1958 (5) TMI 1 - SC - Customs

Penalty, confiscation and fine Redemption of goods Option to pay fine in lieu of confiscation Gold pledged to bank

Issues Involved:
1. Legality of the seizure and detention of gold by Customs authorities.
2. Jurisdiction of Customs authorities to proceed under the Sea Customs Act.
3. Validity of conditions imposed by the Customs Collector for the release of confiscated gold.
4. Rights of the pledgees (banks) under Article 19(1)(f) of the Constitution.
5. Competency of the High Court's certificate for appeal to the Supreme Court.
6. Nature of the proceedings - whether civil or criminal.

Detailed Analysis:

1. Legality of the Seizure and Detention of Gold by Customs Authorities:
The appellant, a private limited company, purchased 9478 tolas of gold and deposited it with two banks as security for loans. The gold was sent to the Calcutta Mint for assaying, but the Customs authorities seized it on November 21, 1950, under a search warrant. The appellant challenged the seizure and detention in the High Court, which declared the seizure of books of account illegal but made no order about the gold. The Customs authorities issued a notice to the appellant on June 20, 1951, under Sections 167(8) and 168 of the Sea Customs Act for alleged violation of Section 19 of the Sea Customs Act read with Section 8 of the Foreign Exchange Regulation Act. The Collector of Customs eventually ordered the confiscation of the gold, giving the owner an option to pay a fine in lieu of confiscation.

2. Jurisdiction of Customs Authorities to Proceed Under the Sea Customs Act:
The appellant argued that the Customs authorities could not proceed under the Sea Customs Act as it prejudiced the provisions of Section 23 of the Foreign Exchange Regulation Act. The High Court initially held that the Customs authorities acted in prejudice to Section 23 of the Foreign Exchange Act. However, the Division Bench reversed this, stating that the proceedings under the Sea Customs Act were in rem and not quasi-judicial, and the remedies under both Acts were cumulative. The Supreme Court clarified that the proceedings under the Sea Customs Act were indeed quasi-judicial, as held in F.N. Roy v. Collector of Customs and Leo Roy Frey v. Supdt., District Jail, Amritsar.

3. Validity of Conditions Imposed by the Customs Collector for the Release of Confiscated Gold:
The Collector of Customs imposed two conditions for the release of the confiscated gold: obtaining a permit from the Reserve Bank of India and paying customs duty and other charges. The High Court found these conditions to be beyond the Collector's jurisdiction. The Supreme Court agreed, noting that no provision allowed the Reserve Bank to give retrospective permission for smuggled gold and that there was no finding on how the gold was smuggled to justify the imposition of customs duty under Section 88 of the Sea Customs Act. The Court held that the invalid conditions were severable from the valid order of confiscation and fine in lieu thereof.

4. Rights of the Pledgees (Banks) Under Article 19(1)(f) of the Constitution:
The banks, as pledgees, claimed that their rights were infringed by the proceedings under the Sea Customs Act, arguing that their special property in the pledged gold was taken away without notice or an option to pay the fine. The Supreme Court held that the foreign bank (respondent 4) had no rights under Article 19, and the Indian bank (respondent 5) could not raise the issue at this stage as it had not taken steps against the Collector's order earlier. The Court also noted that the pledgee's rights were not higher than those of the pledgor and that the order of confiscation vested the property in the government.

5. Competency of the High Court's Certificate for Appeal to the Supreme Court:
The Supreme Court noted that the Solicitor-General did not press the issue of the competency of the certificate granted by the High Court, and the Court chose not to express an opinion on this matter, focusing instead on the merits of the case.

6. Nature of the Proceedings - Whether Civil or Criminal:
The Supreme Court observed that the question of whether a writ application proceeding is civil or criminal was complex and had led to divergent opinions in the High Courts. The Court did not find it necessary to decide this issue in the present case, given that it could grant special leave under Article 136 of the Constitution if needed.

Conclusion:
The Supreme Court upheld the confiscation of the gold and the fine in lieu thereof but struck down the conditions imposed by the Collector for the release of the gold. The appeal was allowed to the extent of restraining the enforcement of the invalid conditions, with the time limit for payment of the fine running from the date of the Supreme Court's order. Each party was directed to bear its own costs.

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