Panchnama cannot be considered as Seizure Memo, Customs Officers Acting on Secret Information must record Minimal Reasons: Patna HC [Read Order]

In a recent ruling, the Patna High Court has clarified that Panchnama cannot be considered as seizure memo following the decision of Delhi HC. It also stated that the customs officers acting on secret information must record at least the minimal reasons in the seizure memo.

Justices P. B. Bajanthri and S. B. Pd. Singh, reading Instruction Notification No. 01/2017-Customs, it clarified that Panchnama cannot be read into seizure memo as held by the Delhi High Court. The notification was issued following the decision of the Delhi high court.

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The notification was issued based on the high court judgment where it was held that a panchnama is a statement by panchas (witnesses) and cannot be taken to be an order passed by the proper officer under Section 110 of the Customs Act, 1962.

In the notification it was clarified that “Whenever goods are being seized, in addition to panchnama, the proper officer must also pass an appropriate order (seizure memo/order etc) clearly mentioning the reasons to believe that the goods are liable for confiscation.”

The petitioners are engaged in the business of Areca Nuts. The first petitioner operates under M/s Krishna Kali Traders, West Bengal, and the second petitioner under M/s Nirmal Kumar Mahavir Kumar, New Delhi.

On August 12, 2020, the second petitioner purchased 21,700 kg of Areca Nuts worth ₹39,43,275 from the first petitioner, supported by a Tax Invoice. Transportation of the goods was arranged through Marudhar Assam Road Lines Private Limited, with an e-way bill generated the same day.

The goods, weighing 21,700 kg in 310 bags, were intercepted by Customs officials in Muzaffarpur, Bihar, and seized along with the transporting truck (UP 31 AT 1107). A seizure memo dated August 14, 2020, indicated the goods' foreign origin, valuing them at ₹44,30,580 and the truck at ₹26,50,000, bringing the total valuation to ₹70,80,580. A Panchnama was also drawn.

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The core issue is whether the seizure memo under Section 110 of the Customs Act, 1962, complies with legal requirements, including provisions under Sections 110(1A), (1B), and (1C), concerning inventory, conveyance, and certification by a Magistrate.

The petitioners argue that the seizure memo is legally invalid due to non-compliance with Sections 110(1A), (1B), and (1C) of the Customs Act. They contended that the Panchnama, prepared subsequent to the seizure memo, violates established procedures.

To support their claims, the petitioners rely on a notification dated February 5, 1986, and a Circular dated February 8, 2017, both of which mandate adherence to statutory provisions.

Furthermore, they reference judicial precedents, including Assam Supari Traders v. Union of India and Worldline Tradex P. Ltd. v. Commissioner of Customs, which asserts that a Panchnama cannot replace a seizure memo.

The senior counsel for the respondents, Dr. K.N. Singh, ASG, raised a preliminary objection regarding the maintainability of the writ petition, asserting that the petitioners have a statutory remedy under Section 128 of the Customs Act, 1962. He also questioned the locus standi of the second petitioner and identified defects in the supporting affidavit.

Addressing the petitioners' reliance on the Assam Supari Traders case, he argued that it is distinguishable as it did not involve a seizure memo read alongside a Panchnama. He emphasized that the Panchnama in the present case, prepared on the same date as the seizure memo, provides sufficient grounds to establish the "reason to believe" required under the Act. He further cited violations of Sections 7, 11, 46, and 47 of the Customs Act, 1962, and Section 3(2) of the Foreign Trade (Development and Regulation) Act, 1992, as grounds for the seizure.

Dr. Singh distinguished the procedural requirements under the Customs Act from those in other laws like the PMLA, IPC, and Income Tax Act, asserting that the seizing officer cannot immediately ascertain whether goods are of foreign or domestic origin. He referenced multiple judgments supporting the principle of "reason to believe" and the validity of alternative remedies, including State of Maharashtra v. Greatship (India) and Tata Chemicals Ltd. v. Commr. of Customs.

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He also cited contradictions in the documentation, such as discrepancies in the place of dispatch and Way Bill details, and evidence suggesting foreign origin of the goods (Bangladesh and Guyana). He concluded that these factors, along with secret information received by the seizing officer, suffice to justify the seizure and support the case for upholding the actions taken by the Customs authorities.

The court, after hearing the matter observed that “That apart reading of both the seizure memo and Panchnama, one can draw inference that firstly seizure memo has been prepared and secondly Panchnama has been drawn, therefore, at the time of writing seizure memo, Panchnama was not written or existed. This is evident from reading of Panchnama.”

It was also added that “Secret information is only tentative when Section 110 of the Act, 1962 stipulates that reason to believe. In this backdrop, Seizing Officer cannot keep reasons in his mind and he has to disclose minimal reasons in the seizure memo.”

Accordingly, the impugned seizure memo was decided to be unsustainable and the same was quashed and set aside.

To Read the full text of the Order CLICK HERE

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