BRG Iron Steel Co. Pvt. Ltd. and Others vs Union of India and Others

Harish Tandon, J.—The original relief claimed in the writ-petition becomes obliterated because of the subsequent events as it stood proceeds on the basis that despite having filed bills of entry, the determination of the duty and the clearance of the goods are not allowed on the basis of Port Circulars issued by the respondent No. 2 i.e. Commissioner of Customs (Port), Kolkata in the first week of April 2014. A mandamus was sought commanding the respondent to forthwith make and complete the final assessment of the customs duty and to grant release of the imported goods on the basis of the bills of entry. The dispute, which would be evident from the writ-petition, relates to 28 bills of entry where the import is made on the basis of the authorization license.

In the affidavit-in-opposition, the Port Authority took the stand that the petitioner submitted 26 bills of entry and not 28 bills of entry as claimed in the writ-petition. It is specifically pointed out therein that there is a duplication of two bills of entry, which is not permissible under the law. It is discern from the statements disclosed in the opposition that 12 bills of entry out 26 bills of entry are shown as ''out of charge'' meaning thereby the goods have already been given clearance by the department. Out of the balance 14 bills of entry, 8 such bills of entry have already been assessed and the clearance under the licensee has been allowed by the department. So far as these bills of entry are concerned, the petitioner has not paid the duty in respect of 2 bills of entry and so far as the 4 bills of entry are concerned, a query is raised by the department but no replies have been given by the petitioner. So far as the 8 bills of entry for which assessment and clearance has already been given, it is stated that in terms of the procedures laid down by the Central Port of Excise and Customs, the goods are required to be presented before the Appraisal Officer for verification and/or examination before they are allowed to pass for clearance.

It would be pertinent to record that the writ-petition was affirmed on April 11, 2014 and the opposition filed by the Port Authorities was affirmed on June 3, 2014. There is no whisper in the opposition about the confiscation and/or seizure of the goods and an inference can readily be inferred that the decision of confiscation and seizure was not taken as on date of the affirmation of the opposition. While the matter was proceeding before this Court, the petitioner points out that the authorities have assessed the goods and an opportunity was given to the petitioner to bring those facts on record by way of supplementary affidavit. The Port Authorities were permitted to file the counter-affidavit to the supplementary affidavit wherein it is stated - a letter dated April 21, 2014 was issued by the petitioner showing their inability to pay the duty so assessed citing the financial stringency. In the said letter, the petitioner proposed to the authorities to keep the part of the cargo for a value of Rs. 32 Crores and interest out of the total cargo valued at Rs. 360 Crores as security towards the past duties. It is a specific stand of the customs authority that upon receiving the said letter a bona fide impression is created over the evasion of the duty and the order of seizure is passed. It would be apt and relevant to quote the relevant portion of such statement from the counter-affidavit filed by the Port Authority which runs as follows:--

"After receiving the said letter the respondents had reasons to believe that there is an evasion of duty on the part of the petitioner company and therefore, the respondent authorities seized the goods on 13th May, 2014 in accordance with law which has been mentioned in the affidavit-in-opposition."

Indisputably, because of passing the order of seizure the authorities communicated that the petitioner can take recourse of Section 110A of the Customs Act seeking provisional release. At the time of final hearing of the writ-petition, the counsels for the respective parties based their arguments on the proposition of law relating to the seizure of the imported goods.

Mr. Mitra, the learned Senior Counsel for the petitioner, submits that after the stand taken in the opposition filed by the Port Authorities to the writ-petition, there is no reason for non-clearance of the imported goods and says that this Court may direct the Port Authorities to clear the goods upon payment of the duty as assessed by the Port Authorities. He further submits that the queries raised by the department has been replied by his client and no further communication is made in this regard and, therefore, the action of the authorities in not permitting the petitioner to have the imported goods cleared upon payment of the duty is illegal, improper and abuse of the power. He thus submits that the Court can take into consideration all the subsequent events in order to mould the relief when the original relief becomes inappropriate.

In support of his contention Mr. Mitra, relies upon a recent judgment of the Supreme Court rendered in the case of Gaiv Dinshaw Irani and Others Vs. Tehmtan Irani and Others, . He strongly submits that the order of seizure came into existence during the pendency of the writ-petition which is illegal, infirm and not in accordance with law. He concludes by saying that the order of seizure is otherwise illegal and not maintainable and is liable to be quashed and set aside.

Mr. Bhardwaj, the learned Advocate for the customs authority submits that the authorities have found the violation of the conditions for granting exemption and passed an order of seizure by invoking the provision of Section 110 of the Customs Act. He further submits that the incidence leading to the confiscation is provided under Section 111 of the said Act and if the authority has reason to believe that the goods imported is liable for confiscation, can seize the goods under Section 110 of the said Act. He, however, submits that the DRI initiated an investigation and for such reasons the goods have been seized and if the petitioner intend to have the release thereof it has to take recourse under Section 110A of the said Act. So far as the order of seizure is concerned, Mr. Bhardwaj submits that the Court in exercise of the power of judicial review should not interfere with such order but leave the dispute to be decided by the authority.

In support of his contentions Mr. Bhardwaj, relies upon the following judgments:--

"1) Madanlal Steel Industries Ltd. Vs. Union of India, reported in.

2) J.K. Bardolia Mills Vs. M.L. Khunger, Dy. Collector and Others, .

3) Union of India and others Vs. Jain Shudh Vanaspati Ltd. and another, .

4) Bowreah Cotton Mills Co. Ltd. Vs. Commissioner of Customs, ."

Mr. Bhardwaj further informs this Court that the authorities after seizing the goods have informed the petitioner that they can take recourse of Section 110A of the Customs Act for provisional release and, therefore, the petitioner should approach the appropriate authority under the aforesaid provision.

In course of argument a question cropped up whether there was any circumstances envisaged the eventualities embodied within Section 111 of the Customs Act or not. According to Mr. Bhardwaj, the violation has come under clause (j) and (o) of Section 111 of the Customs Act and if the goods are liable for confiscation, the appropriate authority can assess the goods if it has reasonable believe that the goods are liable to be confiscated. Before proceeding to deal with the aforesaid contention of the Port Authorities it would be profitable to quote clause (j) and (o) of Section 111 of the Customs Act which reads thus:--

"Section 111 of the Customs Act, 1962

111.(j) any dutiable or prohibited goods removed or attempted to be removed from a customs area or a warehouse without the permission of the proper officer or contrary to the terms of such permission;

111.(o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer."

The meaningful reading of the aforesaid clauses show that the goods are liable to confiscation if it is removed or attempted to be removed from the customs or the from the warehouse without the permission of the proper officer if such goods attract duty or goods within the definition of the prohibited goods. The goods are further liable to confiscation if those are exempted from duty on certain conditions and such conditions have not been observed or if there is any prohibition in respect of an import under the Customs Act or any other law for the time being enforced, the same is also is an incidence of confiscation. Section 110 of the Customs Act can only be pressed in action if the goods are liable to confiscation and the proper officer has a reason to believe on the same.

A conjoint reading of the aforesaid provision makes it clear that the goods cannot be seized unless it is liable to confiscation on any of the grounds enumerated under Section 111 of the said Act subject, however, to the satisfaction of the proper officer in this regard. If the stand of the authorities in the affidavit-in-opposition to the writ-petition is that 26 bills of entry have been processed and cleared upon assessment of the duty or clearance is withheld because of non-submission of reply to the queries raised by the department, my endeavour has failed to find out whether these grounds can be brought within the ambit of the aforesaid clauses as relied upon by the Port Authorities. It is not a case made out in the opposition that the goods imported were exempted from duty provided the conditions attached thereto are fully observed not it is a case that the goods imported is prohibited under the Act or any other law for the time being enforce or a case of removal or attempt to remove from a customs area or a warehouse without the permission of the appropriate authority.

I have already indicated the stand taken in the counter-affidavit to the supplementary affidavit from which it does not appear that any such grounds have been narrated except that the proper officer has reason to believe that the petitioner attempted to evade the payment of duty. It is reasonably ascertained from the letter dated April 21, 2014.

There is another striking feature in the instant case. The aforesaid ground is taken at the Bar and which is absent in the pleadings filed by the Port Authorities. The only ground, which this Court can comprehend from the opposition is "the attempt to evade the duty" which does not, in my opinion, attract clauses (j) and (o) to operate. Furthermore, a case which has not made out in the pleadings, shall not be allowed to be canvassed at the Bar as the Counsel representing the department or the authority cannot travel beyond the stand taken by the department and make out a case de hors the pleadings.

Let me now examine the decisions cited by Mr. Bhardwaj in support of his contention that the Court while exercising the power under Article 226 of the Constitution of India when challenge is made to an order of seizure should not interfere but relegate the party to the authorities who is otherwise competent to take a decision.

In the case of Madanlal Steel Industries Limited (Supra), the goods were imported for human consumption and a bill of entry was filed before the officer who after necessary examination assessed the duty and a part of the cargo was cleared and was stored in the warehouse. The office of the Director of Revenue and Intelligence made a surprise inspection and seized two containers kept in the warehouse and issued the seizure warrant. A challenge is made to the order of seizure before the Madras High Court as well as the show-cause notice issued upon the importer. A point was taken that before the notice under Section 124 of the Customs Act could be issued whether the action of the authorities in seizing the goods is capable of being assailed before the High Court in a writ-petition. In the above backdrop of the fact, it is held that the power of judicial review should not be exercised when the authority is capable of determining the disputes upon issuing a notice under Section 124 of the Act.

In the case of J.K. Bardolia Mills v. M.L. Khunger, Deputy Collector (Supra) a question was raised relating to the applicability of the provisions of Section 123 of the Customs Act where the retention of the goods becomes illegal under Section 110(2) of the Act because no notice as required under the law, was served within the statutory period. In the said case, the Customs Authority seized the Synthetic Fabric of foreign origin from the factory premises of the appellant therein. The Collector (Customs) extended the period for issuance the show-cause notice prescribed under Section 124 of the Act and such show-cause notice was given within the extended period. Subsequently, the Assistant Collector, Bombay by order dated February 24, 1971 allowed confiscation and imposed the penalty upon the appellant therein. The said order was carried in an appeal and ultimately on affirmation challenged under Articles 226/227 of the Constitution. On dismissal of the writ-petition, the matter went up to the Apex Court. A point was taken that after expiration of the statutory period, if a notice is given, the proceeding initiated thereupon is invalid and the Customs Authority cannot retain the goods. It was found during the argument that some of the provisions contained under Section 123 of the Act were satisfied and it cannot be said with certainty that the order of confiscation and seizure was bad. In the above perspective it is held:--

"Para 7. The conditions to be satisfied for application of the provisions of Section 123 of the Act are (a) the goods must be one to which Section 123 applies, (b) the goods are seized under the Act and (c) the goods must be seized in the reasonable belief that they are smuggled.

Para 8. It was not disputed before the Assistant Collector that Section 123 applied to the goods in dispute. Reasonableness of belief has to be judged in the light of the facts and circumstances of each case. It is not the case of the appellant that in the facts of the present case reasonable belief could not be entertained that the goods were smuggled. The only contention raised by the learned counsel for the appellant is that in this case the seizure of the goods became illegal due to non-compliance of the provisions of Section 110(2) of the Act and, as such, one of the conditions for the applicability of Section 123 is not satisfied. There is no force in the contention. The goods were seized under Section 110(1) of the Act by the proper officer on the ground that he had reason to believe that the goods in dispute were liable to be confiscated under the Act. The seizure when made was in accordance with law and no fault could be found with the same. When the goods are seized under Section 110(1) of the Act that amounts to seizure of the goods under the Act and one of the conditions for invoking the provisions of Section 123 of the Act are satisfied by the mere factum of seizure. The effect of non-compliance of the provisions of Section 110(2) would only be that the seized goods are returned to the person from whose possession they were seized. It would not render the initial seizure of the goods illegal. We, therefore, hold that the seizure of the goods under Section 110(1) by itself is sufficient to comply with the requisite condition under Section 123 of the Act. What happens to the goods thereafter is of no consequence."

In a subsequent judgment rendered in Union of India v. Jain Shudh Vanaspati Ltd., a show cause notice under Section 124 of the Act, assailed before the High Court. The High Court considered the evidence and interfered with such notice. It is held that when the authorities have not decided the issue as they have simply issued a show-cause notice, it was not proper on the part of the High Court to go into the evidence and interfere with the proceedings at such stage. The observation made in paragraph 9 of the judgment can be conveniently relied upon which runs thus:--

"Para 9. Certainly, the High Court ought not to have entered into the thicket of evidence. Evidence was something of the authorities hearing the parties under Sections 28 and 124 to accept and weigh. We do not approve of stultifying, in exercise of powers under Article 226, an investigation, still at the show-cause stage, by going into facts."

In somewhat similar facts as in case of Union of India v. Jain Shudh Vanaspati Ltd., this Court in Bowreach Cotton Mills Co. Ltd. v. Commission of Customs, Calcutta reiterated the ratio laid down by the Supreme Court.

Had it been the case that the authorities have made out a case, which suggests the violation of any of the provisions of the Act inviting the confiscation and seizure, the Court would be slow and circumspect in interfering. The authorities says that on the basis of the letter dated April 21, 2014, the proper officer has reason to believe that the petitioner is evading the duty. At the time of argument it has been pointed out to this Court that because of the provisions contained in Clauses (j) and (o) of Section 111 of the Act, the proper officer formed an opinion that the imported goods are liable to confiscation and invoked the provisions of Section 110 of the said Act.

As I have already indicated that none of such facts can be brought within the purview of the aforesaid clauses and from the pleadings of the parties it is apparent that the authorities have wrongly invoked the provisions, the Court cannot be a mute spectator and still relegate the parties to the authorities to take a decision and determine the dispute. In case of glaring illegalities the Court can certainly interfere with an order of seizure, as reverting the parties to the authorities would remain a future exercise.

This Court, therefore, feels that the action of the authorities in seizing the goods under Section 110 of the Act is illegal, improper and invalid and cannot be sustained in law. Accordingly, this Court by moulding the relief because of the subsequent events, quash and set aside the order of seizure. Since the authorities have categorically stated in the opposition that the assessment has already been done and the goods are ready for clearance upon payment of the duty, the said authority shall allow such clearance if the duty so assessed is paid by the petitioner within the time that may be indicated by the authority.

In respect of the bills of entry where the queries are made and replies have not been received, the petitioner is granted liberty to submit the reply within two weeks from date and the authority shall thereafter take a further decision as it deem fit in the circumstances.

With these observations, the writ-petition is disposed of. No costs.