2025 (9) TMI 823 - HC - Customs

Detention without show-cause notice breaches natural justice and Section 110; gold chain released duty-free, phones released on duty payment

HC held that detention without issuance of a show-cause notice (SCN) violated principles of natural justice and Section 110 of the Customs Act, 1962; the ... Violation of principles of natural justice - grievance of the Petitioner is that no SCN has been issued till date - Section 110 of the Customs Act, 1962 - HELD THAT:- It has already been held by this Court that the non-appearance for appraisement would not extend the time for issuance of the SCN under Section 110 of the Customs Act, 1962. Once the goods are detained, it is mandatory to issue a SCN and afford a hearing to the Petitioner. The time prescribed under Section 110 of the Customs Act, 1962, is a period of six months and subject to complying with the formalities, a further extension for a period of six months can be taken by the Customs Department for issuing the SCN. In this case, the one year period itself has elapsed, thus no SCN can be issued at this stage. The detention is therefore impermissible. The gold chain shall be released without payment of any customs duty, fine or penalty. Insofar as two iPhones are concerned, let the applicable customs duty be paid by the Petitioner - the allegations made by the Petitioner against the Custom Officials are not gone into the present petition. Petition disposed off. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether non-appearance of a passenger for appraisement of detained goods permits the Customs Department to withhold issuance of a Show Cause Notice (SCN) under Section 110 of the Customs Act, 1962, and thereby extend the statutory period for issuance of an SCN. 2. Whether detention of imported articles for more than the statutory period(s) under Section 110, without issuance of an SCN and an opportunity of hearing, renders continued detention impermissible and mandates release of goods. 3. What reliefs/remedies follow where detained goods have been held beyond the permissible period: (a) release without duty/penalty, (b) release on payment of duty, and (c) waiver or imposition of warehousing charges. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Effect of non-appearance for appraisement on issuance of SCN under Section 110 Legal framework: Section 110 prescribes timelines for issuance of SCN after detention of goods and requires issuance of SCN and affording of hearing once goods are detained. Precedent Treatment: The Court relied on its prior ruling (referenced in the judgment) holding that non-appearance for appraisement cannot be treated as a justification to withhold issuance of an SCN; that precedent is followed. Interpretation and reasoning: The Court reasoned that the statutory obligation to issue an SCN and afford hearing is triggered upon detention and is not contingent upon the detained person presenting for appraisement. Administrative non-cooperation by the passenger does not enlarge or suspend the statutory timeframe under Section 110. Ratio vs. Obiter: Ratio - non-appearance for appraisement does not extend or excuse non-compliance with statutory timelines for issuing an SCN under Section 110. Conclusions: The Customs Department cannot rely on a passenger's absence from appraisement to delay or withhold issuance of an SCN; issuance must follow statutory timelines irrespective of personal attendance. Issue 2 - Permissibility of detention beyond statutory period without SCN and hearing Legal framework: Section 110 sets a primary period of six months for issuance of an SCN after detention, with a possible further extension of six months subject to complying with prescribed formalities; detention beyond the permissible period without issuance of an SCN and hearing is inconsistent with the statutory scheme. Precedent Treatment: The Court applied its earlier pronouncement that the statutory timeline is mandatory and non-compliance cannot be cured by administrative inaction; that treatment is expressly adopted. Interpretation and reasoning: Where the one-year ceiling (initial six months plus permissible six-month extension) has elapsed without issuance of an SCN, further detention of goods is impermissible. The obligation to issue an SCN and afford an opportunity to be heard is mandatory once goods are detained; absence of such action disentitles the authority from continuing detention. Ratio vs. Obiter: Ratio - continued detention after expiry of the statutory period for issuance of an SCN (including permissible extension) without having issued the SCN and afforded hearing is unlawful and requires release of detained goods. Conclusions: Detention is impermissible where the statutory period for issuance of an SCN has expired; Customs must issue SCN within prescribed timeframes or release goods when those timelines are not met. Issue 3 - Reliefs where detention has become impermissible and incidental directions Legal framework: The Court has inherent power to direct release of goods where detention is found unlawful and to modulate ancillary financial consequences (duty, penalty, warehousing charges) in light of statutory purpose and facts. Precedent Treatment: The Court applied its discretion consistent with prior practice of directing release of detained goods when statutory protections are not complied with, distinguishing between types of goods and equitable considerations. Interpretation and reasoning: The Court considered the nature, quantity and contemporaneous value/relevance of goods (a 50 g gold chain and two older model iPhones) and the fact that statutory procedure was not followed. Exercising equitable discretion, the Court ordered differential relief: unconditional release of the gold chain without customs duty, fine or penalty; release of the two iPhones subject to payment of applicable customs duty; waiver of warehousing charges for the gold chain but imposition of warehousing charges for the iPhones computed at rates applicable on the date of detention. The Court also mandated personal appearance to complete necessary formalities and provided contact details for assistance with procedure. Ratio vs. Obiter: Ratio - where detention is unlawful due to lapse of statutory periods, courts may order release and determine whether duties, penalties or warehousing charges should apply based on nature of goods and equities; procedural facilitation (e.g., directing appearance and providing officer contact) is an appropriate ancillary remedy. Obiter - considerations about the 'outdated' nature of specific electronic items influenced discretionary relief but operate as factual context rather than a legal rule of general application. Conclusions: Unlawful detention requires release; court may direct release without duties/penalties in appropriate cases and may impose duty/payment or waived warehousing fees selectively based on the goods' character and equities; administrative facilitation for completion of formalities may be directed. Cross-references and Practical Implications Non-appearance for appraisement and related administrative non-cooperation cannot be used to justify failure to issue an SCN within the statutory period under Section 110 - see Issue 1 cross-referencing Issue 2. Where the statutory timeline lapses (Issue 2), the consequence is mandatory release subject to court's equitable directions (Issue 3).