- Bookmark
- Share
- CaseIQ
Messrs. Devichand Je... v. The Collector Of Cen...
Structured Summary of the Opinion
Factual and Procedural Background
On 9 November 1957 the Superintendent of Central Excise, Vellore, searched the shop and residence of Messrs. Vanechand and Sons. From the shop 121-7/32 tolas of gold were seized, including two bars of 10 tolas each bearing foreign marks; from the proprietor's residence five bars of 10 tolas each with foreign marks were also recovered. According to the firm's regular accounts, stock on hand should have been only 98 tolas. Private accounts showed receipts of gold from four named Bangalore parties that were not recorded in the regular books.
On 10 November 1957 Bijraj (son of Vanechand), who managed the business, made statements admitting that 70 tolas in marked bars seized from shop and residence were received from the petitioner in W.P. No. 110 of 1959 and later admitted that the smuggled gold had been purchased from the petitioners in four writ petitions. Other employees and family members (a clerk Govindaraj, Sampathraj, and Vanechand) also gave statements describing purchases and sources; Vanechand admitted that the marked gold had been brought from Bowrilal of Bangalore (W.P. No. 110).
Departmental officers in Bangalore recorded statements from each of the four petitioners, all of whom denied connections with Vanechand and Sons (three denying even knowledge of the firm's existence and telephone contact). The partner Bowrilal admitted knowing Vanechand only in connection with some matrimonial proposals.
The Collector of Central Excise, Madras, after a personal hearing of petitioners' counsel, recorded the view that the four Bangalore parties were concerned in the smuggling of gold which they had been passing on to the firm at Vellore. Penalties were imposed as follows: Rs. 6,000 on the petitioner in W.P. No. 88 of 1959; Rs. 25,000 on the petitioner in W.P. No. 109 of 1959; Rs. 25,000 on the petitioner in W.P. No. 110 of 1959; and Rs. 12,000 on the petitioner in W.P. No. 111 of 1959. The four individuals challenged those penalty orders by approaching this Court by writ petitions seeking to quash the Collector's orders.
Legal Issues Presented
- Whether, under Item 8 of the Schedule to S. 167 of the Sea Customs Act, the petitioners could be held liable as having imported the gold or as being "concerned in" the importation (i.e., having arranged, abetted, or received the gold immediately after import).
- Whether mere purchase or possession of gold that has been unlawfully imported, or knowledge that gold is smuggled, suffices to bring a person within Item 8 such that penalties under S. 167(8) may be imposed.
- Whether the evidential materials relied upon by the Collector (statements by Vanechand and employees, private accounts, telephone contacts, and perceived falsehoods in petitioners' statements) constitute legal evidence sufficient to sustain the Collector's conclusion that the petitioners imported or were concerned in the importation.
- Whether the Court may draw a presumption (by reference to illustrations to sections of the Evidence Act) or take judicial notice of extensive smuggling in the region so as to support the departmental finding in the absence of direct legal proof of importation by the petitioners.
Arguments of the Parties
Department's Arguments (as presented in the opinion)
- The department relied upon statements made by Bijraj, Sampathraj, Vanechand and Govindaraj that the firm had purchased gold from the petitioners.
- It pointed to separate private accounts kept for such purchases and frequent trunk telephone communications between the firm and the petitioners as circumstantial evidence of involvement.
- The department relied on the petitioners' alleged inability to explain how they came into possession of the gold and on a conclusion that petitioners' statements were false.
- Learned Counsel for the department argued that smuggling of gold in 1957 along the West Coast of South India was so extensive that the Court could take judicial notice of the fact and, by analogy to Illustration (a) to S.114 (and referenced Illustration (a) to S.112) of the Evidence Act, justify a presumption that the petitioners were concerned in unlawful importation.
- The department referred to the decision in Bhatnagars and Co., Ltd. v. Union of India to contend that the Court should not interfere unless there was no evidence whatsoever supporting the Collector's conclusion.
Petitioners' Position (as reflected in the opinion)
- Each petitioner denied any connection with Vanechand and Sons; three denied knowledge of the firm's existence at Vellore and denied telephone contacts with it. One partner (Bowrilal) admitted only a matrimonial acquaintance with Vanechand.
- The petitioners challenged the Collector's penalty orders by filing writ petitions in this Court seeking quashing of those orders.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| W.P. No. 425 of 1956 (Rajagopala Aiyangar J.) | Held that purchasing gold known to be smuggled long after importation does not make the purchaser an "accessory before the fact" or demonstrate participation in the act of illegal importation under S.167 Item 8. | The Court relied on this decision to show that purchasing smuggled gold after the import does not itself constitute being "concerned in" the importation for the purposes of Item 8; it applied the principle to reject the Collector's characterisation of purchasers as abettors of the importation. |
| W.P. No. 691 of 1957 (Bench; Rajagopalan J.) | Affirmed that knowledge of purchase of smuggled gold does not establish participation in the antecedent act of smuggling; mere purchase with knowledge may make one an accessory after the fact but not responsible under the first column of S.167(8). | The Court cited this Bench decision to reinforce the distinction between being an accessory after the fact (purchase with knowledge) and being "concerned in" the importation itself; it used the authority to conclude that the petitioners could not be held under Item 8 on the basis of purchase/possession/knowledge alone. |
| W.P. No. 247 of 1957 | Re-affirmed the proposition that post-import purchase/possession with knowledge does not constitute being concerned in the prior offence of illegal importation under Item 8. | The Court noted that this judgment reaffirmed the earlier view and used it as further support for the legal principle applied to the present facts. |
| Bhatnagars and Co., Ltd. v. Union of India | Relied upon by the department to argue that the Court should not interfere with administrative findings unless there is no evidential basis for them. | The Court considered the argument but concluded that in the present case there was "no legal evidence whatsoever" to support the Collector's finding that the petitioners imported the gold or were concerned in its import; thus the Court did not allow Bhatnagars to bar relief where the evidential foundation was absent. |
Court's Reasoning and Analysis
The Court began by interpreting Item 8 of the Schedule to S. 167 of the Sea Customs Act: to bring a person within Item 8 it is necessary to establish either that the person actually imported the goods or was "concerned in" the importation—i.e., arranged for the import, abetted it (accessory before the fact), or received the goods immediately after import (receipt as the final step in the process of importation). The Court expressly stated that mere possession, sale or purchase of unlawfully imported goods, once the process of importation is completed, does not fall within Item 8.
The Court reviewed prior decisions (W.P. No. 425 of 1956; W.P. No. 691 of 1957; W.P. No. 247 of 1957) which had held that purchasing smuggled gold after importation, even with knowledge it was smuggled, does not constitute participation in the antecedent act of smuggling and thus does not satisfy Item 8. The opinion used these authorities to delineate the legal distinction between being an accessory after the fact (purchase with knowledge) and being an accessory before the fact or principal actor in importation.
The Court then analyzed the factual basis relied upon by the Collector. The Collector's material consisted of: (1) statements by Bijraj, Sampathraj, Vanechand and Govindaraj that the firm had purchased gold from the petitioners; (2) private accounts kept for such purchases; (3) frequent trunk telephone communications between the firm and the petitioners; (4) the petitioners' inability to explain satisfactorily how they obtained the gold; and (5) the Collector's conclusion that petitioners' statements were false. The Court concluded that these circumstances, either singly or cumulatively, did not legally establish that the petitioners had imported the gold or were concerned in its import.
Addressing the department's contention that the Court could take judicial notice of extensive smuggling in 1957 and apply presumptions from the Evidence Act (reference to Illustration (a) to S.114 and analogy to Illustration (a) to S.112), the Court held there was no warrant for presuming that the gold in question had been imported in India at any particular time. Consequently, the Court found no scope for applying those presumptions in this case.
Finally, the Court considered the department's reliance on Bhatnagars and Co., Ltd. v. Union of India. While that authority was invoked to caution against interference where there is some evidential basis for an administrative finding, the Court found that in the present matter there was "no legal evidence whatsoever" to support the Collector's conclusion that the petitioners either imported the gold or were concerned in its import. On that basis the Court concluded it must allow the writ petitions and quash the orders imposing penalties.
Holding and Implications
Core Ruling: The writ petitions are allowed and the orders of the Collector of Central Excise imposing penalties on the four petitioners are quashed.
Direct effect on the parties: the penalty orders of Rs. 6,000 (W.P. No. 88/1959), Rs. 25,000 (W.P. Nos. 109 and 110/1959) and Rs. 12,000 (W.P. No. 111/1959) imposed by the Collector are set aside. The Court ordered that there would be no order as to costs.
Broader implications: The opinion applies and re-affirms prior authority drawing a clear distinction between being concerned in an act of unlawful importation (which attracts liability under Item 8 of S.167) and purchasing or possessing unlawfully imported goods after the importation has been completed (which does not, by itself, constitute being "concerned in" the import). The Court concluded that the facts in this case did not meet the legal threshold required by Item 8. The opinion does not purport to establish a new legal principle beyond applying these earlier decisions to the facts before it.
V.C.S
On receipt of certain information the Superintendent of Central Excise, Vellore, searched the shop and residence of Messrs. Vanechand and Sons on 9th November, 1957. He seized from the shop 121-7/32 tolas of gold This included 2 bars of 10 tolas each with foreign marks. The residence of the proprietor of the firm was next searched and from there 5 bars of 10 tolas each with foreign marks were recovered. According to the accounts maintained by Vanechand and Sons the stock of gold on hand should have been only 98 tolas. A perusal of the private accounts maintained by this firm showed that it had received gold from the four petitioners in these cases in the past and that the receipts of such gold were not accounted for in the regular account books. On 10th November, 1957, Bijraj, Son of Vanechand Bhatwada who was managing the business stated that the several gold bars bearing foreign marks and weighing 70 tolas which had been seized from the shop as well as from the residence were received from the petitioner in W.P No. 110 of 1959. He also made a statement relating to the transactions of the firm with the petitioners in W.P Nos. 109, 88 and 111 of 1959. He added that the gold was smuggled gold. On 30th November, 1957, he gave a further statement in which he admitted that the smuggled gold had been purchased from the petitioners in these four writ petitions.
Govindaraj, a clerk of Messrs. Vanechand and Sons made statements on 18th November, 1957, and 23rd November, 1957, in which he stated that he used to go to Bangalore and purchase gold on behalf of the firm. He further stated that he had acquired 7 behalf of gold from the petitioner in W.P No. 110 of 1959 on 6th November, 1957. Sampathraj, the second son of Venichand, gave a statement on 10th November, 1957, in which he explained that his brother Bijraj was in charge of bullion transactions and that the gold bars seized from the house would have been kept there by his father and that the clerk Govindraj was entrusted with the duty of purchasing gold. He added that some 4 days previously Govindaraj had been to Bangalore to purchase gold. Venichand gave a statement on 14th November, 1957, in which he admitted that the gold with foreign marks had been brought from Bowrilal of Bangalore, the petitioner in W.P No. 110 of 1959.
The information obtained from these individuals was passed on to the Departmental Officers in Bangalore and they recorded statements from each of the four petitioners. All of them denied that they had any connection with Vanechand and Sons. Three of them denied even the knowledge of the existence of the firm of Vanechand and Sons at Vellore. They also denied that they had any telephonic contacts with that firm. The partner of the firm Bowrilal (W.P No. 110 of 1959) however admitted that he knew Vanechand in connection with some matrimonial proposals.
The Collector of Central Excise, Madras, gave a personal hearing to the Counsel of the petitioners and finally recorded this view:
“As regards the four Bangalore parties, I consider that these four parties at Bangalore were the persons concerned in the smuggling of gold which they had been passing on to the firm at Vellore.”
In this view he imposed a penalty of Rs. 6000. on the petitioners in W.P No. 88 of 1959, of Rs. 25000 on the petitioner in W.P No. 109 of 1959, of Rs. 25000 on the petitioner in W.P No. 110 of 1959 and of Rs. 12000 on the petitioner in W.P No. 111 of 1959. These indivduals have, therefore, come to this Court for the issue of an appropriate writ to quash the order of the Collector imposing these panalties on them.
Item 8 of the Schedule to S. 167 of the Sea Customs Act so for as it is here material runs as follows:
“If any goods, the importation or exportation of which is for the time being prohibited or restricted…be imported into or exported from the States contrary to such prohibition or restriction or
If any attempt be made so to import or export any such goods……such goods shall be liable to confiscation; any person concerned in any such offence shall be liable to a penalty not exceeding three times the value of the goods, or not exceeding one thousand rupees.”
We are not here concerned with the export of any gold but only with its import. To bring the petitioners within the terms of Item 8 it is necessory to establish either that they actually imported the gold or were concerned in the import of gold. That is to say, it must be shown that they had arranged for the import of the gold or abetted the import of the gold or received it immediately after the import, the receipt being the final step in the process of importation. In other words, they must have either actually committed the offence of importation or have been accessories to it either before the fact or after the fact. The terms of Item 8 so far as it relates to attempt to import need not concern us here because even according to the department this is a case where the unlawful import of gold has been completed. To be in possession of the gold, or to sell the gold, or to buy the gold, once the process of importation—assuming the importation is unlawful—is completed and independently of the series of acts connected with such importation will not fall within the terms of Item 8 of the Schedule.
In this connection reference may be made to the decision of Rajagopala Aiyangar J. in W.P No. 425 of 1956. That was a case where a person was proceeded against departmentally for having purchased gold which it was believed, had been smuggled into the country. The Collector of Customs dealt with him under S. 167, Item No. 8. He then came to this Court for the issue of an appropriate writ and the petition was allowed. In dealing with the matter Rajagopala Aiyangar J. observed:
“The ground upon which the officer held the petitioner guilty of an offence under the Sea Customs Act was that he had ‘aided or abetted’ the commission of the offence of illegal importation. It is not the case for the respondent that the petitioner induced, aided or abetted the Arabs to effect the illegal importation of gold; be was not an ‘accessory before the fact’ which is the meaning of the expression ‘abetted’ used by the Collector of Excise in his order. The petitioner no doubt purchased the gold and on the finding of the officers, knowing that it was smuggled. But that was long after the gold was smuggled and the petitioner was no party to the smuggling of the gold. It was therefore a misnomer or misapplication of the words to term the act of the petitioner in purchasing the gold that he had ‘aided or abetted’ the illegal importation.”
This decision was followed by a Bench of this Court in W.P No. 691 of 1957. Delivering the judgment of the Bench, Rajagopalan J. observed:
“The knowledge that what he was purchasing was smuggled gold, could not be evidence of participation in the act of smuggling itself, which is what is constituted an offence under the first column of S. 167(8). To put it other words, even if the act of purchase constituted the petitioner an accessory after the fact, that would not suffice to hold that the petitioner was ‘concerned in the offence’ specified in the first column of S. 167(8). Even if a person purchases gold with the full knowledge that that gold has been smuggled into the country, that by itself will not constitute him a person concerned in the antecedent and completed act of smuggling. It was only on proof that the petitioner was concerned in one or the other of the offences set out in the first column of S. 167(8) that the petitioner would have been liable to suffer the penalty prescribed in Column 3 of S. 167(8).”
This view was re-affirmed in the judgment delivered a few days later in W.P No. 247 of 1957.
To show that the petitioners in these cases imported the gold in question or were concerned in its import, there is really no legal evidence whatsoever. The Collector of Central Excise, Madras, relied upon these circumstances: (1) statements made by Birja, Sampathraj, Vanechand and Govindaraj to the effect that the firm of Vanechand and Sons had purchased gold from these petitioners; (2) the circumstance that the firm of Vanechand and Sons had been keeping separate accounts in respect of these and other purchases; (3) the frequent trunk telephonic communications between the firm of Vanechand and the petitioners; (4) the inability of the petitioners to explain satisfactorily how they came into possession of the gold and finally (5) his conclusion that the statements which the petitioners gave are false. All these facts neither severally nor cumulatively show that the petitioners imported the gold or were concerned in its import.
Learned Counsel for the department explained that in 1957 smuggling of gold along the West Coast of South India was on such an extensive scale that the Court would be justified in taking judicial notice of the fact. He then referred to Illustration (a) to S. 114 of the Evidence Act and contended that the Court would be justified in presuming that the petitioners were concerned in the unlawful importation of the gold. But so far as I can see there is no warrant for presuming that the gold we are dealing with was imported in India in 1957, or in fact at any particular time and, therefore, there is no scope for the application of any such presumption on the analogy of Illustration (a) to S. 112 of the Evidence Act. It must also be borne in mind that mere possession of gold which has been unlawfully imported into India cannot be dealt with under Item of 8 of the Schedule to S. 167. Learned Counsel for the department next referred to the decision in Bhatnagars and Co., Ltd., v. Union of India(1), and contended that before this Court can interfere it must be satisfied that there is no evidence whatsoever on the basis of which the Collector of Central Excise could have come to the conclusion he did. Now, as I have tried to explain, there is no legal evidence whatever to support the conclusion of the Collector of Central Excise that the petitioners either imported the gold or were concerned in its import. The various circumstances referred to by the Collector of Central Excise might justify the belief that they knew that the gold had been imported into the country unlawfully. It may also be that the petitioners were attempting to evade various other laws. All that will not suffice to bring them within the scope of Item 8 in the Scheldule to S. 167. That being so, these writ petitions must be and are allowed. The orders complained of are quashed. There will be no order as to costs.
V.C.S
Alert