AI Structured Summary
Not yet generated for this judgment
Judgment
V.C. Daga, J.—This is a reference made by the Customs, Excise and Gold (Control) Appellate Tribunal ("Tribunal" for short) pursuant to the order dated 17th March, 1999 passed by this Court u/s 133(3) of the Customs Act, 1962. Statement of Case:
The factual context giving rise to the present reference, in brief, is as under:
On the basis of the information gathered by the DRI that large quantity of about 132 bricks of silver had been smuggled through sea route and diverted to Jalgaon, while melting of silver was undergoing, the officers commenced investigations and succeeded on 13th February, 1993 in identifying the concerned parties, who had received smuggled silver.
Premises of the applicants M/s. Rajmal Lakhichand at Jalgaon were searched. The owner thereof Mr. Ishwarlal Lalwani was not present at the time of search. The search resulted into recovery of silver in Choursa form weighing 1,913.256 kgs. Statements of various persons were recorded. Shri Lalwani was summoned to appear before Directorate of Revenue Intelligence (DRI). He appeared before the investigating officer. His statement was recorded.
The show cause notices dated 7th August, 1993 were issued to 47 individuals/ firms on completion of investigation, specifically, pointing out the roles played by each one of them.
The adjudicating authority, vide its order dated 30th August, 1994 discharged the show cause notices holding that the evidence collected were not convincing enough to hold the allegations as proved.
The Central Board of Excise and Customs, New Delhi, exercising the powers u/s 129D of the Customs Act directed the Collector to apply to the Tribunal for determination of the issues specified in the review order. Accordingly, the Tribunal was approached.
The Tribunal granted outofturn hearing to the group of appeals since the Commissioner had moved application for staying the operation of the order impugned therein. Appeals were heard on 20th September, 1996.
The Tribunal, vide its order dated 19th March, 1996 allowed the appeals by setting aside the impugned order and rejected the rest of the appeals and, after hearing both sides confiscated the seized silver absolutely. The Tribunal further held that Mr. Ishwarlal Lalwani and M/s. Rajmal Lakhichand in whose custody the seized silver was found were liable for imposition of penalty u/s 112(b) of the Customs Act. It, accordingly, imposed penalty of Rs. 10 lakh on Mr. Ishwarlal Lalwani for acquiring the smuggled silver. However, the Tribunal did not impose separate penalty on the firm viz. M/s. Rajmal Lakhichand since personal penalty on the person managing the affairs of the firm was imposed. The Tribunal also imposed penalty of Rs. 1 lakh on Mr. Sureshkumar Seth, who had procured smuggled silver and delivered it to Mr. Ishwarlal Lalwani.
M/s. Rajmal Lakhichand and Mr. Ishwarlal Lalwani being aggrieved by the order dated 19th March, 1996, out of three aggrieved parties, filed two reference applications. The applicants framed as many as 11 questions and prayed for reference to this Court.
The Tribunal by its order dated 26th September, 1996 rejected the reference application holding that none of the questions raised therein required consideration at the hands of the High Court.
Being aggrieved by the aforesaid order of the Tribunal rejecting the reference application, the applicants moved this Court by way of application u/s 130(3) of the Customs Act. The said application came up for hearing before the Division Bench of this Court on 17th March, 1999. The Division Bench after hearing both parties opined that only one question of law arising from the order of the Tribunal dated 26th September, 1996 needed consideration at the hands of this Court.
The Tribunal was, accordingly, directed to refer only one under mentioned question of law for the opinion of this Court u/s 130(3) of the Customs Act. Accordingly, the Tribunal has forwarded statement of case and referred the question reading as under:
Whether the Tribunal was justified in invoking the provision of Section 120(2) of the Customs Act, 1962 to order confiscation of silver weighing 194.250 Kgs. purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon, when the said provisions had not been invoked in the Show Cause Notice and when the applicants were not given any opportunity of being heard in the matter by the Customs, Excise & Gold (Control) Appellate Tribunal?
Subsequent to the receipt of statement of case from the Tribunal, the applicants took out motion for speaking to the minutes of the order dated 17th March, 1999 passed by this Court and sought modification of the order, which subsequently came to be modified deleting the words "weighing 194.250 Kgs. purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon". The modified question, thus, reads as under:
Whether the Tribunal was justified in invoking the provision of Section 120(2) of the Customs Act, 1962 to order confiscation of silver, when the said provisions had not been invoked in the Show Cause Notice and when the applicants were not given any opportunity of being heard in the matter by the Customs, Excise & Gold (Control) Appellate Tribunal?
On the Scope of the Question:
At the outset, Mr. Sakhare, learned senior counsel appearing for the applicants tried to expand the scope of the question referred contending that the question referred and quoted in para12 (supra) in its original form was restricted in its scope to the confiscated silver weighing 194.250 Kgs. purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon. That after deletion of the words "weighing 194.250 Kgs. purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon", the question referred would bring within its hold entire quantity of silver weighing 1,913.256 Kgs. He, thus, submits that while considering the question, this Court will have to deal with the legality of the confiscation of the entire quantity of silver weighing 1,913.256 Kgs., otherwise, the very order of this Court deleting the words "weighing 194.250 Kgs. purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon" will be rendered otiose.
Per contra, Mr. Rao, learned Counsel appearing for the Revenue strongly opposed the submission made by Mr. Sakhare contending that the deletion of the words referred to hereinabove (underlined words) shall in no way enlarge the scope of the question referred. In his submission, in spite of deletion of the words and figures "weighing 194.250 Kgs. purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon", the question referred will revolve around confiscation of silver weighing 194.250 Kgs. only, purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon. According to him, notwithstanding modification, no change can be inferred or read in the original question referred by the Tribunal.
Mr. Rao further submits that pursuant to the order of this Court dated 17th March, 1999 passed in Customs Application No. 2/1997, reference was already made by the Tribunal vide its order dated 23rd October, 2001. Thereafter, the question was never modified by the Tribunal or by this Court. The words "weighing 194.250 Kgs. purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon" were allowed to be deleted finding them to be surplus. As such the texture of the original question referred by the Tribunal and modified by this Court under order dated 17th March, 1999 did not change the meaning and/or scope of the question referred. Mr. Rao, in order to buttress the submission, took us through the eleven questions which were framed by the applicants in the reference applications for being referred to this Court and brought to our notice question No. 11, which was identical as one reproduced in para12 (supra).
Mr. Rao submits that all the while parties to the reference were ad adem that silver weighing 194.250 Kgs. was the only quantity of silver confiscated under subsection (2) of Section 120 of the Customs Act. He, thus, submits that the submission advanced by the applicants to widen the scope of the question to bring within its fold entire quantity of the confiscated silver weighing 1,913.256 Kgs. is nothing but an attempt to bring the question for consideration before this Court through back door, which is not permissible in law.
Mr. Rao, thus, submits that considered from any angle i.e. with or without presence of the words "weighing 194.250 Kgs. purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon" the scope, meaning or texture of the question referred would remain unchanged as the central issue for the consideration of this Court is: whether the silver weighing 194.250 Kgs., in the facts of this case, could have been confiscated u/s 120(2) of the Customs Act?
Mr. Rao also took us through the impugned order passed by the Tribunal in general and para19.2 thereof in particular to reiterate his contention and point out that the silver weighing 1,713.807 Kgs. was confiscated u/s 111(d) of the Act; whereas rest of the silver weighing 194.250 Kgs. was confiscated under Sub-section (2) of Section 120 of the Customs Act. Mr. Rao, thus, submits that considered from any angle the question referred and the scope thereof cannot be allowed to be widen. At any rate, it has to be restricted to the silver of 194.250 Kgs. alone.
In rejoinder, Mr. Sakhare finding it difficult to cut the submissions of Mr. Rao made an alternate submission and urged that this Court has ample power to bring into focus the real issue that arises between the parties as such this Court in order to consider real issue should exercise its powers to recast or reframe the question so the confiscation of entire quantity of silver weighing 1,913.256 in exercise of powers under Sections 111(d) and 120(2) of the Customs Act could be considered on its own merits.
Mr. Sakhare in support of power to amend relied upon two judgments of the Apex Court, one in the case of S.P. Gramophone Company Vs. Commissioner of Income Tax , Patiala, ; another in Commissioner of Income Tax, Bombay Vs. Scindia Steam Navigation Co. Ltd., ; and two judgments of this Court one in the case of Rekhchand Gopaldas Mohta Spinning and Weaving Mills Ltd. Vs. Commissioner of Income Tax, Bombay South, and another in Commissioner of Income Tax Vs. Tata Iron and Steel Co. Ltd.,
Mr. Rao again strongly opposed above submission reiterating submissions already made by him to shoot down the attempt of the applicants to widen the scope of the question under consideration.
Consideration:
At the outset, having heard both parties, the submissions advanced by Mr. Sakhare by no stretch of imagination can be accepted. The opposition canvassed by Mr. Rao needs acceptance in toto.
The Tribunal vide its impugned order dated 20th September, 1996 has confiscated silver of 194.250 Kgs. shown to have been purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon under subsection (2) of Section 120 of the Customs Act, which provides that, where smuggled goods are mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, the whole of the goods shall be liable to confiscation.
The Tribunal found that it was not possible to separate the quantity of silver weighing 194.250 Kgs. from rest of the smuggled silver, hence by virtue of Section 120(2) the said quantity was held liable for confiscation. It is, thus, clear that out of entire quantity of silver weighing 1,913.256 Kgs., silver weighing 1,713.807 Kgs. was confiscated u/s 111(d); whereas silver weighing 194.250 Kgs. was confiscated u/s 120(2) of the Customs Act. The question originally framed and directed to be referred for the opinion of this Court was: whether the Tribunal was justified in invoking provision of Section 120(2) of the Customs Act to confiscate the silver when the said provision had not been invoked in the Show Cause Notice. The powers u/s 120(2) were exercised with respect to the silver weighing 194.250 Kgs. only. Under these circumstances, even after deletion of the words "weighing 194.250 Kgs. purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon", the scope, meaning and texture of the original question would remain unaltered. The deletion would not make any difference either way. In the circumstances, we have no hesitation to hold that the originally reframed question or the recast question revolves around confiscation of silver weighing 194.250 Kgs. alone which was confiscated under subsection (2) of Section 120 of the Customs Act. Thus, the entire quantity of silver weighing 1,913.256 Kgs. cannot be brought within the sweep of the question under consideration. As such, in our consideration, the subject question shall remain restricted to the confiscation of silver weighing 194.250 Kgs. only; purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon confiscated by invoking provision of subsection (2) of Section 120 of the Customs Act.
So far as alternate submission, advanced by Mr. Sakhare requesting this Court to recast the question to bring within its sweep the remaining quantity of the silver, is concerned, the same cannot be accepted.
At this juncture, we must point out that, out of 11 questions raised by the applicants, only one question bearing No. 11 was ordered to be referred for the opinion of this Court vide order dated 17th March, 1999; meaning thereby prayer to refer all other 10 questions was rejected by this Court. The said order has become final and conclusive, as such it would operate as res judicata between the parties. The other ten questions, which were rejected by this Court holding it to be not questions of law, vide its order dated 17th March, 1999, now cannot be brought in for consideration through back door method exercising powers of this Court to reframe or recast the question. In the garb of reframing or recasting the question one cannot bring in what was left out by the Court with conscious exercise of the power. In the circumstances, alternate prayer made by Mr. Sakhare requesting this Court to recast or reframe the referred question is liable to be rejected. Order accordingly.
On Merits:
Having said so, let us turn to the merits of the question requiring consideration as reproduced in para 13 (supra).
Rival Submissions:
Mr. Sakhare, learned senior counsel appearing for the applicants advanced his submissions with respect to entire quantity of silver confiscated under the impugned order. However, for the reasons recorded herein, it is not necessary for us to consider legality of the confiscation of the silver weighing 1,713.807 Kgs. confiscated u/s 111(d) of the Customs Act because it is beyond the scope of question referred. Our consideration is, thus, restricted to the legality of the confiscation of silver weighing 194.250 Kgs. confiscated in exercise of powers u/s 120(2) of the Customs Act.
Mr. Sakhare submits that the total quantity of silver of 194.250 Kgs., which was included 6 silver ingots and choursas weighing 180.545 Kgs., was purchased from the dealer M/s. Dilip Kumar Hirachand on 9th February, 1993. The said quantity of silver was legally acquired from local markets, as such the same could not have been confiscated. He further submits that so far as the finding recorded by the Tribunal in para11 of the impugned order, regarding 194.250 Kgs. silver is concerned, it shows that the evidence adduced by the applicants was accepted by the Tribunal. He pressed into service the findings of the Tribunal recorded as "Accepting the evidence adduced as probable, the plea of the Department that the said quantity also is smuggled silver, cannot be accepted." He, thus, submits that silver weighing 194.250 Kgs. could not have been confiscated by the Tribunal u/s 120(2) of the Customs Act.
Mr. Sakhare also brought to our notice the finding of the tribunal in para19.2 holding that silver weighing 194.250 Kgs. could not be proved as smuggled by the Department as such, according to Mr. Sakhare, the Tribunal could not have invoked provision of Section 120(2) of the Customs Act.
Mr. Sakhare, lastly, submits that so far as show cause notice is concerned, at no point of time provision of Section 120(2) was invoked by the Department so as to confiscate the silver weighing 194.250 Kgs. purchased by the applicants from M/s. Dilipkumar Hirachand u/s 120(2) of the Customs Act. He, thus, submits that confiscation of silver in exercise of powers u/s 120(2) of the Customs Act is clearly in breach of the natural justice. He, thus, prayed that the question referred needs to be answered in favour of the applicants and against the revenue.
Per Contra:
Mr. Rao, learned Counsel for the Revenue/ respondents submits that the contention of the applicants that Section 120(2) has not been invoked in the show cause notice is not correct. In support of his submission, he pressed into service para34 of the show cause notice which makes reference to Section 120(2) of the Customs Act. He further submits that the applicants were directed to show cause as to why silver weighing 1,913.256 Kgs. should not be confiscated. As a sequator of this, one has to understand that the said quantity was inclusive of silver of 194.250 Kgs. that was purchased from M/s. Dilipkumar Hirachand. Thus, in the submission of Mr. Rao, the applicants were sufficiently put on notice that Section 120(2) was also invoked for confiscating the silver.
Alternatively, without prejudice to his above submission, Mr. Rao further submits that no prejudice is caused or suffered by the applicants in view of invocation of provision of Section 120(2) of the Customs Act. In his submission, the question of law as referred to does not arise for the reason that Section 120(2) was never relied upon or invoked in the main show cause notice. According to him, in para35 of the show cause notice, entire silver was sought to be confiscated which means that Section 120(2) was also invoked by the respondent. Lastly, he submits that nonmentioning of provision of Section 120(2) specifically is not fatal as the ingredients of Section 120(2) can be gathered from the show cause notice itself, as such confiscation of silver of 194.250 Kgs cannot be said to be incorrect or illegal. He placed reliance on the Apex Court judgment in the case of Collector of Central Excise, Calcutta Vs. Pradyumna Steel Ltd., ; wherein the Apex court ruled that mere mentioning wrong provision of law when the power exercised is available even though under different provision, is by itself not sufficient to invalidate the exercise of that power. With these submissions, Mr. Rao urged that the question of law referred be answered in favour of the Revenue and against the applicants.
Statutory Provision:
The statutory provision relevant to the legal debate involved herein is Section 120 of the Customs Act, which reads as under:
Confiscation of smuggled goods notwithstanding any change in form, etc.
(1) Smuggled goods may be confiscated notwithstanding any change in their form.
(2) Where smuggled goods are mixed with other goods in such manner that the smuggled goods, the whole of the goods shall be liable to confiscation:
Provided that where the owner of such goods proved that he had no knowledge or reason to believe that they included any smuggled goods, only such part of the goods the value of which is equal to the values of the smuggled goods shall be liable to confiscation.
Consideration:
Having heard rival parties on merits, having noticed the relevant statutory provision holding the field; it is necessary to turn to the contents of the show cause notice relating to the invocation of the provision of Section 120 or Section 120(2) of the Customs Act or relating to confiscation of silver weighting 194.250 Kgs.
Let us turn to the show cause notice, para34 which invokes Section 120 of the Customs Act in the following backdrop:
34(i) The silver weighing 1913 Kgs. approx. in chaurasa form seized by DRI Officers on 13/14.2.93 from 169. Balaji Peth, Jalgaon, where it was stored in the Strong Room adjacent to the silver show room of M/s. Rajmal Lakhichand 7 Sons is established to be of smuggled nature. The silver which was smuggled into India and given to Babuji by Suresh of Bombay was in the form of 132 silver bricks weighing around 35 Kgs. approx. having total weight of approx. 4,520 Kgs., the market value of the silver prevailing on 7.2.93 was Rs. 6700/ per kg. and it was transacted by Sh. Babuji with Sh. Suresh @ Rs. 6,200/ per Kg. This silver in brick form after being received at Jalgaon was converted into silver chaurasas by adding copper and reducing its purity from 99.99% to 99.50%. The silver as delivered by Suresh and received by and on behalf of Shri Babuji in 132 bricks form wg. Approx. 4520 Kgs. was of smuggled nature. The smuggled goods are liable for confiscation notwithstanding any change in forms. When the smuggled goods are mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, the whole of the goods shall be liable to confiscation u/s 120 of the Customs Act, 1962. Any goods, which are used for concealing smuggled goods shall be liable to confiscation under the provisions of Section 119 of the Customs Act, 1962. Where any goods imported in the baggage are liable to confiscation, the baggage and any other goods imported in that baggage shall also be liable to confiscation under the provisions of Section 118(a) of the Customs Act.
34(ii) The silver having been imported and brought into India, contrary to the prohibitions imposed by or under the Customs Act, 1962, and the other laws for the time being in force has rendered itself liable to confiscation u/s 111(d) of the Customs Act, 1962.
The silver converted into chaurasas form has also been rendered liable to confiscation under the provisions of Section 120 of the Customs Act, 1962.
In addition to the above, show cause notice also makes a reference to Section 120 of the Customs Act in para35(xi) on the following canvas:
35(xi) The aforesaid persons and firms in their individual capacity as also in their collective capacity conspired with and acted, aided abetted incited supported, actively and/or passively, colluded, disregarded and/or omitted to do certain acts along with others known and unknown persons as detailed above which has rendered the seized silver in chaurasas form liable to confiscation u/s 111(d) and 120 of the Customs Act, 1962
With regard to entire quantity of silver, the powers of confiscation invoked can be seen from para35(a) relating to the silver weighing 199.66 Kgs. out of 1,913.256 Kgs and further reference in para35(h) of the show cause notice. Relevant contents of thereof are reproduced here in below:
35(a) The above mentioned silver weighing 1913.256 Kgs. valued at Rs. 1,09,05,781/ as on 14.2.93 and seized on 13/14.2.93 from the Strong Room adjacent to the Silver Show Room of M/s. Rajmal Lakhichand & Sons located in the premises of M/s. Rajmal Lakhichand, 169, Balaji Peth, Jalgaon, should not be confiscated u/s 111(d) of the Customs Act, 1962, read with Section 3(3) of Foreign Trade (Development & Regulation) Act, 1962, read with Section 111 of the Customs Act, 1962.
....
35(h) Without prejudice to above, it has also come on record that Shri Abdul Mohd. Kunhi, and Shri Khalid Thekee Purayil, whose Customs Baggage Receipts for 100 Kgs. And 99.66 Kgs. of silver are shown in defence by Babuji have admitted in their statements that the said silver did not belong to them and they carried the said silver for a consideration and had not authorised anybody to sell on their behalf of Jalgaon Party, as the silver being carried by them at the time of their arrival did not belong to them. Therefore, 199.66 Kgs. of silver out of 1913.256 Kgs. of silver seized is not co-relatable to the Baggages Receipts. Accordingly, the said silver 199.66 Kgs. is also liable to confiscation under the provisions of Section 111(d) of the Customs Act, 1962.
Having noticed relevant contents of the show cause notice, let us now turn to the findings relating to confiscation of silver weighing 194.250 Kgs. appearing in para11 and paras19.1, 19.2, 19.3 and 20 of the impugned order, the contents of which are reproduced here in below:
19.1 There is thus, sufficient evidence to hold that the seized silver to the extent of 1713.807 is not licitly imported silver and is liable to be confiscation vide Section 111(d) of the Customs Act.
19.2 Silver weighing 194.250 Kg shown to have been purchased from M/s. Dilipkumar Hirachand is not proved to have been of smuggled origin and confiscation thereof cannot be ordered u/s 111(d) of the Act. However, Section 120(2) of the Act provides that when smuggled goods are mixed with other goods in such a manner that separation is not possible, the whole goods shall become liable to confiscation. Here it is not possible to separate the said quantity of silver and hence by virtue of Section 120(2) of the Act, the said quantity also become liable for confiscation. Same criteria also applies to the copper added in converting the silver into Chaurasas.
19.3 Section 120(1) of the Act permits confiscation of smuggled goods irrespective of any change and as such the silver in Chaurasa form become liable to
Considering all these aspects therefore, the order of release of seized silver cannot be sustained and is therefore set aside and same is ordered to be confiscated u/s 111(3) of the Customs Act, 1962 read with Section 120 of the said Act.
With the aforesaid factual sketch of the show cause notice as well as of the findings of the impugned order, this Court has to consider as to whether or not provision of Section 120(2) of the Customs Act was invoked by the Department in the show cause notice with regard to the quantity of silver weighing 194.250 Kgs. and whether or not the applicants were given opportunity to meet the adverse findings suffered by the applicants on this count since the question referred for the opinion of this Court revolves around the confiscation of silver weighing 194.250 Kgs. in exercise of powers u/s 120(2) of the Customs Act.
The dissection of the show cause notice reveals that para34 thereof is the material para in which the invocation of power u/s 120 of the Customs Act is to be found. If that be so, the another question which needs consideration is whether that power was invoked in relation to quantity of silver of 194.250 Kgs. The relevant part of para34, at the cost of repetition, is reproduced here in below for immediate reference and to understand the backdrop in relation to which it was invoked:
This silver in brick form after being received at Jalgaon was converted into silver chaurasas by adding copper and reducing its purity from 99.99% to 99.50%. The silver as delivered by Suresh and received by and on behalf of Shri Babuji in 132 bricks form wg. Approx. 4520 Kgs. was of smuggled nature. The smuggled goods are liable for confiscation notwithstanding any change in forms. When the smuggled goods are mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, the whole of the goods shall be liable to confiscation u/s 120 of the Customs Act, 1962.
Reading of the aforesaid text of the show cause notice, without any doubt, shows invocation of provision of Section 120 of the Customs Act in relation to addition of copper made by the applicants to reduce its purity from 99.999% to 99.50%, since the copper was mixed in the silver to bring down its purity. In the opinion of the department smuggled silver was mixed with copper as such it became necessary for the Department to invoke Section 120 of the Customs Act finding that the copper could not be separated from smuggled goods. In this backdrop, show cause notice proceeds to say that the whole of the goods were liable to be confiscated u/s 120 of the Customs Act. Therefore, reading of para34 would unequivocally go to show that Section 120 was invoked only in relation to the addition of the copper in the smuggled silver and not in relation to the silver which was legally purchased weighing 194.250 Kgs. from local market at Jalgaon.
Proceeding further, if one turns to subpara- (ii) of para34, the recitals reads thus:
The silver converted into chaurasas form has also been rendered liable to confiscation under the provisions of Section 120 of the Customs Act, 1962.
Again reading of the aforesaid para of the show cause notice would show that Section 120 was invoked because the smuggled silver was converted into chaurasa form. Thus change of form was the cause for invocation of provision of Section 120 of the Customs Act.
Proceeding further, again in text of para35, we find reference to Sections 111(d) and 120 of the Customs Act. Again the foundation of invocation of Section 120 is in relation of conversion of silver into chaurasas. So far as the quantity of 194.250 Kgs. Is concerned, there is no separate reference in any para of the show cause notice relating to local purchases made from M/s. Dilipkumar Hirachand & Sons, Jalgaon, obviously, because the Department was of all along contending that the entire silver weighing 1,913.256 Kgs. was smuggled silver. The Department never had a view that any part of silver was purchased from local market and mixed with smuggled silver. It was not the case of the Department at any point of time that silver weighing 194.250 was a legally purchased silver from local market and that it was mixed with the smuggled silver as such it was liable to be confiscated u/s 120(2) of the Customs Act.
Having said so, let us now turn to the impugned order dated 19th March, 1996 passed by the Tribunal to understand the power to confiscate exercised by the Tribunal in relation to the total quantity of silver which was seized weighing 1,913.256 Kgs. The Tribunal, for the reasons recorded, confiscated the seized silver to the extent of 1,713.807 Kgs by invoking Section 111(d) of the Customs Act, whereas silver weighing 194.250 Kgs, held to have been locally purchased from M/s. Dilipkumar Hirachand & Sons, was confiscated invoking powers under subsection (2) of Section 120 of the Customs Act. The relevant discussion relating to the exercise of power by the Tribunal is to be found in paras 19.1 to 20 of the impugned order. These relevant paras, at the cost of repetition, are reproduced here in below for immediate reference and to understand the backdrop in relation to which it was invoked:
19.1 There is thus, sufficient evidence to hold that the seized silver to the extent of 1713.807 is not licitly imported silver and is liable to be confiscation vide Section 111(d) of the Customs Act.
19.2 Silver weighing 194.250 Kg shown to have been purchased from M/s. Dilipkumar Hirachand is not proved to have been of smuggled origin and confiscation thereof cannot be ordered u/s 111(d) of the Act. However, Section 120(2) of the Act provides that when smuggled goods are mixed with other goods in such a manner that separation is not possible, the whole goods shall become liable to confiscation. Here it is not possible to separate the said quantity of silver and hence by virtue of Section 120(2) of the Act, the said quantity also become liable for confiscation. Same criteria also applies to the copper added in converting the silver into Chaurasas.
19.3 Section 120(1) of the Act permits confiscation of smuggled goods irrespective of any change and as such the silver in Chaurasa form become liable to confiscation.
Considering all these aspects therefore, the order of release of seized silver cannot be sustained and is therefore set aside and same is ordered to be confiscated u/s 111(3) of the Customs Act, 1962 read with Section 120 of the said Act.
Reading of the aforesaid paras clearly reveal that powers flowing from two different sections of the Customs Act were invoked to confiscate the seized silver viz. Section 111(d) to confiscate silver weighing 1,713.807 Kgs whereas Section 120(2) to confiscate silver weighing 194.250 Kgs. The Revenue could not prove that the silver weighing 194.250 Kgs. was of smuggled origin, as such confiscation thereof could not have been ordered u/s 111(d) of the Customs Act. The Tribunal found that it was not possible to separate the quantity of locally purchased silver weighing 194.250 Kgs., hence u/s 120(2) of the Act, the said quantity was held liable for confiscation. The same criteria was made applicable to confiscate copper added in the silver to convert it in chourasas. In the result, the order of release of the seized silver by the original adjudicating authority was set aside and it was ordered to be confiscated u/s 111(d) read with Section 120(2) of the Customs Act.
It is, thus, crystal clear that silver weighting 1,913.256 Kgs was bifurcated into two parts; one weighing 1,713.807 falling within sweep of 111(d); whereas other weighing 194.250 Kgs was brought within the sweep of Section 120(2) of the Customs Act. The confiscated silver weighing 1,713.807 Kgs. is not a subject matter of reference; whereas confiscation of silver weighing 194.250 Kgs. u/s 120(2) of the Customs Act alone is a subject matter of reference. Hence the question referred revolves around invocation of the provision of Section 120(2) of the Customs Act to confiscate silver weighing 194.250 Kgs. only.
The factual data sketched hereinabove together with findings recorded by the Tribunal in the backdrop of the text of the show cause notice, it is crystal clear that Section 120(2) of the Customs Act was never invoked by the adjudicating authority visavis seized silver weighing 194.250 Kgs. locally purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon for the obvious reasons that all along the Department was of the view that entire quantity of silver weighing 1,913.256 Kgs was of smuggled origin. Therefore, there was no occasion for the Department to bifurcate silver weighing 194.250 Kgs and invoke provision of subsection (2) of Section 120 of the Customs Act to confiscate it. This power u/s 120(2) was exercised for the first time by the Tribunal visavis seized silver weighing 194.250 Kgs. finding difficult to confiscate it u/s 111(d) of the Customs Act since it was proved to be a local purchase. Now the short issue is whether the invocation of power u/s 120(2) of the Customs Act by the Tribunal is legal and valid, especially, in the absence of show cause notice on that account.
Having considered the entire material available on record, in the light of the submissions made, there is force in the contention raised on behalf of the applicants that in absence of material particulars or reasons being disclosed in the show cause notice for entertaining the tentative or prima facie view that the seized silver weighing 194.250 Kgs. purchased from the local market was liable to be confiscated u/s 120(2) of the Customs Act, the applicants had no real opportunity to meet the case of the Department in that regard. Hence there is a noncompliance of the basic principles of natural justice.
The show cause notice issued by the Department for confiscation of silver ought to have taken alternate stand in relation to seized silver weighing 194.250 Kgs and ought to have put the applicant on notice of their intention to exercise power u/s 120(2) of the Customs Act or, at any rate, the Tribunal ought to have followed this procedure.
It is necessary to observe that show cause notice is not merely an empty formality. But opportunity to show cause has to be the real and substantive which means the noticee concerned must know as to why the adjudicating authority is holding that the seized silver or part thereof is within the sweep of the Customs Act. It is always expected on the part of the adjudicating authority to disclose material facts and particulars in support of the allegations made in the show cause notice so as to enable the noticee to meet the case sought to be made out against him. When an obligation is cast upon the authority to give notice to show cause before reaching the final conclusion against the person affected by its action the purpose and requirement to issue show cause notice is twofold (i) the noticee must get an opportunity to meet the case against him and (ii) he must have an opportunity to set forth his own case to show as to why an adverse order should not be passed against him.
In this regard, de Smith in his Judicial Review of Administrative Act (Fourth Edition) has observed at page 196 as follows:
Natural justice generally requires that persons liable to be directly affected by proposed administrative acts, decisions or proceedings be given adequate notice of what is proposed, so that they may be in a position
(a) to make representations on their own behalf; or
(b) to appear at a hearing or inquiry (if one is to be held); and
(c) effectively to prepare their own case and to answer the case (if any) they have to meet.
It is needless to observe that the conclusions of the authority at the stage of giving a show cause notice are always prima facie or tentative conclusions for if it is not so, its ultimate order would suffer from bias, i.e. its predetermined mind. However, because its conclusions at the stage of show cause notice are only prima facie or tentative conclusions, it would not mean that they are not required to be disclosed in the show cause notice.
In the exercise of a power legal right of a person is affected, for example, where the property is taken by compulsory purchase or someone is dismissed from public office or the property of somebody is confiscated, then in such cases, the person affected may certainly have an interest or expectation to know the authority, jurisdiction and power coupled with ground on which his property is being confiscated or compulsorily purchased. The duty to act judicially is implicit in the exercise of a power to decide and determine to the prejudice of a person, it is hard to exhaustively enumerate the situations in which such a duty will arise according to natural justice. It has, however, been upheld that a duty to act judicially will arise in the exercise of a power to deprive a person of legitimate interest or expectation.
The word "civil consequences" is a wide amplitude as held by the Apex Court in D.K. Yadav Vs. J.M.A. Industries Ltd., . The Apex Court observed as under:
Application of the principles of natural justice that no man should be condemned unheard intends to prevent the authority from acting arbitrarily affecting the rights of the concerned person. No decision must be taken which will affect the right of any person without his/her first being informed of the case and giving him/her an opportunity of putting forward his/her case. An order involving civil consequences must be made consistently with the rules of natural justice. ''Civil consequences'' covers infraction of not merely property or personal right but of civil liberties, material deprivations and non pecuniary damages. In its comprehensive connotation every thing that affects a citizen in his civil life inflicts a civil consequence. ''Civil rights'' have been defined to be such as belonging to every citizen of the State or country ... they include ... rights capable of being enforced or redressed in a civil action ... Even an administrative order which involves civil consequences must be made consistently with the rules of natural justice.
There can be no distinction between a quasijudicial function and an administrative function for the purpose of principles of natural justice. The aim of both administrative inquiry as well as the quasijudicial inquiry is to arrive at a just decision and if a rule of natural justice is calculated to secure justice or to put it negatively, to prevent miscarriage of justice, it is difficult to see why it should be applicable only to quasijudicial inquiry and not to administrative inquiry. It must logically apply to both.
Mr. Rao, learned Counsel for the Revenue tried to canvass that no prejudice was suffered by the applicants in absence of show cause notice invoking power u/s 120(2) of the Customs Act. Mr. Sakhare, learned senior counsel appearing for the applicants countered this submission and urged that there are, a string of authorities of the Supreme Court which rejected the test of prejudice. It is, no doubt, true that in some cases proof of prejudice was held to be a condition precedent before considering the attack based on breach of principles of natural justice.
Cross-examination of witness is well recognized as part of fair hearing, refusal whereof is considered as denial of natural justice. But the Supreme Court in K.L. Tripathi Vs. State Bank of India and Others, , held that where there is no dispute as to the facts, or the weight to be attached on disputed facts but only an explanation of the acts, absence of opportunity to cross-examination does not create any prejudice in such cases and does not vitiate the decision.
In S.L. Kapoor Vs. Jagmohan and Others, and Union Carbide Corporation, etc., etc. Vs. Union of India, etc. etc., , the Supreme Court observed that where there is violation of natural justice no resultant of independent prejudice need to be shown, as the denial of natural justice is, in itself, sufficient prejudice and it is no answer to say that even with observance of natural justice the same conclusion would have been reached.
The authorities cited above favour the contention that breach of natural justice is by itself miscarriage of justice and where a breach of natural justice has been found, there cannot be a further enquiry to ascertain whether there has been a miscarriage of justice.
The decisions on the applicability of the principles of natural justice are legion and only a few have been referred to above. It may be of interest to note that it is difficult to find uniformity in the large number of decided cases. The approach of the court depended upon the facts and circumstances of each case, the law applicable, the nature of the right claimed by the person affected and so on. It is, no doubt, true that the principles of natural justice cannot be reduced to any hard and fast formula.
It has been judicially noticed that natural justice "is no unruly horse, no lurking land mine, nor a judicial cure all". If fairness is shown by the decisionmaker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of (see The Chairman, Board of Mining Examination and Chief Inspector of Mines and Another Vs. Ramjee, ).
Mr. Sakhare urged that had the opportunity been given to the noticee applicants, it would have been possible for them to demonstrate and segregate the locally purchased silver weighing 194.250 Kgs since smuggled silver and melting thereof had taken place on different dates and record in that behalf was maintained by the applicants. He tried to place certain documents before us in support of his submission on merits of the matter and also to demonstrate prejudice suffered by the applicants. However, the jurisdiction, which we are exercising does not permit us to go into the merits of the matter. We are only expected to answer the question referred on the basis of the statement of case forwarded to us. Prima facie; we are of the view that before invoking power under subsection (2) of Section 120 of the Customs Act, the applicants ought to have been put on notice. Show cause notice on this count ought to have been given to the applicants, considering the basic principles of natural justice that the party should be heard before deciding any issue and he should be put on notice with material facts and particulars and deprivation of the valuable property without following due procedure recognised by law itself is a substantial prejudice suffered by the applicants.
It is a fundamental of fair procedure that before action is taken, the affected party should be given a notice to show cause about the proposed action and to seek his explanation. Any order passed without giving notice is against the principles of natural justice. The notice must be clear, specific and unambiguous and the changes should not be vague and uncertain. The object of notice is to give an opportunity to the person concerned, to present his case. Natural justice requires that the person directly affected by the proposed acts, decisions or proceedings be given adequate notice of what is proposed, so that he may be in a position to make representation on his own behalf, or to appear at the hearing or inquiry (if any), and effectively represent his own case and answer the case he has to meet. The Apex Court has recognized that to treat the person in violation of principles of natural justice would amount to arbitrary and discriminatory treatment and will be against the fundamental principles of natural justice.
The Supreme Court while interpreting Article 14 has given a dynamic interpretation on the concept of equality before the law. As per the Hon''ble Supreme Court, violation of the rules of natural justice would amount to discrimination, where discrimination is the result of State action which would violate Article 14 of the Constitution. In short, as per the Supreme Court in certain cases, violation of the principles of natural justice may amount to violation of the fundamental rights of equality guaranteed by Article 14.
On the aforesaid canvass, we have no hesitation to answer that the Tribunal was not justified in invoking provision of Section 120(2) of the Customs Act to confiscate the seized silver to the extent it was confiscated in exercise of that power in absence of show cause notice and opportunity of being heard. In the result, question referred is answered in favour of the applicants and against the Revenue.
Reference stands answered in terms of this order with no order as to costs.