The Assistant Collector of Customs vs Misrimal and Another

Kailasam, C.J.—This criminal revision ease has been posted before us, as Natarajan, J. before whom the matter originally came up, found

himself unable to agree with the decision of Krishnaswamy Reddy, J., in Misrimal Hansraj Vs. Union of India (UOI), .

The facts of the ease are briefly as follows. A search was conducted in the shop of the respondents on 8-12-1969 by a Preventive Officer of

the Customs Department, who seized 384 wrist watches of foreign make in the reasonable belief that they had not been licitly imported into this

country. Adjudication proceedings were taken by the Customs Department and after due observance of all formalities the Assistant Collector of

Customs levied a penalty of Rs. 5,000/-on the first respondent and ordered confiscation of the wrist-watches.

In addition to the adjudication proceedings, a criminal prosecution was also launched. The Chief Metropolitan Magistrate, who tried the case,

acquitted the respondents on the ground that the prosecution had failed to show that the wrist watches were smuggled goods liable to confiscation

u/s 111 of the Customs Act, 1962. Following the decision in Misrimal Hansraj Vs. Union of India (UOI), the Magistrate held that the respondents

were entitled to the return of the wrist watches and the Customs authorities who were in possession of the wrist watches were directed to re-

deposit them into Court for effecting their delivery to the second respondent. The Customs Department preferred an appeal to the Principal

Sessions Judge against that part of the trial Court''s order which directed the re-deposit of the property. Relying on the decision of Krishnaswamy

Reddy, J., above referred to, the Sessions Judge also dismissed the appeal. After an elaborate discussion of the various provisions of the Customs

Act, and the decisions of the various Courts, Natarajan, J., found himself unable to agree with the decision of Krishnaswamy Reddy, J. and

considered it necessary that the matter should be placed before a Bench. That is how the matter has come up before us.

Chapter XIII of the Customs Act (Act 52 of 1962) deals with searches, seizure and arrest. The section that deals with the seizure of goods,

documents and things is Section 110. Section 110(1) provides that, if the officer has reason to believe that any goods are liable to confiscation

under the Act he may seize such goods. Sub-section (2) of Section 110 requires that, where any goods are seized under Sub-section (1) and no

notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession

they were seized. Section 111 lists out the goods brought from a place outside India which are liable to confiscation. When a person improperly

imports goods and renders such goods liable to confiscation u/s 111 or acquires possession or contravenes or does, any of the acts mentioned in

Section 112(b), he shall be liable to penalty not exceeding five times the value of the goods or one thousand rupees whichever is the greater, and,

in the case of dutiable goods, to penalty not exceeding five times the duty sought to be evaded. By an amendment, the penalty that may be

imposed has been enhanced. Section 122 provides that, when any goods are liable to confiscation or any person is liable to penalty, such

confiscation or penalty may be adjudged by the officers mentioned in the section. Section 124 requires that a show-cause notice should be issued

before an order of confiscation is passed. Section 126 vests the goods that are confiscated under the Act in the Central Government. The officer

adjudging confiscation shall take and hold possession of the confiscated goods. The award of confiscation or penalty under the Act by an officer

shall not prevent the infliction of any punishment to which the person affected thereby is liable under the provisions of Chapter XVI of the Act or

under any other law. (Vide Section 127), Chap. XVI deals with prosecution before criminal courts. Chapter XV makes provisions for an

aggrieved person to appeal against the order of confiscation or imposition of penalty.

When proceedings are taken under Chapter XVI, and when a person is prosecuted, the Court takes cognizance of the offence only with the

previous sanction of the Collector of Customs and proceeds to dispose of the case according to law. The question that arises for consideration in

this case is whether, on the acquittal of the accused on the ground that the goods were not proved to be smuggled goods or that the accused was

not guilty of the offence with which he was charged, can the Court, acting u/s 517 of the Cri. P. C. (1898) direct the goods to be delivered to the

accused or to any person other than the Customs Department. Section 517 of the Cri. P. C. (1898), (Corresponding to Section 452 of the Cri. P.

C., 1973) runs as follows :

When an inquiry or trial in any criminal court is concluded, the Court may make such order as it thinks fit for the disposal by destruction,

confiscation or delivery to any person claiming to be entitled to possession thereof or otherwise of any property or document produced before it or

in its custody or regarding which any offence appears to have been committed or which has been used for the commission of any offence.

Before the Court can act under this section and direct delivery of the goods to any person, it must be satisfied that the person claiming is entitled

to possession. In a case where proceedings have been taken under the Customs Act and the concerned property has been confiscated and in law

it has vested in the Central Government, without challenging the confiscation proceedings the persons cannot claim to be entitled to the possession

of the goods. On this ground alone the criminal court, in all cases where there have been prior adjudication proceedings which have ended in the

confiscation of the goods which are before the criminal court, will have to dismiss the petition of the person on the ground that he is not entitled to

possession of the goods. Further the criminal court cannot make any order regarding the goods which have already vested in the Central

Government. The Legislature by enacting the Customs Act has empowered the Customs authorities to take adjudication proceedings and, after

observing all the formalities, direct confiscation. When once such an order is made in law, the goods vest in the Central Government. The Act also

makes it clear that the Adjudication Officer is entitled to hold possession of the goods on behalf of the Central Government. When such is the

position, the goods are not available, though they are produced before the criminal court, for the Court making any order regarding their disposal.

The power of the criminal court would arise only when the person claiming to be entitled to possession of the goods which are in the custody of the

Court makes out a case.

Section 5(2) of the Cri. P. C. provides that all offences under any other law shall be investigated, inquired into, tried and otherwise dealt with

according to the provisions of the Code, but subject to any enactment for the time being in force regulating the manner or place of investigating,

inquiring into, trying or otherwise dealing with such offences. The offence with which the respondents were charged was u/s 135(b) of the Customs

Act and the procedure regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with the offence as prescribed

under the Act has to be followed in preference to the procedure under the Code.

Learned Counsel for the respondents submitted that the Court has ample jurisdiction, while acquitting the respondents, to make an order

regarding the disposal of the goods. In support of his contention he relied on the decision of a Bench of this Court in Assistant Collector of

Customs v. Krishna Pillai 1955 Mad WN 137 : 1956 Cri LJ 72 and of an unreported decision of the Supreme Court in Gian Chand v. Union of

India (UOI) (Civil Appeals Nos. 1430 to 1442 of 1966). (decided on 2-4-1968). Assistant Collector of Customs v. Krishna Pillai 1955 Mad

WN 137 : 1956 Cri LJ 72 was a case under the Land Customs Act. The facts of the case are found in the judgment of Krishnaswarni Nayudu, J.

(at page 139 of the report). The accused was originally convicted u/s 7(3) read with Section 7(1)(b) of the Land Customs Act. The High Court,

while setting aside the conviction and sentence passed on the accused and acquitting him, confirmed the order of confiscation. The accused filed an

appeal to the Supreme Court questioning the order regarding the confiscation of the goods. The Supreme Court held that the order made by the

High Court in regard to the confiscation of the two blocks of gold was manifestly illegal and without jurisdiction, taking the view that, since the

accused was acquitted, the court had no jurisdiction u/s 7(3) of the Land Customs Act, as the jurisdiction to confiscate the goods would arise only

upon the conviction of the accused and not otherwise. After the order of the Supreme Court, the Collector of Central Excise issued a notice to the

respondent on 16-12-1953 to show cause why the gold should not be confiscated. After an enquiry the Collector of Central Excise passed an

order on 15-1-1954 stating that he was satisfied that the respondent was in possession of gold liable to confiscation under the Land Customs Act

and that the import of gold without a permit from the Reserve Bank of India was also an offence u/s 19 of the Sea Customs Act read with Section

8(1) of the Foreign Exchange Regulation Act punishable u/s 167(8) of the Sea Customs Act and accordingly directed confiscation. The respondent

then filed a petition u/s 517 of the Cri. P. C. (1898) for the return of the gold in Cr. M. P. No. 25 of 1954 on the file of the Stationary Sub

Magistrate Cuddalore. The Customs Department opposed this application and wanted the blocks of gold to be returned to them, pending further

action against the respondent. The Magistrate dismissed the petition observing that the Customs authorities might deal with it according to law, and

leaving it to the respondent to take appropriate action before the competent authority for the recovery of the gold. On appeal the District

Magistrate directed the Sub Magistrate to get back the gold from the Customs authorities and hand it over to the respondent from whom it had

been seized. A criminal miscellaneous petition was filed against the order of the District Magistrate and it came up before the Bench of this Court.

This Court held that the District Magistrate had taken an incorrect view which was based on the interpretation of the decision of the Supreme

Court. This Court did not agree with the view of the District Magistrate that the decision of the Supreme Court could be construed as extending its

scope so as to (sic) cover the respondent on the basis that, since an order of acquittal u/s 7(3) of the Land Customs Act was recorded, there

could be No. confiscation. On the facts of the case, Krishnaswami Nayudu, J., who delivered a separate judgment, came to the conclusion that the

principle that prima facie the person from whose possession the property was taken would be entitled to its return was not applicable in that case,

as the respondent had stated that some person brought the gold and gave it to him at the French border asking that it might be brought into the

Indian Union and that he never claimed that the gold belonged to him and he was in possession as owner. Mack, J. based his judgment on a

different ground, namely, that the Customs authorities had very wide discretionary powers of confiscation and fine in regard to property they seized

which was illegally imported or exported and that the fact that they instituted prosecution in the Magistrate''s Court against a particular person in

relation to such property did not mean that it must in any event be handed over to him in the event of his acquittal. The learned Judge proceeded to

point out that the property itself was legally and rightly held by the Customs authorities until duty and discretionary penalty was paid by the

claimant, that is. if confiscation was not ordered, and that merely because a prosecution against one person launched by the Customs authorities in

relation to valuable property obviously smuggled across the border failed, it was not incumbent on the Magistrate to return it to the person on

acquittal. This decision does not support the contention of the learned Counsel for the respondents. On the other hand, it holds that the authority of

the Customs authorities to hold and possess the goods is independent of the order of acquittal made by the criminal court.

The other decision relied on by the learned Counsel for the respondents is an un-reported decision of the Supreme Court in Gian Chand v.

Union of India (UOI) (Civil Appeals Nos. 1430 to 1442 of 1966 D/- 2-4-1968). There were thirteen appeals against the judgment of the Punjab

High Court dismissing proceedings u/s 523 of the Code of Criminal Procedure and six writ petitions filed against the orders of the Collector of

Customs, Amritsar u/s 167(8) of the Sea Customs Act. The proceedings arose out of a raid in the house of the appellant, Gian Chand, on July 17,

1958, when the police seized a certain quantity of gold and currency notes from the person of the appellants in the belief that the gold was stolen

property. The prosecution against the appellant Gian Chand, his wife Nirmal Devi and his brother-in-law Raghunath under Sections 411 and 414

of the Indian Penal Code having failed, the gold and the currency notes were handed over to the Customs authorities u/s 180 of the Act The

Collector of Customs took proceedings against these three persons and others who were said to have sold the gold and from whose possession

currency notes of Rupees 44,800/- were seized. After the notice and after hearing the parties, the Collector paised an order on Feb. 24, 1959,

ordering confiscation of the gold and imposing a personal penalty of Rs. 40.000/- on Gian Chand, Rs. 10,000/- on his wife and Rs. 40,000/-on

Raghunath, It was contended before the Supreme Court that the prosecution u/s 178-A of the Customs Act could not be availed of as the

Customs authorities did not have a reasonable belief that the gold had been smuggled into India. On an application by Gian Chand before the

Magistrate u/s 523 of the Code of Cri minal Procedure for the return of the gold and the currency notes seized by the police, the Magistrate

dismissed the application holding that the police officer had handed them over to the Customs authorities u/s 180 of the Sea Customs Act and that

as the case against Gian Chand u/s 167(8) of the Act was pending, he should take proceedings for the recovery of the goods under the Sea

Customs Act. The appeal by Gian Chand to the Sessions Judge failed and he filed a criminal revision application before the High Court. Gian

Chand, Nirmal Devi and Raghunath also filed three petitions be fore the High Court challenging the legality of the Collector''s order. A petition

against the order of the Collector confiscating the sum of Rs. 44.800/- was also filed. The High Court dismissed all the writ petitions and also the

criminal revision petition, but reduced the personal penalties. In dealing with the petitions before it, the Supreme Court held that the presumption

u/s 178-A of the Sea Customs Act did not apply, as the gold was not seized by the Customs authorities on the reasonable belief that it had been

smuggled into India. Dealing with the legality of the order of the Collector dated 24-2-1950, confiscating the goods, the Supreme Court held that

the Customs authorities had failed to discharge the burden of proving that the gold was smuggled gold or that Gian Chand, his wife and Raghunath

were concerned in its illegal importation, that therefore the order of the Collector was not sustainable and that the High Court was in error in

dismissing the writ petitions. As regards the criminal revision petition of Gian Chand against the Magistrate''s order, the Supreme Court held that

the High Court was in error in declining to order the return of the gold to Gian Chand, Nirmal Devi and Raghunath, as the High Court did so on an

erroneous view that Section 178-A of the Act applied and that on their failure to prove that it was not smuggled gold, it had to be presumed to be

smuggled gold. Holding that the burden was on the Customs authorities to establish that the gold was smuggled gold and on their failure to do so

and the prosecution under Sections 411 and 414 of the Indian Penal Code against Gian Chand, Nirmal Devi and Raghunath having failed, the

Supreme Court held that there was no other alternative but to order the return of the gold to the persons from whose possession the police seized

it The order of the Supreme Court directing the return of the gold to the appellants was very strongly relied on by the learned Counsel for the

respondents who submitted that that decision governed the facts of the present case. We are unable to agree. The Supreme Court was dealing

with writ petitions which questioned the correctness of the order of the criminal court refusing to deliver the gold to the appellants as well as the

order of confiscation made by the Customs authorities. Having gone into the legality of the order of confiscation, the Supreme Court came to the

conclusion that the order was illegal. As the order of confiscation was held to be illegal and as the appellants had been acquitted by the criminal

court the goods had to be returned to them. The Supreme Court was not independently dealing with an order of disposal of the property by the

criminal court u/s 517, Cr. P. C. apart from the order of the Collector of Customs. The Supreme Court did not also deal with the question

whether, when there was a valid order of confiscation by the Customs Department, on the finding that the accused was not guilty, the goods should

be returned to him. The decision is not authority for the proposition that, even though there is a valid order of confiscation by the Customs

Department, on an order of acquittal, the goods should be returned to the accused.

We shall now refer to the decision of Krishnaswamy Reddy, J. in Misrimal Hansraj Vs. Union of India (UOI), with which we are unable to

agree, The reasoning of the learned Judge is that, though under the Customs Act the goods were confiscated and they vested in the Central

Government, when it was produced before the criminal court which exercised powers u/s 517, Cr. P. C., the court disposed of those goods which

had come into its custody or which were concerned in the offence or which had been used in the commission of the offence. As the wrist-watches

were produced before the court as goods in respect of which an offence had been committed, they were produced before the court as offending

goods and not as confiscated goods vesting with the Central Government. When the goods had come into the custody of the Court, it was not

concerned with what happened subsequent to the seizure, but it was concerned only with the fact whether the goods were concerned with the

offence and whether they were used in the commission of the offence, The learned Judge proceeded to observe that vesting in the Central

Government would, in the context, mean that the Central Government would be in possession of the property subject to the decision of a

competent authority in respect of the disposal of the property, and that the vesting in the Central Government did not alter the nature of the goods,

namely, offending goods, concerned with the offence, in respect of which the accused was prosecuted. In conclusion, the learned Judge observed

that the criminal Court had unfettered power to dispose of the property u/s 517, Cri. P. C. independent and irrespective of the order of

confiscation made by the Department. We are totally unable to agree with the view of the learned Judge : When the goods have been validly

confiscated under a valid law, it will not be open to the criminal Court to ignore that law and make an order regarding the disposal of the property.

An order of confiscation duly made can only be altered or set aside by authorities as contemplated under the Act and not interfered with by

Criminal Courts. As stated by Nata-rajan, J., in his order referring the matter to the Bench, the scope and effect of Sections 126 and 127 of the

Customs Act, 1962, has not been properly appreciated by the learned Judge. For the reasons already stated, we agree with the view of

Natarajan, J. and overrule the decision of Krishnaswamy Reddy, J. in Misrimal Hansraj Vs. Union of India (UOI), :

The result is that the criminal revision case (206 of 1976) preferred by the Assistant Collector of Customs is allowed.