Chuharmal
Vs. Union of India & Ors [1988] INSC 125
(2 May 1988)
Mukharji,
Sabyasachi (J) Mukharji, Sabyasachi (J) Rangnathan, S.
CITATION:
1988 AIR 1474 1988 SCR (3) 797 1988 SCC (3) 257 JT 1988 (2) 433 1988 SCALE
(1)1105
ACT:
Customs
Act, 1962: Sections 110(2), 111(2), 111, 112, 123 and 124-Goods seized under
the Act-Extension of period of six months from date of seizure-Cannot be
ordered ex parte by Collector-To be preceded by notice to affected party-Value
of goods seized-Determination of for purposes of levy of penalty-Quantum of
penalty-Not to be arbitrary or excessive.
HEAD NOTE:
On or
about 12th May, 1973 the Superintendent of Central Excise issued search warrant
under s. 105 of the Customs Act, 1962 authorising an Inspector of Central
Excise to search the residential premises of the petitioner. A search was made
and 565 foreign wrist watches were recovered from the premises. The petitioner
was given a notice to showcause why the period of six months fixed by s. 110(2)
should not be extended.
On December 26, 1975 the Collector of Central Excise
passed an order directing confiscation of 565 wrist watches seized from the
petitioner's possession on May 12, 1973
under Section 111, and the imposition of penalty of Rs.2 lacs under section 112
of the Act.
The
petitioner's appeal to the Central Board of Excise and Customs, and revision to
the Government of India having been dismissed, the petitioner challenged the
order of the Collector in a writ petition to the High Court.
The
High Court dismissed the writ petition, on the ground that the Collector was
justified in passing the order of confiscation of the watches and imposing a
penalty of Rs.2 lacs, as the petitioner had not refuted the facts alleged in
the show-cause notice by availing of the opportunity given to him at the
enquiry.
In the
Special Leave Petition to this Court it was contended that: (1) the notice
dated May 4, 1974 issued under section 124 of the Act was issued beyond the
period of six months of the seizure of the goods and as such the entire
proceedings were invalid for this reason; and that the 798 extension of the
period of six months by another period of six months in accordance with the
proviso to section 110(2) could not be made ex-parte without notice to the
petitioner, (2) there was no evidence to determine the value of watches, so the
quantum of penalty could not be determined for want of such evidence, and (3)
the quantification of the penalty was very high.
Dismissing
the Special Leave Petition, this Court, ^
HELD:
1(i) Extension of time takes away a valuable right of a party whose goods are
proposed to be seized. Such deprivation of the valuable right must be upon
notice, otherwise it violates the principles of natural justice.[802D-E] (ii)
An ex-parte determination by the Collector would expose his decision to be one
sided and perhaps one based on an incorrect statement of facts. [802F] (iii) Whether
a notice was given or not within a stipulated time for extension as
contemplated under s.
110(2)
is a question of fact. The onus that the order was passed without notice is on
the person who asserts it to be so and this is a question of fact. [802H;803A]
In the instant case, a notice has been given. There was an assertion to this
effect in the Collector's order. The assertion remained uncontroverted by any
specific evidence and also by failure to urge this point. In that view of the
matter, the inference drawn by the High Court that such notice was given as
contemplated under section 110(2), was not unwarranted. [803A-B]
2. The
value of the watches was mentioned as one of the particulars in the show-cause
notice given to the petitioner and this value was not refuted by the petitioner
in his reply. The petitioner did not avail himself of the opportunity at any
stage to oppose the extension of time or to refute the allegations made in the
show-cause notice given thereafter. The petitioner thus failed to discharge the
burden of proof cast on him by section 123 of the Act. [803C-D]
3. The
quantum of penalty should not be arbitrary or excessive. [804E] In the instant
case, the value of the smuggled goods was Rs.87,455. The penalty permissible is
upto five times the value of the goods. The Collector imposed the penalty of
Rs.2 lacs by his order in 799 1975. Admittedly, for about ten years, the amount
of penalty had not been paid by the petitioner. The High Court noted that the
benefit derived by the petitioner by non-payment of the penalty for ten years
indicates that the penalty could not be treated as arbitrary. That by itself is
not always a safe guide. In the facts and circumstances of this case, the
penalty was not heavy. [804C-E] Asstt. Collector of Customs v. Charan Das Malhotra
1971 3 SCR 802, referred to.
CIVIL
APPELLATE JURISDICTION: Special Leave Petition (Civil) No. 1008 of 1986.
From
the Judgment and Order dated 25.11.1985 of the Madhya Pradesh High Court in
Misc. Petition No. 551 of 1981.
Dr. N.M. Ghatate and S.V. Deshpande for the Petitioners.
Kuldip
Singh, Additional Solicitor General, B.B. Ahuja and Miss. A Subhashini for the
Respondents.
The
Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. This is a
petition for leave to appeal under Article 136 of the Constitution of India
directed against the judgment and order dated 25th November, 1985 of the High Court of Madhya Pradesh at Jabalpur. The petitioner herein had
challenged by a petition under Article 226 of the Constitution the order dated
26th December, 1975 passed by the Collector of Central Excise, Nagpur,
directing confiscation of 565 wrist watches seized from the petitioner's
possession on 12th May, 1973 under Section 111 of the Customs Act, 1962
(hereinafter called 'the Act') and the imposition of penalty of Rs.2,00,000
under section 112 of the Act and as well as the order dated 10th August, 1979
passed by the Central Board of Excise and Customs dismissing the petitioner's
appeal and thereafter the order dated 8th January, 1981 passed by the
Government of India dismissing the petitioner's revision.
It
appears that the petitioner along with his father and brothers migrated to India from Pakistan. It is stated that the petitioner started business of
cutlery in Indira Market Durg and has got this separate business from other two
brothers. The petitioner further asserted that he was not also associated in any
business with his cousin Hariram or 800 business of his father. He stated that
he lives separately from his brother and father. In or about April, 1966, the
petitioner purchased a piece of land for Rs.6250 from one Yeshwant Ram under
the registered sale deed in respect of the plot bearing Khasra No. 1167
admeasuring about 182 sq. ft. Similarly his brothers had also purchased plot
adjoining the plot of the petitioner. Since 1973, the petitioner stated that he
was living in two temporary rooms constructed by his brothers and petitioner's
plot was lying vacant. On or about 12th May, 1973 Superintendent of Central
Excise Raipur issued search warrant under section 105 of the Act authorising
one L.B. Tiwari Inspector, Central Excise to search the residential premises of
the petitioner. They searched the residential premises at Durg and it was
alleged that the house belonged to the petitioner. On 1st April, 1974, the petitioner was detained under
the Conservation of Foreign Exchange and Prevention of Smuggling Activities
Act, 1974 (hereinafter called 'COFEPOSA'). On or about 22nd March, 1975, the
petitioner while in jail received the letter issued by the Collector for the
purpose of extension of six months' time for the issuance of show cause notice
under section 110(2) of the Act under which the period was extended upto
14.11.74. The petitioner alleged that this letter was never received by him.
There was another order on or about 5th January, 1976 passed by the Collector,
Central Excise under which it was held that the petitioner had acquired the
possession of the wrist watches and these were smuggled goods and imposed a
penalty of Rs.2,00,000.
The
High Court noted the facts as below:
"On
12.5.1973 in a search made of the petitioner's bed room at Durg, a total of 565
wrist watches of foreign mark valued at Rs.87,455 were seized from a suit case,
a secret cavity in a locked steel almirah, and behind the almirah concealed in
a bundle of waste-paper from the petitioner's possession during his presence. A
panchnama was prepared at the same time mentioning these facts.
The
petitioner found himself unable to make any statement at that time on account
of which recording of his statement was deferred. However, the petitioner went
out of station on 14.5.1973.
His
statement was then recorded on 30.5.1973, as soon as he was available for this
purpose. In his statement Annexure R-III duly signed by him, he admitted these
facts and merely denied knowledge of the manner in which the watches came to be
in his house. the 801 petitioner was also given a notice to show cause why the
period of six months fixed by section 110(2) of the Customs Act should not be
extended but no reply was given by him till 10.11.1973 or even thereafter,
therefore, by an order dated 10.11.1973 before expiry of the period of six
months' time was extended by the collector of customs for a further period of
six months for giving a notice as required by section 124(a) of the Act. Within
proviso to sub-section (2) of section 110, a show cause notice specifying the
requisite particulars was given to the petitioner on 4.5.1974. In reply the
petitioner made a general denial. The enquiry was fixed for giving a personal
hearing to the petitioner on 31.10.1975 when the petitioner's counsel appeared
and sought an adjournment to 20.11.75 which was granted.
However,
on 20.11.1975 the petitioner's counsel stated that the petitioner did not want
to avail the opportunity of personal hearing or to even cross-examine the
witnesses in whose presence the panchnama the time of the seizure of the
watches was made.
In the
above circumstances and on the basis of facts alleged in the show cause notice
which the petitioner did not even care to refute by availing the opportunity
given to him at the enquiry, the Collector of Central Excise passed the order
dated 26.12.1975, as aforesaid. This order has been affirmed on appeal by the
Board and thereafter in revision by the Government of India." It was
contended before the High Court by the petitioner's counsel that the notice dated
4th May, 1974 issued under section 124(a) of the
Act was issued beyond the period of six months of the seizure of goods made on
12.5.1973 and as such the entire proceedings were invalid for this reason. It
was also contended that the extension of the period of six months by another
period of six months in accordance with the proviso to sub-section (2) of
section 110 could not be made ex parte without notice to the petitioner.
Reliance was placed on the decision of this Court in Asstt. Collector of
Customs v. Charan Das Malhotra, [1971] 3 S.C.R. 802. The High Court found that
this contention had not been urged before the lower authorities.
However,
the High Court noted that the Collector's order dated 26th December 1975 had
specifically mentioned that a show cause notice was issued to the petitioner
for extension of the period for issue of notice in accordance with section
110(2) of the Act by another six months but no reply was 802 given by the
petitioner and the Collector, therefore, extended the period by another six
months by his order. This order coupled with the petitioner's failure to even
raise this point at an earlier stage was sufficient, according to the High
Court, to indicate that the order extended the period by another six months
under the proviso to subsection (2) of section 110 was made after giving an
opportunity to the petitioner which he had failed to avail. Sub-section (2) of
section 110 stipulates as follows:
"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:
Provided
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." Extension of time takes away a valuable right of a party whose
goods are proposed to be seized. Such deprivation of the valuable right must be
upon notice otherwise it violates the principles of natural justice. In the
aforesaid decision of this Court in Asstt. Collector of Customs v. Charandas Malhotra,
(supra), this Court affirmed the view of the Calcutta High Court that the power
under the proviso was quasi-judicial, or at any rate, one requiring a judicial
approach. This Court reiterated that the right to restoration of the seized
goods is a civil right which accrues on the expiry of the initial six months
and which is defeated on an extension being granted, even though such extension
is possible within a year from the date of the seizure. Therefore, according to
this Court an ex parte determination by the collectorwould expose his decision
to be one-sided and perhaps one based on an incorrect statement of facts. How
then can it be said that his determination that a sufficient cause exists is
just and fair if he has done it before by one-sided picture without any means
to check it unless there is an opportunity to the other side to correct or
controvert it? But in the facts of this case a notice has been given and it has
been so found from the records as well as the inference drawn from in absence
of pleading, which inference drawn by the High Court in the facts of this case
was not an improper inference. In our opinion, the order was passed not in
violation of the principles of natural justice. It must be reiterated whether a
notice was given or not within a stipulated time for extension as contenplated
under section 110(2) is a 803 question of fact. It is also true that the onus
that the order was passed without notice, was on the person who asserts it to
be so and this is a question of fact. There was an assertion to this effect in
the collector's order, the assertion remained uncontroverted by any specific
evidence and also by failure to urge this point. In that view of the matter,
the inference drawn by the High Court that such notice was given as
contemplated under section 110(2), in our opinion, was not unwarranted.
The
next contention that was raised before the High Court was that there was no
evidence to determine the value of the watches so that the quantum of penalty
could not be determined for want of such evidence. It was contended that
determination of quantum was arbitrary. It appears, however, as the High Court
noted that the value of the watches was mentioned as one of the particulars in
the show cause notice given to the petitioner and this value was not refuted by
the petitioner in his reply. The petitioner did not avail himself of the
opportunity at any stage to oppose the extention of time or to refute the
allegations made in the show cause notice given thereafter. Furthermore, these
facts must be considered in conjunction with the fact that there was a
statement by the petitioner recorded on 30th May, 1973. Section 123 of the Act
provides as follows:
"123(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 (a) in a case where such seizure is made from
the possession of any person (i) on the person from whose possession the goods
were seized; and (ii) 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;
"(b)
in any other case, on the person, if any, who claims to be the owner of the
goods so seized.
(2)
This section shall apply to gold, diamonds, manufactures of gold or diamonds,
watches, and any other class of 804 goods which the Central Government may by
notification in the Official Gazette specify." (Emphasis supplied) This
provision had been substituted by the Act 36 of 1973 and would be applicable in
the instant case. The petitioner failed to discharge the burden of proof of
trust on him by the aforesaid section. The next question which was canvassed
before the High Court was that the quantification of the penalty was very high.
The High Court however, noted that the liability was incurred by the petitioner
in 1973 and the collector made the order in 1975. Admittedly, for about ten
years even after the collector's order imposing the penalty, the amount of
penalty had not been paid by the petitioner. The value of the smuggled goods
was Rs.87,455 even at that time. On that there is no dispute. The penalty
permissible is upto five times the value of the goods. The High Court noted
that the benefit derived by the petitioner by nonpayment of the amount of Rs.2,00,000
at least for ten years is sufficient indication that the penalty could not be
treated as arbitrary. That of course, by itself in our opinion is not always a
safe guide. But in the facts and circumstances of this case, the penalty was
not heavy and the High Court was right. It is true that this Court in Malhotra's
case (supra) had laid down that the penalty could not be arbitrary and
excessive. But in the facts of this case, it was not so. As far as the value of
the wrist watches is Rs.87,455 it was not arbitrary because it was not denied
even though it was so stated in the show cause notice.
In
that view of the matter, the High Court was right in not entertaining the
petition under Article 226 of the Constitution. We decline to interfere in this
case under Article 136 of the Constitution. The special leave petition is
rejected.
N.V.K.
Petition dismissed.
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