2025 (5) TMI 2026 - HC - Customs

Show cause notice under Section 110 Customs Act must be issued within six months of seizure

Sunny Manoharlal Sharma and Raju Gandabhai Desai Versus Commissioner Of Customs New Delhi

Delhi HC held that a show cause notice under Section 110 of the Customs Act must be issued within six months of seizure. The court found it anomalous that ... Seeking release of gold jewellery - SCN issued beyond the permissible period of limitation under Section 110 (2) - Reconsideration Instruction No. 27/2021-Customs - HELD THAT:- A show cause notice under Section 110 of the Customs Act, 1962, can be issued within six months of seizure of goods. Thus, from a combined reading of Instruction No. 27/2021-Customs and Section 110 of the Customs Act, 1962, it can be inferred that the disposal of the gold can happen even before issuance of the show cause notice. This seems quite anomalous and incongruous. Accordingly, let the CBIC also consider whether the Instruction No. 27/2021-Customs requires reconsideration. The show cause notice proceedings shall be concluded in accordance with law and an order shall be passed within a period of three months. The present petition is disposed of in said terms. Pending applications, if any, are also disposed of. The core legal questions considered by the Court in this matter include:1. Whether the issuance of the Show Cause Notice (SCN) dated 13th December 2024 was within the permissible period under Section 110(2) of the Customs Act, 1962, given that the goods were detained on 20th June 2024.2. Whether the Customs Department complied with procedural requirements, including prior intimation to the petitioners before disposal of the detained gold jewellery.3. Whether the disposal of detained gold jewellery can lawfully take place prior to the issuance and conclusion of show cause notice proceedings.4. The applicability and interpretation of Instruction No. 27/2021-Customs dated 3rd December 2021 regarding the disposal timeline of seized/confiscated gold, especially in light of the statutory provisions under the Customs Act.Issue-wise detailed analysis:1. Timeliness of the Show Cause Notice under Section 110(2) of the Customs Act, 1962The relevant legal framework is Section 110(2) of the Customs Act, which prescribes a limitation period within which a show cause notice must be issued after detention or seizure of goods. The petitioners contended that the SCN issued on 13th December 2024 was beyond the permissible period since the goods were detained on 20th June 2024.The Court examined the timeline and noted that the SCN was indeed issued nearly six months after detention. However, the Customs Department submitted that the goods were assessed for disposal on 22nd August 2024, and the show cause notice was issued subsequently on 13th December 2024. The Department also produced correspondence indicating that pre-trial disposal certification occurred on 23rd August 2024, and the SCN issuance was part of ongoing proceedings.The Court observed that while the issuance of the SCN was close to the six-month period, it was not conclusively established that it was beyond the statutory limitation. The Court therefore allowed the show cause notice proceedings to continue, emphasizing that the SCN must be adjudicated within three months from the date of the order.2. Compliance with procedural requirements for intimation prior to disposalThe petitioners asserted that no intimation was given before the gold jewellery was put up for disposal. The Court noted the absence of any record or evidence indicating prior notice to the petitioners before disposal actions.In response to Court directions, the Customs Department filed a counter affidavit stating that intimation letters dated 21st August 2024 were sent to the petitioners regarding disposal. It was clarified that the goods belonging to one petitioner had already been disposed of, whereas those belonging to the other petitioner had not been disposed of yet.The Court found that the Customs Department had not maintained adequate records or communicated effectively with the petitioners, especially in relation to the disposal of goods. The Court directed that the detained goods not yet disposed of shall remain intact during the pendency of the proceedings, thereby safeguarding the petitioners' interests.3. Lawfulness of disposal of detained gold prior to issuance or conclusion of show cause notice proceedingsThe Court analyzed Instruction No. 27/2021-Customs, which mandates disposal of seized/confiscated gold within three months of seizure. The Instruction permits disposal even before the issuance of a show cause notice under Section 110 of the Customs Act, which allows issuance within six months of seizure.The Court observed an anomaly and incongruity in this regulatory framework, as disposal prior to initiation or conclusion of SCN proceedings could prejudice the rights of the detained goods' owners, especially where the goods are jewellery of sentimental value.The Court opined that disposal should occur only after confiscation is confirmed and show cause proceedings are concluded. It recommended that the Central Board of Indirect Taxes and Customs (CBIC) reconsider Instruction No. 27/2021 to harmonize it with statutory provisions and safeguard procedural fairness.4. Application of law to facts and treatment of competing argumentsThe petitioners argued for release of the detained gold jewellery on grounds of procedural lapses and delay in issuance of SCN. The Customs Department relied on internal procedures, disposal certifications, and statutory provisions to justify their actions.The Court balanced these competing arguments by scrutinizing the timeline, procedural compliance, and statutory scheme. It held that while the Customs Department had some procedural basis for disposal and SCN issuance, the lack of clear communication and premature disposal of goods before conclusion of proceedings was impermissible.The Court ordered that where goods had not been disposed of, they must be preserved during the pendency of the show cause proceedings, ensuring that the petitioners' rights are protected pending final adjudication.Significant holdings and core principles established include:'The show cause notice proceedings shall be concluded in accordance with law and an order shall be passed within a period of three months.''The Customs Department ought to consider that the disposal happens only of confiscated gold and not when the show cause notice proceedings qua the detained gold are pending.''From a combined reading of Instruction No. 27/2021-Customs and Section 110 of the Customs Act, 1962, it can be inferred that the disposal of the gold can happen even before issuance of the show cause notice. This seems quite anomalous and incongruous.'These pronouncements underscore the principle that procedural fairness and statutory compliance must govern the detention and disposal of valuable goods such as gold jewellery, particularly where such goods may have sentimental value to travellers.In conclusion, the Court allowed the continuation of show cause notice proceedings, restrained disposal of undispensed goods during pendency, and directed reconsideration of existing departmental instructions to align with statutory safeguards. The petition was disposed of accordingly with directions for communication to relevant authorities for compliance.