1. Two controversial issues involving determination of true implication of the provisions of sections 110, 124 and 129 of the Customs Act, 1962 (Act 52 of 1962) (hereinafter referred to as the said Act) arise for consideration in this Rule obtained on a Writ Petition. The first issue is as to whether the proviso to section 110(2) is a limitation to a proceeding for confiscation or imposition of penalty under section 124 of the said Act. The second issue is as to whether, the proviso to section 129 requires a judicial or a quasi-judicial adjudication of the interim relief prayed for by an appellant and whether application of the principles of natural justice is called for in such adjudication. In deciding these two issues I propose to set out the facts briefly which are as follows:—
2. On August 18, 1967 one M/s. Parekh's Dresses of No. 66 Hanuman Lane, Bombay sent a consignment to M/s. Amin Stores of No. 10 Bagri Market, Calcutta through the petitioner which is a public limited company carrying on the business of road transport. The consignment note of that consignment was No. 6872. The consignment was purported to contain readymade garments. Both the consignor and the consignee were ultimately found to be non-existent fictitious firms and the consignment was found on contain 347 pieces of foreign watches. In the adjudication proceeding that subsequently followed none turned up to claim the watches.
2. On September 2, 1967 the Customs Authorities acting on an information searched the business premises of the petitioner at Calcutta and recovered the consignment under suspicious circumstances in spite of a determined attempt on the part of the employees of the petitioner company to secret the actual consignment and mislead the authorities conducting the search by interpolating the same consignment number to another package. When recovered under such circumstances the customs authorities seized the goods on a reasonable ground for believing that those goods were smuggled goods. On April 26, 1968 the Collector of Central Excise and Customs served on the petitioner a show cause notice calling upon them to show cause why penalty should not be imposed upon them under section 112 of the said Act and why the 347 watches of foreign origin along with the other package should not be consficated under sections 11(d) and 119 of the said Act.
3. On June 29, 1968 the petitioner showed cause. They disclaimed all knowledge about the watches or the contents of the consignment and pleaded that they are innocent carrier of the goods made over to them for being carried from Bombay to Calcutta.
4. On March 6, 1969 the Collector gave the petitioner a hearing but by an order dated the May 25, 1969 confiscated the goods and imposed a personal penalty of Rs. 10,000/- on the petitioner company. So far as the watches are concerned Collector found and held that all the watches are of foreign origin, none came forward to claim those watches, both the consignor and the consignee are fictitious and as such the watches must be held to be illegally imported in contravention of the orders made under section 3(1) of the Imports and Exports Control Act, 1947. The Collector on the proved facts and circumstances overruled the petitioner's defence that they were innocent carriers but on the part played by the employees and the Director held that both the management as also the employees aided and abated the attempted concealment of the smuggled goods at the petitioner's godown.
5. Being aggrieved by the aforesaid order of the Collector the petitioner preferred an appeal before the Central Board of Revenue on October 3, 1969. They also presented an application praying for an order that the deposit of the amount of penalty under section 129(1) of the said Act may be dispensed with. Such a prayer was made on the ground that in circumstances set out in paragraph 7 of the application deposit of the penalty would cause Undue hardship on them.
6. By an ex parte order dated May 30, 1970 the Board rejected the said application and on the petitioner's failure to deposit the amount of penalty dismissed the appeal for default in making such deposit without, however, going into the merits of the appeal. The appeal was so dismissed by the Board by its order No. 120 of 1970 dated November 7, 1970. Petitioner preferred a revisional application to the Central Government but that was dismissed by an order dated February 1, 1972. Feeling aggrieved by the aforesaid four orders, namely, one dated May 25, 1969 of the Collector, two orders dated May 30, 1970 and November 7, 1970 of the Board and the one dated February 1, 1972 of the Central Government the petitioner has moved this court on a writ petition and has obtained the above Rule.
7. The Rule is being contested by the respondents who have filed an affidavit-in-opposition.
8. Mr. Sen appearing on behalf of the petitioners has first contended that the entire proceeding is illegal and without jurisdiction inasmuch as the show cause notice itself was issued on an extension of time; granted on an ex parte order of the Collector dated February 24, 1968 made under the proviso to section 110(2) of the said Act. Secondly, Mr. Sen has challenged the order imposing the penalty on merits. Lastly, Mr. Sen has contended that the petitioner's appeal to the Board had wrongly been dismissed for default for non-fulfilment of an obligation imposed as a result of an ex parte order refusing the petitioner's prayer for relief under the proviso to section 129(1) of the Act.
9. Mr. Das, learned Counsel for the respondents has contested each of the points so raised by Mr. Sen. So far as the first point raised by Mr. Sen is concerned, Mr. Das has not disputed that the order granting the extension had been granted ex parte by the order dated February 24, 1968; but according to him such an ex parte order might have invalidated the continued seizure and detection of the goods, which were ultimately confiscated but that would not vitiate the proceeding for imposition of penalty or render them illegal or without jurisdiction. So far as the goods confiscated are concerned, the petitioner is not claiming the goods nor is the petitioner challenging their confiscation. So far as the second point raised by Mr. Sen is concerned, Mr. Das is supporting the order of the Collector by contending that on facts the Collector has found the petitioner's active involvement in the carriage, concealment and possession of the smuggled goods under circumstances which clearly establishment due knowledge on the part of the petitioner of the goods being smuggled. Again, the third point raised by Mr. Sen, Mr. Das has contended that section 129 confers no right on a person on whom a penalty is imposed to have the deposit of the amount of penalty dispensed with and as such an ex parte rejection of such a prayer cannot be said to be illegal, nor has it vitiated the rest of the proceeding. According to Mr. Das, section 129 vests absolute direction and the section nowhere contemplates that the appellant has to be heard in support of any claim of relief sought for under the proviso to section 129(1), and as such the Board cannot be said to have acted illegally in disposing of the petitioner's application ex parte. Mr. Das has, however, not disputed the fact that the Board rejected the said prayer not only on an ex parte order but also on an ex parte report of the Collector.
10. To support the first contention raised, Mr. Sen placed strong reliance on two decisions, namely, (1) Assistant Collector, Customs v. Malhotra, 1983 (13) E.L.T 1477 (S.C) : (1971) 1 SCC 697 : AIR (1972) SC 689 and (2) Md. Hanif v. Collector, C. and C. Excise, AIR (1973) All. 433. In the case of Assistant Collector, Customs v. Malhotra the Supreme Court no doubt held that the Collector cannot extend the period for giving notice of confiscation under section 124(a) without giving an opportunity of hearing to the person whose articles are seized on the allegation that those are liable to be confiscated. That principle was of course laid down by the Supreme Court while considering a question whether the Customs authorities can hold back, goods seized even beyond the prescribed period of six months without issuing a show cause notice under section 124(a). The ex parte order of extension of time to show cause was held to have invalidated the continued seizure and detention of the goods. In that case there was no direct is-sue before the Supreme Court as to what be the effect of such an extension on a proceeding for consfication or imposition of penalty for which the statute has provided no limitation. Unlike the contention of Mr. Sen now before me no body pleased in that case that the time prescribed by proviso to section 110(2) is really a limitation prescribed for a proceeding under section 124 and the initiation thereof on a notice to show cause.
11. No doubt that Allahabad decision relied on by Mr. Sen may be said to be incidentally supporting him in his contention insofar the learned Judge held that the show cause notice under section 124 itself was rendered illegal because of ex parte extension of time under proviso to section 110(2). The earned Judge relied on the decision of the Supreme Court in the aforesaid case of Assistant Collector, Customs v. Malhotra and Obviously the principle laid down by the Supreme Court had been extended a little more than what was actually decided by the Supreme Court. With greatest respect, however, I am unable to subscribe to the view so taken by the learned Judge in the case of Md. Hanif v. Collector, C. and C. Excise. In my reading of the. Supreme Court decision, the Supreme Court has not gone so far and on the other hand, observations made therein well support the view contended for by Mr. Das, Section 110 is in Chapter XIII which deals with only searches, seizure and arrest. Subsection (1) of section 110 authorises the proper officer to seize any goods which he has reason to believe are liable to confiscation having been imported illegally and in contravention of any prohibition. This is an ancillary power to the power of conducting searches under the other provisions of the said chapter. Sub-section (2), in order to bring in a balance between the authority's power of search and seizure and the individual's right to the goods seized lays down a limitation that goods so seized are liable to be returned on the expiry of six months from the date of the seizure, if in the mean time a notice under section 124(a) for confiscation had not been issued. Time so specified is not a time limit for initiation of a proceeding for confiscation or imposition of penalty; it is, on the other hand, a limit of time up to which the goods can be held back without issuing a notice under section 124(a). Proviso to section 110(2) when it speaks of extension by an order, only means extension to validate the detention of the goods and not for any other purpose. Provisions for the proceedings for confiscation and imposition of penalty are in a different chapter, namely, Chapter XIV. Neither section 111 which imposes the liability for confiscation nor section 112 which imposes the liability for penalty provides for any limitation. Neither does section 124 itself provide any limitation for the proceedings thereunder. As a matter of fact, the statute nowhere contemplates any limitation in respect of enforcement of these liabilities and it would not be proper to read the limitation prescribed by section 110(2) as a limitation for proceeding under section 124.
12. The decision of the Supreme Court in Malhotra's case does not support the contention of Mr. Sen. That decision is to be read in its proper perspective. It was an appeal from a Bench decision of this court reported in AIR (1968) Cal. 28. The decision of this court was affirmed by the Supreme Court: In AIR (1968) Cal. 28 one of the prayers made before this court was return of the goods seized and in considering such a claim, this court held that the notice under section 124(a) not having been issued within six months and the extension having been illegally obtained ex parte, the goods are liable to be returned. Notice under section 124(a) was also independently challenged in that case and was set aside by this court not on the ground that it was not issued within six months as prescribed by the proviso to section 110(2) but on a totally different ground, namely, that the notice was materially vague. This court specifically considered, the question as to what would be the effect of non-issue of a notice under section 124(a) within six months on the proceedings for confisaction and imposition of penalty and this court held:—
“The next question is as to what is the effect of the second extension being in-. validated. So far as section 110 is concerned, it deals, not with the issue of notice but with the seizure of the goods and the return thereof. In other word if the provisions are not satisfied the goods seized have to be returned. Therefore, since the extension had not been properly granted the appellant is entitled to the return of the goods. That by itself may not invalidate the notice itself. For that purpose we have to travel to the next point taken, namely, the nature of the notice which has been issued under section 124 of the said Act”.
13. The view expressed by this Court was affirmed by the Supreme Court and the observations made in paragraph 5 of the judgment of the Supreme Court are very much instructive, there it was observed that:—
“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.”
14. Views thus expressed fully support the conclusions of this court on the point at issue. Such was also the view expressed in a Bench decision of Madras High Court in the case of Collector of Customs v. Amrutha Lakshmi, 1974 (2) MLJ 88 relied on by Mr. Das. Considered in the light of these decisions, with greatest respect to the learned Judge, I am of the opinion that the Allahabad decision relied on by Mr. Sen to the extent that had extended the principles laid down by the Supreme Court and has held that issue of a notice under section 124(a) of the Act beyond the period of six months from the date of the seizure by itself would invalidate the notice does not lay down the correct principle. I therefore, overrule the first point raised by Mr. Sen and hold that not withstanding the illegality perporated by the Collector in making an ex parte order extending the time prescribed by the proviso to section 110(2), such illegality or irregularity had not rendered the proceeding for imposition of penalty invalid or without jurisdiction.
15. So far as the second point raised by Mr. Sen is concerned I think it would neither be necessary nor proper for me to go into that issue when for reasons hereinafter given I am of the opinion that the petitioner's appeal had not been lawfully disposed of by the Board.
16. In dealing with the last point raised by Mr. Sen, it must be remembered that the petitioner's appeal had not been considered and dismissed on merits. It had been so dismissed for non-compliance with the requirement of section 129(1) after the petitioner's application for the relief contemplated by the proviso thereto was rejected ex parte or an ex parte report. The undisputed facts on the point as they appear from the records produced by Mr. Das are as follows:—
17. The petitioner preferred an appeal against the order imposing the penalty on October 3, 1969. They made a separate application on the ground of hardship as made out in the application itself praying for an order that prior deposit of the amount of penalty as required under section 129(1) may be dispensed with. On receipt of the petition of appeal an officer of the Board by an inter departmental correspondence dated October 10, 1969 forwarded the appeal petition to the Collector for a report and therein asked for the following three informations:
“(i) Whether the appellant has paid the duty and or the penalty payable according to the order appealed against.
(ii) The exact date of the receipt of the order appealed against by the appellant.
(iii) The financial condition of the appellant”.
17. The Collector on his own enquiries submitted a report to the Board on May 13, 1970 wherein he stated that the “appeal has been submitted by the petitioner within the time-limit and the financial condition of the firm itself is quite sound”.
Proceeding on the report as aforesaid, the office of the Board put up a note the relevant part whereof is as follows:—
“In the circumstances, relaxation of Rule 129, requested by the petitioner may not appear well merited. Moreover, the Collector in his report says that financial position of the party is sound. That being so, there is no scope for any hardship being caused to the appellants, if Board insists for pre-deposit of the penalty adjudged. If approved the party may be considered being given a written warning to deposit the amount first within 15 days of receipt of communication, failing which the appeal is liable to be rejected, on this ground alone”.
18. Endorsements on the minute show that on different dates be tween 20th May 1970 and 23rd May, 1970 the members agreed to and accepted the proposal so made and the petitioner was then served with the order dated May 13, 1970 made annexure ‘C’ to the writ petition which stated as follows:—
“The Board do not see any justification to exercise the discretionery powers under the proviso to Section 129(1) of the Customs Act, 1962 and dispense with prior payment of penalty pending consideration of the appeal”.
19. On these facts, the question raised and debated before me is as to whether the Board could have disposed of the application of the petitioner in an ex parte manner as aforesaid. While Mr. Sen appearing for the petitioner claims that the Board could not have so disposed of the application when section 129 contemplates a judicial or quasi-judicial exercise of powers for disposing of a claim for an interim relief contemplated by the proviso to section 129(1), Mr. Das learned Counsel for the respondents contends that when section 129 confers no right to an appellant to apply for and to get an order dispensing with deposit of the amount of penalty, the Board could lawfully dispose of all matters left to its discretion by the proviso to section 129(1) administratively in the manner it had done in the present case. To support this contention Mr. Das has referred to the object behind a provision like 129 as also to the object for introduction of a provision like the one in the proviso to section 129(1). Mr. Das has very strongly contended that when the section itself contemplates no entertainment of an application or of hearing being given to parties to support thereof it would not be proper for this court to read into the section any such liability.
20. I am, however, unable to accept this contention of Mr. Das. Section 129(1) of the Customs Act with its proviso is set out hereunder.
“(1) Where the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of customs authorities of any duty demanded in respect of goods which are not under the control of customs authorities or any penalty levied under this Act, any person desirous of appealing against such decision or order shall, pending the appeal, deposit with the proper officer the duty demanded or the penalty levied:
Provided that where in any particular case the appellate authority is of opinion that deposit of duty demanded or penalty levied will cause undue hardship to the appellant, it may in its discretion dispense with such deposit, either unconditionally or subject to such conditions as if may deem fit.
(2) If upon any such appeal it is decided that the whole or any portion of such duty or penalty was not leviable, the proper officer shall return to the appellant such amount of duty or penalty as was not leviable.”
21. This section may not have spoken of an application by an appellant or of the appellate tribunal giving a hearing in support of such an application. But in my view, the scope of making an application follows by necessary implication from the proviso. It will be pertinent in this context to note the alteration of the provisions of the law on the point. Section 129 of the said Act stands for the earlier section 189 of the Sea Customs Act. In section 189 of the said Act there was no provision like the one in the proviso to section 129(1). No doubt section 129(1) as the previous section 189 of the Sea Cutoms Act is intended to obviate necessity or any proceeding by way of attachment and sale for realisation of any amount imposed by way of penalty or arrears duty but the rigour of section 189 of the Sea Customs Act was relaxed by introducing a clause like the proviso to section 129(1) with the object “in cases where deposit of duty or penalty is required, the appellate authority is being given the discretion to dispense with this requirement if it causes undue hardship to the appellant. This provision will enable the appellant to give relief in deserving cases.” therefore, the definite implication or the introduction of the proviso to section 129(1) is to give an interim relief in proper cases of hardship to an appellant by exempting him from the obligation otherwise imposed by section 129(1). It is not correct to suggest as suggested by Mr. Das that on such a provision section 129(1) proviso confers no right whatsoever on an appellant. Granting the relief by way of dispensation may be in the discretion of the Board. But that in my view, is a judicial or quasi-judicial discretion which is to be exercised with reference to the objective tests laid down in the proviso itself namely hardship to the appellant and may be on consideration of other matters relevant to the exercise of such discretion. The appellant may not have a right to get an order in his favour but certainly he has a right to claim such a relief on grounds sanctioned by the statue and relevant to the exercise of the discretion vested by section 129 proviso and also to claim lawful consideration and disposal of such a prayer. When on my views the discretion vested in the Board in this respect is judicial or quasi-judicial and when a decision of the Board on the issue involved in exercise of such discretion may—if decided against the appellant-adversely affect him, it is incumbent for the Board to hear the appellant on the application and dispose of the same on contest. This position in my view, follows from the very same principles as have been laid down by the Supreme Court in Malhotra's case referred to hereinbefore.
22. That apart, in my considered opinion, there is an additional ground for thinking that disposal of a prayer made for relief claimed under section 129(1) proviso requires a hearing. As pointed out hereinbefore disposal of such a claim involves determination of objectives tests namely either the hardship to the appellant or such other relevant facts as may enter into consideration for exercise of judicial or quasi-judicial discretion vested by the said provision. In the matter of such determination, it is but necessary that the parties who are likely to be affected by such determination of facts should be heard. Reference may be made to the decision of the Supreme Court in the case of Baud Ahmad v. District Magistrate, Allahabad, (1972) 1 SCC 655 : AIR 1972 SC 896. It was observed by his Lordship Mr. Justice Ray as His Lordship then was:—
“That is why the principle of audi alteram partem is attracted. The opinion as to alternative accommodation is not an impersonal obligation. It is a determination of a fact. The District Magistrate has to arrive at the opinion on the existence of facts by holding an enquiry and not on turning the idea within himself without giving the petitioner any say in the matter”.
23. In my considered opinion,. application, of principles of natural justice in the matter of exercise of powers or discretion under Section 129(1) proviso follows from the nature of the powers or the discretion invested by the provision itself which contemplates judicial or quasi-judicial exercise of discretion with reference to objective tests. The principles laid down by the Supreme Court in the case of Purtalpur Company Ltd. v. Cane Commissioner, Bihar, (1969) 1 SCC 308 : AIR 1970 SC 1896, Hyder Rahaman v. State of Bihar, (1973) 3 SCC 333 : AIR 1973 SC 239 and Madan Gopal v. District Magistrate, Allahabad, (1973) 1 SCC 89 : AIR 1972 SC 2656 well support this view. I may also refer to a decision of this court on a comparable provision under the Wealth-tax Act in case of Aluminium Corporation v. Balakrishnan, AIR 1959 Cal. 114 wherein this court held that disposal of an application under Section 31(3) of the Wealth-tax Act contemplates judicial exercise of discretion.
24. Such being the legal requirement when in the present case, the Board proceeded to dispose of the petitioner's application by an ex parte order and on the basis of a report from the Collector which was never disclosed to the petitioner and when the petitioner was given no opportunity to satisfy the Board on evidence produced before it that the report is not correct and that the appellant is so financially involved that it would cause great hardship to the appellant if they are to be made to deposit the amount of penalty prior to the consideration of the appeal;, the Board clearly acted in violation of principles of natural justice.
25. For reasons aforesaid I must hold that the Board had not acted in accordance with law in rejecting the petitioner's application for an order dispensing with deposit of the amount of penalty by an ex parte order dated 30th May 1970 and the said order must be set aside. If that order fails the subsequent order of the Board dated the 7th November, 1970 passed thereon must also fail along with the order dated 1st February, 1972 of the Central Government as passed on the revisional application. Said orders are also therefore set aside. The appeal and the application should now be disposed of by the Board in accordance with law.
26. The Rule is accordingly made absolute in part to the extent as above.
27. Let a Writ of certiorari issue incorporating the above direction. As the said Rule is disposed of, the application for an interim relief be comes infructuous and is accordingly dismissed.
28. There will be no order as to costs.