1973 (11) TMI 42 - SC - Customs

Supreme Court upholds Customs Act extension order due to agreements waiving rights, no violation of natural justice

The Supreme Court held that the extension order under the Customs Act was legal due to special agreements and consent orders between parties, which waived ... Return of seized goods on expiry of prescribed period - order for extension under Section 110(2) of the Customs Act - principles of natural justice - consent orders and waiver of procedural rights - substitution of seized goods by securities/bonds for adjudication - locus standi where goods were in possession of a pledgeeOrder for extension under Section 110(2) of the Customs Act - return of seized goods on expiry of prescribed period - Validity of the order dated 20 September, 1963 extending the period for service of a notice under Section 124(a) of the Act and its effect on the right to return the seized goods - HELD THAT: - The Court analysed whether the extension order of 20 September, 1963 could be impugned as being beyond the permitted time and thereby entitling the appellants to immediate return of the goods. While noting that in some appeals the extension order fell beyond the initial six month period and could be exposed to infirmities of limitation (the Court expressly refrained from expressing any final opinion on that point), the Court held that those temporal or procedural infirmities did not entitle the appellants to automatic return of the goods where, in the interlocutory proceedings, the parties had entered into consent agreements under which the appellants obtained release of the goods on depositing money and executing bonds to be treated as sale proceeds of the seized goods and as securities for adjudication. By these special agreements the parties effectively removed the goods from the operation of Section 110 for the purpose of extension of time and the right to return accrued subject to the consensual terms. The Court therefore treated the deposits and bonds as substituted goods available for adjudication and rejected the plea that the extension order alone entitled the appellants to return of the goods. [Paras 19, 20, 21, 23]The challenge to the extension order did not entitle the appellants to return of the goods where consent orders had authorised release of the goods in consideration of deposits and bonds treated as substituted goods for adjudication.Principles of natural justice - consent orders and waiver of procedural rights - Whether the order of extension dated 20 September, 1963 was vitiated by breach of natural justice because the appellants were not given an opportunity to be heard - HELD THAT: - The Court examined the contention that the appellants must have been heard before any extension of time was granted, in the light of this Court's decision in Assistant Collector of Customs v. Charan Das Malhotra, which held that an affected person is entitled to be heard before an extension is made. The Court found that in these cases the appellants themselves, by consent orders entered during the pendency of their High Court petitions, had sought and obtained release of the goods on the terms of depositing money and executing bonds and thereby waived the right to challenge the extension on grounds of absence of hearing. The agreements evidenced an effective waiver of the appellants' entitlement to be heard against the extension; accordingly there was no actionable breach of natural justice in the circumstances of these appeals. [Paras 8, 10, 11, 21]No breach of principles of natural justice was made out because the appellants, by consent orders, waived their right to be heard and obtained release of the goods on stipulated terms.Substitution of seized goods by securities/bonds for adjudication - locus standi where goods were in possession of a pledgee - Effect of deposits and bonds executed pursuant to consent orders and the appellants' locus standi where goods had been seized from the pledgee (bank) - HELD THAT: - The Court held that the moneys deposited and the bonds executed by the appellants pursuant to the consent arrangements were to be treated as the substituted goods or proceeds of sale for the purposes of subsequent adjudication as to confiscation or penalties. Once the parties so agreed and the goods were released on that basis, the goods ceased to be within the immediate ambit of section 110 for the purpose of giving notice, and the appellants could not claim return of the goods apart from the consensual terms. The Court also accepted the respondents' contention that the appellants' locus standi to claim return was affected by the fact that the bank, a pledgee, was in possession at the time of seizure; this further supported the view that the consensual substitution of securities was effective. [Paras 12, 20, 22, 23]Deposits and bonds executed under the consent orders operate as substituted goods for adjudication and, coupled with the bank's possession as pledgee, the appellants could not seek return of the goods outside the consensual framework.Final Conclusion: The appeals are dismissed. The Court held that the consent orders executed by the parties-under which the appellants obtained release of the seized goods on depositing money and executing bonds to be treated as proceeds or substituted goods-precluded relief based solely on the extension order or alleged want of hearing; the deposits and bonds stand substituted for the goods for adjudication, and the parties are directed to permit prompt completion of adjudication proceedings. Issues Involved:1. Legality of the extension order dated 20 September 1963 under Section 110 of the Customs Act, 1962.2. Violation of principles of natural justice due to lack of opportunity to be heard before the extension order.3. Impact of consent orders and special agreements on the appellants' entitlement to the release of goods and return of deposited amounts.4. Locus standi of the appellants to ask for the release of goods seized from the Bank.Detailed Analysis:1. Legality of the Extension Order Dated 20 September 1963:The primary contention of the appellants was that the order dated 20 September 1963, extending the period for issuing a 'show cause notice' under Section 110 of the Customs Act, 1962, was illegal because it was not within six months of the seizure of the goods. The Supreme Court referred to the case of Assistant Collector of Customs v. Charan Das Malhotra, where it was held that an extension order passed after the initial period of six months had lapsed was invalid. However, in the present case, the Court noted that the special agreements and consent orders between the parties during the pendency of the writ petitions in the High Court altered the applicability of Section 110. Therefore, the extension order's legality was not questioned due to these agreements.2. Violation of Principles of Natural Justice:The appellants argued that the extension order was made without giving them an opportunity to be heard, thus violating the principles of natural justice. The Supreme Court acknowledged that, as per the Malhotra case, the right to be heard before an extension is crucial. However, the Court found that the special agreements and consent orders between the parties effectively waived the appellants' right to contest the extension order. Consequently, there was no violation of natural justice in this context.3. Impact of Consent Orders and Special Agreements:The appellants had entered into several consent orders with the Excise Authorities, which allowed for the release of the seized goods upon depositing certain amounts and executing bonds. These agreements stipulated that the deposited amounts and bonds would be treated as the sale proceeds of the seized goods for adjudication purposes. The Supreme Court held that these agreements took the goods out of the purview of Section 110 of the Act. Therefore, the appellants' contention that they were entitled to the return of the deposited amounts was deemed unsound and unacceptable. The agreements established that the parties had waived the requirement for a notice of extension within six months of the seizure.4. Locus Standi of the Appellants:The Excise Authorities contended that the appellants had no locus standi to ask for the release of the goods because the Bank, as the pledgee, was in possession of the goods when they were seized. The Supreme Court agreed with this contention, stating that the appellants could not claim the release of goods seized from the Bank's possession.Conclusion:The Supreme Court concluded that the appeals failed on all grounds. The special agreements and consent orders between the parties effectively waived the appellants' rights to contest the extension order and negated any claims of violation of natural justice. Additionally, the appellants lacked the locus standi to seek the release of the goods. The Court emphasized that the deposited amounts and executed bonds represented the goods for adjudication purposes, and the Excise Authorities should proceed with the adjudication proceedings without further delay. The appeals were dismissed, with each party bearing its own costs.