F. N. Roy vs Collector Of Customs, Calcutta

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

Court: Supreme Court of India

Case Number: Petition No. 438 of 1955

Decision Date: 16 May 1957

Coram: A.K. Sarkar, Syed Jaffer Imam, S.K. Das, P. Govinda Menon

In this matter the petition was filed by F N Roy against the Collector of Customs, Calcutta. The case was decided by the Supreme Court of India on 16 May 1957. The judgment was authored by Justice A K Sarkar and the bench was composed of Justices A K Sarkar, Syed Jaffer Imam, S K Das and P Govinda Menon. The decision is reported in the 1957 volumes of the All India Reporter (AIR 648) and the Supreme Court Reporter (SCR 1151). The statutory framework under consideration included the Sea Customs Act 1878, specifically sections 167(8) and 183, the Imports and Exports (Control) Act 1947, particularly section 3(1) and its sub-section (2), and the constitutional provision of Article 14 of the Constitution of India, which guarantees equality before the law.

The headnote of the judgment explains that section 167, item 8, of the Sea Customs Act 1878 stipulates that if any goods whose importation is at that time prohibited or restricted under Chapter IV of the Act—Chapter IV containing section 19—are brought into India in violation of the prohibition, those goods may be confiscated and any person involved in the importation may be liable to a penalty not exceeding three times the value of the goods or not exceeding one thousand rupees. Section 183 of the same Act further provides that whenever confiscation is authorised, the officer adjudicating the matter may give the owner an option to pay a fine in lieu of confiscation, the amount of which the officer may determine. Under section 3(1) of the Imports and Exports (Control) Act 1947, the Central Government is empowered to issue orders that prohibit, restrict, or otherwise control the import, export, coastal carriage or shipment of goods of any specified description. Sub-section (2) of that provision declares that any goods to which such an order applies shall be deemed to be goods whose import or export has been prohibited or restricted under section 19 of the Sea Customs Act 1878, and the provisions of that Act shall apply accordingly, except that the word “shall” in section 183 is to be read as “may”. In the present case, the petitioner imported certain goods that had been prohibited by a Central Government order made under section 3(1) of the Imports and Exports (Control) Act. The Collector of Customs, invoking section 167, item 8, of the Sea Customs Act, ordered the confiscation of those goods and imposed a penalty of one thousand rupees on the petitioner. The petitioner challenged the validity of that order before the Supreme Court.

The Court held that (1) section 3(2) of the Imports and Exports (Control) Act 1947 does not violate Article 14 of the Constitution. The provision, by its own terms, does not create any discretionary power for the customs authorities; its sole effect is to make the Sea Customs Act 1878 applicable to the cases covered by the order. Consequently, the provision cannot be said to be arbitrary or discriminatory. (2) Section 183 of the Sea Customs Act 1878 does not itself authorise the confiscation of goods; it merely provides that, if confiscation is authorised under some other provision of the Act, the officer may permit the owner to pay a fine instead. The section therefore does not create an independent power to confiscate, and it cannot be read as granting such power in isolation.

The Court observed that Section 183 of the Sea Customs Act, 1878, does not itself grant authority to confiscate goods; rather it presumes that such a power may exist under other provisions of the Act. Consequently the section cannot be described as a two-part statutory provision in which one part would violate Article 14 of the Constitution while the other would not. It contains only a single statutory provision and, taken alone, does not authorise confiscation. The Court further held that Section 167, item 8, of the Sea Customs Act, 1878, likewise does not offend Article 14. The matter before the Court originated as Petition No. 438 of 1955, filed under Article 32 of the Constitution of India for enforcement of fundamental rights. Counsel for the petitioner and counsel for the respondents were authorised to appear. The judgment was delivered on May 16, 1957 by Justice Sarkar. By way of background, a notification dated March 16, 1953 gave general permission for all persons to import from designated countries any goods listed in the attached schedule. The schedule included iron and steel chains of all types, classified under item 63(28) of the Indian Customs Tariff, but excluded chains for automobiles and cycles, whether cut to length or in rolls. Relying on this notification, the petitioner placed an order in August 1953 with a company in Japan for “Zip Chains.” The goods arrived at the port of Calcutta and the petitioner’s bank paid Rs 11,051-4-0 for them. Before clearance, the Assistant Collector of Customs for Appraisement, Calcutta, issued a notice dated November 19, 1953 stating that the petitioner lacked a valid import licence and required him to show cause why the goods should not be confiscated and why action should not be taken under Section 167, item 8, of the Sea Customs Act. The notice also asked whether the petitioner desired a personal hearing. The petitioner responded in writing, asserting that Zip Chains fell within the category of goods whose free import was permitted by the March 16, 1953 notification and therefore no licence was necessary. He declined a personal hearing when asked again. On December 25, 1953 the Collector of Customs issued an order confiscating the goods and imposing a penalty of Rs 1,000. The order was endorsed as dispatched on February 1, 1954 and reached the petitioner on February 3, 1954. The order specified that an appeal could be made to the Central Board of Revenue, New Delhi.

According to the notice, the appeal had to be filed within three months from the date shown as the dispatch date. The petitioner therefore lodged an appeal and sent the memorandum of appeal on 4 May 1954. That memorandum was received by the Central Board of Revenue on 6 May 1954, but the Board dismissed it on the ground that the appeal had been filed after the prescribed period had expired. After the dismissal, the petitioner applied to the Government of India seeking a revision of the Central Board of Revenue’s order; that application was also turned down. Subsequently, the petitioner approached the High Court of Punjab invoking Article 226 of the Constitution, requesting a writ that would set aside the confiscation order and the accompanying fine, yet the High Court likewise dismissed the petition. The petitioner has now come before this Court under Article 32 of the Constitution, challenging the legality of the confiscation order and the penalty imposed on him. The petitioner’s counsel did not contest the customs officials’ finding that the goods were not covered by the notification dated 16 March 1953, and he expressly acknowledged that such a challenge could not be raised in the present proceeding. He also did not dispute the statutory authority of the customs officials to confiscate the goods. However, the counsel did contest the specific confiscation order on the basis that it failed to give the petitioner an opportunity to pay a fine in lieu of confiscation. This argument relied on section 183 of the Sea Customs Act, which states: “Whenever confiscation is authorised by this Act, the officer adjudging it shall give the owner of the goods an option to pay in lieu of confiscation such fine as the officer thinks fit.” The counsel argued that this provision unmistakably obliges the officer to offer the owner such a choice, and that the failure to do so rendered the order defective. A complication to that argument arises from section 3 of the Imports and Exports (Control) Act, 1947. The pertinent part of that section reads: “(1) The Central Government may, by order published in the official Gazette, make provision for prohibiting, restricting or otherwise controlling, in all cases or in specified classes of cases, and subject to such exceptions, if any, as may be made by or under the order… (a) the import, export, carriage coastwise or shipment as ships' stores of goods of any specified description; … (2) All goods to which any order under subsection (1) applies shall be deemed to be goods of which the import or export has been prohibited or restricted under section 19 of the Sea Customs Act, 1878 (VIII of 1878), and all the provisions of that Act shall have effect accordingly, except that section 183 thereof shall have effect as if for the word ‘shall’ therein the word ‘may’ were substituted.” It is conceded that the Imports and Exports (Control) Act was applicable to the goods in question and that the action taken was pursuant to that Act. Consequently, the interpretation of section 183 must be considered in the light of the modification introduced by section 3 of the 1947 Act.

Section 183 of the Sea Customs Act became applicable because of the Imports and Exports (Control) Act, and it could be applied only in the manner altered by that later Act. Consequently, the provision did not impose a mandatory duty on the customs authorities, when they issued a confiscation order, to present the owner with a choice to pay a fine instead of suffering confiscation; rather, it left the authorities with discretion to decide whether to offer such an option. Accordingly, the order of confiscation was not defective merely because the petitioner was not afforded an alternative payment of a fine.

The petitioner’s counsel argued that the wording of section 3(2) of the 1947 Act, which read “except that section 183 thereof shall have effect as if for the word ‘shall’ therein the word ‘may’ were substituted,” created an unfettered discretion in the customs authorities to either grant or refuse the option of paying a fine, thereby violating Article 14 of the Constitution. He contended that this portion of the provision should be struck out. He further maintained that, if the offending language were removed from section 3(2), the unmodified Section 183 of the Sea Customs Act would apply, making it obligatory for the customs authorities, at the time of a confiscation order, to give the petitioner the alternative of paying a fine in lieu of compensation, even when the 1947 Act was in operation. Since such an alternative had not been given in the present case, he claimed that the confiscation order was invalid.

This line of argument relied on the premise that a segment of section 3(2) of the 1947 Act contravened Article 14 and therefore had to be deleted. That premise was rejected. By its very terms, no part of section 3(2) purports to confer any discretionary power on the customs authorities; consequently, there is nothing within it that can offend Article 14. The sole effect of section 3(2) is to make the Sea Customs Act applicable to specified situations. It is impossible for a statute that merely extends the application of another statute to be said to violate Article 14, because such a provision does not itself involve the exercise of discretion or the denial of equality.

It is correct that section 3(2) of the 1947 Act makes section 183 of the Sea Customs Act applicable with a modification. The argument that the modified version of section 183 infringes Article 14 was considered. Assuming, for the sake of argument, that the modified section 183 were indeed unconstitutional, it would become ultra vires and cease to have legal effect. However, that assumption does not affect the matter before the Court. The invalidity of a modified section 183 does not render a confiscation order, which was issued without offering an alternative fine, invalid, because the confiscation in this case was not made under section 183. Instead, the confiscation order was issued pursuant to another provision of the Sea Customs Act, namely section 167, item 8, which deals with offences relating to prohibited or restricted goods and authorises confiscation under its own terms.

The Court examined section 167, item 8, of the Sea Customs Act, which reads as follows: “The offences mentioned in the first column of the schedule shall be punishable to the extent mentioned in the third column of the same with reference to such offences respectively.” The schedule links offences with the corresponding penalties. Item 8 refers to goods that are prohibited or restricted under Chapter IV of the Sea Customs Act, specifically section 19, and provides that such goods, whether imported or exported, are liable to confiscation and a penalty not exceeding one thousand rupees. Section 19 of Chapter IV therefore enumerates the prohibition of certain goods.

The Court noted that section 3(2) of the Customs Act of 1947 declares that any goods to which an order under subsection (1) applies shall be deemed to have been imported in contravention of section 19 of the Sea Customs Act. In the present case, subsection (1) of section 3 of the 1947 Act was applicable to the goods in question, and consequently, under section 3(2) those goods were deemed prohibited under section 19. Accordingly, the Court held that action under section 167, item 8, of the Sea Customs Act could be taken against those goods, allowing for their confiscation and imposing a penalty on the person responsible for the illegal import.

The Court observed that reliance on section 183 of the Sea Customs Act was unnecessary to justify the confiscation order. Section 183 does not itself authorize confiscation; rather, it assumes that confiscation has been authorized by other provisions and provides that, once confiscation is adjudged, the party may be offered the option of paying a fine in lieu of the confiscation. Therefore, even if the learned counsel’s contention that the amendment of section 183 violates Article 14 were accepted, the confiscation order would not be invalid. The Court declined to rule on the correctness of that constitutional argument because it was not essential to the decision. Finally, the Court addressed the argument that Article 14 only invalidates the amendment to section 183 and does not render the entire provision illegal. The Court held that, if that view were accepted, the unamended section 183 of the Sea Customs Act would still apply, obligating the customs authorities to provide the petitioner with the option to pay a fine instead of undergoing confiscation.

In order to accept the petitioner’s contention that a fine could be substituted for confiscation, the Court would first have to hold that section 3(2) of the 1947 Act itself violated Article 14 of the Constitution and therefore could not lawfully amend section 183 of the Sea Customs Act as the statute purported to do. The Court was unable to reach that conclusion. To determine whether a statutory provision contravenes Article 14, each provision must be examined individually. Two provisions were before the Court. The first, section 3(2) of the 1947 Act, was found not to offend Article 14, for reasons already explained in earlier paragraphs. The second provision was section 183 of the Sea Customs Act as amended by the 1947 Act. For the purposes of the present dispute, the Court assumed that this amended section did offend Article 14. If that assumption were correct, the whole provision would be invalidated; it could not be split into two parts, one of which might be constitutional and the other unconstitutional. Section 183, whether amended or not, formed a single statutory provision and therefore would have to be struck down in its entirety or left intact. Consequently, the petitioner’s argument on this basis failed.

The petitioner’s counsel also argued that section 183 was unconstitutional because it left the Customs authorities with unfettered discretion to decide the amount of the fine that could be imposed in place of confiscation. The Court described this contention as academic in the present case. Even if that argument were correct, the entire section 183 would have to be disregarded, but such a result would not automatically render the confiscation order that had been issued in this case invalid. The petitioner’s primary aim was to show that the confiscation order itself was unlawful. The present line of argument did not address that issue, and therefore the Court found it unnecessary to consider it further.

A further submission was raised that section 167, item 8, of the Sea Customs Act violated Article 14 because it also granted the Customs authorities unchecked discretion to determine the penalty amount. The Court observed that the section expressly limited the maximum penalty to Rs 1,000. The discretion conferred by the section had to be exercised within that prescribed ceiling, and therefore it was neither uncontrolled nor unreasonable. Moreover, the discretionary power was vested in senior Customs officers, and their decisions were subject to appeal. The imposition of a fine was a quasi-judicial act, and the appropriate amount was to be measured against the seriousness of the offence. The purpose of the Act was to prevent the unauthorized importation of goods, and any discretionary judgment had to be exercised with that objective in mind.

Finally, the petitioner’s counsel alleged that the confiscation order had been made mala fide and ex-parte. The Court rejected this allegation as inaccurate.

In the proceedings, the petitioner was asked prior to the issuance of the confiscation order whether he desired a personal hearing, and he responded that he did not, expressing full confidence in the customs authorities. It follows that the petitioner cannot maintain a claim that he was denied an opportunity to be heard before the order affecting him was rendered. The record shows that an opportunity to be heard was indeed furnished, but the petitioner chose not to take advantage of that opportunity. The authorities further alleged that, when they decided not to grant the petitioner the option of paying a fine instead of confiscation, they entered into certain additional transactions without providing any prior notice to the petitioner regarding those actions. It was asserted that the petitioner was consequently deprived of a chance to be heard with respect to those particular transactions. The notice issued by the customs authorities, which required the petitioner to show cause why the goods ought not to be confiscated, also necessarily informed him that a confiscation order could be issued without offering the alternative of a monetary fine, and therefore any failure on his part to appear at the hearing and to present reasons against an absolute confiscation was attributable to him. It was also contended that the denial of the option resulted from the personal differences that existed between the petitioner and the Public Relations Officer of the Customs Department in Calcutta. This perspective was supported by citing two other instances in which individuals had imported comparable goods at approximately the same time and had been afforded the option of paying a fine. Nevertheless, the facts of those comparative cases differed substantially from the present case. In those other instances there was no evidence that the goods had been imported in deliberate contravention of the Government’s order, whereas in the petitioner’s case material existed that could support such a conclusion. The record indicates that the petitioner, acting as manager of a firm named Federal Clearing Agency, received a communication from the customs authorities on 30 July 1953 informing him that zip chains were not covered by the notification dated 16 March 1953. Within two weeks of receiving that communication, the petitioner placed orders for identical goods, which he now alleges fell within the scope of the March notification. It was therefore not unreasonable for the customs authorities to infer that the petitioner had intentionally imported the goods in violation of the Government’s order and without the requisite specific licence, and on that basis to consider it appropriate to deny him the option of paying a fine. That conclusion would remain valid even if, for the sake of argument, the dispute with the Public Relations Officer were assumed to be in the petitioner’s favor. Finally, it was asserted that the petitioner had not been provided a personal hearing of the appeal he preferred to make to the Central Board of Revenue, nor of the revision application to the Government. However, there is no established principle of natural justice that mandates a personal hearing at every procedural stage.

The Court observed that there is no rule of natural justice requiring a personal hearing at every stage of the proceedings. It further held that the appeal filed by the petitioner was untimely. The memorandum of appeal addressed to the Central Board of Revenue was posted on 4 May 1954, whereas the period for filing the appeal had expired on 1 May 1954. Consequently, even if the posting date were treated as the date of filing, the appeal was already out of time. The petitioner contended that he had received the confiscation order on 3 February 1954 and therefore had until 1 May 1954 to lodge an appeal. Nevertheless, the appeal was posted on 4 May 1954, which was still beyond the prescribed limit. Moreover, the Central Board of Revenue did not receive the memorandum of appeal until 6 May 1954; that receipt date is to be regarded as the effective filing date, and it confirms that the appeal was filed clearly after the deadline. The petitioner also alleged that the Customs authorities had wrongfully and maliciously caused his arrest on 1 May 1954, securing his release on 2 May 1954, and suggested that the arrest was intended to prevent a timely appeal. The Court dismissed this allegation as wholly unfounded. While acknowledging that the petitioner had the interval from 3 February 1954 to 1 May 1954 to file his appeal, it noted that he failed to use this ample period and only sought to file at the last moment. No evidence was presented that the arrest was unlawful or that the Customs officials were aware of the pending appeal at the time of the arrest. Accordingly, the assertions that the confiscation order was made in bad faith or that the appeal was timely were found untenable. The application was therefore dismissed with costs, and the petition was rejected.