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Judgment
Raju, J.—The above reference has been made at the instance of the applicant - shipping company, u/s 130(1) of the Customs Act, 1962 of
the following question of law :
Whether in the facts and circumstances of this case, where the adjudicating authority is satisfied that the contraband goods recovered from the
ship are of, such a nature and quantity as could not be without knowledge of its Master, the non-framing of rules contemplated u/s 115(2) of the
Customs Act could be pleaded as a valid defence against action against the vessel under that Section.
The vessel Vishwa Mamta, owned by the applicants carrying general cargo from Japenese Ports arrived at the outer anchorage of the Madras
Harbour on 11-3-1983 and during the course of rummage of the vessel, the Officers of the Customs Department, seems to have recovered articles
of foreign origin from various parts of the vessel after giving due notices and following the procedure prescribed. The Additional Collector of
Customs, Madras, by his proceedings dated 19-3-1983, has ordered confiscation of the goods valued at Rs. 80,890/- u/s 111 of the Act read
with Section 3(2) of the Imports and Exports (Control) Act, 1947 and the vessel M. V. Vishwa Mamta u/s 115(2) of the Customs Act with an
option to redeem the vessel on payment of Rs. 20,000/- in lieu of confiscation u/s 125 of the Act. A further penalty of Rs. 5,000/-was also
imposed on the Master of the vessel u/s 112 of the Act.
Aggrieved, both the Shipping Corporation as also the Master of the ship in question, filed appeals before the Customs, Excise and Gold
(Control) Appellate Tribunal, South Regional Bench. The Tribunal concurred with the order of the adjudicating Authority so far as the penalty
imposed on the Master of the ship is concerned, the sum of Rs. 5,000/- levied as penalty, was reduced to Rs. 1,000/-. It is at that stage, the
applicant the owner of the ship, has sought for the reference pursuant to which the question referred to supra has been referred for our
consideration.
Mr. M. Venkatachalam, learned Counsel appearing for the applicant, has forcefully contended while elaborating the question of law referred to
us that in the absence of the Rules as postulated u/s 115(2) of the safeguards taken must be considered to have been sufficient precautions to
prevent smuggling by concealment and that inasmuch as no positive personal knowledge could be imputed to the Master of the ship, the question
of confiscation or levying penalty in lieu of confiscation or redemption fine does not arise. Learned Counsel for the applicant placed reliance upon
the decisions reported in Additional Collector of Customs Vs. Mogul Lines Limited, , Malabar Steamship Co Ltd. Vs. Additional Collector of
Customs, and Mogul Line Limited Vs. Additional Collector of Customs, Bombay and another, , in support of his contentions.
Per contra, learned Additional Central Government Standing Counsel, appearing for the respondent, placed reliance upon the decision reported
in Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh, Additional Collector of Customs, Calcutta and contended that the absence of personal
knowledge is not sufficient to exonerate the applicant and that, therefore, the order of the Authorities below including the Tribunal, are quite in
accordance with law and does not call for taking a different view.
We have carefully considered the submissions of learned Counsel appearing on either side. Section 115(2) of the Customs Act, 1962 as it
stood prior to its Amendment by the Central Act 26 of 1988, reads as follows :
Any conveyance or animal used as a means of transport in the smuggling of any goods or in the carriage of any smuggled goods shall be liable to
confiscation, unless the owner of the conveyance or animal proves that it was so used without the knowledge or connivance of the owner himself,
his agent if any, and the person in charge of the conveyance or animal and that each of them had taken all such precautions against such use as are
for the time being specified in the rules :
(proviso omitted as unnecessary for the purpose of the case).
In Additional Collector of Customs Vs. Mogul Lines Limited, a Division Bench of the Bombay High Court has taken the view that the owner of
the ship is not necessarily required to lead positive evidence to establish absence of knowledge or connivance on his or the Master''s part in the
ship being used for smuggling and when all the reasonable precautions have been taken by the Master and the owner against use of vessel for
conveying smuggled goods into the port, the vessel would not be liable to confiscation. As for the absence of any Rules u/s 115(2), the Division
Bench observed that it is open to the Government to frame Rules laying down the precautions which must be taken against a sea-going vessel
being used for transporting smuggling goods and that no such rules have been framed even till the date of the decision and therefore, it cannot be
taken in that case that any precaution prescribed by any Rule was not taken. Though the decision appears to have been reported in the year 1990,
the same was rendered on 30-7-1986. As a matter of fact, we find that the provisions of Section 115(2) of the Act underwent an amendment
under the Central Act 26 of 1988 by which the words,
and that each of them had taken all such precautions against such use as are for the time being specified in the rules"" came to be omitted.
In Malabar Steamship Co Ltd. Vs. Additional Collector of Customs, a learned single Judge of the Bombay High Court, had taken the view that
in a case where the owner or Captain of the vessel had no knowledge about concealment of contraband in his vessel, the same is not liable to
confiscation in the absence of Rules specifying the precautions to be observed by any person incharge of the ship. We have been taken through the
decision particularly paragraph 6 of the same, in which, the said view has been expressed. With great respect to the learned Judge, we are unable
to subscribe to the said view. It is not as though, Section 115(2) becomes unworkable in the absence of Rules. The wording of the Section would
indicate that if there are Rules and such Rules for the time being in force, have been complied with and the precautions that are to be actually taken
were taken the person in charge of the ship or the owner could claim to have discharged his duties and seek for exoneration but that is not the
same as to say that in the absence of the Rules, either the provisions become unworkable or that even when there are sufficient materials on record
to show that the person incharge of the ship could not disown knowledge, on the circumstances of the case can plead ignorance of the carriage of
smuggled goods in the ship and the person in charge of the conveyance has to go scot free.
In Mogul Line Limited Vs. Additional Collector of Customs, Bombay and another, yet another learned Single Judge of the Bombay High Court,
has taken the view that it was not permissible for the Authorities to hold on the one hand that the Master or owner of the ship had no personal
knowledge about the smuggling activities and at the same time, observe that the Master must have positive evidence to establish the lack of
knowledge of the smuggling activities, and taking such views were obviously conflicting and contrary to each other since it would amount to
establish a negative fact about the absence of knowledge by leading positive evidence which was not possible and therefore erroneous. On going
through the order of the learned Judge, from the case report, we find the views expressed turned on the peculiar facts and circumstances of the
case and the nature of the order passed with the type of reasons which were noticed to be conflicting and contradictory in nature and not as any
axiomatic principle of law of general application. We find that there is no relevance in the case relied upon by learned Counsel for the Department
to the case on hand. That was a case wherein having regard to the very terms of the provisions, the violation of which was the subject matter for
consideration by the Apex Court, the very construction, alteration, adjustment, adaptation or fitting of a vessel with a connivance to conceal the
goods is directly prohibited u/s 52A of the Sea Customs Act, 1878, and that was by itself sufficient in law to fasten a liability for the contravention
upon the person in charge of the ship and the absence of knowledge about the facts prohibited u/s 52A or concealment of gold bars recovered
from the offending ship would not take the case outside the purview of Section 52A of the Act.
Of course in the course of the said decision, Their Lordships of the Apex Court observed that the offences dealt with under the Act are such that
the Authority should impose deterrent fines to check illegal operations whenever such offences are discovered or proved.
The question of law as formulated and referred to for our consideration is limited in nature, in that, it is not given to us, to independently go
through the materials and find as to whether the finding recorded about the extent of involvement and knowledge of the Master of the ship is
warranted or unwarranted on the materials on record. On the other hand, the question formulated obliges us to consider the issue as to whether the
non-framing of the Rules contemplated u/s 115(2) of the Customs Act could be pleaded as a valid defence against the vessel under the said
provision, even through the adjudicating Authority was satisfied that the contraband goods recovered from the ship are of such a nature and
quantity as could not be without the knowledge of its Master. In the light of our conclusion expressed supra that the absence does not impede or
pose any obstacle in the effective enforcement of the provisions u/s 115(2), at any rate, in the cases of the nature, where there are evidence on
record, on the basis of which, the adjudicating Authority as a fact finds and was satisfied that the contraband goods recovered from the ship could
not have been present or carried without the knowledge of the Master of the ship having regard to the volume or quantity of such goods and the
space which such goods were found to occupy in a conspicuous portion of the ship.
For all the reasons stated above, we are of the view that having regard to the facts and circumstances of the case and the finding recorded by
the adjudicating Authority, on being satisfied that the contraband goods could not be said to have been in the ship or carried in it, without the
knowledge of its Master, the non-framing of rules contemplated u/s 115(2) does not enable [the] applicant to plead absence of rules itself as a
defence, or stand in the way in position of penalty u/s 115(2) of this Act. No costs.