1960 (9) TMI 3 - HC - Customs

Summary

Issues Involved:
1. Constitutionality of Section 178A of the Sea Customs Act.
2. Reasonable belief for seizure of gold under Section 178A.
3. Legality of the seizure and confiscation order by the Additional Collector of Customs.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 178A of the Sea Customs Act:
The respondents contended that Section 178A of the Sea Customs Act was ultra vires of the Constitution. The learned judge initially ruled that Section 178A was ultra vires, which led to the setting aside of the confiscation order. However, this point was not argued in the appeal due to a Division Bench ruling in Pokhraj v. Kohli, which upheld the constitutionality of Section 178A.

2. Reasonable Belief for Seizure of Gold under Section 178A:
The core issue was whether the gold was seized under a "reasonable belief" that it was smuggled, as required by Section 178A. The appellants argued that the reasonable belief could be formed at the time of inquiry, not necessarily at the time of seizure. The court rejected this argument, stating that the language of Section 178A clearly requires the reasonable belief to exist at the time of seizure. The court referred to its earlier decision in Appeal No. 62 of 1959 and a Madras High Court ruling in Nathella Sampathu Chetty v. Collector of Customs, which supported this interpretation. The court emphasized that a reasonable belief must be based on solid information and cannot be formed merely on suspicion.

3. Legality of the Seizure and Confiscation Order by the Additional Collector of Customs:
The respondents argued that the gold was seized merely on suspicion and not under a reasonable belief. The court found that the seizure was indeed based on suspicion aroused by the behavior of the respondents' employee and discrepancies in their accounts. The order itself stated that the gold was seized "pending further inquiries into the legal origin of the gold," indicating it was not seized under a reasonable belief. The court noted that the Additional Collector of Customs did not provide evidence that the seizing officer had a reasonable belief at the time of seizure. Consequently, the court held that the seizure and subsequent confiscation order were not tenable under Section 178A.

Conclusion:
The court dismissed the appeal, affirming the lower court's decision to quash the confiscation order and issue a writ of mandamus for the return of the seized gold. The court also addressed the issue of costs, ruling that the appellants should pay the respondents' costs related to the merits of the case but not for the constitutional challenge, which was already settled by a higher court decision.