I.J. ASSISTANT COLLECTOR OF CUSTOMS & ORS.versusBIBHUTI BHUSHAN BAGH & ANR.

A   I.J. RAO, ASSISTANT COLLECTOR OF CUSTOMS & ORS.                            ·y
                              v.
                 BIBHUTI BHUSHAN BAGH & ANR.

                               MAY 12, 1989
B
             [R.S. PATHAK, CJ, E.S. VENKATARAMIAH,
               RANGANATH MISRA, M.H. KANIA AND
                                                                               y·
                    M.N. VENKATACHALIAH, JJ.]

          Customs Act, 1962-Sections 110(2), lll(d), Jll(o) & 124A-
                                                                               ·~;
    Issuance of a notice for extension of time beyond six months under
c   Proviso to Sec. ) 10(2) to a person from whose possession goods have
    been seized-Held to be necessary but subject to the need for maintain-
    ing confidentiality of investigation . .                                   '1
          Acting on the basis of the information contained in an advertise-
    ment in a newspapers offering the sale of imported manual and electric
D
    typewriters, adding and calculating mac.Moes, the customs authorities '
    raided the premises of M/s Typerwriters and Stationary Operation Pri-
    vate Ltd., Calcutta on 5th May, 1966 and recovered fifteen typewriter.s,
    adding & calculating machines. On inquiry it was learnt that the saill
    machines had been sold to the Company by R.N. Bagh, who in turn
    disclosed that the machines in question had been purchased from crew
E
    members of the vessels. On 7.5.66 the customs authorities searched the
    business premises of the Company and found-several machines from the
    documents seized during the search it came to light that there was a
    conspiracy between the Respondents and some of the crew members of
    certain vessels whereunder it bad been agreed that the Respondents
    would look after the families of the crew members in India and the crew
F
    personnel would draw their wages abroad in foreign currency and after      1:
    purchasing the said machines, would supply to the Respondents after
    clearance under the concessions provided under the Baggage Rules.

          The goods in question were seized on 5/7th May, 1966 and as
    required by Rule 124(a) of the Customs Act, notices as to why the goods
G   should not be confiscated were due to issue within six months thereof.
                                                                                     .,
    Section 110(2) of the Customs Act provided that if a notice as contemp-
    lated by Section 124(a) is not issued within a period of six months as     'r'
    provided thereunder, the goods shall have to be returned to the person
    from whose possession. they were seized. However a proviso to Sec.
    110(2) makes a provision that the period of six months can be extended,
H

                                      282
                                     I.J. RAO v. B.B. BAGH                      283

            on sufficient cause being shown, by the Collector for a period not
                                                                                       A
            exceeding six months.

                  The officers of the Customs Department showed cause to the
            Additional Collector of Customs, Calcutta for extension of time to serve
            a show cause notice on Respondents and extension of six months was
            granted for the purpose under the proviso to Section I 10(2) of the        B
            Customs Act. No notice of the proceedings relating to the said extension
            was given to the persons from whose custody the goods were seized.

                  On 6th December 1966, the Assistant Collector of Customs issued
            a notice to each of the Respondents calling upon them to show cause
            why the goods should not be confiscated.
                                                                                       c
                  On April 18, 1967. the Respondents filed a Writ Petition in the
            High Court at Calcutta challenging the proceedings initated against
            them by Customs Authorities. The learned Single Judge of the High
            Court who heard the Writ Petition held that the Order of extension to
            be made under Section 110(2) of the Customs Act is not an administra-      D
            tive order but a quasi judicial order and as the order has been passed
            ex-parte without notice to the owner of the goods, it was in h.reach of
            principle of Natural Justice. The order of extension was accordingly
            quashed and it was held that the owner was entitled to the retnrn of his
.    ) ..   goods.
                                                                                     E
                   The appellants appealed to the Appellate Bench. The appellate
            Bench allowed the appeal in part, quashed the order of extension dated
            3rd November, 1966 directed the appellants to restore the machines and
            documents seized from the Respondents. However the Customs Autho-
            rities were permitted to initiate and complete such other proceedings
            against the Respondents as were open to them in law. The appellate F
            Bench was of the opinion that the decision in Assistant Collector of
            Customs v. Charan Das, [1971] 3 SCR 802 lays down the correct law
            and notice of extension should have been given to the owner of the goods
            before the Order of extension had been passed.

                  Hence this appeal by the Customs Deparment.                          G

    · '1          At the hearing of the appeal Respondents placed reliance upon
            Charan Das Malhotra, (supra). Reference was also made to the decision
            in Mis Lokenath To/aram etc. v. B.N. Rangwani & Ors., [1974] 2 SCR
            199. The learned Judges hearing the appeal were of the opinion that the
            view taken in the said two cases required reconsideration and the          H
    284                   SUPREME COURT REPORTS             [1989] 3 S.C.R.

A
    appeal has been referred to a larger Bench for a decision on the ques-      y
    tion whether the Collector is bound to issue notice to the persons from
    whose possession the goods were seized and to give him an opportunity
    to make his representation on the point whether the time for issuing
    notice under Section 124(a) of the Act should be extended beyond six
    months.
B
          Partly allowing the appeal this Court,

          HELD: The words "on sufficient cause being shown" in the pro-
    viso to Section 110(2) of the Customs Act indicates that the Collector of
    Customs must apply his mind to the point whether a case for extending
    the period of six months is made out. [289E-F]
c
        The right to notice flows not from the mere circumstance that
  there is a proceeding of a judicial nature, but indeed it goes beyond to
  the basic reason which gives to the proceeding its character, and that
  reason is that a right of a person may be affected and there may be
D prejudice to that right if he is not afforded an opportunity to put
  forward his case in the proceeding. If the notice is not issued in the
    confiscation proceedings within six months from the date of the seizure
    the person from whose possession the goods have been seized becomes
    immediately entitled to the return of goods. It is that right to the
    immediate restoration of goods upon the expiry of six months from the
E   date of the seizure that is defeated by the extension of time under the
    provio to Section 110(2). [289H; 290B-C]

          There can be no right in any person to be informed midway,
    during an investigation, of the material collected in the case against
    him. While notice may be necessary to such per-tun to show why time
F   should not be extended, he is not entitled to information as to the         1~
    investigation which is in process. [290H; 291A]

          The person from whose possession the goods have been seized is,
    therefore, entitled to notice of the proposal before the Collector
    of Customs for the extension of the original period of six months
G   mentioned in Section 110(2) of the Customs Act and he is entitled to
    he heard upon such proposal but subject to the restrictions in regard
    to the need for maintaining confidentiality of the investigation
    proceedings. [292D-E]

         Ganeshmul Channilal Gandhi & , Anr., v. Collector of Central
H   Excise and Asstt. Collector, Bangalore, A.I.R. 1968 Mysore 89; Sheikh
                         I.J. RAO v. B.B. BAGH [PATHAK, CJ.]             285

  '"(    Mohammed Sayeed v. Assistant Collector of Customs for Preventive &    A
         Others, A.LR. 1970 Calcutta 134 and Karsandas Pepatlal Dhinejo
         & Ors., v. Union of1ndia & Anr., [1981] E.L.T. 268 not applicable.

               CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1529
         of 1971.
                                                                               B
              From the Judgment and Order dated 31. 7. 70 of the Calcutta
         High Court in Appeal No. 29 of 1969.                -

             G. Ramaswamy, Additional Solicitor general, A.K. Ganguli, P.
         Parmeshwaran and A.K. Srivastava for the Appellants.

              D.N. Mukharjee and P.K. Ghosh for the respondents.
                                                                               c

              The judgment of the Court was delivered by

               PATHAK, CJ. This appeal by certificate granted by the High
         Court of Calcutta is directed against the judgment dated 31 July, 1970 D
         of that High Court partly allowing a writ petition arising out of pro-
         ceedings under the Customs Act, 1962.

               On 5 May, 1966, noticing an advertisement in a newspaper offer-
- ) ..   ing imported manual and electric typewriters, adding and calculating
         machines, the Customs authorities raided the premises of Messrs. E
         Typewriters and Stationery Operation Private Limited, Caluctta, on
         the same day and recovered fifteen typewriters, adding and calculating
         machines. The machines had been sold to the company by R.N. Bagh,
         who in turn disclosed that he had purchased them from the crew mem-
         bers of some vessels. On 7 May, 1966, the Customs Officers searched
         the residence and business premises of Messrs. Central Typewriter F
         Company and recovered several typewriters and calculating and·
         adding machines. From some documents seized dming the raid and
         statements recorded, it appeared that there was a conspiracy between
         the respondents and. some· of the crew members of certain vessels
         where it was agreed that·ihe respondents would look after and main-
         tain the families of the crew members in India while they were abroad, G
         would advance them money and the crew members would draw their
         wages abroad in foreign currency and purchase with those moneys
         second-hand typewriters, adding and calculating machines and then
         bring them to India and deliver them to the respondents after clear-
         ance under the concessions provided in the Baggage Rules in order to
         circumvent the restrictions imposed under the Import Trade Control H
    286                   SUPREME COURT REPORTS             [1989] 3 S.C.R.

    Regulations. It appeared that during the period 1961 to 1965 about 200
A
    pieces of typewriters, adding and calculating machines had been
    acquired by the respondents for a sum of about Rupees one lakh and
    out of which forty six had been sold.

          The goods were seized on 5/7 May, 1966 and notices were due to
B   issue under s. 124(a) of the Customs Act, 1962 within six months from
    that date. Meanwhile, the Subordinate Officers, Customs Depart-             y
    ment, showed cause to the Additional Collector of Customs, Calcutta
    (who had the same powers under the Act as the Collector) for granting
    an extension of time for serving the show cause notice. On 3
    November, 1966, the Additional Collector granted an extension of
    time for a further six months in terms of the proviso to s. 110(2) of the
c   Customs Act, 1962.

          On 6 December, 1966 the Assistant Collector of Customs issued
    notice to each of the respondents calling upon him to show cause why
    the said seized machines should not be confiscated under s. lll(d) and
D   s. lll(o) of the Customs Act, 1962 read withs. 3(2) of the Import and
    Export Control Act, 1947 and why penal action should not be taken
    against the respondents under s. 112 of the Customs Act, 1962.

          On 18 April, 1967, the respondents filed a writ petition in the
    High Court at Calcutta challenging the proceedings initiated against
E   them by the customs authorities including the seizure of the machines.
    On 11 December, 1968 a learned Single Judge of the High Court
    repelled the contention of the appellants that the proceeding was ad-
    ministrative in nature and held that the order of extension to be made
    under s. 110(2) of the Customs Act was a quasi-judicial order and as
    the order had been made ex-parte and without notice to the owner of
F   the goods it was in breach of the principles of Natural justice and
    therefore void. He observed that as the order, moreover, was not
    communicated to the respondents before the expiry of six months from
    the date of seizure, the order of extension was invalid and the respon-
    dents had become entitled as of right to the return of the goods. The
    writ Pi'tition was allowed, and the proceedings initiated by the respon-
G   dents against the appellants were quashed by the learned Single Judge
    by his judgment and order dated 11 December, 1969.

        The appellants appealed to the Appellate Bench and the Appel-
  late Bench of the High Court by judgment dated 31 July, 1970 allowed
  the appeal in part, quashing the order of extension dated 3 November,
H 1966 and directing the appellants to restore the machines and docu-
                      l.J. RAO v. B.B. BAGH [PATHAK. CJ.]                 287

    ments seized from the respondents. The Customs authorities were
                                                                                 A
    permitted to initiate and complete such other proceedings against the
    respondents as were open to them in law.

         The appellants now appeal to this Court in so far as the judgment
    and order of the Appellate Bench proceeds against them.
                                                                                 B
           Section 110(1) of the Customs Act, 1962 provides that if the
    proper officer has reason to believe that any goods are liable to con-
    fiscation under that Act he may seize such goods. Section 110(2)
    provides:

                "Where any goods are seized under sub-sectioin (1) and no
                notice in respect thereof is given under clause (a) of Section   c
                124 within six months of the seizure of the goods, the goods
                shall be returned to the person from whose possession they
                were seized:

                      Provided that the aforesaid period of six months may,      D
                on sufficient cause being shown, be extended by the Col-
                lector of Customs for a period not exceeding six months."

    Section 124(a), to which reference has been made in s. 110(2), pro-
    vides that no order confiscating any goods or imposing any penalty on
    any person shall be made under Chapter XIV unless the owner of the           E
    goods or such person is given notice in writing informing him of the

-   grounds on which it is proposed to confiscate the goods or to impose a
    penalty and is given an opportunity of making a representation in
    writing, and is also given a reasonable opportunity of being heard in
    the matter.'
                                                                                 F
          It is apparent that goods liable to confiscation may be seized by
    virtue of s. 110(1) but that those goods cannot be confiscated or pen-
    alty imposed without notice, opportunity to represent and to be heard
    to the owner of the goods or the person on whom penalty is proposed.
    This notice must be given within six months of the seizure of the goods,
    as envisaged by s. 110(2) of the Act, and if it is not, the goods must be    G
    returned to the person from whom the goods were seized. The proviso
    to s. 110(2) .of the Act allows the period of six months to be extended
    by the Collector of Customs for a period not exceeding six months on
    sufficient cause being shown to him in that behalf.

          The Appellate Bench of the High Court is of opinion that the           H
    288                    SUPREME COURT REPORTS              [1989] 3 S.C.R.

A
    decision-of the High Court in Assistant Collector of Customs v. Charan
    Das Malhotra, [1971] 3 SCR 802 lays down the correct law and applies
    to the facts of this case, that there is a duty on the part of the Collector
    of Customs to act judicially in exercising the power conferred under
    the proviso to s. 110(2) of the Act and that, therefore, notice should
    have gone to the owner of the goods before the extension was ordered
B   under the proviso. It has been held further that the order of extension        y
    should have been communicated to the owner and as that was not done
    the order was ineffective.

          When this appeal came up for hearing before a Bench of this
    Court, reliance was placed by learned counsel for the respondents on
    Charan Das Malhotra, (supra). That decision was rendered by two
c   learned Judges of this Court. Reference was also made in M /s
    Lokenath Tolaram etc. v. B.N. Rangwani and Others, [1974] 2 SCR
    199 which was a decision rendered by four learned Judges of this
    Court, and in which reference was made to Charan Das Malhotra,
    (supra). The learned Juges hearing this appeal were of the opinion that
D   the view taken in the two cases required reconsideration, and there-
    fore this appeal was referred to a larger Bench for a decision on the
    question whether the Collector is bound to issue notice to the persons
    from whose possession the goods are seized and to give him an
    opportunity to make his representation on the point whether the time
    for issuing notice under s. 124(a) of the Act should be extended
E   beyond six months. That is how the appeal has come before us.

           In Charan Das Malhotra, (supra) the Court referred to the con-
    sideration that seizure was authorised under s. 110(1) on the mere
    "reasonable belief" of the concerned officer, that it was an extra-
    ordinary power and that therefore Parliament had envisaged a period
F   of six months from the date of seizure for completing an enquiry on
    whether the goods should be confiscated and that if the enquiry was
    not completed within that period the goods must be returned. In some
    cases it is possible that the enquiry requires longer than six months,
    and accordingly power was conferred on the Collector, an officer
    superior in rank and also an Appellate Authority under s. 128, to
G   extend the time subject to two conditions, that it did not exceed one
    year, and that sufficient cause must be shown for such extension. The
    Court observed that the Collector was not expected to propose the
    extension mechanically or as a matter of routine but only on being
    satisfied that facts exist which indicate that the investigation could not
    be completed for bona fide reasons within the time provided in
H   s. 110(2), and that therefore extension of the period has become neces-
                       l.J. RAO v. B.B. BAGH [PATHAK, CJ.]                  289

     sary. The Collector, the Court emphasized cannot extend the time
                                                                                   A
     unless he is. satisfied on facts placed before him that there is sufficient
     cause necessitating extension, in which case the burden of proof would
     clearly lie on the Customs authorities applying for extension to show
     that such extension was necessary. Taking these consideration into
     record the Court held that the words "sufficient cause being shown"
     required an objective examination of the matter by the Collector. It          B
     was pointed out that ordinarily on the expiry of the period of six
     months from the date of seizure the owner of the goods would be
     entitled as of right to restoration of the seized goods, and that right
     could not be defeated without notice to him that an extension was
     proposed. The Court rejected the contention that the continuing
     investigation would be jeopardised if such notice was given. The Court
     held that the power under the proviso to s. 110(2) was quasi-judicial,
                                                                                   c
     at any rate one requiring a judicial approach, and consequently the
     person from whom the goods were seized was entitled to notice before
     the period of six months envisaged by s. 110(2) was extended. The
     point was considered again in Mis. Lokenath Tolaram etc. v. B.N.
     Rangwani and Others, (supra) by a Bench of four Judges of this Court          D
     and the Court referred to the view taken in Charan Das Malhotra,
     (supra) but it declined to interfere because the appellants in that case
     had themselves waived notice concerning extension of the time. The
     Court did not specifically give the stamp of approval to the law laid
     down in Charan Das Malhotra, (supra).
                                                                                   E
          · There is no doubt that the words "on sufficient cause being
     shown" in the proviso to s. 110(2) of the Act indicates that the Col-
     lector of Customs must apply his mind to the point whether a case for
     extending the period of six months is made out. What is envisaged is an
     objective consideration of the case and a decision to be rendered after
     considering the material placed before.him to justify the request for         F
     extension. The Customs Officer concerned who seeks the extension
     must show good reason for seeking the extension, and in this behalf he
     would probably want to establish that the investigation is not complete
     and it cannot yet be said whether a final order confiscating the goods
     should be made or not. As more time is required for investigation; he
     applies for extension of time. The-Collector must be satisfied that the       G
,.   investigation is being pursued seriously and that there is need for more
     time for taking it to its conclusion. The question is whether the person
     claiming restoration of goods is entitled to notice before time is ex-
     tended. The right to notice flows not from the mere circumstance that
     there is a proceeding of a judicial nature, but indeed it goes beyond to
     the basic reason which gives to the proceeding its character, and that        H
    290                     SUPREME COURT REPORTS               [1989] 3 S.C.R.

A   reason is that a right of a person may be effected and there may be
    prejudice to that right if he is not accorded an opportunity to put
                                                                                     y
    forward his case in the proceeding. In the other words, the issue is
    whether there is a right in a person from whose possession goods are
    seized and which right may be prejudiced or placed in jeopardy unless
    he is heard in the matter. It cannot be disputed thats. llOsub-s. (2) contemp:
B   !ates either notice (within six months from the date of seizure) to the
    person from whose possession the goods have been seized in order to              y
    determine whether the goods should be confiscated or the restoration
    of the goods to such person on the expiry of that period. If the notice is
    not issued in the confiscation proceedings within six months from the
    date of seizure the person from whose possession the goods have been
C   seized becomes immediately entitled to the return of the goods. It is
    that right to the immediate restoration of the goods upon the expiry of
    six months from the date of seizure that is defeated by the extension of
    time under the proviso to s. 110(2). When we speak of the right of the
    person being prejudiced or placed in jeopardy we necessarily envisage
    some damage or in jury or hardship to that right and it becomes neces-
D   sary to inquire into the nature of such damage or injury or hardship for
    any case to be set up by such person must indicate the damage or
    injury or hardship apprehended by such person. In the present <:ase,
    one possibility is that the person from whose possession the goods
    have been seized may want to establish the need for immediate posses-
    sion, having regard to the nature of the goods and the critical condi-
E   tions then prevailing in the market or that the goods are such as are
    required urgently to meet an emergency in relation to a vocational or
    private need, and that any delay in restoration would cause material
    damage or in jury or hardship either by reason of some circumstance
    special to the person or of market conditions or of any particular
    quality of requirement for the preservation of the goods. But it will not
F   be open to him to question whether the stage of the investigation, and
    the need for further investigation, call for an extension of time. It is
    impossible to conceive that a person from whose possession the goods
    have been seized with a view to confiscation should be entitled to know
    and to monitor, how the investigation against him is proceeding, the
    material collected against him at that stage, and what is the utility of
G   pursuing the investigation further. These are matters of a confidential
    nature, knowledge of which such person is entitled to only upon the
    investigation being completed and a decision being taken to issue
    notice to show cause why the goods should not be confiscated. There
    can be no right in any person to be informed midway, during an
    investigation, of the material collected in the case against him. Conse-
H   quently, while notice may be necessary to such person to show why
                   I.J. RAO v. B.B. BAGH [PATHAK, CJ.]                  291

time should not be extended he is not entitled to information as to the
                                                                               A
investigation which is in process. In such circumstances, the right of a
person, from whose possession the goods have been seized, to notice
of the proposed extension must be conceded, but the opportunity open
to him on such notice cannot extend to information concerning the
nature and course of the investigation. In that sense, the opportunity
which the law can contemplate upon notice to him of the application            B
for extension must be limited by the pragmatic necessities of the case.
If these considerations are kept in mind, we have no doubt that notice
must issue to the person from whose possession the goods have been
seized of the proposal to extend the period of six months. In the
normal course, notice inust go to such person before the expiry of the
original period <if six months. It is true that the further period of six
months contemplated as the maximum period of extension is a short              c
period, but Parliament has contemplated an original period of six
months only and when it has fixed upon such period it must be
assumed to have taken into consideration that the further detention of
the goods can produce damage or in jury or hardship to the person
from whose possession the goods are seized.                                    D

      We have said that notice must go to the person, from whose
 possession the goods have been seized, before the expiry of the origi-
 nal period of six m9nths. It is possible that while notice is issued before
  the expiry of that period, service of such notice may not be effected on
  the person concerned in sufficient time to enable the Collector to           E
  make the order of extension before that period expires. Service of the
  notice may be postponed or delayed or rendered ineffective by reason
  of the person sought to be served attempting to avoid serviee of notice
  or for any other reason beyond the control of the Customs authorities.
 In that event, it would be open to the Collector, if he finds that suffi-
  cient cause has been made out before him in that behalf to extend the        F
  time beyond the original period of six months, and thereafter, after
  notice has been served on the person concerned, to afford a post-
 decisional hearing' to him in order to determine whether the order of
  extension should be cancelled or not.· Having regard to the seriousness
  and the'niagnitude of injury to the public interest in the case of the
  illicifiiiiportatiOn of goods, and having regard to considerations of the    G
  dairiage'to.economic policy underlying the formulation of import and
 ·exp'ort·planning, it seems necessary to· reconcile the need to afford an
  opportunity' to·the persc\n.'effected with the larger considerations of
'public interest.

       Our attention has been drawn to Ganeshmul Channilal Gandhi              H
    292                   SUPREME COURT REPORTS           [1989] 3 S.C.R.

A and another v. Collector of Central Excise and Asstt. Collector, Banga-
  lore, A.LR. 1968 Mysore 89 where the High Court of Mysore has held
  that no notice is necessary to the person from whose possession the
  goods are seized when the Collector proceeds to consider whether the
  original period of six months should be extended. Reliance has also
  been placed on Sheikh Mohammed Sayeed v. Assistant Collector of
B Customs for Preventive and others, A.LR. 1970 Calcutta 134 which
  proceeds on the view that the Collector has to satisfy himself only         y
  subjectively on the point whether extension is called for. In Karsandas
  Pepatlal Dhineja & Others v. Union of India and Another, [1981]
  E.L.T. 268 the High Court defined the implications of the use of the
  words "on sufficient cause being shown" in a statutory proceeding.
C None of these cases convince us that the person from whose possession
  the goods have been seized is not entitled to notice of the proposal to
  extend the period.

        In our opinion, the person from whose possession the goods have
  been seized is entitled to notice of the proposal before the Collector of
D Customs for the extension of the original period of six months
  mentioned in s. 110(2) of the Customs Act, and he is entitled to be
  heard upon such proposal but subject to the restrictions referred to
  earlier in regard to the need for maintaining confidentiality of the
  investigation proceedings.
E         The appeal is allowed accordingly and to the extent set forth in
    our judgment the orders of the High Court are modified, but there is
    no order as to costs.

    Y. Lal                                                Appeal allowed.