JUDGMENT
P.C. Jain, Member (T)
1. Brief facts of the case are that 1246.200 gms. of old gold ornaments were recovered from the premises occupied by the appellants herein. It has been held that different quantities of old gold ornaments were found hypothecated with them, by the various persons. It has further been held that the appellants have violated the provisions of Section 6 and 16 of the Gold Control Act read with Rule 4 of the Gold Control (Forms, fees and miscellaneous matters) Rules, 1968. Accordingly, the adjudicating authority has confiscated the gold ornaments, but has given an option to the appellants on payment of a fine of Rs. 15,000/-. He has also been imposed a penalty of Rs. 2,000/- on each of the appellants herein. The appellants’ learned advocate Sh. T.N. Kaul has stated that the appellants had advanced money to their known friends and relations against the security of ornaments. There is no indication that the appellants were carrying on the business of hypothecation. Merely advancing of money as loan against security of ornaments would not be covered within the scope of business of hypothecation as envisaged under Section 6 of the Gold Control Act. As regards the non-declaration under Section 16 of the Gold Control Act, the learned advocate pleaded that the quantitative limit set out in Sub-section (.5) of Section 16 of the Gold Control Act was not crossed by any of the appellants before they could be made liable for declaration under the said Section 16. Therefore, there was no breach of Section 16 of the Gold Control Act.
He has also pleaded that despite the fact that the adjudicating authority has held that the violation by the appellants is technical, he has gone on to confiscate the gold ornaments and has imposed a penalty of Rs. 2,000/- each. Imposition of redemption fine of Rs. 1.5,000/- and penalties of Rs. 2,000/- each, in the face of adjudicating authority’s own finding of technical violation by the appellants, appear to be on the high side. He has also pleaded for reduction of redemption fine and penalties, in case his plea of non-contravention of Section 6 and 16 of the Gold Control Act is not accepted.
2. Learned SDR on the other hand, has reiterated the findings of the adjudicating authority. She has also stated that as has been rightly held by the adjudicating authority, advancing of money as loan to one’s friends and relations would also be covered within the term ‘Hypothecation’ or ‘Pledge’ referred to in Section 6 of the Gold Control Act. She has also stated that having regard to the value of gold ornaments which is to the tune of Rs. I,74,468/-, redemption fine and penalties imposed cannot be any stretch of imagination being deemed to be on the high side.
3. We have carefully considered the pleas advanced from both sides. We observe that two provisions which have been held to have been contravened by the appellants” are Section 6 and 16 of the Gold Control Act. Sub-section (1) of Section 6 enables the Gold Control Administrator to prescribe a return to be furnished by Pawn brokers in respect of receipt or sale of hypothecated gold. While we set aside the plea of the learned advocate for the appellants that the appellants were not engaged in the act of hypothecation, pledge, mortgage or charge of any article or ornaments, we observe that no return has been prescribed by the Gold Control Administrator in terms of Sub-section (1) of Section 6. Sub-section (2) of the said section further enables the administrator to authorise any Gold Control Officer to examine the accounts of any pawn-broker engaged in any of the aforesaid activities and if any quantity of gold found is in excess of these account and such excess is not duly accounted for to the satisfaction of the officer, such gold shall be deemed to be in the possession of such person (Pawn- broker) in contravention of the provisions of the Gold Control Act. There is no such allegation in the show cause notice nor any finding to that effect in the impugned order. On the other hand, it has been clearly admitted that the appellants (Sh. Naresh Jain, Sh. Kanwar Sain Jain, Sh. Jaipal Jain, Smt. Manju Jain, Smt. Maya Devi and Smt. Santosh Jain) stated to whom the gold belonged and those persons corroborated the statement of the appellants to have given those ornaments against advance of money or loans on security. Therefore, it cannot be said that there was any excess quantity of gold ornaments not accounted for to the satisfaction of the Gold Control officers, in the possession of the appellants. In this view, Sub-section (2) of Section 6 cannot also be held to have been contravened by the appellants.
4. As regards contravention of Section 16 of the Gold Control Act, we observe that the quantity of gold in the possession of each of the appellants did not exceed beyond the permissible quantity required to be held by each of them in their individual capacity in terms of that section. In other words, quantity found in possession of each of the appellants is less than 2,000 gms. of gold ornaments and as such, there was no need for declaration of any such gold by any of the appellants herein. The adjudicating authority appears to believe on the basis of Supreme Court’s observation in the case of Sh. Bhadri Prasad v. Collector of Central Excise”, Kanpur and Ors. (AIR 1971/SC-1170) that every pawn broker is required to make a declaration of his holdings and furnish a return, in terms of Rule 4 of the Gold Control (Forms, Fees and Misc. matters) Rules, 1968. This reading of the Supreme Court’s observation in our view is incorrect. A close reading of the observations quoted by the learned Collector himself in the impugned order indicates that if a person is covered by Sub-section (5) of Section 16 of the Gold Control Act, he would not be required to make a declaration in terms of this section. The pawn broker enjoys the same exemption as applicable to a person in terms of Sub-section (5) of Section 16 inasmuch as that a pawn broker by law, unlike a licensed Gold dealer or refiner, is not compulsorily required to furnish a return irrespective of his holding. Accordingly, we hold that none of the appellants herein has contravened the provisions of Section 16 of the Gold Control Act. Rule 4 of the aforesaid 1968 Rules would apply to a pawn broker who goes out of the purview of sub-section (5) of Section 16 and is therefore, required to make a declaration. This Rule does not help the department in this case.
5. In view of the aforesaid findings, the question of confiscation of gold ornaments and consequently the imposition of penalty does not arise. Hence the impugned order is set aside while allowing the appeals of the appellants.