Omega Trading Agency and Another vs J. Datta, The Collector of Customs and Others

H. Suresh, J.—On 6th May 1975 there was a raid by the Customs authorities on the godown premises as also on the office premises of the petitioners. The petitioners carry on business in the name of M/s. Omega Trading Agency and carry on business in the manufacture and sale of pharmaceutical goods.

In the said raid, the Customs authorities could seize number of items on the basis that they were all smuggled goods, most of the items being of foreign origin of various kinds of drugs. It is not necessary for me to detail all those items, inasmuch as most of the items have already been released, excepting the two items viz. stock of Vitamin B-1 and Krishna Mask.

These two items have been ordered to be confiscated. In addition to the confiscation, petitioner No. 2 has been fined in the sum of Rs. 50,000/-.

It is against this order of confiscation and penalty, the petitioners have filed the present petition.

Mr. J.J. Thakkar, appearing for the petitioners, mainly contended that there was no evidence whatsoever to hold that the goods seized were smuggled goods. He submitted that the petitioners had produced various bills and vouchers in respect of the items found in the godown and in the office premises and on the basis of the bills and invoices most of the goods had been released. He submitted that in respect of the confiscated goods viz. Vitamin B-1 and Krishna Mask, excepting the petitioners'' own statement, which was recorded immediately after the raid, or the panchanama, there is no other evidence whatsoever. He further submitted that as far as those statements were concerned, the petitioners have withdrawn the said statement later on on the basis that the earlier statements were taken under duress.

Mr. Thakkar also submitted that when the goods were seized it was not on the basis that they were smuggled goods but on the footing that they were required in connection with the proceedings under the Customs Act, 1962 (hereinafter referred to as "the Act"). He, therefore, submitted that the Officer who had raided the godown or the office premises and seized the goods did not have any reasonable belief that they were smuggled goods and, therefore, no show cause notice on the footing that they were smuggled goods could have been issued by the Inquiry Officer. He also submitted that as far as the penalty was concerned, the show cause notice indicated that it was given u/s 112, Sub-section (a), while the penalty appears to have been imposed u/s 112, Sub-section (b) of the Act. He submitted that in these circumstances the orders of confiscation and penalty will have to be set aside.

I may mention that I am not sitting in appeal against the findings given by the Customs authorities. In the present case, after the show cause notice was issued, the Collector of Customs had heard the parties at length and after taking into account every item he came to the conclusion that the goods were of foreign origin and most of them were admittedly smuggled ones and that, therefore, the same were liable to be confiscated u/s 111, Sub-section (d) of the Act. Accordingly, the Collector also imposed a penalty u/s 112 of the Act. This order further discloses that the goods seized were not available for wholesale or retail business. It also shows that the storage of these goods required a drug licence and in this case the petitioners did not have such a drug licence for storing the goods. The Collector also took into account that the goods were valued at about Rs. 4 lakhs, while the petitioners were filing Income Tax returns, prior to the said enquiry, of an aggregate sum of only Rs 11,000/-for a period of five years. He, therefore, observed that taking all these facts into account, it was clear that the goods were smuggled goods and, therefore, he passed the order as aforesaid.

As against this order of the Collector, the petitioners preferred an appeal before the Central Board of Excise and Customs. The Board again heard the parties and after taking into account all the facts, partly reversed the findings given by the Collector and again upheld the order, in so far as it related to these two items which were confiscated. The Board, however, reduced the fine from Rs. one lakh to Rs. 50,000/-.

Against this order of the Board, the petitioners filed revision application before the Government of India. The Government of India after hearing the parties again and after taking into account all the facts, sustained the order passed by the Board. In the body of the Judgment given by the Government of India, there is a reference to a verification report which was obtained by the Customs Officers on the basis of the bills and invoices produced by the petitioners, which did not tally with the goods seized. Mr. Thakkar had pointed out, while arguing this petition, that the petitioners were not given the said verification report. The Officer who heard the revision application also took the verification report into account and he was satisfied that the petitioners had not given any satisfactory material in respect of these two items to say that they were not smuggled goods. In these circumstances, he passed the order as stated above.

In my view it is not necessary for me to interfere with the order passed by the Board for the following reasons. Firstly, in matters of economic offences, niceties of law cannot be given undue importance, particularly in a writ petition under Article 226 of the Constitution of India. In the present case, it is true that apart from the statement made by the petitioners at the time of the raid or soon thereafter that these were smuggled goods, there is no other evidence as such, but I must keep in mind that all the authorities below took all facts into account and thereafter came to the conclusion that they were smuggled goods, mainly on the basis that these goods were of foreign origin and that, therefore, there was no satisfactory evidence on the part of the petitioners.

Mr. Thakkar for the petitioners further pointed out that these goods were purchased by the petitioners from Messrs. Venus Laboratories and also from Messrs. Economic Pharmaceuticals Pvt. Ltd. under certain invoices, all prior to the date of the said. He also pointed out that from this very stock, some of the drugs were ordered to be released by the Customs authorities. He, therefore, submitted that there was no reason as to why the remaining goods were ordered to be confiscated.

I must mention that as regards these two firms, there was no evidence from these two parties before the Collector. In any event, I cannot forget the fact that when the godown was raided at that point of time or soon thereafter these bills were not coming forth. All these bills came to be produced at a much later date. In the absence of any satisfactory evidence as to how these goods were obtained by the petitioners, there is no reason as to why I should disturb the findings given by the Collector of Customs and the other authorities.

I must mention that these drugs were found in a godown and admittedly the petitioners had no drug licence for storage. That is an imnortant fact, which cannot be lost sight of. Therefore, after taking into account all these circumstances, the respondents had come to the conclusion that these goods were liable to be confiscated u/s 111 Sub-section (d) of the Act. There is nothing wrong in such a conclusion. In any event I am not sitting in appeal and, therefore, no interference is called for on that count.

Mr. Thakkar relied on the case of M.G. Abrol and Another Vs. Amichand Vallamji and Others, . He relied on this authority to show that when the officer raided the godown and seized the goods, he ought to have formed a reasonable belief as provided u/s 110 and the belief u/s 110(1) could have been to the effect that the goods are the smuggled goods and they are liable to be confiscated. I find that the panchanama shows that the goods were seized on a reasonable belief as in the opinion of the officer, they were useful in connection with the proceedings under the Act, which would come u/s 110, Sub-section (3) of the Act. Relying on this fact and applying the ratio as laid down in this case, Mr. Thakkar submitted that there was no reasonable belief at the time of seizure that they were smuggled goods and that, therefore, the Inquiry Officer could not have given the show cause notice to the effect that they were smuggled goods, liable to be confiscated u/s 111, Sub-section (d) of the Act.

It is true, the Officer has not quoted this particular Section as such, but I must take into account all the facts at the time of the raid and the surrounding circumstances and it is on that basis that the goods were seized. In the case relied on by Mr. Thakkar, I must mention that the goods seized were gold from certain well known bullion merchants in the market, who were doing business for a number of years and, therefore, without a reasonable belief that the goods that were found were smuggled goods there could have been no seizure of the goods as such. That should distinguish this case from the case that is before me. In fact, the authority relied upon by Mr. Thakkar is for the purpose of showing as to how the law provides for a restraint on the part of an officer who could raid and seize the goods without any such reasonable belief and it propounds to clarify the legal position that in such cases the officer must have a reasonable belief that the goods were, in fact, smuggled goods. The officer cannot arbitrarily, at his own sweet will and pleasure raid any premises and seize any goods he likes. In the present case, the goods were of foreign origin, in respect of which there is hardly any quarrel, and, therefore, if the officer had seized the goods (in the belief) that they were smuggled goods, there was nothing wrong in that.

Mr. Thakkar then pointed out that when the show cause notice was issued, after setting out all the facts which were relevant, the officer stated that the petitioners had, in relation to the goods, done or omitted to do certain acts, which acts or omissions had rendered these goods liable to confiscation u/s 111 of the Act. Mr. Thakkar pointed out that these words would indicate that the show cause notice with regard to the penalty would fall within the scope of Section 112, Sub-section (a) and not u/s 112, Sub-section (b) of the Act, which deals with possession of smuggled goods. Mr. Thakkar, therefore, submitted that the penalty was imposed u/s 112, Sub-section (b) of the Act, and, therefore, to that extent the order was certainly bad in law.

As against this Mr. M.I. Sethna for the respondents submitted that the Court has taken into account all the facts. He further submitted that the show cause notice need not necessarily quote any particular provision of the Act as such. He also submitted that if the show cause notice contains all the relevant facts and the facts clearly indicate that the charge was one of possession and not of doing any act or omission or commission, than it could be said that the charge was in fact coming u/s 112, Sub-section (b) of the Act and not u/s 112, Sub-section (a) of the Act. In other words, he submitted that it cannot be said that there was no misleading of the petitioners even with regard to the charge otherwise levelled against the petitioners.

I am inclined to agree with the submissions made by Mr. Sethna. The facts have been clearly set out in detail in the show cause notice, which clearly indicate that the charge was one of possession of smuggled goods of foreign origin and without any valid import licence.

In these circumstances, I find no substance in this petition. The petition, therefore, stands dismissed. However, in the circumstances of the case, there will be no order as to costs.

At the request of Mr. Thakkar, the interim orders granted at the state of admission to continue for a period of eight weeks from today.