IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. C.W.P. No. 7972 of 2009 Date of Decision: September 23, 2009 M/s Aabhas Spinners Pvt. Ltd. …Petitioner Versus Union of India and others …Respondents CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE JASWANT SINGH Present: Mr. Jagmohan Bansal, Advocate, for the petitioner. Mr. Kamal Sehgal, Advocate, for respondent Nos. 1 to 4. Mr. S.C. Pathela, Advocate, for respondent No. 5. 1. To be referred to the Reporters or not? 2. Whether the judgment should be reported in the Digest? M.M. KUMAR, J. This petition filed under Article 226 of the Constitution challenges orders dated 18.3.2009 and 23.3.2009 (P-7 & P-8), passed by the Directorate of Revenue Intelligence, Ludhiana, seizing the goods of the petitioner-Company. A further prayer has been made for directing the Joint Director, Directorate of Revenue Intelligence- respondent No. 2 to defreeze the bank accounts of the petitioner- Company and allow it to withdraw funds therefrom. Still further it has been prayed that goods, cash, mutual funds and record etc. C.W.P. No. 7972 of 2009 belonging to the petitioner-Company be also released. 2. The case of the petitioner-Company is that it used to import various types of yarn and blankets from China and sell the imported yarn as such or would sell it after converting the same into fabrics. It is claimed that the petitioner-Company has neat and clean track record of importing goods. During the last five years the Custom Officers never raised any objection at the time of clearance of their goods. It has been averred that it has always complied with the requirements of Sections 17, 46 and 47 of the Customs Act, 1962 (for brevity, ‘the Act’). These provisions relate to assessment of duty, entry of goods on importation and clearance of goods for home consumption. 3. During the later part of 2008 the petitioner-Company imported goods, which were cleared after passing of an assessment order under Section 47 of the Act. As per prescribed procedure under the Act before permitting clearance of goods for home consumption, goods are physically examined, samples are drawn and assessment order is passed under Section 17 read with Section 47 of the Act. However, on 23.1.2009, the officers of the Directorate of Revenue Intelligence (DRI) conducted a search of the business premises as well as residence of the Director of the petitioner-Company. The DRI alleged that the petitioner-Company has mis-declared the value of the imported goods at the time of filing bill of entry and it has paid less duty as compared to the actual liability. The officers of DRI found 416 bales of nylon/acrylic/ polyester yarn and few cartons of blankets as detailed in para 5 of the petition. The goods and the record which 2 C.W.P. No. 7972 of 2009 was lying in the business premises of the petitioner-Company were detained. Apart from this, an amount of Rs. 1.5 lacs and mutual fund receipts were also detained from the residence of the Director of the petitioner-Company vide panchnama dated 22.1.2009 and 23.1.2009 (P-1 to P-3). It has been alleged that the revenue-respondent has even issued directions to the bankers to freeze the bank accounts of the petitioner-Company, its Director as well as their relatives. The said action of the respondents came to the notice of the petitioner- Company upon receipt of communications dated 24.1.2009 and 27.1.2009 from the Bank of India, Ludhiana (P-4). 4. On 4.2.2009, the petitioner-Company addressed a letter to the Deputy Director, DRI, Ludhiana, and requested for release of the goods. They also furnished documents in proof of purchase of detained goods along with the letter (P-6). On 23.2.2009, the petitioner-Company made a request to the Director General of Revenue Intelligence for de-freezing of their bank accounts (P-5). 5. The Deputy Director, DRI, Ludhiana, instead of releasing the goods and other material passed orders dated 18.3.2009 and 23.3.2009. He seized the detained goods and other material including 18360 Kgs. of yarn which was purchased by the petitioner-Company from M/s Excel Packages. The firm M/s Excel Packages is under the son-in-law of the Director of the petitioner-Company. The yarn weighing 18360 Kgs. was not imported by the petitioner-Company (P-7 & P-8). A perusal of order dated 18.3.2009 (P-7) shows that the goods mentioned therein have been seized on the pretext that the same were found mis-declared and undervalued. With regard to the 3 C.W.P. No. 7972 of 2009 request of the petitioner-Company for release of yarn detained at Sr. No. 1 of the detention memo. dated 23.1.2009, it has been stated in para 2 of the order dated 23.3.2009 (P-8) that as per the documents submitted by the petitioner-Company on 4.2.2009 the yarn has been claimed to be auctioned material i.e. Blended Acrylic Yarn, whereas in the panchnama the detained goods mentioned at Sr. No. 1 were Acrylic Yarn having marking as ‘15/2 100% A Boucle Yarn RW’. It has further been pointed out that the samples drawn from different lots of detained consignment of 18360 Kgs., after testing in the Central Revenue Control Laboratory, New Delhi, have been found to be composed of Acrylic and are special type of yarn having complex construction. The claim of the petitioner-company that the detained Yarn was purchased from Shri Karan Chaudhary of M/s Excel Packages, Ludhiana, who purchased the same in an auction conducted by the port authorities of Punjab State Warehousing Customs (PSWC), has also been turned down on that premise. It has further been mentioned that the seized goods could be provisionally released under Section 110A of the Act after submitting bond with such security and conditions as the Competent Authority may prescribe. 6. The petitioner-Company has also claimed that under Section 110(A) of the Act the respondents were required to follow the procedure as envisaged under Section 110(1B) of the Act, whereas they have detained/seized the goods under Section 110 of the Act. It has been submitted that under Section 110 of the Act the goods could be seized only if the seizing officer has reasons to believe that goods are liable to confiscation, whereas no reasons have been given in the 4 C.W.P. No. 7972 of 2009 seizure memos and, therefore, the petitioner-Company has been deprived of its valuable right to utilise the goods in question. 7. In the written statement filed on behalf of the respondents various preliminary submissions and objections have been raised in addition to the reply given on merits. The first objection raised by the respondents is with regard to concealment of facts by the petitioner-Company from this Court. It has been asserted that the goods in question were originally imported by the petitioner- Company in its own name i.e. M/s Aabhas Spinners (P) Ltd., Ludhiana. The title of the goods was relinquished as they failed to file the bill of entry of the goods. Subsequently, the respondents auctioned the goods, which were purchased by Shri Karan Choudhary of M/s Exel Packages, who happens to be son-in-law of Shri Padam Dalmia, the main promoter/director of the petitioner-Company. The description of the yarn was never challenged either by Shri Karan Choudhary or by the petitioner-Company. It has also been pointed out that the respondents approached PSWC, Ludhiana, for providing details of drawl of sample from the auctioned goods, testing of the same in the Laboratory and result thereof, vide letter dated 1.4.2009. In response thereto, it has been intimated that PSWC had not drawn any sample or sent to any laboratory before conducting the auction as the goods were disposed of on ‘as is where is basis’. 8. It has been further asserted that as the petitioner- Company has not exercised the option of provisional release of the goods under Section 110A of the Act after submitting bonds with such security and condition as the competent authority may 5 C.W.P. No. 7972 of 2009 prescribed, therefore, the writ petition is mis-conceived and liable to be dismissed. 9. It has also been pointed out that the officers of the DRI, Ludhiana, on the basis of intelligence found that some of the importers have imported various types of yarn such as 100% polyester yarn, 100% nylon yarn, nylon viscose blended yarn, feather yarn etc. from China and Singapore. In order to evade Customs Duty they have mis-declared the value and description of the such imported yarn. Accordingly, search operations were carried out on the premises of five importers’ firms based in Ludhiana. The respondents have further given details regarding modus operandi of such importers, investigation conducted by the DRI and unearthing of hawala transaction and channel etc.. 10. The factual matrix regarding search made on 22/23.1.2009 on the business/residence premises of the directors of the petitioner-Company under Section 105 of the Act, detaining of goods, records, cash of Rs. 1.50 lacs, mutual fund receipts etc. and passing of seizure orders dated 18.3.2009 and 23.3.2009, has been admitted. However, it has been submitted that the petitioner- Company could not produce any documentary evidence in support of purchase of yarn and blankets in question lying in the factory-cum- godown premises at the time of search/investigation by the officers of the DRI on 23.1.2009. It has been denied that the seized material includes 18360 Kgs. 100% Boucle Yarn. In that regard test reports of the laboratory have been referred which are to the effect that detained yarn was composed of Acrylic and special type of yarn having 6 C.W.P. No. 7972 of 2009 complex construction. 11. It has also been denied that any directions were issued to the bankers of the petitioner-Company to stop operation of the bank account and the only direction issued was to freeze the balance in the bank accounts so as to facilitate the seizure and subsequent confiscation of the goods in terms of the proceedings under Section 121 of the Act. With regard to the seized amount of Rs. 1.50 lacs it has been stated that the said amount pertains to sale proceeds of the smuggled goods and liable for confiscation. With regard to return of documents, mutual fund receipts, CPUs/laptop etc. it has been mentioned that the CPUs’ and Laptop were returned on 2.2.2009 and 28.3.2009 after retaining the original hard discs. Even copy of the hard disc of the laptop was given on 28.3.2009. Besides this 48 files containing photocopies of import documents were also handed over on 7.2.2009, whereas photocopies of mutual fund subscription made by the family members of the Director of the petitioner-Company were handed over on 24.6.2009. The contention raised by the petitioner-Company regarding non-compliance of the provisions of Section 110(1A), 110(1B) and 110(1C) of the Act, which pertains to disposal of the goods during the pendency of investigation, has been denied by stating that these provisions are not mandatory in nature. 12. In the replication filed on behalf of the petitioner- Company, apart from reiterating the factual position pleaded in the petition, it has been asserted that the goods as well as cash in question were detained on 22/23.1.2009 and as per the provisions of Section 110 read with Section 124 of the Act, if no show cause notice is 7 C.W.P. No. 7972 of 2009 issued within six months from the date of seizure, the goods are liable to be released. According to the petitioner-Company the period of six months in the present case expired on 21/22.7.2009. It has further been submitted that the respondents have shown the date of seizure as 18/23.2.2009 with a view to gain more time. Furthermore, there is no specific provision concerning detention of goods under the Act. It has been asserted that the detention and seizure is one and the same thing. In response to the preliminary objections raised by the respondents it has been stated that relinquishment of title of goods by the petitioner-Company has nothing to do with the present case. It has been specifically denied that the petitioner-company has concealed any material facts from the Court. After relinquishing of title by the petitioner-Company, M/s Exel Packages purchased the goods in an open auction, from whom the petitioner-Company has again purchased the goods. 13. A short affidavit dated 3.8.2009, has also been filed by Shri H.N. Meena, Deputy Director, DRI, Ludhiana, stating that a show cause notice for extension was issued by DRI on 15.7.2009, which was personally handed over to Shri Padam Dalmia, Director of the petitioner Company on 16.7.2009. In response to the said notice, counsel for the petitioner appeared on 20.7.2009 and filed written submissions before the Commissioner of Customs, Amritsar. The Commissioner of Customs, Amritsar, after hearing the petitioner adjudicated the matter and passed an Order-in-Original, bearing No. 08/CUS/09, dated 20.7.2009, issued vide C.No. VIII(Hqrs.)10/CUS/ Order/24/09/4653-56, dated 21.7.2009, and extended the time period 8 C.W.P. No. 7972 of 2009 for issuance of show cause notice by a period of six months i.e. upto 20.1.2010, as per the provisions of sub-section (2) of Section 110 of the Act. However, along with the said affidavit copies of the show cause notice dated 15.7.2009 and order dated 20.7.2009 were not placed on record. The averments already made in the written statement were also reiterated in the affidavit dated 3.8.2009. 14. On 4.8.2009, when the case was taken up for hearing learned counsel for the petitioner-Company argued that in accordance with sub-section (2) of Section 110 of the Act if no notice in respect of seized goods is given within a period of six months from the date of the seizure then the goods have to be returned to the person from whose possession such goods were seized. On the other hand, learned counsel for the respondents reiterated the contents of short affidavit dated 3.8.2009 with regard to issuance of show cause notice dated 15.7.2009 and passing of order dated 20.7.2009 within a period of six months. Learned counsel for the respondents further apprised the Court that the said order was communicated to the petitioner- Company by speed post. Learned counsel had sought and was granted time to file an affidavit and to bring on record all the events and documents so that the petitioner may have an opportunity to file a counter to the aforesaid affidavit. 15. In compliance with the order dated 4.8.2009, an additional affidavit dated 20.8.2009 has been filed along with show cause notice dated 15.7.2009, reply dated 20.7.2009 filed by the counsel for the petitioner-Company before the Commissioner of Customs, Amritsar, Order-in-Original dated 20.7.2009, photocopy of 9 C.W.P. No. 7972 of 2009 dispatch register and a communication dated 19.8.2009 sent by the Superintendent (Adj.) to the Deputy Director intimating that the Order-in-Original dated 20.7.2009 was sent through ordinary post instead of Registered A.D. (Annexures A/1 to A/5 respectively). 16. On 27.8.2009, when the case came up for consideration it transpired that the Order-in-Original, dated 20.7.2009, has not been sent to the petitioner-Company by speed post or by registered post in accordance with the procedure prescribed under Section 153 of the Act. From the perusal of photo copy of the dispatch register (A/3) some doubt cropped up because at the first instance it was stated that the order was sent by speed post and then the aforesaid statement was improved upon by stating that it was sent by ordinary post. Since the procedure of sending orders by ordinary post is unknown to Section 153 of the Act, which postulates that orders are to be served on the petitioner by tendering a copy of the order to him or by sending the same by registered post, it became necessary to examine the original record including the dispatch register. 17. On 1.9.2009, learned counsel for the respondents produced original file of Case No. VIII(Hqrs.)10/CUS/ Order/24/09. A bare perusal of the file shows that the show cause notice for extension of time period beyond six months in respect of seizure of goods and cash, bearing DRI F.No. 856(3)LDH/09/Pt-I/1727, dated 15.7.2009, is available at page No. 25 of the file. In para 11 of the show cause notice, the noticee-petitioner Company was called upon to appear for personal hearing on 20.7.2009 at 1400 hrs before the Commissioner of Customs, Amritsar, to explain their stand. 10 C.W.P. No. 7972 of 2009 However, in para 13 it has been mentioned that “if no cause is shown against the action proposed to be taken within a week of the receipt of this notice of (or?) if they do not appear before the adjudicating authority on dates when the case is posted for hearing, the case will be decided on merits and on the basis of materials available on record”. It is claimed that the said notice was served upon the petitioner-Company by hand on 16.7.2009. At page No. 8 of the file, a sheet containing ‘record of personal hearing’ is available, which shows that on 20.7.2009, Shri Naveen Bindal, Advocate, had put in appearance on behalf of the petitioner-Company. It has been further recorded in the sheet as under:- “ The Advocate submitted written request dated 20.07.2009 to supply them the required documents and at least ten days time to file reply. He reiterated the request already submitted. He has nothing more to say.” The said sheet of ‘record of personal hearing’ also bears the signature of the Commissioner as well as counsel. The written request dated 20.7.2009, submitted by the counsel is also available at page No. 7 of the file. The Order-in-Original passed by the Commissioner is available at page Nos. 14 to 19 of the said file, which is purported to be passed on 20.7.2009. The original of communication dated 19.8.2009 (Annexure A/5) is also available in the file, perusal of which shows that the Order-in-Original, dated 20.7.2009 was never sent through Registered Post whereas the same was dispatched through ordinary post by the concerned official vide C.No. VIII(HQ) 11 C.W.P. No. 7972 of 2009 10/CUS/Adj./ 24/09/4653-56 dated 21/07/09. The order has been sent by Registered Post to other authorities on 22.7.2009. 18. Mr. Jagmohan Bansal, learned counsel for the petitioner- Company has argued that the Order-in-Original, dated 20.7.2009, passed by the Commissioner is liable to be set aside because the same has not been sent to the petitioner-Company within six months from detention/seizure of the goods. He has further argued that in the present case the Commissioner has passed the Order-in-Original in haste without affording proper opportunity of hearing to the petitioner-Company. He has drawn our attention to para Nos. 11 and 13 of the show cause notice dated 15.7.2009 (Annexure A/1) and submitted that as per para 13 of the notice, a week’s time was granted to show cause for extension of time period beyond six months in respect of seizure of goods and cash, which means that the petitioner- Company could file its reply upto 23.7.2009 because the notice was served on 16.7.2009. On the contrary, in para 11 of the notice the date of personal hearing before the Commissioner was fixed as 20.7.2009 ahead of the period of seven days. Accordingly, the petitioner-Company was represented through its advocate before the Commissioner on 20.7.2009 and submitted a written request for supply of test reports and documents, which were referred in the notice but not supplied, so that an effective reply could be given. It was also requested to give ten days time to file the reply. However, the Commissioner without extending the time or waiting up to 23.7.2009, passed the impugned Order-in-Original on 20.7.2009 itself. 12 C.W.P. No. 7972 of 2009 19. Learned counsel then submitted that the goods were detained on 22/23.1.2009 and since the period of six months was going to expire on 21/22.7.2009, therefore, the respondents were in a hurry to pass the order extending the period for another six months. He has emphasised that the period of six months is to be reckoned from the date of detention of goods and not from the date of passing of seizure orders dated 18/23.3.2009. He has emphatically stated that the Order-in-Original was never communicated to the petitioner- Company within a period of six months, which makes it incomplete and ineffective. He has maintained that no order could assume the character of a government order unless it is communicated to the party concerned. In that regard reliance has been placed on a judgment of Hon’ble the Supreme Court in the case of Bachittar Singh v. State of Punjab, AIR 1963 SC 395. According to him the date of order is to be construed the date on which it is made known to the affected party. In support of his arguments, learned counsel has placed reliance on the judgments of Calcutta High Court rendered in the cases of Bibhuti Bhusan Bag and another v. I.J. Rao and others, 1968-1969 (73) Calcutta Weekly Notes; and A.S. Narayana v. State of West Bengal, [1973] 32 STC 505. Regarding service of orders, the learned counsel has also placed reliance on the judgments rendered by the Gujarat, Madras, Delhi and Bombay High Courts in the cases of Vadilal Industries Ltd. v. Union of India, 2006 (197) E.L.T. 160 (Guj.); Redington India Limited v. Commissioner of Customs (Appeals), Chennai, 2007 (212) E.L.T. 187 (Mad.); Neha Cosmetics v. Commissioner of Central Excise, 2007 (208) E.L.T. 13 C.W.P. No. 7972 of 2009 494 (Del.); and Suresh Bafna v. Commissioner of Customs and Central Excise (Appeals), Goa, 2009 (234) E.L.T. 606 (Bom.). 20. On the issue of distinction between detention and seizure of goods, learned counsel has argued that detention virtually amounts to seizure of goods. According to the learned counsel there is no specific provision under the Act which lays down any distinction between detention and seizure of goods. In support of his contention, reliance has been placed on the judgments rendered by the Kerala and Delhi High Courts in the cases of M. Mohammed v. Collector of Customs and Central Excise, Cochin, 1999 (110) E.L.T. 451 (Ker.) and Rajesh Arora v. Collector of Customs, 1998 (101) E.L.T. 246 (Del.). With regard to freezing of bank account by the DRI, reliance has been placed on the judgment rendered by the Calcutta High Court in the case of Anil Kumar Mahensaria v. Commissioner of Customs (Port), 2003 (155) E.L.T. 18 (Cal.). 21. Mr. Kamal Sehgal, learned counsel for respondent Nos. 1 to 4 on the other hand has vehemently argued that there is a lot of difference between the terms ‘detention’ and ‘seizure’. According to the learned counsel at the time of conducting of search operations by the officers of the DRI any doubtful material/goods found at the spot which is taken into custody through panchnamma is detention of goods/material. Thereafter opportunity is provided to the concerned person for production of evidence/documents in support of such goods/material and if the competent authority is satisfied after furnishing of documents, the detained goods/material is released otherwise the same are seized after passing of appropriate seizure 14 C.W.P. No. 7972 of 2009 orders, as has been done in the present case. In support of his submissions, learned counsel has placed reliance on the judgment of Madras High Court in the case of Pro Musicals v. Joint Commissioner of Customs (Prev.), Mumbai, 2008 (227) E.L.T. 182 (Mad.). 22. From the pleadings of the parties and the rival contentions raised by their respective counsel we are of the view that the following questions of law would emerge for determination of this Court:- (A) Whether the goods in question continues to attract the provisions of the Customs Act, 1962 after the petitioner-Company had relinquished its title under Section 23(2) of the Act and purchased the goods from the auction purchaser after the same were auctioned in an open auction conducted by the port authorities of Punjab State Warehousing Customs (PSWC) after obtaining permission from its proper officer? (B) Whether in the facts and circumstances of the case, order dated 23.7.2009, granting extension beyond the period of six months could be passed without communicating the same to the petitioner- Company as per the requirement of Section 153 of the Act? Re: Question No. (A): 23. In order to appreciate the controversy it may first