Assigning Reasons or Grounds is Mandatory while Preparing Seizure Memo under Customs Act: Patna HC sets aside Areca Nuts Seizure Memo [Read Order]

The Patna High Court recently annulled the seizure memo of a consignment of areca nuts issued under the Customs Act, 1962. The court ruled that the memo lacked proper justification and the required "reason to believe," a mandatory prerequisite for such actions.

Justices P. B. Bajanthri and Alok Kumar Pandey observed that “‘Reason to believe’ cannot be a rubber stamping of the opinion already formed by a competent officer. The Officer who is supposed to write down his minimum reasons to believe has to be independently apply his mind. It should not be a mechanical reproduction of the words in the statute.”

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The petitioner, M/s Assam Supari Traders, transported dried areca nuts from Assam to Karnataka with proper invoices, GST documentation, and an e-way bill. However, customs officials seized the consignment on 02.04.2024, alleging violations of the Customs Act, 1962, and the Foreign Trade Act, 1992. The authorities based their action on local traders' visual inspection, which suggested the nuts might be of foreign origin.

Despite the petitioner's claim that the goods were lawfully purchased and transported, and the goods were of Indian origin, the authorities seized the consignment based on local traders' visual inspection, suggesting the goods might be foreign.

The petitioner argued that the seizure was illegal due to the lack of proper reasoning and reliance on the unreliable opinions of local traders. While the goods were provisionally released, further legal proceedings remained pending.

The term "reason to believe" was recognized as a safeguard, requiring sufficient cause based on facts, not arbitrary or capricious actions. The Customs Bill, 1962, discussed by a committee, emphasized the importance of "reason to believe" when seizing goods. Members, including Sri Morarji Desai, agreed that officials must provide written reasons before seizing goods, ensuring accountability, noted the bench.

The bench noted that failure to disclose the "reason to believe" in the seizure memo, as required by Section 110 of the Customs Act, 1962, is not a minor irregularity but an illegality. Without supporting material or specific reasons, the seizure and provisional attachment are rendered invalid. For a lawful seizure, there must be compelling evidence that goods are imported, and mere inference without such evidence is arbitrary and violates constitutional principles.

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The High Court noted the observation of the Supreme Court in the case of matter of (i) State of Rajasthan v. Rohitas and Others, & (ii) Ran Singh vs. State of Haryana that “order disposing of an application necessarily requires recording of reasons in support of the conclusions arrived at in the order irrespective of whether such an order is passed in exercise of judicial or administrative powers vested in the court or the authority and failure to give reasons amounts to denial of justice”.

With regards to the allegation of foreign imported areca nuts, local traders' opinions that the nuts were of foreign origin were unreliable, as the Ministry of Agriculture and ICAR confirmed that it’s impossible to determine origin by visual inspection alone. The Arecanut Research & Development Foundation's report confirmed the nuts resembled Indian produce, further supporting the petitioner’s case.

Accordingly, the impugned seizure memo is set aside, and as a result, the bank guarantee is discharged. The bond furnished by the petitioner for the provisional release of the seized goods shall be released within three months from the date of receipt of this order.

To Read the full text of the Order CLICK HERE

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