TaxTMI 
TaxTMI 
2026 (2) TMI 54
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....Petitioner while the appeal proceedings were pending before Respondent No. 4. For the sake of convenience, the prayers in the present Petition are reproduced herein below:- (a) Rule be issued; (b) This Hon'ble Court be pleased to issue a writ of mandamus or any other appropriate writ or direction in the nature of mandamus under Article 226 of the Constitution of India, after perusing the relevant documents in the matter and after examining the validity, propriety and legality of the same, set aside the confiscation of gold jewellery 373.700 grams. (c) This Hon'ble Court be pleased to issue a writ of mandamus or any other writ or direction in the nature of mandamus under Article 226 of the Constitution of India, after perusing the relevant documents in the matter and after examining the validity, propriety and legality of the same direct the Respondent to refund and compensate the Petitioner equivalent value of gold as on the present date as the old and used gold jewellery has been disposed off by the Respondent No. 2. (d) Interim/ad-interim relief in terms of prayer (c) above; (e) Such other and further reliefs as this Hon'ble Co....
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....of Rs. 9,64,936/- in the year of its detention, i.e., 2014. The Petitioner was heard on the said date, and the charges framed against him were communicated to him. vi. In reply thereto, the Petitioner orally submitted that the gold detained from him was not of 999 purity but was 22 Carat (one chain, one Kada, one small coin of 14 Carat and one chain of 18 Carat). The Petitioner also submitted that he had no intention to defraud the Customs Authority and the gold jewellery was his personal jewellery, which was given to him by his family members. After affording an oral hearing to the Petitioner, an Order-in-Original bearing dated 20th May 2014, issued on 30th July 2017 No. JC/RR/ADJN/107/2014-15 (Order-in-Original) was passed by Respondent No. 2, confiscating the gold jewellery of an approximate weight of 374 grams. Respondent No. 2 ordered the aforesaid confiscation on the basis that the Petitioner had contravened the provisions of Section 77 of the Act and hence the gold jewellery became liable for confiscation under Section 111(l) and 111(m) of the Act. By way of the aforesaid Order-in-Original, Respondent No. 2 also held that the Petitioner was liable to pay penalty under the....
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....hat the Petitioner held a foreign passport and considering the facts of the case and the difference in the CIF value & LMV, reduced the redemption fine to Rs. 3,00,000/- and the penalty to Rs. 50,000/- under Section 112(a) of the Act. Respondent No. 3 did not interfere with the penalty imposed under the provisions of Section 114AA of the Act. ix. Both the Petitioner and Respondent No. 2 filed Revision Applications against the Order-in-Appeal dated 23rd January 2015 before Respondent No. 4. In the Revision Application filed by Respondent No. 2, they prayed for setting aside the Order-in-Appeal and the case being remanded back to Respondent No. 3 to decide the matter afresh in terms of the submission made by Respondent No. 2. In the aforesaid Revision Application, the Petitioner sought Revision of the Order-in-Appeal once again seeking re-export of the gold jewellery under Section 80 of the Act contending that the same is his personal jewellery and was not meant for sale and that he is a foreign National of Mauritius. The Petitioner also prayed that the personal penalty be set aside or reduced substantially insofar as the Petitioner was concerned. x. In the meantime, on 6th Feb....
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....t of filing the refund application dated 12th July 2021 was not disclosed by the Petitioner in the Petition and hence they have approached the Court with unclean hands. The Deputy Commissioner of Customs (Refund) pursuant to the application filed by the Petitioner, passed the Refund Order dated 8th January 2024 wherein it was held that the legitimate right of refund could not be denied to the Petitioner. Further, it was also held that the realized value of the gold jewellery was Rs. 9,76,952/-, out of which the Petitioner was refunded an amount of Rs. 5,12,877/-, after reducing the warehouse charges, redemption fine, personal penalty, and after adding pre-deposit of 7.5% of the personal penalty imposed. 4. It is in the backdrop of the aforesaid facts of the case that the issue which has fallen for consideration before this Court is as to whether the confiscation of the gold jewellery was justified and whether the consequent imposition of redemption fine and penalty was also justified in the facts of the present case. 5. Mr. Sachwani, learned Counsel for the Petitioner, has made the following submissions in support of his contention that the confiscation of the gold jewellery ....
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....oceedings were pending before the Appellate Authority as well as Revisional Authority. In view of the aforesaid, it was contended on behalf of the Petitioner that since the gold jewellery was no longer available with the Customs Authorities, Respondent Nos. 1 to 4 be directed to reimburse the same amount or quantity of gold to the Petitioner which was intercepted from the Petitioner on 16th May 2014 or the equivalent value as on date. 6. An affidavit in reply on behalf of the Respondents is filed by one Mr. G.B. Tilve, Assistant Commissioner of Customs CSMI Airport, Mumbai-III, wherein it has been submitted that the present Petition is liable to be dismissed on the ground that the Petitioner opted for passing through the Green Channel when he was not entitled to, as the Petitioner was allegedly carrying prohibited goods i.e. the gold jewellery. It is also contended that the Petitioner has wrongly submitted that the goods were detained under Section 80 of the Act, however, the same were confiscated under Section 111(d),(l), and (m) of the Act. It is further contended that the goods were detained by issuing a detention memo as it was issued pending adjudication and the same was no....
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....he judgment of this Hon'ble Court in the case of Leyla Mehmoodi (page 151 of rejoinder) is not applicable in the facts and circumstances of the case. In Leyla Mehmoodi, the gold was sold even before issuance of Show Cause Notice much less to order of confiscation. However, in the present case, the gold was sold on 06.02.2019 much after the same was ordered to be confiscated vide Order-in-Original dated 20.05.2014, upheld vide Order-in-Appeal dated 02.02.2015 and Revision Order dated 28.05.2021. In Leyla Mehmoodi, there was specific prayer for return of gold which is not the case here. v) Before disposal of the gold, a notice was displayed on the notice board of the Airport Commissionerate. Since the gold was lying for about 5 years, it was sold pursuant to the circulars issued by the Board, from time to time. He has also relied on some decisions, which we shall deal with later, to contend that the litigant/party cannot be permitted to approbate and reprobate on the same facts and take inconsistent shifting stands. 8. In view of the aforesaid submissions, the Learned Counsel for the Respondents submitted that no case has been made out by the Petitioner for granting a....
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....y of the Petitioner is mentioned at Sr. No. 41 in the list annexed to the said O-I-O. Annexed herewith and marked as "Exhibit-A" is the copy of the Order-In-Original No. ADC/AK/ADJN/427/2018-19 dated 28.01.2019. 6. I state that the valuation of the gold was done at the time of detention of the Gold and the same is mentioned in detention receipt which is annexed as exhibit-A to the affidavit-In-Reply of the Respondents. 7. I state that the all the packages which were lying in the strong room were removed for handing over to India Government Mint for conversion of the gold into standard gold bars. 8. 1 state that the India Government Mint vide out-turn certificate No. OT/GAD/118 dated 06.02.2019 in the said out-turn certificate the details of gold refined is mentioned such as the weight of the gold before and after melting, purity of the gold etc. The total gold handed over to the Respondents weighing about 33830 grams. Annexed herewith and marked as "Exhibit-B" is the copy of the out-turn certificate No. OT/GAD/118 dated 06.02.2019. 9. I state that the said lot of the 33830 grams of gold was auctioned by the State Bank of India and the State Bank ....
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.... detained, and the Petitioner was given an option to redeem the goods on payment of fine of Rs. 3,50,000/- under S. 125 (1) of the Act along with a penalty of Rs. 1,00,000/- under Section 112(a) and a penalty under of Rs. 5000/- under Section 114AA of the Act. The aforesaid fine and penalty were either reduced or deleted by various subsequent orders passed by Respondent Nos. 3 and 4. 14. In order to appreciate the controversy in the present case, it is important to list out the following relevant provisions which will govern the dispute at hand. "80. Temporary detention of baggage.-Where the baggage of a passenger contains any article which is dutiable or the import of which is prohibited and in respect of which a true declaration has been made under section 77, the proper officer may, at the request of the passenger, detain such article for the purpose of being returned to him on his leaving India 1 [and if for any reason, the passenger is not able to collect the article at the time of his leaving India, the article may be returned to him through any other passenger authorised by him and leaving India or as cargo consigned in his name]. 110. Seizure of goods, ....
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....urther 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 of the seized goods has been passed under section 110A, the specified period of six months shall not apply.] (3) The proper officer may seize any documents or things which, in his opinion, will be useful for, or relevant to, any proceeding under this Act. (4) The person from whose custody any documents are seized under sub-section (3) shall be entitled to make copies thereof or take extracts therefrom in the presence of an officer of customs 111. Confiscation of improperly imported goods, etc.-The following goods brought from a place outside India shall be liable to confiscation:- (a) any goods imported by sea or air which are unloaded or attempted to be unloaded at any place other than a customs port or customs airport appointed under clause (a) of section 7 for the unloading of such goods; (b) any goods imported by land or inland water through any route other than a route specified in a notification issued under clause (c) of se....
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....ipment or attempted to be so transited in contravention of the provisions of Chapter VIII; (o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer; (p) any notified goods in relation to which any provisions of Chapter IVA or of any rule made under this Act for carrying out the purposes of that Chapter have been contravened.] 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 1 [writing with the prior approval of the officer of Customs not below the rank of 2 [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 opportunity of making a representation in writing within such reasonable time as may be specified....
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....t mint, where the gold was melted, while the revision application was pending before Respondent No. 4. These peculiar facts to our mind, are a complete abuse of the process of law by the Respondent-Department, inasmuch as, none of the provisions as envisaged above regarding detention and seizure have been followed in the facts of the present case. The analysis of the relevant provisions governing the facts of the present case would make it clear as to how none of these provisions have been followed in respect of the seizure and confiscation of the gold jewellery. 17. On a plain reading of Section 110 of the Customs Act, it is a provision relating to seizure of goods, documents and things. It provides that if the proper officer has a reason to believe that any goods are liable for confiscation under the Customs Act, he may seize such goods. Sub-section (1), sub-sections (1A), (1B) and (1D) are required to be cumulatively read inasmuch as section (1A) is the power of Central Government to issue a notification in the Official Gazette to specify the goods or class of goods which shall, as soon as may be after their seizure under sub-section (1) be disposed of by the proper officer i....
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....ed. In the facts of the present case, even if the department has sought to confiscate the gold jewellery invoking the above provisions, yet there was no concealment of the gold jewellery by the Petitioner and in fact the Order-in-Appeal categorically holds that the Petitioner was not a habitual offender/carrier and no attempt was made to conceal the goods. It was in these circumstances that the Order-in-Appeal reduced the quantum of fine and penalty in facts of the present case. Thus, the provisions of both Sections 110 and 111 have stood breached in the facts of the present case. 19. Further, the Order-in-Original dated 20th May 2014, and the Order-in-Appeal dated 23rd January 2015 have also been passed without considering the provisions of Section 110 and Section 111 of the Act. Redemption fines under Section 125 (1) of the Act and further fines under Section 112(a) and 114-AA of the Act imposed on the Petitioner amount to a gross abuse of the process of law as envisaged in the aforesaid sections. What is fundamentally disturbing in the facts of the present case, is that the gold jewellery was seized from the Petitioner on 16^th May 2014, and as envisaged under Section 110(2),....
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....ed in Section 110(2) of the Act, a notice in respect of the goods which are seized has to be given under Section 124(a) within six months of the seizure of the goods and if such notice is not issued then the said goods are to be returned to the person from whose possession the goods had been seized. 21. It is a settled principle of law that when the order of a customs officer is not final and is subject to an appeal, and if the appellate authority finds later that there was no good ground for the exercise of that power, the property could no longer be retained and under the Act and has to be returned to the owner. In such a situation there is a legal obligation on the part of the department to preserve the property intact and also return it in the same condition in which it was seized, inasmuch as in such a situation the State Government would be a bailee of the seized property until the order became final. In such context, the relevant observations of the Supreme Court in State of Gujarat v. Memon Mahomed Haji Hasam, 1967 SCC OnLine SC 120 reads thus:- "On the facts of the present case, the State Government no doubt seized the said vehicles pursuant to the power under ....
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....n these circumstances, it is difficult to appreciate how the contention that the State Government is not liable for any tortious act of its servants can possibly arise." In the facts of the present case, the appeals were pending before the Revision Authority for adjudication and hence the action of the Respondents/ Custom Authorities to dispose off the gold jewellery hurriedly in 2019 was not in consonance with the aforesaid principles of law. 22. On a plain reading of the provisions of Section 124, it is clear that, 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 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. Further, an opportunity of making a representation in writing within a reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty has to be given and also a reasonable opportunity of being heard in the matter has to be given to the owner of the goods. It is only after these conditions are fulfilled, that the confiscation of the g....
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....t case neither a notice was issued under Section 124 nor the provisions of Section 110 and Section 111 were followed and the Petitioner was subjected to the fine as contemplated under Section 125 of the Act and further under Sections 112 and 114AA of the Act. The fact that the gold jewellery had been sent in the year 2019 to the mint and thereafter the Revision Order was passed in 2021, allowing for the re-export of the gold reeks of further abuse of the process of law, inasmuch as, now there is no gold available with the customs authorities to allow re-export as stipulated by such order. 24. This case, to our mind, is also one of these a gross cases which shows complete apathy on the part of the Customs Department to follow the basic principles of law. Even if the Customs Department has the power to dispose of the gold it has to be exercised fairly, reasonably and transparently. Disposal of the property belonging to a person like the Petitioner and of all the seized goods, would have 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....
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....preceded by the notice dated April 4, 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....
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.... option to pay in lieu of confiscation 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....
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....ted to smuggle the gold. 42. As rightly urged on behalf of the petitioners, 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 customs 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 ....
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....jit Kumar Rana(tm)). 47. In the present case the gold jewellery belonging to the petitioners has been dealt, disposed of and sold in patent disregard to the basic principles of law as articles 14 and 300A of the Constitution would ordain. This apart, even the provisions of the Customs Act, which we have discussed, stand violated not only in taking away the substantial statutory rights as the law would guarantee to the petitioners, on seizure of the petitioners gold jewellery but also in the manner in which the gold jewellery has been disposed of. If such is the consequence of the actions, as taken by the respondents and the same cannot be recognized in law on any parameters, then the only conclusion to be reached by the court is that the disposal/sale of the gold jewellery belonging to the petitioner, is per se illegal, void, ab initio and unconstitutional. Once such action on the part of the respondents is being regarded as a brazen illegality, the mandate of law would be to restore to status quo ante which is the legitimate corollary to remedy such illegality. The legal principle in this regard can be discussed. 48. In State of Gujarat v. Memon Mahomed Haji Hasa....
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....er of property has to return it when its owner is found and demands it, so the State Government was bound to return the said vehicles once it was found that the seizure and confiscation were not sustainable. There being thus a legal obligation to preserve the property intact and also the obligation to take reasonable care of it so as to enable the Government to return it in the same condition in which it was seized, the position of the State Government until the order became final would be that of a bailee. If that is the correct position once the Revenue Tribunal set aside the order of the customs officer and the Government became liable to return the goods the owner had the right either to demand the property seized or its value, if, in the meantime the State Government had precluded itself from returning the property either by its own act or that of its agents or servants. This was precisely the cause of action on which the respondent's suit was grounded. The fact that an order for its disposal was passed by a Magistrate would not in any way interfere with or wipe away the right of the owner to demand the return of the property or the obligation of the Government to return i....
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....held that the gold could not have been hurriedly disposed of and in the absence of a show-cause notice being served or the petitioners. It was held that there was no reason to proceed to the disposal of the seized gold without notice, and that too without passing any order on adjudication and accordingly set aside the seizure of the gold with a direction that the proceeds which were collected in the auction which were equal to the vary of the gold ought to be refunded to the petitioner with interest. The relevant observations of the court in paragraphs 22 and 23 which reads thus: 22. There is no explanation offered by the respondents as to why they were constrained to dispose of the seized gold, when it was neither perishable nor hazardous. Also, there is no answer why it had to be disposed of without notice being issued to the person from whom it was seized. This irrespective of whether the SCN was served or not. The SBEC has issued a circular dated February 14, 2006 in this regard where it was impressed upon the field formations as under: 'An instance has recently been brought to the notice of the Board where seized goods were disposed of without issuing not....
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.... obtain the sale proceeds, which were significantly lower than the seizure value. In subsequent proceedings, the High Court has directed the refund of an amount higher than the sale proceeds, as well as payment of interest. The loss to the exchequer has resulted from a failure to comply with the requirements of section 150 of the Customs Act, 1962. It is impressed upon filed formations that where any goods, 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. 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." 52. We are also of the opinion that the concerned officer of the respondents in the present case has completely overlooked that the gold jewellery in question was sold/disposed of at the stage of the seizure, in fact, prior to the issuance of a show-cause notice under section 124 of the Customs Act, being issued ....
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....s not based on cogent reasons and which can be exercised without due procedure being not followed, apart from such action satisfying the test of lack of any illegal motives, non-arbitrariness, reasonableness and fairness, on the part of the Customs Officials. 55. In the present case, it is difficult to imagine as to what could be the reason for the customs officers to dispose of the goods hurriedly and with such lightening speed and by throwing to the wind the norms of fairness and reasonableness. This is not acceptable even from the reading of the provisions of section 110. Any reading of section 110 otherwise than what has been discussed above, would amount to foisting draconian, reckless and/or unfettered authority on the customs officers conferring a licence to commit illegality. In fact the recognition of any such power with the customs officers would lead to an anomalous situation of the substantive provisions and procedure for confiscation and the appellate/revisional remedy being rendered meaningless, only to be realized that any order for return of property at any stage of such proceedings, would merely remain a paper order, impossible of implementation/execution.....
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....of the gold as on the date of seizure. This would be contrary to the decision of the Division Bench in Leyla Mahmoodi and Anr. Vs. Additional Commissioner of Customs and Ors. (supra), which is accepted by the Respondents. It is for such reason, we do not accept the Revenue's contention relying on the decision in the case of Division Bench in Ramesh Shamji Patel Vs. Union of India (O.S. Writ Petition (L) No. 23037 of 2024), the fact of the said case being totally different wherein the Petitioner had written to the authorities to redeem the gold and therefore there was no challenge to the confiscation or seizure of the gold. 27. Further the contention of the Respondent that the Petitioner has not disclosed in the Petition that he had filed the refund application on 12th July 2021 and has hence suppressed facts from this Court would not be completely correct inasmuch as in the affidavit-in-rejoinder filed by the Petitioner, the Petitioner has averred that his refund application was processed and allowed on 8th January 2024. Further, this contention of the Respondent would not help them to advance their case further, as the very premise of confiscation is bad in law. 28. In so fa....