1961 (9) TMI 3 - SC - Service Tax

Whether Section 178A is obnoxious to the rights guaranteed by Article 19(1)(f) and (g)? Held that - Section 178A was constitutionally valid The rule as to the burden of proof enacted by that section applies to a contravention of a notification under Section 8(1) of the Foreign Exchange Regulation Act, 1947, by virtue of its being deemed to be a contravention of a notification under Section 19 of the Sea Customs Act. The preliminary requirement of Section 178A that the officer seizing should entertain a reasonable belief that the goods seized were smuggled was satisfied in the present case. The result therefore is that the petitions under Article 226 of the Constitution filed by the respondent before the High Court should have been dismissed. We accordingly allow appeals 408 and 409 with costs throughout (one set of hearing fees), the writ petitions filed by the respondent being directed to be dismissed.

Issues Involved:
1. Constitutional validity of Section 178A of the Sea Customs Act, 1878.
2. Application of Section 178A to notifications under the Foreign Exchange Regulation Act, 1947.
3. Requirement of "reasonable belief" by the seizing officer under Section 178A.

Detailed Analysis:

1. Constitutional Validity of Section 178A of the Sea Customs Act, 1878:
The primary issue was whether Section 178A, which shifts the burden of proof to the possessor of seized goods to prove that they are not smuggled, is constitutionally valid. The court examined several arguments against this provision, including its reasonableness under Article 19(1)(f) and (g) of the Constitution. The court upheld the validity of Section 178A, stating that the provision is a reasonable restriction in the interest of the general public to curb the menace of smuggling. The court emphasized that the burden of proof is not impossible to discharge and that the provision is necessary to effectively prevent smuggling, which poses a grave threat to national economy.

2. Application of Section 178A to Notifications under the Foreign Exchange Regulation Act, 1947:
The court addressed whether Section 178A could be applied to contraventions of notifications issued under Section 8(1) of the Foreign Exchange Regulation Act, 1947, which are deemed to be notifications under Section 19 of the Sea Customs Act. The court concluded that Section 23A of the Foreign Exchange Regulation Act does not incorporate the Sea Customs Act but merely refers to it. Therefore, amendments to the Sea Customs Act, including Section 178A, are applicable to notifications under the Foreign Exchange Regulation Act.

3. Requirement of "Reasonable Belief" by the Seizing Officer under Section 178A:
The court examined whether the Customs Officer who seized the gold had a "reasonable belief" that the goods were smuggled, as required by Section 178A. The court found that the circumstances, including the large quantity of gold and the lack of proper documentation, justified the officer's reasonable belief that the gold was smuggled. Therefore, the requirement of "reasonable belief" was satisfied in this case.

Conclusion:
The court allowed the appeals filed by the Collector of Customs and dismissed the writ petitions filed by the respondent. The court upheld the constitutional validity of Section 178A, confirmed its applicability to notifications under the Foreign Exchange Regulation Act, and found that the requirement of "reasonable belief" was met in this case. The court emphasized that the provision is a reasonable restriction necessary to combat smuggling and protect the national economy. Appeals and petitions not heard on merits were directed to be posted for hearing in the usual course.

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