2025 (11) TMI 1126 - HC - Customs

Seized gold unlawfully detained without show-cause notice or hearing; ordered released subject to customs duty and charges under Section 124

Intzar Ahmad Versus The Commissioner of Custom & Ors.

HC held that continued detention of seized gold was unlawful where no show-cause notice or personal hearing was provided, breaching principles of natural ... Continued detention of three cut pieces of gold weighing 233 grams which was seized by the Customs Department - No SCN has been issued, no hearing has been granted and no order has also been passed - Violation of principles of natural justice - HELD THAT:- Since no show cause notice has been issued and no personal hearing has been provided, on the ground that the Petitioner had waived of the same. However, this Court in Amit Kumar vs. The Commissioner of Customs [2025 (2) TMI 385 - DELHI HIGH COURT], has clearly held that the same is impermissible. Further, this Court in Mr Makhinder Chopra vs Commissioner of Customs New Delhi, [2025 (3) TMI 19 - DELHI HIGH COURT] had analysed Section 124 of the Customs Act, 1962 while considering the issue of waiver of show cause notice and personal hearing. The Court while relying on the decision in Amit Kumar held that 'Since, the Court has made clear that the practice of making tourists sign undertaking in a standard form waiving the show cause notice and personal hearing is contrary to the provisions of Section 124 of the Act, hereinafter, the Customs Department is directed to discontinue the said practice. The Customs Department is expected to follow the principles of natural justice in each case where goods are confiscated in terms of Section 124 of the Act.' Accordingly, in view of the settled law discussed, the detained bars would be liable to be released on this ground itself. Further, in terms of the decision of the Supreme Court in Jatin Ahuja [2025 (10) TMI 1285 - SC ORDER] in the absence of any show cause notice being issued within the prescribed period under Section 110 of the Act, the detained gold bars would have to be released - Accordingly, the seized items are directed to be released subject to payment of full applicable Customs Duty as also the complete warehousing charges. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether detention of goods without issuance of a show-cause notice in compliance with Section 124 of the Customs Act, 1962 and without affording a personal hearing is lawful. 2. Whether a pre-printed undertaking signed by a traveller/tourist, purporting to waive issuance of a show-cause notice and personal hearing (an 'oral SCN waiver'), satisfies the requirements of Section 124. 3. Whether the failure to issue a show-cause notice within the time prescribed by Section 110(2) of the Act, and failure to validly extend that period under the first proviso to Section 110(2), mandates release of seized goods. 4. Relief and incidental consequences: extent of entitlement to release (including payment of customs duty and warehousing charges) and liability (or not) for penalty or redemption fine where detention is found contrary to law. ISSUE-WISE DETAILED ANALYSIS Issue 1: Lawfulness of detention absent compliance with Section 124 (SCN and personal hearing) Legal framework: Section 124 requires (a) notice in writing with prior approval of an officer not below Assistant Commissioner informing grounds for proposed confiscation/penalty, (b) opportunity to make written representation within reasonable time, and (c) reasonable opportunity of being heard. The proviso permits issuance of an oral SCN at the request of the person concerned. Precedent treatment: The Court relies on recent decisions of the same Court which held that non-issuance of SCN and denial of personal hearing renders confiscation/detention contrary to law; those decisions disapproved treating oral or printed waivers as satisfying Section 124. Interpretation and reasoning: The Court reasons that Section 124 embodies three discrete components of natural justice that must be complied with before any order confiscating goods or imposing penalty is made. The proviso permits an oral SCN only at the request of the person concerned and does not authorize a unilateral practice by customs of treating printed undertakings as effective oral SCNs or waivers of hearing. Natural justice cannot be dispensed with by routine or opaque printed forms, particularly where the form is not comprehensible to a lay traveller. Ratio vs. Obiter: Ratio - Detention without a valid SCN and without affording a personal hearing contravenes Section 124 and makes the detention unlawful. Obiter - Critique of the intelligibility of standard pre-printed waivers and the courts' normative remarks about administrative practice. Conclusion: Detention is unlawful where Section 124's requirements are not adhered to; such detention must be set aside. Issue 2: Validity of pre-printed undertakings purporting to waive SCN and hearing Legal framework: The proviso to Section 124 allows an oral SCN 'at the request of the person concerned'; the statute anticipates explicit, conscious request and does not contemplate implicit or mechanically procured waivers. Precedent treatment: The Court follows the earlier decisions of this Court which held that printed waivers and printed statements requesting release cannot be equated with an oral SCN or a valid waiver; such practice was declared impermissible and directed to be discontinued. Interpretation and reasoning: The Court finds that an oral SCN waiver, if valid, must be a conscious, comprehensible declaration by the person affected, preferably signed and indicating informed consent. A generic pre-printed three-pronged waiver that also purports to waive personal hearing is unintelligible to a common traveller and violates principles of natural justice. Consequently, such forms cannot be treated as compliance with Section 124. Ratio vs. Obiter: Ratio - Standard pre-printed undertakings do not satisfy Section 124 and cannot operate as valid oral SCNs or waivers of the right to personal hearing. Obiter - The Court's comments on how a valid oral waiver ought to be documented (signed declaration) and administrative expectations. Conclusion: Pre-printed waivers relied upon by customs are invalid; the practice is contrary to law and must cease. Issue 3: Effect of non-issuance of SCN within time prescribed by Section 110(2) and the scope of extension under the first proviso Legal framework: Section 110(2) prescribes the time limit for issuance of notice under Clause (a) of Section 124; the first proviso to Sub-section (2) permits the Principal Commissioner/Commissioner to extend the six-month period by a further period not exceeding six months for reasons recorded in writing and requires informing the person concerned before expiry of the initial six months. Precedent treatment: The Court relies on Supreme Court reasoning that Section 110A (interim releases) does not affect the mandatory operation of time limits in Section 110(2). The Court follows the view that the only statutory gateway to extend the period is the first proviso and that failure to issue requisite notice within the prescribed/extended period results in obligation to return goods. Interpretation and reasoning: The Court adopts the plain meaning approach: the power to extend is statutorily confined to the first proviso and conditional upon reasons in writing and communication to the affected person before expiry. Interim mechanisms for release neither supplant nor nullify the mandatory time limits; thus, absence of notice within the period (including any valid extension) triggers return of goods. Ratio vs. Obiter: Ratio - Non-compliance with the time limits of Section 110(2) (and the conditions of any extension under the first proviso) requires release of the seized goods; interim release powers do not cure substantive time-bar defects. Obiter - Clarification that subsections prescribing time periods operate distinctly from the substantive issuance of show-cause notices under Section 124. Conclusion: Where no SCN has been issued within the statutory period and no valid extension has been recorded and communicated, the detained goods must be released. Issue 4: Relief and incidental consequences - duty, warehousing charges, penalty/redemption fine Legal framework: When detention is set aside for procedural non-compliance, the Court must order appropriate consequential relief while observing statutory obligations (e.g., customs duty) and determine whether penalties/redemption fines should apply. Precedent treatment: The Court follows its prior decisions in which release was directed subject to payment of applicable customs duty and warehousing charges, while refraining from imposing penalty or redemption fine where detention was found contrary to law arising from procedural defects. Interpretation and reasoning: The Court balances the statutory entitlement to release (due to procedural infirmity) with the fiscal interest of the State by requiring payment of full applicable customs duty and warehousing charges before release. However, imposition of penalty or redemption fine is inappropriate where the detention itself was unlawful for want of compliance with Section 124 and Section 110(2). Ratio vs. Obiter: Ratio - Release of detained goods is to be ordered subject to payment of applicable customs duty and warehousing charges; no penalty or redemption fine shall be imposed in such circumstances. Obiter - Directions regarding facilitation of appearance before customs and timelines for release. Conclusion: The detained items must be released upon payment of full customs duty and warehousing charges; no penalty or redemption fine shall be imposed; administrative facilitation for compliance and timelines for release are to be provided. Cross-references and Administrative Directions 1. The Court cross-references its conclusions on invalidity of printed waivers with the temporal analysis under Section 110(2): both independently ground the entitlement to release (i.e., procedural defect under Section 124 and statutory time-bar under Section 110(2)). 2. Administrative practice: The Court directs discontinuation of the practice of obtaining standard printed undertakings waiving SCN and personal hearing and expects Customs to follow principles of natural justice in each case of confiscation/detention.