2025 (11) TMI 882 - HC - Customs

Seizure held detention under s.110 Customs Act; absence of SCN violated natural justice, gold bar released

Avazbek Musaev Versus Commissioner of Customs.

HC held the seizure amounted to detention under s.110, Customs Act, requiring issuance of an SCN and a hearing; absent an SCN, detention violated natural ... Detention of one gold bar weighing 50 grams - no SCN has been issued to the Petitioner with respect to the detention - Violation of principles of natural justice - HELD THAT:- The seizure in this case would be a seizure under Section 110 of the Customs Act, 1962, and the issuance of SCN is mandatory failing which, in terms of judgment of the Supreme Court titled Union of India & Anr. v. Jatin Ahuja [2025 (10) TMI 1285 - SC ORDER], the detained article is liable to be released. In terms of the judgment in Jatin Ahuja, 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. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether issuance of a show-cause notice (SCN) is mandatory when goods are seized under Section 110 of the Customs Act, 1962, and whether oral communication of an SCN suffices. 2. Whether failure to issue an SCN within the statutory period prescribed by Section 110(2) (and any valid extension under the first proviso) mandates release of detained goods. 3. The legal consequences of detention where the statutory period (six months, extendable up to one year as per first proviso) has expired without requisite notice: release of goods and remedial financial liabilities (duty, warehousing charges, penalty, interest, redemption fine). 4. Procedural directions following order for release (appearance before Customs Authority and facilitation by nodal officer). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Mandatory nature and form of SCN under Section 110 of the Customs Act, 1962 Legal framework: Section 110(1) authorizes seizure; Section 110(2) prescribes time limits for consequential action; Section 124 deals with issuance of show-cause notice and related proceedings. The first proviso to Section 110(2) permits a written extension for reasons recorded. Precedent treatment: The Court relies on the Supreme Court judgment in Jatin Ahuja, which holds issuance of notice within the time prescribed by Section 110(2) is mandatory and that interim release powers do not nullify that requirement. Interpretation and reasoning: The Court treats seizure under Section 110 as triggering a statutory duty to issue an SCN and afford hearing within the time limits. Oral communication of the SCN is insufficient because the statutory scheme contemplates formal compliance (including informing the person within the prescribed period and, if applicable, a written extension by competent authority). The Court adopts the plain meaning and intendment approach from Jatin Ahuja: interim release provisions (Section 110A) do not extinguish the mandatory notice requirement under Section 110(2). Ratio vs. Obiter: Ratio - SCN is mandatory and must be issued in accordance with the statutory procedure and time limits; oral communication does not satisfy statutory requirements. Obiter - observations explaining the relationship between Section 110A and Section 110(2) as clarificatory (but consistent with the binding precedent). Conclusions: The statutory scheme mandates issuance of a proper SCN within the period specified by Section 110(2) (subject to valid written extension under the first proviso); informal/oral SCN does not meet this requirement. Issue 2 - Effect of non-issuance of SCN within the statutory period (including allowable extension) Legal framework: Section 110(2) prescribes a six-month period to take action post-seizure; the first proviso permits an extension by the Principal Commissioner/Commissioner for reasons recorded in writing, up to a further six months, with the person informed before expiry of the initial six months. Precedent treatment: Following Jatin Ahuja, the Court emphasizes that failure to issue notice within the statutory timeframe (including the valid extended period) compels release of the seized goods. Interpretation and reasoning: The Court applies Jatin Ahuja's exposition that the time-limit in Section 110(2) is distinct and mandatory; absent either issuance of notice under clause (a) of Section 124 within six months or a valid extension communicated within that period, the statutory consequence is release. The Court notes that the one-year maximum (six months plus six months extension) had elapsed in the present matter and no lawful SCN was issued. Ratio vs. Obiter: Ratio - Non-compliance with statutory time-limits for issuing SCN (and the extension formalities) results in mandatory release of detained goods. Obiter - remarks distinguishing the temporal operation of Section 110(2) and Section 124 (clarifying they operate in different fields) echo the precedent's observations. Conclusions: Where the prescribed period (and valid extension) has passed without SCN as required, continued detention is impermissible and the goods must be released. Issue 3 - Financial consequences upon release: duty, warehousing charges, penalty, interest, redemption fine Legal framework: Customs law authorizes recovery of customs duty and warehousing charges for detained goods; statutory and regulatory provisions govern imposition of penalty, interest and redemption fines, subject to compliance with procedural safeguards (including timely SCN). Precedent treatment: The Court's direction aligns with the remedial consequence in Jatin Ahuja whereby release follows failure to comply with mandatory procedural requirements; concomitant liabilities are limited to lawful charges recoverable notwithstanding defective detention. Interpretation and reasoning: The Court distinguishes between mandatory procedural defects (which vitiate detention) and lawful financial obligations that may legitimately be recovered even upon release. Given that statutory notice was not issued within the permissible period, detention cannot be sustained; however, the State may recover customs duty and warehousing charges applicable on the date of detention. By contrast, imposition of penalty, interest or redemption fine is refused because such punitive consequences would require adherence to procedural safeguards (notice and hearing) which were not satisfied. Ratio vs. Obiter: Ratio - On release for failure to issue SCN timely, the detained person is liable to pay customs duty and warehousing charges but is not liable for penalty, interest or redemption fine absent valid procedure. Obiter - reasoning as to why penalties/redemption fines are inappropriate due to procedural lapse further explains remedial balance between revenue interests and procedural fairness. Conclusions: Release directed subject to payment of applicable customs duty and warehousing charges; penalty, interest and redemption fine are not leviable in the circumstances of procedural non-compliance. Issue 4 - Procedural compliance after judicial direction: appearance before Customs Authority and facilitation Legal framework: Courts may direct parties to comply with administrative formalities post-order and prescribe facilitation measures to implement the order effectively. Precedent treatment: The Court exercises supervisory jurisdiction to ensure effective compliance with its directions and to balance administrative convenience with individual rights. Interpretation and reasoning: The Court directs personal appearance (or through authorised representative with written/email authorisation) before Customs Authority on a specified date to implement payment and release formalities. The Court further directs a nodal officer to facilitate the appearance and compliance, ensuring administrative cooperation and practical implementation of the release order. Ratio vs. Obiter: Ratio - Judicial directions for appearance and administrative facilitation are necessary ancillary measures to give effect to the order of release and recovery of lawful dues. Obiter - administrative contact particulars and procedural facilitation are administrative, not judicial, determinations but are necessary for execution. Conclusions: The detained goods are to be released upon compliance with directions; the detenue must appear (or authorise a representative) and the nominated nodal officer shall facilitate compliance.