Sha Rikhabdas Ghaganraj vs Collector of Central Excise

Srinivasan, J.—This is a petition under Article 226 of the Constitution praying that this Court may call for the records of the Collector of

Central Excise in D.A. Dis. No. VIII/10/179/59 Cus. Adj. dated 26-11-1959 and quash that order.

On 27-9-1958, the Customs authorities raided the premises of the petitioner and recovered large number of packets of 7 O''clock blades from

those premises. The petitioner was asked to show cause why the goods should not be seized as having been illicitly imported into India. He

produced all his accounts before the Customs authorities, and, after a perusal of these accounts, 93 packets containing in all about 20,000 blades

were released, the Customs authorities being apparently satisfied that the possession of that quantity was covered by valid receipts of purchases

produced by the petitioner. In respect of the remaining quantity however, the petitioner''s claim that he had made purchases from one S. K. Mehta

of Bombay was held to be not satisfactory. The particular bill relied upon in that connection did not disclose that the commodity purchased

thereunder tallied with the goods found in the possession of the petitioner. The Customs Collector concluded that the seized blades are not

covered by the bill produced by the party. He, therefore, proceeded to hold that as the party had failed to establish the licit origin of the goods,

they should be held to have been illicitly imported into India. He accordingly confiscated the blades in question and also imposed a penalty of Rs.

3000 upon the petitioner u/s 167 (8)of the Sea Customs Act. It may be mentioned that the petitioner sought to file an appeal before the Central

Board of Revenue u/s 188 of the Sea Customs Act. But, as he did not comply with the terms of the section and deposit the penalty imposed, that

appeal petition was rejected.

In the counter affidavit filed on behalf of the Collector of Central Excise, the facts are not denied. It is claimed, however, that the Customs

authorities acted fully within the limits of their jurisdiction and there is no error of Jaw apparent on the face of the record rendering it liable to be

quashed. After setting out the facts relating to the seizure, verification of the bills and other details, the counter states that since the goods were of

foreign manufacture, the import of which was restricted, they could not have been imported without an import licence and in such large quantities

and that the respondent was, therefore, fully justified in calling upon the petitioner to establish the licit origin of the goods, and that on his failure to

so establish the origin of the goods, the Customs authorities were competent to infer that they had been illicitly imported. It is further contended that

this court cannot issue a writ as the petitioner had appealed to the Central Board of Revenue and the order of the Collector of Central Excise had

become merged with the order of the appellate authority.

I may deal with the latter contention first. It is not the contention of the learned counsel appearing for the respondent that an appeal was

entertained by the Central Board of Revenue and was disposed of on merits. What happened in this case is admittedly, that though an appeal

petition was no doubt presented since the conditions precedent to the entertainability of the appeal laid down by Section 189 of the Sea Customs

Act were not complied with, the petition was rejected. The appeal as such was certainly not disposed of in any manner known to law. Mere

rejection of an appeal petition as not maintainable for non-compliance with certain conditions prescribed by the statute does not certainly amount

to a disposal of the appeal, resulting in an order of the appellate authority displacing the order of the original authority. The theory of merger has

therefore no application to the facts of the present case.

The next question is whether in a case where the goods are not of the prohibited variety, but only restricted for the purpose of import, and

goods lawfully imported into the country are available in the open market, it is justifiable on the part of the Customs authorities to demand proof of

licit origin from a person in possession of the goods, and on his failure to establish it, to draw the inference that the goods must have been illicitly

imported. The provision of law under which the proceedings were dealt with is Section 167(8). The offence described therein is :

If any goods, the importation or exportation of which is for the time being prohibited or restricted by or under Chapter IV of this Act, be imported

into or exported from India contrary to such prohibition or restriction.

Such goods shall be liable to confiscation and any person concerned in any such offence shall be liable to a penalty. . .

In contradistinction to Section 178-A of the Act, where the onus is placed upon the party in possession of certain classes of notified goods to

establish that they are not smuggled goods, Section 167(8) purports to indicate that in the case of goods other than those covered by a notification

u/s 178-A the onus of proving all the ingredients of an offence is upon the Collector of Customs. It is not open to the Collector of Customs to call

upon any individual and demand to be satisfied that the goods in his possession are illicitly imported.

This question came up for consideration before Jagadisan J. in W. P. No. 20 of 1960 (Mad). In that case also the Collector had ordered

confiscation only on the ground that the petitioner was unable to give any satisfactory explanation of the possession of the goods. The learned

Judge proceeded to say that the disbelief of the Collector cannot be substituted for the necessary evidence which must be forthcoming to show that

the goods were in fact, or must have been, illicitly imported from foreign territory. Merely to act upon suspicion or upon the ground that the

petitioner failed to substantiate the case pleaded by him, namely that he had purchased the goods from other persons, was held not to be sufficient

to discharge the onus which rested upon the Customs authorities.

The facts of the present case are in no wise different. In addition to these features, it was also stressed on behalf of the petitioner that the petitioner

was dealing in these goods and that he had stocks of these goods even on the dates when he made purchases under the bills in question. It was

urged that the Collector did not examine whether the stocks that he had on hand previously would not account for the possession of the quantity of

goods which he had with him on the date of the seizure. These features apart, there is no doubt that it is not open to the Collector to presume that

any goods, the entry of which into India is not wholly prohibited, should be deemed to have been illicitly imported only for the reason that the

person in possession of such goods was not able to establish how he came to possess them. I follow the decision referred to above, and hold that

the order of confiscation and the imposition of penalty in this case cannot be sustained. The burden of proof has been wrongly cast upon the

petitioner and that is sufficient to destroy the basis of the decision of the Collector. The petition is allowed, but in the circumstances with no order

as to costs.