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TMI Blog2010 (4) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... ichand at Jalgaon were searched. The owner thereof Mr. Ishwarlal Lalwani was not present at the time of search. The search resulted into recovery of silver in Choursa form weighing 1,913.256 kgs. Statements of various persons were recorded. Shri Lalwani was summoned to appear before Directorate of Revenue Intelligence (DRI). He appeared before the investigating officer. His statement was recorded. 4. The show cause notices dated 7th August, 1993 were issued to 47 individuals/firms on completion of investigation, specifically, pointing out the roles played by each one of them. 5. The adjudicating authority, vide its order dated 30th August, 1994 discharged the show cause notices holding that the evidence collected were not convincing enough to hold the allegations as proved. 6. The Central Board of Excise and Customs, New Delhi, exercising the powers under Section 129D of the Customs Act directed the Collector to apply to the Tribunal for determination of the issues specified in the review order. Accordingly, the Tribunal was approached. 7. The Tribunal granted out-of-turn hearing to the group of appeals since the Commissioner had moved application for staying the operation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoked in the Show Cause Notice and when the applicants were not given any opportunity of being heard in the matter by the Customs, Excise & Gold (Control) Appellate Tribunal?" (Emphasis supplied) 13. Subsequent to the receipt of statement of case from the Tribunal, the applicants took out motion for speaking to the minutes of the order dated 17th March, 1999 passed by this Court and sought modification of the order, which subsequently came to be modified deleting the words "weighing 194.250 Kgs. purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon". The modified question, thus, reads as under : "Whether the Tribunal was justified in invoking the provision of Section 120(2) of the Customs Act, 1962 to order confiscation of silver, when the said provisions had not been invoked in the Show Cause Notice and when the applicants were not given any opportunity of being heard in the matter by the Customs, Excise & Gold (Control) Appellate Tribunal?" On the Scope of the Question : 14. At the outset, Mr. Sakhare, learned senior counsel appearing for the applicants tried to expand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as one reproduced in para-12 (supra). 17. Mr. Rao submits that all the while parties to the reference were ad adem that silver weighing 194.250 Kgs. was the only quantity of silver confiscated under sub-section (2) of Section 120 of the Customs Act. He, thus, submits that the submission advanced by the applicants to widen the scope of the question to bring within its fold entire quantity of the confiscated silver weighing 1,913.256 Kgs. is nothing but an attempt to bring the question for consideration before this Court through back door, which is not permissible in law. 18. Mr. Rao, thus, submits that considered from any angle i.e. with or without presence of the words "weighing 194.250 Kgs. purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon" the scope, meaning or texture of the question referred would remain unchanged as the central issue for the consideration of this Court is : whether the silver weighing 194.250 Kgs., in the facts of this case, could have been confiscated under Section 120(2) of the Customs Act? 19. Mr. Rao also took us through the impugned order passed by the Tribunal in general and para-19.2 thereof in particular to reiterate his contention and poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was not possible to separate the quantity of silver weighing 194.250 Kgs. from rest of the smuggled silver, hence by virtue of Section 120(2) the said quantity was held liable for confiscation. It is, thus, clear that out of entire quantity of silver weighing 1,913.256 Kgs., silver weighing 1,713.807 Kgs. was confiscated under Section 111(d); whereas silver weighing 194.250 Kgs. was confiscated under Section 120(2) of the Customs Act. The question originally framed and directed to be referred for the opinion of this Court was : whether the Tribunal was justified in invoking provision of Section 120(2) of the Customs Act to confiscate the silver when the said provision had not been invoked in the show-cause-notice. The powers under Section 120(2) were exercised with respect to the silver weighing 194.250 Kgs. only. Under these circumstances, even after deletion of the words "weighing 194.250 Kgs. purchased from M/s. Dilipkumar Hirachand & Sons, Jalgaon", the scope, meaning and texture of the original question would remain unaltered. The deletion would not make any difference either way. In the circumstances, we have no hesitation to hold that the originally reframed question or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the legality of the confiscation of silver weighing 194.250 Kgs. confiscated in exercise of powers under Section 120(2) of the Customs Act. 30. Mr. Sakhare submits that the total quantity of silver of 194.250 Kgs., which was included 6 silver ingots and choursas weighing 180.545 Kgs., was purchased from the dealer M/s. Dilip Kumar Hirachand on 9th February, 1993. The said quantity of silver was legally acquired from local markets, as such the same could not have been confiscated. He further submits that so far as the finding recorded by the Tribunal in para-11 of the impugned order, regarding 194.250 Kgs. silver is concerned, it shows that the evidence adduced by the applicants was accepted by the Tribunal. He pressed into service the findings of the Tribunal recorded as "Accepting the evidence adduced as probable, the plea of the Department that the said quantity also is smuggled silver, cannot be accepted." He, thus, submits that silver weighing 194.250 Kgs. could not have been confiscated by the Tribunal under Section 120(2) of the Customs Act. 31. Mr. Sakhare also brought to our notice the finding of the tribunal in para-19.2 holding that silver weighing 194.250 Kgs. co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt judgment in the case of Central Excise, Calcutta v. Pradyumna Steel Ltd., 1996 (82) E.L.T. 441; wherein the Apex court ruled that mere mentioning wrong provision of law when the power exercised is available even though under different provision, is by itself not sufficient to invalidate the exercise of that power. With these submissions, Mr. Rao urged that the question of law referred be answered in favour of the Revenue and against the applicants. Statutory Provision : 35. The statutory provision relevant to the legal debate involved herein is section 120 of the Customs Act, which reads as under : "120. Confiscation of smuggled goods notwithstanding any change in form, etc.- (1) Smuggled goods may be confiscated notwithstanding any change in their form. (2) Where smuggled goods are mixed with other goods in such manner that the smuggled goods, the whole of the goods shall be liable to confiscation : Provided that where the owner of such goods proved that he had no knowledge or reason to believe that they included any smuggled goods, only such part of the goods the value of which is equal to the values of the smuggled goods shall be liable to confiscation." Consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to confiscation under the provisions of Section 120 of the Customs Act, 1962." 38. In addition to the above, show cause notice also makes a reference to Section 120 of the Customs Act in para-35(xi) on the following canvas : "35(xi) The aforesaid persons and firms in their individual capacity as also in their collective capacity conspired with and acted, aided abetted incited supported, actively and/or passively, colluded, disregarded and/or omitted to do certain acts along with others known and unknown persons as detailed above which has rendered the seized silver in chaurasas form liable to confiscation under Section 111(d) and 120 of the Customs Act, 19 62....." 39. With regard to entire quantity of silver, the powers of confiscation invoked can be seen from para-35(a) relating to the silver weighing 199.66 Kgs. out of 1,913.256 Kgs. and further reference in para-35(h) of the show cause notice. Relevant contents of thereof are reproduced herein below : "35(a) The above mentioned silver weighing 1913.256 Kgs. valued at Rs. 1,09,05,781/- as on 14-2-93 and seized on 13/14-2-93 from the Strong Room adjacent to the Silver Show Room of M/s. Rajmal Lakhichand & Sons located in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the silver in Chaurasa form become liable to confiscation. 20. Considering all these aspects therefore, the order of release of seized silver cannot be sustained and is therefore set aside and same is ordered to be confiscated under Sec. 111(3) of the Customs Act, 1962 read with Sec. 120 of the said Act." (Emphasis supplied) 41. With the aforesaid factual sketch of the show cause notice as well as of the findings of the impugned order, this Court has to consider as to whether or not provision of Section 120(2) of the Customs Act was invoked by the Department in the show cause notice with regard to the quantity of silver weighing 194.250 Kgs. and whether or not the applicants were given opportunity to meet the adverse findings suffered by the applicants on this count since the question referred for the opinion of this Court revolves around the confiscation of silver weighing 194.250 Kgs. in exercise of powers under Section 120(2) of the Customs Act. 42. The dissection of the show cause notice reveals that para-34 thereof is the material para in which the invocation of power under Section 120 of the Customs Act is to be found. If that be so, the another question which needs cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Proceeding further, again in text of para-35, we find reference to Sections 111(d) and 120 of the Customs Act. Again the foundation of invocation of Section 120 is in relation of conversion of silver into chaurasas. So far as the quantity of 194.250 Kgs. is concerned, there is no separate reference in any para of the show cause notice relating to local purchases made from M/s. Dilipkumar Hirachand & Sons, Jalgaon, obviously, because the Department was of all along contending that the entire silver weighing 1,913.256 Kgs. was smuggled silver. The Department never had a view that any part of silver was purchased from local market and mixed with smuggled silver. It was not the case of the Department at any point of time that silver weighing 194.250 was a legally purchased silver from local market and that it was mixed with the smuggled silver as such it was liable to be confiscated under Section 120(2) of the Customs Act. 45. Having said so, let us now turn to the impugned order dated 19th March, 1996 passed by the Tribunal to understand the power to confiscate exercised by the Tribunal in relation to the total quantity of silver which was seized weighing 1,913.256 Kgs. The Tribunal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Customs Act. The Tribunal found that it was not possible to separate the quantity of locally purchased silver weighing 194.250 Kgs., hence under Section 120(2) of the Act, the said quantity was held liable for confiscation. The same criteria was made applicable to confiscate copper added in the silver to convert it in chourasas. In the result, the order of release of the seized silver by the original adjudicating authority was set aside and it was ordered to be confiscated under Section 111(d) read with Section 120(2) of the Customs Act. 46. It is, thus, crystal clear that silver weighing 1,913.256 Kgs. was bifurcated into two parts; one weighing 1,713.807 falling within sweep of 111(d); whereas other weighing 194.250 Kgs. was brought within the sweep of Section 120(2) of the Customs Act. The confiscated silver weighing 1,713.807 Kgs. is not a subject matter of reference; whereas confiscation of silver weighing 194.250 Kgs. under Section 120(2) of the Customs Act alone is a subject matter of reference. Hence the question referred revolves around invocation of the provision of Section 120(2) of the Customs Act to confiscate silver weighing 194.250 Kgs. only. 47. The factual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the sweep of the Customs Act. It is always expected on the part of the adjudicating authority to disclose material facts and particulars in support of the allegations made in the show cause notice so as to enable the noticee to meet the case sought to be made out against him. When an obligation is cast upon the authority to give notice to show cause before reaching the final conclusion against the person affected by its action the purpose and requirement to issue show cause notice is two-fold (i) the noticee must get an opportunity to meet the case against him and (ii) he must have an opportunity to set forth his own case to show as to why an adverse order should not be passed against him. 51. In this regard, de Smith in his Judicial Review of Administrative Act (Fourth Edition) has observed at page 196 as follows : "Natural justice generally requires that persons liable to be directly affected by proposed administrative acts, decisions or proceedings be given adequate notice of what is proposed, so that they may be in a position- (a) to make representations on their own behalf; or (b) to appear at a hearing or inquiry (if one is to be held); and (c) effectively to prepare t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pable of being enforced or redressed in a civil action . . . Even an administrative order which involves civil consequences must be made consistently with the rules of natural justice." "There can be no distinction between a quasi-judicial function and an administrative function for the purpose of principles of natural justice. The aim of both administrative inquiry as well as the quasi-judicial inquiry is to arrive at a just decision and if a rule of natural justice is calculated to secure justice or to put it negatively, to prevent miscarriage of justice, it is difficult to see why it should be applicable only to quasi-judicial inquiry and not to administrative inquiry. It must logically apply to both." 55. Mr. Rao, learned counsel for the Revenue tried to canvass that no prejudice was suffered by the applicants in absence of show cause notice invoking power under Section 120(2) of the Customs Act. Mr. Sakhare, learned senior counsel appearing for the applicants countered this submission and urged that there are, a string of authorities of the Supreme Court which rejected the test of prejudice. It is, no doubt, true that in some cases proof of prejudice was held to be a conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible for them to demonstrate and segregate the locally purchased silver weighing 194.250 Kgs. since smuggled silver and melting thereof had taken place on different dates and record in that behalf was maintained by the applicants. He tried to place certain documents before us in support of his submission on merits of the matter and also to demonstrate prejudice suffered by the applicants. However, the jurisdiction, which we are exercising does not permit us to go into the merits of the matter. We are only expected to answer the question referred on the basis of the statement of case forwarded to us. Prima facie; we are of the view that before invoking power under sub-section (2) of Section 120 of the Customs Act, the applicants ought to have been put on notice. Show cause notice on this count ought to have been given to the applicants, considering the basic principles of natural justice that the party should be heard before deciding any issue and he should be put on notice with material facts and particulars and deprivation of the valuable property without following due procedure recognised by law itself is a substantial prejudice suffered by the applicants. 62. It is a fundamen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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