1975 Supreme(Cal) 74

High Court Of Calcutta
Sankar Prasad Mitra, Salil Kumar Datta
COLLECTOR OF CUSTOMS AND CENTRAL EXCISE, WEST BENGAL - Appellant
Versus
HINDUSTAN MOTORS LTD. - Respondent
Appeal 47  Of  1973
Decided On : 03/14/1975

The condition precedent for the exercise of power under Section 110(1) of the Customs Act, 1962, is "reason to believe" and there must be objective reasons for forming this belief.

Headnote:

CUSTOMS ACT, 1962 - SECTION 110(1), 110(2), 124(A) - FOREIGN EXCHANGE REGULATION ACT, 1947 - SECTION 19-D, 19-E - IMPORTS AND EXPORTS (CONTROL) ACT, 1947 - SECTION 3(1)(A) - IMPORTS (CONTROL) ORDER, 1955 - CLAUSE 3 - SEIZURE OF GOODS - EXTENSION OF TIME FOR ISSUANCE OF SHOW CAUSE NOTICE - VALIDITY - JURISDICTION - WAIVER - DISTINCTION BETWEEN SEIZURE OF GOODS AND PROHIBITORY ORDER - REASON TO BELIEVE - IMPORTATION OF GOODS WITHOUT LICENSE - CLEARANCE OF GOODS FOR HOME CONSUMPTION - ESTOPPEL - LEGALITY AND PROPRIETY OF ORDERS PASSED BY CUSTOMS AUTHORITIES - REVISION BY CENTRAL BOARD OF REVENUE - LIMITATION. The appellants, Hindustan Motors Ltd. and Rajendra Prosad Jhunjhunwala, Vice-President (Finance) of the Hindustan Motors Ltd., challenged the order of seizure dated November 7, 1969, the extension order dated May 4, 1970, and the show cause notice dated October 28, 1970, issued by the Customs Authorities under the Customs Act, 1962. The goods were seized under Section 110(1) of the Customs Act, 1962, which provides that if the proper officer "has reason to believe" that any goods are liable to confiscation under the said Act, he may seize the goods. The appellants contended that the condition precedent for the exercise of power under Section 110(1) is "reason to believe" and that there must be objective reasons for forming this belief, which was absent in the instant case. The Court held that the affidavit of the Customs Officer disclosed sufficient reasons for formation of his belief, and that he had objective reasons to believe to satisfy the condition precedent in Section 110(1) of the Customs Act, 1962. The Court also held that the extension order dated May 4, 1970, extending the time for issue of the show cause notice by a period of six months, was invalid as it was passed ex parte, and that the order of seizure dated November 7, 1969, was valid. The Court further held that the show cause notice dated October 28, 1970, was not bad, as it was issued on the basis of alleged importation without license, which attracted the provisions of the Customs Act, 1962. The Court also held that the order passed under Section 47 of the Customs Act, 1962, permitting clearance of the goods for home consumption, did not bar the issuance of the show cause notice under Section 124(a), as the appellants had the duty to obey the law and could not be heard to say that because of the order under Section 47, steps could not be taken against them under the other provisions of the Customs Act.

Fact of the Case:

The appellants, Hindustan Motors Ltd. and Rajendra Prosad Jhunjhunwala, Vice-President (Finance) of the Hindustan Motors Ltd., challenged the order of seizure dated November 7, 1969, the extension order dated May 4, 1970, and the show cause notice dated October 28, 1970, issued by the Customs Authorities under the Customs Act, 1962. The goods were seized under Section 110(1) of the Customs Act, 1962, which provides that if the proper officer "has reason to believe" that any goods are liable to confiscation under the said Act, he may seize the goods. The appellants contended that the condition precedent for the exercise of power under Section 110(1) is "reason to believe" and that there must be objective reasons for forming this belief, which was absent in the instant case. The Court held that the affidavit of the Customs Officer disclosed sufficient reasons for formation of his belief, and that he had objective reasons to believe to satisfy the condition precedent in Section 110(1) of the Customs Act, 1962. The Court also held that the extension order dated May 4, 1970, extending the time for issue of the show cause notice by a period of six months, was invalid as it was passed ex parte, and that the order of seizure dated November 7, 1969, was valid. The Court further held that the show cause notice dated October 28, 1970, was not bad, as it was issued on the basis of alleged importation without license, which attracted the provisions of the Customs Act, 1962. The Court also held that the order passed under Section 47 of the Customs Act, 1962, permitting clearance of the goods for home consumption, did not bar the issuance of the show cause notice under Section 124(a), as the appellants had the duty to obey the law and could not be heard to say that because of the order under Section 47, steps could not be taken against them under the other provisions of the Customs Act.

Finding of the Court:

The Court held that the affidavit of the Customs Officer disclosed sufficient reasons for formation of his belief, and that he had objective reasons to believe to satisfy the condition precedent in Section 110(1) of the Customs Act, 1962. The Court also held that the extension order dated May 4, 1970, extending the time for issue of the show cause notice by a period of six months, was invalid as it was passed ex parte, and that the order of seizure dated November 7, 1969, was valid. The Court further held that the show cause notice dated October 28, 1970, was not bad, as it was issued on the basis of alleged importation without license, which attracted the provisions of the Customs Act, 1962. The Court also held that the order passed under Section 47 of the Customs Act, 1962, permitting clearance of the goods for home consumption, did not bar the issuance of the show cause notice under Section 124(a), as the appellants had the duty to obey the law and could not be heard to say that because of the order under Section 47, steps could not be taken against them under the other provisions of the Customs Act.

Issues: 1. Whether the seizure of goods under Section 110(1) of the Customs Act, 1962, was valid. 2. Whether the extension order dated May 4, 1970, extending the time for issue of the show cause notice by a period of six months, was valid. 3. Whether the show cause notice dated October 28, 1970, was valid. 4. Whether the order passed under Section 47 of the Customs Act, 1962, permitting clearance of the goods for home consumption, barred the issuance of the show cause notice under Section 124(a).

Ratio Decidendi: 1. The condition precedent for the exercise of power under Section 110(1) of the Customs Act, 1962, is "reason to believe" and there must be objective reasons for forming this belief. 2. An ex parte order extending the time for issue of the show cause notice under Section 110(2) of the Customs Act, 1962, is invalid. 3. A show cause notice issued on the basis of alleged importation without license is valid, as it attracts the provisions of the Customs Act, 1962. 4. An order passed under Section 47 of the Customs Act, 1962, permitting clearance of the goods for home consumption, does not bar the issuance of the show cause notice under Section 124(a), as the appellants had the duty to obey the law and could not be heard to say that because of the order under Section 47, steps could not be taken against them under the other provisions of the Customs Act.

Final Decision: The Court dismissed the appeals filed by the appellants, Hindustan Motors Ltd. and Rajendra Prosad Jhunjhunwala, Vice-President (Finance) of the Hindustan Motors Ltd., and upheld the order of seizure dated November 7, 1969, the show cause notice dated October 28, 1970, and the order of the trial court setting aside the extension order dated May 4, 1970.