Court invalidates Customs Act extension, citing lack of hearing and communication, upholds petitioners' rights

The court held that the Collector of Customs extending the time under the proviso to section 110 of the Customs Act without hearing the petitioners was invalid, as it violated natural justice principles. Additionally, the order extending the period was deemed invalid as it was not communicated to the petitioners within the required six-month period, infringing on their right to reclaim the seized goods. The court quashed the extension, ruling in favor of the petitioners due to their vested right. No costs were awarded, and the order's operation was stayed for eight weeks.

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Issues Involved:
1. Whether the Collector of Customs could extend the time under the proviso to sub-section (2) of section 110 of the Customs Act, 1962, without hearing the petitioner.
2. Whether the order extending the period under the said proviso is valid or binding if it was not served upon the petitioners within six months of the seizure of the goods.

Detailed Analysis:

Issue 1: Extension of Time Without Hearing the Petitioner
The first issue addressed whether the Collector of Customs could extend the time for issuing a notice under clause (a) of section 124 of the Customs Act, 1962, without providing a hearing to the petitioner. The court examined the nature of the Collector's function in extending the time, determining whether it was an administrative or quasi-judicial act.

The court referred to the case of Vasantlal Ranchhoddas Patel and others v. Union of India and others, AIR (1967) Bom. 138, which held that ex parte extension of the period before the expiry of six months under the proviso to sub-section (2) of section 110 of the Customs Act was valid, without addressing the principles of natural justice.

Conversely, in Charandas Malhotra v. Assistant Collector of Customs and Superintendent, Preventive Service and others, AIR 1968 Cal. 28, it was held that extending the period under the proviso to sub-section (2) of section 110 after the expiry of six months without hearing the party was void. The court emphasized that the Collector must consider the sufficiency of the cause shown for the extension, which necessitates a judicial approach involving hearing all affected parties.

The court concluded that the right to reclaim the goods if no notice under section 124 is served within six months is a vested right. Any action to prevent the return of such goods or postpone the owner's right to reclaim them prejudices the owner's property rights. Thus, the Collector's function in extending the period under the proviso to sub-section (2) of section 110 requires a judicial or quasi-judicial approach, mandating a hearing for the affected parties. The court held that the ex parte extension violated the principles of natural justice and was therefore invalid.

Issue 2: Validity of the Order if Not Served Within Six Months
The second issue considered whether the order extending the period under the proviso to sub-section (2) of section 110 was valid if it was not served upon the petitioners within six months of the seizure of the goods.

The court referred to Nripendra Nath Mazumdar v. N. M. Bardhan and others, AIR 1959 Cal 219, which held that an order affecting a person's rights must be communicated to that person to be effective. The date of the order is the date on which it is made known to the affected party. In this case, the order extending the period was made on November 3, 1966, but was communicated to the petitioners only on December 16, 1966, after the six-month period had expired.

The court also cited Director of Supplies and Disposals, Calcutta v. Member, Board of Revenue, Government of West Bengal, 11 STC 589, which supported the principle that the effective date of an order is when it is communicated to the affected party. Additionally, Lala Shri Bhagwan and another v. Ram Chand and another, AIR 1965 SC 1767, emphasized that statutory bodies dealing with citizens' rights must act judicially and in accordance with natural justice principles.

The court concluded that the order extending the period was not effective until communicated to the petitioners on December 16, 1966, by which time the right to reclaim the goods had already vested in the petitioners. Therefore, the order made on November 3, 1966, was invalid and must be quashed.

Conclusion
The court ruled that the extension of the period under the proviso to sub-section (2) of section 110 of the Customs Act, 1962, without hearing the petitioners was invalid as it violated the principles of natural justice. Additionally, the order extending the period was invalid as it was not communicated to the petitioners within the six-month period, thus infringing on their vested right to reclaim the seized goods. The rule was made absolute, and the purported extension was quashed. No order as to costs was made due to the petitioners' involvement in smuggling activities. The operation of the order was stayed for eight weeks.

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