COMMISSIONER OF CUSTOMS (PREVENTIVE) vs. SWEES GEMS AND JEWELLERY

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CUSTA/1/2019HC RajasthanRJHC02052441201925 July 2019Author: S. RAVINDRA BHAT,SANJEEV PRAKASH SHARMA15 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the CESTAT erred in its conclusion. The Court found that the amendment to Section 110(2) of the Customs Act, 1962, by the Finance Act, 2018, brought about a significant change. The pre-amended provision required 'sufficient cause being shown' for extension, implying objective considerations and a hearing. The amended provision, however, requires the Commissioner to 'record reasons in writing' and 'inform the person from whom such goods were seized before the expiry of the period so specified.' The Court emphasized that the latter condition of informing the concerned party is a crucial prerequisite. It reasoned that Parliament, aware of the previous legal position requiring notice, deliberately changed the terminology to streamline the process. The Court also noted the introduction of Section 110A for provisional release of goods, which softened the rigor of the original Section 110(2). Therefore, a textual reading of the amended Section 110(2) indicates that no separate notice is necessary before extending the period for issuing a show cause notice, provided the Commissioner records reasons in writing and informs the concerned party before the expiry of the initial six-month period. The impugned order of the CESTAT was set aside, and the appeals were allowed. The Court did not expressly leave any issue undecided.

What were the facts?

The Revenue (Commissioner of Customs) filed two appeals against an order of the CESTAT. The appeals concerned the import of rough diamonds by respondents Swees Gems and Jewellery and Aaradhya Impex from Hong Kong. The Directorate of Revenue Intelligence (DRI) seized the imported consignments on August 8, 2018, under Section 110 of the Customs Act, 1962, alleging overvaluation and that the IEC holder was not the actual importer, violating Section 46. Show cause notices were not issued within the initial six-month period from the seizure date (August 8, 2018). The DRI sought an extension of this period by another six months under the proviso to Section 110(2) of the Customs Act, citing difficulties in investigation. The Commissioner of Customs granted this extension. The respondents appealed to the CESTAT, which ruled in their favor, holding that goods had to be released as no notice preceded the extension of detention.

What were the issues?

1. Did the CESTAT err in holding that goods had to be released because no notice preceded the extension of detention under the Proviso to Section 110(2) of the Customs Act, 1962? (Question of law) Assessee's Arguments: The respondents argued that they were not issued a show cause notice or given an opportunity to be heard before the extension of the time limit for issuing the show cause notice. They relied on Supreme Court decisions in I.J. Rao v. Bibhuti Bhushan Bagh, Harbans Lal v. Collector of Customs, and Assistant Collector of Customs & Superintendent, Preventive Service Customs, Calcutta & Others v. Charan Das Malhotra, which held that affected parties are entitled to notice and an opportunity to be heard before such extensions. They also cited other High Court decisions and contended that the amendment to Section 110(2) by the Finance Act, 2018, did not alter the requirement for a personal hearing before extension. Revenue's Arguments: The revenue contended that Section 110(2) was amended by the Finance Act, 2018, substituting 'on sufficient cause being shown' with 'for reasons to be recorded in writing'. The amended provision required the Commissioner to inform the person concerned before the expiry of the period. The revenue argued that this amendment dispensed with the requirement of issuing a show cause notice before extending the time limit and that the Commissioner's order of extension was valid. They stated that the investigation was delayed due to overseas inquiries, necessitating the extension.

Which sections of the Income-tax Act were involved?

Section 110,Section 110(2),Section 111,Section 46,Section 124,Section 110A

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Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR (1) D.B. Custom Appeal No. 1/2019 Commissioner Of Customs (Preventive), Jodhpur, Head Quarters At New Central Revenue Building, Statue Circle, C-Scheme, Jaipur 302005 In The State Of Rajasthan ----Appellant Versus Swees Gems And Jewellery, Kumhar Mohalla, Village Sikhrani, Tehsil Masuda, Vijay Nagar, Ajmer In The State Of Rajasthan ----Respondent (2) D.B. Custom Appeal No. 2/2019 Commissioner Of Customs (Preventive), Jodhpur, Head Quarters At New Central Revenue Building, Statue Circle, C- Scheme, Jaipur 302005 In The State Of Rajasthan ----Appellant Versus Aaradhya Impex, Kumhar Mohalla, Village Sikhrani, Tehsil Masuda, Vijay Nagar, Ajmer In The State Of Rajasthan ----Respondent For Appellant(s) : Mr. Siddharth Ranka For Respondent(s) : Mr. Arun Goyal HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA Reportable Judgment Reserved on :: 17/07/2019 Judgment Pronounced on :: 25th/07/2019 By the Court:(Per Hon’ble The Chief Justice): (2 of 15) [CUSTA-1/2019] 1. The question of law framed in these two appeals are common; it is as follows: “Did the CESTAT fall into error in holding that goods had to be released in the circumstances of the case since no notice preceded extension of detention under Proviso to Section 110(2) of the Customs Act, 1962?” 2. In these two appeals, the respondents imported consignments of rough diamond from Hong Kong and filed Bills of Entry for their clearance through ICD, Jaipur. It was alleged that during scrutiny of the said Bills of Entry by the Directorate of Revenue Investigation (hereafter referred to as ‘DRI’), it was found that the imported consignments were heavily overvalued. The articles, were therefore, were seized for further investigation on 8.8.2018 under Section 110 of the Customs Act, 1962 (hereinafter referred to as " the Act") on reasonable belief that the they were liable for confiscation under Section 111 of the Act as the IEC holder, allegedly was found not to be the actual importer and a true declaration were not made as stipulated by Section 46 of the Act. 3. Show cause notices were not issued to the respondents before 25.10.2018 i.e. within six months from the date of detention of the goods. The DRI requested for extension of the period of issuing show cause notice by another six months under the proviso to Section 110 (2) of the Act for the reasons outlined in a letter- dated 12.10.2018 to the Commissioner of Customs, Jaipur. The DRI informed the Commissioner of Customs, Jaipur of various difficulties and impediments in not issuing the show cause notice within the prescribed time of six months from the date of detention and seizure of the goods. Being aggrieved by these orders, the respondents appealed to the Customs Excise and Service Tax Appellate Tribunal (hereafter referred to as ‘CESTAT’). (3 of 15) [CUSTA-1/2019] 4. The respondents argued before CESTAT that they were not issued the show cause notice and given opportunity to be heard before extending the time limit for issuance of show cause notice under provisions of the Act. Reliance was placed upon the decision of the Supreme Court in I.J. Rao, Assistant Collector of Customs Vs. Bibhuti Bhushan Bagh - 1989 (42) ELT 338 (SC) which held that the Commissioner could not extend the period of six months period for issuance of show cause notice without hearing the affected parties (in this case, the appellants). I.J. Rao (supra) also referred to post decisional hearing by the Collector but only in such cases where service of notices were evaded. It was argued that even after the impugned order of extension the time limit for issue of show cause notice was passed the respondents were not granted even post decisional hearing although a request was made in writing by them. 5. The respondents also relied on Harbans Lal Vs. Collector of Customs - 1993 (67) ELT 20, which held that before extending the time limit under Section 110 (2), owners of seized goods were entitled to notice, as such goods on the expiry of six months had to be returned to them and if that period was to be extended, such owner had a vested right to be heard. Assistant Collector of Customs & Superintendent, Preventive Service Customs, Calcutta & Others Vs. Charan Das Malhotra - 1983 (13) ELT 1477 (SC), too was relied on, which held that extension of period for retention of seized goods should be for sufficient cause and without opportunity of being heard to one from whose possession goods are seized. Other decisions relied are Chunilal Damani v Collector of Customs & Central Excise, 2000 (126) ELT 357 (Cal.); K.K. Sukhani Vs. Union of India, 1999 (110) ELT 505 (Pat.); Works of Art (Pvt.) Ltd. & Anr v Union of India & Ors., 1998 (36) ELT 91 (Bom.). The respondents had also contended before the CESTAT that the amendment to the Section 110 (2) of the Act by the Finance (4 of 15) [CUSTA-1/2019] Act 2018, did not alter the legal position with respect to grant of personal hearing before the extension of period for issuing show cause notice. 6. The revenue supported the extension granted by the Commissioner arguing that Section 110 (2) post amendment, by the Finance Act, 2018, had changed; the amendment substituted the expression 'on sufficient cause being shown" with "for reasons to be recorded in writing," for extension of time period for a further period not extending six months with a condition that the Commissioner had to inform the person concerned from whom such goods were seized before the expiry of period so specified. The revenue’s position therefore was that the requirement for issuance of show cause notice before extending the time period by another six months was done away with and there was no infirmity in the order of the Commissioner in these cases. On being asked, he also made available the investigation file before the Bench. The revenue also stated that investigation could not be completed due to the various reasons including the overseas enquiries and therefore, the DRI requested the Commissioner to extend the time period for issuance of the show cause notice. Therefore, according to the revenue, the Commissioner after applying his mind and considering the surrounding circumstances extended the time period for issue of show cause notice by another six months. 7. In the impugned order, the CESTAT compared the provisions of the pre-amended Section 110 (2) with the amended provision, and further relied on Para 163 of the speech of the Finance Minister, with respect to the amendment, which it reproduced. The relevant part of the speech is as follows: (5 of 15) [CUSTA-1/2019] " I also propose to make certain change to the Customs Act, 1962 to further improve ease of doing business in cross border trade, and to align certain provisions with the commitments under the Trade Facilitation Agreement. To smoothen dispute resolution processes and to reduce litigation, certain amendments are being made, to provide for pre-notice consultation, definite timelines for adjudication and deemed closure of cases of those timelines are now adhered to. Clause 90 of the Bill seeks, to amend Section 110 of the Customs Act so as to give power to extend the period for issuing show cause notice in case of seized goods by a further period of six months to case in cases where no order for provisional release of goods has been passed.” 8. The CESTAT noticed that a coordinate bench in S.R.K. Metal & Industries & Pink Commercial (Final Order No.75047-75048/ 2018, dated 17.1.2019) which held as under: "Our attention was also drawn towards the decision of Sardar Kulwant Singh v Collector of Central Excise & Customs, wherein it is held that an order extending period of issue of Show Cause Notice under Section 110 (2) and 124 of the Customs Act, 1962, without giving an opportunity of being heard to the affected party is illegal. Further, the requirement of issue of Show Cause Notice issued under Section 124 of the Customs Act in such a case was held to be a must relying upon the various judgments referred as above. Relying on these judgments, we find that the seized goods are required to be returned to the person from whom the seizure has been made of fact of expiry of six month under Section 110 of the Act without extension of time. Regarding the Revenue contention that with effect of the amendment carried out in Section 110 (2) of the Customs Act, the requirement of issuance of Show Cause Notice is dispensed with is without any basis. In fact, we find that after the amendment the Adjudicating Authority has to give the proper reasoning by way of reasoned order after examining the requirement for extension of time period as per sub proviso 2 of Section 110 (2). Question as to whether the person claiming restoration of the goods under Section 110 of Act (6 of 15) [CUSTA-1/2019] is entitled to notice before time is extending, this flows from the circumstances that this is a quasi judicial proceeding, and also it goes beyond the doubt that rights of a person are likely to prejudicially affected, he is entitled to opportunity to put forwarded his case before the Adjudicating Authority. Therefore, the person from whom the goods have been seized, is entitled to notice of the proposal before Adjudicating Authority for the extension of original period of the six months under Section 110 (2) of the Customs Act subject to the restriction that he is not entitled to the information about the investigation which is in possession of the Investigating Agency as there can be no right in any person to be informed whose goods during the investigation material collected against him and there is no need for maintaining the investigation proceedings. This view has been affirmed in the I G Rao case referred(supra). The provisions of Section 110 (2) before and after the amendment is as identical but for "on sufficient cause being shown has been replaced with reasons to be recorded in writing extends such period", for a period not exceeding six months and inform the person from whom such goods were seized before expiry of the said period. Careful analysis of the provision makes it clear that the right of issuance of the Show Cause Notice for the extension of the period of six months as prescribed under said sub- Section of Section 110 (2) remains same from which the emanate right of Show Cause Notice to the affected party in furtherance of Principle of Natural Justice as his rights are being prejudicially affected. The amendment will not obliterate the aforesaid position of issuance of Show Cause Notice has discussed above, even after insertion of with new sentence in the provisions of Section 110 (2) of the Act. In fact, we are of the view that after amendment not only the Show Cause Notice is required to be issued by the Adjudicating Authority, but he has also to give a reasoned order after hearing the Investigation Officer and also taking view of the affected party from whom seizure has been made as his personal right is being deprived of which emanate from the Section 110 (2) of the Act that entitled him to got the goods returned which has been seized from his possession. This is also cleared from statements of objects in the Finance Act as discussed above. 13. In view of above, we are of the opinion that the impugned order is in violation in this provisions of Section 110 (2) of the Customs Act (7 of 15) [CUSTA-1/2019] has held in the various decisions discussed above. We have also seen the note sheet order of the Ld. Commissioner in this case. It is seen from the order that the Commissioner while extending the time period has only gone by the letter of DRI and not put up to him by his office without examining the merits of the such extension and recording his own finding. His finding is only two worded finding which is „GC issued dated 26/06/2018‟ Sd- M Chandra This proves that there is no independent application of mind by the Commissioner (Port) for the extension of Show Cause Notice even by accepting his assertion that the only requirement is that the Principal Commissioner/ Commissioner of Customs made for the reasons to be recorded in writing, extends such period to further period not extending six months and inform the person from whom the goods are seized. We have also considered the submission made by Ld. Advocate that the aforesaid amendment has been brought with effect from 18/3/2018. Obviously, the amendment will not have its application from the retrospective date. The amendment has not been made with retrospective effect as is evident from the Finance Act, , 2018. We also find that in case of Commissioner of Income Tax (Central-1) New Delhi, v Vatika Township [(2014) 0 SCC 670], Hon’ble Supreme Court has held that law enacted in absence of a provision in the statue about the same being with of retrospective effect in the Clause of Finance Act, the amendment will have prospective effect only. In view of that also we find that the impugned order is not sustainable as the new amended provision has been applied for the seizure made during period when the amendment was not there in the statue.” 14. In view of above our analysis as above, we are of the considered opinion that there is no legality for dispensing with the Show Cause Notices to the affected party even under the amended provisions of Section 110 (2) of the Act. The Adjudicating Authority has erroneously held that this is no need of issue of Show Cause Notice in the cases of extension at hand. 15. Accordingly, we set aside the impugned orders and allow appeals with consequential relief as per law." In view of that decision in S.R.K. Metal & Industries (supra), the CESTAT allowed the respondents’ appeals. (8 of 15) [CUSTA-1/2019] 9. The revenue argues that the CESTAT fell into error in not considering the fact that the change in the statute was meant to bring about a substantial change in regard to the regime regarding procedure for extension of time under Section 110 (2). Whereas, the pre-amended law required the official to ensure that there was sufficient cause for extension of time, the amended provision now merely requires the reasons (for extension) to be recorded in writing and informed to the assessee. It was argued that CESTAT, erred in holding that even after the amendment, a show cause notice is necessary. Mr. Ranka, learned counsel, relied on the Supreme Court’s decision in Designated Authority v Holdor Topse 2000 (120) ELT 11 (SC) to submit that the order extending time to issue show cause notice was administrative and that it is not necessary to issue a

show cause notice before passing such order.

10.

Counsel for the respondents urged that principles underlying the decision in I.J. Rao (supra) would continue to apply. He stated that repeated decisions of various High Courts have affirmed that principle, and that the CESTAT did not commit any error in holding that despite the amendment, the position in law, remained the same and that the affected party had to be issued with notice, before time (for issuing show cause notice) is extended, even for a limited period of 6 months. He reiterated the grounds urged before CESTAT and also relied on the decisions cited before that tribunal.

11.

Before proceeding to analyze the parties’ rival submissions, it would be useful to extract the pre-amended law, and the provision of Section 110 (2) after the amendment. They are set out, in a tabular manner, as follows: Provisions prior to amendment

of Provisions subsequent to amendment of (9 of 15)

proviso to section 110(2) proviso to section 110(2) (2) Where any goods are seized under sub- section (1) and no notice

in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized. Provided that the aforesaid period of six months

may, on sufficient

cause being shown, be extended

by the [Principal Commissioner

of Customs

or Commissioner

of Customs] for a period not exceeding six months. (2) Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized: "Provided

that the Principal Commissioner of Customs

or Commissioner

of Customs

may,

for reasons to be recorded in writing, extend such period to a further period not exceeding

six months and inform the person from whom such good were seized before the expiry of the period so specified: Provided further that where any order for provisional release of the seized goods has been passed under section 110A, the specified period of six months shall not apply".

12.

The Supreme Court in The Asstt. Collector of Customs and Ors. v. Charan Das Malhotra AIR 1972 SC 689 considered the interplay between Sections 110 and 124 of the Customs Act and held as follows: “Section 124 provides that no order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person is given a notice in writing informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty. The Section does not lay down any period within which the notice required by it (10 of 15)

has to be given. The period laid down in Section 110(2) affects only the seizure of the goods and not the validity of the notice.”

13.

This view was again applied and followed in J.K. Bardolia Mills v Dy. Collector and Ors. 1994 (5) SCC 332. Thus, there is no time limit for issuing a show cause notice, under Section 124 of the Customs Act. However, in case a show cause notice is not issued, for some reason, Section 110 would operate. Section 110 (2) states that goods cannot be detained for more than six months, unless a show cause notice (i.e. under Section 124) is issued; the proviso clothes the revenue with the power of extending the period by another six months. Under the pre-amended law, the power under the proviso could be exercised, “for sufficient cause”. This was the subject of interpretation in I.J. Rao (supra). The Supreme Court, held, in that decision, that: “There is no doubt that the words "on sufficient cause being shown" in the proviso to Section 110 (2) of the Act indicates that the Collector of Customs must apply his mind to the point whether a case for extending the period of six months is made out. What is envisaged is an objective consideration of the case and a decision to be rendered after considering the material placed before him to justify the request for extension. The Customs Officer concerned who seeks the extension must show good reason for seeking the extension, and in this behalf he would probably want to establish that the investigation is not complete and it cannot yet be said whether a final order confiscating the goods should be made or not. As more time is required for investigation, he applies for extension of time. The Collector must be satisfied that the investigation is being pursued seriously and that there is need for more time for taking it to its conclusion. The question is whether the person claiming restoration of goods is entitled to notice before time is extended. The right to notice flows not from the mere circumstance that there is a proceeding of a judicial nature, but indeed it goes beyond to the basic reason which gives to the proceeding its character, and that reason is that a right of a person may be effected and there may. be prejudice to that right if he is not accorded an opportunity to put forward his case in the proceeding. In the other words, the issue is whether there is a (11 of 15)

right in a person from whose possession goods are seized and which right may be prejudiced or placed in jeopardy unless he is heard in the matter. It cannot be disputed that S. 110 sub- s. (2) contemplates either notice (within six months from the date of seizure) to the person from whose possession the goods have been seized in order to determine whether the goods should be confiscated or the restoration of the goods to such person on the expiry of that period. If the notice is not issued in the confiscation proceedings within six months from the date of seizure the person from whose pos- session the goods have been seized becomes immediately entitled to the return of the goods. It is that right to the immediate restoration of the goods upon the expiry of six months from the date of seizure that is defeated by the extension of time under the proviso to S. 110 (2). When we speak of the right of the person being prejudiced or placed in jeopardy we necessarily envisage some damage or injury or hardship to that right and it becomes necessary to inquire into the nature of such damage or injury or hardship for any case to be set up by such person must indicate the damage or injury or hardship apprehended by such person. In the present case, one possibility is that the person from whose possession the goods have been seized may want to establish the need for immediate possession, having regard to the nature of the goods and the critical conditions then pre- vailing in the market or that the goods are such as are required urgently to meet an emergency in relation to a vocational or private need, and that any delay in restoration would cause material damage or injury or hardship either by reason of some circumstance special to the person or of market conditions or of any particular quality of requirement for the preservation of the goods. But it will not be open to him to question whether the stage of the investigation, and the need for further investigation, call for an extension of time. It is impossible to conceive that a person from whose possession the goods have been seized with a view to confiscation should be entitled to know and to monitor, how the investigation against him is proceeding, the material collected against him at that stage, and what is the utility of pursuing the investigation further. These are matters of a confidential nature, knowledge of which such person is entitled to only upon the investigation being completed and a decision being taken to issue notice to show cause why the goods should not be confiscated. There can be no right in any person to be informed midway, during an investigation, of the material collected in the case against him. Consequently, while notice may be necessary to such (12 of 15)

person to show why time should not be extended he is not entitled to information as to the investigation which is in process. In such circumstances, the right of a person, from whose possession the goods have been seized, to notice of the proposed extension must be conceded, but the opportunity open to him on such notice cannot extend to information concerning the nature and course of the investigation. In that sense, the opportunity which the law can contemplate upon notice to him of the application for extension must be limited by the pragmatic necessities of the case. If these considerations are kept in mind, we have no doubt that notice must issue to the person from whose possession the goods have been seized of the proposal to extend the period of six months. In the normal course, notice must go to such person before the expiry of the original period of six months. It is true that the further period of six months contemplated as the maximum period of extension is a short period, but Parliament has contemplated an original period of six months only and when it has fixed upon such period it must be assumed to have taken into consideration that the further detention of the goods can produce damage or injury or hardship to the person from whose possession the goods are seized. We have said that notice must go to the person, from whose possession the goods have been seized, before the expiry of the original period of six months. It is possible that while notice is issued before the expiry of that period, service of such notice may not be effected on the person concerned in sufficient time to enable the Collector to make the order of extension before that period expires. Service of the notice may be postponed or delayed or rendered ineffective by reason of the person sought to be served attempting to avoid service of notice or for any other reason beyond the control of the Customs authorities. In that event, it would be open to the Collector, if he finds that sufficient cause has been made out before him in that behalf to extend the time beyond the original period of six months, and thereafter, after notice has been served on the person concerned, to afford a post decisional hearing to him in order to determine whether the order of extension should be cancelled or not. Having regard to the seriousness and the magnitude of injury to the public interest in the case of the illicit importation of goods, and having regard to considerations of the damage to economic policy underlying the formulation of import and export planning, it seems necessary to reconcile the need to afford an opportunity to the person effected with the larger considerations of public interest.”

(13 of 15)

14.

The reasoning of the Supreme Court was primarily based on the fact that issuance of a show cause notice (i.e under Section 124) is part of a quasi-judicial or judicial act and consequently, the delay in its issue can at times, be prejudicial to the interests of the party or importer, who has an interest in the goods. The observations of the court are pointed, with respect to the nature of the goods and the information about their condition, which the party likely to be affected might possess. This court is also alive to the fact that Section 110 confers a general power of detention of goods: thus, all classes of articles, including perishables, such as foodstuffs, pharmaceuticals and other goods having limited shelf life can be implicated. Yet, the court has to also be alive to the fact that I.J. Rao (supra) was premised upon the phraseology of Section 110 (2), and the power of extension being conditioned “on sufficient cause being shown” which was the subject matter of the court’s discussion. Now, the amendment has done away with that expression; the power to extend (the period of detention) after amendment states that, “if the Commissioner of Customs may, for reasons to be recorded in writing, extend such period to a further period not exceeding six months and inform the person from whom such good were seized before the expiry of the period so specified.”

15.

The change in the statute, in the opinion of this court, is a significant one. The previous provision required the Commissioner to show sufficient cause, which meant that such cause had to be based on objective considerations. However, the amended provision merely requires the Commissioner to record the reasons in writing and “inform the person from whom such good were seized before the expiry of the period so specified”. In this court’s considered view, the amended provision deliberately sought to overbear the previous view that a notice before extension was necessary. Now two conditions are to be satisfied: one, the (14 of 15)

Commissioner has to record his reasons in writing, why the extension is necessary, and two, inform the person from whom such good were seized before the expiry of the period so specified. The latter condition is equally important, in the opinion of this court, because it is a pre-requisite for the exercise of the power of extension. The pre-amended provision was silent on this aspect.

16.

There are other reasons for this court to hold that the amendment brought about a radical change in the law. Parliament had knowledge – or is deemed to have knowledge of the existing state of law, which required notice, before extension. Therefore, the change of terminology is significant; the amendment has resulted in only two conditions, being insisted upon- primarily that the Commissioner should record his reasons, before the expiry of the period of limitation and should inform those reasons to the party concerned.

17.

Besides, this court also notices that Parliament, aware of difficulties that might be faced by importers of goods, which might be seized, also provided, through an amendment in 2006, the facility of provisional release. Section 110A, enacted for this purpose, reads as follows: “110A. Provisional release of goods, documents and things seized pending adjudication.—Any goods, documents or things seized under section 110, may, pending the order of the 3 [adjudicating authority], be released to the owner on taking a bond from him in the proper form with such security and conditions as the [adjudicating authority] may require.”

18.

These developments, in the opinion of the court, resulted in a complete change of law, on the aspect. Section 110 (2) too has not remained unaffected; a second proviso has been added, which states that:-

(15 of 15)

“Provided further that where any order for provisional release of the seized goods has been passed under section 110A, the specified period of six months shall not apply".

19.

The effect of these amendments, is that the rigor of unamended Section 110 (2) has been softened. Now, a person, whose goods are detained, can claim provisional release. At the time when IJ Rao was decided, that facility was not available. Seen in the context of these facts, it is apparent that a textual reading of Section 110 (2) would lead one to conclude that no separate notice is necessary, before extending the period of limitation by a further six months (for issuance of show cause notice); the authority has to record reasons in writing, which of course, should be based on materials and inform the concerned party about the extension before the expiry of the first period of six months. At this stage, it is necessary to also notice that even in IJ Rao (supra) the court recognized that not all reasons can be disclosed, because investigative processes and information gathering can be confidential.

20.

In view of the foregoing discussion, this Court is of opinion that the impugned order cannot be sustained. The answer to the question of law framed, is in the affirmative; the impugned order of CESTAT is hereby set aside and the appeals are allowed. All pending applications are disposed of. (SANJEEV PRAKASH SHARMA),J (S. RAVINDRA BHAT),CJ KAMLESH KUMAR /(Reserved)

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