Prakash Damodar Dhorda and Others vs Union of India and Others

Shri V.P. Tipnis, J.—These eight Writ Petitions are filed by persons carrying their avocation at Dubai and Middle East. Each one of them is holder of a valid Indian passport. The petitioners have averred that Govt. of India by notification bearing no. 171 of 1994 issued on 30.9.1994 which came into force on 1st of November 1994, exempted gold when imported into India by an eligible passenger from the customs duty as mentioned in the notification. According to the petitioners, the eligible passenger does not require any licence or permit but he has only to satisfy the conditions laid down under the notification. All the petitioners came to Mumbai from Dubai by Emirates Flight No. 500 on 31st August, 1996 and each one of them brought about 42 gold bars weighing 4900 gms. Upon the landing, each one of them declared that they possess gold of the aforesaid quantity to the proper Officer of the customs channel designated to assess such gold imported. The officers examined the gold and assessed the same for payment of Customs duty as per the notification and after payment of duty in foreign exchange each one of them was issued a duty paid receipt and was allowed the clearance on said gold. It is alleged by the petitioners that they brought this gold for their personal use and they were to appoint one Suresh Jain, a regular broker for the sale of gold who had also come to airport to receive the petitioners. It is the case of the petitioners that they came out of the customs hall and were still at the airport, when they were apprehended by the officers of the Commissioner of Customs and Additional Commissioner of Customs and questioned about the ownership of the gold. The petitioners claimed the gold to be of their ownership. However, they were taken to the office of the second respondent at Marine Lines. Some statement was dictated by the customs officer and the petitioners were forced to write or sign the said statement under the physical assault, mental torture and duress. The petitioners thus were compelled to sign the statement. Thereafter, the officers informed the petitioners that the gold is seized including the duty paid receipt and the passport of the petitioners. The petitioners were released thereafter with instructions that whenever required, the petitioners would be called and the petitioners should attend the office. The petitioners have thereafter come to know that said Suresh Jain who had come to airport to pick up the petitioners, was also arrested and was in fact kept in judicial custody till 2nd September, 1996 on which date, the learned Chief Metropolitan Magistrate released the said Suresh Jain on bail in the sum of Rs. 50,000/-.

It is asserted by the petitioners that they fully satisfy the explanation describing "eligible passenger". It is submitted that it is not necessary under the notification that the petitioners should prove their ownership of the gold or how they came in possession of the said gold. Referring to several directions given by various authorities, the petitioners have contended that for the purpose of clearance of gold under notification the issue of ownership is thoroughly irrelevant and once the person satisfies the conditions of the notification, the gold has to be cleared. It is further submitted that in the facts of the case, in that the gold after payment of duty in foreign exchange was cleared and as such, after the gold was cleared, it was impermissible for the customs authorities to seize the same. The petitioners have therefore, challenged the said action of the customs authority and prayed that the action of seizure of the gold and the passport by the customs authorities be quashed and the respondents authorities be directed to immediately return to the petitioners the gold seized from them, duty paid receipt for the same and the passport.

Two affidavits in reply have been filed by the Assistant Commissioner of Customs (Preventive), Marine Preventive Wing, Mumbai. In the first affidavit, it is contended that after the investigation, adjudication proceedings will follow wherein the petitioners can raise all contentions. It is further stated that the petitioners have suppressed the material facts from the Court. It is thereafter stated as under :

"That the petitioners are mere carriers. Each one of them under instructions and directions of one Mr. Mohammedbhai at Dubai brought 42 gold biscuits along with him as a part of his baggages to India. The said Mohammedbhai gave 3800 US $ to each one of them to be paid as customs duty for the purpose of clearance of gold at Mumbai airport. After customs clearance, each one of them was advised by the said Mohammedbhai to hand over 42 gold biscuits to a person named as Mr. Suresh Jain purported to be a representative of Mr. Mohammedbhai for carrying the gold on behalf of the said Mohammedbhai. Each one of them was given free return air tickets from Dubai and Mumbai for the said job. All the eight persons were mere carriers and brought the gold on the same conditions at the instance and for and on behalf of the said Mohammedbhai at Dubai. All received foreign exchange from said Mohammedbhai for payment of customs duty for clearance of gold. All the gold biscuits totalling to 336 weighed approximately 40 kgs."

3.1. It is further stated that as per the direction of said Mohammedbhai, all the eight petitioners handed over the gold biscuits, after the customs clearance to said Shri Suresh Jain in the vicinity of the airport area. Said Shri Suresh Jain was waiting to collect the said gold biscuits as representative of said Mr. Mohammedbhai of Dubai. It is asserted that Suresh Jain was not a bona fide purchaser of gold. He was only receiver of the gold biscuits on behalf of Mohammedbhai. After collection of the gold biscuits from all the petitioners when Suresh Jain was about to leave the airport in his car, the Officers of the Customs apprehended Mr. Suresh Jain and interrogated him. Upon interrogation, Suresh Jain admitted that he was acting at the behest of Mr. Mohammedbhai. Shri Suresh Jain further admitted that he was to hand over this gold collected from the carriers to the persons subsequently on getting telephonic instructions from Mr. Mohammedbhai from Dubai. Shri Suresh Jain admitted that the gold was not acquired from the carriers on purchase basis. In fact, he was just a part of an entire network, aim of which was to import huge quantity of gold into India without the support of any licence in contravention of the provisions of the Customs Act and FERA. The statements of all the petitioners were recorded. Statement of Shri Suresh Jain was also recorded wherein, they admitted that they were not the owners of the gold and it was brought on behest of said Mr. Mohammedbhai. Shri. Suresh Jain further revealed that he was regularly receiving the gold biscuits from carriers despatched from Mohammedbhai and in the past, he received the gold on about 35 occasions. The gold so received by him was handed over to the representative of Mohammedbhai as per the telephonic instructions. Shri Suresh Jain admitted that he doesn''t pay income tax and he is also not doing the business of broker in gold. It is asserted that all the biscuits have been seized under the provisions of Customs Act and investigations are going on. It is asserted that 40 kgs. of gold has been imported by Mr. Mohammedbhai through 8 different passengers by sending 5 kgs. of gold per passenger. The gold is restricted import item and the import of such huge quantity of gold is permissible only if the importer possesses the special import licence issued under the provisions of the Export and Import policy. The special import licences are issued to only class of Export Organisations like Export Houses, Star Trading Houses etc. on the basis of their export performance. Shri Mohammedbhai does not fall in any of the categories and therefore, could not have imported the gold in such a large quantity. According to the respondents, the statements of the petitioners and said Shri Suresh Jain clearly point out the aforesaid situation. In the statement of Shri Suresh Jain, it was further revealed that upon the instructions of Mr. Mohammedbhai of Dubai, he used to receive the gold from the passengers and hand it over to the representative of Mohammedbhai in Mumbai as per his instructions who in turn, were directly sending the sale proceeds of the gold back to Mr. Mohammedbhai in Dubai. The petitioners have stated that even on earlier occasions they have cleared about 5 kgs. of gold in similar manner. It is asserted in the affidavits, that thus it is clear that the petitioners were mere carriers working in syndicate which deals illegally importing gold without having any support of import licences, thus contravening the Customs Act, Foreign Trade (Development and Regulation) Act 1992, Section 9 of the Foreign Exchange Regulation Act, 1973, and scheme appears to be illegally importing huge quantity of gold and to sell the gold in Indian market and to remit the realized price back to Dubai in foreign currencies. It is submitted that the correct interpretation of the notification is that the passenger who carries any goods in his package is required to file ownership declaration.

In further affidavit, it is asserted that all the carriers handed over the gold to Suresh Jain who received the gold and who made statement that he has received it on behalf of Mohammedbhai. No consideration for sale is shown and thus FERA violation is involved. The Enforcement Directorate of Mumbai have been informed about the incident and they are conducting the investigation for contravening of FERA. The Customs authorities are also conducting further investigation and the petitioners have been summoned. It is complained that despite summons, the petitioners have failed to appear on certain dates.

It is also an admitted position that during the pendency of the petitions, and in fact when the petitions were directed to be finally heard, the respondent-authorities have issued show cause notice dated 19.2.1997 to all the petitioners in addition to said Shri Suresh Jain and his driver Patel, Mohammedbhai and Abubaker of Dubai, as also one Manekchand Kothari. After referring to the incident and various statements of the petitioners and said Shri Suresh Jain and his driver Patel, the notice also refers specifically to Writ Petition filed by Prakash Dhorda in this Court and the other petitioners having filed Writ Petition in the Court claiming back the gold. Thereafter, referring to several sections of the Customs Act and Foreign Trade (Exemption from application of rules in certain cases) Order, 1993, it is contended in the notice that the passenger must be owner of the gold for lawful clearance. It is stated that a separate licence is required for import of gold as it is restricted commodity for import. It is stated in this case, it appears that 8 NRI passengers who imported gold are only carriers and they undertook this exercise for a free air ticket and small remuneration offered to them by Mohammedbhai who is the real owner and importer of gold in India. Mohammedbhai does not fall under any of the categories entitling him to import gold. Mohammedbhai does not possess any licence and it is Mohammedbhai who has induced 8 NRI passengers to carry gold in their personal baggage to abuse the concessions extended to genuine NRI passengers to import the gold owned by them and thus, 336 of gold bars of foreign origin appear to have been imported and are liable to confiscation under the provisions of Section 111(d) of the Customs Act, 1962. There is also reference to Nokia Mobile Phone and Maruti Esteem Car which was confiscated from the possession of said Shri Suresh Jain.

Dr. Kantawala, the learned Counsel appearing for all the petitioners urged that in fact, issuance of the notice of show cause during the pendency of the petitions and when the petitions were in fact set out for hearing, is clear case of contempt and Court should take very serious view of the matter and the respondents may be made to face the consequences of their act of contempt. Shri Dada, learned Additional Solicitor General, appearing for the respondents-authority on the other hand, contended that when the learned single judge admitted the petitions, the learned single judge expressly refused the interim relief. Referring to provisions of Section 110(2) of the Customs Act, Shri Dada submitted that the gold was seized with a view to confiscate and unless notice was issued within six months under the provisions of Section 110(2), it would have been required to be returned to the persons from whose possession the same was seized. Shri Dada submitted that if the authorities under the provisions of the Act issued show cause notice which is absolutely necessary before adjudication proceedings could commence, that act cannot be treated as contempt of the Court only because petitions are pending and especially when the learned Judge while admitting petition had expressly refused interim relief.

On proper consideration of the matter, we are of the opinion that it cannot be said that by issuing show cause notice the respondents have any way attempted to interfere with the hearing of this case or have committed the contempt. Issuance of notice is a condition precedent for adjudicating process and before the gold could be confiscated. Whether on merits and in the facts of the case, the gold should be confiscated or not is altogether a different matter. But taking into consideration the fact that interim relief was expressly refused; that the pendency of the petition is expressly referred to in the show cause notice and that issuance of show cause notice is absolutely necessary within a particular time, we are of the opinion that in the facts and circumstances of this case, the respondents cannot be held guilty of any contumacious conduct or even impropriety.

Coming to the merits of the case, Shri Kantawala submitted that once the passenger is eligible passenger as described or explained in the notification then, there is no further question of ownership of the gold and as such, the proper officer very correctly cleared the goods. Shri Kantawala next submitted that in fact, several clarifications and notifications of the proper authorities clearly show that for clearance of gold under the said notifications, ownership is thoroughly irrelevant and that is how all the relevant authorities have understood the said notifications. Shri Kantawala next submitted that in any case, once the gold was cleared by the proper officer without that order being set aside in lawful manner, it was impermissible for the authorities to again seize the gold and in the submission of Dr. Kantawala this action of the respondents-authorities is clearly mala fide, unlawful and thoroughly without any authority of law. Dr. Kantawala in support of his submission relied upon certain judgments to which we will make a reference hereafter at proper stage. Dr. Kantawala therefore, submitted that the action of the respondents-authorities is thoroughly illegal and proceedings must be quashed and the gold must be returned to respective petitioners. Dr. Kantawala also emphasised the fact that all the petitioners have retracted their statements and statements recorded by the customs authority under the provisions of Section 108 of the Customs Act were extracted under duress and by coercion.

Shri Dada, learned Additional Solicitor General, on the other hand, emphasised the fact that as per the record and as per the respondents authority the gold was not seized from any one of the petitioners at all, but the gold was seized from the possession of said Shri Suresh Jain and said Suresh Jain not being the petitioner before the Court, there is no question of returning the gold to any one of the petitioners. Shri Dada then referred to the averments in paragraph 6 of the petitions and averments of the respondents in para 4 of their affidavits in reply. Shri Dada submitted that notification cannot be read in isolation which has to be read along with the Customs Act, FERA Regulation and Import and Export Regulation Act. Shri Dada then referred to several notifications and orders as well as several Sections of the Customs Act, FERA and Foreign Trade (Development and Regulation) Act, 1992. Shri Dada in substance contended that if the preparation of abetment or attempt to commit violation of Section 9 of the FERA is involved then any goods which are imported as a preparation or attempt to commit such an offence under FERA are liable to be confiscated u/s 111(d) of the Customs Act. Shri Dada emphasised the fact that Import Control Law requires that any quantity beyond 5 kgs. of gold requires special licence before it is permitted to be imported. Shri Dada referred to the provisions of Section 3 of the Foreign Trade (Development and Regulation) Act, 1992 and also the judgments of the apex court reported in The Collector of Customs, Madras Vs. Nathella Sampathu Chetty and Another, . Shri Dada contended that the gold has been seized from Shri Suresh Jain under the provision of the Section 110 of the Customs Act. u/s 111(d) of the Customs Act import is illegal if it is in violation of provisions of the Customs Act or any other law. In the submission of Shri Dada the present import is violative of import trade control order issued under the Foreign Trade (Development and Regulation) Act, 1992 as total gold is in excess of 5 kgs. which cannot be imported except with special import licence. The present import is accordingly illegal import u/s 11 of the Trade (Development and Regulation) Act, 1992. According to Shri Dada, action of the petitioners, is a preparation or attempt to commit an offence u/s 9 of FERA, 1973. Even a preparation or attempt or abetment is an offence u/s 64 of FERA read with Section 56 thereof. The notification issued under FERA, 1973 if violated, attracts provisions of Sections 11 of the Customs Act, by virtue of Section 67 of FERA, 1973. Shri Dada submitted that on the basis of statements of the petitioners and said Shri Suresh Jain, it is clear that the petitioners prepared or attempted to violate or abet the violation of provisions of Section 9 of FERA, 1973.

Dr. Kantawala in reply, submitted that this petition is specifically for enforcement of the right of each of the petitioners under the notifications which is taken away by the respondents-authority arbitrarily and mala fide and without any authority. Shri Kantawala submitted that the judgments of the apex court relied upon by the learned Additional Solicitor General, may not help as those judgments were with reference to the provisions of Sections of old Act which are drastically amended.

We would like to make a reference now to the judgment on which heavy reliance was placed by Dr. Kantawala. The very first judgment relied upon by Dr. Kantawala is the judgment of the Division Bench of this Court reported in Abdulla Kalingal Andu Vs. Union of India, . The judgment being very short containing only two paragraphs, it is reproduced in its entirety as under :

"Shri R. M. Agarwal, learned counsel appearing for the Respondents, on taking instructions, states that the ownership of gold and silver is not a criterion for its eligibility to be imported by the passenger under the Gold Import Scheme. Accordingly incoming passengers can import the gold so long as they satisfy the conditions of stay abroad and those relating to payment of duty in foreign exchange.

In view of the above statement, the present prosecution does not survive and the petitioner is entitled for order of discharge. The prosecution sought to be initiated to stand cancelled and cash security, if paid, will be returned to the petitioner. Similarly gold and silver seized from possession of the petitioner including related documents and passport be returned to the petitioner forthwith. Rule made absolute."

It is clear that the learned counsel appearing for the authorities on instructions had stated that the ownership of gold or silver is not a criterion for its eligibility to be imported by passengers under the Gold Import Scheme and it is in view of the said statement, the Court held that the prosecution does not survive and the petitioner is entitled for order of discharge. From the reading of the judgment, it is clear that there is absolutely no discussion on any point of law. In fact, there is absolutely no mention of any facts relating to the case and the judgment is entirely based on concession by the learned counsel and the statement made by him. It is elementary that such judgments and orders are not binding precedent inasmuch as there is no ratio. In this situation, we are of the clear opinion that the fact that the Division Bench on the basis of the statement made by the respondent authorities, quashed the particular prosecution, does not help the petitioners in these petitions to substantiate their submission. Shri Kantawala then referred to the judgment of the learned single Judge in the matter of Popular Dyechem v. Union of India and others reported in 1987 (28) ELT 220 (Bom) = 1987 (11) ECR 721 (Bom). We have carefully gone through the judgment and we fail to appreciate how this judgment in any way helps any submission of the petitioners. The judgment sets aside the order passed by the Collector of Customs without offering any opportunity of being heard to the petitioners therein. Dr. Kantawala next relied upon the judgment of the appeal bench of this Court in the matter of Union of India and others Vs. Popular Dyechem, . The said judgment shows that the order of clearance u/s 47 of the Customs Act was passed by the Asstt. Collector after physical verification of the goods and as such the Division Bench held that it is clear that such goods cannot be confiscated except in contemplation of an order or in pursuance of order passed in Revision u/s 129(d) of the Customs Act, 1962. The Division Bench observed that no such order has been passed till the date of the judgment and it is under these circumstances no interference with the trial Court''s order is called for.

12.1. In the facts and circumstances of the case, we are of the opinion that this judgment is of no help to the petitioners. It is extremely relevant to notice that according to the petitioners the gold was seized from the possession of the petitioners themselves whereas, it is categorical case of the respondent-authorities that gold was physically seized from the possession of Shri Suresh Jain after each of the petitioners handed over the said gold to Shri Suresh Jain. Undoubtedly, once the goods are cleared in a normal circumstance without the order of clearance being set aside the order without there being order of setting aside in revision in contemplation as stated by the Division Bench, the goods could not be confiscated. However, even the cleared goods if they are subject matter of the commission of offence under any other law, if so permitted can be confiscated in accordance with law. In the facts and circumstances of the case before us, we are of the clear opinion that it is the case of the respondent-authorities firstly that it is Shri Mohammedbhai who is the real importer and secondly in any case, after the gold was handed over to Shri Suresh Jain in view of the statement of Shri Suresh Jain, it is clear that the huge quantity of the gold was being imported by this modus operandi in India, with a view to ultimately send back the sale proceeds to said Shri Mohammedbhai which clearly violated several provisions of FERA. Whether ultimately the said case is proved against the concerned accused and whether ultimately the adjudicating officer shall be justified in confiscating the gold is altogether different issue.

In this connection, it is relevant to notice that in The Collector of Customs, Madras Vs. Nathella Sampathu Chetty and Another, , the Apex Court referred to Section 19(c) of the Customs Act and Section 23(A) of the Foreign Exchange Regulation Act and held that

"the effect, therefore, of Section 23(A) is to treat the text of the notification by the Central Govt. u/s 8(1) as if it had been issued u/s 19 of the Sea Customs Act with the title and the recital of the source of power appropriate to it by the creation of a legal fiction."

At the end of para 42, the Apex Court observed that when the notification issued u/s 8(1) of the Foreign Exchange Regulation Act as deemed for all purposes to be notification issued u/s 19 of the Sea Customs Act, the contravention of the notification attracts to it each and every provision of the Sea Customs Act which is in force at the date of the notification. Shri Dada also brought to our notice the decision of the Apex Court reported in Pukhraj Vs. D.R. Kohli, , which reiterates the same principle of incorporation.

13.1. In this behalf, it is relevant to notice that Section 3 of the Foreign Trade (Development and Regulation) Act, 1992 provides that the Central Govt. may by order published in the official gazette, make the provision for the development and regulation of Foreign Trade by facilitating the imports and increase in exports. Sub-section (2) of Section 3 of FERA provides that the Central Govt. may also, by order published in the Official Gazette, make provision for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases and subject to such exceptions, if any, as may be made by or under the Order, the import or export of goods. Sub-section (3) provides that all goods to which any order under sub-section (2) applies shall be deemed to be goods the import or export of which has been prohibited u/s 11 of the Customs Act, 1962 and the provisions of that Act shall have effect accordingly.

Turning to the provisions of Foreign Exchange Regulation Act, 1973, Section 9 provides that save as may be provided in and in accordance with any general or special exemption from the provisions of this sub-section which may be granted conditionally or unconditionally, by the Reserve Bank, no person in, or resident in, India shall -

(a) make any payment to or for the credit of any person resident outside India;

(b) -

(c) -

(d) make any payment to or for the credit of any person by order or in behalf of any person resident outside India;

14.1. Section 50 of FERA provides for penalty for contravention of the Rules, Orders, Directions etc. as provided therein. Section 56 provides for offences and prosecutions. Section 64 of the FERA is extremely relevant, which provides that whoever makes preparation to contravene any provisions of this Act [other than Section 13, clause (a) of sub-section (1) of Section 18, Section 18(A) clause (a) of sub-section (1) of Section 19, sub-section (2) of Section 44 and sections 57 and 58] or any rule, direction or order made thereunder and from the circumstances of the case it may be reasonably inferred that if not prevented by circumstances independent of his will, the contravention as aforesaid would have taken place, shall, for the purposes of section 56, be deemed to have contravened that provision, rule, direction or order, as the case may be.

14.2. Sub-section (2) provides that whoever attempts to contravene, or abets any contravention of any of the provisions of this Act [other than Section 13, clause (a) of sub-section (1) (Section 18, Section 18A), clause (a) of sub-section (1) of section 19, sub-section (2) of section 44 and sections 57 and 58] or of any rule, direction or order made thereunder, shall for the purposes of this Act, be deemed to have contravened that provisions, rule direction or order, as the case may be.

We also feel necessary to refer to the definition of importer under the provisions of the Customs Act ,1962. Section 2(26) defines importer as under :

"importer, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer."

For obvious reasons, we refrain ourselves from adjudicating upon the issues which are subject matter of the show cause notice. However, we have referred to aforesaid provisions of the Act and the several notifications which are pointed out by the learned Addl. Solicitor General only with a view to demonstrating that in the facts and circumstances of the case and on the basis of statements of Shri Suresh Jain and the petitioners, although retracted subsequently, this is not the case where we can come to the conclusion that the action of the respondents-authority in seizing the gold and passport and entering upon the adjudication is either illegal or without authority of law or without any basis or mala fide. In exercise of writ jurisdiction of this Court, we do not find any reason at all to either quash these proceedings or show cause notice or to direct that the gold be returned to the petitioners as claimed by them. We have referred to several provisions and the facts of the matter only with a view to ascertaining whether there is any substance in the allegations of the petitioners that the action of the respondents is mala fide or without any basis or is thoroughly illegal. In our opinion, on the basis of facts and circumstances of the case and the various provisions and the Notifications brought to our notice, the respondents have made out a clear case for further investigation and adjudication in the matter. It is solely on this ground that we do not find it necessary to entertain these petitions and grant the prayers of the petitioners.

16.1. In the result, all the petitions fail and rule is discharged in all the petitions. There shall be no order as to costs.

16.2. We direct that the adjudicating proceedings shall be completed as expeditiously as possible. After hearing both the sides we further direct that unless the proper authorities commence any prosecution of any of the petitioners before us and unless they obtain appropriate orders from competent Court in that behalf on or before 30th April, 1997, the respondents-authorities shall return the passport to respective petitioners.

16.3. Issuance of certified copy of this judgment is expedited.