Legal principle

Clandestine removal of goods from a bonded warehouse without the permission of the proper officer amounts to 'smuggling' even after assessment of duty, because import is not complete until clearance from the warehouse on payment of duty, and such goods remain liable to confiscation under Section 111(j) notwithstanding the alternative remedy of duty collection under Section 72.

Court decision

The Supreme Court dismissed the Special Leave Petition and upheld the orders of the High Court dismissing the writ petition (though not the reasoning of the Division Bench), with no order as to costs. It held that a detention order may be challenged before service only in exceptional cases where it is flagrantly violative of the statute or not made under it, which was not shown here; that prima facie the company's unauthorised removal of goods from the bonded warehouse would amount to smuggling and the petitioner's acts to abetment of smuggling; that Section 111(j) applies to goods assessed to duty and warehoused under Section 59; and that the authorities may choose between confiscation under Section 111(j) and collection of duty under Section 72, with Section 125(2) (inserted w.e.f. 27.12.1985) capable of attracting penalty. The decision was in favour of the Revenue/detaining authorities and against the petitioner.

Facts

The petitioner was the Managing Director of a company manufacturing plastic goods which imported materials that were assessed to duty and lodged in bonded warehouses kept under the lock and key of customs officials, with part of the goods cleared on payment of duty under customs supervision. Customs officials later discovered a shortage of material in the warehouses, and a detention order was passed/proposed against the petitioner under Section 3(1) of COFEPOSA, 1974 to prevent him from abetting smuggling of the goods. Without waiting for the order and grounds of detention to be served, the petitioner filed a writ petition in the High Court; the authorities filed no counter affidavit and did not disclose the grounds. The Single Judge dismissed the petition, and the Division Bench, while holding the circumstances insufficient to constitute 'smuggling', dismissed the appeal on the view that courts should not examine the validity of a detention order before the grounds are served. The petitioner then filed the Special Leave Petition before the Supreme Court.

Key provisions

• Section 111(j), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 72, Customs Act, 1962 — Goods improperly removed from warehouse, etc
• Section 59, Customs Act, 1962 — Warehousing bond
• Section 49, Customs Act, 1962 — Storage of imported goods in warehouse pending clearance or removal
• Section 2(43), Customs Act, 1962 — Definitions
• Section 125(2), Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 23, Customs Act, 1962 — Remission of duty on lost, destroyed or abandoned goods