Pukhraj vs D. R. Kohli

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 511 of 1960

Decision Date: 15 March 1962

Coram: P.B. Gajendragadkar, J.L. Kapur, J.L. AiyyAr, T.L. Venkatarama

In the matter titled Pukhraj versus D. R. Kohli, decided on 15 March 1962, the Supreme Court of India delivered its judgment under the authorship of Justice P. B. Gajendragadkar, with Justice J. L. Kapur also sitting on the bench. The case is recorded as a petition filed by the appellant, identified as Pukhraj, against the respondent, D. R. Kohli. The official citation of the decision appears as 1962 AIR 1559 and 1962 SCR Supl. (3) 866. The decision is referenced in later reports, including RF 1972 SC 689, R 1987 SC1321, and is governed by statutes such as the Sea Customs Act of 1878, particularly sections 19, 167(8), 178 and 178A, and the Foreign Exchange Regulation Act of 1947, specifically sections 8(1) and 23A. The headnote of the judgment outlines that the appellant, who was a goldsmith, was traveling by train from Calcutta when he was searched and found to be in possession of gold weighing 290.6 tolas, valued at Rs. 29,835. The authorities seized the gold on the basis of a reasonable belief that it was smuggled. After serving a show‑cause notice and conducting a due inquiry, the Collector issued an order of confiscation under section 167(8) of the Sea Customs Act. The appellant challenged the presumption under section 178A, arguing that there was no reasonable belief that the gold was smuggled, that he was not the importer and therefore not liable to confiscation, and that section 167(8) did not apply to the circumstances.

The Court held that the order of confiscation was valid and properly made. It explained that section 178A imposes upon the person in possession of seized goods the burden of proving that the items are not smuggled, once the seizure is carried out on a reasonable belief of smuggling. While the existence of a reasonable belief is a question of fact, the Court clarified that it was not reviewing the officer’s decision on appeal but was limited to determining whether any facts existed that could prima facie justify such a belief. The Court found that the recovery of a large quantity of gold, the possession of precise intelligence concerning the appellant, and his travel without a ticket collectively satisfied the standard of reasonable belief. Section 167(8) of the Sea Customs Act authorizes the confiscation of goods whose importation is prohibited or restricted when imported in contravention of those prohibitions, and the statute does not require that the goods be found with the actual importer. Under section 8(1) of the Foreign Exchange Regulation Act, the Government had issued a 1948 notification prohibiting the import of gold unless permitted by the Reserve Bank, and section 23A deemed such restrictions to be equivalent to those under section 19 of the Sea Customs Act. Consequently, the 1948 notification operated as a notification under section 19, rendering gold imported in violation liable to seizure under section 178 and subject to confiscation under section 167(8). Given the statutory presumption of smuggling under section 178A, the gold was properly confiscated pursuant to section 167(8).

In this case the Court explained that the notification issued in 1948 operated as a notification made under section 19 of the Sea Customs Act. Consequently, any gold imported in violation of that notification could be seized pursuant to section 178 of the same Act, and such seizure fell within the scope of proceedings authorized by section 167(8). Because the gold in question was deemed smuggled gold under the statutory presumption created by section 178A, the Court held that the confiscation of the gold was proper under the authority of section 167(8).

The matter before the Court arose from Civil Appeal No. 511 of 1960, which challenged a judgment and order dated 20 March 1959 rendered by the Bombay High Court at Nagpur in Special Civil Application No. 322 of 1958. Counsel for the appellant and counsel for the respondents were instructed, and the appeal was listed on 15 March 1962. The judgment was delivered by Justice Gajendragadkar. The factual backdrop involved an order dated 26 July 1958 issued by the Collector of Central Excise, Nagpur, directing absolute confiscation of five gold bars weighing a total of 290.6 tolas that had been found in the possession of Pukhraj. The order also imposed a personal penalty of Rs 25,000 on the appellant, invoking section 167(8) of the Sea Customs Act, 1878 read in conjunction with section 19 of that Act and section 23A of the Foreign Exchange Regulation Act, 1947. Aggrieved by the order, the appellant filed a writ petition before the Bombay High Court at Nagpur on 15 September 1958 under Articles 226 and 227 of the Constitution, seeking a certiorari or any other appropriate writ to set aside the impugned order. In support of his petition the appellant contended, inter alia, that section 178A of the Sea Customs Act was unconstitutional because it infringed his fundamental right guaranteed by Article 19(1)(a) and Article 19(1)(g) of the Constitution. He further argued that, on the merits, the order was not justified by the provisions of the Sea Customs Act read together with the Foreign Exchange Regulation Act. The High Court rejected the appellant’s challenge to the validity of section 178A and upheld the confiscation order, but it held that the direction imposing the personal penalty of Rs 25,000 was invalid, set that direction aside, and issued a writ accordingly. Subsequently, the appellant obtained a certificate from the High Court authorising him to approach this Court and challenge the correctness of the High Court’s decision confirming the validity of the confiscation. The certificate was primarily concerned with the constitutional validity of section 178A, a question that this Court had already decided on 25 September 1961 in Civil Appeals Nos.

In the earlier appeals numbered 408 to 410 of 1960 and the other companion appeals, a constitutional bench had examined the validity of section 178A and had upheld that provision. Consequently, the main issue that the appellant hoped to raise before this Court was already decided against him. Nevertheless, counsel for the appellant, Mr Bobde, advanced three additional contentions arguing that the confiscation of the gold was not justified. Before addressing those submissions, the Court found it necessary to set out briefly the material facts that led to the seizure of the gold. The appellant was a goldsmith by occupation and operated a gold‑and‑silver shop in Rajnandgaon, Madhya Pradesh. On 25 October 1956, while travelling as a passenger on the Calcutta‑Nagpur train, he was stopped for a search at Raigarh railway station. The search revealed that he was in possession of five pieces of gold bullion weighing a total of 290.6 tolas and having an approximate market value of Rs 29,835. The officer in charge seized the bullion on a reasonable belief that it constituted smuggled gold. Subsequently, on 20 May 1957, a notice was served on the appellant requiring him to show cause why no action should be taken against him for contravening Government of India Notification No 12 (11)‑F.1/48 dated 26 August 1948 issued under the Foreign Exchange Regulation Act, 1947, read with section 23A of that Act, and also in violation of section 19 of the Sea Customs Act, the offence being punishable under item (8) of section 167 of the Sea Customs Act. The appellant replied to the notice, after which the Collector of Central Excise ordered an enquiry. At the enquiry the appellant, represented by counsel, examined four witnesses who testified that the gold in his possession belonged to him and was not smuggled. In addition, the appellant produced his account books as documentary evidence to support his claim. The Collector, however, was not persuaded by the appellant’s evidence and concluded that the statutory presumption created by section 178 of the Sea Customs Act had not been rebutted. Relying on that conclusion, the Collector issued the impugned order that confiscated the gold and imposed a personal penalty of Rs 25,000 on the appellant. In view of these facts, the three contentions raised by Mr Bobde were to be considered in the present appeal. The first contention put forward by the appellant asserted that the confiscation of the gold was not justified under item (8) of section 167 because the High Court had found that the appellant was not a person concerned in the offence of importing the gold. It appeared that, in deciding whether the personal penalty imposed on the appellant was valid, the High Court relied on two considerations. The High Court held that the officer’s jurisdiction to impose a personal penalty was limited to the imposition of a penalty

In this case the High Court had limited the Collector of Central Excise’s power to impose a personal penalty to a maximum of one thousand rupees. The High Court reached this conclusion by relying on observations made by this Court in the earlier decision of F.N. Roy v. Collector of Customs, Calcutta. The issue of the ceiling on the personal penalty was again examined by this Court in the later case of M/s. Ranchhoddas Atmaram v. The Union of India. In that judgment this Court held that the wording of item (8) of section 167 of the Sea Customs Act is clear and authorises the imposition of a penalty that exceeds one thousand rupees, and that this intention must be given effect even if other provisions appear to limit the amount. Consequently, the High Court’s view that, under section 167(8), the Collector of Central Excise lacked jurisdiction to levy a penalty greater than one thousand rupees was erroneous. The High Court also concluded that the appellant was not shown to be a person concerned in the importation of the smuggled gold, although the appellant was found in possession of that gold. On that basis the High Court held that a personal penalty could not be imposed on the appellant. This Court does not need to adjudicate the correctness of that finding because the respondent Collector of Central Excise has not filed an appeal against that part of the High Court’s order. Counsel for the appellant, relying on the High Court’s finding that the appellant was not involved in the importation, argued that the goods themselves could not be confiscated under section 167(8). The Court finds that argument to be misconceived. Section 167(8) expressly provides, inter alia, that any goods whose importation is prohibited or restricted by Chapter IV of the Act and are imported into India in violation of such prohibition or restriction shall be liable to confiscation. Once it is established that the goods were imported contrary to the statutory prohibition, confiscation follows automatically, irrespective of whether the goods are found with a person who participated in the importation. Therefore, if section 167(8) is applicable, the order directing confiscation of the smuggled gold cannot be successfully challenged. The remaining issue is whether section 167(8) applies to the present facts. That inquiry leads to the notification issued by the Government of India in 1948, which imposed restrictions on the import of gold and silver under section 8(1) of the Foreign Exchange Regulation Act, 1947. The notification provides that, except with general or special permission of the Reserve Bank, no person may bring or send into India from any place outside India any gold, gold coins, gold bullion, gold sheets or gold ingot, whether refined or not.

In this case, the notification issued in 1948 forbade the import of gold, sheets, or gold ingots, whether refined or not, unless the import was carried out with a general or special permission granted by the Reserve Bank. Section 23 of the Foreign Exchange Regulation Act prescribed the penalty and the procedure for any breach of its provisions, rules, orders or directions. Section 23‑A further provided that, without prejudice to the provisions of section 23 or any other provision of the Act, the restrictions imposed by sub‑sections (1) and (2) of section 8 were to be treated as if they had been imposed under section 19 of the Sea Customs Act, and that all the provisions of that Act would apply accordingly, except that the word “shall” in section 183 would be read as “may”. Consequently, the combined effect of the two Acts together with the 1948 notification was that the notification acquired the force of a notification issued under section 19 of the Sea Customs Act. As a result, any gold imported in contravention of that notification was liable to be seized under section 178 of the Foreign Exchange Regulation Act, and the person in possession of such gold became liable to proceedings under section 167(8) of the same Act. Because the matter also fell within the relevant provisions of the Sea Customs Act, section 178A was applicable as well. This legal position was not contested by the parties.

Section 178A placed on the person from whose possession the goods were seized the burden of proving that the goods were not smuggled, whenever the goods were seized under the Sea Customs Act in the reasonable belief that they were smuggled. Once it was shown that the seizure had been made in the manner described in the first part of section 178A, the onus shifted to the appellant to demonstrate that the goods were not smuggled. The Collector of Central Excise held that the appellant had failed to discharge this burden, leaving the statutory presumption unrebutted. Accordingly, the goods were to be treated as smuggled goods. On that basis, the goods became liable to confiscation under section 167(8) of the Sea Customs Act. The High Court had adopted this view when it rejected the appellant’s prayer for a writ quashing the confiscation order issued by the Collector of Central Excise concerning the gold in question. The present Court saw no reason to disturb that decision. The appellant’s counsel, Mr Bobde, also argued that certain witnesses whose statements had been recorded by the Collector during the enquiry were not produced for cross‑examination. The Court found that this argument lacked substance and therefore dismissed it.

This complaint concerned the testimony of three individuals, namely Anwar, Marotrao and his brother Rambhau. The petitioner alleged that the statements of all three witnesses had been recorded while the appellant was absent. The department, represented before the High Court by counsel, countered this allegation by stating that Anwar had indeed been examined in the presence of the appellant’s counsel, and that the counsel chose not to cross‑examine him. The appellant’s counsel accepted this description, and consequently the Court found that no valid grievance could be made on the ground that Anwar’s evidence was taken in the appellant’s absence nor that the appellant was denied an opportunity to cross‑examine Anwar. Regarding the statements of Marotrao and Rambhau, the department explained that their evidence was intended to disprove the appellant’s earlier claim that the gold had been melted with their assistance. During the enquiry the appellant abandoned that contention and no longer maintained that the gold in question had been melted through the aid of those two witnesses. Because the appellant changed his position, it became unnecessary to permit him to cross‑examine Marotrao and Rambhau; their testimony was no longer inconsistent with the appellant’s later case. On this basis the Court concluded that the argument that the enquiry conducted by the Collector of Central Excise was unfair or that the procedure violated the principles of natural justice lacked any substance.

The final contention raised by counsel for the department was that the record did not demonstrate that the officer who seized the gold acted on a reasonable belief that the gold was smuggled. Section 178A of the Sea Customs Act requires the prosecution to first establish that the seizure was made under that Act and that the officer had a reasonable belief that the goods were smuggled before the burden can shift to the appellant to prove otherwise. The petitioner argued that, because the record contained no material establishing the reasonableness of the officer’s belief, the statutory presumption could not arise. The Court found this argument unpersuasive. It observed two salient features of the seizure that could not be ignored. First, the sheer quantity of gold involved – the appellant was found in possession of five gold bullions weighing a total of 290.6 tolas, valued at approximately Rs 30,000 – was sufficient to give the officer a reasonable belief that the gold might have been smuggled. Second, it was relevant to note that the officer had received positive information in the month preceding the seizure concerning the appellant’s alleged smuggling activities. These facts together supported the conclusion that the officer’s belief was reasonable, and therefore the statutory presumption under Section 178A was properly engaged.

According to the record, the officer received positive information in September 1956 that the appellant was engaged in the smuggling of gold. Consequently, the officer intercepted the appellant on 25 October 1956 at Raigarb railway station at approximately sixteen hours thirty minutes. The second circumstance that could justify a reasonable belief concerns the suspicious nature of the appellant’s journey. The appellant was discovered travelling without a railway ticket, and his explanation regarding how he came to be on the passenger train was found to be plainly false. A person found in possession of a large quantity of gold while travelling without a ticket could reasonably lead an officer to suspect that the gold was being smuggled. The purpose of travelling without a ticket appears to have been to conceal the fact that the appellant had journeyed from Calcutta, the place where the gold was allegedly smuggled. The appellant’s subsequent account of his travel to Tatanagar, which the officer disbelieved, further strengthens the inference that his motive for travelling without a ticket was to hide the smuggled gold. Ultimately, the question before the Court was whether the officer’s belief at the time of the seizure was reasonable, not whether the officer’s decision could be reviewed on appeal. The Court considered only whether there existed any prima facie ground that could justify a reasonable belief. Finding none of the arguments persuasive, the Court concluded that the seizure was made on a reasonable belief and therefore fell within the scope of section 178A. Accordingly, the appeal was dismissed, and costs were awarded to the respondent.