Detention of seized gold chain illegal for missing SCN deadline under Section 110 Customs Act; release ordered conditionally

HC held that continued detention of petitioner's seized gold chain was illegal due to non-issuance of SCN within the statutory time under Section 110 of the Customs Act. The Court noted that the maximum permissible period of six months, extendable by a further six months with recorded reasons, had fully expired, and no SCN could now be validly issued. Consequently, the seizure could not be sustained and retention of the gold chain was impermissible. HC directed Customs to release the gold chain to the petitioner, subject to fulfillment of specified conditions, and disposed of the petition.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether continued detention of the seized gold chain is permissible in the absence of issuance of a show cause notice within the time prescribed under Section 110(2) of the Customs Act, 1962, or any valid extension thereof.

1.2 Consequential directions and conditions, if any, for release of the seized gold chain upon holding the continued detention to be impermissible.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of continued detention of the seized gold chain in absence of show cause notice within the statutory period

Legal framework

2.1 The Court considered Section 110(2) of the Customs Act, 1962, which prescribes a six-month period from the date of seizure for issuance of notice under clause (a) of Section 124, extendable by the Principal Commissioner/Commissioner for a further period not exceeding six months, with reasons recorded in writing and intimation to the person from whom goods were seized.

2.2 The Court relied on the dictum of the Supreme Court in Civil Appeal No. 3489/2024, which held that: (i) the only power to extend the time period is as per the first proviso to Section 110(2); (ii) release under Section 110A is merely interim and does not affect the mandatory consequence flowing from non-issuance of notice within the period under Section 110(2); and (iii) if no notice is issued within the original or validly extended period, the consequence is that the goods shall be returned to the person from whose possession they were seized.

Interpretation and reasoning

2.3 The Court noted that the gold chain was detained on 17 January 2024 and that no show cause notice had been issued till the date of decision.

2.4 It was observed that there was also no material before the Court to show that the period under Section 110(2) had been validly extended by the competent authority in the manner prescribed, i.e., by recording reasons in writing and informing the person concerned before expiry of the initial six-month period.

2.5 The Court held that in view of the Supreme Court's interpretation, the time period to issue notice under clause (a) of Section 124 is governed by Section 110(2), and that this time prescription is mandatory in relation to the consequence of seizure and continued detention, irrespective of the distinct field in which Section 124 operates.

2.6 The Court found that more than one year had elapsed from the date of seizure; consequently, even the maximum extendable period under the first proviso to Section 110(2) stood exhausted, and no show cause notice could be issued at that stage for purposes of sustaining the seizure.

2.7 Applying the binding precedent, the Court held that continued detention of the seized gold chain in such circumstances is impermissible and that the goods are liable to be released to the person from whose possession they were seized.

Conclusions

2.8 The Court concluded that, as no show cause notice was issued within six months of seizure nor any valid extension granted within the statutory framework of Section 110(2), and the one-year outer limit had elapsed, the seized gold chain must be released to the petitioner.

Issue 2: Conditions and modalities for release of the seized gold chain

Interpretation and reasoning

2.9 Having held that the continued detention was illegal and that the gold chain must be released, the Court proceeded to structure the terms on which such release should occur, ensuring compliance with applicable revenue requirements.

2.10 The Court directed that release would be subject to payment of applicable customs duty and warehousing charges calculated as on the date of detention, thereby balancing the petitioner's right to release of goods with the statutory dues of the Customs Department.

2.11 The Court also prescribed the procedural modality for implementation by directing the petitioner to appear before the Customs Department on a specified date, personally or through an authorised representative, with verification of authorisation through appropriate communication.

Conclusions

2.12 The Court directed the Customs Department to release the seized gold chain to the petitioner upon:

(a) Payment of applicable customs duty; and

(b) Payment of warehousing charges based on the rates applicable on the date of detention.

2.13 The Court further directed that, upon such payments being made and appearance being facilitated through the designated nodal officer, the gold items shall be released and the petition stood disposed of on these terms.

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