Halima Bi, Properietrix, Khader and Yousuff And Bros. vs The Collector of Central Excise

Srinivasan, J.—The Petitioner is the proprietrix of Messrs. Khader and Yousuff Brothers. On 31st January 1959, the Central Excise department searched the business premises of the Petitioner and seized 50 wrist watches end 13 watch straps. The Petitioner was asked to produce invoices or bills or other documents to establish that the goods were imported through normal trade channels on a valid import licence and on payment of customs duty. The Petitioner�s case was that these watches and straps were purchased from persons who came from Singapore and that these persons were not known to her and she could not say whether customs duty had been paid. A bill to cover five watches was produced and that was accepted. The Collector of Central Excise confiscated the 45 watches and the 13 watch straps and also imposed a personal penalty of Rs. 2,000 on the Petitioner u/s 167(8) of the Sea Customs Act. This order is impugned and it is contended by the Petitioner that that seizure itself was not made in the reasonable belief that the goods were smuggled goods and that the circumstances in which the seizure was made did not give rise to any presumption as to the contraband nature of the goods. It is claimed that in so far as the goods do not come within the category indicated in Section 178-A of the Sea Customs Act, the onus of proving the offence u/s 167(8) is upon the Collector of Central Excise and that the onus in the present case has been wrongly cast upon the Petitioner. It is urged that it is not unusual for persons coming from abroad to bring watches for their own use and who for some reason, or other, principally for need of funds, to sell the watches. It is claimed that when watches have been purchased from such persons, it cannot be said that the watches had been unlawfully imported into the country. In any event, it is urged there is no evidence to establish that the Petitioner was a person concerned in the offence of illegal import and that no personal penalty should have been imposed.

On behalf of the Collector of Central Excise, the seizure is admitted. It is stated that the salesman at the shop could not produce bills in respect of the 45 watches and the 13 straps. It is claimed that on a consideration of the materials available, the Respondent reached the conclusion that these items had been imported without a valid import licence and in contravention of the Import and Export Control Act. In paragraph 3 of the counter, it is stated that the fact that the firm was in possession of a large number of watches without bills and invoices and these were being dealt with in a manner opposed to normal business practices proved that the goods were smuggled goods. It is denied that there is anything in the order impugned to show that the burden of proving that the goods are not smuggled goods has been cast upon the Petitioner. It is also asserted that in the context of these circumstances, the imposition of the personal penalty was also validly made.

In the order of the Collector of Central Excise, after setting out the facts relating to the seizure and the statement made by the persons in charge of the shop, the Officer observed:

It was therefore clear that the wrist watches and watch straps were not acquired through normal trade channels and hence a show-cause notice was issued...From the evidence on record it is established that (these items),...for which no evidence regarding purchase through bona fide trade channels had been produced and were admitted to have been purchased from unknown persons, were smuggled ones and were imported without on import control licence.

It is on this basis that the order of confiscation and the imposition of personal penalty was made.

In Writ Petition No. 1050 of 1961, 20 wrist watches were seized from the display windows of the Petitioner�s shop. The same explanation with regard to the acquisition of these watches was furnished. Finally, the Collector stated that the Petitioners did not reply to the show-cause notice.

and hence it is evident that they have no defence to put forward. The 20 wrist watches are therefore liable to confiscation...and the firm liable to a penalty....

The same grounds as in the other case have been advanced in this petition and the department''s contention are also similar to those in the other case.

A perusal of the orders in the two cases does not show the existence of any material on the basis of which the department could reasonably conclude that the goods had been imported into the country in contravention of any prohibition or restriction. Mr. Ramaswami, learned Additional Government Pleader, even at the outset frankly conceded that he cannot support the imposition of the personal penalty in the two cases, for there is no evidence at all and no circumstances to suggest that the Petitioner was concerned in the offence of illicit import. Mere possession of goods, even if they are established to be contraband, cannot immediately lead to the conclusion that the person possessing them was involved in the offence of the import itself. In any event, therefore, the imposition of the personal penalty in these two cases does not follow upon any finding that the Petitioner was involved in the offence. The orders to that extent have necessarily to be quashed.

Mr. Ramaswami contends that these watches are of foreign origin. They should necessarily have been imported into the country. He claims that there is a prohibition upon the import of these watches, in the light of which one must necessarily conclude that the import of these watches must have been contrary to the prohibition. I find it exceedingly difficult to accept such a broad contention. In his order, the Collector of Central Excise observes that the watches must have been acquired outside normal trade channels. He came to this conclusion principally on the basis that the Petitioner was not able to produce any invoices relevant to the acquisition of these watches. Is it then open to the Collector to demand production of material from the Petitioner to satisfy him, the Collector, that the watches had been acquired lawfully, lawfully, in the sense that no violation of the Import Control Act or the Sea Customs Act had been involved? If the conclusion in this regard was reached only on the basis of the inability of the Petitioner to produce evidence, it needs hardly to be said that virtually the Petitioner was called upon to show that the goods were not smuggled goods and that they had been lawfully imported. In the light of the decided cases, I am unable to hold that it is open to the Collector to take this view which undoubtedly throws the onus upon the Petitioner.

I may refer to a decision of Jagadisan J., in Writ Petition No. 20 of 1960. In that case also, certain goods suspected to be contraband were seized while they were being transported by lorry. Statements were recorded from persons who were in possession and the person for whom the goods were intended. The question arose whether an offence u/s 167(8) of the Sea Customs Act was established, and the specific contention put forward was that there was no proof that the goods were contraband and that the relevant provisions of the Sea Customs Act had been applied as if there is a presumption that goods of foreign origin found in the possession of any individual should be taken to be contraband unless that individual is in a position to explain satisfactorily as to how he came by the goods. The r learned Judge had to decide whether the order of the Collector confiscating the goods and imposing a personal penalty was vitiated by the burden of proof having been wrongly cast upon the Petitioner. For the department it was contended that there was enough circumstantial evidence to warrant the conclusion that the goods were contraband and once the finding is reached that the goods must have been illicitly imported into the territory, the order of confiscation would be proper and valid. The learned Judge observed:

On a plain reading of Section 167(8), it seems to be quite clear that the onus is upon the department to establish the illicit importation or the contraband character of the goods before they can pass an order of confiscation or impose a penalty on any individual. It is no doubt true that in a majority of cases the department may not be in a position to obtain evidence of facts to establish wrongful importation. But difficulty of proof is not a ground which would relieve the department from the onus if the true position in law is that the onus is upon them.

The learned Judge referred to Section 178-A wherein the law enacts a special provision regarding the burden of proof in respect of certain articles. The decision of the Supreme Court in Amba Lal Vs. The Union of India (UOI) and Others, was referred to as establishing that the burden of proof is on the customs authorities and they have to bring home the guilt to the person alleged to have committed a particular offence under the Sea Customs Act or the Import and Export Control Act by adducing satisfactory evidence. In conclusion the learned Judge stated:

In my opinion, the department must prove that the goods in question were in fact imported in contravention of the prohibition or restriction referred to in Section 167(8). The burden of proof is not discharged by merely holding that the Petitioner has failed to prove that he bona fide purchased those articles from other persons in the usual course of business.

By way of contrast, that is to say, that the surrounding circumstances might reasonably lead to such conclusion regarding the illicit nature of the import is the decision of this Court in Writ Appeal No. 96 of 1962. In that case a large quantity of wrist watches, Parker fountain pens, alloy-tipped nibs, etc., were found secreted in the bedding. Besides the suspicious method of transporting the goods, a statement was also made by the person from whom they were recovered that the goods had been purchased from persons who had smuggled them and that he knew that the goods had been illicitly imported. Where there was an admission of the offence, it is quite open to the department to rely upon that statement in discharging the onus that lies upon them. In that case, there were certain suspicious circumstances which justified an inference that was drawn, that is to say, the circumstances, operated as part of the evidence which the department had to produce in proof of their contention that the goods had been unlawfully imported.

The specific case of the Petitioner was that these watches were purchased from various brokers who themselves had purchased them from persons coming from Singapore. Mr. Rattan, learned Counsel for the Petitioner, pointed out that it is open to persons entering the country to bring as part of their personal belongings such articles as wrist watches, that the Baggage Rules permit the lawful importation of such goods without payment of duty as part of the personal baggage of the passengers and that, therefore, if these persons purported to sell their goods, they would not for that reason become goods which had been unlawfully imported. Mr. Ramaswami, learned Additional Government Pleader, has produced the Baggage Rules of 1960. These rules provide that articles in the immediate personal use of a passenger may be allowed free of duty provided they are his property, were in his possession abroad and are imported by him for his own personal use and not for sale, exchange or gift. But the articles in this context do not include wrist watches and jewellery. Another rule permits import free of duty of articles not exceeding Rs. 500 in value provided that die articles are not imported for sale or exchange and are such as could reasonably be treated as baggage or are of a kind normally used for making gifts or as souvenirs. Another part of this rule states that a passenger shall not be permitted under this rule to import without payment of duty a large number of units of the same article even though their total value may be within the free allowance. Presumably, under this rule wrist watches could be brought in. The 1957 passengers'' Baggage Rules were somewhat more liberal and they permitted two watches each not exceeding Rs. 200 in value to be imported as part of the personal effects of a passenger, with the additional qualification that the personal effects should show some definite signs of use. Rule 5 of the 1957 rules permitted the import, free of duty of articles not exceeding Rs. 500 in value if they were not imported for sale or exchange but were such as could reasonably be treated as of a kind normally used for making gifts or as souvenirs. Watches are included in that category. It is seen, therefore, that the bringing of watches awfully into the country is not prohibited in certain circumstances. It is quite possible that passenger coming from Singapore or elsewhere are under these rules permitted to bring in watches provided they declare that they were not intended for sale or exchange. Gifts are also not precluded. The only point to be noticed is in whatever manner the goods may have been subsequently dealt with by these parties, they have undoubtedly been permitted to be imported lawfully. Subsequent violation of a condition imposed in this regard will not render the import itself unlawful. I am fully alive to the fact that by means of this argument it is not established that the Petitioner came by these watches by this particular means, that is to say purchased from passengers coming from Singapore. It is also true that such an explanation may be put forward only for the purpose of meeting the charge levelled by the department that the goods have been unlawfully imported. But in evaluating this contention, one must necessarily have regard to the fact that the onus of proving the illegal import is upon the department and when lawful avenues of import without payment of duty do exist, the department cannot merely rest upon the statement that the watches are of foreign origin and that they are prohibited import. It follows that in these cases there is no evidence to establish that the offence u/s 167(8) was committed. The department has totally failed to establish facts and circumstance or which would support their contention.

The petitions are accordingly allowed. The rules are made absolute. There will be no order as to costs.