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PETITIONER: M/S.  LOKENATH TOLARAM ETC.

       Vs.

RESPONDENT: B.   N. RANGWANI & ORS.

DATE OF JUDGMENT08/11/1973

BENCH: RAY, A.N. (CJ) BENCH: RAY, A.N. (CJ) MATHEW, KUTTYIL KURIEN CHANDRACHUD, Y.V. BHAGWATI, P.N.

CITATION:  1974 AIR  150            1974 SCR  (2) 199  1974 SCC  (3) 575  CITATOR INFO :  RF         1975 SC  67  (16)  RF         1987 SC1884  (11,12)

ACT: Customs Act, 1962, Ss. 110 and 124-Scope of.

HEADNOTE: Under  s.  110(1)  of the- Customs  Act,  1962,  the  excise authorities may seize goods if the proper officer has reason to  believe  that the goods are  liable   for  confiscation. Section  124(a) provides that no such order of  confiscation shall  be made unless the owner of the goods or  the  person from  whose  possession  they are  seized  is  given  notice informing  him of the grounds of confiscation.  If  no  such notice  is given within 6 months of the seizure, the goods shall be returned to the person from whom they ’were seized. Section 110(2) provides that the period of 6 months may,  on sufficient  cause being shown, be extended by the  Collector of Customs for a period not exceeding 6 months. In  the present case, the central excise authorities  seized certain  goods  from the appellants.  The  appellants  filed writ petitions in the High Court for releaser of the  goods. While the petitions were pending various consent orders were passed by the High Court providing for execution of-bonds as well  as  deposit of amounts of money by the  appellants  in favour  of  the excise authorities against  release  of  the goods  and the parties had agreed that the deposits  of  the bonds  were to be treated as proceeds of sale of  the  goods and   treated  as  goods  to  seized  for  the  purpose   of adjudication  proceedings.  Pursuant to the  consent  orders the goods were released. Meanwhile, the Assistant Collector applied for extension  of time  for  giving  notice under s. 124(a) and  an  order  of extends  on for a further period of & months was  made.   In the  case of two of the appellants, the order  of  extension was made beyond 6 months from the date of seizure. The writ petitions were dismissed by the High Court. On the questions, (1) whither the orders extending time  not being within 6; months of the date of seizure of the  goods, were illegal and (2) whether the orders made without  giving

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an  opportunity  to  the appellant were  violative  of’  the principles of natural justice, HELD (Dismissing the appeals) But for the special agreement in the consent orders  between the  parties the orders for extension of time to  serve  the notice  under  s.  124(a) might have  been  exposed  to  the infirmities of limitation as to time and. the observance of’ principle%  of  natural  justice referred  to  in  Assistant Collector of Customs- v. Charan Das Malhotra [1971] 3 S.C.R. 802. [240D-E] (1)(a)  All  the goods had already been  released  to  the appellants  by reason of the consent orders.  Therefore,  it could  not be contended that since the order  of  extension was not within. 6 months of the seizure of goods, the appel- lants were entitled to the release of the goods. [204F] (b)  The agreements between the parties as a result  of the  consent orders- came into existence before as  well  as after  the date when the Collector of Customs  extended  the period for service of the notice under s. 124(a). After  the appellants had obtained release of the good in terms of  the agreements,   the  goods  went  out  of  the   province   of application of, s. 110. and therefore, the appellants  could not  contend  that the amounts deposited in terms of  the  I agreements represented the goods or that the appellants were entitled  to the return of the amounts.  The parties  agreed that the Excise Authorities would retain, the securities for the  purpose  of adjudication proceedings in  the  event  of failure  of  the appellants in the writ petitions  filed  by hem. [204F-H] 200 (2)   The   agreements  establish  that  the   parties,   on consideration  of  all the facts  and  circumstances  waived notice for extending the time for giving notice under Q. 124 of  the  Act.  Therefore, there cannot be  any  question  of violation  of principles of natural justice or any  lack  of opportunity to the appellants to show cause in regard to the order extending time. [205A-B] (3)  Also,  as  the goods of one of the  appellant  were  in possession of a Bank as  pledge, and the excise  authorities seized the goods from the possession of the    Bank,    that appellant  had  no locus standi to ask for  release  of  the goods. [205B-C]

JUDGMENT: CIVIL APPELLATE JURISDICTION :Civil Appeal No. 1109 of 1971. From the Judgment and order dated the 1st September 1970  of the Bombay High Court, in Miscellaneous Petition No. 187  of 1963. Civil Appeal No. 1132 of 1971 : From the Judgment and  Order dated  the 1st September, 1970 of the Bombay High Court,  in Miscellaneous Petition N. 184 of 1963. Civil  Appeal No. 1133 of 1971 From the Judgment  and  Order dated  the  31st August, 1970 of the Bombay High  Court,  in Miscellaneous Petition No. 127 of 1963. M.   C.  Chagla,  P.  C. Bhartari, Ravinder  Narain,  J.  B. Dadachanji  and O. C. Mathur, for the appellants.  (in  C.A. No. 1133). P.   C.  Bhartari, Ravinder Narain, J. B. Dadachanji and  O. C. Mathur, for the appellants. (in C.A. Nos. 1109 and 1132). G.   L. Sanghi and S. P. Nayar, for respondents Nos. 1-4 & 7 (In C.    A.  No. 1109/71) and for Respondents Nos. 1  to  5 (in C.As. Nos 1132 and 1133/71). The Judgment of the Court was delivered by

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RAY, C.J. These three appeals are by certificate from  three judgments  of the Bombay High Court. The main  judgement  is dated  31  August, 1970 in Civil Appeal  No.1133  1971.  The judgments   in   the   other  two  appeals   are   dated   1 September,1970 following the judgement  in Civil Appeal  No. 1133, of 1971. In  civil  Appeal No. 1133 of 1971 the appellants  carry  on business  inter  alia  as manufacturers of  cotton  yarn  at cotton fabrics.  The first five respondents are the  Central Excise  Authorities.   The  6th  respondent  is  the   Bank. Between II March, 1963 and 20 March, 1963 the Central Excise Authorities  conducted  search  at  the  factory  and   mill premises   belonging   to  the   appellants.    The   Excise Authorities  seized 1662 bales of processed and grey  cotton fabrics belonging to the appellants, The 6th respondent, the Bank  was  the pledge of the seized goods.  The  goods  were lying  in  the  godown and bonded store rooms  at  the  mill premises and the Bank was in possession of the same under  a cash  credit  arrangement with the appellants.   The  Excise Authorities   also   seized  several  books   of   accounts, documents, vouchers belonging to the appellants and lying at the mill premises. On  8 April, 1963 the appellants made an  application  under Article  226  of  the Constitution in-  the  High  Court  at Bombay.   Respondent  ’No.  1, the  Assistant  Collector  of Central Excise on 16 September, 1963 made an application  to the  Collector  of  Central  Excise  respondent  No.  5  for extension of time for giving notice under section 124(a) 201 of  the  Customs Act, 1962 (hereinafter referred to  as  the Act).   On  20 September, 1963 an order of extension  for  a further period of six months was made.  The appellants asked for  a writ of mandamus directing the Excise Authorities  to release  and  hand  over the goods and  books  of  accounts, documents. and vouchers to the appellants. Two  of  the  grounds advanced by  the  appellants  for  the release  of the goods and documents were these.  First,  the Excise  Authorities  did  not issue a  "show  cause  notice" within six months of the seizure of the goods under  section 110  of  the Act.  Second, the order of extension  was  made without  giving the appellants an opportunity to show  cause against  the  grant of extension.  The High  Court  did  not accept those contentions.  The High Court held that an order for extension could be made at any time within or after  six months  of the date of seizure.  The High Court relied on  a Bench  decision of the Mysore High Court and held  that  the order  of extension could not be said to be void on  account of absence of opportunity to show cause against the order of extension.  The High Court dismissed the application of  the appellants. In  this  appeal the only contention which was  advanced  on behalf  of  the  appellants  is  that  the  order  dated  20 September,  1963  passed  by the  Excise  Authorities  under section  110 of the Act is bad and therefore the  appellants are entitled to the release of the goods. The  contentions on behalf of the appellants were  two-fold. First the order dated 20 September, 1963 was not within  six months  of  the seizure of the goods,  and  was,  therefore, illegal.   Second,  the order dated 20 September,  1963  was made  without giving an opportunity to the appellants to  be heard  and  was, therefore, in violation  of  principles  of natural justice. Counsel  for  the appellants relied Assistant  Collector  of Customs  v.  Charan  Das Malhotra [1971]  3  S.C.R.  802  in support  of  the contentions advanced in these  appeals.  In

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Malhotra  case  (supra) the Rummaging staff  of  the  Excise Authorities raided the business premises and seized goods on 19  March,  1963.  On 6 March, 1964 the  Excise  Authorities served  a  notice under section 124(a) of the  Act  to  show cause  why the goods not be imposed.  It was contended  that because the goods were seized on 19 March, 1963 the  initial period  of six months provided under section 110(2)  of  the Act  expired  on  19 September, 1963   and  Malhotra  became entitled  to there turn of the goods on the ground  that  no notice  to show cause had till then been issued. The  Excise Authorities  contended on the other  hand that an  extension of  four  months  was applied for and  was  granted  by  the collector  of  Customs on 19 September, 1963.  The  extended period of four months expired on 19 January, 1964. A further extension for two months was applied for on 3 January, 1964. The  Collector  passed an  order extending the  time  on  20 February,  1964  a  months after  the  extended  period  had expired on 19 January, 202 1964.   The other contention in that case was that  Malhotra got, no chance to resist the application for extension, and, therefore, the orders were in violation of natural justice. This Court held that the right to have the watches  restored to Malhotra accrued on 19 January, 1964 and it could not  be defeated  by an order for extension passed on  20  February, 1964  after-the first extended period lapsed on  19  January 1964.   It  was also held that Malhotra was entitled  to  be heard before the extension was made.  This Court in Malhotra case  (supra)  held that the decision’ of  the  Mysore  High Court  on  which the Bombay High Court relied  (reported  in A.I.R. 1968 Mysore 89) was wrong. Counsel  for the Excise Authorities contended that in  these appeals no notice under section II 0 of the Act was required to  be  given  by reason of special  agreement  between  the appellants and the Excise Authorities during the pendency of the writ petition in the High Court.  It was submitted  that because  of  the  agreement there was also  no  question  of violation  of  principles of natural justice.  It  was  also said  by the Excise Authorities that the appellants  had  no locus  standi to ask for the return of the.  goods.  because the goods had been in the possession of the respondent  Bank as  pledge and the Excise Authorities seized the goods  from the possession of the Bank. The  High Court admitted the petition of the  appellants  in Civil Appeal No. 1133 of 1971 on 8 April, 1964.  On 9 April, 1964  the  Chief Justice of the High Court passed  an  order directing the petition to be heard by a Division Bench.  The Bench  decision  was given after six years on  31  August, 1970.   During th‘e pendency of the petition the  appellants took  out  several notices of motion  and  obtained  various interlocutory  orders by consent of parties.  These  consent orders  were  dated  29  July, 1963,  19  November  19(5,  2 December, 1966 and 3 September 1969. Broadly  stated the pattern of these consent orders  was  as follows.  The appellants will deposit with the Collector  of Central  Excise  government securities of certain  value  in order to obtain release of quantities of the seized goods in favour  of  the  Bank.  in  the  event  of  the   appellants succeeding in the petition the securities deposited shall be returned.   In  the event of the appellants failing  in  the petition  the  securities shall be retained  by  the  Excise Authorities for the purpose of adjudication proceedings.  In the  event of the Collector of Central Excise  holding  that the  goods  are  not  able  to  confiscation  or  that   the appellants  are  not personally liable for any’  penalty  or

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excise  duty  the said securities shall  be  returned.   The appellants agree and undertake that the securities deposited shall  be  treated as sale proceeds of the said  goods  and treated   as  goods  so  seized  for  the  purpose  of   any adjudication proceedings.  The appellants further agree that they  shall  not raise any contention  in  the  adjudication proceedings  that the said proceedings will not be valid  on the  ground  that  the  goods  have  been  released  to  the appellants  and  are  not  available  for  confiscation   or imposition of fine in lieu of confiscation. 203 The  appellants  pursuant to the  consent  orders  aforesaid deposited,Rs.  9,03,300  with  the  Excise  Authorities  and executed  bonds for the sum of Rs. 15,51,080/- in favour  of Excise  Authorities on different dates and obtained  release of 1662 bales and 56 boras. In  Civil Appeal No. 1132 of 1971 the Excise Authorities  on and 29 April, 1963 seized 432 pieces of grey cotton  fabrics and  136.  bales containing cotton fabrics and  fents.   The Excise  Authorities  also  seized  books  of  accounts   and documents  of  the  appellants on those two  dates.,  On  20 September, 1963 the Excise Authorities passed another  under section 110(2) of the Customs Act extending the period-.  of giving  a  "show cause" notice.  The appellants on  10  May, 1963  filed  a  petition in the High  Court  and  asked  for release of the goods on,grounds similar to the other appeal. The High Court dismissed the petition of the appellants. The  only  contention advanced in this appeal was  that  the order dated 20 September, 1963 was passed without giving  an opportunity  to  the  appellants  to  be  heard.   It   was, therefore,  said  on behalf of the appellants  that  on  the ruling  of  this Court in Malhotra case  (supra)  the  order dated 20 September, 1963 was illegal. In  Civil  Appeal No. 1132 of 1971 the  respondents  on  the other  hand contended that the appellants were not  entitled to  be  heard by reason of agreements  embodied  in  consent orders  identical to those in,,.  Civil Appeal No.  1133  of 1971.   The  consent orders provided execution of  bonds  as well  as  deposit of amounts of money by the  appellants  in favour  of  the Excise Authorities against release  of,  the goods The parties agreed that the deposits of the bonds were to be treated as, proceeds of sale of the goods and  treated as   goods  so  seized  for  the  purpose  of   adjudication proceedings.  The appellants took delivery of the seized 136 bales  and  deposited  on 5 May, 1965, 5 May,  1966  and  22 April,  1970 in lieu thereof amount aggregating  Rs.  99,000 and executed bonds of the value of Rs. 1,80,000. In  Civil Appeal.  No. 1109 of 1971 the  Excise  Authorities seized’ 477 and 91 aggregating 68 bales of cotton fabrics of the  appellants on 16 March, 1963.  The  Excise  Authorities also   seized  books  of  accounts  and  documents  of   the appellants.   The  appellants  oil  10  May,  1968  made  an application  under  Article 226 of the Constitution  in  the High  Court of Bombay.  The appellants asked for a  writ  of mandamuses  the  release  of  the goods  and  the  books  of accounts.   The High Court did not accede to the request  of the appellants. The  two contentions of the appellants in Civil  Appeal  No; 1109’  of 1971 were that the order dated 20 September,  1963 extending  the  period  of giving "show  cause"  notice  was illegal on grounds similar to those in Civil Appeal No. 1133 of  1971.  The respondents in Civil Appeal No. 1109 of  1971 repeated the same answers that the ruling, in Malhotra (case (supra)  does not apply by reason of agreements between  the appellants  and the respondents embodied in similar  consent

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orders  in  interlocutory  proceedings in  the  High  Court. During  the, pendency of the proceedings in the  High  Court the appellants depo- 204 sited  with  the  Excise Authorities between  the  month  of April,  1966 and the mouth of August 1968 Rs.  3,16,016  and executed bonds for -the sum of Rs. 4,44,059.  The appellants obtained  release  of  the goods namely  568  bales.   The amounts  deposited  were agreed between the ,parties  to  be sale  proceeds of the goods and treated as goods  as  seized for the purpose of adjudication proceedings. The  Excise Authorities may under section 110(1) of the  Act seize goods if the proper officer has reason to believe that the  goods  are  liable to confiscation.   Where  goods  are seized  under section 110,(1) ,of the Act and no  notice  in respect thereof is given under section. 124 (a) of the.  Act within  six  months of the seizure of the  goods  the  goods shall be returned to the person from whose possession  they were  seized.   Section 1.24(a) of the Act  states  that  no order confiscating any goods or imposing any penalty on  any person shall be made under Chapter XIV of the Act unless the owner  of  the  goods or such person is given  a  notice  in writing  informing  him of the grounds  of  confiscation  or imposition of penalty.  Section 10 (2) of the Act contains a proviso  that  the period of six months  may  on  sufficient cause  being shown be extended by the Collector  of  Customs for a period not exceeding six months. in  Civil  Appeals No. 1133 and 1109 of 1971  the  order  of extension on 20, September, 1963 was beyond the period  of six months from the date of seizure.  In Civil Appeal No.  1 1 32 of 1971 the order was in time.  Therefore, the  orders for  extension  of time to serve the  notice  under  section 124(a). of the Act could have been exposed to infirmities of limitation as to time (though we do not express any, opinion upon it) and observance of principles of natural justice but for the special agreement in the consent orders between  the parties in these appeals. Counsel  for  the ’ appellants contended that if  the  order dated  20 September, 1963 was not within six months of  the seizure  of  the  goods, the  appellants  were  entitled  to release  of  the  goods.  All the goods  have  already  been released  to  the appellants.  The release is by  reason  of terms  of  consent  by and between the  appellants  and  the Excise Authorities during the pendency of the appeals in the Bombay  High  Court.   It was next  said  on  behalf  of-the appellants that the amounts deposited represented the  goods and  the appellants were entitled to return of  the  amounts deposited.  The. contention of the appellants is unsound and unacceptable.   The amounts of money which are now  retained by  the  Excise Authorities represent the  goods  reason  of special  agreements between the parties.   These  agreements came  into existence before as well as after  20  September, 1963.   After  the appellants had obtained  release  of  the goods  in  accordance with the terms  of  special  agreement embodied  in the consent terms’, the goods went out  of  the province  of  application  of section 110  of  the  Act  for extension ,of time for serving a notice. There cannot be any question of violation of principles  of natural justice  or  any  lack  of  opportunity  to   the appellants  to show cause, in regard to the order  dated  20 September, 1963 extending the time for 20 5- giving the notice under section 124 of the Act  contemplated in section 110 of the Act.  The appellants themselves  asked for release of the goods on depositing moneys and  executing

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bonds  representing  the value of the goods  released.   The agreements in the present appeals establish that the parties on  consideration of all the facts and circumstances  waived notice  for  extending  the time within six  months  of  the seizure of the goods. The  Excise Authorities are also. right in their  contention that the appellants have no locus standi to ask for release, of  the,  goods because the Bank was in  possession  of  the goods  as the pledge and the Excise Authorities  seized  the goods from the possession of the Bank. The   moneys  deposited  and  the  bonds  executed  by   the appellants are really the substituted goods for the  purpose of abdication as to whether there can be any confiscation of goods or imposition of penalty.  The parties agreed that the Excise  Authorities  would  retain the  securities  for  the purpose of adjudication proceedings in the event of  failure of the appellants in the writ petitions filed by them. The  goods were seized in 1963.  Long time has lapsed.   The Excise   Authorities  should  immediately  take  steps   and complete the adjudication proceedings. For  these reasons the appeals fail and are dismissed.   The parti es will play and bear their own costs. V.P.S. Appeal dismissed.                             2 06