Sree Rajendra Textiles vs Commissioner of Customs, Tuticorin

V. Ramasubramanian, J.—The petitioner has come up with the above writ petition, seeking a mandamus, directing the second respondent to assess the goods covered by the Bill of Entry Nos. 2363919, 2366129 and 2367779 respectively dated 25-11-2010, 26-11-2010 and 26-11-2010. Heard Mr. Joseph Prabakar, learned counsel for the petitioner. Mr. R. Aravindan, learned Standing Counsel for the respondents.

The petitioner imported three consignments of Silk Fabric in 440 cartons for a total value of US$ 431,695.86 from a Malaysian Company vide three invoices dated 1-10-2010, 1-10-2010 and 15-10-2010. The petitioner also filed three Bills of Entry in Tuticorin Port, bearing Nos. 2363919, 2366129 and 2367779 respectively dated 25-11-2010, 26-11-2010 and 26-11-2010.

Pending the assessment of the goods, the office premises of the petitioner was subjected to a search by the Department of Revenue Intelligence, Bangalore on 8-11-2010. A mahazar was drawn on 8-11-2010 and summons were issued. The partners of the petitioner appeared for an enquiry on January 3rd and 4th, 2011 before the Department of Revenue Intelligence at Tuticorin and their statements were recorded. Ever since then the goods are lying under the custody of the respondents and no order of assessment has so far been passed. Therefore, the petitioner has come up with the above writ petition.

The writ petition was filed on 11-1-2011 and it was moved for admission on 12-1-2011. At that time, the Senior Standing Counsel for the respondents took notice and sought time. The case was adjourned thereafter, from time to time. On 9-3-2011, the petitioner insisted for an interim direction to direct the second respondent to provisionally release the goods, as the material was lying from November 2010. At that time, it was pointed out by the Standing Counsel for the respondents that though the goods appeared to have been imported from Malaysia, the origin of the goods was suspected to be China and that therefore, there was a likelihood of Anti Dumping Duty to the extent of Rs. 1,79,00,000/-being levied. In view of the said statement, the counsel for the petitioner agreed to offer bank guarantee for the said amount, to enable the petitioner to take the goods. Therefore, this Court passed an order on 9-3-2011, directing the second respondent to release the goods subject to the petitioner furnishing a bank guarantee to the tune of Rs. 1,79,00,000/-.

But the petitioner could not get a bank guarantee executed. Therefore, the petitioner came up with an application in M.P. No. 3 of 2011 for modifying the order passed on 9-3-2011. But the same was dismissed by the learned Judge by an order dated 5-7-2011, on the ground that an order passed by consent, cannot be modified. The petitioner filed a writ appeal in W.A. No. 735 of 2011, but the same was also dismissed by the Division Bench. The result is that the goods are still lying uncleared and the writ petition itself has come up for final hearing.

When the petitioner came up with the writ petition in January 2011, within two months of the goods arriving at the Port, the only prayer that he could contemplate was to direct the respondents to complete the assessment and also to direct them to release the goods in the meantime. Therefore, the primary contention taken in the writ petition, as it was originally filed, was that since the goods are neither prohibited nor banned items, the detention of the goods by the respondents was unlawful. The petitioner also relied upon the Circular of the CBEC bearing No. 22/2004-Cus., dated 3-3-2004, which stipulates that a consignment should not be held up, unless its import or clearance is totally prohibited or banned. Since there was no dispute about the fact that the goods in question were neither banned nor prohibited and also since there was no dispute about the value declared by the petitioner, the focus of the petitioner in the writ petition, as it was originally filed, was only to direct the respondents to complete the assessment and to release the goods.

The respondents filed a counter contending inter alia (i) that with a view to protect the Indian Silk Industry, the Government of India issued a Notification bearing No. 121/2006, dated 26-12-2006, imposing Anti-dumping Duty for Silk Fabric imported from China; (ii) that the petitioner had routed the material in question through Malaysia, though they were of China origin and hence the Anti-Dumping Duty worked out to Rs. 1,79,31,926/-; (iii) that the cartons as well as the fabrics did not contain any marking about the description, brand or manufacturer''s name; (iv) that the partner of the petitioner admitted that he had no direct contact with the Malaysian supplier, but ordered the fabric from a person by name Jerry Yuan of China; (v) that the petitioner could not furnish either K1/K2 Certificate or evidence for payment of money to the Malaysian party; (vi) that since the Anti-dumping Duty payable is very high, the goods had to be detained; and (vii) that the goods are now kept only in CWC CFS Bonded Warehouse and hence the petitioner is not incurring any demurrage and that therefore the writ petition deserved to be dismissed.

From the averments contained in the affidavit and the counter affidavit filed by the respondents, it is clear that there is no difficulty about granting the prayer of the petitioner for a mandamus, directing the second respondent to complete the assessment within a time frame. According to the learned Standing Counsel for the respondents, the only impediment for completing the assessment is the non-production of two documents viz., (i) the details of payment made to Malaysian Company and (ii) the clearance issued by the Malaysian Customs for the export of goods from Malaysia. But the learned counsel for the petitioner produced proof to show that these two documents have already been furnished. But without standing on formalities, the learned counsel for the petitioner submitted that he is prepared to furnish one more set of copies also. Therefore, virtually there is no objection to the grant of the prayer made in the writ petition for a direction to complete the assessment within a time frame.

The only area of dispute today is as to whether and how the goods should be allowed to be cleared or not. According to the learned Standing Counsel for the respondents, the respondents never stood in the way of the goods being cleared, subject to a bank guarantee being furnished as aforesaid. But according to the learned counsel for the petitioner, despite his consent at the interlocutory stage, the petitioner is unable to furnish bank guarantee to have the goods cleared. Therefore, the only dispute today is as to whether the goods can be allowed to be cleared without requiring the petitioner to furnish bank guarantee or not.

It is the contention of the learned counsel for the petitioner that the position as on date is different from what it was on 9-3-2011 when he agreed to furnish bank guarantee and get the goods cleared. According to the learned counsel for the petitioner, the respondents have today lost the legal authority to detain the goods, any further, due to the efflux of time prescribed by the statute. Consequently, the petitioner is entitled to take away his goods.

In support of the above contentions, the learned counsel for the petitioner relied upon Section 110(2) of the Customs Act, the Circular of C.B.E. & C. dated 3-3-2004 and a few decisions. Let me take them up for consideration now.

Section 110 of the Customs Act, 1962, deals with seizure of goods. Under sub-section (1), the proper Officer is entitled to seize goods, which he has reason to believe, are liable to confiscation under the Act. If the goods are not capable of being seized, the proper Officer may serve on the owner of the goods, an order prohibiting him from removing, parting with or otherwise dealing with the goods, except with the previous permission of such Officer.

If the goods are of perishable or hazardous nature, then the Government may order their disposal, by following the procedure. But sub-section (2) and the proviso thereunder of Section 110 of the Act, prescribes a period of limitation for the proper Officer to take action and for the return of the goods if no action is taken within the period prescribed. They read as follows :-

(2) Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of Section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized; Provided that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Commissioner of Customs for a period not exceeding six months.

The object of Section 110(2) is to ensure that the imported goods are not detained for a longtime, causing not only a dent in the finances of the importer, but also causing congestion at Ports and Warehouses. This is seen from the Circular No. 22/2004-Cus., dated 3-3-2004 issued by the Department. It reads as follows :-

I am directed to say that the trade has represented to the Board that the items involved in classification disputes should not be withheld but should be released by resorting to provisional assessment

The matter has been examined by the Board. It may be mentioned that in case of classification disputes, by and large, option is given for provisional clearance/assessment if the inquiries are going to take time. However, the Board desires that a disputed or offending consignment should also not be held up unless its import/clearance is totally prohibited or banned under any law for the time being in force (e.g. PFA, CITES, Weight & Measures Act, etc.) or where prosecution is contemplated. At most, samples should be drawn and consignment should be allowed to be cleared on provisional basis as a matter of right. This will prevent congestion at ports and warehouses. Adequate B.G/security may be taken to safeguard revenue (including possible fine and penalty). In case where it is decided to detain the consignment action should be taken to shift the same to a Customs Warehouse u/s 49 of the Customs Act, 1962 (Board''s Circular No. 84/95-Cus., dated 25-7-1995 may be referred to)."

Regulation 2 of the Customs (Provisional Duty Assessment) Regulations, 1963, also prescribes the procedure for making a provisional assessment, in case the proper Officer is unable to make a final assessment. It reads as follows:-

Conditions for allowing provisional assessment. - Where the proper Officer on account of any of the grounds specified in sub-section (1) of Section 18 of the Customs Act, 1962 (52 of 1962), is not able to make a final assessment of the duty on the imported goods or the export goods, as the case may be, he shall make an estimate of the duty that is most likely to be levied hereinafter referred to as the provisional duty. If the importer or the exporter, as the case may be, executes a bond in an amount equal to the difference between the duty that may be finally assessed and the provisional duty and deposits with the proper Officer such sum not exceeding twenty per cent of the provisional duty, as the proper Officer may direct, the proper Officer may assess the duty on the goods provisionally at an amount equal to the provisional duty.

In Om Udyog v. Union of India [2010 (254) E.L.T. 547 (P & H)], a Division Bench of the Punjab and Haryana High Court considered the question as to whether the detention of goods for a period of more than two months can be taken to be justified or not. After looking at Sections 17,18,47 and 110 of the Customs Act, and the decision of the Supreme Court in Mapsa Tapes [2006 (201) E.L.T. 7], the Division Bench of the Punjab High Court held that non-clearance of goods seriously affects the rights of lawful importer and that no authority can plead unlimited power of non-clearance, on account of its own incompetence.

Again in Amit Enterprises v. Union of India [2011 (269) E.L.T. 314 (P&H)], the Division Bench of the Punjab and Haryana High Court reiterated that the power of detention is a drastic power and that its exercise has to be hedged by safeguards to check its abuse. The Court also pointed out that the authority exercising such power must strictly justify the same.

Similarly, it was held by the Calcutta High Court in S.J. Fabrics Pvt. Ltd. v. Union of India [2011 TIOL 532 = 2011 (268) E.L.T. 475 (Cal.)], that consignments cannot be held indefinitely without any valid order of detention u/s 110. The Court also pointed out that if no show cause notice u/s 124(a) is issued within 6 months from the date of detention, the consignments are liable to be released.

From the provisions of Section 110(2) and the view taken by the High Courts of Punjab and Haryana and Calcutta, it is clear that without passing an order of assessment, it is not open to the respondents to keep the goods detained. In the case on hand, the goods arrived at the Port in the last week of November 2010. The Bills of Entry were filed on 25/26-11-2010. Till date, the respondents have not issued any notice of assessment, either provisional or final. u/s 110(2), the respondents are obliged to release the goods within 6 months of seizure, if no notice is issued in terms of Section 124(a). This period of 6 months can be enlarged by the Commissioner of Customs by a further period of 6 months, by virtue of the proviso to Section 110(2). Therefore, the respondents had time till 25/26-5-2011, which could have been extended upto 25/26-11-2011. But we are in December 2011. Till date no notice u/s 124(a) has been issued.

The petitioner himself gave a wake up call, to this effect, by filing a reply to the counter, way back in June 2011 in MP. No. 3 of 2011. But the respondents did not wake up from their slumber. Therefore, the respondents have become obliged to release the goods in terms of Section 110(2).

The only reason stated by the respondents for not issuing a notice u/s 124(a) for the past more than one year, is that the petitioner failed to furnish two documents called for by them. The petitioner has produced proof to show that he had in fact furnished those documents. Even assuming without admitting that such documents were not furnished by the petitioner, the respondents were not left without a remedy. For issuing a notice u/s 124(a), there was no necessity for insisting upon the production of those two documents. At any rate, there was no prohibition for the respondents to draw adverse inference, when the documents called for were not produced. The Act empowers the proper Officer to proceed to complete the assessment on the basis of available records, if the importer fails or refuses to co-operate. Therefore, the excuse given by the respondents for not issuing a notice u/s 124(a) is just like the excuse given by a person who does not know dancing, but who blames the stage for his failure to perform. In view of the above, the writ petition is allowed and the respondents are directed to issue a notice, within two weeks of receipt of a copy of this order. Within two weeks of receipt of the notice, the petitioner shall file a reply along with necessary documents, even if those documents have already been furnished. Within four weeks of the petitioner giving a reply, the proper Officer shall pass an order of assessment. In the meantime, the respondents are directed to release the goods within a week of receipt a copy of this order, upon the petitioner executing personal bonds of all the partners, to the effect that they would abide by the order of assessment subject to further remedies available under the Act. There will be no order as to costs. Consequently connected miscellaneous petition is closed.