Safiya Malik

The Patna High Court has quashed a seizure memo related to the confiscation of betel nuts and a transport vehicle under the Customs Act, 1962, citing the absence of recorded "reason to believe" as required by law. The court, however, maintained that the Customs authorities have the right to continue their investigation and issue appropriate show-cause notices in accordance with the Act’s provisions.

The petitioners, M/s Ashoke Das and Sunil Kumar Gupta, filed a writ petition challenging the seizure of 19,188 kg of betel nuts, valued at Rs. 38,37,600, along with a transport vehicle worth Rs. 12,00,000. The seizure was carried out on November 26, 2019, by the Customs (Preventive) Division, Muzaffarpur, on the alleged suspicion that the goods were smuggled from Nepal.

The petitioners contended that petitioner no. 1 is a trader dealing in betel nuts sourced from India’s northeastern region, while petitioner no. 2 owns the transport vehicle used to carry the goods. They argued that the consignment, en route from Falakata, West Bengal, to Nagpur, Maharashtra, was intercepted at Maithi Toll Plaza, Muzaffarpur, without any justification for seizure.

They submitted that the goods were accompanied by all necessary legal documentation, including invoices, E-way bills, and other regulatory clearances, asserting that the seizure was solely based on suspicion rather than concrete evidence that the betel nuts were of foreign origin or illegally imported. The petitioners further contended that the seizure memo did not satisfy the conditions set out in Section 110 of the Customs Act, which mandates explicit recording of "reasons to believe" before confiscation.

The Customs authorities, in defense, cited Sections 7, 11, 46, and 47 of the Customs Act, 1962, along with Section 3(2) of the Foreign Trade (Development and Regulation) Act, 1992. They argued that betel nuts are frequently smuggled from Nepal and that a prima facie case existed that the goods in question were of foreign origin. The authorities also referenced previous instances where similar consignments had been seized, asserting that such actions were necessary to curb smuggling.

The division bench of Justice Rajeev Ranjan Prasad and Justice Shailendra Singh examined the seizure memo and relevant legal provisions. The court reaffirmed that under Section 110 of the Customs Act, a valid "reason to believe" that goods are liable for confiscation must be recorded before a seizure can take place. Upon examining the memo in question, the court found that it merely cited statutory provisions without presenting any factual basis for the assertion that the betel nuts were smuggled.

The court referenced Assam Supari Traders v. Union of India and Krishna Kali Traders v. Union of India, which held that seizure memos must contain more than a generic reference to legal provisions and must explicitly state the rationale behind the belief that the goods were illegally imported.

The court also cited a circular issued by the Central Board of Excise and Customs mandating that seizure memos must clearly articulate the "reason to believe" as required under Section 110. The court found that the authorities had failed to adhere to this directive in the present case.

Additionally, the court took note of Supreme Court rulings, including Charan Das Malhotra v. Assistant Collector of Customs, which underscored the necessity of recording valid reasons before taking coercive action such as seizures. The court observed that the authorities had not conducted any preliminary investigation to ascertain the country of origin of the betel nuts before issuing the seizure order.

The court further examined the extension of time for issuing a show-cause notice under Section 110(2) of the Act. It considered whether the extension orders granted by the Commissioner were valid in the absence of an opportunity for the petitioners to present their case. The court referred to Assistant Collector of Customs v. Charan Das Malhotra, which held that an extension under Section 110(2) requires due process and an opportunity for the affected party to be heard. The court observed that no such opportunity had been given in this case.

Based on these findings; the court ordered that the seizure memo was legally unsustainable. However, it stated that its decision to quash the seizure memo did not prevent the Customs authorities from continuing their investigation and proceeding in accordance with the law.

The court issued the following directives:

• The seizure memo dated November 26, 2019, is quashed.

• The Customs authorities are permitted to proceed with their investigation and adjudication under the relevant provisions of the Customs Act, 1962.

• The petitioners are allowed to submit their reply to the show-cause notice within six weeks.

• The adjudicating officer must ensure that due process is followed while deciding on the matter.

• The Customs authorities must comply with procedural requirements under Section 110 and provide valid reasons for any future seizures.

Case Title: M/s Ashoke Das & Anr. v. Union of India & Ors.
Case Number: CWJC No. 4918 of 2021
Bench: Justice Rajeev Ranjan Prasad, Justice Shailendra Singh

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