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Collector Of Customs And Central Excise, Cochin v. A. S. Bava And Others
Structured Summary of the Provided Opinion
Factual and Procedural Background
A transporter, C. S. Pillai, moved 108 bags of tobacco under transport permit T.P. 1 - 599495 dated 3 October 1961. On 15 December 1961 the Superintendent of Central Excise inspected the respondent's licensed premises and found that the respondent had received these 108 bags. On comparison of the transport permit with the parent documents it was noted (1) the parent documents did not mention the rate of duty noted on the permit and (2) the description of the tobacco in the parent documents differed from that in the permit.
Show-cause notices were issued: one to C. S. Pillai for contravention of rule 32(1) of the Central Excise Rules, 1944, and one to the respondent proposing confiscation under rules 32(2) and 40 read with section 168 of the Sea Customs Act, 1878 (notification No. 69/59 adapting the section). The seized tobacco had been provisionally released to the respondent on bond and a cash security of Rs. 2,000.
By adjudication (ex. P-6) the appellant adjudged the tobacco and bags liable to confiscation under rules 32(2) and 40 read with s.168 and directed production of the tobacco, or alternatively appropriation of the Rs. 2,000 security as fine and payment of duty at the higher rate for a portion of the tobacco. The respondent filed Original Petition No. 391 of 1963 challenging ex. P-6; the High Court (Govindan Nair, J.) allowed that petition, quashing ex. P-6. The appellant appealed that decision.
Legal Issues Presented
- Whether section 168 of the Sea Customs Act (as adapted by notification No. 69/59) confers an independent power to confiscate goods or only an ancillary power to confiscate packages and conveyances connected with goods liable to confiscation.
- Whether rule 32(2) of the Central Excise Rules authorises confiscation of tobacco in rem so as to permit confiscation of goods after transport has ceased and the goods have come into the possession/ownership of the consignee (i.e., whether the tainted goods can be followed into the hands of a receiver).
- Whether rule 40 of the Central Excise Rules applies to the respondent (a wholesale purchaser/receiver) in the circumstances where the recipient received goods under a transport permit that was, on its face, correctly filled and did not put the recipient on enquiry, despite discrepancies between the permit and the consignor's parent documents.
Arguments of the Parties
Appellant's Arguments
- The confiscation order was justified on the basis of rule 32(2) and rule 40 of the Central Excise Rules and also on the basis of section 168 of the Sea Customs Act, 1878 (as adapted).
- Section 168 (and its adaptation) was relied upon to support confiscation of packages or goods connected with the contravention.
- It was argued that once goods were transported in violation of the rules the tainted goods could be followed and confiscated in the hands of any person even after transport had ceased (i.e., confiscation could operate in rem beyond the transporter).
Respondent's Position
- The respondent submitted explanations to the show-cause notice and relied on the fact that the receipt was under a permit which ex facie had entries correctly filled and disclosed nothing to put the respondent on enquiry.
- There was no allegation (in ex. P-6 or before the court) that the permit had not been applied for or obtained by the transporter or that it was obtained by fraud.
- Implicitly, the respondent resisted application of rule 32(2) and rule 40 to him on the facts presented.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court addressed the statutory provisions invoked and analysed their scope and operation on the facts before it.
On section 168 of the Sea Customs Act (as adapted): The court reproduced the text of s.168 and the adaptation notification (No. 69/59) and held that neither the section nor the adaptation confers any independent power of confiscation of goods. Instead, the court found that the provision confers only an ancillary power to confiscate packages, receptacles, or conveyances connected with goods liable to confiscation. Accordingly, s.168 (as adapted) had no application to sustain the confiscation order in question.
On rule 32(2) of the Central Excise Rules: The court examined the text of r.32(1) and r.32(2), noting that r.32 penalises a person who transports without a valid permit or commits the other specified acts, and provides that the tobacco in respect of which the offence is committed shall be liable to confiscation. The court interpreted this provision to mean that the power of confiscation under r.32(2) can be exercised only during the currency of the transport — while the goods remain in the dominion and control of the transporter. Once the transport has ceased and the goods have come to rest in the consignee's premises and passed into his ownership, the court held the power under r.32(2) is unavailable.
The court rejected the appellant's argument that the tainted goods could be followed and confiscated in the hands of subsequent holders after transport had ceased. The court reasoned that the content and purpose of r.32(2) militate against such a construction. It also observed that if r.32's confiscation power were applicable beyond transport, r.40 (which specifically punishes receivers) would be rendered superfluous.
The court contrasted r.32(2) with section 167(8) of the Sea Customs Act (quoted in the opinion): it noted that s.167(8) clearly contemplates confiscation of goods wherever they are and treats the goods as the dominant idea of the penal provision. By contrast, r.32 focuses on penalising the transporter and does not have the same in rem emphasis. On that basis the court concluded r.32 was not applicable to the present facts and its invocation in ex. P-6 was unjustified.
On rule 40 of the Central Excise Rules: The court quoted r.40, which makes it an offence for a wholesale purchaser to receive unmanufactured tobacco other than under a valid permit showing payment of duty, and makes such goods liable to confiscation where the rule is contravened. The court noted the admitted facts: the respondent received the goods under a permit; the permit's entries were, on their face, correctly filled and disclosed nothing to put the respondent on enquiry; and there was no case that the permit was not obtained legitimately or that it was obtained by fraud.
The court also noted that no provision was pointed out that would render a facially valid permit invalid by reason of discrepancies discovered on scrutiny against parent documents, nor any provision obliging a wholesale purchaser to verify the permit against the consignor's parent documents. In these circumstances the court concluded that r.40 did not attract the case at hand.
Given these analyses, the court found ex. P-6 unjustified: r.32 was inapplicable and r.40 was not attracted on the facts presented; s.168 did not confer an independent confiscatory power. The court therefore upheld the High Court's quashing of ex. P-6.
Holding and Implications
Holding: The appeal is dismissed with costs. The adjudication ex. P-6 (which declared the tobacco and bags liable to confiscation under r.32(2) and r.40 read with s.168) was quashed by the High Court and that quashing is sustained by this dismissal of the appeal.
Implications:
- Direct effect on the parties: The confiscation order contained in ex. P-6 was held unjustified and the High Court's order quashing ex. P-6 stands; the appellant's attempt to confiscate on the bases relied upon (r.32(2), r.40, and s.168 as adapted) failed.
- Statutory interpretation consequences: The court clarified that s.168 (as adapted) is ancillary and does not create an independent confiscatory power; r.32(2) operates against the transporter during the transport (not as an in rem power once goods are in the hands of a consignee); and r.40 applies to a receiver only where the statutory conditions for its application are met (not where a recipient has a facially valid permit and no reason to suspect it).
- No broader precedent beyond these interpretive findings was stated by the court in the opinion; the decision was applied to the facts and the appeal dismissed.
This summary is limited to, and derived exclusively from, the information contained in the provided opinion.
1. One c. S. Pillai transported 108 bags of tobacco under a transport permit t. P. 1 - 599495, Dated 3rd october 1961. On 15th december 1961, The superintendent of central excise visited the licensed premises of the respondent, And checked the stock of the tobacco in the said premises with the connected transport permits of the goods. It was noticed that the respondent had received the 108 bags of tobacco transported by c. S. Pillai under the permit above noticed. On checking up the permit with the parent documents, It was noticed
(1) that there was no mention in the parent documents of the rate of duty as rs. 2. 20+44 np. Whereas the same was so mentioned in the permit; and
(2) that the description of tobacco in the parent documents was only as stems kandi and stalk barado; whereas the description in the permit was biri tobacco mixture.
2. On the above facts, A show cause notice was issued to sri c. S. Pillai for contravention of r. 32 (1) of the central excise rules, 1944 (hereinafter referred to as the rules). A show cause notice, Copy produced as ex. P - 1, Was issued, To the respondent for confiscation of the tobacco under r. 32 (2) and 40 of the rules, Read with s. 168 of the sea customs act, 1878, Made applicable to the rules by government of india notification under 69/59, Dated 18th july 1959. The tobacco which had been seized was provisionally released to the respondent on executing a bond and furnishing a cash security of rs. 2,000.
3. The respondent submitted his explanation to the show cause notice, & thereafter, The appellant by proceedings evidenced by ex. P - 6 adjudged the tobacco and the bags in which they were contained as liable to confiscation under r. 32 (2) and r. 40 of the rules, Read with s. 168 of the sea customs act. The respondent was directed to produce the tobacco and on failure to do so, The order ex. P - 6 directed that the security deposit of rs. 2,000 was to be appropriated towards fine in lieu of confiscation of the goods. The respondent was also directed to pay duty at the higher rate on tobacco brought to his premises under t. I. 1 - 599495. Dated 3rd october 1961, A portion of which was found in the tobacco seized from the premises. The respondent filed o. P. No. 391 of 1963 to quash the above order. Our learned brother (govindan nair, J.) allowed the o. P. With costs, And quashed ex. P - 6, Hence this appeal.
4. The learned judge has stated in his judgment that the order ex. P - 6 was not sought to be supported on the basis of r. 40, And arguments before our learned brother proceeded only on the basis of r. 32 (2). No arguments were addressed to sustain the order on the terms of the bond. The learned judge held that r. 32 did not enable the appellant to pass an order in rem, Or order the confiscation of goods belonging to a person, Who had not contravened the conditions mentioned in the rule.
5. Before us, Counsel for the appellant urged that the confiscation was based on r. 32 (2) and r. 40 of the rules, And besides, On the provisions of s. 168 of the sea customs act, 1878.
6. Argument based on s. 168 of the sea customs act, 1878 can easily be disposed of. The said section reads as follows:
"168. The confiscation of any goods under this act includes any package in which they are found, And all the other contents thereof.
every vessel, Cart or other means of conveyance, And every horse or other animal, Used in the removal of any goods liable to confiscation under this act shall in like manner be liable to confiscation.
the confiscation of any vessel under this act includes her tackle, Apparel and furniture. "
7. We have examined notification no. 69/59, By which the above section was adapted for central excise adjudications. We are satisfied that neither the section nor the notification by which it was adapted confers any independent power of confiscation of goods. They confer only an ancillary power to confiscate packages, Receptacles, Etc. Connected with the goods. The section and the notification which adapted the same, Have no application.
8. R. 32 (1) and (2) of the rules reads as follows:
"32. Tobacco not to be carried except under transport document: (1) except for tobacco in a green state and except for small quantities of cured tobacco not exceeding in weight two standard seers for personal or domestic use,
(a) no unmanufactured tobacco shall be carried or transported without a valid permit in the proper form signed by an officer or a certificate in the proper form signed by the carer, A licensed broker or commission agent or the wholesale dealer to whose permises it is to be carried or transported:
provided that duty - paid tobacco may be carried or transported from the premises of a licensed wholesale dealer to the premises of another licensed wholesale dealer under cover of a sale note issued by the consignor, Subject to such limitations and such other conditions as the central board of revenue may by order in writing impose;
(6) no unmanufactured tobacco shall except in special circumstances, Where the collector by written order otherwise directs be carried or transported by rail, Motor vehicle river or canal without a valid permit in the proper form signed by an officer.
(2) if any person,
(a) carries or transports such tobacco without a valid permit, Certificate or sale note, Or
(6) while carrying or transporting such tobacco, Does not, On request by an officer, Forth with produce a valid permit or certificate or sale - note, As the case may be, Or
(c) enters any particulars in the certificate or sale - note in respect of any such tobacco, Which are, Or which he has reason to believe to be false, He shall be liable to a penalty not exceeding one thousand rupees, And the tobacco in respect of which the offence is committed shall be liable to confiscation. "
9. We are clear on a reading of r. 32 (2) that it penalises a person who transports without a valid permit or does any of the other things contemplated by clauses (b) and (c) of the rules, And further provides that the tobacco in respect of which the penalty mentioned by clauses (a) to (c) of the said rule is committed, Is liable to confiscation. We feel that the power of confiscation can be exercised only during the currency of the transport, I. E., While the goods still remain in the dominion and control of the transporter. Once transport had ceased, And the goods have come to rest in the premises of the consignee and pass into his ownership, The power of confiscation under r. 32 (2) is unavailable.
10. It was argued by counsel for appellant that the confiscation is in respect of the goods, And once the goods have been transported in violation of the rules, The tainted goods can be followed in the hands of any person, Even after the transport has ceased. The content and purpose of r. 32 (2) seems to us to militate against this construction. There is, Besides, R. 40 of the rules which punishes the receiver of the goods otherwise than under a valid permit, And directs a confiscation of the goods for contravention of the rule. If, As contended, The power of confiscation directed by r. 32, Would enure beyond the transport of the goods and be available against anyone who has come by the goods, It seems to us, The provision for confiscation under r. 40 would be superfluous.
11. The language of r. 32 (2) may usefully be contrasted with the provisions of s. 167, Clause (8) of the sea customs act, 1878. The latter provision clearly emphasises that the dominant idea of the penal provision is the goods, Wherever they are, And the person guilty of the contravention assumes only a subordinate role in the provision. We are therefore of the view, That r. 32 of the rules has no application to the instant case and its invocation by ex. P - 6 was unjustified.
12. R. 40 of the central excise and salt rules runs as follows:
"wholesale purchaser may not receive unmanufactured tobacco or other unmanufactured products except under permit showing payment of duty. Except as provided in the proviso to clause (a) of sub - rule (1) of r. 32 and in r. 171 no wholesale purchaser of unmanufactured tobacco for the purpose of trade or manufacture & no wholesale purchaser of other unmanufactured products from a career shall receive into any part of his premises or into his custody or possession, Any unmanufactured tobacco or other unmanufactured products, Other than tobacco or other unmanufactured products imported from a foreign country, Otherwise than under a valid permit granted by an officer showing that the proper duty has been paid; & every such wholesale purchaser who receives or has in his custody or possession any such goods, In contravention of this rule, Shall, In respect of every such offence, Be liable to pay the duty leviable on such goods, And to a penalty which may extend to two thousand rupees, And the goods shall also be liable to confiscation."
13. It is admitted that the receipt by the respondent was under a permit. It is further admitted that ex facie the entries in the permit had been correctly filled up and disclosed nothing to alert the respondent, So as to put them on further enquiry. There was no case before us that the permit had not been applied for or obtained by c. S. Pillai. Nor was there any case, Either in ex. P - 6, Or before us, That it was obtained by fraud. What is alleged for the appellant is that on a comparison of the permit with the parent documents under which it was applied for, There was discrepancy in regard to the quality of the tobacco and the rate of duty payable thereon. Our attention was not called to any provision by which a permit ex facie valid and proper on its entries would cease to be such, By reason of discrepancies on scrutiny with the parent documents. Nor were we told of any provision under the act or the rules which require a wholesale purchaser, Contemplated by r. 40 to check up the permit with the parent documents of the consignor or transporter. In these circumstances, We are unable to hold that r. 40 is attracted to the case.
14. The appeal is without merits and is dismissed with costs.
dismissed.
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