Gold bar detention illegal without timely SCN under Section 110(2) Customs Act, ordered release to passenger with conditions

HC held that Customs could not continue to detain a 117-gram gold bar without issuing a SCN within the statutory period under Section 110 of the Customs Act, 1962. Relying on the SC decision in Jatin Ahuja, the court reiterated that the time limit in Section 110(2) governs detention of goods and is distinct from Section 124, and that failure to issue a SCN within this period renders continued detention illegal. Consequently, HC directed release of the detained gold bar to the passenger, subject to fulfilment of conditions imposed by the court, and disposed of the petition.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether continued detention of a seized gold bar is lawful when no notice under Section 124(a) of the Customs Act, 1962 has been issued within the period prescribed under Section 110(2), and no order extending such period has been passed.

1.2 Consequential relief and conditions, if any, governing release of the detained gold bar upon failure to issue the statutory notice within time.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of continued detention of seized gold bar in absence of timely notice under Section 124(a)

Legal framework

2.1 The Court reproduced Section 110(2) of the Customs Act, 1962, which mandates that where goods are seized under Section 110(1) and no notice in respect thereof is given under clause (a) of Section 124 within six months of the seizure, the goods shall be returned to the person from whose possession they were seized. The first proviso empowers the Principal Commissioner or Commissioner of Customs, for reasons to be recorded in writing, to extend such period by a further period not exceeding six months and to inform the person from whom the goods were seized before expiry of the original period. The second proviso, relating to provisional release under Section 110A, provides that in such cases the specified period of six months shall not apply.

2.2 The Court relied on the decision of the Supreme Court in Union of India & Anr. v. Jatin Ahuja, which held that: (i) the only power to extend the time period is that contained in the first proviso to Section 110(2); (ii) provisional release under Section 110A does not curtail or negate the mandatory consequence under Section 110(2) for non-issuance of notice within the prescribed period; (iii) in the absence of notice within six months or within an extended period duly ordered and communicated, the goods shall be returned to the person from whose possession they were seized.

Interpretation and reasoning

2.3 It was recorded that the seized gold bar was detained on 7 July 2023 and that no show cause notice under Section 110 read with Section 124(a) had been issued to the person concerned. Counsel for the customs authorities also confirmed that no such notice had been issued.

2.4 The Court applied Section 110(2) and the ratio of the Supreme Court in Jatin Ahuja to hold that continued detention, in the absence of a notice within the statutory period or an order of extension in terms of the first proviso, is contrary to law. The Court adopted the Supreme Court's interpretation that Section 110(2) prescribes the time limit and legal consequence for non-issuance of notice, and that this operates independently of the power of provisional release under Section 110A.

2.5 The Court followed the Supreme Court's elucidation that the authority must not only extend the period by a reasoned order but also inform the person from whom the goods were seized before expiry of the original six-month period, failing which the statutory consequence of return of goods must follow.

Conclusions

2.6 As no notice under Section 124(a) was issued within the prescribed six months from seizure, and there was no indication of any valid extension of such period by the competent authority in accordance with the first proviso to Section 110(2), the continued detention of the gold bar was held to be unlawful.

2.7 The Court concluded that, in terms of Section 110(2) as interpreted by the Supreme Court in Jatin Ahuja, the seized gold bar was liable to be released to the person from whose possession it was seized.

Issue 2: Relief and conditions governing release of the detained gold bar

Interpretation and reasoning

2.8 Having found the continued detention unlawful, the Court directed release of the gold bar to the concerned person, but imposed conditions to regulate such release in alignment with the statutory framework relating to customs duty and incidental charges, while ensuring that no punitive consequence was imposed in the absence of a valid and timely show cause notice.

2.9 The Court took into account that the subject item was a gold bar imported by a passenger and that, notwithstanding the failure to issue a notice within time leading to release of the goods, the liability to pay applicable customs duty and warehousing charges could still be enforced as part of the conditions for release, without resort to redemption fine or penalty.

Conclusions

2.10 The Court ordered that the gold bar shall be released to the concerned person subject to the following terms:

* Applicable customs duty shall be paid.

* Warehousing charges shall be paid.

* If physical appearance is not made, the person's credentials shall be verified upon virtual appearance before the customs authorities.

* No redemption fine or penalty shall be chargeable.

2.11 Directions were issued for appearance before the customs authorities on a specified date and for facilitation by a designated nodal officer to ensure compliance with the order of release.

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