2023 (11) TMI 21 - AT - Customs

Tribunal Orders Release of Seized Goods with Bond and Bank Guarantee; Approves Re-Export for Appellant's Favorable Outcome.

M/s. Ocean Sky Impex Private Limited Versus Commissioner of Customs

M/s. Ocean Sky Impex Private Limited Versus Commissioner of Customs - 2024 (387) E.L.T. 76 (Tri. - Chennai) 1. ISSUES PRESENTED AND CONSIDERED 1. Whether seized imported goods can be provisionally released for re-export where no notice under Section 124(a) of the Customs Act, 1962 was issued to the person from whose possession the goods were seized. 2. Whether the pendency of an investigation (by DRI) and the claim that investigation is at a 'crucial stage' justifies refusal of provisional release for re-export when the importer offers security and has already deposited an amount claimed as anti-dumping duty. 3. Whether alleged mis-declaration of imported goods and classification disputes (including potential levy of anti-dumping duty) justify continued seizure/warehousing rather than provisional release for re-export where the importer asserts bona fide mistake and supplier agrees to accept return. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Jurisdiction and validity of seizure where no notice under Section 124(a) was issued Legal framework: Section 124(a) (procedure for seizure) and Section 110(2) (release of seized goods) of the Customs Act, 1962; Section 49 (warehousing) as applicable to possession and storage of seized goods. Precedent treatment: The impugned order and first appellate order did not explicitly counter the appellant's legal argument regarding absence of notice under Section 124(a); no binding precedent was relied upon or overruled in the impugned judgment. Interpretation and reasoning: The Tribunal accepted the appellant's contention that no notice under Section 124(a) had been issued to the person from whose possession the goods were seized, raising a question of procedural irregularity and potential absence of jurisdiction for seizure in the form pleaded. The Court observed that Section 110(2) prescribes conditions for release when no such notice is issued, and the appellant sought relief under that provision. Ratio vs. Obiter: Ratio - where seizure procedure under Section 124(a) is not followed, the legal basis for holding the goods can be undermined and Section 110(2) becomes applicable to consider conditional release. Obiter - the judgment does not lay down a broad rule invalidating every seizure lacking a Section 124(a) notice beyond the facts of the case. Conclusion: The absence of a Section 124(a) notice was a material factor supporting the appellant's entitlement to seek provisional release under Section 110(2); this procedural defect weighed in favor of release subject to security. Issue 2 - Effect of ongoing investigation and 'crucial stage' argument against provisional release Legal framework: Administrative power to retain goods for investigation balanced against principles permitting provisional release where Revenue's interest is adequately protected (including by deposit, bond or bank guarantee); Section 110(2) considerations for release. Precedent treatment: The adjudicating authority and first appellate authority relied on the general proposition that an ongoing investigation could justify withholding release; however, they did not address specific legal counter-arguments or reconcile the protection of Revenue against importer's security deposited. Interpretation and reasoning: The Tribunal evaluated whether the Department's generalized assertion that the investigation was at a crucial stage justified refusal. It noted the undisputed deposit of a substantial sum towards anti-dumping duty and that the goods were not sought for home-consumption clearance but for re-export, thereby reducing the risk of loss to Revenue. The Tribunal further considered the practical prejudice to the importer (warehousing charges, demurrage, and risk of supplier refusing acceptance) and found these factors weighed against the blanket refusal. Ratio vs. Obiter: Ratio - an ongoing investigation, without specific articulated reasons why the physical retention of seized goods is necessary for that investigation, does not automatically outweigh an importer's offer of adequate security and bona fide re-export plan; authorities must specifically justify continued detention. Obiter - suggestions about the precise form or quantum of security (bond and bank guarantee) as sufficient are contextual to the case facts. Conclusion: The 'crucial stage' assertion by the Revenue, unsupported by particularized reasons demonstrating necessity of continued detention, did not justify denial of provisional release where adequate security and deposits were available and the goods were intended for re-export. Issue 3 - Mis-declaration/classification dispute and anti-dumping duty implications as justification for continued seizure Legal framework: Customs classification and anti-dumping duty determination processes; revenue protection through deposits; distinction between clearance for home consumption and release for re-export. Precedent treatment: No specific precedents were cited by the authorities to sustain continued seizure on the basis of mis-declaration alone where compensatory measures (deposit) have been made. Interpretation and reasoning: The Tribunal observed that the Textiles Committee's report altered the classification proposed by the importer, and the DRI suspected ADD applicability, prompting demand and deposit. Yet because the importer sought only provisional release for re-export (not clearance for consumption), the opportunity for re-valuation or further fiscal prejudice to Revenue was limited. The Tribunal emphasized that the deposit of Rs.2.37 crores served to protect Revenue's fiscal interest and that the importer's demonstrated bona fides (supplier acceptance of wrong shipment and agreement to take back) further diminished the justification for continued seizure. Ratio vs. Obiter: Ratio - alleged mis-declaration and classification disputes do not by themselves justify continued seizure when the importer offers adequate protection to revenue, goods are sought for re-export, and there is evidence of bona fide error with supplier acceptance; authorities must point to a concrete need for goods to remain detained for evidentiary or investigatory necessity. Obiter - commentary on the non-existence of re-valuation scope when goods are for re-export is fact-specific. Conclusion: Classification disagreement and suspected ADD liability did not justify refusal of provisional release for re-export given the deposit, lack of necessity for the goods in ongoing investigation, and importer's bona fide conduct. Remedial relief and procedural direction Legal framework: Powers of the Tribunal to set aside administrative orders and direct provisional release subject to conditions (bond, bank guarantee) to protect Revenue interests. Interpretation and reasoning: Balancing Revenue protection against importer prejudice, the Tribunal found release appropriate subject to suitable securities. The authorities below had not adequately addressed the legal and factual submissions opposing detention and had failed to justify non-release in a manner consistent with statutory safeguards. Ratio vs. Obiter: Ratio - where the conditions for provisional release are met (adequate deposit/security, no prohibition on goods, re-export intent, bona fide circumstances), the adjudicating authority should grant provisional release upon taking appropriate bond and bank guarantee; failure to do so without specific justification warrants setting aside the refusal. Obiter - the exact terms of securities are left to the adjudicating authority to fix consistent with the Tribunal's direction. Conclusion: The impugned order refusing provisional release was set aside; the adjudicating authority was directed to permit provisional release forthwith upon taking suitable bond and bank guarantee to safeguard Revenue, thereby resolving the appeal in favor of release on conditional terms.