The court emphasized the need for proper authorization for seizure, the reasonableness of conditions for release of goods, and the proportionality of exercising power of confiscation under the Customs Act, 1962.

ADARSH KUMAR GOEL, ACJ. - 1. This petition seeks quashing of seizure memo and for permitting clearance of goods seized and detained by the Customs Authorities under the provisions of Customs Act, 1962 (‘the Act’).

2. The case set out in the petition is that the petitioner imported ‘Heavy Melting Steel Scrap’ (HMSS) from South Africa under Open General Licence Scheme subject to Nil basic customs duty. The petitioner filed seven bills of entry for clearing the said goods in 31 containers on different dates in January 2011 but the custom authorities did not allow clearance on the ground that the material so imported was not scrap but re-rollable metal attracting 5% basic custom duty. The goods were seized under Section 110 of the Act. The goods were physically examined and opinion of Chartered Engineers was taken to the effect that a part of consignment contained moon cut pieces while the remaining was old rusty but not used pipes. The petitioner deposited the amount of duty as per valuation assessed by the said Chartered Engineers and sought provisional release of the goods to avoid demurrage charges. The petitioner also requested for mutilation of the consignment. The goods having not been released, this petition has been filed.

3. Main contention raised in the petition is that when a bill of entry is filed under section 46 of the Act for clearance of goods, the proper officer is required to make an assessment of the duty under section 17 and on payment of the said duty, the goods have to be allowed to be cleared. Section 24 provides for mutilation of goods at the request of the importer to render the goods unfit for any other purpose to claim that lesser rate of duty was payable. Section 18 provides for provisional assessment of duty where any further investigation is required to form a final view about the valuation. Section 110 provides for seizure of goods if there are reasons to believe that goods are liable to confiscation. Section 111 provides for grounds on which the goods may be liable to confiscation. The grounds for confiscation include loading/unloading at a place other than customs port, taking a route other than the specified route, importing of prohibited goods, misdeclaration in the bill of entry about the classification of goods and their value. A circular has been issued by the Central Board of Excise and Customs which is contained in Supplementary Manual Chapter 16 issued by the said Board providing for expeditious assessment/investigation to avoid hardship to the importer on account of continued detention of goods. The said circular further provides that the imported goods should not be detained unless prohibited on simple valuation/classification disputes. Power of confiscation has to be exercised by a proper officer as defined under Section 2(34) of the Act i.e. the officer who is assigned those functions expressly. In Commissioner of Customs v. Sayed Ali, 2011 (265) ELT 17, the Hon’ble Supreme Court held that the Proper Officer under Section 2(34) should be specifically authorized to act as such. Thus, the grievance of the petitioner is that action of the respondents in detaining the goods and continuing to detain the same was without jurisdiction and arbitrary.

4. The stand of the respondents in their reply is that goods were detained on account of dispute of classification and valuation. The goods were re-rollable material wrongly described as HMSS to evade payment of duty and once there is a mis-declaration, the goods are liable to be confiscated under Section 111 of the Act. Report of the Chartered Engineers suggests that there is undervaluation. All the officers of the Directorate of Revenue Intelligence were officers of Customs and could be treated as proper officers to seize the goods. Order of provisional release had been passed on 3.5.2011 to release the goods subject to following conditions:-

(i) On payment of differential duty.

(ii) On furnishing a bond for the full value of the seized