Allowed

The Collector of Customs, Madras v. Nathella Sampathu Chetty and Another

Supreme Court25 Sept 19611961 INSC 276 · [1962] 3 S.C.R. 7861961 INSC 276

Case brief

AI extract

What is this about?

The Supreme Court upheld the constitutional validity of Section 178A of the Sea Customs Act, 1878, which shifted the burden of proof to the person from whose possession smuggled goods are seized. The Court held that the restriction was reasonable in the interest of the general public to prevent smuggling. It further ruled that Section 23A of the Foreign Exchange Regulation Act did not incorporate

What did the court decide?

Appeals allowed; writ petitions dismissed; confiscation order upheld.

What the court decided

The Collector of Customs, Madras versus Nathella… — Customs and Excise | Supreme Court (1962)

¶1

i86 SL"PREME COURT REPORTS [I !162]

¶2

1981 accep~ tho appellant's argument that tho letter Jowohar Z..I was intended to make a substantial variation in B""""" v. the contract by making the deposit. of security a. UniM of India condition precedent instead of a. condition subsequent.

¶3

. In the result the appeal fails and is dismissed ll 01th costs.

Appeal dismused.

1961 THE COLLECTOR OF CUSTOMS, MADRAS 8t1l1f'lt011 2S.

¶8

t'.

¶9

.--

¶10

NATHELLA SAMPATHU CHETTY AND ANOTHER

¶11

(And connected cases)

¶12

(B.P. SINHA, c. J., A. K. SARKAR, M. HIDAYATULLA.H,

¶13

N. RAJAGOPALA AYYANGA.R and

¶14

J. R. lllUDilOLKAR, JJ.)

¶15

Smuggl•d Gooda-Re&trictiona on imporration of goldS•izurt of gold on muonable bPlz°p/ that it UllU amuggl•~BarclM of proof that it uaa not amuggled °" peraon in ~ Conatitutional va/iJlity of enaclmeRt-Rfer..,.ce of statute in a atconcl statute without incorporatiorr-Effut of modification. of the firat •tatutP.-1'oreign Exchange Regulation Act, 1947 (7 of 1947), sa. 2(/), 8(1), 23A-See Cuatoma Act, 1878 (8 of 1878), u. 19, 167(8), 178A, 182-Conalitutio,.of Ind4a, Arta. 1', 19(1), (/) and (g).

¶16

Un1er the powers conferred bys. 8( I) of the Foreign Exchange Re~'\llation Act, 1947, the Central Government issued a notification on August. 25, 1948, placing a ban on the imp1>rtation of gold except with the permission of the Reserve Bank. Section 23A of the Act, which was introduced by an amendment in 1952, provided that " .. the restrictions imposed by s. 8( I) .. shall be deemed to have been imposed under s. 19 of the Sea Customs Act, 1878, and all the provi1ions of the Act shall have effect accordi~gly .. " Section 19 of the Sea Custom• Act, 1878, enabled the Central Government, by notification, to prohibit or restrict the bringing goods of any specified description into

¶17

3 s.c.R. SUPREME OOURT REPORTS 78i

¶18

India and, by reason of other provisions of that Act, goods imported in contravention of the notification issued under s. 19 were liable to confiscation. In 1955, the Sea Customs Act, 1878, was amended by the introduction of s. l 78A in that Act, which provided, inter alia· that "where goods were seized under that Act in the reasonable belief that they were smuggled goods, the burden of proving that they were not smuggled goods shall be on the person from whose posse!Sion the goods were seized;"

¶19

19/JI Thi Coll1ctor of Curtoms, M a4ra1 v. Nath11/• Sampat"" ChttlJ

¶20

On June 26, 1956, N, an employee of the respondent, on alighting at the Central Station in Madras from Bombay was intercepted by a Police Head Constable and, on a search of his clothing, four blocks of gold weighing about a thousand tolas were found in his possession. The officers of the customs department interrogated him and, finding that he was unable to produce any record for the purchase of the gold, seized from him the blocks of gold. N admitted that he brought the gold.for the respondent and enquiries were made to verify the story narrated by him as to the source from which he obtained the gold. Theroafter the Collector of Customs being prima facie of the view that the gold seized had been smuggled, issued notice to the respondent to show cause why the said gold should not be confiscated. The respondent offered his explanation but the Collector held that the respondent had not discharged the onus of proving that the gold was not smuggled, an onus which had been cast on him by s. l 78A of the Sea Customs Act, 1878, and directed the confiscation of the gold under s. 167 (8) of that Act.

¶21

The respondent challenged the legality of the action taken by the Collector of Customs on the grounds, inter alia, ( 1) that s. l 78A of the Sea Cu.toms Act, 1878, was consti- tutionally invalid as it was an unreasonable restraint on the citizen's rights to hold property or to do business guaranteed by Art. 19(l)(f) and (g) of the Constitution of India and was not saved by els. (5) and (6) respectively of Art. 19; (2) that s.178A of the Sea Customs Act which was enacted in 1955 could not be invoked in adjudicating a contravention of a notification under the Foreign Exchange Regulation Act inasmuch as s. 23A of the latter Act when enacted in 1952 in effect incorporated into that Act all the relevant provisions of the Sea Customs Act as they stood in 1952 with the result that any subsequent amendments to the Sea Customs Act could not affect s. 23A; and (3) that the rule as to the burden of proof under s. I 78A was not attracted to the present case because the Customs Officer who effected the seizure did not, at the moment of seizure, entertain a reasonable belief that the goods seized were smuggled. The Collector of Customs besides maintaining the legality of the order of confiscation, contended that the question raised in the case as to the constitutional

¶22

788 SUPREME COURT REPORTS [1962]

¶23

1961 validity of s. of s. s. I i8A of i8A of of the Sea Customs Act was Act was was concluded by the drcision in Babu/al Amthalal Mehla v. The Collulor of T/i, Colltt101 of Cwtom.s, M atbu Custom&, Calcu!ta[l957J S.C.R. 1110. v . Ileld: (I) that Babula! Amthalal Mehta v. The Collutor of • V.iJwUa Sampatlm Cu•iomJJ, Calcu~, [19571 S. C.R. 1110, was a decision as to Chttty the 'alidit:1 of s. I i8A of the Customs Act, 1878, with reference to Art. 14 of the Con!litution of India onlv and that the C]'JCstio·1 whether the said section \vas obnoxious to the rights h"'aranteed by Art. 19(l)(f) and (g) was not considered by that judrment.

¶24

validity of s. of s. s. I i8A of i8A of of the Sea Customs Act was Act was was concluded by the drcision in Babu/al Amthalal Mehla v. The Collulor of Custom&, Calcu!ta[l957J S.C.R. 1110.

¶25

(2) t 01at the object of s. 178A was the prevention and eradktion of smuggling, intu alio, of gold which was widely prevaent 1 and in vie\ll of the fact that \vithout a La\' in that form and with that amplitude smuggling might not be possible of heing efl'<:ctivcly checked, the restrictions imposed by that s<".ction bein in the interests of the general public could not be held to be violati'e of the rights guaranteed by Art. 19(l)(f) and (l:l, thcugh it might operate somewhat harshly on a small section of the public. Accorclingly, s. I 7BA does not contravene Art. l~'(l)(f) and (g).

¶26

Stale of M!Jdra• '" V. G. Row, 119521 S.C.R. 597, Manohar r.ol v. _State of Punjab, rl9611 2 S.C.R. 343 and Ram Dhan DaJ• '" Stat• of Punjab, 119621 I S.C.R. 852, relie<l on.

¶27

Puki<Nj Cl1ampalal Jain v, D.R. Koh1', (1~59) 61 Ilom. L. R. 12.10, approved.

¶28

M. G. Abroi v. Amichand, (1960) 62 Born. L. R. 1043, disappro,«d.

¶29

Nathr.'h Sa.,,.pathu CheUy '" Co/kctor of CW1tom.•. Madra., A. I. R. l!lo9 ~fad. 142, r<versed.

¶30

(3) th 1t a sr.izure to which s. l 78A wa.• applicable was merely a preliminary to the proceedings before a quai-judicial authoritv undr s. 182 and that it was only \vhen the latter authorit: ,-a, satisfied that the seizure \'CSS made "in the reasonable belief that the goods seized were goods that had been smug1:l~d" that the rule of evidence laid dov.·n by s. 178.1\ canic into operation.

¶31

(1) that the wording of s. 21A of the Forei!p' . Exchange Regulation A.ct, 1947, showed that the reference 1n 1t. to s. I~ of the Sea (ustor.1s Act, 1878, \·a merely for ren<ler1r.g notifications urder the named provisions of the Foreign Exchange Regulation Act to operate as notifications under the Sea Customs Act and that it cottld not have the effect of incor· porating thr relevant provisions of the latter Act in the Act of 1947 and that consequently, When a notification issued under '· 8(l) of th·: F~reign Exchange Regulation Act was deemed for all purposes to be a notification issued under s. 19 of the

¶32

3 S.C.R. SUPREME COURT .REPORTS 789

¶33

)· Sea Customs Act the contravention of the notification attracted to it each and e~ery provision of the Sea Customs Act which was in force at the date of the notification.

¶34

The Secretary of State for India in Council v. Hindu•fan Gocoperative Insurance Society Ltd., (1931) L. R. 58 I. A .. 259, held inapplicabl,.

¶35

1961

¶36

· ' The Co!lettor of Customs, Madras v. Nothella Sampathu Chetty

¶37

( 5) that, in the instant case, the circumstances present at the moment when the gold was taken by the Customs Officer at the Central Station did tend to raise a reasonable suspicion that the gold seized had been obtained illicitly and that this was sufficient to constitute in the words of the 'statute "a reasonable belief that the goods (gold) were smuggled.''

¶38

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 408 to 410 of 1960.

¶39

Appeals from the judgmen.t and order dated September II, 1958, of the Madras High Court in Writ Petition Nos. 384 .of 1957 and 660 of 1958.

¶40

WITH

¶41

Criminal Appeals. Nos. 38, 126 and 123 of 1959.

¶42

Appeals by special leave from the judgments orders dated May 16, 1958, June 19, 1959 and April 14, 1959, of the Punjab High Conrt in Criminal Revisions Nos. 290 of 1958 and 144 of 1959 and Criminal Appeal No. 677 of 1958 respectively.

¶43

AND

¶44

Civil Appeal No. 511 of 1960.

¶45

Appeal from the judgment and order dated March 20, 1959, of the Bombay High Court (Bench) at Nagpur in Special Civil Application No. 322 of 1958.

¶46

AND

¶47

Petition No. 118 of 1958.

¶48

-,.

¶49

Petition under Art. 32 of the Constitution of India for enforcement of Fundamental Rights.

¶50

G. K: Daphtary, Solicitor-General of India, H.J. Umrigar and T. M. Sen, for the. appellant in

¶51

~ -.

¶52

790 SUP.REME OOURT REPORTS [1962)

¶53

JIOJ C. Ae. ~os. 498 and 409 498 and 409 and 409 409 of 1960 and and respondent in in n. C<i/1-./ C. A. No. 410 410 of 1960. C.Ut.-i, JIM10J

¶54

v. N. A. Palkhiva"la, S. R. Vakil, R. J. Joshi. N.U.11• s.tb• S. J. Sohr.11>ji, J. B. Dadachanji, S. N. Andley, Ott(! Rameshwar Nath_ and l'. L. Vohra, for the rcspon· dents in C. Ae. Nos. 408 and 409 of 60and appe· llant in C. A. No. 410 of 1960.

¶55

C. Ae. ~os. 498 and 409 498 and 409 and 409 409 of 1960 and and respondent in in C. A. No. 410 410 of 1960.

¶56

R. S. Narwla, for the appellant in Cr. A. No. 38 of 59.

¶57

C. K. Daphtary, Solicif,()1'.General of India, N. S. llindr!l and D. Gupta, for the respondent in Cr. A. No. :18 of 1950.

¶58

'J'. M. Sen, for Intervener No. I in Cr. A. No. 38 of 59.

¶59

K. N. Kuu:rmi, for inter>ener No. 2 in Cr. A. No. 38 of 59.

¶60

I'.. S. Narula ancl R. L. Kohli, for the appellant in Cr. A. No. 126 of 1959.

¶61

C. K. Daphtary, Solicitor-General, of India, H.J. Umrigar ancl D. Gupta, for the respondPT1t in Cr. A. No. 126 of 1959.

¶62

N. C. Cliatlerji, S. K. Kapur and Gcinp<tl Rai, for the &p~lant in Cr. A. No. 126 of 1939.

¶63

A. S. Bodbe, Shankar Anand and Ganp"t Rai, for the app~llant in C. A. No. 5ll of 1960.

¶64

C. K. Daphtary, Solicitor.General of Indi?• JI. J. /;'mriaar a.nd 'J'. A-!. Sen, for the respondt>nt m C. A. No. 5n of 1960.

¶65

8. VenkatakriRhnmt, for thA petitioner in Pctn. Xo. 118 of 1958.

¶66

C. K. Daphtmy, Solicit-0r-Ue11eral of India, II. J. Um.riuar a,1d R. JI. Dhelxtr, for the respondents in Petn. Ne·. llE: of 1958.

¶67

J 961. Sept-0mber 25. The Judgment of the Court was delivered by

¶68

.4,J;1•1•r J,

¶69

AYYAtm.u:, J.-The Sea Customs Act, 1878 (Act 8 of 1878) (referred to hereinafter as the Act),

¶70

~ s.c.R. SuPREME COURT REPORTS 191

¶71

was amended bys. 14 of Act 21 of 1955 by the introduction of s. l 78A reading :

¶72

"178A. (1) Where any goods to which this section applies are seized under this Act in the reasonable belief that they arc smuggled goods, the burden of proving that they a.re not smuggled goods shull be on the person from whose possession the goods were seized.

¶73

1961

¶74

The Collector oj Customs, MadraB v.

¶75

Nathella Sampathu

¶76

A;vyangar ] .

¶77

(2) This section shall apply to gold, gold manufactures, diamonds and other precious stones, cigarattes and cosmetics and any other goods which the Central Government may, by notification in the Official Gazette, specify in this behalf.

¶78

(3) Every notification issued under Subsection (2) shall be laid before both Houses of Parliament as soon as may be after it is issued."

¶79

¶80

It is the constitutional validity of this section that is the common point which arises in these several cases which have beiin heard together. We have heard on the merits only Civil Appeals 408 to 410 of 1960 and the other cases were posted before us in order that Counsel appearing for the parties in them, might have an opportunity to be heard upon the common question mentioned earlier. We shall, therefore, refer only to the facts of Civil Appeals 408 to 410 of 1960 in dealing with these petitions.

¶81

Civil Appeals 480 to 410 :

¶82

These appeals come before us on a certificate granted by the High Court of Madr1ts undPr Arts.132(1) and 133(l)(c} of the Constitution and are directed against the judgment and order of thf' High Court in two Writ Petitions filed before it by Nathella Sampathu Chetty-the sole proprietor of a business in gold and silver, bullion, jewellery etc. carried on in the name of Natholla Sampathu

¶83

¶84

792 SUPREME COURT REPORTS [19621

¶85

1961 Chetty & Sons (ref..rrcd to hereafter as the res- T/,, c.u,,,., •f pondent). Customs> Madras v. The facts giving rise to tlwse appeals arc Jf.uitl/a Sam;alhu briefly as follows : On the morning of Juno 26, Ch.117 1956, one Nandgopal-an <'mploycc of tho respon- Ayyongar J. dent-alighted at the Ce1;tral talion in Madras from the Bombay Express. Xandgopal was interc"pted and questioned by a Head Constable of the State Police Scr'ice attached to the Prohibition Intdligencc Department. Nandgopal admitted that he was in possession of gold which he was bringing for his firm-the respond!·nt-from Bombay. The Head Constable immcdiatdy contaewd the officerd of the Prevouti \·e Section of the Customs Department who were on duty at tho Central station who interrogated Nandgopal and wized from him four blocks of gold weighing in a.II about 1,00(1 tolas. Enquiries were madl' to verify -ihe story narrated by Nandgopal as to the source from which he obtained the gold and thereafter the Collector of Customs being prima f11cie of the view that the gold seized had been muggled, issued notice to the respondent to show cause why the said gold should not bo confiscated. The respondent offered his expla.na.tion but the Collector held that the rt'Spondent had not discharged the onus of proving that the gold was not smuggled-an onus which had been cast on him by H. l 78A of the Sea. Customs Act and directed the confiscation of the gold. The respondent thereupon filed a petition (Writ Petition 3S-! of 1957) under Art. 2:26 of the Constitution before the High Court of Madras for tho isaue of a writ, of certi-Orari or other appropriate writ for quashing the order of th Collector of Customs on va.riou grounds to which we shall advert later, including the constit11tional validity of s. I iSA.

•

.. -.-;

While this writ petition was pending, the respondent filed another petition (Writ Petition 660 of 1958) for a writ of ma11dam11s directing tho Collector to return the gold seized and confiscated by him.

¶91

3 S.C.R. St.11.>REM:fll COUR'l' REPORTS 79.3

¶92

¶93

The two writ petitions were heard together and by an order dated September 11, 1958, the learned Judges of the High Court held, allowing Writ Petition 384of1957, that s. 178A of the Sea Customs Act was void under Art. 13 of the Constitution. They further held that even ifs. 178A were valid, the condition precedent for invoking the rule as to the burden of proof prescribed by the section had not been complied with, in that the customs officer who effected the seizure which preceded the adjudication did not enterhin "a reasonable belief that the gold was smuggled", with the result that the order of confiscation was invalid. Besides, the learned J11dges were also of the view that s. l 78A of the Sea Customs Act could not be invoked in adjudicating a contravention of a notification under the Foreign Exchange Regulation Act which imposed restrictions on the import of gold. Though on these conclusions the order of the Collector confiscating the gold was set aside, the learned Judges held that the respondent was not entitled to an order for the return of the gold, but only to a direction to the Collector to he~r and determine the question about the gold seized being smuggled gold without reference to the rule as to onus of proof enacted bys. 178A. The appellant, the Collector of Customs, Madras, obtained leave from the High Court under Arta. 132 and 133 of the Constitution to appeal to this Court against the orders in wirt Petition No. 384of1957 and No. 660 ofl958 (Civil Appeals 408 and 409) and a similar order was passed in an application for a certificate by the respondent who felt aggrieved by the refusal of the Court in Writ Petition No. 660 of 1958 to direct an immediate return of the gold seized (Civil Appeal 410). The three appeals have been consolidated as they arise out of the same tnmsaction.

¶94

1Hl

¶95

The fJGl!tctor c,f Customs, Madras v. }/atlulla SampatJ>u Chetty Ayyan~c;r J.

¶96

We shall first take up for consideration Civil Appeals 408 and 409 of 1960 filed by the Collector -0f Customs, because unless those appeals fail there would be no need to decide the relief to which the

¶97

•

¶98

SUPRE?IIB CoURT REPORTs (1062 j

¶99

TT-.. Co/Int•• •f Cuato.l'flS Madraf

¶100

.. N.U..lla Samp.i/.., C/wtty

¶101

.1'f.Yl"I"' J.

¶102

respondent would bo entitled in Civil Appeal 410 of 1960. In order to appreciat-0 the contentions raised, it 1rnuld he n•,ccss1iry to set out t.ho statutory provisi1ms which form the background of tho impugned pro'ision -s. I i8A of the Sea Customs Act. The Furoign Exchang<' Hegulation Act, 1947 (Act 7 of UJ.17), waR brouf!ht into force on March 25, 1947, by a notification issued by tlrn Central Government under s. 1(3) of that Act. Tho preamble to the Act recites:

¶103

¶104

"It is expedient in the economic and financial int-OrPsts of Inrlia to provide for tho regulation of ...... the import and export of currency and bu Ilion."

¶105

Section 8 of this Ad refers to the import of goldthe eommodity with which these appeals n.re concerned. It enacts:

¶106

"8(1). The Central Govcrnm<>nt may, by notification in the official Gazette, order that, 6ubjeet to such exemptions, if any, as may be c-ontained in the notification, no person shall, except with the general or special permission of the Rescn•c Bank and on payment of tho foe, if any, prescribed bring or send into India any gold or silver or any currenc.v notes or bank notes or coin whether Indian or foreign.

¶107

Explanation.-The bringing or S<.'nding into any port or place in India of any such article as aforesaid intended to ho taken out of India without being removed from the ship of conveyance in which it i~ being carrild shall nonethelcsH be deemed to be a bringing, or as the case may be sending, into India. of that article for the purposes of this section."

¶108

Oold io defined ins. 2(f) of this Act thus:

¶109

.....,

¶110

I"'.' ....

¶111

" 'gold' includes gold in the form of coin, whether legal tender or not, or in tho form of bullion or ingot, whether refined or not and

¶112

¶113

3S.C.R. SUPREME COURT REPORTS 795

¶114

¶115

jewellery or articles made wholly or mainly of gold."

¶116

These provisions have to be read in conjunction with the provisions of the Sea Customs Act which form, as it were, integrated provisions in relation to the import and export of, among other commodities, gold, and s. 23A of the Foreign Exchange Regnlation Act which was introduced by an amendment of 1952 effects this co-ordination. This section reads:

¶117

1961

¶118

The Collwor of. Cuuciin.S, Mtuftas v. N athel/a Su.ipatlw; · Chetty

¶119

Ayyan:ar J.

¶120

"23A. Without prejudice to the provisions of section 23 or to any other provision contained in this Act the restrictions imposed by sub-sections (1) and (2) of section 8, subsection ( 1) of section 12 and clause (a) of sub-section ( 1) of section 13 shall be deemed to have been imposed under section 19 of the Sea Customs Act, 1878, and all the provisions of that Act shall have effect, aceordingly, exeept that section 183 thereof shall have effect as if for the word 'shall' therein the word 'mav' were substituted." "

¶121

¶122

Turning now to the Sea Customs Act. s. 167(8) enacts:

¶123

¶124

"167. The offences mentioned in the first column of the following schedule shall be punishable to the extent mentioned in the third column of the same with reference to such offences respectively:-

¶125

Section of this Act to Offences which offPenalties ence has reference.

¶126

If any goods, 18 & 19 Such goods the importation of shall be liable which is for the to confiscation; time being prohianq ~ited or reBtricted ' ' . ..

¶127

[1962]

¶128

796

¶129

SUPREME COURT REPORTS

¶130

1gu by or under Chapter IV of this Act, Tiu c.lim••f Out....,, Mdr., be imported into or .,V¢1Atll'l v. Sa•;at4u exported from India oontrary t-0 such ... _,,...,., ], prohibition or restriction; or

¶131

if any attempt be made so to import or export any euch goode; or

¶132

any person concerned in any such offence sba II be liable to a penalty not exceeding three times the value of tho goods, or not exceeding one thousand rupees.

¶133

if any such goods be found in any package produced to any officer of Customs as containing no such goods; or if any eur.h goods or any dutiable goods, be found either before or after landing or shipment to have been concealed in any manner on board of any vessel within tho limits of any port in India; or

¶134

if any goods, the exportation of which is prohibited or restricted as aforca&id, be brought to any wharf in order to be put on board of any "l"essel for exportation contrary to such prohibiiion or restriotiffil.

¶135

3 S.C.R. SUPREME COURT REPORTS

¶136

Section 19 referred to here reads :

¶137

"19. The Central Government may from time to time, by notification in the Offidial Gazette, prohibit or restrict the bringing or taking by sea or by land goods of any specified description into or out of India across any customs frontier as defined by the Central Government."

¶138

ltll

¶139

Tht c.r1ec1o, •f CustomM, MWa• v. Nathe/la S•,Yatlm Chetty AY.J"ntsr J

¶140

The other provisions which have a bearing upon the points arising for discussion with reference to the validity of the impugned s. l 78A of the Sea Customs Act are :

¶141

"s. l 78. Any thing liable to confiscation under this Act may be seized in any place, in India either upon land or water, or within the Indian Customs waters, by any officer of Customs or other person duly employed for the prevention of smuggling."

¶142

"s. 181. When anything is seized, or any person is arrested, under this Act, the officer or other person making such seizure or arrest shall, on demand of the person in charge of the thing so seized, or of the person so arrested, give him a statement in writing of the reason for .such seizure or arrest." .

¶143

"s. 182 .. In every case, except the cases mentioned in section 167, Nos. 26, 72 and 74 to 76, both inclusive, in which, under this Act, anything is liable to confiscation or to increased rates of duty;

¶144

or any person is liable to penalty,

¶145

such confiscation, increased rate of duty or penalty may be adjudged-

¶146

( a) without limit, by a Deputy Commissioner or Deputy Collector of Customs, or a Customs-co!lector;

¶147

(b) up to confiscation of goods not exceeding two hundred and fifty rupees in value, and imposition of penalty or incre~~ecj

¶148

•

¶149

798 SUPREME COURT REPORTS [1962]

¶150

11111 71r Collrct" •! Cust1ms, M airaJ v. ,Yatlu/"2 SMC/NUJiu c1u11,, A.v@gat' J·

¶151

duty, ~ot exceeding one hundred rupees, by an Assistant Commissioner or Assistant Collector of Customs;

¶152

(c) up to confiscation of goods not exceeding fifty rupees in value, and imposition of penalty or increased duty not exceeding ten rupees, by such other subordinate officers of customs 8:8 the ~ief Customs-authority m'ly, from time to time, empower in that br·half in virtue of their office:

¶153

Provided that the Chief Custom&authority may, in tho case of any officer performing the duties of a Customs-collector, limit his powers to those indicated in clause (b) or in clause (c) of this section, and may confer on any offic~r, by name or in virtue of his offi<~e. the powers indicated in clauses (a), (b) or (c) of this section."

¶154

and

¶155

"s. 183. Whenever confiscation is authorized by this Act, the officer adjudging it shall gi vc the ow nor of the goods an option to pay in lieu of confiscation such fine aa the oflicer thinks fit."

¶156

Immediately the Foreign Exchange Regulation Act came into forctl in March, 1947, a notification was issued on 'March 25, 1947, under s. 8(1) placing a ban on the importation of gold except with tho permisFion of the Reserve Bank. This notification was superseded and replaced by a fresh ono dated Aug•ist 25, l!lS. also issued under tho powers conferred by sub-s. (1) of s. 8 of the Foreign Exch1inge Regulation Act and this_ is the notificaton which c1Jntinues in force up to this date and which is relev;int to the proceedings against the respondent. The notification ran:

¶157

¶158

"(l) Restrictions on import of gold and

¶159

silver.-

¶160

In exercise of tho vowel"!! conferred b;r

¶161

3S.C.R. SUPREME COURT REPORTS 799

¶162

¶163

sub-s. 1 of s. 8 of the Foreign Exchange Regulation Act, 1947 (Act 7 of 1947) and in supersession of the notification of the Government of India in the late Finance Department No. 12(11) FI/47, dated the 25th March 1947, the Central Government is pleased to direct that except with the general or special permis' Sion of the Reserve Bank, no person shall bring or send into India from any place outside India-

¶164

( a) any gold coin, gold bullion, gold sheets or gold ingot whether refined or not; or

¶165

1961 The Col1-:tor of CU6toms, Madraa v. Naihel/a Sampathu Chet(Y

¶166

Ayyangar J.

¶167

(b} any silver bullion ............ "

¶168

It would be noticed that on the law as it stood upto 1952 before s. 23A was inserted in the Foreign Exchange Regulation Act, the importation of gold in contravention of the notification of August 1948issued under s. 8(1) of the Foreign Exchange Regulation Act would have been an importation contrary to s. 19 of the Sea Customs Act, with the result that any person concerned in the act of importation would have been liable to the penalties specified in the third column of s. 167(8) and the imported gold would have been liable to confiscation under the opening words of that column. The gold being "a thing" liable to confiscation could have been seized by any officer of the Customs under s. 178 of the Sea Customs Act with an obligation on the officer effecting the seizure to give to, the person from whom the gold was seized a "statement in writing of the reason for such seizure" (s. 181 ). Thereafter the officers specified in s. 182 would have adjudged the confiscation of these goods subject to the option mentioned in s. 183 with the modification to this provision enacted by s. 23A of the Foreign Exchange Regulation Act. It would further be manifest that at that date before the gold seized was liable to be de~lt with under t4e t4ird oolumn of s. 167(8) b;y

¶169

800 SUPREME COURT REPORTS [1962)

¶170

1901

¶171

Tlll c.l/ftt11 qf Glat...,, Mair., v. N.u..Ila s.,.,.uw Glut~

¶172

,j-'-"'"'"' J.

¶173

a.n officer adjudicating on the matt<>r under s. 182, the burden of proving that the gold was smuggled la.v upon the department and unless the adjudging officer who was acting quasi-judicially was reasonably satisfied on that point, the confiscation or the imposition of tho penalty could not have been ordered.

¶174

The effect of thn imposition of the severe restrictions on tho import of gold into this country by the notifications under the Foreign Exchange Regulation Act with a view to defend and conserve the economy of the country in conjunction with the circumqtn.nc~ that the internal production of gold was very little, resulted in a great disparity between tho prine of gold in India and outside India i.e., in tho internntional markets. This naturally gave a great incentive to smuggling which bnsides depriving the Stiite of its revenue, also posed a grave thl'cat t-0 ne.tion:il economy. It is only necessary to add that gold wq,s not tho only commodity which gavo rise to this problem. But as thc>o appeals are concerned with gold, wo are confining our examination to that article. Taking these matters into account the Taxation Enquiry Commission, which submitted its report to the Government of India in 1954, rncommendcd a tightening of the law in order effectively to prevent smuggling. After dealing with the administrative problems in regard to the levy and enforcement of Customs duties in Ch. VII of the report the Committee recommended inter alia the amendment of the Sea Customs Act so as-

¶175

• •

¶176

"( I) to mako smuggling a criminal offence, and

¶177

(2) to transfer the onus of proof in respect of offences relating to smuggling to the person in whoso possoesion any dutia hie, restricted or prohibit{)d goods are found."

¶178

. -

¶179

In pursuance of these recommendations the Sea Customs Aot was amended by ~ct 2l of 1955 and

¶180

3 S.C.R. SUPREME COURT REPORTS 801

¶181

. "

¶182

among others s. l 78A whose terms we have set out, was introduced into it.

¶183

As the question of the constitutionality of s. l 78A has been the subject of elaborate consideration in a few decided cases to which reference was made during the arguments, we consider that it would be convenient if we deal with them before setting out and discussing the precise grounds on which the challenge to the validity of the provision was rested before us.

¶184

Very soon after s. l 78A was enacted its constitutional validity was challenged by an original petition filed in this Court (Petition 98 of 1956)- Babulal Amthalal Mehta v. The Collector of Customs, Calcutta ('). The goods involved in the case were diamonds. Four hundred and seventy-five diamond pieces which had heen seized from the petitioner, were directed to be confiscated holding them to be smuggled, by the application of the burden of proof laid down in s. l 78A. The validity of the confiscation was challenged before this Court on the ground thats. l 78A was unconstitutional as being violative of Art.14 of the Constitution and the contention was rejected. It has been urged by the learned Solicitor. General, for the appellant, that the points regarding the constitutional validity of s. l 78A raised in the present appeal are concluded in his favour by this judgment. We shall, therefore, have to examine the exact scope of this decision in detail which we shall do later, but for the present it is sufficient to state that the case dealt mainly with an objection based on a violation of Art. 14 of the Constitution which the following extract from the headnote would indica.te:

¶185

1961 Tiu C l/«for of Gust tJm , .f ru!raJ v. Natlul/a Sampathu Clutty 4vyaazar ].

¶186

"Section l 78A of the Sea Customs Act which places the burden of proving that any of the goods mentioned in the section and reasonably believed to be smuggled are not really so on the person from whose possession pl [1957] s.c.R. 1110,

¶187

¶188

19GI 7"' Colltttor of Cau uiins, M adr a; v, NaJ/i,/la SampGtiw Ax)'angar J.

¶189

802

¶190

SUPREME COURT REPORTS ·[1962]

¶191

thoy are seized, is not discriminative in charac·ter and does not "iolate equal proU>ction of law guaranteed by Art.14 of the Constitution''.

¶192

The validity of the s!'ction was next attack1·d before the Hid1 Court of Bombay in a Writ Peti1 ion filed under Art. 226 of the Constitution on the ground that it violatc:cl Art. 19( lXf) and(!.() of the Constitution: ,1[, G. Abrolv. Amichand('). The article involved in that case was gold which had been seized from tho petitioner and directed to be confisra.ted by an adjudicating officer under s. 18~ of the Sea Customs Act. The case came up for hC'aring before K. T. Desai, J., and the lcarnl'd Judge held tlmt s. l 78A was 11ncon,tit11tional aH being an 1111r,•aRouable restriction 011 the citizens' right t.o hold property and to trade; and also that enu assurnilli! the' provi~ion to be constitutionally valid, thr rcquirem<'nts of the section had not bcC'n compliC'd with in the case before him inasmuch as the seizing oflic<·r had not,· at the moment of seizure, "reasonable belirf that the gold seized was smuggled". The next clecision in ordl'r of date is that of the Bench of the Madras High Court dated )farch 11, 19:>7, which is now under appc,al· before us in Civil Appeals 408 to 410 of I !)60. The reasoning of the ll·a1·nccl ,JuJgPR uf the Madras High Court is on the same lines aH that of JCT. Desai; J., in the judgment jnst now r<'frrred. Subseqnentlythe N:Lgpur Bench of the Bombay High Court ha.cl to crlllsi<lcr the sam•' question and th<,ir decision is repor!t·d in l'·ukhrnj Clwmpalal Jain v. D. R. Kohli ('}. There the learned Jncl.!;eS dissC'nted from the decioion ofJC. T. Desai. J., it1 JJ, G. Abrol v. Arnir:han<l (') and of the Madras High Court. in l'l'atlu;lla S<impathu Chrtty '.The Collector "J Cu.tom .. ('). It ma v be mentionBd tha.t the arguments of the )erncd Solicitor-General on bchnJf of the appel· )ant were in eubsta.nce the reasoning on which tho decision of the Nagpur Bench r<'sta. To completo (!) (1958) 62 Born. L.R. 1043 at P· 1046. C2l 11959) 61 Born. L.R. 1210. (31 A J.R. 1959 Mad. )tl,

••

> -

. ,

-a s.c.R. SUPREME COURT REPORTS 803

¶197

the narrative it is only necessary to add that an appeal was preferred by the Customs authorities from the decision of K. T. Desiti, J. The appeal however was dismissed on the (,lround that even if s. l 78A were valid as held by th~t Court previously, its terms were not attracted to the particular. case, because of the non-fulfilment of an essential condition requisite for the application of the section [See 11f. G. Abrol v. Arnichand (¹ )].

¶198

1961

¶199

Tiu Collector of Customa, Madras v. N ath1lla Sampatku Chett)I

¶200

A,lYantar J.

¶201

\Ve shall now proceed to deal with the points urged by learned Counsel for the respondent in support of his ploa that the impugned provision viola.tea the fundamental right to hold property under Art. 19 ( 1 )(f) and the l'ight to carry on trade or business under Art. 19( l)(g) and was not saved by els. (5) & (6) respectively of Art. 19. Before we do so, however, it is necessary to advert to the points upon which learned Judges have, in the judgment under appeal, allowed the petition of the respondent, because in deciding these appeals we have necessarily to pronounce upon them also. Besides holding s. l 78A of the Sea Customs Act which was called in aid by the Collector of Customs to direct tho confiscation of the gold seized to be unconstitutional and therefore void under Art. 13, the learned Judges also upheld two further contentions urged on behalf of the respondent in support of their petition : (I) that s. l 78A was not attr&cted to the determination of a question raised in relation to the confiscation of an article imported in contravention of a notification under s. 8( I) of the Foreign Exchange Regulation Act, (2) that s. 178.A required as a pre-condition of its applicability, that the goods which were the subject of adjudication must have been seized "in the reasonable belief that they are smuggled goods" and that in the instant case the Customs Officer effecting the seizure did not or could not entertain such a belief. We consider it would be convenient if we deal with these two points after e:x:amining the constitutional validity of s. l 78A.

¶202

(I) (1960) 62 Born. L.R. 1043.

¶203

(196.2]

¶204

S04 SUPRE?lrE COURT REP<'.>RTS

¶205

1961

¶206

Tilt Collect"' of C11Jtotn1, Madra.r v. JVatluUa Sampathu Chtt!J

¶207

~··J.

¶208

Before embarking on this enquiry it is necessary to deal with the argument of the learned Solicitor-General that every point (1.bout the consti· tutional validit.y of s. l 78A is concluded in his favour by the judgment of this Court in Babu/al Amtlialal Jifehta v. The Collector of Customs, Calcutta('). \Vo have ·already extracted tho head-note of tho rnport in the Supreme Court Reports which would appear to indicate that this Court considered only the impact of Art. 14 of the Constitution on the provision. Nevertheless, there are somo passages in thiA judgmt•nt, which would be immediately referred to on which reliance was placed by the learned SolicitorGcneral in support of his contention that this judgml·nt is an authority for tho position not merely thats. l78A docs not violate Art. 14 but that it impliedly, if not expreesly decides that the restriction imposed by it on the right to hold property or to engage in the business of dealing in gold was a. reasonable restriction within Art. 19(5) & (6) of tho Constitution. Wo will quote these passages in order to examine whether this contention is made out. That judgment after setting out a summary of the provisions of the Sea Customs Act relating to seizure, the adjudiction of confiscation, tho imposi · tion of penalties, appeals from tho orders of tho Customs authorities to the higher revenue authori· ties and tbs terms of s. 178, proceeds:

¶209

"No doubt the content and import of the Rection are very wide. It applies not only to the aotno.l smuggler from whose possession the goods arc seized but also to thoso who came into possession of the goods after having purchased the same after the same has passed through many hands or agencies. For example, if the Customs authorities have a reasonable belief that certain goods in the possession of an innocent party aro smuggled goods and the same is seized under the provisions of this Act, then the person from whose posse8llion (ll [1957) S. C.R. 1110.

•

••

.,,.... .. .r

3 $.C.R. StJPREl\IB COURT REPORTS 805

¶214

the goods were seized, however innocent be may be, has to prove that the goods are not smuggled articles. This is no dou~t a very heavy and onerous duty cast on an mnocent possessor who, for aught one knows, may have bona fide paid adequate consideration for the purchase of the articles without knowing that the same has been smuggled. The only pre-requisite for the application of the section is the subjectivity of the Customsofficer in having a reasonable belief that the goods are smuggled."

¶215

1961

¶216

The Collector of Customs, Madros v. Nathella Sampallw Chetty

¶217

AY.Y""gar J.

¶218

This passage is followed by an examination of the matters with reference to Art. 14 expressing the opinion that the petition did not show in what manner there had been a violation of that Article, and the judgment continues:

¶219

"But Mr. Chatterjee argues that tho burden of proof enunciated therein is opposed to fundamental principles of natural justice, as it gives an unrestricted arbitrary and naked power to the customs authorities without laying down any standard or norm to be followed for exercising powers under the section ........ . It is a heavy burden to be laid upon the shoulders of an innocent purchaser who might have come into possession after the article has changed many hands and this, it is alleged, invokes discrimination between him and • other litigants and deprives him of the equal protection of the law guaranteed by Art. 14 of the Constitution. A large number of cases have been cited at the B11r in support of the respective contentions of the parties."

¶220

This is followed by a citation from the decisions of this Court in which the scope and content of Art. 14 were discussed and in particular a passage in the judgment in Budhan Chaudhury v. The State of Bihar(') where the principle that Art. 14

¶221

r1955J 1 s.c.R. 1045, 1048-1049.

¶222

806 SUPREME COURT REPORTS (1962j

¶223

19~1

¶224

TJ., Cliltc"1r of Customs, Mad!as v. NoJht/lrl-Samf14tlu< a,,,tl

¶225

-1-J.

¶226

does not forbid classification on a reasonable and ration-LI basis is ext.meted. The judgment proceeds:

¶227

"A cursory perusal of s. l 78A will at once <lisclosc the well defined classification of goods based on an intelligible diffcrentia. It 11pplies only to certain goods described in hUb-s. (2) which are or can be easily smuggled. The section applies only to those goods of the specified kind which have been seized under the Act and in the reasonable belief that they are smuggled goods. It is only those goods which answer the threefold description that come under the operation of the section. The object of the Act is to prevent smuggling. The differentia on the basis of which the goods have beon classified and the presumption rnised by the section obviously have a rational reh1tion to the object sought to he achieved by the Act .................. The impugned section cannot be struck down on the infirmity either of discrimination or illegal classi.fioation."

¶228

\Ve arc therefore satisfied that the decision of this Court considered the validity of s. l 78A only with rcforcnce to Art. 14 and that it is not a decision regarding the impugned legislation being or not being obnoxious to Art. l9(l)(f) & (g). It is only necessary to add that at the beginning of tho discussion, Govinda l\Icnon, J., specifically points out that he was not considering any attack on s. l 78A based on an infringement of Art. l9(l){f) & (g), for he sai<l :

¶229

"Though Mr. Chatterjon faintly argued that the provisions of Art. IO( l )( f) & (g) and Art. 31 of the Constitution had been violated, he did not seriously press those contentions. The ma.in point of the attack was centered on tho contention that s. l 78A was violative of tho principles of equal protection of the laws guaranteed under Art. 14 of the Constitution."

.·

~ ~~ 4ii(. <' f

3 s.c.n. SUPREME COURT REPORTS 807

¶235

We cannot accept the further submission either that, even if this Court did not in terms consider the validity of 8. l 78A with reference to Art. 19 (1) (f) & (g), still the reasoning by which it rejected the contention that it violated Art. 14 would be sufficient to cover the former also. No doubt, there are situations when the points regard· ing a violation of Art; 14 and an objection that a re&triction is not reasonable so as to conform to th@ requirements of Art. 19(5) or (6) may converge and appear merely as presenting the same question viewed from different angles. Such, for instance, are cases when the denial of equality before the Jaw is based on the ground that the power vested, say, in an administrative authority to affect rights guaranteed to a citizen is arbitrary, being unguided or·uncanalised. The vesting of such a power would also amount to the imposition of an unreasonable restriction on the exercise of the guaranteed right to trade or carry on a business etc. Where howeTer, there is guidance and the legislation is challenged on the ground tha. t the law with the definite guidance for which it provides has outstepped the limits of the Constitution by imposing a restraint which is either uncalled for or unreasonable in the circumstances, the scope and content of the enquiry is far removed from the tests of conformity to rational classification adopted for judging whether the law has contravened the requirement of equal protection under Art. 14.

¶236

1H1 The Colltct,r •f CuslDlnJ, Jl•lrcs v. N«tlvll• Samfloih• Clvtty

¶237

A.rJ""l"' ].

¶238

It is therefore necessary for u~ to consider whether s. l 78A is obnoxious to the rights guaranteed by Art. 19( l)(f) & (g) which is the ground upon which the section has been held unconstitutional by the judgment of the Madras High Court under appeal. We have already set out what one might term 'the historical background and the surrounding circumstances' which necessit.ated the enactment of this provision. As already indicated, since the commodity with which the presC'nt appeals are. concerned is gold, we are referring to that in pa.rticufar, though the circumstances attendant on the

¶239

808 SUPREME COURT REPORTS [1962]

¶240

i 1

¶241

11191 other commodities referred to in s. l 78A might be Till C ollutor ef eimilar. CiuUinu, M wiras •• As pointed out already, the disparity between Nat/ulla o..iv SIJ1ll#ollsu the internal and external price o! gold became, by I9-i8, eo great as to provide considerable incentive

¶242

A.17111\f.,. J. to smuggling by making it very profitable. This wae aeeisted by the very long coast-line which India has, coupled with the extensive land frontiers both on the east as well aa on the west, ignoring for the moment the very small pockets of foreign territory within the sub-continent. Notwithstand· ing the efforts of the Custome authoritioa and tho Preventive Staff of that department, a considerable volume of the yellow metal did seep into the country and efforts had therefore to be made to tighten tho law in this regard. It wa1 in pursuance of thi8 endeavour that s. l 78A wai introduced into the Sea Customs Act in 1955. Ex faoie, the impugned provision enacts a rule of evidence and tho ratio underlying it is not far t-0 seek; and it is that the person in possession of the gold would, with certainty in most cases, be in a better position to pro,·e that it was legally within the country than the Cast-Oms authorities. In this connection reference may be made to the observations by Lord Goddard, C. J ., in R. v. Fitzpatrick (' ). Speaking of s. 259 of the U. K. Customs Consolidation Act, 1876, which enacted :

¶243

"If in any pr011eoution in respect of a.ny goods seized for non-payment of duties, or any other cause of forfeiture, or for the recovering any penalty or penalties under the Customs Acta, any diimute shall arise whether the duties of customs Ia ve been paid in respect of such goods, or whether the same have been lawfully imported or lawfully unshipped, or concerning the place from whence ~uch goods were brought, then and in every such case the proof thereof shall be on the defon. dant in 1uoh pros!•cution."

¶244

[1948] 1 A!J. B.R. 769, 772.

¶245

3 S.C.R. SUPREME COURT REPORTS

¶246

so fl

¶247

the learned C. J. said:

¶248

¶249

"The onus is put on the defendant when there is a dispute in the proceedings whether duty has been paid or whether the goods were lawfully imported. The obvious reasons for this provision is that the facts must be within the know ledge, and often within the exclusive knowledge of the defendant. If, for instance, it is found that he has dealt in prohibited goods, if he can show that he acquired them in the ordinary course of business obviously he would not be guilty of dealing in them with intent to avoid the prohibition. He can prove the positive and, unless he had to undertake the proof, the Crown would generally have to undertake the proof of a negative."

¶250

The Colltc?1r of Cust1ms, Mflha v. N•tlull• Scn;•thu Ch.tty

¶251

Mr. Palkivala, learned Counsel for the reepondent, stated that if the impugned section, s. l 78A, had contented itself with laying down the principle enunciated in the above observations of Goddard, C. J., he would not contend that it was an unreasonable restraint on the citizen's rights to hold property or on his right to do business guaranteed by Art. 19 (1) (f) & (g). His submission, however, was that the burden cast upon the person from whom gold were seized transcended the limits of what that person could reasonably be called on to prove and that as the burden cast by s. l 78A was impossible of being discharged, it amounted not to a law laying down a rule of evidence, but operated virtually to effect a confiscation of the property of a citizen without affording him any real opportunity to establish his right to it.

¶252

_,,..

¶253

To appreciate properly this argument about the real effect of the provision it is necessary to set out a few facts relating to gold as an article of trade in this country. Learned Counsel on either side a.greed that the matters stated in relation to gold and the trade in gold referred to in the following passage in the judgment of K. T. Desai, J.,

¶254

810 SUPREME COURT REPORTS [1962]

¶255

1901

¶256

Thi C./i«lor of Clutoms, Madras •• N"""ll• SampaU.. C!utty An•1arJ.

¶257

correctly sums up the position. The learned Judge summarised the position thus :

¶258

"It is common knowledge that India. prod 10es very little gold a.nd that most of tho gold a.vaila.ble in India. is imported p;old. A statement has boon put in by consent showing the officia.l figures of India's imports and cxports of gold from 1851 to 1956. It shows a net import in tho country, after deducting cxports, of 353 crores and three lakhs worth of gold. Restrictions on tho import of gold were for the first time introduced in India by Fina.noo Department (C('ntra.l Rovcnucs) Notification No. 53, dnted September 4, 1939. By tha.t notification tho Contra.I Government in the exercise of the powers conferred by s.19 of the Sea Customs Act prohibited the bringing or taking hy sea or land into British India from any place other than Burma or out of British India to any place other than Burma. gold coin, gold bullion or gold ingots, whether refined or not, except on the authority of a licence granted in that behalf by the Rescrvo Bank of India ............ Till April 1, 1946, gold remained duty frco. Thereafter rluty waa levied on the import of gold bullion, gold pl11to, gold manufactures etc ....... .. Gold besides being a store of value, is an article of adornment a.nd investment. It is ca.pa.hie of being split a.nd there can be a fusion of diverse quantities or gold. It is e,asily changeable in form, size and aha.po. The gold available in tho market hardly bears any identification mark. It is impossihlo for any person looking at gold to say whether duty has been paid thereon or not or whether it has been smuggled. It is precisely the difficulty experienced by tho cust-0ms officers with the whole machinery of Government at their disposal in proving that the gold ha.a been smuggled which is itself made a. reason for tbrowini the burden upon tho citizen•

¶259

• •

¶260

38.C.R. SUPREME COURT REPORTS 811

¶261

to establish that the gold is not smuggled ...... Gold as such has no earmark. It is impossible to identify gold in the possession of a person with the gold mentioned in the Bill of Entry of any importer of gold ......... Gold has been imported through centuries into this country and it is virtually impossible for a person to establish that any particular quantity of gold in his possession was the gold imported in th!i country at a particular time without resort to smuggling. The proof required pre. supposes the existence of µ-old in an identifi. able form from the time of its import to the time of its ultimate sale to the person from whose possession the same has been seized."

¶262

Thi Colll<ttr oj Customs, M udrGI v. Nalh<lla Samp"""' Che1t;1

¶263

Mr. Palkivala, learned Counsel for the res· pondent, explained to us the special features atta· ching to gold as a commodity and as a store of value, and of the difficulties, if not impossibility, of identifying one piece of gold from another in the absence of a requirement of marking, and bas· ing himself on this factual position submitted six grounds in support of his contention that the res· triction imposed bys. 178 A was unreasonable and we shall deal with these points in the same order :

¶264

( l) Section l 78A, no doubt, on its face purports to be a rule of evidence, but in reality is not so. The purpose of the enquiry by the adjudicating officer is to find out whether the gold seized from a person had been smuggled, and in such an enquiry the fact to be proved, viz., that the gold had been smuggled is statutorily established not as an inference from basic facts, which would indicate the smuggled character of the Gold seized, but from the mere belief of the seizing officer that the gold aeized was smuggled,

¶265

(2) It was said on the other side that the requirement in s. 178 A that the officer seizing the gold must entertain "a reasonable belief" that the gold was smuggled provided an adequate safeguard

¶266

812 SUPREME COURT REPORTS [1962]

¶267

• --

¶268

J9U

¶269

The C11/t'1.,. •f Curtll'\S, Mairas

¶270

v. N.i!u//o s...,athu C/ul'.J

¶271

AE"'l"' ].

¶272

to the p<irson affected which would render the restriction imposed reasonable within els. (5) & (u) of Art. 19. This argument is untenable. If the reasonable belief was a matter for the subjective satisfaction of the seizing officer, as seems to ho implied from the obsorvations of this Court in Babidai Amthalal Mehta v. The Collector of Cu13tom8, Calcutta (1), it provides no safeguard at all for the person from whom the gold is soizecl. Even if, on the other hand, the test is objective, in the sense that at the stage of the adjudication under s. 182 the grounds upon which the belief was entertained, could be the subject matter of enquiry it furnishes no safeguard either, because tlic "reasonahknl'ss'' of the belief regarding the smuggled character of the gold would haTc to be judged by the adjudicat· ing officer with n·fcrenee to the information which the seizing officer h01d at the moment of seizure, and that information must necessarily have been obtained behind t.ho back of the person from whom the gold had been seized and b<'foro the officer commenced any cn<1uiry to ascertain th·' truth or otherwise of the information com·cyed Lu him,

¶273

(:l) There is no reasonable or rational connection between the fact to be proved, viz., that tho gol<i was smuggled and the fact from which such an inference is permitted to be drawn by the impugned provision, viz., the reasonable belief of the officer effecting the seizure that the gold waR smuggled. Thero is therefore no adequate basis on which the provision could be sustained as a rulo of eviclencc,

¶274

(4) The operation of s. liSA ib not restricted in point of timo or to persons actually suspected to be connected with the import but extends also to persons who arc able to establish bona fide acquisition of gold but who arc unable to prove bow the person from whom they acquired, obtained the gold they sold,

¶275

(I) (1957] S.C.R. 1110.

¶276

3 S.C.R. SUPREME COURT REPORTS 813

¶277

¶278

¶279

(5) A presumption of this sort might be reaeonable in respect of goods which are dangerouB or noxious per se, like firearms or poison, since ordinarily peoplo might be expected to be on their guard before obtaining such goods to ensure that their acquisition was lawful and in accordance with the formalities, if any prescribed by the relevant statute or rule. Gold, however, is not such a type of commodity. It is an innocuous article of commerce and is under the law a aubject of unrestricted trade within the country. The burden of proof of the sort imposed by s. 178A, in respect of such a commodity, is therefore unreasonable,

¶280

(6) The burden of proof cast by e. 178A is, in most oases, impossible of being discharged because: (a) it extends to facts which would not be in the possession of a bona fide purchaser and would comprise matters which he never knew, or could never know, (b) large quantities of gold have been imported into India before restrictions were imposed in 1939. The net imports upto 1939 are estimated at over 353 orores of rupees whioh at the present price of gold would be over 2,000 crores of rupees. As gold which is sold in the market is not identifiable, it would be impossible for any purchaser to say whether the gold that he was buying was that which had been imported lawfully before 1939 or had come into the country after 1939 after payment of duty or had been smuggled into the country in violation of the Foreign Exchange Control Regulations. '.Che section, therefore, practically prohibits all holding of gold or trade in gold and subjects the holding of and the trade in gold to the penalty of confiscation, ( c) indigenous gold has been produced in mines in India both before and after 1939 and there is nothing to differentiate this from imported gold, (d) it is a commodity which frequently changes hands because of regular trade and widespread

¶281

1961

¶282

Thi Colleceor _of Customs, Madras v.

¶283

Nathell• Sampalhu, .. Cheµy

¶284

Ayy•lll"' ] . •

¶285

814

¶286

SUPREME COURT REPORTS [1962]

¶287

1161

¶288

1161 use as ornaments etc., and finally (e) tho indenti- TIM c.11,,,., •! fication of gold is impossible bel'ause of frequent lWsflWll, Y. M1drcs meltings and fusion of separate pieces and the x.u..ii. s...,.u.u absence of any syst~m of compulsory marking.

¶289

Y. x.u..ii. s...,.u.u Clull.J

¶290

We shall deal with each of those points and examine them in the light of the submissions maclc by the learned Solicitor-General in answer. Grounds I and 3 which we have set out earlier mav be taken up together since they arc merely different modes of expreRSing the same contention. The point raised iR that there is no rational connection between the fact from which the statute raises tho presumption and the fact which has to be proved in order that the goods might he th<' RU bjcct of confiscation. The argument is that the fact from which the presumption is drawn is the reaRonable belief of the officer effecting the Sl'iZure that the artick seized is smuggled; while the fact which by the terms of the statute it is held lo prove is that the gold seized is 8muggled; with the result that the practical effect of the provision is that th11re is a statutory direction to the adjudicating officer to treat the gold as smuggled so as to e11title him to confiscate the same. It is only if learned Counsel for th"' respondent is right that tho effect of the 1ection is as above that the several decisions of the American Courts to which he invited our att€ntion, could have any application. Learned Counsel relied particularly on the decisions in Bailey v. State of .Alabama ('), and Manley v. State of Georgia('). The first of these was concerned with the validity of a law of the State of Alabama by which refusal without just cau1e, to perform the labour agreed to be performed in a written contract of employment under which the C'mployee had obtained money whiah ho did not refund was made prima facie evidence of an intent to commit a fraud. The Supremo Court hel<l the law invalid. Two grounds were urged in support of the argument that the legislat.ion was unconstitutional. The first was that

¶291

.A,,..,.,_ J.

¶292

•.

¶293

(II (1911)219U•S.219'55L.Ed; 101. (21 (1929) 279 U.S. I: 73 L. P.d; 5·~.

¶294

3 S.C.R. SUPREME COURT REPORTS 815

¶295

¶296

it was in violation of the 13th amendment against "involuntary servitude except as punishment for crime", the other that the law was in violation of due 'process' clause contained in the 14th amendment. The Supreme Court upheld both these contentions, but what is relevant to the present context and on which learned Counsel relied was the reason assigned for holding that the rule of evidence enacted by the impugned statute violated the requirement of due 'process'. Reliance was placed for the State before the Supreme Court on the fact that the presumption raised was not conclusive but was open t,o rebuttal by the accused, but this was held not to be of avail, because according to the rule of evidence enforced by the Courts of Alabama, the accused, for the purpose of rebutting the statutory presumption, was not allowed to testify as to his uncommunicated motives, purposes or intentions, so that virtually it amounted to a conclusive presumption against the accused. The statute whoso validity was attacked in the second American decision referred to was one declaring that every insolvency of a bank ahall be deemed fraudulent and subjected the directors to imprisonment unless they repelled the presumption of fraud by showing that the affairs of the bank had been fairly and legally administered. Head Note 1 to this case sums up the American law on the subject of the constitutional validity with reference to the due 'process' clause, of laws of evidence creating presumptions. It rune:

¶297

JUJ

¶298

l"lu C1llect•r of Cust•ms, AIWl.S

¶299

y, .N«thella S.m~'thu Chdl;t

¶300

A.yJ~l'' J.

¶301

"l. State legielation that proof of one fact, or group of facts, shall constitute prirna facie evidence of the main or ultimate fact in iBsue, does not constitute a denial of due process of law if there is a rational connection between what is proof and what is to be inferred, and the presumption is not unreasonable, and is not made conclusive of the riirhts of the person against whom it is raised."

¶302

816 SUPREME OOUR'r REPORTS [1962)

¶303

...

¶304

1961

¶305

1961 fn rC'g&rd to th!'. American decisions of which Tiu C-01/t<t•' J only n few WNe cited, including those just now .Y.tJ11ll• CuJtfmJ, v. S•m:itlw A·lotl11ls Bet found 11ut, ~ummn.ri7,ed the principle underlying them in Rott8l'haefcr'H C".-0nstitution&l is to be

¶306

Clwtty Law at. p. 835, where the learnc1l author saya:

¶307

"The power of a legislature to prescribC' thP rul1 s of <·vidence is uni\·crsally recognised, !mt it ill equally well est.ablished that du<' process limits it in this matt<>r. It may 1·stablish rehutt.able presumptions only if therr i' a rational conntictiun between what is proHd and what is permitted to be inferred therefrom."

¶308

It would be seen that the deciions proceed on the application of the "due process·• clause of the American Constitution. Though the teetft o! 'reasonableness· laid down by els. (2} to(6} of Art.19 might in great part coincide with that for judging of 'due process', it must nut be assumed that these are identical, for it has to be borne in mind that the Constitution framers deliberately avoided in this context the use o! the expression 'due process· with its comprehensiveness, flexibility and attendant. vagueness, in favour of a somewhat more definite word "reasonable'', and caution has, thereforo to be exercised before the literal application o! Americn.n dl'cisions. [n making these ob1ervation1 we arc merely rep 1ting a warning found in the judgment of this Co :t in A. S. ]( rishna v. The Stau of Madra. ('), wlJrc Venkatarama Ayyar, J., epeaking with reference to the point now under discussion after quoting the pa.i;sage already extracted from Rottschaefer'.s treatise st.ated:

¶309

"The law would thus appear to be baaed on the due proceAs clause. and it is extremely doubtful whether it can have application under our Const.itution."

¶310

With tbiB caution we shall proceed to en.mine the submission of learned Counsel regarding the (I) [19~7] S.C.R. 399, 412.

¶311

3 S.C.R. SUPREME COURT REPORTS 817

1961

.ft ....

.;· • >

absence of any rational connection bet1l'een the fact to be proved and the fact on which the presumption is raised. An analysis of the arguments of the learned Counsel shows that the real legal objection to the provision lay in the sixth point urged by him, viz., the impossibility of discharging the burden of proof cast by s. l 78A, which thus virtually results in a confiscation of property without a judicial adjudication or condemnation. Pausing here we might mention that two matters might be urged as flowing from or as the necesgary result of the impugned provision: (1) that even a bona fide possessor of the goods might be deprived of his property notwith~tanding that there was no basis even for a suspicion that he was a party to the smuggling or had any knowledge that the goods in his possession were smuggled goods; and (2) that the burden cast on the possessor to prove the negative, namely, that the gold was not smuggled cast an impossible burden upon the person from whom the goods are seized as it virtually amounts to a confiscation by tho law without any reaso'.lable proof before a quasi-judicial authority that the gold was smuggled. To this last, the sixth point, we shall advert in its proper place, but what we are concerned to point out at this stage is that apart from the point about the impossibility of discharging the onus of proof cast by the section, there is little basis for the argument that there is lack of any rational connection between the facts giving rise to the presumption and the fact presumed, and .to this we shall now proceed.

¶316

Tbe c.uect" •f Cust•ms, M•ir•s

¶317

v. Jil«thell• S•mi•thu Chetty

¶318

This question about the lack of rational connection may be considered from two points of view. First Mr. Palkivala does not impugn the constitutional validity of ~. 106 of the Indian Evidence Act or the legislative application of the principle underlying it to any concrete case. It need hardly be pointed out that in every case without exception, the possessor of the gold would be the person best acquainted with the manner of

¶319

818 SUFREME CO'IJ'RT REPORTS [1062]

¶320

¶321

IPll

¶322

IPll his ncquisition and the circumstnnc<'s attendant on Tiu C1ll«t1r •f or connected with that acquisition. It was part of C11111m1, '1Urai the learned Counsel's submission that he c•mld not

¶323

}{atlulltJ " Stmt~tttfm Ht1Cccssfully impugn tho validity of a provision on tho

¶324

r.1ic11y terms of s. 259 of the C. K. Customs Consoli<l&tion .Ayyan:•r }. Act. Recalling the decrnion in R. v. Fitzpatrick('), already referred to, we might mention that the prosecution there was for a violation of s. 186 of tho C. IC Customs Consolidation Act, 18i6, which, so far as matorial, was iu substantially the same terms as the relevant portion of s. l6i(8) of the Sea Customs Act, l 8i8, tho essential ingredient of tho offencn beiug indicated by the words "person concerned in dealing with go(1ds the import of which is prohibited or which arc liable to duty with intent to dofraud His Majesty", and it was a violation of this section that Fitzpatrick was found guilty of by the application of the rule as to onus of proof prescribed by s. 259 extract-Od earlier. If in a prosecution for dealing in smuggled goods tho onus could with constitutional propriety be cast upon the accused to prove that the goods were not smuggled, it is difficult to soc any reasonable basis for the contention that whore the offence charged against a person is not dealing in but possession of smuggled goods, there is a constitutional bar on the burden being so laid.

¶325

Secondly, is learned Counsel correct in his submission that under s. l 78A the onus is ca.st upon tho poiscssor of the goods seized by reason only of the reasonable belii;f of the seizing officer that the goods seized by him &ro smuggled ? It is to be noted that tho seizure by the officer in tho belief that the goods are smuggled does not by itself operate to effect the confiscation or deprive the owner of his property in the goods. This result, however, follows only on an order of an adjudicating officer who investigates into the complaint regarding the defendant's possession of tho smuggled goods. As we shall have occasion to point out

¶326

(11 [ 19-IB; I All. E, R. 769, 772.

¶327

3 S.C.R. SUPREME COURT REPORTS 819

.. < ,

, <

~·

later the entira evidence in the possession of the seizing officer would be and has to be before the officer adjudicating the confiscation under s. 182 of the Sea Customs Act. No doubt, on the language of s. l 78A the presumption of the goods being smuggled arises only when the seizure is made by an officer entertaining a reasonable belief that the goods are smuggled, and in that sense the reasonable belief of the seizing officer is a pre-requisite for the statutory onus to arise. It is also true that at the stage of the adjudication the reasonableness of the belief of the officer effecting the seizure that the goods are smuggled would be the subject-matter ofinvestigation by the adjudicating officer. Nevertheless it is manifest that at the stage of the adjudication (when only the rule of evidence laid down by the section comes into operation) the very facts which led the seizing officer to effect the seizure, as rlistinguished from their significance as affording a reasonable belief for the seizing officer to hold that the goods are smuggled are before the adjudicating officer. These facts which justified the seizing officer to reasonably believe that the goods were smuggled would certainly impart a rational connection between the facts on which the presumption is raised and the fact to be proved, so that whatever other constitutional infirmity might attach to the impugned provision, the lack of rational connection is not one of them. It appears to us therefore that the argument regarding the lack of rational connection has no substance. It is derived wholly on a literal reading of s. 178 A and would not be available if the provisions were read in the manner we have just now indicated.

¶333

The second of the grounds urged by learned Counsel was that the requirement of s. 178 A that the belief of the officer seizing the goods should rest on reasonable grounds provided no safeguard to the citizen, as the seizing-officer who acts administratively entertains the belief on unproved information gathered from sources which most often are not and

¶334

Th.1 Collector of Cwtoms. Madras v. Nalhtlla Sampathu Che tty

¶335

A.y,,wintlif J.

¶336

• •

¶337

820 SUPREME COURT REPORTS [1962]

¶338

T!it Co/!tcl1r •f Czut1wt1 • .V. 4Jr•J v.

¶339

JV•:ht/!4 Svnl•lhu Chttty

¶340

in practico will not bo possiblo to bo discl~sed to the party affected. In connection with this point two alternative s11bmissions were made : ( l) that the reasonable belief of the officer effecting the seizure was one entirely for his subjective satisfaction and that this rendered the protection wholly illusory and therefore patently unreasonable. This was iidvanced on the basis of the passage in the judgment of this Court in Babulal Amtl1alal Mehta v. 'l'he CoUectur of Cuswms, Calcutta ('), already e:i:tracted reading :

¶341

"the only pre-requisite for the application of the section is tho subjectivity of tho Customs OfficPr in hin·ing a reasonable belief that the good~ are smuggled."

¶342

~· 9 '·

¶343

The learnd Solicitor-General, on the other hand poin!t-d out that this was not really part of the decision, hut was jnt an obsernition and that he wonl•l not support it. The learned Solicitor-C'ri!neral submitt<•cl that a sciz11re to which s. 178 A was appli<'ablE was merely a preliminary to proceedings bcfon· a quasi-judicial authority under s. 182. When the matt-0 ~ comes before the latUir authority, and anterior t•) that authority im•oking the presumption raised by B. 178 A, it would, on tho terms of the secti(•n, 1i,~ve to be satisfied that the seizure was made "i11 tho reasonable belief that tho goods 8cizc1l were goods that had been smuggled". At that 'tago the ·~nqniry is not and cannot be confined all to whether the seizing-officer bona fido entertained th•• belief, but must necessarily o:i:tend to an !'xamination of the grounds upon which that belief was, nteriained with a view to ascertain whether the lwli<'f was reasonable. It might he that the cntin·t.y of the evidence which conceh·ably in several <·asea consist of information commu11icated hy informers might not bo made availahh• to the person afTeeteJ, but still the adju<licating-officer would ham to satisfy himself that the roquiremcnts

¶344

(L 11sn1 s. c. R. 1110.

¶345

¶346

SUPREME COURT REPORTS 821

¶347

3 S.C.R.

¶348

of s. 178 A had been complied with before invoking the presumption laid down by that section.

¶349

Mr. Palkivala's alternative submission was that even if test of 'reasonable belief' was not 8Ubjective but was objective, in that the point as to whether the belief was reasonable was open to examination by the adjudicating-officer under e. 182, still, this provided no sufficient safeguard, because, if "information not tested by cross examination" could from the basis of "reasonable belief", by applying the same tests, the adjudieating officer would and must in moet cases reach the eame conclusion.

¶350

It is, no doubt, true that in some cases there might be pieces of information on the basis of which the seizure was effected which might not be capable of being disclosed to the affected party because it might consist of information supplied by customs informers, but if that information would have to stand the test of scrutiny as to credibility by an independent officer dealing with it in a quasijudicial capacity, it cannot be said that the protection is illusory. It has also to be added that at the stage of appeal or revision from the orders . of the officer adjudging confiscation under s. 182 of the Act each successive appellate or Revisional authority has also to address itself to this requirement.

¶351

1161

¶352

7 Ju Colltcljr •f Customs, MaJra.r v. Ntllhtlla Sam;«thu Ck tty

¶353

We ehall now pass on to the fourth of the points urged by learned Counsel for the petitioner that the onus of proof is unreasonable, in that it was not restricted in point of time or to persons connected with the import. 'l'he point suggested may be expanded in these terms : What the party affected has to prove is not that his acquisition hae been bona fide, which of course he might be in a position to prove and might properly be required to prove, but that somebody else over whom he has no control and of whose actions he would, in mo11t eaees, be completely ignorant has similarly bona fide

¶354

822 SUPRl<.:ME COURT REPORTS (1962)

¶355

1!81

¶356

1!81 acquired tho gold without violating the law and so Tiu C11lut11r of on until onEl reached tho stage of the origin of the

¶357

C'Mlll1'flJ, v. .J.1.JtaJ gold which is the Rubject of seizure and of adjudica- _.'o:Mll• SatY•thu tion before tho Customs authority. It would ho

¶358

l'lutt;· seen that this is really the argument upon which ... '.1""l"1 ]. the Rixth of the points urged by learned Counsel rests nnd therefore it will be convenient to examine the soundness <·f tho contention and tho answore which have been made on the other 1ido aft{)r dcalinf! with point No. 5.

¶359

The fifth p•Jint relat<'! to the fart that **the** presuIT. ption raii;ecl by tho section is about the possC'ssion cf an innocuous articlt> of property which under the ls.w is the subject of unrestricted trade in the open market as distinguished from articlee which are inherently dangerous-such as firearms or PoiBonoua drugs, in regard to which possession 11.nd de11.lin~ are l1>gitimately subject to severe restri"tions. Learned Counsel is, no doubt, right in hi8 subm.ssion that gold as a commodity is an innocuous article of commerce, that articles made of gold have been used as part of jewellery by the middle and upper classes from the beginning of tim11, thn.t it has served &s & store of value from ancient times and that the very large number of people in this cmmtry are in possessi1;n of gold for the purposes jus•, now mentioned. nut that however is not any conclusive consideration in support of the invalidity of a law which seeks to throw the burden of establishing p0RSession a~ leg&! under the law, upon tbe posseor. It cannot be seriously dispute< I that in most of tho cases tho possessor of the gold would crrtn.inly be in a position to eBtablish the mode of his acquisition (subject to tho last of the point. nbout the burden of proof being impossible to discharg1,), which would more often than not take it out of the category of smuggled gold. It is o 1ly in thoso cases whero rcaaonnble suspicion ex sts that the gold in the possession of a person ha.s como into the countrv bv illicit means, that there is po'ver in an offiocr to ·effect the !eizure and in moet

. "·

•

SUPREME COURT REPORTS 823

¶364

3S.C.R.

¶365

of the cases the innocent possessor would he in a position to discharge the onus. It is therefore in cases where· a person is unable to prove how he got into possession of the gold found with him or where his explanations are found to be false or unacceptable that in the large majority of cases the section would normally be invoked. Besides these, it would be applied also in cases where a person is able to prove that his acquisition was bona fide but that the persons from - whom he acquired or one higher up in the series of prior owners is unable to explain satisfactorily his possession, and it is only in these marginal or extreme cases that the onus created by the section might be contended to be harsh and unreasonable. Learned Counsel is, therefore, not right in suggesting that s. l 78A operated, as it were, by itself to confiscate the gold and gold ornaments in the possession of the entire population of the country, each individual being compelled before the restoration of the gold to him to strictly prove either that the gold was of indigenous origin or had been imported prior to 1939, or if imported subsequently had either been permitted to be imported or had paid duty, if such duty was leviable. We consider that this is not the effect of the section and that it does not, on any reasona hie construction, justify this picture of its operation.

¶366

We shall now proceed to consider the last of the points raised by learned Council in conjunction with point No. 4 which we had reserved for being examined along with it. This point learned Counsel expanded in the following terms. The burden of proof cast by the section is or is almost impossible of discharge, because ( 1) it extends to facts which would not be in the possession of bona fide pur- chaser at all, facts which he never knew and which he could never reasonably ascertain ; (2) large quantities of gold have been imported into this country before the introduction of restrictions on their importation by virtue of the legislation

¶367

•

¶368

1961

¶369

Th< CollutM of Customs, Madrru v. Nathti1a Saf!f/>dthu Che tty

¶370

Ay.>antar J,_

¶371

824 SUPREME COURT REPORTS [1692)

¶372

1961 brought into forco from 1939. In this Till Colhrt"' of context, learned Counsel relied on tho sev<Jral Oustom3, MaJra.; v: matters set out in the passage from the judgment NIJJ,,lla s.,.atk• of IC T. Desai, J., extracted earlier and laid parti- Cltttty cu Jar <'ID phasig on the fact : (a) that gold was held in myriarl forms and for di verse purposes by a sizeable portion of the population of the country, (b) that gold in its several forms was incapablo of being id•'ntified aA indigenous or imported, or if import<'d had paid duty or not. In view of these circumst;rnees he urged that to rail upnn any person tn prove <my thing mor·' than that his acquisition of tlw golcl was bon•i fide and without violation of the la•;;- woalcl Le to <':1st an impn~sible hurdcn upon the p0ssessor. Learned Counsel furth<'r urged that. the precise rnason for whic·h the burden had been thrown upon the paS8cAsor was be<'ause nf th•: inability of the State to et1tablish before the quasi-judicial authorities actil1g unrler s. 182 reasouablc proof that the gold 'Pizcd was smuggled. He tht>rcfore submitted that if Government with all its aclmini"trati,·c machinery operating in sever11l field, was una.blo to lea•! evidence which could satisfv th0- Collector of Cu,toms that the golcl seized had" an illicit origin, how could it ho reasonable to expect the indh·idual posseHSor, who knew nothing beyond how he himself camp by the gold, to establish the negative, viz., that the gold in his possession had not been smug· glecl hut was lawfully within tho country.

¶373

Before considering these submissions it is nece>sary to mention one point sugge•tecl in andwcr by th~ Jearne<l Solicitor-G0neral which ha.s appa· rently found favour with tho learned .Tudgrs of the Division Bench of the Bombay High Court in Pnkhra.j Champa/al .lain v. D. R. Kohli('). The point was this: The Central Board of Revenuo had issued certJ,in administrative' instructions as r~gards the manner in which the Customs Officors Rhoulcl regulate their procedure bf'f•:rc the goods are adjurlgecl to be confiscated under t.ho provisions of thu Sea Custom; Act. These a.re s⁰ t ·mt at p. 124() (ll (1959) GI Born. L.R. 123-0.

¶374

3 S.C.R. SUPREME COURT REPORTS

¶375

of the Report in 61 Bombay Law Reporter and need not be repeated here. 'l'be learned SolicitorGeneral's argument was that as the section was being administered subject to these safeguards, tht: provision must be held to be a reasonable restriction within<·!. (6) of Art. 19 of the Constitution. We are clearly of the opinion that the argument about the relevance of this matter is incorrect and must be rejected. vThis Court has held in numerous rulings, to which it is unnecessary to refer, that the possibility of the abuse of the powers under the provisions contained in any statute is no ground for declaring the provision to be unreasonable or void. Commenting on a passage in the judgement of the Court of Appeal of Northern Ireland which stated:

¶376

11161

¶377

The Collectar of Customs: Mttdras v. Nath.Ila Sampatl:u Che tty

¶378

A;yangar ].

¶379

"If such powers are capable of being exerci~ed reasonably it is impossible to say that they may not also be exercised unreasonably" and treating this as a ground for holding the statute invalid Viscount Simonds obsbrved in Belfast Corporation v. 0. D. Gommis.~ion('):

¶380

¶381

.,.

¶382

"It appears to me that the short answer to this contention (and I hope its shortness will not be regarded as disrespect) is that the v'tlidity of a measure is not to be determined by its applic11tion to particular cases ... .... . .... If it i8 not so exercised (i.e., if the powers are abused) it is open to challenge and there is no need for express provision for its challeL1go in the statute".

¶383

The possibility of abuse of a statute otherwise valid does not impart to it any element of invalidity. The converse must also follow that a statute which is otherwise invalid as being unreasonable cannot be saved by its being a<lministered in a reasonable manner. The constitutional validitv of the statute would have to be determined on tqe bsis of its I) 1960) A.C. 49, 520-51.

¶384

826 SUPREME COURT REPORTS [1962]

¶385

¶386

1flfl

¶387

Th. Cd/¥ ... •f Customs, Madras ·v. Notiotl/a Sampat"" Ch.tly

¶388

A »""l"' J.

¶389

provisions and on the ambit of its operation as reasonably construed. If so judged it passes tho test of reaaonablencss, possibility of the powers conferred being improperly used is no ground for prononncing the law itself invalid and similarly if the law properly interpreted and tesLcd in the light of the requirements set out in Part III of the Con· stitution does not pass the test. it cannot be pronounced valid merely because it is administered in a manner which might not conflict with the constitutional requirements. In saying this we are not to be untlerstood as laying down that a law which might operate harshly but still be constitutionally valid should be operated always with harshness or that reasonableness and justness ought not to guide the actual administration of such laws.

¶390

We shall now proceed to examine what in effect is the central point in the argument of the learned Counsel for the respondent which might be split up into two beads: (I) Under s. 178-A the burden of proof is ca.et upon a person from whom the goods have been seized which is impossible for him to discharge, with the consequence that though in form the impugned section purports to be a rule of evidence, it is virtually a law which per se effecte confiscation in E•very case to which it is applicable. (2) Is such a law a reasonable restriction on tho right to bold property or on tho right to carry on business within els. (5) & (6) of Art. 19, but they may be considered together.

¶391

Section 178-A operates to cast the burden of proof on the person from whose poseession goods specifie<l in its sub-s. (:?) are seized to establish that the goods l\r<l not smuggled. It mnst be apparent that this will include, in several cases, persons who are concerned in and are charged with being concerned in the act of illicit importation. In their case, as we have already pointed out, lea.med Counsel admits that the onus is properly shifted and that ~uoh a provision would be reasonable and so com1titutionally valid, though undoubtedly it mi_sht be possible for the State to prove

¶392

3 S.C.R. SUPREME COURT REPORTS 827

¶393

¶394

its case even without the aid of the pre'sumption raised by s. l 78A. Again there might be some cases where goods are seized from a person who is unable to account satisfactorily for his ownership or possession. In such cases also we did not understand learned counsel for the petitioner to suggest that the shifting of the burden of proof would be unconstitutional, for surely the principle underlying s. 106 of the Evidence Act which, it is concederl, enunciates a just and reasonable principle would serve to sustain the validity of the impugned provision. The two classes of cases which we have just set out would in themselves constitute most of the cases in which suspicion or information of the type which leads to seizure and the ensuing proceedings would occur. Section 178A however does not exhaust those classe11, and that is the ground of complaint by the learned Counsel, and it is precisely on this basis or for this reason that learned Counsel contends that the entire provision JS constitutionally invalid. This analysis would show that the provisions of the section are constitutionally valid in the sense of being reasonable restrictions on the right to hold property or to carry on trade or business in the large percentage of cases to which the section would apply, and it is only in the marginal cases already described that it can, with any justification, be contended that the restriction is unreasonable. From this position, the question that arises is whether bc~ause of the inclusion of this type of case the impugned provision should be held to be constitutionally invalid. This has to be ta.ken in conjunction with what is obviously correct, that any severance of the marginal cases and their exclusion from the operation of the provision would greatly reduce its effectiveness and provide innumerable loop-holes for easy evasion. It is in this context that tha test for ascertaining the "reasonableness" postulated of the restrictions in els. (2) to (6) of Art. 19 assumes great. relevance and crucial importance. There are several decisions of this Court in which the relevant

¶395

JU61 The Collector of CusttJms, Madras v. N athel!a Sampat!iU Chetty

¶396

Ayyangar ].

¶397

828 SuPRE~rE COUR'r REPORTS [1962j

¶398

1911

¶399

1911 critNi1i have bC'cn laid down hut we consider it T/:t Colltcl•' of suflicient to refer to a pe~sage ill the judgment of Nat/,,/ia Samp.thu Customs, v. kladras Patanjali Sastri, V. G'. Row<,¹ ). The learned Chief C. J., in .Tustic« State of eaid .Madras at p. 607 v.

¶400

C/,,tty of the Report:

¶401

A.1J'G'ltar J.

¶402

"It is important ill thie cont.ext to bear in mind that the test of rcnsonao!en<'~s, wherever prcsrribecl, should he applied to each individual statute impugned, and no <ibstract standard, or gerwrnl pattern of reasonableness can ho laid down as applicable to all cases. The natnrc of tho right allep;Pcl tu havo been infringed, tho underlying ·purpose of the restrictions imposed, the extellt and urgency nf tho evil sought to he r<'mcdied thereby, the disproportion of the imposition, the prcvailillg conditions at tlw tim<» should all enter into the judicial verdict."'

¶403

It would be apparent that this is in lint• with the groat, principle underlying the structure of the rights guaranteed by Art. HJ_. i-iz., a balaneing of the need for individual liucrtv in the mattt•r inter ulia of the right to hold property or of the right to trnde, with the need for social control in onh·r that the freedoms guara.nt!'cd to the individual subservc the larger ncods-moral, social, economic and political -of the community and thus ensure orderly prog· ress towards the goal indicated by the prt•amblc. It would follow that the rcasonablenes8 of the restraint would have to he judged by the magnitude of tho evil which it is the purpose of the restraint to curb or eliminate.

•

••

The submission of the learned ::lolicitorGeneral was that the reasonab1Pllt'H8 of the impug· ned provision had to be judged in the light of the widespread smuggling in commodities liko gold which if not checked was calculated to destroy national economy and hamper economic stability and progress, and that no

¶408

(11 [1952] S. C.R. :i97, 607.

¶409

3 S.C.R. SUPREME COURT REPOR'iS 829

¶410

¶411

reasonable alternative to the provision would achieve the desired end. In this connection he drew our attention to the Report of the Taxation Enquiry Commiosion, 1953-54, which pointed out the factual position regarding the existence of widespread smuggling in certain commodities including inter alia gold. They stated at p. 320 of the Report:

¶412

"11. Smuggling now constitutes not only a loophole for escaping duties but also a threat to the effective fulfilment of the objectives of foreign trade control. The existence of foreign pockets in the country accentuates the danger. The extent of the leakage of revenue that takes place through this process cannot be estimated even roughly, but, we understand, it is not unlikely that it is substantial. Apart from its deleterious effect on legitimate trade, it also entails the outlay of an appreciable amount of public funds on patrol vessels along the sea coasts and permanent works along the land border, and watch and ward staff on a generous scale. It is, therefore, necessary, in our opinion, that stringent measures, both legal and administrative should be adopted with a view to minimising the scope of this evil."

¶413

19~1

¶414

Tht Collector 1 Customs, .\tladros v. Nath~lla Samp'"lthu C!:etty

¶415

4r1angar .].

¶416

The deleterious effects of smuggling, as pointed out in the extract from the Report, are real and it is not in dispute that the prevention and eradication of smuggling is a proper and legally attainable objective and that this is sought to be achieved by the relevant law. If therefore for the purpose of achieving the desired objective and to ensure that the intentions of Parliament shall not be defeated a law is enacted which operates somewhat harshly on a small section of the public, taken in conjunction with the position that without a law in that form and with that amplitude smuggling might not be possible of being effectively checked, the question arises whether the law could be held to be violative of the

¶417

830 SUPREME COURT REPORTS

¶418

[HJ62)

¶419

19'1

¶420

Thi Coilu:w of C11.Jtom1 1 Mtu/r(l.J v. No1/,,l/a Somj>oliw Ch11ty

¶421

AY.)lantar ].

¶422

'.reedom guaranteed by Art. lO(l )(f) & (g) as imposmg an unrea.sonable restrain. That tht> restrictions arc in the "interest of the general puhlic" is beyond controversy. But is the social good to Le achieved Ly the legislation so disproportionately small that on balance it could be said that it has proceeded b<·yond the limits of reasonablenrAs? \Ve would answer this in the negative. \Ve would only add that there is authority for the position that "act;; innocent in themselves may be prohibited and the restrictions in that regard would bP rPasonablP, if the same were necessary to scc·urc t.he efficient enforcc.>ment of valid provisions. The inclusion of a reasonable margin to ensure effective enforcement will not stamp a law otherwis<' valid as within lt•gislative competence with the charact"r of uncon· stitntionality as being unrPasonable" [vide Mmwh<P' Lt1l v. St<ltP. nf T'u11jnli (') and Rmn JJ!um /Jass '" State of T'1111jub (')). Having gi,•en thC' mattt-r our best attention we have arrived at the condusion that the impugned legislation has not ovorstPpped the limits set by the Constitution and in saying this wo have adoptPd the test laid down in Slate of Jfadras v. V. 0. flow(') whos" lfTms we luwe quoted at the start of this discussion.

¶423

-~·

¶424

¶425

Proceeding thl'refore on the lmsis that the impugned provision was constitutionally valid we have still to consider two further points on the basis of which learned .Tudgos of the High Court upheld the case of the reRpondent even on thu assumption that s. I i8A was constitutionally valid. The first of these grounds was th11t tho impugned s. l 78A which had been introduced bv the Act of l!l55 (Act 21 of 19<'55) is not attract~l to the prohi· hitions enacted by s. 23A of tho Foreign Excha11ge Regulation Act. The reasoning on which this conclusion was reached was that s. 23A, whose terms we have set out, when ('Dacted in Hl52 in effect incorporated into the provisions of the Poreign Exchange Regulation Act all he relevant provisions of the Sea Customs Act, 1818, as that (1) [1961] 2 S. C.R. 34. (2) [19,6;_11.s, C:. R. 852. (3) [1952] S. C.R .. ,., 0<··

¶426

3 S.C.R. SUPREME COURT REPORTS 831

¶427

¶428

enactment stood in 1952, with the result that any subsequent amendments to the Sea Customs Act did not and could not affect, modify or enlarge the scope of the incorporated Sea Customs Act which had become part of the Foreign Exchange Regulation Act. In support of this conclusion the learned Judges of the High Court have relied largely on the decision of the Privy Council in 1'he Secr~tary of State for India in Council v. Hindustan Co-operative Insurance Society Ltd. (1). We consider that the legislation regarding which the Privy Council rendered the decision bears no resemblance, whatever to the matter now on hand and that the ruling in The Secretary of State for India 'in Council v. Hindustan Co-operative Insurance Society Ltd. (1), cannot therefore furnish any guidance or authority applicable to the interpretation of s. 23A of the Jf'oreign Exchange Regulation Act. To consider that the decision of the Privy Council has any relevance to the construction of the legal effect of the terms of Ii. 23A of the Foreign Exchange Hegulation Act is to ignore the distinction between a mere reference to or a citation of one statute in another and an incorporation which in effect means the bodily lifting of the provisions of one enactment and making it part of another so much so that the repeal of the former leaves the latter wholly untouched. In the case, however, of a reference or a citation of one enactment by another without incorporation, the effect of a repeal of the one "referred to" is that set out in s. 8( 1) of the General Clauses Act :

¶429

1961

¶430

The Collector 1J Customs, Madras v, }llathtUa Sampalhu Che Uy .A_yyangcr ].

¶431

"8. (1) Where this Act, or any Central Act or Hegnlation made after the commencement of this Act, repeals and re-enacts, with or without modification, any provision of a former enactment, then references in any other enactment or in any instrument to the provision so repealed sllall, unless a different

¶432

(ii [1931] L.R. 58 LA. 259,

¶433

8UP!tEME CUURT REPORTS [ J !Jtii)

¶434

Tk CQ//tcl()r uj Cwl4m.s, .•fod-ns v . ./l"alhtlla Sampatlw Chet17 AJYOntar J.

¶435

intention appears : be construed as i•tiferences to the provision RO re-enacted."

¶436

On the other hancl, the effect of incorporation is as stated by Brctt, L. J., in Clarke v. Bradlaugh(' ):

¶437

''Where a statute is incorp'>rated, by reference, into a second statute the repeal of the first statute by a third does not affect tho second".

¶438

This is analogous to, though not identical with the principle embodier! in s. 6A of the General Clauses Act .. nacted to i!Pfine the effect of repeals effected by rnpcaling ancl anwnding Atta which runs in these terms:

¶439

"6A. Whore anv Cf.'ntral Act or Re~ula· tion made after tllc commencement ot this Aet repc>als any t'!lactmcnt by which the text of any Central Act or RPgulation was amended by the cxprPss omission, insertion or substitution of any matter, then.. unless a different intention appears, thc 1cpeal shall not affect the continuanre of any such amendment made Ly the enactmc>nt so repealed and in operation at the time of such repeal."

¶440

We say 'not identical' because in the class of cases contemplated by s. fiA of the General Clauses Act, the function of the incorporating legislation is almost wholly to effect the incorporation and when that is accomplished, they die as it were a natural death which is formally l'ffocted by their repeal. In cases, however, dealt with by Brett, L. J., the legislation from which provisione are absorbed continue to retain their efficacy and usefulness and their indep•~ndent operation even after the incorporation is effected.

¶441

\Ve consider that on the language of the pro· visions in the two At·ts-s. 19 of the Sea Customs Act and s. 23A of the Foreign Exchange Regulation Act-there is no scope for any argument that there (I) ( 1881) 8 Q. B. D. 63.

3 ~.C.R.

SUPREME COURT REPORTS 833

¶446

has been any incorporation of the provisions of the earlier statute in the later. We shall repeat the terms of s. 19 of the Sea Customs Act which runs:

¶447

"19. The Central Government may from time to time, by notification in the Official Gazette, prohibit or restri0t the bringing or taking by sea or by land goods uf any specified description into or out of India across any customs frontier as defined by the Central Government."

¶448

1981

¶449

The CollettM of Customs, ltfadras v: N atlulla SampaJhu C/utty AJ!Yangar J

¶450

Section 8(1) of the Foreign Exchange Regulation Act enables similar notifications by the Central ,._." Government in these terms:

¶451

"8. (I) The Central Government may, by notification in the Official Gazette, order that subject to such exemptions, if any, as may be contained in the notification, no person shall, except with the general or special permission of the Reserve Bank and on payment of the fee, if any, prescribed bring or send into India any gold or silver or any currency notes or bank notes or coin whether Indian or foreign.

¶452

¶453

Explanation.-The bringing or sending into any port or place in India of any such article as aforesaid intended to be taken out of India without being removed from the ship or conveyance in which it is being carried shall nonetheless be deemed to be a bringing, or as the case may be, sending, into India of that article for the purposes of this section."

¶454

In this situation s. 23A of the Foreign Exchange Regulation Act enacts:

¶455

" ............ the restrictions imposed by subsection ( l ) ............ of section 8 ........... . shall be deemed to have been imposed under section 19

¶456

834 80PREME COURT REPORTS fHJ62J

¶457

1961

¶458

of the :)ua Customs Aet, 1878, 1tnd all tho provisions of that Act shall have <>ffect aecord ingly ............ " ............ " "

¶459

Tiu CoJlect<>r of provisions of that Act shall have <>ffect Customs, v . Jf 1;,{rtu aecord ingly ............ " ............ " " . \reJhtlla Sct¥0llm Chilly The offcct, therefore, of d. 23A i$ to treat the text of tho notification bv the Central Government undor .i>·7antlfT J,_ s. 8(1) as if it had bOen issued under s. 19 of the Sea Customs Act with the title and the recital of the sourco of power appropriate to it by the creation of a h·gal fiction. It would be obvious that in tho context and on the language hero employed, ifs. !!} uf the Sea. Customs Act wero repealed thl'ro would no longer bn any legal found:ition fur invoking tho pcn;d provisions of tho Sea Customs Act to a contravention of a notification under s. 8(1) of tho Foreign Exchange Regulation Act.

¶460

This conclusion is reinforcecl by a comparison of the usual and normal or recognized formulae genera.Uy employed to effect incorporation, suoh that changes in or even repeal uf the incorporated statuk is n0t intended per 8e to affect the operation of the incorporating legislation. It is sufficient to pick out a few of tho well-known formulae employ. eel which would indicate that normally the draftsman does not lenvo his intent.ions in doubt. For instanc:e, in s. 20 of 53 and fi4 Viet. Ch. iO- -Housing of tho \Vorking Classes Act, 18UO, the words used \'Crc:

•

"shall, for that purpose, be doemecl to form part of this Act in the samo manner as if thoy wero enacted in the bocly thereof;".

¶465

In !i-! and 55 Viet. Ch. I!l, s. !(:~). the language employed was :

¶466

"The pro\·isions o f s. I:H of tho said Act (set out in tho schedule) shall apply as if they wne herein re-enacted."

¶467

To take more modern instnnce8, IO and 11 Georgo VI Ch. 51, (the Town and Country Planning Act, HH 7), s. 44( 1) enacts :

¶468

3 S.C.R. SUPREME COURT REPORTS 835

¶469

"Sections 19 to 30 of the Act of 1944 which provide for the disposal and appropriation by local Planning Authorities of land acquired or appropriated under Part l of that Act, for the carrying out by such authorities of development of such land, and for other matters arising in relation to the acr1uisition of land in that part shall, except so far as repealed by this Act, be incorporated with this part of this Act, subject to the amendments specified in the second column of the 8th Schedule of this Act and of the following provision of this section".

¶470

19~1

¶471

The Col/1ctor of Custom.t, M aJras v. Natherla Sampathu ChtUy , A)'yangar J.

¶472

6 & 7 Eliz. 2 Ch. 63 (the Park Lane Improvement Act, 1958), s. 5 reads:

¶473

"The Land Clauses Act (other than the excepted provision); so far as they are a pplicable for the purposes of this Act and arf' not inconsistent with the provisions thereof, are hereby incorporated with this Act."

¶474

A comparison of the formulae with the text of • s. 23A shows that the reference in it to s. 19 of tho Sea Customs Act is merely for rendering notifications under the named provisions of the Foreign Exchange Regulations Act to operate as notifications under the Sea Customs Act, and that it cannot have the effect of incorporating t.he relevant provisions of the earlier Act into the Act of 194 7, so aA to attract the rule formulated by Brett, L. J., in Clarke v. Bradlaugh already quoted.

¶475

A close examinat.ion of the decision of the Privy Council in The Secretary of 8tate for India in Council v. Hindustan Co-operative Insurance Society Ltd. (¹ ) would show that the incorporation effected in the statute there under consideration-the Calcutta Improvement Trust Act, 1911-referred to by their Lordship as the "Local Act" was in oxpress terms and in the form illustrated by 54 & 55 Viet., Ch. 19, just now referred to. The "Local Act" in ( 11 (1931) L.R. 58 I.A. 259 .

¶476

•

¶477

•

¶478

836 SUPREME COVRT REPORTS [1962]

¶479

/961

¶480

11w Coll"'" of Cu.slim!, Madras Y. NaJhrlla SampaJ\u ChtltJ

¶481

AJJ'""l"" J.

¶482

dealing with tho acquisition of Land for the purposes designated by it, made provision for the acquisition under the Land Acquisition Act, and the pro\·isions of the Land Act Acquisition were subjected to numerous modifications which wero sot out in tho Schedu]t,, so that in C'fTcct the "Local Act" was held to be the enactment cf a Special Law for the acquisition of l:tnd for the sp<•cial purpose. It waR in the context of these and several otho:· provi~ions which point<'tl to the absorption of certain of the provisions of the Land A<'quisition Act into the "Local A('t" with \·ital modifications thnt thPir Lorcl,hips ~tat•'d:

¶483

"But their Lordships think that there are other and perhaps more cogent objcctiLns to this contention of tho Secretary of State, and thoir Lordships are not prepared to hold that the sub-section in que8tion, which was not enacted till 1!)21, can be n·gardP.cl as incorporated in the Local Act of 191 l. ft was not part of the Land Arquisition Act \dH'n the local Act was passed, nor in atlopting the provisions of the Land Acquisition Act is there anything to suggest that the Bengal Legislature intended to bind thl'mscl vcs to any future additions ~hich might he mado to that Act. It is at least conceivable that new provisions might have been aclclrd to the Land Acquisitic.;n Act which woulrl be wholly unsuitable to the local coc!P. Nor ag,1in, docs Act XIX of 1021 contain any provision that the amendments ena<1tcd by it are to be treated 88 in nny way retrospective, er are to be regarded as affecting any otlwr enactment than the Land Acquisition Act itself. Their Lord.ships regarcl the local Act as doing nothiJJg more than incurpornting certain provisions from and existing Act, and for - convenience of tlrafting doing so by reference to thnt Act, in~tcad of setting out for itscl f at length tho provisiong whicl} it was desired to a d opt. "

¶484

3 S.C.R. SUPREME COURT REPORTS 837

¶485

It was for thie, among other reasons, that the Judicial Committee held that rights of appeal created by amendments effected to the Land Acquisition Act subsequent to the enactment of the Local Act were not attracted to the incorporated provisions in the "Local Act". We consider that there is no analogy between the provisions held to be incorporated in the Calcutta Improvement Trust Act 1911 dealt with by the Privy Council and s. 23.A of the Foreign Exchange Regulation Act now under discussion. 'Ve hold therefore that when a notification issued under s. 8( 1) of the Foreign Exchange Regula.ti on Act is deemed for all purposes to be a notification issued under s. 19 of the Sea Customs Act, the contravention of the notification attracts to it each and every provision of the Sea Customs Act which is in force at the date of the notification.

¶486

1961 The Collector of Cu.rt911U, MaJrllS v. N athella S ampathu C/,,tty A.yyangar J.

¶487

The other ground upon which the learned Judges upheld the responnent's contention that the rule as to the burden of proof enunciated in s.178 A was not attracted to the present case was based on the finding that the Customs Officer who effected the seizure did not, at the moment of seizure, entertain a reasonable belief that the goods seized were smuggled. The learned SolicitorGeneral who contested the correctness of this finding did not urge that the words in s. l 78A "in the reasonable belief that they are smuggled goods" did not prescribe a, condition precedent to the applicability of that provision whieh had to be satisfied before the provision could be invoked against the affected party. As we have already pointed out, his further submission was that such a reasonable belief must not onlv be entertained by the seizing officer and besides that the question whether the officer had done so or not, was a matter which could objMtively be determined by the adjudicating authority acting under s. 182. And these submissions he made, as aids to J:i,iB µi.ail). con tent ion that the burden of proof

¶488

838 SUPHE.t'\f.E COURT REPORTS

¶489

(1962]

¶490

1961 imposed was reasonable. We are pointing this 1'ht Coll1ctor of out beoause before the learned Judges of the High Cu.stont5, ,v.mas v • Court the argument apparently advanood was that .'\lathtlla s,mpa1fn4 the test was tho subjecth·o bolief of tho seizing ChLtt;· officer which could only Le disproved hy tLe esta.i:yanear ]. Llihment cf circumstances in which no such belief could over honestly or reasonably be entertained hased on tho refen•nce to "the subjectivity of the officer" in tlw judgment of th is Court in Babu/al Amthalal Metlui v. The Col/eel-Or of Ou.~toms, c .• lcutla (¹ ). It was by approa .. hing the problelll oven from this very narrow stand point that tho l('arned ,Judges re11.ched a conclusion on this pa.rt of the case f1woumhle to the respondent.

¶491

For the decision of thi.s point it is necessary to C•\n vass :he fads which occurred at tho moment of seizure in some detail. As narrated at the commt•ne<•rnent of this .TudgmPnt, andgopal, the ipondcnt-tht1 employce of the first n·spondent Wi\8 intercept<•d first Ly the He11.d Constable <·ft he Madras 8tato Prohibition Intelligeuce DepartmPnt and his clothing wa searched anrl the fo1r gold-hhicks wcif!hing about a thou•aud tolas wcr" seized by the Head Const<tble. Tlw Prohi.Jition Crirne branch has a Criminal [m·cstig&tion Dt-partment and the seized gold m\s handt•d ovor by the Head Constable to the Inspector of Police' Criminal r .. vcstigation DPpartment on the sam• day. It was this Ji1spcctor (C. l{ajamani"kam) that forwardecl thegolcl to tlw Inspector of Customs (Special Division) with a Iott.er in theso terms:

¶492

"I scrid herewith I ,000 (One thousand) tolas •Jf gold in 4 (four) blocks seized from U. Nandgupal, Clerk, ~i/s. Xathclla Samp;itlrn Chetty, ~[adms, No. l 77, :". S. C. Boso !toad: The passenger came from Bombay to Madras in ~. Y. Bomhav ~fail on 2Gth June I 956, at fl A. )!. He has no records ' •:) [1957; s.c.R. 1110.

;._

"-"'"

3 S.C.R. SUPREME COURT REPORTS 839

¶497

¶498

of any kind for the purchase of gold. Hence the gold was seized and he was arrested under a mahazar.

¶499

The passenger and gold are forwarded for further action under Customs Act."

¶500

It would be seen that up to this point there had been no seizure by an officer acting under the Sea Customs Act within s. l 78A of the Act. It has also to be noticed that Nandgopal had in his possession admittedly no receipt of any kind for the purchase of the gold ; further he had on him the letter addressed by the first respondent to Mathuradas Gopalakrishnayya & Co., Bullion merchants, Bombay intimating that cash to the extent of rupees one lakh was being sent through the representative, which obviously could not possibly remain in the possession of Nandgopal if h1s story about his taking cash to that addressee and the purchase of the gold from him were true. It was in these circumstances that the Inspector (SpAcial Division) Customs House recorded :

¶501

"Detained four blocks of gold said to weigh about 1,000 tolas from Shri Nandgopal, representative of Nathella Sampathu Chetty & Sons for further investigation''.

¶502

1961

¶503

The Collector of Custams, .1f adras v.

¶504

l•lathdla ,·ampa!hu Chetty

¶505

A):vangnr ].

¶506

There are two views possible of the exact import of this note by the Customs Inspector : ( 1) that it wa.s a "detention'' preliminary to a seizure which would be effected after the further investigation, and (2) that which found favour with the learned Judges of the High Court that it was itself the seizure. In support of the first of the above constructions attention mav be drawn to the fact that the events narrated·· earlier took place before 8 O'clock in the morning and that immediately thereafter Nandgopal was taken to the Customs House and was examined there at about 8.30 and in the course of his examination he made several statements which were obviously incorrect ·and whose error was capable of being detected then and there.

¶507

840 SUPREME COURT REPORTS [1962]

¶508

1961

¶509

Th Colltcf()f of Cuslams, Mad1a3 v, : · athtlla Scvnpatliu Ch,t/Y

¶510

A.1.)"1'z_~ar ].

¶511

(I) Ho stated that the golrl had bePn bought from )1/~. fathnra<las Gop.alakrishnayya & Co. h:iving pai'l th'.·m the Hum of rupees mw lakh which was refrrred to in the letter seized from him, but obYiously if the gol<I had been purchased from that firm the lettnr could not remain with :N'andgopal and this <li<'repancy he was unablt> to explain at that stage, for he said "I <'annot account for the presence of this letter on me which sh"uld ha'O been given to the firm in Bombay". (2) ~andgopa.l who spok<' to having recein-d gold and th,.n sreretcrl it. in the inner side pockets of his waist coat and stitched it statc<I, th•1t the gold was rnoosa gold and it was found tlrn.t the gold seized from him was not that ,-ariety. It is really a.ftN this statem .. nt was record"d at tho Custo1t1s House that the "iuvcstigati"n" began. It is therefore possible to take the view that tho detention resulted in a seizure after tho statement was recorded. There was ample material at that stage on the basis of which it could be said that a reasonable bcli('f could ht> entertainl'd that the golcl seized was Rmugglcd.

¶512

.. •

¶513

•

¶514

Evon taking the record of the detention in the mahazar prepared at the Ccntrnl station as "thP seizure" we do not agrel' with the learned .Judges of the Hih C.rnrt th:•t the seizing-oflkl·r could not entertain a wasonablt' belief that the gold sl·ized was smuggled. The rl'asonableness of the belief has to be judged by :di the circumstances app<'aring at that monH·nt. In the presl'nt case, tho quantity of gold in the possession of Nandgopal-of the valun of over one lakh of rupeeswas certainly a Vl'l'Y relevant factor to be taken into account an<l which could be considered in judging thti matter. No doub.t, such a quntity could bo the subject of booo fide purchase m the course of normal trade, particularly whPn the pernon in possession was. the repreSi•Dta.tive of a. ·::ell-known firm of hulhon <lealors. But ono

¶515

-- ... •

¶516

¶517

3 S.C.R. SUPREME COURT REPORTS

¶518

8~1

¶519

would also normally expect that the representative would have secured a bill or voucher to evidence the purchase. In other words: (I) it was not a case of a fow trinkets of gold or small quantity purchased for domestic or personal use but a considerable amount for purposes of business, (2) the undelivered letter addressed to M/s. Mathuradas Gopalakrishnayya and Co., which admittedly had a bearing upon the purchase of gold in the possession ofNandgopal necessarily drew an amount of suspicion on the theory of a bona fide purchase. These circumstances, in our opinion, which were admittedly present at the moment when the gold was taken bv the Customs Officer at the Central Station did tend to raise a reasonable suspicion that the gold seized had been obtained illicitly and this was sufficient to constitL1te, in the words of the statute, "a reasonable belief that the goods (gold) \Vere smuggled".

¶520

1961

¶521

The f",,'olleclor of Customs, Jfadras v. J.la¹ hella Sampath1' Chetty

¶522

A_Y)'' nr.;ar ].

¶523

We are therefore of opinion (I} that s.l78A was constitutionally valid, (2) that the rule as to the burden of pro~f enacted by that section applies to a contravention of a notification under s. 8(1) of ' the Foreign Exchange Regulation Act, ID4 7, by virtue of its bein-; deemed to lie a contravention of a notification under s. 19 of the Sea Customs Act, ( 3) that the preliminary requirement of s. I 78A that the officer seizing should entertain "a reasonable belief that the goods seized were smuggled" was satisfied in the present case. The result therefore is that the petitions under Art. 226 of the Constitution filed by the respondent before the High Court should have been dismissed. We accordingly allow appeals 408 and 409 with costs throughout (one set of hearing fees), the writ petitions filed by the respondent being directed to be dismissed. Iu view of our decision in appeals 408 and 409, the points raised by the respondent in appeal 410 of 19o0 do not require to be decided. That appeal fails and is dismissed. There will however, be no order as to costs.

¶524

842 SUPREME OOURT REPORTS [1962]

¶525

111!1

¶526

Criminal Appoals No. 33 of 1959, No. 126 of Tiu Colltclor of 1959, No. 123 of 1959, Civil Appeal No. 5ll of Cwtoms, M.adrtu v. 1960 and Writ Petition No. ll8 of 1958 were not N .ih.lla Sampalhu heard on the merits and wo havo not oxamined Cllltty the_f~cta of any of those cases. Those appeals and AJ7an1ar ]. petitions should, therofore, be posted for hearing in the usual oourse.

¶527

Appeals ooa. 408 ond 40~ alloww. Appeal 110. 410 dism1'.ssed.

¶528

¶529

HMI S1Jltmber 25.

¶530

RAKAL PAPERS (P) LTD., AND OTHERS

¶531

¶532

THE UNIOX OF INDIA

¶533

(B. P. SINHA, c. J., A.K. SARKAR, K.C.DASGUPTA, N. RA.JAGOPAJ,A AYYA:<'OAR and J. R. MunHOLKAH, JJ.)

¶534

Fundatnmtal Right-Fretdom of •puch-Statut. rti}ulating number of pag'8 in ntw•paper according to price charg<dGo1 ... titutio114lity of-N•w•paper (I'ri" and /'a~e) Act, 1956 (46 of 1966)-Daily New•paper (Priu and Page) Ord'", 1960Co .... tittition of India, Art. 19 (1) (a).

¶535

•

¶536

The Newspaper (Price and Page) Act, 1956, empowered the Central Government to regulate the prices of newspapers in relation to their pagec; and sizes and to regulate the alloca- tion of space for advertising matter. u~der this Act the Central Government marle the Daily Ncw,papers (Price and Page) Order, 1960, thereby fixing the maximum number of pages that might be published by a newspaper according to the price charged and prescribing the number of >upplements that could be issued. The petitioner challenged the Act and the order as contravening Art. 1 q (1) (a) of the Constitu- tion.

¶537

1/i/4, that the Act and the Order were void as they violated Art I 9(1) (a) of the Constitution and v.ere not saved by Art. 19(2). The freedom of speech and expression guaranteed by Art. 19(1) (a) included the freedom of the prm. For propagating his ideas a citiz~n had the right to publish them, to di.5$emlnate them and to circulate them, either by word of mouth or by writing. The right extended not merely to the matter which he was entitled to circulate but also to the

¶538

• .....,_

The Collector of Customs, Madras v. Nathella Sampathu Chetty and Another

Case brief

What is this about?

What did the court decide?

What the court decided

The Collector of Customs, Madras v. Nathella Sampathu Chetty and Another

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Immani Appa Rao and Others versus Gollapalli Ramalingamurthi and Ors.

Magiti Sasamal versus Pandab Bissoi

Mool Chand Sharma versus State of Uttar Pradesh

The Matter of Mr. 'a' an Advocate versus .

Sakal Papers (P) Ltd., and Others versus the Union of India

Jawahar Lal Burman versus Union of India