Vallabhdas Liladhar And Ors vs Assistant Collector Of Customs on 27 January, 1964

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

Court: Supreme Court of India

Case Number: Criminal Appeals Nos. 48 and 80 of 1960

Decision Date: 27/01/1964

Coram: P.B. Gajendragadkar, A.K. Sarkar, K.C. Das Gupta, N. Rajagopala Ayyangar

In the matter titled Vallabhdas Liladhar and Others versus Assistant Collector of Customs, the Supreme Court of India delivered its judgment on 27 January 1964. The bench that heard the appeal comprised Justices P B Gajendragadkar, A K Sarkar, K C Das Gupta and N Rajagopala Ayyangar. The petitioner was Vallabhdas Liladhar together with other respondents, and the respondent was the Assistant Collector of Customs. The decision was reported in 1965 AIR 481 and 1965 S C R (3) 854, with subsequent citations appearing in later reports. The case concerned provisions of the Sea Customs Act of 1878, specifically sections 186 and 167(81), and also examined the admissibility of statements under sections 24 and 25 of the Indian Evidence Act of 1872. The headnote of the decision recorded that gold which had been smuggled and subsequently recovered from the appellants was confiscated and a penalty was imposed; the appellants were then tried and convicted under section 167(81) of the Sea Customs Act. The statements made by the appellants to customs officials effectively admitted the prosecution’s case and were entered as evidence. Earlier appeals to the Sessions Judge and a revision before the High Court had been dismissed, leading to the present appeal before this Court.

The Court held that because the statements made to the customs authorities bore the appellants’ signatures and had been admitted, they were deemed proved by that admission and no additional evidence was required, as noted in paragraph 858C. It further observed that customs officers, unlike police officers, are not subject to the exclusionary rule of section 25 of the Evidence Act; therefore, the statements fell under section 24, which applies to persons in authority, and would only be excluded if obtained by inducement, threat or promise, following the precedent set in State of Punjab v Barkat Ram, [1962] 3 S C R 338, as reflected in paragraphs 858E‑F. The Court also clarified that section 186 of the Sea Customs Act is merely an enabling provision and does not prevent prosecution for an offence under the Act when confiscation, penalty or a higher duty rate has been levied, as explained in paragraph 859F‑G, with reference to Leo Ray Frey v Superintendent of District Jail [1958] S C R 822. Finally, the Court concluded that once the recovered gold was established as smuggled, any person who possessed, dealt with, or was aware that the gold was smuggled must be deemed to have intended to evade duty or to violate the applicable prohibition, as set out in paragraphs 860C‑D. The case was filed as Criminal Appeals Nos 48 and 80 of 1960, arising by special leave from judgments dated 11 December 1959 and 2 March 1960 of the Bombay High Court (Rajkot, now Gujarat High Court), together with Criminal Revision Application No 100 of 1959. Counsel for the appellants was N N Keswani, while D R Prom and R N Sachthey represented the respondent. The judgment was delivered by Justice Wanchoo, addressing the two appeals together.

Both appeals, which were granted by special leave, originated from the same criminal trial that had been conducted before a magistrate at Porbunder, and the Court indicated that the two appeals would be considered together. The three appellants, together with another individual named Keshavlal Nagjibhai, had been charged under section 167(81) of the Sea Customs Act, No 8 of 1878, which the judgment thereafter refers to as “the Act.” The prosecution’s case, as summarised by the learned counsel, was that a man named Vallabhdas Liladhar—who was deceased at the time of the trial—had negotiated with an Arab trader and purchased smuggled gold weighing slightly more than eighty‑four tolas on 1 December 1956. In order to finance that purchase, Vallabhdas Liladhar had, on about 28 November 1956, borrowed a sum of Rs 3,600 from the two other appellants and from Keshavlal Nagjibhai.

After completing the purchase, Vallabhdas Liladhar travelled to Porbunder and visited the residence of the two other appellants, where he disclosed the transaction and sought their assistance in disposing of the gold. The two appellants, identified as Narandas Nagjibhai and Vallabhdas Nagjibhai, were brothers, and Keshavlal Nagjibhai was also their brother, making all four men members of the same family. According to the prosecution, Narandas Nagjibhai instructed Vallabhdas Nagjibhai to transport the gold to the town of Bantwa and to sell it at a price of approximately Rs 103 per tola. The prosecution further alleged that Vallabhdas Nagjibhai received additional directions that, should he be unable to sell the gold at the stipulated price, he was to contact both Vallabhdas Liladhar and Narandas Nagjibhai at the Bantwa bus stand, after which they would travel together to Junagadh to attempt further disposal of the gold.

Acting on these instructions, Vallabhdas Nagjibhai boarded a bus bound for Bantwa on the afternoon of 2 December 1956. During the journey, an information tip reached Inspector Mehta of the Customs Department, alerting him to the alleged smuggling of gold. Acting on this intelligence, Inspector Mehta, accompanied by the Deputy Superintendent of Customs, trailed the bus on which Vallabhdas Nagjibhai was travelling and intercepted the vehicle at the Kutiyana bus stand at approximately three o’clock in the afternoon. Vallabhdas Nagjibhai was removed from the bus, and a search was conducted in the presence of witnesses. The search yielded five bars of gold, collectively weighing about eighty‑four tolas, all bearing marks that identified them as of foreign origin. The customs officers prepared a recovery list and took possession of the bars.

Subsequent investigative steps were taken, and on 7 October 1957 the Collector of Central Excise at Baroda exercised the powers conferred by section 167(8) of the Act in conjunction with section 23 of the Foreign Exchange Regulation Act, 1947, to confiscate the gold bars. The Collector also imposed a monetary penalty of Rs 1,000 on each of the three appellants and a penalty of Rs 500 on Keshavlal Nagjibhai. Following these actions, the Assistant Collector of Customs filed a complaint under section 167(81) of the Act before the magistrate at Porbunder on 27 June 1958. In his defence, Vallabhdas Liladhar asserted that he had not purchased the gold from any Arab; rather, he claimed that he had originally brought the gold from Karachi in 1946. Vallabhdas Nagjibhai, while acknowledging that the gold had been recovered from his possession, contended that the gold belonged to Vallabhdas Liladhar and that he was merely carrying it at the request of the latter, without knowledge that it was smuggled gold.

In the evidence presented, Narandas Nagjibhai testified that the gold bars found on his person had originally belonged to Vallabhdas Liladhar and that he was merely transporting them at Liladhar’s request, asserting that he was unaware the gold was smuggled. He further stated that Vallabhdas Liladhar had visited their house with the gold and claimed that the metal was his own property and was being offered for sale, not contraband. Keshavlal, the fourth individual who had been acquitted, declared that he possessed no knowledge of the matter and had no connection with the gold. It was also recorded that the three appellants had previously given statements to customs authorities, and those statements were admitted as evidence supporting the prosecution. In those statements the appellants effectively acknowledged that the gold was smuggled and that they were attempting to dispose of it. Relying on the customs statements and on the material concerning the recovery of the gold, the magistrate convicted all four persons under section 167(81) of the Act, sentencing each to six months of rigorous imprisonment and a fine of five hundred rupees. All four convicted individuals filed appeals before the Sessions Judge. The Additional Sessions Judge at Porbunder acquitted Keshavlal, while dismissing the appeals of the remaining three appellants and affirming their convictions and sentences. The three appellants subsequently sought revision before the High Court. The High Court summarily rejected the revision applications of Vallabhdas Liladhar and Vallabhdas Nagjibhai, admitted the revision of Narandas Nagjibhai, and ultimately dismissed it as well. The appellants then applied for leave to appeal to this Court; the initial application for leave was denied, but a subsequent special leave application was granted, bringing the present matter before the Court.

Vallabhdas Liladhar, one of the appellants listed in Criminal Appeal No. 48 of 1960, had died, causing his appeal to abate. Consequently, the Court’s consideration was limited to the appeals of Vallabhdas Nagjibhai (Cr. A. 48) and Narandas Nagjibhai (Cr. A. 80). Before addressing the specific points raised by the appellants, the Court outlined the factual circumstances that had been consistently established by the lower courts and upon which the convictions rested. Firstly, although the prevailing market price of gold at the relevant time exceeded one hundred five rupees per tola, the appellants intended to sell the gold bars at a reduced rate of approximately one hundred three rupees per tola. Secondly, both appellants were employed as goldsmiths in Porbunder, a sizable town where there was no logical necessity to transport the gold elsewhere for sale; the local market could have accommodated the transaction. Thirdly, the appellants exhibited an undue haste in attempting to dispose of the gold, indicating a consciousness of wrongdoing. These findings formed the factual basis upon which the lower courts, and now this Court, evaluated the legality of the appellants’ conduct.

The Court observed that the manner in which the gold bars were concealed by Vallabhdas Nagjibhai at the time they were seized indicated that the appellants were aware that the gold had been smuggled. It was further noted that an amount of Rs 3,600 had been advanced to Vallabhdas Liladhar, yet the entries in the appellants’ account book were recorded under the name of Vallabhdas Liladhar’s brother, who was also the brother‑in‑law of the two appellants. The markings on the gold bars made it evident that the metal was of foreign origin, and the Court held that, given their profession as goldsmiths, the two appellants could not have been ignorant of this fact. In addition to these circumstances, all the lower tribunals had relied upon the statements that the two appellants had given to the customs officials and had invoked the presumption under section 178‑A of the Customs Act, thereby convicting the appellants. The High Court, however, went further and held that even without relying on the presumption in section 178‑A, the remaining evidence was sufficiently strong to sustain the convictions. Counsel for the appellants, without challenging the unanimous factual findings of the lower courts, advanced four specific points for the Court’s consideration. The first point contended that the statements made to the customs authorities were inadmissible because they had not been properly proved. The second point asserted that the statements made before the Collector of Customs were inadmissible under sections 24 and 25 of the Indian Evidence Act. The third point argued that, because the gold had already been confiscated and a penalty imposed under section 167(8) of the Customs Act, no further criminal trial could be instituted under section 186 of the same Act. The fourth point maintained that the conditions laid down in section 167(81) were not fulfilled in the present case.

Addressing the first point, the Court observed that the sole argument presented was that the lawyer who had signed the statements before the customs authorities had not been produced to prove their authenticity. The Court found that the statements were in fact signed both by the appellants’ lawyer and by the appellants themselves. In their courtroom testimony, the appellants admitted to having signed the statements, although they claimed they did not understand their contents and had signed only because their lawyer requested it. The lower courts had not accepted this explanation, a view the Court concurred with. Because the appellants’ own signatures appeared on the statements and this was admitted, the Court held that the statements were properly proved by the admissions of the parties, and it was unnecessary to call the lawyer who also signed them as a witness. Consequently, the contention that the statements were not proved failed.

Concerning the second point, the Court expressed the opinion that section 25 of the Indian Evidence Act did not apply to the facts of the present case, which were identical to those in the earlier decision of The State of Punjab v. Barkat Ram. The Court therefore concluded that the statements could not be excluded on the basis of section 25. While the Court did not elaborate further on section 24 in this passage, it indicated that the circumstances did not satisfy the conditions for exclusion under that provision, as the statements were not obtained by inducement, threat, or promise.

In the matter of Barkat Ram, the Court observed that, as had been decided in a previously reported decision, customs officers are not to be regarded as police officers and consequently the statements that were made to them were not excluded from evidence under section 25 of the Indian Evidence Act. The Court explained that section 24, however, could apply because customs officials are persons exercising authority, and under that section any statement obtained by inducement, threat or promise would be inadmissible in a criminal trial. The Court then noted that all the lower courts had found that the statements in question were not obtained by any inducement, threat or promise as required by section 24. In light of that consistent finding, the Court concluded that the statements could not be said to be inadmissible under section 24 of the Indian Evidence Act.

The appellants subsequently placed reliance upon section 186 of the Sea Customs Act, which provides: “The award of any confiscation, penalty or increased rate of duty under this Act by an officer of Customs shall not prevent the infliction of any punishment to which the person affected thereby is liable under any other law.” The appellants argued that this provision, by stating that a punishment under any other law would not be prevented, implicitly barred the imposition of any punishment under the Sea Customs Act itself. The Court referred to observations made in Leo Roy Frey v. The Superintendent District Jail, noting that although that case cited section 186, it did not directly address whether a prosecution under section 167(81) of the Act could proceed after a confiscation, penalty or increased rate of duty had been awarded under section 167(8) in view of section 186. The Court explained that clause (81) was inserted into section 167 by the Amending Act No 21 of 1955; before that amendment the section contained only eighty clauses, and the design of those clauses was to give the authorities two alternative remedies: either to impose confiscation, penalty or an increased rate of duty, or to prosecute the person before a magistrate. It was under that earlier scheme that section 186 was enacted to make clear that the award of confiscation, penalty or increased rate of duty would not bar the imposition of any other punishment under any other law. The legislative intention, the Court held, was therefore to permit a prosecution under any other law even when the customs authority had already prescribed confiscation, penalty or an increased rate of duty under the Act. Consequently, section 186 was intended as an enabling provision that allows additional prosecutions, not as a provision that bars further prosecution under the Act itself.

In this case the Court examined the character of section 186 of the Customs Act and concluded that the provision was intended only as an enabling provision and not as a bar to any further prosecution that might be permissible after the award of confiscation, penalty or an increased rate of duty. The Court observed that section 186 was inserted in the Act ex abundanti cautela, that is, with abundant caution, to make explicit that the award of confiscation, penalty or an increased rate of duty would not prevent the infliction of any other punishment under any other law. When clause (81) was later introduced into section 167, it became possible in certain cases for the customs authorities to confiscate goods and impose a penalty and at the same time to prosecute persons under clause (81) of the Act. However, the Court held that this development did not alter the fundamental nature of section 186, which remained an enabling provision rather than a prohibitive one. The Court reasoned that, had the legislature intended to bar prosecutions following the award of confiscation, penalty or increased duty, the language of section 186 would have been expressed very differently. Accordingly, the Court could not read into section 186 a bar by implication to a prosecution under the Act merely because the section permits prosecution under any other law. In this view, section 186 does not bar the prosecution for an offence under the Act even when the award of confiscation, penalty or increased rate of duty has already been made, as reflected in the reference to paragraph (4) of the judgment.

The Court then considered the contention that the requirements of clause (81) of section 167 were not satisfied because it had not been proved that the appellants intended to defraud the government of duty payable on the gold or to evade any prohibition or restriction then in force. The Court noted that, before clause (81) can be applied, it must be shown, among other things, that the person charged with possession of dutiable, prohibited or restricted goods, or with carrying, removing, depositing, keeping or concealing such goods, had the intention of defrauding the government of any duty payable thereon or of evading any prohibition or restriction then in force. The prosecution argued that it had failed to prove, by positive evidence, such an intention in the present case. The Court could not accept this argument. It stated that once it is established that the gold was smuggled, it follows that it was brought into the country without payment of duty or in violation of the existing prohibition or restriction, and that any person who brought the gold into the country or dealt with it thereafter, knowing it to be smuggled, must be deemed to have intended to evade duty or violate the prohibition. The Court therefore found no merit in the contention. Finally, the appellants urged that the substantive imprisonment sentence should be reduced to the period already served, particularly because they had been on bail since March 1960 and it would not be in the interest of justice to return them to prison for a short remaining term after four years. The Court, however, saw no reason to interfere with the sentence in a case of this nature and dismissed the appeals.

The Court observed that reducing the term of imprisonment to the period already served would not be appropriate in view of the surrounding circumstances of the case as presently presented. It noted that the appellants had been released on bail beginning in March 1960 and had remained out of custody for an extended period without any further legal impediment thereafter. The Court further expressed that sending the appellants back to prison for a brief term after they had already endured roughly half of the prescribed sentence would run contrary to the interests of justice. Nevertheless, the Court affirmed that it found no statutory or equitable ground to alter the original sentence in matters of this nature under the prevailing legal principles as applied by this jurisdiction. Consequently, the appeals were deemed untenable and the petitions for modification of the punishment were rejected in light of the foregoing considerations and the lack of any compelling reason to deviate from the imposed term. The Court therefore entered an order dismissing the appeal and confirming the original judgment without alteration, as previously recorded, and did so in accordance with established legal procedure of law. Accordingly, the appellate process concluded with the dismissal of the petition and the maintenance of the sentence as originally imposed.