Jal Hormusji Khajotia vs T.C. Seth

This is a petition under Article 226 of the Constitution challenging the validity of an order dated November 25, 1958 whereby the Ist Respondent, the Collector of Central Excise and Land Customs, Bombay ordered confiscation of certain gold sovereigns and motor car No. BML 8268 and also give option to pay a fine of Rs. 5,000/- in lieu of confiscation of motor car within 30 days.

The Petitioners'' case is as follows :-

The first Petitioner carried on business as dealer in second hand motor cars. The 2nd Petitioner had delivered the motor car No. BML 8268 to the 1st Petitioner for the purpose of sale with authority to use it so as to maintain it in good working order. Between October 10, 1956 and October 31, 1956 the 1st petitioner had purchased 1920 gold sovereigns and had in that connection borrowed loans through finance broker Ali Singh H. Rohra. The 1st petitioner had purchased these sovereigns from Umedchand M. Shah. Between February and March 1957 the 1st petitioner was through brokers attempting to sell of the sovereigns and had sold 76 sovereigns in the first week of April 1957. On April 5th, 1957 with intent to sell 1124 sovereigns the 1st petitioner was travelling by the motor car No. BML 8268 and while he was so travelling with them certain Customs Officers stopped the car and 1124 sovereigns were recovered from the 1st petitioner and seized by the officers of the Central Excise Department. The remaining 720 sovereigns were then lying in possession of the 3rd petitioner, the adoptive father of the 1st petitioner. On that day these 720 sovereigns were also seized by the Officers of the Central Excise Department. The 1st petitioner claims to be the bona fide purchaser for value of all these sovereigns seized by the Department. The 1st petitioner was served with a show cause notice dated June 28, 1958 and thereby informed that it appeared that 1124 and 720 gold sovereigns had been imported without permission as required under notifications dated August 25, 1948 and February 27, 1951 mentioned in the notice and that the 1st petitioner was concerned in the offence mentioned in Section 167(8) of the Sea Customs Act. He was required to show cause why the sovereigns should not be confiscated. I will come to the contents of that notice in connection with the arguments advanced on behalf of the parties later. This show cause notice was also served on the 2nd petitioner and he was called upon to show cause why the motor car belonging to him should not be confiscated u/s 168 of the Sea Customs Act, correspondence was thereupon started by the attorneys of the petitioners. In that correspondence the charge made against the petitioners was denied. The facts as recited by me above were pointed out and it was specifically stated that the sovereigns were purchased from Umedchand Shah. Having regard to that case of the petitioners on enquiries the investigating officer appeared to have received information from Umedchand Shah by way of a statement recorded on August 26, 1957. A hearing was given to the petitioners on December 6, 1957 where the 1st petitioner produced receipts and memoes in respect of purchase of these sovereigns from Umedchand Shah. The 1st respondent thereupon gave the statement of Umedchand to the Petitioners'' attorneys''. By petitioners'' attorneys letter dated December 7, 1957 an intimation was given to the 1st respondent that Umedchand Shah had purchased these sovereigns from two persons viz. (1) Hariram and (2) Murlidhar. Having regard to that intimation information was gathered from Murlidhar and Hariram by way of statements recorded by investigation officers respectively on February 8, 1958. Another hearing was given to the petitioners on May 7, 1958 and at that hearing the 1st respondent gave to the legal advisers of the petitioners, 14 statements recorded by the investigating officers are in possession of the 1st respondent. These statements included statements made by the petitioners themselves and statements made by 1. Umedchand M. Shah, 2. Hariram, 3. Murlidhar, 4. Ajit Singh Rohra, broker and 5. (one) Tatke who was the printer of the memo forms produced by the 1st petitioner as having been given by Umedchand Shah. By his letter dated June 6, 1958 the 1st respondent in response to the demand made by the legal advisers of the petitioners offered to furnish to them copies of all those statements and copies of all the statements were ultimately furnished to the legal advisers of the petitioners. The 1st respondent by his letter dated October 18, 1958 finally intimated to the petitioners'' attorneys to give their reply within ten days from the date of the receipt of the letter and that in defaults the case would be decided on the basis of evidence on record.

As the petitioners had not led any further evidence in support of their contentions after receipt by them of these copies of the 14 statements the 1st respondent made the impugned order dated November 25, 1958 for confiscation of the sovereigns and the motor car.

The only two grounds on which the petitioners have contended before me that the order dated November 25, 1958 is illegal and not binding are to be found in sub-paras (a) and (b) of para 20 of the petition.

Shortly stated the first contention of the petitioners is that as regards 14 statements recorded by the investigating officers in the absence of the petitioners the same could not be the basis of the impugned order the petitioners case is that it is abundantly clear from the contents of the impugned order that the 1st respondent has based his decision on the statements given by 14 persons to be investigating officers in the absence of the petitioners. It is contended that before all quasi-judicial tribunal in order to comply with well-established principles of natural justice evidence of the opponent should be taken in the presence of the other party and that consequently if it is found as a fact that evidence of one side was accepted in the absence of the other the Court must come to the conclusion the Tribunal violated principles of natural justice. According to the petitioners on this ground alone the impugned order should be set aside and quashed.

The second contention of the petitioners is that on reading the whole of the contents of the impugned order it is evident that there is no evidence on record of any kind on the basis whereof a finding could be made against the petitioners that the sovereigns in question were imported into India in contravention of the notifications dated August 25, 1948 and February 27, 1951 and that the contents of the order are direct evidence of absence of such evidence and accordingly there is an error apparent on the record of the case and the decision of the respondent 1st should be held to be arbitrary and capricious and the impugned order therefore set aside and quashed. Before referring to the authorities cited by counsel in this connection it is necessary to record that there is no dispute between the parties as regards the facts which transpired in connection with a large number of statements which are referred to in the impugned order of the 1st respondent. The 1st respondent has in his decision other statements referred to the statements made by 1. Umedchand M. Shah, 2. Hariram Hinduja, 3. Tatke and 4. Murlidhar Ramchandra Hasija. Admittedly these statements were made to and recorded by the investigating officers who possibly were helping the 1st respondent in connection with the enquiry before him. As intimated to the Petitioners attorneys by the 1st respondent by his letter dated October 18, 1958 he took into the consideration these statements recorded and documents collected by the investigating officers which had been produced to him by these officers. Admittedly all these statements were taken and recorded in the absence of the petitioners and even in the absence of the Adjudicating Officer the 1st respondent himself. The petitioners have contended that in basing his decision on this evidence in proceedings before him the 1st respondent has violated well established principles of natural justice.

In reply to these contentions Mr. Advani for the respondent has contended that each of the statements were taken from parties who were stated by the 1st petitioner himself as the parties who would prove the 1st petitioner''s case that he was the bona fide purchaser for value without notice of these sovereigns. When the 1st petitioner indicated that Umedchand M. Shah was the seller of these sovereigns and produced documents being memos tendered to the 1st petitioner by Umedchand M. Shah the investigating officers contacted Umedchand M. Shah. The result of the statements made by Umedchand M. Shah was that the petitioners had got Umedchand M. Shah to fabricate these documents indicating sale of sovereigns by Umedchand M. Shah to the first petitioner, and that there was no sale of any kind by Umedchand M. Shah to the 1st petitioner of these sovereigns. When the petitioners indicated Hariram and Murlidhar as parties who had sold these very sovereigns to Umedchand, these parties were contacted and on the statements given by them it was further ascertained that the case of the 1st petitioner that these parties had sold these sovereigns to Umedchand M. Shah was altogether false. Tatke was the printers of the memo bills stated to be given by Umedchand M. Shah to the 1st petitioner and the statements made by Tatke clearly prove that these memos and bills had come into existence subsequent to the date alleged by the 1st petitioner on which he alleged that he had purchased sovereigns from Umedchand M. Shah. All these statements were thus recorded only as a result of information which the 1st petitioner required to be gathered. When information was gathered the same was found to be destructive of the case of the 1st petitioner as put forward in his formal reply before the 1st respondent. According to Mr. Advani all this was not the evidence which was required by the party which in this case may be described as a prosecutor, or department. Broker Rohra''s statement was also recorded as he was indicated by the petitioners. These statements were collected for the benefit of and on the information and indications given by the petitioner to see that the case made by them was correct. Mr. Advani has contended by relying upon the correspondence which is on the record that at every stage the 1st respondent had intimated to the petitioners of all the information that was received and recorded and had expressly intimated to the petitioners that he was willing that these persons who had made statements may be produced at the instance of the petitioners before him so as to prove that the statements which were given by them to the investigating officers had not disclosed the true facts and that the correct and true facts were otherwise. In that connection he relied upon amongst other correspondence on the contents of the 1st respondent''s letter dated October 18, 1958 where it was specifically stated as follows :-

"It would be open to you to call before me any person whose statements is produced by the investigating officer and question him with reference to his statement with the object of converting the truth of the statement."

I have no doubt that the 1st respondent was throughout willing at the petitioner''s instance to have all opportunities to test the truth or otherwise of the statements given by these persons and recorded by investigating officers.

The petitioners however never availed of this opportunity which the 1st respondent was always willing to give them. It appears from the correspondence exchanged between the attorneys of the petitioners and the 1st respondent that the petitioners took up the attitude that it was for the 1st respondent himself to call these persons as witnesses for the purpose of proving the case against the petitioners and that when these persons in the presence of the petitioners gave evidence of the nature already recorded by the investigating officers the same could be taken on record and that thereafter the petitioners should have opportunity to cross-examine those persons as if witnesses produced on behalf of the prosecution the petitioner''s case appears to be that this was the only method which would satisfy and comply with principles of natural justice. The 1st respondent was unwilling to comply with such a request of the petitioners. He however was throughout willing that these witnesses could be brought before him at the instance of the petitioners to prove the untruth of the statements given by them. That indicates the narrow question which has to be decided in this case. In support of his contentions Mr. Joshi for the petitioners has relied upon the observations made by the Supreme Court in the case of Union of India (UOI) Vs. T.R. Varma, . In that case the petitioner in the Trial Court had complained that the enquiry in question was vitiated by the fact that the petitioner had not been permitted to cross-examine witnesses who had given evidence against him. The High Court of Punjab had accepted that contention of fact as correct and accordingly set aside the order that was challenged in that case. The Supreme Court as a matter of fact found that the contention of the petitioner was incorrect and that he had never desired to proceed with cross-examination and therefore the order was held to be valid. The proceedings in that case were originally before quasi judicial Tribunal and in discussing the principles to be complied with by such a Tribunal, it was observed as follows :-

"''Now, it is no doubt true that the evidence of the respondent and his witnesses was not taken in the mode prescribed in the Evidence Act; but that Act has no application to enquiries conducted by tribunals, even though they may be judicial in character. The Law requires that such tribunals should observe rules of natural justice in the conduct of the enquiry and if they do so, their decision is not liable to be impeached on the ground that the procedure followed was not in accordance with that, which obtains in a Court of Law".

"Stating it broadly and without intending it to be exhaustive, it may be observed that rules of natural justice require that a party should have the opportunity of adducing all relevant evidence on which he relies, that the evidence of the opponent should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party and that no materials should be relied on against him without his being given an opportunity of explaining them".

"If these rules are satisfied, the enquiry is not open to attack on the ground that the procedure laid down in the Evidence Act for taking evidence was not strictly followed. Vide the recent decision of this court in New Prakash Transport Co. v. New Suwarna Transport Co., xx xx".

Mr. Joshi has particularly relied upon the observations that "the evidence of the opponent should be taken in his presence" and "that he should be given an opportunity of cross-examining the witnesses examined by that party". These are very important general observations and have got always to be borne in mind in any case where the question about non-observance of principles of natural justice arises in Court. It is therefore necessary to find in this case as to whether the evidence which is Referred to in the decision of the 1st respondent, viz. the statements made by different persons as above mentioned to the investigating officers was "evidence of the opponent" in this case. The persons who made the statements were indicated by the petitioners as persons, from whom the department should gather information which would prove truth of the case of the petitioners. Upto the stage that the investigating officers called for information from these persons there was no question that these were not witnesses of or for "the opponent", viz. the department. They were going to be if at all witnesses of defence, viz. petitioners in this case. They were however found to be so useless when they gave their information and statements that the petitioners did not take any courage to call them as their witnesses. I would not describe the persons who gave these statements as "witnesses for the Department".

The statements given by these parties however were so destructive of the case of the petitioners that these statements have become evidence of the opponent in this case in so ar as they are destructive of the petitioner No. 1''s positive case about his having purchased these sovereigns from Umedchand M. Shah. This is therefore a very peculiar case where the petitioners have sought to describe what would have been their evidence as "Evidence of the opponent" and then contended that the same should have been taken in their presence.

In my view then in the observations cited above the Supreme Court used the phrase "stating it broadly" it was indicated that in the observations broad principles were being stated, but these were not universally applicable in all quasi-judicial proceedings. That is clear when one refers to the case of New Prakash Transport Co. Ltd. Vs. New Suwarna Transport Co. Ltd., , specifically Referred to in the decision of the Supreme Court relied upon by Mr. Joshi.

In the case of New Prakash Transport Co., the question again was with reference to quasi-judicial proceedings held under Motor Vehicles Act with reference to permits issued for plying motor transport. In that case certain report made by the police authorities was taken on record as being the material on which the Tribunal was entitled to rely for making its decision. This report was departmental and the parties to the proceedings had not been heard by the authorities making the report. It was inter alia contended that this report had not been shown to the petitioner respondent and that it had not been afforded any real and effective opportunity to deal with the report or to meet allegations made therein and to study that report and make its submission in regard thereto before the Tribunal gave the impugned decision. In the Trial Court Sen J. held that principles of natural justice had not been violated and discharged the rule. The Appellate Bench of the High Court however after considering various English authorities came to the conclusion that there had been breach of rules of natural justice in the proceedings before the Tribunal and granted relief desired by the petitioner. The Supreme Court held that the petitioner was not entitled to any relief and that there had been no breach of principles of natural justice. A reference is made in that case to the decision of the House of Lords in the case of Local Government Board v. Arlidge 1915 A.C. 120 with approval. The observations made by Viscount Haldane L.C. as cited in the Supreme Court decision as regards the principles of natural justice to be observed by tribunals are relevant to be cited here :-

"My Lords, when the duty of deciding an appeal is imposed, those whose duty it is to decide it must act judicially. They must deal with the question Referred to them without bias, and they must give to each of the parties the opportunity of adequately presenting the case made. The decision must be come to in the spirit and with sense of responsibility, of a tribunal whose duty it is to meet out justice. But it does not follow that the procedure of every such tribunal must be the same".

The observations made by Lord Shaw also were quoted in the decision of the Supreme Court in the following manner : "Lord Shaw in his speech made the following observations which are very opposite to the facts and circumstances of this case.

15."The judgments of the majority of the Court below appear to me, if I may say so with respect to be dominated by the idea that the analogy of judicial methods or procedure should apply to departmental action. Judicial methods may, in many points of administration, be entirely unsuitable, and produce delays, expense, and public and private injury. The department must obey the statute". The observations of Lord Parmoor which are cited by the Supreme Court and are applicable to the facts of this case are as follows :-

"Where, however, the question of the propriety of procedure is raised in a hearing before some tribunal other than a Court of Law there is no obligation to adopt the regular forms of legal procedure. It is sufficient that the case has been heard in a judicial spirit and in accordance with the principles of substantial justice".

Citing with approval the above observations and considering the scheme of the Motor Vehicle Act, the Supreme Court came to the conclusion that in the proceedings in question it was permissible for the Tribunal to accept the police report made and base its decision on that police report. The Supreme Court was of the opinion that it was sufficient that the Tribunal intimated to the petitioners in that case about the contents of the report and read it over to the petitioners and it was unnecessary that the petitioners should have been heard as regards the report before the same was made.

It appears to be implicit in the decision of the Supreme Court that in all cases before quasi-judicial tribunal principles of natural justice must be observed, but that there might be certain small variations in the principles to be observed having regard to the constitution of the tribunal and the statutory enactments and rules made thereunder. In the case of Union of India v. T. R. Verma broad principles are indicated but those principles are variable having regard to the constitution of tribunal and the statutory enactments and rules made thereunder. In that connection one may also refer to the contents of the Article 122 under the heading "Natural Justice" in vol. 11 of Helsbury''s Laws of England. Large number of cases are referred to in this Article and it is apparent by reading the principles of natural justice as carved out from the decision and mentioned in the Article that some variations must follow from the constitution of different tribunals and the statutory enactments and rules made thereunder.

In this connection Mr. Advani relied upon the case of Madhav Ganesh v. The Secreary of State for India ILR Bom. 732 cited with approval in the decision of the Supreme Court in Maqbool Hussein v. The State of Bombay 1983 (13) E.L.T. 1284 (T.C.) : 1953 S.C.R. 713. The case of Mahadev Ganesh arose under the Sea Customs Act and the plaintiff in that suit contested the finding made against him by the Collector of Customs on the ground that the Sarkarkun who started investigation accepted false evidence behind the plaintiff''s back and relying on this evidence the Collector passed the order complained against. Apparently all that was relied upon by the Collector for basing his finding in that case was the statements recorded by the Sarkarkun. The Sarkarkun had also in connection with those statements recorded what the plaintiff Mahadev had to say so that finding should be made in favour of the plaintiff. Chief Justice Macleod referred to the case of Local Government v. Arlidge and hold that it was obvious from the record in the case before him that the plaintiff had ample opportunity to correct or contradict any statement prejudicial to his view which had been recorded. He also stated that if it had appeared to him in any way that there had been real injustice in the case he would not have hesitated to entertain the plaintiff''s claim. He further observed :-

"But as far as I can see from the provisions of the Sea Customs Act, the appellants have no reasons to complain that justice had not been dealt out to Mahadev by the Customs authorities"

The Scheme of the Sea Customs Act came to be discussed by Bhagwati, J. in the case of Maqbool Hussein and the case of Mahadev Ganesh was cited with approval, with the following observations :-

"All these provisions go to show that far from being authorities bound by any rules of evidence or procedure established by law and invested with power to enforce their own judgments or orders, the Sea Customs authorities are merely constituted administrative machinery for the purpose of adjudging confiscation, increased rates of duty and penalty prescribed in the Act. The same view of the functions and powers of Sea Customs Officers was expressed in a decision of the Bombay High Court to which our attention was called".

It is true that in Maqbool Hussein''s case the question of violation of principles of natural justice did not arise. Even so Mr. Advani has urged that in that case even Supreme Court recognised as correct what is implicit in the case of Mahadev Ganesh that the procedure of having witnesses produced by the Department as if there was prosecution against an offender need not be adhered to, in an enquiry relating to offences mentioned in Sections 167 and 168 of the Sea Customs Act.

The question is whether it was necessary in this case for the 1st respondent to get persons, whose statements were considered by him, to be produced as witnesses for the department. These witnesses had not made any statements which were positive proof of the charge against the petitioners. These persons have not made any statements relating to the importation of the sovereigns in question into India. These persons were the persons whose statements were recorded only because the petitioners indicated them as the persons (1) from whom the sovereigns were purchased and (2) who were otherwise concerned in (a) prior dealings in the sovereigns in question and/or (b) the documents produced on behalf of the petitioners. Was it necessary for giving a fair opportunity to the petitioners to meet the charge against them that these persons should be called as witnesses for the department and their evidence (statements) once again recorded in the usual way as if in court and that they should thereafter be made available for cross-examination by the petitioners ?

From the scheme of the Sea Customs Act this does not seem to be the intent and purpose of the enquiry held under the provisions of Chapter XVII of the Act. In that connection one may rely upon the decisions in the case of Mahadev Ganesh and Maqbool Hussein referred to above. In his connection the provisions of the new Section 178A and Section 181 of the Act are relevant. u/s 178A in the case of certain goods mentioned in that section if seizure is made "in the reasonable belief that the same are smuggled", burden is cast on the citizen to prove that the same are not smuggled goods. It is left to the subjective satisfaction of the adjudicating officer to decide whether the goods had been seized in the reasonable belief that they were smuggled goods. The secret information available to him in that connection is not directed to be divulged to the citizen concerned. In a case covered by Section 178A obviously evidence to be produced is evidence of the person charged and the burden is cast on him to produce all evidence in defence. In the event of his not producing sufficient evidence to discharge the burden cast on him the adjudicating officer would be entitled to proceed to make a finding that the goods were smuggled. In such a case even if investigating officers have taken statements from different parties as relevant to the proceedings before him it would be unnecessary and redundant for the adjudicating officer to rely upon such statements for the purpose of making the relevant finding. Such redundant statements recorded in the absence of the citizen obiviously could not render the finding made an untenable and in violation of principles of natural justice. However in a case which is not covered by Section 178A it is apparent that under the provisions of Section 181 on goods being seized the citizen is entitled to "a statement in writing of the reasons for which his goods are seized and he is put under arrest".

In proceedings not covered by the provisions of Section 178A it would be necessary for the Department to produce positive evidence in proof of the charge against the citizen that the goods seized from him were smuggled goods. As regards any positive evidence that may be relied upon by the Adjudicating Officer it may be true that the same should be produced and tendered in the presence of the citizen concerned so that ordinary principles of natural justice are observed and no injustice is caused by placing reliance upon evidence tendered in his absence. Mr. Advani says that having regard to the decision in the case of Mahadev Ganesh v. The Secretary of State for India, the Adjudicating Officer would be in all cases entitled to base his decision on statements recorded by investigating officers in the absence of an offending party.

As I have already held in fact the statements referred to in the decision of the 1st respondent in this case and other statements considered by him do not amount to "evidence of the opponents" as mentioned in the case of Union of India v. T. R. Verma. These are all statements of persons on whom it was necessary for the petitioners to rely for proof of their own case. The 1st respondent was always willing that the petitioners should produce these persons before him and if they so desired to cross-examine these persons so as to prove untruth of the statements made by them. The petitioners themselves did not avail of the opportunity which the 1st respondent was willing to give to them. The question then is whether in the matter of the proceedings in question the petitioners had not received a fair hearing and whether the 1st respondent had proceeded to decide the case without giving to the petitioners opportunity of adequately presenting the case that they wanted to make. In my view having regard to the facts as already mentioned by me the 1st respondent proceeded with this case as regards the statements considered by him in a manner which does not in any way violate principles of natural justice, He furnished the copies of those statements to the petitioners and repeatedly informed them that he was willing to give to them all opportunity to examine all these persons so that every statements made by them may be proved to be untrue. The petitioners have suffered in this case by not lending evidence of any witness and by their own conduct. No injustice appears to me to have been caused to the petitioners on the first ground mentioned in para 20(a) of the petition and that ground must fail.

In support of his second contention Mr. Joshi has relied upon the contents of the decision dated November 25, 1958 as also the contents of the show cause notice served on the petitioners. The basis for the charge of contravention of notifications dated August 25, 1948 and February 27, 1951 as mentioned in the annexure to the show cause notice does not disclose any positive evidence in possession of the investigating authorities or the 1st respondent. The substance of the annexure is that there was some information on which it was suspected that the third petitioner was dealing in smuggled gold. On questioning the 1st petitioner had denied any knowledge about the sovereigns in question and that the sovereigns had remained unclaimed. It was therefore that according to the 1st respondent he was entitled to confiscate the sovereigns. That was the whole of the basis of the charge against the petitioners at the date of the show cause notice. The statements from the beginning to the end, as contained in the decision of the 1st respondent do not disclose any positive evidence in proof of the charge against the petitioners. Not one statement appears in the whole decision as regards the history of the importation of the sovereigns in question into India. Briefly stated the whole of the decision is based on suspicion which must arise by reason of the statements made and information given by several persons indicated on behalf of the petitioners. All information gathered and recorded by investigating officers was, as rightly found, destructive of the case of the 1st petitioner that he had purchased the sovereigns in question from Umedchand M. Shah as also the allegation that Umedchand had purchased these sovereigns from Hariram and Murlidhar. That is shortly the whole of the finding in the decision which runs into several pages. Mr. Joshi therefore contends that the decision is based merely on suspicion that the 1st petitioner''s explanation was incorrect and accordingly that the sovereigns in question were imported into India in contravention of the relevant notifications. The burden according to him was on the department to prove that these sovereigns had been imported into India in contravention of the relevant notifications and on proof of that fact only the findings as mentioned in the infringed order could be made by the 1st respondent. In my view that is a sound contention in respect of all goods seized under the Sea Customs Act except as covered by Section 178A of the Act.

The short question therefore is whether the sovereigns in question are covered by the provisions of Section 178A and a presumption was raised by the 1st respondent as mentioned in that section in the proceedings against the petitioners. In that connection in his affidavit in reply dated June 1st, 1959 para 28 the 1st respondent has made the following categorical statements :-

"I deny that I have proceeded on the footing that the burden of proving that the said sovereigns were not smuggled was on the first petitioner or that I have relied upon Section 178A of the Sea Customs Act. I deny that the impugned order was passed on the basis that the 1st petitioner must prove that the said gold sovereigns were not smuggled goods".

Now, these are emphatical categorical statements made on an extremely relevant matter. So far as the present proceedings go it is the 1st respondent''s case that he has not made any findings on the footing that the burden was on the petitioners. The 1st respondent has not raised any presumption as envisaged in Section 178A against the petitioners.

Mr. Advani has not mentioned to me any reason why I should not accept these statements made on oath as correct. Even so he contends that I should hold that the sovereigns in question are covered by the words in sub-section (2) of Section 178A, viz. "Gold" and "gold manufactures". He therefore says that I should hold that the burden in this case was on the petitioners. As against that contention Mr. Joshi has drawn my attention to certain observations in the case of Pokhraj v. D. R. Kohli, 61 Bom. L. R. 1230. The appeal Court in that case whilst dealing with the validity of Section 178A observed :-

"In our opinion, there is good reason for not disclosing information giving rise to the reasonable belief of a Customs Officer. This, however, does not mean that the facts on which the Customs Officer seizing gold founds his reasonable belief are not subjected to any scrutiny at all, if we turn to the provisions of Section 182 of the Sea Customs Act, it becomes clear that the officer who holds an inquiry thereunder is usually not the same officer who has seized the gold. As already stated, it is for that officer to consider whether he should raise a presumption or not. It necessarily follows that it is open to that officer to consider whether on the material placed before him he could hold that the seizure made by the Customs Officer was made in the reasonable belief that the gold was smuggled".

Relying upon these observations Mr. Joshi has rightly contended that it was for the 1st respondent to consider whether in this case sovereigns were seized in the reasonable belief that they were smuggled. It was thereafter necessary for the 1st respondent to raise a presumption as mentioned in Section 178, and if he so chooses to proceed on that footing. As the 1st respondent has made categorical statements as quoted above even if the sovereigns are held to be covered by the provisions of Section 178A I must come to the conclusion that the 1st respondent did not raise the presumption as mentioned in that section against the petitioners. Having regard to that state of affairs it was necessary for the department, as I have already mentioned to prove as a matter of positive fact that the sovereigns in question were imported into India in contravention of the relevant notifications. The whole of the finding of the 1st respondent in that connection is based merely on suspicion and on the statements made by several persons which according to the 1st respondent were destructive of the case of the 1st petitioner that he was the bona fide purchaser for value of these sovereigns. In the circumstances in my view there is an error apparent on the record of this case as regards the finding made by the 1st respondent. That finding must be held as vitiated by reason of what is well-known as legal misconduct and is liable to be set aside.

Mr. Joshi has informed me that as regards the contention that the provisions of Section 178A are ultra vires the constitution and invalid, he has not been able to press that contention before me as division Bench of this Court has in the case of Pokhraj v. D. R. Kohli held that the contention is not well founded. That contention will be open to be urged by the petitioners in further proceedings if any in this case.

The result of my above findings must be that the petitioners are entitled to the relief as claimed in prayers (a) and (b) of the petition. The petitioners will be entitled to costs. Rule absolute in terms of prayers (a) and (b) with cost.

The respondents are given time of ten days within which they may obtain such order as they desire from the appeal Court.