2023 (5) TMI 347 - AT - Customs

Deputy Commissioner's Incompetence in Goods Seizure Decision Remanded for Procedural Adherence

Commissioner of Central Excise - Nashik Versus Rajmal Lakhichand Jewellers

The Tribunal found that the Deputy Commissioner was not competent to decide on the release of seized goods and the refund of monetary proceeds of silver. ... Refund in the case of seizure/ confiscated to be more than the money proceeds of the sale of the seized goods - proper jurisdiction to decide the matter - HELD THAT:- It is settled principle in law that refund claims filed under Section 27 of Customs Act is not limited to the refund of the customs duty but also provides for refund of the amounts due to the claimant for any reason. Refund of sale of the ceased/confiscated goods is one of such refunds provided by Section 27 of Customs Act, 1962. As per Section 27(2), it is only the Assistant Commissioner who could have consider the appeal for refund and decided. Matter remanded back to Commissioner (Appeal) for a finding on grounds raised in the appeal before him including the payment of interest on the amount refunded. Appeal allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether refund of sale proceeds of seized/confiscated goods falls within the scope of 'claim for refund' under Section 27 of the Customs Act, 1962. 2. Whether the Deputy Commissioner who executed an order releasing monetary proceeds was a competent authority to decide the refund claim under Section 27(2) of the Customs Act. 3. Whether principles of natural justice required issuance of a show cause notice and grant of personal hearing before ordering refund/release of money proceeds in place of physical return of seized silver. 4. Whether refund of sale proceeds (instead of returning physical goods) requires adjustment to reflect subsequent market price changes and whether the department is liable for profit or loss arising from price fluctuations. 5. Whether the appellate authority should have decided issues left open by the adjudicating authority, including claim to interest on refunded amount, or whether the matter should be remitted for fresh consideration. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Scope of 'claim for refund' under Section 27: legal framework Legal framework: Section 27 of the Customs Act permits any person claiming refund of any duty or interest 'paid by him' or 'borne by him' to apply for refund to the Assistant Commissioner or Deputy Commissioner; Section 27(2) empowers those officers to determine and order refund. The Tribunal treated refund of sale proceeds of seized/confiscated goods as a species of refund under Section 27. Precedent treatment: The Tribunal recognised settled authority holding that where seized/confiscated goods are sold and physical goods are not available, the claimable amount is the sale proceeds (or market value where appropriate). Decisions relied upon by authorities (earlier Tribunal and High Court decisions) were noted and considered material. Interpretation and reasoning: The Court accepted that refund under Section 27 is not confined to customs duty but extends to amounts due to the claimant for any reason, specifically including refund of sale proceeds of seized/confiscated goods. This interpretation aligns the statutory text (broad 'any amount') with established practice and cited precedents. Ratio vs. Obiter: Ratio - refund of sale proceeds of seized/confiscated goods is within Section 27's scope. Conclusion: Claim for refund of sale proceeds is maintainable under Section 27. Issue 2 - Competence of the Deputy Commissioner to adjudicate the refund (Section 27(2)) Legal framework: Section 27(2) specifies that 'the Assistant Commissioner of Customs or Deputy Commissioner of Customs' may, on receipt of an application, be satisfied and make an order for refund. The core question was whether the specific Deputy Commissioner who passed the order was competent where the matter involved earlier seizure/confiscation and prior adjudication by higher officers. Precedent treatment: While prior orders and judicial decisions on merits/quantum of confiscation and release were recited, the Tribunal focused on statutory competence under Section 27(2) rather than re-deciding substantive confiscation issues. Interpretation and reasoning: The Court examined the impugned order and found that the Deputy Commissioner had sanctioned a refund of Rs.19,26,198/- under Section 27 read with Section 11B of the Central Excise Act, treating the matter as one within his competence. However, the Tribunal concluded that because the issue involved release of seized goods or payment in lieu thereof - matters arising from seizure/adjudication - the specific Deputy Commissioner concerned (who was neither seizing nor adjudicating authority in the original proceeding) was not the competent officer to decide the refund. The statutory text and the scheme of Section 27(2) were applied to determine the competence question, and the impugned findings on competence were held unsustainable. Ratio vs. Obiter: Ratio - where refund relates to release of seized goods or payment in lieu of goods tied to earlier seizure/adjudication, the officer who hears the refund must be the officer competent under the statute; a Deputy Commissioner not vested with adjudicatory competence in the underlying seizure cannot lawfully make the refund order. Conclusion: The Deputy Commissioner who passed the order was not a competent authority under Section 27(2) to decide the present refund; impugned order on that basis cannot be sustained and requires remand. Issue 3 - Principles of natural justice (SCN and personal hearing) Legal framework: Natural justice requires that adverse action be preceded by notice and opportunity of hearing where a party's rights are affected. The factual question was whether failure to issue a show cause notice (SCN) and to grant personal hearing rendered the refund order invalid. Precedent treatment: The impugned and earlier orders referenced departmental practice and prior judicial decisions indicating issuance of SCN is customary where matters are disputed, but that execution of a court order may be carried out without fresh SCN where the position has attained finality in higher courts. Interpretation and reasoning: The Court noted the department's practice and the fact that the Deputy Commissioner was executing a release directed by the High Court, subsequently affirmed by the Supreme Court. Where the relief (release of a quantified portion of seized material) had already been ordered by the High Court and sustained, the executing authority characterized the action as implementation rather than fresh adjudication. Nevertheless, because the competence of the adjudicating officer under Section 27(2) was held determinative, the natural justice issue was not the primary basis for setting aside the impugned order; remand was directed to the Commissioner (Appeal) to examine all grounds, including natural justice and entitlement to interest. Ratio vs. Obiter: Obiter as to practice - where a higher court has directed release, the executing officer may implement that direction without re-issuing an SCN; however, this observation is subject to the competence issue (ratio on competence prevails). Conclusion: Natural justice concerns remain relevant and must be re-examined on remand by the competent appellate authority; the absence of SCN/PH was not finally disposed of given the competence infirmity. Issue 4 - Refund as sale proceeds vs. market value and departmental liability for market fluctuations Legal framework: Where confiscated/seized goods are sold and physical goods are not available, established practice and jurisprudence require refund of sale proceeds (or market value where applicable), not an adjusted amount reflecting current market price years later. Departmental role is to return actual proceeds of disposal, not to speculate or compensate for market movements. Precedent treatment: The impugned order and submissions relied on earlier decisions holding that sale proceeds credited to government account be refunded rather than the present market value, and that where goods are sold, redemption fine or penalty may be adjusted against sale proceeds before disbursement. Interpretation and reasoning: The Court accepted that disposal occurred in 2004 and the department refunded the entire monetary proceeds of that disposal. Price fluctuations after sale are speculative and beyond departmental control; the department is not a trader obliged to account for subsequent market gains or losses. The cited precedents support refund of actual sale proceeds (or deduction of redemption fines from sale proceeds where applicable). Ratio vs. Obiter: Ratio - refund of actual sale proceeds of previously disposed seized goods is appropriate; subsequent market price increases do not give rise to entitlement against the department where sale proceeds were properly returned. Conclusion: Refund of sale proceeds, rather than present market value, was consistent with departmental practice and judicial authority; no basis to treat the department as liable for subsequent price appreciation in the circumstances narrated. Issue 5 - Scope of appellate decision and remand for determination of outstanding issues including interest Legal framework: Appellate authorities must decide issues within their competence and may remit matters where competence or procedural infirmities require fresh consideration. Section 27(2) and the scheme of administrative competence govern who may determine refund claims and attendant relief including interest. Precedent treatment: The Commissioner (Appeals) had earlier allowed the refund claim; the impugned decision set aside that allowance on competence and other grounds; the Tribunal observed that certain questions (e.g., payment of interest) remained open. Interpretation and reasoning: Given the Tribunal's conclusion that the Deputy Commissioner lacked competence under Section 27(2) to make the refund order, the Tribunal did not itself decide substantive contested issues but remitted the matter to the Commissioner (Appeal) for fresh finding on grounds raised in appeal, including entitlement to interest on the refunded amount. The Tribunal therefore exercised appellate restraint by remitting to the statutory appellate forum to address unresolved factual and legal questions. Ratio vs. Obiter: Ratio - remand to the Commissioner (Appeal) was necessary because the impugned order suffered from a competence defect and associated issues (natural justice, interest) required adjudication by the appropriate authority. Conclusion: Appeal allowed by way of remand; matter returned to Commissioner (Appeal) for fresh determination on all grounds raised, including interest; co-terminative directions given to re-examine competence, procedural fairness, and financial consequences.