2025 (11) TMI 881 - HC - Customs

Delayed show-cause notice after one year invalidates detention of 100g gold chain; release ordered, duty and 50% warehousing payable

Lakhvir Singh Sohlanki Versus Commissioner Of Customs

HC held continued detention of a 100-gram gold chain unlawful for failure to issue a show-cause notice and deny a hearing, breaching natural justice. ... Continued detention of one gold chain weighing 100 grams - no SCN has been issued to the Petitioner with respect to the detention - Violation of principles of natural justice - HELD THAT:- In terms of the judgment in Jatin Ahuja [2025 (10) TMI 1285 - SC ORDER], it is a settled position of law that 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. The detention is therefore impermissible and the detained article of the Petitioner is directed to be released to the Petitioner. The Petitioner shall pay the customs duty, as applicable, along with 50% of the warehousing charges, as per the charges applicable on the date of detention. No penalty, interest or redemption fine would be payable. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether continued detention of a seized article is lawful in the absence of issuance of a show-cause notice (SCN) within the statutory period prescribed by Section 110(2) of the Customs Act, 1962. 2. Whether the interim release power under Section 110A affects or displaces the mandatory time-bound requirement to issue an SCN under Section 110(2). 3. Consequences of non-compliance with the statutory timelines (including availability of extension under the first proviso to Section 110(2)) and appropriate relief where no SCN has been issued within the permissible period. 4. Appropriate financial and procedural directions upon release (customs duty, warehousing charges, penalties, interest, redemption fines, and appearance before authority). ISSUE-WISE DETAILED ANALYSIS Issue 1: Lawfulness of continued detention absent issuance of SCN within statutory period Legal framework: Section 110(2) prescribes a six-month period for issuance of notice under Clause (a) of Section 124 in respect of seized goods; the first proviso permits a written extension by the Principal Commissioner/Commissioner for up to a further six months, subject to informing the person concerned before expiry of the initial six months. Precedent treatment: The Court follows the reasoning in the Supreme Court judgment discussed in the record, which treats issuance of the SCN within the time prescribed by Section 110(2) (including any valid extension under the first proviso) as mandatory; failure to comply results in return/release of goods. Interpretation and reasoning: The Court reasons that the statutory timeline in Section 110(2) is mandatory and distinct from provisions enabling interim release; detention cannot be continued indefinitely where no SCN has been issued within the statutory period or any validly recorded and communicated extension. The concession by the revenue (no SCN issued) further substantiates non-compliance. Ratio vs. Obiter: Ratio - where no SCN is issued within the statutory period (including a valid extension), continued detention is impermissible and the detained goods must be released. Observational - procedural details relating to how concessions affect the Court's exercise of discretion. Conclusion: The continued detention is unlawful; the detained article is to be released. Issue 2: Effect of Section 110A interim release power on mandatory requirement under Section 110(2) Legal framework: Section 110A authorizes interim release (e.g., for fast-moving or perishable goods); Section 110(2) prescribes time-limits for issuance of the notice which triggers substantive proceedings under Section 124. Precedent treatment: The Court adopts the view that Section 110A is an interim power that does not extinguish or limit the mandatory operation of Section 110(2); the two provisions operate in different fields and are not substitutes for one another. Interpretation and reasoning: The Court explains that the existence of interim release power cannot be construed to negate the statutory obligation to issue a show-cause notice within the time mandated by Section 110(2). The interim mechanism is procedural and temporary and cannot be used to justify non-issuance of the SCN. Ratio vs. Obiter: Ratio - Section 110A does not affect the mandatory time-bound requirement of Section 110(2); failure to issue SCN within time cannot be cured by reliance on Section 110A. (This is applied to the facts at hand.) Conclusion: Section 110A's interim-release power does not validate continued detention when Section 110(2)'s timelines for issuing an SCN have not been observed. Issue 3: Consequences of lapse of one-year period and availability of extensions under first proviso Legal framework: The first proviso to Section 110(2) permits extension of the six-month period by up to six months for reasons recorded in writing and requires informing the person from whom goods were seized before expiry of the initial period. Precedent treatment: The Court applies the established principle that absence of the requisite notice even within a validly extended period mandates release of goods; extensions must be recorded and communicated as statutorily required. Interpretation and reasoning: The Court notes that where the total permissible period (initial six months plus any validly recorded extension up to six months) has elapsed without issuance of an SCN (and where no valid extension was recorded/communicated), the consequence prescribed by the statute is release of the seized goods to the person from whose possession they were taken. Ratio vs. Obiter: Ratio - non-issuance of SCN within the statutory timeframe (including any valid extension) results in mandatory release; absence of extension compliance cannot be cured retrospectively. Conclusion: As the one-year period has elapsed without issuance of SCN or lawful extension, the detained article must be released. Issue 4: Financial and procedural directions upon release - customs duty, warehousing charges, penalties, interest, and appearance Legal framework: Customs law permits assessment and recovery of applicable duty and lawful imposition of penalties/interest/redemption fines in appropriate cases; courts exercise equitable discretion in directing release subject to conditions where detention was improper proceduraly. Precedent treatment: The Court, while ordering release for procedural failure, frames equitable conditions to protect revenue interests consistent with prior jurisprudence allowing payment of duty and costs while waiving punitive consequences in certain cases of procedural lapse. Interpretation and reasoning: Balancing the statutory right to release where SCN issuance has not occurred within the prescribed timeframe against the revenue's interest, the Court directs payment of applicable customs duty and 50% of warehousing charges as per rates on date of detention, while expressly waiving penalty, interest and redemption fine. The Court also directs personal or authorised representative appearance before Customs on a specified date and provides facilitation through a named nodal officer (including contact details) for compliance. Ratio vs. Obiter: Ratio - on facts where detention is unlawful due to procedural non-compliance, goods are to be released upon payment of applicable duties and proportionate warehousing charges, with penal consequences dispensed with where appropriate. Observational - specific percentages and appointment of a nodal officer pertain to the present case and constitute procedural directions rather than broad precedent. Conclusion: Release is ordered subject to payment of customs duty and 50% warehousing charges; no penalty, interest or redemption fine to be levied; directions given for appearance before Customs and facilitation by nodal officer. Miscellaneous Observations 1. The Court treated the revenue's concession (absence of SCN) as determinative on the issue of procedural non-compliance. 2. The principles applied emphasize the mandatory nature of statutory timelines and the distinct operation of interim release powers; these principles are applied as ratio in the present decision. 3. The directions for release balance statutory mandates and revenue protection and are specific to the facts and concessions in this matter.