Radha Kishan Bhatia vs Union Of India And Others

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 777 of 1962

Decision Date: 23 November 1964

Coram: Raghubar Dayal, N. Rajagopala Ayyangar, Subbarao, K. Ayyangar

In the matter titled Radha Kishan Bhatia versus Union of India and others, the Supreme Court delivered its judgment on 23 November 1964. The judgment was authored by Justice Raghubar Dayal, who sat on a bench together with Justices N. Rajagopala Ayyangar and Subbarao K. Ayyangar. The petitioner was Radha Kishan Bhatia and the respondents were the Union of India along with various other parties. The case is reported in the 1965 volume of the All India Reporter at page 1072 and in the Supreme Court Reporter, volume 1, page 213. The dispute involved the Sea Customs Act of 1878, specifically section 167(8), which provides for a penalty against a person who is concerned in the illegal importation of gold. According to the headnote, a number of gold bars that were alleged to have been smuggled were seized from the appellant’s possession. The Collector of Central Excise and Land Customs confiscated the gold and imposed a penalty under the mentioned provision. The appellant subsequently challenged the order by filing a writ petition in the Punjab High Court, raising grounds of procedural impropriety and lack of sufficient finding. A single judge allowed the writ on the ground that the Collector had failed to record a finding that the appellant was concerned in the smuggling. The Punjab High Court’s appellate bench later set aside that order and dismissed the writ petition on the basis that the findings were sufficient under the statutory provision. The appellant then obtained special leave to appeal before this Court, contending that possession of the smuggled gold did not, by itself, establish his concern in the illegal importation, and that the Collector had not recorded any finding of such concern.

The Court held that the person who may be penalised under section 167(8) is anyone who is in any way concerned in the commission of the offence of bringing goods into India. The provision also covers a person who is concerned in taking goods out of the country where such goods are subject to prohibitions or restrictions. The statutory language therefore intended to capture not only the actual importers but also those who facilitate the illegal entry of prohibited goods. The expression ‘concerned in any such offence’ in the penalty clause of the provision may embrace a person who is interested, involved, or engaged. It also includes a person who is mixed up in the commission of the offence described in the first column of the section. The Court further explained that such concern must exist at a stage prior to the completion of the illegal importation of gold. If the person’s involvement occurs after the goods have crossed the frontier, the legal basis for penalisation under the section disappears. According to sections 18 and 19 of the Act, the offence of importation is completed when the goods have crossed the customs frontier. Consequently, once the gold has entered the country, any later interest or possession in the smuggled gold does not bring the person within the scope of section 167(8) for the purpose of imposing the penalty.

In this case, the Court observed that a mere finding of fact recorded by the Collector of Customs, indicating that the smuggled gold had been recovered from the appellant, was insufficient to establish that the appellant was “concerned” in the illegal importation of the gold and therefore could not be held liable for the penalty prescribed under section 167(8) of the Act. The Court relied on the decisions in Pukhraj Jain v. D. R. Kohli, I.L.R. 1959 Bom. 1771; Gopal Mayaji v. T. C. Seth, A.I.R. 1960 Bom. 478; and Additional Collector of Customs v. Sitaram, A.I.R. 1962 Cal. 242, which approved this principle.

The Court further held that a finding of fact by the Collector showing that a person possessed smuggled goods did not automatically mean that the Collector had examined whether the person was “concerned” in the commission of the offence of illegal impartation of those goods. While the absence of a formal finding on that point might not, by itself, invalidate the imposition of a penalty, the order must demonstrate that the Collector had indeed considered the relevant aspect. Accordingly, the order should expressly set out the matters the Collector believed to be relevant to the question of the person’s concern in the illegal importation, and it must explain why the Collector concluded that the person was so concerned and thereby liable to pay the penalty under section 167(8) of the Act. In reaching this conclusion, the Court referred to Balvir Singh v. Collector of Central Excise & Land Customs, New Delhi, A.I.R. 1960 Punj. 488, and noted that Union of India v. Jagdish Singh, I.L.R. 1962 (1) Punj. 369, was disapproved.

The judgment proceeded to set out the civil appellate jurisdiction for Civil Appeal No. 777 of 1962, which was filed by special leave against the judgment and decree dated 6 March 1962 rendered by the Punjab High Court (Circuit Bench) at Delhi in L.P. Appeal No. 120‑D of 1960. Counsel for the appellant was identified, and counsel for the respondents was also listed. The Court’s opinion was delivered by Justice Raghubar Dayal. The factual background stated that a number of gold bars, alleged to be smuggled, were recovered from the appellant on 17 September 1957 while he was travelling in a truck from Jaisalmer to Pokaran. Subsequently, on 4 December 1957, the Superintendent of Land Customs issued a notice to the appellant requiring him to show cause why penal action should not be taken and why the goods should not be confiscated under section 167(8) of the Sea Customs Act, 1878 (referred to as the Act). After the appellant answered the notice, the Collector of Central Excise and Land Customs, hereinafter referred to simply as the Collector, on 21 March 1959 ordered the confiscation of the gold seized from the appellant and imposed a penalty of Rs 15,000 under section 167(8) of the Act.

Following the Collector’s order, the appellant filed a writ application under article 226 of the Constitution before the High Court of Punjab, seeking a writ of certiorari to quash the Collector’s order dated 21 March 1959 and a writ of mandamus directing the respondents not to take any steps for the realization of the penal amount. The writ petition was allowed by the learned Single Judge on the ground that the Collector had not recorded a finding that the appellant was concerned in the smuggling of gold, relying on the Division Bench decision in Balvir Singh v. Collector of Central Excise & Land Customs, New Delhi. On appeal by letters patent, the appellate Bench set aside the Single Judge’s decision, dismissed the writ petition, and relied upon the Full Bench decision in Union of India v. Jagdish Singh, concluding that a formal finding of concern was not indispensable for the imposition of the penalty.

In the present matter the petitioner sought a writ of certiorari to set aside the Collector’s order dated 21 March 1959 and also asked for a writ of mandamus directing the respondents not to take any steps to realise the amount of the penalty that had been imposed. The writ petition was granted by the learned Single Judge because the Collector had failed to record a finding that the petitioner was concerned in the act of smuggling gold into the country. The Single Judge relied on the decision of the Division Bench of the Punjab High Court in Balbir Singh v. Collector of Central Excise & Land Customs, New Delhi. Upon the filing of a letters‑patent appeal, the appellate Bench reversed the Single Judge’s order and dismissed the writ petition. The appellate Bench based its decision on the Full Bench judgment of the Punjab High Court in Union of India v. Jagdish Singh, holding that the Collector of Customs was not required to make a formal finding that the person against whom the proceedings were taken was concerned in the importation of the smuggled gold. After obtaining special leave from this Court, the petitioner appealed the appellate order.

The counsel for the petitioner did not dispute that gold had been recovered from the petitioner’s possession nor that the gold constituted smuggled goods. However, the petitioner argued that the collector’s findings of possession and of the goods being smuggled were insufficient to conclude that the petitioner was concerned in the offence of illegal importation. The petitioner further contended that the collector had made no explicit finding that the petitioner was concerned in the importation, and therefore the collector lacked the competence to levy the penalty. The counsel for the respondent countered that, based on the established facts, the petitioner must be deemed “interested in the importation” of the smuggled gold. The respondent urged that the term “concerned” in section 167(8) of the Sea Customs Act, 1878 should be interpreted in accordance with the purpose of the statute and the practical difficulties of proving that a person found in possession of smuggled gold was actually involved in its illegal import. The relevant portion of section 167(8) reads: “The offences mentioned in the first column of the following schedule shall be punishable to the extent mentioned in the third column of the same with reference to such offences respectively (Column 1) (Column 3) offences Penalties (1) (2) 8. If any goods, the importation or exportation of which is for the time being, and being prohibited or restricted by or under Chapter IV of this Act, be imported or exported from India contrary to such prohibition or restriction, any person concerned in any such offence shall be liable to confiscation and to a penalty not exceeding three times the value of the goods, or not exceeding one thousand rupees.”

If any such goods were found in a package presented to a customs officer as containing no such goods, the offence attracted a penalty that could not exceed three times the value of the goods or a maximum of one thousand rupees. The Court then examined who could be described as “concerned” in any such offence for the purpose of the expression used in the third column relating to penalties. A person described as concerned was one who participated in the importation or exportation of goods whose import or export contravened the prohibition or restriction placed under Chapter IV of the Act. The offences listed in the first column referred to sections 18 and 19 of the Act. Section 18 prohibited the bringing of the specified goods into India, whether by land or sea. Section 19 authorized the Central Government to prohibit or restrict, by notification in the Official Gazette, the bringing or taking by sea or land of any goods of a specified description into or out of India across any customs frontier. Consequently, the individual who could be penalised under section 167(8) was anyone who, in any manner, was “concerned in the commission of the offence of bringing into India or taking out of the country goods for which certain prohibitions or restrictions existed.” The Court noted that it was undisputed that gold could not be brought into the country without a valid permit from the authority empowered to issue such a permit, and it was also undisputed that the gold recovered from the appellant had been imported illegally. Therefore, the appellant could be said to be concerned in the commission of the offence of illegally bringing gold into the country only if he had been, in some way, responsible for that importation. He could not be said to be concerned if he had merely obtained possession of the gold after it had already been brought into the country. His possession of the gold at the time of arrest did not create any presumption that he had imported the gold from outside the border or that he had taken any action leading to its illegal import. The Court further observed that there was no evidence that the appellant had taken any action in connection with the import of the gold found in his possession. The Court held that the meaning of the word “concerned” was immaterial to the analysis; it could be interpreted as “interested,” as the respondent suggested, or as “involved,” “engaged,” or “mixed up.” Nonetheless, the requirement embedded in the penalty provision of section 167(8) was that the person to be penalised must be interested, involved, engaged, or mixed up in the commission of the offence.

In interpreting section 167(8), the Court explained that the appellant’s interest, involvement, engagement or mixing up in the offence must exist before the illegal importation of gold is completed. Once the gold has crossed the customs frontier, the offence of importation is deemed complete. This point is derived from the provisions of section 19 and is also supported by section 18, although the latter does not expressly use the words “across the customs frontier.” Consequently, any interest that arises after the gold has already been imported cannot bring the person within the scope of section 167(8) for the purpose of imposing the penalty. The Court therefore held that the mere fact‑finding by the Collector of Customs, which noted that smuggled gold was recovered from the appellant’s possession, does not suffice to conclude that the appellant was “concerned” in the illegal importation of that gold. Accordingly, the appellant could not be held liable for the penalty prescribed in section 167(8) of the Sea Customs Act, 1878. This interpretation aligns with the judgments of the Bombay, Calcutta and Madras High Courts in Pukhraj Fain v. D. R. Kohli (1), Gopal Mayaji v. T. C. Seth (2), Additional Collector of Customs v. Sitarmn (3) and Devi Chand J. & Co. v. Collector, Central Excise (4). The Punjab High Court, however, adopted a contrary view, and the Court indicated that it would now examine the reasons behind that opposite approach.

The Court then turned to the decision in Balbir Singh’s case (5), where it was undisputed that the Collector had not recorded any finding that the petitioner was concerned in the offence of importing or exporting goods that were at that time prohibited or restricted. On that basis, the penalty imposed on the petitioner could not be sustained. The learned Single Judge in the present matter relied on that judgment, citing the Collector’s finding as follows: “In view of all this evidence on record I hold that the gold in question is smuggled one and was recovered from Shri Radha Kishan while he was taking the same to Pokaran in truck No. RJM 40. I therefore order confiscation of the seized gold under Section 7(i) of the Land Customs Act … I also impose upon Shri Radha Kishan a personal penalty of Rs. 15,000 (Rupees Fifteen thousand only) under Section 167(8) of the Sea Customs Act, 1878.” The Division Bench, hearing a Letters Patent Appeal, relied on Jagdish Singh’s case (1) and held that the finding that Radha Kishan was concerned in the importation of gold was implicit in the manner in which the Collector dealt with the case.

The Collector, while dealing with the present case, recorded an observation that it could not be denied that, in addition to the fact that a large quantity of smuggled gold had been discovered hidden on the person of Shri Radha Kishan, the defence put forward by Shri Kishan—that the gold had not been taken from his person—had been found to be false. The Collector stated that this circumstance, taken together with the recovery of the smuggled gold, was sufficient to satisfy him that Shri Kishan was “concerned in the importation of the smuggled gold.” The Punjab High Court appellate Bench referred to these circumstances as possibly sufficient to hold that the appellant knew that he was carrying smuggled gold and that, by doing so, he was committing an offence. However, the Court expressed uncertainty as to how these circumstances alone could lead to the conclusion that the appellant must be “concerned” in the importation of that gold. The Court observed that it is not invariably true that smuggled articles are always carried by the smuggler himself or by a person who had taken steps for the smuggling. Smuggled goods may be carried by individuals who had no involvement in the smuggling or illegal importation but who later came into possession of the goods, even if they were aware that the goods were smuggled. The facts of Jagdish Singh’s case were noted to be somewhat different, and the Court clarified that the correctness of the conclusion in that case—regarding Jagdish Singh’s being concerned in the illegal importation of foreign watches—was not before it for decision. In that earlier case, the conclusion was based not only on his possession of the watches after receiving a parcel from the post office but also on several other surrounding circumstances.

The present discussion turned to the issue of what findings a Collector must reach before imposing a penalty under section 167(8) of the Act. It was observed that the Collector had not recorded any explicit finding that Jagdish Singh had been concerned in the illegal importation of the watches. The High Court had held that the law does not require a formal finding to that effect. While an omission to record a formal finding might not be fatal to the imposition of the penalty, the Court emphasized that the Collector’s order must demonstrate that he had considered the relevant aspect of the matter. Specifically, the order should clearly indicate which facts the Collector regarded as bearing on the question of the person’s concern in the illegal importation of the goods and why he concluded that the person was so concerned, thereby making the person liable to pay the penalty under section 167(8) of the Act. The Court noted that the decision of the High Court in Jagdish Singh’s case did not appear to contradict this view. The High Court’s reasoning, quoted at page 486, was that the inquiry must determine whether the Tribunal’s mind was directed to a particular matter and whether it actually arrived at a specific conclusion.

The Court observed that the essential issue was whether a Tribunal had actually considered a particular matter and reached a definite conclusion. In the facts before it, the Court had no doubt that the Collector of Customs had concluded that Shri Jagdish Singh bore responsibility for the illegal importation of the watches in question and that he could not free himself from liability for violating the Import Trade Control Regulations. The judgment under review recorded that, after issuing an order to confiscate the watches, which were deemed to be of foreign origin and to have entered the country through unlawful means, the Collector proceeded to examine Jagdish Singh’s personal liability and held that he could not be absolved of the infringement of the regulations. The Court noted that if the Collector truly had reached such a conclusion, the failure to record a separate formal finding that Jagdish Singh was “concerned” in the illegal importation would not have rendered the order legally defective. However, the Court found that a further extract from the Collector’s order did not support the High Court’s view because the extract showed that the Collector’s opinion was based merely on the fact that Jagdish Singh possessed the smuggled watches. The manner in which the Collector recorded his finding indicated that he inferred Jagdish Singh’s concern in the illegal importation solely from his possession of the watches, a reasoning the Court considered unjustifiable in light of the principle articulated in A.I.R. 1962 Punj. 484. The relevant passage of the Collector’s order read: “Shri Jagdish Singh cannot absolve himself from the infringement of I.T.C. Regulations inasmuch as he was in possession of the offending watches. Therefore, impose on Shri Jagdish Singh a personal penalty of Rs. 7,000.” The Court did not agree with the High Court that this passage implicitly showed that the Collector was fully satisfied that Jagdish Singh was concerned in the offence punishable under Section 167(8) of the Act. Accordingly, the Court held that a mere factual finding that a person possessed smuggled goods does not demonstrate that the Collector had considered that the person was concerned in the commission of the illegal importation, nor does it justify concluding that the person was so concerned. The Court emphasized that additional circumstances showing a connection between the person and the importation before the goods actually arrived must be established. In the present case, no such circumstances were alleged to link the appellant with the actual importation of the smuggled gold recovered from his possession. Moreover, the order of the Collector and the reply affidavit filed in the High Court by the Assistant Collector of Central Excise and Land Customs, New Delhi, contained no reference to any such connecting circumstances, despite the appellant’s claim in ground C of the writ petition.

The Court observed that respondent no. 3 had not been presented with any material upon which a finding could be based that the petitioner had imported the gold in question. In other words, the record before respondent no. 3 was completely devoid of evidence or information that would support a conclusion that the petitioner had been responsible for the importation of the said gold. The Court further noted that no specific allegation had been made that the appellant himself had smuggled the gold from a foreign country into India. Consequently, having found that the basis for the finding of importation was absent and that there was no charge against the appellant for personally executing the smuggling, the Court proceeded to dispose of the appeal. The Court allowed the appeal and ordered that costs be awarded throughout the proceedings. In addition, the Court set aside the order rendered by the appellate Bench of the High Court and restored the order that had been passed by the Single Judge. By these directions the appeal was affirmed, and the relief sought by the petitioner was granted.