Delhi High Court

Purushottam Jajodia vs Directorate Of Revenue ... on 24 July, 2014

         IN THE HIGH COURT OF DELHI AT NEW DELHI

                                           Judgment delivered on: 24.07.2014

W.P.(C) 416/2014 & CM No.827/2014

PURUSHOTTAM JAJODIA                                 .....Petitioner


                                  versus

DIRECTORATE OF REVENUE INTELLIGENCE, NEW DELHI &
ANR                              .....Respondents



W.P.(C) 417/2014

AMIT KUMAR                                          .....Petitioner


                                  versus

DIRECTORATE OF REVENUE INTELLIGENCE, NEW DELHI &
ANR                              .....Respondents



W.P.(C) 3379/2014 & CM 6975/2014

K.M. UDYOG                                          ..... Petitioner

                                  versus



DEPUTY COMMISSIONER (ANTI EVASION) CENTRAL EXCISE &
ANR.                              ..... Respondents




WP(C) 416/2014, 417/2014 & 3379/2014                                   Page 1 of 22
 Advocates who appeared in this case:

For the Petitioner       : Mr Abhas Mishra, Advocate with Ms Divya Bansal and Mr Abhimanue
                           Shrestha, Advocates

For the Respondents      : Mr Kamal Nijhawan, Advocate with Mr Dinesh Patel, Advocate for
                           R-1 in W.P.(C) 3379/2014 and for R-2 in W.P.(C) Nos.416/2014 and
                           417/2014
                           Mr Satish Aggarwala, Advocate with Mr Sushil Kaushik, Advocate for
                           R-2 in W.P.(C) 3379/2014 and for R-1 in W.P.(C) Nos.416/2014 and
                           417/2014

CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SIDDHARTH MRIDUL

                                       JUDGMENT

BADAR DURREZ AHMED, J (ORAL)

1. These three writ petitions raise a common issue with regard to the

meaning to be ascribed to the word ―given‖ appearing in Section 110(2) of

the Customs Act, 1962 (hereinafter referred to as ‗the said Act') and in

Section 124(a) of the said Act. This pertains to the giving of a notice under

Section 124(a) of the said Act informing a person from whom goods have

been seized of the grounds on which it is proposed to confiscate the goods or

to impose a penalty. Section 110(2) of the said Act prescribes that the upper

time limit for retaining the seized goods is of six months, in case no notice in

respect thereof is given under Clause (a) of Section 124 of the said Act, from

the date the seizure of the goods. Moreover, in case no such notice is given,

the goods are mandatorily required to be returned to the person from whose

possession they were seized. Of course, the period of six months may, on

sufficient cause being shown by the Commissioner of Customs, be extended

for a further period not exceeding six months. This is stipulated in the

proviso to Section 110(2) of the said Act.

2. The facts in each of these writ petitions need to be set out briefly in

order to appreciate the context in which the said expression is to be

considered.

3. In W.P.(C) 416/2014 (Purushottam Jajodia vs. Directorate of Revenue

Intelligence & Anr.) the seizure of goods took place on 29.10.2012. The

period of six months prescribed under Section 110(2) would expire on

28.04.2013. However, the Commissioner of Customs invoked the proviso

and extended the period by an order-in-original dated 26.04.2013 by a

further six months. Although the order-in-original mentions that the period

was extended up to 08.10.2013 for issuance of a show cause notice, in view

of the fact that the order expressly records that the period is extended by six

months, we are treating the date given in the said order i.e., 08.10.2013 to be

read as 28.10.2013. In other words, the notice under Section 124(a) had to

be given on or before 28.10.2013. The show cause notice was dated

28.10.2013. It was sent by speed post to the petitioner and the tracking

record indicates that the postal item was booked on 29.10.2013 and actually

received by the petitioner on 30.10.2013. It is the case of the petitioner that

signing of the show cause notice on 28.10.2013 was not sufficient

compliance and that the same should have been received on or before

28.10.2013. It was further submitted that the notice was itself posted on

29.10.2013 which was, in any event, beyond the terminal date of 28.10.2013.

4. We shall now advert to the facts in the case of W.P.(C) 3379/2014

(K.M. Udyog vs. Deputy Commissioner (Anti Evasion) Central Excise &

Anr). Here the seizure of Rs.10,00,000/- (Rupees Ten Lakhs) cash took

place on 12.08.2011. The six-month period would expire on 11.02.2012.

The show cause notice under Section 124(a) of the said Act was dated

10.02.2012 and it was also dispatched on 10.02.2012, both within six months

of the date of seizure. However, the said notice under Section 124(a) of the

said Act was received by the petitioner on 13.02.2012, when the period of

six months from the date of seizure had expired. It was once again

contended on behalf of the petitioner that this was not sufficient compliance

of the provisions of Section 110(2) read with Section 124(a) of the said Act

as the notice was received beyond the six-month period and, therefore, the

respondents were liable to release the sum of Rs.10,00,000/- (Rupees Ten

Lakhs) which they had seized, unconditionally.

5. The facts in W.P.(C) 417/2014 (Amit Kumar vs. Directorate of

Revenue Intelligence) are that the goods including the currency were seized

on 09.10.2012. The six-month period would expire on 08.04.2012 but the

Commissioner of Customs passed an order on 08.04.2013 itself extending

the period by a further six months. It is stated by the petitioner that on

19.10.2013 a letter of that very date i.e., 19.10.2013 was received by the

petitioner through a Special Messenger sent by the respondent. The letter

indicated that earlier a show cause notice dated 08.10.2013 had been sent by

speed post but the same could not be delivered as the house was found

locked. Consequently, the said notice was being sent again through a

Special Messenger. It was, therefore, requested that the petitioner should

acknowledge receipt of the notice. As, according to the petitioner the notice

was received beyond the period of six months, the petitioner requested for

unconditional release of the goods including the currency. The same was not

accepted by the respondent and, therefore, the petitioner has approached this

Court.

6. From the facts narrated above, it is evident that the question which

arises for consideration in each of these three writ petitions is the same. The

question is whether mere dispatch of a notice under Section 124(a) of the

said Act would imply that the notice was ―given‖ within the meaning of

Section 124(a) and Section 110(2) of the said Act?

7. The learned counsel for the petitioners placed reliance on a decision of

the Supreme Court in the case of K. Narsimhiah vs. H.C. Singri Gowda:

AIR 1966 SC 330. They also placed reliance on a decision of a Division

Bench of the Gujarat High Court in Ambalal Morarji Soni vs. Union of

India and Ors: AIR 1972 GUJ 126. Based on these decisions, the sum and

substance of the submission on behalf of the petitioners was that the

expression ―given‖ used in Section 110(2) and also in Section 124(a) of the

said Act was distinct and different from the word ―issued‖ or ―served‖.

Relying upon the said decisions, the learned counsel for the petitioners

submitted that by the use of the word ―given‖ the legislative intent was clear

that the notice had to be received by the person concerned or the notice had

to be offered/tendered and refused by the person concerned. Mere dispatch

by post would not be covered by the word ―given‖ as appearing in the above

mentioned provisions of the said Act.

8. On the other hand, the learned counsel appearing on behalf of the

respondents submitted that Section 153 of the said Act also needed to be

considered. According to them, the said provision dealt with the manner in

which any order or decision or summon or notice which is issued under the

said Act is required to be served. Referring to Section 153(a) of the said Act,

the learned counsel appearing on behalf of the respondents submitted that the

moment a notice is tendered or sent by registered post or by an approved

courier, that amounts to service of the notice and the actual receipt by the

noticee is not a relevant consideration. Consequently, they submitted that in

each of the three cases at hand, the notices had been sent by registered post

within the stipulated period (either original or extended) as prescribed under

Section 110(2) of the said Act and, therefore, the goods were not liable to be

released. The learned counsel for the respondents placed strong reliance on

the decision of the Calcutta High Court in the case of Union of India vs.

Kanti Tarafdar: 1997 (91) ELT 51 (Cal.). They also placed strong reliance

on the decision of a Division Bench of the Madhya Pradesh High Court in

the case of CCE, Indore vs. Ram Kumar Aggarwal: 2012 (280) ELT 13

(MP). Several other decisions of the Calcutta High Court as also of the

Patna High Court and the Punjab and Haryana High Court were referred to

by the learned counsel for the respondents but we need not examine them in

detail as they essentially follow the decision of the Calcutta High Court in

the case of Kanti Tarafdar (supra).

9. Section 110(2) of the said Act reads as under:-

―(2) Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized:

Provided that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Commissioner of Customs for a period not exceeding six months.‖

(underlining added)

10. Section 124 of the said Act reads as under:-

―124. Issue of show cause notice before confiscation of goods, etc. - No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person-

(a) is given a notice in writing with the prior approval of the officer of customs not below the rank of a Deputy Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty;

(b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and

(c) is given a reasonable opportunity of being heard in the matter:

Provided that the notice referred to in clause (a) and the representation referred to in clause (b) may at the request of the person concerned be oral.‖

(underlining added)

11. Section 153 of the said Act reads as under:-

―153. Service of order, decision, etc. - Any order or decision passed or any summons or notice issued under this Act, shall be served, -

(a) By tendering the order, decision, summons or notice or sending it by registered post to the person for whom it is intended or to his agent; or

(b) If the order, decision, summons of notice cannot be served in the manner provided in clause (a), by affixing it on the notice board of the customs house.‖

12. On a plain reading of Section 110(2) of the said Act it is evident that

the goods which have been seized under Section 110(1) of the said Act

cannot be retained beyond the stipulated period of six months or the

extended period of a further six months, if no notice in respect of the goods

is ―given‖ under Section 124(a) of the said Act within the said period.

Section 124(a) of the said Act clearly stipulates that no order confiscating

any goods or imposing any penalty on any person shall be made unless the

owner of the goods or such person is ―given a notice‖ in writing, ―informing

him of the grounds on which it is proposed to confiscate the goods or to

impose a penalty‖. It is evident that no order of confiscation can be passed

unless and until such notice is ―given‖ to the concerned person.

13. The key words, according to us, are -‗informing him of the grounds on

which it is proposed to confiscate the goods or to impose a penalty'. The

object of Section 124(a) is that the person concerned had to be informed of

the grounds on which the confiscation of the goods is to be founded. This

can only happen when the person from whom the goods have been seized,

receives the notice and is capable of reading and understanding the grounds

of the proposed confiscation. Therefore, according to us, upon a conjoint

reading of Section 110(2) and Section 124(a) of the said Act, the notice

contemplated in these provisions can only be regarded as having been

―given‖ when it is actually received or deemed to be received by the person

from whom the goods have been seized. The whole object of giving the

notice under Section 124(a) of the said Act is to inform the person concerned

of the grounds of the proposed confiscation or proposed imposition of

penalty as also to give him an opportunity to make a representation in

writing so that an order confiscating or not confiscating the goods may be

passed.

14. The Supreme Court in K. Narsimhiah (supra) was considering the

meaning of the word ―given‖ as used in the proviso to Section 23(a) of the

Mysore Town Municipalities Act, 1951. The relevant proviso was as under:-

―Provided that no such resolution shall be moved unless notice of the resolution is signed by not less than one-third of the whole number of the Councillors and at least fifteen days' notice has been given of the intention to move the resolution.‖

(underlining added)

15. The view expressed by the Supreme Court was as under:-

―11. This brings us to the main contention that three days' notice of the special general meeting was not given and so the meeting is invalid. We find it difficult to agree with the High Court that ―sending‖ the notice amounts to ―giving‖ the notice.

12. ―Giving‖ of anything as ordinarily understood in the English language is not complete unless it has reached the hands of the person to whom it has to be given. In the eye of law however giving is complete in many matters where it has been offered to a person but not accepted by him. Tendering of a notice is in law therefore giving of a notice even though the person to whom it is tendered refuses to accept it. We can find however no authority or principle for the proposition that as soon as the person with a legal duty to give the notice dispatches the notice to the address of the person to whom it has to be given, the giving is complete. We are therefore of opinion that the

High Court was wrong in thinking that the notices were given to all the Councillors on the 10th October. In our opinion, the notice given to five of the Councillors was of less than three clear days.‖

16. We may note that the Supreme Court considered the ordinary meaning

of the word ―giving‖ and observed that it would not be complete unless it

had reached the hands of the person to whom it has to be given. The

Supreme Court, however, distinguished the ordinary meaning from that the

meaning as ascribed to it in law. The Supreme Court noted that in law

―giving‖ is complete in many matters where it has been offered to a person

but not accepted by him. Consequently, the Supreme Court observed that

tendering of a notice is in law equivalent to giving a notice even though the

person to whom it is tendered refuses to accept it. But, more importantly, the

Supreme Court observed that there is no authority or principle for the

proposition that as soon as the person with a legal duty to give the notice

dispatches the notice to the address of the person to whom it has to be given,

the giving is complete. If we apply the observation of the Supreme Court to

the fact situation of the present cases, it is clear that the mere issuance or

dispatch of the notices to the petitioners would not amount to ―giving‖ of the

notice as contemplated both in the ordinary sense as also in law.

17. The view expressed by the Supreme Court was followed as it should

have been, by the Gujarat High Court in the case of Ambalal Morarji Soni

(supra) while construing the very word ―given‖ appearing in Sections 110(2)

and 124(a) of the said Act. After referring to the Supreme Court decision in

K. Narasimhiah (supra) the Division Bench of the Gujarat High Court

observed as under:-

―6. In our opinion, this decision of the Supreme Court clearly indicates that looking to the object for which the notice is to be given as provided in that particular piece of legislation, the Court has to consider whether the giving of the notice with the particular object in view is so material as to render the proceedings subsequent to non compliance with such provision invalid or in the present case, whether the notice can be said to have been properly given as contemplated by law. The words in Section 124 are--―the owner of the goods or such person is given a notice in writing so far as the Customs Act is concerned. Similar words are found in the Gold (Control) Act. The whole object of giving notice is to inform the person concerned of the grounds on which it is proposed to confiscate the goods or to impose a penalty and to give him an opportunity to make a representation in writing within such reasonable time as may be specified in the notice and he must be given reasonable opportunity of being heard in the matter.‖

―7. ......Giving of the notice contemplated by Section 124 of the Customs Act and Section 79 of the Gold Control Act means that the notice must have been received because as pointed out by the Supreme Court in Narasimhiah's case, AIR 1966 SC 330 (supra) the giving of the notice is not complete unless and until it reaches the person concerned or its actual tender to him. Merely dispatching of the notice to the address of the person does not, complete the giving of the notice. In the instant case, therefore, the fact that the respondents dispatched the notices by post on November 5, 1968, would not complete the giving of the notice. The giving of the notice should have been complete on or before November 6, 1968 i.e., notices should have reached the petitioner on or before November 6, 1969 or should have been tendered to him before that date. That was not done in the instant case and, therefore, as from November 7, 1969, the civil right to get back the seized goods accrued to the petitioner.‖

(underlining added)

18. From the above, it is evident that the Gujarat High Court had clearly

held that mere dispatch of a notice to the address of a person does not

complete the giving of a notice and that the same would only have been

completed if the notice had reached the person concerned or after having

been tendered to him had been refused by him. We may say at this juncture

itself that we are in full agreement with the decision of the Gujarat High

Court in the case of Ambalal Morarji Soni (supra) and are, therefore, of the

view that the notices in the present petition had not been ―given‖ before the

terminal date specified in Section 110(2) of the said Act.

19. However, since a different line of approach has been taken by the

Calcutta High Court which has been followed by the Punjab and Haryana

High Court, the Madhya Pradesh High Court and the Patna High Court, we

would like to refer to the decision in Kanti Tarafdar (supra) which is the

fountain head of that stream of decision. There is no doubt that the decision

of the Calcutta High Court in Kanti Tarafdar (supra) completely supports

the contention of the learned counsel for the respondents. But, with respect,

we do not agree with the said decision. We may point out that the decision

has been arrived at on the premise that Section 124 of the said Act requires

that a notice be ―issued‖ as against a notice being ―given‖. This would be

evident from the following paragraphs of the said decision:-

―21. The controversy here is whether the words ―is given‖ as occurring in Section 110(2) of the Act, are controlled by the words ―issue of show cause notice‖ as occurring in Section 124 of the Act and the words ―any notice issued under this Act shall be served‖ as occurring in Section 153 of the Act.‖

―31.The legislature, while providing that a notice under Section 110(2) must be given within the time as specified in the said section did not provide

in the section itself as to how such notice should be given, but at the same time provided that a notice under Section 110(2) should be a notice ―issued‖ under Section 124 of the Act and ―any notice‖, issued under the Act, which obviously includes a notice under Section 124 of the Act, should be ―served‖ in the manner provided in Section 153 of the Act. If the legislature intended that the manner and method of giving notice under Section 110(2) should be different, then it would not have provided in the said section the words ―notice in respect thereof if given under Clause (a) of Section 124‖ and the words ―issue of show cause notice‖ in Section 124 of the Act and the words ―Any.....notice issued‖ in Section 153 of the Act.‖

(underlining added)

20. We are afraid that we cannot agree with the observation of the

Calcutta High Court that the word ―given‖ as occurring in Section 110(2) of

the said Act is controlled by the word ―issue of show cause notice‖ as

occurring in Section 124 of the said Act. The body of the provision of

Section 124 of the said Act nowhere uses the expression ―issue of show

cause notice‖. It is only the heading of that Section which uses that

expression. On the contrary, the body of Section 124(a) of the said Act uses

the exact same expression ―given‖ as used in Section 110(2) of the said Act.

Therefore, the very basis of the Calcutta High Court decision in Kanti

Tarafdar (supra) is, with respect, incorrect. The same sentiment is

expressed in paragraph 31 of the said decision where, once again, it is

presumed that the word ―issued‖ had been used in Section 124(a) of the said

Act. We are also not in agreement with the observation that the word

―given‖ used in Section 110(2) and Section 124(a) of the said Act is in any

manner controlled by Section 153 of the said Act. In our view, in the context

of the present cases, Section 153 would only define the mode and manner of

service and not the time of service or when a notice can be said to have been

―given‖.

21. At this juncture, since an argument has been raised based on Section

27 of the General Clauses Act, 1897, it would be pertinent to refer to the said

provision which reads as under:-

―27. Meaning of service by post- Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression ―serve‖ or either of the expressions ―give‖ or ―send‖ or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.‖

22. The argument raised on the basis of Section 27 of the General Clauses

Act, 1897 on behalf of the respondents was that the expressions ―serve‖,

―given‖ and ―send‖ were used interchangeably and, therefore, the word

―given‖ used in Section 110(2) and Section 124(a) of the said Act would also

mean ―served‖. Therefore, according to them, since Section 153 of the said

Act deals with service of notices, mere dispatch by registered post would

amount to service of the notices and, therefore, would amount to giving of

the notices under Section 124(a) of the said Act. We do not agree with this

submission made on behalf of the learned counsel for the respondents

inasmuch as they have ignored the last phrase used in Section 27 of the

General Clauses Act, 1897 which is to the following effect -

―...to have been effected at the time at which the letter would be delivered in the ordinary course of post.‖

23. In each of the cases before us, the show cause notices under Section

124(a) of the said Act bears the dates which happens to be either the last date

or the penultimate date of the stipulated period under Section 110(2) of the

said Act. It cannot be expected that a document sent by registered post

would be delivered on the very same day or even the next day in the ordinary

course of post. Furthermore, Section 27 of the General Clauses Act is

qualified by the words - ―unless a different intention appears.‖ That

different intention is discernible from the expression ―informing him of the

grounds on which it is proposed to confiscate the goods or to impose a

penalty.‖ Unless a person receives the notice how can he said to be

‗informed' of the said grounds? Therefore, we do not see as to how Section

27 of the General Clauses Act, 1897, would in any way come to the aid of

the respondents.

24. The decision of the Madhya Pradesh High Court in CCE, Indore

(supra) also relies on Kanti Tarafdar (supra). We may point out that both

the decisions, in Kanti Tarafdar (supra) and CCE, Indore (supra), noticed

the Supreme Court decision in K. Narasimhiah (supra) but did not follow

the same for reasons to which we do not subscribe. In CCE, Indore (supra)

also the Madhya Pradesh High Court came to the conclusion that it did on

the understanding that Section 124 of the said Act requires ―issuance‖ of a

show cause notice. This would be evident from paragraphs 8 and 9 of the

said decision which read as under:-

―8. Perusal of the aforesaid provisions makes it clear that sub-section (2) of Section 110 conferred a right on the respondent to seek the return of the goods in question, if no notice to him, in respect thereof, is given under Clause (a) of Section 124 within six months of the seizure of the goods. Section 124 empowers the department to

confiscate any goods or impose any penalty on any person if he is given notice in writing informing him of the grounds on which it is proposed to confiscate the good or to impose a penalty.

Section 110 deals with the seizure of goods, documents and things, whereas Section 124 requires issuance of a show cause notice before confiscation of goods etc. It is important to note that the central legislature has made it obligatory on the part of the department to give a notice by employing the words "notice in respect thereof is given" in Section 110(2)which is required to be given in writing by virtue of clause

(a) of Section 124. The words "notice is given" cannot be construed as "notice is served" else the legislature itself could have used the word 'served' in place of 'given'. The word 'given' cannot be treated as a synonym to word 'served', unless it is indicated by the legislature in express manner or by necessary implication.

9. Sub-section (1) of section 110 of the Customs Act empowers the proper officer to seize the goods, if he has reason to believe that the goods are liable to be confiscated under the said Act. After such seizure, he is further obliged to give a notice within six months of the seizure of the goods, failing which, the goods shall be liable to be returned to the person from whose possession they were seized. The object of this provision is to apprise such person of the grounds on which confiscation of the goods or imposition of penalty is proposed. In view of the object and purpose of this provision, the legislature in its wisdom has used the words "notice is given", which would obviously mean that notice must be issued within six months of the date of seizure. The purpose of this provision is to relieve such person, if the

department sleeps over the matter for a period exceeding six months from the date of seizure, without issuing notice of intended confiscation of the goods or imposition of penalty. Its purpose will not be frustrated, if the notice, though is given within six months of the seizure of the goods, is not served on such person within six months. On the contrary, if the same is construed so as to mean service within six months from the date of seizure, such person may avoid the service of notice for a period up to six months and may further take undue advantage by invoking sub-section (2) of Section 110. Needless to say that notice may be given by invoking the mode of registered post, which seems to have been prescribed by virtue of Section153 of the said Act.‖

25. While the Madhya Pradesh High Court was right in observing that the

object of Section 110(2) and Section 124(a) of the said Act read together was

to apprise the concerned person of the grounds on which the confiscation of

the goods or imposition of penalty was proposed, with respect, it was wrong

when it concluded that when the legislature had used the words ―notice is

given‖ it would ―obviously mean that the notice must be issued within six

months of the date of seizure‖. In our view, the expression ―notice is given‖

does not logically translate to the conclusion that ―notice must be issued

within the stipulated period‖.

26. For the above reasons, we do not agree with the view taken by the

Calcutta High Court in Kanti Tarafdar (supra) which has been followed by

some other High Courts. We find ourselves to be in entire agreement with