CASE NO.: Appeal (civil) 2335 of 1996 PETITIONER: GOPALDAS UDHAVDAS AHUJA AND ANR. RESPONDENT: UNION OF INDIA AND ORS. DATE OF JUDGMENT: 06/07/2004 BENCH: RUMA PAL & S.H. KAPADIA JUDGMENT:
JUDGMENT
2004 Supp(2) SCR 942
The Judgment of the Court was delivered by
KAPADIA, J. : This appeal by special leave is directed against the judgment
and order of the Division Bench of the Bombay High Court dated 5.1.1994
passed in Appeal No. 19 of 1992, by which the Division Bench allowed the
appeal preferred by the respondents, thereby setting aside the judgment and
order passed by the learned Single Judge dated 11.9.1990 in Writ Petition
No. 2406 of 1982 and consequently confirming the order of the Adjudicating
Authorities confiscating the primary gold, weighing 37,398.300 gms. and
valued at Rs. 18.70 lacs, under section 71(1) of the Gold (Control) Act,
1968 (hereinafter referred to for the sake of brevity as “the 1968 Act”)
with imposition of penalties on each of the appellants herein under section
74 of the said Act.
The undisputed facts are as follows :
The appellants are the son and widow respectively of one Udhavadas Ahuja.
Udhavdas had married twice – first to the mother of appellant no. 1 who
died on 19.2.1950 and next to appellant no. 2 on 1.7.1950. Appellant no. 1
was born on 16.2.1950. Udhav’s grandmother Bhojibai died on 4.7.1951. On
August 28, 1974, the Income Tax Commissioner issued an authorization under
section 132 of the Income Tax Act, 1961 authorizing search and seizure at
Gopi Kunj, situate at Shivaji Park, Bombay, being the residential premises
of appellant no. 1. Pursuant to the authorization, R.D. Mahadeshwar, Asstt.
Director of Inspection, Income-tax department conducted the search and
recovered primary gold and other gold items, more particularly described in
the panchnama (at page 95 of Volume-II). At the time of search, appellant
no. 1 was present. The primary gold and the gold items collectively weighed
37,398.300 gms. valued at Rs. 18.70 lacs as on August 30, 1974. Thereafter,
the Income Tax Authorities intimated the Gold Control Officer appointed
under section 4 of the 1968 Act. On August 30, 1974, the said officer
attended the Income Tax Office and in the presence of appellant no. 1, who
was the Karta of Kewal Ram Ahuja, Hindu Undivided Family, took over the
custody of the said gold from the Income-tax department. The Gold Control
Officer also prepared the above panchnama. On 20.9.1974, the Gold Control
Officer, Bombay served a show-cause notice on the appellants calling upon
them to explain why the said primary gold should not be confiscated under
section 71(1) of the 1968 Act and also why penalty should not be imposed on
each of the appellants under section 74 of that Act. The show-cause notice
inter alia alleged contravention of section 8(1) read with section 8(6) and
section 16(1) read with section 16(5) inasmuch as the appellants had in
their possession primary gold which they failed to dispose of within six
months from 1.3.1967 as provided for in rule 126H (1)(B) of the Defence of
India Rules. By the said show-cause notice, it was further alleged that the
appellants had failed to file the declaration in respect of gold articles,
other than the gold bars which constituted contravention of section 16(1)
read with section 16(5) of the said Act. The appellants claimed during the
investigation that the seizure was illegal; that taking over of the gold
from Income tax Authorities did not amount to seizure in fact or in law.
They contended that there was no contravention of the provisions of the Act
as they were not in conscious possession of the said gold recovered from
their residence. The appellants claimed that entire gold was recovered from
a secret cavity/vault inside the dome of one cupboard in the eastern
bedroom and that they were not aware of the secret cavity or the contents
thereof. The appellants also claimed that they were not in possession of
the keys of the secret vault. In the meantime, on 18.10.1975, Voluntary
Disclosure of Income and Wealth Ordinance 1975 was promulgated. It was
replaced by Act No. VIII in 1976. On 27.12.1975. appellant no. 1 as Karta
filed a declaration under said Voluntary Disclosure Scheme. To complete the
chronology of the events, the Collector of Customs (Preventive). Bombay
(hereinafter referred to for the sake of brevity as “Authorized Officer”)
ordered confiscation of the gold bars, gold coins and sovereigns under the
provisions of section 71(1) read with section 8(1) of the 1968 Act.
However, the appellants were given an option to redeem the gold coins and
sovereigns weighing 7.719.90 gms. on payment of fine of Rs. 1.5 lacs in
lieu of confiscation. By the said order, the Authorized Officer imposed
penalty of Rs. 1 lac on each of the appellants. This order of the
Authorized Officer held that the entire gold was seized from one cupboard
in the eastern bedroom. The order passed by the Authorized Officer on
26.6.1976 was. however, set aside by the Gold Control Administrator in
appeal (hereinafter referred to for the sake of brevity as “the Appellate
Authority”) By order dated 21.11.1977, the Appellate Authority remanded the
case for de novo adjudication by accepting the contention of the appellants
herein that the order passed by the Authorized Officer on 26.6.1976 was in
breach of principles of natural justice. On remand, the Authorized Officer
once again came to the conclusion, after considering the evidence on record
that the gold seized was in conscious possession of the appellants.
However, this time, the Authorized Officer held that the gold seized was
recovered from cupboard in the eastern bedroom, from the cupboard in the
western bedroom and from the cupboard in the telephone room. He, therefore,
concluded that the appellants were in conscious possession of the seized
gold. The Authorized Officer, therefore, held that there was contravention
of section 8(1) read with section 8(6) as far as primary gold was concerned
and since the appellants failed to file declaration with regard to other
gold items, there was contravention of section 16(1) read with section
16(5) of 1968 Act. Therefore, by his order dated 14/28.2.1980, the
Authorized Officer directed absolute confiscation of the primary gold, gold
sovereigns, gold coins and other gold items. He also imposed a personal
penalty of Rs. 1 lac each on the two appellants. Being aggrieved by the
said order, the appellants herein carried the matter in appeal once again
to the Gold Control Administrator, New Delhi, being Appeal No. 91 of 1981.
It was contended before the Appellate Authority that the entire gold was
recovered from one place i.e. from a secret vault inside the dome of the
cupboard in the eastern bedroom. The appellants relied upon the statements
of two panchas. However, the Appellate Authority vide order dated 5.11.1981
found that the statements made by the officers from the Income-tax
department that gold was recovered from different places were truthful. The
Appellate Authority rejected the testimony of locksmith and the panchas. On
the state of these findings, the Appellate Authority held that the
appellants were in conscious possession of the said gold. The order passed
by the Authorized Officer confiscating the said gold was upheld. However,
the Appellate Authority ordered redemption of gold idols found in the pooja
room on payment of fine of Rs. 5000. The Appellate Authority also reduced
the personal penalty of Rs. 1 lac imposed on each of the appellants to Rs.
50000 each. Being aggrieved, the appellants herein preferred Revision
application to respondent no. 1 which was dismissed on 10.7.1982. At this
stage, it may be mentioned that by order dated 5.6.1976, the Gold Control
Officer found that appellants declaration under Voluntary Disclosure Scheme
unacceptable as according to him the declaration was filed by appellant no.
1 as Karta after commencement of proceedings under the 1968 Act. Being
aggrieved by the dismissal of revision application filed by the appellants.
Writ Petition No. 2406 of 1982 was filed in the Bombay High Court for a
declaration that the said gold was unlawfully seized and therefore, the
appellants were entitled to immunity from proceedings for prosecution,
confiscation and penalty. The appellants also sought return of the said
gold. The said writ petition was filed on 18.10.1982. In the meantime, the
appellants who were charged for offences under section 85(1 )(ii) read with
section 8(1) of the 1968 Act were acquitted by the Addl. Chief Metropolitan
Magistrate, Bombay on 24.3.1983. The Criminal Appeal No. 443 of 1983 filed
by the Gold Control Authorities against the order of acquittal was
dismissed by the Bombay High Court on 8/9.3.1991. By judgment and order
dated 11.9.1990. the learned Single Judge held in Writ Petition No. 2406 of
1982. mentioned herein above that the appellants were innocent possessors
of the said gold. Accordingly, the Trial Judge quashed the orders of
penalty and confiscation passed by the Gold Control Authorities. Being
aggrieved, the department herein, tiled Letters Patent Appeal No. 19 of
1992 before the Division Bench of the Bombay. High Court. By impugned
judgment dated 5.1.1994, the Division Bench allowed the L.P.A. No. 19 of
1992 on the ground that the appellants were in conscious possession of the
gold as it was found in several cupboards in the eastern bedroom, western
bedroom and the telephone room. The Division Bench held that the findings
of the criminal court were not relevant for the purposes of adjudicating
confiscation under section 71(1) of the said Act. consequently, the
Division Bench confirmed the orders passed by the Gold Control Authorities.
Hence, the appellants have filed this appeal by way of special leave.
Lastly, it may be mentioned that by order dated 7.4.1994. this Court
dismissed Special Leave Petition (Criminal) filed by the Assistant
Collector of Customs, Bombay against the Judgment of the Bombay High Court
confirming the acquittal of the appellants by the learned Magistrate.
Mr. C.A. Sundaram, learned senior counsel appearing on behalf of the
appellants submitted that the Gold Control Authorities took over the gold
from Income-tax department in contravention of section 132(5) of the Income
Tax Act and consequently, there was no seizure in law and therefore, the
appellants were entitled to claim immunity under Voluntary Disclosure
Scheme. In this connection, it was urged that in fact there was no seizure
as the Gold Control Officer merely took over the gold from Income-tax
department and to get over this lacunae, respondent no. 2 herein seeks to
contend that gold was returned to the appellants by the Income-tax
authorities and it was thereafter seized from the appellants by Gold
Control Officer appointed under section 4 of the Act. In this connection,
reliance was placed on the panchnama dated 30.8.1974 (Vol. II page 95) to
show that the gold was seized by the Gold Control Officer from Income-tax
department. It was submitted that such seizure was also contrary to section
132(5) of the Income Tax Act. In this connection, reliance was placed on
the judgment of this Court in the case of Commissioner of Income Tax v.
Tarsem Kumar reported in [1986] 3 SCC 489.
Learned senior counsel for the appellants next contended that though under
the 1968 Act any primary gold held in contravention of section 8( 1) was
liable to be confiscated under section 71(1), the proviso thereto protected
such gold from confiscation for contravention of the provisions of the Act
in the absence of knowledge or connivance on the part of the owner in such
contravention. In view of the said proviso, it was submitted that there was
no absolute bar to the possession of the primary gold under the 1968 Act.
In this connection, it was urged that mere possession of primary gold was
an offence under sections 71(1) and 85(1) of the Act; that, therefore, the
word “possession” in sections 8(1), 71(1) and 85(1) referred to conscious
possession. Learned counsel for the appellants next contended that the
appellants were prosecuted by the Gold Control Authorities for offences
under section 85(1)(ii) read with section 8(1) of the Act in respect of
retention of possession of primary gold: that they were also prosecuted for
not filing declarations under section 16(1) in respect of gold coins,
sovereigns and gold idols; that on the first count the appellants proved
beyond reasonable doubt that they had no knowledge of the primary gold
bars, coins and sovereigns; that consequently, they were acquitted and.
therefore, the appellants were entitled to the benefit of acquittal not
only in criminal trial but also in the matter of confiscation of the said
property. It was urged that in the impugned judgment, the Division Bench of
the High Court had erred in holding that findings recorded by the criminal
court had no bearing on adjudication under section 71(1) and section 74 of
the said Act. In this connection, reliance was placed on the judgment of
this Court in the case of Pasupaleti Venkateswarlu v. The Motor & General
Traders reported in [1975] 1 SCC 770; Rajesh D. Durbar v. Narasingrao
Krishnaji Kulkarni & Ors. reported in [2003] 7 SCC 219; Ram Chandra Singh
v. Savitri Devi & Ors. reported in [2003] 8 SCC 319 and Carp. M. Paul
Anthony v. Bharat Gold Mines Ltd & Anr. reported in [1999] 3 SCC 679.
Learned counsel for the appellants further contended that the mens rea was
a sine qua non for confiscation of gold under the Act; that the proceedings
under the Act were quasi criminal in character and consequently, the
judgment of the learned Magistrate acquitting the appellants was binding on
the departmental authorities adjudicating the question of confiscation. In
any event. it was urged, that the learned Single Judge in the writ petition
had discussed the entire evidence and had come to the conclusion that the
appellants were not in conscious possession of the gold; that the said gold
was found only at one place, namely, in the cavity on the cupboard in the
eastern bed room of the flat; that the locksmith had to prepare a key to
open the locker in the cavity in which the gold was found, that the screws
were rusted and they had to be cut to open the top which showed that the
appellants were not in conscious possession of the said gold. It was
submitted that the above facts were not considered by respondents no. 2 and
3 herein and, therefore, their orders suffered from errors apparent on the
face of the record and consequently, the learned Single Judge of the High
Court was right in exercising the power of judicial review. That the
Division Bench had erred in ignoring the findings of the learned Single
Judge. Lastly, learned counsel for the appellants submitted that in any
event, an option of redemption should have been given to the appellants.
That, in the present case, no reasons have been given by the Collector for
not exercising his discretion in the matter of grant of redemption. In this
connection, reliance was placed on the judgment of this Court in the case
of Hargovind Das & Ors. v. Collector of Customs & Ors. reported in AIR
[1987] SC 1982.
Per contra, Mr. N.K. Bajpai, learned counsel appearing on behalf of the
department contended that the Income-tax authorities had recovered the said
gold from the residence of the appellants during the search on 28.8.1974.
That in accordance with a circular issued by the Central Board of Direct
Taxes, the Gold Control Officer was informed about the seizure. That the
said officer visited the office of Income-tax department around 30.8.1974
and in the presence of appellant no. 1 took over the gold from the Income-
tax department under section 66 of the 1968 Act. In this connection,
reliance was placed on the panchnama dated 30.8.1974. It was urged that all
the statutory authorities rejected the claim that the appellants were not
in conscious possession of the gold on the ground that the recovery was
made from more than the one cupboard; that appellant no. 2, on being asked,
produced the keys with which the secret locker in the cavity on top of the
cupboards in the western bedroom was opened; that the said keys were
recovered from the cupboard in the western bedroom and, therefore, the
appellants were in conscious possession of the said gold, which rightly
confiscated under section 71(1) of the Act.
Learned counsel for the respondent further submitted that section 66 of the
Act empowered the gold Control Officer to seize primary gold in respect of
which he had reason to believe that any provision of the Act had been
contravened. That in this case, the seizure of gold was made under a
panchnama in presence of appellant no. 1 in the reasonable belief that the
provisions of the Act had been contravened . In this connection, reliance
was placed on the copy of the panchnama (at page 95, volume-II), which
bears the signature of appellant no. 1. Further, a circular had been issued
on 30.8.1965 by CBDT addressed to all Commissioners of Income Tax & Wealth
Tax stating that when the gold is seized in a search by Income-tax
authorities, necessary information should be given to the Gold Control
Officer. It was submitted that the circular issued by the CBDT was binding
on the subordinate authorities. Therefore, it was urged that there was no
illegality in making the seizure. It was further submitted that the
judgment of this Court in Tarsem Kumar’s case (supra) was not applicable as
it was given prior to insertion of section 132A in the Income Tax Act. It
was urged that section 66 of the said Act was a self contained Code and it
was, therefore, not necessary to refer to the provisions of the Income Tax
Act, 1961.
Learned counsel for the respondent next submitted that mens rea was not a
necessary ingredient of sub-section (1) of section 71. That possession,
ipso facto, was an offence under the Act. That the appellants were found to
be in possession of huge gold bars of primary gold contrary to section
8(1). They were also found in possession of undeclared gold articles in
contravention of section 16. in such a case, it was submitted that the
claim of the appellants that they were not in conscious possession of the
primary gold as their defence was unbelievable. Learned counsel further
submitted that in view of sections 8(1), 71(1) and 85(1), an absolute
liability was imposed and, therefore, there was no merit in the argument
advanced on behalf of the appellants that the gold was not liable to be
confiscated till conscious possession therefore stood proved. Lastly, it
was urged that the applicability of the proviso to section 71(1) had to be
adjudged by the adjudicating authority and not by the officer who had
seized the primary gold. It is for the adjudicating authority to decide the
claim of the benefit under the proviso to section 71(1). Hence, it was
urged that, the seizure cannot be held to be illegal in the present case.
Learned counsel for respondent no. 2 next submitted that under the 1968
Act, adjudication and prosecution were two independent proceedings and they
were permissible on the same set of facts. That the possibility of
different conclusions being reached by two different Authorities under the
same Act cannot be ruled out. That adjudication and prosecution were
independent of each other and the procedures to be adopted in the two
proceedings were also different. In this connection, reliance was placed on
the judgment of this Court in the case of Tukaram G. Gaokar v. R.N. Shukla,
AIR (1968) SC 1050. It was further submitted that the presumption of
culpable mental state under section 98B of the Act had no relevance
whatsoever to the proceedings for confiscation and penalty. That the factum
of acquittal in prosecution proceedings cannot affect the findings of fact
reached by the statutory authorities in adjudication. That there was no
provision in the Act which gives a superior status to the outcome of the
prosecution proceedings. In the circumstances, it was submitted that the
factum of acquittal in prosecution proceedings cannot affect findings of
fact reached by the Adjudicating Authority.
Learned counsel for the respondent lastly submitted that the voluntary
disclosure scheme was introduced vide Voluntary Disclosure of Income &
Wealth Ordinance, 1975. That under sub-section 5 of section 15A, primary
gold which had been seized or confiscated under the 1968 Act was not
entitled to immunity. That in present matter, on 20.9.1974, the Gold
Control Officer issued the show-cause notice calling upon in appellants to
show-cause as to why the said gold should not be confiscated under section
71(1) whereas appellant No. 1 filed the declaration as a Karta only on
27.12.1975. Therefore, the appellants were not entitled to immunity as
prior to their declaration on 27.12.1975, proceedings for confiscation had
been initiated. For the aforestated reasons, it was urged that there is no
merit in the civil appeal and the same deserves to be dismissed.
For the sake of clarity, we may point out that by order dated 10.7.1982
passed by the Appellate Authority, seven gold bars, one gold brick, gold
coins and sovereigns (more particularly described in the panchnama dated
30.8.1974 – Vol. II page 95) stood absolutely confiscated with personal
penalty on each of the two appellants herein, whereas the gold idols and
pooja articles were ordered to be redeemed on payment of fine. This order
of the Appellate Authority was confirmed in Revision by respondent No. 6
vide order dated 10.7.1982. By the impugned judgment of the Division Bench
of the High Court, the orders passed by the Appellate Authority and the
Revisional Authority were upheld. Consequently, our judgment is confined
only to absolute confiscation of the aforestated gold bars, gold bricks,
gold coins and sovereigns.
Before examining the provisions of the 1968 Act, it is necessary to refer
to the various provisions of law which existed prior to the Gold (Control)
Act, 1968. On 12.12.1962, the Defence of India Act, 1962 was enacted
replacing an Ordinance issued on 26.10.1962. Under section 3 of the 1962
Act, the Central Government framed Defence of India Rules. 1962. In the
1962 Rules, as originally framed, there was no provision dealing with
control of gold. By Defence of India (Amendment) Rules. 1963, a new Part
XIIA was inserted w.e.f. Januarv 9, 1963. By this amendment, rules 126A to
126Z were inserted. Rule 126A(d) defined “gold” as. inter alia, including
primary gold, ornament or any other article of gold. Rule 126H provided for
restrictions on possession of gold. The effect of rule 126H was that,
except in the manner provided under the said rule, no person could acquire
or buy primary gold. Rule 126-1 required declaration to be made of the
possession of gold other than ornaments. It provided that every person, not
being a dealer, shall, within thirty days from the commencement of the 1963
Amendment Rules, make a declaration as to the quantity, description and
other particulars of gold. Under rule 126M, gold seized was liable to be
confiscated. Under the said rules power was given for search and seizure of
gold in respect of which there has been contravention of the said rules.
The net effect of the aforesaid rules was that acquisition, possession or
control of primary gold, without declaration, became illegal.
On 1.3.1967, the Defence of India Rules, 1962 were further amended by
Defence of India (4th Amendment) Rules, 1966, which imposed a ban on the
possession of primary gold. Under the Amended Rules, no person, other than
a dealer, was entitled to own or possess primary gold after expiry of six
months from the commencement of Defence of India (4th Amendment) Rules,
1966. The effect of the said Amendment was that within six months from
1.3.1967 (i.e. by 1.9.1967), no person, other than a dealer, could be in
lawful possession of the primary gold.
On 22.6.1968, Part XIIA of Defence of India Rules, 1962 was repealed and
replaced by Gold (Control) Ordinance, 1968. The ordinance was itself
repealed by Gold (Control) Act. 1968 w.e.f. 1.9.1968. The Act was enacted
to provide for the control of the production, manufacture, supply,
distribution, use and possession of gold ornaments and articles of gold.
The basic object was to reduce the internal demand for the gold in India.
Under section 2(j), gold was defined to mean gold, including its alloy in
any shape or form including primary gold, gold articles and ornaments.
Under Section 2(r), primary gold was defined to mean gold in unfinished or
semi finished form including gold bars, ingots, slabs, pellets, sheets etc.
Under section 4, the administration of the Act was placed in the overall
charge of the Gold Control Administrator. Under section 5(2), price of the
gold to be sold and brought was to be fixed by the administrator, in
consultation with the Reserve Bank of India. Under section 8(1), retention
of possession of gold was prohibited. Section 8(1), which is relevant for
the present case, read as under :
“8. Restrictions regarding acquisition, possession and
gold. – ( 1 ) Save as otherwise provided in this Act. no person shall
(i) own or have in his possession, custody or control, or
(ii) acquire or agree to acquire the ownership, possession, custody
or control of, or
(iii) buy. accept or otherwise receive or agree to buy. accept or
otherwise receive,any primary gold.”
Under section 8(1), possession of the primary gold after the Act came into
operation was contrary to law unless the same was held in the manner as
provided by the Act. An essential pre-condition for assumption of
jurisdiction under section 8(1) was that the article must be primary gold.
Section 8(1) placed an absolute embargo on retention of the possession of
the primary gold on and after 1.9.1968 when the said Act came into
operation. Under section 8(6), the Gold Control Administrator was empowered
under special circumstances of any case to authorize any person(s) to buy,
acquire, sell, transfer or otherwise dispose of primary gold or article.
However, the normal rule was against the retention of the possession of
primary gold. Chapter XII dealt with entry, search and seizure. Section 58
read with section 66 empowered the Gold Control Officer on reasonable
suspicion to seize such gold in respect of which he holds a reasonable
belief of contravention of the provisions of the Act. However, the Gold
Control Officer who was a seizing officer was not required to decide the
question on actual contravention which had to be decided by the Collector
(hereinafter referred to as “Authorized Officer”) in the adjudication
proceedings under sections 71(l)and 74 of the Act. If the Authorized
Officer found such actual contravention, he could order confiscation under
section 71(1) of the Act. Sections 66 and 71(1) are relevant for the
purposes of this case and accordingly, they are quoted hereinbelow :
“66. Power to seize – (1) If any Gold Control Officer has reason to believe
that in respect of any gold any provision of this Act has been, or is
being, or is attempted to be. contravened, then he may seize –
(a) such gold along with the package, covering or receptacle, if any and
the contents thereof, in which the gold is found;
(b) any other goods in which any quantity of such gold has been mixed.
(2) Any Gold Control Officer may seize –
(a) any document or other thing which, in his opinion, will be useful
for. or relevant to, any inquiry or proceeding for the contravention of any
provision of this Act or any rule or order made thereunder;
(b) any conveyance or animal which has been, or is being, or is
attempted to be, used for the transport of any gold in relation to which
any provision of this Act or any rule or order made thereunder has been or
is being, or is attempted to be contravened.
(3) Any document or other thing seized under sub-section (2) shall not be
retained by the Gold Control Officer for a period exceeding six months from
the date of the seizure unless the reasons for retaining the same are
recorded by him in writing and the approval of the Administrator for such
retention is obtained :
Provided that the Administrator shall not authorize the retention of the
document or other thing for a period exceeding thirty days after all
proceedings, for which the document or other thing is useful or relevant,
are completed.
(4) The person from whose custody any document or other thing is seized
under sub-section (2) may make copies thereof or take extracts therefrom in
the presence of the Gold Control Officer or any other person empowered by
him in this behalf, at such place and at such time as the Gold Control
Officer may appoint in this behalf.
(5) If a person legally entitled to the document or other thing seized
under sub-section (2) objects for any reason to the approval being given by
the Administrator under sub-section (3), he may make an application to the
Central Government stating therein the reasons for such objection and
requesting for the return of the document or other thing.
(6) On receipt of the application under sub-section (5). the Central
Government may, after giving the applicant an opportunity of being heard,
pass such orders as it may think fit.
71. Confiscation of gold. – (1) Any gold in respect of which any provision
of this Act or any rule or order made thereunder has been, or is being, or
is attempted to be, contravened, together with any package covering or
receptacle in which such gold is found, shall be liable to confiscation.
Provided that where it is established to the satisfaction of the officer
adjudging the confiscation that such gold or other thing belongs to a
person other than the person who has. by any act or omission, rendered it
liable to confiscation, and such act or omission was without the knowledge
or connivance of the person to whom it belongs, it shall not be ordered to
be confiscated but such other action, as is authorized by this Act, may be
taken against the person who has, by such act or omission, rendered it
liable to confiscation.”
Therefore, under the scheme of section 66 read with section 71, the officer
seizing such gold was not to decide issues, such as, collusion, connivance,
knowledge of possession etc. The belief that the officer had to form under
section 66 was only in respect of the gold, whoever its owner be. The
ownership of the gold or the person in whose possession the gold was kept
was not relevant for the purposes of section 66. Before acting under
section 66. existence of a reasonable belief that the provisions of the Act
had been contravened was essential.
Chapter XIV dealt with adjudication and appeals. Section 83 gave power to
the Authorized Officer to summon witnesses: to receive evidence on
affidavits and issue commissions for examination of witnesses. Chapter XV
dealt with offences and their trial. Section 85(1 )(ii) inter alia provided
that whosoever had in his possession any primary gold in contravention of
the Act or rules thereunder shall be punished with imprisonment or fine,
without prejudice to any other action that may be taken under the Act.
Section 98B referred to circumstances in which the Court had to raise
statutory presumption. For the purposes of deciding this case, sections
85(1) and 98B are relevant and they are quoted hereinbelow :
“85. Punishment for illegal possession, etc. of gold:-(1) Whoever, in
contravention of the provisions of this Act or any rule or order made
thereunder. –
(i) makes, manufactures, prepares or processes any primary gold; or
(ii) owns or has in his possession, custody or control any primary gold; or
(iii) buys or otherwise acquires, or accepts or otherwise receives, or
agrees to buy or otherwise acquire or to accept or otherwise receive, any
primary gold; or
(iv) sells, delivers, transfers or otherwise disposes of. or agrees to
sell, deliver, transfer or otherwise dispose of, or exposes or offers for
sale, delivery, transfer or disposal, any primary gold; or
(v) melts, assays, refines, extracts, alloys or converts any gold or
subjects it to any other process; or
(vi) makes, manufactures, prepares, repairs, polishes or processes or
places any order for the making. manufacturing, preparing, repairing,
polishing or processing, of any article or ornament; or
(vii) buys or otherwise acquires, or accepts or otherwise receives, or
agrees to buy or otherwise acquire or to accept or otherwise receive, or
sells, delivers, transfers or otherwise disposes of, or agrees to sell,
deliver, transfer or otherwise dispose of, or exposes or offers for sale,
delivery, transfer or other disposal, any article or ornament; or
(viii) owns or has in his possession, custody or control any article or
ornament; or
(ix) carries on any business or transaction in gold for which a licence or
certificate is required to be obtained by or under this Act; or
(x) carries on business as a banker or money-lender;
shall, without prejudice to any other action that may be taken under this
Act, be punishable –
(a) if the offence is under Cl. (i), (ii), (iii), (iv) or (viii), [the
offence under Cl. (viii) being a contravention of sub-section (3) of
Section 55] and the value of the gold involved therein exceeds one lakh of
rupees, with imprisonment for a term which may extend to seven years and
with fine;
Provided that in the absence of special and adequate reasons to the
contrary to be recorded in the judgment of the Court such imprisonment
shall not be for a term of less than six months.
(b) in any other case, with imprisonment for a term which may extend to
three years, or with fine, or with both.
98 B. Presumption of culpable mental state. – (1) in any prosecution for an
offence under this Act which requires a culpable state on the part of the
accused, the Court shall presume the existence of such mental state but it
shall be open to the accused to prove the fact that he had no such mental
state with respect to the act charged as an offence in that prosecution.
Explanation. – In this section, “culpable mental state” includes intention,
motive, knowledge of a fact and belief in, or reason to believe, a fact.
(2) For the purposes of this section, a fact is said to be proved only when
the Court believes it to exist beyond reasonable doubt and not merely when
its existence is established by a preponderance of probability.”
Section 98B of the 1968 Act was similar to section 138A of the Customs Act,
1962. It made a drastic change in the concept of mens rea as a necessary
ingredient of an offence. According to the provisions of this section
wherever mens rea, in the sense of knowledge of the wrongfulness, was a
necessary ingredient of an offence under the Act, the Court shall presume
its existence. However, such presumption was rebuttable. The explanation to
sub-section (1) of Section 98B provided for an inclusive definition of
culpable mental state which included knowledge of the wrongfulness of an
act or omission prohibited by the statute. Under section 98B (2), the
accused was required to prove beyond reasonable doubt that he did not
possess the requisite mental state. The provisions of sections 85(1) and
98B were similar to sections 9, 10 of the Opium Act, which came for
consideration before this Court in the case of Inder Sain v. State of
Punjab reported in [1973] 2 SCC 372. In that case, the appellant got a
parcel of apples released from the railway. While he was carrying the
parcel, he was intercepted by the police and the parcel was found to
contain opium. He was convicted under section 9. The only question was :
whether the appellant was in possession of opium. It was held by this Court
that if possession is an offence then there must be proof that the accused
was knowingly in possession of the article. That knowledge involved in
possession of the unauthorised article had to be proved. It was further
held that the word “possession”, in such cases, connotes possession with
knowledge. In the said judgment, this Court has drawn a dichotomy between
the law pertaining to presumptions and the law relating to the burden of
proof. It was held that though knowledge is an essential ingredient of the
offence of possession, it is a different thing to say that the prosecution
should prove that the accused was knowingly in possession. It was held that
by virtue of Section 10. similar to section 98B of the 1968 Act. the onus
of proof was placed on the accused to prove that he did not knowingly
possess the article. This is after the prosecution showing by evidence that
the accused was in possession of the article.
The analysis of the various provisions of the 1968 Act (repealed in 1990)
shows that the Act made possession of primary gold an offence. Under the
Act, possession of primary gold was made an offence under section 85(l)(ii)
read with section 8(1). The said Act provided for a special machinery for
confiscation of unauthorised gold under section 71(1) and for trial of the
person concerned under section 85(1). The word “possession” finds place in
all the above provisions. In the light of the judgment of this Court in the
case of Inder Sain (supra), we have to read the word “possession” as
conscious possession. Under section 71(1), any gold in respect of which
there existed contravention was liable to be confiscated. Provided, where
it was established to the satisfaction of the Authorised Officer, that the
owner had no knowledge of the Act or omission on the part of the holder,
which made it liable to confiscation, then it could not be confiscated.
Therefore, reading sections 8(1), 71(1) including the proviso, 85(1) with
section 98B, it is clear that possession ipso facta was prohibited. It was
an overt act which was made an offence not only for prosecution under
section 85(1) but also in the matter of confiscation under section 71(1).
Since possession was an offence, knowledge in possession of the
unauthorised article was an essential ingredient of the said offence. Where
a statute forbids an act, doing of that act itself supplies mens rea. In
such a case, the prosecution needs only to prove commission of the
prohibited act and it is for the person concerned to bring himself within
the statutory defence, which in the present case was provided for in the
proviso to section 71(1). However, in view of section 98B, the accused had
to prove beyond reasonable doubt that he had no knowledge in the possession
of the unauthorised article. In the present case, the appellants were
charged for offence of possession of unauthorized gold under section 85(1 )
(ii) read with section 8(1) of the Act. They were acquitted. The judgment
of the trial court was confirmed by the High Court and by this Court. In
the trial, they proved beyond doubt that they were nut in conscious
possession of the primary gold. In the circumstances, one of the points for
determination in this civil appeal is – what is the effect of an order of
acquittal in the prosecution under section 85(l)(ii) read with section 8(1)
on the order of confiscation passed under section 71(1) read with section
8(1) by the Authorized Officer in respect of the primary gold. In both the
proceedings, the basic facts were common. The recovery of incriminating
articles was the same in both the proceedings. The same witnesses were
examined in both the proceedings. The same charge of possession was there
in both the proceedings. The said charge was sought to be proved by same
set of officers in both the proceedings. The witnesses and the officers who
saw the recovery were common in both the proceedings. However, the criminal
court on consideration of the entire evidence came to the conclusion that
both the accused had no knowledge of the gold concealed in the ornamental
top of the cupboard in the eastern bedroom from where the entire gold was
seized whereas the Authorised Officer in the proceedings under section
71(1) of the Act ordered confiscation on the ground that recovery was made
from the cupboards in the eastern and western bedroom and from the
telephone room; that appellant No. 2 had produced the key with the help of
which the secret vault in the cupboard in the western bedroom could be
opened and, therefore, the appellants were in conscious possession of the
said gold. It was further held by the Authorised Officer that when the gold
in respect of which any provision of the 1968 Act had been contravened,
such gold, ipso facto, attracted confiscation.
In the case of Capt. M. Paul Anthony v. Bharat Gold Mines Ltd. reported in
[1999J 3 SCC 679 it has been held that where department and criminal
proceedings are based on identical facts and where charges were sought to
be proved by the policy officers and the panchas who raided the house and
effected recovery and where same set of witnesses were examined in both the
proceedings but the criminal court on examination of the evidence came to
the conclusion that no recovery was made from the house and that raid was
not proved it would be unjust, unfair and oppressive to allow the findings
recorded by the enquiry officer to stand against acquittal by judicial
pronouncement. The present case is on the stronger footing than the case of
Capt. M. Paul Anthony (supra). In the present case, in view of section 98B,
a very heavy burden was placed on the appellants in the criminal
proceedings. It was for the appellants to rebut the statutory presumption
of the culpable mental state placed on them b section 98B. Under section
98B, the appellants had to prove beyond reasonable doubt, which they did.
that they had no knowledge of the gold hidden in the ornamental top of the
cupboard in the eastern bedroom. Hence, it would be unjust, unfair and
oppressive to allow the decision of the Authorised Officer in confiscation
proceedings to stand against acquittal by the competent criminal court,
which acquittal was confirmed by the High Court and by this Court.
We may clarify that our above observation should not be taken to mean that
there is no difference between departmental proceedings under section 71(1)
and prosecution for illegal possession under section 85(1). A combined
reading of sections 8(1), 71(1) and 85 of the 1968 Act made it clear that
the legislature intended to provide for two separate proceedings before two
different forums and there is no conflict of jurisdictions between the
Authorised Officer acting under section 71(1) to direct confiscation on
being satisfied that an offence has been committed and the magistrate
making an order on conviction of an accused under section 85(1) and that
mere acquittal in the trial before the Magistrate, in every case, cannot
result in setting aside, ipso facto, of the orders of confiscation passed
by the competent authority under the Act. That merely because there was
acquittal in the trial before the Magistrate, due to paucity of evidece or
otherwise, would not entail nullification of the order of confiscation of
the sei/ed articles in every case. (See Divl. Forest Officer v. G. V.
Sudhakar Rao, reported in [1985] 4 SCC 573). In any event, on a plain
reading of sections 8(1) and 71(1) it is clear that the Authorised Officer
was required to be satisfied that an offence under the Act had been
committed. That the confiscation proceedings were separate and distinct
from prosecution under the Act. However, that difference did not entitle
the Authorised Office: to proceed arbitratily in making an order for
confiscation.
In the light of the above discussion, the first point for determination is
– whether from the circumstances one can say that the appellants were in
conscious possession of primary gold. As indicated above, the adjudication
proceedings under section 71(1) concluded before the criminal case. The
judgment of the criminal court was not before the Authorised Officer.
However, the basic controversy before the Authorised Officer was -whether
the entire primary gold (bars) was recovered from the ornamental top of the
cupboard in the eastern bedroom as alleged by the appellants, or whether
some of the gold bars were also recovered from the cupboards in the western
bedroom and the room in which the telephone was placed as alleged by the
department. According to the department, appellants were in conscious
possession of the gold bars because some of the bars were found from the
cupboards in the western room which were opened with the keys handed over
by Ishwaribai, appellant No. 2 herein. According to the department, since
primary gold was recorded from western bedroom and telephone room in
addition to the recovery from the ornamental top of the cupboard in the
eastern bedroom, the appellants were in conscious possession. The orders of
the Authorised Officer and the Gold Control Administrator show that even
according to the department, gold bars hidden in the ornamental top of the
cupboard in the eastern bedroom were not apparently visible but the fact
that some of the remaining gold bars were recovered from the other rooms
proved that the appellants had knowledge of the gold bars. Therefore, the
key question to be answered is – whether recovery of the gold from western
bedroom and telephone room was proved by the department. At the outset, it
may be stated that the evidence on record shows that the officers who took
part in the raid were officers from Income-tax department. They saw the
collection of gold and not the place from which the gold was recovered.
There was no exact record to show from where the items of gold were found.
Each witness gave different versions. Their versions are self-contradictory
and conflicting with each other. The original panchnama was not produced.
The copy of the panchnama did not indicate the place from which the items
were recovered. Even the specific key supplied by appellant No. 2 herein.
Ishwaribai. with which the locker in the western bedroom was allegedly
opened, was not separately seized. There was no contemporaneous record to
show from which place what was recovered. In all, eight gold bars were
seized. According to Mahadeshwar, one of the key witnesses from the Income-
tax department, five of the bars were recovered from the ornamental top of
the cupboard in the eastern bedroom. This statement was made before the
Authorised Officer. However, later on in the criminal trial he has deposed
that two to three bars were recovered from that place. Before the
Authorised Officer, Mahadeshwar stated that two gold bars were recovered
from the western bedroom whereas in the criminal trial he has deposed that
one gold bar was recovered from the western bedroom. Before the criminal
court, he deposed that two bars were found in the telephone room, whereas
before the Authorised Officer he deposed that he was not sure. According to
Ms. Thadani, one of the witnesses in the raiding party from the Income-tax
department, only one gold bar was recovered from the telephone room. No
recovery memo was prepared by her. According to Kundalgaonkar, one of the
witnesses to the recovery, one gold bar was recovered from the western
bedroom. However, in his confidential record, he stated that two gold bars
were recovered from that room. Similarly, in his report to Shri Vaidya,
Kundalgaonkar has stated that Ishwaribai gave the keys to him whereas in
the criminal trial he has deposed that she gave the keys to Mahadeshwar.
All these contradictions have taken place because there was no
contemporaneous record to prove the recovery and the panchnama prepared was
faulty as it did not indicate the place from which the gold was recovered,
in conclusion, none of the witnesses were able to give a coherent story as
to where the primary gold was found. Therefore, recovery of three gold bars
from the telephone room and western bedroom was not proved.
On the other hand, from the evidence, it stood established that the
ornamental top of the cupboard in the eastern bedroom could not be opened.
The screws were rusted and old. They had to be cut. The entire gold was
found at this place. The opening of the ornamental top was difficult. That
improvised keys had to be prepared by the locksmith, who was the witness
for the department. That they were made to open the locker/vault inside the
ornamental top. The evidence shows that the appellants did not have the
keys to open the said vault. That the entire primary gold, except the
idols, was found from the ornamental top of the cupboard in the eastern
bedroom. At this stage, it may be mentioned that some of the gold bars had
foreign markings for which proceedings were taken against the appellants
under the Customs Act. They were exonerated of the charge of smuggling.
However, in those proceedings, it was deposed by Mahadeshwar that the
entire primary gold was recovered from one cupboard. Further, in his order
dated 26.6.1976, the Authorized Officer held that entire gold was seized
from one cupboard. In the circumstances, the appellants were not in
conscious possession of primary gold and they were entitled to the benefit
to the proviso to section 71(1).
The next point which we are called upon to decide concerns legality of
seizure of primary gold, more particularly described in the panchnama
dated 30.8.1974 (at page 95 of Volume-II). On August 28. 1974. the
residential premises of appellant No. 1 Gopaldas was searched and primary
gold was seized. A panchnama for the same was prepared by the officers of
Income-tax department. The said search and seizure operations were carried
out by R.D. Mahdeshwar, Assistant Director of Inspection, Income-tax
department, Bombay, pursuant to authorization from Commissioner of Income
Tax in terms of Section 132 of Income Tax Act, 1961. Gopaldas, appellant
No. 1, was present at the time of search. The Income Tax Authorities gave
intimation of the concealed gold bars to the Gold Control Officer, who was
informed about the recovery of huge quantity of gold from the residence of
the appellants. On August 30, 1974, the Gold Control Officer attended the
Income-tax office and, in the presence of Gopaldas. took over the custody
of the seized gold from the Income-tax department. Thereafter, the above
panchnama was prepared, which was signed by appellant No. 1 herein. On
20.9.1974, the Gold Control Officer served a show-cause notice on the
appellants calling upon them to explain why proceedings under section 71(1)
and section 74 of the 1968 Act should not be initiated. In the show-cause
notice, it was alleged inter alia that the appellants had contravened
section 8(1) read with section 8(6) and section 16(1) read with section
16(5) inasmuch as the appellants had in their possession, custody and
control primary gold in the form of gold bars; that they had failed to
dispose of the same within six months from 1.3.1967 in terms of rule 126H
of Defence of India Rules and that they had failed to file a declaration in
the prescribed form in respect of 682 gold sovereigns, one gold coin and
four gold idols (hereinafter referred to as “the gold article). The
appellants submitted their reply to the show-cause notice vide letters
dated 29.10.1974. They claimed that Bhojibai had purchased the said gold
much prior to the Defence of India Act. 1962. They claimed that they were
not aware of the existence of the said gold as it was concealed in the
cavity under an ornamental top over the cupboard in the eastern bedroom
from which the entire gold was recovered by the officers of the Income-tax
department and consequently they were not in conscious possession of the
said gold.
Mr. Sundaram, learned senior counsel appearing on behalf of the appellants
submitted that the Gold Control Officer merely took over the primary gold
from the Income-tax officers which did not constitute a seizure under the
1968 Act. That in any event, such take over was not permissible under
section 132(5) of the Income Tax Act, 1961. He urged that there was no
second seizure as alleged by respondents no. 2 and 3 herein: that the said
plea was taken to prevent the appellants from claiming immunity under
voluntary disclosure scheme. In any event, it was submitted, that if there
were two seizures, one in the Income Tax Act on 28.8.1974 and the other
under the 1968 Act on 30.8.1974, it would tantamount to the gold having
been seized by the Gold Control Officer from Income Tax Authorities which
would be no seizure in law. He relied upon the judgment of this Court in
the case of Tarsem Kumar’s (supra). He elaborated this point by alleging
that in order to get over the judgment of this Court in Tarsem Kumar’s
case, the said respondents have sought to contend that the primary gold was
returned to the appellants by Income-tax department and seized thereafter
by Gold Control Officer from the appellants. That this contention was not
possible as there was no document to establish that gold was returned by
the Income-tax department to the appellants. That this stand of the
respondents herein was self serving and incorrect as the panchnama (at page
95 of Volume-II) itself stated that primary gold was seized from Income-tax
department by the Gold Control Officer. It was urged that inter-
departmental seizure was impermissible under the Income Tax Act, 1961 as
well as under the 1968 Act.
Learned counsel for the appellants next contended that even section 66 of
the 1968 Act was not applicable as seizure connotes taking possession of
the goods contrary to the wishes of the person from whom it is taken. In
this connection, it was submitted that section 3 of the 1968 Act made the
Act inapplicable to any gold in possession of the Government. It was
contended that on and from 28.8.1974, the said gold was in possession of
Income-tax department and, therefore, the said 1968 Act was inapplicable.
It was urged, that in the circumstances, since there was no seizure in law
or fact, the appellants were entitled to claim immunity under the Voluntary
Disclosure Scheme, 1975 (hereinafter referred to as “the VDS, 1975”).
Per contra, Mr. Bajpai learned counsel appearing on behalf of the
department submitted that section 66 empowered the Gold Control Officer to
seize any gold in respect of which he had reason to believe that any
provision of the Act had been contravened. That the seizure of gold in this
case was made under a panchnama in presence of Gopaldas in the reasonable
belief that the provisions of the Act had been contravened. In this
connection, reliance was placed on the copy of the panchnama (at page No.
95 of Volume-II). which specifically recorded that the Gold Control Officer
had reason to believe that the provisions of the Act had been contravened
in respect of primary gold, gold sovereigns and gold coins, in all weighing
37.389.300 gms, value at Rs. 18.70 lacs, and seized from Income Tax
Officer. Further, CBDT had issued a circular on 30.8.1965 addressed to all
Commissioners of Income Tax and Wealth Tax stating that where gold was
seized in a search or a raid by the Income Tax Authorities, necessary
information should be given to the Gold Control Officer. It was submitted
that the circular issued by the CBDT was binding on subordinate Income Tax
Authorities. That it was in compliance with the said circular that the
Income Tax Authorities informed the Gold Control Officer about the seizure
of the said gold, in response to which the Gold Control Officer visited the
Income-tax office and seized the gold under section 66 of the 1968 Act.
Therefore, it was urged that there was no illegality in making the seizure.
That, when the Gold Control Officer went to take over the gold, he had
knowledge that in respect of such gold, certain provisions of the 1968 Act
had been contravened. It was next submitted that section 8 of the Gold
(Control) Act cannot apply to seized gold and if the interpretation place
on behalf of the appellants is accepted, it would render section 66
redundant. It was next urged that the judgment of this Court is Tarsem
Kumar’s case (supra) was given in relation to the provisions of the Income
Tax Act. That the said 1968 Act was self-contained Act. In this connection,
it was submitted that the power of seizure under section 132 of the Income-
Tax Act was limited to assets found as a result of search whereas the power
under section 66 of the Gold (Control) Act was an omnibus power of seizure,
which was not restricted by any preconditions. In this connection, it was
urged that in case of a seizure under section 132 of the Income Tax Act,
search was a precondition which requirement was not there in section 66 of
the 1968 Act. Hence, it was contended that the judgment of this Court in
case of Tarsem Kumar (supra) did not apply to section 66 of the 1968 Act.
Lastly, it was submitted that the adjudicating proceedings were separate
and independent of the prosecution proceedings and in view of the
concurrent findings of the Gold Control Authorities under section 71(1) and
under section 74, no interference is called for.
The short point which we are called upon to decide is the validity of the
seizure of primary gold on 30.8.1974 by the Gold Control Officer. For that
purpose, we have to examine the scheme of the 1968 Act. Chapter XII made
provisions for entry, search, seizure and arrest. Under section 58 any Gold
Control Officer authorised by the Administrator may search the business
premises of a dealer, if he had reason to suspect that any provision of the
Act had been contravened. Section 66 conferred power on the Gold Control
Officer to seize any gold if he had reason to believe that in respect of
such gold any provision of the Act had been contravened. It has been
vehemently urged before us on behalf of the appellants that the Gold
Control Officer had no authority to take over and seize the gold from
Income-tax department. Under section 64(b). any Gold Control Officer may,
during the course of enquiry in connection with the contravention of any
provisions of the Act, require any person to produce or deliver any
document or article or relevant to such enquiry. In our view, the words any
person” in section 64(b) included all revenue officers of the Government.
This is borne out by section 105 under which all officers of the Government
engaged in collection or prevention of evasion of revenue were required to
assist the Gold Control Officer in execution of the provisions of the 1968
Act. Hence, the Gold Control Officer acted within his authority when he
took over the said gold from the Income-tax department on 30.8.1974. In the
case of The Collector of Customs, Madras v. Nathella Sampathu Chetty
reported in, AIR (1962) SC 316, the expression “reason to believe” in
section 178(1) of the Sea Custums Act came up for consideration. Section
178(1) prescribed that where goods to which that section applied were
seized in the reasonable belief that they were smuggled, the burden of
proving that they were not smuggled shall be on the person from whose
possession they were seized. It was held by this Court that where
circumstances existed to raise a reasonable suspicion that goods seized had
been obtained illicitly, that was sufficient to constitute “a reasonable
belief that the goods were smuggled”. In the case of Narandas M. Kapadia
v. Union of India & Ors., reported in (1977) Crl. L.J. 1303, the Calcutta
High Court has held that in order to seize goods liable to confiscation
under section 110(1) of the Customs Act, the officer concerned must have
reason to believe that goods were improperly imported. That when a
challenge was thrown, it was necessary to find out whether the officer had
in fact formed the belief and whether there was material relevant or
germane upon which he could have formed the belief. If there existed some
material upon which such a belief could be formed, the Court is not
concerned with the propriety of the belief or sufficiency of the material.
Applying the above principles to the facts of the present case, we find
that seizure in this case was made by the officers of Income-tax department
on 28.8.1974 and all that the Gold Control Officer did was to take over the
seized gold. When the Gold Control Officer on 30.8.1974 went to take over
the said gold, he had knowledge of the huge quantity of gold seized by the
Income-tax department. He had the knowledge that the seized gold was
illegally possessed by the appellants, which by itself was a contravention
of the 1968 Act. The circumstances were so eloquent that they themselves
presented “reason to believe” that the provisions of 1968 Act had been
contravened. Some of the gold bars had markings and even stamp of purity
embossed on them. These writings also provided reason to believe that the
provisions of the Act had been contravened. In the circumstances, there
existed grounds upon which the belief of contravention of the Act was
entertained by the seizing officer. It was urged before us on behalf of the
appellants that “seizure” connotes taking possession of the goods contrary
to the wishes of the person from whom it is taken. It was submitted that in
the present case, the seized gold was taken from the Income-tax department
and not from the appellants and consequently, there was no seizure in law
or in fact. It this connection, reliance was placed on the judgment of this
Court in Tarsem Kumar’s case (supra). We do not find any merit in these
arguments. Firstly, as stated above, the Gold (Control) Act, 1968 is a self
contained Act, Under section 64(b), the Gold Control Officer was empowered
to call upon “any person” to produce any document or thing relevant to his
enquiry into contravention of the provisions of the Act. Under section 105,
all officers engaged in collection or prevention of evasion of revenue were
required to assist the Gold Control Officers in the execution of the
provisions of the said Act. Under section 111, the said Act was given an
overriding effect over all other laws inconsistent thereto. That mere
possession was an offence punishable under section 85(l)(ii) of the Act. On
the other hand, the purpose of seizure under section 132(5) of the Income-
Tax Act is not to punish the assessee but to assess his tax liability.
Section 132 of the Income Tax Act confers power on Income Tax Authorities
to realize the income tax dues of the assessee from his assets. After
realizing the dues, the balance value is returned to the assessee. On the
other hand, when gold was seized from the possession of the person
concerned, it was not only liable to confiscation under the 1968 Act but he
was liable to be prosecuted for the offence of possessing gold. Further,
the object behind section 132 of the Income Tax Act is to ascertain the
source of income with which the assessee acquires an undisclosed asset.
Consequently, search under section 132(1) is made a precondition to seizure
under section 132(5) (as it stood at the material time). Lastly, as stated
above, possession ipso facto was made an offence under the said 1968 Act,
which not only provided for prosecution for possessing gold on the
appointed date but it also provided for confiscation under section 74(1).
The power of seizure under section 132(5) of the Income Tax Act was limited
to the assets found as a result of the search, whereas the power under
section 66 of the Gold (Control) Act was omnibus. It was not restricted by
any preconditions. In the circumstances. we hold that the scheme of section
132(5) of the Income Tax Act. as it stood at the relevant time, was
different from that of the Gold (Control) Act, 1968. Therefore, the
judgment of this Court in Tarsem Kumar’s case (supra) has no application to
the facts of the present case. Secondly, it may be pointed out that on
30.8.1965, the CBDT has issued a circular to all Commissioners of Income
Tax and Wealth Tax stating that where gold was seized in a search/raid by
Income Tax Authorities, necessary information should be given to the Gold
Control Officer. This circular was binding on all subordinate Income Tax
Authorities, in terms of section 119 of the Income Tax Act, 1961. This
circular has to be read in the light of sections 64(b) and 105 of the Gold
(Control) Act. As stated above, section 64(b) conferred power on Gold
Control Officer to ask any person, which included Income Tax Officer, to
produce before him the primary gold which the Income Tax Officer had
seized. Under section 105, the Income Tax Officer as a revenue Officer, had
to assist the Gold Control Officer. It is, therefore, clear that under the
provisions of the Gold (Control) Act, the officer was empowered to call
upon the Income Tax Officer to produce the seized gold before him for
taking action under the Gold (Control) Act. In the circumstances, we are of
the view that there was no illegality in the matter of seizure of primary
gold on 30.8.1974 by the Gold Control Officer.
In the case of Vasantlal Ranchhoddas Patel v. Union of India, reported in
68 (BLR) 223, the Assistant Enforcement Officer obtained a search warrant
from Chief Presidency Magistrate. Bombay, on 23.7.1964 under section 19 of
FERA. authorizing him to search shop No. 157 situate at Mumba Devi Road,
Bombay and to seize incriminating documents, foreign exchange, account
books etc. In pursuance of this warrant, the Assistant Enforcement Officer
searched the premises on the same date. No incriminating documents or other
materials were found. The appellant was present in the shop. He was
searched by the officers of the Enforcement Directorate in the presence of
panchas and four packets containing diamonds were found on his person. They
were, therefore, seized. There was a safe in the shop which was also sealed
by the said officers. One of the Enforcement Officers thereafter informed a
Customs Officer about the seizure of the diamonds. On 23.7.1964, Customs
Officer went to the shop but as the panchnama had already been made and as
the diamonds had been recovered by the Enforcement Officers, the Customs
Officer did not once again seize them. On 24.7.1964, the safe was opened.
It was found to contain seven packets of diamonds. These articles were
seized by the officers of the Enforcement Directorate. All the packets of
diamonds remained in the custody of the Enforcement Directorate till
4.9.1964, when the Customs Officers took charge of the diamonds from the
Enforcement Directorate and seized them under section 110 of the Customs
Act. The appellant applied to the Chief Presidency Magistrate for orders
directing the officers of the Enforcement Directorate to return the
diamonds. On behalf of the Enforcement Directorate, it was urged that the
diamonds had not been seized under the search warrant issued by the learned
Magistrate but they had been reized under section 151 of the Customs Act,
1962. This contention was accepted by the learned Magistrate who held that
as the Customs Authorities had taken charge of the diamonds according to
law, he could not order their return. The appellant thereafter filed Misc.
Writ Petition on the original side of the Bombay High Court praying for
return of the diamonds. The writ petition was summarily dismissed. Being
aggrieved the matter came before the Division Bench of the High Court. If
was held that under section 1 10 of the Customs Act, before any action
could be taken, it was necessary that the proper officer should entertain
the belief that the goods were liable to confiscation under the Act. That
the belief must be entertained at the time when the goods were seized. It
was held on facts that the goods were seized by the Enforcement Directorate
on 23rd and 24th July, 1964 and they were taken over by the Customs
Authorities on September 4, 1964. The Division Bench rejected the argument
advanced on behalf of the appellants that the transfer of custody of the
goods by the officers of the Enforcement Directorate to the Customs
Officers did not constitute seizure under section 110 of the Customs Act .
It was held that section 110 of the Customs Act does not place any
limitation as to the person from whose possession the goods believed to
liable to confiscation can be seized. As stated above, the Gold (Control)
Act, 1968 was a self-contained Act; that under section 64(b) the Gold
Control Officer had wide powers to direct any person to produce the
document or thing relevant to the inquiry into contravention of the
provisions of the Act; that section 66 did not place any limitation as to
the person from whose possession the goods liable to confiscation could be
seized and under section 105, all revenue officers were duty bound to
assist the Gold Control Officer in execution of the provisions of the Act.
In the circumstances, the judgment of this Court in the case of Gian Chand
v. State of Punjab, reported in AIR (1962) SC 496 has no application. For
aforestated reasons, the take over of gold on 30.8.1974 constituted lawful
seizure under Section 66.
The last point which we have to decide is – whether the appellants herein
were entitled to claim immunity from confiscation of gold and imposition of
penalty under the Voluntary Disclosure of Income and Wealth Ordinance,
1975? In this connection, the following facts may be noted. On 8.10.1975,
the President of India promulgated Voluntary Disclosure of Income and
Wealth Ordinance, 1975. The said Ordinance was repealed subsequently by the
Voluntary Disclosure of Income and Wealth Act (No. VIII of 1976). The Act
conferred complete immunity from proceedings for confiscation, penalty and
prosecution. On 27.12.1975, appellant No. 1 as Karta herein filed the
declaration under the VDS, 1975 and claimed immunity. On 5.6.1976, the
Officer took the decision that the declaration in respect of the seized
gold could not be accepted. It was further held that as the show-cause
notice was issued under the 1968 Act on 20.9.1974 and as the declaration
was filed on 27.12.1975, the appellants were not entitled to immunity.
Learned counsel appearing on behalf of the appellants urged that in the
present case, proceedings were not pending on the relevant date and in
support of his submission he contended that the initial order dated
26.6.1976 passed by the Collector was set aside by the Appellate Authority
on 21.11.1977 and the proceedings were remanded for de novo trial and,
therefore, till the commencement of de novo adjudication, there were no
proceedings pending and consequently the appellants were entitled to
immunity. We do not find any merit in this argument. As stated above,
proceedings were initiated vide show-cause notice dated 20.9.1974 whereas
the Ordinance came to be promulgated on 18.10.1975 and appellant No. 1
filed his declaration on 27.12.1975. Under the Ordinance, a declarant was
entitled to claim immunity from penalty, confiscation and prosecution under
Gold (Control) Act, if before making the declaration the gold was not
seized and no proceeding was pending in respect of that gold before any
authority under that Act. Since, proceedings were pending at the time of
filing of the declaration, the appellants were not entitled to immunity.
It was next contended on behalf of the appellants that since there was no
seizure in fact or in law, the appellants were entitled to claim immunity
under the VDS, 1975. In this connection, it was argued that seizure in the
present case was not in accordance with sections 58, 59 and 66 of the Gold
(Control) Act and consequently, it was void and, therefore, the appellants
were entitled to claim immunity under the VDS, 1975. It was submitted that
in the present case, the declaration of appellant No. 1 was refused only on
the ground that there was seizure of gold but once this fact is
demonstrated to be incorrect then ipso facto the reason for depriving the
appellants of the benefit of the scheme would fail. In this case, we have
held that the seizure of the gold on 30.8.1974 was in accordance with the
provisions of the 1968 Act and since the declaration was filed after the
said seizure, the appellants were not entitled to claim immunity.
To sum up, we find that the seizure of the gold on August 30, 1974 was
lawful and in accordance with Section 66 of the 1968 Act. However, in
absence of any evidence of recovery of primary gold from the western
bedroom and the telephone room and in the absence of any material to show
that the appellants had knowledge of the said gold hidden in the ornamental
top of the cupboard in the eastern bedroom, the contravention of the
provisions of the 1968 Act is not established against the appellants and
consequently the orders of confiscation and penalty are not sustainable.
For the aforestated reasons, the appeal is allowed and the impugned
judgment and order of the Division Bench of the High Court dated 5.1.1994
is set aside. The order of the Appellate Authority dated 5.11.1981
confirmed in Revision vide order dated 10.7.1982 to the extent of absolute
confiscation of seven gold bars, one gold brick, gold coins and sovereigns,
more particularly described in the panchnama dated 30.8.1974 (page 95 of
Vol. II) with personal penalties on each of the two appellants herein, are
set aside. Consequently, we direct that the said gold, if not disposed of
so far. shall be returned to the appellants within two months from the date
of the receipt of the copy of this judgment and order by the Collector of
Customs (Preventive), Bombay. If, however, the said gold is disposed of.
its sale price shall be paid to the appellants with interest @ 6% p.a. from
the date of disposal till payment. In the facts and circumstances of this
case, there will be no order as to costs.