2023 (9) TMI 773 - HC - Customs

Gold seizure on import: procedural noncompliance with Customs sale and notice requirements leads to valuation and payment to owner.

Challenge to seizure of a gold chain on import contends statutory procedures under the Customs Act were not followed; sale or disposal under section ... Return of seized goods on lapse of six months - mandatory issuance of show cause notice before confiscation - seizure under Section 110 and procedural safeguards - disposal of seized goods without compliance with statutory procedure - valuation of disposed seized gold based on tariff value on date of transfer - writ of mandamus for restitution/compensationReturn of seized goods on lapse of six months - mandatory issuance of show cause notice before confiscation - seizure under Section 110 and procedural safeguards - disposal of seized goods without compliance with statutory procedure - The seizure/detention of the petitioner's gold chain without issuance of a show cause notice under Section 124(a) within the statutory period rendered continued custody and subsequent disposal unlawful, entitling the petitioner to relief. - HELD THAT: - Section 110(2) provides that goods seized under Section 110(1) must be returned to the person from whose possession they were seized if no notice under Clause (a) of Section 124 is given within six months, subject to a possible extension by the Commissioner for a further period not exceeding six months. The record in this case shows detention/seizure on 18 October 2017 and no notice under Section 124(a) having been issued within the prescribed period; no extension was granted. The respondents also failed to form or record any opinion that the gold was liable to confiscation and did not issue any show cause notice. Disposal of the gold by depositing it at the Government Mint without adhering to the mandatory notice and opportunity provisions of Section 124 and the procedural safeguards in Section 110 was therefore arbitrary and contrary to law. The Court relied on established authority holding that omission to issue the requisite notice within six months requires return (or appropriate remedy) to the person from whom the goods were seized, and found the respondents' conduct unsustainable. [Paras 7, 8, 9]The detention/seizure and disposal of the gold chain without issuance of the mandatory show cause notice within the statutory period was unlawful and entitled the petitioner to remedial relief.Valuation of disposed seized gold based on tariff value on date of transfer - compensation in lieu of disposed seized goods - writ of mandamus for restitution/compensation - Because the gold ornament had been deposited/disposed of, the petitioner was entitled to a monetary assessment and payment equivalent to the value of the gold as on the date of transfer to the Mint, to be assessed in accordance with prescribed parameters. - HELD THAT: - The Court noted absence of specific pre-existing guidelines for valuation of gold ornaments at the time of disposal but observed subsequent notifications and guidelines which provide for calculation of refund where seized gold has been disposed of: calculation based on the tariff value of gold on the date of transfer to SPMCIL where seizure occurred in a Customs area. Applying that principle to the facts (the chain having been deposited on 26 June 2018), the Court directed the respondent to assess/evaluate the value of the gold item as on 26 June 2018 using tariff value and RBI-prescribed parameters and to pay an amount equivalent thereto to the petitioner. The Court fixed a short time for completion of the exercise and provided for token costs if the direction was not complied with within the stipulated period. [Paras 11, 12, 13]Respondent to assess the value of the gold as on 26 June 2018 based on tariff value/RBI parameters and pay the equivalent sum to the petitioner within three weeks, failing which token costs will be payable.Final Conclusion: Writ petition allowed; seizure and disposal of the petitioner's gold chain without issuance of the mandatory show cause notice within the statutory period held unlawful; respondent directed to assess and pay the value of the gold as on 26 June 2018 in accordance with tariff/RBI parameters within three weeks, with token costs if delayed. Issues Involved:1. Legality of the seizure/detention of the petitioner's gold chain.2. Compliance with the procedural requirements under the Customs Act.3. Entitlement of the petitioner to the return of the seized gold chain.4. Relief to be granted to the petitioner.Summary:1. Legality of the Seizure/Detention of the Petitioner's Gold Chain:The petitioner, an Indian passport holder, arrived from Malaysia at IGI Airport on 18 October 2017 and was intercepted by Customs Officers. His gold chain, weighing about 100 grams, was seized/detained on the assumption that it was imported from Malaysia. The petitioner claimed it was his personal ornament worn before leaving for Malaysia. The respondent argued that the gold chain was concealed in the baggage and no declaration was made by the petitioner before leaving India.2. Compliance with Procedural Requirements under the Customs Act:The petitioner contended that no Show Cause Notice under Section 124(a) of the Customs Act was issued within six months of the seizure, as mandated by Section 110(2) of the Act. The respondent admitted that the gold chain was inventorized and deposited with the Government Mint at Mumbai on 26 June 2018 without issuing any notice to the petitioner. The Court noted that the respondent failed to follow the prescribed procedure under the Act, including the issuance of a notice under Section 124(a).3. Entitlement of the Petitioner to the Return of the Seized Gold Chain:The Court referred to the provisions of Section 110 and Section 124 of the Act, emphasizing that goods seized must be returned if no notice is issued within six months, extendable to a maximum of one year. The Court found that the respondent's plea that the gold chain was detained at the petitioner's request was unconvincing and noted that there is no provision for 'detention' of goods instead of 'seizure'. The Court cited precedents, including the Supreme Court's decision in Chaganlal Gainmull v. Collector of Central Excise, which held that failure to issue a Show Cause Notice within the stipulated period entitles the person to the return of the seized goods.4. Relief to be Granted to the Petitioner:The Court directed the respondent to assess/evaluate the value of the gold item as on 26 June 2018 based on the tariff value of gold applicable on that day, as per prescribed RBI parameters, and pay a sum equivalent thereto to the petitioner. The Court mandated that this exercise be conducted within three weeks, failing which the respondent would be liable to pay token costs of Rs. 25,000/-.Conclusion:The Writ Petition was allowed, and the respondent was directed to compensate the petitioner based on the valuation of the gold chain as per the specified guidelines. The Court emphasized adherence to procedural requirements under the Customs Act and upheld the petitioner's entitlement to relief due to the respondent's failure to issue the necessary Show Cause Notice.