Case: Hind Trading Company Vs. Union Of India &amp; Anr

1. The appellant M/s. Hind Trading Company, imported 1,65,000 pieces of Chinese silver dollars from Yatung in Tibet to Kalimpong, via Nathula Pass and Hungpo through Sikkim State under two Reserve Bank import licences, dated April 22, 1957. As there were two Reserve Bank licences, the dollars were divided into two lots at Yatung. Each lot consisted of 66 bags containing 82,500 dollars. One lot of bags bore the mark "H.D. and Serial Nos. 1 to 66, and the other lot bore the mark "H. N. and Serial Nos. 1 to 66. On May 15, 1957, the appellant made two applications bearing Nos. 32 and 34 to the officer-in-charge. Land Customs Station, Kalimpong, for the grant of permits for passing the goods across the frontier. Application No. 32 related to the bags marked "H. N. Application No 34 related to the bags marked "H.D.. On May 16, the two consignments arrived at the land Customs Station, Kalimpong and were examined and appraised by the Land Customs Officer-in-charge of the station On the duty being paid, the officer endorsed the two applications, certifying that the duty was paid and permitting the import of the goods. The consignments loaded in trucks then passed out of the Customs House and on the way to Silguri were checked at the Teesta Bazar check-post at 8-45 p.m. on May 16. On the night of May 16, they reached Siliguri and were delivered to M/s. Amalgamated Transport Co., for carriage by air to Dum Dum. On the morning of May 17, one consignment of 22,500 dollars packed in 66 bags together with the import appln. No. 34 was sent by plane from the Sonapur airstrip to Dum Dum Airport and on the same date the consignment reached Dum Dum and was delivered to the appellant at Calcutta. On May 18, 1957, the Range Officer, Matidhar, seixed the second consignment to 82,500 dollars packed in 66 bags bearing the mark "H.D. together with the application No. 32, when they were about to be despatched by air from the Sonapur airstrip. The seizure was made under s. 5 (3) of the Land Customs Act on the ground that the mark on the bags was "H.D. whereas the accompanying import appln. No. 32 related to "H.N. bags.2. On July 7, 1957, the Collector of Land Customs, Calcutta, issued a notice to the appellant to show cause why the dollars seized on May 18, 1957, should not be confiscated and why a penalty should not be imposed upon the appellant under Sections 5 (3) and 7(1) of the Land Customs Act, 1924, and Section 167 (8) read with Section 19 of the Sea Customs Act, 1878 as made applicable by S. 23-A of the Foreign Exchange Regulation Act, 1947, as there was reason to believe that the goods had been imported by the appellant by land from Tibet into India on lay 16, 1957 through Indo-Tibet border, (i) without a valid permit under Section 5 of the Land Customs Act, and (ii) without valid permission granted by the Reserve Bank of India under notification No. F. 3 (84) E. F. VII/56 dated May 4, 1956 issued under Section 8 (1) of the Foreign Exchange Regulation Act. That notification prohibited the import into India of silver coins current in the Tibet region of China without the permission of the Reserve Bank of India. On July 30, 1957, the appellant showed cause against the proposed action by a letter stating that the first consignment of 82,500 dollars was packed in bags marked "H.N., that by inadvertence the carriers M/s. Amalgamated Transport Co., had sent import application No. 34 with the first consignment and had kept application No. 32 with the bags marked "H.D., that the two consignments were covered by valid Reserve Bank licences and import passes, that the seixure of the dollars kept in "H.D. bags under Section 5 (3) of the Land Customs Act was not justified and that there was no ground for confiscating the goods or imposing any penalty. The appellant was heard by the Collector on August 26, and December 11, 1957. On January 10, 1958, the Collector passed an order adjudging that offences under Section 5 (3) and 7 (1) of the Land Customs Act and Section 167 (8) of the Sea Customs Act, 1878 had been committed and directing confiscation of the goods under those sections read with Section 23-A of the Foreign Exchange Regulation Act. The Collector held that (i) the goods were liable to confiscation under Section 5 (3) of the Land Customs Act as they were not covered by the accompanying import application No. 32; (ii) the appellant failed to prove that the first consignment of 66 bags bore the mark "H.N. or that by inadvertence of the carriers, application No. 34 had been sent with it, and (iii) had the first consignment of 66 bags bore the mark "H.N., the Range Officer Matidhar and the officers at Dum Dum would have detected and noted the fact and the appellant could have produced before the Customs officials at Calcutta bags with the mark "H.N. immediately after May 18, 1957. An appeal against this order was dismissed by the Member, Central Board of Revenue, on May 17, 1958. A revision petition against the last order was dismissed by the Secretary to the Government of India, Ministry of Finance, Department of Revenue, on January 16, 1961.3. On November 16, 1962, the appellant filed a writ petition in the Punjab High Court for quashing the aforesaid decisions and for setting aside the order of confiscation of the silver dollars. On May 14, 1964, Shamsher Bahadur J. dismissed the petition. He held that there was no error of law apparent on the face of the record. The appellant filed a Letters Patent appeal against the order. On August 25, 1964, the Divisional Bench dismissed the appeal. It held that (1) Section 5 (3) of the Land Customs Act, 1924, applied to the case; (2) the fact that the 66 bags bore the mark "H.D. and the accompanying application No. 32 related to "H.N. bags showed conclusively that the dollars contained in those bags were imported without proper licence and import permit and without payment of duty and (3) the finding of fact that there was no mistake on the part of the carriers with regard to the despatch of the consignments and accompanying documents could not be set aside in a writ application. The present appeal has been filed by the appellant after obtaining a certificate from the High Court.

Court's reasoning:
9. The Central Board of Revenue framed the Chinese Silver Dollars (Import) Rules on March 29, 1958 in exercise of the powers conferred by Section 9 (1) of the Land Customs Act, 1924. Rule 6(2) provided that on its journey from Kalimpong land customs station to its ultimate destination any consignment of Chinese silver dollars imported from Tibet into India must be accompanied by a permit, i.e., the importers copy of the relative import application bearing the endorsement of the officer in charge of the Kalimpong land customs station permitting the clearance of the consignment. The permit must be produced at the land customs check-post at Teesta Bazar, along with the consignment if the destination was Teesta Bazar or beyond. It must also be produced on demand by any land customs officer at any time during the journey of the consignment up to its ultimate destination. These rules were framed on the assumption that independently of the Rules, the importer was not obliged to keep the permit with the dollars after they passed out of the Kalimpong land customs station. The rules were not in force on May 18, 1957 when the dollars were seized by the Range Officer Matidhar. There was no provision in the Act or the Rules in force on May 18, 1957 which required the appellant to keep the permit at Sonapur airstrip with the dollars seized on that date.10. The contention of the Revenue is that Section 5(3) required that all important goods must always, at all time and at all places be accompanied by a permit. We are unable to accept this contention. After the import, the goods became a part and parcel of the mass of other like goods in India.There was no duty to keep the permit with the consignment of imported goods for all times and at all places.Nor was the importer under a duty to keep the consignment intact in his hands. He could sell portions of it to different buyers and obviously he could not give the permit to every consumer.He could import rubies from Burma by land and by sea. It was not necessary to keep any permit with the rubies imported by sea after their clearance from the Customs House. Nor was the position different in case of rubies important by land. A consumer wearing a necklace made of rubies was not expected to carry the permit for the rubies in her bag. Under the Land Customs Act a customs clearance permit was necessary for the passage of goods imported or about to be exported through the land customs station. For this reason Section 5 (3) read with Section 7(1) (a) required that the goods so passing through the land customs station must be accompanied by the permit. The rule could provide that the important goods should be accompanied by the permit even after such passage.As already stated. The rule required that important Chinese silver dollars should be accompanied by the permit during the entire journey up to their ultimate destination. In such cases, Section 5(3) was infringed if the permit covering the goods was not produced on demand by any Land Customs officer. Except in such cases, Section 5(3) did not apply, and it was not necessary to keep the permit with the goods. We hold that Section 5(3) was not infringed when the carriers did not produce the permit covering the goods at the Sonapur airstrip on May 18, 1957 and the goods could not be confiscated under Section 5 (3).11. Nor were the goods Hable to confiscation under Section 7 (1) of the Land Customs Act. The appellant imported 1,65,000 dollars from Tibet under two Reserve Bank licences and two import permits. There was no distinguishing mark on any dollar. The appellant was found in possession of 1,65,000 dollars only. No attempt was made to prove that the appellant was in possession of another consignment of 82,500 dollars. At the time of import the dollars were packed in 66 bags marked "HN." and 66 bags marked "H.D."The Range Officer seized 82,500 dollars packed in 66 bags marked "H.D." There is no evidence to show that the seized dollars were not covered by the permits and licences held by the appellant. The onus was on the respondents to prove that the first consignment of 66 bags bore the mark "HD."Application No. 34 accompanied the first consignment. There was no nothing on application No. 34 by the Customs officers at Sonapur or at Dum Dum indicating that they had examined the bags or that the bags were found to bear the mark "HD." The summary of the diary of the Range Officer Matidhar set out in the order of confiscation does not show that the officer examined the bags. The note in the diary that the mark checked was "HD." could have been made on the basis of the mark "HD" shown in the accompanying application No. 34. Before the issue of the show-cause notice on July 17, 1957, the appellant had no occasion to produce before the Customs authorities any of the 66 bags marked "HN" which had reached Calcutta.No inference has been drawn against the appellant from their inability to produce any bags marked "HN" after July 17, 1957.On the materials on the record it is impossible to hold that the dollars seized on May 18, 1957 were smuggled goods. There was no nothing by the Customs officers at Sonapur and Dum Dum on application No. 34. If the appellant desired to send smuggled "HD" bags from Sonapur to Dum Dum, they could easily obtain application No. 34 from Calcutta and send it with the consignment seized at Sonapur. Moreover, the Customs officers had not put any mark or initials on the bags, and there was nothing to prevent the appellant from putting the mark "HN." on other bags and using them for the carriage of the dollars.The conclusion is irresistible that due to the inadvertence of the carriers the permits were interchanged and that application No. 34 was sent with "HN." bags and application No. 32 was with "H.D." bags. No inference of smuggling could be drawn from the fact that "H.D." bags were found with application No. 32. In the circumstances, the finding that the appellant had smuggled the goods and was guilty of an offence under Section 7(1) of the Land Customs Act must be characterized as perverse.Having regard to the facts on the record, no Tribunal could reasonably come to the conclusion that the dollars were liable to confiscation if they properly understood the relevant enactments.This conclusion is sufficient to dispose of the appeal. It is, therefore, unnecessary to examine the contention that the impugned orders were passed in contravention of the principles of natural justice.