Full Judgment Text
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PETITIONER:
BABULAL AMTHALAL MEHTA
Vs.
RESPONDENT:
THE COLLECTOR OF CUSTOMS, CALCUTTA
DATE OF JUDGMENT:
08/05/1954
BENCH:
ACT:
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.
HEADNOTE:
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.
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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
inapplicable.
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.
JUDGMENT:
ORIGINAL JURISDICTION: Petition No. 98 of 1956.
Petition under Article 32 of the Constitution of India for
enforcement of fundamental rights.
N. C. Chatterjee and S. C. Majumdar, for the petitioner.
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
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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
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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
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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
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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, 1955, Messrs.
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
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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
Constitution.
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.
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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
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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
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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 duly made.
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.
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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) [1953] S.C.R. 730,742.
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" 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 therefor 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
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regarding either confiscation or penalty or duty. This
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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 terms:
"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
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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
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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) [1950] S.C.R. 869,
(2) [1951] S.C.R. 682.
(3) [1952] S.C.R. 284.
(4) [1952] S.C.R. 435.
(5) [1952] S.C.R. 710.
(6) [1953] S.C.R. 591.
(7) [1953] S.C.R. 661.
(8) [1954] S.C. R. 117.
(9) [1955] 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
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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 States(5).
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) [1955] 2 S.C.R. 889, 898-899.
(2) [1955] 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.
Petition dismissed.