The Bombay High Court detaining of CRGO strip without being any demand due is invalid. It was found that there isn’t any such provision that would empower the respondents in the facts of the present case, to detain the goods.
Mayur Enterprises, the petitioner is a proprietorship concern engaged in the business of buying and selling CRGO sheets, scraps, etc. in the local market. The petitioner agreed with Pacific Powertech Solutions (Pacific) for the purchase of CRGO Strips. The petitioner made market enquiries and found that Pacific had purchased the said goods from one GSD Technology, who, in turn, had purchased the goods from one M/s ST Electricals, who is the actual importer of the goods. M/s ST Electricals is located in Jaipur.
The petitioner purchased these goods from Pacific under Invoice No. 043 dated 02.07.2023, No. 044 dated 02.07.2023, No. 045 dated 03.07.2023 and No. 046 dated 05.07.2023. The petitioner, in the course of his business, sold the goods, which were purchased from Pacific to one Narayan Power Solutions and one Transel Engineer over the period of 4 July 2023 to 11 July 2023 under various invoices, which are annexed to the petition. The petitioner claims to be a bonafide purchaser of the goods as originally imported by M/s S. T. Electricals and cleared for home consumption.
Meanwhile, the Customs Authorities at Jaipur initiated proceedings against M/s ST Electricals alleging undervaluation of goods. M/s ST Electricals has challenged the said action of the authorities before the Rajasthan High Court which is stated to be pending. The Customs Authorities, during the investigation, found that M/s ST Electricals had sold these goods to GST Technology, who, in turn, has sold to Pacific and Pacific has sold goods to the petitioner and the petitioner has further sold these goods in the market.
Under the above investigation, the respondents attached the bank accounts and sealed the premises of the petitioner based on communication received from the Commissioner of Customs, Jodhpur as averred by the respondents in their reply. However, no such communication is annexed to the reply.
It was submitted that it would be illegal for the respondents to freeze the cash credit account. This is also contrary to the settled principles of law. Further contended that the respondents would not have any authority to seal the godown premises, being immovable property. It is also contended that the godown has several materials of the petitioner and the respondent in the present case undertaking any search operations would not be concerned for the entire goods and they will be required to identify the goods on which the respondent may intend to proceed.
After analysing various provisions, it was found that once the goods are cleared for home consumption and enter the domestic market for sale, such goods cannot be seized from the subsequent purchasers and that too if the third person against whom action is initiated has already sold the goods in open market and when no demand or proceedings was pending for recovery of duty etc. against such third person.
The goods imported by M/s ST Electricals were initially cleared for home consumption by the said importer and the said goods have changed hands in the open market and are also out of the possession of the petitioner. The respondents in their affidavit in reply have referred to the communication from Jodhpur Customs authorities wherein the Jodhpur authorities have directed the respondents to seize the very goods imported by M/s ST Electricals.
Section 28 nowhere provides for detention of the goods and attachment of the bank accounts more so in the absence of any demand of any duty or penalty or any proceedings pending against the petitioner. Therefore the reliance placed by the respondents on the provisions of Section 28, is misconceived.
Section 110(1) of the Customs Act also would not assist the case of the respondents. The said provision provides that if the proper officer has reason to believe that any goods are liable to confiscation under the Act, he may seize such goods. Proviso to Section 110(1) provides that where it is not practicable to seize any such goods, 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.
There is no material to prima facie show that the goods which are detained as observed above by the respondents are the very goods that were imported by M/s ST Electricals and which were purported to be in the possession of the petitioner. Further Section 110(5) of the Act empowers the proper officer during any proceedings under the Act to provisionally attach a bank account to protect the interest of revenue or to prevent smuggling.
A division bench comprising Justice G S Kulkarni and Justice Jitendra Jain observed that the respondents have contended that they have not seized the goods but they have only detained the goods.
The court held that “the impugned action of the respondents in detaining the goods in question and attaching the bank account of the petitioner without there being any demand due from the petitioner or any proceedings pending is without jurisdiction and any authority of law.”
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