CUSTOMS AUTHORITIES CANNOT SEAL THE PREMISES IN WHICH SEARCH IS MADE

[Mr. M. GOVINDARAJAN]

Section 105 of the Customs Act, 1962 has given the powers to the Customs Authorities to search premises.  Section 105(1) of the Customs Act provides that if the Assistant Commissioner of Customs or Deputy Commissioner of Customs, or in any area adjoining the land frontier or the coast of India an officer of customs specially empowered by name in this behalf by the Board, has reason to believe that any goods liable to confiscation, or any documents or things which in his opinion will be useful for or relevant to any proceeding under this Act, are secreted in any place, he may authorize any officer of customs to search or may himself search for such goods, documents or things.

The issue to be discussed in this article is as to whether Section 105 gives power to the Customs authorities to seal the premises of the assessee while undergoing the search operations in the premises of the assessee with reference to the following case laws:

In RS. SETH GOPIKISAN AGARWAL VERSUS RN. SEN, ASSTT. COLLECTOR OF CUSTOMS AND CENTRAL EXCISE, RAIPUR AND OTHERS - 1967 (1) TMI 39 - SUPREME COURT, the Supreme Court interpreted Section 105 of the Customs Act.  The Supreme Court observed that the object of Section 105 is to make search for the goods liable to be confiscated or the documents secreted in any place which are relevant to any proceeding under the Act.  The legislative policy reflected in this section is that the search must be in regard to the two categories mentioned - goods liable to be confiscated and documents relevant to the proceedings under the Act.

If any Customs Officer requires any person to be searched for goods liable to confiscation or any document relating thereto, without having reason to believe the he has such goods or documents secreted about their person or arrests any person without having reason to believe that he has been guilty of an offence punishable under section 135 of the Act or searches or authorizes any other officer of customs to search any place without having reason to believe that any goods, documents or things of the nature referred to in Section 105 of the Act are secreted in that place, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to Rs.1000/- or with both.

He can be prosecuted only with the previous sanction of the Central Government but his liability to original prosecution for dereliction of duty under section 105 of the Act is an effective control on his arbitrary acts.  It is, therefore clear, that not only a policy is laid down in Section 105 but also that the acts of the Assistant Collector are effectively controlled in the manner stated above.

In KALPESH GHEVARCHAND JAIN VERSUS UNION OF INDIA SENIOR INTELLIGENCE OFFICER DIRECTORATE OF REVENUE INTELLIGENCE, MUMBAI, STATE OF MAHARASHTRA - 2023 (3) TMI 1292 - BOMBAY HIGH COURT, the writ petitioner sought for the relief of de-sealing of his premises in which search was conducted by the Customs Authorities.  The High Court was of the view that there is no power available with the Customs authorities to seal premises of any person, which is an immovable property.  According to section 110 of section 121 of the Customs Act what can be seized and confiscated is the ‘goods’ or ‘movable property’.  These sections empower customs authorities to seize the goods liable to confiscation and confiscate the sale proceeds of the smuggled goods, sold by the person having the knowledge or reasons to believe that the goods are smuggled goods.  The High Court analyzed the provisions of section 2(22) of the Customs Act.  The said section defines the term ‘goods’ as including vessels, aircraft and vessels, stores, baggage, currency and negotiable instruments and any other kind of moveable property.  Therefore it is clear that only the movable goods can be seized.  The immovable property cannot be seized instead it can be attached and sold for making recovery of loss to or dues of the Government.  But in this case the said stage is yet to reach and therefore the writ petition is allowed to this extent.

In M/S. NARAYAN POWER SOLUTIONS VERSUS UNION OF INDIA & ANR. - 2023 (7) TMI 1134 - BOMBAY HIGH COURT the Customs Authorities in the course of search of the premises of the writ petitioner sealed the premises.  The petitioner approached the High Court for unsealing the petitioner’s office premises.

The petitioner submitted that-

• The Department intended to undertake investigation on the goods sold by S.T. Electricals who is the importer.
• The S.T. Electricals filed a writ petition against the said investigation before the High Court which was pending and to be heard on the next day.
• The petitioner is willing to cooperate in any investigation to any transactions concerning S.T. Electricals.
• The petitioner has not directly purchased goods from S.T. Electricals. 
• The petitioner will fully cooperate with the Department if the search of their office premises and confine their search to the documents in regard to the trail of transactions of the goods which ST Electricals has sold.
• The search cannot be a fishing search and it has to be a specific search.

The Revenue was not in a position to justify that the powers under section 105 of the Customs Act can be utilized to seal the office premises.  The Revenue contended that the Customs Authority would have powers to search the premises and as the petitioner did not co-operate the department in the search the premises came to be sealed.

The High Court considered the submissions made by the petitioner and the Department and also perused the records.  The High Court was of the opinion that the power to search cannot mean a power to seal.   A power to seal the premises is a drastic power.  Such power cannot be exercised unless the same is expressly conferred by law.  The Department has not supported their contention of such power being vested with the Customs Officers citing any authority on such proposition.

The High Court was of the opinion that the customs authorities are not having an explicit power to seal the premises under Section 105 of the Act.  Sealing of premises is a drastic action.  It results in tinkering with substantive rights of a person to hold, use and occupy and immovable property, which may be used for the business purposes.  Therefore the action to seal the premises would have a direct bearing and effect on legal rights of the person to use and occupy the premises as guaranteed by Article 300A of the Constitution.  Once the sealing of the premises is of business premises, it would adversely affect the right to carry on business which is a fundamental right as guaranteed under Article 19(1)(g) of the Constitution.  The High Court was of the opinion that it is for such reasons in providing for powers under Section 105 of the Customs Act of search, the legislature has kept out and or has not included within its power to seal and has confined the power only to search the premises.

The High Court observed that in the present the premises of the petitioner were available for the purpose of search.  It appears that the Authorities had drastically resorted to take a drastic action against the petitioner to seal the premises for the purpose of searching the premises.  This is certainly not permissible under Section 105 of the Act.  Further the petitioner has shown his willingness to co-operate in search action to be undertaken by the Customs Authorities.  The High Court directed that the customs authorities need to unseal the office premises of the petitioner in the presence of the petitioner, so that the customs authorities can undertake search of the office premises in regard to the relevant material only.

Conclusion

From the above it can be inferred the Customs Authorities have no power to seal the premises of the assessee while undergoing search operations in the premises of the assessee.  They can seize only movable properties not the immovable properties.  The immovable properties may be attached by selling the same for the recovery of the arrears of duty but it has to be done as a last resort after observing the due formalities prescribed under the provisions of the Act and the rules made there under.