1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CUSTOM REFERENCE NO. 1 OF 2002 M/s.Rajmal Lakhichand, having its office at 169, Johari Bazar, Balaji Peth, Jalgaon- 425 001. & Ishwarlal Shankarlal Lalwani residing at 169, Johari Bazar, Jalgaon- 425 001. ... Applicants. V/s. The Commissioner of and Customs, Aurangabad. ... Respondent. A.Y.Sakhare, senior counsel with R.G.Sheth and Ms.Nikita Trivedi i/b. R.G.Sheth & Associates for the applicants. A.S.Rao with R.B.Pardeshi for the respondent. CORAM : V.C.DAGA AND K.K.TATED, JJ. DATED : 20th April 2010. JUDGMENT : (Per V.C.Daga, J.) This is a reference made by the Customs, Excise and Gold (Control) Appellate Tribunal (“Tribunal” for short) pursuant to the order dated 17th March, 1999 passed by this Court under section 133(3) of the Customs Act, 1962. 2 Statement of Case : 2. The factual context giving rise to the present reference, in brief, is as under: On the basis of the information gathered by the DRI that large quantity of about 132 bricks of silver had been smuggled through sea route and diverted to Jalgaon, while melting of silver was undergoing, the officers commenced investigations and succeeded on 13th February, 1993 in identifying the concerned parties, who had received smuggled silver. 3. Premises of the applicants- M/s.Rajmal Lakhichand at Jalgaon were searched. The owner thereof Mr.Ishwarlal Lalwani was not present at the time of search. The search resulted into recovery of silver in Choursa form weighing 1,913.256 kgs. Statements of various persons were recorded. Shri Lalwani was summoned to appear before Directorate of Revenue Intelligence (DRI). He appeared before the investigating officer. His statement was recorded. 4. The show cause notices dated 7th August, 1993 were issued to 47 individuals/ firms on completion of investigation, specifically, pointing out the roles played by each one of them. 5. The adjudicating authority, vide its order dated 30th August, 1994 discharged the show cause notices holding that the evidence collected were not convincing enough to hold the allegations as proved. 3 6. The Central Board of Excise and Customs, New Delhi, exercising the powers under section 129D of the Customs Act directed the Collector to apply to the Tribunal for determination of the issues specified in the review order. Accordingly, the Tribunal was approached. 7. The Tribunal granted out-of-turn hearing to the group of appeals since the Commissioner had moved application for staying the operation of the order impugned therein. Appeals were heard on 20th September, 1996. 8. The Tribunal, vide its order dated 19th March, 1996 allowed the appeals by setting aside the impugned order and rejected the rest of the appeals and, after hearing both sides confiscated the seized silver absolutely. The Tribunal further held that Mr.Ishwarlal Lalwani and M/s.Rajmal Lakhichand in whose custody the seized silver was found were liable for imposition of penalty under section 112(b) of th Customs Act. It, accordingly, imposed penalty of Rs.10 lakh on Mr.Ishwarlal Lalwani for acquiring the smuggled silver. However, the Tribunal did not impose separate penalty on the firm viz. M/s.Rajmal Lakhichand since personal penalty on the person managing the affairs of the firm was imposed. The Tribunal also imposed penalty of Rs.1 lakh on Mr.Sureshkumar Seth, who had procured smuggled silver and delivered it to Mr.Ishwarlal Lalwani. 9. M/s.Rajmal Lakhichand and Mr.Ishwarlal Lalwani being aggrieved by the order dated 19th March, 1996, out of three aggrieved parties, filed two reference 4 applications. The applicants framed as many as 11 questions and prayed for reference to this Court. 10. The Tribunal by its order dated 26th September, 1996 rejected the reference application holding that none of the questions raised therein required consideration at the hands of the High Court. 11. Being aggrieved by the aforesaid order of the Tribunal rejecting the reference application, the applicants moved this Court by way of application under section 130(3) of the Customs Act. The said application came up for hearing before the Division Bench of this Court on 17th March, 1999. The Division Bench after hearing both parties opined that only one question of law arising from the order of the Tribunal dated 26th September, 1996 needed consideration at the hands of this Court. 12. The Tribunal was, accordingly, directed to refer only one undermentioned question of law for the opinion of this Court under section 130(3) of the Customs Act. Accordingly, the Tribunal has forwarded statement of case and referred the question reading as under: “Whether the Tribunal was justified in invoking the provision of Section 120(2) of the Customs Act, 1962 to order confiscation of silver weighing 194.250 Kgs. purchased from M/s.Dilipkumar Hirachand & Sons, Jalgaon, when the said provisions had not been invoked in the Show Cause Notice and when the applicants were not given any opportunity of being heard in the matter by the Customs, Excise & Gold (Control) Appellate Tribunal?” (Emphasis supplied) 5 13. Subsequent to the receipt of statement of case from the Tribunal, the applicants took out motion for speaking to the minutes of the order dated 17th March, 1999 passed by this Court and sought modification of the order, which subsequently came to be modified deleting the words “weighing 194.250 Kgs. purchased from M/s.Dilipkumar Hirachand & Sons, Jalgaon”. The modified question, thus, reads as under: “Whether the Tribunal was justified in invoking the provision of Section 120(2) of the Customs Act, 1962 to order confiscation of silver, when the said provisions had not been invoked in the Show Cause Notice and when the applicants were not given any opportunity of being heard in the matter by the Customs, Excise & Gold (Control) Appellate Tribunal?” On the Scope of the Question : 14. At the outset, Mr.Sakhare, learned senior counsel appearing for the applicants tried to expand the scope of the question referred contending that the question referred and quoted in para-12 (supra) in its original form was restricted in its scope to the confiscated silver weighing 194.250 Kgs. purchased from M/s.Dilipkumar Hirachand & Sons, Jalgaon. That after deletion of the words “weighing 194.250 Kgs. purchased from M/s.Dilipkumar Hirachand & Sons, Jalgaon”, the question referred would bring within its hold entire quantity of silver weighing 1,913.256 Kgs. He, thus, submits that while considering the question, this Court will have to deal with the legality of the confiscation 6 of the entire quantity of silver weighing 1,913.256 Kgs., otherwise, the very order of this Court deleting the words “weighing 194.250 Kgs. purchased from M/s.Dilipkumar Hirachand & Sons, Jalgaon” will be rendered otiose. 15. Per contra, Mr.Rao, learned counsel appearing for the Revenue strongly opposed the submission made by Mr.Sakhare contending that the deletion of the words referred to hereinabove (underlined words) shall in no way enlarge the scope of the question referred. In his submission, in spite of deletion of the words and figures “weighing 194.250 Kgs. purchased from M/s.Dilipkumar Hirachand & Sons, Jalgaon”, the question referred will revolve around confiscation of silver weighing 194.250 Kgs. only, purchased from M/s.Dilipkumar Hirachand & Sons, Jalgaon. According to him, notwithstanding modification, no change can be inferred or read in the original question referred by the Tribunal. 16. Mr.Rao further submits that pursuant to the order of this Court dated 17th March, 1999 passed in Customs Application No.2/1997, reference was already made by the Tribunal vide its order dated 23rd October, 2001. Thereafter, the question was never modified by the Tribunal or by this Court. The words “weighing 194.250 Kgs. purchased from M/s.Dilipkumar Hirachand & Sons, Jalgaon” were allowed to be deleted finding them to be surplus. As such the texture of the original question referred by the Tribunal and modified by this Court under order dated 17th March, 1999 did not change the meaning and/or scope of the question referred. 7 Mr.Rao, in order to buttress the submission, took us through the eleven questions which were framed by the applicants in the reference applications for being referred to this Court and brought to our notice question No.11, which was identical as one reproduced in para-12 (supra). 17. Mr.Rao submits that all the while parties to the reference were ad adem that silver weighing 194.250 Kgs. was the only quantity of silver confiscated under sub-section (2) of section 120 of the Customs Act. He, thus, submits that the submission advanced by the applicants to widen the scope of the question to bring within its fold entire quantity of the confiscated silver weighing 1,913.256 Kgs. is nothing but an attempt to bring the question for consideration before this Court through back door, which is not permissible in law. 18. Mr.Rao, thus, submits that considered from any angle i.e. with or without presence of the words “weighing 194.250 Kgs. purchased from M/s.Dilipkumar Hirachand & Sons, Jalgaon” the scope, meaning or texture of the question referred would remain unchanged as the central issue for the consideration of this Court is: whether the silver weighing 194.250 Kgs., in the facts of this case, could have been confiscated under section 120(2) of the Customs Act? 19. Mr.Rao also took us through the impugned order passed by the Tribunal in general and para-19.2 thereof in particular to reiterate his contention and point out that the silver weighing 1,713.807 Kgs. was confiscated 8 under section 111(d) of the Act; whereas rest of the silver weighing 194.250 Kgs. was confiscated under sub- section (2) of section 120 of the Customs Act. Mr.Rao, thus, submits that considered from any angle the question referred and the scope thereof cannot be allowed to be widen. At any rate, it has to be restricted to the silver of 194.250 Kgs. alone. 20. In rejoinder, Mr.Sakhare finding it difficult to cut the submissions of Mr.Rao made an alternate submission and urged that this Court has ample power to bring into focus the real issue that arises between the parties as such this Court in order to consider real issue should exercise its powers to recast or reframe the question so the confiscation of entire quantity of silver weighing 1,913.256 in exercise of powers under sections 111(d) and 120(2) of the Customs Act could be considered on its own merits. 21. Mr.Sakhare in support of power to amend relied upon two judgments of the Apex Court, one in the case of M/s.S.P.Gramophone Company v. Commissioner of Income- tax, Patiala, AIR 1986 SC 1152; another in Commissioner of Income-tax, Bombay v. Scindia Steam Navigation Co.Ltd., AIR 1961 SC 1633; and two judgments of this Court one in the case of Rekhchand Gopaldas Mohta Spinning and Weaving Mills Ltd. v. Commissioner of Income-tax, Bombay South, (1966) 60 ITR 699 (Bom.) and another in Commissioner of Income tax v. Tata Iron and Steel Co.Ltd., (1994) 206 ITR 196 (Bom.) 22. Mr.Rao again strongly opposed above submission reiterating submissions already made by him to shoot 9 down the attempt of the applicants to widen the scope of the question under consideration. Consideration : 23. At the outset, having heard both parties, the submissions advanced by Mr.Sakhare by no stretch of imagination can be accepted. The opposition canvassed by Mr.Rao needs acceptance in toto. 24. The Tribunal vide its impugned order dated 20th September, 1996 has confiscated silver of 194.250 Kgs. shown to have been purchased from M/s.Dilipkumar Hirachand & Sons, Jalgaon under sub-section (2) of section 120 of the Customs Act, which provides that, where smuggled goods are mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, the whole of the goods shall be liable to confiscation. 25. The Tribunal found that it was not possible to separate the quantity of silver weighing 194.250 Kgs. from rest of the smuggled silver, hence by virtue of section 120(2) the said quantity was held liable for confiscation. It is, thus, clear that out of entire quantity of silver weighing 1,913.256 Kgs., silver weighing 1,713.807 Kgs. was confiscated under section 111(d); whereas silver weighing 194.250 Kgs. was confiscated under section 120(2) of the Customs Act. The question originally framed and directed to be referred for the opinion of this Court was: whether the Tribunal was justified in invoking provision of section 120(2) of the Customs Act to confiscate the silver when 10 the said provision had not been invoked in the show- cause-notice. The powers under section 120(2) were exercised with respect to the silver weighing 194.250 Kgs. only. Under these circumstances, even after deletion of the words “weighing 194.250 Kgs. purchased from M/s.Dilipkumar Hirachand & Sons, Jalgaon”, the scope, meaning and texture of the original question would remain unaltered. The deletion would not make any difference either way. In the circumstances, we have no hesitation to hold that the originally reframed question or the recast question revolves around confiscation of silver weighing 194.250 Kgs. alone which was confiscated under sub-section (2) of section 120 of the Customs Act. Thus, the entire quantity of silver weighing 1,913.256 Kgs. cannot be brought within the sweep of the question under consideration. As such, in our consideration, the subject question shall remain restricted to the confiscation of silver weighing 194.250 Kgs. only; purchased from M/s.Dilipkumar Hirachand & Sons, Jalgaon confiscated by invoking provision of sub-section (2) of section 120 of the Customs Act. 26. So far as alternate submission, advanced by Mr.Sakhare requesting this Court to recast the question to bring within its sweep the remaining quantity of the silver, is concerned, the same cannot be accepted. 27. At this juncture, we must point out that, out of 11 questions raised by the applicants, only one question bearing No.11 was ordered to be referred for the opinion of this Court vide order dated 17th March, 1999; meaning thereby prayer to refer all other 10 11 questions was rejected by this Court. The said order has become final and conclusive, as such it would operate as res judicata between the parties. The other ten questions, which were rejected by this Court holding it to be not questions of law, vide its order dated 17th March, 1999, now cannot be brought in for consideration through back door method exercising powers of this Court to reframe or recast the question. In the garb of reframing or recasting the question one cannot bring in what was left out by the Court with conscious exercise of the power. In the circumstances, alternate prayer made by Mr.Sakhare requesting this Court to recast or reframe the referred question is liable to be rejected. Order accordingly. On Merits : 28. Having said so, let us turn to the merits of the question requiring consideration as reproduced in para 13 (supra). Rival Submissions : 29. Mr.Sakhare, learned senior counsel appearing for the applicants advanced his submissions with respect to entire quantity of silver confiscated under the impugned order. However, for the reasons recorded herein, it is not necessary for us to consider legality of the confiscation of the silver weighing 1,713.807 Kgs. confiscated under section 111(d) of the Customs Act because it is beyond the scope of question referred. Our consideration is, thus, restricted to the legality of the confiscation of silver weighing 194.250 Kgs. 12 confiscated in exercise of powers under section 120(2) of the Customs Act. 30. Mr.Sakhare submits that the total quantity of silver of 194.250 Kgs., which was included 6 silver ingots and choursas weighing 180.545 Kgs., was purchased from the dealer M/s.Dilip Kumar Hirachand on 9th February, 1993. The said quantity of silver was legally acquired from local markets, as such the same could not have been confiscated. He further submits that so far as the finding recorded by the Tribunal in para-11 of the impugned order, regarding 194.250 Kgs. silver is concerned, it shows that the evidence adduced by the applicants was accepted by the Tribunal. He pressed into service the findings of the Tribunal recorded as “Accepting the evidence adduced as probable, the plea of the Department that the said quantity also is smuggled silver, cannot be accepted.” He, thus, submits that silver weighing 194.250 Kgs. could not have been confiscated by the Tribunal under section 120(2) of the Customs Act. 31. Mr.Sakhare also brought to our notice the finding of the tribunal in para-19.2 holding that silver weighing 194.250 Kgs. could not be proved as smuggled by the Department as such, according to Mr.Sakhare, the Tribunal could not have invoked provision of section 120(2) of the Customs Act. 32. Mr.Sakhare, lastly, submits that so far as show cause notice is concerned, at no point of time provision of section 120(2) was invoked by the Department so as to confiscate the silver weighing 13 194.250 Kgs. purchased by the applicants from M/s.Dilipkumar Hirachand under section 120(2) of the Customs Act. He, thus, submits that confiscation of silver in exercise of powers under section 120(2) of the Customs Act is clearly in breach of the natural justice. He, thus, prayed that the question referred needs to be answered in favour of the applicants and against the revenue. Per Contra : 33. Mr.Rao, learned counsel for the Revenue/ respondents submits that the contention of the applicants that section 120(2) has not been invoked in the show cause notice is not correct. In support of his submission, he pressed into service para-34 of the show cause notice which makes reference to section 120(2) of the Customs Act. He further submits that the applicants were directed to show cause as to why silver weighing 1,913.256 Kgs. should not be confiscated. As a sequator of this, one has to understand that the said quantity was inclusive of silver of 194.250 Kgs. that was purchased from M/s.Dilipkumar Hirachand. Thus, in the submission of Mr.Rao, the applicants were sufficiently put on notice that section 120(2) was also invoked for confiscating the silver. 34. Alternatively, without prejudice to his above submission, Mr.Rao further submits that no prejudice is caused or suffered by the applicants in view of invocation of provision of section 120(2) of the Customs Act. In his submission, the question of law as referred to does not arise for the reason that section 120(2) was 14 never relied upon or invoked in the main show cause notice. According to him, in para-35 of the show cause notice, entire silver was sought to be confiscated which means that section 120(2) was also invoked by the respondent. Lastly, he submits that non-mentioning of provision of section 120(2) specifically is not fatal as the ingredients of section 120(2) can be gathered from the show cause notice itself, as such confiscation of silver of 194.250 Kgs cannot be said to be incorrect or illegal. He placed reliance on the Apex Court judgment in the case of Central Excise, Calcutta v. Prabyumna Steel Ltd., 1996 (82) ELT 441; wherein the Apex court ruled that mere mentioning wrong provision of law when the power exercised is available even though under different provision, is by itself not sufficient to invalidate the exercise of that power. With these submissions, Mr.Rao urged that the question of law referred be answered in favour of the Revenue and against the applicants. Statutory Provision : 35. The statutory provision relevant to the legal debate involved herein is section 120 of the Customs Act, which reads as under: “120. Confiscation of smuggled goods notwithstanding any change in form, etc.- (1) Smuggled goods may be confiscated notwithstanding any change in their form. (2) Where smuggled goods are mixed with other goods in such manner that the smuggled goods, the whole of the goods shall be liable to confiscation: 15 Provided that where the owner of such goods proved that he had no knowledge or reason to believe that they included any smuggled goods, only such part of the goods the value of which is equal to the values of the smuggled goods shall be liable to confiscation. Consideration : 36. Having heard rival parties on merits, having noticed the relevant statutory provision holding the field; it is necessary to turn to the contents of the show cause notice relating to the invocation of the provision of section 120 or section 120(2) of the Customs Act or relating to confiscation of silver weighting 194.250 Kgs. 37. Let us turn to the show cause notice, para-34 which invokes section 120 of the Customs Act in the following backdrop: “34(i) The silver weighing 1913 Kgs. approx. in chaurasa form seized by DRI Officers on 13/14.2.93 from 169. Balaji Peth, Jalgaon, where it was stored in the Strong Room adjacent to the silver show room of M/s.Rajmal Lakhichand 7 Sons is established to be of smuggled nature. The silver which was smuggled into India and given to Babuji by Suresh of Bombay was in the form of 132 silver bricks weighing around 35 Kgs. approx. having total weight of approx. 4,520 Kgs., the market value of the silver prevailing on 7.2.93 was Rs.6700/- per kg. and it was transacted by Sh.Babuji with Sh.Suresh @ Rs.6,200/- per Kg. This silver in brick form after being received at Jalgaon was converted into silver chaurasas by adding copper and reducing its purity from 16 99.99% to 99.50%. The silver as delivered by Suresh and received by and on behalf of Shri Babuji in 132 bricks form wg. Approx. 4520 Kgs. was of smuggled nature. The smuggled goods are liable for confiscation not-with-standing any change in forms. When the smuggled goods are mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, the whole of the goods shall be liable to confiscation under Sec. 120 of the Customs Act, 1962. Any goods, which are used for concealing smuggled goods shall be liable to confiscation under the provisions of Sec.119 of the Customs Act, 1962. Where any goods imported in the baggage are liable to confiscation, the baggage and any other goods imported in that baggage shall also be liable to confiscation under the provisions of Sec. 118(a) of the Customs Act. 34(ii) The silver having been imported and brought into India, contrary to the prohibitions imposed by or under the Customs Act, 1962, and the other laws for the time being in force has rendered itself liable to confiscation under Sec. 111(d) of the Customs Act, 1962. The silver converted into chaurasas form has also been rendered liable to confiscation under the provisions of Section 120 of the Customs Act, 1962.” 38. In addition to the above, show cause notice also makes a reference to section 120 of the Customs Act in para-35(xi) on the following canvas: “35(xi) The aforesaid persons and firms in their individual capacity as also in their collective capacity conspired with and acted, aided abetted incited supported, actively and/or passively, colluded, disregarded and/or omitted to do 17 certain acts along with others known and unknown persons as detailed above which has rendered the seized silver in chaurasas form liable to confiscation under Section 111(d) and 120 of the Customs Act, 1962.....” 39. With regard to entire quantity of silver, the powers of confiscation invoked can be seen from para-35(a) relating to the silver weighing 199.66 Kgs. out of 1,913.256 Kgs and further reference in para-35(h) of the show cause notice. Relevant contents of thereof are reproduced hereinbelow: “35(a) The above mentioned silver weighing 1913.256 Kgs. valued at Rs. 1,09,05,781/- as on 14.2.93 and seized on 13/14.2.93 from the Strong Room adjacent to the Silver Show Room of M/s.Rajmal Lakhichand & Sons located in the premises of M/s.Rajmal Lakhichand, 169, Balaji Peth, Jalgaon, should not be confiscated under Sec.111(d) of the Customs Act, 1962, rad with Sec. 3(3) of Foreign Trade (Development & Regulation) Act, 1962, rad with Sec. 11 of the Customs Act, 1962. ..... ..... ..... 35(h) Without prejudice to above, it has also come on record that Shri Abdul Mohd. Kunhi, and Shri Khalid Thekee Purayil, whose Customs Baggage Receipts for 100 Kgs. And 99.66 Kgs. of silver are shown in defence by Babuji have admitted in their statements that the said silver did not belong to them and they carried the said silver for a consideration and had not authorised anybody to sell on their behalf of Jalgaon Party,