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Appellate Collector of Customs and C.E. Vs. T.N. Khambati - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtAndhra Pradesh High Court
Decided On
Case NumberW.A. No. 305 of 1976
Judge
Reported in1988(37)ELT37(AP)
ActsCustoms Act, 1962 - Sections 100, 110, 110(1), 110(2), 110(3), 111, 112, 123 and 124
AppellantAppellate Collector of Customs and C.E.
RespondentT.N. Khambati
Appellant AdvocateK. Subrahmanya Reddy, Standing Counsel for the Central Government
Respondent AdvocateP. Babulu Reddy, Adv.
DispositionAppeal dismissed
Excerpt:
.....any opportunity to him as the need for extension, was bad. the collector was empowered to extend the time only when he was satisfied that there was sufficient cause for extension. since that inquiry with notice to the petitioner was not held, the extension is bad and the consequential proceedings are invalid and megel. therefore, the failure to hold an inquiry before the collector granted extension of time to issue show cause notice would not in any way affect the confiscation made of the articles of the petitioner and the penalty imposed on him. 9. it is true that sections 111 and 112, which authorises confiscation of good: the power under sub-section (1) cannot be equated with the power under the proviso to sub-section (2) of section 110.'such being the legal position enunciated by the.....sambasiva rao, j.1. whether confiscation of certain goods seized and penalty imposed under the customs act, 1962. without giving an opportunity in the affected person before the collector had extended the time for giving show cause notice, are valid or not, is the question before us.2. this is how it arose. the custom officers raided the residence of the writ petitioner and recovered 31 articles of alleged foreign origin on 27th june, 1970. as contemplated by section 110 of the customs act, the show cause was note issued to the writ petitioner within six months. however, the collector by his order, dated 18th december, 1970, extended the period to issue the show cause notice upto 26th june, 1971. while extending the time, he had not afforded any opportunity to the writ petitioner as to.....
Judgment:

Sambasiva Rao, J.

1. Whether confiscation of certain goods seized and penalty imposed under the Customs Act, 1962. without giving an opportunity in the affected person before the Collector had extended the time for giving show cause notice, are valid or not, is the question before us.

2. This is how it arose. The Custom Officers raided the residence of the writ petitioner and recovered 31 articles of alleged foreign origin on 27th June, 1970. As contemplated by Section 110 of the Customs Act, the show cause was note issued to the writ petitioner within six months. However, the Collector by his order, dated 18th December, 1970, extended the period to issue the show cause notice upto 26th June, 1971. While extending the time, he had not afforded any opportunity to the writ petitioner as to whether time should be extended or not. The actual snow cause notice was issued on 22nd June, 1971 and the petitioner submitted his explanation thereto on 23rd July, 1971. The Deputy Collector of Customs, thereupon inquired into the matter and concluded that the seized goods were prohibited articles. So, he passed an order confiscating the articles and also imposed a penalty of Rs. 1,000. This order was, dated 22nd March, 1972. The writ petitioner preferred an appeal to the Collector, Madras, who confirmed, by his order, dated 8th November, 1973, the order of confiscation and imposition of penalty made by the Deputy Collector. Thereupon. W.P. No. 2176 of 1974 was filed by the writ petitioner before this Court The relief he sought therein was to issue a writ of certiorari or mandamus quashing the order of the Deputy Collector, dated 22nd March, 1972 and confirmed by the Collector by his order, dated 8th November, 1973 and to direct the respondents to release the articles seized on 27th June. 1970. The Appellate Collector of Customs and the Deputy Collector of Customs were respondents 1 and 2 in the writ petition.

3. One of the principal contentions urged by the writ petitioner was that the extension of time given by the Collector by his order, dated 16th December, 1970 without giving any opportunity to him as the need for extension, was bad. The Collector was empowered to extend the time only when he was satisfied that there was sufficient cause for extension. Sufficient cause necessarily implied an inquiry. Since that inquiry with notice to the petitioner was not held, the extension is bad and the consequential proceedings are invalid and Megel. Therefore, he sought the striking down of the orders and the release of the seized articles. Our learned brother Gangadhara Rao. J., was persuaded to accept this contention. In fact, he relied on the decision of the Supreme Court in Assistant Collector, Customs v. Malhotra (1) : 1973ECR1(SC) in upholding this contention advanced by the petitioner. Therefore, the learned Judge allowed the writ petition, quashed the orders of the respondents and directed the release of the seized articles. The respondents have preferred this appeal.

4. We will continue to refer to the parties as they were in the writ petition.

5. Sri Subrahmanya Reddi, the teamed Standing Counsel for the Central Government, strongly urges that the view taken by the learned Judge is wrong, that the decision of the Supreme Court in Assistant Collector, Customs v. Malhotra(1 Supra) does not apply to the present situation, and that the ex parte order of the Collector extending time might v. Mate seizure but would not invalidate confiscation. In the submission of the learned Counsel, seizure is different from confiscation. Therefore, the failure to hold an inquiry before the Collector granted extension of time to issue show cause notice would not in any way affect the confiscation made of the articles of the petitioner and the penalty imposed on him.

6. A brief resume of the material provisions of the Customs Act would facilitate the consideration of these contentions. Chapter XIII of the Customs Act deals with searches, seizure and arrest. It starts with Section 100. It confers power on the proper officer to search suspected person, entering or leaving India, to find out whether he has secreted about his parson any goods liable to confiscation or any documents relating thereto. It to worthy of note that the idea of confiscation to thus made a part of search. In fact, a search can be made only if the proper officer has reason to believe that a person has secreted any goods table to confiscation. If he has no suspicion that there are no goods liable to confiscation on his person, then there is no occasion or power to make a search. Then Section 110 deals with seizure of goods, documents and things. We may notice that this is the last section in Chapter XIII. Since it is material provision, we may usefully extract the entirety of it. This section reads:

'110. (1) if the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods:

Provided that where it is not practicable to seize any such goods, the proper officer may serve on the owner of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer.

(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 pOS(sic) session they were seized:

Provided that the aforesaid period of six months may, on sufficient caua(sic) being shown, be extended by the Collector of Customs for a period not exceeding six months.

(3) The proper officer may seize any documents or things which, in his opinion, will be useful for, or relevant to, any proceedings under this Act.

(4) The person from whose custody any documents are seized under Sub section (3) shall be entitled to make copies thereof or take extracts therefrom in the presence of an officer of Customs.'

From Section 111, Chapter XIV commences. The heading for this Chapter is 'Confiscation of goods and conveyances and imposition of penalties'. Section 111 says

'111. The following goods brought from a place outside India shall be liable to confiscation -

a) * * *b) * * *c) * * *d) any goods which are imported or attempted to be imported or are brought within the Indian Customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force: * * * * * *

We have extracted only clause (d) and omitted the other clauses, because according to the learned Government Pleader the case of the articles now In question comes Under clause (d). It is Section 112 that provides for imposition of penalty. We may usefully extract certain portions of this section:

'112. Any person,...

(a) who, in relation to any goods does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act.

(b) * * *shall be liable,-

(i) In the case of goods in respect of which any prohibition is in force under mis Act or any other law for the time being in force, to a penalty not exceeding five times the value of the goods or one thousand rupees, whichever is the greater;

(ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding five times the duty sought to be rendered evaded on such goods or one thousand rupees, whichever is greater.'

'123. (1) where any goods to which this section applies are seized under this Act in the reasonable belief that they are sumuggled goods, the burden of proving that they are not smuggled goods shall be on the person from whose possession the goods were seized.

(2) This section shall apply to gold, diamonds, manufactures of gold CM diamonds, watches, and any other class of goods which the Central Government may, by notification in the official Gazette, specify.'

Section 124 lays down:

'124. No order confiscating any goods or imposing any penalty on any per son shall be made under this Chapter unless the owner of the goods or such person-

(a) 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;

(b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation of imposition or penalty mentioned therein; and

(c) is given a reasonable opportunity of being heard in the matter:

Provided that the notice referred to in clause (a) and the representation referred to in clause (b) may. at the request of the person concerned be oral.'

7. These are the material portions of the Act. Sri Subramanya Reddi, puts forward the theory that the idea of seizure postulated by Section 110 is distinct and different from the power to confiscate or to impose any penalty. Therefore, the procedure laid down under Section 110 is not required to be followed for confiscating any goods or imposing any penalty for which a separate procedure is provided under Section 124. Indeed, so the learned Counsel points out, there is no period of limitation prescribed for the issue of notice under Section 124. This distinguishes from the period of six months fixed under Section 110. Therefore, if no inquiry, has been held and no opportunity has been given to the affected person, that omission may vitiate the seizure as such and not confiscation. In support of this contention he relies on the Division Bench decision of the Madras High Court in Collector of Customs and Central Excise, Hyderabad v. Amruthalakshmi,(2) : AIR1975Mad43 , the decision of a Division Bench of the Gujarat High Court in J.R. Baroolia Mills v. M.L Khunger (3) 16 Guj. L.R. 119 and that of a single Judge of the High Court of Punjab and Haryana in Muni Lal v. Collector, Central Excise, Chandigarh (4) .

8. We are not persuaded to accept this contention of the learned Counsel. In the first place, it is difficult, nay impossible, to postulate confiscation without seizing any goods. Seizure, in our opinion, necessarily forms part of confiscation. That is why the Act has always connected the idea of confiscation with search and seizure. We have already given a resume of the material sections, viz. Sections 100 and 110. Section 100 enables the officer to search any person any only if he has reason to believe that that person has secreted about his person any goods liable to confiscation or any documents relating thereto.

Therefore, even to make a search, there must be a suspicion in the mind of the proper person that goods which are liable to confiscation are secreted about the person who is searched. The same emphasis on confiscation is reiterated in Section 110 which provides for seizure. Under this section, goods or documents can be seized only if the proper officer has reason to believe that the said goods or documents are liable to confiscation. If he has no prima facie reason to believe or suspect that the goods or documents are liable to confiscation, he cannot seize them. To put it in other words, only those goods or documents which are liable to be confiscated can be seized. Thus the idea of confiscation is mextrically connected with the power to seize. This idea is further reinforced by what is contained in Sub-section 1(1) and no notice in respect thereof is given under Section 124 (a) within six months of the seizure, the goods shall be returned to the person from whose possession they were seized. Obviously, this period of six months to give show cause notice before confiscation is provided to enable the concerned officers to make investigation.

It should be borne in mind that when the goods are seized, there was only a suspicion or a reason to believe that the goods are liable to be confiscated. They must pursue that suspicion or reasonable impression and make an investigation. Six months period is thus provided to enable them to do that, before they issue notice under Section 124 for confiscation and for imposing penalty. If this notice is not issued within six months, the goods shall be returned to the person from whose possession they were seized. Sub-section (2) of Section 110 brings out the inescapable connection between confiscation and seizure, for, if no notice under Section 124 is given within six months c the seizure, goods shall be returned to the person from whom they were seized. Section 123 which places the burden of proof that the goods are not smuggled on the person from whose possession the goods were seized, is also useful in understanding the connection between seizure and confiscation.

9. It is true that Sections 111 and 112, which authorises confiscation of good: and imposition of penalty, merely refer to the goods brought from a place outside India Sri Subrahmanya Reddy urges that the word 'goods' occurring in Sections 111 and 112 is unqualified, and bears no reference to the confiscated goods. Therefore, according to him, action can be taken de hors Section 110 and without reference to the procedure under that section for confiscating the goods and imposing penalty. We are afraid that this is total misreading of the provisions of the section. What we have already pointed ou(sic) above in respect of Sections 100 and 110 would demonstrate that confiscation is ar(sic) integral part of the scheme of seizure. That is why six months time to give notice under Section 124 from the date of the seizure is provided for under Sub-section (2) of Section 110. That is why it is also provided that if no such notice is given, the goods shall be returned to the person. That is also why power is conferred on the Collector of Customs to extend the time of six months for a further period not exceeding six months. Therefore, there is no escape from the intimate and irremovable connection between seizure and confiscation, despite the fact that the provisions occur in two separate chapters. If we read the provisions of Chapter XIV, it becomes abundantly dear that they continue the idea and the theme of Chapter XIII. Further as we have pointed out, there cannot be any confiscation without seizure. Confiscation is only forfeiture of the goods in favour of the State. Before that, articles are taken possession of by the authorities of the State. Without that possession or control over that possession, there cannot be any confiscation.

10. It is in this light, we must examine the question that is posed before us. The Collector in this case, by his order, dated 16th December, 1970 extended the period giving notice under Section 124. It is common ground that there was no prior notice given to the writ petitioner before this order was passed by the Collector. That means the writ petitioner had no opportunity to state his case why there should not be extension. In fact, there was no inquiry before the Collector passed this order of extension and that vitiates the confiscation and penalty proceedings. We have no hesitation in answering this question that it would under Sub-section (2) of Section 110, a right would vest in the person from whom the goods had been seized, if no notice under Section 124 was issued within six months of the seizure, because the goods shall be returned to him immediately after the completion of the six months period if there was no notice. This right is sought to be taken away by an ex parte order made by the Collector without any notice to the affected party, without affording him any opportunity and without holding an inquiry in his presence. It is only with the aid of this extension the authorities concerned issued the delayed notice under Section 124 and thereafter confiscated the goods and imposed penalty. When the order extending the time had been made by the Collector in the back of the affected person and without his knowledge he took away the right that would vest in him under Section 110(2) and consequently, the extension order, dated 16th December, 1970 passed by the Collector is illegal and invalid. It must necessarily follow that the notice under Section 124 which was given in pursuance of the extension granted by the Collector is invalid. That would result in vitiating the confiscation and penalty proceedings.

11. We receive great support to this view of ours from the decision of the Supreme Court in Assistant Collector, Customs v. Malhotra(1 Supra). True, it is a case which arose immediately after the order of extension was passed by the Collector, challenging the extension. There was no order of confiscation or imposition of penalty. It is on the basis of this circumstance that Sri Subrahmanya Reddi, endeavours to distinguish this decision from the case on hand.

12. We, however, do not see any substantial distinction in the principle of law. The Supreme Court laid down to Asst. Collector, Customs v. Malhotra (1 Supra).

'The power under the proviso to Section 110(2) (to extend time) is quasi-Judicial and at any rate one requiring a judicial approach. While the power of seizure under Sub-section (1) of Section 110 can be exercised on basis of reasonable belief on part of the concerned officer the power of extending the period to give notice under Section 124 (a) is to be exercised only on 'sufficient cause being shown'. This expression envisages at least some sort of inquiry on facts placed before the authority and determination by him of those facts Extension order is not to be passed mechanically. The power under Sub-section (1) cannot be equated with the power under the proviso to Sub-section (2) of Section 110.'

Such being the legal position enunciated by the highest Court in the land, it must necessarily follow that the notice issued by the authorities in the particular case under Section 124 is legally bad and no notice and be taken on that basis. Therefore, it vitiates the confiscation and penalty proceedings. A Division Bench of the Gujarat High Court consisting of Divan, J., as he then was, and Desai, J., took the same view, in A.M. Soni v. Union of India (5) 0043/1972 : AIR1972Guj126 . That was also a case where the challenge was made in the Court immediately after the notice under Section 124 was issued under the order of extension passed by the Collector. The learned Judges pointed out that the notice under Section 124 must reach the affected person before the expiry of the period fo six months from the date of seizure if the civil right to get back the seized goods is not to accrue to him. In the case before them, the notice was not issued within the period of six months from the date of seizure, and so a right to get back the seized, goods had vested in that person. Consequently the learned Judges opined that is was not open to the respondents (Customs Officials) to proceed with the confiscation or imposition of penalty under the relevant provisions of the Customs Act To the same effect is a single Judge's decision of the Allahabad High Court in Mohd. Hanif v. Collector (6) : AIR1973All433 . The learned Judge held that when the extension of the period was invalid, the goods recovered and seized from the possession of the petitioner were liable to be returned to him.

13. We have already noted that Shri Subrahmanya Reddi, relies on a Bench decision of the Madras High Court, a Bench decision of the Gujarat High Court and a single Judge's decision of the Punjab and Haryana High Court in Collector of Customs and Central Excise v. Amruthalakshmi (2 Supra), J.R. Barodla Mills v. M.L Khunger (3 Supra) and Muni Lal v. Collector, Central Excise, Chandigarh (4 Supra). With due respect to the learned Judges there, we cannot accept their view that Sections 110 and 124 are distinct and different from each other and they have no inter-connection or interplay. Their decisions were rested on this conclusion. For the reasons we have given above, we cannot accept this foundation for the three decisions relied on by Sri Subrahmanya Reddl. Our views receives full support from the decision of the Supreme Court.

14. Therefore, what we have stated above clearly shows that since the extension of time was made by the Collector ex parte, and without any inquiry giving an opportunity to the effected person, the extension was bad and consequently the notice under Section 124 given to the petitioner and the subsequent confiscation and penalty proceedings are invalid.

15. We may also point out another vitiating circumstance in the order of extension. The proviso to Sub-section (2) of Section 110 enables the Collector to extend the time only if there is, sufficient cause. The order of the Collector extending the time must prime facie show as to what that sufficient cause was. We are aware that no Court can sit in judgment and say that the Cause shown by the Collector was not sufficient In the circumstances. The Court cannot sit in judgment over the sufficiency of the reason; but the legal requirement remains that there should be a sufficient cause for extending time. That cause must be indicated in the order. The order of the Collector, dated 16th December 1970 is conspicuous by absence of any reference to any cause. This also vitiates the order of extension. For these reasons, we are in full agreement with our learned brother Gangadhara Rao, J., in allowing the writ petition, quashing the orders of the Deputy Collector and the Collector of Excise, and directing the return of the seized articles.

16. In the result, the writ appeal is dismissed with costs. Advocate fee Rs. 150.


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