2025 (11) TMI 539 - AT - Customs

Provisional release granted for seized imported goods under bond pending adjudication due to perishability and sole claimant

CESTAT (Bangalore) allowed provisional release of the seized imported goods under a bond for their value pending adjudication, noting no other claimant ... Application for release of seized goods imported rejected - inadvertent data error that had occurred in the consignment shipped - denial of title of the goods lacking requisite certification/licenses - goods illegally detained and a period of over one year has passed - HELD THAT:- Since there is no other claimant for these goods and M/s. Card2India have disowned these goods stating that they do not belong to them and M/s. ATM retail has claimed ownership, in the facts and circumstances of the case the claim of M/s. ATM retail could be considered. Since the seized goods are lying in the warehouse for a considerable time and most of them have a shelf life, their prolonged storage in the warehouse would result in depreciation of their value and lose their functional utility. Therefore, pending the ascertainment of the ownership of the goods seized goods it is felt that the goods can be allowed provisional release under a bond for the amount equivalent to the value of the goods pending adjudication of the issue by the competent authority as these goods are also covered in the notice dated 15.02.2025 issued to M/s. Cart2India. It is found that M/s. Cart2India have been issued a Show Cause Notice No. 1069/2024-25 dated 15.02.2025 with regard to the goods imported by Bill of Entry 7566789 dated 28.08.2023 wherein M/s. Cart2India have contended that the goods were wrongly shipped and requested for reexport of the same which was denied by the customs. The appeal filed by M/s. Cart2India wherein they have requested for the release of the goods imported by Bill of Entry No. 7566789 dated 28.08.2023 and the other reliefs as per their prayer need not be examined by this Tribunal at this stage since a detailed show cause notice stating all the charges have been issued to the appellant vide Show Cause Notice No. 1069/2024-25 dated 15.02.2025. Hence, the Appeal No. C/20112/2025 filed by M/s. Cart2India is infructuous hence is disposed, accordingly. ISSUES PRESENTED AND CONSIDERED 1. Whether the detention/seizure of imported goods and their continued withholding without release violated the statutory procedure under Section 110 of the Customs Act and related provisions. 2. Whether the goods covered by a contested bill of entry that the importer sought to re-export could be provisionally released or ordered re-exported in light of alleged regulatory non-compliances and discrepancies in description. 3. Whether goods seized in a warehouse and claimed by a third party (not the importer on the bill of entry) can be provisionally released pending adjudication, and on what terms, when those goods are also the subject of a show-cause notice to the importer. 4. The legal effect of issuance of show-cause notices by Customs (including valuation-related notice invoking related-party rules) on the maintainability of an appeal against refusal to release goods, and whether an appeal becomes infructuous once a detailed show-cause notice is issued. 5. The conditions and scope for provisional release of seized goods that require statutory/regulatory licences (BIS, WPC, EPR, battery management, etc.), including whether release can be ordered subject to production of licences and execution of bonds. 6. The obligation of the adjudicating authority to expeditiously adjudicate show-cause notices and to afford parties an opportunity of hearing before final orders are passed. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legality of detention/seizure and compliance with Section 110 Legal framework: Section 110 (and related seizure provisions) prescribes procedure for seizure, custody and release of seized goods; Section 108 provides for recording statements. Officers must follow prescribed mahazar/panchnama and statutory steps for detention and seizure. Precedent treatment: No binding judicial precedents were cited or relied upon by the Tribunal in the judgment; the Court proceeded on statutory text and facts. Interpretation and reasoning: The Tribunal examined factual chronology - assessment and OOC, subsequent withholding, mahazar seizure and recording of statement under Section 108 - and the communications exchanged. The Tribunal found that a detailed show-cause notice dealing with substantive charges had later been issued, and therefore the appeal against refusal to release goods need not be decided at the interlocutory stage. The Tribunal did not hold the initial seizure per se to be illegal on procedural grounds in the circumstances; instead it treated the matter as pending substantive adjudication under the Act. Ratio vs. Obiter: Ratio - where a detailed show-cause notice has been issued addressing the relevant charges, an interlocutory appeal against refusal to release may be rendered infructuous and is not required to be separately decided; the existence of a proper show-cause process addresses procedural propriety concerns. Obiter - observations on the timing and length of detention (section 110(2) related concerns) were made in context but not as a standalone declaration of illegality. Conclusion: The Tribunal declined to set aside the refusal to release in the appeal challenging seizure when a comprehensive show-cause notice had been issued; the appeal was held to be infructuous and disposed for that reason, without a separate finding that the original seizure procedure was unlawful. Issue 2 - Re-export request and refusal where alleged regulatory non-compliances exist Legal framework: Customs controls imports and may prohibit release where goods contravene customs or allied Acts or lack mandatory regulatory licences (BIS, WPC, EPR, battery waste authorisations etc.); re-export may be permitted if goods are shown not to be contraband and proper documentation is produced. Precedent treatment: None cited; Tribunal applied statutory and regulatory requirements. Interpretation and reasoning: The Tribunal noted that the Department had alleged mismatches in description and absence of regulatory certifications. The importer sought re-export on account of supplier error. However, by the time of the Tribunal's hearing a detailed show-cause notice covering the goods had been issued. Given the pendency of that statutory adjudication, the Tribunal refrained from deciding the re-export request on merits and treated the appeal as infructuous. Ratio vs. Obiter: Ratio - where regulatory non-compliance allegations form the gravamen of detailed proceedings under a show-cause notice, an appellate tribunal may defer determination of re-export relief until adjudication of the show-cause notice. Obiter - remarks about supplier mistake and its evidential weight were factual observations not elevated to binding principle. Conclusion: Request for re-export was not granted by the Tribunal at interlocutory stage because substantive adjudication via show-cause notice was pending; the appeal challenging refusal to release on re-export grounds was disposed as infructuous. Issue 3 - Third-party warehouse claimants and provisional release when goods are covered by a show-cause notice to the importer Legal framework: Customs may provisionally release seized goods subject to bond/security where ownership or compliance issues are to be adjudicated; goods may be released to claimants if reasonable correlation between goods and documents is established, subject to conditions and any statutory licences where applicable. Precedent treatment: Not cited. Interpretation and reasoning: The Tribunal evaluated documentary reconciliation undertaken by SIIB and the Addl. Commissioner's report. It categorized the seized warehouse goods into (A) units with one-to-one correlation to import documents, (B) units requiring regulatory licences, (C) domestically purchased units, and (D) samples (which claimant did not press for). The Tribunal reasoned that (A) and (C) could be provisionally released against bond for value pending adjudication, and (B) could be provisionally released subject to production of requisite licences/permissions and bond, because prolonged storage would cause depreciation and loss of utility (shelf-life concern), and because no other claimant had come forward and original importer had disowned those specific units. The Tribunal emphasized that the goods were also covered in the show-cause notice issued to the importer, making provisional release on bond appropriate pending final adjudication. Ratio vs. Obiter: Ratio - where claimant establishes reasonable one-to-one correlation between seized goods and import documents, and no rival claimant exists, provisional release against bond may be ordered even when goods are also subject to a show-cause notice to the importer; goods requiring licences may be released subject to production of licences and bond. Obiter - policy reasoning about shelf-life and depreciation informed the exercise of discretion. Conclusion: The Tribunal ordered provisional release of (i) 15,115 correlated units and (ii) 1,039 domestically purchased units against bond for value, and allowed release of 1,269 licence-sensitive units subject to production of licences and bond; samples were not pressed for release. Issue 4 - Effect of show-cause notices (including valuation/related-party allegations) on appeals against non-release Legal framework: A show-cause notice commencing adjudication under Sections 28/124 and valuation rules creates the statutory channel for determining liability, confiscation and differential duty; appellate remedies exist but interlocutory relief may be rendered moot once substantive proceedings are initiated. Precedent treatment: Not invoked. Interpretation and reasoning: The Tribunal found that issuance of a detailed show-cause notice to the importer (including valuation/related party allegations) indicated that substantive adjudication was underway. Therefore, the Tribunal considered the appeal against refusal to release the same goods to be infructuous because the show-cause process was the proper forum to address the charges and possible release. The Tribunal nevertheless required that adjudication be expeditious and that parties be heard. Ratio vs. Obiter: Ratio - detailed show-cause proceedings addressing the same goods can render interlocutory appeals against refusal to release goods unnecessary; tribunals may remit substantive contestations to the adjudicating authority while handling provisional relief for third-party claimants. Obiter - the judgment emphasizes expeditious adjudication but does not prescribe fixed timelines. Conclusion: The appeal by the importer challenging non-release was disposed as infructuous in view of the show-cause notice; the adjudicating authority was directed to proceed expeditiously and afford hearing. Issue 5 - Conditions for provisional release where licences/regulatory permissions are required Legal framework: Release despite regulatory restrictions may be conditioned on production of requisite licences/permissions from regulatory authorities, and provision of bond/security for value pending final adjudication. Precedent treatment: Not cited. Interpretation and reasoning: The Tribunal allowed provisional release of licence-sensitive units only upon production of the necessary statutory permissions and subject to bonds equivalent to the value of the goods. This balances the administrative interest in enforcing regulatory compliance with the commercial interest in preventing deterioration of goods in warehouse custody. Ratio vs. Obiter: Ratio - licence-sensitive seized goods may be provisionally released subject to production of permits and an appropriate bond; failure to produce licences justifies continued non-release. Obiter - none. Conclusion: Provisional release of units requiring licences was permitted conditional on production of licences/permissions and execution of bond for value. Issue 6 - Duty to expeditiously adjudicate and to afford hearing Legal framework: Principles of natural justice and statutory adjudicatory process require opportunity of hearing before final orders; administrative expediency requires timely disposal of show-cause proceedings affecting commercial goods. Precedent treatment: Not cited. Interpretation and reasoning: The Tribunal directed the adjudicating authority to expeditiously adjudicate the show-cause notice and expressly directed that both relevant parties be given an opportunity to be heard prior to final orders, reflecting obligations of fairness and administrative efficiency. Ratio vs. Obiter: Ratio - adjudicating authorities must afford hearing and proceed expeditiously where show-cause notices affect seized goods; provisional release may be ordered subject to bonds pending such adjudication. Obiter - the decision does not fix specific timelines but imposes an obligation of expedition. Conclusion: The Tribunal set aside the order rejecting release to the warehouse claimant (for the units covered by show-cause notice) and remitted substantive determination to the adjudicating authority with directions for expeditious adjudication and hearing; provisional release ordered on specified conditions in the interim.