# MOTIBHAI FULABHAI PATEL & CO v. MIS. R. PRASAD AND ORS

- **Citation:** [1969] 2 S.C.R. 580
- **Court:** Supreme Court of India
- **Decided:** 1968-10-30
- **Case number:** Civil Appeal No. 13 of 1966
- **Bench:** S. M. Sikri, R. S. 'Bachawat, K. S. Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/motibhai-fulabhai-patel-co-v-mis-r-prasad-and-ors-4569
- **Pages:** 8

## Headnote

B
Central Excise Rules, 1944, r. 40-Appe/lants guilty of violating '" 40
for mixing duty .. paid tobacco with quantity of tobacco on which no duty
had been paid-Collector confiscating entire mixture and levying fine on
.,._
its value-Whether collector could confiscate only so 111uch of the 1nixture
on which no duty paid,
The appellants were tobacco merchants in Baroda in Gujarat State 'and
were holding Central Excise licence in Forms L-2 and L-5 for the purpose
of storing, selling ancl processing duty paid and non-duty paid tobacco.
On December 23, 1958 while the process of mixing some tobacco was
going on in a godown where duty-paid tobacco was kept, the Superintendent of Central Excise, Preventive Headquarters, Baroda and his party raided the premises of the appellants and seized a mixture of tobacco weighing
1,64,834.50 lbs. tobacco
This mixture included 60,770 lbs. of tobacco
on wnich duty had not been paid. After the ·appellants were issued a
show-rause notice why action should not be taken against them under rule
40 of the Central Excise Rules, 1944, and after they had filed their reply,
the Collector, Central Excise, by his order dated April 13, 1959 held the
appellants guiitv of contravening rule 40 levied on them a penalty
of
Rs. 2,000 a< well as the duty payable under the law, and also ordered
the confiscation df the entire quantity of the tobacco seized. As he gave
the appellants the option of redeeming the same on payment of a fine of
Rs. I lakh, they paid the fine under protest and secured release of the
tobacco. The appellants' appeal as well as revision against the Co]]ector's
order under the provisions of the Central Excise and Salt Act, 1944, were
both dismissed. The appellants then filed a writ petition under Art. 226
of the Constitution challenging the legality of the Collector's order but
this was dismissed by the High Court.
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In appeal to this Court the only challenge was to the Collector's
order of confiscation. It was contended, relying on the decision in Messrs,
Valimahomed Gulamhusain Sonavala & Co. v. C.T.A. Pillai, (1960) 42,
B.L.R., p. 634, that the Collector could not have confiscated the tobacco
mixture as it consisted of both duty-paid tobacco as well as tobacco on
which duty had not been paid, the altornative contention was that the Collector could not in any event have confiscated more than 60,770 lbs. of
mtxture which could be' said to represent tobacco on which duty had not
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been pa.id.
HELD : Rule 40 permits the Central Excise authorities to confiscate
only those goods on which duty had not been paid. It does not permit
them either specifically or by necessary implication to confiscate
other
goods.
Therefore it was not permissible for the Collector to confiscate
the entire· tobacco mixture. At the same time no person can be permitted
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to benefit by his wrongful act. No rule of law should be so interpreted
as to pem1it or encourage its circumvention.
If by the wrongful act of
a party he renders it impossible for the authorities to confiscate under
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MOTIBHAI v. R. PRASAD (Hegde, J.)
581
rule 40 the non-duty paid goods, it is open to those authorities to confiscate from out of the goods seized, goods of the value reasonably
representing th~ value of the non-duty paid goods mixed in the goods seized.
Applying that rule to the facts of the present case it follows that althuough
the appellants were guilty under Rule 40 of an unlawful act in mixing
duty-paid tobacco with non-duty paid tobacco, the Collector could have
confiscated out of the tobacco seized so much of it as can be held to
reasonably reoresent the value of the tobacco on which the dutv had not
been paid. [586 G-581 Bl
As the parties were agreed that the value of the tobacCI'.> used in the
mixture for which no duty had been paid could be fixed at Rs. 35,000,
the fine to be levied on the appellant in lieu of the confiscation that could
have been ordered had to be fixed at Rs. 35,000.
The Collector t

## Text

580
MOTIBHAI FULABHAI PATEL & CO.
A
v.
MIS. R. PRASAD AND ORS.
October 30, 1968
[S. M. SIKRI, R. S. 'BACHAWAT AND K. S. HEGDE, JJ.]
B
Central Excise Rules, 1944, r. 40-Appe/lants guilty of violating '" 40
for mixing duty .. paid tobacco with quantity of tobacco on which no duty
had been paid-Collector confiscating entire mixture and levying fine on
.,._
its value-Whether collector could confiscate only so 111uch of the 1nixture
on which no duty paid,
The appellants were tobacco merchants in Baroda in Gujarat State 'and
were holding Central Excise licence in Forms L-2 and L-5 for the purpose
of storing, selling ancl processing duty paid and non-duty paid tobacco.
On December 23, 1958 while the process of mixing some tobacco was
going on in a godown where duty-paid tobacco was kept, the Superintendent of Central Excise, Preventive Headquarters, Baroda and his party raided the premises of the appellants and seized a mixture of tobacco weighing
1,64,834.50 lbs. tobacco
This mixture included 60,770 lbs. of tobacco
on wnich duty had not been paid. After the ·appellants were issued a
show-rause notice why action should not be taken against them under rule
40 of the Central Excise Rules, 1944, and after they had filed their reply,
the Collector, Central Excise, by his order dated April 13, 1959 held the
appellants guiitv of contravening rule 40 levied on them a penalty
of
Rs. 2,000 a< well as the duty payable under the law, and also ordered
the confiscation df the entire quantity of the tobacco seized. As he gave
the appellants the option of redeeming the same on payment of a fine of
Rs. I lakh, they paid the fine under protest and secured release of the
tobacco. The appellants' appeal as well as revision against the Co]]ector's
order under the provisions of the Central Excise and Salt Act, 1944, were
both dismissed. The appellants then filed a writ petition under Art. 226
of the Constitution challenging the legality of the Collector's order but
this was dismissed by the High Court.
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F
In appeal to this Court the only challenge was to the Collector's
order of confiscation. It was contended, relying on the decision in Messrs,
Valimahomed Gulamhusain Sonavala & Co. v. C.T.A. Pillai, (1960) 42,
B.L.R., p. 634, that the Collector could not have confiscated the tobacco
mixture as it consisted of both duty-paid tobacco as well as tobacco on
which duty had not been paid, the altornative contention was that the Collector could not in any event have confiscated more than 60,770 lbs. of
mtxture which could be' said to represent tobacco on which duty had not
G
been pa.id.
HELD : Rule 40 permits the Central Excise authorities to confiscate
only those goods on which duty had not been paid. It does not permit
them either specifically or by necessary implication to confiscate
other
goods.
Therefore it was not permissible for the Collector to confiscate
the entire· tobacco mixture. At the same time no person can be permitted
H
to benefit by his wrongful act. No rule of law should be so interpreted
as to pem1it or encourage its circumvention.
If by the wrongful act of
a party he renders it impossible for the authorities to confiscate under
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MOTIBHAI v. R. PRASAD (Hegde, J.)
581
rule 40 the non-duty paid goods, it is open to those authorities to confiscate from out of the goods seized, goods of the value reasonably
representing th~ value of the non-duty paid goods mixed in the goods seized.
Applying that rule to the facts of the present case it follows that althuough
the appellants were guilty under Rule 40 of an unlawful act in mixing
duty-paid tobacco with non-duty paid tobacco, the Collector could have
confiscated out of the tobacco seized so much of it as can be held to
reasonably reoresent the value of the tobacco on which the dutv had not
been paid. [586 G-581 Bl
As the parties were agreed that the value of the tobacCI'.> used in the
mixture for which no duty had been paid could be fixed at Rs. 35,000,
the fine to be levied on the appellant in lieu of the confiscation that could
have been ordered had to be fixed at Rs. 35,000.
The Collector therefore had to refund to the appellant a sum of Rs. 65,000.
Institutes of Justinian, p. 104; Williams on Personal Property ( 18tlz
edition) p. 50; Spence and Anr. v. The Union Ma1ine Insurance Co. Ltd.,
Law Reports (Common Pleas) 3, 1867-68 and Smurthwaite and Ors. v.
Hannay and Ors., [18941 A.C. p. 494; referred to.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No. 13 of
1966.
Appeal from the judgment and order dated January 13, 1964
of the Punjab High Court, Circuit Bench at Delhi 4n Civil Writ No.
557-D of 1961.
M. P. Vashi, Dalip K. Kapur, S. V. Tambwekar and A. G.
Ratnaparkhi, for the appellant.
D. Narsaraju, R. M. Mehta and S. P. Nayar, for the respondents.
The Judgment of the Court was delivered by
Hegde, J. In this appeal by certificate though several contentions were raised in the memo of appeal only two of them were
pressed at the time of hearing.
They are : ( 1) under the circumstances of the case the confiscation ordered by the Collector,
Central Excise is illegal and ( 2) under any
circumstance he
could not have confiscated the entire quantity of tobacco used in
the mixture.
The appellants are tobacco merchants in Dashrath
village
near Baroda in Gujarat State.
At the relevant time they were
holding Central Excise licence in form L-2 and L-5 for the purpose of storing, selling and processing duty paid and non-duty
paid tobacco.
They had their own duty paid and non-duty paid
godowns. In about December 1958 according to their books
they possessed the following lots of different varieties of tobacco.
-Vaiiety ·or tobacco
---·----~-
Quantity
Rate of duty
--·--·
Bmds.
Rs.
Blri Patti
"
251 ·8
l ·20 nP
per lb.
Stems Kandi
"
287·20
0·50
Do .
Rava
,,
1326 ·14
0·50
Do.
Stalk Kandi
"
57·20
0·06
Do.
582
SUPREME COURT REPORTS
[1969] 2 S.C.R.
On December 13, 1958 the appellants· obtained permission
A
from the Local Central Excise authorities to mix the above lots
of tobacco.
The percentage of different varieties of tobacco when
mixed would have been as under :
Rava
.
Stems Kandi
Biri Patti
Stalk Kandi
68·97%
14·86%
13 ·07%
3·00%
On December 23, 1958 when the process of mixing was still
going on the Superintendent of Central Excise, Preventive Headquarters, Baroda and his party raided the duty paid premitP.s of
the appellants.
There he seized the entire mixture
tobacco
weighing Mds. 2004.3 srs. i.e. 1,64,834.50 lbs. of tobacco. According to that Superintendent when experiments were conducted
he found in the above mixture percentage of different varieties
as under :
Rava
Biri Patti
Stems Kandi
44%
51 ·50%
3·74%
From this he concluded that considerable quantity of non-duty
paid Biri Patti tobacco had been utilised in the manufacture of
the mixture. Hence notice was issued to the appellants on J anuary 6, 1959 to show cause why action should not be taken against ·
them under rule 40 of the Central Excise Rules 1944 inasmuch
as they brought into duty paid premises 60, 770 lbs. of Biri Patti
tobacco without payment of duty. It was also alleged in that
notice that the appellants had removed certain quantity of Rava
tobacco from L-2 premises.
The appellants submitted their
reply on March 13, 1959. At the hearing before the Collector
as the appellants challenged the correctness of the experiments
conducted by the Superintendent, Central Excise, the Collector
himself in the presence of the appellants conducted a fresh experiment.
On the basis of that experiment he came to the conclusion that the results obtained by the experiment conducted
by the Superintendent, Central Excise are by and large correct.
By his order dated April 13, 1959, the Collector, Central
Excise held the appellants guilty of contravening rule 40 and
conseqHently levied on them a penalty of Rs. 2,000 as well as
the duty payable uuder law.
He also ordered the confiscation
of the seized tobacco weighing 1,64,834.50 lbs.
But he gave
an option to the appellants of redeeming the same on payment
of a fine of Rs. 1 lac. The appellants paid the amount of fine
under protest and got the goods released.
Thereafter they moved the High Court of Bombay under
Art. 226 of the Constitution for quashing the order of the Collector but that applicatfon was withdrawn as the appellants first
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MOTIBHAI v. R. PRASAD (Hegde, J.)
583'
wanted to exhaust their remedy under the Central Excise Act.
The appellants unsuccessfully went up in appeal and thereafter
in revision under the Central Excise and Salt Act, 1944 against
the order of the Collector.
After the 3rd respondent dismissed
their revision petition they filed in the High Court of Punjab at
Delhi Civil Writ No. 557-D of 1961 challenging the legality of
the order made by the Collector of Central Excise on April 13,
1959. That petition was dismissed by a Division Bench of that
Court on January 13, 1964. This appeal is brought against that
decision.
In this Court the finding of the Collector of Central Excise
that the appellants were guilty of mixing the duty paid tobacco
with non-duty paid tobacco and thereby they contravened rule
40 was not challenged.
Nor was ther.e any dispute about the·
quantity of non-duty paid tobacco used in the mixture. The main
contention of Mr. M. P. Yaish, learned Counsel for the appellants was that under rule 40, the Collector could not have confiscated the tobacco mixture as it consisted of both duty paid
tobacco as well as tobacco on which duty had not been paid.
His alternative contention was that under any circumstance the
Collector could not have confiscated anything more than 60,770·
lbs. of the mixture which can be said to represent Biri Patti
tobacco on which duty had not been paid. In support of his
first contention he heavily relied on the decision of K. T. Desai,
J. in Messrs. Va/imahomed Gulamhusain Sonavala & Co.
v.
C. T. A. Pillai(').
The seized tobacco mixture weighed 1,64,834.50 lbs.
That
included 60, 770 lbs. of Biri Patti tobacco on which duty had not
Qeen paid. But on the remaining quantity duty had been paid.
The tobacco seized was found in the godown licenced to store
duty paid tobacco. Hence the appellants were clearly guilty of
contravening rule 40 of the Central Excise Rules which reads :
"Except as provided in the proviso to sub-rule (1)
of rule 32 and in rule 171 no wholesale purchaser
of unmanufactured tobacco for the purpose of trade or
manufacture and no wholesale purchaser of other unmanufactured products from a curer shall receive into
any part of his premises or into his custody or possession, any unmanufactured tobacco or other unmanufactured products, other than tobacco or other unmanufactured products imported from a foreign country
otherwise than under a valid permit
granted by an
officer showing that the proper duty has been paid;
and every such wholesale purchaser who
receives or
has in his custody or possession any such
goods, in
contravention of this rule shall, in
respect of every
such offence, be liable to pay the duty leviable on such
ll) (1960) 42 B.LR., p. 634.
584
SUPREME COURT REPORTS
[1969] 2 S.C.R.
goods, and to a penalty which may extend to two thousand rupees, and the goods shall also be liable to confiscation."
In view of this rule the legality of the order made by the Collector in so far as he levied duty as well as penalty cannot be
challenged and was not c)!allenged before us.
But so far as the
confiscation is concerned it was urged that under the rule in
question only tobacco on which duty had not been paid could
alone have been confiscated. In the instant case even according
to the finding of the Collector only on 66, 770 lbs. of Biri Patti
tobacco the duty had not been paid; but on the remaining tobacco
seized duty had been paid,. it was not possible to separate the
duty paid tobacco from the non duty-paid tobacco; hence it was
impermissible for the Collector to confiscate the said tobacco
under Rule 40 as that rule permitted the confiscation of only
non-duty paid tobacco. In Sonavala's case(') referred to earlier
Desai, J. had held that the right to confiscate smuggled goods
under s. 167 (8) of the Sea Customs Act, 1878 does not carry
with it the right to confiscate unsmuggled goods.
The words
·'such goods' appearing ins. 167(8) of the Act cannot be interpretted to mean similar goods. It is not open to the Customs
authorities to confiscate similar goods eveμ though they may be
of the same quality, bulk and value. The words 'such goods'
mean the very goods which have been smuggled. If the smuggled
goods lose their identity, it would not be open to the Customs
officers to confiscate any part of those goods. Where, therefore,
gold that has been smuggled has in the melting process got so
mixed up with gold that is unsmuggled that it is impossible to
separate the smuggled gold from the unsmuggled one, the right
to confiscate smuggled gold ceases when the two get inextricably
mixed up.
The broad proposition laid down by Desai, J. undoubtedly supports the contention advanced on behalf of the
appellants. We shall presently show that this statement of the
law is not correct but it is necessary to mention at this juncture
that in the Sonavala's case(') an innocent third party had purchased the smuggled gold for proper value and mixed the same
with unsmuggled gold, which circumstance had an important
bearing on the decision of the case.
Jn Institutes of Justinian at page 104 dealing with the topic
commixtio it is observed :
"If the things mixed, still remaining the property of
their former ownqs, were easy to separate again, as
for instance, cattle united in one herd, when one owner
brought his claim by vindicatio his property was restored to him without difficulty but if there was difficulty in separating the materials from each other, as
in dividing the grains of wheat in a heap, the obvious
(I) (1960) 42 B.L.R. p. 634.
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MOTIBHAI v. R. PRASAD (Hegde, J.)
mode would be to distribute the whole heap in shares
proportionate to the quantity of wheat belonging to the
respective owners. But it might happen that the wheat
mixed together was not all of the same quality, and
therefore the owner of the better kind of wheat would
lose by having a share determined in amount only by
the quantity of his wheat; and the judge therefore was
permitted to exercise his judgment how great an addition ought to be made to his share to compensate for
the superior quality of the wheat originally belonging
to him."
585
In Williams on Personal Property
(18th Edn.) at p. 50, it is
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observed :
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"The acquisition of ownership by accession or confusion of substances also presupposes a previous title.
Thus the young of a domestic animal belong to the
owner of the mother. If any substances, for instance
tallow, belonging to various owners be mixed by consent or accidentally, the mass appears to belong to the
owners of its parts in common. And if the confusion
be made wilfully by one without the other's leave, the
mass belongs to the latter, whose ownership is thus unlawfully invaded."
Dealing with the same topic it is observed in Halsbury's Laws of
England 3rd Edn. (Vol. 29) at p. 378.
"Ownership of goods may be acquired by confusion
or intermixture, if the goods, when mixed, are indistinguishable. If the goods are mixed
by
agreement
or consent the proprietors have an interest in common
in proportion to their respective shares; if mixed
by
accident or the act of a third party, or which neither
owner is responsible, the proprietors become
owners
in common of the mixed property in proportion to the
amounts contributed.
Where, however, one man wilfully mixes his goods with those of another without the
approbation or knowledge of the other, the whole belongs to the latter."
The law on this topic was stated by Bovill, C.J. as early as 1868
in Spence and Anr. v. The Union Marine Insurance Co. Ltd. (1)
thus : ·
"In our own law there are not many authorities to .
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be found upon this subject but, as far as they go, they
are in favour of the view, that, when goods of diffe-
(1) Law Reports (Common Pleas) 3, 1867-68.
.586
SUPREME COURT REPORTS
[1969] 2 S.C.R.
rent owners become by accident so mixed together as
to be undistinguishable, the owners of the goods so
mixed become tenants in common of the whole, in the
proportions which they have severally contributed to
it.
The passage cited from the judgment of Blackburn. J ., in the case of the tallow which was melted
and flowed into the sewers, is to that effect : Buckley
v. Gross.
And a similar view was adopted by Lord
Abinger in the case of the mixture of oil by leakage on
.board ship in Jones v. Moore.
"lt has been long settled in our law, that where
goods are mixed so as to become undistinguishable, by
the wrongful act or default of one owner, he cannot re-
.cover, and will not be entitled to his proportion, or any
part of the property, from the other owner, but no
.authority has been cited to shew that any such principle
has ever b.~en applied, nor indeed could it be applied,
to the case of <)n accidental mixing of the goods of the
two owners; and thete is no authority nor sound reason for saying that the goods of several persons be
.th~ property of their several owners,
and become
bona-vacantia."
The same principle was again reiterated by the House of
Lords in Smurthwaite and Ors. v. Hannay and Ors. (1)
The rules enunciated above are of assistance in finding out
a solution to the problem before us though they do not govern
the same.
In the instant case there is no doubt that the appellants were guilty of an unlawful act in mixing duty p_aid tobacco
with the non-duty paid tobacco but the fact remains that they
were the owners of both those lots at the time they mixed them
. and hence the legal principles set out earlier do not cover such
. a case. It must also be remembered that in dealing with a provision relating to forfeiture we are dealing with a penal provi-
. sion.
It would not be proper for us to extent the scope of that
provision by reading into it words which are not there and thereby widen the scope of the provision relating to confiscation. Rule
40 permits the Central Excise authorities to confiscate only those
·goods on which duty has not been paid. It does not permit them
. either specifically or by necessary implication to confiscate other
goods. Therefore it was not permissible for the Collector to confiscate the entire tobacco mixture. At ·the same time no person
can be permitted to benefit by his wrongful act. No rule of
law should be so interpreted as to permit or encourage its circumvention. If by the wrongful act of a party he renders it im-
. possible for the authorities to confiscate u,uder rule 40 the non·
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(I) [1894] A.C. p. 494.
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MOTIBHAI v. R. PRASAD (Hegde, J.)
587
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duty paid goods it is in our opinion open to those authorities to
confiscate from out of the goods seized, goods of the value reasonably representing the value of the non-duty paid goods mixed
in the goods seized. Applying that rule to the
facts
of this
it follows that the Collector, Central Excise could have confiscated out of the tobacco seized,. so much of it as can be held to
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reasonably represent the value of the tobacco on which the duty
had not been paid.
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As noticed earlier the tobacco confiscated had been returned
to the appellants after realising from them a sum of Rs, l lac as
fine. The Counsel for the parties agreed at the hearing that the
value of the Biri Patti tobacco used in the mixture for which no
duty had been paid could be fixed at Rs. 35,000.
In view of
this agreement it is not necessary for us to remit the case back
to the Collector of Central Excise for assessing the value of the
tobacco on which duty had not been paid.
In view of our earlier
findings the fine to be levied on the appellants in lieu of
the
confiscation that could have been ordered has to be fixed
at
Rs. 35,000.
From this it follows that the Collector has to refund
to the appellants a sum of Rs. 65,000 which he has collected
from them in excess of the aforementioned Rs.
35.000.
The
appeal is allowed to that extent.
In the circumstanees of the
case we direct the parties to bear their own costs both in this
Court as well as before the High Court.
R.K.P.S.
_Appeal allowed in part.