TaxTMI 
TaxTMI 
2023 (12) TMI 967
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....itioners, and before an order of confiscation under Section 111 of the Customs Act, 1962 (for short 'the Customs Act') can be said to be legal and valid. 2. The contention of the petitioners is that the impugned action of the respondents of seizure of petitioners' gold jewellery and its disposal was patently illegal being in breach of the provisions of not only the Customs Act, but the rights guaranteed to the petitioners under Article 300A read with Article 14 of the Constitution of India. 3. The prayers as made in the petition are required to be noted which read thus:- (a) This Hon'ble Court be pleased to issue a writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, order or direction, ordering and directing the Respondents themselves, its officers, subordinates, servants, and agents to forthwith provide the records of seized gold jewellery and return gold equal to 1028 grams of gold of which was disposed by the Respondents to enable the Petitioners to re-export the same in terms of the order dated 19.09.2022, passed by the Revisionary Authority, Government of India. (b) in the alternative to the Prayer Clause (a) above, this ....
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....ed gold jewellery totally weighing 1028 grams within fifteen days from the date of issue of the notice, failing which the same would be disposed of without further reference to the department. Such notice is stated to be forwarded to the petitioners, as also put up on the notice board of the C.S.I. Airport. It is alleged that it was also forwarded to Mr. Prakash Singrani and Mr. Prassad Kamble, Advocate. However, it appears that there is no record with the Customs of the same being received by the petitioners. Insofar as the notice being addressed to the Advocates was concerned, at the relevant time, the said Advocates were not the petitioners' Advocate before the department. In this regard on 13 April 2018, Shri. Prakash K. Shingrani informed the Assistant Commissioner of Customs that he had no instructions from the petitioners as after released on bail, the petitioners had not contacted him. He recorded that such fact of the notice be informed to the Consulate, and if no reply is received it may be disposed off according to law. 6. It appears that the Assistant Commissioner initiated proceedings under Section 110(1B) of the Customs Act so as to obtain an order from the Court o....
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.... D.P. Kshirsagar, Air Customs Superintendent, Gold Disposal Section, inter alia to withdraw the gold jewellery packages from the strong room for the purpose of depositing in India Government Mint, Mumbai. The gold jewellery belonging to the petitioner was indicated under the following entry. The relevant contents of the said authority letter are required to be noted which read thus:- "OFFICE OF THE COMMISSIONER OF CUSTOMS (AIRPORT) TERMINAL-2, LEVEL-II, CHHATRAPATI SHIVAJI INTERNATIONAL AIRPORT SAHAR, ANDHERI (EAST), MUMBAI - 400 099. F. No. AirCus/71-01/2018-19/Pt-I Date 13.06.2018 AUTHORITY LETTER I, J. P. Singh, Asstt. Commissioner of Customs, Gold Disposal Section, CSI Airport, Mumbai hereby authorize Shri D. P. Kshirsagar, Air Customs Superintendent-Gold Disposal Section, to withdraw the following packages, said to contain gold/gold jewellery from Strong Room for the purpose of depositing in the India Government Mint, Mumbai under escort of Shri R. M. Salvi, Head Hawaldar, under supervision of Shri D.P. Kshirsagar, ACS-Gold Disposal Section and Shri Prasad S. Pednekar, ACO-Gold disposal Section, CSI Airport, Mumbai Sr.No. File No. ....
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.... Net Amount Payable to Customs Authority vide DD No.- 319233 dated 02.08.2018 221461154.00 GST amount recovered as mentioned above has been deposited with the concerned Govt. authorities. Yours faithfully, Sd/- For Asst. General Manager" 10. It may be observed that, as to whatever had happened within the department from the date of the seizure of the gold jewellery that is on 14 January 2018 till the disposal of the gold jewellery which had taken place on 1 August 2018, as informed by State Bank of India, the petitioners were never put to any notice whatsoever, much less, in a manner the law would mandate that the petitioners' gold jewellery as seized was disposed of / sold. Surprisingly the petitioners were kept in complete darkness either personally or through their country's consulate, in regard to the disposal of their gold jewellery. 11. On 18 January 2019 an order-in-original came to be passed by the Additional Commissioner of Customs. It clearly appears that before such orders could be passed, the petitioners were not heard, the petitioners were not furnished with the copy of the show cause notice in a manner known to law. By such order....
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....ity to cross-examine the panchas. The petitioners contended that the petitioners were tourists and were eligible to carry gold including personal jewellery for the stay in India. They contended that they were not involved in any smuggling activity in the past. The petitioners contended that the jewellery under absolute confiscation was not dutiable as personal gold jewellery was not prohibited items and were only restricted items. Another significant contention as urged by the petitioners was that they were not given reasonable opportunity to defend the proceedings of the show cause notice, which was in violation of the principles of natural justice. The respondents submitted their written reply. 15. The Revisional Authority passed final orders on the petitioners' Revision Application dated 19 September, 2022 inter alia observing that the quantity of the gold jewellery was not large and that the petitioners were wearing the gold jewellery as seized. It was observed that there were no allegations that the petitioners were habitual offenders and of being involved in similar offences earlier. It was also observed that the quantity and facts of the case indicated that it was a case ....
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....t the Revisional Authority, having granted redemption of gold jewellery in question 1028 grams valued on payment of Rs. 5,25,000/- for re-export, requested that necessary directions be issued to the concerned authority to inform the petitioners as to whether the gold jewellery is available with the Department for redemption to the petitioners. On 13 October, 2022, a reminder letter was addressed by the Advocate for the petitioner to the Joint Commissioner, that reply to the earlier letter was not received and the details were not furnished, so as to execute the orders passed on the revision application. However, as no reply was received, a detailed reminder dated 02 November, 2022 was addressed inter alia recording that Consulate General of Islamic Republic of Iran, Mumbai was following up the matter, and the correct position was required to be informed to the Embassy Officials, as no information in regard to the availability of the confiscated gold was being furnished. It was, therefore, requested that the authorities ought to look into the matter and inform whether the confiscated goods were available. As no reply was received, another letter dated 24 November, 2023 came to be ad....
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....ated that the jewellery seized from both the petitioners fell under item No. AA specified under the said Notification No. 31 of 86 as amended, which pertains to "gold in all forms including bullion, ingot, coin, ornament, crude jewellery". It is stated that in view of the said provision and as gold being a precious item having high value, there are constraints on the storage of the same in the office for longer duration. Hence, in view of the specific provision for disposal of goods, as soon as after seizure, after following due procedure, an action was taken by respondents to dispose of the gold jewellery belonging to the petitioners, which was justified and legal. It is stated that the ownership of the seized gold had stood vested with the Central Government post confiscation. Hence, there was no question of depriving the petitioners of their own property. 19. In paragraph 7 of the affidavit, it is contended that Section 110 of the Customs Act provides for a notice, such notice dated 04 April, 2018 was issued to both the petitioners and their Advocates Mr. Prakash Shingrani and Mr. Prasad Kamble, as also the same was put on the notice board at the airport. It is further conten....
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....dents to return the gold jewellery to the petitioners, in the same condition in which it was seized. The position was that the government was a bailee until the confiscation order attained finality. It is submitted that the order passed by the adjudicating authority in adjudicating the show cause notice is not a final order, as it is subject to an appeal and revision. There is a likelihood that, in such further proceedings, the confiscation order in a given case may be reversed or modified, in such event the seized gold could no longer be retained. It is hence submitted that there would be a statutory obligation on the respondents to return the goods to the owner. It is next submitted that once it was decided in favour of the petitioners who are the owners of the gold jewellery that the same be returned either for re-export or otherwise and the said order is not stayed by any Court, it becomes an absolute liability of the respondents to return the goods to the petitioners. In such case, the petitioners being the owners of the goods, have the right to demand the seized jewellery. It is submitted that the respondents would not have any legal right to dispose of the goods without foll....
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....lery in question, which has resulted in undue financial loss and serious prejudice to the petitioner. It is submitted that in the present case, the order passed by the Revisional Authority has attained finality which is required to be implemented in its letter and spirit. The respondents cannot be heard to say that such order would not be complied with and/or that the petitioners' gold jewellery would not be returned and made available to the petitioners for reexport. It is submitted that the petitioners in the present case have been put to undue loss and are deprived of their property, apart from serious harassment. Such actions on the part of respondents is violative of the petitioners right guaranteed under Article 300A of the Constitution. 24. It is next submitted that the Circular dated 6 September 2022 is misconceived as the said circular is not binding on the petitioner. It is submitted that such circular cannot override the statutory provisions. In support of such contentions, reliance is placed on the decision of the Madras High Court in the case Carista Herbal Products (P) Ltd. vs. Commissioner of Central Excise, Pondicherry 2019 (370) ELT 223 (Mad.); Union of India Vs....
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....licable. He has further submitted that neither the circular nor the statutory provisions are assailed by the petitioners and on this count, the petition ought not to be entertained. In support of such submissions, reliance is placed on a decision of this Court in Shabir Ahmed Abdul Rehman vs The Union Of India 2009 (235) ELT 402(Bom). F. Analysis and Conclusion 27. We have heard learned Counsel for the parties, we have also perused the record. 28. At the outset, we may note some of the admitted facts. It is not in dispute that on 14 January 2018 the petitioners arrived in India and were apprehended at the Mumbai Airport. The jewellery belonging to the petitioners which were gold bangles came to be seized by the Customs officials. 29. The power of the Customs Authorities to seize the goods is conferred by Section 110 of the Customs Act and its application was subject matter of debate in the present proceedings. We thus note the said provision which reads thus:- "110. Seizure of goods, documents and things.- (1) If the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods: Provided....
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....ion is made under sub-section (1B), the Magistrate shall, as soon as may be, allow the application. (1D) Where the goods seized under sub-section (1) is gold in any form as notified under sub-section (1A), then, the proper officer shall, instead of making an application under sub-section (1B) to the Magistrate, make such application to the Commissioner (Appeals) having jurisdiction, who shall, as soon as may be, allow the application and thereafter, the proper officer shall dispose of such goods in such manner as the Central Government may determine. (2) Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized: Provided that the Principal Commissioner of Customs or Commissioner of Customs may, for reasons to be recorded in writing, extend such period to a further period not exceeding six months and inform the person from whom such goods were seized before the expiry of the period so specified: Provided further that where any order for provisional release o....
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....y of such goods containing such details relating to their description, quality, quantity, marks, numbers, country of origin and other particulars as the proper officer may consider relevant to the identity of the goods in any proceedings under the Customs Act and shall make an application to a Magistrate for the purpose interalia of certifying the correctness of the inventory so prepared; or taking, in the presence of the Magistrate, photographs of such goods, and certifying such photographs as true; or allowing to draw representative samples of such goods, in the presence of the Magistrate and certifying the correctness of any list of samples so drawn. Sub-Section (1C) provides that when an application is made under sub-section (1B), the Magistrate shall, as soon as may be, allow the application. Sub-section (1D) provides that when the goods seized under subsection (1) is gold in any form as notified under sub-section (1A), then, the proper officer shall, instead of making an application (1B) to the Magistrate, make such application to the Commissioner (Appeals) having jurisdiction, who shall, as soon as may be, allow the application and thereafter, the proper officer shall dispos....
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.... and hence, it would be imperative to dispose of the goods. In short, such reasons are required to be present and recorded by the proper officer before any steps are taken to deal with the goods to be disposed of, as per the procedure as set out in sub-sections (1B), (1C) or (1D) of the Customs Act. 33. Mere issuance of a notification under sub-section (1A) of Section 110 of the Customs Act would not suffice and enable the proper officer to have instant disposal of the goods unless a subjective satisfaction as noted by us is emenintly present on any of the eventualities for such action to be resorted and the owner of the goods is informed in that regard. To take a situation converse to what we have observed, namely mere issuance of notification under sub-section (1A) of Section 110 would suffice and enable the proper officer to dispose of the goods, would be a difficult proposition to be accepted, in as much as, it would certainly lead to patent arbitrariness as also may defeat the other provisions of the Act. We are thus, of the opinion that even after recourse to the provisions of subsections (1A) to (1D) is to be taken, the same would be required to be taken only after a subj....
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...., 2018 as noted above, although all this was not to the knowledge of the petitioners. Once the gold itself was not available for confiscation, it is surprising as to what was the need and purpose for issuing such notice. This inasmuch as the confiscation of the gold jewellery in question would be required to be understood in terms of what Chapter XIV of the Customs Act would provide, which contains provisions in relation to confiscation of goods. In the said Chapter, provisions of Section 124 would have significant bearing on the facts of the present case, inasmuch as Section 124 provides for issuance of show cause notice before confiscation of goods. Section 124 reads thus: 124. Issue of show cause notice before confiscation of goods, etc. No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person- (a) is given a notice in writing with the prior approval of the officer of Customs not below the rank of an Assistant Commissioner of Customs, informing] him of the grounds on which it is proposed to confiscate the goods or to impose a penalty; (b) is given an ....
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.... such fine as the said officer thinks fit: Provided that where the proceedings are deemed to be concluded under the proviso to sub-section (2) of section 28 or under clause (i) of sub-section (6) of that section in respect of the goods which are not prohibited or restricted, the provisions of this section shall not apply: Provided further that, without prejudice to the provisions of the proviso to sub-section (2) of section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon. 2) Where any fine in lieu of confiscation of goods is imposed under sub-section (1), the owner of such goods or the person referred to in sub-section (1), shall, in addition, be liable to any duty and charges payable in respect of such goods. 3) Where the fine imposed under sub-section (1) is not paid within a period of one hundred and twenty days from the date of option given thereunder, such option shall become void, unless an appeal against such order is pending. Explanation.-For removal of doubts, it is hereby declared that in cases where an order under sub-section (1) has been....
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....ioners, the Assistant Commissioner who disposed of the gold never informed either the Appellate Authority or the Revisional Authority that the seized gold jewellery of the petitioners itself was not available and was disposed of. This, in our opinion, is something which raises a serious doubts on the method and manner in which the Custom officers discharge their duties under the Act. In our opinion, even if there is a power to dispose of the gold, it has to be exercised fairly, reasonably and transparently. Disposal of the property belonging to the persons like the petitioners and / or to sell the seized goods at the ipse dixit of the officers, is not what the law would recognise. The procedure to dispose of such valuable commodities is required to withstand the test of law and more particularly, the constitutional requirement of reasonableness, non-arbitrariness, fairness and transparency as enshrined under Article 14 of the Constitution coupled with safeguarding the valuable rights of property recognized by the Constitution, under Article 300A. It cannot be otherwise, as Section 110(1A) would be required to be read, interpreted and applied only in a manner the basic law of land u....
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....ed assorted gold jewellery totally weighing 1028 grams within fifteen (15) days from the date of issue of this Notice, failing which the same will be disposed off without any further reference to them. (SUBRAT ROUT) ASSTT. COMMISSIONER OF CUSTOMS, AIR INTELLIGENCE UNIT C.S.I. AIRPORT. To, 1. Mrs. Leyla Mahmoodi, Mottahari 28, Hosslenzadeh 5, Palak 86, Mashhad, Iran 2. Mr. Mojtaba Gholami, Mottahari 28, Hosslenzadeh 5, Palak 86, Mashhad, Iran. 3. Notice Board of C.S.I. Airport (through CHS) 4. Mr. Prakash Singrani & Prassad Kamble, Advocate." 45. It is abundantly clear from the record that the gold jewellery belonging to the petitioners was not merely disposed of but sold by the respondents, which is clear from the respondents' own showing in the reply affidavit as also compounded by a letter of the State Bank of India dated 1 August 2018. Once the property of the ownership of the petitioners was being disposed of and / or sold, in our opinion, certainly the provisions of Article 300A of the Constitution would stand attracted. Article 300A of the Constitution reads thus:- "300A Persons not to be deprived of property s....
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....ined under the Act and was required to be returned to the owner, which was the statutory obligation to return the property. It was held that there was a legal obligation to preserve the property in tact, also an obligation to take reasonable care of the same so as to enable the property to be returned in the same condition in which it was seized. It was held that the respondent was entitled to return of the property or to the value of the property. The observations of the Supreme Court in such context are required to be noted, which read thus:- "6. There can, therefore, be bailment and the relationship of a bailor and a bailee in respect of specific property without there being an enforceable contract. Nor is consent indispensable for such a relationship to arise. A finder of goods of another has been held to be a bailee in certain circumstances. 7. On the facts of the present case, the State Government no doubt seized the said vehicles pursuant to the power under the Customs Act. But the power to seize and confiscate was dependent upon a customs offence having been committed or a suspicion that such offence had been committed. The order of the Customs Officer was....
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....n v. Mst. Vidhyawati, (AIR 1962 SC 933) and Kasturi Lal v. The State of U.P. (AIR 1965 SC 1039), to which Mr. Dhebar drew our attention, have no relevance in view of the pleadings of the parties and the cause of action on which the respondent's suit was based." 49. In "Union of India Vs. Shambhunath Karmakar & Ors." (supra) the Division Bench of the Calcutta High Court on a plea of the respondents therein for return of the gold ornaments, which were seized from them which were forwarded for melting, it was observed that the owner of the goods was entitled to claim damages for disposal of the seized gold. It was observed that the cause of action for return of the gold accrued on the date the confiscation order was set aside and the owner became entitled to obtain return of the seized gold. It was observed that the seized gold was not sold to a third party for value and that if the seized gold has been forwarded for melting to the Government of India, it really amounted to appropriation of the gold by another department of the Government. It was also observed that if the gold and gold ornaments were melted, the same resulted only in the change of form. The Court observed the G....
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....ods, not being confiscated goods, are to be sold under any provision of the Customs Act, they shall be sold by public auction or by tender or in any other manner after notice to the owner of the goods. 3. It is further clarified that the requirement to issue notice to the owner of the goods shall also obtain in case of goods that have been confiscated but in respect of which all appeal/legal remedies have not been exhausted by the owner of the goods." 23. In the present case with the seized material not being perishable, being gold bars there was no reason for the Respondents to have hurriedly disposed it off and that too without notice to the Petitioner. When it was plain that even the SCN was not served upon the Petitioner, there was no reason to proceed with disposal of the seized gold without notice. It also appears that the Respondents hurriedly went ahead and passed an adjudication order more than four years after the gold was seized only after the present petition was filed. ... ... .. ... ..." 51. In our opinion, the petitioners would also be correct in contending that the impugned action of the respondents in the present case was in the teeth of the CB....
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....ervation of the said goods that for no reason whatsoever the goods ought not to be preserved, till the proceedings attain finality. In the present case there are none. 53. We may also sound a note of caution that it would be travesty of justice, as also a patent illegality if in the teeth of the well settled principle of law and constitutional provisions conferring right to property, any authority being conferred on the Customs officials purportedly under Section 110 to dispose of the seized goods, can be recognized, merely because the goods are seized under the Customs Act. The Customs official without recording cogent and acceptable reasons and without a prior notice being issued to the owner of the goods or the persons from whom the goods are seized, would not wield a power / authority to sell and/or dispose of the seized goods, and more particularly, valuable items like gold. Such unbridled power cannot be recognized under the provisions of Section 110 of the Customs Act, and if any action contrary to the legitimate principles of law as applicable and discussed by us hereinabove, is sought to be taken, the same would be rendered illegal. 54. In other words, the scheme as ....
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.... the case of Shabbir Ahmed Abdul Rehman (supra). In our view, the said decision does not take the case of the respondents any further for more than one reason. The Court in para 9 of such decision has observed that the Revenue Authorities were not justified in selling the gold, during the pendency of the appeal. In the present case, we have held that action of the respondent in selling gold pending the appeal/revisional proceeding was bad in law. Secondly, in such case, the revenue had informed the assessee that gold has been handed over to the New House of Customs for disposal, which is not the case before us, inasmuch as no such notice was given to the petitioner before disposal of the gold. Thirdly, on the issue as to whether the assessee was justified in claiming the market value of the said gold, this Court observed that the market value of gold was diminishing, at the relevant time, hence in the fact situation, the claim of the petitioner in seeking market value of the gold was not accepted. Whereas in the proceedings before us there is no such contention that the value of the gold is falling. Lastly the said decision did not decide on the petitioners entitlement to the retur....