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PETITIONER: I.J. RAO, ASSISTANT COLLECTOR OF CUSTOMS & ORS.

       Vs.

RESPONDENT: BIBHUTI BHUSHAN BAGH & ANR.

DATE OF JUDGMENT12/05/1989

BENCH: PATHAK, R.S. (CJ) BENCH: PATHAK, R.S. (CJ) VENKATARAMIAH, E.S. (J) MISRA RANGNATH KANIA, M.H. VENKATACHALLIAH, M.N. (J)

CITATION:  1989 AIR 1884            1989 SCR  (3) 282  1989 SCC  (3) 202        JT 1989 (2)   531  1989 SCALE  (1)1431

ACT:     Customs  Act,  1962--Sections 110(2), 111(d),  111(o)  & 124A--Issuance of a notice for extension of time beyond  six months  under Proviso to Sec. 110(2) to a person from  whose possession goods have been seized--Held to be necessary  but subject  to  the  need for  maintaining  confidentiality  of investigation.

HEADNOTE:     Acting  on the basis of the information contained in  an advertisement in a newspapers offering the sale of  imported manual  and  electric typewriters,  adding  and  calculating machines, the customs authorities raided the premises of M/s Typewriters and Stationary Operation Private Ltd.,  Calcutta on 5th May, 1966 and recovered fifteen typewriters, adding & calculating machines. On inquiry it was learnt that the said machines  had been sold to the Company by R.N. Bagh, who  in turn  disclosed that the machines in question had been  pur- chased  from  crew  members of the vessels.  On  7.5.66  the customs  authorities searched the business premises  of  the Company and found several machines from the documents seized during the search it came to light that there was a conspir- acy between the Respondents and some of the crew members  of certain  vessels  whereunder  it had been  agreed  that  the Respondents  would look after the families of the crew  mem- bers in India and the crew personnel would draw their  wages abroad  in  foreign currency and after purchasing  the  said machines.  would supply to the Respondents  after  clearance under the concessions provided under the Baggage Rules.     The goods in question were seized on 5/7th May, 1966 and as required by Rule 124(a) of the Customs Act, notices as to why  the goods should not be confiscated were due  to  issue within six months thereof. Section 110(2) of the Customs Act provided that if a notice as contemplated by Section  124(a) is  not  issued within a period of six  months  as  provided thereunder,  the  goods  shall have to be  returned  to  the person  from whose possession, they were seized.  However  a proviso to Sec. 110(2) makes a provision that the period  of

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six months can be extended, 283 on  sufficient  cause being shown, by the  Collector  for  a period not exceeding six months.     The  officers of the Customs Department showed cause  to the Additional Collector of Customs, Calcutta for  extension of  time  to serve a show cause notice  on  Respondents  and extension  of six months was granted for the  purpose  under the proviso to Section 110(2) of the Customs Act. No  notice of the proceedings relating to the said extension was  given to the persons from whose custody the goods were seized.     On 6th December 1966, the Assistant Collector of Customs issued a notice to each of the Respondents calling upon them to show cause why the goods should not be confiscated.     On April 18, 1967, the Respondents filed a Writ Petition in  the High Court at Calcutta challenging  the  proceedings initiated  against them by Customs Authorities. The  learned Single  Judge of the High Court who heard the Writ  Petition held  that the Order of extension to be made  under  Section 110(2) of the Customs Act is not an administrative order but a quasi judicial order and as the order has been passed  ex- parte  without notice to the owner of the goods, it  was  in breach of principle of Natural Justice. The order of  exten- sion was accordingly quashed and it was held that the  owner was entitled to the return of his goods.     The  appellants  appealed to the  Appellate  Bench.  The appellate  Bench  allowed the appeal in  part,  quashed  the order  of  extension dated 3rd November, 1966  directed  the appellants to restore the machines and documents seized from the  Respondents. However the Customs Authorities were  per- mitted  to  initiate  and complete  such  other  proceedings against  the  Respondents as were open to them in  law.  The appellate  Bench  was of the opinion that  the  decision  in Assistant  Collector of Customs v. Charan Das, [1971] 3  SCR 802 lays down the correct law and notice of extension should have  been given to the owner of the goods before the  Order of extension had been passed. Hence this appeal by the Customs Department.     At the hearing of the appeal Respondents placed reliance upon  Charan Das Malhotra, (supra). Reference was also  made to the decision in M/s Lokenath Tolaram etc. v.B.N. Rangwani JUDGMENT: appeal  were of the opinion that the view taken in the  said two cases required reconsideration and the 284 appeal has been referred to a larger Bench for a decision on the question whether the Collector is bound to issue  notice to  the persons from whose possession the goods were  seized and to give him an opportunity to make his representation on the point whether the time for issuing notice under  Section 124(a) of the Act should be extended beyond six months. Partly allowing the appeal this Court,     HELD: The words "on sufficient cause being shown" in the proviso to Section 110(2) of the Customs Act indicates  that the  Collector of Customs must apply his mind to  the  point whether  a  case for extending the period of six  months  is made out. [289E-F]     The right to notice flows not from the mere circumstance that there is a proceeding of a judicial nature, but  indeed it  goes beyond to the basic reason which gives to the  pro- ceeding its character, and that reason is that a right of  a person  may be affected and there may be prejudice  to  that right  if he is not afforded an opportunity to  put  forward his  case in the proceeding. If the notice is not issued  in the confiscation proceedings within six months from the date

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of  the seizure the person from whose possession  the  goods have been seized becomes immediately entitled to the  return of  goods. It is that right to the immediate restoration  of goods  upon  the expiry of six months from the date  of  the seizure that is defeated by the extension of time under  the provio to Section 110(2). [289H; 290B-C]     There  can  be  no right in any person  to  be  informed midway,  during an investigation, of the material  collected in  the case against him. While notice may be  necessary  to such  person to show why time should not be extended, he  is not entitled to information as to the investigation which is in process. [290H; 291A]     The  person  from whose possession the goods  have  been seized  is,  therefore, entitled to notice of  the  proposal before  the  Collector of Customs for the extension  of  the original period of six months mentioned in Section 110(2) of the  Customs  Act and he is entitled to be heard  upon  such proposal  but subject to the restrictions in regard  to  the need  for maintaining confidentiality of  the  investigation proceedings. [292D-E]      Ganeshmul  Channilal  Gandhi & Anr.,  v.  Collector  of Central Excise and Asstt. Collector, Bangalore, A.I.R.  1968 Mysore 89, Sheikh 285 Mohammed  Sayeed v. Assistant Collector of Customs for  Pre- ventive  &  Others, A.I.R. 1970 Calcutta 134  and  Karsandas Pepatlal  Dhineja & Ors., v. Union of India &  Anr.,  [1981] E.L.T. 268 not applicable.

&     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 1529  of 197 1.     From the Judgment and Order dated 31.7.70 of the Calcut- ta High Court in Appeal No. 29 of 1969.     G.  Ramaswamy, Additional Solicitor general,  A.K.  Gan- guli,  P.  Parmeshwaran and A.K. Srivastava for  the  Appel- lants. D.N. Mukharjee and P.K. Ghosh for the respondents. The judgment of the Court was delivered by     PATHAK,  CJ. This appeal by certificate granted  by  the High  Court  of Calcutta is directed  against  the  judgment dated  31  July, 1970 of that High Court partly  allowing  a writ  petition arising out of proceedings under the  Customs Act, 1962.     On 5 May, 1966. noticing an advertisement in a newspaper offering  imported manual and electric  typewriters,  adding and calculating machines, the Customs authorities raided the premises  of  Messrs. Typewriters and  Stationery  Operation Private  Limited,  Calcutta, on the same day  and  recovered fifteen  typewriters, adding and calculating  machines.  The machines  had been sold to the company by R.N. Bagh, who  in turn  disclosed  that he had purchased them  from  the  crew members  of some vessels. On 7 May, 1966, the Customs  Offi- cers searched the residence and business premises of Messrs. Central Typewriter Company and recovered several typewriters and  calculating  and adding machines. From  some  documents seized during the raid and statements recorded, it  appeared that there was a conspiracy between the respondents and some of  the crew members of certain vessels where it was  agreed that  the  respondents  would look after  and  maintain  the families  of  the  crew members in  India  while  they  were abroad, would advance them money and the crew members  would draw  their  wages abroad in foreign currency  and  purchase

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with those moneys second-hand typewriters, adding and calcu- lating  machines  and then bring them to India  and  deliver them  to the respondents after clearance under  the  conces- sions  provided in the Baggage Rules in order to  circumvent the restrictions imposed under the Import Trade Control 286 Regulations. It appeared that during the period 1961 to 1965 about  200  pieces of typewriters,  adding  and  calculating machines  had been acquired by the respondents for a sum  of about  Rupees one lakh and out of which forty six  had  been sold.     The goods were seized on 5/7 May, 1966 and notices  were due to issue under s. 124(a) of the Customs Act, 1962 within six months from that date. Meanwhile, the Subordinate  Offi- cers,  Customs  Department, showed cause to  the  Additional Collector  of  Customs, Calcutta (who had  the  same  powers under the Act as the Collector) for granting an extension of time  for  serving  the show cause notice.  On  3  November, 1966, the Additional Collector granted an extension of  time for  a  further  six months in terms of the  proviso  to  s. 110(2) of the Customs Act, 1962.     On  6 December, 1966 the Assistant Collector of  Customs issued notice to each of the respondents calling upon him to show  cause why the said seized machines should not be  con- fiscated  under s. 111(d) and s. 111(o) of the Customs  Act, 1962 read with s.3(2) of the Import and Export Control  Act, 1947  and why penal action should not be taken  against  the respondents under s. 112 of the Customs Act, 1962.     On 18 April, 1967, the respondents filed a writ petition in  the High Court at Calcutta challenging  the  proceedings initiated against them by the customs authorities  including the seizure of the machines. On 11 December, 1968 a  learned Single  Judge of the High Court repelled the  contention  of the  appellants  that the proceeding was  administrative  in nature and held that the order of extension to be made under s. 110(2) of the Customs Act was a quasi-judicial order  and as  the order had been made ex-parte and without  notice  to the owner of the goods it was in breach of the principles of Natural justice and therefore void. He observed that as  the order,  moreover,  was not communicated to  the  respondents before  the expiry of six months from the date  of  seizure, the  order of extension was invalid and the respondents  had become entitled as of right to the return of the goods.  The writ petition was allowed, and the proceedings initiated  by the  respondents against the appellants were quashed by  the learned  Single  Judge by his judgment and  order  dated  11 December, 1969.      The appellants appealed to the Appellate Bench and  the Appellate Bench of the High Court by judgment dated 31 July, 1970  allowed  the  appeal in part, quashing  the  order  of extension  dated 3 November, 1966 and directing  the  appel- lants to restore the machines and docu- 287 ments  seized from the respondents. The Customs  authorities were permitted to initiate and complete such other  proceed- ings against the, respondents as were open to them in law.     The appellants now appeal to this Court in so far as the judgment  and order of the Appellate Bench proceeds  against them.     Section 110(1) of the Customs Act, 1962 provides that if the proper officer has reason to believe that any goods  are liable  to  confiscation under that Act he  may  seize  such goods. Section 110(2) provides:               "Where any goods are seized under  sub-section               (1) and no notice in respect thereof is  given

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             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." Section  124(a),  to  which reference has been  made  in  s. 110(2),  provides  that no order confiscating any  goods  or imposing  any  penalty  on any person shall  be  made  under Chapter XIV unless the owner of the goods or such person  is given  notice  in writing informing him of  the  grounds  on which it is proposed to confiscate the goods or to impose  a penalty and is given an opportunity of making a  representa- tion in writing, and is also given a reasonable  opportunity of being heard in the matter.     It is apparent that goods liable to confiscation may  be seized by virtue of s. 110(1) but that those goods cannot be confiscated  or penalty imposed without notice,  opportunity to  represent and to be heard to the owner of the  goods  or the person on whom penalty is proposed. This notice must  be given  within  six months of the seizure of  the  goods,  as envisaged  by  s. 110(2) of the Act, and if it is  not,  the goods  must  be returned to the person from whom  the  goods were seized. The proviso to s. 110(2) of the Act allows  the period  of  six months to be extended by  the  Collector  of Customs for a period not exceeding six months on  sufficient cause being shown to him in that behalf. The Appellate Bench of the High Court is of opinion that the 288 decision-of the High Court in Assistant Collector of Customs v.  Charan  Das  Malhotra, [1971] 3 SCR 802  lays  down  the correct  law  and applies to the facts of  this  case,  that there  is a duty on the part of the Collector of Customs  to act  judicially in exercising the power conferred under  the proviso to s. 110(2) of the Act and that, therefore,  notice should have gone to the owner of the goods before the exten- sion was ordered under the proviso. It has been held further that the order of extension should have been communicated to the  owner and as that was not done the order  was  ineffec- tive.     When  this appeal came up for hearing before a Bench  of this  Court, reliance was placed by learned counsel for  the respondents  on Charan Das Malhotra, (supra). That  decision was rendered by two learned Judges of this Court.  Reference was  also made in M/s Lokenath Tolaram etc. v.B.N.  Rangwani and  Others, [1974] 2 SCR 199 which was a decision  rendered by four learned Judges of this Court, and in which reference was made to Charan Das Malhotra, (supra). The learned Judges hearing this appeal were of the opinion that the view  taken in  the  two cases required reconsideration,  and  therefore this appeal was referred to a larger Bench for a decision on the question whether the Collector is bound to issue  notice to  the persons from whose possession the goods  are  seized and to give him an opportunity to make his representation on the  point  whether  the time for issuing  notice  under  s. 124(a) of the Act should be extended beyond six months. That is how the appeal has come before us.     In  Charan Das Malhotra, (supra) the Court  referred  to the  consideration  that  seizure was  authorised  under  s. 110(1)  on  the mere "reasonable belief"  of  the  concerned officer, that it was an extraordinary power and that  there- fore  Parliament had envisaged a period of six  months  from the date of seizure for completing an enquiry on whether the

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goods should be confiscated and that if the enquiry was  not completed within that period the goods must be returned.  In some  cases it is possible that the enquiry requires  longer than six months, and accordingly power was conferred on  the Collector, an officer superior in rank and also an Appellate Authority  under s. 128, to extend the time subject  to  two conditions, that it did not exceed one year, and that suffi- cient  cause  must be shown for such  extension.  The  Court observed that the Collector was not expected to propose  the extension mechanically or as a matter of routine but only on being  satisfied  that facts exist which indicate  that  the investigation  could not be completed for bona fide  reasons within  the time provided in s. 110(2), and  that  therefore extension of the period has become neces- 289 sary. The Collector, the Court emphasized cannot extend  the time unless he is satisfied on facts placed before him  that there is sufficient cause necessitating extension, in  which case  the burden of proof would clearly lie on  the  Customs authorities applying for extension to show that such  exten- sion  was necessary. Taking these consideration into  record the Court held that the words "sufficient cause being shown" required  an  objective  examination of the  matter  by  the Collector. It was pointed out that ordinarily on the  expiry of  the  period of six months from the date of  seizure  the owner of the goods would be entitled as of right to restora- tion  of the seized goods, and that right could not  be  de- feated without notice to him that an extension was proposed. The Court rejected the contention that the continuing inves- tigation would be jeopardised if such notice was given.  The Court held that the power under the proviso to s. 110(2) was quasi-judicial,  at  any rate one requiring a  judicial  ap- proach, and consequently the person from whom the goods were seized  was  entitled  to notice before the  period  of  six months  envisaged by s. 110(2) was extended. The  point  was considered again in M/s. Lokenath Tolaram etc. v.B.N.  Rang- wani  and Others, (supra) by a Bench of four Judges of  this Court and the Court referred to the view taken in Charan Das Malhotra,  (supra) but it declined to interfere because  the appellants  in that case had themselves waived  notice  con- cerning extension of the time. The Court did not specifical- ly give the stamp of approval to the law laid down in Charan Das Malhotra, (supra).     There  is no doubt that the words "on  sufficient  cause being  shown" in the proviso to s. 110(2) of the  Act  indi- cates  that the Collector of Customs must apply his mind  to the  point  whether a case for extending the period  of  six months  is made out. What is envisaged is an objective  con- sideration  of the case and a decision to be rendered  after considering  the material placed before him to  justify  the request  for  extension. The Customs Officer  concerned  who seeks  the extension must show good reason for  seeking  the extension,  and  in this behalf he would  probably  want  to establish  that  the investigation is not  complete  and  it cannot  yet be said whether a final order  confiscating  the goods  should be made or not. As more time is  required  for investigation, he applies for extension of time. The Collec- tor  must be satisfied that the investigation is being  pur- sued  seriously  and that there is need for  more  time  for taking  it  to its conclusion. The question is  whether  the person  claiming restoration of goods is entitled to  notice before time is extended. The right to notice flows not  from the mere circumstance that there is a proceeding of a  judi- cial  nature, but indeed it goes beyond to the basic  reason which gives to the proceeding its character, and that

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290 reason is that a right of a person may be effected and there may.  be  prejudice to that right if he is not  accorded  an opportunity  to put forward his case in the  proceeding.  In the other words, the issue is whether there is a right in  a person  from  whose possession goods are  seized  and  which right  may be prejudiced or placed in jeopardy unless he  is heard in the matter. It cannot be disputed that s. 110  sub- s.  (2) contemplates either notice (within six  months  from the date of seizure) to the person from whose possession the goods  have  been seized in order to determine  whether  the goods should be confiscated or the restoration of the  goods to  such person on the expiry of that period. If the  notice is  not  issued in the confiscation proceedings  within  six months  from the date of seizure the person from whose  pos- session  the  goods  have been  seized  becomes  immediately entitled to the return of the goods. It is that right to the immediate  restoration of the goods upon the expiry  of  six months  from  the date of seizure that is  defeated  by  the extension  of time under the proviso to s. 110(2).  When  we speak of the right of the person being prejudiced or  placed in jeopardy we necessarily envisage some damage or injury or hardship  to that right and it becomes necessary to  inquire into the nature of such damage or injury or hardship for any case to be set up by such person must indicate the damage or injury  or  hardship  apprehended by  such  person.  In  the present case, one possibility is that the person from  whose possession the goods have been seized may want to  establish the  need  for immediate possession, having  regard  to  the nature  of the goods and the critical conditions  then  pre- vailing  in  the market or that the goods are  such  as  are required  urgently  to meet an emergency in  relation  to  a vocational  or private need, and that any delay in  restora- tion  would  cause  material damage or  injury  or  hardship either by reason of some circumstance special to the  person or  of  market conditions or of any  particular  quality  of requirement  for the preservation of the goods. But it  will not  be  open to him to question whether the  stage  of  the investigation, and the need for further investigation,  call for an extension of time. It is impossible to conceive  that a  person from whose possession the goods have  been  seized with  a view to confiscation should be entitled to know  and to monitor, how the investigation against him is proceeding, the  material collected against him at that stage, and  what is the utility of pursuing the investigation further.  These are  matters  of a confidential nature, knowledge  of  which such person is entitled to only upon the investigation being completed and a decision being taken to issue notice to show cause why the goods should not be confiscated. There can  be no  right  in any person to be informed  midway,  during  an investigation, of the material collected in the case against him.  Consequently,  while notice may be necessary  to  such person to show why 291 time  should not be extended he is not entitled to  informa- tion  as to the investigation which is in process.  In  such circumstances, the right of a person, from whose  possession the goods have been seized, to notice of the proposed exten- sion  must be conceded, but the opportunity open to  him  on such  notice  cannot extend to  information  concerning  the nature  and course of the investigation. In that sense,  the opportunity which the law can contemplate upon notice to him of  the  application for extension must be  limited  by  the pragmatic  necessities of the case. If these  considerations are kept in mind, we have no doubt that notice must issue to

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the person from whose possession the goods have been  seized of  the proposal to extend the period of six months. In  the normal  course,  notice must go to such  person  before  the expiry of the original period of six months. It is true that the further period of six months contemplated as the maximum period  of extension is a short period, but  Parliament  has contemplated an original period of six months only and  when it  has  fixed upon such period it must be assumed  to  have taken  into consideration that the further detention of  the goods can produce damage or injury or hardship to the person from whose possession the goods are seized.     We  have  said that notice must go to the  person,  from whose  possession  the goods have been  seized,  before  the expiry of the original period of six months. It is  possible that while notice is issued before the expiry of that  peri- od, service of such notice may not be effected on the person concerned in sufficient time to enable the Collector to make the  order of extension before that period expires.  Service of the notice may be postponed or delayed or rendered  inef- fective by reason of the person sought to be served attempt- ing  to  avoid  service of notice or for  any  other  reason beyond  the  control  of the Customs  authorities.  In  that event,  it would be open to the Collector, if he finds  that sufficient cause has been made out before him in that behalf to extend the time beyond the original period of six months, and  thereafter, after notice has been served on the  person concerned,  to  afford a postdecisional hearing  to  him  in order to determine whether the order of extension should  be cancelled  or not. Having regard to the seriousness and  the magnitude  of injury to the public interest in the  case  of the  illicit  importation  of goods, and  having  regard  to considerations  of the damage to economic policy  underlying the  formulation  of import and export  planning,  it  seems necessary to reconcile the need to afford an opportunity  to the person effected with the larger considerations of public interest. Our attention has been drawn to Ganeshmul Channilal Gandhi 292 and  another v. Collector of Central Excise and Asstt.  Col- lector,  Bangalore,  A.I.R. 1968 Mysore 89  where  the  High Court of Mysore has held that no notice is necessary to  the person  from whose possession the goods are seized when  the Collector  proceeds to consider whether the original  period of  six  months should be extended. Reliance has  also  been placed  on Sheikh Mohammed Sayeed v. Assistant Collector  of Customs for Preventive and others, A.I.R. 1970 Calcutta  134 which proceeds on the view that the Collector has to satisfy himself only subjectively on the point whether extension  is called for. In Karsandas Pepatlal Dhineja & Others v.  Union of  India and Another, [1981] E.L.T. 268 the High Court  de- fined  the implications of the use of the words  "on  suffi- cient cause being shown" in a statutory proceeding. None  of these  cases convince us that the person from whose  posses- sion the goods have been seized is not entitled to notice of the proposal to extend the period.     In  our  opinion, the person from whose  possession  the goods have been seized is entitled to notice of the proposal before  the  Collector of Customs for the extension  of  the original period of six months mentioned in s. 110(2) of  the Customs  Act, and he is entitled to be heard upon such  pro- posal but subject to the restrictions referred to earlier in regard  to the need for maintaining confidentiality  of  the investigation proceedings.     The appeal is allowed accordingly and to the extent  set forth  in  our  judgment the orders of the  High  Court  are

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modified, but there is no order as to costs. Y.  Lal                                          Appeal  al- lowed. 293