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Chaganlal Gainmull v. Collector Of Central Excise And Others
Factual and Procedural Background
The appellant’s goods were seized under the Customs Act, 1962. No show-cause notice under Section 124(a) was issued within six months of the seizure. Claiming that this omission violated Section 110(2), the appellant filed W.P. No. 3387 of 1970 before a learned Single Judge of the Madras High Court, who allowed the writ and set aside the adjudication proceedings that had culminated in an order of confiscation. On a Letters Patent Appeal, a Division Bench reversed that decision on 22 July 1974, holding that Section 110(2) limits only the power to retain goods, not the power to issue a notice. The present appeal to the Supreme Court was brought by special leave against that Division Bench judgment.
Legal Issues Presented
- Whether the Customs Department is barred from issuing a show-cause notice under Section 124(a) of the Customs Act, 1962 after the expiry of six months from the date of seizure, by virtue of Section 110(2).
Arguments of the Parties
Appellant's Arguments
- Relied on the proviso to Section 110(2) to contend that a show-cause notice under Section 124(a) cannot be issued once six months have elapsed from the seizure.
- Argued that failure to give such notice within that period vitiates the entire adjudication and confiscation proceedings.
Respondent's Arguments
The opinion does not contain a detailed account of the respondent’s legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Astt. Collector of Customs v. Charan Das Malhotra, (1971) 1 SCC 697; (1971) 3 SCR 802 | Section 124 does not prescribe any time-limit for issuance of a notice; the six-month period in Section 110(2) affects only the power to retain seized goods. | The Supreme Court invoked this decision to affirm that a notice issued after six months is not invalid; only the right to retain the goods without notice lapses. |
Court's Reasoning and Analysis
The Court examined Section 110, which authorises seizure when goods appear liable to confiscation, and Section 124, which requires a written notice before any order of confiscation or penalty. Sub-section (2) of Section 110 specifies that if no notice under Section 124(a) is issued within six months, “the goods shall be returned” to the person from whom they were seized. The Court held:
- Section 110(2) creates a consequence—mandatory return of goods—if the notice is not issued within six months, but it does not impose a statutory limitation period on initiating adjudication proceedings themselves.
- The interpretation advanced by the High Court’s Division Bench is supported by the Supreme Court’s own earlier pronouncement in Charan Das Malhotra, which clarified that the six-month limit concerns seizure, not notice validity.
- Therefore, delay in issuing the show-cause notice only impacts the Department’s authority to continue detaining the goods; it does not nullify its power to adjudicate thereafter.
Holding and Implications
APPEAL DISMISSED.
The Supreme Court upheld the Division Bench of the Madras High Court, confirming that a show-cause notice under Section 124(a) may validly be issued after six months, although the goods must be returned if detention extends beyond that period without notice. The decision affirms existing precedent and does not create a new rule, but it reinforces the distinction between the power to retain seized goods and the power to adjudicate confiscation.
Order
1. This appeal, by special leave, arises out of and is directed against the judgment dated July 22, 1974 of a Division Bench of the High Court of Madras in Letters Patent Appeal No. 273 of 1972 dismissing, in reversal of the order dated January 5, 1972 of the learned Single Judge of the High Court, the W.P No. 3387 of 1970 filed by the appellant by which appellant assailed certain adjudication proceedings under the Customs Act, 1962 culminative in an order of confiscation of certain seized goods. The adjudication proceedings were assailed on the ground that the show cause notice contemplated by Section 124(a) had not been issued within six months from the date of the seizure of the goods as envisaged by Section 110(2) of the Act. The High Court, in the judgment under appeal, was persuaded to the view that the time limit referred to by Section 110(2) pertained to the power to retain the seized goods beyond six months and that the issue of the show cause notice under Section 124(a) beyond six months did not affect or vitiate the power to adjudicate.
2. We have heard Sri Sharad Javali, learned senior advocate for the appellant and Sri V.C Mahajan, learned senior advocate for the revenue. Support for Sri Javali's proposition that a show cause notice under Section 124(a) cannot be issued after the lapse of six months of the seizure is sought to be drawn entirely from the proviso the sub-section (2) of Section 110. Section 110 deals with the seizure of goods, documents and things. Sub-section (1) of that section says that “if the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods”. Sub-section (2) says that “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 to the person from whose possession they were seized”.
3. It appears to us that the consequence that flows from the failure to issue a show cause notice under Section 124(a) within the period of six months is limited to what is envisaged in sub-section (2) namely that the goods shall be returned to the person from whose possession they were seized. Section 110(2), does not prescribe a period of limitation within which a show cause notice is to be issued. But if no action by way of issue of a show cause notice is initiated under Section 124(a) within the period of six months, stipulated by Section 110(2) the effect would be that the person from whom the goods were seized would become entitled to their return.
4. The view that commended itself to the Division Bench of the High Court is supported by the following observation of this Court in Astt. Collector of Customs v. Charan Das Malhotra (1971) 1 SCC 697, (1971) 3 SCR 802 :( : SCR p. 805)
“Section 124 provides that no order confiscating any goods or imposing any penalty on any person shall be made 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 lay down any period within which the notice required by it has to be given. The period laid down in Section 110(2) affects only the seizure of the goods and not the validity of the notice. “
(emphasis supplied)
5. The delay beyond six months in the issue of the show cause notice goes to and affects the power to detain the seized goods beyond six months and does not denude the adjudicating authority of the power to initiate proceedings even thereafter.
6. We find no merit in the appeal which is, accordingly, dismissed; but without an order as to costs.
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