Babulal Amthalal Mehta vs Collector Of Customs Calcutta

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Writ Petition (civil) 98 of 1956

Decision Date: 08 May 1957

Coram: S.R. Das, S.J. Imam, S.K. Das, P.G. Menon, A.K. Sarkar

In this matter the petitioner, Babulal Amthalal Mehta, filed a writ petition under Article 32 of the Constitution challenging the constitutional validity of section 178‑A, which had been inserted into the Sea Customs Act of 1878 by section 14 of the Amending Act XXI of 1955. The petitioner argued that the impugned provision violated the guarantee of equality before the law contained in Article 14 of the Constitution. The petition was numbered Writ Petition (Civil) 98 of 1956 and was heard before a bench comprising the Chief Justice S.R. Das, Justice S.J. Imam, Justice S.K. Das, Justice P.G. Menon and Justice A.K. Sarkar of the Supreme Court of India. The judgment was delivered by Justice Govinda Menon, who read the opinion on behalf of the Court. The petitioner described himself as a broker dealing in diamonds and other precious stones, operating in Calcutta and enjoying a reputation for creditworthiness and respectability in his trade. According to the affidavits filed by both parties, the petitioner maintained a residential premises at number 32 Sir Hariram Goenka Street in Calcutta, where he kept his business stock in a steel almirah. The core of the petition centered on whether the statutory provision authorising the seizure and subsequent procedural steps could stand consistent with the constitutional guarantee of equal protection.

According to the factual record, on May 4, 1955 the Rummaging Inspector (Intelligence) of the Customs House, Calcutta, identified as Respondent No. 3, acted under a search warrant issued by the Chief Presidency Magistrate, Calcutta, identified as Respondent No. 4. The inspector entered the petitioner’s residential room and conducted a brief examination of the steel almirah that, as the petitioner explained, housed his trade stock. No diamonds were discovered in that almirah, and the inspector subsequently questioned the petitioner as to whether he had concealed any diamonds; the petitioner denied any such concealment. The inspection then proceeded to a wall almirah used for storing washed clothes and other articles, where the inspector uncovered an old jacket containing four hundred and seventy‑five diamonds together with a single synthetic stone. The petitioner signed a statement acknowledging possession of the diamonds, explaining that ten thousand rupees’ worth of the diamonds had been received from M/s Ratilal Amritlal, located at 89 Zaveri Bazar, Bombay, while the remainder had been bought locally in Calcutta. The petitioner could not recall the names or addresses of the local sellers and possessed no documentary evidence of the purchases. After the seizure, the Rummaging Inspector escorted the petitioner to the Customs House, where the Assistant Collector of Customs demanded that the petitioner produce proof that the seized items were not smuggled but had been lawfully imported upon payment of the appropriate customs duty. The Assistant Collector granted the petitioner permission to leave and set a deadline of May 7, 1955 for the production of such evidence, including any valid import licence. On the same day, that is, May 4, 1955, a notice was served on the

In this matter, the Customs authorities issued a notice to the petitioner indicating that they possessed reasonable grounds to suspect that the diamonds seized by the Rummaging Inspector had been imported into India in violation of law, and therefore, before invoking the powers granted by sections 167(8) and 167(39) of the Sea Customs Act, they required the petitioner to file, no later than 7 May 1955, any documents in his possession that could demonstrate that the seized articles had been lawfully imported on payment of the appropriate customs duty and that a valid import trade control licence had been obtained; the notice further stipulated that, should the petitioner assert that the diamonds had not been imported by him but had instead been purchased from another party, he must also submit, by the same deadline, any evidence showing the transaction by which he acquired the goods. In response to this demand, counsel representing the petitioner, identified as a firm of advocates from Calcutta, addressed a letter to the Assistant Collector of Customs on 7 May 1955, in which they outlined the circumstances under which the petitioner came into possession of the seized items, argued that, given those circumstances, the presumption of an offence under section 86 of the Sea Customs Act—an offence punishable under section 167(39) of the same Act—was unwarranted, and requested that the Collector furnish a detailed statement of the reasons for the seizure at the earliest possible opportunity. That same correspondence also sought a ten‑day extension to enable the petitioner to obtain and submit certificates from both the Bombay and Calcutta trading communities, documents that would attest to the legitimacy of the petitioner’s business and clarify how he obtained the diamonds. A further letter from the same counsel was dispatched on 9 May 1955; the content of that letter was deemed unnecessary to reproduce in full. On 16 May 1955, the advocates sent another communication enclosing two certificates and providing additional particulars, while again reiterating the request that the Assistant Collector disclose the specific grounds on which the seizure had been based. The Assistant Collector replied on 23 May 1955, informing the petitioners that the diamonds had been seized on the basis of reasonable suspicion that they had been imported illegally and consequently were subject to seizure under the provisions of the Sea Customs Act. Subsequent correspondence continued, with a letter dated 20 June 1955 followed by a reply on 25 June 1955, in which the Collectors’ office furnished a comprehensive recitation of all events up to that date, particularly emphasizing the petitioner’s earlier denial of any possession of diamonds and the later discovery of the stones concealed in a used jacket placed in a wall almirah. That June 25 letter represented a thorough justification of the actions taken by the search officers and concluded with a warning that, should the petitioner fail to provide a written explanation within the prescribed time or neglect to appear before the Collector at the scheduled hearing, the matter would be decided solely on the basis of the evidence already on record, without any further notice. On

In July 1955 the petitioner’s representatives, Messrs S K Sawday & Company, sent a letter on 1 July reiterating the petitioner’s objections and explaining why the customs action should not be taken. Further letters were dispatched on 4 July and on 20 July 1955. The customs authority then granted the petitioner a personal hearing on 21 July 1955, after which the petitioner’s counsel sent a further letter on 22 July 1955. The Court noted that it is unnecessary to reproduce the contents of these letters or to refer to the statement submitted by M s Ratilal Amritlal of Bombay. After reviewing the entire material placed before him, the Collector of Customs issued an order dated 12 September 1955, which was sent to the petitioner on 5 November 1955. That order contained a detailed discussion of the relevant facts and circumstances and concluded that the petitioner had failed to discharge the burden of proof imposed by section 178‑A of the Sea Customs Act in respect of the diamonds seized on 4 May 1955. Consequently, the Collector ordered the confiscation of the diamonds under sections 167(8) and 167(39) of the Sea Customs Act and declared the confiscation to be absolute pursuant to sections 3(2) and 4 of the Imports and Exports (Control) Act, 1947. The reasons recorded were that the petitioner’s later statements contradicted his original accounts, that at the time of the raid the diamonds had been concealed in a suspicious manner, and that the petitioner’s explanations appeared to be after‑thoughts lacking factual support. On these and other grounds the Collector held that the presumption created by section 178‑A had not been rebutted. The order further informed the petitioner that an appeal could be made to the Central Board of Revenue within three months of the dispatch of the order and set out the requirement to affix the appropriate court‑fee stamps. The petitioner did not pursue that remedy and instead entered this Court by filing an application for a writ of remedy under article 32 of the Constitution. Although counsel for the petitioner briefly raised the contention that articles 19(1)(f) and 19(1)(g) as well as article 31 were infringed, those arguments were not pressed with vigor. The principal contention advanced was that section 178‑A violated the principle of equality before the law guaranteed by article 14 of the Constitution. Before addressing the validity of section 178‑A, the Court observed that it would be useful to examine the circumstances that led to the enactment of that provision, and for that purpose it was necessary to outline the relevant provisions of the Sea Customs Act. Section 19 of the Sea Customs Act, 1878 authorises the Central Government, by notification in the official Gazette, to prohibit or restrict the importation or exportation of goods into or out of India, while section 20 enumerates the goods that are subject to duty. When any person imports a good into India, the owner of…

According to the statute, once the master of a vessel delivered the manifest for goods imported into India, the owner of those goods was required to make an entry for home consumption or for warehousing. This entry had to be effected by submitting a bill of entry to the Customs‑collector. The bill of entry had to contain particulars that corresponded precisely with the particulars shown in the ship’s manifest, as mandated by section 86. The purpose of this requirement was to enable the Customs‑collector to verify whether the description provided by the owner matched the description supplied by the master of the vessel in the manifest. Upon receipt of the bill of entry, if any customs duty was payable on the imported goods, the duty was to be assessed under section 87. Only after the assessed duty had been paid could the owner proceed to obtain clearance of the goods, a step that was governed by section 89. When all statutory conditions were satisfied, the owner was then permitted to take possession of the goods.

Chapter XVI of the Act dealt with offences and penalties. Section 167 of that chapter presented a schedule containing three columns. The first column listed the offence; the second column, which did not possess the force of law, identified the provision of the Act to which the offence related; and the third column set out the penalty that could be imposed. It was necessary to distinguish between the penalty that could be levied by the customs authorities under the third column and the punishment that a court of law could impose for the violation of certain provisions. Offences listed in entries 26, 72 and 74 to 76 required prosecution and conviction before a Magistrate, whereas most other entries concerned penalties that were to be imposed by the customs authorities. This distinction became relevant to the interpretation of section 182.

The present case concerned entries 8 and 39 of the schedule. Entry 8 stipulated that when goods whose importation or exportation was prohibited or restricted were brought into the country in violation of such prohibition or restriction, the goods were subject to confiscation. In addition to confiscation, the persons concerned were liable to a monetary penalty not exceeding three times the value of the goods or not exceeding one thousand rupees, whichever was lower. The Court had previously held that the lower limit of the alternative penalty applied, as explained in the decision of Maqbool Hussain v. The State of Bombay (1953 SCR 730, 742). Entry 39 prescribed a penalty not exceeding five hundred rupees and also mandated confiscation of the goods if they were taken out of any customs house or wharf without a duly made entry. Goods that were smuggled and later seized fell within the ambit of this entry. Although the Act did not define the term “smuggling,” it was to be understood in its ordinary dictionary sense, namely the clandestine transport of goods into the country. Chapter XVII subsequently dealt with the search and recovery of smuggled goods, as well as related offences, appeals and other procedural matters.

Section 169 of the Customs Act authorised any customs officer who was duly engaged in preventing smuggling to search a person who was on board any vessel anywhere in India or a person who had disembarked from a vessel, but only when that officer possessed a reasonable belief that the individual was concealing dutiable or prohibited goods on his person. The statute therefore required a factual basis for the search, namely a suspicion that prohibited articles were being hidden. To protect persons from arbitrary search, Section 170 provided that a person who was about to be searched could insist that the officer escort him before the nearest magistrate or customs collector prior to the search being carried out. The Court highlighted that the essential condition for a search or an attempted search was the officer’s belief, supported by reasonable suspicion, that dutiable or prohibited goods were being concealed. These provisions dealt with the moment a person introduced dutiable goods into India. The later provisions of Chapter XVII, however, governed the procedure to be applied when goods were smuggled without being detected at the port or wharf. Section 172 vested the power to issue search warrants in any magistrate. The provision read: “Any Magistrate may, on application by a Customs‑collector, stating his belief that dutiable or prohibited goods (or any documents relating to such goods) are secreted in any place within the local limits of the jurisdiction of such Magistrate, issue a warrant to search for such goods (or documents). Such warrant shall be executed in the same way, and shall have the same effect, as a search‑warrant issued under the law relating to Criminal Procedure.” The Court observed that a warrant could be issued only on an application made by a customs collector who was a senior and responsible officer, and that this requirement operated as a safeguard against the indiscriminate issuance of search warrants.

Section 178 dealt with the seizure of goods that were liable to confiscation, whether the seizure occurred on land or on water, and authorised any customs officer or any other person duly employed for the prevention of smuggling to make such seizure. The provision that was contested, Section 178‑A, was set out in two clauses. Clause (1) stated: “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 and goods were seized.” Clause (2) listed the categories of goods to which the provision applied, namely gold, gold manufactures, diamonds and other precious stones, cigarettes, cosmetics and any other goods that the Central Government might specify by notification in the Official Gazette. The Court held that the presumption created by Section 178‑A applied equally to seizures effected under a search warrant issued pursuant to Section 172 and to seizures made under Section 178 without a warrant. The subsequent provisions, Section 179 and Section 181, explained the procedure for dealing with seized articles and required that, when a seizure or an arrest was effected, a written statement setting out the reasons for the seizure or arrest be given to the person whose goods were seized or who was arrested.

The Court explained that whenever a person is arrested or goods are seized, the law requires that a written statement of the reasons for the arrest or seizure be provided to the arrested individual or to the owner of the seized goods. It further observed that when an article is seized under sections 172 and 178, the confiscation, penalty or duty may be adjudicated only by the officer named in those provisions, except in cases falling under entries 26, 72 and 74 to 76 of section 167, and that the person from whom the articles are seized is therefore entitled to receive a determination as to whether confiscation, penalty or duty will be imposed. This right, the Court held, allows the seized party to obtain an adjudication of the claim made by a superior officer; and if, after such adjudication, the confiscation is still ordered, section 188 provides that an appeal may be filed by the subordinate officer to the Chief Customs‑authority within three months of the decision. In the case before the Court the confiscation had been ordered by the Collector of Customs, and consequently an appeal was available from the Collector to the Central Board of Revenue.

Section 191 was then described as empowering the Central Government, upon application by any person aggrieved by a decision or order passed under the Act by a Customs officer or the Chief Customs‑authority, to reverse or modify such a decision or order when no other appeal lies. The Court pointed out that the series of provisions outlined above creates a succession of remedies for any person whose articles have been seized and confiscated, and that the Act constitutes a complete code providing redress and relief in cases of illegal or unjustified orders. Regarding the origin of section 178‑A, the Court noted that the Central Government had constituted the Taxation Enquiry Commission, whose report recommended the principles underlying section 178‑A as a means to curtail smuggling. In volume II of the report, Chapter VII, pages 320 and 321, the Committee suggested amending the Sea Customs Act to make smuggling a criminal offence, to empower Customs officers to search premises, and, in the third recommendation, to shift the burden of proof in smuggling offences onto the person in whose possession any dutiable, restricted or prohibited goods are found. The enactment of section 178‑A was intended to give effect to that recommendation.

The Court observed that section 178‑A expressly applies to diamonds and other precious stones, and that there was no dispute that the provision was applicable to the present facts. It concluded that, based on the facts, the seizure had been made under the Act in a reasonable belief by the Customs authorities that the goods were smuggled, and consequently the burden of proving that the goods were not smuggled was placed by this section upon the person from whose possession the goods had been seized. The Court further emphasized that the scope of the section is broad, extending not only to the actual smuggler who possessed the goods at the time of seizure but also to persons who subsequently came into possession of the goods, thereby imposing a substantial evidential burden on any party whose items are seized under the presumption created by section 178‑A.

In this case the Court considered the effect of the statutory provision that places the burden of proof on any person who possesses goods that have been seized on the basis of a reasonable belief by customs officers that the goods are smuggled. The provision applies not only to the original smuggler but also to any subsequent possessor who may have acquired the articles after they had passed through many hands or agencies. For example, where customs officials develop a reasonable belief that certain articles in the possession of an innocent person constitute smuggled goods and those articles are seized under the relevant Act, the law requires that the person from whose possession the goods were taken must demonstrate that the articles are not smuggled, even if that person maintains that he is innocent. The Court observed that such an obligation imposes a very heavy and onerous duty on an innocent possessor who may, for all that is known, have paid a fair price for the purchase of the articles without any knowledge that the items were obtained by smuggling. The only condition for the operation of the section, according to the Court, is the subjective belief of the customs officer that the goods are smuggled, provided that belief is reasonable.

A careful examination of the lengthy petition filed under Article 32 of the Constitution did not reveal a clear manner in which the impugned section infringes Article 14. No separate ground of unconstitutionality was specifically raised, but counsel for the petitioner argued that the burden of proof prescribed by the section contravenes the fundamental principles of natural justice. Counsel contended that the provision grants an unrestricted, arbitrary and unchecked power to customs authorities because it fails to lay down any standard or norm that must be followed when exercising the powers conferred by the section. The argument advanced was that, under ordinary law, the burden of proof in such matters rests on the party who alleges a particular case, whereas the statute reverses this position and places the evidential burden on the possessor of the article to prove that the item was imported into India with a proper bill of entry and that the appropriate customs duty had been paid. The Court noted again that this represents a heavy burden for an innocent purchaser who may have obtained the article after it had changed several hands. It was further alleged that this burden creates discrimination between the innocent possessor and other litigants and deprives him of the equal protection of the law guaranteed by Article 14 of the Constitution.

The parties cited a substantial number of authorities to support their respective positions. The Court recognized that the true nature, scope and effect of Article 14 have been elucidated by various constitutional benches in earlier decisions, including Chiranjit Lal Chowdhury v. Union of India and Others (1950 SCR 869), The State of Bombay and Another v. F N Balsara (1951 SCR 682), The State of West Bengal v. Anwar Ali Sarkar (1952 SCR 284), Kathi Raning Rawat v. State of Saurashtra (1952 SCR 435), Lachmandas‑Kewalram Ahuja and Another v. State of Bombay (1952 SCR 710), Syed Qasim Razvi v. State of Hyderabad and Others (1953 SCR 591), and Habeeb Mohammad v. State of Hyderabad. These authorities were referenced to illustrate the established jurisprudence concerning the permissible classification under Article 14 and to frame the discussion of whether the statutory burden of proof constitutes unreasonable discrimination.

In this case, the Court observed that earlier authorities such as the decision reported in 1953 SCR 661 and the case of V. M. Syed Mohammed and Company v. The State of Andhra reported in 1954 SCR 1117 were not required to be discussed in detail. The Court explained that it was unnecessary to delve into lengthy passages of those judgments because the essential principles underlying the relevant constitutional provision had already been summarised by a Full Bench of this Court in Budhan Chaudhury and Others v. The State of Bihar, reported in 1955 (1) SCR 1045 at pages 1048‑1049. The Full Bench had stated that it is well established that while Article 14 forbids class legislation, it does not prohibit reasonable classification for legislative purposes. The Court further explained that for a classification to be permissible, two conditions must be satisfied. First, the classification must be based on an intelligible differentia that distinguishes the persons or things placed in the group from those left out. Second, that differentia must have a rational relation to the objective that the statute seeks to achieve. The Court noted that the basis of classification may be geographical, occupational, or related to other categories, but there must always be a nexus between the classification and the purpose of the Act. It also reiterated that Article 14 condemns discrimination not only in substantive law but also in procedural law. The principle articulated in Budhan Chaudhury’s case was subsequently adopted and applied by this Court in Purshottam Govindji Halai v. Shri B. M. Desai, reported in 1955 (2) SCR 889 at pages 898‑899, and in A. Thangal Kunju Musaliar v. M. Venkitachalam Potti and another, reported in 1955 (2) SCR 1196 at page 1229.

The Court observed that counsel for the petitioner, Mr. N. C. Chatterjee, referred to several decisions of the Supreme Court of the United States, namely William N. McFerland v. American Sugar Refining Co., reported in 1916 (241) US 79; 60 L.Ed. 899, W. D. Manley v. State of Georgia, reported in 1929 (279) US 1; 73 L.Ed. 575, and Tot v. United States, reported in 1943 (319) US 463; 87 L.Ed. 1519. The Court indicated that those American cases were decided on the basis of the due‑process clause of the United States Constitution and therefore could not assist in interpreting the equal‑protection clause of the Indian Constitution. Consequently, the Court held that the arguments advanced by counsel Chatterjee challenging the constitutionality of Section 178‑A of the Sea Customs Act, 1878, must be examined in light of the principles set out in Budhan Chaudhury’s case (supra). A preliminary examination of Section 178‑A, the Court said, immediately reveals a clearly defined classification of goods based on an intelligible differentia. The provision applies only to certain goods described in sub‑section (2) that are either easily smuggled or capable of being smuggled. Moreover, the section is limited to those specified kinds of goods that have been seized under the Act on a reasonable belief that they are

The Court observed that the provision applied only to goods that were described as smuggled goods. It clarified that only those items which satisfied the threefold description laid down in the statute fell within the operation of the section. The Court noted that the purpose of the Act was to prevent smuggling. It explained that the classification of goods and the statutory presumption were based on a clear and intelligible differentia, and that this differentia bore a rational connection to the objective of the legislation. The presumption, the Court said, attached solely to goods that matched the description provided in the section and it directly advanced the aim of preventing smuggling. Accordingly, the Court held that the impugned section conformed to the principle previously explained and was not violative of Article 14 of the Constitution. The Court further held that the section could not be invalidated on the ground of improper discrimination or unlawful classification. Because the provision was limited to particular classes of goods seized by customs authorities on a reasonable belief that they were smuggled, the statutory presumption operated only in those cases and could be rebutted by evidence. In these circumstances, the Court found no doubt that Section 178‑A did not offend Article 14, and consequently the petition challenging the provision was dismissed with costs.