S. Kannan vs Collector of Customs, Madras

When W.M.P. No. 11975 of 1994 for an injunction filed by the Writ Petitioner and W.M.P. No. 24245 of 1994 filed by the Department for

vacating the injunction came up before this Court, the main Writ Petition itself has been heard, having regard to the nature of the claim and the

stage of the of the proceedings before the authorities below.

The above writ petition has been filed for a writ of certiorari to call for and quash the proceedings on the file of the 2nd respondent in file No.

SIB/136/93/S16/3/94 SIB, dated 28-3-1994 whereunder the 2nd respondent came to issue a show cause notice u/s 124 of the Customs Act, 25

of 1962 (hereinafter referred to as the Act), calling upon the petitioner to show cause to the Collector of Customs-II, Customs House, Madras-1,

as to why 25,725 pieces of snake skins with an estimated market value of Rs. 50 lakhs attempted to be illegally exported out of India, be not

confiscated under Sections 113(d) and 113(i) of the Act and the levy of penalty u/s 114(i) of the Act should not be made for the various acts,

referred to in detail in the show cause notice under challenge. On receipt of the above show cause notice, the petitioner has filed this Writ Petition.

It is stated in the affidavit filed in support of the Writ Petition that the petitioner is an Engineering Graduate, originally in the service of the Public

Works Department, later resigned the job to join a private organisation as a Project Engineer, and thereafter started his own engineering contract

works. In the course of undertaking and executing engineering contract works, he claims to have gained experience to enter into industrial line and

he had been issued with the impugned show cause notice involving the petitioner in the alleged offence under the Act.

Having regard to the nature and stage of the proceedings before the authorities below, I consider it inappropriate as also not desirable to advert

to the various claims made on the merits of the case, except referring to one ground, among other grounds, on which the impugned show cause

notice is challenged. The said ground of challenge is based on the provisions contained in Section 122 of the Act and based also on the fact of the

market value of the goods alleged to have been exported, as given in the show cause notice itself, which renders the 2nd respondent-authority

lacking in jurisdiction to issue such a notice. While admitting the writ petition, interim injunction has been granted by this Court on 27-4-1994.

The respondents have filed a counter-affidavit in the writ miscellaneous petition contending among other things that the writ petition is premature

at the stage of the show cause notice, that on an elaborate investigation conducted the involvement of the petitioner came to light, which

necessitated the issue of a show cause notice under the impugned proceedings, that there are prima facie materials against the petitioner and his

involvement, which necessitated the issue of a show cause notice and that there is absolutely no legal infirmity in officers other than the adjudication

authority issuing the show cause notice. It is also contended that though the show cause notice was issued and signed by the Assistant Collector,

the notice has directed the petitioner to appear directly before the adjudicating authority, who, in this case, is the Collector of Customs-II, Madras,

that this practice has been upheld by various courts and that, therefore, the issue of notice by the 2nd respondent in this case does not suffer from

any legal or other infirmity, warranting interference of this Court at this stage. As noticed earlier, the reference made to the factual averments made

in the counter-affidavit is not to be treated as any indication of expression of opinion by this Court on the merits of the claim itself.

The above challenge based on the lack of jurisdiction in the 2nd respondent to issue the show cause notice, under challenge u/s 124 of the Act

has to be considered in the light of the submissions made by the learned counsel appearing on either side. Learned counsel for the petitioner

contended that though the stipulations contained in paragraph 34 of the impugned show cause notice stated that the petitioner is called upon to

show cause to the Collector of Customs, Madras-1 the recital in paragraph 36 obliges the petitioner to submit the explanation in the office of ""the

undersigned"" meaning thereby the 2nd respondent, within 15 (fifteen) days and that, therefore, the impugned notice is contrary to law and totally

without jurisdiction. Reliance is placed by the learned counsel on a decision of the learned single Judge of the Kerala High Court in V. Ramananda

Prabhu Vs. Collector of Customs and Central Excise, Cochin, . Learned counsel also tried to distinguish the decision reported in Tarak Nath Sen

and Others Vs. Union of India (UOI) and Others, , which is also one of the decisions relied upon by the learned counsel for the respondents.

Learned Counsel for the respondents, while reiterating the stand taken in the counter-affidavit, referred to supra, has relied upon the decisions in

Manilal Bhanabhai Patel Vs. Kaul and Others, and Tarak Nath v. Union of India (supra) in support of his stand that no infirmity can be attributed

to the notice under challenge and that the 2nd respondent cannot be said to be wanting in jurisdiction to issue the said notice. While contending that

the grievance of the petitioner proceeds on suppositions and surmises, learned counsel for the respondents would urge that there was no

justification to presume that it is the 2nd respondent, who will take up further follow-up action pursuant to the impugned show cause notice, that

the fact that the copies of explanation were required to be filed in the office of the 2nd respondent is to facilitate easy receipt and for placing the

matter before the adjudicating authority effectively and that there is nothing in the notice as such, which is indicative of the fact that further

proceedings will not be held or conducted by the adjudicating authority, viz. the Collector of Customs-II, Madras, who has already been referred

to as the adjudicating authority in the notice under challenge itself.

Before adverting to the consideration of claims made by learned counsel appearing on either side, it would be necessary to refer to the relevant

provisions of the Act as also the decisions relied upon at the Bar. Section 122 of the Act reads as hereunder :

Adjudication of confiscation and penalties. - In very case under this Chapter in which anything is liable to confiscation or any person is liable to a

penalty, such confiscation or penalty may be adjudged, -

(a) without limit, by a Collector of Customs or a Deputy Collector of Customs;

(b) where the value of the goods liable to confiscation does not exceed twenty-five thousand rupees, by an Assistant Collector of Customs;

(c) where the value of the goods liable to confiscation does not exceed two thousand five hundred rupees, by a Gazetted officer of customs lower

in rank than an Assistant Collector of Customs.

Section 124 of the Act reads as hereunder :

Issue of show cause notice before confiscation of goods, etc. - No order confiscating any goods or imposing any penalty on any person shall be

made under this Chapter unless the owner of the goods or such person

(a) is given a notice in writing informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty;

(b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of

confiscation or imposition of penalty mentioned therein; and

(c) is given a reasonable opportunity of being heard in the matter :

Provided that the notice referred to in Clause (a) and the representation referred to in Clause (b) may, at the request of the person concerned, be

oral.

The decision in V. Ramananda Prabhu Vs. Collector of Customs and Central Excise, Cochin, is that of a learned single Judge of that Court

wherein the challenge before the learned Judge by means of the writ petition was of the order passed by the Collector of Customs ordering

confiscation and imposing a penalty on the petitioner. Among the various grounds of challenge, it is found that the two grounds considered in the

Judgment deserve reference. They are : that the show cause notice issued by the Assistant Collector of Customs only stated that the petitioner

would appear before him and not before the Collector; and that the Collector of Customs, before he passed the order, did not give any

opportunity to the petitioner before the court of being heard and therefore the impugned order was violative of the principles of natural justice. It is

in that context the learned single Judge sustained the ground of violation of principles of natural justice on account of the Collector not giving an

opportunity to the petitioner of being heard before passing final orders by him and on account of the defective nature of the notice containing a

recital calling upon the petitioner to appear before the Assistant Collector of Customs and submit his representations. In my view, the decision will

have no relevance or application to the case on hand. So far as the present case is concerned, there is no recital in the notice that the petitioner

should appear before the 2nd respondent to make his representations. Instead, as noticed earlier, the notice specifically states that the explanation

should be submitted to the adjudicating authority, viz. the Ist respondent, and it may be filed before the 2nd respondent and indicates further that if

the petitioner so desires, before adjudication he will be heard. That apart, the case before the Kerala High Court was one where final orders have

been passed with irregularity, as noticed. So far as the present case is concerned, it is at the stage of show cause notice, having regard to the stand

taken by the respondent Department that it is not the object of the 2nd respondent to take any further steps except issuing notice and receiving

explanation and forwarding the same by the 2nd respondent to the Ist respondent and that all further proceedings will be taken by the Ist

respondent adjudicating authority, alone.

The decision in Tarak Nath Sen and Others Vs. Union of India (UOI) and Others, is that of a learned single Judge of the Calcutta High Court

wherein the learned Judge had an occasion to deal with a challenge of the nature in question and reject the same on the ground that there was

nothing wrong in the Assistant Collector issuing a notice preceding adjudication, provided the person concerned was asked to submit the

explanation to the adjudicating authority, as contemplated in the provisions contained in the Adjudication Manual. In my view, the said decision

applies to the case on hand and the distinction sought to be pointed out by the learned counsel for the petitioner on the basis of the petitioner in this

case having been called upon to file the explanation in the office of the 2nd respondent does not in any way alter the position that the 2nd

respondent has only called upon the petitioner to submit his explanation to the Ist respondent, adjudicating authority.

The decision in Manilal Bhanabhai Patel Vs. Kaul and Others, is that of a Division Bench of the Gujarat High Court. That was also a case in

which the Challenge has been made before the High Court even at the [stage] of show cause notice [sic] issued by the Assistant Collector of

Customs. Challenging the authority of the Assistant Collector, principally on the ground that looking to the value of the commodity seized in respect

of which adjudication proceedings were initiated, it was contended that it is only the Collector of Customs or the Deputy Collector of Customs,

who has the authority u/s 122 of the Act to conduct the proceedings regarding confiscation and levy of penalty and that, therefore, the show cause

notice contemplated u/s 124 of the Act ought to have been issued only by the Collector of Customs or Deputy Collector of Customs authorised to

hold adjudication proceedings, and not by the Assistant Collector of Customs. Learned Judges of the Division Bench considered the question from

all angles and in great detail and depth and held as hereunder :

Shri Nanavati''s contention that the requirement of issuing a show cause notice contemplated by Section 124 of the Act is a part and parcel of the

proceedings of adjudication contemplated by Section 122 is also not acceptable. The provision as regards show cause notice which is

incorporated in Section 124(a) is, as already stated above, in compliance with the rules of natural justice. These rules of natural justice require that

the person against whom the proceedings of confiscation and imposition of penalty are proposed to be undertaken should know the exact grounds

on which these proceedings are contemplated to be undertaken. These grounds would be best known to the officer who conducts the proceedings

of seizure u/s 110 as it is that officer who proposes to confiscate the goods and who, therefore, ultimately seizes the goods u/s 110. Therefore, that

officer would be in a better position to know the grounds on which the goods are seized on the footing that they are liable to confiscation. Under

the circumstances, it would not be correct to state that proposal to confiscate the goods and to impose penalty should come only from an officer

who is authorised to conduct the adjudication proceedings u/s 122 of the Act. Issuance of a show cause notice is a distinct step which is

preliminary to the adjudication proceedings which are to follow. The adjudication proceedings are dependent upon the grounds mentioned in the

show cause notice, but not vice versa. It is therefore not correct to say that the proceedings for a show cause notice form part and parcel of

adjudication proceedings. The scheme of the Act as revealed from Sections 110, 124 and 122 is that after a ''proper officer'' forms a reasonable

belief that certain goods are liable to be confiscated, he would seize these goods u/s 110. Within six months from this seizure a notice contemplated

by Section 124(a) should be given to the person from whose possession these goods are seized, calling upon him to show cause why the goods

should not be confiscated. Such a notice u/s 124(a) can be given by any officer who is competent to act. Ordinarily, the officer who has seized the

goods after forming a belief that they are liable to be confiscated would be best fitted to issue the required show cause notice and to give

information as regards the grounds on which the confiscation is proposed to be made, but there is nothing in Section 124 to prevent any other

competent officer from issuing such a notice after studying the facts of the case. It is significant to note that the legislature has advisedly refrained

from providing in Section 124 as to who is competent to issue show cause notices under clause (a). The purpose of not making any specific

provision on this point is that the issuance of a show cause notice being a formality which is quite distinct and separate from the actual adjudication

proceedings u/s 122, such a formality can be undertaken by any officer who is conversant with the facts of the case, and also has authority to take

steps under the provisions of the Act. Thus the show cause notice stating grounds of confiscation amounts practically to a charge-sheet submitted

by the police relating to an accused who is sought to be tried before a Court of law. Adjudication proceedings which follow pursuant to the show

cause notice u/s 124(a) furnish the last step which may result in actual confiscation and penalty. From this analysis of the scheme there emerges

nothing to show that the issuance of a show cause notice u/s 124(a) is part and parcel of adjudication proceedings held u/s 122.

What Section 122 of the Act does is merely to make a suitable distribution of pecuniary jurisdiction to adjudicate as amongst different ranks of

customs officers. Different officers authorised to act under this section may or may not be having first-hand knowledge about the circumstances

under which goods are seized u/s 110. They can therefore supply the grounds for confiscation in a show cause notice u/s 124(a) only after studying

materials placed before them. It would therefore be a mistake to hold that they are the only authorities who can issue show cause notices u/s

124(a).

On a careful consideration of the above submissions, I am in entire agreement with the principles laid down by the learned Judges of the

Division Bench of the Gujarat High Court in the decision reported in M. B. Patel v. Kaul (Supra). As rightly pointed out, therein as also in the

decision of the Calcutta High Court, referred to supra, the petitioner cannot be said to be put to any prejudice or legal damage by the 2nd

respondent, Assistant Collector of Customs, issuing the show cause notice, since he is also one of the authorities concerned under the Act and

conferred with powers to enforce the provisions of the Act and to take action for any violation thereof. Consequently, the provisions of Section

122, which allocates the powers of adjudication for confiscation and imposition of penalty on different authorities of the Department depending

upon the value of the goods liable for confiscation, can be no indicator as to who actually has to issue the show cause notice contemplated u/s 124

of the Act. Apart from the fact that in Section 124 itself there is no specific mention or indication that the show cause notice also has to be issued

by an authority empowered to pass an order of adjudication, the prescription of different limits on different officers for passing actual orders of

adjudication will not, in my view, deny the power of the Assistant Collector of Customs, who is equally an authority entrusted with the powers of

enforcement of the provisions of the Act to issue a notice contemplated u/s 124 of the Act, de hors the value of the goods liable for confiscation.

The value of the goods liable for confiscation has relevance only for fixing the authority, which ultimately has to pass an order of adjudication, after

giving the opportunity to the person concerned of hearing and enquiry, as it thinks necessary in each individual case. In my view, the scheme

underlying the hierarchy of officers designated with financial restrictions or ceiling for limiting their jurisdiction to pass final orders of adjudication

envisaged u/s 122 cannot be dovetailed into the provisions contained in Section 124 of the Act so as to necessitate only such authorities with

prescribed monetary limits to issue even the show cause notice contemplated u/s 124 of the Act. Section 122 is not the provision conferring power

or authority to pass an order of confiscation but merely one identifying the category or officers who can pass such orders.

That being the position of law, on the facts and circumstances of the case also, I am of the opinion that the petitioner cannot make any legal

grievance even at this stage. The approach of the petitioner to this Court, in my view, is also premature. The 2nd respondent has only called upon

the petitioner to submit the explanation to the first respondent, adjudicating authority, in that, the petitioner has to address the explanation to the

first respondent only, as noticed in the show cause notice itself. The fact that the petitioner is called upon to file the said explanation addressed to

the adjudicating authority with the 2nd respondent does not in any manner alter the position that the petitioner has been called upon to submit his

explanation to the adjudicating authority only. From the above, it cannot be contended or surmised that the 2nd respondent alone will consider the

explanation or rather conduct the enquiry or personal hearing and will not allow any of these things to be performed by the adjudicating authority

himself. Such grievance must be ventilated on the actual occurrence of any of such infirmities and that too only as and when they happen and

cannot be allowed to be projected on mere apprehensions and suppositions or surmises at this stage itself. In fact, the stand taken in the counter-

affidavit as also the submission made by the learned counsel for the respondents leaves no doubts in this regard that all further proceedings

including the enquiry or any hearing, will be conducted only by the adjudicating authority, viz. the 1st respondent, and not by the 2nd respondent.

This itself, is a sufficient answer and safeguard, enough to reject the alleged grievance of the petitioner.

For all the reasons stated above, the challenge made to the impugned notice fails and the writ petition shall stand rejected. It is made clear that

any of the observations made in the course of the order need not be construed as expression of any opinion on the merits of the claim of the

respective parties which are left open with liberty to the competent authority as also to the petitioner to be vindicated for consideration in the

manner known to and in accordance with law. No costs. In view of the fact that the main writ petition is rejected, the interim injunction granted in

W.M.P. No. 11975 of 1994 is vacated and W.M.P. Nos. 11975 & 24245 of 1994 shall stand disposed of.