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Bimal Kumar Jain v. Commissioner Of Customs & Anr.

Delhi High Court

Oct 17, 1997

Judgment

CaseIQ

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Factual and Procedural Background

On 22.6.1995 customs officials seized a Maruti Esteem car (registration No. DLG-6) under Section 110 of the Customs Act, 1962, having formed the opinion that it was liable to be confiscated under Section 115. At the time of seizure the car was standing outside Indira Gandhi International Airport, Delhi, with driver Prakash Sharma in it. On 11.12.1995 the Assistant Commissioner of Customs (Preventive) issued a notice to show cause against proposed confiscation addressed to five named persons (Ganji Satya—Narayana Dasu; Padamnabha Menon Rajaram; Surender Kumar Jain; Prakash Sharma; and Naresh Jain). The petitioner's name (Bimal Kumar Jain) does not appear among those served and he was not a party to the pending adjudication under the Customs Act.

The petitioner asserts that he is sole proprietor of M/s. Jain Enterprises (a stainless-steel trading concern), that he paid for the car from his personal account, and that the vehicle registration stands in the name of M/s. Jain Enterprises. He says his brother Naresh Kumar Jain borrowed the car to go to Nepal on the day of seizure. On that day Ganji Satya—Narain Dasu arrived by flight EK-700 and customs recovered substantial gold and silver from him; customs suspected Naresh's involvement. Ganji Satyanarain Dasu, Naresh and the driver Prakash Sharma were arrested. The opinion records that, admittedly, the car was not used for carrying the recovered smuggled gold or silver on that particular day, though statements recorded under Section 108 later indicated that on earlier occasions the car had been used to transport smuggled goods.

The petitioner made written representations to the Assistant Commissioner of Customs (Preventive) on 11.1.1996 (Annexure P-4) and repeated the representation on 2.4.1996, filing documents (payment from personal account, invoice, income-tax returns, assessment orders, cheque dated 2.1.1995). Originals of registration, insurance and road tax documents were in the car at seizure and remained in respondents' custody. On hearing before this Court, respondents' counsel stated that the petitioner's representations were in the departmental file but no action had been taken on them.

Legal Issues Presented

Whether the seized vehicle should be released to the petitioner pending adjudication where the petitioner claims ownership but has not been served with a notice to show cause under Section 124.
Whether the statutory consequence under Sub-section (2) of Section 110 (return of goods where no notice under Section 124 is given) applies after the lapse of six months unextended and without the petitioner having been served.
Whether the respondents' failure to consider the petitioner's documentary proof of ownership and to give him notice renders continuation of custody unjustified (at least pending final adjudication).

Arguments of the Parties

Petitioner's Arguments

The seizure was unjustified and without jurisdiction because the car had not been used to transport the smuggled gold and silver on the date of seizure.
No notice to show cause under Section 124 had been given to the petitioner within six months of seizure; therefore, under the statutory scheme the car should be returned to him forthwith.
The petitioner produced documentary proof of ownership and payment (personal account, invoice, tax returns, assessment orders, cheque) which were also placed before the respondents and called for a considered decision; respondents failed to apply their mind to those materials.

Respondents' Arguments

The confiscation proceedings are pending and the petitioner must await the result of those proceedings; custody should be retained to protect the adjudication process.
The car in fact belongs to Naresh Kumar Jain, who is allegedly actively involved in smuggling, and was used for illegal purposes, so there is no flaw in continuing the seizure and adjudication against the vehicle.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
J.K. Vardolia Missl v. M.L. Khugar, Dy. Collector, 1994 72 ELT 813 (SC)	Non-compliance with Sub-section (2) of Section 110 results in return of seized goods to the person from whose possession they were seized; such non-compliance does not render the initial seizure illegal.	The Court used this authority to underline that failure to comply with the return provision leads to return of goods; thus it supported the direction to release the car pending final adjudication (while not declaring the initial seizure illegal).
I.J. Rao, Asstt. Collector of Customs v. Bibhuti Bhushan Bagh, 1989 (42) ELT 338 (SC)	The phrase "sufficient cause being shown" in the proviso to Sub-section (2) of Section 110 imposes an obligation on the Collector to determine on material whether circumstances warrant an extension of the six-month period.	The Court relied on this line of authority to note the Collector's duty to consider material when extending time, and observed that no order extending the six months had been passed in the present case.
Assistant Collector of Customs & Superintendent Preventive Service Customs, Calcutta v. Charan Das Malhotra, 1983 ELT 1477 (SC)	Similar principle: the Collector must be satisfied on material placed before him that sufficient cause exists for extension of the prescribed six-month period under Sub-section (2) of Section 110.	The Court referenced this authority to reinforce that extensions require a reasoned determination by the Collector; since no extension was shown, the statutory return consequence applied.

Court's Reasoning and Analysis

The Court proceeded in a stepwise statutory and factual analysis, applying the statutory scheme and the material placed on record:

Statutory framework: The Court recited the relevant provisions — Section 110(1) (seizure when officer has reason to believe goods are liable to confiscation), the definition of "goods" (including vehicles) in Section 2(22), Section 124 (requirement to give written notice to the owner and afford opportunity to make a written representation and a hearing), and Sub-section (2) of Section 110 (return of goods if no notice under Section 124(a) has been given). The Court emphasised that Section 115 specifically deals with confiscation of conveyances and that the proviso to Section 110(2) permits one six-month extension by the Collector on sufficient cause.
Assessment of documentary material: The petitioner had placed on record, and had earlier placed before the respondents, documents (payment from personal account, invoice reflecting sole proprietorship, income-tax returns, assessment orders, cheque) that prima facie evidenced his ownership of the vehicle. The Court found the genuineness of these documents not susceptible to prima facie doubt and noted that the respondents had the same material in their file.
Failure of administrative action: The respondents had not applied their mind to the petitioner’s documents nor served the petitioner with a notice under Section 124. On a specific query in Court, respondents' counsel stated the representations were in the departmental file but that no action had been taken.
Operation of the statutory return rule and lack of extension: Because no notice under Section 124 had been given to the petitioner, Sub-section (2) of Section 110 mandated return of goods on the lapse of six months from seizure unless the Collector had, upon sufficient cause, extended the period. The Court observed that no such extension order had been passed in this case.
Precedential support: The Court relied on J.K. Vardolia Missl v. M.L. Khugar to note that non-compliance with Section 110(2) leads to return of goods but does not render the initial seizure illegal. The Court also relied on authorities (I.J. Rao and Charan Das Malhotra) which treat the "sufficient cause" proviso as imposing an obligation on the Collector to determine, on material, whether justification for extension exists; because no extension had been shown, these authorities supported the statutory consequence of return.
Protecting adjudication while enforcing statutory right: Balancing the respondents' interest in pursuing confiscation and the petitioner's statutory entitlement where notice had not been given, the Court concluded that the car should be released to the petitioner immediately but on conditions designed to protect the confiscation proceedings (bond equal to the car's price, prohibiting transfer/encumbrance, prohibiting alteration of identity/appearance, obligation to produce the car if confiscation is ultimately ordered, joint inventory at time of release, and serving the petitioner with a show cause notice under Section 124(1) together with an opportunity to represent and be heard).
Limitation of findings: The Court expressly recorded that factual statements and findings in the judgment were made solely for the limited purpose of deciding release pending finalisation of confiscation proceedings and were not intended to pre-empt or prejudice the pending departmental adjudication.

Holding and Implications

Holding: The petition was partly allowed and the Court directed that the seized car be released to the petitioner forthwith subject to conditions. The Court issued a writ of mandamus directing respondents to release the car on the petitioner furnishing a bond equivalent to the price of the car and complying with specified conditions. The petitioner must also be served with a show cause notice under Section 124(1) and afforded an opportunity of representation and hearing.

Implications and consequences:

The immediate, direct effect is that the vehicle is to be returned to the petitioner pending final adjudication, but only upon compliance with conditions designed to secure the rights of the Customs authorities (bond, no transfer/encumbrance, no alteration, duty to surrender if confiscation is finally ordered, and joint inventory on delivery).
The respondents are required to serve the petitioner with the statutory show cause notice under Section 124(1) and provide an opportunity to make representations and to be heard — addressing the procedural deficiency identified by the Court.
The Court limited its factual findings to the narrow purpose of deciding about release and explicitly stated that nothing in the judgment is to pre-empt, prejudice or bind the on-going confiscation proceedings; in that sense the decision does not function as a final adjudication on ownership or guilt and does not create a substantive precedent displacing the pending administrative process.

Disposition: Petition partly allowed. No order as to costs. The Court emphasized protection of the confiscation proceedings from being frustrated while enforcing the statutory return rule.

Petition partly allowed.

Show all summary ...

R.C Lahoti, J.— It is not disputed that Maruti Esteem Car bearing registration No. DLG-6 was seized under Section 110 of the Customs Act, 1962 on 22.6.95 by the Customs Officials having formed an opinion that it was liable to be confiscated under Section 115 of the Customs Act, 1962 (hereinafter the Act, for short).

2. It is also not disputed that on 22.6.95, the car was standing outside the Indira Gandhi International Airport at Delhi with driver Prakash Sharma in it.

3. Notice to show cause against the proposed confiscation of the car has been issued by the Assistant Commissioner of Customs (Preventive) on 11.12.95 It is addressed to (i) Shri Ganji Satya—Narayana Dasu, (2) Shri Padamnabha Menon Rajaram, (3) Shri Surender Kumar Jain, (4) Shri Prakash Sharma, and (5) Shri Naresh Jain. The proceedings for confiscation and other adjudication proceedings under the Act are pending qua the abovesaid five persons. However, so far as the petitioner Bimal Kumar Jain is concerned neither he has been served with any show cause notice till this day nor is he a party to the proceedings pending under the Customs Act.

4. According to the petitioner he is the sole proprietor of M/s. Jain Enterprises. In the name and style of M/s. Jain Enterprises with its office situated at 17, Meera Tower Industrial Complex, Wazirpur, Delhi, the petitioner is carrying on the business of trading in stainless steel. He had paid for the car from his personal account while purchasing the same. He has been paying the taxes and he is being assessed as sole proprietor of M/s. Jain Enterprises. The registration of the car stands in the name of M/s. Jain Enterprises. It is further alleged by the petitioner that Naresh Kumar Jain is his real brother. On the fateful day, Naresh Kumar Jain with his family intended to go to Nepal. He had borrowed the petitioner's car for going to the Airport.

5. It is also alleged that on 22.6.95, Ganji Satya—Narain Dasu arrived at the IGI Airport by flight No. EK-700. Substantial quantity of gold and silver was recovered from his possession on a search being taken. The Customs officials suspected involvement of Naresh Kumar Jain, the brother of the petitioner, in the said smuggling of goods. Ganji Satyanarain Dasu, Naresh Kumar Jain and Parkash Sharma—the driver were all arrested. Admittedly on that day, the car was not used for carrying smuggled gold or silver, though in the statements recorded under Section 108 of the Customs Act, subsequently to the point of seizure of the car and arrest of the persons above-named, the customs officials have gathered information that on earlier occasions this car was used for transporting smuggled goods concealed in the car.

6. On 11.1.96, the petitioner made a representation to the Assistant Commissioner of Customs (Preventive). Copy of the representation is filed and marked as Annexure P-4. Therein the petitioner has set out his ownership of the car, his ignorance of the incident leading to the seizure and denial of the car having been involved in smuggling activities at any point of time. Representation was repeated on 2.4.96 The petitioner had also filed documents showing the deposit by him from his personal account of the initial booking amount for purchase of the car, payment of consideration for the purchase of the car from his personal account, the petitioner having signed the invoice with the agent showing the petitioner to be the sole proprietor of M/s. Jain Enterprises. Copies of the income tax returns, assessment orders and cheque dated 2.1.95 were also filed. The same set of documents has been filed with the petition in this Court also. Original registration book alongwith the insurance and road tax papers were lying in the car at the time of seizure and are in the custody of the respondents.

7. On the date of hearing, we had called for the records of the proceedings under the Customs Act from the custody of the respondents. On our specific query the learned Counsel for the respondent made a statement based on the record of the proceedings that the representations made by the petitioner were lying in the file of the respondents and no action was taken thereon.

8. According to the petitioner, the seizure having been made without the car having been used for transporting the smuggled gold and silver is totally unjustified and without jurisdiction. It is also submitted that on seizure having been made a notice to show cause against the proposed confiscation was required to be given to the petitioner within a period of six months which having not been done the seized car is liable to be returned to the petitioner forthwith. The learned Counsel for the respondents has submitted that the proceedings for confiscation are going on and the petitioner must await the result thereof. The car in fact belongs to Naresh Kumar Jain who is actively involved in smuggling activities also, using the car for the said illegal purpose, and hence no flaw can be found with the proceedings.

9. Having heard the learned Counsel for the parties, we are of the opinion that though the proceedings for confiscation may continue but the seized car is liable to be returned to the petitioner immediately and to satisfy the ends of justice the petitioner should also be afforded an opportunity of hearing by the respondents in the matter of proposed confiscation.

10. We may briefly refer to the relevant statutory provisions. Under subsection (1) of section 110, if the proper officer has reason to believe that any goods are liable to confiscation under the Customs Act he may seize such goods. Vide Clause (22) of Section 2 of the Act ‘goods’ includes vehicles. Vide Section 124, no order confiscating any goods shall be made unless the owner of the goods is given a notice in writing informing him of the grounds on which it is proposed to confiscate the goods. An opportunity of making a representation in writing, within a reasonable time specified in the notice, against the grounds of confiscation has to be given. A reasonable opportunity of being heard in the matter has to follow. The person concerned may waive a written notice and a written representation and may feel satisfied with an oral notice and oral representation. Under Sub-section (2) of Section 110 the goods seized under Sub-section (1) must be returned to the person from whose possession they were seized if no notice in respect thereof was given under Clause (a) of Section 124. Though the term ‘goods’ includes vehicles, Section 115 is a specific provision dealing with confiscation of conveyances. It specifies the circumstances on availability whereof a conveyance may be liable to be confiscated.

11. The documents filed with the petition on the oath of the petitioner and the genuineness whereof cannot prima facie be doubted go to show that the ownership of the vehicle vests in the petitioner prima facie. Such documents were filed by the petitioner with the respondents also. The least that was expected of the respondents was to have applied their mind to the documents and taken a decision whether they were satisfied prima facie of the ownership of the car being with the petitioner. If that be so, then the petitioner is one who should have been served with a notice to show cause against the proposed confiscation.

12. If there is a failure to give the notice under Section 124 then, as already noticed, consequence statutorily provided by Sub-section (2) of Section 110 is the return of the goods on lapse of six months period from the date of seizure of the goods. The proviso enacted to Sub-section (2) of Section 110 provides for extension of six months’ time by the Collector of Customs by another period not exceeding six months but only on sufficient cause being shown for such extension.

13. In J.K Vardolia Missl v. M.L Khugar, Dy. Collector, 1994 72 ELT 813 (SC). Their Lordships have held:

“The effect of non-compliance of the provisions of Section 110 (2) would only be that the seized goods are returned to the person from whose possession they were seized. It would not render the initial seizure of the goods illegal.”

(para 8)

14. In I.J Rao, Asstt. Collector of Customs v. Bibhuti Bhushan Bagh, 1989 (42) ELT 338 (SC) and Assistant Collector Of Customs & Superintendent Preventive Service Customs, Calcutta v. Charan Das Malhotra, 1983 ELT 1477 (SC) their Lordships have held that the phrase “sufficient cause being shown”, as occurring in the proviso to Sub-section (2) of Section 110, for extension of time by the Collector of Customs, casts an obligation on the Collector to determine on material placed before him availability of circumstances warranting extension of time. However, we need not further dwell on this aspect as so far as the case at hand is concerned as the Collector of Customs has nowhere passed an order extending the said six months time.

15. To sum up, on the documents placed on the record of this case there is material available pointing out to the ownership of the petitioner over the car. At least he is claiming ownership and such claim cannot be said to be baseless or false prima facie. The material on which such claim is being made was placed before the respondents also. They have failed to apply their mind and take decision thereon. Admittedly the petitioner has not been noticed so far. There is no reason to doubt prima facie that the driver Parkash Sharma was holding the possession of the car for the time being on behalf of the petitioner. As a period of six months has expired unextended and without the petitioner having been given a notice to show cause against, the car must be released to the petitioner awaiting the final outcome of the confiscation and adjudication proceedings. As the respondents have failed to do so a writ of mandamus shall issue but taking care to protect the confiscation proceedings from being frustrated.

16. The petition is partly allowed. The respondents are directed to immediately release the car to the petitioner subject to his furnishing a bond before the Asstt. Collector of Customs (Preventive) in an amount equivalent to the price of the car to the following effect:

(1) that during the pendency of the proceedings the petitioner shall not transfer or part with possession of the car in favour of anyone else nor shall encumber or charge it with any financial liability;

(2) that the petitioner shall not alter the identity and appearance of the car in any manner;

(3) that in the event of the confiscation proceedings terminating with an order of confiscation of the car, the petitioner shall forthwith and without any demur produce the car before the respondent and deliver its possession to the Customs officials.

16.1 At the time of delivery of the car to the petitioner, an inventory thereof shall be prepared and signed jointly by an official of the Customs department and of the petitioner.

16.2 The petitioner shall also be served with a show cause notice under Section 124(1) of the Customs Act and shall be afforded opportunity of making a representation and of hearing.

17. The petition stands disposed of accordingly and without any order as to the costs. However, by way of abundant caution we would like to place on record that the facts and the findings on the factual aspects stated and recorded in this judgment have been so made solely for the purpose of adjudicating upon the release of the car pending the finalisation of the confiscation proceedings. Whatever has been stated hereinabove is not in any manner intended to record any finding so as to pre-empt or prejudice the pending proceedings under the Customs Act and the officials of the Customs shall be free to arrive at their own findings unobsessed by anything recorded in this judgment wittingly or unwittingly.