Indirect Tax / Customs Law : Jurisdiction of Customs Department and its Legal Periphery Explained in an Important Judgment

Indirect Tax / Customs Law : Jurisdiction of Customs Department and its Legal Periphery Explained in an Important Judgment

In a recent Judgment, the writ petition filed against the Customs Department has been allowed and notice was quashed.

It was held that when the goods are sold in auction, the title in the goods gets transferred to the auction purchaser and hence, the goods will not retain the character as imported goods in the hands of the auction purchaser. The auction purchaser therefore cannot be treated as an importer.The IGST is paid on the import and it is a levy under Section 3(7) of the Customs Tariff Act read with Section 5 of the IGST Act. Whereas, the GST on the sale through auction is a levy under Section 9 of the CGST Act and these two transactions are separate and independent. Under the Scheme of the Act, the only right that is available for the authorities to make Regulations is provided under Section 152 of the Act read with Section 157. A Public Notice can be issued by the Department to the importers, exporters etc., clarifying about the changes to the customs Procedures, Regulations or Policies. Such Rules and Regulations is confined to the Customs Act alone and the same cannot be used with respect to any other enactment.

Section 48 of the Customs Act, 1962 provides the procedure in case where import cargo is not cleared, warehoused or transhipped within 30 days after unloading. If the consignee fails to clear the cargo within the time frame, a notice has to be issued to the consignee. The person in custody of the goods, with the permission of the appropriate Officer is entitled to sell the goods in their custody. In other words, Container Freight Station is entitled to auction any uncleared or unclaimed cargo after issuance of notice if goods imported for home consumption are not cleared within 30 days from the date of import.

Section 150(2) provides for the sequence of utilisation of proceeds and sub clause(c) refers to payment of duty if any on the goods sold. The duty referred to is the customs duty payable. Rule 2 of the Uncleared Goods (Bill of Entry) Regulations, 1972 also deals with a Bill of Entry to be submitted in the form appended to the Regulations for the goods to be sold in auction.

Rule 3 of the said Regulations provides that the Bill of Entry prepared under Regulation 2 shall be deemed to be a bill of entry under Section 46(1) of the Act and presented to the proper Officer.

In fact, in cases where the cargo is auctioned by the Customs Department, GST is payable by the highest bidder and the Cargo is handed over to the highest bidder only after proof of payment of GST on the bid price by the bidder. If that is so, it is not known as to why the same GST should not be insisted for payment when the auction is conducted by the CFS.

When cargo is auctioned under Section 48 of the Act, the manual Bill of Entry is filed by CFS who is the custodian. At that juncture, customs duty and IGST is paid to the Department for the goods. Once the bill of entry is filed and customs duty is discharged, the Customs Department will not have any further jurisdiction in the matter.

Reference : M/s. National Association of Container Freight Stations v Jt. Commissioner of Customs [2025] GCtR 1642 (Madras)