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Tax on Go


Handling of Seized Goods Under The Customs Act, 1962
By Hans Raj Garg, Addl. Director, DRI (Retd.)
Jul 20, 2021

PRIME focus of this article is the seized goods which arehanded over by the seizing officer under superdiginama (undertaking).

Provisions of the Customs Act, 1962

Chapter XIII (Section 100 to s110A) of the Customs Act, 1962 (the Act for brevity) relates to search, seizure and arrest. In terms of s110(1) of the Act, the proper officer in order to seize the goods should have ‘reasons to believe'that suchgoods are liable to confiscation under the provisions of the Act.The seized goods may be dealt with as under:

(a) Where it is not practicable to remove, transport, store or take physical possession of the seized goods for any reason, the seizing officer may give custody of the seized goods to the owner of the goods or the beneficial owner or any person holding himself out to be the importer, or any other person from whose custody such goods have been seized on such person executing an undertaking that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer. [First Proviso to Section 110(1)]

(b) Where it is not practicable to seize any such goodse.g. over dimensional packages, the seizing officer may serve an order on the owner of the goods or the beneficial owner or any person holding himself out to be importer, or any other person from whose custody such goods have been found, directing that such person shall not remove, part with, or otherwise deal with such goods except with the previous permission of such officer. [Second Proviso to Section 110(1)]

Constraint of Storage Space

It is common knowledge that the Customs department does not have adequate and appropriate space for storing all the seized goods. Therefore, the seizing officers are forced to liberally resort to the first proviso to Section 110(1) of the Act.

Provisional Release of the Seized Goods

Provision has been made in Section 110A of the Act for provisional release of the seized goods to the owner on execution of bond with such security and conditions as may be prescribed by the Adjudicating Authority.

Who shall act first for Provisional Release – The department or the party?

It is not mentioned as to who should act first – whether the department should offer provisional release suo moto or the party should come with the proposal

Considering the constraint of storage space, the department should proactively offer provisional release of the goods, other than prohibited goods including goods subject to BIS, on reasonable & practical terms. In case the offer is not taken, expeditious disposal of the goods may be considered. Party's request, if any, for provisional release should be processed with the urgency it deserves. In other words, the seized goods should be treated like a ‘hot ball'.Provisional release should be the rule. Action otherwise will push the parties towards writ remedy and provide them with a stick to beat the department with.

Disposal of the Seized Goods

Section 110(1A) of the Act provides that in case the goods are perishable or hazardous in nature or the goods are likely to deteriorate in value with passage of time or there is constraint of storage space, the goods, as specified by the Central Govt., shall be disposed of. In the case of such goods, disposal is mandatory. The procedure laid down in this regard in the Act and by way of executive instructions issued by the CBIC should be followed meticulously. It is suggested that the owner also must be kept in the loop by giving notice under Section 150 during such disposal (i) to avoid allegation of distress sale and (ii) to prompt the party to obtain provisional release where the goods can be so released .

Even in the case of goods not specified as above, disposal should be considered, if possible, in a transparent manner because keeping the seized goods in custody is fraught with various risks

Attendant Avoidable Risks in Handling Seized Goods

Experience shows that keeping the seized goods in custody for long time carries following risk to the interest of revenue:

(a) The goods may be inappropriately dealt with or removed surreptitiously by the person to whom these were handed over for safe custody. The department may not always be lucky in recovery of the value of the goods as it was in the case of Gurnam Singh Vs Supdtt of Customs (Preventive) - TOG-452-SC-CUS-2015

(b) The goods may be lost or destroyed due to fire, flood, riots, strikes and civil commotion or other natural & manmade causes. The case of Sogo Synergy Pvt. Ltd. vs. Customs, Central Excise & Service Tax Settlement Commission & Others - TOG-974-HC-MAD-CUS-2021 where part of the goods were destroyed by fire, refers which led to avoidable litigation. The department released the goods available on redemption fine but confiscated the goods lost in fire absolutely. The party made an ingenious argument that claim received from insurance company should be given to them after deducting amount of differential Customs Duty demanded in the SCN, redemption fine to be imposed and penalty already imposed as was done in the case of goods which were available for confiscation.

(c) The goods may be pilfered or replaced.

(d) The goods may become outdated and deteriorate in valuewith efflux of time e.g. electronic & information technology products or motor vehicles.

(e) The goods may require regular maintenance and upkeep expensese.g. motor vehicles.

(f) The goods may become unfit for use & fit for destruction and for disposal thereof, the department may have to spend money rather than getting any money on disposal.

(g) Not only the above, the department may be forced to pay the seizure value of the goods to the party as it was in the case of Overseas Enterprises & Others Vs UoI & Others - TOG-74-HC-PTN-CUS-2016

(h) Payment of storage charges in case the party does not get the goods released on payment of redemption fine after adjudication.

(i) In the case of export goods, export order may be cancelled with attendant consequences.

Precautions in Handling of Seized Goods

(i) The department should prepare an SOP to handle seized goods.

(ii) The department should consider leasing in suitable storage space as a temporary solution. Central Warehousing Corporation wherever available may be a good option.

(iii)  Premises where the seized goods are stored should be safe and secure.

(iv) The officer in charge of the case should physically verify periodically that the seized goods are intact and the storage premises continue to be safe and secure. This is seldom done.

(v)  If the value of the seized goods is enormous, it is always advisable, as a measure of abundant precaution, to inform the jurisdictional beat police officer to keep an eye on the same (i.e. breaking open the seal, forced entry, removal of goods without authority, etc.).

(vi)  The goods may be insured at the cost of the department to avoid loss by manmade or natural causes. This is presently never done.

(vii) In each Commissionerate and investigation agency, consolidated central record of the seized goods should be maintained. Presently such records are not available.

(viii)  The seized goods should be audited at regular intervals.

[The views expressed are strictly personal.]