Whether the Authority under COFEPOSA can Rely on Section 123 of Customs Act, 1962?

Prelude

Preventing and curbing smuggling activities is one of such objectives which is shared by both Customs Act, 19621 and Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA Act)2. So much so that COFEPOSA Act, 1974 defines the “smuggling” under Section 2(e)3 as “‘smuggling’ has the same meaning as in clause (39) of Section 2 of the Customs Act, 1962, and all its grammatical variations and cognate expressions shall be construed accordingly”. Thus, from this it is evident that insomuch as understanding of smuggling activities is concerned, the meaning of this term under both these Acts are identical. Keeping this background in mind, it is nothing but natural to wonder whether the provisions of the Customs Act, 1962 can be relied on by the Authority under the COFEPOSA Act, 1974. It is in this backdrop that this article will attempt to explore and expound on one of the most mooted questions on the applicability of provisions of Customs Act on proceedings under COFEPOSA i.e., whether or not authority under Section 34 of the COFEPOSA Act, 1974 can rely on Section 1235 of the Customs Act, 1962 to cast the burden of proof on the detenu while passing detention order under Section 3 of the Act.

Understanding the term “smuggling” under Customs Act, 1962

As discussed above, COFEPOSA defines the term “smuggling” in terms of Customs Act. Therefore, it becomes paramount to first understand as to what this term means under Customs Act. As per Section 2(39) of the Customs Act, 1962 — “Smuggling” in relation to any goods means “any act or omission which will render such goods liable to confiscation under Section 1116 or Section 1137”. Section 111 of the Act elucidates about “confiscation of improperly imported goods, etc.” This provision delineates sixteen situations (in the form of sixteen sub-clauses) wherein the goods brought from a place outside India shall become liable for confiscation. Whereas Section 113 of the Act elucidates about “confiscation of goods attempted to be improperly exported, etc.” This provision delineates thirteen situations (in the form of thirteen sub-clauses) wherein goods attempted to be exported become liable for confiscation.

Out of these sixteen sub-clauses stipulated in Section 111, clause (d) is of particular importance. As per this clause “any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force” shall be liable for confiscation. As can be seen from the words used in this clause, this clause makes the term “smuggling” of widest amplitude. And, in case any good is either imported or even attempted to be imported contrary to any law in force, like Foreign Exchange Management Act, 1999 (FEMA)8, Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS)9, Food Safety and Standards Act, 2006 (FSS)10, Environment (Protection) Act, 198611, Bureau of Indian Standards Act, (BIS Act)12, Foreign Trade (Development and Regulation) Act, 199213, etc., such a good will be considered as a smuggled item and will become liable for confiscation. Similarly, as per clause (d) of Section 113 of the Act “any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force” shall be liable for confiscation. Thus, in case any goods which are imported/attempted to be imported or attempted to be exported contrary to any law in force, such a good will be considered as a smuggled item and will become liable for confiscation.

In view of the above, it will not be wrong to infer that where any person is either indulging or attempting to indulge in import-export of a good contrary to prohibition under Customs Act or any other law in effect and which has an increasingly deleterious effect on the national economy and thereby a serious adverse effect on the security of the State (refer to the Preamble of the COFEPOSA Act, 1974), the provisions of the COFEPOSA Act can be invoked to prevent such person from undertaking said activity and such person(s) can be detained under Section 3 of the Act.

Understanding Section 123 of the Customs Act

Section 123 of the Customs Act carves out an exception to the normal rule of evidence whereby in case where goods, to which this provision applies, are seized by the proper officer in the reasonable belief that they are smuggled goods, the burden of proving (for brevity “BOP”) that they are not smuggled goods shall be on the person from whose possession such goods were seized and in any other case BOP shall be on the person who claims to be the owner thereof. It is for this reason that this provision is said to encompass the legal principle which is generally referred to as “reverse burden of proof”. Here, the point that needs an emphasis is that this provision will only apply to gold and manufactures thereof, watches and any other class of goods notified by the Central Government in the Official Gazette.14 Recently, in exercise of power under Section 123(2) of the Act, Central Government vide Notification No.103/2016-Customs (NT) dated 25-7-201615 specified the following classes of goods, for the purposes of the said section, namely:

Silver bullion.
Cigarettes.

Thus, it is patently clear that barring gold and manufactures thereof, watches, silver bullion and cigarettes, this provision cannot be invoked so as to cast reverse burden of proof so as to prove non-smuggled nature of the goods.

Situations wherein detention order under Section 3 of COFEPOSA Act can be passed

Under COFEPOSA Act, an authority as stipulated under Section 3 of the Act can pass detention order [under the sub-section (1) of the said provision] with a view to preventing any person (including a foreign person) from:

(i) smuggling goods, or

(ii) abetting the smuggling of goods, or

(iii) engaging in transporting or concealing or keeping smuggled goods, or

(iv) dealing in smuggled goods otherwise than by engaging in transporting or concealing or keeping smuggled goods, or

(v) harbouring persons engaged in smuggling goods or in abetting the smuggling of goods.

Further, as per sub-section (3) of the Act the grounds on which such detention order has been made shall be made “as soon as may be” after the detention, but ordinarily not later than 5 days, and in exceptional circumstances and for reasons to be recorded in writing, not later than 15 days, from the date of detention.

Here, it may also be worthwhile to note that as per Section 5-A16 of the Act, detention order may be passed on any one of the grounds mentioned under Section 3(1) singly or in conjunction with one or more grounds.

Whether authority under Section 3 of the COFEPOSA Act can rely on Section 123 of the Customs Act to cast the burden of proof on the detenu?

Before we deal with this issue, the decision of the Supreme Court in Shalini Soni v. Union of India17, merits attention. In this case it was held by the Supreme Court that the Constitution and the statute (COFEPOSA) cast a duty on the detaining authority to communicate the grounds of detention to the detenu. The grounds communicated to the detenu must reveal the whole of the factual material considered by the detaining authority and not merely the inferences of fact arrived at by the detaining authority. It also means that the detenu is to be informed not merely of the inferences of fact but all the factual materials which have led to the inferences of fact. If the detenu is not to be so informed, the opportunity so solemnly guaranteed by the Constitution gets reduced to an exercise in futility. The inference drawn by the seizing officer cannot be imported to that of the detaining authority and the burden of proof will not be available and cannot be invoked while passing the order of detention without any materials whatsoever.

From the above decision of the Supreme Court, it is clear that the detaining authority must form its own mind (i.e. reasonable belief) vis-à-vis Sections 3(1)(i) to (v) of the Act based on concrete information and positive evidence. Otherwise, the detention order will suffer from the “vice of non-application independent mind” and thus, will be liable to be set aside. Further, no inference can be drawn by such authority by resorting to the reverse burden of proof.

Relying upon the above decision of the Supreme Court, Madras High Court in Gunasundari v. State of T.N.18, held that:

“It might be that the entirety of the evidence which conceivably, in several cases, consists of information communicated by informers, might not be made available to the person affected, but still the adjudicating officer would have to satisfy himself that the requirement of Section 178-A had been complied with before invoking the presumption laid down by that section. Therefore, the seizing officer’s reasonable belief has to be tested before the adjudicating officer or even at the stage of appeal or revision. The detaining authority, while subjectively satisfying himself on invoking the power of COFEPOSA, cannot be permitted to say that the detenu failed to discharge the burden and that he cannot avail of the presumption drawn by the customs officer in his favour.

The said provision has not been incorporated in the COFEPOSA so as to invoke the jurisdiction for detention by applying the provisions of Section 123 of the Customs Act, 1962. Therefore, on the failure of the detenu to discharge his burden that the goods seized are not smuggled goods or that the seizing officer had a reasonable belief that they were smuggled goods are matters that cannot be applied in the case of preventive detention. The detaining authority cannot import the reasonable belief of the seizing officer for the purpose of holding the detenu liable. The finding of the detaining authority by invoking Section 123 of the Customs Act, 1962 and proceeding on that basis for passing the detention order without even giving an opportunity to the detenu is in violation of Articles 2120 and 22(5)21 of the Constitution of India.”

Again, in Mohd. Haneefa v. State of T.N.22, and Rabiyathul Basharia v. Govt. of T.N.23, Madras High Court relying upon the above decision of the Supreme Court in Shalini Soni case24 and Gunasundari case25 concluded and held:

(i) That the presumption under Section 123 of the Customs Act cannot be applied to preventive detention under COFEPOSA.

(ii) That the detaining authority while subjectively satisfying himself on invoking the power of COFEPOSA cannot be permitted to do so when the detenu failed to discharge the burden and that he cannot avail of the presumption drawn by the customs officer in his favour.

(iii) That the inference drawn by the seizing officer cannot be imported to that of the detaining authority, and the burden of proof will not be available and cannot be invoked while passing the order of detention without any materials whatsoever.

(VI) Parting remark

From the discussion as transpired above, it is clear that for passing an order of detention under COFEPOSA Act, the detaining authority must form reasonable belief based on concrete and positive evidence. In this regard, said authority cannot rely on Section 123 of the Customs Act, 1962 and cannot avail of the presumption as drawn by the Customs Officer under the said provision while passing the order of detention.

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† Advocate, e-mail: vsj180594@gmail.com.

1 <http://www.scconline.com/DocumentLink/Mmgu10uo>.

2 <http://www.scconline.com/DocumentLink/0QmPsjuw>.

3 <http://www.scconline.com/DocumentLink/Ut672J4q>.

4 <http://www.scconline.com/DocumentLink/s6Fsk3TJ>.

5 <http://www.scconline.com/DocumentLink/opbd2M25>.

6 <http://www.scconline.com/DocumentLink/dLpIK97g>.

7 <http://www.scconline.com/DocumentLink/G3fjrw0j>.

8 <http://www.scconline.com/DocumentLink/pIrl0KB8>.

9 <http://www.scconline.com/DocumentLink/206RMMRJ>.

10 <http://www.scconline.com/DocumentLink/G1k49V8b>.