The reasonable belief that the goods were smuggled, as required by Section 178A of the Sea Customs Act, must exist at the time of seizure, not at the time of inquiry.

Headnote:
SEA CUSTOMS ACT - SECTION 178A - INTERPRETATION - REASONABLE BELIEF - TIME OF SEIZURE - BURDEN OF PROOF - CONSTITUTIONALITY - ULTRA VIRES.
Fact of the Case:

The respondents, a bullion merchant firm, sent gold to a refinery for melting and assaying. A Customs Officer seized 151 tolas of gold from their employee on suspicion of smuggling. The Additional Collector of Customs confiscated the gold under Section 167(8) of the Sea Customs Act read with Section 23A of the Foreign Exchange Regulation Act. The respondents challenged the order by filing a petition under Article 226 of the Constitution, contending that Section 178A of the Sea Customs Act was ultra vires and that the gold was not seized under a reasonable belief that it was smuggled.
Finding of the Court:

The Court held that Section 178A of the Sea Customs Act was not ultra vires the Constitution. However, it interpreted Section 178A to mean that the reasonable belief that the goods were smuggled must exist at the time of seizure, not at the time of inquiry. The Court found that the Customs Officers seized the gold merely on suspicion, not on a reasonable belief that it was smuggled. Therefore, the burden of proof did not shift to the respondents to show that the gold was not smuggled.
Issues: 1. Whether Section 178A of the Sea Customs Act is ultra vires the Constitution? 2. Whether the gold was seized under a reasonable belief that it was smuggled?
Ratio Decidendi: 1. The Court held that Section 178A of the Sea Customs Act was not ultra vires the Constitution. It reasoned that the section was enacted to curb the smuggling of precious metals and stones, and that the restrictions placed on the powers of Customs Officers under the section were necessary to prevent arbitrary and harassing seizures. 2. The Court interpreted Section 178A to mean that the reasonable belief that the goods were smuggled must exist at the time of seizure, not at the time of inquiry. It reasoned that the language of the section is clear and unambiguous, and that any other interpretation would render the section meaningless.
Final Decision: The Court dismissed the appeal filed by the Additional Collector of Customs and the Union of India. It held that the Customs Officers had failed to prove that the gold was seized under a reasonable belief that it was smuggled, and that therefore the order confiscating the gold was invalid.

JUDGMENT - 1. This is an appeal filed by the Additional Collector of Customs, Bombay, and the Union of India, against the order passed by Mr. Justice K. T. Desai, by which the order passed by the Additional Collector of Customs confiscating certain quantity of gold belonging to the respondents was quashed, and a writ of mandamus was issued requiring the Additional Collector to withdraw the order that he had passed.

2. The respondents carry on business in Bombay as dealers in bullion in partnership in the firm name and style of Messrs. Ambalal Amichand and Co. at 101 Shaikh Memon Street, Bombay. In the petition that they filed in this Court, they stated that they were one of the leading bullion merchants in the city and used to buy and sell gold in a largo way in diverse forms. It was alleged that on 12-9-1955 respondents in the usual course of their business sent about 385 tolas of gold from their stock to the Bombay Bullion Association Refinery for the purpose of melting and assaying. It was further alleged that as the respondents required more gold of the same lineness they sent a further quantity of 1151 tolas of gold from out of their stock with one of their employees named Jitendra Bhagwandas, to have the same melted with the earlier lot in order to have one lot of uniform fineness with one certificate of assaying. The petition went 011 to allege that as their employee Jitendra was about to hand over the 151 tolas of gold to an employee of the Refinery for being put in the same crucible in which the earlier lot of 385 tolas of gold had been put, he was stopped by one B. M. Kamat, an officer in the Customs Department. It was further alleged that Kamat took charge of the said 151 tolas of gold within the premises of the Refinery and that thereafter Kamat and the said Jitendra went to the respondents shop with the said 151 tolas of gold. The respondents alleged that Kamat, alter going to that shop, checked the stock of gold with their stock as shown in their books of account and other documents and found that there was a shortage of about 24 tolas of gold, which had to be explained by tho respondents. The said Kamat, according to the respondents, made the alleged shortage of gold of about 24 tolas an excuse to seize the entire quantity of gold weighing 151 tolas. A panchnama was thereafter made on the same day in connection with the said seizure of gold. According to the respondents, the panchnama recited that the panchas were called by Customs Inspector Mr. Kishinchand N. Vazirani and Customs Preventive Officers M/s. B. M. Kamat and G. S. Shiroor and P. M. Ranade in the Rummaging Division, New Customs House, Bombay, to witness the taking over of the gold bullion from Amichand Vallamji. In the said panchnama the gold was staled to consist of three lots: (1) Three pieces of odd shapes and sizes weighing approximately 64 tolas stated by the respondents to have been purchased from Shantilal Kalidas on Saturday the 10th September 1955; (2) Two pieces of odd shapes and sizes weighing approximately 46 tolas, stated to have been purchased by the respondents from the said Shantilal Kalidas on 12th September 11955; and (3) Two pieces of odd shapes and sizes weighing approximately 41 tolas, stated to be forming part of the quantity purchased by the respondents from Mulchand Jitaji on 9th September 1955. The respondents thereafter quoted a passage from the panchnama showing that all those three pieces of gold were taken charge of by the Customs Officers to facilitate inquiries after they were placed in a cloth bag, which was sealed by Amichand with his key as desired by Amichand himself. The respondents further went on to allege in the petition that the said Shantilal Kalidas and Mnlchand Jitaji were well known bullion merchants in the market, doing business for a number of years past and were registered dealers under the Bombay Sales Tax Act. They alleged that the statement of the said Shantilal Kalidas was recorded by the Customs Off

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