Appeals Nos
408 to 410 of 1960
Appeals from the judgment and order dated September 11 1958 of the Madras High Court in Writ Petition Nos
384 of 1957 and 660 of 1958
WITH Criminal Appeals Nos 38 126 and 123 of 1959
Appeals by special leave from the judgments orders dated May 16 1958 June 19 1959 and April 14 1959 of the Punjab High Court in Criminal Revisions Nos 290 of 1958 and 144 of 1959 and Criminal Appeal No 677 of 1958 respectively
AND Civil Appeal No 511 of 1960
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
AND Petition No 118 of 1958
Petition under article 32 of the Constitution of India for  enforcement of Fundamental Rights
C K Daphtary Solicitor General of India H J Umrigar and P M Sen for the appellant in 790 C As
Nos 408 and 409 of 1960 and respondent in C A No 410 of 1960
N A Palkhivala section R Vakil R J Joshi
section J Sohrabji J B Dadachanji section N Andley Rameshwar Nath and P L Vohra for the respondents in C As
Nos 408 and 409 of 60 and appellant in C A No 410 of 1 960
R section Narula for the appellant in Cr A No 38 of 59
C K Daphtary Solicitor General of India N section Bindra and D Gupta for the respondent in Cr A No 38 of 1959
T M Sen for Intervener No 1 in Cr A No 38 of 59
K N Keswani for intervener No 2 in Cr
A N o 38 of 59
R section Narula and R L Kohli for the appellant in Cr A No 126 of 1959
C K Daphtary Solicitor General of India H J Umrigar and D Gupta for the respondent in Cr A No 126 of 1959
N C Chatterji section K Kapur and Ganpat Rai for the appellant in Cr A No 126 of 1959
A section Bodbe Shankar Anand and Ganpat Rai for the appellant in C A No 511 of 1960
C K Daphtary Solicitor General of India H J Umrigar and T M Sen for the respondent in C A No 511 of 1960
section Venkatakrishnan for the petitioner in Petn
No 118 of 1958
C K Daphtray Solicitor General of India H J Umrigar and R H Dhebar for the respondents in Petn
No 118 of 1958
September 25
The Judgment of the Court was delivered by AYYANGAR J
The Act 8 of 1378 referred to hereinafter as the Act 791 was amended by section 14 of Act 21 of 1955 by the introduction of section 178A reading 178A 1 Where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled goods the burden of proving that they are not smuggled goods shall be on the person from whose possession the goods were seized
2 This section shall apply to gold gold manufactures diamonds and other precious stones cigarettes and cosmetics and any other goods which the Central Government may by notification in the Official Gazette specify in this behalf
3 Every notification issued under Sub section 2 shall be laid before both Houses of Parliament as soon as may be after it is issued
 It is the constitutional validity of this section that is the common point which arises in these several cases which have been 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 fact of Civil Appeals 408 to 410 of 1960 in dealing with these petitions
Civil Appeals 480 to 410 These appeals come before us on a certificate granted by the High Court of Madras under Arts1321 and 1331c of the Constitution and are directed against the judgment and order of the 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 Nathella Sampathu 792 Chetty  Sons referred to hereafter as the respondent
The facts giving rise to these appeals are briefly as follows  On the morning of June 26 1956 one Nandgopal an employee of the respondent alighted at the Central station in Madras from the Bombay Express
Nandgopal was intercepted and questioned by a Head Constable of the State Police Service attached to the Prohibition Intelligence Department
Nandgopal admitted that he was in possession of gold which he was bringing for his firm the respondent from Bombay
The Head Constable immediately contacted the officers of the Preventive Section of the Customs Department who were on duty at the Central station who interrogated Nandgopal and Eeized from him four blocks of gold weighing in all about 1000 tolas
Enquiries were made to verify the story narrated by Nandgopal as to the source from which he obtained the gold and thereafter 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 smug led an onus Customs Act and directed the confiscation of the gold
The respondent thereupon filed a petition Writ Petition 384 of 1957 under article 226 of the Constitution before the High Court of Madras for the issue of a writ of certiorari or other appropriate writ for quashing the order of the Collector of Customs on various grounds to which we shall advert later including the constitutional validity of a 178A
While this writ petition was pending the respondent filed another petition Writ Petition 660 of 1958 for a writ of mandamus directing the Collector to return the gold seized and confiscated by him
793 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 384 of 1957 that section 178A of the was void under article 13 of the Con stitution
They further held that even if section 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 entertain a reasonable belief that the gold was smuggled with the result that the order of confiscation was invalid
Besides the learned Judges were also of the view that section 178A of the 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 hear and determine the question about the gold seized being smuggled gold without reference to the rule as to onus of proof enacted by section 178A
The appellant the Collector of Customs Madras obtained leave from the High Court under articles 132 and 133 of the Constitution to appeal to this Court against the orders in writ petition No 384 of 1957 and No 660 of 1958 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 transaction
We shall first take up for consideration Civil Appeals 408 and 409 of 1960 filed by the Collector of Customs because unless those appeals fail there would be no need to decide the relief to which the 794 respondent would be entitled in Civil Appeal 410 of 1960
In order to appreciate the contentions raised it would be necessary to set out the statutory provisions which form the background of the impugned provision section 178A of the 
The Foreign Exchange Regulation Act 1947 Act  7 of 1947 was brought into force on March 25 1947 by a notification issued by the Central Government under section 13 of that Act
The preamble to the Act recites It is expedient in the economic and financial interests of India to provide for the regulation of the import and export of currency and bullion
 Section 8 of this Act refers to the import of gold the commodity with which these appeals are concerned
It enacts 81
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 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 of 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
 Gold is defined in section 2f of this Act thus  gold  includes gold in the form of Coin whether legal tender or not or in the form of bullion or ingot whether refined or not and 795 Jewellery or articles made wholly or
mainly of gold
 These provisions have to be read in conjunction with the provisions of the which form as it were integrated provisions in relation to the import and export of among other commodities gold and section 23A of the Foreign Exchange Regulation Act which was introduced by an amendment of 1952 effects this co ordination
This section reads 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 sec tion 1 of section 13 shall be deemed to have been imposed under section 19 of the  and all the provisions of that Act shall have effect
accordingly except that section 183 thereof shall have effect as if for the word shall  therein the word may  were substituted
 Turning now to the  section 1678 enacts 167
The offenses 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 offenses respectively Section of this Act to Offenses which off Penalties ence has re ference
If any goods 18  19 Such goods the importation of shall be liable which is for the to confiscation time being prohi and bited or restricted 796 by or under Chapter any person concerned IV of this Act be in any such offence imported into or shall be liable to a exported from India penalty not exceeding Contrary to such three times the value prohibition or res of the goods or not triction or exceeding one thousand rupees
if any attempt be made so to import or export any such goods or if any such goods be found in any package produced to any officer of Customs as containing no such goods or if any such 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 the limits of any port in India or if any goods the exportation of which is prohibited or restricted as aforesaid be brought to any wharf in order to be put on board of any vessel for exportation contrary to such prohibition or restriction 797 Section 19 referred to here reads 19
The Central Government may from time to time by notification in the Official 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
 The other provisions which have a bearing upon the points arising for discussion with reference to the validity of the impugned section 178A of the are  section 178
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
 Is
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 section 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 or any person is liable to penalty such confiscation increased rate of duty or penalty may be adjudged a without limit by a Deputy Commissioner or Deputy Collector of Customs or a Customs collector b up to confiscation of goods not exceeding two hundred and fifty rupees in value and imposition of penalty or increased 798 duty not exceeding one hundred rupees by an Assistant Commissioner or Assistant Collector of Customs 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 as the Chief Customs authority may from time to time empower in that half in virtue of their office Provided that the Chief Customs authority may in the 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 officer by name or in virtue of his office the powers indicated in clauses a b or c of this section 183
Whenever confiscation is authorized by this Act the officer adjudging it shall give the owner of the goods an option to pay in lieu of confiscation such fine as the officer thinks fit
 Immediately the Foreign Exchange Regulation Act came into force in March 1947 a notification was issued on March 25 1947 under section 81 placing a ban on the importation of gold except with the permission of the Reserve Bank
This notification was superseded and replaced by a fresh one dated August 25 1948 also issued under the powers conferred by sub section
1 of section 8 of the Foreign Exchange Regulation Act and this is the notification which continues in force up to this date and which is relevant to the proceedings against the respondent
The notification ran 1 Restrictions on import of gold and silver
In 1 exercise of the powers conferred by 799 sub section 1 of section 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 1211 FI47 dated the 25th March 1947 the Central Government is pleased to direct that except with the general or special permission of the Reserve Bank no person shall bring or send into India from any place outside India a any gold coin gold bullion gold sheets or gold ingot whether refined or not or b any silver bullion 
It would be noticed that on the law as it stood upto 1952 before section 23A was inserted in the Foreign Exchange Regulation Act the importation of gold in contravention of the notification of August 1948 issued under section 81 of the Foreign Exchange Regulation Act would have been an importation contrary to section 19 of the  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 section 1678 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 section 178 of the 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 section 181
Thereafter the officers specified in section 182 would have adjudged the confiscation of these goods subject to the option mentioned in section 183 with the modification to this provision enacted by section 23A of the Foreign Exchange Regula tion Act
It would further be manifest that at that date before the gold seized was liable to be dealt with under the third column of a 1678 by 800 an officer adjudicating on the matter under section 182 the burden of proving that the gold was smuggled lay 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 the penalty could not have been ordered
The effect of the imposition of the severe restrictions on the 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 circumstance that the internal production of gold was very little resulted in a great disparity between the price of gold in India and outside India ie in the international markets
This naturally gave a great incentive to smuggling which besides depriving the State of its revenue also posed a grave threat to national economy
It is only necessary to add that gold was not the only commodity which gave rise to this problem
But as these appeals are concerned with gold we 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 recommended 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 so as 1 to make smuggling a criminal offence and 2 to transfer the onus of proof in respect of offenses relating to smuggling to the person in whose possession any dutiable restricted or prohibited goods are found
 In pursuance of these recommendations the was mended by Act 21 of 1955 and 801 among others section 178A whose terms we have set out was introduced into it
As the question of the constitutionality of section 178A 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 teh precise grounds on which the challenge to the validity of the provision was rested before us
Very soon after a 178A was enacted its constitutional validity was challenged by an original petition filed in this Court Petition 98 of 1956Babulal Amthalal Mehta vs The Collector of Customs Calcutta 1The goods involved in the case were diamonds
Four hundred and seventy five diamond pieces which had been 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 is
The validity of the confiscation was challenged before this Court on the ground that 3
178A was unconstitutional as being violative of Art14 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 B 178A raised in the present appeal are concluded in his favour by this judgment
We shall therefore have to examine the exact scone 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 article 14 of the Constitution which the following extract from the head note would indicate Section 118A of the 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 1 802 they are_ seized is nor discriminative in character and does not violate equal protection of law guaranteed by Art14 of the Constitution
The validity of the section was next attacked before
the High Court of Bombay in a Writ Petition filed under article 226 of the Constitution on the ground that it violated article 191f and g of the Constitution 
M G Abrol vs Amichand1
The article involved in that case was gold which had been seized from the petitioner and directed to be confiscated by an adjudicating officer under section 182 of the 
The case came up for hearing before K T Desai J and the learned Judge held that section 178A was unconstitutional as being an unreasonable restriction on the citizens  right to hold property and to trade and also that even assuming the provision to be constitutionally valid the requirements of the section had not been complied with in the case before him inasmuch as the seizing officer had not at the moment of seizure reasonable belief that the gold seized was smuggled
The next decision in order of date is that of the Bench of the Madras High Court dated March 11 1957 which is now under appeal before us in Civil Appeals 408 to 410 of 1960
The reasoning of the learned Judges of the Madras High Court is on the same lines as that of KT Desai J in the judgment just now referred 
Subsequently the Nagpur Bench of the Bombay High Court had to consider the same question and their decision is reported in Pukhraj Champalal Jain vs D R Kohli 2
There the learned Judges dissented from the decision of K T Desai J in M G Abrol vs Amichand 1 and of the Madras High Court in Nathella Sampathu Chetty vs The Collector of Customs
It may be mentioned that the arguments of the learned Solicitor General on behalf of the appellant were in substance the reasoning on which the decision of the Nagpur Bench rests
To complete 1 at p 1046 2 1959 61 Bow
LR 1230 3 A IR  803 the narrative it is only necessary to add that an appeal was preferred by the Customs authorities from the decision of K T Desai J
The appeal however was dismissed on the ground that even if section 178A were valid as held by that 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 M G Abrol vs Amichand 1
We shall now proceed to deal with the points Urged by learned Counsel for the respondent in support of his plea that the impugned provision violates the fundamental right to hold property under article 191f and the right to carry on trade or business under article 191g and was not saved by cls
5  6 respectively of article 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 a 178A of the which was called in aid by the Collector of Customs to direct the confiscation of the gold seized to be unconstitutional and therefore void under article 13 the learned Judges also upheld two further contentions urged on behalf of the respondent in support of their petition  1 that section 178A was not attracted to the determination of a question raised in relation to the confiscation of an article imported in contravention of a notification under section 81 of the Foreign Exchange Regulation Act 2 that section 178A 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 examining the constitutional validity of section 178A 1 804 Before embarking on this enquiry it is necessary to deal with the argument of the learned Solicitor General that every point about the constitutional validity of section 178A is concluded in his favour by the judgment of this Court in Babulal Amthalal Mehta vs The Collector of Customs Calcutta 1
we have already extracted the head note of the report in the Supreme Court Reports which would appear to indicate that this Court considered only the impact of article 14 of the Constitution on the provision
Nevertheless there are some passages in this judgment which would be immediately referred to on which reliance was placed by the learned Solicitor General in support of his contention that this judgment is an authority for the position not merely that section 178A does not violate article 14 but that it impliedly
if not expressly 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 article 195  6 of the Constitution
We 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 relating to seizure the adjudication of confiscation the imposition of penalties appeals from the orders of the Customs authorities to the higher revenue authorities and the terms of section 178 proceeds No doubt the content and import of the section are very wide
It applies not only to the actual smuggler from whose possession the goods are seized but also to those 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 are smuggled goods and the same is seized under the provisions of this Act then the person from whose possession 1 1957 SCR1110
805 the goods were seized however innocent he may be has to prove that the goods are not smuggled articles
This is no doubt a very heavy and onerous duty cast on an innocent 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 prerequisite for the application of the section is the subjectivity of the Customs officer in having a reasonable belief that the goods are smuggled
 This passage is followed by an examination of the matters with reference to article 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 But Mr Chatterjee argues that the 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 lay ing 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 article 14 of the Constitution
A large number of cases have been cited at the Bar in support of the respective contentions of the parties
 This is followed by a citation from the decisions of this Court in which the scope and content of article 14 were discussed and in particular a passage in the judgment in Budhan Chaudhury vs The State of Bihar1 where the principle that article 14 1   1048 1049
806 does not forbid classification on a reasonable and rational basis is extracted
The judgment proceeds  A cursory perusal of section 178A will at once disclose the well defined classification of goods based on an intelligible differentia
It applies only to certain goods described in sub a
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 been classified and the presumption raised by the section obviously have a rational relation to the object sought to be achieved by the Act  
The impugned section cannot be struck down on the infirmity either of discrimination or illegal classification
 We are therefore satisfied that the decision of this Court considered the validity of section 178A only with reference to article 14 and that it is not a decision regarding the impugned legislation being or not being obnoxious to article 191f  g
It is only necessary to add that at the beginning of the discussion Govinda Menon J specifically points out that he was not considering any attack on section 178A based on an infringement of article 191f  g for he said  Though Mr Chatterjee faintly argued that the provisions of article 191f  g and article 31 of the Constitution had been violated he did not seriously press those contentions
The main point of the attack was centered on the contention that section 178A was violative of principles of equal protection of the laws guaranteed under article 14 of the Constitution
 807 We cannot accept the further submission either that even if this Court did not in terms consider the validity of section 178A with reference to article 19 1 f  g still the reasoning by which it rejected the contention that it violated article 14 would be sufficient to cover the former also
No doubt there are situations when the points regarding a violation of Art 14 and an objection that a restriction is not reasonable so as to conform to the requirements of article 195 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 law 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 however there is guidance and the legislation is challenged on the ground that the law with the definite guidance for which it provides has out stepped 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 article 14
It is therefore necessary for us to consider whether section 178A is obnoxious to the rights guaranteed by article 191f  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 necessitated the enactment of this provision
As already indicated since the commodity with which the present appeals are concerned is gold we are referring to that in particular though the circumstances attendant on the 808 other commodities referred to in section 178A might be similar
As pointed out I already the disparity between the internal and external price of gold became by 1948 so great a to provide considerable incentive to smuggling by making it very profitable
This as assisted by the very long coast line which India has coupled with the extensive land frontiers both on the east as well as on the west ignoring for the moment the very small pockets of foreign territory within the subcontinent
Notwithstanding the efforts of the Customs authorities and the 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 the law in this regard
It was in pursuance of this endeavour that section 178A was introduced into the in 1955
Ex facie the impugned provision enacts a rule of evidence and the ratio underlying it is not far to seek
and it is that the person in possession of the gold would with certainty in most cases be in a better position to prove that it was legally within the country than the Customs authorities
In this connection reference may be made to the observations by Lord Goddard C J in B vs Fitzpatrick 1
Speaking of section 259 of the V K Customs Consolidation Act 1876 which enacted If in any prosecution in respect of any goods seized for non payment of duties or any other cause of forfeiture or for the recovering any penalty or penalties under the Customs Acts any dispute shall rise whether the duties of customs have been paid in respect of such goods or whether the same have been lawfully imported or lawfully unshipped or concerning the place from whence such goods were brought then and in every such case the proof thereof shall be on the defendant in such prosecution 1  772
809 the learned C J said 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 knowledge 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
Mr Palkivala learned Counsel for the respondent stated that if the impugned section section 178A 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 article 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 section 178A 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
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 agreed that the matters stated in relation to gold and the trade in gold referred to in the following sage in the judgment of K TDesai J 810 correctly sums up the position
The learned Judge summarised the position thus It is common knowledge that India produces very little gold and that most of the gold available in India is imported gold
A statement has been put in by consent showing the official figures of India s imports and exports of gold from 1851 to 1956
it shows a net import in the country after deducting exports of 353 crores and three lakhs worth of gold
Restrictions on the import of gold were for the first time introduced in India by Finance Department Central Revenues Notification No 53 dated September 4 1939
By that notification the Central Government in the exercise of the powers conferred by s19 of the prohibited the bringing or taking by 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 autho rity of a licence granted in that behalf by the Reserve Bank of India Till April 1 1946 gold remained duty free
Thereafter duty was levied on the import of gold bullion gold plate gold manufactures etc Gold besides being a store of value is anarticle of adornment and investment
It is capable of being split and there can be a fusion of diverse quantities of gold
It is easily changeable in form size and shape
The gold available in the market hardly bears any identification mark
It is impossible for 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 the the customs officers with the whole machinery of Government at their disposal in proving that the gold has been smuggled which is itself made a reason for throwing the burden upon the citizens 811 to establish that the gold is not smuggled
Gold an 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 the country at a particular time without resort to smuggling
The proof required presupposes the existence of gold in an identifiable 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 Mr Palkivala learned Counsel for the respondent explained to us the special features attaching 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 basing himself on this factual position submitted six grounds in support of his contention that the restriction imposed by section 178 A was unreasonable and we shall deal with these points in the same order  1 Section 178A 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 seized was smuggled 2 It was said on the other side that the requirement in section 178 A that the officer seizing the gold must entertain  a reasonable belief that the gold was smuggled provided an adequate safeguard 812 to the person affected which would render the restriction imposed reasonable within cls
5  6 of article 19
This argument is untenable
If the reasonable belief was a matter for the subjective satisfaction  of the seizing officer as seems to be implied from the observations of this Court in Babulal Amthalal Mehta vs The Collector of Customs Calcutta 1 it provides no safeguard at all for the person from whom the gold is seized
Even if on the other hand the test is objective in the sense that at the stage of the adjudication under section 182 the grounds upon which the belief was entertained could be the subject matter of enquiry it furnishes no safeguard either because the reasonableness of the belief regarding the smuggled character of the gold would have to be judged by the adjudicating officer with reference to the information which the seizing officer had at the moment of seizure and that information must necessarily have been obtained behind the back of the person from whom the gold had been seized and before the officer commenced any enquiry to ascertain the truth or otherwise of the information conveyed to him 3 There is no reasonable or rational connection between the fact to be proved viz  that the gold 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 was smuggled
There is therefore no adequate basis on which the provision could be sustained as a rule of evidence 4 The operation of section 178A is not restricted in point of time or to persons actually suspected to be connected with the import but extends also to persons who are able to establish bona fide acquisition of gold but who are unable to prove how the person from whom they acquired obtained the gold they sold 1 813 5 A presumption of this sort might be reasonable in respect of goods which are dangerous or noxious per se like firearms or poison since ordinarily people might be expected to be
on their guard before obtaining such goods to ensure that their acquisition was lawful and in accordance with I the formalities if any prescribed by the relevant statute or rule
Gold however is not such a type of commodity
It is an inncouous article of commerce and is under the law a subject of unrestricted trade within the country
The burden of proof of the sort imposed by a 178A in respect of such a commodity is therefore unreason able 6 The burden of proof cast by section 178A is in most cases impossible of being discharged be cause 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 crores of rupees which at the present price of gold would be over 2000 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
The 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 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 814 use as ornaments etc and finally e the indentification of gold is impossible because of frequent meltings and fusion of separate pieces and the absence of any system of compulsory marking
We shall deal with each of these points and examine them in the light of the submissions made by the learned Solicitor General in answer
Grounds 1 and 3 which we have set out earlier may be taken up together since they are merely different modes of expressing the same contention
The point raised is that there is no rational connection between the fact from which the statute raises the presumption and the fact which has to be proved in order that the goods might be the subject of confiscation
The argument is that the fact from which the presumption is drawn is the reasonable belief of the officer effecting the seizure that the article seized is smuggled while the fact which by the terms of the statute it is held to prove is that the gold seized is smuggled with the result that the practical effect of the provision is that there is a statutory direction to the adjudicating officer to treat the gold as smuggled so as to entitle him to confiscate the same
It is only if learned Counsel for the respondent is right that the effect of the section is as above that the several decisions of the American Courts to which he invited our attention could have any application
Learned Counsel relied particularly on the decisions in Bailey vs State of Alabama 1 and Manley vs State of Georgia 2
The first of these was concerned with the validity of a law of the State of Alabama by which refusal without just cause to perform the labour agreed to be performed in a written contract of employment under which the employee had obtained money which he did not refund was made prima facie evidence of an intent to commit a fraud
The Supreme Court held the law invalid
Two grounds were urged in support of the argument that the legislation was unconstitutional
The first was that 1    2 L Ed 5 5 815 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 to 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 whose validity was attacked in the second American decision referred to was one declaring that every insolvency of a bank shall 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 runs 1
State legislation that proof of one fact or group of facts shall constitute prima facie evidence of the main or ultimate fact in issue 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 un reasonable and is not made conclusive of the rights of the person against whom it is raised
 116 In regard to the American decisions of which only a few were cited including those just now get out the principle underlying them is to be found summarized in Rottschaefer s Constitutional Law at p 835 where the learned author says The power of a legislature to prescribe the rules of evidence is universally recognised but it is equally well established that due process limits it in this matter
It may establish rebuttable presumptions only if there is a rational connection between what is proved and what is permitted to be inferred therefrom
 It would be seen that the decisions proceed on the application of the due process clause of the American Constitution
Though the tests of reasonableness  laid down by cls
2 to 6 of article 19 might in great part coincide with that for judging of due process  it must not 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 of the expression due process  with its comprehensiveness flexibility and attendant vagueness in favour of a somewhat more definite word  reasonable and caution has therefore to be exercised before the literal application of American decisions
In making these observations we are
merely repeating a warning found in the judgment of this Court in A section Krishna vs The State of Madras 1 where Venkatarama Ayyar J speaking with reference to the point now under discussion after quoting the passage already extracted from Rottschaefer s treatise stated The law would thus appear to be based on the due process clause and it is extremely doubtful whether it can have application under our Constitution
 With this caution we shall proceed to examine the submission of learned Counsel regarding the 1   412 817 absence of any rational connection between 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 section 178A 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 necessary result of the impugned provision 1 that even a bona fide possessor of the goods might be deprived of his property notwithstanding 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 the law without any reasonable 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
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 section 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 beat acquainted with the manner of 818 his acquisition and the circumstances attendant on or connected with that acquisition
It was part of the learned Counsel s submission that he could not successfully impugn the validity of a provision on the terms of section 259 of the U K Customs Consolidation Act
Recalling the decision in R vs Fitzpatrick 1 already referred to we might mention that the prosecution there was for a violation of section 186 of the U K Customs Consolidation Act 1876 which so far as material was in substantially the same terms as the relevant portion of section 1678 of the  the essential ingredient of the offence being indicated by the words person concerned in dealing with goods the import of which is prohibited or which are liable to duty with intent to defraud 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 section 259 extracted earlier
If in a prosecution for dealing in smuggled goods the onus could with constitutional propriety be cast upon the accused to prove that the goods were not smuggled it is difficult to see any reasonable basis for the contention that where 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
Secondly is learned Counsel correct in his submission that under a 178A the onus is cast upon the possessor of the goods seized by reason only of the reasonable belief of the seizing officer that the goods seized by him are smuggled  It is to be noted that the seizure by the officer in the 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 the smuggled goods
As we shall have occasion to point out 1  772
819 later the entire evidence in the possession of the seizing officer would be and has to be before the officer adjudicating the confiscation under section 182 of the 
No doubt on the language of section 178A 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 of investigation 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 distinguished 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 section 178 A and would not be available if the provisions were read in the manner we have just now indicated
The second of the grounds urged by learned Counsel was that the requirement of section 17 8 A that the belief of the officer seizing the goods should rest of 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 820 in practice will not be possible to be disclosed to the party affected
In connection with this point two alternative submissions were made  1 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 advanced on the basis of the passage in the judgment of this Court in Babulal Amthalal Mehta vs The Collector of Customs Calcutta 1 already extracted reading  the only pre requisite for the application of the section is the subjectivity of the Customs Officer in having a reasonable belief that the goods are smuggled
 The learned Solicitor General on the other hand pointed out that this was not really part of the decision but was just an observation and that he would not support it
The learned Solicitor General submitted that a seizure to which section 178 A was applicable was merely a preliminary to proceedings before a quasi judicial authority under section 182
When the matter comes before the latter authority and anterior to that authority invoking the presumption raised by section 178 A it would on the terms of the section have to be satisfied that the seizure was made in the reasonable belief that the goods seized were goods that had been smuggled
At that stage the enquiry is not and cannot be confined as to whether the seizing officer bona fide entertained the belief but must necessarily extend to an examination of the grounds upon which that belief was entertained with a view to ascertain whether the belief was reasonable
It might be that the entirety of the evidence which conceivably in several cases consist of information communicated by informers might not be made available to the person affected but still the adjudicating officer would have to satisfy himself that the requirements 1 821 of section 178 A had been complied with before invoking the presumption laid down by that section
Mr Palkivala s alternative submission was that even if test of reasonable belief  was not subjective but was objective in that the point as to whether the belief was reasonable was open to examination by the adjudicating officer under section 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 adjudicating officer would and must in most cases reach the same conclusion
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 quasi judicial 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 section 182 of the Act each successive appellate or Revisional authority has also to address itself to this requirement
We shall 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
The point suggested may be expanded in these terms  What the party affected has to prove is not that his acquisition has been bona fide which of course be 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 most cases be completely ignorant has similarly bona fide 822 acquired the gold without violating the law and so on until one reached the stage of the origin of the gold which is the subject of seizure and of adjudication before the Customs authority
It would be seen that this is really the argument upon which the sixth of the points urged by learned Counsel rests and therefore it will be convenient to examine the soundness of the contention and the answers which have been made on the other side after dealing with point No 5
The fifth point relates to the fact that the presumption raised by the section is about the possession of an innocuous article of property which under the law is the subject of unrestricted trade in the open market as distinguished from articles which are inherently dangerous such as firearms or Poisonous drugs in regard to which possession and dealing are legitimately subject to severe restrictions
Learned Counsel is no doubt right in his submission 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 time that it has served as a store of value from ancient times and that the very large number of people in this country are in possession of gold for the purposes just now mentioned
But that however is not any conclusive consideration in support of the invalidity of a law which seeks to throw the burden of establishing possession as legal under the law upon the possessor
It cannot be seriously disputed that in most of the cases the possessor of the gold would certainly be in a position to establish the mode of his acquisition subject to the last of the points about the burden of proof being impossible to discharge which would more often than not take it out of the category of smuggled gold
It is only in those cases where reasonable suspicion exists that the gold in the possession of a person has come into the country by illicit means that there is power in an officer to affect the seizure and in most 823 of the cases the innocent possessor would be 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 section 178A 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 bad 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 reasonable construction justify this picture of its operation
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 purchaser at all facts which he never knew and which be 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 824 brought into force from 1939
In this context learned Counsel relied on the several matters set out in the passage from the judgment of K T Desai J extracted earlier and laid particular emphasis on the fact  a that gold was held in myriad forms and for diverse purposes by a sizeable portion of the population of the country b that gold in its several forms was incapable of being identified as indigenous or imported or if imported had paid duty or not
In view of these circumstances he urged that to call upon any person to prove any thing more than that his acquisition of the gold was bona fide and without violation of the law would be to cast an impossible burden upon the possessor
Learned Counsel further urged that the precise reason for which the burden had been thrown upon the possessor was because of the inability of the State to establish before the quasi judicial authorities acting under section 182 reasonable proof that the gold seized was smuggled
He therefore submitted that if Government with all its administrative machinery operating in several fields was unable to lead evidence which could satisfy the Collector of Customs that the gold seized had an illicit origin how could it be reasonable to expect the individual possessor who knew nothing beyond how he himself came by the gold to establish the negative viz that the gold in his possession had not been smuggled but was lawfully within the country
Before considering these submissions it is necessary to mention one point suggested in answer by the learned Solicitor General which has apparently found favour with the learned Judges of the Division Bench of the Bombay High Court in Pukhraj Champalal Jain vs D R Kohli1
The point was this The Central Board of Revenue lad issued certain administrative instructions as regards the manner in which the Customs Officers should regulate their procedure before the goods are adjudged to be confiscated under the provisions of the 
These are sell  out at p 1240 1 825 of the Report in 61 Bombay Law Reporter and need not be repeated here
The learned Solicitor General s argument was that as the section was being administered subject to these safeguards the provision must be held to be a reasonable restriction within 6 of article 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
This Court has held in numerous rulings to which it is un necessary 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 If such powers are capable of being exercised 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 observed in Belfast Corporation vs O D Commission1 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 validity of a measure is not to be determined by its application to particular cases 
If it is not so exercised ie if the powers are abused it is open to challenge and there is no need for express provision for its challenge in the statute
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 administered in a reasonable manner
The constitutional validity of the statute would have to be determined on the basis of its 1  520 521 826 provisions and on the ambit of its operation as reasonably construed
If so judged it passes the test of reasonableness possibility of the powers conferred being improperly used is no ground for pronouncing the law itself invalid and similarly if the law properly interpreted and tested in the light of the requirements set out in Part III of the Constitution 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 understood 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
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 heads 1 Under section 178 A the burden of proof is cast 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 effects confiscation in very ease to which it is applicable
2 Is such a law a reasonable restriction on the right to hold property or on the right to carry on business within cls
5  6 of article 19 but they may be considered together
Section 178 A operates to cast the burden of proof on the person from whose possession goods specified in its sub section
2 are seized to establish that the goods are not smuggled
It must 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 learned Counsel admits that the onus is properly shifted and that such a provision would be reasonable and so constitutionally valid though undoubtedly it might be possible for the State to prove 827 its case even without the aid of the presumption raised by section 178A
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 section 106 of the Evidence Actwhich it is conceded 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 classes
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 is 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 because of the inclusion of this type of case the impugned provision should be held to be constitutionally invalid
This has to be taken 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 the test for ascertaining the reasonableness postulated of the restrictions in cls
2 to 6 of article 19 assumes great
relevance and crucial importance
There are several decisions of this Court in which the relevant 828 criteria have been laid down but we consider it sufficient to refer to a passage in the judgment of Patanjali Sastri C J in State of Madras vs V G Row
The learned Chief Justice said at p 607 of the Report It is important in this context to bear in mind that the test of reasonableness wherever prescribed should be applied to each individual statute impugned and no abstract standard or general pattern of reasonableness can be laid down as applicable to all cases
The nature of the right alleged to have been infringed the underlying purpose of the restrictions imposed
 the extent and urgency of the evil sought to be remedied thereby the disproportion of the imposition the prevailing conditions at  he time should all enter into the judicial verdict
 It would be apparent that this is in line with the great principle underlying the structure of the rights guaranteed by article 19 viz a balancing of the need for individual liberty in the matter inter alia of the right to hold property or of the right to trade with the need for social control in order that the freedoms guaranteed to the individual subserve the larger needs moral social economic and political of the community and thus ensure orderly prog ress towards the goal indicated by the preamble
It would follow that the reasonableness of the restraint would have to be judged by the magnitude of the evil which it is the purpose of the restraint to curb or eliminate
The submission of the learned Solicitor General was that the reasonableness of the impugned provision had to be judged in the light of the widespread smuggling in commodities like gold which if not checked was calculated to destroy national economy and hamper economic stability and progress and that no 1   607 829 reasonable alternative to the provision would achieve the desired end
In this connection he drew our attention to the Report of the Taxation Enquiry Commission 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 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 there
fore necessary in our opinion that stringent measures both legal and administrative should be adopted with a view to minimising the scope of this evil
 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 attainableobjective 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 830 freedom guaranteed by article 191f  g as imposing an unreasonable restrain
That the restrictions are in the interest of the general public is beyond controversy
But is the social good to be achieved by the legislation so disproportionately small that on balance it could be said that it has proceeded beyond the limits of reasonableness We would answer this in the negative
We would only add that there is authority for the position that acts innocent in themselves may be prohibited and the restrictions in that regard would be reasonable if the same were necessary to secure the efficient enforcement of valid provisions
The inclusion of a reasonable margin to ensure effective enforcement will not stamp a law otherwise valid as within legislative competence with the character of uncon stitutionality as being unreasonable vide Manohar Lal vs State of Punjab 1 and Ram Dhan Dass vs State of Punjab 2 Having given the matter our best attention we have arrived at the conclusion that the impugned legislation has not overstepped the limits set by the Constitution and in saying this we have adopted the test laid down in State of Madras vs V G ROW 3 whose terms we have quoted at the start of this discussion
Proceeding therefore on the basis that the impugned provision was constitutionally valid we have still to consider two further points on the basis of which learned Judges of the High Court upheld the case of the respondent even on the assumption that section 178A was constitutionally valid
The first of these grounds was that the impugned section 178A which had been introduced by the Act of 1955 Act 21 of 1955 is not attracted to the prohibitions enacted by section 23A of the Foreign Exchange Regulation Act
The reasoning on which this conclusion was reached was that section 23A whose terms we have set out when enacted in 1952 in effect incorporated into the provisions of the Foreign Exchange Regulation Act all the relevant provisions of the  as that 1  2  3   607
831 enactment stood in 1952 with the result that any subsequent amendments to the did not and could not affect modify or enlarge the scope of the incorporated 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 The Secretary of State for India in Council vs 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 vs Hindustan Co operative Insurance Society Ltd 1 cannot therefore furnish any guidances or authority applicable to the interpretation of section 23A of the Foreign 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 section 23A of the Foreign Exchange Regulation 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 un touched
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 section 81 of the General Clauses Act 8
1 Where this Act or any Central Act or Regulation 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 shall unless a different 1 1931 LR 58 IA 259
832 intention appears  be construed as references to the provision so re enacted
 On the other hand the effect of incorporation is as stated by Brett L J in Clarke vs Bradlaugh1 Where a statute is incorporated by reference into a second statute the repeal of the first statute by a third does not affect the second
This is analogous to though not identical with the principle embodied in section 6A of the General Clauses Act enacted to define the effect of repeals effected by repealing and amending Acts which runs in these terms  6A Where any Central Act or Regulation made after the commencement of this Act repeals any enactment by which the text of any Central Act or Regulation was amended by the express omission insertion or substitution of any matter then unless a different intention appears the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal
 We say not identical  because in the class of cases contemplated by section 6A 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 effected by their repeal
In cases however dealt with by Brett L J the legislation from which provision 
are absorbed continue to retain their efficacy and usefulness and their independent operation even after the incorporation is effected
We consider that on the language of the provisions in the two Acts section 19 of the and section 23A of the Foreign Exchange Regulation Act there is no scope for any argument that there 1 833 has been any incorporation of the provisions of the earlier statute in the later
We shall repeat the terms of section 19 of the which runs  19
The Central Government may from time to time by notification in the Official 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 Section 81 of the Foreign Exchange Regulation Act enables similar notifications by the Central Government in these terms 8
1 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
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
 In this situation section 23A of the Foreign Exchange Regulation Act enacts   the restrictions imposed by sub section 1 of section 8 shall be deemed to have been imposed under section 19 834 of the  and all the provisions of that Act shall have effect accordingly  
The effect therefore of section 23A is to treat the text of the notification by the Central Government under section 81 as if it had been issued under s  19 of the with the title and the recital of the source of power appropriate to it by the creation of a legal fiction
It would be obvious that in the context and on the language here employed if section 19 of the were repealed there would no longer be any legal foundation for invoking the penal provisions of the to a contravention of a notification under section 81 of the Foreign Exchange Regulation Act
This conclusion is reinforced by a comparison of the usual and normal or recognized formulae generally employed to effect incorporation such that changes in or even repeal of the incorporated statute is not intended per se to affect the operation of the incorporating legislation
It is sufficient to pick out a few of the well known formulae employed which would indicate that normally the draftsman does not leave his intentions in doubt
For instance in section 20 of 53 and 54 Vict
70 Housing of the Working Classes Act 1890 the words used were shall for that purpose be deemed to form
part of this Act in the same manner as if they were enacted in the body thereof
In 54 and 55 Vict
19 section 13 the language employed was The provisions of section 134 of the said Act set out in the schedule shall apply as if they were herein reenacted
 To take more modern instancess 10 and 11 George VI Ch
51 the Town and Country Planning Act 1947 section 441 enacts  835 Sections 19 to 30 of the Act of 1944 which provide for the disposaland appropriation by local Planning Authorities of land acquired or appropriated under Part I of that Act for the carrying out by such authorities of development of such land and for other matters arising in relation to the acquisition 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 following Schedule of this Act and of the following provision of this section
6  7 Eliz
2 Ch 63 the Park Lane Improvement Act 1958 section 5 reads The Land Clauses Act other than the excepted provision so far as they are applicable for the purposes of this Act and are Dot inconsistent with the provisions thereof are hereby incorporated with this Act
 A comparison of the formulae with the text of section 23A shows that the reference in it to section 19 of the is merely for rendering notifications under the named provisions of the Foreign Exchange Regulations Act to operate as notifications under the  and that it cannot have the effect of incorporating the relevant provisions of the earlier Act into the Act of 1947 so as to attract the rule formulated by Brett L J in Clarke vs
Bradlaugh already quoted
A close examination of the decision of the Privy Council in The Secretary of State for India in Council vs 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 express terms and in the form illustrated by 54  55 Vict Ch 19 just now referred to
The Local Act in 1 1931 LR 58 IA 259
836 dealing with the acquisition of Land for the purposes designated by it made provision for the acquisition under the Land Acquisition Act and the provisions of the Land Act Acquisition were subjected to numerous modifications which were set out in the Schedule so that in effect the  Local Act was held to be the enactment of a Special Law for the acquisition of land for the special purpose
It was in the context of these and several other provisions which pointed to the absorption of certain of the provisions of the Land Acquisition Act into the Local Act with vital modifications that their Lordships stated But their Lordships think that there are other and perhaps more cogent objections to this contention of the Secretary of State and their Lordships are not prepared to hold that the sub section in question which was not enacted till 1921 can be regarded as incorpo rated in the Local Act of 1911
It was not part of the Land Acquisition Act hen the local Act was passed nor in adopting the provisions of the Land Acquisition Act is there anything to suggest that the Bengal Legislature intended to bind themselves to any future additions which might be made to that Act
It is at least conceivable that new provisions might have been added to the Land Acquisition Act which would be wholly unsuitable to the local code
Nor again does Act XIX of 1921 contain any provision that the amendments enacted by it are to be treated as in any way retrospective or are to be regarded as affecting any other enactment than the Land Acquisition Act itself
Their Lordships regard the local Act as doing nothing more than incorporating certain provisions from and existing Act and for convenience of drafting doing so by reference to that Act instead of setting out for itself at length the provisions which it was desired to adopt
 837 It was for this 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 section 23A of the Foreign Exchange Regulation Act now under discussion
We bold therefore that when a notification issued under section 81 of the Foreign Exchange Regulation Act is deemed for all purposes to be a notification issued under section 19 of the  the contravention of the notification attracts to it each and every Provision of the which is in force at the date of the notification
The other ground upon which the learned Judges upheld the respondent s contention that the rule as to the burden of proof enunciated in s178 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 Solicitor General who contested the correctness of this finding did not urge that the words
in section 178A in the reasonable belief that they are smuggled goods did not prescribe a condition precedent to the applicability of that provision which 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 only be entertained by the seizing officer and besides that the question whether the officer had done so or not was a matter which could objectively be determined by the adjudicating authority acting under section 182
And these submissions he made as aids to his main contention that the burden of proof 838 imposed was reasonable
We are pointing this out because before the learned Judges of the High Court the argument apparently advanced was that the test was the subjective belief of the seizing officer which could only be disproved by the establishment of circumstances in which no such belief could ever honestly or reasonably be entertained based on the reference to the subjectivity of the officer in the judgment of this Court in Babulal Amthalal Metha vs The Collector of Customs Calcutta 1
It was by approaching the problem even from this very narrow stand point that the learned Judges reached a conclusion on this part of the case favourable to the respondent
For the decision of this point it is necessary to canvass the facts which occurred at the moment of seizure in some detail
As narrated at the commencement of this Judgment Nandgopal the second respondent the employee of the first respondent was intercepted first by the Head Constable of the Madras State Prohibition Intelligence Department and his clothing was searched and the four gold blocks weighing about a thousand tolas were seized by the Head Constable
The Prohibition Crime branch has a Criminal Investigation Department and the seized gold was handed over by the Head Constable to the Inspector of Police Criminal Investigation Department on the same day
It was this Inspector C Rajamanickam that forwarded the gold to the Inspector of Customs Special Division with a letter in these terms I send herewith 1000 One thousand tolas of gold in 4 four blocks seized from GNandgopalClerk Ms Nathella Sampathu Chetty Madras No 177 N section C Bose Road
The passenger came from Bombay to Madras in N Y Bombay Mail on 26th June 1956 at 6 A M He has no records 1 839 of any kind for the purchase of gold
Hence the gold was seized and he was arrested under a mahazar
The passenger and gold are forwarded for further action under Customs Act
 It would be seen that up to this point there had been no seizure by an officer acting under the within section 178A 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 Mathura das 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 has 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 Special Division Customs House recorded  Detained four blocks of gold said to weigh about 1000 tolas from Shri Nandgopal representative of Nathella Sampathu Chetty  Sons for further investigation
There are two views possible of the exact import of this note by the Customs Inspector  1 that it was a detention preliminary to a seizure which would be effected after the further investigation and 2 that which found favour with the learned Judge of the High Court that it was itself the seizure
In support of the first of the above constructions attention may 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 830 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
840 1 He stated that the gold had been bought from Ms Mathuradas Gopalakrishnayya  Co having paid them the sum of rupees one lakh which was referred to in the letter seized from him but obviously if the gold had been purchased from that firm the letter could not remain with Nandgopal and this discrepancy he was unable to explain at that stage
 for he said  I cannot account for the presence of this letter on me which should have been given to the firm in Bombay
2 Nandgopal who spoke to having received gold and then secreted it in the inner side pockets of his waist coat and stitched it stated that the gold was moosa gold and it was found that the gold seized from him was not that variety
It is really after this statement was recorded at the Customs House that the investigation began
It is therefore possible to take the view that the detention resulted in a seizure after the statement was recorded
There was ample material at that stage on the basis of which it could be said that a reasonable belief could be entertained that the gold seized was smuggled
Even taking the record of the detention in the mahazar prepared at the Central station as the seizure we do not agree with the learned Judges of the High Court that the seizing officer could not entertain a reasonable belief that the gold seized was smuggled
The reasonableness of the belief has to be judged by all the circumstances appearing at that moment
In the present case the quantity of gold in the possession of Nandgopal of the value of over one lakh of rupees was certainly a very relevant factor to be taken into account and which could be considered in judging the matter
No doubt such a quantity could be the subject of bona fide purchase in the course of normal trade particularly when the person in possession was the representative of a  well known firm of bullion dealers
Put one 841 would also normally expect that the representative would have secured a bill or voucher to evidence the purchase
In other words 1 it was not a case of a few 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 Ms Mathuradas Gopalakrishnayya and Co which admittedly had a bearing upon the purchase of gold in the possession of Nandgopal 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 by 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 constitute in the words of the statute 1 reasonable belief that the goods gold were smuggled
We are therefore of opinion 1 that s178A was constitutionally valid 2 that the rule as to the burden of proof enacted by that section applies to a contravention of a notification under section 81 of the Foreign Exchange Regulation Act 1947 by virtue of its being deemed to be a contravention of a notification under section 19 of the  3 that the preliminary requirement of section 178A 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 article 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
In view of our decision in appeals 408 and 409 the points raised by the respondent in appeal 410 of 1960 do not require to be decided
That appeal fails and is dismissed
There will however be no order as to costs
842 Criminal Appeals No 38 of 1959 No 126 of 1959 No 123 of 1959 Civil Appeal No 511 of 1960 and Writ Petition No 118 of 1958 were not heard on the merits and we have not examined the facts of any of those cases
Those appeals and petitions should therefore be posted for hearing in the usual course
Appeals nos
408 and 409 allowed
Appeal No 410 dismissed


Summary:
Under the powers conferred by section 81 of the Foreign Exchange Regulation Act 1947 the Central Government issued a notification on August 25 1948 placing a ban on the importation 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 section 81 shall be deemed to have been imposed under section 19 of the  and all the provisions of the Act shall have effect accordingly  Section 19 of the  enabled the Central Government by notification to prohibit or restrict the bringing goods of any specified description into 787 India and by reason of other provisions of that Act goods imported in contravention of the notification issued under section 19 were liable to confiscation
In 1955 the  was amended by the introduction of section 178A 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 possession the goods were seized
 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 lie 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
Thereafter 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 bat the Collector held that the respondent bad not discharged the onus of proving that the gold was not smuggled an onus which had been cast on him by section 178A of the  and directed the confiscation of the gold under section 1678 of that Act
The respondent challenged the legality of the action taken by the Collector of Customs on the grounds inter alia 1 that section 178A of the Sea Customs Act 1873 was consti tutionally invalid as it was an unreasonable restraint on the citizen s rights to hold property or to do business guaranteed by article 191f and g of the Constitution of India and was not saved by cls
5 and 6 respectively of article 19 2 that section 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 section 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 section 23A and 3 that the rule as to the burden of proof under section 178A 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 788 validity of section 178A of the Sea Customs Act was concluded by the decision in Babulal Amthalal Mehta vs The Collector of Customs Calcutta Held 1 that Babulal Amthalal Mehta vs The Collector of Customs Calcutta 1957 section C R II 10 was a decision as to the validity of section 178A of the Customs Act 1878 with reference to article 14 of the Constitution of India only and that the question whether the said section was obnoxious to the rights guaranteed by article 191f and g was not considered by that judgment
2 that the object of section 178A was the prevention and eradication of smuggling inter alia of gold which was widely prevalent and in view of the fact that without a Law in that form and with that amplitude smuggling might not be possible of being effectively checked the restrictions imposed by that section being in the interests of the general public could not be held to be violative of the rights guaranteed by article 19 1 f and g though it might operate somewhat harshly on a small section of the public
Accordingly section 178A does not contravene article 191f and g
State of Madras vs V G Row   Manohar Lal vs State of Punjab  and Ram Dhan Dass vs State of Punjab   relied on
Pukhraj Champalal Jain vs D R Kohli 1959 61 Bom
T R 1230 approved
MG Abrol vs Amichand 1 960  disapproved
Nathella Sampathu Chetty vs Collector of Customs Madras A 1
R  reversed
3 that a seizure to which section 178A was applicable was merely a preliminary to the proceedings before a quasi judicial authority under section 182 and that it was only when the latter authority was satisfied that the seizure was made in the reasonable belief that the goods seized were goods that had been smuggled that the rule of evidence laid down by section 178A came into operation
4 that the wording of section 23A of the Foreign Exchange Regulation Act 1947 showed that the reference in it to section 19 of the  was merely for rendering notifications under the named provisions of the Foreign Exchange Regulation Act to operate as notifications under the and that it could not have the effect of incorporating the relevant provisions of the latter Act in the Act of 1947 and that consequently when a notification issued under section 81 of the Foreign Exchange Regulation Act was deemed for ail purposes to be a notification issued under section 19 of the 789  the contravention of the notification attracted to it each and every provision of the which was in force at the date of the notification
The Secretary of State for India in Council vs Hindustan Co operative Insurance Society Ltd 1931 L R
A 259 held inapplicable
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