ORDER
K. Gopal Hegde, Member (J)
1. Revision Application filed before the Government of India against order No. 117 to 118 dated 5-5-1980 passed by the Gold (Control) Administrator statutorily stood transferred to the Tribunal for being heard as appeals. This Revision Application came to be numbered as GC(T) Bom.A.No. 60 of 1980. As the Gold Control Administrator had disposed of two appeals by a common order, the appellant was directed to restrict the Revision Application filed before the Government of India to one of the appeals or to file a supplementary appeal with a formal application for condonation of delay. The appellant opted to file a supplementary appeal with a condonation application. The supplementary appeal filed by the appellant came to be numbered as GC(T) B 80 of 1986. The formal application of condonation of delay was numbered as COD(B) 113/of 1986.
2. The condonation application was allowed since option was given by the Tribunal to file a supplementary appeal in order to comply with the procedural requirements.
3. The two appeals involve common questions of law and facts therefore, they are clubbed together and heard together and hence this common order. The brief facts necessary for the disposal of these appeals may be stated as under:
The Central Excise Officers on 26-2-1976 searched the business premises as well as the residential premises of the appellant who is a licensed gold dealer. On verification of the statutory record and the physical stock, the Central Excise Officers noticed shortage of 895.450 gms. in the stock of 22 cts. gold ornaments. The search of the residential premises yielded in the recovery of primary gold weighing 706.700 gms. and gold ornaments weighing 590.350 gms. one piece of the primary gold weighed 116.300 gms. and on assaying the purity of which was found to be 999.4%. The Collector of Central Excise & Customs, Pune initiated three proceedings, one under the Customs Act for possessing contraband gold, another in respect of the shortage of gold ornaments found in the shop premises and the third in regard to the primary gold found in the residential premises. He also passed three separate orders. In the proceedings initiated under the Customs Act, he ordered absolute confiscation of 116.300 gms. and also imposed a penalty of Rs. 2,000/-. Against this order, the appellants herein preferred an appeal before the Central Board of Excise & Customs. The Board by its order No. 2074 dated 24-11-1980 observed that as the gold in question has been initially seized under the Gold Control Act and also confiscated under the Gold Control Act, the Collector ought not to have passed the order confiscating those pieces of gold under the Customs Act. The Board also observed the seizure had already been made under the Gold Control Act, the subsequent seizure under the Customs Act was not legally tenable. There was also lack of sufficient evidence to establish guilt of the appellant and for establishing the contrband nature of the gold for the purpose of the Customs Act. The Board, therefore, set aside the order passed by the Collector under the Customs Act.
4. In respect of the shortage found in the shop premises the Collector who held the adjudication imposed a penalty of Rs. 10,000/- under Section 74 of the Gold Control Act.
5. In respect of the primary gold found in the residence the Collector who held the adjudication ordered absolute confiscation of the primary gold weighing 116.300 grams under Section 71(1) of the Act. He also ordered confiscation of the primary gold weighing 590.400 grams but allowed redemption on payment of a fine of Rs. 7,500/-. He, further, imposed a penalty of Rs. 5,000/- on the appellant. He, however, ordered release of the gold ornaments weighing 590.300 grams seized from the residence.
6. Feeling aggrieved by the personal penalty, imposed in respect of shortages found in the business premises; and the confiscation and imposition of fine and penalty in respect of the primary gold found in the residential premises, the appellant herein preferred two separate appeals before the Gold Control Administrator. The Administrator, however clubbed both the appeals and passed a common order. The Administrator, after consideration afresh of the contentions urged before him reduced the personal penalty from Rs. 10,000/- to Rs. 5,000/- but confirmed the absolute confiscation of gold weighing 116.300 grams and also the confiscation, with an option to pay a fine of the primary gold weighing 590.400 grams and the personal penalty of Rs. 5,000/-.
7. (1) During the hearing of these appeals, Shri S.R. Shetty the learned Advocate for the appellant, made the following submissions: The shortage noticed in the shop premises had been sufficiently explained but the authorities below have not properly appreciated the contentions and the evidence. He urged that immediately after the seizure the statement of the appellant was recorded and in that statement the appellant had stated, among other things, that the gold ornaments for which there was no market weighing about 709 gms. were melted and primary gold weighing 706.700 gms were obtained. He also urged that the employee of the appellant committed theft and the police were able to recover 19.3 gms. besides Rs. 12,000/-. The two authorities below only took into consideration the seizure of 193 gms. but did not take into consideration the cash amount of Rs. 12,000/-recovered from the employee Shri More. If that had been taken into consideration there would be no discrepancy between the shortage noticed in the shop and the primary gold found in the residence and recovered from the employee Shri More.
(2) Admittedly no gold had been seized from the shop premises. Therefore there could be no confiscation of the gold. In the circumstances, the Collector as well as the Gold Control Administrator committed an error in invoking Section 74 to impose a personal penalty for the alleged offence of shortage in the shop premises. He urged that Section 74 would apply only if there is an order to confiscate gold and in the absence of such an order, no penalty can be levied.
(3) The Collector and the Board committed an error in ordering absolute confiscation of primary gold – weighing 116.300 gms. Shri Shetty urged that what was seized was not at all primary gold but it was a patli or a bracelet. In support of his contention Shri Shetty relied upon the description given in the seizure panchnama which read:
Sl.No. Description Weight Purity Value (Rs. )
1. Primary gold 116.300 22 cts 5,815/-
turned strip of
patli - 1 piece
(4) Shri Shetty urged that absolute confiscation of the above was ordered mainly on the ground of its purity and because of the findings of the Collector that it was a foreign gold. Shri Shetty contended that the said gold had been in the family for over 35 years when there was no restriction to import pure gold. It was also submitted by Shri Shetty that in the appeal filed against the order of the Collector under the Customs Act, the Board had not only set aside the order of confiscation that it had even observed:
"There is also lack of sufficient evidence to establish the guilt the appellant and for establishing the contraband nature of the gold for purposes of the Customs Act." In view of the above finding of the Board, Shri Shetty contended that the confiscation of that gold was bad and in any case, there was no justification to order absolute confiscation and the Collector as well as the Board ought to have given an option to redeem the said gold as has been done in the case of other primary gold.
(5) The Collector as well as the Board ought to have accepted the explanation of the appellant with regard to the shortage and about the primary gold found in the residence of the appellant. It was submitted by Shri Shetty that the residence is above the shop -premises and entrance to the residence through the shop premises and for the purpose of safety the primary gold obtained by melting gold ornaments was kept in the residence and this explanation should have been accepted.
(6) Shri Shetty further submitted that the Collector having rightly released old gold ornaments found in the residence committed an error in imposing a penalty of Rs. 5,000/- on the ground that the appellants did not make a declaration in respect of the said ornaments. Shri Shetty urged that the Collector had accepted that the ornaments belonged to his mother and that the mother had given the said ornaments for keeping in safe custody and in the said circumstances there was no legal obligation for the appellant to make a declaration in respect of the said gold ornaments and as such the penalty imposed was bad. The Board did not consider the above contention and therefore the confirmation of the penalty of Rs. 5,000/- by the Board is also bad-in-law. Shri Shetty finally prayed that the two appeals may be allowed, the order of confiscation as well as the penalty may be set aside.
8. Shri Pattekar, appearing for the Collector, supported the orders passed by the Collector and the Board. He urged that the two authorities have given cogent reason to support their conclusions and therefore their findings may not be disturbed. Shri Pattekar also submitted that the appellant has been giving inconsistent versions and his contentions that the primary gold found in the residence was obtained from melting old gold ornaments cannot be believed. Shri Pattekar also submitted that what was recovered from the residence is not patli or bracelet but a patti which is a primary gold and its purity was found to be 999 and such a purity is not obtained in Indian Mint. Therefore, the finding of the Collector was justified. Finally Shri Pattekar submitted that the two appeals may be rejected.
9. he points that fall for determination are:
(1) Whether the imposition of personal penalty of Rs. 5,000/-on the appellant in regard to the shortage found in the shop premises is not legal and whether it is unjustified?
(2) Whether the absolute confiscation of patli weighing 116.300 grams was unjustified?
(3) Whether the confiscation of 590.350 grams of primary gold was unjustified and,
(4) Whether the imposition of penalty of Rs. 5,000/- on the appellant for non-declaration of the ornaments was illegal and unjustified?
Point (1) : There was no dispute that the Central Excise Officer noticed the shortage of 895.450 grams in the stock of 22 cts. gold ornaments. To arrive at this figure, they had taken into consideration the transactions entered in the statutory records upto 1-2-1976. and the physical stock of the gold ornaments. The appellant did not contend that there was no shortage or the shortage found was incorrect. The appellant, however, gave an explanation for the shortage and the explanation was that gold ornaments weighing 709.500 grams were melted because the ornaments have become obsolete and not marketable. He further stated that by melting gold ornaments he obtained primary gold weighing 706.700 grams. For the purpose of safety and security, the melted gold was kept inside the residence. The Collector as well as the Gold Control Administrator did not accept this explanation. The Collector imposed a penalty of Rs. 10,000/- and the Gold Control Administrator reduced the penalty to Rs. 5,000/-. There appears no justification to disturb the above findings of the Collector and the Board. The shortage found was 895.490 grams. Even if the statement of the appellant is accepted in toto, the weight of the ornaments melted was 709 grams. Still there is a deficit of 186 grams for which no explanation is forthcoming. Further, the shortage noticed was gold ornaments of 22 cts. The primary gold found are one patli piece weighing 116.300 grams. Gold lagadi found pieces 442.400 grams, and Gold pieces of lagadi three pieces weighing 168.000 grams. On assaying the one piece weighing 116.300 grams was ground to be 999.4% purity. Therefore, this could not represent the gold ornaments stated to have been melted. If that quantity is deducted from he total quantity of primary gold found in the residence, the quantity comes to 590.350 grams. But then the shortage noticed was 859.450 grams. They do not tally. Further, the explanation given was that for the purposes of safety and security, the melted gold was taken to the residential portion. This cannot be true because during the search of the premises, the Central Excise Officers found ornaments weighing 2150.750 grams in the shop premises. If safety and security was the reason for keeping melted gold in the residential premises then one would expect the ornaments weighing 2150.750 grams also being removed to the residential portion but then that quantity remained in the shop premises. The other explanation given was that there was a theft and gold ornaments weighing 193 grams were recovered by the police and besides Rs. 12,000 which represented the sale proceeds of the gold ornaments were also found by the police. For reducing the personal penalty, the Gold Control Administrator had taken into consideration the theft that had taken place in the shop. During the hearing, Shri Shetty submitted that the authorities below did not take into consideration the cash found by the police with their employee Shri More. This contention has no force. Firstly because the categorical statement made by the appellant was that they had removed gold ornaments weighing 709 grams from the shop premises. Total shortage found was 859.450 grams, 193 grams found from More is added it exceeds the shortage noticed by the Central Excise Officers. Therefore, question of taking the cash found would -not arise. Further, it was admitted in the statement that More had committed theft of gold ornaments from the residence and probably the cash found by the police represents the sale proceeds of those ornaments. In the circumstances, I see no reason to interfere with the findings of the Collector and the Board.
The legal contention raised by Shri Shetty was that what was noticed was shortage and therefore that was not available for confiscation. When no order to confiscate the gold could be passed under Section 71 no penalty can be levied under Section 74. There is no substance in this contention. Sub-section (1) of Section 71 makes the gold liable confiscation if any provision of the Act or the Rules has been contravened in respect of the said gold. Admittedly, there has been contravention of the provisions of Section 55 in respect of this gold ornaments which were found short, therefore, the gold which were found short became liable for confiscation. Actual confiscation could not be done because he gold ornaments were not available. In order to levy penalty under Section 74, it is not necessary that the offended gold should be available for confiscation. It is sufficient if the offended gold became liable to confiscation under Section 71. If the contention of Shri Shetty is to be accepted all that a gold dealer is required to avoid being penalised under Section 74, is clanestinely dispose of his stock. Such an interpretation would defeat the object and the purpose of the Act. I, therefore, reject that contention.
Point No. 2 : It was argued on behalf of the appellant that the Collector ordered absolute confiscation of the primary gold weighing 116.300 grams solely on the basis of its purity and because of his conclusion that such a purity is not obtained in India and therefore that piece of gold was a smuggled gold. Shri Shetty contended that the Collector’s finding in that regard is erroneous and the Gold Control Administrator also did not properly consider the evidence relating to that piece of gold. Shri Shetty urged that the authorities below have not considered whether that piece of gold is primary gold or ornament. Shri Shetty also relied on the observation of the Board in the appeal filed against confiscation of that piece of gold ordered under the Customs Act. He particularly relied on the following observations of the Board : “There is also lack of sufficient evidence to establish guilt of the appellant and for establishing the contraband nature of the gold for the purpose of the Customs Act.” There appears considerable force in the contention urged by Shri Shetty. In the show cause notice the allegation was that the appellant contravened the provisions of Section 8 of the Gold (Control) Act and that he was in possession, custody and control of primary gold weighing 706.700 grams. No distinction was made between the two sets of primary gold in the show cause notice. The Collector in his order observed : “I confiscate absolutely the gold piece weighing 116.300 grams under seizure as it is of foreign origin.” His further order was “I confiscate the primary gold weighing 590.400 grams but give Shri V.A. Yeolekar, Pune an option to redeem the same on payment of a fine of Rs. 7,500/-.” So it is for the first time in his order the Collector made a distinction between two types of primary gold seized from the residence of the appellant. The primary gold which was not of foreign origin, was allowed to be redeemed on payment of fine. Absolute confiscation was ordered on account of finding of the Collector that, the primary gold was of foreign origin. The similar finding given by the Collector was set aside by the Board under the Customs Act. Further, there was no allegation in the show cause notice making a distinction between the two sets of primary gold. In the said circumstances, the Collector was not justified in ordering ‘absolute confiscation of gold piece weighing. 116.300 grams. The Collector’s order would go to show that other pieces of primary gold were also of higher purity than 22 cts. gold. The fineness alone” should not have been taken as a criteria for arriving at the conclusion that it was smuggled gold. Even assuming that it was of foreign origin, there was no finding by the Collector that it was smuggled gold. The appellant had contended that that gold piece has been in their house for over 35 years when the import of gold was not prohibited. The Collector, no doubt, had some justification not to accept this part of the appellant’s explanation since no such explanation was offered when his statement was recorded on 27.2.1976. But then that statement itself was not found to be correct. In the said circumstances, the Collector and the Gold Control Administrator should have recorded definite finding that gold piece weighing 116.300 grams was smuggled into India. In the absence of such a finding merely on the ground of purity the Collector and the Gold Control Administrator were not justified in concluding that that piece was smuggled into India. Therefore, the distinction made between that gold piece and the other gold pieces for the purposes of giving redemption has no justification.
Coming to the contention of Shri Shetty that the gold piece weighing 116.300 grams is not primary gold but it was patli or bracelet, it may be stated that if it was a patli or bracelet, one would have expected the appellant to make such a statement when he was questioned on 27-2-1986. > Further, the description in the panchnama by itself would not establish that it was a patli or bracelet. It was not the contention of the appellant that patli or bracelet was cut into pieces. An attempt was made before the Collector that that gold was a bracelet in a straightened form. The observation of the Collector reads : “Shri Yeolekar has attempted to argue that the gold was in fact a bracelet (patli) only in a straightened form; that it was initially in the round form and he is not aware of who straightened it up. However, this attempt is rather late. He had all along maintained that it was primary gold obtained by melting gold ornaments from his shop. The panchas have also certified that this piece is of primary gold in the form of a strip.” Shri Shetty was not able to point out evidence contrary to the conclusion arrived at by the Collector. In the. circumstances, I reject this contention that gold piece weighing 116.300 grams is not primary gold.
But then haying regard to my finding that the Collector and the Gold Control Administrator were not justified in treating that piece as smuggled gold and ordering absolute confiscation. I set aside absolute confiscation of gold piece weighing 116.300 grams but order confiscation with an option to redeem the same on payment of fine of Rs. 5815.00 (Rupees Five thousand eight hundred and fifteen only) the value shown in the panchanama. The appellant shall exercise that option within two months from the date of communication of this order. In the event of the appellant exercising the option, he shall get the primary gold converted into ornaments immediately thereafter.
Point No. 3 : Shri Shetty appearing for the appellant contended that the primary gold weighing 590.350 represented the melted ornaments and therefore the Collector was not justified in ordering confiscation and the Gold Control Administrator was unjustified in confirming that part of the Collector’s order. There is no merit in this contention. I have already considered this plea while considering the point No. 1. I have dis-believed the theory that the primary gold found in the house was obtained by melting ornaments of 22 cts. found short in the shop. I, therefore, reject this contention of Shri Shetty. The Collector as well as the Gold Control Administrator were justified in ordering confiscation and allowing redemption.
Point No. 4 : From the residential premises of the appellant, ornaments weighing 590.350 grams were also seized. The explanation offered by the appellant in regard to the gold ornaments seized from his residence was, some of the ornaments belonged to his mother, some belonged to persons who had kept them with his mother against some hand loans taken from her and some belonged to his customers. He also admitted that all those ornaments were given by his mother to him for safe custody. He further admitted that he had not filed any declaration in respect of those ornaments. But then he did file a declaration on 28-2-1976 after the detection of the case. He also contended that he received the ornaments for safe custody on 5-2-1976 and the declaration filed within 30 days was valid. The Collector, however, found that the ornaments were given by the person to whom they belonged several months earlier to 5-2-1976. The Collector further found that the appellant’s mother was old, infirm, could not see very well. He, therefore, inferred that she could have kept the valuables with the appellant immediately on receipt. For these reasons, he did not believe the statement of the appellant that he received them on 5-2-1976. Since he had not filed declaration the Collector held that he was liable to penalty under Section 74 of the Act. He imposed a penalty of Rs. 5,000/- on the appellant. He had, however, released the gold ornaments to the person from whom the same were seized. The Gold Control Administrator had confirmed this part of the order without much discussion, From the order of the Collector, it appears that out of gold ornaments weighing 590,350 grams some gold ornaments belonged to the mother of the appellant, some were received by her against the loans advanced by her, and some belonged to the customers of the appellant. The gold ornaments, belonged to the mother and received by her against loans, were given to the appellant for safe custody. Therefore, in respect of these gold ornaments, there was no legal obligation on the appellant to give declaration. Those ornaments were not received as stock in trade of the firm and there was no finding by the Collector or the Gold Control Administrator that hey formed stock-in-trade of the firm. The requirements of declaration under Section 16(2)(f) would arise only in respect of those gold ornaments which were received by the appellant from his customers. There is no indication in the order of the authorities below which were the ornaments received by the appellant from his customer or what was the weight of those ornaments. For the purposes of imposing penalty, the Collector had taken into consideration all the ornaments weighing 590.350 grams. It may be pointed out here that in the show cause notice issued to the appellant, the allegation was that he contravened the provisions of Section 8(2) read with Section 16(2)(f) inasmuch as he bought, accepted or otherwise received gold ornaments weighing 590.350 grams and he had reason to believe that the said ornaments should be included in the declaration but had not so been included. From the findings of the Collector, it is clear that the ornaments belonging to the mother and ornaments received by her against the loans advanced by her were kept with the appellant for safe custody and they were not bought or accepted or received for any purpose other than safe custody. Further, having regard to the quantity, namely 590.350 (Assuming that all the quantity belonged to his mother), the mother was not required to make any declaration under Section 16 because the weight of gold ornaments fell short of 2000 grams see Section 16(5)(b). Therefore, it cannot be said that the receipt of the ornaments was in violation of the provisions of Sub-section (2)(ii) of Section 8.
11. The order of the Collector is not clear and explicit as to the reasons why he imposed a penalty of Rs. 5,000/- on the appellant. At one place the Collector observed that the appellant ought to have made the declaration in respect of the gold ornaments seized from the residence and no such declaration had been made within the presecribed time. Therefore, he became liable to penalty under Section 74. The Collector’s above finding is not wholly correct. As has been pointed out earlier the appellant was not required to make a declaration in respect of gold ornaments which were received by him for safe custody from his mother. The declaration required was in respect of the gold ornaments received from the customers. Admittedly, no such declaration had been made. Therefore, some penalty was leviable for that part of the offence. Taking all aspects into consideration, I reduce the penalty from Rs. 5,000/-to Rs. 3,000/- (Rupees Three thousand only).
12. In the result, that part of the Gold Control Administrator’s order by which he reduced the penalty from Rs. 10,000/- to Rs. 5,000/-is confirmed.
13. The order if absolute confiscation of primary gold weighing 116.300 grams is set aside. The appellant is given an option to redeem the said primary gold on payment of fine of Rs. 5815/- the value set out in the panchanama and he shall exercise that option within two months from the date of communication of this order. He shall also convert the primary gold on redemption into ornaments immediately thereafter. The confiscation, as well as redemption allowed in respect of primary gold weighing 590.350 grams is confirmed. The personal penalty imposed on the appellant is reduced from Rs. 5,000/- to Rs. 3,000/-. The appellant be granted the consequential relief.