M/S. J.K. BARDOLIA MILLSversusM.L. KHUNGER, DY. COLLECTOR AND ORS.

A                      MIS. J.K. BARDOLIA MILLS
                                    v.
               M.L. KHUNGER, DY. COLLECTOR AND ORS.

                                  JULY 18, 1994

B                   [KULDIP SINGH ANDS. MOHAN, JJ.]

           Customs Act, 1962--·Sections 110(1) & (2), 123 and 124--Seizure of
    goods under section 110( !)-Notice u/s 110(2)served after statutory period of.
    six months--lnvali<f--Adjudication proceedings and confiscation order--
c   Validity challenged-Whether provisions of Section 123 would be attracted in
    a case where retention of goods has become illegal u/s 110(2) because no
    notice as required under said provision was served within statutory period.

          Packages of synthetic fabrics of foreign origin were seized u/s 110 of
    the Customs Act, 1962, on May 29, 1969. The show cause notice as con-
D   templated by Section 124(1) (a) and under section 110 was given on Decem-
    ber 19, 1969. Goods were conOscated by an order under Section 112(b) and
    a penalty of Rs. 50,000 was imposed on the appellant. Orders of Assistant
    Collector were challenged on the ground that the said notice, having been
    served on the appellant after the statutory period of six months, the
E   custom authorities were debarred from holding the adjudication proceed-
    ings in respect of the goods in dispute.

          Dismissing the appeal, this Court

          HELD : When the goods are seized under Section 110(1) of the
F Customs Act that amounts to seizure of the goods under the Act and as
    such the conditions for invoking the provisions of Section 123 of the Act
    are satisfied by the mere factum of seizure. The effect of non-compliance
    of the provisions of Section 110(2) would only be that the seized goods are
    returned to the person from whose possession they were seized. It would
G   not render the initial seizure of the goods illegal. The seizure of the goods
    under Section 110(1) by itself is sufficient to comply with the requisite
    condition under Section 123 of the Act. What happens to the goods
    thereafter is of no consequence. (761-D-E)

          Assistant Collector, Custom v. Charan Das Malhotra, A.I.R. (197i) SC
H 689 and Chaganlal Gainmull v. Collector of Central Excise & Ors. (1990)
                                        756
         J.K. BARDOLIA MILLS v. M.L. KHUNGER [KULDIP SINGH, J.)        757

 Supp. sec 527, referred to.                                                 A
         CIVIL APP ELLATE JURISDICTION : Civil Appeal No. 1913 of
 1974.

      From the Judgment and Order dated 1/2.11.73 of the Gujarat High
 Court in S.C.A. No. 576 of 1973.                                            B
         Hardev Singh and Ms. Madhu Moolchandani for the Appellant.

      Joseph Vallav Pallai, K. Swamy, P. Parmeswaran and C.V.S. Rao for
 the Respondents.
                                                                             c
         The Judgment of the Court was delivered by

       KULDIP SINGH, J. The question for our consideration in this
 appeal is whether the provisions of Section 123 of the Customs Act, 1962
 (the Act) would be attracted in a case where the retention of the goods
 has betome illegal under Section 110(2) of the Act because no notice as     D
 required under the said provision was served within the statutory period.

        The factory premises of the appellant-firm were raided by the Cus-
  tom authorities on May 26, 1969 and 28 packages of synthetic fabrics of
  foreign origin were seized. The seizure was made under Section 110 of the E
  Act. By the order dated November 27, 1969 the Collector Customs ex-
  tended the period for the issue of show cause notice prescribed under
  Section 124 of the Act by two months from the date of the order. Finally,
  the show cause notice in terms of section 124(1)(a) of the Act was received
  by the appellant-firm on December 26, 1969. The Assistant Collector,
  Bombay by the order dated February 24, 1971 under Section 112(b) of the F
  Act, confiscated the goods in dispute and also imposed a penalty of Rs.
  50,000 on,be appellant. The appeal filed against the order of the Assistant ·
  Collector was dismissed by the Appellate Collector. The appellant chal-
  lenged the orders of the Assistant Collector and the Appellate Collector
  by way of a writ petition under Article 226/227 of the Constitution of India G
· before the High Court of Gujarat at Ahmedabad. The High Court. dis-
  missed the writ petition with cost. This appeal, by way of special leave, is
  against the judgment of the High Court.

      It was contended before the High Court that the goods in dispute
 were seized by the Customs authorities on May 29, 1969 and the notice as    H
    758                  SUPREME COURT REPORTS [1994] SUPP. I S.C.R.

A   contemplated by Section 124(l)(a) read with Section 110 of the Act was
    given on December 19, 1969. The said notice, having been served on the
    appellant after the statutory period of six months, was invalid and illegal.
    It was further contended that the notice being invalid, the appellant was
    entitled to the return of the seized goods under Section 110(2) of the Act
    and further the Custom authorities were debarred from holding the ad-
B
    judication proceedings in respect of the goods in dispute. In other words,
    it was contended that once the notice under Section 110(2) of the Act is
    invalid, no proceedings for confiscation of the seized goods can thereafter
    continue. The High_ Court, relying upon the judgment of this Court in
    Assistant Collector Customs v. Charan Das Malhotra, AIR (1972) SC 689,
c   held the show cause notice under Section 110(2) read with Section
    124(l)(a) of the Act to be invalid but even then found the adjudication
    proceedings and the confiscation order to be valid on the following reason-
    ing:


D            "The consequence is that the order passed by the Collector of
             Customs and Central Excise dated November 27, 1969 extending
             the period of six months provided in Section 110 by two months
             from November 26, 1969 is bad and illegal in view of the provisions
             of Section 110(2) of the Act. But the question then arises is whether
             the petitioner is entitled to return of the goods seized, once the
E            order of confiscation is passed under Section 111 of the Act. So
             far as Section 110 is concerned it deals with the seizure of the
             goods and the return thereof. In other words if the said provisions
             are not satisfied the goods seized have to be returned. Section 110
             of the Act deals with the seizure of the goods. Section 124 of the
F            Act deals with the confiscation and imposition of the penalty. The
             provisions relating to the seizure of the goods and those relating
             to the confiscation of the goods or imposition of penalty stand on
             different footing. Section 124 of the Act does not layfdown any
             period within which the notice required by it has to be given. The
             period laid down in Section 110(2) affects only the seizure of the
G            goods and not the validity of the notice. In the present case after
              the proceedings of seizure, proceedings for confiscation and im-
              position of penalty were proceeded with and the proceedings
              ended in the order of confiscation and imposition of penalty vide
              order Ex. 'D'. As the goods have already been ordered to be
H             confiscated the question of return of goods after the period of six
     J.K. BARDOLIAMILLS v. M.L K!IU!:ijER [KULDIP SINGH).]               759

        months as mentioned in section 110 of the Act cannot survive."          A

      The High Court further noticed the provisions of Sections 110, 111,
112 and 124 of the Act and observed as under : -

        "These words are of widest import and they cannot be given a
        restricted meaning as is sought to be given by the learned advocate     B
        for the petitioner. There is nothing in these provisions to indicate
        that the goods in respect of which an order of confiscation or
        penalty can be passed under Sections 111 & 112 of the Act must
        be goods seized under the provisions of Section 110 of the Act.
        The power to seize the goods under section 110 is distinct and          C
        separate from the power of confiscation and imposition of penalty
        as provided in Sections 111 and 112 of the Act. The later provisions
        are not absolutely dependent on the provisions of Section 110 of
        the Act.n

     Charan Das Malhatra's case (supra) was followed by this Court in D
Chaganlal Gainmull v. Collector of Central Excises & Ors., [1990] Supp. SCC
527. The view taken by the High Court is, therefore, unexceptionable and
we uphold the same.

       Mr. Hardev Singh, learned counsel for the appellant, however, con-       E
tended that the notice under Section 110(2) being invalid, the provisions
of Section 123 of the Act would not be attracted in the present case.
According to him but for the presumption under Section 123 of the Act
there is no material on the record to show that the goods in dispute are
smuggled goods and once it is held that Section 123 of the Act is not
applicable to the facts of the present case, the order confiscating the goods   F
and imposing penalty are liable to be set aside. We do not agree with the
contention of the learned counsel. To appreciate the argument, we may
refer to· the relevant provisions of Sections 110 and 123 of the Act which
are as under : -
                                                                                G.
        "110. Seizure of goads, documents and things. (1) If the proper
        officer has reason to believe that any goods are liable to confisca-
        tion under this Act, he may seize such goods:

           Provided that where it is, not practicable to seize any such
        goods, the proper officer may serve on the owner of the goods an H
    760                        SUPREME COURT REPORTS (1994] SUPP. 1 S.C.R.

A          order that he shall not remove, part with, or otherwise deal with
           the goods except with the previous permission of such officer.

               (2) Where any goods are seized under sub-section (1) and no
           notice in respect thereof is given under clause (a) of Section 124
           within six months of the seizure of the goods, the goods shall be
B          returned to the person from whose possession they were seized :

               Provided that the aforesaid period of six months may, on
           sufficient cause being shown, be extended by the Collector of
           Customs for a period not exceeding six months.

c              (3) ............................................. .

               (4) ............................................. .

              123. Burden of proof in certain cases. (1) Where any goods to
           which this section applies are seized under this Act in the
D          reasonable belief that they are smuggled goods, the ·burden of
           proving that they are not smuggled goods shall be--

                (a) in a case where such seizure is made from the possession
            of any person, -
E                 (i) on the person from whose .possession the goods were
                  seized; and

                 .(ii) if any person, other than the person from whose posses- ·
                  sion the goods were seized, claims to be the owner thereof,
                  also on such other person ;
F
               (b) in any other case, on the person, if any, who claims 'to be
            the owner of the goods so seized.

                (2) This section shall apply to gold, diamonds, manufacturers
            of gold or diamonds, watches, and any other class of goods which
G
            the Central Government may by notification in the Official Gazette
            specify."

          The conditions to be satisfied for application of the provisions of
    Section 123 of the Act are (a) the goods must be one to which Section 123
H   applies; (b) the goods are seized under the Act and (c) the goods must be
       J.K. BARDO LIA MILLS v. M.L. KHUNGER (KULDIP SINGH, J.)          761

seized in the reasonable belief that they are smuggled.                       A
        It was not disputed before the Assistant Collector that Section 123
 applied to the goods in dispute. Reasonableness of belief has to be judged
 in the light of the facts and circumstances of each case. It is not the case
of tlie appellant that in the facts of the present case reasonable belief could
not be entertained that the goods were smuggled. The only contention B
 raised by the learned counsel for the appellant is that in this case the
seizure of the goods became illegal due to non-compliance of the
provisions of Section 110(2) of the Act and, as such, one of the conditions
for the applicability of Section 123 is not satisfied. There is no force in the
contention. The goods were seized under Section 110(1) of the Act by the C
proper officer on the ground that he had reason to believe that the goods
in dispute were liable to be confiscated under the Act. The seizure when
made was in accordance with law and no fault could be found with the
same. When the goods are seized under Section 110(1) of the Act that
amounts to seizure of the goods under the act and one of the conditions
for invoking the provisions of Section 123 of the Act are satisfied by the D
mere factum of seizure. The effect of non-compliance of the provisions of
Section 110(2) would only be that the seized goods are returned to the
person from whose possession they were seized. It would not render the
initial seizure of the goods illegal. We, therefore, hold that the seizure of
the goods under Section 110(1) by itself is sufficient to comply with the E
requisite condition under Section 123 of the Act. What happens to the
goods thereafter is of no conSequence.

      We, therefore, dismiss the appeal with costs. We quantify the cost as
Rs. 10,000. As a consequence, LA. No. 1/93 is also dismissed.
                                                                              F
A.G.                                                      Appeal dismissed.