M/S. LOKENATH TOLARAM ETC. versus B. N. RANGWANI & ORS.

M/S. LOKENATH TOLARAM ETC.

B. N. RANGWANI & ORS.

November 8, 1973

[A. N. RAY, C.J., K. K. MATHEW, Y. V. CHANDRACHUD AND P. N. BHAGWATI. JJ.]

Custom3 Act. 1962. SJ. 110 and 124-Scope of.

Under 5. 110(1) of the Customs Act. 1962, the excise authorities may seize goods if the proper officer has reason to believe that the goods are liable-for confiscation. Section 124Ca) p,·ovides that no such order of cor..fiscation shall be made unless the owner of the goods or the person from whose posses-sion they are· seized is liven notice informina him of the arounds of confisca-tion. l! no such notice is 1iven within 6 months of the seizure. the goods shall be returned to the person from whom they were seiz~d. Section 110(2) provides 1bat the period of 6 months may, on sufficient cause being shown, be extended by the Collector of Customs for period not exceeding 6 months.

authorities may

Jn the present case. th~ central excise authorities seized certain aoods front' the appellar~ts. The appellants filed writ petitions in the High Court for release-of the aoods. While the petitions were '!'ending various coil'SCnt orders were-passed by the High Court providing for execution of bonds as well as deposit of amounts of money by the appellants irr favour of the excise authorities against release of the .izood~- and the tiarties had a.Rreed that the deposit111 of the 1-onds were to be treated· as. proceeds of sale of the goods and - treated as goods 10-seized for the purpose of adjudication proceedings. Pursuant to the consent orders the goods were ·released.

Meanwhile, the Assis!ant Collector apolied for extension of time tor giving notice- under s. 124(a) and a-n order of extension for further period of 6-months was made. In the case of two of the appellants, the order. of exten.-sion v.:as made beyond 6 months' from the date of seizure.

The writ petitions were dismissed by the High Court.

On the questions. ( 1) whether the orders extendini time not beina within 6 months of !he date of seizure of the goods. were illeA:al: and (2) wheth~r the order111 made withoui aivin2 an opportuhfty to ·the appellant were violative or the principles of n1tural justice, ·

HE~D (Dismissing the appeals)::

But for the special ap:reement in the consent orders between the parties !he orde:"S for extension of time to ~crve the notice und-:r s, 124(a) might have beM e11:oo~ed ro the infirmities of limitation as to time nnd the observance of' princip]e!I. of natural iu~tice ·referred to. in As.tistan.t Collector of Custom., v. Charan DaJ Malhotra 1!9711 3 S.C.R. 802. [2400-EJ

·c11 Ca) All the ~oods had already been released to the nppellants by-reason of the con5enc orders. ·Therefore, it cou[1]d not be .:ontended that since the-order of exter..sion was not within 6 months of the !'ieizure of goods, the appcl~----· tant111 were entitled to the release of the Jt:oods. [204FJ

(b) The agreements between the parties as result· of the consent orders came into existence before as wcJI --as after the date when the Collector or Customs e11:tended the 'Period for service of the nntice ur..der ~. 124(a). After the appellants had obtained ·release of the goods in terms of the agreements.,· the f!:Oods wen• out of the orovince of app1ication of s. 110, and therefore, the appel1ants ·could r.ot contend that the amounts deposited in rerms of the agree. mcnts represented the goods or· that the app.:llan~s were entitled to the return of the amounts. The parties agreed that t·he Excise Authorities would retain_ the securities for the purpose of adjudkation proceedings ir.. the event of failure: of the appellants in-the writ· petitions filed by hem. {204F-H1 . ·(2) The agreements establish that the parties, on consideration of all tb.c :facts and circumstances waived notice for extending the time for givina notice tUnder s. 124 of lhc Act. Therefore, there cannot be any question of violation of Principles of na-tural justi::e· or any lack of opportunity to the appellants to -show cause in regard to the order extending time. [20SA-B)

( 3) Also, as the goods of one of the appellant were in possenion of Bank as pledgee, and the excise authorities seized the goods from the posses-:sion of the Ban}.;, that appellant had no locus standi to ask for release of the .goods. (2059-C]

OVIL APPELLATE JURISDICTION : Civil Appeal No. 1109 of 1971.

From the Judgment and order dated the 1st September 1970 of the Bombay High Court, in Miscellaneous Petition No. 187 of 1963.

Civil Appeal No. 1132 of 1971 : From· the Judgment and Order dated the· 1st September, 1970 of the Bombay High Court, in Miscel· laneous Petition N. 184 of 1963.

Civil Appeal No. 1133 of 1971 : From the Judgment and Order dated the 31st August, 1970 of the Bombay High Court, in · Miscella-neous Petition No. 127 of 1963.

M. C. Chag/a, P. C. Bhartari, Ravinder Narain, 1. B. Dadachanji and O. C. Mathur, for the appellants. (in C.A. No. 1133).

P. C. Bhartari, Ravinder Narai•, /. B. Dadachanji and 0. C. Mathur, for the appellants. (in C.A. Nos. 1109 and 1132).

G. L. Sangh; and s. P. Nayar, for rsepondents Nos. 1-4 & 7 (In C. A. No. 1109/71) and for Respondents Nos. 1 to 5 (in C.As. l>os 1132 and 1133/71).

The Judgment of the Court was delivered by

RAY, C.J. These three appeals are by certificate from three judgments of the Bombay High Court. The main judgment is dated 31 August, 1970 in Civil Appeal No. 1133 of 1971. The judgments in the <lther two appeals are dated 1 September, 1970 following the judg-ment in Civil Appeal No. 1133 of 1971.

In Civil Appeal No. 1133 of 1971 the appellants carry on business inter a/ia as manufacturers of cotton yarn and cotton fabrics. The first five respondents are the Central Excise Authorities. The 6th respor.dent is the Banlc. Between 11 March, 1963 and 20 March, 1963 the Central Excise Authorities conducted search at the factory and mill premises belonging . to the appellants. The Excise Authorities seized 1662 bales of processed and grey cotton fabrics belonging to the .appellants. The 6th respondent, the Banlc was the pledgee of the seized goods. The goods were lying in the godown and bonded store rooms at the mill premises and the Bank was in possession of the same under cash credit arrangement with the appellants. The Excise Authorities also seized several books of accounts, documents, vouchers belonging to the appellants and lying at the mill premises.

On 8 April, 1963 the ap1Jellants made an application under Article 22.6 of the Constitution in the High Court at Bombay. Respondent No. 1, the Assistant Collector of Central Excise on 16 September, 1963 made an application to the Collector of Central Excise respon-dent No. 5 for extension of time for giving notice under section 124(a)

of the Customs Act, 1962 (hereinafter referred to as the ~ct). On ~O September, 1963 an order of extension for furthe~ period of six months was made. The appellants asked for writ of mandamus directing the Excise Authorities to release and hand. over the goods and books of accounts, documents and vouchers to the appellants.

Two of the grounds advanced by the appellants for the release of the goods and documents were these, First, the Excise Authorities did not issue "show cause ootice" within six .months of the seizure of the goods under section 11.0 of the Act. Second, the order of extension was made without giving the appellants an opportunity to show cause against the grant of extension. The High C.ourt cJid .not ac<:pt those contentions. The High Court held that an order for extension could · be made at any time within or after six months of the date of seizure. The High Court relied on ll Bench decision of the Mysore High Court and held that the order of extension could not be said to be void on account of absence of opportunity to show cause against the order of extension. The High Court dismissed the application of the appellants.

In this appeal the only contention which was advanced on behalf of the appellants is that the order dated 20 September, 1963 passed by the Excise Authorities under section 110 of the Act is bad and there-fore the appellants are entitled to the release of the goods.

The coptentions on behalf of the appellants were two·fold. First, the order dated 20 September, 1963 was not within six months of the seizure of the goods, and was, therefore, illegal. Second, the order dated 20 September, 1963 was made without giving an opportunity to the appellants to be heard and was, therefore, in violation of princi-ples of natural. justice.

Counsel for the appellants relied on the decision of this Court in Assistant Collector of Customs· v. Charan Das Malhotra [1971] 3 S.C.R. 802 in support of the contentions advanced in these appeals. In Malhotra case (supra) the Rummaging staff of the Excise Authorities raided the business premises and seized goods on 19 March, 1963. On 6 March, 1964 the Excise Authorities served . notice under section 124(a) of the Act to show cause why the goods should not be confiscated and penalty should not be imposed. It was contended that because the· goods were seized on 19 March, 1963 the initial period of six months provided under.section 110(2) of the Act expired on 19 September, 1963 and Malhotra became entitled to the return of the goods on the ground that no notice to show cause had till then been issued. The Excise Au!horities contended on the other hand that an extensioi:i of four months was applied for and was granted by the Collector of Customs on 19 September, 1963. The ~I extended perlod of four months expired on 19 January, 1964. further extension for two months was applied for on 3 January, 1964 .. ·The Collector passed an ord~r extending the time on 20 February, 1964 month after the extended period had expired on 19 January,

1964. The other contention in that case was that Malhotra got no chance to resist the application for extension, and, therefore, the orders were in violation of natural justice.

This Court held that the right to have the watches rest.ored to ,Malhotra accrued on 19 January, 1964 and it could not be defeafod by an order for extension passed on 20 February, 1964 after the first extended period lapsed on 19 January 1964. It was also held that Malhotra was entitled to be heard before the extension was made. This Court in Malhotra case (supra) held that the decision of the Mysore High Court on which the Bombay High Court relied (reported in A.I.R. 1968 Mysore 89) was wrong.

Counsel for the Excise Authorities contended that in these appeals no notice under section 110 of the Act was required to be given by reason of special agre~ment between the appellants and . the Excise Authorities during the pendency of the writ petition in the High Court. It was submitted that because of the agreement there was a:so no question of violation of principles of natural justice. ·It was also said by the Excise Authorities that the appellants had no locus standi to ask for the return of the goods because the goods had been in the posses· sion of the respondent Bank as pledgee and the Excise Authorities seized the goods from the possession of the Bank.

The High Court admitted the petition of the appellants in Civil Appeal No. 1133 of 1971 on 8 April, 1964. On 9 April, 1964 the Chief Justice of the High Court passed an order directing the petition to be heard by Division Bench. The Bench decision was given after six years on 31 August, 1970. During the pendency of the petition the appellants took out several notices of motion and obtained various interlocutory orders by consent of parties. These oonsent orders were dated 29 July, 1963, 19 November 1965, 2 December, 1966 and 3 September 1969.

Broadly stated the pattern of these consent O!ders was as follows. The appellants will. deposit with the Collector of Central Excise p;ov-ernment securities of certain value in order to obtain release of quanti-ties of the seized goods in favour of the Bank. In the event of the appellants succeeding in the petition the securities deposited shall be. returned. In the event of the appellants failing in the petition the secu-rities shall be retained by the Excise Authorities for the purpose of adjudication proceedings. In the event of the Collector of Central Excise holding that the goods are not liable to confiscation or that the appellants are not personally liable for any penalty or excise duty the said securities shall be returned. The appellants agree and undertake that the securities deposited. shall be treated as sale proi:eeds of the said goods and treated as goods so seized for the . purpose of any adjudication proceedings. The appellants further agree that they shall not raise any contention in the adjudication proceedings that tfie said . proceedings will n•ot be valid on the ground that the goods have been released to the appellants and are not available for confiscation or imposition of fine in lieu of confiscation.

The appellant$ pursuant to the consent orders aforesaid deposited-Rs. 9,03,300 with the Excise Authorities and executed bonds for the sum of Rs. 15,51,080/- in favour of Excise Authorities on differenL dates and obtained release of 1662 bales and 56 boras.

ln Civil Appeal.No. 1132 of 1971 the Excise Authorities ou 27 and 29 April, 1963 seized 432 pieces of grey cotton fabrics and 136 bales containing cotton fabrics and fents. The :Excise Authorities also seized books of accounts and documents of the appellants on those two dates. On 20 September, 1963 the Excise Authorities passed an. order under section 110( 2) of the Customs Act extending the pericd. of giving "show cause" notice. The appellants on 10 May, 1963 filed petition in the High Court and asked .. for release of the goods 011 grounds similar to the other appeal. The High . Court dismissed the petition of the appellants.The only contention advanced in this appeal was that the order dated 2.0 September, 1963 was passed without giving an opportunity to the appellants to, be beard. It was, therefore, said on behaif of the appellants that on the ruling of this Court in Malhotra case (supra)-the order dated 20 September, 1963 was illegal. .

0 · In Civil Appeal No. 1132 of 1971 the respondents on the other: hand contended that the appellants were no( entitled to be beard. by reason of agreements embodied in consent orders identical to those in. Civil Appeal No, 1133 of 1971. The consent orders ·provided execu-tion of bonds as well as deposit of amounts of money by the appel-lants in f~vour of the Excise Authorities against release of the goods The parties agreed that the deposits of the bonds were te be treated as proceeds of sale of the goods and treated as goods so seized for the purpose of adjudication proceedings, The appellants took delivery of . the seized 136 bales and deposited on 5 May, 1965, 5 May, 1966 and 22 April, 1970 in lieu thereof amount aggregating Rs, 99,000 a~d executed bonds of the value of Rs: 1,80,000.

In Civil Appeal No. 1109 of 1971 the Excise Authorities seized" 4 77 and 91 aggregating 68 b~~ of cott9n fabrics of the appellants on 16 March. 19~ •. The. E:i;cise ~uthorities' also seized bookS of accounts and documents of the appellants. 1be appellants on 1 O May. 1968 inade an applicltion under Article" 226 of '.the Constitution in the Hi~h Court (lf Bombav. The appellants asked for writ of mandamus-. directing the release of the goods and the books of accdunts. The H'gb Court did not accede to the request of the appellants.

The tw() contentions of the appellants in Civil Appeal No. 1109 of 1971 were that the order dated 20 Septeinber, 1963 extrndi112. •he period of. giving ''show cause" notice was illegal on gr()unds similar to those in Qvil Appeal No. 1133 of 1971. The respondents il\ Civil Appeal N<:>. 1109 of 1971 repeated the same answers that the ruling· in Malhotra· (case (supra) does not aoplv by reason of ag·eement· between the appellants and the respondents embodied in similar con· sent orders in interlocutory proceediAAS in the High Court, During the" pendency of the proceedings in the High Court the appellants dopo ..

· sited with the Excise Authorities between the month of April, 1966 and the month of August 1968 Rs. 3,16,016 and executed bonds for the sum of Rs. 4,44,059. The appellants obtained .release of the goods nam~ly 568 bales. The amounts deposited were agreed between the parties to be sale proceeds of the goods and treated as goods as seized for the purpoise of adjudication proceedings.

The Excise Authorities may under section 110(1) of the Act seize 11oods if the proper officer has reason to believe that the goods are liable to confiscation. Where goods are seized under section 110 (1) of the Act and no notice in respect thereof is given under section 124(a) of the Act within six months of the seizure of the goods the goods shall be ~eturned to the person from whose possession they were seized. Section 1.24(a) of the Act states that no order confiscating any goods or imposing any penalty on any person shall be made under Chapter XIV of the Act unless the owner of the goods or such person is given i:otice in writing infonning him of the grounds of confiscation or imposi-tion. of pen~lty. Section 110(2) of the Act contains proviso that the penod of SlX _months may on sufficient cause being shown be extended .by the Collector of Customs for period not exceeding six months.

In Civil Appeals No. 1133 and 1109 of 1971 the order of extension -on 20 September, 1963 was beyond the period of six months from the date of seizure. In Civil Appeal No. 1132 of 1971 the order was in time. Therefore, the orders for extension of time to serve the notice under section 124(a) of the Act could have been exposed to infirmi-ties of limitation as to time (though we do not express any opinion upon it) and observance of principles of natural justice but for the special agreement in the consent orders between the parties in these appeals.

Counsel for the appellants contended that if the order dated 20 September, 1953 wai not within six months of the seizure of the goods, the appellants were entitled to release of the goods. All the goods have already been released to the appellants. The release is by reason of tenns of consent by and between the appellants and th~ Excise Authorities during the pendency of the appeals in the ,Bombay High Court. It was next said on behalf of the appellants that the amounts deposited represented the goods and the appellants were entitled to return· of the amounts deposited. The contention of the apJ>'llanls is unsound and unacceptable. The amounts of money which are now retained by the Excise Authorities represent the goods by reason of special agreements between the parties. These agreements came into existence before as well as after 20 September, 1963. After the appel-lants had obtained release of the goods in accordance with the terms of special agreement embodied in the consent terms, the goods went out of the province of application of section 110 of the Act for extension of time for serving notice.

There cannot be any question of violation of principles of natural justice or any lack of opportunity to the appellants to show cause in regard to the order dated 20 September, 1963 extending the time for

giving the notice under section 124 of the Act contemplated in section 110 of the Act. The appellants themselves asked for release of the goods on depositing moneys and executing bonds representing the value of the goods released. The agreements in the present appeals establish that the parties on consideration of all the facts and circumstances waived notice for extending the time within six months of the seizure of the goods.

The Excise Authorities are also right in their contention that the appellants have no locus standi to ask for release of the goods because the Bank was in possession of the goods as the pledgee and the Excise Authorities seized the goods from· the possession of the Bank.

The moneys deposited and the bonds executed by the appellants are really the substituted goods for the purpose of adjudication as to whet· her there can be any confiscation of goods or imposition of penalty. The parties agreed that the Excise Authorities would retain the securi-ties for the purpose of adjudication proceedings in the event of failure of the appellants in the writ petitions filed by them.

The goods were seized in 1963. Long time has lapsed. The Excise Authorities should immediately take steps and complete the adjudica-tion proceedings. For these reasons the appeals fail and are dismissed. The parties will play and bear their own costs.

Appeal dismissed.