ORDER
S. Kalyanam, Member (J)
1. Since the above four appeals arise out of the common order of the Collector of Customs, Cochin, dated 26-11-1987 under which he has confiscated absolutely Rs. 5 lakhs of Indian currency recovered from the possession of appellant Lalith Kumar (provision of the Act not mentioned), imposed a fine of Rs. 15,000 and Rs. 35,000 in lieu of confiscation of 2086.10 gms. of gold ornaments belonging to appellants Fashion Jewellery, and imposing a penalty of Rs. 2,500 on each of the appellants under Customs Act, 1962 as well as Section 74 of the Gold (Control) Act 1968.
2. The Customs authorities intercepted appellant Lalith Kumar on 29th March, 1987 at Cochin Airport and recovered from his possession Indian currency totalling Rs. 5 lakhs. Since the authorities had reason to believe that the currency represented the sale proceeds of contraband gold, the authorities effected seizure of the currency under a mahazar as per law. Appellant Lalith Kumar gave a statement before the authorities that the currency actually represented the sale proceeds of gold ornaments sold to appellants Fashion Jewellery. The authorities made verification with appellant Fashion Jewellery, who stated that though they purchased gold ornaments from appellant Lalith Kumar they had not made the cash payment but the purchase was on credit basis as reflected in their accounts. Subsequently, appellant Lalith Kumar on 1-4-1987 sent a petition to the Collector of Customs, Cochin, that the currency under seizure was brought from Nellore and belonged to his master, appellant Mohanlal B. Jain, who was a licensed Gold Dealer having business under the name and style M/s. South India Jewellers at Nellore. It is in these circumstances, after further investigations, proceedings were instituted against the appellants, which ultimately resulted in the present impugned order now appealed against
3. Shri Suganchand Jain, the learned counsel for the appellants, at the outset submitted that the cash of Rs. 5 lakhs belonged to appellant Mohanlal B. Jain, who is a licensee under the Gold (Control) Act, and appellant Lalith Kumar was his servant. It was urged that the amount was being taken to Bombay for purchase of gold as per law. The learned counsel submitted that there is absolutely no evidence at all either direct or circumstantial even remotely suggesting that the currency in question represented the sale proceeds of contraband gold. As a matter of fact even the Section under which the currency has been absolutely confiscated has not been specified in the impugned order. The learned counsel submitted that merely because there was a discrepancy or contradiction with reference to the source and origin of the money the adjudicating authority has drawn an inference that it should represent the sale proceeds of contraband gold. Regarding the imposition of fine and penalty under the provisions of the Gold (Control) Act, 1968, Shri Suganchand Jain contended that in the earlier order dated 26-11-1987 no provision of any enactment was mentioned for imposition of penalty and it is only by way of an addendum to that order it was clarified by a communication dated 3rd March, 1988 that the various penalties were at the rate of Rs. 2,500 on each of the appellants under the Customs Act, 1962 and Gold (Control) Act, 1968. Regarding the fine and penalty under the Gold (Control) Act, 1968, Shri Jain contended that appellant Mohanlal B. Jain was a writ petitioner in the High Court of Andhra Pradesh and obtained an order during the penden cy of the writ for transacting business in gold outside the licensed premises through travelling salesmen under proper voucher and this fact, it was contended, is not disputed and has also been adverted to in the impugned order of the Collector. The learned Counsel assailed the reasoning of the Collector that the order of the Andhra Pradesh High Court would prevail only over the territorial jurisdiction of the Andhra Pradesh and would not bind the adjudicating authority or extend beyond the territorial limits of Andhra Pradesh. It was, therefore, submitted by the learned counsel that when by virtue of the order of the High Court appellant Mohanlal B. Jain and his employee Lalith Kumar have sold gold ornaments to other licensed Dealers viz. Fashion Jewellery at Emakulam, the act of sale would not make for any contravention Under-Section 27(7) (b) of the Gold (Control) Act 1968 and likewise M/s. Fashion Jewellery also could not be held to be an abettor in reoard to the same. The learned counsel further submitted that the very same adjudicating authority has released under the impugned order 1394 gms. of gold ornaments seized from Mohanlal B. Jain on the ground that no sale had taken place in regard to the same and that he had proper records for carrying the ornaments from Nellore to Cochin.
4. Shri Krishnan, the learned D.R., referred to the reasoning of the adjudicating authority in the impugned order and contended that unsatisfactory explanation on the part of appellant Mohanlal B. Jain would lead one to believe that the currency represented the sale proceeds of contraband gold though there is no evidence for the same. Receding the binding nature of the order of the Andhra Pradesh High Court, the learned D.R. submitted that he has no submissions to make in regard to the same.
5. We have carefully considered the submissions made before us. The fact that a sum of Rs. 5 lakhs was seized from the possession of appellant Lalith Kumar, who is an employee under appellant Mohanlal B. Jain, a licensee under the Gold (Control) Act is not disputed. The question that arises for our consideration in this context is whether there is any acceptable legal evidence on record, direct or circumstantial, to warrant a conclusion that the currency represented the sale proceeds of contraband gold so as to render it confiscable in terms of Section 121 of the Customs Act, 1962. We have carefully gone through the impugned order and other connected records and, we should confess, we do not find a ray of evidence warranting confiscation of the Indian currency Under-Section 121 of the Customs Act, 1962. No doubt, appellant Mohanlal B. Jain at the initial statement given before the authorities on 29-3-1987 stated that the currency represented the sale proceeds of gold ornaments sold to Fashion Jewellery at Ernakulam and Fashion Jewellery, Ernakulam, immediately on being contacted by the authorities, while admitting the fact of purchase of the gold ornaments, denied the fact of having paid cash for the same. We also find that appellants Mohanlal B. Jain and Lalith Kumar addressed a communication dated 1-4-1987 stating that the currency was taken from Nellore for purchase of gold. Excepting this discrepancy in regard to the origin and source of Indian currency, there is absolutely no further evidence to warrant a conclusion that the currency was the sale proceeds of contraband gold. Even if the version in regard to the origin and source of currency given by the appellants is found to be false, that would not ipso facto lead to the inference that the currency represented the sale proceeds of contraband gold so as to come within the mischief of Section 121 of the Customs Act, 1962. We find that even the letter of 1-4-1987 by appellants Mohanlal B. Jain and Lalith Kumar has also not been adverted to in the impugned order. It is better to refer to the reasoning of the adjudicating authority for effecting confiscation of the currency in his own words. In this context the impugned order reads as under :-
“Had the seized amount been the cash representing property accounted money, I am sure, by now the concerned parties would be in a better position to account of them. In view of the fact that there has been sale of gold jewellery, it is normal to conclude that M/s. Fashion Jewellery ought to have paid the amount in cash This conclusion is also supported by the fact that immediately after the seizure both Shri Lalith Kumar and Shri MB. Jain admitted the seized amount being the sale proceeds of gold jewellery sold to M/s. Fashion Jewellery. This leads to further conclusion that the gold is not of licit origin. It is all through a clever manipulation of account and by purchase of a small quantity of standard gold bears that M/s. South India Jewellers have been functioning. This conclusion is further supported by the fact of various entries in the extracts of cash book submitted by the party. It is also noticed from the extracts of the cash book that their purchases of standard gold bars is far too less compared to the sale of gold jewellery. This also should go to prove that the gap is filled by gold obtained through llicit way.”
6. The reasoning of the adjudicating authority that the purchase of standard gold bars by appellant Mohanlal B. Jain or by M/s. South India Jewellers, Proprietor appellant Mohanlal B. Jain, is far too less compared to the sale of gold jewellery and this would prove that the gap is filed by gold obtained through illicit way” is a mere surmise without any basis. The show cause notice also does not contain any such allegations set out against the appellant Mohanlal B. Jain. The proceedings under the Act being penal in nature, it is settled law, that there must be acceptable legal evidence on record either direct or circumstantial warranting a conclusion that the currency in question represented the sale proceeds of contraband gold to attract Section 121 of the Customs Act, 1962. On careful analysis of the entire evidence on record we do not find any such evidence against the appellant Mohanlal B. Jain and Lalith Kumar and at any rate they would be entitled to the benefit of doubt in the facts and circumstances of this case. In this view of the matter we set aside the order of absolute confiscation of the Indian currency of Rs. 5 lakhs under the impugned order and direct the same to be returned to appellant Mohanlal B. Jain, who admittedly is the owner. Consequently, we also set aside the penalty imposed on the appellants under the Customs Act, 1962.
7. We shall now take up the fine and penalty imposed on the appellants under the provisions of Gold (Control) Act, 1968. It is not disputed by the learned DR. that appellant Mohanlal B. Jain, a licensee, was armed with an order of the High Court of Andhra Pradesh to transact business outside his licensed premises through travelling salesmen. This fact also is clearly mentioned by the adjudicating authority himself in the impugned order. No doubt, in our view, Section 27(7)(b) of the Gold (Control) Act, 1968 clearly enjoins on a licensed Dealer not to cany on business as such Dealer in any premises other than the premises specified in the licence. In this context we may also refer to the ruling of the Supreme Court in the case of Manik Chand Paul and 35 Ors v. Union of India and 3 Ors (Writ Petition Nos. 918 to 953 of 1977 decided on 17-4-1984) wherein the Supreme Court, while upholding the constitutional validity of Section 27(7) (b) of the Gold (Control) Act, 1968, has held that Section 27(7) (b) confines “a licensed dealer to carry on business as such dealer to the premises specified in his licence”. This observation of the Supreme Court came to be made in the context of the challenge to the constitutional validity of Section 27(7) (b) of the Act particularly when the writ petitioners before the Supreme Court challenged the Government of India’s letter of instructions to the Collectors of Central Excise throughout the country directing them to withdraw the facility till then afforded to licensed dealers to send ornaments for sale through travelling salesmen and the Trade Notices issued by the Collectors of Central Excise pursuant thereto withdrawing the said facflity with immediate effect. We also would like to note that a Division Bench of the Punjab and Haryana High Court in the case of Gian Chand Kapur v. Assistant Collector of Central Excise, Amritsar and Ors., has held that in view of the provisions of Sub-section (7) of Section 27 of the Gold (Control) Act, 1968 and the Rules, inter-State movement of gold ornaments and sale thereof outside the licensed premises is not permitted and “an endorsement on a licence granted by the Administrator would certainly be beyond the provisions of the Act and the Rules and the said endorsement has to be treated to be without jurisdiction ab initio and nullity in the eyes of law”. The Division Bench of the Punjab and Haryana High Court was considering the validity of the order of the Gold Control Administrator permitting licensees to transact business outside the licensed premises through travelling salesmen. The Division Bench further held that the Administrator is a creature of the Act and he has no jurisdiction to travel beyond the authority conferred upon him by the provisions of the Act and the Rules made thereunder. The endorsement of the Gold Control Administrator on the licence permitting inter-State trade of gold and selling thereof was held to be without jurisdiction, void ab initio and a nullity in the eyes of law. Presumably, the ruling of the Supreme Court and the ruling of the Division Bench of the Punjab and Haryana High Court were not brought to the notice of the High Court of Andhra Pradesh when the interim order permitting appellant Mohanlal B. Jain to transact business outside the licensed premises through travelling salesmen was made during the pendency of his Writ Petition before the Andhra Pradesh High Court. Be that as it may, we are afraid that when the High Court has passed an order according permission to appellant Mohanlal B. Jain to transact business outside his licensed premises, it would not be proper to get over the same on the ground that the order of the Andhra Pradesh High Court would not be valid beyond the territorial jurisdiction of the High Court. It should be noted that the Department was a party to the writ proceedings as one of the Respondents. Therefore, when by virtue of an order of the High Court appellant Mohanlal B. Jain was transacting business of sale of gold ornaments with another licensee viz. Fashion Jewellery at Kerala neither of them can be said to be guilty of contravention of the provisions of the Act in the peculiar circumstances. We also find from the impugned order that the interim order of the Andhra Pradesh High Court was valid til 24-6-1987 and the sale was on 27/29th March, 1987 and the seizure was on 30th March, 1987, when the interim order of the High Court was in force. We, therefore, hold that appellants cannot be said to be gutty of contravention of the provisions of the Act by reason of the interim order of the Andhra Pradesh High Court referred to above. In this view of the matter we set aside the fine and penalty imposed on the appellants under the provisions of the Gold (Control) Act, 1968. The appeals have been disposed of accordingly.