M.M. Malkani vs M. S. Mehta, Collector Of Customs on 1 January, 1800

Bombay High Court
M.M. Malkani vs M. S. Mehta, Collector Of Customs on 1 January, 1800
Equivalent citations: 1990 ECR 62 Bombay, 1990 (45) ELT 62 Bom
Bench: M Pendse


1. Petitioners Nos. 1 and 3 to 5 were carrying on business in partnership under the name of M/s. M. B. Malkani. The business of the firm is dealing in gold and gold ornaments and the petitioner firm is registered licence gold dealer under the Gold Control Act, 1968. On November, 26, 1970, the petitioner firm tendered 38 gold bangles and 4 broken pieces of bangles together weighing 928.750 grams to the Government of India Mint for conversation into standard weighing gold bars. The gold tendered by the petitioner firm was seized by the Customs and Central Excise Officers posted at the Mint as according to the officers the ornaments tendered were not really the ornaments as contemplated by Section 2(p) but was primary gold. On May, 11,1971,the petitioners except petitioner No. 2 were served with show cause notice, a copy of which is annexed as Exh A to the petition. By the said show cause notice, the Superintendent of Central Excise, Gold Circle, Bombay, called upon the petitioners to show cause why the gold tendered by them to the Mint should not be confiscated as prima facie it appears that the provisions of Sections 31 and 55 read with Section 2(a) of the Act and Rule 13(g) of the gold Control (Forms Fees and Misc. Matters) Rules, 1968 are contravened. The show cause notice also called upon the petitioners to explain why penalty should not be imposed upon them apart from the order of confiscation of seized material.

2. Petitioner No. 2 joined the partnership concern on July, 1, 1971. In pursuance to the show cause notice the petitioners claimed that the gold seized by the officers is not in the nature of primary gold but they are ornaments. It was also claimed that the ornaments were purchased from 34 different customers under vouchers signed by petitioner No. 2. The Superintendent, after considering the claim of the petitioners, by his order dated April, 20,1972 ordered confiscation of the entire seized material and imposed personal penalty of Rs. 2500/- on the petitioners. The Deputy Collector of Central Excise, came to the conclusion by the petitioners that the bangles were purchased from various people and vouchers were issued, is bogus as letters addressed to those alleged customers by registered post acknowledgment due were required as `not found and traceable’.

3. The order passed by the Deputy Collector was challenged by the petitioners by filing an appeal before the Collector of Customs, Preventive, Bombay , and the appeal was partially allowed by the order dated October, 13, 1972. The Appellate Authority found that the petitioners’ explanation in respect of gold measuring 142 grams though not entirely proved can be accepted and the order of confiscation in respect of gold weighing 142 grams is required to be set aside. The Appellate Authority also reduced the penalty on the petitioners Nos. 3, 4 and 5 to the sum of Rs. 100/-only. The personal penalty on petitioner No. 1 of Rs. 2500/- was maintained.

The Appellate Authority concurred with the finding of the Deputy Collector that the vouchers were issued in factious names and the transactions alleged by the petitioners were bogus. The order passed by the Appellate Authority wa confirmed in revision preferred by the petitioners before the Government of India. These orders are under challenge in this filed under Article 226 of the Constitution of India.

4. Shri Advani, the learned counsel appearing in support of the petition, very strenuously urged that the three authorities below have proceeded to pass orders against the petitioners by traveling beyond what was alleged in the show cause notice. The complaint is that the orders proceeded on the grounds which are divorce to the show cause notice. The learned counsel also submitted that what was seized was not a primary gold but were the ornaments in the shape of bangles. It was also claimed that the authorities below overlooked the fact that the prosecution launched against the petitioners ended in discharge in the criminal Court. In my judgment, the submissions of the learned counsel cannot be accepted. The show cause notice inter alia mentions that the petitioners have contravened the provisions of Section 31 of the Act. Section 31 provides that save as otherwise provided in the Act, no licensed dealer shall buy or otherwise acquire or agree to buy or otherwise acquire or accept or otherwise receive or agree to buy or otherwise acquire or accept or otherwise receive from a person who is not a licensed dealer or refiner, any ornament, unless such dealer knows or has reason to believe that such ornaments being required to be included in the declaration, has not been so included. In other words, a licensed dealer is entitled to purchase the ornaments from a person who is not a licensed dealer provided he has no reason to doubt that such ornaments being required to be included in the declaration have not been so included. The licensed dealer is permitted to acquire but only in exceptional cases.

5. The first submission of Shri Advani is that what has been acquired to be petitioners are ornaments and not the primary gold, while the show cause notice was served upon the petitioners complaining that the acquisitions was of a primary gold. The authorities below have found that though the gold seized is in shape of bangles, it is difficult to hold that those are ornaments because the weight and thickness is not common. The learned counsel submitted that the appellate authority has accepted the claim that the gold seized was in the form of ornaments and on that finding has released the ornaments weighing 142 grams. I propose to consider the case of the petitioners on the basis that what was seized by the authorities were ornaments and not the primary gold. Shri Advani complains that the petitioners were called upon to explain their acquisition of primary gold and not of ornaments and therefore, the orders based upon the acquisition of ornaments should be set aside. I am not inclined to accept this line of reasoning. The show cause notice, through refers to Section 31(iii) dealing with acquisition of primary gold, also sets out that the petitioners have contravened provisions of Section 31 of the Act. Merely because the show cause notice describe the seized material as primary gold instead of ornaments, the orders under challenge cannot be set aside on that count. In case the petitioners establish that the acquisition of ornaments, as he claims the seized material to be, is in accordance with law, then only the orders under challenge could be disturbed. As mentioned herein above, the petitioners could acquire ornaments provided they are not aware or have reason to believe that such ornaments, through required to be included in the declaration , have not been so included by the seller. The petitioners have come out with a specific case that they have purchased the ornaments these ornaments from about 34 customers and have produced vouchers in support of their claim. All the three authorities below have concurred in the finding that the alleged purchases of the petitioners were totally factious and non-existent. The authorities sent notices by registered post, acknowledgment due, to those 34 customer and save and except two of them the other notices were returned unserved with an endorsement that the addresse is not traceable. From this, the authorities came to the conclusion that the transactions were factious in nature and no infirmity can be found with that conclusion. Once it is held that the petitioners have acquired the ornaments in contracention of provisions of Section 31 of the Act, then the orders under challenge are required to be sustained.

6. Shri Advani submits that Section 100 of the Act requires the licence dealer to take precaution before accepting, buying or otherwise receiving any gold from any person and such precaution are in the shape of the steps as are specified by the Central Governments by Rules. The learned counsel submits that Section 100 has no application in respect of petty transactions and petty transactions are defined by the explanation to the Section as acquisition which does not exceed 25 grams. Shri Advani submits that in the present case, the petitioners have acquired ornaments of less than 25 grams from large number of customers, and therefore, it would not be necessary for the petitioners to identify the customers and therefore it would not be necessary for the petitioners to identify the customers as contemplated by Section 100. The submission proceeds on the assumption that the customers as contemplated by Section 100. The submission proceeds on the assumption that the transaction entered into by the petitioners were genuine and in fact there existed such sellers of ornaments. From the findings recorded by the three authorities below,it is obvious that the transaction were not only genuine but were not real in nature, but only the record was prepared and…….. to overcome the provision of the Act. If the transaction of sale are found to be bogus, then the question of application of Section 100 of the Act does not arise.

7.Shri Advani then submits that the criminal Courts has found in favour of the petitioners while passing the order of discharge and those findings should be taken into consideration while considering the correctness of the orders under challenge. I am afraid this submission could not be entertained, because it is well settled that what is admissible are only the conclusions recorded by the criminal Court and not the reasoning thereof. Whatever the criminal Court might have decided, that would have no effect as far as the confiscation of ornaments are concerned. The orders under challenge seems to be perfectly justified and requires no interference.

8. Accordingly, the petition fails and the rule is discharged with costs.

At the stage of admission of the petition, the petitioners have agreed that they would not seek possession of gold weighing 142 grams during the pendency of this petition and on that statement the department has not proceeded to recover the amount of penalty. As the petitioners have now failed, the Department is bound to return the gold which was released by the appellate authority. It is open for the Department to adopt the necessary proceedings to recover the penalty but for recovering the amount of penalty, the released goods need not be retained.

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