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PETITIONER: THE COLLECTOR OF CUSTOMS, MADRAS

       Vs.

RESPONDENT: NATHELLA SAMPATHU CHETTY AND ANOTHER(And connected cases)

DATE OF JUDGMENT: 25/09/1961

BENCH: AYYANGAR, N. RAJAGOPALA BENCH: AYYANGAR, N. RAJAGOPALA SINHA, BHUVNESHWAR P.(CJ) SARKAR, A.K. HIDAYATULLAH, M. MUDHOLKAR, J.R.

CITATION:  1962 AIR  316            1962 SCR  (3) 786  CITATOR INFO :  R          1962 SC 496  (6)  F          1962 SC1559  (2)  RF         1966 SC1867  (3)  R          1967 SC 737  (1,6)  R          1970 SC 951  (12,13,14,15,16,17,19)  R          1971 SC 454  (7)  RF         1972 SC 689  (16)  RF         1973 SC1461  (1709)  RF         1975 SC  17  (30,31)  R          1979 SC 798  (8)  RF         1981 SC 873  (25)  R          1982 SC 697  (15,16)  RF         1989 SC 222  (3)  RF         1989 SC 516  (49)  R          1990 SC1480  (63)  C          1991 SC 101  (45,225)  RF         1992 SC 604  (50)

ACT: Smuggled  Goods-Restrictions on importation of gold  Seizure of gold on reasonable belief that it was smuggled-Burden  of proof  that  it was not smuggled on  person  in  possession- Constitutional validity of enactment-Reference of statute in a    second   statute   without   incorporation-Effect    of modifications   of   the  first   statute-Foreign   Exchange Regulation  Act, 1947 (7 of 1947), ss. 2(f),  8(1),  23A-See Customs  Act, 1878 (8 of 1878), ss. 19, 16 7(8), 1 78A,  188 Constitution of India, Arts. 14, 19(1), (f) and (g).

HEADNOTE: Under  the  powers  conferred  by s.  8(1)  of  the  Foreign Exchange Regulation Act, 1947, the Central Government issued a  notification  on August 25, 1948, placing a  ban  on  the importation  of  gold  except with  the  permission  of  the Reserve Bank.  Section 23A of the Act, which was  introduced by  an amendment in 1952, provided that".. the  restrictions imposed  by S. 8(1).. shall be deemed to have  been  imposed under  s.  19  of the Sea Customs Act,  1878,  and  all  the provisions  of  the Act shall have  effect  accordingly..  "

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Section 19 of the Sea Customs Act, 1878, enabled the Central Government,  by  notification, to prohibit or  restrict  the bringing goods of any specified description into 787 India and, by reason of other :provisions of that Act, goods imported  in contravention of the notification issued  under s. 19 were liable to confiscation.  In 1955, the Sea Customs Act,  1878,  was amended by the introduction of s.  178A  in that Act, which provided, inter alia that "where goods  were seized,  under that Act in the reasonable belief  that  they were  smuggled goods, the burden of proving that  they  were not  smuggled  goods  shall  be on  the  person  from  whose possession the goods were seized." On  June  26,  1956, N, an employee of  the  respondent,  on alighting  at the Central Station in Madras From Bombay  was intercepted  by a Police Head Constable and, on a search  of his clothing, four blocks of gold weighing about a  thousand tolas  were  found in his possession.  The officers  of  the customs  department interrogated him and, finding  that  lie was  unable  to produce any record for the purchase  of  the gold,  seized from him the blocks of gold.  N admitted  that he  brought the gold for the respondent and  enquiries  were made  to verify the story narrated by him as to  the  source from  which he obtained the gold.  Thereafter the  Collector of  Customs  being  prima facie of the view  that  the  gold seized had been smuggled, issued notice to the respondent to show cause why the said gold should not be confiscated.  The respondent  offered his explanation bat the  Collector  held that  the respondent bad not discharged the onus of  proving that the gold was not smuggled, an onus which had been  cast on him by s. 178A of the Sea Customs Act, 1878, and directed the confiscation of the gold under s. 167(8) of that Act. The  respondent challenged the legality of the action  taken by the Collector of Customs on the grounds, inter alia,  (1) that  s.  178A  of the Sea Customs Act,  1873,  was  consti- tutionally  invalid as it was an unreasonable  restraint  on the  citizen’s  rights to hold property or  to  do  business guaranteed  by Art. 19(1)(f) and (g) of the Constitution  of India and was not saved by cls. (5) and (6) respectively  of Art.  19; (2) that s. 178A of the Sea Customs Act which  was enacted  in  1955  could not be invoked  in  adjudicating  a contravention  of a notification under the Foreign  Exchange Regulation  Act  inasmuch as s. 23A of the latter  Act  when enacted in 1952 in effect incorporated into that Act all the relevant provisions of the Sea Customs Act as they stood in’ 1952  with the result that any subsequent amendments to  the Sea  Customs Act could not affect S. 23A; and (3)  that  the rule  as  to  the  burden of proof under  s.  178A  was  not attracted  to the present case because the  Customs  Officer who effected the seizure did not, at the moment of  seizure, entertain  a  reasonable belief that the goods  seized  were smuggled.  The Collector of Customs besides maintaining  the legality  of the order of confiscation, contended  that  the question raised in the case as to the constitutional 788 validity of S. 178A of the Sea Customs Act was concluded  by the  decision in Babulal Amthalal Mehta v. The Collector  of Customs, Calcutta [1957] S.C.R. 110. Held:     (1)  that Babulal Amthalal Mehta v. The  Collector of   Customs,  Calcutta,  [1957]  S.  C. R.  II  10,  was  a decision  as to the validity of s. 178A of the Customs  Act, 1878, with reference to Art. 14 of the Constitution of India only  and  that the question whether the  said  section  was obnoxious to the rights guaranteed by Art. 19(1)(f) and  (g) was not considered by that judgment.

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(2)    that  the object of s. 178A was  the  prevention  and eradication  of  smuggling,  inter alia of  gold  which  was widely prevalent, and in view of the fact that without a Law in that form and with that amplitude smuggling might not  be possible  of  being effectively  checked,  the  restrictions imposed  by  that  section being in  the  interests  of  the general  public  could not be held to be  violative  of  the rights  guaranteed  by Art. 19 (1) (f) and  (g),  though  it might  operate  somewhat harshly on a small section  of  the public.   Accordingly,  s.  178A does  not  contravene  Art. 19(1)(f) and (g). State of Madras v. V. G. Row, [1952] S.C.R. 597, Manohar Lal v. State of Punjab, [1961] 2 S.C.R. 343 and Ram Dhan Dass v. State of Punjab, [1962] 1 S.C.R. 852, relied on. Pukhraj Champalal Jain v. D. R. Kohli, (1959) 61 Bom. T.  R. 1230, approved. M.G.  Abrol  v.  Amichand,  (1 960) 62  Bom.   L.  R.  1043, disapproved. Nathella Sampathu Chetty v. Collector of Customs, Madras, A.   1. R. 1959 Mad. 142, reversed. (3)  that  a  seizure to which s. 178A  was  applicable  was merely  a  preliminary to the proceedings  before  a  quasi- judicial  authority under s. 182 and that it was  only  when the  latter  authority was, satisfied that the  seizure  was made  "in the reasonable belief that the goods  seized  were goods that had been smuggled" that the rule of evidence laid down by s.     178A came into operation. (4)  that  the  wording of s. 23A of  the  Foreign  Exchange Regulation Act, 1947, showed that the reference in it to  s. 19  of the Sea Customs Act, 1878, was merely  for  rendering notifications  under  the named provisions  of  the  Foreign Exchange  Regulation Act to operate as  notifications  under the Sea Customs Act and that it could not have the effect of incorporating  the relevant provisions of the latter Act  in the Act of 1947, and that, consequently, when a notification issued under S. 8(1)  of the Foreign Exchange Regulation Act was  deemed  for ail purposes to be  a  notification  issued under s. 19 of the 789 Sea  Customs  Act,  the contravention  of  the  notification attracted to it each and every provision of the Sea  Customs Act which was in force at the date of the notification. The,  Secretary of State for India in Council  v.  Hindustan Co-operative Insurance Society Ltd., (1931) L. R,. 58 1.  A. 259, held inapplicable. (5)  that, in the instant case, the circumstances present at the moment when the gold was taken by the Customs Officer at the Central Station did tend to raise a reasonable suspicion that  the gold seized had been obtained illicitly  and  that this  was  sufficient  to constitute in  the  words  of  the statute  "a  reasonable belief that the  goods  (gold)  were smuggled."

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 408 to  410 of 1960. Appeals  from  the judgment and order  dated  September  11, 1958, of the Madras High Court in Writ Petition Nos. 384  of 1957 and 660 of 1958. WITH Criminal Appeals Nos. 38, 126 and 123 of 1959. Appeals by special leave from the judgments orders dated May 16,  1958, June 19, 1959 and April 14, 1959, of  the  Punjab

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High Court in Criminal Revisions Nos. 290 of 1958 and 144 of 1959 and Criminal Appeal No. 677 of 1958 respectively.                             AND Civil Appeal No. 511 of 1960. Appeal from the judgment and order dated March 20, 1959,  of the  Bombay  High Court (Bench) at Nagpur in  Special  Civil Application No. 322 of 1958.                             AND Petition No. 118 of 1958. Petition  under  Art. 32 of the Constitution of  India  for’ enforcement of Fundamental Rights. C.   K. Daphtary, Solicitor-General of India, H. J.  Umrigar and P. M. Sen, for the appellant in 790 C. As.  Nos. 408 and 409 of 1960 and respondent in C.  A. No. 410 of 1960. N.   A. Palkhivala, S. R. Vakil, R. J. Joshi.  S. J. Sohrabji,  J. B. Dadachanji, S. N. Andley,  Rameshwar  Nath, and P. L. Vohra, for the respondents in C. As.  Nos. 408 and 409 of 60 and appellant in C. A. No. 410 of 1-960. R.   S. Narula, for the appellant in Cr.  A. No. 38 of 59. C.   K. Daphtary, Solicitor-General of India, N.  S.  Bindra and D. Gupta, for the respondent in Cr. A. No. 38 of 1959. T.   M. Sen, for Intervener No. 1 in Cr.  A. No. 38 of 59. K.  N. Keswani, for intervener No. 2 in Cr.  A. N  o. 38  of 59. R.   S. Narula and R. L. Kohli, for the appellant in Cr.  A. No. 126 of 1959. C.   K. Daphtary, Solicitor-General of India, H. J.  Umrigar and  D.  Gupta,  for  the respondent  in  Cr.   A.  No.  126 of .1959. N.   C.  Chatterji,   S. K. Kapur and Ganpat Rai,  for  the, appellant in Cr.  A. No. 126 of 1959. A.   S.  Bodbe,  Shankar  Anand  and  Ganpat  Rai,  for  the appellant in C. A. No. 511 of 1960. C.   K. Daphtary, Solicitor-General of India, H.  J. Umrigar and T. M. Sen, for the respondent in ,C. A. No. 511 of 1960. S.  Venkatakrishnan, for the petitioner in Petn. No. 118  of 1958. C.   K., Daphtray, Solicitor-General of India, H. J. Umrigar and R. H. Dhebar, for the respondents in     Petn.  No.  118 of 1958. 1961.   September  25.   The  Judgment  of  the  Court   was delivered by AYYANGAR,  J.-The  Sea  Customs Act, 1878 (Act  8  of  1378) (referred to hereinafter as the ’Act), 791 was  amended by s. 14 of Act 21 of 1955 by the  introduction of s. 178A reading:               "178A.  (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.               (3)   Every  notification  issued  under  Sub-               section  (2) shall be laid before both  Houses               of  Parliament as soon as may be after  it  is               issued."

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It  is the constitutional validity of this section  that  is the  common point which arises in these several cases  which have been heard together.  We have heard on the merits  only Civil  Appeals 408 to 410 of 1960 and the other  cases  were posted  before  us in order that Counsel appearing  for  the parties in them,. might have an opportunity to be heard upon the common question mentioned earlier.  We shall, therefore, refer only to the fact,% of Civil Appeals 408 to 410 of 1960 in dealing with these petitions. Civil Appeals 480 to 410: These appeals come before us on a certificate granted by the High Court of Madras under Arts.132(1) and 133(1)(c) of  the Constitution and are directed against the judgment and order of  the High Court in two Writ Petitions filed before it  by Nathella  Sampathu Chetty-the sole proprietor of a  business in  gold and silver, bullion, jewellery etc. carried  on  in the name of Nathella Sampathu 792 Chetty & Sons (referred to hereafter as the respondent). The  facts  giving  rise to these  appeals  are  briefly  as follows : On the morning of June 26, 1956, one  Nandgopal-an employee  of the respondent-alighted at the Central  station in   Madras   from  the  Bombay  Express.    Nandgopal   was intercepted and questioned by a Head Constable of the  State Police  Service  attached to the  Prohibition Intelligence Department.  Nandgopal admitted that he was in possession of gold which he was bringing for his firm-the  respondent-from Bombay.   The  Head  Constable  immediately  contacted   the officers of the Preventive Section of the Customs Department who  were  on duty at the Central station  who  interrogated Nandgopal  and Eeized from him four blocks of gold  weighing in all about 1,000 tolas.  Enquiries were made to verify the story  narrated by Nandgopal as to the source from which  he obtained  the gold and thereafter the Collector  of  Customs being prima facie of the view that the gold seized had  been smuggled, issued notice to the respondent to show cause  why the  said  gold should not be confiscated.   The  respondent offered  his  explanation but the Collector  held  that  the respondent  had not discharged the onus of proving that  the gold  was not smug led-an onus Customs Act and directed  the confiscation of the gold.  The respondent thereupon filed  a petition  (Writ Petition 384 of 1957) under Art. 226 of  the Constitution  before the High Court of Madras for the  issue of  a  writ  of certiorari or  other  appropriate  writ  for quashing  the order of the Collector of Customs  on  various grounds  to  which  we shall  advert  later,  including  the constitutional validity of a. 178A.  While this writ petition was pending, the respondent  filed another petition (,Writ Petition 660 of 1958) for a writ  of mandamus  directing the Collector to return the gold  seized and confiscated by him. 793 The  two writ petitions were heard together and by an  order dated  September  11, 1958, the learned Judges of  the  High Court held, allowing Writ Petition 384 of 1957, that s. 178A of  the Sea Customs Act was void under Art. 13 of  the  Con- stitution.   They  further held that even if  s.  178A  were valid,  the condition precedent for invoking the rule as  to the  burden of proof prescribed by the section had not  been complied with, in that the customs officer who effected  the seizure which preceded the adjudication did not entertain "a reasonable  belief  that the gold was  smuggled",  with  the result that the order of confiscation was invalid.  Besides, the learned Judges were also of the view that s. 178A of the Sea  Customs  Act  could not be invoked  in  adjudicating  a

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contravention  of a notification under the Foreign  Exchange Regulation  Act which imposed restrictions on the import  of gold.   Though  on  these  conclusions  the  order  of the Collector  confiscating the gold was set aside, the  learned Judges held that the respondent was not entitled to an order for  the return of the gold, but only to a direction to  the Collector to hear and determine the question about the  gold seized being smuggled gold without reference to the rule  as to  onus  of proof enacted by s. 178A.  The  appellant,  the Collector  of Customs, Madras, obtained leave from the  High Court under Arts. 132 and 133 of the Constitution, to appeal to this Court against the orders in writ petition No. 384 of 1957  and No. 660 of 1958 (Civil Appeals 408 and 409) and  a similar order was passed in an application for a certificate by  the respondent who felt aggrieved by the refusal of  the Court  in  Writ  petition  No. 660  of  1958  to  direct  an immediate return of the gold seized (Civil Appeal 410).  The three  appeals have been consolidated as they arise  out  of the same transaction. We shall first take up for consideration Civil Appeals  408 and  409 of 1960 filed by the Collector of Customs,  because unless  those appeals fail there would be no need to  decide the relief to which the 794 respondent would be entitled in Civil Appeal 410       of 1960.   In order to appreciate the contentions,  raised,  it would be necessary to set out the statutory       provisions which form the background of the impugned provision s. 178A of  the  Sea Customs Act.  The Foreign  Exchange  Regulation Act, 1947 (Act’ 7 of 1947), was brought into force on  March 25, 1947, by a notification issued by the Central Government under s. 1(3) of that Act.  The preamble to the Act recites:               "It is expedient in the economic and financial               interests   of  India  to  provide   for   the               regulation  of...... the import and export  of               currency and bullion." Section  8  of  this Act refers to the import  of  gold  the commodity  with  which  these  appeals  are  concerned.   It enacts:               "8(1).    The  Central  Government   may,   by               notification  in the official  Gazette,  order               that  subject to such exemptions, if  any,  as               may  be  contained  in  the  notification,  no               person  shall  except  with  the  general   or               special permission of the Reserve Bank and  on               payment  of the fee, if any, prescribed  bring               or  send into India any gold or silver or  any               currency  notes or bank notes or coin  whether               Indian or foreign,               Explanation.-The bringing or sending into  any               port or place in India of any such article  as               aforesaid  intended to be taken out  of  India               without   being  removed  from  the  ship   of               conveyance in which it is being carried  shall               nonetheless be deemed to be a bringing, or  as               the  case may be sending, into India  of  that               article for the purposes of this section." Gold is defined in s. 2(f) of this Act thus:                "  ’gold’ includes gold in the form of  Coin,               whether legal tender or not, or in the form of               bullion or ingot, whether refined or ’not and                                    795               Jewellery  or articles made wholly or.  mainly               of gold." These  provisions  have to be read in conjunction  with  the

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provisions  of the Sea Customs Act which form, as  it  were, integrated  provisions in relation to the import and  export of,  among  other  commodities, gold, and-  s.  23A  of  the Foreign  Exchange Regulation Act which was introduced by  an amendment of 1952 effects this co-ordination.  This  section reads:               "23A.  Without prejudice to the provisions  of               section 23 or to any other provision contained               in  this Act the restrictions imposed by  sub-               sections (1) and (2) of section 8,  subsection               (1)  of section 12 and clause (a) of  sub-sec-               tion (1) of section 13 shall be deemed to have               been  imposed  under  section 19  of  the  Sea               Customs  Act, 1878, and all the provisions  of               that  Act  shall  have  effect.   accordingly,               except  that  section 183 thereof  shall  have               effect  as if for the word shall’ therein  the               word "may’ were substituted.  " Turning now to the Sea Customs Act. s. 167(8) enacts-               "167.   The  offenses mentioned in  the  first               column  of  the following  schedule  shall  be               punishable  to  the extent  mentioned  in  the               third  column  of the same with  reference  to               such offenses respectively:      Section of                     this Act to Offenses             which    off-              Penalties                      ence has re-                      ference. 8. If any goods,    18 & 19                    Such goods the importation of                        shall be liable which is for the                          to confiscation; time being prohi-                          and bited or restricted 796 by or under Chapter                any person concerned IV of this Act, be                 in any such offence imported into or                   shall be liable to a exported from India                penalty not exceeding Contrary to such                   three times the value prohibition or res-                 of the goods, or not triction; or                        exceeding one thousand                                     rupees. if any attempt be made so to import or export any such goods; or if any such goods be found in any package produced to any officer of Customs as containing no such goods; or if any such goods or any dutiable goods, be found either before or after landing or shipment to have been concealed in any manner on board of any vessel within the limits of any port in India; or if any goods, the exportation of which is prohibited or restricted as aforesaid, be brought to any wharf in order to be put on board of any vessel for exportation contrary to

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such prohibition or restriction, 797               Section 19 referred to here reads               "19.  The Central Government may from time  to               time, by notification in the Official Gazette,               prohibit or restrict the bringing or taking by               sea   or  by  land  goods  of  any   specified               description  into or out of India  across  any               customs  frontier  as defined by  the  Central               Government." The  other provisions which have a bearing upon  the  points arising for discussion with reference to the validity of the impugned s. 178A of the Sea Customs Act are :               "s.  178.   Any thing liable  to  confiscation               under this Act may be seized in any place,  in               India either upon land or water, or within the               Indian  Customs  waters,  by  any  officer  of               Customs or other person duly employed for  the               prevention of smuggling."               "Is.  181.   When anything is seized,  or  any               person  is  arrested,  under  this  Act,   the               officer or other person making such seizure or               arrest  shall,  on  demand of  the  person  in               charge  of  the  thing so seized,  or  of  the               person  so arrested, give him a  statement  in               writing  of  the reason for  such  seizure  or               arrest."               "s.  182.   In every case,  except  the  cases               mentioned  in section 167, Nos. 26, 72 and  74               to  76, both inclusive, in which,  under  this               Act, anything is liable to confiscation or  to               increased rates of duty;               or any person is liable to penalty,               such  confiscation, increased rate of duty  or               penalty may be adjudged-               (a)   without limit, by a Deputy  Commissioner               or Deputy  Collector of Customs, or a Customs-               collector;               (b)   up   to   confiscation  of   goods   not               exceeding  two  hundred and  fifty  rupees  in               value and imposition of penalty or increased               798               duty, not exceeding one hundred rupees, by  an               Assistant Commissioner or Assistant  Collector               of Customs;               (c)   up   to   confiscation  of   goods   not               exceeding   fifty   rupees   in   value,   and               imposition  of penalty or increased  duty  not               exceeding   ten   rupees,   by   such,   other               subordinate  officers of customs as the  Chief               Customs-authority  may,  from  time  to  time,               empower  in  that  half  in  virtue  of  their               office:               Provided that the Chief Customs authority may,               in  the  case of any  officer  performing  the               duties  of  a  Customs-collector,  limit   his               powers to those indicated in clause (b) or  in               clause (c) of this section, and may confer  on               any  officer,  by  name or in  virtue  of  his               office,  the powers indicated in clauses  (a),               (b) or (c) of this section."               "183.      Whenever confiscation is authorized               by  this Act, the officer adjudging  it  shall               give  the owner of the goods an option to  pay

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             in  lieu  of  confiscation such  fine  as  the               officer thinks fit." Immediately  the Foreign Exchange Regulation Act  came  into force  in  March, 1947, a notification was issued  on  March 25., 1947, under s. 8(1) placing a ban on the importation of gold  except with the permission of the Reserve Bank.   This notification  was  superseded and replaced by  a  fresh  one dated  August  25,  1948,  also  issued  under  the   powers conferred  by  sub-s. (1) of s. 8 of  the  Foreign  Exchange Regulation Act and this is the notification which  continues in  force  up  to this date and which  is  relevant  to  the proceedings against the respondent.  The notification ran:               "(1)  Restrictions  on  import  of  gold   and               silver.-               In 1 exercise of the powers conferred by                                    799               sub-s.   1  of s. 8 of  the  Foreign  Exchange               Regulation  Act, 1947 (Act 7 of 1947)  and  in               supersession   of  the  notification  of   the               Government  of  India  in the  late  Finance               Department  No. 12(11) FI/47, dated  the  25th               March 1947, the Central Government is  pleased               to  direct  that except with  the  general  or               special  permission  of the Reserve  Bank,  no               person shall bring or send into India from any               place outside India-               (a)   any gold coin, gold bullion, gold sheets               or gold ingot whether refined or not; or               (b) any silver bullion............ It  would be noticed that on the law as it stood  upto  1952 before   s.  23A  was  inserted  in  the  Foreign   Exchange Regulation Act, the importation of gold in contravention  of the notification of August 1948 issued under s. 8(1) of  the Foreign   Exchange  Regulation  Act  would  have   been   an importation  contrary to s. 19 of the Sea Customs Act,  with the  result  that  any  person  concerned  in  the  act   of importation   would  have  been  liable  to  the   penalties ,specified in the third column of s. 167(8) and the imported gold  would  have  been liable  to  confiscation  under  the opening  words  of that column.  The gold  being  "a  thing" liable to confiscation could have been seized by any officer of  the Customs under s. 178 of the Sea Customs Act with  an obligation  on the officer effecting the seizure to give  to the  person  from whom the gold was seized a  "statement  in writing   of  the  reason  for  such  seizure"   (s.   181). Thereafter  the  officers  specified in s.  182  would  have adjudged  the  confiscation of these goods  subject  to  the option  mentioned  in s. 183 with the modification  to  this provision enacted by s. 23A of the Foreign Exchange  Regula- tion  Act.  It would further be manifest that at  that  date before the gold seized was liable to be dealt with under the third, column of a.. 167(8) by                             800 an  officer  adjudicating on the matter under  s.  182,  the burden  of proving that the gold was smuggled lay  upon  the department  and unless the adjudging officer who was  acting quasi-judicially was reasonably satisfied on that point, the confiscation or the imposition of the penalty could not have been ordered. The  effect of the imposition of the severe restrictions  on the  import of gold into this country by  the  notifications under  the  Foreign Exchange Regulation Act with a  view  to defend   and  conserve  the  economy  of  the   country   in conjunction   with  the  circumstance  that   the   internal production  of  gold was very little, resulted  in  a  great

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disparity  between  the price of gold in India  and  outside India  i.e., in the international markets.   This  naturally gave a great incentive to smuggling which besides  depriving the  State  of  its revenue, also posed a  grave  threat  to national economy.  It is only necessary to add that gold was not the only commodity which gave rise to this problem.  But as  these appeals are concerned with gold, we are  confining our examination to that article.  Taking these matters  into account the Taxation Enquiry Commission, which submitted its report  to  the Government of India in 1954,  recommended  a tightening  of  the  law in  order  effectively  to  prevent smuggling.   After dealing with the administrative  problems in  regard to the levy and enforcement of Customs duties  in Ch.  VII of the report the Committee recommended inter  alia the amendment of the Sea Customs Act so as-               "(1) to make smuggling a criminal offence, and               (2)   to transfer the onus of proof in respect               of  offenses  relating  to  smuggling  to  the               person  in  whose  possession  any   dutiable,               restricted or prohibited goods are found." In  pursuance of these recommendations the Sea  Customs  Act was  mended by Act 21 of 1955 and  801 among  others  s.  178A whose terms we  have  set  out,  was introduced into it. As the question of the constitutionality of s. 178A has been the  subject  of elaborate consideration in  a  few  decided cases  to which reference was made during the arguments.  we consider  that it would be convenient if we deal  with  them before  setting  out and discussing teh precise  grounds  on which  the  challenge to the validity of the  provision  was rested before us. Very  soon  after  a. 178A was  enacted  its  constitutional validity  was  challenged by an original petition  filed  in this  Court (Petition 98 of 1956)Babulal Amthalal  Mehta  v. The Collector of Customs) Calcutta (1).The goods involved in the  case  were diamonds.  Four  hundred   and  seventy-five diamond  pieces which had been seized from  the  petitioner, were directed to be confiscated holding them to be smuggled, by  the application of the burden of proof laid down in  is. 178A.   The  validity  of the  confiscation  was  challenged before   this  Court  on  the  ground  that  3.   178A   was unconstitutional  as  being  violative  of  Art.14  of   the Constitution  and the contention was rejected.  It has  been urged  by the learned Solicitor-General, for the  appellant, that the points regarding the constitutional validity of  B. 178A  raised  in  the present appeal are  concluded  in  his favour  by  this  judgment.  We shall,  therefore,  have  to examine the exact scone of this decision in detail which  we shall  do  later, but for the present it  is  sufficient  to state that the case dealt mainly with an objection based  on a  violation  of  Art.  14 of  the  Constitution  which  the following extract from the head note would indicate:               "Section  118A  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               (1)   [1957] S.C.R. 1110.               802               they  are_ seized, is nor,, discriminative  in               character   and   does   not   violate   equal               protection of law guaranteed by Art.14 of  the               Constitution". The  validity of the section was next attacked  before.  the

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High Court of Bombay in a Writ Petition filed under Art. 226 of  the  Constitution on the ground that  it  violated  Art. 19(1)(f)  and  (g)  of the Constitution-.  M.  G.  Abrol  v. Amichand(1).   The article involved, in that case  was  gold which had been seized from the petitioner and directed to be confiscated  by an adjudicating officer under s. 182 of  the Sea Customs Act.  The case came up for hearing before K.  T. Desai,  J.,  and  the learned Judge held that  S.  178A  was unconstitutional as being an unreasonable restriction on the citizens’ right to hold property and to trade and also  that even  assuming the provision to be  constitutionally  valid, the requirements of the section had, not been complied  with in  the case before him inasmuch as the seizing officer  had not  at the moment of seizure, "reasonable belief  that  the gold  seized was smuggled".  The next decision in  order  of date  is  that of the Bench of the Madras High  Court  dated March 11, 1957, which is now under appeal before us in Civil Appeals  408 to 410 of 1960.  The reasoning of  the  learned Judges of the Madras High Court is on the same lines as that of  K.T.  Desai,  J., in the judgment  just  now  referred’. Subsequently  the Nagpur Bench of the Bombay High Court  had to consider the same question and their decision is reported in  Pukhraj  Champalal Jain v. D. R. Kohli (2).   There  the learned  Judges dissented from the decision of K. T.  Desai, J.,  in M.  G. Abrol v. Amichand (1) and of the Madras  High Court  in  Nathella  Sampathu Chetty  v.  The  Collector  of Customs(&).   It may be mentioned that the arguments of  the learned Solicitor-General on behalf of the appellant were in substance the reasoning on which the decision of the  Nagpur Bench rests.  To complete (1)  (1958) 62 Bom.  L.R. 1043 at p. 1046, (2)  (1959) 61 Bow.  L.R. 1230, (3) A I.R. 1959 Mad. 142, 803 the narrative it is only necessary to add that an appeal was preferred by the Customs authorities from the decision of K. T. Desai, J. The appeal [however was dismissed on the ground that  even  if  s. 178A were valid as  held  by  that  Court previously,  its terms were not attracted to the  particular case,   because  of  the  non-fulfilment  of  an   essential condition requisite for the application of the section  [See M. G. Abrol v. Amichand (1)]. We  shall  now  proceed to deal with  the  points  Urged  by learned  Counsel for the respondent in support of  his  plea that  the impugned provision violates the fundamental  right to hold property under Art. 19(1)(f) and the right to  carry on  trade or business under Art. 19(1)(g) and was not  saved by cls. (5) & (6) respectively of Art. 19.  Before we do so, however, it is necessary to advert to the points upon  which learned  Judges have, in the judgment under appeal.  allowed the  petition of the, respondent, because in deciding  these appeals  we  have necessarily to pronounce upon  them  also. Besides  holding  a. 178A of the Sea Customs Act  which  was called  in  aid by the Collector of Customs  to  direct  the confiscation  of the gold seized to be unconstitutional  and therefore void under Art. 13, the learned Judges also upheld two further contentions urged on behalf of the respondent in support  of  their  petition  : (1) that  s.  178A  was  not attracted  to  the  determination of a  question  raised  in relation  to  the  confiscation of an  article  imported  in contravention of a notification under s. 8(1) of the Foreign Exchange Regulation Act, (2) that s. 178A required as a pre- condition  of its applicability, that the goods  which  were the  subject of adjudication must have been seized ",in  the reasonable belief that they are smuggled goods" and that  in

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the  instant case the Customs Officer effecting the  seizure did  not or could not entertain such a belief.  We  consider it  Would  be convenient if we deal with  these  two  points after examining the constitutional validity of s. 178A. (1)  (1960) 62 Bom.  L.R. 1043. 804 Before  embarking  on this enquiry it is necessary  to  deal with  the  argument of the  learned  Solicitor-General  that every point about the constitutional validity of s. 178A  is concluded  in  his favour by the judgment of this  Court  in Babulal Amthalal Mehta v. The Collector of Customs, Calcutta (1).  we have already extracted the head-note of the  report in the Supreme Court Reports which would appear to  indicate that this Court considered only the impact of Art. 14 of the Constitution on the provision.  Nevertheless, there are some passages  in  this  judgment,  which  would  be  immediately referred  to  on which reliance was placed  by  the  learned Solicitor-General  in  support of his contention  that  this judgment is an authority for the position not merely that s. 178A does not violate Art. 14 but that it impliedly. if  not expressly decides that the restriction imposed by it on  the right  to  hold  property or to engage in  the  business  of dealing  in  gold was a reasonable restriction  within  Art. 19(5)  &  (6)  of the Constitution.   We  will  quote  these passages in order to examine whether this contention is made out.   That  judgment  after setting out a  summary  of  the provisions  of the Sea Customs Act relating to seizure,  the adjudication  of confiscation, the imposition of  penalties, appeals  from the orders of the Customs authorities  to  the higher  revenue  authorities  and  the  terms  of  s.   178, proceeds:               "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               (1)   [1957] S.C.R.1110.                                    805               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               prerequisite   for  the  application  of   the               section  is  the subjectivity of  the  Customs               officer in having a reasonable belief that the               goods are smuggled." This  passage is followed by an examination of  the  matters with  reference to Art. 14 expressing the opinion  that  the petition  did  not  show in what manner  there  had  been  a violation of that Article, and the judgment continues:               "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

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             power to the customs authorities without  lay-               ing  down any standard or norm to be  followed               for     exercising    powers     under     the               section.........  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." This  is followed by a citation from the decisions  of  this Court  in  which  the  scope and content  of  Art.  14  were discussed  and  in particular a passage in the  judgment  in Budhan  Chaudhury  v.  The  State  of  Bihar(1)  where,  the principle that Art. 14 (1)  [1955] 1 S.C.R. 1045, 1048-1049. 806 does not forbid classification on a reasonable and  rational basis is extracted.  The judgment proceeds:               "  A cursory perusal of s. 178A will  at  once               disclose  the well defined  classification  of               goods  based on an  intelligible  differentia.               It applies only to certain goods described  in               sub-a.   (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 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  impugned   section               cannot be struck down on the infirmity  either               of discrimination or illegal classification." We  are therefore satisfied that the decision of this  Court considered  the validity of s. 178A only with  reference  to Art.  14  and  that  it is  not  a  decision  regarding  the -impugned  legislation being or not being obnoxious to  Art. 19(1)(f)  &  (g).  It is only necessary to add that  at  the beginning of the discussion, Govinda Menon, J., specifically points out that he was not considering any attack on s. 178A based  on  an infringement of Art. 19(1)(f) & (g),  for  ’he said :               "Though Mr. Chatterjee faintly argued that the               provisions of Art. 19(1)(f) & (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.  178A  was  violative  of               principles  of  equal protection of  the  laws               guaranteed under Art. 14 of the Constitution." 807 We cannot accept the further submission either that, even if this Court did not in terms consider the validity of s. 178A with reference to Art. 19 (1) (f) & (g), still the reasoning by which it rejected the contention that it violated Art. 14

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would  be  sufficient to cover the former also.   No  doubt, there  are situations when the points regarding a  violation of  Art;  14  and an objection that  a  restriction  is  not reasonable  so  as to conform to the  requirements  of  Art. 19(5)  or (6) may converge and appear merely  as  presenting the  same question viewed from different angles.  Such,  for instance,  are cases when the denial of equality before  the law is based on the ground that the power vested, say, in an administrative  authority to affect rights guaranteed  to  a citizen  is arbitrary, being unguided or  uncanalised.   The vesting of such a power would also amount to the  imposition of  an  unreasonable  restriction on  the  exercise  of  the guaranteed right to trade or carry on a business etc.  Where however, there is guidance and the legislation is challenged on  the ground that the law with the definite  guidance  for which  it  provides  has  out  stepped  the  limits  of  the Constitution  by  imposing  a  restraint  which  is   either uncalled for or unreasonable in the circumstances, the scope and content of the enquiry is far removed from the tests  of conformity  to rational classification adopted  for  judging whether  the  law has contravened the requirement  of  equal protection under Art. 14. It is therefore necessary for us to consider whether s. 178A is obnoxious to the rights guaranteed by Art. 19(1)(f) & (g) which  is  the ground upon which the section has  been  held unconstitutional  by the judgment of the Madras  High  Court under  appeal.  We have already set out what one might  term the historical background and the surrounding circumstances’ which  necessitated  the enactment of  this  provision.   As already  indicated,  since  the  commodity  with  which  the present  appeals are concerned is gold, we are referring  to that  in particular, though the circumstances  attendant  on the 808 other  commodities referred to in s. 178A might be similar. As pointed out I already, the disparity between the internal and  external price of gold became, by 1948, so great a"  to provide considerable incentive     to smuggling by making it very profitable.  This as, assisted by the very long  coast- line  which  India  has, coupled  with  the  extensive  land frontiers  both on the east as well as on the west  ignoring for  the moment the very small pockets of foreign  territory within the subcontinent.  Notwithstanding the efforts of the Customs  authorities  and  the  Preventive  Staff  of   that department,  a considerable volume of the yellow  metal  did ’seep into the country and efforts had therefore to be  made to  tighten the law in this regard.  It was in pursuance  of this  endeavour  that s. 178A was introduced  into  the  Sea Customs  Act  in  1955.  Ex facie,  the  impugned  provision enacts a rule of evidence and the ratio underlying it is not far to seek,. and it is that the person in possession of the gold  would,  with certainty in most cases, be in  a  better position  to  prove that it was legally within  the  country than the Customs authorities.  In this connection  reference may  be made to the observations by Lord Goddard, C. J.,  in B.  v.  Fitzpatrick (1).  Speaking of s. 259 of  the  V.  K. Customs Consolidation Act, 1876, which enacted               "If in any prosecution in respect of any goods               seized for non-payment of duties, or any other               cause of forfeiture, or for the recovering any               penalty  or penalties under the Customs  Acts,               any dispute shall &rise whether the duties  of                             customs  have  been paid in  respect  of  such               goods, or whether the same have been  lawfully               imported or lawfully unshipped, or  concerning

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             the place from whence such goods were brought,               then and in every such case the proof  thereof               shall   be   on   the   defendant   in    such               prosecution."               (1)  [1948] 1 All.  E.R. 769, 772.               809               the learned C. J. said-               "The  onus is put on the defendant when  there               is  a dispute in the proceedings whether  duty               has  been  paid  or  whether  the  goods  were               lawfully  imported.  The obvious  reasons  for               this  provision  is  that the  facts  must  be               within  the  knowledge, and often  within  the               exclusive knowledge of the defendant.  If, for               instance,  it  is found that he has  dealt  in               prohibited  goods,  if  he can  show  that  he               acquired  them  in  the  ordinary  course   of               business  obviously he would not be guilty  of               dealing  in  them  with intent  to  avoid  the               prohibition.   He can prove the positive  and,               unless  he  had to undertake  the  proof,  the               Crown  would generally have to  undertake  the               proof of a negative. Mr.  Palkivala, learned Counsel for the  respondent,  stated that if the impugned section, s. 178A, had contented  itself with  laying  down  the principle enunciated  in  the  above observations of Goddard, C. J., he would not contend that it was  an  unreasonable restraint on the citizen’s  rights  to hold  property or on his right to do business guaranteed  by Art.  19 (1) (f) & (g).  His submission, however,  was  that the  burden cast upon the person from whom gold were  seized transcended the limits of what that person could  reasonably be called on to prove and that as the burden cast by s. 178A was impossible of being discharged, it amounted not to a law laying  down a rule of evidence, but operated  virtually  to effect  a confiscation of the property of a citizen  without affording him any real opportunity to establish his right to it. To  appreciate properly this argument about the real  effect of  the  provision it is necessary to set out  a  few  facts relating  to  gold as an article of trade in  this  country. Learned  Counsel  on  either side agreed  that  the  matters stated in relation to gold and the trade in gold referred to in the following *sage in the judgment of K. T.Desai, J., 810 correctly   sums  up  the  position.   The   learned   Judge summarised the position thus:                     "It  is  common  knowledge  that   India               produces very little gold and that most of the               gold  available in India is imported gold.   A               statement  has been put in by consent  showing               the  official figures of India’s  imports  and               exports of gold from 1851 to 1956. it shows  a               net  import  in the country,  after  deducting               exports,  of 353 crores and three lakhs  worth               of  gold.  Restrictions on the import of  gold               were for the first time introduced in India by               Finance    Department    (Central    Revenues)               Notification No. 53, dated September 4,  1939.               By that notification the Central Government in               the  exercise of the powers conferred by  s.19               of the Sea Customs Act prohibited the bringing               or  taking by sea or land into  British  India               from  any  place other than Burma  or  out  of               British  India to any Place other  than  Burma

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             gold  coin,  gold  bullion  or  gold   ingots,               whether  refined or not, except on the  autho-               rity  of a licence granted in that  behalf  by               the Reserve Bank of India Till April 1,  1946,               gold remained duty free.  Thereafter duty  was               levied  on  the import of gold  bullion,  gold               plate,  gold  manufactures  etc  Gold  besides               being  a  store  of  value,  is  anarticle  of               adornment  and investment.  It  is capable  of               being  split  and  there can be  a  fusion  of               diverse  quantities  of gold.   It  is  easily               changeable  in form size and shape.  The  gold               available  in  the  market  hardly  bears  any               identification   mark.  It is  impossible  for               person looking at gold to say whether duty has               been  paid thereon or not or ’whether  it  has               been  smuggled. It is precisely the difficulty               experienced    by   the the  customs  officers               with  the  whole machinery  of  Government  at               their  disposal in proving that the  gold  has               been  smuggled which is itself made  a  reason               for throwing the burden upon the citizens                                    811               to   establish   that   the   gold   is    not               smuggled......  Gold an such has  no  earmark.               It  is  impossible  to identify  gold  in  the               possession of a person with the gold mentioned               in  the  Bill  of Entry  of  any  importer  of               gold.........  Gold has been imported  through               centuries   into  this  country  and   it   is               virtually impossible for a person to establish               that  any particular quantity of gold  in  his               possession  was  the  gold  imported  in,  the               country at a particular time without resort to               smuggling.  The proof required presupposes the               existence of gold in an identifiable form from               the  time  of its import to the  time  of  its               ultimate   sale  to  the  person  from   whose               possession the same has been seized." Mr. Palkivala, learned Counsel for the respondent, explained to us the special features attaching to gold as a  commodity and  as  a store of value, and of the difficulties,  if  not impossibility, of identifying one piece of gold from another in  the  absence  of a requirement of  marking,  and  basing himself  on this :factual position submitted six grounds  in support of his contention that the restriction imposed by s. 178  A was unreasonable and we shall deal with these  points in the same order : (1)  Section  178A, no doubt, on its face purports to  be  a rule of evidence, but in reality is not so.  The purpose  of the  enquiry  by  the adjudicating officer is  to  find  out whether the gold seized from a person had been smuggled, and in  such  an enquiry the fact to be proved, viz.,  that  the gold had been smuggled is statutorily established not as  an inference  from.  basic  facts,  which  would  indicate  the smuggled  character  of the Gold seized, but from  the  mere belief  of  the  seizing officer that the  gold  seized  was smuggled, (2)  It  was said on the other side that the requirement  in s.  178 A that the officer seizing the gold  must  entertain "’a  reasonable belief" that the gold was smuggled  provided an adequate safeguard 812 to  the person affected which would render  the  restriction imposed reasonable within cls. (5) & (6)     of   Art.   19.

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This argument is untenable.  If the reasonable belief was  a matter  for  the subjective satisfaction ,  of  the  seizing officer,  as  seems to be implied from the  observations  of this  Court  in Babulal Amthalal Mehta v. The  Collector  of Customs,  Calcutta (1), it provides no safeguard at all  for the  person from whom the gold is seized.  Even if,  on  the other hand, the test is objective, in the sense that at  the stage  of  the adjudication under s. 182  the  grounds  upon which the belief was entertained could be the subject matter of  enquiry  it furnishes no safeguard either,  because  the "reasonableness"  of  the  belief  regarding  the   smuggled character  of  the  gold  would have to  be  judged  by  the adjudicating officer with reference to the information which the  seizing officer had at the moment of seizure, and  that information  must necessarily have been obtained behind  the back  of the person from whom the gold had been  seized  and before  the officer commenced any enquiry to  ascertain  the truth or otherwise of the information conveyed to him, (3)  There  is no reasonable or rational connection  between the fact to be proved, viz.’ that the gold was smuggled  and the  fact  from which such an inference is permitted  to  be drawn by the impugned provision, viz., the reasonable belief of  the  officer  effecting the seizure that  the  gold  was smuggled.  There is therefore no adequate basis on which the provision could be sustained as a rule of evidence, (4)  The operation of s. 178A is not restricted in point  of time  or to persons actually suspected to be connected  with the  import  but  extends also to persons who  are  able  to establish  bona fide acquisition of gold but who are  unable to  prove how the person from whom they  acquired,  obtained the gold they sold, (1)  [1957] S.C.R. 1110.                             813 (5)  A  presumption  of  this sort might  be  reasonable  in respect of goods which are dangerous or noxious per se, like firearms  or  poison,  since  ordinarily  people  might   be expected  to be. on their guard before obtaining such  goods to   ensure  that  their  acquisition  was  lawful  and   in accordance with I the- formalities, if any prescribed by the relevant statute or rule.  Gold, however, is not such a type of  commodity.  It is, an inncouous article of commerce  and is under the law a subject of unrestricted trade within  the country.   The  burden of proof of the sort  imposed  by  a. 178A, in respect of such a commodity, is therefore unreason- able, (6)  The burden of proof cast by s. 178A is, in most  cases, impossible  of being discharged be cause: (a) it extends  to facts  which would not be in the possession of a  bona  fide purchaser and would comprise matters which he never knew, or could  never  know, (b) large quantities of gold  have  been imported  into  India before restrictions  were  imposed  in 1939.   The net imports upto 1939 are estimated at over  353 crores of rupees which at the present price of gold would be over  2,000 crores of rupees.  As gold which is sold in  the market  is not identifiable, it would be impossible for  any purchaser  to say whether the gold that he was  ’buying  was that  which  had been imported lawfully before 1939  or  had come into the country, after. 1939 after payment of duty  or had  been.  smuggled into the country in  violation  of  the Foreign   Exchange   Control  Regulations.    The   section, therefore,  practically prohibits, all holding of  gold,  or trade  in gold and subjects the-holding of and the trade  in gold  to  the penalty of confiscation, indigenous  gold  has been  produced in mines in India both before and after  1939 and  there  is nothing to differentiate this  from  imported

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gold,  (d) it is a commodity which frequently changes  hands because of regular trade and widespread 814 use  as ornaments etc., and finally (e) the  indentification of  gold  is  impossible because of  frequent  meltings  and fusion  of separate pieces and the absence of any system  of compulsory marking. We shall deal with each of these points and examine them  in the light of the submissions made by the learned  Solicitor- General  in answer.  Grounds 1 and 3 which we have  set  out earlier  may  be  taken up together since  they  are  merely different  modes  of expressing the  same  contention.   The point raised is that there is no rational connection between the  fact from which the statute raises the presumption  and the  fact  which has to be proved in order  that  the  goods might be the subject of confiscation.  The argument is  that the  fact  from  which  the  presumption  is  drawn  is  the reasonable belief of the officer effecting the seizure  that the article seized is smuggled; while the fact which by  the terms  of the statute it is held to prove is that  the  gold seized  is  smuggled;  with the result  that  the  practical effect  of  the  provision  is that  there  is  a  statutory direction  to the adjudicating officer to treat the gold  as smuggled so as to entitle him to confiscate the same.  It is only if learned Counsel for the respondent is right that the effect of the section is as above that the several decisions of  the American Courts to which he invited  our  attention, could   have  any  application.   Learned   Counsel   relied particularly on the decisions in Bailey v. State of  Alabama (1), and Manley v. State of Georgia (2).  The first of these was  concerned  with the validity of a law of the  State  of Alabama by which refusal without just cause, to perform  the labour  agreed  to  be performed in a  written  contract  of employment under which the employee had obtained money which he did not refund was made prima facie evidence of an intent to commit a fraud.  The Supreme Court held the law  invalid. Two  grounds were urged in support of the argument that  the legislation was unconstitutional.  The first was that (1)  (1911) 219 U. S. 219 : 55 L. Ed. 191. (2)  (1929) 279 U. S. 173 L. Ed; 5 - 5.                             815 it   was  in  violation  of  the  13th   amendment   against "involuntary servitude except as punishment for crime",  the other that the law was in violation of due ’Process’  clause contained  in  the 14th amendment The Supreme  Court  upheld both these contentions, but what is relevant to the  present context  and on which learned Counsel relied was the  reason assigned  for holding that the rule of evidence  enacted  by the  impugned  statute  violated  the  requirement  of   due ’process’.   Reliance  was placed for the State  before  the Supreme  Court on the fact that the presumption  raised  was not conclusive but was open to rebuttal by the accused,  but this  was held not to be of avail, because according to  the rule  of  evidence enforced by the Courts  of  Alabama,  the accused,   for  the  purpose  of  rebutting  the   statutory presumption,   was  not  allowed  to  testify  as   to   his uncommunicated  motives,  purposes or  intentions,  so  that virtually  it amounted to a conclusive  presumption  against the accused.  The statute whose validity was attacked in the second American decision referred to was one declaring  that every  insolvency of a bank shall be deemed  fraudulent  and subjected the directors to imprisonment unless they repelled the presumption of fraud by showing that the affairs of  the bank had been fairly and legally administered.  Head Note  1 to this case sums up the American law on the subject of  the

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constitutional validity with reference to the due  ’process’ clause, of laws of evidence creating presumptions.  It runs:               "1. State legislation that proof of one  fact,               or  group  of facts,  shall  constitute  prima               facie evidence of the main or ultimate fact in               issue,  does  not constitute a denial  of  due               process   of  law  if  there  is  a   rational               connection  between what is proof and what  is               to be inferred, and the presumption is not un-               reasonable, and is not made conclusive of  the               rights  of  the  person  against  whom  it  is               raised." 116 In regard to the American decisions of which only a few were cited,  including  those  just now get  out,  the  principle underlying them is to be found summarized in  Rottschaefer’s Constitutional Law at p. 835, where the learned author says:               "The  power of a legislature to prescribe  the               rules  of evidence is universally  recognised,               but  it is equally well established  that  due               process  limits  it in this  matter.   It  may               establish  rebuttable  presumptions  only   if               there is a rational connection between what is               proved  and what is permitted to  be  inferred               therefrom." It  would  be  seen  that  the  decisions  proceed  on   the application  of  the ’due process" clause  of  the  American Constitution.   Though  the tests of  ,reasonableness’  laid down  by  cls.  (2) to (6) of Art. 19 might  in  great  part coincide with that for judging of ’due process’, it must not be assumed that these are identical, for it has to be  borne in  mind that the Constitution framers deliberately  avoided in this context the use of the expression due process’  with its comprehensiveness, flexibility and attendant  vagueness, in  favour of a somewhat more definite  word  "’reasonable", and  caution  has,  therefore to  be  exercised  before  the literal application of American decisions.  In making  these observations we are. merely repeating a warning found in the judgment  of  this Court in A. S. Krishna v.  The  State  of Madras  (1),  where  Venkatarama Ayyar,  J.,  speaking  with reference to the point now under discussion  after   quoting the passage already extracted from  Rottschaefer’s  treatise stated:               "The law would thus appear to be based on  the               due  process  clause,  and  it  is   extremely               doubtful whether it can have application under               our Constitution." With this caution we shall proceed to examine the submission of learned Counsel regarding the (1)  [1957] S.C.R. 399, 412.                             817 absence  of any rational connection between the fact  to  be proved and the fact on which the presumption is raised.   An analysis of the arguments of the learned Counsel shows  that the  real legal objection to the provision lay in the  sixth point  urged by him, viz., the impossibility of  discharging the  burden of proof cast by s. 178A, which  thus  virtually results  in  a confiscation of property without  a  judicial adjudication or condemnation.  Pausing here we might mention that  two matters might be urged as flowing from or  as  the necessary result of the impugned provision: (1) that even  a bona  fide possessor of the goods might be deprived  of  his property notwithstanding that there was no basis even for  a suspicion  that he was a party to the smuggling or  had  any knowledge  that  the goods in his possession  were  smuggled

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goods;  and  (2) that the burden cast on  the  possessor  to prove  the negative, namely, that the gold was not  smuggled cast  an  impossible burden upon the person  from  whom  the goods  are seized as it virtually amounts to a  confiscation by  the  law without any reasonable proof  before  a  quasi- judicial  authority  that the gold was  smuggled.   To  this last, the sixth point, we shall advert in its proper  place, but what we are concerned to point out at this stage is that apart from the point about the impossibility of  discharging the onus of proof cast by the section, there is little basis for  the  argument  that  there  is  lack  of  any  rational connection between the facts giving rise to the  presumption and the fact presumed, and to this we shall now proceed. This  question about the lack of rational connection may  be considered  from  two points of view.  First  Mr.  Palkivala does not impugn the constitutional validity of s. 106 of the Indian  Evidence Act or the legislative application  of  the principle  underlying  it  to any concrete  case.   It  need hardly be pointed out that in every case without  exception, the  possessor  of  the  gold  would  be  the  person   beat acquainted with the manner of 818 his  acquisition  and  the  circumstances  attendant  on  or connected with that acquisition.  It was part of the learned Counsel’s  submission that he could not successfully  impugn the validity of a provision on the terms of s. 259 of the U. K. Customs Consolidation Act.  Recalling the decision in  R. v.  Fitzpatrick (1), already referred to, we  might  mention that the prosecution there was for a violation of s. 186  of the U. K. Customs Consolidation Act, 1876, which, so far  as material,  was  in  substantially  the  same  terms  as  the relevant portion of s. 167(8) of the Sea Customs Act,  1878, the  essential ingredient of the offence being indicated  by the words "person concerned in dealing with goods the import of  which  is prohibited or which are liable  to  duty  with intent  to defraud His Majesty", and it was a  violation  of this  section  that Fitzpatrick was found guilty of  by  the application of the rule as to onus of proof prescribed by s. 259  extracted earlier.  If in a prosecution for dealing  in smuggled goods the onus could with constitutional  propriety be  cast upon the accused to prove that the goods  were  not smuggled,  it is difficult to see any reasonable  basis  for the  contention  that where the offence  charged  against  a person is not dealing in but possession of ,smuggled  goods, there is a constitutional bar on the burden being so laid. Secondly, is learned Counsel correct in his ,submission that under  a.  178A the onus is cast upon the possessor  of  the goods seized by reason only of the reasonable belief of  the seizing officer that the goods seized by him are smuggled  ? It  is  to be noted that the seizure by the officer  in  the belief  that  the  goods are smuggled  does  not  by  itself operate  to effect the confiscation or deprive the owner  of his  property in the goods.  This result,  however,  follows only on an order of an adjudicating officer who investigates into  the complaint regarding the defendant’s possession  of the smuggled goods.  As; we shall have occasion to point out (1)  [1948] 1 All.  E, R. 769, 772. 819 later the entire evidence in the, possession of the  seizing officer   would  be  and  has  to  be  before  the   officer adjudicating  the  confiscation  under s.  182  of  the  Sea Customs  Act.   No  doubt, on the language of  s.  178A  the presumption of the goods being smuggled arises only when the seizure  is  made by an officer  entertaining  a  reasonable belief  that the goods are smuggled, and in that  sense  the

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reasonable belief of the seizing officer is a  pre-requisite for  the statutory onus to arise.  It is also true  that  at the  stage  of the adjudication the  reasonableness  of  the belief  of the officer effecting the seizure that the  goods are smuggled would be the subject-matter of investigation by the adjudicating officer.  Nevertheless it is manifest  that at  the  stage of the adjudication (when only  the  rule  of evidence laid down by the section comes into operation)  the very  facts  which  led the seizing officer  to  effect  the seizure’   as  distinguished  from  their  significance   as affording  a  reasonable belief for the seizing  officer  to hold that the goods are smuggled are before the adjudicating officer.  These facts which justified the seizing officer to reasonably  believe  that  the  goods  were  smuggled  would certainly impart a rational connection between the facts  on which  the presumption is raised and the fact to be  proved, so that whatever other constitutional infirmity might attach to  the impugned provision, the lack of rational  connection is  not  one of them.  It appears to us therefore  that  the argument  regarding the lack of rational connection  has  no substance.  It is derived wholly on a literal reading of  s. 178 A and would not be available if the provisions were read in the manner we have just now indicated. The second of the grounds urged by learned Counsel was  that the requirement of s. 17 8 A that the belief of the  officer seizing the goods should rest of reasonable grounds provided no safeguard to the citizen, as the seizing-officer who acts administratively   entertains   the   belief   on   unproved information  gathered from sources which most often are  not and                             820 in  practice  will not be possible to be  disclosed  to  the party   affected.   In  connection  with  this   point   two alternative submissions were made : (1) that the  reasonable belief of the officer effecting the seizure was one entirely for  his subjective satisfaction and that this rendered  the protection   wholly   illusory   and   therefore    patently unreasonable.  This was advanced on the basis of the passage in  the judgment of this Court in Babulal Amthalal Mehta  v. The  Collector of Customs, Calcutta (1),  already  extracted reading :               "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." The learned Solicitor-General, on the other hand pointed out that this was not really part of the decision, but was  just an  observation  and  that he would  not  support  it.   The learned Solicitor-General submitted that a seizure to  which s.  178  A  was  applicable  was  merely  a  preliminary  to proceedings before a quasi-judicial authority under s.  182. When  the  matter  comes before the  latter  authority,  and anterior  to that authority invoking the presumption  raised by S. 178 A, it would, on the terms of the section, have  to be  satisfied that the seizure was made "in  the  reasonable belief  that  the  goods seized were  goods  that  had  been smuggled".   At that stage the enquiry is not and cannot  be confined  as  to  whether  the  seizing  officer  bona  fide entertained  the belief, but must necessarily extend  to  an examination  of  the  grounds upon  which  that  belief  was entertained with a view to ascertain whether the belief  was reasonable.   It might be that the entirety of the  evidence which  conceivably in several cases consist  of  information communicated  by informers might not be made  available,  to the  person  affected, but  still  the  adjudicating-officer

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would have to satisfy himself that the requirements (1)  [1577] S. C. R. 1110. 821 of  s.  178  A had been complied with  before  invoking  the presumption laid down by that section. Mr. Palkivala’s alternative submission was that even if test of ’reasonable belief’ was not subjective but was objective, in  that the point as to whether the belief  was  reasonable was open to examination by the adjudicating-officer under s. 182, still, this provided no sufficient safeguard,  because, if ",information not tested by cross examination" could from the  basis  of  "reasonable belief", by  applying  the  same tests, the adjudicating officer would and must in most cases reach the same conclusion. It  is,  no doubt, true that in some cases  there  might  be pieces of information on the basis of which the seizure  was effected  which might not be capable of being  disclosed  to the  affected party because it might consist of  information supplied by customs informers, but if that information would have  to stand the test of scrutiny as to credibility by  an independent  officer  dealing with it  in  a  quasi-judicial capacity, it cannot be said that the protection is illusory. It  has  also  to be added that at the stage  of  appeal  or revision   from   the  orders  of  the   officer   adjudging confiscation  under  s.  182  of  the  Act  each  successive appellate or Revisional authority has also to address itself to this requirement. We  shall now pass on to the fourth of the points  urged  by learned Counsel for the petitioner that the onus of proof is unreasonable, in that it was not restricted in point of time or  to  persons  connected  with  the  import.   The   point suggested  may be expanded in these terms : What  the  party affected  has to prove is not that his acquisition has  been bona  fide,  which of course be might be in  a  position  to prove  and  might properly be required to  prove,  but  that somebody  else  over  whom he has no control  and  of  whose actions he would, in most cases, be completely ignorant  has similarly bona fide  822 acquired the gold without violating the law and so on  until one  reached the stage of the origin of the   gold which  is the  subject  of  seizure and  of  adjudication  before  the Customs authority.  It would be seen that this is really the argument upon which the sixth of the points urged by learned Counsel rests and therefore it will be convenient to examine the  soundness of the contention and the answers which  have been made on the other side after dealing with point No. 5. The  fifth  point relates to the fact that  the  presumption raised  by  the  section  is  about  the  possession  of  an innocuous  article  of property which under the law  is  the subject  of  unrestricted  trade  in  the  open  market   as distinguished from articles which are inherently  dangerous- such  as  firearms or Poisonous drugs, in  regard  to  which possession  and dealing are legitimately subject  to  severe restrictions.   Learned Counsel is, no doubt, right  in  his submission that gold as a commodity is an innocuous  article of  commerce, that articles made of gold have been  used  as part  of jewellery by the middle and upper classes from  the beginning  of time, that it, has served as a store of  value from ancient times and that the very large number of  people in  this country are in possession of gold for the  purposes just now mentioned.  But that however is not any  conclusive consideration  in support of the invalidity of a  law  which seeks  to  throw the burden of  establishing  possession  as legal  under  the  law, upon the possessor.   It  cannot  be

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seriously  disputed that in most of the cases the  possessor of  the gold would certainly be in a position  to  establish the  mode  of his acquisition (subject to the  last  of  the points  about  the  burden  of  proof  being  impossible  to discharge),  which would more often than not take it out  of the  category of smuggled gold.  It is only in  those  cases where  reasonable  suspicion  exists that the  gold  in  the possession of a person has come into the country by  illicit means,  that  there  is power in an officer  to  affect  the seizure and in most                             823 of  the cases the innocent possessor would be in a  position to  discharge  the onus.  It is therefore in cases  where  a person is unable to prove how he got into possession of  the gold  found with him or where his explanations are found  to be false or unacceptable that in the large majority of cases the  section would normally be invoked.  Besides  these,  it would  be  applied also in cases where a person is  able  to prove  that  his  acquisition was bona  fide  but  that  the persons from whom he acquired or one higher up in the series of  prior  owners is unable to  explain  satisfactorily  his possession,  and  it is only in these  marginal  or  extreme cases  that  the  onus  created  by  the  section  might  be contended to be harsh and unreasonable.  Learned Counsel is, therefore, not right in suggesting that s. 178A operated, as it were, by itself to confiscate the gold and gold ornaments in  the possession of the entire population of the  country, each  individual being compelled before the  restoration  of the  gold to him to strictly prove either that the gold  was of indigenous origin or had been imported prior to 1939,  or if  imported  subsequently bad either been permitted  to  be imported  or had paid duty, if such duty was  leviable.   We consider  that  this is not the- effect of the  section  and that  it does not, on any reasonable  construction,  justify this picture of its operation. We  shall  now proceed to consider the last  of  the  points raised  by learned Council in conjunction with point  No.  4 which  we  had reserved for being examined  along  with  it. This point learned Counsel expanded in the following  terms. The  burden  of proof cast by the section is  or  is  almost impossible  of  discharge, because (1) it extends  to  facts which would not be in the possession of bona fide  purchaser at  all, facts which he never knew and which be could  never reasonably  ascertain  ; (2) large quantities of  gold  have been  imported into this country before the introduction  of restrictions   on  their  importation  by  virtue   of   the legislation 824 brought  into  force from 1939.  In  this  context,  learned Counsel relied on the several      matters  set out  in  the passage from the judgment     of K. T. Desai, J.,  extracted earlier and laid particular emphasis on the fact : (a)  that gold was held in myriad forms and for diverse purposes by  a sizeable portion of the population of the country, (b)  that gold in its several forms was incapable of being  identified as  indigenous or imported, or if imported had paid duty  or not.   In view of these circumstances he urged that to  call upon  any  person  to prove any thing more,  than  that  his acquisition of the gold was bona fide and without  violation of  the law would be to cast an impossible burden  upon  the possessor.   Learned Counsel further urged that the  precise reason  for  which  the  burden had  been  thrown  upon  the possessor  was  because  of the inability of  the  State  to establish before the quasi-judicial authorities acting under s.  182 reasonable proof that the gold seized was  smuggled.

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He  therefore  submitted  that if Government  with  all  its administrative  machinery  operating in several  fields  was unable  to lead evidence which could satisfy the,  Collector of  Customs that the gold seized had an illicit origin,  how could  it be reasonable to expect the individual  possessor, who knew nothing beyond how he himself came by the gold,  to establish   the  negative,  viz.,  that  the  gold  in   his possession had not been smuggled but was lawfully within the country. Before  considering  these submissions it  is  necessary  to mention  one  point  suggested  in  answer  by  the  learned Solicitor-General which has apparently found favour with the learned  Judges  of the Division Bench of  the  Bombay  High Court  in  Pukhraj Champalal Jain v. D.  R.  Kohli(1).   The point  was  this: The Central Board of  Revenue  lad  issued certain administrative instructions as regards the manner in which  the Customs Officers should regulate their  procedure before  the goods are adjudged to be confiscated  under  the provisions of the Sea Customs Act.  These are sell-, out  at p. 1240 (1)  (1959) 61 Bom.  L.R. 1230.                             825 of  the  Report in 61 Bombay Law Reporter and  need  not  be repeated here.  The learned Solicitor-General’s argument was that as the section was being administered subject to  these safeguards,  the provision must be held to be  a  reasonable restriction within  (6) of Art. 19 of the Constitution.   We are  clearly  of  the opinion that the  argument  about  the relevance of this matter is incorrect and must be  rejected. This Court has held in numerous rulings, to which it is  un- necessary to refer, that the possibility of the abuse of the powers  under the provisions contained in any statute is  no ground  for  declaring the provision to be  unreasonable  or void.  Commenting on a passage in the judgement of the Court of Appeal of Northern Ireland which stated:               "If such powers are capable of being exercised               reasonably  it is impossible to say that  they               may not also be exercised unreasonably" and  treating  this  as a ground  for  holding  the  statute invalid Viscount Simonds observed in Belfast Corporation  v. O. D. Commission(1):               "It  appears  to me that the short  answer  to               this contention (and I hope its shortness will               not  be  regarded as disrespect) is  that  the               validity of a measure is not to be  determined               by     its    application    to     particular               cases............  If it is not  so  exercised               (i.e., if the powers are abused) it is open to               challenge  and  there is no need  for  express               provision for its challenge in the statute". The  possibility of abuse of a statute otherwise valid  does not  impart to it any element of invalidity.   The  converse must also follow that a statute which is otherwise,  invalid as   being  unreasonable  cannot  be  saved  by  its   being administered  in  a reasonable manner.   The  constitutional validity  of the statute would have to be determined on  the basis of its (1)  [1960] A.C. 490, 520-521 826 provisions  and on the ambit of its operation as  reasonably construed.  If so judged it passes the       test         of reasonableness, possibility of the powers    conferred being improperly used is no ground for   pronouncing    the    law itself invalid and similarly if    the     law      properly interpreted and tested in the light of the requirements  set

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out  in Part III of the Constitution does not pass the  test it   cannot  be  pronounced  valid  merely  because  it   is administered  in a manner which might not conflict with  the constitutional  requirements.  In saying this we are not  to be understood as laying down that a law which might  operate harshly  but  still  be  constitutionally  valid  should  be operated  always with harshness or that  reasonableness  and justness  ought  not to guide the actual  administration  of such laws. We  shall  now  proceed to examine what  in  effect  is  the central point in the argument of the learned Counsel for the respondent which might be split up into two heads: (1) Under s. 178-A the burden of proof is cast upon a person from whom the  goods have been seized which is impossible for  him  to discharge,  with  the consequence that though  in  form  the impugned  section purports to be a rule of evidence,  it  is virtually a law which per se effects confiscation in  (,very ease  to  which  it  is applicable. (2)  Is  such  a  law  a reasonable  restriction on the right to hold property or  on the right to carry on business within cls. (5) & (6) of Art. 19, but they may be considered together. Section  178-A operates to cast the burden of proof  on  the person  from whose possession goods specified in its  sub-s. (2) are seized to establish that the goods are not smuggled. It  must  be  apparent that this will  include,  in  several cases,  persons  who are concerned in and are  charged  with being concerned in the act of illicit importation.  In their case, as we have already pointed out, learned Counsel admits that the onus is properly shifted and that such a  provision would  be reasonable and so constitutionally  valid,  though undoubtedly it might be possible for the State to prove                             827 its  case even without the aid of the presumption raised  by s.  178A.  Again there might be some cases where  goods  are seized from a person who is unable to account satisfactorily for his ownership or possession.  In such cases also we  did not understand learned counsel for the petitioner to suggest that   the  shifting  of  the  burden  of  proof  would   be unconstitutional, for surely the principle underlying s. 106 of the Evidence Act;which, it is conceded, enunciates a just and reasonable principle would serve to sustain the validity of  the impugned provision.  The two classes of cases  which we have just set out would in themselves constitute most  of the  cases  in which suspicion or information  of  the  type which  leads  to seizure and the ensuing  proceedings  would occur.  Section 178A however does not exhaust those classes. and that is the ground of complaint by the learned  Counsel, and  it is precisely on this basis or for this  reason  that learned  Counsel  contends  that  the  entire  provision  is constitutionally invalid.  This analysis would show that the provisions of the section are constitutionally valid in  the sense of being reasonable restrictions on the right to  hold property  or  to  carry on trade or business  in  the  large percentage  of cases to which the section would apply,  and. it is only in the marginal cases already described that,  it can,   with  any  justification,  be  contended   that   the restriction  is  unreasonable.   From  this  position,   the question that arises is whether because of the inclusion  of this  type of case the impugned provision should be held  to be  constitutionally  invalid.   This has  to  be  taken  in conjunction  with  what  is  obviously  correct,  that   any severance of the marginal cases and their exclusion from the operation   of  the  provision  would  greatly  reduce   its effectiveness  and provide innumerable loop-holes  for  easy evasion.    It  is  in  this  context  that  the  test   for

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ascertaining   the   "reasonableness"  postulated   of   the restrictions  in cls. (2) to (6) of Art. 19  assumes  great. relevance   and  crucial  importance.   There  are   several decisions of this Court in which the relevant 828 criteria  have been laid down but we consider it  sufficient to  refer to a passage in the judgment of Patanjali  Sastri, C. J., in State of Madras v. V.    G.  Row(,).  The  learned Chief Justice said at p. 607 of    the Report:               "It  is important in this context, to bear  in               mind that the test of reasonableness, wherever               prescribed,   should   be  applied   to   each               individual  statute impugned, and no  abstract               standard, or general pattern of reasonableness               can  be laid down as applicable to all  cases.               The  nature of the right alleged to have  been               infringed,  the  underlying  purpose  of   the               restrictions imposed., the extent and  urgency               of the evil sought to be remedied thereby, the               disproportion    of   the   imposition,    the               prevailing  conditions at ’,-he  time,  should               all enter into the judicial verdict." It  would  be apparent that this is in line with  the  great principle underlying the structure of the rights  guaranteed by  Art.  19, viz., a balancing of the need  for  individual liberty  in  the  matter inter alia of  the  right  to  hold property or of the right to trade, with the need for  social control  in  order  that  the  freedoms  guaranteed  to  the individual subserve the larger needs-moral, social, economic and political of the community and thus ensure orderly prog- ress  towards the goal indicated by the preamble.  It  would follow  that the reasonableness of the restraint would  have to  be judged by the magnitude of the evil which it  is  the purpose of the restraint to curb or eliminate. The submission of the learned Solicitor-General was that the reasonableness of the impugned provision had to be judged in the  light of the widespread smuggling in  commodities  like gold which if not checked was calculated to destroy national economy and hamper economic stability and progress, and that no (1)  [1952] S.C. R. 597, 607.                             829 reasonable  alternative to the provision would  achieve  the desired  end.  In this connection he drew our  attention  to the  Report  of the Taxation  Enquiry  Commission,  1953-54, which  pointed  out  the  factual  position  regarding   the existence  of  widespread smuggling in  certain  commodities including  inter  alia gold.  They stated at p. 320  of  the Report:               "11.  Smuggling  now constitutes  not  only  a               loophole for escaping duties but also a threat               to the effective fulfilment of the  objectives               of  foreign trade control.  The  existence  of               foreign pockets in the country accentuates the               danger.  The extent of the leakage of  revenue               that  takes place through this process  cannot               be estimated even roughly, but, we understand,               it  is  not unlikely that it  is  substantial.                             Apart   from   its   deleterious   effect   on               legitimate  trade, it also entails the  outlay               of  an appreciable amount of public  funds  on               patrol  vessels  along  the  sea  coasts   and               permanent  works  along the land  border,  and               watch and ward staff on a generous scale.   It               is,  there. fore, necessary, in  our  opinion,

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             that   stringent  measures,  both  legal   and               administrative  should be adopted with a  view               to minimising the scope of this evil." The deleterious effects of smuggling, as pointed out in  the extract  from the Report, are real and it is not in  dispute that the prevention and eradication of Smuggling is a proper and legally attainable,objective and that this is sought  to be  achieved  by  the relevant law.  If  therefore  for  the purpose  of  achieving the desired objective and  to  ensure that  the intentions of Parliament shall not be  defeated  a law  is enacted which operates somewhat harshly on  a  small section  of  the  public,  taken  in  conjunction  with  the position  that  without  a law in that form  and  with  that amplitude   smuggling  might  not  be  possible   of   being effectively  checked,  the question arises whether  the  law could be held to be violative of the 830 freedom  guaranteed  by Art. 19(1)(f) & (g) as  imposing  an unreasonable  restrain.   That the restrictions are  in  the "interest of the general public" is beyond controversy.  But is  the  social good to be achieved by  the  legislation  so disproportionately  small that on balance it could  be  said that  it has proceeded beyond the limits of  reasonableness? We  would  answer this in the negative.  We would  only  add that there is authority for the position that "acts innocent in themselves may be prohibited and the restrictions in that regard  would be reasonable, if the same were  necessary  to secure  the efficient enforcement of valid provisions.   The inclusion  of  a  reasonable  margin  to  ensure   effective enforcement  will not stamp a law otherwise valid as  within legislative   competence  with  the  character   of   uncon- stitutionality  as being unreasonable" [vide Manohar Lal  v. State of Punjab (1) and Ram Dhan Dass v. State of Punjab (2) Having  given the matter our best attention we have  arrived at  the  conclusion that the impugned  legislation  has  not overstepped the limits set by the Constitution and in saying this  we have adopted the test laid down in State of  Madras v. V. G. ROW (3) whose terms we have quoted at the start  of this discussion. Proceeding   therefore  on  the  basis  that  the   impugned provision  was  constitutionally  valid  we  have  still  to consider  two further points on the basis of  which  learned Judges  of the High Court upheld the case of the  respondent even  on  the assumption that s. 178A  was  constitutionally valid.  The first of these grounds was that the impugned  s. 178A which had been introduced by the Act of 1955 (Act 21 of 1955) is not attracted to the prohibitions enacted by s. 23A of  the Foreign Exchange Regulation Act.  The  reasoning  on ’which  this conclusion was reached was that s.  23A,  whose terms  we  have  set out, when enacted  in  1952  in  effect incorporated  into  the provisions of the  Foreign  Exchange Regulation  Act  all  the relevant  provisions  of  the  Sea Customs Act, 1878, as that (1) [1961] 2 S. C. R. 343.  (2) [1962] 1 S. C. R. 852. (3) [1952] S. C. R. 597, 607. 831 enactment stood in 1952, with the result that any subsequent amendments  to  the Sea Customs Act did not  and  could  not affect, modify or enlarge the scope of the incorporated  Sea Customs  Act which had become part of the  Foreign  Exchange Regulation  Act.  In support of this conclusion the  learned Judges of the High Court have relied largely on the decision of the Privy Council in The Secretary of State for India  in Council  v.  Hindustan Co-operative Insurance  Society  Ltd. (1).   We consider that the legislation regarding which  the

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Privy  Council rendered the decision bears  no  resemblance, whatever  to the matter now on hand and that the  ruling  in The Secretary of State for India in Council v. Hindustan Co- operative  Insurance  Society  Ltd.  (1),  cannot  therefore furnish  any  guidances  or  authority  applicable  to   the interpretation of s. 23A of the Foreign Exchange  Regulation Act.   To consider that the decision of the  Privy  Council; has any relevance to the construction of the legal effect of the  terms of s. 23A of the Foreign Exchange Regulation  Act is to ignore the distinction between a mere reference to  or a  citation of one statute in another and  an  incorporation which  in effect means the bodily lifting of the  provisions of  one enactment and making it part of another so  much  so that  the repeal of the former leaves the latter wholly  un- touched.  In the case, however, of a reference or a citation of  one  enactment  by another  without  incorporation,  the effect of a repeal of the one "referred to" is that set  out in s. 8(1) of the General Clauses Act:               "8. (1) Where this Act, or any Central Act  or               Regulation  made:  after the  commencement  of               this  Act,  repeals and  re-enacts.,  with  or               without  modification,  any  provision  of   a               former enactment, then references in any other               enactment   or  in  any  instrument   to   the               provision   so   repealed  shall,   unless   a               different               (1)   [1931] L.R. 58 I.A. 259.               832               intention appears : be construed as references               to the provision so re-enacted."               On the other hand, the effect of incorporation               is  as  stated by Brett, L. J., in  Clarke  v.               Bradlaugh(1):               "Where   a   statute   is   incorporated,   by               reference, into a second statute the repeal of               the  first statute by a third does not  affect               the second". This  is  analogous  to,  though  not  identical  with   the principle  embodied  in  s. 6A of the  General  Clauses  Act enacted  to  define  the  effect  of  repeals  effected   by repealing and amending Acts which runs in these terms :               "6A.  Where any Central Act or Regulation made               after the commencement of this Act repeals any               enactment by which the text of any Central Act               or  Regulation  was  amended  by  the  express               omission,  insertion  or substitution  of  any               matter,  then,  unless a  different  intention               appears,  the  repeal  shall  not  affect  the               continuance of any such amendment made by  the               enactment so repealed and in operation at  the               time of such repeal." We  say  not  identical’  because  in  the  class  of  cases contemplated  by  s.  6A of the  General  Clauses  Act,  the function  of the incorporating legislation is almost  wholly to  effect the incorporation and when that is  accomplished, they  die  as  it were a natural  death  which  is  formally effected by their repeal.  In cases, however, dealt with  by Brett,  L. J., the legislation from which  provision,-.  are absorbed  continue to retain their efficacy  and  usefulness and their independent operation even after the incorporation is effected. We  consider that on the language of the provisions  in  the two  Acts-s.  19 of the Sea Customs Act and s.  23A  of  the Foreign  Exchange Regulation Act-there is no scope  for  any argument that there

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(1)  (1881) 8 Q. B. D. 63.                             833 has been any incorporation of the provisions of the  earlier statute in the later.  We shall repeat the terms of s. 19 of the Sea Customs Act which runs :               "19.  The Central Government may from time  to               time, by notification in the Official Gazette,               prohibit or restrict the bringing or taking by               sea   or  by  land  goods  of  any   specified               description  into or out of India  across  any               customs  frontier  as defined by  the  Central               Government." Section 8(1) of the Foreign Exchange Regulation Act  enables similar  notifications  by the Central Government  in  these terms:               "8.   (1)  The  Central  Government  may,   by               notification  in the Official  Gazette,  order               that  subject to such exemptions, if  any,  as               may  be  contained  in  the  notification,  no               person  shall,  except  with  the  general  or               special permission of the Reserve Bank and  on                             payment  of the fee, if any, prescribed  bring               or  send into India any gold or silver or  any               currency  notes or bank notes or coin  whether               Indian or foreign.               Explanation.-The bringing or sending into  any               port or place in India of any such article  as               aforesaid  intended to be taken out  of  India               without   being  removed  from  the  ship   or               conveyance in which it is being carried  shall               nonetheless be deemed to be a bringing, or  as               the  case may be, sending, into India of  that               article for the purposes of this section.  "               In  this  situation  s.  23A  of  the  Foreign               Exchange Regulation Act enacts:               "............   the  restrictions  imposed  by               sub-section (1)  of section 8  shall be deemed               to have been imposed under section               19               834               of  the Sea Customs Act,, 1878, ’and  all  the               provisions  of  that  Act  shall  have  effect               accordingly............. The effect, therefore, of s. 23A is to treat the text of the notification  by the Central Government under s. 8(1) as  if it  had been issued under s’ 19 of the Sea Customs Act  with the title and the recital of the source of power appropriate to  it  by  the creation of a legal fiction.   It  would  be obvious  that  in  the  context and  on  the  language  here employed,  if  s. 19 of the Sea Customs  Act  were  repealed there  would no longer be any legal foundation for  invoking the   penal  provisions  of  the  Sea  Customs  Act   to   a contravention of a notification under s. 8(1) of the Foreign Exchange Regulation Act. This  conclusion is reinforced by a comparison of the  usual and  normal  or recognized formulae  generally  employed  to effect incorporation, such that changes in or even repeal of the  incorporated statute is not intended per se  to  affect the  operation  of  the incorporating  legislation.   It  is sufficient  to  pick out a few of  the  well-known  formulae employed  which would indicate that normally  the  draftsman does not leave his intentions in doubt.  For instance, in s. 20 of 53 and 54 Vict.  Ch. 70-Housing of the Working Classes Act, 1890, the words used were,               "shall,, for that purpose, be deemed to  form.

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             part of this Act in the same manner as if they               were enacted in the body thereof,".               In  54  and  55 Vict.  Ch. 19,  s.  1(3),  the               language employed was               "The provisions of s. 134 of the said Act (set               out  in the schedule) shall apply as  if  they               were herein reenacted." To  take more modern instancess 10 and 11 George VI Ch.  51, (the Town and Country Planning Act, 1947), s. 44(1) enacts : 835               "Sections  19 to 30 of the Act of  1944  which               provide for the disposal,and appropriation  by               local Planning Authorities of land acquired or               appropriated  under Part I of that  Act,  ’for               the  carrying  out  by  such  authorities   of               development  of  such  land,  and  for   other               matters arising in relation to the acquisition               of  land in that part shall, except so far  as               repealed  by  this Act, be  incorporated  with               this   part  of  this  Act,  subject  to   the               amendments  specified in the second column  of               the following  Schedule of this Act and of the               following provision of this section". 6 & 7 Eliz. 2 Ch. 63 (the Park  Lane Improvement Act, 1958), s. 5 reads:               "The Land Clauses Act (other than the excepted               provision); so far as they are applicable  for               the   purposes  of  this  Act  and   are   Dot               inconsistent with the provisions thereof,  are               hereby incorporated with this Act." A  comparison of the formulae with the text of s. 23A  shows that the reference in it to s. 19 of the Sea Customs Act  is merely   for   rendering  notifications  under   the   named provisions  of  the  Foreign  Exchange  Regulations  Act  to operate as notifications under the Sea Customs Act, and that it  cannot  have the effect of  incorporating  the  relevant provisions of the earlier Act into the Act of 1947, so as to attract  the  rule  formulated by Brett, L.  J.,  in  Clarke v.Bradlaugh already quoted. A close examination of the decision of the Privy Council  in The Secretary of State for India in Council v. Hindustan Co- operative  Insurance  Society Ltd. (1) would show  that  the incorporation   effected   in  the   statute   there   under consideration-the  Calcutta  Improvement  Trust  Act,  1911- referred  to  by their Lordship as the "Local  Act"  was  in express terms and in the form illustrated by 54 & 55  Vict., Ch. 19, just now referred to.  The "Local Act" in (1)  (1931) L.R. 58 I.A. 259. 836 dealing  with  the  acquisition of  Land  for  the  purposes designated  by it, made provision for the acquisition  under the Land Acquisition Act, and the provisions of the Land Act Acquisition  were subjected to numerous modifications  which were set out in the Schedule, so that in effect the  "’Local Act"  was held to be the enactment of a Special Law for  the acquisition ;of land for the special purpose.  It was in the context of these and several other provisions which  pointed to  the absorption of certain of the provisions of the  Land Acquisition   Act   into   the  "Local   Act"   with   vital modifications that their Lordships stated:               "But  their  Lordships think  that  there  are               other  and perhaps more cogent  objections  to               this contention of the Secretary of State, and               their Lordships are not prepared to hold  that               the  sub-section  in question, which  was  not

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             enacted till 1921, can be regarded as incorpo-               rated  in  the Local Act of 1911. It  was  not               part  of  the Land Acquisition  Act  "hen  the               local  Act  was passed, nor  in  adopting  the               provisions  of  the Land  Acquisition  Act  is               there  anything  to suggest  that  the  Bengal               Legislature,  intended to bind  themselves  to               any  future additions which might be  made  to               that Act.  It is at least conceivable that new               provisions  might have been added to the  Land               Acquisition   Act   which  would   be   wholly               unsuitable to the local code.  Nor again, does               Act XIX of 1921 contain any provision that the               amendments enacted by it are to be treated  as               in  any,  way  retrospective,  or  are  to  be               regarded as affecting any other enactment than               the   Land  Acquisition  Act  itself.    Their               Lordships  regard  the  local  Act  as   doing               nothing   more  than   incorporating   certain               provisions  from  and existing  Act,  and  for               convenience of drafting doing so by  reference               to that Act, instead of setting out for itself               at length the provisions which it was  desired               to adopt." 837 It  was  for this, among other reasons,  that  the  Judicial Committee  held that rights of appeal created by  amendments effected  to  the  Land Acquisition Act  subsequent  to  the enactment  of  the  Local  Act were  not  attracted  to  the incorporated  provisions  in the "Local Act".   We  consider that  there is no analogy between the provisions held to  be incorporated  in  the Calcutta Improvement  Trust  Act  1911 dealt  with by the Privy Council and s. 23A of  the  Foreign Exchange  Regulation  Act  now under  discussion.   We  bold therefore  that when a notification issued under s. 8(1)  of the  Foreign  Exchange  Regulation Act  is  deemed  for  all purposes to be a notification issued under S. 19 of the  Sea Customs Act, the contravention of the notification  attracts to it each and every Provision of the Sea Customs Act  which is in force at the date of the notification. The  other ground upon which the learned Judges  upheld  the respondent’s  contention that the rule as to the  burden  of proof enunciated in s.178 A was not attracted to the present case  was based on the finding that the Customs Officer  who effected  the  seizure did not, at the  moment  of  seizure, entertain  a  reasonable belief that the goods  seized  were smuggled.   The learned Solicitor-General who contested  the correctness of this finding   did  not urge that the  words. in s. 178A "in the  reasonable belief that they are smuggled goods"    did  not  prescribe a condition precedent  to  the applicability  of that provision which had to  be  satisfied before  the provision could be invoked against the  affected party.   As  we  have  already  pointed  out,  his   further submission  was that such a reasonable belief must not  only be  entertained by the seizing officer and besides that  the question  whether  the  officer had done so or  not,  was  a matter   which  could  objectively  be  determined  by   the adjudicating  authority  acting  under s.  182.   And  these submissions he made, as aids to his main contention that the burden of proof 838 imposed  was reasonable.  We are pointing this  out  because before  the  learned Judges of the High Court  the  argument apparently  advanced  was that the test was  the  subjective belief of the seizing officer which could only be  disproved

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by  the  establishment  of circumstances in  which  no  such belief  ,could  ever honestly or reasonably  be  entertained based on the reference to ’,the subjectivity of the officer" in  the judgment of this Court in Babulal Amthalal Metha  v. The   Collector  of  Customs,  Calcutta  (1).   It  was   by approaching  the problem even from this very  narrow  stand- point  that the learned Judges reached a conclusion on  this part of the case favourable to the respondent. For  the decision of this point it is necessary  to  canvass the  facts which occurred at the moment of seizure  in  some detail.   As narrated at the commencement of this  Judgment, Nandgopal,  the second respondent-the employee of the  first respondent  was intercepted first by the Head  Constable  of the Madras State Prohibition Intelligence Department and his clothing  was  searched and the  four  gold-blocks  weighing about  a thousand tolas were seized by the  Head  Constable. The  Prohibition Crime branch has a  Criminal  Investigation Department  and the seized gold was handed over by the  Head Constable to the Inspector of Police Criminal  Investigation Department  on  the  same day.  It was  this  Inspector  (C. Rajamanickam)  that forwarded the gold to the  Inspector  of Customs (Special Division) with a letter in these terms               "I send herewith 1,000 (One thousand) tolas of               gold   in   4  (four)   blocks   seized   from               G.Nandgopal,Clerk,  M/s.   Nathella   Sampathu               Chetty,  Madras, No. 177, N. S. C. Bose  Road.               The passenger came from Bombay to Madras in N.               Y.  Bombay Mail on 26th June 1956, at 6 A.  M.               He has no records               (1)   [1957] S.C.R. 1110.                                    839               of  any kind for the purchase of gold.   Hence               the gold was seized and he was arrested  under               a mahazar.               The  passenger  and  gold  are  forwarded  for               further action under Customs Act." It  would  be seen that up to this point there had  been  no seizure  by  an  officer acting under the  Sea  Customs  Act within  s. 178A of the Act.  It has also to be noticed  that Nandgopal had in his possession admittedly no receipt of any kind  for the purchase of the gold ; further he had  on  him the letter addressed by the first respondent to Mathura  das Gopalakrishnayya & Co., Bullion merchants, Bombay intimating that  cash to the extent of rupees one lakh was  being  sent through  the  representative,  which  obviously  could   not possibly remain in the possession of Nandgopal if has  story about his taking cash to that addressee and the purchase  of the gold from him were true.  It was in these  circumstances that the Inspector (Special Division) Customs House recorded :               "Detained  four blocks of gold said  to  weigh               about   1,000  tolas  from   Shri   Nandgopal,               representative  of Nathella Sampathu Chetty  &               Sons for further investigation". There  are  two views possible of the exact import  of  this note  by  the  Customs  Inspector  :  (1)  that  it  was   a ,,,detention"  preliminary  to  a  seizure  which  would  be effected after the further investigation, and (2) that which found favour with the learned Judge; of the High Court  that it  was itself the seizure.  In support of the first of  the above constructions attention may be drawn to the fact  that the  events narrated earlier took place before 8 O’clock  in the  morning and that immediately thereafter  Nandgopal  was taken  to the Customs House and was examined there at  about 8.30  and in the course of his examination he  made  several

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statements  which were obviously incorrect and  whose  error was capable of being detected then and there. 840 (1)  He  stated  that the gold had  been  bought  from  M/s. Mathuradas Gopalakrishnayya & Co. having     paid  them  the sum  of rupees one lakh which was referred to in the  letter seized  from  him,  but  obviously  if  the  gold  had  been purchased  from that firm the letter could not  remain  with Nandgopal  and this discrepancy he was unable to explain  at that stage., for he said " I cannot account for the presence of  this  letter on me which should have been given  to  the firm in Bombay". (2) Nandgopal who spoke to having  received gold  and then secreted it in the inner side pockets of  his waist  coat and stitched it stated, that the gold was  moosa gold and it was found that the gold seized from him was  not that  variety.   It  is  really  after  this  statement  was recorded  at  the  Customs House  that  the  "investigation" began.   It is therefore possible to take the view that  the detention  resulted  in a seizure after  the  statement  was recorded.   There  was ample material at that stage  on  the basis  of  which it could be said that a  reasonable  belief could be entertained that the gold seized was smuggled. Even  taking  the  record of the detention  in  the  mahazar prepared  at the Central station as "the seizure" we do  not agree  with  the learned Judges of the High Court  that  the seizing-officer could not entertain a reasonable belief that the  gold  seized was smuggled.  The reasonableness  of  the belief  has to be judged by all the circumstances  appearing at  that moment.  In the present case, the quantity of  gold in the possession of Nandgopal-of the value of over one lakh of  rupees was certainly a very relevant factor to be  taken into  account and which could be considered in  judging  the matter.   No doubt, such a quantity could be the subject  of bona   fide  purchase  in  the  course  of   normal   trade, particularly   when  the  person  in  possession   was   the representative  of  a’ well-known firm of  bullion  dealers. Put one                             841 would  also  normally expect that the  representative  would have secured a bill or voucher to evidence the purchase.  In other words: (1) it was not a case of a few trinkets of gold or small quantity purchased for domestic or personal use but a  considerable  amount for purposes of  business,  (2)  the undelivered    letter   addressed   to   M/s.     Mathuradas Gopalakrishnayya  and  Co., which admittedly had  a  bearing upon  the  purchase of gold in the possession  of  Nandgopal necessarily  drew an amount of suspicion on the theory of  a bona  fide purchase.  These circumstances, in  our  opinion, which  were admittedly present at the moment when  the  gold was taken by the Customs Officer at the Central Station  did tend  to raise a reasonable suspicion that the  gold  seized had  been  obtained  illicitly and this  was  sufficient  to constitute,  in  the  words of the  statute,  1%  reasonable belief that the goods (gold) were smuggled". We   are   therefore  of  opinion  (1)   that   s.178A   was constitutionally  valid, (2) that the rule as to the  burden of proof enacted by that section applies to a  contravention of  a  notification under s. 8(1) of  the  Foreign  Exchange Regulation Act, 1947, by virtue of its being deemed to be  a contravention  of  a  notification under s. 19  of  the  Sea Customs Act, (3) that the preliminary requirement of s. 178A that  the  officer seizing should  entertain  "a  reasonable belief that the goods seized were smuggled" was satisfied in the  present  case.   The  result  therefore  is  that   the petitions  under Art. 226 of the Constitution filed  by  the

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respondent before the High Court should have been dismissed. We  accordingly  allow  appeals  408  and  409  with   costs throughout  (one  set of hearing fees), the  writ  petitions filed by the respondent being directed to be dismissed.   In view  of  our decision in appeals 408 and  409,  the  points raised  by  the  respondent in appeal 410  of  1960  do  not require to be decided.  That appeal fails and is  dismissed. There will however, be no order as to costs. 842 Criminal  Appeals No. 38 of 1959, No. 126 of 1959, No.  1.23 of 1959, Civil Appeal No. 511 of 1960 and Writ Petition  No. 118 of 1958 were not     heard on the merits and we have not examined the facts of any of those cases.  Those appeals and petitions  should, therefore, be posted for hearing  in  the usual course. Appeals nos. 408 and 409 allowed. Appeal no. 410 dismissed.