The prosecution must prove goods are smuggled for conviction; mere possession does not equate to illegal activity. Courts maintain authority to adjudicate matters post-Customs confiscation.

1. The appellant Misrimal Hansraj was convicted under S.135(b)(ii) of the Customs Act (hereinafter called 'the Act') and sentenced to pay a fine of Rs. 500/- by the Chief Presidency Magistrate, Madras.

2. In respect of the disposal of the alleged smuggled watches. (M.O. 1 series), no separate order was passed as, in the opinion of the learned Chief Presidency Magistrate, they have been already confiscated to the State by the Customs Authorities.

3. The appellant is running a business in Watches and other fancy goods in the premises at No. 97, Narayana Mudali Lane, George Town, Madras under the name and style of Messrs. Sha Manmal Misrimal, a partnership firm consisting of the appellant and his two brothers.

4. On 19-12-1968, P.W. 1 J. Rama Rao, Preventive Officer attached to the Customs House, Madras, searched the shop of the appellant in pursuance of a search warrant issued by the Assistant Collector of Customs and recovered from the shop, 221 wrist watches, 27 fountain pens and 8 ball point pens. All of them were brand new and were of foreign origin. Of 221 wrist watches, 18 watches were kept in a paper packet under a chest of drawer attached to the show - case. Another tin containing 28 watches was found underneath a steel almirah in an adjoining room. All other watches were in the show - cases in the shop. The appellant did not produce the documents to prove that he acquired the watches lawfully. But, however, it is the case of the appellant that he told the Customs authorities that he would produce the vouchers, but they asked him to produce them later at the Customs Office. P.W. 1 seized all those articles in the reasonable belief that they were smuggled ones. The details of the seized items were incorporated in the Annexure to Ex. P - 2, the mahazer for seizure, and the copy of Ex. P - 2 was served on the appellant. The appellant does not dispute the seizure of the watches and other articles detailed in Ex. P - 2.

5. After the search of the premises at Narayana Mudali Lane, the house of the appellant at No. 51, Strotten Muthiah Mudali Street, Madras, was also searched. Leather and metal watch straps were seized during that search and they were subsequently released to the appellant as they were not, in the opinion of the Customs Officers, goods liable for confiscation.

6. P.W. 1 recorded a statement Ex. P - 3 from the appellant. In Ex. P - 3, the appellant admitted about the seizure of the watches and other articles and stated that he was not able to produce any documents readily for the watches fountain pens and ban point pens seized by the Customs authorities. In respect of the recovery of one brown paper packet containing watches and one tin containing watches, kept underneath a cup - board in the back room of the shop, the appellant stated that he did not know as to how the watches came to be there and further stated therein that he was new to the business, that his elder brother Manmal used to look after the business completely and that after his death, his other brother Chunilal was looking after the shop.

7. The appellant stated that Ex. P - 3 was obtained under duress.

8. A show cause notice (Ex. P - 4) was issued to the appellant stating that the appellant was not in a position to correlate the seized watches with the relevant documents and asking him to show cause as to why 221 numbers wrist watches, 27 numbers fountain pens, 8 numbers ball point pens, 27 numbers Seik