Mills Vs. M.L. Khunger, Dy. Collector  INSC 385 (18 July 1994)
Singh (J) Kuldip Singh (J) Mohan, S. (J)
1994 SCC (5) 332 JT 1994 (4) 515 1994 SCALE (3)341
Judgment of the Court was delivered by KULDIP SINGH, J.- The question for our
consideration in this appeal is whether the provisions of Section 123 of the
Customs Act, 1962 (the Act) would be attracted in a case where the retention of
the goods has become illegal under Section 110(2) of the Act because no notice
as required under the said provision was served within the statutory period.
factory premises of the appellant-firm were raided by the Custom authorities on
26-5-1969 and 28 packages of synthetic
fabrics of foreign origin were seized. The seizure was made under Section 110
of the Act. By the order dated 27-11-1969 the
Collector Customs extended the period for the issue of show-cause notice
prescribed under Section 124 of the Act by two months from the date of the
the show-cause notice in terms of Section 124(1)(a) of the Act was received by
the appellant-firm on 26-12-1969.
Assistant Collector, Bombay by the order dated 24-2-1971 under Section 112(b) of the Act, confiscated the
goods in dispute and also imposed a penalty of Rs 50,000 on the appellant. The
appeal filed against the order of the Assistant Collector was dismissed by the
Appellate Collector. The appellant challenged the orders of the Assistant
Collector and the Appellate Collector by way of a writ petition under Articles
226/227 of the 334 Constitution of India before the High Court of Gujarat at Ahmedabad.
The High Court dismissed the writ petition with cost. This appeal, by way of
special leave, is against the judgment of the High Court.
was contended before the High Court that the goods in dispute were seized by
the Custom authorities on 29-5- 1969 and the notice as contemplated by Section
124(1)(a) read with Section 110 of the Act was given on 19-12-1969.
said notice, having been served on the appellant after the statutory period of
six months, was invalid and illegal.
further contended that the notice being invalid, the appellant was entitled to
the return of the seized goods under Section 110(2) of the Act and further the
Custom authorities were debarred from holding the adjudication proceedings in
respect of the goods in dispute. In other words, it was contended that once the
notice under Section 110(2) of the Act is invalid, no proceedings for
confiscation of the seized goods can thereafter continue.
High Court, relying upon the judgment of this Court in Assistant Collector of
Customs v. Charan Das Malhotra1 , held the show-cause notice under Section
110(2) read with Section 124(1)(a) of the Act to be invalid but even then found
the adjudication proceedings and the confiscation order to be valid on the
consequence is that the order passed by the Collector of Customs and Central
Excise dated 27-11-1969 extending the period of six months
provided in Section 110 by two months provided in Section 110 by two months
from 26- 11-1969 is bad and illegal in view of the
provisions of Section 110(2) of the Act. But the question then arises is
whether the petitioner is entitled to return of the goods seized, once the
order of confiscation is passed under Section 111 of the Act. So far as Section
110 is concerned it deals with the seizure of the goods and the return thereof.
other words if the said provisions are not satisfied the goods seized have to
be returned. Section 110 of the Act deals with the seizure of the goods. Section
124 of the Act deals with the confiscation and imposition of the penalty. The
provisions relating to the seizure of the goods and those relating to the
confiscation of the goods or imposition of penalty stand on different footing.
Section 124 of the Act does not lay down any period within which the notice
required by it has to be given. The period laid down in Section 110(2) affects
only the seizure of the goods and not the validity of the notice. In the
present case after the proceedings of seizure , proceedings for confiscation
and imposition of penalty were proceeded with and the proceedings ended in the
order of confiscation and imposition of penalty vide order Ex. 'D'.
goods have already been ordered to be confiscated the question of return of
goods after the period of six months as mentioned in Section 110 of the Act
cannot survive." The High Court further noticed the provisions of Sections
110, 111, 112 and 124 of the Act and observed as under:
(1971) 1 SCC 697 : 1971 SCC (Cri) 321 : AIR 1972 SC 689 335 "These words
are of widest import and they cannot be given a restricted meaning as is sought
to be given by the learned advocate for the petitioner. There is nothing in
these provisions to indicate that the goods in respect of which an order of
confiscation or penalty can be passed under Sections III and 112 of the Act
must be goods seized under the provisions of Section 110 of the Act. The power
to seize the goods under Section 110 is distinct and separate from the power of
confiscation and imposition of penalty as provided in Sections 111 and 112 of
later provisions are not absolutely dependent on the provisions of Section 110
of the Act."
Das Malhotra case' was followed by this Court in Chaganlal Gainmull v.
Collector of Central
Excise2. The view
taken by the High Court is, therefore, unexceptionable and we uphold the same.
5. Mr Hardev
Singh, learned counsel for the appellant, however, contended that the notice
under Section 110(2) being invalid, the provisions of Section 123 of the Act
would not be attracted in the present case. According to him but for the
presumption under Section 123 of the Act there is no material on the record to
show that the goods in dispute are smuggled goods and once it is held that
Section 123 of the Act is not applicable to the facts of the present case, the
order confiscating the goods and imposing penalty are liable to be set aside.
We do not agree with the contention of the learned counsel. To appreciate the
argument, we may refer to the relevant provisions of Sections 110 and 123 of
the Act which are as under:
Seizure of goods, documents and things.- (1) If the proper officer has reason
to believe that any goods are liable to confiscation under this Act, he may
seize such goods:
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
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
possession they were seized:
that the aforesaid period of six months may, on sufficient cause being shown,
be extended by the Collector of Customs for a period not exceeding six months.
(4) 123. Burden of proof in certain cases.- (1) Where any goods to which this
section applies are seized under this Act in the reasonable 2 1990 Supp SCC 527
: 1991 SCC (Cri) 149 336 belief that they are smuggled goods, the burden of
proving that they are not smuggled goods shall be- (a) in a case where such
seizure is made from the possession of a any person,-
the person from whose possession the goods were seized; and
if any person, other than the person from whose possession the goods were
seized, claims to be the owner thereof, also, on such other person;
any other case, on the person, if any, who claims to be the owner of the goods
This section shall apply to gold, diamonds, manufacturers of gold or diamonds,
watches, and any other class of goods which the Central Government may by
notification in the Official Gazette specify."
conditions to be satisfied for application of the provisions of Section 123 of
the Act are
goods must be one to which Section 123 applies;
goods are seized under the Act and
goods must be seized in the reasonable belief that they are smuggled.
was not disputed before the Assistant Collector that Section 123 applied to the
goods in dispute. Reasonableness of belief has to be judged in the light of the
facts and circumstances of each case. It is not the case of the appellant that
in the facts of the present case reasonable belief could not be entertained
that the goods were smuggled. The only contention raised by the learned counsel
for the appellant is that in this case the seizure of the goods became illegal
due to non-compliance of the provisions of Section 110(2) of the Act and, as
such, one of the conditions for the applicability of Section 123 is not satisfied.
There is no force in the contention. The goods were seized under Section 110(1)
of the Act by the proper officer on the ground that he had reason to believe
that the goods in dispute were liable to be confiscated under the Act. The
seizure when made was in accordance with law and no fault could be found with
the same. When the goods are seized under Section 110(1) of the Act that
amounts to seizure of the goods under the Act and one of the conditions for
invoking the provisions of Section 123 of the Act are satisfied by the mere factum
of seizure. The effect of non- compliance of the provisions of Section 110(2)
would only be that the seized goods are returned to the person from whose
possession they were seized. It would not render the initial seizure of the
goods illegal. We, therefore, hold that the seizure of the goods under Section
110(1) by itself is sufficient to comply with the requisite condition under
Section 123 of the Act. What happens to the goods thereafter is of no
therefore, dismiss the appeal with costs. We quantify the cost as Rs 10,000. As
a consequence, 1A No. 1 of 1993 is also dismissed.