1980 (9) TMI 103 - HC - Customs

Summary

Issues Involved:
1. Confiscation of motor vehicle under the Customs Act, 1962.
2. Non-issuance of notice and opportunity of hearing to the financier (petitioner No. 2).
3. Determination of ownership under a hire purchase agreement.
4. Application of principles of natural justice.
5. Delay in proceedings and its impact on the release of the vehicle.

Detailed Analysis:

1. Confiscation of Motor Vehicle under the Customs Act, 1962:
The petitioners challenged the order dated 31-12-1977 of the Collector of Central Excise, Bangalore, which involved the confiscation of motor vehicle No. MEL 4681 for carrying foreign goods worth approximately Rupees fourteen lakhs. The Collector allowed the release of the vehicle on payment of a fine of Rupees seventy thousand in lieu of confiscation.

2. Non-Issuance of Notice and Opportunity of Hearing to the Financier (Petitioner No. 2):
The petitioners argued that petitioner No. 2, a co-operative bank and financier of the vehicle, was not issued a notice or given an opportunity of hearing, violating Section 124 of the Customs Act and principles of natural justice. Respondent No. 1 admitted that no notice was issued to petitioner No. 2, claiming that as a financier, petitioner No. 2 was not the owner and thus not entitled to notice.

3. Determination of Ownership under a Hire Purchase Agreement:
The court examined the nature of a hire purchase agreement, distinguishing it from a credit sale. Under common law, a hire purchase agreement is a form of bailment where the hirer has an option, not an obligation, to purchase the goods. The real owner remains the financier until all instalments and the purchase price are paid by the hirer. The court found that petitioner No. 1 had not paid all instalments or exercised the option to purchase, making petitioner No. 2 the real owner of the vehicle at the time of seizure and confiscation.

4. Application of Principles of Natural Justice:
Section 124 of the Customs Act mandates that an order for confiscation or penalty cannot be made without notifying the owner and providing an opportunity for an oral hearing. The court held that the Collector's failure to notify petitioner No. 2 and provide an opportunity of hearing violated this mandatory provision. The court referenced the ruling in Pradeep and Company v. Collector of Customs, agreeing that such an omission invalidated the order.

5. Delay in Proceedings and Its Impact on the Release of the Vehicle:
The petitioners argued against a fresh show cause notice due to the delay and time already spent. The court acknowledged the delay but emphasized that the Collector's legal duty must be performed in accordance with the law. The court directed the Collector to issue a show cause notice to the petitioners and dispose of the matter within three months, ensuring the vehicle's condition is considered due to the prolonged proceedings.

Conclusion:
The court quashed the order dated 31-12-1977 of the Collector regarding the confiscation of motor vehicle No. MEL 4681. The Collector was directed to issue a show cause notice to the petitioners, particularly petitioner No. 2, and resolve the matter expediently within three months. The rule was made absolute, and parties were directed to bear their own costs.