08 May 1954
Supreme Court







DATE OF JUDGMENT: 08/05/1954


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. 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 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



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, 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 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 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.



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  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.



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. 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 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 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 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



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)  [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



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.