The issue of withholding of live consignment to realise arrear has now come to the fore because of the stricture given by the Bombay High Court and a penality imposed on Revenue in a case where live consignments were withheld by Customs without following the proper procedure. What Revenue did was to ask the importer to pay up what Revenue considered as short levy in regard to 28 consignment already assessed and cleared in the previous year 2009.
They did not even as much as issue show cause notice to explain the reason for the short levy, which a show cause memo is supposed to do.
The Bombay High Court has observed that "in the absence of positive action by issuing show cause notice to set up demand in this regard", holding up of consignments was arbitrary and without the authority of law.
The High Court observed that "no law permits Revenue to twist the arms of the importer in the manner in which it is being done through the communication dated 1st October". The High Court has even gone to the extent of making the department pay Rs.25,000/- to the petitioner for their unjustifiable and arbitrary action.
The High Court also said that the show cause memo should have been issued which has not been done even though the Court gave them time initially to issue it.
I am only examining the legality of holding up live consignments. The High Court's order gives the implication that merely issuing show cause notice is enough. The fact is that the previous cases must be adjudicated also and if an order is passed in adjudication, the amount becomes payable. It is then only that the action to hold up live consignment is permissible under Section 142 of Customs Act which specifically deals with such cases.
But it seems here the officers did not even know about this Section. And even if they knew, they simply ignored it and acted arbitrarily by holding up live consignments.
The only way to hold up live consignments legally is to follow Section 142.
Now let us see what Section 142 says. Section 142(b) empowers the proper officer to recover the amount payable to customs by detaining and selling the goods under the control of customs.
So the procedure that has developed over a long period of time is to first issue a show cause memo and adjudicate the case of short levy and if the order is passed that a certain amount is payable by the importer, then a notice under Section 142 is issued to all ports of the country so that consignments imported thereafter are held up and the importer is asked to pay up the amount. The word payable is very important.
If the importer goes to the Tribunal or to the Court and gets a stay order, then the amount is not payable.
If the appeal is merely pending, it is payable. In the case of J K Synthetics Ltd. vs. CTO (AIR1994SC2393) under Rajasthan Sales Tax Act, the Supreme Court held that the word payable ordinarily means "that which must be paid or its due or may be paid".
Therefore in the stage of show cause memo it is not payable, it is payable only after the adjudication order is passed confirming the demand.
Revenue should have followed the procedure under Section 142 which is followed for ages. Not following it and holding up live consignment to realise arrear has been highly illegal and arbitrary.
As a Customs Officer for decades I have used this Section 142 and never has any legal complication arisen. Disregarding this Section by the Customs officers, that also at a higher level, shows scant regard for judicial approach.
It also underlines the need for further training for even senior officers to learn the basics.
If they are sent back to the Training School of the Department once again, it should be a lesson for them.
E-mail: smukher2000@yahoo.com
