2025 (4) TMI 1737 - HC - Customs

Seizure of dried areca nuts and transport vehicle based on FSSAI report-seizure memos quashed; show-cause proceedings left open

The dominant issue was the legality of seizure memos for dried areca nuts and the vehicle, alleged to involve violations under the Customs Act, 1962 read ... Seizure of 23975 kgs of Dried Areca Nuts contained in 350 Bags along with Tata Truck - Seized Betel Nuts were found to be sub standard and unsafe as per FSSAI Report - Seized Betel Nuts found to be sub standard and unsafe as per FSSAI Report - mis-application of provisions of Food Safety and Standards Act, 2006 - alleged violation of Section 7, 11, 46 and 47 of Customs Act, 1962 read with Section 3 (2) of the Foreign Trade (Development and Regulation) Act, 1992 - HELD THAT:- Since on facts, there is no dispute that the seizure memos in these two writ applications have been drawn in identical manner in which the earlier seizure memos were drawn by the Department which stood quashed, this Court is of the considered opinion that the legal position as enunciated in the judgment of this Court in M/s Ashoke Das [2025 (2) TMI 1123 - PATNA HIGH COURT] would govern the present case as well. This Court has been informed that notice to show cause has been served upon the petitioner - it is refrained from taking any view on the issue of issuance of the show cause notice. The petitioners, if so advised, may submit their replies to the show cause notice whereafter the Adjudicating Officer shall proceed to pass appropriate order under the provisions of the Act of 1962. All questions with regard to issuance of the show cause notice and impact of quashing of seizure memos shall remain open. Application allowed. 1. ISSUES PRESENTED AND CONSIDERED (1) Whether the seizure of dried areca nuts under Section 110 of the Customs Act, 1962 was vitiated for non-compliance with the requirement that the Proper Officer must record 'reasons to believe' that the goods are liable to confiscation in the seizure memo itself. (2) Whether the Department can rely on the panchnama or other documents prepared after seizure to supplement or cure the absence of 'reasons to believe' in the seizure memo. (3) Whether the legal position laid down in earlier decisions of the Court, particularly regarding invalid seizure memos and the effect of the Supreme Court's order in Om Sai Trading Company, governs the present case. (4) What is the effect of quashing the seizure memos on (a) the subsisting show cause notices and (b) the Department's power to continue investigation and adjudication under the Customs Act, 1962. 2. ISSUE-WISE DETAILED ANALYSIS Issue (1): Validity of seizure memos in absence of recorded 'reasons to believe' Legal framework (5) The Court proceeds on the basis of Section 110(1) of the Customs Act, 1962, which mandates that before seizing goods, the Proper Officer must form and act upon 'reason to believe' that such goods are liable to confiscation and that this must be reflected in the seizure memo prepared under that provision. (6) The Court also refers to Section 110(1-B), which makes it clear that preparation of further documentation such as inventory, photographs or samples occurs after seizure, thereby affirming the sequencing that seizure (based on reasons to believe) precedes subsequent procedural steps. Interpretation and reasoning (7) The seizure memo in one case records the goods as of 'foreign origin' and in the other as of 'third country origin', but the Court finds that neither memo specifies which foreign country is involved nor discloses any factual basis for such belief. (8) The seizure memos merely cite alleged violations of specified sections of the Customs Act, 1962 and the Foreign Trade (Development and Regulation) Act, 1992, without stating any material particulars or the minimal factual grounds constituting 'reasons to believe' that the goods were liable to confiscation. (9) The Court notes that the Department does not dispute that the seizure memos in the present cases are drawn in an identical manner to those earlier considered and quashed in the decision in M/s Ashoke Das and that the 'reasons for seizure' entries are identically worded. (10) Relying on the reasoning expressly adopted from the earlier decision in M/s Ashoke Das, the Court reiterates that mere mention of statutory provisions in a seizure memo, without material information disclosing the grounds of belief, does not satisfy the mandate of Section 110(1). (11) The Court also adopts the view of co-ordinate Benches in Assam Supari Traders and Krishna Kali Traders, as earlier followed in M/s Ashoke Das, that the Seizing Officer cannot keep the reasons only in his mind; at least minimal reasons must be disclosed in the seizure memo itself. Conclusions (12) The Court concludes that the Seizing Officer in the present cases has failed to comply with Section 110(1) of the Customs Act, 1962, as the seizure memos do not record the 'reasons to believe' that the goods were liable to confiscation. (13) Consequently, the seizure memos in both writ petitions (Annexure P/4 and Annexure P/6) are held to be legally unsustainable and are quashed. Issue (2): Whether panchnama can be read into or cure defects in the seizure memo Legal framework (14) The Court considers departmental instructions issued in light of a prior judgment which direct that, in addition to a panchnama, the Proper Officer must pass an appropriate seizure order or memo clearly mentioning 'reasons to believe'. Interpretation and reasoning (15) The Department argued that the panchnama, prepared by the same Proper Officer, should be read into the seizure memo to provide the missing reasons. (16) The Court calls upon the Department to clarify the sequence of events and records the ASG's categorical submission that the panchnama is prepared only after the seizure; therefore, seizure is the first step and panchnama follows. (17) On this admitted position, the Court reasons that 'reasons to believe' must necessarily exist and be recorded at the time of seizure and must be evident from the seizure memo drawn under Section 110(1). A post-seizure document like a panchnama cannot retrospectively supply or substitute those reasons. (18) The Court expressly affirms and adopts the co-ordinate Bench's conclusion in Krishna Kali Traders, as reiterated in M/s Ashoke Das, that the panchnama cannot be read into the seizure memo and that both are distinct documents serving different purposes. Conclusions (19) The Court holds that the panchnama, prepared after seizure, cannot cure the statutory defect of non-recording of 'reasons to believe' in the seizure memo and cannot be read into or treated as part of the seizure memo. (20) The Department's reliance on the panchnama to justify the seizure is rejected. Issue (3): Applicability of earlier decisions and governing legal position Interpretation and reasoning (21) The Court notes that the factual pattern and the format and content of the seizure memos are identical to those in M/s Ashoke Das, where such memos were examined and quashed on the same legal grounds. (22) The Court refers to its previous detailed discussion in M/s Ashoke Das of the relevant case law, departmental instructions and co-ordinate Bench decisions, and it adopts the legal position crystallised there, particularly paras 42-43, concerning the necessity to record reasons to believe in the seizure memo. (23) The Court further notes that the co-ordinate Bench judgments in Assam Supari Traders and Krishna Kali Traders have attained finality and agrees with their ratio that mere citation of statutory provisions does not suffice as 'reasons to believe'. (24) The Court also relies on the view earlier taken regarding the order of the Supreme Court in Om Sai Trading Company and analogous matters, where the Supreme Court, after granting leave, declined to interfere with quashing of seizure memos but clarified that investigation and proceedings under the Customs Act could still continue. Conclusions (25) The Court holds that the legal position articulated in M/s Ashoke Das, including the effect of the Supreme Court's order in Om Sai Trading Company, squarely governs the present matters. (26) On this basis, the seizure memos are quashed, while the possibility of continued investigation and adjudication under the Customs Act is preserved. Issue (4): Effect of quashing seizure memos on show cause notices and further proceedings Interpretation and reasoning (27) The Court is informed that show cause notices have already been issued to the petitioners pursuant to departmental proceedings. (28) Relying on the Supreme Court's clarification, as already understood and applied in M/s Ashoke Das, the Court observes that quashing of a seizure memo does not preclude the authorities from investigating or proceeding further in accordance with law under the Customs Act, 1962. (29) The Court therefore consciously refrains from adjudicating upon the validity or effect of the show cause notices in these writ petitions, explicitly leaving those questions open. Conclusions (30) The Court clarifies that, notwithstanding the quashing of the seizure memos, the Department is not barred from continuing investigation and adjudication under the Customs Act, 1962. (31) The petitioners are permitted, if so advised, to file replies to the show cause notices, and the Adjudicating Authority is directed to proceed and pass appropriate orders in accordance with law. (32) All questions regarding the legality of the show cause notices and the legal impact, if any, of the quashing of the seizure memos on such notices and subsequent proceedings are kept expressly open.