2004 (96) ECC 475 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-B

Shri V.K. Agrawal, Member (T) and Shri P.G. Chacko, Member (J)

Best & Co.

Versus

CC, New Delhi

Appeal No. C/524/2003-B

[Arising out of Order-in-Original No. 3/VS/Cus.Prev/2003 dated 17.10.2003 of the Commissioner of Customs (Prev.), New Delhi]

Final Order No. 310/04-B, dt. 22.4.2004, Certified on 26.4.2004

Show Cause Notice

Section 110(2) of the Customs Act, 1962 -- Section 110(2) ceased to be invocable in respect of goods which was seized under Section 110(1) and subsequently released against securities -- Show cause notice as also adjudication order set aside -- Department at liberty to proceed under Section 124 without resort to Section 110(2) if there is any valid ground for taking action under Section 124.

[Paras 6 & 7]

PRESENT :

Shri Krishna Kant, Advocate for the appellant.

Shri V. Raja Ram, JDR for the respondent.

Cases Cited :

1. Lokenath Tolaram v. B.N. Rangwani, 1983 (13) ELT 1520 (SC).................. [Paras 3 & 5]

2. Uttam Laminates Pvt. Ltd. v. CCE, 1996 (81) ELT 238.............................. [Paras 3 & 5]

3. Vimal International v. Commissioner of Customs , 2002 (146) ELT 576....... [Paras 3 & 5]

Per : P.G. Chacko

The appellants had imported from M/s. Kalo Holdings Corpn., LLC (USA), 1000 pieces of what was claimed to be "Online Computer Hardware", and had filed Bill of Entry dated 21.4.2003 for their clearance. The goods were valued at EURO 5,50,000. The Bill of Entry was accompanied by a copy of invoice dated 31.3.2003 issued by the said company, wherein also the value of the goods had been shown as EURO 5,50,000. The department subsequently gathered a copy of another invoice dated 27.3.2003 issued by an Italian company viz. M/s. Technost Systemmi, wherein the value of the goods had been shown as EURO 17,90,000 and the goods were described as "Online Computer Hardware & Software". The "Supply Agreement" between the appellants and their supplier referred to the goods as "Online Lottery Terminals". From the documentary evidence gathered, it appeared to the Department that the appellants had misdeclared the value of the goods and filed the invoice with lesser value with intent to evade payment of Customs duty. Therefore, the goods were seized under Section 110 of the Customs Act. Subsequently, statements of the Chief Executive of the appellant-company were recorded under Section 108 of the Act, wherein he stated, inter alia, that the invoice dated 31.3.2003 pertained to hardware only whereas the invoice dated 27.3.2003 was for both hardware and software. Pending further investigations, the seized goods were released provisionally to the appellants against Bond & cash deposit of over Rs. 3.6 crores on 21.5.2003. Later on, show-cause notice dated 7.10.2003 was issued to the appellants by the Commissioner of Customs (Preventive) under the proviso to Section 110(2) of the Customs Act directing the party to show cause why the period for issuance a show-cause notice under Section 124(a) of the Act for confiscating the goods should not be extended by a period of six months w.e.f. 21.10.2003. The show-cause notice dated 7.10.2003 was resisted by the party on numerous grounds. In adjudication of the dispute, the Commissioner, under the proviso to Section 110(2), ordered extension of the period for issuance of show-cause notice under Section 124(a) by six months w.e.f. 20.10.2003. It is this order of the Commissioner that is under challenge in the present appeal.

2. We have examined the records and heard both sides.

3. Ld. Counsel for the appellants submitted that, as the goods in question were provisionally released to them against Bond & cash security and were not available for confiscation, it was not open to the Commissioner of Customs to issue any show-cause notice under the proviso to Section 110(2) of the Customs Act. In this connection, Ld. Counsel, relied on the Supreme Court's judgment in Lokenath Tolaram v. B.N. Rangwani, 1983 (13) ELT 1520 (SC). Counsel also relied on the Tribunal's decision in Uttam Laminates Pvt. Ltd. v. CCE, 1996 (81) ELT 238, wherein Lokenath Talaram (supra) was followed. Finally, Counsel relied on the Tribunal's decision in Vimal International v. Commissioner of Customs , 2002 (146) ELT 576.

4. The DR reiterated the findings of the Commissioner. He has not relied on any case law on the issue.

5. We have examined the facts of this case and the case law cited by the Ld. Counsel. The goods in question were, admittedly, provisionally released to the appellants on 21.5.2003 against Bond and cash deposit. When the show-cause notice dated 7.10.2003 was issued to the appellants, the goods were not available with the Department for confiscation. Where the goods had been released to the party and were no longer in the custody of the department, Section 110(2) of the Customs Act was not applicable. For this provision to be applicable, the offending goods should remain under seizure. This appears to the be view taken by the Tribunal in Vimal International (supra), which is in accordance with the Apex Court's decision in Lokenath Tolaram (supra). In `Uttam Laminates' (supra), the Tribunal followed the Apex Court's ruling to hold that, where the goods have already been released, the party has no liability under Section 110(2). In the case of Lokenath Tolaram, the appellants had obtained provisional release of seized goods from Customs authorities against securities furnished in the form of Bond and cash deposit. The court held that, in such circumstances, the goods went out of the province of application of Section 110(2) of the Customs Act. This ruling is squarely applicable to the instant case with essentially similar facts.

6. Following the decisions cited by Ld. Counsel, we hold that Section 110(2) ceased to be invocable against the appellants on 21.5.2003 in respect of the goods which was seized under Section 110(1) and subsequently released to the party against securities on the said date. We, therefore, set aside the show-cause notice as also the Commissioner's order passed in adjudication thereof.

7. We may also explicity state something which is corollary to the view we have already expressed. It is open to the Department to proceed under Section 124 for confiscation etc. without resort to Section 110(2) if there is any valid ground for taking action under the said Section 124. But the ends of justice would demand that any such action be taken within a reasonable period from the date of seizure of the goods. Inapplicability of Section 110(2) is not to be construed to mean that the Department can take any long time under Section 124. Having regard to the fact that almost one year has elapsed since the seizure of the goods and that the duty (as provisionally assessed) paid under protest by the importer is lying in Government's credit, we are inclined to direct the Commissioner to adjudicate on any show-cause notice under Section 124 issued in respect of the subject goods and pass final order in the matter within three months from the date of receipt of this order. In this connection, it is made clear that any such notice already issued to the appellants pursuant to the Commissioner's order shall not be treated as infirm by reason of the said order having been set aside by us and shall, if otherwise competent, be valid for purposes of Section 124.

8. We have noticed the appellant's prayer for refund of certain amount deposited at the time of provisional release of the goods. This prayer is beyond the scope of this appeal inasmuch as the dispute in this case is not on the admissibility of any refund claim. It is open to either sides to take appropriate steps in respect of the deposit, depending on the results of finalisation of assessment of the Bill of Entry.

9. The appeal stands allowed to the aforesaid extent.

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