner under Sections 112 and 114 AA of the Act. The Court found that the adjudication order was passed ex parte without the SCN being served on the Petitioner, violating the principles of natural justice. The adjudication order was set aside due to this procedural lapse.

Disposal of Seized Gold Without Notice:
The seized gold was disposed of without issuing notice to the Petitioner, which is a violation of the procedure specified under Section 110 (1) (a) of the Act. The Court noted that the gold was neither perishable nor hazardous, and there was no justification for its hurried disposal without notice. The Central Board of Excise and Customs (CBEC) circular dated 14th February 2006 mandates issuing notice to the owner before disposing of seized goods. The Respondents failed to follow this procedure, rendering the disposal illegal.

Conclusion:
The Court set aside the adjudication order dated 15th January 2019 and directed the Respondents to refund the proceeds from the auction of the gold, amounting to Rs. 93,34,783/-, to the Petitioner by 30th June 2019. Failing this, the Respondents would be liable to pay simple interest at 6% per annum on the said sum for the period of delay. The petition was allowed, and the Petitioner was granted the liberty to seek other remedies for any further grievances in accordance with the law.

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