In Re: K. Hastimal

Somasundaram, J.—Thiru Hastimal, the Appellant herein stands convicted and sentenced by the Chief Presidency Magistrate, Egmore,

Madras, to pay a fine of Rs. 2,000, for an offence u/s 135(b)(ii) of the Customs Act, 1962.

The prosecution case is briefly as below: P.W. 1, Chakrapani, Preventive Officer, attached to the Customs House at Madras, had information

that this Appellant had stored foreign goods, smuggled into India, in door No. 49/1 Dams Road, Chintadripet, Madras. On 17th August 1964 he

met Mr. Manilal, the occupant of this premises, and the latter told him that the Appellant had kept some articles in the rear verandah of the ground

floor. He took P.W. 1 to the Appellant''s house in No. 70 Kesava Iyer St, and pointed him out. P.W. 1 returned to Dams Road and searched

door No. 49/1. 30 tins, each tin containing 11b of Thymol, made in Germany, 500 packets of French Pack Brand Hops, 1 lb each product of

U.S.A. packed in 5 gunny bags, 133 packets each containing 6 dozens of Eclipss Hacknaw blades, made in England and 38 packets each

containing 1 dcz, of Glacier Clinical thermometers, made in Japan, were seized from this premises under Mahazar Ex. P-2, The Appellant then

took them to door No. 20 Raja Street, Robertsonpet, Mandaveli-pakkam, Madras and from this house, 100 packets of Hops, 84 boxes

containing refills, 46 pieces of Ecobra drafting instruments, made in Germany and 208 boxes containing knives of warranted stainless steel table

cutlery, made in England, were seized under Mahezar Ex. P-4. From the house of the Appellant, 78 packets of Hops were seized under mahazar

Ex. P-11. The Appellant was then taken to the Customs house with all these articles and there he made the statement Ex. P-12, admitting therein

that the items seized were smuggled ones. Show cause notice, Ex. P-6, was issued and at this stage the appellant stated that he had purchased

these articles from some company at Bombay. The Collector confiscated the articles and imposed a penalty of Rs. 1000. In addition prosecution

of the Appellant on an offence u/s 135(3)(2) of the Customs Act was also sanctioned. The Appellant was put up further before the learned Chief

Presidency Magistrate, Madras. P.Ws. 1 to 3 and 5, Preventive Officers deposed to the above facts. When questioned in court, the Appellant

stated that he had purchased these articles under proper bills form Middle East Tradition Corporation, a firm of Importers and Exporters at

Bombay. Disbelieving his case, the learned magistrate convicted the Appellant and sentenced him to pay a fine of Rs. 2000. The correctness of this

conviction is new canvassed in this appeal.

The prosecution has well established that the articles seized are of foreign origin. In fact, this is not disputed. Further, the fact that these articles

were in the possession of the Appellant also does not admit of any doubt. The Appellant himself admits it. On behalf of the Appellant it is

contended that these articles were purchased by him from a company at Bombay and that the prosecution has not shown that they are smuggled

items and that in any event he had purchased them with knowledge that they are such. The charge against the Appellant is u/s 135(b) of the

Customs Act, 1962 and under this section ""if any person acquires possession of or is in any way concerned in carrying, removing, depositing,

harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe are

liable to confiscation u/s 111, shall be punished with imprisonment for a term which may extend to two years or with fine or with both."" Section

111 of the Act deals with the confiscation of improperly imported goods, without paying the duty thereon. The goods seized in this case are

certainly goods for which duty is payable but there is no proof that duty was not paid. Section 123 of she Act easts the burden of proof in respect

of cases where a person is found in possession of gold, diamonds, manufactures of gold or diamonds, watches and any other class of goods which

the Central Government may by notification in the official Gazette specify, on the person with whom those goods are found. The goods seized in

this case are not goods coming within the purview of this stetion. Therefore, the burden is on the prosecution to show (1) that these goods are of

foreign origin on which duty is payable; (2) they were imported into the country without payment of duty or in contravention of any restriction or

prohibition imposed as regards the entry of these goods; (3) the person found in possession knew or had reason to believe that the goods were of

that character. In Additional Collector of Customs and Others Vs. Sitaram Agarwalla, one Agarwalla was convicted u/s 167(8) of the Sea

Customs Act as having been concerned in the import of some gold. There Lordships of the Calcutta High Court observed that-

A thing is imported when it reaches the borders of the country.... There is not the faintest suggestion in this case as to how, when or by whom the

stuff was imported into this country. It is tree that for the purpose of proceeding against the gold itself, it is enough to show that it has been

imported without a valid permit, and immediately that is established, the gold becomes liable to confiscation.

But before a person can be proceeded against u/s 167(8) and a personal penalty imposed upon him for being concerned in the commission of the

offense of such importation, it is essential to prove that he did take some part in the series of steps which culminated in the gold being brought into

the country. It may well be that a person, with-out coming into physical contact with the smuggled gold, may yet be held liable for having been

concerned in its importation... In order that a person may be said to be concerned some facts have to be proved which will establish that he was in

conscious relation with the gold in one or other of the several successive steps preceding its actual receipt into the country. If there is no even

evidence, merely because the accused was going to be the first taker of the smuggled gold, he cannot be deemed to be a person concerned in

illegal importation of the bars.

In W.P. No. 786 of 1957 of this Court, Rajagopalan, J. has pointed out as follows:

Certainly the authorities were entitled to reject as approved the plea of the Petitioner that these goods had bees acquired by the Petitioner through

the normal trade channels in the open market. But that does net necessarily establish that either the goods had been illegally imported or even that

the Petitioner knew at the time of the acquisition of these goods that they had been illegally imported into the country. It certainly was not the case

of the Department that the articles mentioned in the list or any of them were not available in the market in India, though import of these articles was

restricted... The real basis for action was (1) the suspicion that the Petitioner traded in smuggled goods, which was what led to the search; and (2)

the Petitioner did not prove the purchase of these articles from the dealers named by him. Neither, in the circumstances of this case, constitutes, in

our opinion material on which a conclusion could be rested that all these were smuggled goods, or even a conclusion that when the Petitioner

acquired these goods he knew or had reason to believe that these were smuggled goods.

In W.P. No. 934 of 1964 of this Court, camphor of foreign origin was kept concealed under coriander bags by a person is certain premises.

His explanation was that he had purchased the same from the lorry driver for Rs. 15, 375 without obtaining a receipt for the amount paid. He

could not furnish the name and address of that driver. Later in answer to the show cause notice he stated that he had purchased this camphor from

one Sivaperumal Nadar who had purchased from M/s. Calcutta Dyeing and Bleaching Works, who in turn had purchased in an auction held by the

Customs authorities of confiscated goods. For substantiating this defence he had produced certain vouchers. Observing that the statements were

contradictory and mutually destructive, the Collector confiscated the camphor. This was challenged in the aforesaid writ petition. Ramakrishnan, J.

upheld the case of the Petitioner with the following observations:

There is no evidence at all to prove that the Petitioner played a part in the illegal import, justifying the levy of penalty. The department had not

discharged the onus to prove that the goods in question were imported without a licence and contrary to the provisions of the Sea Customs Act.

They cannot for the purpose of discharging this onus refrain from adducing any evidence what so ever even for the prima facie purposes of holding

that the goods must have been imported without a licence and rest content with contradictions in the explanations offered by the Petitioner

regarding the circumstances of his possession and the unreliability of his explanation. Such an approach would mean that the department can threw

the onus on the Petitioner of explaining his possession of the goods in question. Decisions have held that this is not the correct approach for dealing

with a case of possession of the category of goods covered by Section 167(8) of the Sea Customs Act, 1878, In Sha Rikhabdas Ghaganraj Vs.

Collector of Central Excise, it was held that the onus of proving all the ingredients of the offence is upon the Collector of Customs in a case where

Section 167(8) is applicable in contradistinction to Section 178A of the Act and that it is not open to the Collector to call upon any individual and

demand to satisfy that the goods in his possession are not illicitly Imported. The Calcutta High Court in Kanungo and Co. Vs. Collector of

Customs and Others, has expreised its view in an even more emphatic term (p. 251). Apart from showing that the Petitioner had no valid

importation licence and could not successfully explain how he came to possess the watches, the Customs authority proved nothing mere. What the

Customs authority proved do not lead to the inevitable inference that he must have illicitly imported the watches. The explanation given by the

Petitioner may be dis-believed but there may be other explanations for it. One such explanation of his possession of the wrist watches may be that

be was in unlawful possession of lawfully imported watches, say for example in possession of stolen watches, which have been lawfully Imported.

That may make the Petitioner liable under the law of crimes but that would not enable the customs authorities to confiscate the watches.

In the case of Public Prosecutor, Madras, v. H.L. Modi 1961 M.W.N. Cri. 79, 247 wrist watches of ""Record"" manufacture were kept

concealed under the clothing by the latter who disembarked at the Meenambakkam airport from an aeroplane which flew from Bombay to

Madras. When interrogated he made a statement admitting everything. He was prosecuted u/s 167(8) of the Sea Customs Act. Later he retracted

his earlier statement. Anantanarayanan, J. (as he then was) acquitted him observing that ""From the mere possession of a large quantity of wrist

watches of a foreign origin no presumption that those watches were smuggled goods imported into India from abroad without due payment of duty

could be drawn because the purchase of these goods was not prohibited even on a large scale and duty was payable in respect of such goods only

on the occasion of import into the country. He could have acquired these goods quite legitimately at Bombay or elsewhere. The fact that the bills

were not produced or that he failed to satisfactorily account for the acquisition will not raise any presumption against him unless goods fall within

the scope of Section 178A of the Act with regard to the penal provisions of this character.

As pointed out in Nataraj Stores, Trivandrum Vs. Superintendent of Central Excise, Trivandrum and Another, he goods that are to be

confiscated must be shown to be that they have been imported into India contrary to the prohibition or restriction imposed by or under Chapter IV

of the Act. In that case it was said that the import of the goods (press buttons) was restricted completely for sometime from 1963. But as

observed therein, from this alone it is net possible to conclude they the goods seized were actually imported after the restrictions have been

Imposed. It must be established that the goods have been imported into India against the restrictions imposed by chapter IV. It is not enough to

show merely that there has been some restriction at some time. There must be material to show that the particular goods have been imported into

India after such restrictions. There is nothing in evidence in this case to indicate as to what time these goods were imported into India. As long as

there is no such material it is not possible to postulate with any amount of reasonable certainty that these goods have been imported into India after

the imposition of the restrictions and in the absence of that, a penal provision, quasi criminal in nature, cannot be pressed into service against

persons like the Petitioner.

This is the position of law. Thus it is now well settled that the burden is on the prosecution to show (1) that the goods were smuggled goods, i.e.

imported into the country either without payment of duty or in contravention of any restriction or prohibition imposed as regards the entry of these

goods; and (2) that the accused knowing that the goods were of that character was in possession or was in any way concerned in dealing with it in

any manner. Such proof is lacking in this case. For proving that these goods were smuggled the prosecution mainly relies upon Ex. R. 12, the

statement said to have been made by the Appellant on the night of 17th August 1964 Immediately after the seizure. Therein he has stated that he

had knowledge that these goods were arthugled ones and that he had stored them on behalf of a broker who promised to pay him. commission for

the disposal. He has retracted his statement even in his reply to the show cause notice issued by the Collector of Customs. This statement was

recorded from him is the Customs Office on the night of 17th August 1964 between the hours 1 a.m. and 3 am. by P.W. 3 the Preventive Officer.

This statement is in English. The Appellant does not know English and P.W. 3 states that the statement was explained to him in Hindi by P.W. 5

another Preventive Officer, P.W. 5 states that be has working knowledge of Hindi and that when the Appellant spoke in that language, he

translated the same and that P.W. 3 recorded it. This witness does not know whether the statement was again translated and explained to the

Appellant after the recording. More than that, he admits that he cannot write or read Hindi. He knows only to speak. The translation of the

statement made by this Appellant was by such a person. The Appellant states that the statement was never read over to him P.W. 5 has not

attested Ex. P. 12. He was not also mentioned as a witness in the original complaint filed by the department.

Thus, under these circumstances, as in the case of Public Prosecutor v. Modi 1961 M.W.N (Cri.) 79 here also I am not certain as to how far

Ex. p.12 could be safely accepted and acted upon. Certainly even if it is to be acted upon, such an admission cannot clearly form the basis for the

conviction of the Petitioner. The prosecution must prove, by some other dependable evidence, that these articles have been imported into India

without duty and were in fact smuggled goods. The legislature has been very well aware of the difficulty of proving this and has enacted Section

123 of the Act which creates a presumption that certain categories of goods are smuggled goods when they are seized under the Act in the

reasonable belief that they were of that character. Section 123(2) refers to goods like gold, diamonds, manufactures of gold or diamonds, watches

and any ether class of goods which the Central Government may, by notification in the official gazette, specify. This section corresponds to Section

178A of the Sea Customs Act. Thus Section 123 refers to categories of sales and refers to notification which the Central Government may make.

Neither under this section nor in any such a notification these goods are said to be of that description. Therefore, there can be no presumption that

the goods are smuggled goods. Ex. P. 12 statement shows that these goods are smuggled goods. Granting that it was a statement made voluntarily

by the Appellant, when it is retracted there must be some material to corroborate this statement in order to satisfy the court that the statement

made could be acted upon. There is no such corroboration in this ease. The learned Magistrate has accepted the statement (Ex. P, 12) and has

acted upon certain admissions made by the Appellant therein. The defence of the Appellant at the trial was that he had purchased these goods

under vouchers (Ex. D. 1 and D. 2) from Middle East Trading Corporation, Importers and Exporters at Bombay for valuable consideration. D.W.

1, K.B.S. Manl, Preventive officer, has marked these bills from the confiscation file in the Customs House. The Appellant bad produced these bills

in the confiscation proceedings before the Collector of Customs, Ex. D. 3 is an affidavit filed before the Collector in May 1965 by one B.R. Shah,

who was the constituted attorney of the firm, Middle East Trading Corporation. This firm was sold in public auction on 23rd November 1964.

Shah has sworn be this affidavit that to the best of his knowledge Hops blades., Thymol etc, were sold to the Appellant in August 1964 for Rs.

29930. These receipts were not produced by the Appellant on 17th August 1964, when the goods were seized. But he had produced them at the

time of the confiscation proceedings. The learned Magistrate has adverted to several variations and circumstances for disbelieving the defence

case, that is, the purchase of these articles from a company at Bombay. As pointed out by Anantanarayanan, J. in Public Prosecutor v. Modi

1961. M.W.N. (Cri.) 7l the fact that the bills were not produced or that he failed to satisfactorily account for the acquisition will not raise any

presumption against him unless the goods fall within the scope of Section 178A (123) with regard to the penal provisions of this character"". There

is no evidence in this case to show that the Middle East Trading Corporation was not granted any import licence to import the articles in question.

The Collector in his order of confiscation Ex. P. 9 in paragraph 6 has stated that under Clause 3 of the imports (Control) Order 1955 and

notification issued in pursuance of Section 3(1), Imports and Exports (Control) Act 1947, the import of the articles seized without a valid licence

issued by the I.T.C. authorities is prohibited. He has set cut the import policy on the goods concerned la this case as below:

Hops. Importation allowed on

percentage basis upto

October March 1958

and Nil thereafter.

Thymol Importation allowed on a

quota basis upto April

1963 and nil thereafter.

Thermometers

Hacksaw Nil from October 1958.

blades

Jetter refills

Engineering Nil from 1957 but

instruments allowed on 30 % quota

basis during April-

September 1960. Nil

thereafter.

Cutlery Nil from 1957.

These notifications are not marked and none has been examined on the side of the prosecution to prove the same. With the result, the

Appellant has had no opportunity of challenging the statements made in para 6 of this order. Granting that these restrictions were there as stated in

para 6, still the possibility of these items having been imported late India at some time anterior to the years 1957, 1958 and 1960 cannot be

completely ruled out. Therefore, this alone cannot form the basis for convicting the Appellant u/s 135(2) of the Act. The falsity or otherwise of the

defence cannot be a ground for convicting a person and it is the duty of the prosecution to prove beyond all doubt that he comes under the

purview of Clause (2) of Section 135 of the Act. There is no proof in this case that the goods have been imported into India contrary to the

prohibitions restrictions imposed by the Act. As pointed out in Nataraj Stores v. Superintendent of Central Excise (2) it is not enough to show that

there has been restriction imposed at some time. There must be material to show that the particular goods have been imported into India after such

restrictions. There is nothing in evidence to indicate as to at what time, these goods were imported and as long as there is no such material it is not

possible to postulate with any amount of reasonable certainty that these goods have been imported into India after the imposition of the restrictions

and without payment of any duty and in the absence of such evidence a penal provision like Section 135(2) cannot be pressed into service against

persons like the Appellant. The conviction and sentence are set aside. The appeal is allowed. The fine if collected shall be refunded.