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Andhra Pradesh High Court
Judges : B.P.JEEVAN REDDY
Innovation, Secunderabad - Appellant
Versus
Central Board of Excise and Customs - Respondent
Decided On : 06-07-82
CUSTOMS ACT - SEARCH AND SEIZURE - POWER OF INSPECTION - BURDEN OF PROOF - CONFISCATION OF GOODS - PENALTY - INTERPRETATION OF SECTIONS 105, 106-A, 110, 111, 112, 122 AND 123 OF THE CUSTOMS ACT, 1962.
Fact of the Case:
The Superintendent of Customs and Central Excise visited the petitioner's shop to collect a penalty imposed upon the petitioner in an earlier proceeding. During the visit, the Superintendent noticed foreign goods exhibited in the shop and called upon the petitioner to produce the register of notified goods and the requisite vouchers relating to the said goods. The petitioner failed to produce the register or any vouchers. The Superintendent seized 110 items alleged to be foreign goods. A show cause notice was issued to the petitioner calling upon him to explain why the goods should not be confiscated under Section 111 (p) and Section 111 (d) of the Customs Act, 1962. The petitioner submitted an explanation denying the allegations and requesting a personal hearing. The Collector of Central Excise, after examining the evidence and conducting an enquiry, confiscated the goods and imposed a penalty of Rs. 5,000. The petitioner challenged the order of confiscation and penalty by filing a writ petition.
Finding of the Court:
1. The search and seizure were not illegal as they were not conducted under Section 105 of the Customs Act, but under Section 106-A, which empowers the proper officer to inspect the goods and require the person in charge to produce accounts and furnish information for ascertaining whether the goods have been illegally imported. 2. The Superintendent of Customs had a reasonable belief that the goods were liable to confiscation, as the petitioner failed to produce the register and vouchers required under Sections 11-E and 11-F of the Act. 3. The burden of proving that the goods were not smuggled goods lay upon the petitioner under Section 123 of the Act, and the petitioner failed to discharge this burden. 4. The confiscation of goods notified under Section 11-B of the Act was justified as the petitioner violated Sections 11-E and 11-D of the Act. 5. The confiscation of goods not falling under Section 123 or 11-B of the Act was not justified as the department failed to establish that they were smuggled goods. 6. The penalty imposed was within the limits prescribed by Section 112 of the Act, and the appellate authority had reduced the penalty to Rs. 5,000, which was reasonable.
Issues: 1. Whether the search and seizure were illegal. 2. Whether the Superintendent of Customs had a reasonable belief that the goods were liable to confiscation. 3. Whether the burden of proving that the goods were not smuggled goods lay upon the petitioner. 4. Whether the confiscation of goods notified under Section 11-B of the Act was justified. 5. Whether the confiscation of goods not falling under Section 123 or 11-B of the Act was justified. 6. Whether the penalty imposed was excessive.
Ratio Decidendi: 1. Section 106-A of the Customs Act, 1962 empowers the proper officer to inspect goods and require the person in charge to produce accounts and furnish information for ascertaining whether the goods have been illegally imported. 2. The existence of a reasonable belief is a condition precedent for the exercise of the power of seizure under Section 110 of the Act. 3. Under Section 123 of the Act, the burden of proving that goods are not smuggled goods lies upon the person from whose possession the goods were seized. 4. Confiscation of goods notified under Section 11-B of the Act is justified if there is a violation of Sections 11-E and 11-D of the Act. 5. Confiscation of goods not falling under Section 123 or 11-B of the Act is not justified unless the department establishes that they are smuggled goods. 6. The penalty imposed under Section 112 of the Act should not exceed five times the value of the goods or Rs. 1,000, whichever is greater, in the case of prohibited goods, and five times the duty sought to be evaded on such goods, or Rs. 1,000, whichever is greater, in the case of other dutiable goods.
Final Decision: The writ petition was allowed in part. The confiscation of goods not falling under Section 123 or 11-B of the Act was set aside, and the respondents were directed to release and return the goods to the petitioner. The confiscation of goods notified under Section 11-B of the Act and the penalty imposed were upheld.
( 1 ) THIS writ petition is directed against the order of the Central Board of Excise and Customs, subsequently confirming the adjudication order passed by the Collector, Customs and Central Excise, Hyderabad. The Collector by his order dated 25-5-1977 confiscated the goods seized from the petitioners under Section 111 (d) and Section 111 (p) of the Customs Act, 1962 and also imposed a penalty of Rs. 25,000 under Section 112 of the Act. On appeal the Board confirmed the order of the Collector, except in the matter of penalty. It reduced the penalty to Rs. 5,000.
( 2 ) IN the writ petition Sri. V. R. Reddy, the learned counsel for the petitioners, raised four contentions viz. (i) that the search which led to the seizure and ultimately to the adjudication and confiscation was conducted by a person not competent in law to do so and, therefore, all subsequent steps, viz. , the seizure, adjudication and confiscation are void; (ii) that the person conducting the search had not formed a reasonable belief as contemplated by Section 105 of the Act and this reason too, the search is illegal; (iii) in this case, the goods seized are of three categories, viz goods notified under Section 123, goods notified under Section 11, and thirdly other categories of goods. The burden of proof varies in each of these categories of goods. The respondents however have not kept this distinction in mind, and have vitiated their orders; and (iv) that, the authorities have not determined the value, nor the duty payable, as required by Section 112, read with Section 122, of the Act, with determination was essential for assessing the penalty to be levied. For a proper appreciation of these contentions, it is necessary to set out the facts of the case clearly, which facts are found stated in the order of the Collector, I may state that no dispute has been raised with reference to the correctness of the facts as stated in the Collectors order, nor, indeed, any such dispute can be entertained in this writ petition.
( 3 ) ON 26-6-1973, the Superintendent of Customs and Central Excise I. D. O. II, Hyderabad with his Staff visited the petitioners shop "m/s. Innovation", at No. 62, Mahatma Gandhi Road, Secunderabad, for the purpose of collecting a sum of Rs. 2,200 being the penalty imposed upon the petitioners in an earlier proceeding. In that connection, there appears to have been an exchange of hot words between the 1st petitioner, and the Superintendent. Be that as it may, the Superintendent while in the shop, noticed goods of foreign origin exhibited in the show cases in the shop. The Superintendent called upon the petitioner to produce the register of notified goods, required to be maintained under Section 11-E of the Act, and the requisite vouchers relating to the said goods. According to the respondent, the 1st petitioner did not produce the register, nor was he able to produce any vouchers relating to those goods. He, however, produced certain documents, which on comparison, were found not to relate to those goods. Thereupon, the Superintendent seized 110 items alleged to be foreign goods, under a panchanama of the same data and prepared goods did not satisfactorily agree with the documents produced by the 1st petitioner. It is stated further that Sri T. N. Khambati (1st petitioner) refused to give a statement immediately after the seizure. Summons were issued by the detecting officer under Section 108 of the Act, on 2-7-1973, to the 1st petitioner, Sri T. N. Khambati, to appear before the Superintendent of Excise on 5-7-1973 in connection with the enquiry regarding the goods seized; but the 1st petitioner failed to appear. The petitioners advocate, however, addressed a registered letter dated 30-7-1973 to the Deputy Collector of Central Excise, Hyderabad contending that the several goods seized were not of foreign origin and that, the seizure was not in good faith. The respondents say that the goods seized were verified by another Sup
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