TaxTMI 
TaxTMI 
1982 (11) TMI 56
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....toms, but were the property of the queen mother of Nepal who had given them to him for repair, remaking and polishing etc. On this explanation the Additional Collector of Customs wrote a letter to Counsel General of Nepal in India on 3-7-1967 enquiring from him whether Her Highness, the queen mother, had entrusted ornaments and diamonds in question to the petitioner. On 24-7-1967 Counsel General replied to the enquiry and said that some ornaments were given to the petitioner for repair, remaking and polishing etc. some time in January-February, 1967 during their Majesties' visit to Calcutta. But he denied that any ornaments were given for sale by queen mother. 3. As the period of six months was going to expire on 14th August, 1967, the search having taken place on 15-2-1967, the Additional Collector on 4-8-1967 made an order extending the time for a further period of 3 months under the proviso to Section 110(2) of the Customs Act, 1962 (the Act). Thus time was extended upto 14-11-1967. Thereafter the Assistant Collector of Customs issued a show cause notice on 10-11-1967. In the show cause notice itself he ordered the release of certain items of the seized goods. But as rega....
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....petitioner specifically asked for the return of the goods on 27-12-1967 when he made a reply to the show cause notice. The customs authorities paid no heed to his request. They refused to return the goods to him and, on the contrary, made an order of confiscation of the goods on 14-8-1968. 6. One thing is clear from this narrative. On 14-8-1967 the customs authorities were bound in law to return the goods which inspite of the petitioner's demand they did not return to him. What is the effect of the wrongful refusal to return the goods? This is the question for decision in this case. Section 110 of the Act says : "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....
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....iction as the same was directly contravention of sub-section (2) of Section 110 of the Act. The right of restoration of the seized goods is a vested civil right which accrued to the owner of the goods on the expiry of six months. Case of Charan Dass Malhotra : 8. Section 110(2) was incorporated in the Customs Act of 1962 for the first time. There was no such provision in the old Sea Customs Act of 1878. Upon the reasonable belief that certain goods are liable to confiscation, an officer of the customs has now been empowered to seize such goods from any person. This power of seizure is an extraordinary power. Six months time is given to investigate the case, to collect evidence and to complete the enquiry. If within that period prima facie evidence of confiscation is not collected and the proper officer thinks that further investigation into the matter is necessary, the Collector of customs under the proviso to Section 110(2) is given the power to extend the period for a further period of 6 months. In dealing with this power to extend the time under the proviso the Supreme Court held in Assistant Collector of Customs v. Charan Dass Malhotra, AIR 1972 S.C. 689 = 1983 E.L.T. 147....
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.... by the Collector. 10A. This right which the Supreme Court called a vested civil right cannot be defeated by the customs authorities by extending the time of six months behind the back of the owner. The extension to be valid must be given not on an ex parte determination by the collector but after giving to the owner a notice of the proposed extension and after hearing him. If he makes an ex parte order and does not hear the owner of the goods on the question of extension, the extension order will be non-est. So power of extension under the proviso cannot be exercised without an opportunity being given to the person from whom the goods were seized. 11. Applying the principle of Malhotra's case to the facts of the present case it is clear to me that the order of extension dated 4-8-1967 was bad. It was without jurisdiction and void ab initio on the simple ground that the petitioner was never heard on the question of extension. The order of extension, therefore, is a complete nullity in law. It could not deprive the petitioner from whom the goods were seized of his right to have the goods restored to him on the expiry of six months from the date of the seizure. 12. In Ma....
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....hey did not do so, though he pleaded with them that he had become entitled to the restoration of the goods. This refusal was based not on any lawful authority but only on superior force. Against the customs authorities the petitioner could do nothing except to appeal to the courts. The authorities under the Act, namely, the Collector of Customs, the Central Board of Excise and Customs and the Central Government, equally paid no heed to his entreaties. All of them turned a deaf ear. The law was in favour of the petitioner. He was entitled to the return of his goods. But the authorities refused and, on the contrary, passed an order of confiscation in complete disregard of the law. A civil right : 15. The right to the restoration of the goods is a vested civil right, as the Supreme Court has said. So on the expiry of the initial period of six months this right to the restoration of the goods vested indefeasibly and absolutely in the petitioner. It could be defeated and taken away either by issuing notice under Section 124(a) of the Act within the initial period of 6 months or by obtaining a valid extension and by issuing notice under Section 124(a) within the extended period. On....
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....feated. It was never taken way. The goods were vested in the petitioner by force of law. So the confiscation proceedings must be held to be nullity. "And there are no degrees of nullity", Lord Reid has told us. [Anisminic v. Foreign Compensation Commission, (1969) 2 A.C. 147(170)]. The refusal of the customs authorities to obey the law will render everything illegal that they do after the right to the restoration of the goods had accrued to the petitioners. Section 110 is based on seizure. Seizure means taking possession by force. It means "take possession of contrary to the wishes of the owner of the property". The idea that it is the unilateral act of the person seizing is the very essence of the concept (Gian Chand v. State of Punjab, AIR 1962 S.C. 496 (499) = 1983 E.L.T. 1365. 19. The seized goods can be retained by the customs only for a period of six months unless the period is validly extended by another six months. If not validly extended or if no notice is issued under Section 124(a) the right to the restoration of the goods indefeasibly and absolutely vests in the person from whom the goods are seized. He is entitled to the return of the goods. The customs officer "sha....
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.... well as the ruled. The extraordinary power of seizure conferred by Section 110 is not an absolute power. It is cabined, confined and caged. The legislature is careful to see that the power does not overflow the banks and dams that it has built to contain it. The legislature has given the power subject to the obligation to return the goods if no notice is issued under Section 124 within the initial or validly extended period. If the goods are not returned in obedience to the statutory duty laid on the Customs Officer and are consequently confiscated, the right order for the court to make will be to strike down the order of confiscation itself which had its origin and being in illegalities and nullities. This will be a reminder to the authorities of what Thomas Fuller said : "Be you ever so high, the law is above you". Judicial conflict : 23. On the inter-relationship of Section 110 and Section 124 there is a divergence of judicial opinion in this country. There are two schools of thought. One school says that two sections are independent and not interrelated. [See Collector, C. & C. Excise v. Amruthalakshmi, AIR 1975 Mad. 43; Munnilal v. Collector of Central Excise, Chandigar....
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....the goods after return of the same to the owner may not be excluded. The collector may or may not be able to net the same after the adjudication of the confiscation of goods when the same had been returned to the owner under sub-section (2) of Section 110, but these considerations cannot, in my opinion, for the reason already recorded above, change or restrict the extent and scope of provisions of Section 124. Cash or G.C. notes, after return of the same to the owner under sub-section (2) of Section 110, may or may not be available on recording of adjudication of confiscation of the same, but a car or any goods like that may be readily available for taking possession thereof after adjudication of confiscation of the same even though the same had to be returned under sub-section (2) of Section 110." What about gold and diamonds? Will they be available? 28. The law does not depend on the nature of the goods such as "car or any goods like that". No such distinction is made in Section 124. This shows the utter futility of continuing confiscation proceedings after the goods have been returned to the owner. The learned judge says what would happen to the confiscation of goods after....
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....d thereafter? My answer is `No.' Unless the goods are available, they cannot be confiscated. As Mookerji J. said in Uma Rajeswarrao Patra : "Moreover an order of confiscation rests on the theory of `offending goods'. Where the goods are unlawfully imported, these goods become the `offender' and they might be confiscated without finding out the actual importer. But for the purpose of confiscation of the goods physical existence of the goods is necessary." (page 273). Once the seized goods go out of the hands and custody of the customs there is an end of the matter. The offending goods cannot be tried in absentia. They are not there to receive the sentence of condemnation and forfeiture. No proof can be produced at the adjudication proceedings about the goods being smuggled. The goods cannot be valued. No personal penalty can be imposed because the penalty has to be on the basis of the value of the goods. It can be upto five times of the value of the goods (Section 112). No criminal complaint can be lodged. For criminal prosecution the goods must be present for they are the proof, the very corpus of the crime. Adjudication proceedings would end in fiasco becau....
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....tice. A criminal complaint had been filed in that case and one Rana who had transported hashish in the owner's case had been found guilty and sentenced to 6 months imprisonment. The car was in the custody of the customs and the owner claimed that it be returned to him. The court declined the request and asked him to join the adjudication proceedings. That case presents no difficulty. The car being in the custody of the customs and notice under Section 124(a) having been given to the person from whom it was seized the adjudication proceedings could be continued. The court referred to the decisions of other courts and expressed disagreement with the view of Andhra Pradesh High Court taken in Appellate Collector of Customs v. T.N. Khamibati (1977 Crl. L.J. 1331). In Manubhai C. Hirani v. Union of India, C.W. 211 of 1971 decided on 15-10-1980 Kirpal J. disagreed with the view of Andhra Pradesh. 34. But the question which has arisen before me did not arise before the division bench which is binding on me. I decide the present case on the ratio of Malhotra's case. The extension being invalid and the goods having been detained in contravention of the statutory obligation the ad....
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.... the law. The judges are the architects of case law. They should construct it to achieve the objects of uniformity, clarity, and accountability. (Lord Devlin-the Judge, p. 182). Meaning of confiscation : 38. The word `confiscate' means to appropriate property to the use of the state. To adjudge property to be forfeited to the public treasury; to seize and condemn private forfeited property to public use. (Black's Law Dictionary 4th ed. page 371). Confiscation is based on seizure. Seizure is forcible taking of possession. Forcible possession is either by lawful authority or by over-powering force. Seizure is by lawful authority under Section 110(1). But refusal to return the seized goods contrary to Section 110(2) is unlawful and without any authority. Because it is based on sheer force. This illegality spreads and infects the whole process and renders the entire proceedings void ab initio and a complete nullity. 39. The right to the restoration of goods which accrues to the person from whom the goods are seized is a `vested' right, meaning thereby a right to absolute ownership of the goods and not subject to be defeated by any subsequent proceedings taken again....
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....s : (1) that the detention of the goods by the customs beyond six months was a nullity and (2) that the petitioner's vested civil right cannot be taken away, it is not necessary to refer it to a larger bench. These two grounds mark an independent line of thought. They flow from Malhotra's case. On these premises it must inevitably follow that confiscation was without jurisdiction and a nullity. In addition to this I have held in a later part of this judgment that the seizure was also illegal because it was not based on any reasonable belief. So reference to a larger bench is unnecessary. 43. Calcutta decision in Uma Rajeswarrao Patra v. Union of India (supra) is a correct application of Malhotra's case. Malhotra's case has not always been correctly understood and applied and is one single source of judicial conflict. Allahabad, Andhra and Calcutta hold that there is a connecting link between the notice of confiscation of the goods under Section 124 and retention of the seized goods under Section 110(2). Madras, Bombay, Gujarat and Punjab hold that the two sections are independent. Madras decision in Amruthalakshmi denies the vested right of the owner of the goods....
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....ven to Section 124. This case gives undue weightage to the power of confiscation and minimises the importance of sub-section (2) of Section 110 to such an extent that by giving undivided hegemony to Section 124 the right to restoration of goods is completely destroyed. 46. Manubhai C. Hirani is a representative decision of that school of thought which believes in the principle of independence. They take the view that Sections 110 and 124 are entirely independent and are in no way connected with each other. Manubhai shows that even if the right to restoration of goods had accrued to the petitioner it can be denied to him on the ground that collector had made an order of confiscation under Section 124. This case exemplifies the death of the right of the individual to the restoration of the goods guaranteed to him by the legislature under Section 110(2). The order of confiscation made by the collector is destructive of the citizen's right under Section 110(2), the court assumed. So it comes to this that if the notice to show cause is issued under Section 124 and the man comes to court immediately thereafter challenging the notice on the ground that he had become entitled to ....
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.... sub-section (2) of Section 110. This civil right to the restoration of the goods which accrues to the man on the expiry of six months, though a vested right, can be defeated by the collector by one stroke of his pen when he passes the order of confiscation. I cannot subscribe to this line of reasoning which will make the civil right nugatory. Whether a person from whom the goods are seized asks for the return of the goods or not the customs officer is bound to return the same to him if no notice in respect of the seized goods is given under clause (a) of Section 124 within six months of the seizure of the goods or within the time extended by the collector on sufficient cause being shown and after hearing the person affected. The words "shall be returned" impose a duty of a positive kind. The customs cannot escape from this statutory obligation. They must obey the statute and release the goods. The words are too strong to justify a milder view. 50. The right to the restoration of the goods entrenched in Section 110(2) cannot be defeated by an order of confiscation once it has accrued to the man and has vested in him. It can be defeated, as the Supreme Court has said, only either....
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....ond six months is illegal. This illegality enters into the adjudication proceedings and vitiates the confiscation order. The independent school condones this illegality, as it were, by resorting to Section 124. To them the facts are nothing and interpretation is everything. Cases holding that the two sections are independent show this. This case vividly illustrates how the owner can be deprived of the protection of the law and how the due and orderly administration of the law can be diverted into a new course, which may serve as an evil precedent in future. 53. As the practice of search raises many issues as to the liberty of the individual the practice of seizure raises many issues as to his right to property. Illegal exercises of search and seizure result in unauthorised confiscation of goods. The law is deeply concerned for the rights of the individual. In the end the personality of the judge is the only guarantee of justice, as Ehrlich has said. Reasonable belief : 54. The other question which was argued before me was that the customs officer did not act on any reasonable belief when he searched the petitioner's premises on 15-12-1967 and seized the goods. Section ....
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....ties to prove that the goods were imported after the restrictions against import were imposed. (Amba Lal v. Union of India, AIR 1961 S.C. 264 = 1983 E.L.T. 1321). In Pukhraj v. D.R. Kohli, AIR 1962 S.C. 1559 = 1983 E.L.T. 1360, the Supreme Court said that when the court was dealing with the question as to whether the belief in the mind of the officer who effected a seizure, was reasonable or not, the court was not sitting in appeal over the decision of the said officer. All that it could consider was whether there was any ground which prima facie justified a reasonable belief. That the officer had reasonable belief must be stated in the notice to show cause. It must be adjudicated upon by the authorities under the Act. At the stage of appeal or revision from the orders of the officer adjudging confiscation each successive appellate or revisional authority has also to address itself to this requirement of reasonable belief. The seizing officer either by his own evidence or other materials placed before the adjudicating authority, has to prove to its satisfaction that there was ground for him to reasonably believe that the goods were smuggled goods, that is to say that the goods w....
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....proceed upon the foundation of a reasonable belief inspired in him by some definite material by way of some definite information or otherwise so that he could be said to have seized the goods in a reasonable belief that they were smuggled goods. (Bapalal v. Collector of Central Excise, AIR 1965 Gujarat 135). The question is whether the record before me shows that there was a reasonable belief in the mind of the seizing officer that the goods were smuggled goods. It does not appear to me that he had entertained any reasonable belief at the time of seizure. Neither the board on appeal, nor the Central Government applied their mind to this question. Two reasons : 57. Applying the principles of these cases to the facts of the present case what do we find? Two reasons were given in support of the reasonable belief. One is that the customs authorities received some information. What is that information? It was never disclosed to the petitioner. Nor was it disclosed to the adjudicating authorities. Very vague words such as `on information received' are used in the show cause notice. The information on which the customs authorities act must be definite information. No one suggest....
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....onable man entertain a belief that these were smuggled goods? 59. The belief must be such as any reasonable man in the circumstances of the case would entertain about the existence or non-existence of a thing. Simply because the goods were not accounted for at that time does not necessarily mean that the goods were smuggled goods. Unaccounted goods may be stolen goods. Reasonable belief could be entertained either on the basis of some external indicia or on the basis of some internal information that the goods had been illegally imported into India from Nepal or some other foreign country either without payment of duty or in contravention of any restriction or prohibition imposed by statute. There was nothing to suggest the foreign origin of the goods. There was nothing to suggest the illegal importation of the goods into the country. 60. The goods must be smuggled goods. The word `smuggled' means that the goods were of foreign origin and they had been imported from abroad. Only then does the presumption under Section 123 arise. The goods themselves did not suggest that the petitioner was an old smuggler or a dealer in smuggled goods. If there was such information with th....