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Bhanabhai Khalpabhai v. Collector Of Customs And Another
Factual and Procedural Background
On 30 January 1969 customs and police officials, acting on suspicion, searched the appellant’s Wadi at Iklora (within 50 km of the Indian coast) and unearthed 101 buried silver ingots weighing 3,274.98 kg and valued at approximately ₹18 lakh. The goods were not covered by any transport documents and no compliance with Chapter IV-B of the Customs Act, 1962 was shown. The appellant’s voluntary statement under Section 108 of the Act admitted ownership of the Wadi and acknowledged the presence of the ingots.
The Magistrate convicted the appellant under Section 135(1)(a) of the Customs Act, sentencing him to two years’ rigorous imprisonment and a ₹5,000 fine (with six months’ default imprisonment). His appeal was transferred to the High Court, which dismissed it. The present judgment concerns the appellant’s further appeal before the Supreme Court of India.
Legal Issues Presented
- Whether the appellant’s Section 108 Customs Act statement was admissible against him in view of Article 20(3) of the Constitution.
- Whether possession and concealment of the silver ingots constituted involvement in “fraudulent evasion or attempt at evasion” of (a) duty or (b) statutory prohibitions so as to satisfy Section 135(1)(a) of the Customs Act.
- Whether, in light of Section 138-A of the Customs Act, the prosecution had proved the requisite culpable mental state of the appellant.
Arguments of the Parties
Appellant's Arguments
- The ingredients of Section 135(1)(a) were not met because the prosecution failed to prove that the buried ingots were connected with any fraudulent evasion of duty or statutory prohibition.
- Ownership of the Wadi was disputed; it allegedly belonged to the appellant’s wife, and the appellant was not present during seizure, negating conscious possession.
Prosecution's Arguments
- The voluntary Section 108 statement and witness testimony established the appellant’s ownership/control over the premises and goods.
- Failure to file the mandatory intimation under Section 11-J(2) within a specified area was itself a prohibited act, evidencing an attempt at evasion of statutory prohibition and duty.
- By virtue of Section 138-A, a presumption of culpable mental state arose, which the appellant failed to rebut.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Veera Ibrahim v. State of Maharashtra, (1976) 2 SCC 302 | Statement to Customs Officer under Section 108 is admissible when the accused is not formally charged; not barred by Article 20(3). | Relied on to admit and use the appellant’s Section 108 statement acknowledging ownership and presence of ingots. |
| R.C. Mehta v. State of West Bengal, (1969) 2 SCR 461 | Customs statements prior to formal accusation are not protected by Article 20(3). | Cited in support of the admissibility rationale formulated in Veera Ibrahim. |
| Asst. Collector of Customs v. Babu Miya Sheikh Imam, (1983) 3 SCC 447 | Interpretation of Section 135(1)(a) in three distinct parts concerning duty and prohibition. | Used to demonstrate that violation of a statutory prohibition alone suffices for conviction under Section 135(1)(a). |
| State of Maharashtra v. Natwarlal Damodardas Soni, (1980) 4 SCC 669 | Mens rea under Section 135(1) can be proved circumstantially; burden may shift to the accused under Section 106 Evidence Act. | Reinforced the Court’s view that circumstantial evidence plus statutory presumptions established the appellant’s culpable mental state. |
| Heydon’s Case, (1584) 3 Co Rep 7a | Mischief Rule of statutory interpretation. | Cited to justify a purposive construction of anti-smuggling provisions of Section 135(1). |
Court's Reasoning and Analysis
1. Admissibility of the Section 108 Statement: Applying Veera Ibrahim and R.C. Mehta, the Court held that the appellant’s statement—recorded before any formal accusation—was voluntary and admissible.
2. Ownership and Possession: The appellant’s admissions, corroborated by witness testimony, established that the Wadi belonged to him and that he had knowledge of the buried ingots.
3. Statutory Prohibitions under Section 11-J: Silver bullion had been declared “specified goods,” and the appellant’s premises lay within a “specified area.” Under Section 11-J(2) no person could acquire such goods exceeding ₹15,000 without prior intimation to Customs. The appellant’s failure to give such intimation constituted an attempt to evade this prohibition.
4. Evasion of Duty: Concealment of a large quantity of silver in a coastal belt is, by its nature, indicative of intended smuggling to avoid customs duty. The Court recognised the difficulty of direct proof in smuggling cases and relied on circumstantial evidence.
5. Presumption of Mens Rea (Section 138-A): Because Section 138-A was in force before trial, the Court presumed the existence of a culpable mental state. The appellant produced no evidence to rebut this presumption or to explain lawful possession.
6. Conformity with Section 135(1)(a): The Court concluded that the appellant was (i) knowingly concerned in an attempt at evasion of duty and (ii) knowingly concerned in evasion of a statutory prohibition. Either ground satisfied Section 135(1)(a).
Holding and Implications
Appeal Dismissed. The conviction and sentence imposed by the trial court were affirmed, and directions were issued for the appellant to be taken into custody to serve the remaining sentence.
Implications: The judgment reinforces the admissibility of Section 108 statements, clarifies that breach of Section 11-J prohibitions independently attracts Section 135(1)(a) liability, and upholds the evidentiary presumption of mens rea under Section 138-A. No new legal doctrine was created, but existing anti-smuggling principles were strongly reaffirmed.
N.P Singh, J.— The appellant was convicted by the Magistrate for an offence under Section 135(1)(a) of the Customs Act (hereinafter referred to as the ‘Act’) and was sentenced to undergo rigorous imprisonment for two years and to pay a fine of Rs 5000, in default of payment thereof, to undergo rigorous imprisonment for further period of six months. The appeal preferred on behalf of the appellant, before the Sessions Judge, was transferred to the High Court, to be heard along with the appeal filed on behalf of the State, against the order of acquittal, passed by the Magistrate against other co-accused persons. The High Court, by the impugned judgment, dismissed the appeal of the appellant.
2. It is the case of the prosecution that on January 30, 1969, the patrolling officials found a truck coming from the side of Moti Daman and proceeding towards Mohangam Railway Crossing, without the headlights being on in a suspicious manner. On inquiry, it was found that the said truck had unloaded some contraband articles at some Wadi. Police and the officials of the Customs Department, found out that goods had been unloaded at the Wadi of the appellant at Iklora. A search was carried out in the said Wadi, and on digging the ground near a well 101 silver ingots, weighing 3274.98 kgs., worth about Rs 18,08,850, were recovered. The said silver ingots were neither covered under any transport voucher nor any of the requirements contemplated under Chapter IV-B of the Act, were found to have been complied with. The Customs officials had reasonable belief that the said silver ingots had been stored at the Wadi of the appellant, for the purpose of illegal export and as such liable for confiscation. Further investigation disclosed that the said silver ingots had been brought by two motor trucks bearing Nos. M.H.T 2304 and M.R.T 2751. So far the truck No. M.H.T 2304 was concerned, which was spotted out first moving in a suspicious manner, was carrying contraband silver ingots 20 in number. Several persons including the drivers and owners of the trucks were made accused in connection with the said recovery. The original accused 2 Shankarbhai Haribhai, brother-in-law of the appellant, was at the time of seizure, present at the Wadi and was guarding the said place. Later he absconded and could not be made available for trial.
3. By Notification No. C.S.R 37, dated January 3, 1969, issued by the Government of India, Ministry of Finance, in exercise of the powers conferred by the Act ‘Silver Bullion and Coins’ had been declared as ‘specified goods’. By Notification No. C.S.R 38, dated January 3, 1969, issued in exercise of powers conferred by the said Act, the area of 50 kilometres in width from the coast of India, falling within the territories of the States of Gujarat, Maharashtra, Mysore and Union Territory of Goa, Daman and Diu, had been declared as ‘the specified area’. There is no dispute that the Wadi of the appellant was within 50 kilometres from the coast of India as such within the ‘specified area’, and before the seizure were made on January 30, 1969, the silver ingots had been notified as ‘specified goods’.
4. After the recovery aforesaid, the statement of the appellant had been recorded, in accordance with Section 108 of the Act. During course of the statement, the appellant admitted that the Wadi belonged to him and 101 silver bars had been buried near a well in the said Wadi. He stated:
“Customs personnel came at night at my Iklora Wadi and they took away 101 silver bars which were buried near the well….”
He again repeated the same thing later in his statement by saying:
“On date January 30/31, 1969 the Customs officials digged the land near the well in the Wadi of my Iklora and found 101 silver bars….”
He, however, stated that he did not know how the silver bars came there. In the case of Veera Ibrahim v. State of Maharashtra (1976) 2 SCC 302, AIR 1976 SC 1167 it was examined, as to whether the statement of the accused in that case recorded by the Customs Officer under Section 108 of the Act before any complaint or first information had been lodged against him, can be used against such accused when he was charged for having committed an offence under Section 135(1)(a) of the Act. It was said that mere facts that at the relevant time the person was arrested on suspicion of having committed an offence under Section 124 of the Bombay Police Act and a panchnama had been prepared seizing the goods, were immaterial when neither the case was registered nor the FIR was recorded by the police. It was pointed out that when the Customs Officer recorded the statement of the appellant, in that case he was not formally accused of any offence and as such the statement recorded by the Inspector of Customs was not hit by Article 20(3) of the Constitution. In that connection, reference was made to the judgment of this Court in the case of R.C Mehta v. State of W.B (1969) 2 SCR 461, AIR 1970 SC 940 As such the statement made by the appellant under Section 108 of the Act, can be used against him. The appellant stated in clear and unambiguous words (i) that the Wadi belonged to him by saying twice “my Iklora Wadi” (ii) Customs personnel came at night and took away “101 silver bars, which were buried near the well”. At the time of trial, the appellant took a stand that the Wadi did not belong to him, it belonged to his wife and as during the recovery of the silver ingots, he was not present at the Wadi, no inference of guilt against him could be drawn.
5. On behalf of the appellant, nothing has been brought to our notice to reject his statement under Section 108 of the Act, saying that the said statement was not voluntary or made under coercion. On behalf of the prosecution, witnesses have been examined to prove as to how after digging the ground near the well, 101 silver ingots were recovered. Witnesses have also stated that the Wadi, from where recovery was made, belonged to the appellant. The statement of the appellant made under Section 108 of the Act along with the evidence of the witnesses, who have been examined to prove the recovery from the Wadi aforesaid, establish that Wadi belonged to the appellant and 101 silver ingots had been concealed under the ground, which were recovered after digging the ground.
6. Now the only question which is to be examined, is as to whether on basis of the recovery, the appellant can be held to be guilty for an offence under Section 135(1)(a) of the Act? On behalf of the appellant, a stand was taken before this Court that even if the prosecution case regarding recovery aforesaid is accepted, the ingredients of Section 135(1)(a) have not been fulfilled, so as to hold that the appellant committed an offence under that section. The relevant part of Section 135(1)(a) is as follows:
“135. Evasion of duty or prohibitions.— (1) Without prejudice to any action that may be taken under this Act, if any person—
(a) is in relation to any goods in any way knowingly concerned in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under this Act or any other law for the time being in force with respect to such goods; or
***.”
7. According to appellant, the prosecution has not established that the silver ingots had been kept buried in connection with any fraudulent evasion or attempt at evasion of any duty chargeable thereon. In the case of Asst. Collector of Customs v. Babu Miya Sheikh Imam (1983) 3 SCC 447, AIR 1983 SC 974 it was pointed out that Section 135(1)(a) has to be read in three parts:(, 451, para 4)
“1. If any person is in relation to any goods in any way knowingly concerned in any fraudulent evasion or attempt at evasion of any duty chargeable thereon, he shall be punishable with imprisonment for a term which may extend to three years or with fine or both.
2. If any person is in relation to any goods in any way knowingly concerned in any fraudulent evasion or attempt at evasion of any prohibition for the time being imposed under the Customs Act, 1962 with respect to such goods, he shall be punishable with imprisonment for a term which may extend to three years or with fine or both.
3. If any person is in relation to any goods in any way knowingly concerned in any fraudulent evasion or attempt at evasion of any prohibition for the time being imposed under any other law for the time being in force with respect of such goods, he shall be punishable with imprisonment for a term which may extend to three years or with fine or both.”
8. As such if any person is in relation to any goods in any way knowingly concerned in any fraudulent evasion or attempt at evasion of any prohibition for the time being imposed under the said Act with respect to such goods, even then he shall be punishable with imprisonment as prescribed under the said section. In other words, the person must be concerned in any fraudulent evasion or attempt at evasion of any prohibition imposed under the Act. In the instant case, the ‘silver bullion’ had been declared as specified goods and the inland area of 50 kilometres in width from the coast of India including the area in which the Wadi of the appellant was situated had been declared as ‘specified area’ under the provisions of the Act. Sub-section (1) of Section 11-J, which had come in force, w.e.f January 3, 1969, required every person who owns, possesses, or has control, on the specified date, over any specified goods, the market price of which exceeds fifteen thousand rupees, to deliver to the proper officer, an intimation containing the particulars of the place where such goods had been kept or had been stored within the specified area. Sub-section (2) of Section 11-J enjoins that every person who acquires, within the specified area, after the specified date, any specified goods, the value whereof exceeds fifteen thousand rupees, to deliver to the proper officer an intimation containing the particulars of the place where such goods were proposed to be kept or stored “before making such acquisition”. In other words sub-section (2) prescribes a bar on acquiring any specified goods within the specified area unless before making such acquisition, he delivers to the proper officer an intimation containing the particulars of the place where such goods are proposed to be kept or stored, after such acquisition. Per se this will amount to be prohibition in acquiring specified goods within the specified area, the value whereof exceeds fifteen thousand rupees unless the conditions for such acquisition are fulfilled with. There is no dispute in the present case that the appellant, never before making acquisition, delivered to the proper officer any intimation in respect of acquisition, of those silver ingots and the place where such silver ingots were proposed to be kept or stored after the acquisition. In this background, there should not be any difficulty in holding that the appellant was concerned in fraudulent evasion or attempt at evasion of the aforesaid prohibition under sub-section (2) of Section 11-J in relation to specified goods.
9. In the facts and circumstances of the case, it can also be held that the appellant was concerned with the specified goods in connection with ‘fraudulent evasion or attempt at evasion’ of duty chargeable on the specified goods. It is well known, that it is very difficult for the prosecution, to prove every link, in respect of the commission of the offence under the Act by direct evidence. The whole process of smuggling, for evading payment of custom duty consists of different links. The links aid and abate each other, sometimes through a remote control. That is why, Parliament has introduced Section 138-A in the Act. Section 138-A says:
“138-A. Presumption of culpable mental state.— (1) In any prosecution for an offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.
(2) For the purposes of this section, a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability.”
This section had come in force before the trial commenced. The provision relates only to burden and nature of proof at the trial, as such it was applicable in the present case. In view of the aforesaid section, a presumption has to be drawn, in respect of existence of the alleged mental state. An option has been given to the accused to prove by way of defence the fact, that he did not have any such mental state with respect to the act charged which is an offence. It can be said that the provision aforesaid is an exception to the general criminal jurisprudence that onus never shifts on the accused and he has only to raise a doubt in the mind of the court, in respect of the correctness of the prosecution version. It is different from Sections 106 and 114 of the Evidence Act. In view of Section 138-A, once a presumption is raised about a culpable mental state on the part of the accused, that he had stored the silver ingots, to export them outside the country evading payment of custom duties, the accused has to prove as a defence that no such mental state with respect to the act charged, did exist. No material has been produced on behalf of the appellant to discharge this burden. He has not explained as to why 3274.98 kgs. of silver ingots, worth rupees more than 18 lakhs had been concealed underground near a well in his Wadi without any intimation being given to the proper officer concerned, before acquisition of those silver ingots, as required by sub-section (2) of Section 11-J.
10. This Court in the case of State of Maharashtra v. Natwarlal Damodardas Soni (1980) 4 SCC 669 in which the trial had been completed before the introduction of Section 138-A in the Act, examined as to what is the nature of proof required for establishing a charge for an offence under Section 135(1). It was said that the requisite guilty knowledge or mens rea under clause (a) or (b) of Section 135(1), can be established by circumstantial evidence as well. Even without applying Section 138-A of the Act, it was held that the burden of proving an innocent receipt of gold lay upon the appellant under Section 106 of the Evidence Act. The totality of facts proved, was enough to raise a presumption under Section 114 of the Evidence Act, that the gold had been illegally imported into the country. It was further said that provisions of Section 135(1) had been designed to suppress smuggling, as such it has to be construed in accordance with the Mischief Rule first enunciated in Heydon case (1584) 3 Co Rep 7a.
11. According to us, the prosecution has established that the appellant was concerned in an attempt at evasion of duty under the provisions of the Act, as such committed the offence under first part of Section 135(1)(a) of the Act. He was also concerned in evasion of the prohibition imposed by sub-section (2) of Section 11-J of the Act, by not having delivered to the proper officer, an intimation containing the particulars of the place, where the silver ingots, in such a huge quantity were to be kept and stored, as such he committed the offence even under the second part of Section 135(1)(a) of the Act. The very fact that 3274.98 kgs. of silver ingots worth more than rupees 18 lakhs had been kept buried near the well in the garden, leads to irresistible conclusion that the said silver ingots had not been kept or stored in normal course of business.
12. As such there is no merit in this appeal and it is accordingly dismissed. The trial court shall take all necessary steps to take the appellant in custody to serve out the remaining period of sentence.
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