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TMI Blog1982 (6) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... iscation was conducted by a person not competent in law to do so and, therefore, all subsequent steps, viz., the seizure, adjudication and confiscation are void; (ii) that the person conducting the search had not formed a reasonable belief as contemplated by Section 105 of the Act and this reason too, the search is illegal; (iii) in this case, the goods seized are of three categories, viz. goods notified under Section 123, goods notified under Section 11, and thirdly other categories of goods. The burden of proof varies in each of these categories of goods. The respondents however, have not kept this distinction in mind, and have vitiated their orders; and (iv) that, the authorities have not determined the value, nor the duty payable, as required by Section 112, read with Section 122 of the Act, with determination was essential for assessing the penalty to be levied. For a proper appreciation of these contentions, it is necessary to set out the facts of the case clearly, which facts are found stated in the order of the Collector, I may state that no dispute has been raised with reference to the correctness of the facts as stated in the Collector's order, nor, indeed, any such dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be levied under Section 112(b) of the Customs Act. In this show cause notice, it was alleged that, of the 110 items of goods seized from the petitioners, items 1, 3, 7 etc., in all 48 items are goods notified under Section 11(D) of the Customs Act, while certain other items (specified in the notice) are prohibited goods under Section 123 of the Act. It was indicated that in the case of prohibited goods, the burden of proving that they are not smuggled goods lies upon the petitioner. The action proposed to be taken was also indicated, and it was stated that the show cause notice was based upon the panchanama dated 26-6-1973 and five other documents mentioned therein. 5. After receiving the show cause notice, the 1st petitioner requested for copies of the documents upon which the show cause notice was said to be based and also the statements of the witnesses examined, if any, during the course of investigation. In August 1975 copies of the documents referred to in the show cause notice were supplied whereafter the 1st petitioner submitted his explanation dated 12-9-1975. In this explanation, the 1st petitioner submitted, in the first instance, that the Superintendent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty. 6. In pursuance of the 1st petitioner's request, a date of hearing was fixed and intimated to him. On the adjourned dated of hearing, the 1st petitioner appeared and in his presence, witnesses were examined, who were also cross-examined by the 1st petitioner and/or by his counsel, as the case may be. Eight documents were also filed by the 1st petitioner in support of his case, comparing of 7 bills issued by "Mogwa Company, Tawai (NEFA)" and the Customs notified items register for the year 1973-74. Since the foreign origin of the goods was disputed by the petitioners the Collector decided to settle the said dispute by physical examination of seized goods. He intimated the 1st petitioner, on 20-3-1976 that the goods would be examined on 23-3-1976 at 3.00 P.M. On that day, the 1st petitioner, Sri T.N. Khambati, intimated the Collector in writing that he had no objection to the goods being inspected by the Collector in the petitioner's absence. Accordingly the Collector examined the goods, and found that all the goods except Item No. 26 (2 sarees) were unmistakenably of foreign origin. 7. After the enquiry was closed, information was received by the Collector that "Mogwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be served and he did not attend on the notified date of hearing. 8. The Collector recorded the following findings in his order : (i) the Superintendent of Customs and Central Excise found certain foreign goods exhibited and displayed in the shop. Accordingly he called upon the 1st petitioner to produce the register and the relevant documents pertaining to them. Certain documents were produced but, on comparison, the goods did not agree with these documents. Those goods which were found not to be backed by relevant documents, were seized. The Superintendent was acting under a reasonable belief that the goods on which Customs duty was not paid must be deemed to be smuggled goods. There was no ulterior motive on his part. Accordingly it cannot be said that there was no reasonable belief on the part of the officer when he seized the said goods; (ii) no attempt has been made by the petitioners in this case to establish that the seized goods are in fact covered by relevant documents. The documents produced by the petitioners at a late stage are bogus. Further, on the day of seizure, the 1st petitioners himself stated that they had not maintained the register as per Section 11E of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with". Section 11, which is the only Section in Chapter IV, empowers the Central Government to prohibit, by notification in the Official Gazette, either absolutely or subject to such conditions as may be specified in the notification, the import or export of goods of any specified description. Chapter IVA contains several provisions relating to detection of illegally imported goods, and prevention of the disposal thereof. Chapter VIA was introduced by an amendment in 1969. Section 11A defines certain expressions used in the Chapter. "Intimated place" is defined by clause (b) to mean "a place intimated under sub-section (1), sub-section (2) or sub-section (3) as the case may be, of Section 11C". The expression "notified goods" is defined in clause (d) to mean "goods specified in the notification issued under Section 11B". Section 11B empowers the Central Government to notify the goods. It says : "If having regard to the magnitude of the illegal import of goods of any class or description, the Central Government is satisfied that it is expedient in the publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Collector of Customs may, for the purpose of ascertaining whether or not the requirements of this Act have been complied with, at any reasonable time, enter any place intimated under Chapter IVA or Chapter IVB as the case may be and inspect the goods kept or stored therein and require any person found therein who is for the time being in charge thereof, to produce to him for his inspection the accounts maintained under the said Chapter IVA or Chapter IVB, as the case may be, and to furnish to him such other information as he may reasonably require for the purpose of ascertaining whether or not such goods have been illegally imported, exported or are likely to be illegally exported." 16. Section 110 deals with seizure of goods, documents and things. It says that if proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods. 17. Chapter XIV contains provisions relating to confiscation of goods, and imposition of penalties. Section 111 provides for confiscation of and Section 112 for imposition of penalty for improper importation of goods. Clauses (d) and (p) of Section 111 under which the goods in question have confis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Now in the light of the above provisions, let me deal with the contentions urged by the learned counsel for the petitioners. The first contention, as already noticed, pertains to the competency of the officer who is said to have searched the premises and seized the goods. The contention is that he was not empowered to do so under Section 105 (Searches) and Section 110 (Seizure). This contention has been raised in paragraph 6 of the writ petition. In paragraph 6 of the counter-affidavit it is stated that the Superintendent of Central Excise was vested with powers under Section 110 of the Act and further that, this was not a case of `search' within the meaning of Section 105. It is stated that since the Superintendent found that the goods exhibited in the petitioner's shop were liable to confiscation and also because the 1st petitioner was not able to produce the register to be maintained under Section 11E of the Act, nor the vouchers which he was bound to maintain under Section 11F of the Act, he seized the goods. I have already set out the factual situation, which bears out the respondents' contention that it was not a case of `search' within the meaning of Section 105. The Supdt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 110(1) is that the proper officer must entertain a reasonable belief that certain goods are liable to be confiscated under the Act; and thereupon the is entitled to seize the same. I am, therefore, unable to agree with Mr. V.R. Reddy, the learned counsel for the petitioners, that this is a case of search or that the seizure is invalid and/or illegal for the reason suggested by him. Further as held by the Supreme Court any invalidity affecting the search, does not vitiate the seizure and further investigation. In State of Maharashtra v. Natwarlal Damodardas Soni (1980) 4, S.C. Cases, 669 the Supreme Court held following a catena of decisions, that even if the search is illegal it does not affect the validity of the seizure and further investigation by the Customs authorities, or the validity of the trial which followed on the complaint of the Customs Officer. On the same parity of reasoning, even if the inspection is invalid or incompetent, it does not vitiate the seizure which is, undoubtedly, by a competent Officer, nor does it vitiate the subsequent adjudication proceedings. The first contention is, accordingly, rejected. 21. The next contention of Mr. V.R. Reddy is that, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the officer did not form or entertain a reasonable belief that the goods in question are liable to confiscation under the Act, when he seized the same. It should be remembered that the formation of this belief is a subjective one. Both the adjudicating authorities have found, on the above material, that the Officer did entertain a reasonable belief, as contemplated by Section 110 of the Act; and I see no reason to interfere with their finding. It should also be remembered that this Court cannot sit as an appellate authority over the decisions of the adjudicating authorities, nor can it go into the adequacy of material upon which the reasonable belief was formed. In any event, the material in this case is certainly sufficient for any reasonable person to form the reasonable belief. The panchanama recites that the 1st petitioner admitted not maintaining the register as contemplated by Section 11E. The register subsequently produced by him has been rejected by the adjudicating authority (Collector) as a fabrication. Moreover, the documents produced by him were also found not tallying with the goods in question, The above facts certainly constituted the relevant, and indeed adeq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down in its entirety. With respect to the accounts books etc., which were seized from the dealer, the Court directed them to be returned to the dealer inasmuch as the safeguards provided by the Code of Criminal Procedure were not followed when the search was made. I am unable to see any relevance between the principles of the said decision and the contention which I am now dealing with. 23. Mr. V.R. Reddy next relied upon the decision of the Allahabad High Court in Collector, Central Excise v. L.K.N. Jewellers, A.I.R. 1972, Allahabad, 231 the facts of which case, according to the learned counsel bear a close approximation to the facts of the present case. It must, however, be remembered that, that was a case where the seizure was challenged by way of a writ petition. It was not a case where the matter came up before the Court after adjudication. The matter arose under the Gold (Control) Act, 1968, Section 66 whereof empowered any Gold Control Officer, if he has reason to believe that in respect of gold any provision of the said Act has been, or is being, or is attempted to be contravened to seize such gold along with the package, covering or receptable etc., in which the gold is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with exparte. At that time, it appears an order of detention was issued against the 1st petitioner and was in force, and he was absconding. Be that it may, the notice sent to him was returned with an endorsement that the 1st petitioner was absent at the said address for continuous period of seven days. The notice sent to Mogwa Company at the address mentioned by the petitioner on the bills was also returned with the endorsement "not known". Then there was information received by the adjudicating officer with reference to the place where the said firm was said to be located, its inaccessibility, and the absence of any merchant at that place. These circumstances led the adjudicating officer to the conclusion is not open to interference in this writ petition. Mr. V.R. Reddy however, contended that no proper or sufficient opportunity was given to the petitioner to meet, or disprove the allegation that Mogwa Company is a non-existent firm. In the facts stated above, this contention cannot be acceded to. 25. It was then argued that merely because the letters sent to Mogwa Company in 1977 were returned with the endorsement "Not Known", it does not follow that such a firm was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of Section 11G as the case may be, or (b) * * * [Sub-clause (b) omitted as unnecessary] (ii) unless he has taken, before acquiring such goods from a person other than a dealer having a fixed place of business such reasonable steps as may be specified by rules made in this behalf, to ensure that the goods so acquired by him are not goods which have been illegally imported." While Section 11F deals with sale of notified goods except under a voucher in the prescribed form, Section 11D deals with purchase or acquisition of notified goods. It says that no person shall acquire notified goods unless they are accompanied by the voucher referred to in Section 11F, and unless he has taken, before acquiring such goods from a person other than a dealer having a fixed place of business, such reasonable steps as may be specified by the Rules in this behalf, to ensure that the goods acquired by him have not been illegally imported. In other words, according to this Section, if the goods are acquired from a dealer having a fixed place of business, it is not necessary to take the prescribed reasonable steps before acquiring the goods, but if he is a dealer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in my opinion, is not warranted or justified. It is therefore, directed that in so far as the third category of goods are concerned, the confiscation is bad and they are liable to be released and returned forthwith to the petitioner. It is for the adjudicating officer to determine after notice to the first petitioner, which of the seized goods fall within the third category and implement the above direction. 30. With respect to the fourth and the last contention, it is undoubtedly true that for leving the penalty it may be necessary to assess the value of the goods seized and confiscated, inasmuch as the penalty to be levied should not exceed five times, the value of the goods of Rs. 1,000/- whichever is greater, in the case of prohibited goods, while in the case of other dutiable goods, the penalty should not exceed five times the duty sought to be evaded on such goods, or Rs. 1,000/- whichever is greater. It is true that the value of the seized goods was not indicated in the show cause notice, nor is it determined in the adjudication order. In the counter affidavit in paragraph 21, it is merely stated that the value of the goods was shown in the F.I.R. as Rs. 29,739.50 being t ..... 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