HARBANS LAL v. COLLECTOR OF CENTRAL EXCISE & CUSTOMS, CHANDIGARH

The Judgment of the Court was delivered by

PUNCHHI, J. This appeal is directed against the judgmc1t and order of a learned Single Judge of the Punjab and Haryana High Court at Chandigarh, dated August 7, 1979, passed in Civil Writ Petition No.4206 of 1973, raising an important question of law, whether Sections 110 and 124 F of the Customs Act, 1962 (hereinafter referred to as 'the Act') are illter-se independent, distinct and exlcusive or are they inter-woven, inter-con- nected and inter- playing, on the answer of which depends the survival or otherwise uf proceedings for confiscation of goods and imposition of penalties, under Chapter XIV of the Act. G On March 4, 1970, Harbans Lal, the appellant herein, was arrested and a huge quantity of gold, currency notes and other articles were seized from his possession. The seizure was effected under Chapter XIII of the Act. Sub-section (2) of Section 110 occurring in that Chapter provides that where any goods are seized under sub-section (1) of Section 110 and if no H

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A notice in respect thereof is giYcn under clause (a) of Section 124 \Vithin six mnnths of the seizure of the goods, the goods shall be returned to the person from \Vhosc possession they \vcre seized; provided that the period of six months may, on sufficient cause being sho\vn, be extended by the Collector of Customs for a period not exceeding another six months. (Jn August 27, 1970, prior lo the expiry of six months from the dale of seizure, the Collector, Central Excise and Customs, Chandigarh, on his own, by means of an ex parte order, extended {be seizure period further by six months, i.e., up to 19.3.71. Thereafter, on. March 4, 1971, a show cause notice was issued lo the appellant in accordance with the provisions of Section 124 of the Act informing him the grounds on which it was proposed to confiscate the goods and to impose on him a penalty, as well as affording him an opportunity for making representation in writing within a period of ten days against the grounds of confiscation or imposition of penalty mentioned in the notice. Opportunity was also given to the appellant in the said notice for his personal appearance or through a legal representative on the date to be fixed, on which date the case would be decided on the basi5, of the evidence on record.

The appellant, in response, challenged the jurisdiction of the Collec- tor, inter alia, claiming that since the extension of the seizure period under Section 110 of the Act had been made ex-parle, without affording the appellant an opportunity of being heard against the the proposed exten- sion, the entire proceedings were vitiated and hence issuance of notice under Section 124 was void ab initio. The Collector, however, deferred the objection raised by the petitioner viewing that it would be dealt with during the course of proceedings under Section 124 of the Act. Thus at that stage itself the appellant approached the High Court in a petition under Article 226 of the Constitution praying for quashing the extension order and sequally the show cause notice, and in the alternative, for a direction to the Colledor to decide the preliminary objection as to the vitiation first and not to proceed with the case under Section 124 of the Act, its initiatin being void ab Iinitio. G The legal stance adopted by the. appellant was refuted by the Cus- toms Authorities. The factual position was, however, not denied. Addition- ally it was pleaded that proceedings under Sectior. 78 of the Gold (Control) Act, 1968 has also been initiated against the appellant \vithin the period of H ]imitation prescribed under Sect.ion 79 of the said.Act. The seizure of goods·

HARllANS LAL 1·. C.C.E. jPUNCHHl.J.J 135

thcnccfr)rth \Vere .suggc.'!t1.:d lo h1: under the Gold (Control) Act, and thus it ,,·as pleaded that Section 110(2) of the Custon1s Act, 1962 \V<ts no longer in play fl1r the purpose of holding thc goods by the Customs autht)ritics. ()n thc legal question, it \Vas asserted that the provisions of Sections 110 and 124 \Vere mutually exclusi\·e; thc former only compelling in the return of goods to the person fron1 \1,.·hosc pos5ession they \Vere taken, on the expiry of the original or cxtcndcc..I period. So far as the goods in question were concerned, it was pleaded that those would have been returned to the.appellant but for the proceeding under the Gold (Control) Act, 1968 initiated against the appellant.

On the question above posed, the High Court when deciding in 1979 c found a difference of opinion raging in various High Courts in the country. The learned Single Judge, considering himself bound by the view taken by his Court, holding that proceedings under Section 124 were independent of the provisions of Section 110 of the Act, and even though a person from whom the goods had been seized may become entitled to receive the goods back in vie\v of the failure of service of notice within the period stipulated under Section 110(2) of the Act, still proceedings for confiscation under Section 124 could proceed. For the said reason, the High Court dismissed the writ petition leading the appellant to appeal to this Court.

It would, at this juncture, be apposite to take note of the two provisions, quoted hereafter:-

"110. Seizure of goods, documents and things: (l) If the proper officer has reason to believe that any goods are liable to confisca- tion under this Act, he may seize such goods: F Provided that where it is not practicable to seize any such goods, the proper officer may serve on the owner of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer. G (2) Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of Section 124 within six months of the seizure of the goods the goods shall be returned 1·0 the person from whose possession they were seized: .

Provided that the aforesaid period of six months may, on H

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A sufficient cause being shown, be extended hy the Collector of Customs for a period not exceeding six months.

(3) The proper officer may seize any documents or things which in his opinion will be useful for, or relevant to, any proceedings under this Act. B (4) The person from whose custody any documents are seized under sub-section (3) shall be enitled to make copies thereof or take extracts therefrom in the presence of an officer of customs."

c "124. Issue of show"Ciluse notice before confiscation of goods etc. - No order confiscating any .goods or imposing any penalty on any person shall be made under this -Chapter unless the owner of the goods or such person - D (a) is given a notice in writing informing him of the grounds on which it is t-n oposed to confiscate the goods or to impose a penatly;

(b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice E against the grounds of confiscation or imposition of penalty men- tioned therein; and

(c) is given a reasonable opportunity of being heard in the matter:

F Provided that the notice referred to m clause (a) and the representation referred to in clause (b) may, at the request of the person concerned be oral. n

As said before Section 110 is in Chapter XIII covering the subject of search, seizure and arrest. The Section operates during the stage of inves· G ligation. Section 124 hinted earlier, is in Chapter XIV which covers the topic confiscation of goods and imposition of penalties. The subject of i111vestigation and that of confiscations and imposition of penalties are ex facie exclusive of each other, the goal of each being different. A Constitu- tion Bench of this Court in l.J. Rao, Asstt. Collector of Customs and Others H v. Bibhuti Bhushan Bagh and Another, [1989] 3 SCC 202, while interpreting

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Then comes the question as to what is the faJlout of the order extending time under sub-section(2) of Section 110 of the Act being vitiated. Learned counsel for the appellant would have us hold that in face of that vitiation, proceedings under Section 124 get lapsed for they could H

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A not be initiated without the aid of Section 110. This argument, however, militates against the ratio of Charandas Malhotra's case supra and cannot be accepted. In the second half of paragraph 5 of the report of the case this Court observed :-

"Section 124 provides that no order confiscating any goods or B imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person is given a notice in writing informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty. The Section does not Jay down any period within which the notice required by it has to be given. The period laid down in Section c 110(2) affects only the seizure of the goods and not the validity of the notice." (Emphasis supplied).

In clear terms, it has thus been held that the period angle causing affecta- tion under Section 110(2), would only pertain to the seizure of goods. The D validity of notice under Section 124, for which no period has been laid within which it is required to be given is not affected. The seizure may have, after the expiry of six months or after the expiry of extended period of six months entitled the owner or the person concerned the possession of the seized goods. This obviously is so because the matter at that stage is under investigation. On launching proceedings under Chapter XIV, Section 124 enjoins issuance of a notice for which no period has been fixed within which notice may be given. The difference is obvious because this goes as a step towards trial. The ratio of this Court afore-quoted in Charandas Malhotra's case, thus settles the question afore-posed and the answer is that these two Sections 110 and 124 are independent, distinct and exclusive of each other, resulting in the survival of the proceedings under Section 124, even though the seized goods might have to be returned, or stand returned, in terms of Section 110 of the Act, after the expiry of the permissible period of seizure.

The Bomhay High Court in Mis Mohan/a/ Devdanbhai Choksey and G Other.i v. M.P. Mondkar and Other, AIR (1977) Bombay 320, as is evident, correcily appreciated and followed Charandas Ma/hotra's case supra. In so doing, it has observed:

"It should not be overlooked that the object underlying Section 110 is not initiation of proceedings for confiscation of eoods or for imposition of personal penalty, but is to indicate what will happen

HARBANS LAL v. C.C.E. [PUNCHHl,J.] 139

if such initiation has not taken place within the time prescribed by the section itself. The consequences of non-initiation of proceed- ings within the prescribed time are set out in the section and they are that the goods shall be returned to the person from whose possession they were seized. All the provisions of Chapter XIII are steps to facilitate investigation machinery and failure to issue a B show cause notice under clause (a) of Section 124 within the prescribed time will only result in an obligation on the part of the Customs Authorities to return che goods to the person from whose possession they were seized. There is nothing in the language of Section 110 to indicate that a fatter or limitation is imposed upon · the power of the Competent Authority to initiate proceedings under section 124. On the other hand, Section 124 is contained ill Chapter XIV which contains substantive provisions relating to confiscation of goods etc. and imposition of penalty. Under Section 124 issue of a show cause notice prior to passing an order of confiscation or imposition of personal penalty is mandatory, but the language of Section 124 is clear and. precise and no restriction or limitation or even a fetter is imposed as regards the time when proceedings may be initiated by issue of a show cause notice."

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A each other is not correct. The views of the other High Courts would now stand straightened by the above answer, without burdening this judgment with further case law.

Having answered the question as above, the order of the High Court under appeal commends to us and deserves in the circumstances to be B maintained. Accordingly, while doing so, we dismiss the appeal but make no order as lo costs.

R.P. Appeal dismissed.