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Ambali Karthikeyan v. Collector Of Customs & Central Excise
Structured Summary of the Judgment
Factual and Procedural Background
The petitioner, an exporter of rose wood timber residing in Calicut, had his residential premises searched by the Central Excise Inspector (Divisional P & I Unit, Kozhikode) on 4-8-1969 under authorisation from the Assistant Collector of Central Excise, Kozhikode (the second respondent). The search, carried out in the petitioner’s absence but in the presence of his son, resulted in seizure of numerous items including bottles of foreign liquor, radios, binoculars, empty bottles used as containers for foreign liquor and a few documents. A statement from the son was recorded on the spot, and the petitioner subsequently gave a statement on 8-8-1969.
Following departmental investigation, the Collector of Customs and Central Excise (first respondent) issued a show cause notice (Ext. P-1), dated 12-1-1970 and despatched on 4-2-1970, stating that the seized articles appeared to be of foreign origin liable for confiscation under Section 111(d) of the Customs Act, 1962 and that offences under other relevant provisions were made out. The petitioner received Ext. P-1 on 10-2-1970 and submitted an explanation (Ext. P-2) on 28-2-1970, contending that because the show cause notice was received only after six months from seizure and there was no extension of that period by the Collector, he was entitled to return of the goods under Section 110 (sub-section (2)) of the Customs Act.
The Collector informed the petitioner (Ext. P-6 / Ext. P-8) that the time for issue of the show cause notice was extended by one month in exercise of powers under Section 110 of the Act. After further correspondence and a notice fixing hearing, the petitioner filed this writ petition seeking a writ of mandamus or appropriate order directing release of the goods seized on 4-8-1969.
Legal Issues Presented
- Whether the six-month period specified in Section 110(2) of the Customs Act should be reckoned from the date of despatch/issue of the show cause notice or from the date of receipt of the notice by the person concerned.
- Whether the Collector of Customs can extend the six-month period under Section 110(2) without hearing the person from whose possession the goods were seized (i.e., whether an extension must be preceded by notice to and opportunity to be heard of the affected person).
Arguments of the Parties
Petitioner's Arguments
- The petitioner contended that the relevant six-month period in Section 110(2) should be reckoned up to the date of actual receipt of the show cause notice by him (i.e., service), not merely the date of despatch.
- He argued that the word "given" in subsection (2) requires actual service on the person, and therefore a notice despatched but received after six months would not satisfy the statutory time-limit.
- The petitioner further contended that an extension under Section 110(2) could be made only "on sufficient cause being shown" and that such an extension—because it affects the vested right to the return of goods once the six-month period expires—must be preceded by hearing the person affected (i.e., the petitioner ought to have been given an opportunity to show cause against the extension).
- The petitioner asserted that in the present case he only received the show cause notice after six months, there was no extension order shown to him initially, and hence he was entitled to return of the goods.
Respondent's (First Respondent / Collector's) Position
- In his counter-affidavit the first respondent stated that Ext. P-1 was signed by the Collector on 12-1-1970 but was actually despatched on 4-2-1970, and that the delay in despatch was brought to the Collector's notice on 2-2-1970 when he extended the time for issuing the notice by one month under the proviso to Clause (2) of Section 110.
- The respondent effectively relied on the statutory mechanism for service (Section 153) which permits service by sending a notice by registered post, and on the fact that the notice was sent by registered post within the statutory time period.
- Implicitly, the respondent maintained that extension of time was validly made by the Collector on sufficient cause (office omission/delay) and that there was no requirement to hear the petitioner before making that extension.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Charandas v. Asstt. Collector of Customs, AIR 1968 Cal. 28 | The Calcutta High Court held that where the period for issuing a show cause notice under Section 110(2) has expired and a right to return of goods has vested in the person from whose possession the goods were seized, an order extending the period (thereby divesting that vested right) should not be made without giving that person an opportunity to be heard — i.e., the extension after expiry requires hearing as it takes away a vested right. | The court considered this decision but explicitly rejected its reasoning. The present court held that the Collector can extend the period before expiry on being satisfied on "sufficient cause" shown by the investigating officer and that such satisfaction does not require hearing the accused/owner. The court disagreed with the distinction drawn in Charandas between extensions made before and after expiry and held the Collector's extension in the instant case to be valid. |
Court's Reasoning and Analysis
The court addressed the legal issues in two linked strands: (A) the meaning of "given" in Section 110(2) as to whether the statutory period runs to despatch or receipt of the notice; and (B) whether the Collector could validly extend the six-month period without hearing the affected person.
A. On the question of timing (despatch versus receipt):
- The court examined Section 124(a) (which requires that the owner/person be "given notice in writing") in conjunction with Section 153 (which prescribes modes of service under the Act: by tendering or by sending by registered post to the person or his agent, or by affixture on the notice board where clause (a) cannot be used).
- The court concluded that Section 153 indicates that a notice can be effectively "given" by sending it by registered post—that is, the relevant act is issue/service in one of the prescribed manners rather than actual receipt by the person. On that basis, since Ext. P-1 was despatched by registered post within the statutory time, the show cause notice was held to have been "given" within the six-month period prescribed by Section 110(2).
B. On the question whether extension requires hearing of the affected person:
- The petitioner argued (and relied on the Calcutta decision) that an extension under the proviso to Section 110(2) must be preceded by hearing the person affected because the extension can divest a vested right to return of goods once the initial six-month period expires.
- The court reviewed the reasoning in Charandas and respectfully disagreed. The court held that the power to extend the six-month period is exercisable only "on sufficient cause being shown" and that the cause must be shown to the Collector by the investigating officer who requests the extension. The court explained that the accused/owner does not figure in the showing of cause to the Collector and therefore there is no statutory requirement that the person whose rights may be affected be heard before the Collector is satisfied that sufficient cause exists.
- The court rejected the proposition that extension can be made after the statutory period has expired; instead it held that extension must be made before expiry, because once time has expired the right to return accrues. Thus the practical focus must be whether the Collector was satisfied of sufficient cause and whether the satisfaction occurred before expiry. If so, the extension is valid and there is no need to hear the affected person prior to that administrative decision.
- Applying these principles to the facts, the court accepted the Collector's statement that the delay in despatch was brought to his notice on 2-2-1970 and that he extended the time by one month on that date under the proviso to Clause (2) of Section 110. The court found that the extension was made before expiry and that the reason for extension (omission/negligence in the office causing delay) constituted sufficient cause to justify the extension in order not to defeat the proceedings.
Holding and Implications
Holding: The Original Petition is DISMISSED.
Direct consequences for the parties:
- The court upheld the validity of the Collector's extension of time under Section 110(2) and held that the show cause notice (Ext. P-1), having been sent by registered post within the extended period, was lawfully "given" under the Act.
- Accordingly, the petitioner's claim for return of the seized goods on the ground that the six-month period had elapsed without extension was rejected.
- The court ordered no costs ("There will be no order as to costs").
Broader implications: The court expressly rejected the reasoning of the Calcutta High Court decision (Charandas) to the extent it required hearing of the affected person before extension; it treated extension as an administrative/quasi-judicial function exercisable by the Collector on being satisfied of sufficient cause shown by the investigating officer. The opinion does not articulate the setting of any binding new precedent beyond the decision in this case.
JUDGMENT
1. The petitioner is an exporter of Rose Wood timber residing within the Corporation of Calicut. On 4-8-1969 the Central Excise Inspector. Divisional P & I Unit, Kozhikode, searched the residential premises of the petitioner as per an authorisation from the Assistant Collector of Central Excise. Kozhikode, who is the second respondent, and recovered from his premises 89 bottles of foreign liquor, another bottle containing 4 ounces of foreign liquor. 2 sets Poni transistors, 2 foreign radios, 2 binoculars and 18 empty bottles used as containers for foreign liquor along with a few documents. The petitioner was not then in the house; and the search and recovery were made in the presence of his son. A statement was recorded from him by the Inspector on the spot; and subsequently on 8-8-1969 the petitioner also gave a statement regarding the articles seized from the premises in his possession.
2. This was followed by the usual investigation by the Central Excise Department, and a notice Ext. P-1 dated 12-1-1970 to the petitioner from the first respondent the Collector of Customs and Central Excise stating that it appeared to him that the articles seized were of foreign origin liable for confiscation under Section 111(d) of the Customs Act, 1962, and that an offence was committed by the petitioner under Sec. 11 of the Act read with Section 3, (2) of the Imports and Exports (Control) Act, 1947 and calling upon the petitioner to show cause why a penalty should not be imposed on him under Section 112(b) of the Act and why the said articles should not be confiscated under Section 111(d). Ext. P-1 was despatched on 4-2-1970; and it was received by the petitioner on 10-2-1970. The petitioner submitted an explanation, Ext. P-2 dated 28-2-1970, regarding possession of the above articles by him and he also contended that, as the show cause notice was received by him only after six months of the seizure and there was no extension of that period by the Collector, he was entitled to the return of goods. The contention obviously is based upon the provisions of Section 100 of the Customs Act. Ext. P-2 was followed by a notice, Ext. P-3 dated 1-4-1970 fixing the case for hearing to 29-4-1970. The petitioner by his letter Ext. P-4 dated 20-4-1970 protested to the posting of the case without deciding his claim for the return of the goods; and he also applied for a true copy of the order, if any, made by the Collector to extend the time under Section 110 of the Act. The 1st respondent, by letter Ext. P-6 dated 2-5-1970, informed the petitioner that he had extended the time for issue of the show cause notice by one month from 4-2-1970 in exercise of the powers conferred on him under Section 110 of the Act. The petitioner again by his letter, Ext. P-7 dated 18-5-1970, applied for a true copy of the above order, to which the first respondent replied by letter, Ext. P-8 dated 1-6-1970, reiterating his previous position, namely that he has on 2-2-1970 extended the time by one month from 4-2-1970.
3. The petitioner protested to the above communication by his letter, Ext. P-9 dated 5-6-1970; and he again requested for a true copy of the above order. On 8-7-1970, the first respondent issued a notice, Ext. P-11, posting the case for hearing to 1-8-1970, and informed the petitioner that if he failed to appear with all documents and other evidence in support of his defence, the case will be considered and disposed of ex parte. Thereupon the petitioner filed this writ petition praying for a writ of mandamus or other appropriate writ or order directing the first respondent to release the goods seized from his on 4-8-1969.
4. There is no dispute that Ext. P-1 was despatched on 4-2-1970. On the question whether there was an extension of time as stated in Ext. P-8 and the circumstances under which it was extended the first respondent states as follows in paragraph 5 of his counter-affidavit:
“It is submitted that the then Collector Shri M.C Das signed the draft of Ext. P-1 on 12-1-1970. Ext. P-1 is also dated the same day. It was actually despatched from the first respondent's office on 4-2-1970. The delay in the despatch of Ext. P-1 was brought to the notice of the then Collector on 2-2-1970 and he extended the time for issue of notice by one month on the same date in exercise of the power vested in him by the proviso to Clause (2) of Section 110 of the Customs Act, 1962.”
5. The correctness of the above statement is not disputed. The counsel for the petitioner rightly submitted his arguments only on the basis of sub-sec. (2) of Section 110. It reads:
“110. (1) xxx
(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 on the seizure of the goods, the goods shall be returned to the person from whose possession they were seized:
Provided that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Collector of Customs for a period not exceeding six months.
(3) xxx
(4) xxx”
6. He first contended that the period of six months mentioned in the above provision should be reckoned from the date of seizure of the goods to the date of receipt of notice by him under Section 124(a) and not to the date of despatch of the notice. He submitted that the use of the word given in subsection (2) shows that the notice must be actually served on the person, and that it was not sufficient that the notice was despatched. The question has to be decided on first impressions as it does not appear to have been covered by any decision. Section 124(a) deals with issue of show cause notice before confiscation of the goods etc.; and that section also states that the owner of the goods or the person on whom the penalty is proposed to be imposed shall be given notice in writing. That by itself does not give any indication whether the relevant date is the date of issue of the notice or the date of receipt of the notice of the person concerned.
7. Section 153 of the Act deals with service of order, decision etc. and it reads:—
“153. Service or order, decision etc. — Any order or decision passed or any summons or notice issued under this Act, shall be served—
(a) by tendering the order, decision, summons or notice or sending it by registered post to the person for whom it is intended or to his agent; or
(b) if the order, decision, summons or notice cannot be served in the manner provided in clause (a), by affixing it on the notice board of the customs house.”
The above provision shows that a notice issued under the Act can be served by sending it by registered post to the person for whom it is intended or to his agent, and that if it cannot be served in that manner it can be served by affixing on the notice board of the Customs Office. It gives an indication that in giving notice under the Act receipt of the same by the person concerned is not relevant; but what is relevant is issuing of the notice in any one of the manners provided in that section. In this view of the matter, it follows that the show cause notice in this case has been given to the petitioner under Section 110 of the Act within the prescribed period of 6 months, as it has been admittedly sent by registered post within that rime.
8. Assuming that it is the date of receipt by the person concerned which is relevant, the question for consideration is whether an extension of the period of 6 months mentioned in Sec. 110(2) of the Act can be made by the Collector without hearing the person concerned. Counsel for the petitioner submitted that such extension can be made only on sufficient cause being shown and that, an extension would affect the vested right of a person to get the goods released if the show cause notice is not issued within the prescribed period, no order extending the time can be passed by the Collector without hearing the person concerned and giving him an opportunity to show cause against the extension.
9. In support of the above contention, counsel brought to my notice a Division Bench decision of the Calcutta High Court in Charandas v. Asstt. Collector of Customs, AIR 1968 Cal. 28. In that case the premises of the appellant was searched by the Customs authorities on 19-3-1963; and certain articles were seized by them. On 18-9-1963, the Additional Collector of Customs made an ex parte order extending the period for issuing the show cause notice under Sec. 110(2) of the Act by 4 months. Before the expiry of that period another application was made by the Investigating Officer on 3-1-1964. That application however happened to be ordered by the Collector only on 20-2-1964; and he passed another ex parte order extending the time by two months. It is not very clear from the decision what exactly was the relief sought for by the appellant in that case. The contention was that the above two orders extending the period under Section 110(2) of the Act was bad, as they were passed without hearing the appellant. Sinha, C.J who delivered the judgment of the Court in dealing with the above contention stated as follows:—
“As long as the period of issuing notice has not expired, it might be one thing. But quite a different set of circumstances arise when the period has expired and the right to the return of the goods is vested in the person from whose possession the goods are seized. If you are to take away the right you can only do that for a “sufficient cause”. How can the officer concerned decide as to divest a vested right, unless he hears the parties Affected…………. I am not suggesting that the hearing should be as if it was in a court of law. But some opportunity would have to be given to a person who has a vested right to the return of the goods to be heard in his defence, before that right can be taken away. Even though it is an executive action, the statutory provisions require that a judicial approach should be adopted.”
10. Speaking with great respect, I am not able to endorse the view contained in the above statement. The learned Chief Justice thinks that the period fixed under Section 110(2) of the Act can be extended even after the expiry of the said period. In my view, no question of extension of time can arise after the time has expired. When the time expires, the person from whose possession the goods were seized, gets the right for the return of the goods. The extension can only be before that right accrues: and if the time is extended, the right does not accrue.
11. Again according to the learned Chief Justice, different considerations arise in the matter of extension before the expiry of the period and after the expiry of the period. I am unable to find-any scope for the differentiation in the light of the language used in the section. All that the section says is that the extension can be made only “on sufficient cause being shown”, whether the extension is before the expiry of the period or after its expiry, it would always affect the right of the person, whose goods has been seized. In the former case, he would have got the goods returned to him after the expiry of the period, but for the extension; and in the latter case, his right to get them returned is taken away, by virtue of the extension. If the power of extension is a quasi-judicial power, the authority exercising it has to give a reasonable opportunity for being heard to the person who would be affected by the exercise of that power, whether it is exercised before the expiry of the period or after its expiry. The learned Chief Justice himself states that the extension of time under Sec. 110 is an executive action, and that it should be exercised with a judicial approach. I respectfully agree with this statement, in the sense that any administrative or executive decision should be made on a just and proper consideration of the relevant facts and circumstances of the case. The Collector of Customs can extend the period of six months fixed in S. 110(2) of the Act only “on sufficient cause being shown”. The cause has to be shown before him by the officer investigating the case and who wants the extension. In that matter, the accused does not come into the picture; and there is no question of hearing him. The Collector has to be satisfied on the facts placed before him that there is sufficient cause for extension. I, therefore, reject the contention that the extension of time allowed by the Collector in the instant case is bad, as it was done without notice to the petitioner. Counsel for the petitioner also contended that there has been no proper extension of time in this case, as there was nothing to show that the Collector of Customs was satisfied that there was sufficient cause for the extension of time. It is clear from the facts of this case that the time was extended due to some omission or negligence in the office of the Collector or Customs in despatching the notice which was signed by him on 12-1-1970. When it was brought to his notice it was only just and proper that he extended the time, so that the proceedings may not be defeated; and he has done so before the expiry of the period. Therefore the objection that the extension has been done without sufficient cause cannot be sustained.
12. In the result, this Original Petition is dismissed. There will be no order as to costs.
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