Indoshell Mould Limited vs. Union Of INDIA And Ors

Facts

The petitioner, Indosheel Mould Limited, challenged the investigation and seizure of two consignments of Mercedes-Benz Engine Oil by the Deputy/Assistant Commissioner of Customs. The goods were imported from Sinopec Lubricant (Singapore) Pte Ltd via Oman. The revenue alleged undervaluation based on the MRP on retail packs compared to the declared transaction value. The petitioner argued that the transaction value, determined by commercial contracts, should be accepted. Two consignments, under Bills of Entry dated June 1, 2020, and October 7, 2020, were seized and allowed to be warehoused. Provisional release was offered with onerous conditions, including a bank guarantee of Rs. 2 Crores, which the petitioner could not meet, leaving the goods under seizure. The petitioner contended that the seizure and continued detention were illegal due to the expiry of the time limit under Section 110(2) of the Customs Act, 1962.

Held

The Court held that the respondent authorities had exceeded the statutory time limit prescribed under Section 110(2) of the Customs Act, 1962, for retaining the seized consignments. The Court reasoned that the proviso to Section 110(2) exempts cases with provisional release orders from the time limit, but since the petitioner did not avail of the provisional release due to onerous conditions, the goods remained under seizure, and the rigors of Section 110(2) continued to apply. The Court rejected the revenue's contention that the pendency of the writ petition should be excluded from the time computation, as no stay or interim order had prevented the authorities from proceeding. The Court found that the continued detention of the goods was illegal. The ratio decidendi is that failure to issue a show-cause notice within the stipulated period under Section 110(2) of the Customs Act, 1962, mandates the release of seized goods, irrespective of the pendency of the writ petition or the existence of an alternate remedy, if the detention is ex-facie illegal due to time bar.

Key Issues

1. Whether the seizure and continued detention of the two consignments of Mercedes-Benz Engine Oil by the respondent No.4, beyond the period prescribed under Section 110(2) of the Customs Act, 1962, is legal and valid? (Question of law) Petitioner's arguments: The petitioner argued that the Customs authorities had exceeded the statutory time limit of six months (extendable by another six months) for retaining seized goods without issuing a show-cause notice under Section 124(a) of the Customs Act. They contended that the goods should be released as the time limit had expired, rendering the continued detention illegal. The petitioner also argued that the difference between the transaction value and MRP was due to the premium commanded by the Mercedes-Benz brand, on which GST was separately discharged by Mercedes-Benz India Private Limited. Revenue's arguments: The revenue contended that Article 226 of the Constitution of India should not be used to circumvent statutory procedures and that the petitioner had an alternative efficacious remedy under the Customs Act. They also argued that the period the petition remained pending in the High Court should be excluded from the computation of the time limit under Section 110(2).