Judgment:
1. The above appeal arises out of the order dated 14th July, 1995 passed by the Commissioner of Customs (Preventive), New Customs House, Bombay extending the period for issue of show cause notice by a period of six months from 15-7-1995, in terms of the proviso to Section 110(2) of the Customs Act, 1962. Since the application for stay of operation of the order is not pressed by the learned Counsel, we dismiss the same as withdrawn and proceed to hear the appeal itself with the consent of both the sides.
2. The facts of the case are that the appellant herein is a private company carrying on, inter alia, the business of ship breaking and for that purpose, it had imported a ship called 'Ocean Blessing'. Nikhil Alloy Steels Ltd. is also a private company carrying on inter alia, the business of manufacture and sale of iron and steel products from its factory at Raigad (Maharashtra). Sh. Vinod Goel and Smt. Sujata Goel are the directors of both these companies.
3. On 16-1-1995, the officers of Marine and Preventive Wing of Customs (Preventive) Collectorate, Bombay visited the factory premises of M/s.
Nikhil Alloy Steels Ltd. and noticed various items of foreign origin viz., Tyres, HDPE Granules, Compressors, Carbon Black etc. for which no documents could be produced by the company's representative and hence, these items were detained and handed over under Supratnama to the Manager of the Company on 19-1-1995. The office premises of M/s. Nikhil Alloy Steels and the residential premises of Sh. Vinod Goel were searched on 16-1-1995; various documents were recovered from the office and unexplained cash of Rs. 3 lakhs was also seized from the residence of Sh. Vinod Goel. During the course of further investigation, other premises were also searched and goods of foreign origin were seized.
Further investigation revealed that Sh. Vinod Goel had informed his staff over the telephone, when the search operation was being carried out at the factory premises of M/s. Nikhil Alloy Steels Ltd. that four trucks carrying goods of foreign origin had already left Mangalore for Bombay and he directed the staff to divert the trucks to Panvel.
Subsequently, such diverted goods were also recovered and seized.
4. Smt. Sujata Goel did not respond to the summons issued to her Under Section 108 of the Customs Act. She applied for and obtained anticipatory bail from the Karnataka High Court at Bangalore. As per the condition of the Court order, she appeared before the Investigating Officer where her statement was recorded. She stated that her husband looked after the day-to-day affairs of the company and she was unable to inform the present whereabouts of her husband. Sh. Vinod Goel's applications for anticipatory bail were rejected both by the Punjab and Haryana High Court at Chandigarh and in the Karnataka High Court at Bangalore, and he did not respond to summons and was absconding.
5. The investigations at Bombay and Bangalore revealed that M/s. Engee Industrial Services Pvt. Ltd. had retrieved about 12 containers from the vessel 'Ocean Blessing' at Mangalore during December 1994/January 1995 and thereafter, they broke about 4 containers and removed the contents without filing any bill of entry and without paying any Customs duty at Bangalore, and these smuggled goods were despatched to Bombay in about 12 lorries.
6. The Department proposed to treat Sh. Vinod Goel as the main person in the background of the entire case of smuggling and, therefore, his examination was vital for the purpose of the case. In this background, a show cause notice dated 23rd June, 1995 was issued to the four persons mentioned above, as well as to certain other persons, proposing extension of time prescribed Under Section 110 of the Customs Act, 1962, by a further period of six months. The appellants filed their replies to the show cause notices, contending inter alia that the majority of the seized goods were duty paid and all duty paying documents were filed and, therefore, the department had no authority or jurisdiction to pass any order, including an order of extension of time for detaining the seized goods.
7. The Commissioner of Customs (Preventive) passed an order extending the period for issue of show cause notice by six months, holding that lack of co-operation on the part of Sh. Vinod Goel and his employees, prevented the early completion of the investigation in this case within the time limit laid down Under Section 110 and since examination of Sh.
Vinod Goel and one of his employee, Sh. K.K. Sharma who are alleged to be the main persons responsible for controlling/managing the smuggling racket, was essential for clarifying the position regarding the seized goods and other related issues which had arisen during the investigation, this was a fit case for extending the period for issue of show cause notice as provided for in the proviso to Section 110(2) of the Act. Hence this appeal.
8. Arguing on the question of maintainability of an appeal against an order passed Under Section 110 of the Customs Act, 1962, Sh. R.Santhanam, learned Counsel for the appellants, submits that the order under challenge is an order passed by the Collector of Customs as an Adjudicating Authority, as the effect of the order is to deprive the appellants of their right to return of the seized goods in terms of the provisions of Section 110(2), and hence it is an order falling within the purview of Clause (a) of Sub-section (1) of Section 129A. In support of this argument, he cites the following decisions :Mahindra & Mahindra Ltd. v. Collector of Central Excise, Bombay [1988 (33) E.L.T. 517]S. Kumar and Ors. v. Collector of Central Excise and Ors. [1983 (13) E.L.T. 1057] Hindustan Photo Films Mfg. Co. Ltd. v. C.E.G.A.T., New Delhi [1990 (50) E.L.T. 234 (Delhi)] Collector of Customs and Supdt. Prev. Service Customs, Charan Das Malhotra [1983 (13) E.L.T. 1477] 9. On the merits of the matter, the learned Counsel submits that the Collector has ignored the fact that the appellants had entered into a Memorandum of Agreement dated 2nd February, 1994 for purchase of the ship 'Ocean Blessing' from M/s. Veerana Paper Sales Pvt. Ltd., Singapore. The appellants had written to the Additional Collector of Customs, Mangalore under cover of letter dated 29-3-1993 requesting that the imported vessel be assessed to Customs duty on as is where is basis. The Port authorities at Mangalore, issued permission for beaching of the ship on 16-3-1993. The Bill of Entry was filed in June 1993 for assessment for home consumption in regard to the ship which was imported for ship breaking purposes and duty was paid thereon. The appellants requested that assessment of the goods in the containers inside the ship be separately made, in order to avoid the appellants incurring any loss that might arise as a result of likelihood of the sinking of the ship due to rains and storm conditions in Mangalore Coast. The matter was however, delayed and ultimately, the Central Board of Excise & Customs, on representation made to it, directed assessment of the bill of entry in regard to the ship without further delay and directed removal of containers in the ship in the presence of the Customs authorities, identification of the contents and valuation and assessment thereof. The learned Counsel submits that as and when each container was taken out, bills of entry were filed, assessments were made and thereafter, duty-paid goods were allowed to be removed by the appellants. Therefore, there is no basis for the allegation that the seized goods were not duty-paid. The next submission of the learned Counsel is that the show cause notice dated 23-6-1995 which culminated in the passing of the impugned order, was not even signed by the Commissioner of Customs, Bombay and was void ab nitio and proceedings pursuant thereto, cannot be sustained in law. The learned Counsel further contends that the Collector of Customs, Bombay has no jurisdiction in the matter since the seized goods were imported through Mangalore and had been assessed to duty at that place.
10. Regarding the finding of the Commissioner of Customs that Sh. Vinod Goel was absconding and he could not be examined, the learned Counsel draws our attention to an order dated 22-2-1995 passed by the Additional Collector of Customs, Mangalore from which it is apparent that Sh. Vinod Goel appeared in response to summons and tendered his statement before the Superintendent of Customs. Lastly, he submits that the order has been passed without consideration of the points raised by the appellants during the personal hearing and ignoring the case laws cited before him, thus, establishing non-application of mind on the part of the Collector and hence, the order requires to be set aside and seized goods directed to be released immediately to the appellants.
11. In reply to the arguments of the learned Counsel, Sh. T.R. Malik, learned DR contends that the order dated 23rd June, 1995 is not an order of adjudication as show cause notice has yet to be issued and it is only after issue of notice that an order of adjudication will be passed and hence, the present appeal is not an order passed by the Collector as an Adjudicating Authority which alone is appealable under Clause (a) of Section 129A (1). On the merits of the case, the learned DR invites attention to the show cause notice dated 23rd June, 1995 in which the details of investigation have been set out and from which a smuggling racket is spelt out, in which Sh. Vinod Goel and Sh. K.K.Sharma were actively involved. Sh. Vinod Goel and his employees started removing the goods from Mangalore even without filing any documents for clearance or payment of duty and some of the goods so removed were also cleared resorting to mis-declaration of quantity, and transported to Bombay and stored in several places including the premises of M/s.
Nikhil Alloy Steel Ltd. which is owned and controlled by Sh. Vinod Goel. The learned DR submits that investigation in this case revealed involvement of Sh. Vinod Goel as a kingpin behind the entire illicit transaction and, therefore, his examination by the Customs authorities was very vital. Since Sh. Vinod Goel was absconding and could not be examined, investigations could not be completed within the period of 6 months and it is in these circumstances that the Commissioner of Customs has concluded, after weighing all the facts and evidence before him,that it is a fit case for extension of time for issue of show cause notice. He submits that since the goods in question were seized at Bombay, the Commissioner of Customs at Bombay had jurisdiction to deal with the matter. Lastly, he contends that the reference in order of the Collector of Customs, Mangalore to the statement of Sh. Vinod Goel is immaterial in the face of his admitted non-appearance before the Commissioner of Customs at Bombay. He therefore, urges that the well reasoned and detailed order of the Commissioner of Customs, Bombay be upheld and the appeal rejected.
12. We have given our anxious thought to the rival submissions made before us. The contention of the appellants that the order dated 14-7-1995 of the Commissioner of Customs, extending the period for issue of show cause notice by six months, is an order passed by him in his capacity as an Adjudicating Authority, is well founded. In the case of Assistant Collector of Customs, Calcutta v. Charan Das [1983 (13) E.L.T. 1477 (SC)], the Hon'ble Supreme Court has held that right to restoration of the seized goods is a civil right which accrues on the expiry of initial six months and which is defeated on the extension being granted, even though such extension is possible within a year from the date of seizure (paragraph 15). The Hon'ble Supreme Court has over-ruled the judgment of the Hon'ble Calcutta High Court in the case of Sheikh Mohd. Sayeed v. Assistant Collector of Customs (AIR 1970 Cal.
134) holding that there is no indication in the Customs Act to state that the Collector is required to act judicially while passing an order of extension of period for issue of notice, on the ground that the proviso to Section 110(2) requires determination of facts and not on mere suspicion, and sufficient cause being made out by the applicant officer and also on the ground that the civil right of a citizen to the restoration of property on expiry of the period, whether initial or extended, is affected. The Supreme Court also did not follow the judgment of the High Court of Mysore in Ganeskmul Channilal v.Collector of Central Excise (AIR 1968 Mysore 89) to the effect that the power of extension under proviso to Section 110(2) was administrative.
For the same reason, the Supreme Court did not follow the judgment of the Bombay High Court in the case of Prakash Cotton Mills Pvt. Ltd. v.Collector of Central Excise (Misc. Petition No. 127/63, dated 31-8-1970). The relevant portions of the Supreme Court judgment are reproduced below: "But it may be said that in both these cases there was a civil right involved and the power, therefore, had to be held to be quasi-judicial. But in the present case also, the right to restoration of the seized goods is a civil right which accrues on the expiry of the initial six months and which is defeated on the extension being granted, even though such extension is possible within a year from the date of the seizure. Since the Collector has on facts to decide on the existence of a sufficient cause, although his decision as to sufficiency of materials before him may be within his exclusive jurisdiction, it is nonetheless difficult to comprehend how he can come to his determination unless, as the Division Bench of the High Court has said, he has before him the pros and cons of the question. An ex parte determination by the Collector would expose his decision to be one-sided and perhaps one based on an incorrect statement of facts. How then can it be said that his determination that a sufficient cause exists is just and fair if he has before him a one-sided picture without any means to check it unless there is an opportunity to the other side to correct or controvert it The difference in the language used in the first Sub-section and the proviso to Sub-section (2) lends support to the contention that the power in one case may be subjective, and, therefore, not calling for an enquiry, and the power in the other is one, the exercise of which necessitates an enquiry into the materials placed before the Collector for his determination. In our view, these considerations lead to the conclusion that the power under the proviso is not to be exercised without an opportunity of being heard given to the person from whom the goods are seized.
In a recent decision in Sheikh Mohammed Sayeed v. Assistant Collector of Customs (AIR 1970 Cal. 134) a contrary view has however, been taken by a single Judge of the High Court of Calcutta. The extension order there was passed before the expiry of the initial six months' period.
But the contention raised was that an opportunity to be heard should have been given to the petitioner. The learned Judge distinguished the decision of the Division Bench under this appeal (reported in AIR 1968 Cal. 28) on the ground that the question involved in that decision as whether an opportunity of being heard had to be given in respect only of an extension when the right to restoration of the goods in question has already accrued to the party from whom they were seized, and, therefore, the decision did not apply to the case before him when such a right had not vested in the petitioner. With respect to the learned Judge, the distinction was not correct, firstly, because the first order of extension was only assumed to be correct as the Division Bench concentrated its attention on the second order of extension which also involved the question of the right to restoration of the goods having already vested, and secondly, because the Division Bench set aside extension order on the ground that the power of extension was quasi-judicial or at any rate one which required a judicial approach.
The latter ground applied to both the orders, and, therefore, if the second order of extension was bad, the first was for the same reason necessarily bad. The order of extension in both the cases would deprive the person from whom the goods are seized of the right to have the goods restored to him on the expiry of six months from the date of seizure. As for his decision on the nature of the power, the learned Judge relied on decisions in Collector of Customs v. N. Sampathy Chetty (AIRBabulal Amthalal v. Collector of Customs (AIR 1957 SC 877); Pukhraj v. Kohli (AIR 1962 SC 1559) and Nathmal Jalan v.Additional Collector of Customs [(1966) 70 WN 349)] which were all cases where the exercise of power depended on reasonable belief or reasons to believe. But he held that the power under the proviso to Section 110(2) should be construed on the same principles laid down in those decisions. This is made clear at page 141 of the report where he observed : "In my view the same principles are attracted in construing the phrase 'on sufficient cause being shown' - with regard to the nature and sufficiency of the cause, it is the satisfaction of the Collector of Customs that provides the ground and justification for an order extending the time to complete the inquiry - if the order of extension is made before expiry of the initial period of six months, or before expiry of the extended period, it cannot in my view be challenged on the ground that notice to show cause, or opportunity of being heard was not given to the party." In our view, equating the power, the exercise of which depends on a mere reasonable belief, with the power, the exercise of which depends on sufficient cause being shown' envisaging at least some sort of inquiry of facts placed before the authority and determination by him on those facts, is not warranted. Therefore, a conclusion based on such a premise creates difficulty in sustaining it. Further, the distinction between an order extending before and after the expiry of the initial or the extended period does not make any difference as was sought to be made by the learned Judge when one inquires into the character of the power of- extension. Both would raise precisely the same question, whether the power is purely administrative requiring no opportunity of being heard or judicial or quasi- judicial, as in both the cases the right to the goods being restored would be involved. We cannot also agree with the learned Judge that there is no indication in the Act to suggest that the Collector is required to act judicially, firstly, because the proviso requires determination on facts and not on mere suspicion and a sufficient cause being made out by the applicant-officer, and secondly, because a civil right of a citizen to the restoration of the goods on expiry of the period, whether initial or extended, is affected.
The other decision which takes a contrary view, is of the High Court of Mysore in Ganeshmul Channilal v. Collector of Central Excise (AIR 1968 Mysore 89). The grounds on which the learned Judges there took that view were (1) that the power was administrative, and (2) that if notice were to be necessary, the authority which applies for extension would have to make a disclosure about the investigation, which disclosure would be detrimental to the investigation itself. For the reasons already given, we cannot agree with the first ground. As for the second ground, we do not see any reason for the apprehension. So far as the initial period of six months is concerned, there is no question of disclosure of the investigation. The legislature itself contemplated that ordinarily such an investigation would be completed within that period. The question of disclosure would arise only in cases where for bona fide reasons something yet remains to be done. The only disclosure in such cases would be about the fact that investigation at some place or places, or about certain matters is still incomplete and pending. No one suggests that the inquiry to be held by the Collector would be similar to the one held in a Court of law or that the officer applying for extension would be compelled to disclose the names of his informants or such other matters which would be detrimental to the investigation. Even in more serious matters, such as applications for remand in criminal cases, opportunity to be heard has to be given. No one has yet suggested that such an opportunity is detrimental to the investigation. The unreported judgment of the High Court of Bombay in Prakash Cotton Mills Pvt. Ltd. v. Assistant Collector of Central Excise, Bombay Misc. Petition No. 127 of 1963, dated 31-8-1970 (Bom.), does not throw any further light as it is mostly based on the reasoning of the Mysore High Court. We are not satisfied that as between the right of the person from whom the goods are seized and the supposed danger to the investigation the matter is so weighed down that we would be compelled to hold that the legislature could not possible have contemplated a judicial approach by the Collector when he orders extension of time, the effect; of which would be the deprivation of, or in any event, postponement of the right to restoration. In our view, the first question must be answered in favour of the respondent, and, therefore, the Division Bench was right in holding that the power under the proviso was quasi-judicial, or at any rate, one requiring a judicial approach. Consequently, an opportunity of being heard ought to have been given to the respondent before orders for extension were made. The High Court, consequently, was justified in ordering restoration of the watches in question to the respondent."Rao, Assistant Collector of Customs v. Bibhuti Bhushan Bagh [1989 (42) E.L.T. 338], the Hon'ble Supreme Court has noted in paragraph 5 of its order that the single Judge of the Calcutta High Court, by his order dated 11th December, 1968, had repelled the contention of the Department that the proceedings Under Section 110(2) of the Customs Act, 1962 are administrative in nature and held that the order of extension was a quasi-judicial order. The Supreme Court then proceeded to decide the question as to whether the person from whose possession goods have been seized, is entitled to notice, before the expiry of the original period of six months and held that it is open to the Collector to extend the time beyond the original period of six months and thereafter, if he finds that sufficient cause has been made out before him in that behalf. The Court also held that such a person is entitled to notice of the proposal before the Collector of Customs for the extension of the original period of six months mentioned in Section 110(2) and he is entitled to be heard upon such proposal, but subject to the restrictions in regard to the need for maintaining confidentiality of the investigation proceedings. This view has been reaffirmed in the recent decision of the Supreme Court in the case of Harbans Lal v. Collector of Central Excise, Chandigarh -(AIR 1993 SC 2487).
14. In view of the above, we hold that the order passed in terms of the proviso to Section 110(2) is a quasi-judicial order passed by the Collector as an Adjudicating Authority and hence is appealable to the Tribunal under the provisions of Clause l(a) of Section 129A.15. Having held that the appeal is maintainable, we now proceed to discuss the legality, validity and correctness of the impugned order.
From the narration of the facts which have been set out in the earlier part of this order, it transpires that there were several links in the chain of alleged smuggling. The Adjudicating Authority has dealt with this aspect in the findings portion of his order wherein he has held that the picture as unfolded by investigation, prima facie shows involvement of Sh. Vinod Goel as the key person behind the alleged illicit transaction. It is also brought out from the show cause notice and the order that the department was concerned with non-dutypaid goods of foreign origin diverted from Mangalore to Bombay and hence, the submission of the learned Counsel for the appellants that the goods seized at Bombay had been cleared on payment of duty at Mangalore, does not appear to be prima facie correct and the submission regarding duty paid nature of the seized goods will have to be considered only after the issue of show cause notice Under Section 124(a) and not at this stage, when the submissions are pre-mature. Since the department seeks to treat Sh. Vinod Goel as the main person behind the entire alleged illicit transaction, the Collector has rightly held that his examination and that of Sh. K.K. Sharma, his employee who is alleged to have colluded with him, is vital for the purpose of the case. Since neither person appeared in response to the summons and further since Sh. Vinod Goel was absconding, the period for issue of notice requires to be extended. All the issues raised by the learned Counsel relating to the jurisdiction, liability of the goods to confiscation, valuation of the seized goods, etc. can be agitated by the appellants after a proper show cause notice Under Section 124(a) is issued. It cannot be said that the Collector has not applied his mind to the facts and circumstances of the case before passing the order of extension and in our opinion, he has satisfied himself that sufficient cause exists for extending the period for issue of notice. We are satisfied that the power of extension of time has been exercised judicially. We see no infirmity in the impugned order and accordingly uphold the same and reject the appeal.