1958 (5) TMI 56 - SC - Customs

Summary

Issues Involved:
1. Jurisdiction of Customs Authorities under the Sea Customs Act and the Foreign Exchange Regulation Act.
2. Validity of conditions imposed for the release of confiscated gold.
3. Rights of pledgees under the Constitution.
4. Severability of the impugned order.

Detailed Analysis:

1. Jurisdiction of Customs Authorities under the Sea Customs Act and the Foreign Exchange Regulation Act:

The appellant argued that under Section 8(3) of the Foreign Exchange Regulation Act (FERA), the customs authorities could not take action against the appellant under the Sea Customs Act as it would prejudice the provisions of Section 23 of FERA. The Court examined the relevant sections of both acts. It concluded that Section 23 of FERA is a proceeding against the offender, applicable when the offender is known. In contrast, Section 167(8) of the Sea Customs Act allows for confiscation of goods even if the offender is unknown, making it a proceeding in rem. The Court found that the customs authorities' action did not prejudice Section 23 of FERA, as the proceedings were in rem and the appellant was not identified as the smuggler. Therefore, the customs authorities had the jurisdiction to proceed under the Sea Customs Act.

2. Validity of Conditions Imposed for the Release of Confiscated Gold:

The Collector of Customs confiscated the gold and gave the appellant an option to pay a fine of Rs. 10,00,000 in lieu of confiscation. However, the Collector also imposed two additional conditions: the production of a permit from the Reserve Bank of India and the payment of proper customs duties. The Court agreed with the High Court that these conditions were not warranted by the statute. The Collector had no jurisdiction to impose these conditions, as there was no provision in the Foreign Exchange Act or the Sea Customs Act for such retrospective permissions or additional duties.

3. Rights of Pledgees under the Constitution:

The respondents 4 and 5 (banks) claimed that their special property rights as pledgees were violated, arguing that the Sea Customs Act's provisions were not reasonable restrictions under Article 19(1)(f) of the Constitution. The Court noted that the foreign company (respondent 4) had no rights under Article 19. For the Indian company (respondent 5), the Court found that it had been represented throughout the adjudication proceedings and had not taken any steps against the Collector's order. Therefore, respondent 5 could not now independently challenge the order for violation of its fundamental rights.

4. Severability of the Impugned Order:

The Court examined whether the invalid conditions imposed by the Collector could be severed from the valid order of confiscation and fine. Applying principles from previous judgments, the Court found that the invalid conditions were not inextricably mixed with the valid order. The Collector would have passed the order of confiscation and fine even if he knew the conditions were invalid. The Court held that the invalid conditions could be separated without affecting the enforceability of the rest of the order. The High Court had erred by not giving appropriate directions regarding the invalid conditions.

Conclusion:

The appeal was allowed to the extent that the invalid conditions imposed by the Collector were struck down. The order of confiscation and the option to pay a fine in lieu thereof were upheld. The time limit for payment of the fine would run from the date of the Court's order. The Court directed that each party bear its own costs.