M/S Rajmal Lakhichand & Anr vs Commr.Cen.Exc.& Customs Aurangabad

M/s. Rajmal Lakhichand & Anr. .... Appellants

Versus

Commr. Cen. Exc. & Customs,

Aurnagabad ....Respondent

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. Leave granted.

2. This appeal is directed against the judgment and order

dated 20.04.2010 passed by the Bombay High Court in

Custom Reference No. 1 of 2002 whereby the High Court

answered the question referred to it by the Customs, Excise

and Gold (Control) Appellate Tribunal [for short "the

Tribunal"] in favour of the appellant and against the

Revenue holding that the Tribunal was not justified in

invoking the provision of Section 120(2) of the Customs Act,

1962 to confiscate the seized silver to the extent it was

confiscated in exercise of that power in absence of any show

cause notice and also in absence of opportunity of being

heard. By the aforesaid judgment and order, however, the

High Court refused to expand the scope of reference to the

confiscated seized silver to the extent of 1713.807 kgs. and

restricted it to the silver of 194.250 kgs. only.

3. The Directorate of Revenue Intelligence [for short "the DRI"]

searched the premises of the appellants on the basis of

information gathered by it to the effect that large quantity of

about 132 bricks of silver had been smuggled through sea

route and diverted to Jalgaon. During the aforesaid search

the DRI seized silver in Choursa form weighing 1913.256

kgs. Pursuant to the same, a show-cause notice was issued

to the appellants dated 07.08.1993 to which they submitted

their replies. The adjudicating authority took up the matter

for consideration and by its order dated 30.08.1994

discharged the show-cause notices holding that the

evidence collected were not convincing enough to hold the

allegations as proved. The Central Board of Excise and

Customs, New Delhi exercising powers under Section 129D

of the Customs Act directed the collector to apply to the

Tribunal for determination of the issues specified in the

review order, consequent upon which, the Tribunal was

approached. The Tribunal by its order dated 19th March,

1996 allowed the appeals by setting aside the impugned

order and ordered for confiscation of the seized silver

absolutely. The Tribunal further held that Mr. Ishwarlal

Lalwani and M/s. Rajmal Lakhichand, in whose custody the

seized silver was found were liable for imposition of penalty

under Section 112(b) of the Customs Act. Accordingly, a

penalty of Rs. 10 lakhs was imposed as personal penalty on

Mr. Ishwarlal Lalwani for acquiring the smuggled silver. The

Tribunal, however, did not impose separate penalty on M/s.

Rajmal Lakhichand since personal penalty on the person

managing the affairs of the firm was imposed. The Tribunal

also imposed penalty of Rs. 1 lakh on Mr. Sureshkumar

Seth who had procured smuggled silver and delivered it to

Mr. Ishwarlal Lalwani. M/s. Rajmal lakhichand and Mr.

Ishwarlal Lalwani being aggrieved by the order dated 19th

March, 1996 filed two reference applications in which they

framed as many as 11 questions and prayed for reference to

the High Court. The Tribunal by its order dated 29.09.1996

rejected the reference applications holding that none of the

questions raised therein required consideration at the

hands of the High Court.

4. Being aggrieved by the aforesaid order of the Tribunal

rejecting the reference applications the appellants moved

the High Court by way of application under Section 130(3)

of the Customs Act. By filing the aforesaid applications the

appellant-assessee sought for a direction to the Tribunal to

refer the questions of law which the Tribunal refused to

refer. The High Court took up the aforesaid application for

consideration and passed an order on 17.03.1999 to the

following effect: -

"2. We have heard the learned counsel for the

parties. The learned counsel for the Petitioners has

submitted redrafted questions which according to

him bring out the real controversy that arises from

the order of Tribunal. We have carefully considered

the questions proposed by the Petitioners before

Tribunal and the redrafted questions submitted

before us. We have also heard Mr. R.V. Desai,

learned counsel for the Respondent. In our opinion,

the following question of law arises from the order of

the Tribunal:

"Whether the Tribunal was justified in invoking

the provisions of Section 120(2) of the Customs

Act, 1962 to order confiscation of silver

weighing 194.250 kgs. purchased from M/s.

Dilipkumar Harichand & Sons, Jalgaon, when

the said provisions had not been invoked in the

Show Cause Notice and when the applicants

were not given any opportunity of being heard

in the matter by the Customs, Excise & Gold

(Control) Appellate Tribunal?"

3. We accordingly direct the Tribunal to refer the

above question to this court for opinion under Section

130(3) of the Customs Act, 1962. Rule is made

absolute in the above terms."

5. It is thus established from the aforesaid order passed by the

High Court that only one question of law was found to have

arisen from the order of the Tribunal dated 26.09.1996

which required consideration at the hands of the High

Court. The prayer before the High Court was also to refer

the other questions but the High Court felt that only the

reframed question to the aforesaid effect only is a question

of law arising from the order of the Tribunal, which was

accordingly directed to be referred. Consequent upon the

said order the Tribunal prepared the statement of case and

referred the aforesaid question for the consideration of the

High Court for its opinion under Section 130(3) of the

Customs Act, 1962. Subsequent to the receipt of the

aforesaid statement of case from the Tribunal the assessee

took out a motion to the minutes of the order dated 17th

March, 1999 passed by the High Court and sought

modification of the order which subsequently came to be

modified deleting the words "weighing 194.250 kgs.

purchased from M/s. Dilipkumar Hirachand & Sons,

Jalgaon". Consequent upon the aforesaid modification, the

modified question thus referred to the High Court for its

opinion reads as under: -

"Whether the Tribunal was justified in invoking the

provision of Section 120(2) of the Customs Act, 1962

to order confiscation of silver, when the said

provisions had not been invoked in the Show Cause

Notice and when the applicants were not given any

opportunity of being heard in the matter by the

Customs, Excise & Gold (Control) Appellate

Tribunal?"

6. The aforesaid reference was taken up for consideration by

the High Court and during the course of arguments counsel

appearing for the appellant sought to get the scope of the

reference extended by making the submission that the

question referred would also bring within its fold the entire

quantity of silver weighing 1913.256 kgs. and not restricted

to only 194.250 kgs. purchased from M/s. Dilipkumar

Hirachand & Sons, Jalgaon. It was also submitted on behalf

of the appellant that while considering the question referred

to the High Court for its opinion it would have to deal with

the legality of the confiscation of the entire quantity of silver

weighing 1913.256 kgs. and if that is not done the very

purpose of deleting the aforesaid words would get frustrated

and would be rendered otiose.

7. The counsel appearing for the respondent, however, refuted

the aforesaid submissions contenting inter alia that the

High Court cannot expand the scope of the reference by

including for its consideration the entire quantity of silver,

i.e., 1913.256 kgs. It was also submitted by him that the

attempt to widen the scope of the question to bring within

its fold entire quantity of the confiscated silver weighing

1913.256 kgs. is nothing but an attempt to bring the

question for consideration before this Court through back

door which is not permissible in law. It was also submitted

that the deletion of the words referred to hereinabove would

in no way enlarge the scope of the question referred for so

far as the silver weighing 194.250 kgs. is concerned, as the

same stood on completely different footing than the silver

which was imported illegally and, therefore, confiscated. It

was submitted by him that the silver weighing 1713.807

kgs. was confiscated under Section 111 (d) of the Customs

Act, whereas rest of the silver weighing 194.250 kgs. was

confiscated under sub-Section (2) of Section 120 of the

Customs Act and, therefore, law applicable being different,

the two types of silver stood apart from each other. It was

also submitted by him that the two types of silver being in

issue and only one of it having been referred there is no

question of reframing or recasting the question of law as

suggested by the counsel appearing for the appellant as the

other quantity of silver weighing 1713.807 kgs. involves and

revolves around a completely different law, namely, Section

111(d) and, therefore, cannot be held to be permissible to be

raised on the same question as that of silver weighing

194.250 kgs.

8. In the light of the aforesaid submissions of the counsel

appearing for the parties we have considered the records. It

is disclosed from the records that the Tribunal by its order

dated 29.09.1996 directed for confiscation of silver weighing

194.250 kgs. which was locally purchased from M/s.

Dilipkumar Hirachand & Sons, Jalgaon, whereas the

Tribunal also directed for confiscation of another quantity of

silver weighing 1713.807 kgs. as it was imported illegally

from abroad. Despite the fact that the silver weighing

194.250 kgs. was locally purchased the Tribunal directed

for confiscation of the said quantity of silver also by

applying the provisions of Section 120(2) of the Customs Act

which provides that where smuggled goods are mixed with

other goods in such a manner that the smuggled goods

cannot be separated from such other goods, the whole of

the goods shall be liable for confiscation. The Tribunal also

held that it was not possible to separate the quantity of

silver weighing 194.250 kgs. from the rest of the smuggled

silver and, therefore, by virtue of Section 120(2) of the said

quantity was also held liable for confiscation.

9. The aforesaid order of the Tribunal also makes it crystal

clear that out of the entire quantity of silver weighing

1913.256 kgs., silver weighing 1713.807 kgs. was

confiscated under Section 111(d) whereas silver weighing

194.250 kgs. was confiscated under Section 120(2) of the

Customs Act.

10.The High Court in the impugned order took notice of the

aforesaid difference of the orders of confiscation and the two

types of silvers by applying two different provisions of law.

The High Court observed that the Tribunal also considered

the prayer of the counsel appearing for the appellant-

assessee regarding the reframing of the question of law

referred by the Tribunal to the High Court in terms of the

order of the High Court as also the effect of the deletion of

few words from the said question and that thereafter the

Tribunal held that the deletion would not make any

difference either way because the said deletion was in

respect of applicability of the provisions of Section 120(2) of

the Customs Act inasmuch as the powers under Section

120(2) were exercised with respect to the silver weighing

194.250 kgs. only.

11.Despite the deletion of the aforesaid words the issue that

was required to be considered was only in respect of the

provisions applicable being sub-Section (2) of Section 120 of

the Customs Act and, therefore, in any event and even after

the deletion of the said words the question of law which was

referred and was required to be answered by the High Court

was restricted only to the said quantity of silver weighing

194.250 kgs. for which only provisions of sub-Section (2) of

Section 120 of the Customs Act was being made applicable.

12.In the present case, 11 questions were raised by the

appellants before the Tribunal seeking for reference of the

same as questions of law to the High Court by way of

reference. The Tribunal rejected the said application seeking

for reference holding that none of the said 11 questions

could be referred to the High Court by way of reference. As

against the aforesaid decision of the Tribunal, the High

Court directed that only one question out of the said 11

questions, particularly, question No. 11 is a question of law

which could be referred to the High Court for its opinion

and not any other question. At that stage, the appellant-

assessee had the remedy to approach this Court as against

the aforesaid order by the High Court calling for just one

question out of the 11 questions to be referred to the High

Court. The aforesaid remedy which was available to the

appellant at that stage was not resorted to and only one

question was then referred for the consideration and answer

by the High Court. While the aforesaid question of law

which was referred to the High Court for its opinion was

being considered and argued, effort was made by the

appellant-assessee to get the scope of reference expanded to

other question for which earlier reference was sought and

rejected by the Tribunal as also by the High Court.

13.Since, silver weighing 1713.807 kgs. was confiscated under

Section 111(d), law applicable to the said confiscation was

totally different from the confiscation of silver weighing

194.250 kgs. which was directed to be confiscated by

applying the provisions of Section 120(2) of the Customs

Act. The High Court in the impugned judgment and order

held that since two different laws are applicable there is no

question of getting the scope of reference expanded to

include the silver weighing 1713.807 kgs. also for

consideration while hearing the reference restricted only to

the silver weighing 194.250 kgs. The High Court held that

the confiscation of the aforesaid silver weighing 194.250

kgs. by applying provisions of Section 120(2) of the Customs

Act is illegal and without jurisdiction as the show cause

notice is not issued proposing to make the aforesaid

provisions applicable and, therefore, there was a violation of

principle of natural justice.

14.The aforesaid provision on which the said confiscation of

silver weighing 194.250 kgs. is concerned, cannot by any

stretch of imagination could be said to be similar or

applicable to the other quantity of silver which was

confiscated. Legal position is totally different and legal

principles which are applicable also being different there

was no scope for extending the reference by the High Court

nor was there any scope for reframing or redrafting the

question referred by including another separate and

independent question of confiscation of silver weighing

1713.870 kgs.

15.Mr. Soli Sorabjee, Sr. Advocate, appearing for the appellant

sought to rely upon sub-Section (4) of Section 130 of the

Customs Act to contend that the High Court has the power

to hear, for reasons to be recorded, the appeal on any other

substantial question of law not formulated by it, if it is

satisfied that the case involves such question.

16.We have considered the said submission of Mr. Sorabjee,

but, unfortunately, we are not in a position to agree with

him as it is clear on a bare reading of the said provision

that the said provision came into the statute book only with

effect from 2003 and, therefore, said provision is not

applicable to the facts of the present case.

17.Mr. Soli Sorabjee, Sr. Advocate, also relied on Section 130B

which is power of the High Court to require the statement to

be amended. The said Section provides that if the High

Court or the Supreme Court is not satisfied that the

statements in a case referred to it are sufficient to enable it

to determine the questions raised thereby, the Court may

refer the case to the Appellate Tribunal for the purpose of

making such additions thereto or alterations therein as it

may direct in that behalf.

18.We have considered the said submission also of the counsel

appearing for the appellant and are of the opinion that the

said provision is not applicable to the present case for the

said Section 130B is applicable only for the purpose of

amendment of the statement of the case. It has no relevance

so far as the issue with regard to redrafting or reframing of

a question of law is concerned.

19.Therefore, we are of the considered opinion that the High

Court was justified in refusing to expand the scope of the

reference so as to include the silver weighing 1713.807 kgs.

which was confiscated under Section 111(d) while hearing

the reference with regard to silver weighing 194.250 kgs.

but confiscated under a different provision of law, namely,

under Section 120(2) of the Customs Act.

20.Before parting with the case, however, we would like to

observe that in the counter affidavit filed by the respondent

certain observations have been made regarding the order

passed by the High Court. Subsequently, however, the

person who has filed the aforesaid counter affidavit had

submitted an additional affidavit tendering his unqualified

apology in the following manner: -

"2. I state that the criticism, if any, of the Judgment

of the High Court on merits, in the Counter-affidavit

on behalf of the Respondents dated 2.2.2011 is not

deliberate and totally unintentional. The

inadvertence in this regard is highly regretted and

deponent unconditionally withdraws any such

criticism and tenders unconditional apology. The

deponent has highest respects for the Hon'ble Courts

and is duty bound to comply the directions passed

by the Hon'ble Courts."

21.Although at one stage we were very unhappy with the

language used by the deponent in the counter affidavit but

since the concerned officer has tendered unqualified

apology and has withdrawn the said statements made in the

affidavit, we accept the aforesaid apology tendered and we

do not intend to proceed any further in the matter and treat

the said chapter closed.

22.In terms of the aforesaid observations and findings we

dismiss this appeal leaving the parties to bear their own

costs.

............................................J

[ Dr. Mukundakam Sharma ]

............................................J

[ Anil R. Dave ]

New Delhi,

July 4, 2011.