Case: M/s. Kanungo &amp; Co Vs. The Collector of Customs, Calcutta &amp; Others

2. The relevant facts for the determination of the points raised before us are as follows: The Appellant is a firm carrying on business as dealer, importer and repairer of watches. The Appellants premises at 129, Radha Bazar Street, Calcutta, were searched on October 17, 1959, under a search warrant issued by the Chief Presidency Magistrate, Calcutta. In the course of the search, the Customs authorities seized 390 pieces of watches and took them away. By an order dated January 27, 1960, the Assistant Collector of Customs released 43 watches out of the 390 watches which had been seized. On September 5, 1960, he released 64 more watches, and on January 11, 1961 he released another three watches and confiscated the remaining 280 pieces of wrist watches.3. The Appellant filed an appeal before the Additional Collector of Customs who quashed the confiscation, without going into the merits of other grounds, as according to him principles of natural justice had not been complied with the case.4. A fresh notice was thereafter served on the Appellant to show cause why the watches seized should not be confiscated. The Appellant thereupon filed a petition in the High Court challenging the initiation of fresh proceedings in respect of the 280 watches. A consent order was made by the High Court, and in pursuance of that order the Deputy Collector of Customs decided certain preliminary issues against the Appellant, on April 19, 1962. Aggrieved by this decision, the Appellant filed another petition in the High Court. Before the High Court Mr. Kar, counsel for the Customs, agreed to certain clarifications, namely, (1) that if the petitioner (appellant) is found guilty of having violated the order under S. 3 of the Imports and Exports (Control) Order made in 1955, and (2) if it be found to have imported watches across the customs frontiers as notified under S. 3A of the Sea Customs Act, then only the charge will be taken as established. On these clarifications the High Court held that the charge levied against the Appellant did not suffer from vagueness, as complained by the Appellant. The High Court concluded : "With the two clarific, ons made in the charge the adjudication against the petitioner should now proceed. Subject to the clarifications asmade, I discharge the Rule. Let the adjudication proceedings against the petitioner now proceed on the charges as hereby clarified. There will be no order for costs.The adjudication proceedings have been held up for long long years and I direct the respondents customs authorities to finish the adjudication proceedings as early as possible."This order was passed on March 7, 1963.5. It appears that the Customs Authorities sent a memo, dated May 17, 1963, directing the Appellant to show cause against the seizure of 280 pieces of wrist watches by the Customs Department. On May 25, 1963, the Appellant sent its reply to the memo. The Appellant first contested the jurisdiction of the Assistant Collector, and after raising some legal objections, stated in para 6 as followshave sufficiently explained our lawful acquisition and our legal possession of the said wrist watches in our various explanations submitted to you from time to time and we refer you to our explanation dated2 to you and also to our explanation contained in our petition filed beforepara 8 of its reply, the Appellant asserted that principles of natural justice had been violated. In para 10 it was alleged that "the Customs Department has not been able to produce any evidence that the said goods are smuggled goods or that these goods have been brought across any Customs Frontier of India or in violation of any of the provisions of Sea Customs Act or in violation of any of the notification under that said Act".6. On June 15, 1963 (Order issued on August 7, 1963) the Additional Collector, after giving reasons, passed an order confiscating the watches under S. 167(8) of the Sea Customs Act, read with S. 3(2) of the Imports and Exports (Control) Act, 1947. After referring to the history of the litigation and the reply of the Appellant, dated May 25, 1963, it was stated in the order that on June 13, 1963, the Appellant company was granted a personal hearing when its representatives desired to be furnished with the details of the enquiries conducted by the Customs House. The Additional Collector of Customs also referred to their contention that the watches had been purchased between 1956 and 1959  they had produced vouchers for the same and as such they had been able to establish that the watches had not been obtained by them in an illegal way.7. The Additional Collector gave the following reasons for coming to his conclusionsparty originally sought to connect the watches under seizure with certain transactions some of which have been found on enquiry to be false and fictitious. The result of the enquiries and the evidence on which the charges were framed were made known to the party specifically under paras 6 to 19 of the Show Cause Notice. The party in his reply to the show cause notice has merely denied the charges but could not make any submission in rebuttal of those specific allegations. The watches under seizure are of foreign origin. The cash memos and vouchers etc. produced by the party in disclosure of his knowledge about the source from which these watches were obtained and in proof of their licit source have been found on enquiry to be false and fictitious. Besides in respect of 11 pieces of watches (Item Nos. 22, 34, 65, 66, 74, 80 and 95 of the inventory) no document whatsoever showing their licit source could be produced. It is clear that these watches could not have been legally imported. I therefore hold that these watches were imported into India clandestinely from a foreign country and the party made a desparate attempt to connect these watches with some false and fictitious transactions.The Appellant then filed a writ petition challenging this order. Banerjee J., quashed the order on the ground that the Customs authorities had failed to prove that the Appellant had imported the wrist watches without valid licence from beyond the Customs frontiers of India.9. The High Court (Bose, C.J. and B. C. Mitra, J.) allowed the appeal. The High Court held that the onus of proof that the wrist watches were lawfully imported had shifted on to the Appellant after the Customs Authorities had informed the Appellant of the results of the enquiries and investigations regarding the claim made by it with regard to the possession of the said watches, and this onus the Appellant had failed to discharge. The High court observed :"The watches were seized from the possession of the respondent No. 1 (appellant) who had not obtained a licence or a customs clearance permit for importation of the same. They were of foreign make and must have been imported across the customs frontier. The explanations offered by the respondent No. 1 regarding its coming into possession of the same between 1956 and 1957 were found, upon enquiries by the customs authorities, to be false, the result of these enquiries were communicated to the respondent No. 1 who was thereafter heard by the adjudicating officer. Yet no attempt was made by the respondent No. 1 to substantiate its claim regarding lawful importation of the watches. In this same matter, the respondent No. 1 came to this court twice previously with writ petitions, for relief, and appropriate reliefs were granted to it. Yet it failed to satisfy the customs authorities that 280 watches were not imported in violation of the statutory restrictions. The customs authorities came to the conclusion that the said 280 watches were illegally imported and thereupon made an order for confiscation of the same. It is not for this court, in exercise of its jurisdiction under Art. 226 of the Constitution, to revise, set aside or quash this order, in the facts of this case".The High Court granted the certificate under Art. 133(1)(a) and (b) of the Constitution and the appeal is now before us.

Reasoning:
12. We may first deal with the question of breach of natural justice. On the material on record, in our opinion, there has been no such breach. In the show cause notice issued on August 21, 1961, all the material on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation. The complaint of the appellant now is that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced to enable it tothem. In our opinion, the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to beby them on the statements made before the Customs Authorities. Accordingly we hold that there is no force in the third contention of the appellant.13. There is also no force in the second point because we do not read the impugned order as having wrongly placed the burden on the appellant. What the impugned order does is that it refers to the evidence on the record which militates against the version of the appellant and then states that the appellant had not been able to meet the inferences arising therefrom. In our opinion, the High Court was right in holding that the burden of proof had shifted on to the appellant after the Customs Authorities had informed appellant of the results of the enquiries and investigations.14. This also disposes of the first point, as we have said, the burden was on the Customs Authorities which they discharged by falsifying in many particulars the story put forward by the appellant.15. Coming to the fourth point, we are of the opinion that, except for certain items there is evidence in favour of the conclusion of the High Court. It cannot be disputed that a false denial could be relied on by the Customs Authorities for the purpose of coming to the conclusion that the goods had been illegally imported. In Issardas Daulat Ram v. Union of India, (1962) Supp. 1 SCR 358 at p. 363 the credibility of the story about the purchase of gold from certain parties was treated as a relevant piece ofour opinion it would be impossible for ato produce any further evidence in order to justify possession of watches. Acannot be expected to go into the history of the acquisition of a watch when it is given for repair. The onus being on the Customs Authorities, the type of the statements mentioned in Para 8 cannot be held to be sufficient to discharge the onus which lay on them. Further, no indication has been given in Para 9 as to how many parties had stated that they never gave any watches to the Appellant. The apparent bona fides of the correction slip and receipt book mentioned in Para 10 could not be ignored on the reasons given by the Customs Authorities. Para 10 proceeds on the basis that the onus is on the Appellant to prove that the watches had not been illegally imported.There is also one wrist watch mentioned on Para 18, which in our opinion has been wronglyfact that it was not shown in the stock register is not material to show that it has been illegally imported. It is not stated by the Authorities that the invoice and the bill of entry had nothing to do with this watch.