Mere seizure of gold by Customs Officer cannot be construed to confer any power, authority to sell [Read Order]

The Bombay High Court in the matter of Leyla Mohmoodi Vs. The Additional Commissioner of Customs ordered that the Mere seizure of gold by the Customs Officer can be construed to confer any power, authority to sell.

Relevant Text of the Judgment:

It is the case of the petitioners that they are Iranian nationals. On 14 January 2018, they arrived at Chhatrapati Shivaji Maharaj International Airport , Mumbai by the Oman Air Flight. The petitioners were wearing gold ornaments (bangles) having net weight of 1028 grams. They were intercepted by the Customs officials at Mumbai Airport and the gold bangles (for short ‘the gold jewellery’) worn by them, were seized by the Customs officials.

It may be observed that, as to whatever had happened within the department from the date of the seizure of the gold jewellery that is on 14 January 2018 till the disposal of the gold jewellery which had taken place on 1 August 2018, as informed by State Bank of India, the petitioners were never put to any notice whatsoever, much less, in a manner the law would mandate that the petitioners’ gold jewellery as seized was disposed of / sold. Surprisingly the petitioners were kept in complete darkness either personally or through their country’s consulate, in regard to the disposal of their gold jewellery.

The respondents have filed two reply affidavits. The first reply affidavit is of Mr. G. B. Tilve, Assistant Commissioner of Customs, which does not dispute that the petitioners were carrying the gold jewellery in question, when they reached Mumbai Airport by Oman Air Flight, on 14 January, 2018. The affidavit sets out the facts in relation to the adjudication of the show cause notice, the orders passed on the show cause notice, the appeal preferred by the petitioners, orders passed by the appellate authority and thereafter in regard to the orders passed by the revisional authority on the petitioners’ revision. As the said facts are already discussed and subject matter of record, they need not be detailed any further, suffice it to observe that there is no dispute that the orders passed by the Revenue Authority would direct the Department to permit the petitioners to re-export the gold and such order has attained finality.

In so far as the availability of the gold is concerned, the challenge as raised to the approach of the Department in not reverting the petitioners’ repeated queries that the gold be made available, so that the redemption fine can be paid, the case of the department can be noted. It is stated in the affidavit that Notification No.31 of 86 dated 05 February, 1986 as amended from time to time, issued under Section 110(1A) of the Customs Act authorizes the Central Government, to issue a notification for disposal of gold on considerations as provided in sub-section (1A), namely having regard to the perishable, hazardous nature of any goods, depreciation in the value of goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, as soon as, maybe after its seizure, by following the procedure prescribed under Section 110(1B) of the Customs Act, 1962. It is stated that the jewellery seized from both the petitioners fell under item No.AA specified under the said Notification No.31 of 86 as amended, which pertains to “gold in all forms including bullion, ingot, coin, ornament, crude jewellery”. It is stated that in view of the said provision and as gold being a precious item having high value, there are constraints on the storage of the same in the office for longer duration. Hence, in view of the specific provision for disposal of goods, as soon as after seizure, after following due procedure, an action was taken by respondents to dispose of the gold jewellery belonging to the petitioners, which was justified and legal. It is stated that the ownership of the seized gold had stood vested with the Central Government post confiscation. Hence, there was no question of depriving the petitioners of their own property.

Having considered the pleadings, we now turn to the submissions as advanced on behalf of the petitioners. It is submitted that in the present case gold jewellery was seized by the respondents from the petitioners, exercising powers under the Customs Act. It is submitted that when the gold jewellery was seized, there was a legal obligation on the part of the respondents to preserve the property of the petitioners and keep the same intact. Also there was an obligation to take reasonable care of the seized jewellery so as to enable the respondents to return the gold jewellery to the petitioners, in the same condition in which it was seized. The position was that the government was a bailee until the confiscation order attained finality. It is submitted that the order passed by the adjudicating authority in adjudicating the show cause notice is not a final order, as it is subject to an appeal and revision. There is a likelihood that, in such further proceedings, the confiscation order in a given case may be reversed or modified, in such event the seized gold could no longer be retained. It is hence submitted that there would be a statutory obligation on the respondents to return the goods to the owner. It is next submitted that once it was decided in favour of the petitioners who are the owners of the gold jewellery that the same be returned either for re-export or otherwise and the said order is not stayed by any Court, it becomes an absolute liability of the respondents to return the goods to the petitioners. In such case, the petitioners being the owners of the goods, have the right to demand the seized jewellery. It is submitted that the respondents would not have any legal right to dispose of the goods without following due procedure in law. It is further submitted that an order for its disposal passed by the Magistrate would not in any manner extinguish the right of the owner to demand the return of the property and the obligation of the respondents to return the gold jewellery to the petitioner and in its absence, the respondents are liable to pay the market value of the seized gold jewellery to the petitioner. It is submitted that applying the provisions of Section 110(1A) of the Customs Act was illegal as gold does not fall within the meaning of perishable or hazardous goods. Therefore, any action on the part of the respondents to dispose of the said goods under Section 110 would amount to illegality. In this context, it is submitted that it is held by the Delhi High Court in the case Zhinet Banu Nazir Dadany Vs. Union of India that in case of seizure of gold or gold ornaments/items, such goods are neither perishable nor hazardous as per Section 110(1A) of the Customs Act and that such goods are required to be disposed of only after issuing a notice to the person from whom the gold was seized. It is next submitted that without admitting that Section 150 was applicable in the present facts, no notice under Section 150 of the Customs Act was issued to the petitioners before the disposal of the gold jewellery. It is strongly contended that the fact of disposal of seized confiscated goods, was also not brought to the knowledge of the appellate authority or the Revisional Authority at any point of time.

On the other hand Mr. Devang Vyas, learned ASG has made the following submissions:

At the outset Mr. Vyas has fairly submitted that the gold jewellery subject matter of the proceedings in the present case, after its seizure was disposed of / sold. He however submits that the provisions of Section 150 of the Customs Act are not applicable as in the facts of the present case, the gold was already sold although later on confiscated. It is however submitted that proper procedure was followed since after seizure a show cause notice was issued to the petitioners and an order adjudicating the show cause notice came to be passed on 6 July 2018 whereby the goods were directed to be confiscated. It is his submission that Section 110 with its sub-sections are applicable so as to justify the orders passed by the respondents to dispose of the petitioners gold jewellery. Mr. Vyas has placed reliance on the Notification dated 22 December 1997 (Notification No.72/97-Cus.(N.T.), to submit that as per the provisions of Section 110(1A) of the Customs Act, by such notification, gold, in all forms including bullion, ingot, coin, ornament, crude jewellery, has been notified under the said provision. It is submitted that Section 110(1B) of the Customs Act confers an absolute power on the department to dispose of the gold jewellery in the manner as set out in the said provision which would include power to dispose of even prior to adjudication. It is his submission that the department has strictly followed the provisions of Section 110. It is next submitted that disposal of the gold jewellery in question would not amount to sale. Mr. Vyas would next submit that the power conferred on the Customs Authorities to dispose of gold has not been assailed by the petitioners. The notifications as issued by the Customs Authorities are fully applicable. He has further submitted that neither the circular nor the statutory provisions are assailed by the petitioners and on this count, the petition ought not to be entertained. In support of such submissions, reliance is placed on a decision of this Court in Shabir Ahmed Abdul Rehman vs The Union Of India.

Heard learned Counsel for the parties, we have also perused the record.

At the outset, we may note some of the admitted facts. It is not in dispute that on 14 January 2018 the petitioners arrived in India and were apprehended at the Mumbai Airport. The jewellery belonging to the petitioners which were gold bangles came to be seized by the Customs officials.

Order:

In the light of the discussion, interest of justice would require that the petition be allowed by granting the following reliefs to the petitioners:

It is declared that the action on the part of the Assistant Commissioner of Customs in disposing of / selling the gold jewellery belonging to the petitioners subject matter of the present proceedings, is illegal and unconstitutional.

The respondents are directed, to restore to the petitioners, equivalent amount of gold namely 1028 gms. and/or to compensate the petitioners by making payment of amounts equivalent to the market value of the said gold, as on date.

The directions be complied by the respondents within a period of three weeks from today.

In the event the petitioners are granted payment of the amounts as directed in, the amount of redemption fine and penalty as directed by the Revisional Authority in its order, be deducted.

The petition is accordingly, disposed of in the above terms. No costs.

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