Babulal Amthalal Mehta Vs. The
Collector of Customs, Calcutta  INSC 60 (8 May 1954)
See Customs-Goods seized in reasonable belief
that they are smuggled goods-Burden of proof-If violative of equal protection
of law-Sea Customs Act (VIII of 1878), as amended by Amending Act (XXI Of
1955), s. 178-A-Constitution of India, Art. 14.
Section 178-A of the Sea Customs Act which
places the burden of proving that any of the goods mentioned in the section and
reasonably believed to be smuggled are not really so on the person from whose
possession they are seized, is not discriminative in character and does not
violate equal protection of law guaranteed by Art. 14 Of the Constitution.
Budhan Chaudhury and Others v. The State of Bihar, (1955) I S.C.R. 1045, applied.
Purshottam Govindji Halai v. Shri B. M.
Desai, (1955) 2 S.C.R. 889 and A. Thangal Kunju, Musaliar v. M. Venkitachalam
Potti and another (1955) 2 S.C.R. ii96, referred to.
1111 William N. McFeyland v. American Sugar
Refining Co., (1916) 241 U.S. 79, W. D. Manley v. State of Georgia, (1929) 279 U.S. I and Tot v. United States, (1943) 319 U.S. 463, held
Consequently, in a case where the Collector
of Customs on the failure of a person, from whose possession certain diamond
pieces were seized, to prove that they were not smuggled goods but were legally
imported into India, confiscated the diamonds under ss. 167(8) and 167(39) Of
the Sea Customs Act, no violation of the fundamental right conferred by Art.
14, Of the Constitution occurred.
ORIGINAL JURISDICTION: Petition No. 98 of
Petition under Article 32 of the Constitution
of India for enforcement of fundamental rights.
N. C. Chatterjee and S. C. Majumdar, for the
P. A. Mehta, R. Ganapathy Iyer and R. H.
Dhebar, for the respondents NOS.. 1, 2, 3 and 5.
1957. May 8. The Judgment of the Court was
delivered by GOVINDA MENON, J.-This application under Art. 32 of the
Constitution raises the question of the constitutionality of s. 178-A, inserted
in the Sea Customs Act, (VIII of 1878), by s. 14 of the Amending Act XXI of
1955, and the chief ground on which it is sought to be struck down is that it
offends Art. 14 of the Constitution. From the affidavits of both the parties to
which there are annexures the following facts emerge:
The petitioner carries on business as a
broker in diamonds and precious stones in Calcutta and, according to him, he
enjoys credit and reputation in the market as a well-known and respectable
broker of such goods. On May 4, 1955, the Rummaging Inspector (Intelligence),
Customs House, Calcutta, Respondent No. 3, armed with a search warrant from the
Chief Presidency Magistrate, Calcutta, Respondent No. 4, searched the
residential room of the petitioner, situated at No. 32, Sir Hariram Goenka
Street, Calcutta, and after a minute search of the steel almirah in which
according to the statement of the petitioner, he used to keep his stock in
trade and finding none there questioned him as to where he had secreted the
diamonds to which the 1112 reply given by him was in the negative. Thereupon a
wall almirah, wherein washed clothes, and other articles were stored, was
searched and therein in an old jacket 475 pieces of diamonds were discovered
along with one piece of synthetic stone. A statement signed by him was taken
from which we find that his explanation for the possession was that Rs.
10,000/- worth of diamonds were received by him from M/s. Ratilal Amritlal, of
89 Zaveri Bazar, Bombay, and the rest were purchased locally in Calcutta. He
did not remember the names and address of the parties from whom the local
purchases were made, nor did he have in his possession any documents covering
the purchase. Thereafter the Rummaging Inspector escorted the petitioner to the
Customs House where the Assistant Collector, Customs, asked him to produce
evidence showing that the goods were not smuggled goods but were legally
imported on payment of duty. The Assistant Collector then permitted the
petitioner to go and gave him time till May 7, 1955, to produce evidence
showing that the goods were imported on payment of customs duty and under a
valid import licence. On the same day, i.e., May 4, 1955, a notice was served
on the petitioner by the Customs authorities stating that there were reasonable
grounds to believe that the goods seized by the Rummaging Inspector had been
illegally imported into India and, therefore, before further action was taken
under as. 167(8) and 167(39) of the Sea Customs Act, the petitioner should
submit by May 7, 1955, any documents which might be in his possession showing
that the goods in question were legally imported into India on payment of
proper Customs duty and on production of a valid import trade control licence.
It is also stated that if the goods were not imported by the petitioner, but
were bought from another party he should submit by the same date any evidence
in his possession showing the purchase of the goods. In answer to this, on
behalf of the petitioner' Messrs. S. K. Sawday and Company, a firm of Advocates,
Calcutta, wrote to the Assistant Collector, Customs, on May 7, 1955, reciting
the circumstances under which the petitioner came to 1113 be in possession of
the seized articles alleging that in the circumstances the presumption of an
offence having been committed in contravention of s. 86 of the Sea Customs Act
attracting a punishment under s. 167(39) of the Sea Customs Act was unwarranted
and requested to be furnished with a statement of the reasons for the seizure
as soon as possible. The letter went on to request for ten days' time for
procuring and producing certificates etc. from the Bombay trade and Calcutta
trade about the authenticity of the petitioner's business. and also how he came
to be in possession of the goods. Another letter was written by the same firm
of Advocates on May 9, 1955, the details of which it is unnecessary to refer.
On May 16, 1955, a further letter was written enclosing two certificates and
containing further particulars. This also reiterated the request for the supply
of specific reasons for the seizure. On May 23, 1955, the Assistant Collector
replied to the Advocates informing them that the diamonds in question were
seized on reasonable suspicions that the same had been imported into India
illegally and as such were liable to seizure under the Sea Customs Act. Further
correspondence followed by a letter dated June 20, 1955, to which there was a
reply on June 25, 1955, wherein there was a detailed reference to everything
that had taken place till then and especially with regard to the earlier denial
of the petitioner about there being any diamonds with him and the discovery of
the same later on in a used jacket in a wall almirah. This is a comprehensive
letter containing the justification for the proceedings taken by the search
officers and finally the Assistant Collector observed that if the petitioner
failed to submit a written explanation in time or did not appear before him
when the case was fixed for hearing, the case would have to be decided on the
basis of the evidence on the record without any further notice; On July 1,
S. K. Sawday & Company wrote a further
letter on behalf of the petitioner reiterating their objections and showing why
action should not be taken. This was followed by letters dated July 4 and 20,
1955. A personal hearing was granted on July 21, 1955, followed by a letter
from the Advocates 143 1114 dated July 22, 1955. It is unnecessary for the
present to elaborate the contents of these letters or to refer to the statement
enclosed therewith from M/s. Ratilal Amritlal, Bombay.
The Collector of Customs thereupon, after
considering the entire matter placed before him, passed an order dated
September 12, 1955, which was dispatched on November 5, 1955, containing an
elaborate discussion of the various facts and circumstances and finally
concluding that since the petitioner had failed to discharge the onus under s. 178-A
of the Sea Customs Act in respect of the diamonds seized on May 4, 1955, orders
had been passed confiscating the same under ss. 167 (8) and 167 (39) of the Sea
Customs Act and that the confiscation would be absolute in terms of the
provisions of ss. 3 (2) and 4 of the Imports and Exports (Control) Act, 1947.
The reasons given in the above order were that the subsequent statements were
contrary to what had been stated in the first instance, that at the time of the
raid, an attempt was made to hide the diamonds in a suspicious manner and
lastly that the petitioner was making statements which were in the nature of an
afterthought, and not supported by facts. On account of these and other reasons
the Collector was of the opinion that the presumption under s. 178-A had not
been rebutted. The order stated that an appeal against it lay to the Central
Board of Revenue within three months of the date of the dispatch and also
contained information as to the court-fee stamps etc., which would have to be
affixed. Without availing himself of that remedy the petitioner has come up to
this Court by way of an application for a writ under Art. 32 of the
Though Mr. Chatterjee faintly argued that the
provisions of Art. 19(1)(f) and (g) and Art. 31 of the Constitution had been
violated, he did not seriously press those contentions.
The main point of the attack was centered on
the contention that s. 178-A was violative of the principles of equal
protection of the laws guaranteed under Art. 14 of the Constitution.
Before we discuss the validity of s. 178-A,
it would be useful to consider the circumstances which led to 1115 the
enactment of that statutory provision and for that purpose a brief outline of
the relevant sections of the Act would be necessary.
Section 19 of the Sea Customs Act, 1878,
enables the Central Government by notification in the official Gazette to
prohibit or restrict importation or exportation of goods into or out of India,
and s. 20 enumerates the dutiable goods. When any person imports goods into
India, the owner of such goods is required, after the delivery of the manifest
by the master of the vessel in which they are imported, to make an entry of the
goods for home consumption or warehousing by delivering to the
Customs-collector a bill of entry containing particulars which shall correspond
with the particulars given of the same goods in the manifest of the ship (s.
86). This is intended to give an idea to the Customs collector as to whether
what the owner claims is different or the same as what the master of the vessel
has intimated by the delivery of the manifest. On the delivery of such a bill,
if any duty is payable on such goods, the same shall be assessed and it is only
after payment of the duty so assessed that the owner may proceed to clear the
same (s. 87). Clearance of the goods after the payment of such duty is provided
in s. 89 and if everything has been done according to law, the owner can take
away the goods.
Chapter XVI deals with offences and penalties
and s. 167 of the same Chapter contains three columns in a schedule, the first
of which mentions the offence, the ,second, which does not have the force of
law, gives the section of the Act to which the offence has reference and the
third lays down the penalty which may be imposed. With regard to the third
column a distinction has to be made between the penalty to be imposed by the
customs authorities and the. punishment that can be imposed by a court of law
for the infringement of certain provisions. Offences mentioned in entries Nos.
26, 72 and 74 to 76 (both inclusive) have
reference to prosecution and conviction before a Magistrate, whereas most of
the others concern penalties imposed by the Customs authorities. This
distinction will be important when referring to s. 182. We are in this 1116
case concerned with entries Nos. 8 and 39. The penalty of confiscation is
provided in the third column of entry No. 8, if any goods, the importation or
exportation of which is prohibited or restricted, are imported contrary to such
prohibition or restriction. It lays down that in addition to the confiscation
of the goods, the persons concerned shall be liable to a penalty not exceeding
three times the value of the goods, or not exceeding one thousand rupees.
This Court has held that the minimum is the
alternative: see Maqbool Hussain v. The State of Bombay(1). Entry No. 39 also
provides for a penalty not exceeding Rs. 500 and the -confiscation of the goods
if they are taken or passed out of any custom-house or wharf without an entry
Smuggled goods when traced and seized come
under this category. Though the word 'smuggling' is not defined in the Act, it
must be understood as having the ordinary dictionary meaning namely carrying of
goods clandestinely into a country.
Chapter XVII relates to searchers and
recovery of smuggled goods, as well as offences, appeals, etc. Section 169
gives power to any customs officer, duly employed in the prevention of
smuggling, to search any person on board of any vessel in any part in (India)
or any person who has landed from any vessel, provided that such officer has
reason to believe that such person has dutiable or prohibited goods secreted
about his person. A safeguard is provided under s. 170 by which any person
about to be searched may require the said officer to take him, previous to
search, before the nearest Magistrate or Customs- collector. The important
factor in this case is that the person making the search or attempting to do it
must have a reason to believe that such person has dutiable or prohibited
goods. These two sections refer to the time at which a person brings dutiable
goods into India but the later provisions of the Chapter lay down the procedure
to be followed where goods have been smuggled without being detected at the
port or the wharf. Power to issue search warrants is given to any Magistrate
under S. 172 which is to the following effect:
(1)  S.C.R. 730,742.
1117 " Any Magistrate may, on
application by a Customs-collector, stating his belief that dutiable or
prohibited goods (or any documents relating to such goods) are secreted in any
place within the local limits of the jurisdiction of such Magistrate, issue a
warrant to search for such goods (or documents).
Such warrant shall be executed in the same
way, and shall have the same effect, as a search-warrant issued under the law
relating to Criminal Procedure. " The warrant, as will be noticed, may be
issued only on the application of a Customs-collector who is a responsible
senior officer and that is certainly a safeguard against indiscriminate issue
of search warrants.
Section 178 speaks of the seizure of goods
liable to confiscation in any place either upon land or water by any officer of
customs or any other person duly employed for the prevention of smuggling. The
impugned s. 178-A comes next which is quoted below:
" 178-A (1): Where any goods to which
this section applies are seized under this Act in the reasonable belief that
they are smuggled 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, gold
manufactures, diamonds and other precious stones, cigarettes and cosmetics and
any other goods which the Central Government may, by notification in the
Official Gazette, specify in this behalf. " The presumption under s. 178-A
is equally applicable to seizure as a result of a search warrant under s. 172
or seizure made under s. 178. How the things seized are to be dealt with can be
seen from s. 179, and s. 181 lays down that when a seizure or arrest is made, a
statement in writing of the reasons there for should be given to the person who
is arrested or from whom goods are seized. When an article is seized under ss.
172 and 178, except in cases falling under entries Nos. 26, 72 and 74 to 76 of
s. 167, the confiscation or penalty or duty may be adjudged by the officer
mentioned therein, i.e., the person from whom the articles are seized is
entitled to an adjudication 1118 regarding either confiscation or penalty or
duty. This gives the valuable right of having the adjudication of the claim
made by a superior officer, and despite such adjudication if the confiscation
is still made, under s. 188 an appeal lies from the subordinate to the Chief
Customs- authority within three months from the date of such a decision. In the
present case the confiscation was made by the Collector of Customs and an
appeal lay from him to the Central Board of Revenue.
Section 191 enables the Central Government on
the application of any person aggrieved by any decision or order passed under this
Act by an officer of Customs or Chief Customs-authority and from which no
appeal lies, to reverse or modify such decision or order. The outline of the
various provisions above made shows that successive remedies are provided to an
aggrieved person from whom articles have been seized and confiscated and the
Act is a complete Code in itself affording redress and relief in case of
illegal or unjustified orders.
The genesis of s. 178-A may now be
considered. The Central Government had appointed a commission known as the
Taxation Enquiry Commission which by its report recommended the adoption of the
principles underlying s. 178-A in order to minimize smuggling. In Vol. II of
their report, Chapter VII deals with administrative problems in regard to
customs and Excise duties. At pp. 320 and 321 the Committee recommends the
amendment of the Sea Customs Act, firstly to make smuggling a criminal offence
and secondly empowering Customs officers to search premises etc. and the third
recommendation is the one with which we are concerned. It is in the following
"To transfer the onus of proof in
respect of offences relating to smuggling to the person in whose possession any
dutiable, restricted or prohibited goods are found." It is to implement
this recommendation that s. 178-A has been enacted.
Section 178-A applies to diamonds and other
precious stones and there has been no dispute about 1119 the application of
this provision to the present case. On the facts mentioned above it is clear
that the seizure has been under the Act in the reasonable belief of the Customs
authorities that they are smuggled goods and, therefore, the burden of proving
that they are not smuggled goods has been cast by this section on the persons
from whose possession the goods are seized. No doubt the content and import of
the section are very wide. It applies not only to the actual smuggler from
whose possession the goods are seized but also to those who came into possession
of the goods after having purchased the same after the same has passed through
many hands or agencies. For example, if the Customs authorities have a
reasonable belief that certain goods in the possession of an innocent party are
smuggled goods and the same is seized under the provisions of this Act, then
the person from whose possession the goods were seized, however innocent he may
be, has to prove that the goods are not smuggled articles. This is no doubt a
very heavy and onerous duty cast on an innocent possessor who, for aught one
knows, may have bona fide paid adequate consideration for the purchase of the
articles without knowing that the same has been smuggled. The only
pre-requisite for the application of the section is the subjectivity of the
Customs-officer in having a reasonable belief that the goods are smuggled.
A careful examination of the contents of the
somewhat lengthy petition under Art. 32 of the Constitution does not show how
the impugned section offends Art. 14, and no distinct and separate ground is
taken about its unconstitutionality, but Mr. Chatterjee argues that the burden
of proof enunciated therein is opposed to fundamental principles of natural
justice, as it gives an unrestricted arbitrary and naked power to the customs authorities
without laying down any standard or norm to be followed for exercising powers
under the section. What is urged is that whereas under the ordinary law the
burden of proof in matters like this is on the party who sets up a particular
case, under the section that process is inverted and the 1120 burden is cast on
the possessor of the article to show that it was imported into India with a
proper bill of entry and after paying the proper custom duty due. As stated
already, it is a heavy burden to be laid upon the shoulders of an innocent
purchaser who might have come into possession after the article has changed
many hands and this, it is alleged, invokes discrimination between him and
other litigants and deprives him of the equal protection of the law guaranteed
by Art. 14 of the Constitution. A large number of cases have been cited at the
Bar in support of the respective contentions of the parties.
The true nature, scope and effect of Art. 14
of the Constitution have been explained by different constitutional Benches of
this Court in a number of cases, namely, Chiranjit Lal Chowdhury v. The Union
of India and Others(1), The State of Bombay and Another v. F. N. Balsara(2),
The State of West Bengal v. Anwar Ali Sarkar(3), Kathi Raning Rawat v. The State
of Saurashtra(4), Lachmandas-Kewalram Ahua and another v. The State of Bombay
(5), Syed Qasim Razvi v. The State of Hyderabad and Others(6) , Habeeb Mohammad
v. The State of Hyderabad(6) and V. M. Syed Mohammed and Company v. The State
of Andhra(7), but it will not be necessary for us to enter upon a lengthy
discussion of the matter or to refer to passages in those judgments, for the
principles underlying the provisions of the Article have been summarised by a
Full Bench of this Court in Budhan Chaudhury and Others v. The State of
Bihar(9) in the following terms:
"It is now well established that while
Art. 14 forbids class legislation, it does not forbid reasonable classification
for the purposes of legislation. In order, however, to pass the test of per omissible
classification two conditions must be fulfilled, namely (1) that the
classification must be founded on an intelligible differential which
distinguishes persons or things that (1)  S.C.R. 869, (2)  S.C.R.
(3)  S.C.R. 284.
(4)  S.C.R. 435.
(5)  S.C.R. 710.
(6)  S.C.R. 591.
(7)  S.C.R. 661.
(8)  S.C. R. 117.
(9)  1 S.C.R. 1045 at p. 1048-1049.
1121 are grouped together from others left
out of the group and (ii) that that differentia must have a rational relation
to the object sought to be achieved by the statute in question.
The classification may be founded on
different bases, namely, geographical or according to objects or occupations or
the like. What is necessary is that there must be a nexus between the basis of
classification and the object of the Act under consideration. It is also well
established by the decisions of this Court that Art. 14 condemns discrimination
not only by a substantive law but also by a law of procedure." The
principle thus enunciated has been adopted and applied by this Court in
Purshottam Govindji Halai v. Shri B. M. Desai (1) and in A. Thangal Kunju
Musaliar v. M. Venkitachalam Potti and another (2). Mr. N. C. Chatterjee
appearing for the petitioner has referred us to several decisions of the
Supreme Court of America, such as William N. McFerland v. American Sugar
Refining Co. (3), W. D. Manley v. State of Georgia (4) and Tot v. United
It appears to us that these decisions really
turn upon the due process clause of the American Federal Constitution and
cannot help in the construction of the equal protection clause of our
Constitution. The contentions urged by Mr. Chatterjee as to the
unconstitutionality of s. 178-A of the Sea, Customs Act, 1878, will, therefore,
have to be tested in the light of the principles laid down by this Court in
Budhan Chowdhury's case (supra).
A cursory perusal of s. 178-A will at once
disclose the well defined classification of goods based on an intelligible
differentia. It applies only to certain goods described in sub-s. (2) which are
or can be easily smuggled. The, section applies only to those goods of the
specified kind which have been seized under the Act and in the reasonable
belief that they are (1)  2 S.C.R. 889, 898-899.
(2)  2 S-C.R. 1996, 1229.
(3) (1916) 241 U.S. 79 ; 6o L. Ed. 899.
(4) (1929) 279 U.S.I; 73 L. Ed. 575.
(5) (1943) 319 U.S. 463; 87 L. Ed. 1519.
144 1122 smuggled goods. It is only those
goods which answer the threefold description that come under the operation of
the section. The object of the Act is to prevent smuggling.
The differentia on the basis. of which the
goods have been classified and the presumption raised by the section obviously
have a rational relation to the object sought to be achieved by the Act. The
presumption only attaches to goods of the description mentioned in the section
and it directly furthers the object of the Act, namely, the prevention of
smuggling, and that being the position the impugned section is clearly within
the principle enunciated above, not hit by Art. 14. The impugned section cannot
be struck down on the infirmity either of discrimination or illegal
classification. Confining as it does to certain classes of goods seized by the
customs authorities on the reasonable belief that they are smuggled goods,
there is only a presumption which can be rebutted.
In these circumstances, there can be no doubt
whatever that s. 178-A does not offend Art. 14 of the Constitution and this
petition is, therefore, to be dismissed with costs.