No provision for ‘detention of goods’ under the Customs Act, rules Delhi High Court [Read Judgment]

In a recent Judgment, the division bench of Delhi High Court ruled that, there is no provision in the Customs Act for detention of goods by the authorities whether it is the Customs or the DRI.

The Petitioner Worldline Tradex Private Limited is engaged in the business of import of mobile accessories. It is stated that, in the normal course of its business, the Petitioner placed an order for importing unbranded mobile accessories, parts, memory card adaptor, plastic watches, tempered glass and mobile phone LCD on its foreign supplier M/s Micsun Import and Export Private Limited for USD 15,649.19 by way of invoice dated 11th April, 2016.

According to the Petitioner, the goods were dispatched through air by Airway bill (AWB) dated 25th April, 2016. On arrival of the goods, the Petitioner filed the aforementioned B/E for home consumption. The assessable value was declared as Rs. 10,61,351.54/- and the duty payable as Rs. 2,63,494/-. The Petitioner states that it kept requesting for a copy of the entire panchnama as well as for the release of the goods, but did not receive any response. A letter dated 28th June, 2016 was addressed by the counsel for the Petitioner to the DRI and as well as the Customs making the same request. The Petitioner also requested to the DRI that its letter dated 28th June, 2016 be treated as an application under Section 110A of the Customs Act, 1962, for provisional release of the goods in case the goods had been seized. Aggrieved by the continued inaction of the Respondents, the present petition is filed.

The division bench comprising of Justice S Muralidhar and Justice Najmi Waziri observed that, there is no provision in the Customs Act which justifies the detention simpliciter of goods by the authorities whether it is the Customs or the DRI, and that too without recording of reasons.

The Court also said that, Senior Counsel Satish Agarwala drew the attention of the Court to the proviso to Section 110(1) of the Act which envisages a situation where it is not practical to seize imported goods. The proviso states that in such instance “the proper officer may serve on the owner of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer”.

The Court noted that, in the present case, “there is no order was served on the owner of the goods in terms of proviso to Section 110(1) of the Act. What the panchnama talks of is the custodian being told by the DRI not to remove, part with or otherwise deal with the goods. Clearly, therefore, no action was proposed and, in fact, taken in terms of the proviso to Section 110(1) of the Act, which is the only exception to not immediately seizing the goods. It appears to be imperative that if the proper officer decides to seize the goods, then he must record first reasons to believe that such goods are liable to be confiscation under the Act”.

The Court relied on the the decisions of the Punjab & Haryana High Court Mapsa Tapes Pvt. Ltd. v. Union of India and Om Udyog v. Union of India, the High Court was concerned with the similar situation of detention of the goods without recording reasons to believe that seizure of the goods was warranted under Section 110(1) of the Act. The following discussion in Mapsa Tapes Pvt. Ltd. v. Union of India supports the case of the Petitioner that, for there to be a valid seizure of the goods it is incumbent on the proper officer to record reasons to believe, under Section 110(1) of the Act, that the goods are liable to be confiscated.

“The power of seizure under Section 110 of the Act has to obviously be exercised for valid reasons. The proper officer has to record his reasons to believe that the goods that he proposes to seize are liable to confiscation. The said reasons for exercise of the power have to be recorded prior to the seizure”, the division bench observed.

In the present case, as already noticed, apart from the panchnama, there is no separate order passed under Section 110(1) of the Customs Act by the proper officer recording the reasons to believe that the goods are liable for confiscation. Since till date no other order exists and no such order has been communicated to the Petitioner, it is not possible to accept the plea of Mr Satish Agarwala, learned counsel for the DRI, that the ‘detention’ of the goods by the DRI was with the authority of law and in any event should be treated as a seizure in terms of Section 110(1) of the Act”.

“The detention by the DRI of the goods imported by the Petitioner under the aforementioned B/E from 13th May, 2016 onwards is entirely without the authority of law”, the Court also added.

Read the full text of the Judgment below.

Tax Law News, Tax News, Indian Tax Laws, Taxation Law News, Tax Lawyers, CA News, Delhi High Court News, Finance News, Business Tax News, Income Tax News, Tax Scan, Taxscan, Legal News, Legal News India, Indian Legal News, Law News.

taxscan-loader