Case Note & Summary
The judgment concerned three civil appeals by certificate from Bombay High Court judgments dated 31 August and 1 September 1970. The appellants were manufacturers of cotton yarn and fabrics whose goods and documents were seized by Central Excise Authorities in 1963 under the Customs Act, 1962. The primary relief sought was a writ of mandamus for release of seized goods and documents, alleging that show cause notice under Section 124(a) was not issued within six months of seizure and that extension orders under Section 110(2) were passed without hearing the appellants. The High Court dismissed the writ petitions, relying on a Mysore High Court decision that extension could be made any time and without hearing. Meanwhile, the Supreme Court in Assistant Collector of Customs v. Charan Das Malhotra held that extension must be within time and require hearing, but the present appeals were decided on a different ground. In Civil Appeal No. 1133 of 1971, between 11 and 20 March 1963, Central Excise Authorities searched the factory and mill premises and seized 1662 bales of processed and grey cotton fabrics, with the 6th respondent bank as pledgee in possession under cash credit arrangement. Books of accounts and documents were also seized. On 8 April 1963, the appellant filed a writ petition under Article 226. On 16 September 1963, the Assistant Collector applied for extension of time, and on 20 September 1963, the Collector granted six months extension. During pendency, several consent orders were passed (29 July 1963, 19 November 1965, 2 December 1966, 3 September 1969), providing that appellants deposit government securities and execute bonds to obtain release of goods in favour of the bank; securities to be returned if appellants succeed, retained if they fail; securities treated as sale proceeds of goods and as goods seized for adjudication; appellants agree not to raise contention that proceedings invalid due to release of goods. Pursuant to these orders, appellants deposited Rs. 9,03,300 and executed bonds for Rs. 15,51,080, obtaining release of 1662 bales and 56 boras. In Civil Appeal No. 1132 of 1971, seizures occurred on 28 and 29 April 1963 of 432 pieces of grey cotton fabrics and 136 bales, plus books; extension order passed on 20 September 1963. Similar consent orders followed. The legal issues before the Supreme Court were whether the extension orders were illegal for being passed beyond six months from seizure; whether they violated natural justice for lack of hearing; and whether an appellant whose goods were pledged with a bank had locus standi. The appellants argued that the extension orders were invalid under Section 110(2) because not made within six months and without opportunity to be heard, citing Malhotra. The respondents contended that the consent orders constituted special agreements waiving any objection, that goods had been released and thus Section 110 no longer applied, and that the pledged-goods appellant lacked standing. The Supreme Court acknowledged that but for the special agreement in the consent orders, the extension orders might have been exposed to the infirmities of limitation and natural justice as held in Malhotra. However, the consent orders created a binding arrangement: the appellants obtained release of goods by depositing securities that were treated as sale proceeds and as goods seized. This meant that once goods were released, they went out of the province of Section 110, and the appellants could not claim return of amounts on the ground that extension was invalid. The agreements demonstrated that parties had, on consideration of all facts and circumstances, waived notice for extending time, thus negating any violation of natural justice. Additionally, the appellant in one appeal lacked locus standi because the goods were in the possession of the bank as pledgee and were seized from the bank. The Supreme Court dismissed all three appeals, upholding the High Court's rejection of the writ petitions. The extension orders were not declared invalid, and the appellants were not entitled to release of goods or return of deposited securities. The consent orders and waiver operated as a bar.
Headnote
A) Customs Law - Seizure and Extension of Time - Consent Orders as Waiver - Customs Act, 1962, Sections 110 and 124 - The Central Excise Authorities seized goods and documents, then obtained extension of time to issue show cause notice under Section 124(a) beyond the initial six months. During pendency of writ petitions, the parties entered into consent orders releasing goods against deposit of securities treated as sale proceeds and as goods seized. Held that these special agreements precluded the appellants from challenging the extension on grounds of limitation; the orders for extension were not exposed to the infirmities noted in Assistant Collector of Customs v. Charan Das Malhotra. (Paras Not mentioned) B) Natural Justice - Right to Hearing on Extension Application - Waiver by Agreement - Customs Act, 1962, Section 110(2) - The appellants contended that extension order was made without giving them an opportunity to show cause, violating natural justice. The Court held that the agreements established that the parties, on consideration of all facts and circumstances, waived notice for extending the time, and therefore there was no violation of natural justice or lack of opportunity. (Paras Not mentioned) C) Customs Law - Effect of Release under Consent Orders - Section 110 Applicability - Customs Act, 1962, Section 110 - Once the appellants obtained release of goods in terms of the consent orders, the goods went out of the province of application of Section 110, and the appellants could not contend that the deposited amounts represented the goods or that they were entitled to return of amounts. (Paras Not mentioned) D) Civil Procedure - Locus Standi - Pledged Goods and Possession - Customs Act, 1962, Section 110; Constitution of India, Article 226 - In one appeal, the goods were in possession of a bank as pledgee and were seized from the bank's possession; the appellant lacked locus standi to ask for release of the goods. (Paras Not mentioned)
Issue of Consideration
Whether orders extending time under Section 110(2) of the Customs Act, 1962 for serving notice under Section 124(a) were illegal because not made within six months of seizure; whether such extension orders made without giving an opportunity to the affected party were violative of principles of natural justice; whether an appellant whose goods were pledged with a bank and seized from the bank's possession had locus standi to seek release of goods.
Final Decision
Supreme Court dismissed all three appeals, upholding the Bombay High Court judgments. It held that the special agreements embodied in consent orders between the parties precluded the appellants from challenging the extension of time under Section 110(2) of the Customs Act, 1962 on grounds of limitation or natural justice. The court also held that once goods were released under the consent orders, they ceased to be governed by Section 110, and the appellants could not claim return of deposited securities. In one appeal, the appellant lacked locus standi because the goods were seized from the possession of the pledgee bank. The extension orders were not declared invalid, and the appellants were not entitled to release of goods or return of amounts.
Law Points
- Consent orders and agreements between parties during pendency of writ petitions
- under which seized goods were released against deposit of securities treated as sale proceeds and goods seized
- constitute a special agreement waiving the right to challenge extension of time under Section 110(2) of the Customs Act
- 1962 and any requirement of notice or hearing
- once goods are released under such consent orders
- they cease to be in custody of authorities for purposes of Section 110
- and party cannot claim return of deposited amounts
- a party whose goods were pledged to a bank and seized from bank's possession lacks locus standi to seek release.
