SEARCH AND SEIZURE UNDER CUSTOMS ACT, 1962

[Mr. M. GOVINDARAJAN]

Power to search premises

Section 105 of the Customs Act, 1962 (‘Act’ for short) that if the Assistant Commissioner of Customs or Deputy Commissioner of Customs, or in any area adjoining the land frontier or the coast of India an officer of customs specially empowered by name in this behalf by the Board, has reason to believe that any goods liable to confiscation, or any documents or things which in his opinion will be useful for or relevant to any proceeding under this Act, are secreted in any place, he may authorize any officer of customs to search or may himself search for such goods, documents or things.

The provisions of the Code of Criminal Procedure, 1898, relating to searches shall, so far as may be, apply to searches under this section subject to the modification that sub-section (5) of section 165 of the said Code shall have effect as if for the word ‘Magistrate’, wherever it occurs, the words ‘Principal Commissioner of Customs or Commissioner of Customs’ were substituted.

Seizure of goods, documents and things

Section 110 of the Act provides that if the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods.  Where any goods, being goods have been seized by a proper officer, he shall prepare an inventory of such goods containing such details relating to their description, quality, quantity, mark, numbers, country of origin and other particulars as the proper officer may consider relevant to the identity of the goods in any proceedings under this Act.  Where any goods are seized and no notice in respect thereof is given clause (a) of section 124 within 6 months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized.   The said period may be extended to further 6 months. 

Reason to believe

The Supreme Court in ‘STATE OF RAJASTHAN VERSUS REHMAN - 1959 (10) TMI 1 - SUPREME COURT and in DURGA PRASAD VERSUS HR. GOMES SUPDT. (PREVENTION) CENTRAL EXCISE NAGPUR - 1965 (12) TMI 135 - SUPREME COURT held that although wide power to search is wide, to do so validly, it is necessary that the conditions required by law i.e., the officer concerned is to satisfy himself that there are reasons to believe that the assessee was evading tax, to authorize a legal search should be available on record.

Burden of proof

Section 123 of the Act provides that where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be -

•  in a case where such seizure is made from the possession of any person, -

• on the person from whose possession the goods were seized; and
• if any person, other than the person from whose possession the goods were seized, claims to be the owner thereof, also on such other person;

•  in any other case, on the person, if any, who claims to be the owner of the goods so seized.

This section shall apply to gold, and manufactures thereof, watches, and any other class of goods which the Central Government may by notification in the Official Gazette specify.

In UNION OF INDIA & ORS. ETC. VERSUS M/S. MAGNUM STEEL LTD. ETC. - 2023 (3) TMI 251 - SC ORDER, the Revenue initiated search and seizure proceedings in the premises of the appellant on 20.08.2009.   During that period a panchnama listing out materials and documents seized in the course of proceeds was drawn up.  The assessee fought the case contending that there were ‘no reasons to believe’ under Section 110 of the Act read with Section 123 of the Act in this case.  However the Adjudicating Authority decided the case against the appellant.

The appellant filed appeal before High Court, Madhya Pradesh challenging the impugned action of the Revenue.  The High Court quashed the initiation of search and seizure proceedings and consequential proceedings launched against the appellant.  The High Court called for the original records.  The Revenue produced the records as directed by the High Court, the warrant of seizure, which had mentioned about some information, placed before the concerned officer leading the Officer to conclude the goods were liable for confiscation existed.  The Officer had authorized the impugned search.  The High Court found that the file did nto contain any material to disclose what was placed before the Officer nor there was any noting on it to link the nature of the materials with the decision to search to legitimize the search proceedings.  The High Court, therefore,  held that the officer concerned is to satisfy himself that there are reasons to believe that the assessee was evading tax, to authorize a legal search should be available in the file.

The Revenue challenged the order of High Court before the Supreme Court.  The Revenue contended that there were intelligence reports which resulted in the authorized official concluding that a search was essential.  Such intelligence report existed as a matter of fact. 

The Supreme Court  observed that the power of search, resorted in this case, can be gathered from Section 105 of the Act which confers powers to search premises if Assistant Commissioner of Customs or Deputy Commissioner of Customs has reasons to believe that goods are liable to confiscation or documents relevant for such proceedings are secreted in any place.  In such event the search proceedings can be authorized by the Assistant Commissioner or other official.  On the other hand Section 123 enacts a burden of proof which is that where any goods to which that provision applies are seized under the Act on reasonable belief that they are smuggled goods, the burden of proof would then shirt to the person in possession of such goods to prove that they were not smuggled goods.

The Supreme Court further observed that the basic premise of section 105 and indeed search proceedings is the reasonable belief that some objective material exists on the official record to trigger searches.  The person authorizing the search must express his satisfaction that the material is sufficient for him to concluded that search is necessary; further there should exist something to show what is such material.  The mere record that the person concerned is satisfied, without the supportive materials, therefore, is sufficient to trigger a lawful search.

The Supreme Court found that in the present case the concerned official who authorized the search did not refer any information nor indeed any report on the record which was produced before the High Court.  Since there is no merit in the appeal the Supreme Court dismissed the appeal filed by the Revenue.