Holding

The court held that the appellant was knowingly concerned in fraudulent evasion of duty and the prohibition, the presumption of mens rea under Section 138‑A applied, and he failed to discharge the burden, so his conviction under Section 135(1)(a) stands.

Summary

The police and customs officials recovered 101 silver ingots worth over Rs. 18 lakh from the appellant's wadi, which lay within the 50‑km specified area and the ingots were notified as specified goods. The appellant admitted the recovery but claimed he did not know how the ingots came to be there and had not filed any intimation under Section 11‑J of the Customs Act before acquiring the goods. He was convicted under Section 135(1)(a) for knowingly being concerned in fraudulent evasion of duty and the prohibition under Section 11‑J, with the prosecution relying on a presumption of culpable mental state under Section 138‑A. On appeal, the Supreme Court held that the failure to give the required intimation and the concealment of a large quantity of silver indicated knowledge of evasion, and that the burden of disproving the presumption under Section 138‑A rested on the accused, which he failed to discharge. Consequently, the conviction was upheld and the appeal dismissed.

Issues considered

Whether the appellant satisfied the elements of Section 135(1)(a) of the Customs Act, i.e., was knowingly concerned in fraudulent evasion or attempt at evasion of duty or prohibition.
Whether the failure to give an intimation under Section 11‑J constitutes fraudulent evasion within the meaning of Section 135(1)(a).
Effect of Section 138‑A's presumption of culpable mental state on the burden of proof and whether the appellant discharged it.
Admissibility and evidentiary value of the statement recorded under Section 108 of the Customs Act.

Legislation cited

Customs Act, 1962s. 108, s. 11-J, s. 135(1)(a), s. 138-A
Indian Evidence Act, 1872s. 106, s. 114

Subjects

Customs Actspecified goodsspecified areaSection 135fraudulent evasionSection 138-Apresumption of mens reaintimation requirementsmugglingsilver ingotsburden of proof

Judgment

A BHANABHAI KHALPABHAI
v.
THE COLLECTOR OF CUSTOMS AND ANR.

MARCH 8, 1994

B [K. JAYACHANDRA REDDY AND N.P. SINGH, JJ.]

O.istoms Act, 1962: Ss.11-J, 135(1)(a) and 138-A-Silver ingots-
Nutified as specified goods-Recovery of-From specified area-Fraudulent
evasion or attempt at evasion-Prohibition of-Culpable mental state-
C Presumption of-Accused to prove that such mental state <lid not exist.

On suspicion that some contraband goods were unloaded at the wadi
of the appellant, officials of the Police and Customs carried out a search
in the wadi and on digging the ground near a well, 101 silver ingots worth
over Rs. 18 lakhs were recovered. After the recovery, the statement of the
D appellant was recorded in accordance with S.108 of the Customs Act, 1962,
in which he admitted the recovery, but stated that he cl.id not know how the
silver bars came there. Silver ingots has been notified as 'specified goods'
and the wadi of the appellant was within 50 kms. from the Coast of India
and as such was within the 'specified area' notified under the Customs Act.
E prosecution was laid against. the appellant and he was convicted for an
offence under S.135(1)(a) of the Customs Act. He preferred an appeal and
the High Court dismissed the same. Hence the appeal.

On behalf of the appellant it was contended that the ingredients of
s. 135(1)(a) had n~t been fulfilled so as to hold that the appellant com-
F mitted an offence under that section, since the prosecution had not estab-
lished that the silver ingots had been kept hurried in connertion with any
fraudulent evasion or attempt at evasion of any duty chargeable thereon.

Dismissing the appeal, this Court

G HELD: 1.1. Sub-section (1) of Section ll·J of the Customs Act, 1962
which had come in force w.e.f. 3.1.1969, required every person who owns,
possesses, or bas control, on the specified date, over any specified goods,
the market price of which el1ceeds fifteen thousand rupees, to deliver to the
•.
.

proper officer, an intimation containing the particulars of the place where
H such goods had been kept or had been stored within the specified area.
348
'
BHANABHAI v. COLLECTOR 349

'' Sub-section (2) of S.11 ·J prescribed a bar on acquiring any specified goods A
within the specified area unless before making such acquisition, he delivers
to the proper officer an intimation containing the particulars of the place
where such goods are proposed to be kept or stored, after such acquisition.
Per se this will amount to be prohibition In acquiring specified goods
within the specified area, the value whereof exceeds fifteen thousand rupees
unless the conditions for such acquisition are fulfilled with. [345-D-G]
B

-. 1.2. There is no dispute in the present case that the appellant, never
before making acquisition, delivered to the proper officer any intimation
in respect of acquisition, of those silver ingots and the place where such
silver ingots were proposed to h• kept or stored af\ev the o.c<jUisition. In c
this background, there should not be any ~.ifficulty In contencling that the
appellant was concerned in fraudulent •~dSion or attempt at evasion of the
aforesaiil. prohibition under sub-section (2) of Section 11-J in relation to
specified goods. [354-G-H; 355-A)

_,• 1.3. In view of Section 138-A d ih~ Act a presumption has to be D
drawn, in respect of existence of the alleged i::ental state. An option bas
been given to the accused to prove by way or defence the fact, that be did
not have any such mental state with respect Lo lbc act charged which is an
offence. This provision is an exception to the general criminal
jurisprudence that onus never shifts on the accused and be had only to E
raise a doubt in the mind of the Court, in respect of the correctness of the
prosecution version. It Is different from Sections 106 and 114 of the
Evidence Act. In view of Section 138-A, once a presumption is raised about
a culpable mental state on the part of the accused. that be bad stored the
silver ingots, to export them outside the country evading payment of
' custom duties, the accused has to provide as a defence that no such mental F
state with respect to the act charged, did exist. No meterial has been
produced on behalf of the appellant to discharge this burden.
[355-F-H, 356-A)
1.4. The prosecution bas established that the appellant was con-
cerned in an attempt at evasion of duty under the provisions of the Act, G
and as such committed the offence under first part or Section 135 (l)(a)
-~ of the Act. He was also concerned in evasion of the prohibition imposed
by sub-section (2) of Section 11-J of the Act, thereby committing the offence
even under the second part of Section 135(1)(a) of the Act. The very fact
that 3,274.98 kgs. of silver ingots worth more than rupees 18 lakbs bad H
!

350 SUPREME COURT REPORTS [1994] 2 S.C.R.

A been kept hurried near tbe well in tbe garden, leads to irrestible conclusir.n
that tbe said silver ingots had not been kept or stored in tbe normal course
of business. [356·E·G]

Asstt. Collector of Customs v. Babu Miya Sheikh, AIR (1983) SC 447
and State of Maharashtra v. Natwar/al Damodardas Soni, [1980] 4 SCC 669,
B relied on.

Veera Ibrahim >. State of Maharashtra, AIR (1976) SC 1167; RC.
Mehta v. State of West Bengal, [1969] 2 SCR 461 =AIR (1970) SC 940 and
Heydon's case· [1584] 76 DR 7:!, referred to.
c . ,j ',f. •• '

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.
757of1980. . ·

From the Judgment and _Order dt. 10/15-10-80 of the Gujarat High
Court in Cr!. Appeal No. 1038ns.
D U.R. Lalit, A.A. Khan aii:d lVls. Rani Jethmalani for the Appellant.

M. Gauri Shanker Murthy, Dilip Tandon, D.S. Mabra and Ms. A.
Subhashini for the Respondents.

E The Judgment of the Court has delivered by

N.P. SINGH, J. The appellant was convicted by the Magistrate for
an offence under Section B5(1)(a) of the Customs Act {hereinafter
referred to as the 'Act') and was sentenced to undergo rigorous imprison-
ment for ~o years and to pay a fine of Rs. 5000, in default of payment •
F thereof, to undergo rigorous imprisonment for further period of six months.
The appeal preferred on behalf of the appellant, before the Sessions Judge,
was transferred to the High Court, to be heard along with ihe appeal filed
on behalf of the State, against the order of acquittal, passed by the
Magistrate against other co-accused persons. The High Court, by the
G impugned judgment, dismissed the appeal of the appellant.

It is tlie case of the prosecution that on 30.1.1969, the patrolling
officials found a truck coming from the side of Moti Daman and proceed-
ing towards Mohangarn Railway Crossing, without the headlights being on
"'·
in a suspicious manner. On inquiry, it was found that the said truck had
H unloaded some contraband articles at some Wadi. Police and the officials
BHANABHAI v. COLLECTOR [N.P.SINGH, J.] 351
''
of the Customs Department, found out that goods had been unloaded at A
the wadi of the appellant at Iklora. A search was carried out in the said
wad~ and on digging the ground near a well 101 silver ingots, weighing
3,274.98 kgs., worth about 18,08,850, were recovered. The said silver ingots
were neither covered under any trans1mrt voucher nor any of the require-
ments contemplated under Chapter IV-B cf the Act, were found to· have B
been complied with. The Customs officials had reasonable belief that the
said silver ingots had been stored at the Wadi of the appellant, for the
purpose of illegal export and as such liable for confiscation. Further
investigation disclosed that the said silver ingots had been brought by two
moter J:rucks bearing Nos. M.H.T. 2304 and M.R.T. 2751. So far the truck
No. M.H.T. 2304 was concerned, which was spotted out first moving in a C
suspicious manner, was carrying contraband silver ingots 20 in number.
Several persons including the drivers and owners of the trucks were made
accused inconoection with the said recovery. The original accused No.2
Shankarbahi Haribahi, brother-in-law of the appellant, was at the time of
seizure, present at the wadi and was guarding the said place. Later he D
..
~
absconded and could not be made available for trial.

By a notification No. C.S.R. 37 dated 3.1.1969, issued by the Govern-
ment of India, Ministry of Fin~ce, in exercise of the powers confer;ed by
the Act 'Silver Bullion and Coins' had been declared as 'specified goods'.
By Notification No. C.S.R. 38 dated 3.1.1969, issued in exercise of powers E
conferred by the said Act, the area of 50 kilometers in width from the coast
of India, falling within the territories of the States of Gujarat, Maharashtra,
Mysore and Union Territory of Goa, Daman and Div, had been declared
as 'the specified area'. There is no dispute that the Wadi of the appellant
was within 50 kilometers from the coast of India as such within the
'specified area', and before the seizure were made on 30.1.1969, the silver F
ingots had been notified as 'specified goods'.

After the recovery aforesaid, the statment of the appellant had been
recorded, in accordance with Section 108 of the Act. During course of the
statement, the appellant admitted that the Wadi belonged to him and 101 G
silver bars bad been hurried near a well in the said Wadi. He stated :-

"Customs personnel came at night at my Iklora Wadi and they took
away 101 silver bars which were hurried near the well..............."

He again repeated the same thing later in bis statement by saying :- H
I
I

352 SUPREME COURT REPORTS (1994] 2 S.C.R.
I
A "On date 30/31.1.69 the Customs Officials digged the land near '
the well in the Wadi of my Iklora and found 101 Silver bars

He, however, stated that he did not know how the silver bars came there.
B In the case Veera Ibrahim v. State of MahllJ'<JShtra, AIR {1976) SC 1167, it
was examined, as to whether the statement of the accused in that case
recorded by the Customs Officer under Section 108 of the Act before any .-
.'

complaint or first information had been lodged against him, can be used
against such accused when he was charged for having committed an offence'
under Section 135(1)(a) of the Act. It was said that mere facts th~t at the
C relevant time the person was arrested on suspicion of having committed an
offence under Section 124 of the Bombay Police Act and a r anchnama had
been prepared seizing the goods, were immaterial when ndther the case
was registered nor the F.l.R. was recorded by the police. [t was pointed
out that when the Customs Officer recorded the statement of the appellant,
D in tiiat case he was not formally accused of any offence and as such the
statement recorded by the Inspector of Customs was not hit by Article
20(3) of the Constitution. In that connection, reference was made to the
judgment of this Court in the case of R.C. Mehta v. State cf West Bengal,
[1969] 2 SCR 461 = AIR (1970) SC 940. As 'uch the statement made by
the appellant under Section 108 of the Act, can be used against him. The
E appellant stated in clear and unambiguous words (i) that the Wadi
belonged to him by saying twice "my Iklora Wadi" (ii) Customs personnal
came at night and took away "101 silver bars, which were hurried near the
well'. At the time of trial, the appellant took a stand that the Wadi did not
belong to him, it belonged to his wife and as during the recovery of the
F silver ingots, he was not present at the Wadi, no inference cif guilt against
him could be drawn.

On behalf of the appellant, nothing has been brought to our notice
to reject his statement under Section 108 of the Act, sa'lipg--that said
statement was not voluntary or made under coercion. On behalf of the
G prosecution, witnesses have been exmined to prove as to how after digging
the ground near the well, 101 silver ingots were recovered. Witnesses have
also stated that the Wadi, from where recovery was made, belonged to the
appellant. The statement of the appellant made under Section 108 of the
Act along with the evidence of the witnesses, who have been examined to
H prove the recovery from the Wadi aforesaid, establish that Wadi belonged
\

BHANABHAI v. COLLECTOR [N.P.SINGH, J.] 353

to the appellant and 101 silver ingots had been concealed under the A
ground, which were recovered after digging the ground.

Now the only question which is to be examined, is as to whether on
basis of the recovery, the appellant can be held to be guilty for an offence
under Section 135(1)(a) of the Act? On behalf of the appellant, a stand
was taken before this Court that even if the prosecution case regarding B
recovery aforesaid is accepted, the ingredients of Section 135(1)(a) have
not been fulfilled, so as to hold that the appellant committed an offence
under that Section. The relevant part of Section 135(1)(a) is as follows :-

"135. Evasion of duty or prohibitions (1) Without prejudice to any C
action that may be taken under this Act, if any person -

(a) is in relation to any goods in any way knowingly concerned
in any fraudulent evasion or attempt at evasion of any duty char-
geable thereon or of any prohibition for che time being imposed

• under this Act or any other law for the time being in force with
respect to such goods; or
D

According to appellant, the prosecution has not established that the
silver ingots had been kept hurried inconnection with any fraudulent E
evasion or attempt at evasion of any duty chargeable thereon. In the case
of Asst. Collector of Customs v. Babu Miya Sheikh Imam, AIR (1983) SC
4 '7, it was pointed out that Section 135(1)(a) has to be read in three parts:-
•
-~ "l. If any person is in relation to a11) goods in anyway knowingly
concerned in any fraudulent evasion or attempt at evasion of any F
duty chargeable thereon, he shall be punishable with imprisonment
for a term which may exter ~ to three years or with fine or both.

2. If any person is in relation to any goods in any way knowi_ngly
concerned in any fraudulent evasion or attempt at evasion of any G
prohibition for the time being imposed under the Customs Act,.
rt 1962 with respect to such goods, he shall be punishable with
imprisonment for a term which may extend to three years of with
fine or both.

3. If any person is in relation to any goods in any way knowingly H
I

354 SUPREME COURT REPORTS (1994] 2 S.C.R.
I

A concerned in any fraudulent evasion or attempt ai evasion of any I

prohibition for the time being imposed under any other law for
the time being in force with respect of such goods, he shall be
punishable with imprisonment for a term which may extend to
three years or with fine or both."
B
As such if any person is in relation to any goods in any way knowingly
concerned in any fraudulent evasion or attempt at evasion of any prohibi- '
.r
lion for the time being imposed under the said Act with respect to such
goods, even then he shall be punishable with imprisonment as prescribed
under the said Section. In other words, the person must be concerned in
c any fraudulent evasion or attempt at evasion of any prohibition imposed
under the Act. In the instant case, the 'si ver bullion' had been declared as
specified goods and the inland area of 50 kilometers in width from the
coast of India including the area in whi.;h the Wadi of the appellant was
situated had been declared as 'specified area' under the provisions of the
D Act. Sub-section (1) of Section 11-J, which had come in force w.e.f.
3.1.1969, required every person who owns, possesses, or has control, on the
specified date, over any specifed goods, I he market price of which exceeds
fifteen thousand rupees, to deliver to the proper officer, an intimation
•
containing the particulars of the place where such goods had been kept or
had been stored within the specified area. Sub-section {2) of Section 11-J
E enjoins that every person who acquires, within the specified area, after the
specified date, any specified goods, the value whereof exceeds fifteen
thousand rupees, to deliver to the proper officer an intimation containing
the particulars of the place where such g·Jods were proposed to be kept or
stored ''before making such acquisition''. In other words sub-section (2)
F prescribes a bar on acquiring any specified goods within foe specified area
unless before making such acquisition, h•: delivers to the proper officer an
-
•

intimation containing the particulars of the place where such goods are
proposed to be kept or storetl, after i;uch acquisition. Per se this will
amount to be prohibition in acquiring specified goods within the specified
area, the value whereof exceeds fifteen thousand rupees unless the condi-
G lions for such acquisition are fulfilled with. There is no dispute in the
present case that the appellant, never before making acquisitoin, delivered
to the proper officer any intimation in respect of acquisition, of those silver ~:

ingots and the place where such silver ingots were proposed to be kept or
stored after the acquisition. In this background, there should not be any
H difficulty in holding that the appellant was concerned in fraudulent evasion
BHANABHAI v. COLLECTOR [N.P. SINGH, J.] 355

or attempt at evasim;. of the aforesaid prohtbition nnder sub-section (2) of A
'
' Section 11-J in relation to specified goods.

In the facts and circumstances of the case, it can also be held that
the appellant was concerned with the specified goods in connection with
'fraudulent evasion or attempt at evasion' of duty chargeable on the
specified goods. It is well known, that it is very difficult for the prosecution, B
to prove every link, in respect or the commission of the offence under the
Act by direct evidence. The \ •hole process of smuggling, for evading
payment of custom duty consists of different links. The links aid and abate
each other, sometimes through a remote control. That is why, the Parlia-
ment has introduced Section 138-A in the Act. Section 138-A says :- c
"138-A. Presumption of culpable mental state- (1) In any prosection
for an offence nnder this Act which requires a culpable mental
state on the part of the accused, tb.e court shall presume the
existence of such mental state but it shall be a defence for the
accused to prove the fact that he had no such mental state with D
respect to the act charged as an offence in that prosecution.

(2) For the purposes of this section, a fact is said to be proved
only when the court believes it to exist beyond reasonabl~ doubt
and not merely when its existence is established by a
preponderance of probability.'
E

This Section had come in force before the trial commenced. The provision
relates only to burden and nature of proof at the trial, as such it was
applicable in the present case. In view of the aforesaid Section, a presump-
.
-'
tion has to be drawn, in respect of existence of the alleged mental state. F
An option has been given to the accused to prove by way of defence the
fact, that he did not have any such mental state with respect to the act
charged which is an offence. It can be said that the provision aforesaid is
an exception to the general criminal jurisprudence that onus never shifts
on the accused and he has only to raise a doubt in the mind of the Court,
in respect of the correctness of the prosecution version. it is different from G
Sections 106 and 114 of the Evidence Act. In view of Section 138- A, once
a presumption is raised about a culpable mental state on the part of the
~
- accused, that he had stored the silver ingots, to export them outside the
country evading payment of custom duties, the accused has to prove as a
defence that no such mental state with respect to the act charged, did exist. H
I

356 SUPREME COURT REPORTS [1994) 2 S.C.R.

A No material has been produced on behalf of the appellant to U::~"~rge this
burden. He has not explained as to why 3,274.98 kgs. of silver ingots, worth (

rupees more than 18 lakhs had been concealed underground near a well '
in his Wadi without any intimation being given to the proper officer
concerned, before acquisition of those sm·er ingots, as required by sub-
secion (2) of Section 11-J.
B
This Court in the case of State of Maharashtra v. Natwarlal Damodar-
das Son~ [1980) 4 SCC 669, in which the trial had been completed before
the introduction of Section 138-A in the Act, examined as to what L the
nature of proof required for establishing a charge for an offence under
C Section 135(1). It was said that the requisite guilty knowledge or mens rea
under clauses (a) or (b) or Section 135(1), can be established by cir-
cumstantial evidence as well. Even without applying Section 138-A of the
Act, it was held that the burden of proving an innocent receipt of gold lay
upon the appellant wider Section 106 of the Evidence Act. The totality of
facts· proved, was enough to raise a presumption under Section 114 of the
D Evidence Act, that the gold had been illegally imported into the country.
It was further said that provisions of Section 135(1) had been designed to
suppress smuggling, as such it has to be construed in accordance with the
Mischief Rule first enunciated in Heydon's case [1584) 76 ER 73.

According to us, the prosecution has established that the appellant
E was concerned in an attempt at evasion of duty under the provision of the
Act, as such committed the offence under first part of Section 135(1)(a) of
the Act. He was also concerned in evasion of the prohibition imposed by
sub-section (2) of Section 11-J of the Act, by not having delivered to the
proper officer, an intimation containing the particulars of the place, an
F intimation containing the particulars of the place, where the silver ingots,
in such a huge quantity were to be kept and stored, as such he committed •
the offence even under the second part of Section 135(1)(a) of the Act.
The very fact that 3,274.98 kgs. of silver ingots worth more than rupees 18
lakhs had been kept hurried near the well in the garden, leads to irrestible
conclusiton that the said silver ingots had not been kept or stored in normal
G course of business.

As such there is no merit in this appeal and it is accordingiy dis-
missed. The Trial Cowt shall take all necesary steps to take the llppellant
in custody to serve out the remaining period of sente&ce.

G.N. Appeal dismissed.