2014 (12) TMI 356 - HC - Customs

Detention under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 - forfeiture of the property under the SAFEMA - hold of properties purchased and/or developed by tented money earned out of smuggling activities - Bar of limitation - Held that - There is delay in issuing the impugned notices. However, we believe that delay is to be considered inclusively, as it differs from case to case. In service matters, delay is an important aspect but, the same yardstick cannot be applied in matters involving smuggling and foreign exchange manipulations. Persons engaged in such activities do not keep regular and proper accounts with respect to such activities. Evasion of taxes is integral to such activity. It would be difficult for any authority to say, in the absence of any accounts or other relevant material, that among the properties acquired by a smuggler, which of them or portions thereof, are attributable to violation of law. It is probably for this reason that the burden of proving that the properties specified in the show cause notice are not illegally acquired properties is placed upon the person concerned. For this reason also, the SAFEMA does not prescribe any time-limit for issuance of show cause notice u/s 6(1). Whether the competent authority had reasons to believe that the properties of the original petitioners are illegally acquired properties under the definition of SAFEMA - Held that - Section 6(1) of the SAFEMA provides that the competent authority is empowered to serve a notice of forfeiture upon such person whom it has reason to believe that all or any of the properties of such person is illegally acquired. The condition precedent for issuing a notice u/s 6(1) is that the authority should have reason to believe that all or any of such properties are illegally acquired properties and the reasons for such belief have to be recorded in writing. The language of the section does not show that there is any requirement of mentioning any link between the detenue and property ostensibly standing in the name of the person to whom the notice has been issued. Section 8 of SAFEMA states that the burden of proving that any properties specified in the notice u/s 6 is not illegally acquired property shall be on the person affected. It is apparent that the authority had sufficient reasons to believe that the said two properties had been illegally acquired. The authority recorded the satisfaction on the ground that neither AP-2 nor AP-3 had any ostensible source of income. They were not income tax assessees. In spite of that the properties stood in their name and also in the revenue records. Considering the antecedents of AP-1 and his criminal record and when AP-2, who is the wife of AP-1, was found to be having no ostensible source of income and also not an income tax assessee, the impugned notice u/s 6(1) cannot be said to have been issued without arriving at a subjective satisfaction regarding the alleged financial manipulation. Decision in the case of Whirlpool Corporation distinguished 1998 (10) TMI 510 - SUPREME COURT since the instant case do not would fall under any of the three contingencies mentioned in Whirpool s case. Neither there is any breach of the fundamental rights of the affected party nor there is any violation of the principles of natural justice or that the proceedings are without jurisdiction. The impugned action is only a show cause notice issued under the SAFEMA. Mere issuance of a show cause notice by a statutory authority cannot be said to be infringing the fundamental rights of a person. In our opinion, it also cannot be said to be violative of the principles of natural justice since the impugned action is only the initiation of proceedings and not the final conclusion. The affected persons could avail the opportunities provided under the SAFEMA to defend themselves. The proceedings are ripe and at this stage, to say that there has been breach of the principles of natural justice, would be premature and improper. Writ jurisdiction under Article 226 ought to be refused by Single Judge since the issue was totally premature. - Impugned order set aside - Decided in favour of Revenue.

Issues Involved:
1. Validity of the second show cause notice under Section 6(1) of the SAFEMA.
2. Availability and appropriateness of alternative remedies.
3. Delay in initiating proceedings under the SAFEMA.
4. Application of the principles of natural justice and subjective satisfaction.
5. Jurisdictional error and the scope of writ jurisdiction under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Validity of the Second Show Cause Notice:
The primary issue was whether the second show cause notice issued under Section 6(1) of the SAFEMA was valid. The respondents argued that the second notice was issued without application of mind and after an unreasonable delay of 17 years. The court observed that the properties in question were in existence when the earlier notices were issued and should have been included then. However, the court emphasized the broader perspective, considering the deleterious effect of smuggling and foreign exchange manipulations on the national economy. The court concluded that the competent authority had sufficient reasons to believe that the properties were illegally acquired, and the second notice was justified.

2. Availability and Appropriateness of Alternative Remedies:
The appellant-competent authority argued that the original petitioners had alternative remedies available under the SAFEMA, such as filing an appeal before the Appellate Tribunal. The court noted that the SAFEMA provides a complete machinery for redressal of grievances and that the High Court should not entertain writ petitions under Article 226 when effective alternative remedies are available. The court cited several Supreme Court decisions supporting this principle and held that the learned single Judge erred in entertaining the writ petitions.

3. Delay in Initiating Proceedings:
The respondents contended that there was an unreasonable delay in initiating proceedings under the SAFEMA. The court acknowledged the delay but emphasized that in cases involving smuggling and foreign exchange manipulations, delay is not a material ground. The court noted that persons engaged in such activities do not keep regular accounts, making it difficult to locate properties and assets. The court concluded that the delay did not invalidate the proceedings.

4. Application of the Principles of Natural Justice and Subjective Satisfaction:
The respondents argued that the second show cause notice violated the principles of natural justice and was issued without subjective satisfaction. The court examined the notice and found that the competent authority had recorded sufficient reasons to believe that the properties were illegally acquired. The court emphasized that the burden of proving that the properties were not illegally acquired lies with the affected party. The court held that the impugned notice was issued with proper subjective satisfaction and did not violate the principles of natural justice.

5. Jurisdictional Error and the Scope of Writ Jurisdiction:
The court disagreed with the learned single Judge's conclusion that the second show cause notice was issued without jurisdiction. The court cited the Supreme Court's decision in Whirlpool Corporation's case, which held that the existence of alternative statutory remedies is not a constitutional bar to the High Court's jurisdiction in certain contingencies. The court found that none of the contingencies applied in this case and that the writ petitions were premature. The court emphasized that the SAFEMA is a complete code in itself and that the writ Court should not have entertained the petitions under Article 226 at the notice stage.

Conclusion:
The court allowed the appeals, quashed the impugned judgment and order passed by the learned single Judge, and directed the original petitioners to respond to the impugned show cause notices within two months. The competent authority was instructed to consider their replies in accordance with the law and render its decision within a reasonable time.

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