{"id":219810,"date":"2004-07-06T00:00:00","date_gmt":"2004-07-05T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/gopaldas-udhavdas-ahuja-and-anr-vs-union-of-india-and-ors-on-6-july-2004"},"modified":"2015-02-12T16:53:39","modified_gmt":"2015-02-12T11:23:39","slug":"gopaldas-udhavdas-ahuja-and-anr-vs-union-of-india-and-ors-on-6-july-2004","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/gopaldas-udhavdas-ahuja-and-anr-vs-union-of-india-and-ors-on-6-july-2004","title":{"rendered":"Gopaldas Udhavdas Ahuja And Anr vs Union Of India And Ors on 6 July, 2004"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Gopaldas Udhavdas Ahuja And Anr vs Union Of India And Ors on 6 July, 2004<\/div>\n
Bench: Ruma Pal, S.H. Kapadia<\/div>\n
           CASE NO.:\nAppeal (civil)  2335 of 1996\n\nPETITIONER:\nGOPALDAS UDHAVDAS AHUJA AND ANR.\n\nRESPONDENT:\nUNION OF INDIA AND ORS.\n\nDATE OF JUDGMENT: 06\/07\/2004\n\nBENCH:\nRUMA PAL & S.H. KAPADIA\n\nJUDGMENT:\n<\/pre>\n
JUDGMENT<\/p>\n
2004 Supp(2) SCR 942<\/p>\n
The Judgment of the Court was delivered by<\/p>\n
KAPADIA, J. : This appeal by special leave is directed against the judgment
\nand order of the Division Bench of the Bombay High Court dated 5.1.1994
\npassed in Appeal No. 19 of 1992, by which the Division Bench allowed the
\nappeal preferred by the respondents, thereby setting aside the judgment and
\norder passed by the learned Single Judge dated 11.9.1990 in Writ Petition
\nNo. 2406 of 1982 and consequently confirming the order of the Adjudicating
\nAuthorities confiscating the primary gold, weighing 37,398.300 gms. and
\nvalued at Rs. 18.70 lacs, under section 71(1) of the Gold (Control) Act,
\n1968 (hereinafter referred to for the sake of brevity as “the 1968 Act”)
\nwith imposition of penalties on each of the appellants herein under section
\n74 of the said Act.\n<\/p>\n
The undisputed facts are as follows :\n<\/p>\n
The appellants are the son and widow respectively of one Udhavadas Ahuja.
\nUdhavdas had married twice – first to the mother of appellant no. 1 who
\ndied on 19.2.1950 and next to appellant no. 2 on 1.7.1950. Appellant no. 1
\nwas born on 16.2.1950. Udhav’s grandmother Bhojibai died on 4.7.1951. On
\nAugust 28, 1974, the Income Tax Commissioner issued an authorization under
\nsection 132 of the Income Tax Act, 1961 authorizing search and seizure at
\nGopi Kunj, situate at Shivaji Park, Bombay, being the residential premises
\nof appellant no. 1. Pursuant to the authorization, R.D. Mahadeshwar, Asstt.
\nDirector of Inspection, Income-tax department conducted the search and
\nrecovered primary gold and other gold items, more particularly described in
\nthe panchnama (at page 95 of Volume-II). At the time of search, appellant
\nno. 1 was present. The primary gold and the gold items collectively weighed
\n37,398.300 gms. valued at Rs. 18.70 lacs as on August 30, 1974. Thereafter,
\nthe Income Tax Authorities intimated the Gold Control Officer appointed
\nunder section 4 of the 1968 Act. On August 30, 1974, the said officer
\nattended the Income Tax Office and in the presence of appellant no. 1, who
\nwas the Karta of Kewal Ram Ahuja, Hindu Undivided Family, took over the
\ncustody of the said gold from the Income-tax department. The Gold Control
\nOfficer also prepared the above panchnama. On 20.9.1974, the Gold Control
\nOfficer, Bombay served a show-cause notice on the appellants calling upon
\nthem to explain why the said primary gold should not be confiscated under
\nsection 71(1) of the 1968 Act and also why penalty should not be imposed on
\neach of the appellants under section 74 of that Act. The show-cause notice
\ninter alia alleged contravention of section 8(1) read with section 8(6) and
\nsection 16(1) read with section 16(5) inasmuch as the appellants had in
\ntheir possession primary gold which they failed to dispose of within six
\nmonths from 1.3.1967 as provided for in rule 126H (1)(B) of the Defence of
\nIndia Rules. By the said show-cause notice, it was further alleged that the
\nappellants had failed to file the declaration in respect of gold articles,
\nother than the gold bars which constituted contravention of section 16(1)
\nread with section 16(5) of the said Act. The appellants claimed during the
\ninvestigation that the seizure was illegal; that taking over of the gold
\nfrom Income tax Authorities did not amount to seizure in fact or in law.
\nThey contended that there was no contravention of the provisions of the Act
\nas they were not in conscious possession of the said gold recovered from
\ntheir residence. The appellants claimed that entire gold was recovered from
\na secret cavity\/vault inside the dome of one cupboard in the eastern
\nbedroom and that they were not aware of the secret cavity or the contents
\nthereof. The appellants also claimed that they were not in possession of
\nthe keys of the secret vault. In the meantime, on 18.10.1975, Voluntary
\nDisclosure of Income and Wealth Ordinance 1975 was promulgated. It was
\nreplaced by Act No. VIII in 1976. On 27.12.1975. appellant no. 1 as Karta
\nfiled a declaration under said Voluntary Disclosure Scheme. To complete the
\nchronology of the events, the Collector of Customs (Preventive). Bombay
\n(hereinafter referred to for the sake of brevity as “Authorized Officer”)
\nordered confiscation of the gold bars, gold coins and sovereigns under the
\nprovisions of section 71(1) read with section 8(1) of the 1968 Act.
\nHowever, the appellants were given an option to redeem the gold coins and
\nsovereigns weighing 7.719.90 gms. on payment of fine of Rs. 1.5 lacs in
\nlieu of confiscation. By the said order, the Authorized Officer imposed
\npenalty of Rs. 1 lac on each of the appellants. This order of the
\nAuthorized Officer held that the entire gold was seized from one cupboard
\nin the eastern bedroom. The order passed by the Authorized Officer on
\n26.6.1976 was. however, set aside by the Gold Control Administrator in
\nappeal (hereinafter referred to for the sake of brevity as “the Appellate
\nAuthority”) By order dated 21.11.1977, the Appellate Authority remanded the
\ncase for de novo adjudication by accepting the contention of the appellants
\nherein that the order passed by the Authorized Officer on 26.6.1976 was in
\nbreach of principles of natural justice. On remand, the Authorized Officer
\nonce again came to the conclusion, after considering the evidence on record
\nthat the gold seized was in conscious possession of the appellants.
\nHowever, this time, the Authorized Officer held that the gold seized was
\nrecovered from cupboard in the eastern bedroom, from the cupboard in the
\nwestern bedroom and from the cupboard in the telephone room. He, therefore,
\nconcluded that the appellants were in conscious possession of the seized
\ngold. The Authorized Officer, therefore, held that there was contravention
\nof section 8(1) read with section 8(6) as far as primary gold was concerned
\nand since the appellants failed to file declaration with regard to other
\ngold items, there was contravention of section 16(1) read with section
\n16(5) of 1968 Act. Therefore, by his order dated 14\/28.2.1980, the
\nAuthorized Officer directed absolute confiscation of the primary gold, gold
\nsovereigns, gold coins and other gold items. He also imposed a personal
\npenalty of Rs. 1 lac each on the two appellants. Being aggrieved by the
\nsaid order, the appellants herein carried the matter in appeal once again
\nto the Gold Control Administrator, New Delhi, being Appeal No. 91 of 1981.
\nIt was contended before the Appellate Authority that the entire gold was
\nrecovered from one place i.e. from a secret vault inside the dome of the
\ncupboard in the eastern bedroom. The appellants relied upon the statements
\nof two panchas. However, the Appellate Authority vide order dated 5.11.1981
\nfound that the statements made by the officers from the Income-tax
\ndepartment that gold was recovered from different places were truthful. The
\nAppellate Authority rejected the testimony of locksmith and the panchas. On
\nthe state of these findings, the Appellate Authority held that the
\nappellants were in conscious possession of the said gold. The order passed
\nby the Authorized Officer confiscating the said gold was upheld. However,
\nthe Appellate Authority ordered redemption of gold idols found in the pooja
\nroom on payment of fine of Rs. 5000. The Appellate Authority also reduced
\nthe personal penalty of Rs. 1 lac imposed on each of the appellants to Rs.
\n50000 each. Being aggrieved, the appellants herein preferred Revision
\napplication to respondent no. 1 which was dismissed on 10.7.1982. At this
\nstage, it may be mentioned that by order dated 5.6.1976, the Gold Control
\nOfficer found that appellants declaration under Voluntary Disclosure Scheme
\nunacceptable as according to him the declaration was filed by appellant no.
\n1 as Karta after commencement of proceedings under the 1968 Act. Being
\naggrieved by the dismissal of revision application filed by the appellants.
\nWrit Petition No. 2406 of 1982 was filed in the Bombay High Court for a
\ndeclaration that the said gold was unlawfully seized and therefore, the
\nappellants were entitled to immunity from proceedings for prosecution,
\nconfiscation and penalty. The appellants also sought return of the said
\ngold. The said writ petition was filed on 18.10.1982. In the meantime, the
\nappellants who were charged for offences under section 85(1 )(ii) read with
\nsection 8(1) of the 1968 Act were acquitted by the Addl. Chief Metropolitan
\nMagistrate, Bombay on 24.3.1983. The Criminal Appeal No. 443 of 1983 filed
\nby the Gold Control Authorities against the order of acquittal was
\ndismissed by the Bombay High Court on 8\/9.3.1991. By judgment and order
\ndated 11.9.1990. the learned Single Judge held in Writ Petition No. 2406 of
\n1982. mentioned herein above that the appellants were innocent possessors
\nof the said gold. Accordingly, the Trial Judge quashed the orders of
\npenalty and confiscation passed by the Gold Control Authorities. Being
\naggrieved, the department herein, tiled Letters Patent Appeal No. 19 of
\n1992 before the Division Bench of the Bombay. High Court. By impugned
\njudgment dated 5.1.1994, the Division Bench allowed the L.P.A. No. 19 of
\n1992 on the ground that the appellants were in conscious possession of the
\ngold as it was found in several cupboards in the eastern bedroom, western
\nbedroom and the telephone room. The Division Bench held that the findings
\nof the criminal court were not relevant for the purposes of adjudicating
\nconfiscation under section 71(1) of the said Act. consequently, the
\nDivision Bench confirmed the orders passed by the Gold Control Authorities.
\nHence, the appellants have filed this appeal by way of special leave.
\nLastly, it may be mentioned that by order dated 7.4.1994. this Court
\ndismissed Special Leave Petition (Criminal) filed by the Assistant
\nCollector of Customs, Bombay against the Judgment of the Bombay High Court
\nconfirming the acquittal of the appellants by the learned Magistrate.\n<\/p>\n
Mr. C.A. Sundaram, learned senior counsel appearing on behalf of the
\nappellants submitted that the Gold Control Authorities took over the gold
\nfrom Income-tax department in contravention of section 132(5) of the Income
\nTax Act and consequently, there was no seizure in law and therefore, the
\nappellants were entitled to claim immunity under Voluntary Disclosure
\nScheme. In this connection, it was urged that in fact there was no seizure
\nas the Gold Control Officer merely took over the gold from Income-tax
\ndepartment and to get over this lacunae, respondent no. 2 herein seeks to
\ncontend that gold was returned to the appellants by the Income-tax
\nauthorities and it was thereafter seized from the appellants by Gold
\nControl Officer appointed under section 4 of the Act. In this connection,
\nreliance was placed on the panchnama dated 30.8.1974 (Vol. II page 95) to
\nshow that the gold was seized by the Gold Control Officer from Income-tax
\ndepartment. It was submitted that such seizure was also contrary to section
\n132(5) of the Income Tax Act. In this connection, reliance was placed on
\nthe judgment of this Court in the case of Commissioner of Income Tax v.
\nTarsem Kumar reported in [1986] 3 SCC 489.\n<\/p>\n
Learned senior counsel for the appellants next contended that though under
\nthe 1968 Act any primary gold held in contravention of section 8( 1) was
\nliable to be confiscated under section 71(1), the proviso thereto protected
\nsuch gold from confiscation for contravention of the provisions of the Act
\nin the absence of knowledge or connivance on the part of the owner in such
\ncontravention. In view of the said proviso, it was submitted that there was
\nno absolute bar to the possession of the primary gold under the 1968 Act.
\nIn this connection, it was urged that mere possession of primary gold was
\nan offence under sections 71(1) and 85(1) of the Act; that, therefore, the
\nword “possession” in sections 8(1), 71(1) and 85(1) referred to conscious
\npossession. Learned counsel for the appellants next contended that the
\nappellants were prosecuted by the Gold Control Authorities for offences
\nunder section 85(1)(ii) read with section 8(1) of the Act in respect of
\nretention of possession of primary gold: that they were also prosecuted for
\nnot filing declarations under section 16(1) in respect of gold coins,
\nsovereigns and gold idols; that on the first count the appellants proved
\nbeyond reasonable doubt that they had no knowledge of the primary gold
\nbars, coins and sovereigns; that consequently, they were acquitted and.
\ntherefore, the appellants were entitled to the benefit of acquittal not
\nonly in criminal trial but also in the matter of confiscation of the said
\nproperty. It was urged that in the impugned judgment, the Division Bench of
\nthe High Court had erred in holding that findings recorded by the criminal
\ncourt had no bearing on adjudication under section 71(1) and section 74 of
\nthe said Act. In this connection, reliance was placed on the judgment of
\nthis Court in the case of Pasupaleti Venkateswarlu v. The Motor & General
\nTraders<\/a> reported in [1975] 1 SCC 770; Rajesh D. Durbar v. Narasingrao
\nKrishnaji Kulkarni & Ors.<\/a> reported in [2003] 7 SCC 219; Ram Chandra Singh
\nv. Savitri Devi & Ors.<\/a> reported in [2003] 8 SCC 319 and Carp. M. Paul
\nAnthony v. Bharat Gold Mines Ltd & Anr.<\/a> reported in [1999] 3 SCC 679.
\nLearned counsel for the appellants further contended that the mens rea was
\na sine qua non for confiscation of gold under the Act; that the proceedings
\nunder the Act were quasi criminal in character and consequently, the
\njudgment of the learned Magistrate acquitting the appellants was binding on
\nthe departmental authorities adjudicating the question of confiscation. In
\nany event. it was urged, that the learned Single Judge in the writ petition
\nhad discussed the entire evidence and had come to the conclusion that the
\nappellants were not in conscious possession of the gold; that the said gold
\nwas found only at one place, namely, in the cavity on the cupboard in the
\neastern bed room of the flat; that the locksmith had to prepare a key to
\nopen the locker in the cavity in which the gold was found, that the screws
\nwere rusted and they had to be cut to open the top which showed that the
\nappellants were not in conscious possession of the said gold. It was
\nsubmitted that the above facts were not considered by respondents no. 2 and
\n3 herein and, therefore, their orders suffered from errors apparent on the
\nface of the record and consequently, the learned Single Judge of the High
\nCourt was right in exercising the power of judicial review. That the
\nDivision Bench had erred in ignoring the findings of the learned Single
\nJudge. Lastly, learned counsel for the appellants submitted that in any
\nevent, an option of redemption should have been given to the appellants.
\nThat, in the present case, no reasons have been given by the Collector for
\nnot exercising his discretion in the matter of grant of redemption. In this
\nconnection, reliance was placed on the judgment of this Court in the case
\nof Hargovind Das & Ors. v. Collector of Customs & Ors.<\/a> reported in AIR
\n[1987] SC 1982.\n<\/p>\n
Per contra, Mr. N.K. Bajpai, learned counsel appearing on behalf of the
\ndepartment contended that the Income-tax authorities had recovered the said
\ngold from the residence of the appellants during the search on 28.8.1974.
\nThat in accordance with a circular issued by the Central Board of Direct
\nTaxes, the Gold Control Officer was informed about the seizure. That the
\nsaid officer visited the office of Income-tax department around 30.8.1974
\nand in the presence of appellant no. 1 took over the gold from the Income-
\ntax department under section 66 of the 1968 Act. In this connection,
\nreliance was placed on the panchnama dated 30.8.1974. It was urged that all
\nthe statutory authorities rejected the claim that the appellants were not
\nin conscious possession of the gold on the ground that the recovery was
\nmade from more than the one cupboard; that appellant no. 2, on being asked,
\nproduced the keys with which the secret locker in the cavity on top of the
\ncupboards in the western bedroom was opened; that the said keys were
\nrecovered from the cupboard in the western bedroom and, therefore, the
\nappellants were in conscious possession of the said gold, which rightly
\nconfiscated under section 71(1) of the Act.\n<\/p>\n
Learned counsel for the respondent further submitted that section 66 of the
\nAct empowered the gold Control Officer to seize primary gold in respect of
\nwhich he had reason to believe that any provision of the Act had been
\ncontravened. That in this case, the seizure of gold was made under a
\npanchnama in presence of appellant no. 1 in the reasonable belief that the
\nprovisions of the Act had been contravened . In this connection, reliance
\nwas placed on the copy of the panchnama (at page 95, volume-II), which
\nbears the signature of appellant no. 1. Further, a circular had been issued
\non 30.8.1965 by CBDT addressed to all Commissioners of Income Tax & Wealth
\nTax stating that when the gold is seized in a search by Income-tax
\nauthorities, necessary information should be given to the Gold Control
\nOfficer. It was submitted that the circular issued by the CBDT was binding
\non the subordinate authorities. Therefore, it was urged that there was no
\nillegality in making the seizure. It was further submitted that the
\njudgment of this Court in Tarsem Kumar’s case (supra) was not applicable as
\nit was given prior to insertion of section 132A in the Income Tax Act. It
\nwas urged that section 66 of the said Act was a self contained Code and it
\nwas, therefore, not necessary to refer to the provisions of the Income Tax
\nAct, 1961.\n<\/p>\n
Learned counsel for the respondent next submitted that mens rea was not a
\nnecessary ingredient of sub-section (1) of section 71. That possession,
\nipso facto, was an offence under the Act. That the appellants were found to
\nbe in possession of huge gold bars of primary gold contrary to section
\n8(1). They were also found in possession of undeclared gold articles in
\ncontravention of section 16. in such a case, it was submitted that the
\nclaim of the appellants that they were not in conscious possession of the
\nprimary gold as their defence was unbelievable. Learned counsel further
\nsubmitted that in view of sections 8(1), 71(1) and 85(1), an absolute
\nliability was imposed and, therefore, there was no merit in the argument
\nadvanced on behalf of the appellants that the gold was not liable to be
\nconfiscated till conscious possession therefore stood proved. Lastly, it
\nwas urged that the applicability of the proviso to section 71(1) had to be
\nadjudged by the adjudicating authority and not by the officer who had
\nseized the primary gold. It is for the adjudicating authority to decide the
\nclaim of the benefit under the proviso to section 71(1). Hence, it was
\nurged that, the seizure cannot be held to be illegal in the present case.\n<\/p>\n
Learned counsel for respondent no. 2 next submitted that under the 1968
\nAct, adjudication and prosecution were two independent proceedings and they
\nwere permissible on the same set of facts. That the possibility of
\ndifferent conclusions being reached by two different Authorities under the
\nsame Act cannot be ruled out. That adjudication and prosecution were
\nindependent of each other and the procedures to be adopted in the two
\nproceedings were also different. In this connection, reliance was placed on
\nthe judgment of this Court in the case of Tukaram G. Gaokar v. R.N. Shukla,
\nAIR<\/a> (1968) SC 1050. It was further submitted that the presumption of
\nculpable mental state under section 98B of the Act had no relevance
\nwhatsoever to the proceedings for confiscation and penalty. That the factum
\nof acquittal in prosecution proceedings cannot affect the findings of fact
\nreached by the statutory authorities in adjudication. That there was no
\nprovision in the Act which gives a superior status to the outcome of the
\nprosecution proceedings. In the circumstances, it was submitted that the
\nfactum of acquittal in prosecution proceedings cannot affect findings of
\nfact reached by the Adjudicating Authority.\n<\/p>\n
Learned counsel for the respondent lastly submitted that the voluntary
\ndisclosure scheme was introduced vide Voluntary Disclosure of Income &
\nWealth Ordinance, 1975. That under sub-section 5 of section 15A, primary
\ngold which had been seized or confiscated under the 1968 Act was not
\nentitled to immunity. That in present matter, on 20.9.1974, the Gold
\nControl Officer issued the show-cause notice calling upon in appellants to
\nshow-cause as to why the said gold should not be confiscated under section
\n71(1) whereas appellant No. 1 filed the declaration as a Karta only on
\n27.12.1975. Therefore, the appellants were not entitled to immunity as
\nprior to their declaration on 27.12.1975, proceedings for confiscation had
\nbeen initiated. For the aforestated reasons, it was urged that there is no
\nmerit in the civil appeal and the same deserves to be dismissed.\n<\/p>\n
For the sake of clarity, we may point out that by order dated 10.7.1982
\npassed by the Appellate Authority, seven gold bars, one gold brick, gold
\ncoins and sovereigns (more particularly described in the panchnama dated
\n30.8.1974 – Vol. II page 95) stood absolutely confiscated with personal
\npenalty on each of the two appellants herein, whereas the gold idols and
\npooja articles were ordered to be redeemed on payment of fine. This order
\nof the Appellate Authority was confirmed in Revision by respondent No. 6
\nvide order dated 10.7.1982. By the impugned judgment of the Division Bench
\nof the High Court, the orders passed by the Appellate Authority and the
\nRevisional Authority were upheld. Consequently, our judgment is confined
\nonly to absolute confiscation of the aforestated gold bars, gold bricks,
\ngold coins and sovereigns.\n<\/p>\n
Before examining the provisions of the 1968 Act, it is necessary to refer
\nto the various provisions of law which existed prior to the Gold (Control)
\nAct, 1968. On 12.12.1962, the Defence of India Act, 1962 was enacted
\nreplacing an Ordinance issued on 26.10.1962. Under section 3 of the 1962
\nAct, the Central Government framed Defence of India Rules. 1962.  In the
\n1962 Rules, as originally framed, there was no provision dealing with
\ncontrol of gold. By Defence of India (Amendment) Rules. 1963,  a new Part
\nXIIA was inserted w.e.f. Januarv 9, 1963. By this amendment, rules 126A to
\n126Z were inserted. Rule 126A(d) defined “gold” as. inter alia, including
\nprimary gold, ornament or any other article of gold. Rule 126H provided for
\nrestrictions on possession of gold. The effect of rule 126H was that,
\nexcept in the manner provided under the said rule, no person could acquire
\nor buy primary gold. Rule 126-1 required declaration to be made of the
\npossession of gold other than ornaments. It provided that every person, not
\nbeing a dealer, shall, within thirty days from the commencement of the 1963
\nAmendment Rules, make a declaration as to the quantity, description and
\nother particulars of gold. Under rule 126M, gold seized was liable to be
\nconfiscated. Under the said rules power was given for search and seizure of
\ngold in respect of which there has been contravention of the said rules.
\nThe net effect of the aforesaid rules was that acquisition, possession or
\ncontrol of primary gold, without declaration, became illegal.\n<\/p>\n
On 1.3.1967, the Defence of India Rules, 1962 were further amended by
\nDefence of India (4th Amendment) Rules, 1966, which imposed a ban on the
\npossession of primary gold. Under the Amended Rules, no person, other than
\na dealer, was entitled to own or possess primary gold after expiry of six
\nmonths from the commencement of Defence of India (4th Amendment) Rules,
\n1966. The effect of the said Amendment was that within six months from
\n1.3.1967 (i.e. by 1.9.1967), no person, other than a dealer, could be in
\nlawful possession of the primary gold.\n<\/p>\n
On 22.6.1968, Part XIIA of Defence of India Rules, 1962 was repealed and
\nreplaced by Gold (Control) Ordinance, 1968. The ordinance was itself
\nrepealed by Gold (Control) Act. 1968 w.e.f. 1.9.1968. The Act was enacted
\nto provide for the control of the production, manufacture, supply,
\ndistribution, use and possession of gold ornaments and articles of gold.
\nThe basic object was to reduce the internal demand for the gold in India.
\nUnder section 2(j), gold was defined to mean gold, including its alloy in
\nany shape or form including primary gold, gold articles and ornaments.
\nUnder Section 2(r), primary gold was defined to mean gold in unfinished or
\nsemi finished form including gold bars, ingots, slabs, pellets, sheets etc.
\nUnder section 4, the administration of the Act was placed in the overall
\ncharge of the Gold Control Administrator. Under section 5(2), price of the
\ngold to be sold and brought was to be fixed by the administrator, in
\nconsultation with the Reserve Bank of India. Under section 8(1), retention
\nof possession of gold was prohibited. Section 8(1), which is relevant for
\nthe present case, read as under :\n<\/p>\n
“8. Restrictions regarding acquisition, possession and<\/p>\n
gold. – ( 1 ) Save as otherwise provided in this Act. no person shall<\/p>\n
(i)     own or have in his possession, custody or control, or<\/p>\n
(ii)    acquire  or agree  to acquire the  ownership,  possession, custody
\nor control of, or<\/p>\n
(iii)   buy. accept or otherwise receive or agree to buy. accept or
\notherwise receive,any primary gold.”\n<\/p>\n
Under section 8(1), possession of the primary gold after the Act came into
\noperation was contrary to law unless the same was held in the manner as
\nprovided by the Act. An essential pre-condition for assumption of
\njurisdiction under section 8(1) was that the article must be primary gold.
\nSection 8(1) placed an absolute embargo on retention of the possession of
\nthe primary gold on and after 1.9.1968 when the said Act came into
\noperation. Under section 8(6), the Gold Control Administrator was empowered
\nunder special circumstances of any case to authorize any person(s) to buy,
\nacquire, sell, transfer or otherwise dispose of primary gold or article.
\nHowever, the normal rule was against the retention of the possession of
\nprimary gold. Chapter XII dealt with entry, search and seizure. Section 58
\nread with section 66 empowered the Gold Control Officer on reasonable
\nsuspicion to seize such gold in respect of which he holds a reasonable
\nbelief of contravention of the provisions of the Act. However, the Gold
\nControl Officer who was a seizing officer was not required to decide the
\nquestion on actual contravention which had to be decided by the Collector
\n(hereinafter referred to as “Authorized Officer”) in the adjudication
\nproceedings under sections 71(l)and 74 of the Act. If the Authorized
\nOfficer found such actual contravention, he could order confiscation under
\nsection 71(1) of the Act. Sections 66 and 71(1) are relevant for the
\npurposes of this case and accordingly, they are quoted hereinbelow :\n<\/p>\n
“66. Power to seize – (1) If any Gold Control Officer has reason to believe
\nthat in respect of any gold any provision of this Act has been, or is
\nbeing, or is attempted to be. contravened, then he may seize –\n<\/p>\n
(a)    such gold along with the package, covering or receptacle, if any and
\nthe contents thereof, in which the gold is found;\n<\/p>\n
(b)    any other goods in which any quantity of such gold has been mixed.\n<\/p>\n
(2)  Any Gold Control Officer may seize –\n<\/p>\n
(a)    any document or other thing which, in his opinion, will be useful
\nfor. or relevant to, any inquiry or proceeding for the contravention of any
\nprovision of this Act or any rule or order made thereunder;\n<\/p>\n
(b)    any conveyance or animal which has been, or is being, or is
\nattempted to be, used for the transport of any gold in relation to which
\nany provision of this Act or any rule or order made thereunder has been or
\nis being, or is   attempted to be contravened.\n<\/p>\n
(3) Any document or other thing seized under sub-section (2) shall not be
\nretained by the Gold Control Officer for a period exceeding six months from
\nthe date of the seizure unless the reasons for retaining the same are
\nrecorded by him in writing and the approval of the Administrator for such
\nretention is obtained :\n<\/p>\n
Provided that the Administrator shall not authorize the retention of the
\ndocument or other thing for a period exceeding thirty days after all
\nproceedings, for which the document or other thing is useful or relevant,
\nare completed.\n<\/p>\n
(4)  The person from whose custody any document or other thing is seized
\nunder sub-section (2) may make copies thereof or take extracts therefrom in
\nthe presence of the Gold Control Officer or any other person empowered by
\nhim in this behalf, at such place and at such time as the Gold Control
\nOfficer may appoint in this behalf.\n<\/p>\n
(5)  If a person legally entitled to the document or other thing seized
\nunder sub-section (2) objects for any reason to the approval being given by
\nthe Administrator under sub-section (3), he may make an application to the
\nCentral Government stating therein the reasons for such objection and
\nrequesting for the return of the document or other thing.\n<\/p>\n
(6) On receipt of the application under sub-section (5). the Central
\nGovernment may, after giving the applicant an opportunity of being heard,
\npass such orders as it may think fit.\n<\/p>\n
71. Confiscation of gold. – (1) Any gold in respect of which any provision
\nof this Act or any rule or order made thereunder has been, or is being, or
\nis attempted to be, contravened, together with any package covering or
\nreceptacle in which such gold is found, shall be liable to confiscation.\n<\/p>\n
Provided that where it is established to the satisfaction of the officer
\nadjudging the confiscation that such gold or other thing belongs to a
\nperson other than the person who has. by any act or omission, rendered it
\nliable to confiscation, and such act or omission was without the knowledge
\nor connivance of the person to whom it belongs, it shall not be ordered to
\nbe confiscated but such other action, as is authorized by this Act, may be
\ntaken against the person who has, by such act or omission, rendered it
\nliable to confiscation.”\n<\/p>\n
Therefore, under the scheme of section 66 read with section 71, the officer
\nseizing such gold was not to decide issues, such as, collusion, connivance,
\nknowledge of possession etc. The belief that the officer had to form under
\nsection 66 was only in respect of the gold, whoever its owner be. The
\nownership of the gold or the person in whose possession the gold was kept
\nwas not relevant for the purposes of section 66. Before acting under
\nsection 66. existence of a reasonable belief that the provisions of the Act
\nhad been contravened was essential.\n<\/p>\n
Chapter XIV dealt with adjudication and appeals. Section 83 gave power to
\nthe Authorized Officer to summon witnesses: to receive evidence on
\naffidavits and issue commissions for examination of witnesses. Chapter XV
\ndealt with offences and their trial. Section 85(1 )(ii) inter alia provided
\nthat whosoever had in his possession any primary gold in contravention of
\nthe Act or rules thereunder shall be punished with imprisonment or fine,
\nwithout prejudice to any other action that may be taken under the Act.
\nSection 98B referred to circumstances in which the Court had to raise
\nstatutory presumption. For the purposes of deciding this case, sections
\n85(1) and 98B are relevant and they are quoted hereinbelow :\n<\/p>\n
“85. Punishment for illegal possession, etc. of gold:-(1) Whoever, in
\ncontravention of the provisions of this Act or any rule or order made
\nthereunder. –\n<\/p>\n
(i) makes, manufactures, prepares or processes any primary gold; or<\/p>\n
(ii) owns or has in his possession, custody or control any primary gold; or<\/p>\n
(iii) buys or otherwise acquires, or accepts or otherwise receives, or
\nagrees to buy or otherwise acquire or to accept or otherwise receive, any
\nprimary gold; or<\/p>\n
(iv) sells, delivers, transfers or otherwise disposes of. or agrees to
\nsell, deliver, transfer or otherwise dispose of, or exposes or offers for
\nsale, delivery, transfer or disposal, any primary gold; or<\/p>\n
(v) melts, assays, refines, extracts, alloys or converts any gold or
\nsubjects it to any other process; or<\/p>\n
(vi) makes, manufactures, prepares, repairs, polishes or processes or
\nplaces any order for the making. manufacturing,   preparing,   repairing,
\npolishing  or processing, of any article or ornament; or<\/p>\n
(vii) buys or otherwise acquires, or accepts or otherwise receives, or
\nagrees to buy or otherwise acquire or to accept or otherwise receive, or
\nsells, delivers, transfers or otherwise disposes of, or agrees to sell,
\ndeliver, transfer or otherwise dispose of, or exposes or offers for sale,
\ndelivery, transfer or other disposal, any article or ornament; or<\/p>\n
(viii) owns or has in his possession, custody or control any article or
\nornament; or<\/p>\n
(ix) carries on any business or transaction in gold for which a licence or
\ncertificate is required to be obtained by or under this Act; or<\/p>\n
(x)   carries on business as a banker or money-lender;\n<\/p>\n
shall, without prejudice to any other action that may be taken under this
\nAct, be punishable –\n<\/p>\n
(a)     if the offence is under Cl. (i), (ii), (iii), (iv) or (viii), [the
\noffence under Cl. (viii) being a contravention of sub-section (3) of
\nSection 55] and the value of the gold involved therein exceeds one lakh of
\nrupees, with imprisonment for a term which may extend to seven years and
\nwith fine;\n<\/p>\n
Provided that in the absence of special and adequate reasons to the
\ncontrary to be recorded in the judgment of the Court such imprisonment
\nshall not be for a term of less than six months.\n<\/p>\n
(b)    in any other case, with imprisonment for a term which may extend to
\nthree years, or with fine, or with both.\n<\/p>\n
98 B. Presumption of culpable mental state. – (1) in any prosecution for an
\noffence under this Act which requires a culpable state on the part of the
\naccused, the Court shall presume the existence of such mental state but it
\nshall be open to the accused to prove the fact that he had no such mental
\nstate with respect to the act charged as an offence in that prosecution.\n<\/p>\n
Explanation. – In this section, “culpable mental state” includes intention,
\nmotive, knowledge of a fact and belief in, or reason to believe, a fact.\n<\/p>\n
(2) For the purposes of this section, a fact is said to be proved only when
\nthe Court believes it to exist beyond reasonable doubt and not merely when
\nits existence is established by a preponderance of probability.”\n<\/p>\n
Section 98B of the 1968 Act was similar to section 138A of the Customs Act,
\n1962. It made a drastic change in the concept of mens rea as a necessary
\ningredient of an offence. According to the provisions of this section
\nwherever mens rea, in the sense of knowledge of the wrongfulness, was a
\nnecessary ingredient of an offence under the Act, the Court shall presume
\nits existence. However, such presumption was rebuttable. The explanation to
\nsub-section (1) of Section 98B provided for an inclusive definition of
\nculpable mental state which included knowledge of the wrongfulness of an
\nact or omission prohibited by the statute. Under section 98B (2), the
\naccused was required to prove beyond reasonable doubt that he did not
\npossess the requisite mental state. The provisions of sections 85(1) and
\n98B were similar to sections 9, 10 of the Opium Act, which came for
\nconsideration before this Court in the case of Inder Sain v. State of
\nPunjab<\/a> reported in [1973] 2 SCC 372. In that case, the appellant got a
\nparcel of apples released from the railway. While he was carrying the
\nparcel, he was intercepted by the police and the parcel was found to
\ncontain opium. He was convicted under section 9. The only question was :
\nwhether the appellant was in possession of opium. It was held by this Court
\nthat if possession is an offence then there must be proof that the accused
\nwas knowingly in possession of the article. That knowledge involved in
\npossession of the unauthorised article had to be proved. It was further
\nheld that the word “possession”, in such cases, connotes possession with
\nknowledge. In the said judgment, this Court has drawn a dichotomy between
\nthe law pertaining to presumptions and the law relating to the burden of
\nproof. It was held that though knowledge is an essential ingredient of the
\noffence of possession, it is a different thing to say that the prosecution
\nshould prove that the accused was knowingly in possession. It was held that
\nby virtue of Section 10. similar to section 98B of the 1968 Act. the onus
\nof proof was placed on the accused to prove that he did not knowingly
\npossess the article. This is after the prosecution showing by evidence that
\nthe accused was in possession of the article.\n<\/p>\n
The analysis of the various provisions of the 1968 Act (repealed in 1990)
\nshows that the Act made possession of primary gold an offence. Under the
\nAct, possession of primary gold was made an offence under section 85(l)(ii)
\nread with section 8(1). The said Act provided for a special machinery for
\nconfiscation of unauthorised gold under section 71(1) and for trial of the
\nperson concerned under section 85(1). The word “possession” finds place in
\nall the above provisions. In the light of the judgment of this Court in the
\ncase of Inder Sain (supra), we have to read the word “possession” as
\nconscious possession. Under section 71(1), any gold in respect of which
\nthere existed contravention was liable to be confiscated. Provided, where
\nit was established to the satisfaction of the Authorised Officer, that the
\nowner had no knowledge of the Act or omission on the part of the holder,
\nwhich made it liable to confiscation, then it could not be confiscated.
\nTherefore, reading sections 8(1), 71(1) including the proviso, 85(1) with
\nsection 98B, it is clear that possession ipso facta was prohibited. It was
\nan overt act which was made an offence not only for prosecution under
\nsection 85(1) but also in the matter of confiscation under section 71(1).
\nSince possession was an offence, knowledge in possession of the
\nunauthorised article was an essential ingredient of the said offence. Where
\na statute forbids an act, doing of that act itself supplies mens rea. In
\nsuch a case, the prosecution needs only to prove commission of the
\nprohibited act and it is for the person concerned to bring himself within
\nthe statutory defence, which in the present case was provided for in the
\nproviso to section 71(1). However, in view of section 98B, the accused had
\nto prove beyond reasonable doubt that he had no knowledge in the possession
\nof the unauthorised article. In the present case, the appellants were
\ncharged for offence of possession of unauthorized gold under section 85(1 )\n<\/p>\n
(ii) read with section 8(1) of the Act. They were acquitted. The judgment
\nof the trial court was confirmed by the High Court and by this Court. In
\nthe trial, they proved beyond doubt that they were nut in conscious
\npossession of the primary gold. In the circumstances, one of the points for
\ndetermination in this civil appeal is – what is the effect of an order of
\nacquittal in the prosecution under section 85(l)(ii) read with section 8(1)
\non the order of confiscation passed under section 71(1) read with section
\n8(1) by the Authorized Officer in respect of the primary gold. In both the
\nproceedings, the basic facts were common. The recovery of incriminating
\narticles was the same in both the proceedings. The same witnesses were
\nexamined in both the proceedings. The same charge of possession was there
\nin both the proceedings. The said charge was sought to be proved by same
\nset of officers in both the proceedings. The witnesses and the officers who
\nsaw the recovery were common in both the proceedings. However, the criminal
\ncourt on consideration of the entire evidence came to the conclusion that
\nboth the accused had no knowledge of the gold concealed in the ornamental
\ntop of the cupboard in the eastern bedroom from where the entire gold was
\nseized whereas the Authorised Officer in the proceedings under section
\n71(1) of the Act ordered confiscation on the ground that recovery was made
\nfrom the cupboards in the eastern and western bedroom and from the
\ntelephone room; that appellant No. 2 had produced the key with the help of
\nwhich the secret vault in the cupboard in the western bedroom could be
\nopened and, therefore, the appellants were in conscious possession of the
\nsaid gold. It was further held by the Authorised Officer that when the gold
\nin respect of which any provision of the 1968 Act had been contravened,
\nsuch gold, ipso facto, attracted confiscation.\n<\/p>\n
In the case of Capt. M. Paul Anthony v. Bharat Gold Mines Ltd.<\/a> reported in
\n[1999J 3 SCC 679 it has been held that where department and criminal
\nproceedings are based on identical facts and where charges were sought to
\nbe proved by the policy officers and the panchas who raided the house and
\neffected recovery and where same set of witnesses were examined in both the
\nproceedings but the criminal court on examination of the evidence came to
\nthe conclusion that no recovery was made from the house and that raid was
\nnot proved it would be unjust, unfair and oppressive to allow the findings
\nrecorded by the enquiry officer to stand against acquittal by judicial
\npronouncement. The present case is on the stronger footing than the case of
\nCapt. M. Paul Anthony (supra). In the present case, in view of section 98B,
\na very heavy burden was placed on the appellants in the criminal
\nproceedings. It was for the appellants to rebut the statutory presumption
\nof the culpable mental state placed on them b section 98B. Under section
\n98B, the appellants had to prove beyond reasonable doubt, which they did.
\nthat they had no knowledge of the gold hidden in the ornamental top of the
\ncupboard in the eastern bedroom. Hence, it would be unjust, unfair and
\noppressive to allow the decision of the Authorised Officer in confiscation
\nproceedings to stand against acquittal by the competent criminal court,
\nwhich acquittal was confirmed by the High Court and by this Court.\n<\/p>\n
We may clarify that our above observation should not be taken to mean that
\nthere is no difference between departmental proceedings under section 71(1)
\nand prosecution for illegal possession under section 85(1). A combined
\nreading of sections 8(1), 71(1) and 85 of the 1968 Act made it clear that
\nthe legislature intended to provide for two separate proceedings before two
\ndifferent forums and there is no conflict of jurisdictions between the
\nAuthorised Officer acting under section 71(1) to direct confiscation on
\nbeing satisfied that an offence has been committed and the magistrate
\nmaking an order on conviction of an accused under section 85(1) and that
\nmere acquittal in the trial before the Magistrate, in every case, cannot
\nresult in setting aside, ipso facto, of the orders of confiscation passed
\nby the competent authority under the Act. That merely because there was
\nacquittal in the trial before the Magistrate, due to paucity of evidece or
\notherwise, would not entail nullification of the order of confiscation of
\nthe sei\/ed articles in every case. (See Divl. Forest Officer v. G. V.
\nSudhakar Rao,<\/a> reported in [1985] 4 SCC 573). In any event, on a plain
\nreading of sections 8(1) and 71(1) it is clear that the Authorised Officer
\nwas required to be satisfied that an offence under the Act had been
\ncommitted. That the confiscation proceedings were separate and distinct
\nfrom prosecution under the Act. However, that difference did not entitle
\nthe Authorised Office: to proceed arbitratily in making an order for
\nconfiscation.\n<\/p>\n
In the light of the above discussion, the first point for determination is\n<\/p>\n
– whether from the circumstances one can say that the appellants were in
\nconscious possession of primary gold. As indicated above, the adjudication
\nproceedings under section 71(1) concluded before the criminal case. The
\njudgment of the criminal court was not before the Authorised Officer.
\nHowever, the basic controversy before the Authorised Officer was -whether
\nthe entire primary gold (bars) was recovered from the ornamental top of the
\ncupboard in the eastern bedroom as alleged by the appellants, or whether
\nsome of the gold bars were also recovered from the cupboards in the western
\nbedroom and the room in which the telephone was placed as alleged by the
\ndepartment. According to the department, appellants were in conscious
\npossession of the gold bars because some of the bars were found from the
\ncupboards in the western room which were opened with the keys handed over
\nby Ishwaribai, appellant No. 2 herein. According to the department, since
\nprimary gold was recorded from western bedroom and telephone room in
\naddition to the recovery from the ornamental top of the cupboard in the
\neastern bedroom, the appellants were in conscious possession. The orders of
\nthe Authorised Officer and the Gold Control Administrator show that even
\naccording to the department, gold bars hidden in the ornamental top of the
\ncupboard in the eastern bedroom were not apparently visible but the fact
\nthat some of the remaining gold bars were recovered from the other rooms
\nproved that the appellants had knowledge of the gold bars. Therefore, the
\nkey question to be answered is – whether recovery of the gold from western
\nbedroom and telephone room was proved by the department. At the outset, it
\nmay be stated that the evidence on record shows that the officers who took
\npart in the raid were officers from Income-tax department. They saw the
\ncollection of gold and not the place from which the gold was recovered.
\nThere was no exact record to show from where the items of gold were found.
\nEach witness gave different versions. Their versions are self-contradictory
\nand conflicting with each other. The original panchnama was not produced.
\nThe copy of the panchnama did not indicate the place from which the items
\nwere recovered. Even the specific key supplied by appellant No. 2 herein.
\nIshwaribai. with which the locker in the western bedroom was allegedly
\nopened, was not separately seized. There was no contemporaneous record to
\nshow from which place what was recovered. In all, eight gold bars were
\nseized. According to Mahadeshwar, one of the key witnesses from the Income-
\ntax department, five of the bars were recovered from the ornamental top of
\nthe cupboard in the eastern bedroom. This statement was made before the
\nAuthorised Officer. However, later on in the criminal trial he has deposed
\nthat two to three bars were recovered from that place. Before the
\nAuthorised Officer, Mahadeshwar stated that two gold bars were recovered
\nfrom the western bedroom whereas in the criminal trial he has deposed that
\none gold bar was recovered from the western bedroom. Before the criminal
\ncourt, he deposed that two bars were found in the telephone room, whereas
\nbefore the Authorised Officer he deposed that he was not sure. According to
\nMs. Thadani, one of the witnesses in the raiding party from the Income-tax
\ndepartment, only one gold bar was recovered from the telephone room. No
\nrecovery memo was prepared by her. According to Kundalgaonkar, one of the
\nwitnesses to the recovery, one gold bar was recovered from the western
\nbedroom. However, in his confidential record, he stated that two gold bars
\nwere recovered from that room. Similarly, in his report to Shri Vaidya,
\nKundalgaonkar has stated that Ishwaribai gave the keys to him whereas in
\nthe criminal trial he has deposed that she gave the keys to Mahadeshwar.
\nAll these contradictions have taken place because there was no
\ncontemporaneous record to prove the recovery and the panchnama prepared was
\nfaulty as it did not indicate the place from which the gold was recovered,
\nin conclusion, none of the witnesses were able to give a coherent story as
\nto where the primary gold was found. Therefore, recovery of three gold bars
\nfrom the telephone room and western bedroom was not proved.\n<\/p>\n
On the other hand, from the evidence, it stood established that the
\nornamental top of the cupboard in the eastern bedroom could not be opened.
\nThe screws were rusted and old. They had to be cut. The entire gold was
\nfound at this place. The opening of the ornamental top was difficult. That
\nimprovised keys had to be prepared by the locksmith, who was the witness
\nfor the department. That they were made to open the locker\/vault inside the
\nornamental top. The evidence shows that the appellants did not have the
\nkeys to open the said vault. That the entire primary gold, except the
\nidols, was found from the ornamental top of the cupboard in the eastern
\nbedroom. At this stage, it may be mentioned that some of the gold bars had
\nforeign markings for which proceedings were taken against the appellants
\nunder the Customs Act. They were exonerated of the charge of smuggling.
\nHowever, in those proceedings, it was deposed by Mahadeshwar that the
\nentire primary gold was recovered from one cupboard. Further, in his order
\ndated 26.6.1976, the Authorized Officer held that entire gold was seized
\nfrom one cupboard. In the circumstances, the appellants were not in
\nconscious possession of primary gold and they were entitled to the benefit
\nto the proviso to section 71(1).\n<\/p>\n
The next point which we are called upon to decide concerns legality of
\nseizure of primary gold, more particularly described in the panchnama
\ndated 30.8.1974 (at page 95 of Volume-II). On August 28. 1974. the
\nresidential premises of appellant No. 1 Gopaldas was searched and primary
\ngold was seized. A panchnama for the same was prepared by the officers of
\nIncome-tax department. The said search and seizure operations were carried
\nout by R.D. Mahdeshwar, Assistant Director of Inspection, Income-tax
\ndepartment, Bombay, pursuant to authorization from Commissioner of Income
\nTax in terms of Section 132 of Income Tax Act, 1961. Gopaldas, appellant
\nNo. 1, was present at the time of search. The Income Tax Authorities gave
\nintimation of the concealed gold bars to the Gold Control Officer, who was
\ninformed about the recovery of huge quantity of gold from the residence of
\nthe appellants. On August 30, 1974, the Gold Control Officer attended the
\nIncome-tax office and, in the presence of Gopaldas. took over the custody
\nof the seized gold from the Income-tax department. Thereafter, the above
\npanchnama was prepared, which was signed by appellant No. 1 herein. On
\n20.9.1974, the Gold Control Officer served a show-cause notice on the
\nappellants calling upon them to explain why proceedings under section 71(1)
\nand section 74 of the 1968 Act should not be initiated. In the show-cause
\nnotice, it was alleged inter alia that the appellants had contravened
\nsection 8(1) read with section 8(6) and section 16(1) read with section
\n16(5) inasmuch as the appellants had in their possession, custody and
\ncontrol primary gold in the form of gold bars; that they had failed to
\ndispose of the same within six months from 1.3.1967 in terms of rule 126H
\nof Defence of India Rules and that they had failed to file a declaration in
\nthe prescribed form in respect of 682 gold sovereigns, one gold coin and
\nfour gold idols (hereinafter referred to as “the gold article). The
\nappellants submitted their reply to the show-cause notice vide letters
\ndated 29.10.1974. They claimed that Bhojibai had purchased the said gold
\nmuch prior to the Defence of India Act. 1962. They claimed that they were
\nnot aware of the existence of the said gold as it was concealed in the
\ncavity under an ornamental top over the cupboard in the eastern bedroom
\nfrom which the entire gold was recovered by the officers of the Income-tax
\ndepartment and consequently they were not in conscious possession of the
\nsaid gold.\n<\/p>\n
Mr. Sundaram, learned senior counsel appearing on behalf of the appellants
\nsubmitted that the Gold Control Officer merely took over the primary gold
\nfrom the Income-tax officers which did not constitute a seizure under the
\n1968 Act. That in any event, such take over was not permissible under
\nsection 132(5) of the Income Tax Act, 1961. He urged that there was no
\nsecond seizure as alleged by respondents no. 2 and 3 herein: that the said
\nplea was taken to prevent the appellants from claiming immunity under
\nvoluntary disclosure scheme. In any event, it was submitted, that if there
\nwere two seizures, one in the Income Tax Act on 28.8.1974 and the other
\nunder the 1968 Act on 30.8.1974, it would tantamount to the gold having
\nbeen seized by the Gold Control Officer from Income Tax Authorities which
\nwould be no seizure in law. He relied upon the judgment of this Court in
\nthe case of Tarsem Kumar’s (supra). He elaborated this point by alleging
\nthat in order to get over the judgment of this Court in Tarsem Kumar’s
\ncase, the said respondents have sought to contend that the primary gold was
\nreturned to the appellants by Income-tax department and seized thereafter
\nby Gold Control Officer from the appellants. That this contention was not
\npossible as there was no document to establish that gold was returned by
\nthe Income-tax department to the appellants. That this stand of the
\nrespondents herein was self serving and incorrect as the panchnama (at page
\n95 of Volume-II) itself stated that primary gold was seized from Income-tax
\ndepartment by the Gold Control Officer. It was urged that inter-
\ndepartmental seizure was impermissible under the Income Tax Act, 1961 as
\nwell as under the 1968 Act.\n<\/p>\n
Learned counsel for the appellants next contended that even section 66 of
\nthe 1968 Act was not applicable as seizure connotes taking possession of
\nthe goods contrary to the wishes of the person from whom it is taken. In
\nthis connection, it was submitted that section 3 of the 1968 Act made the
\nAct inapplicable to any gold in possession of the Government. It was
\ncontended that on and from 28.8.1974, the said gold was in possession of
\nIncome-tax department and, therefore, the said 1968 Act was inapplicable.
\nIt was urged, that in the circumstances, since there was no seizure in law
\nor fact, the appellants were entitled to claim immunity under the Voluntary
\nDisclosure Scheme, 1975 (hereinafter referred to as “the VDS, 1975”).\n<\/p>\n
Per contra, Mr. Bajpai learned counsel appearing on behalf of the
\ndepartment submitted that section 66 empowered the Gold Control Officer to
\nseize any gold in respect of which he had reason to believe that any
\nprovision of the Act had been contravened. That the seizure of gold in this
\ncase was made under a panchnama in presence of Gopaldas in the reasonable
\nbelief that the provisions of the Act had been contravened. In this
\nconnection, reliance was placed on the copy of the panchnama (at page No.
\n95 of Volume-II). which specifically recorded that the Gold Control Officer
\nhad reason to believe that the provisions of the Act had been contravened
\nin respect of primary gold, gold sovereigns and gold coins, in all weighing
\n37.389.300 gms, value at Rs. 18.70 lacs, and seized from Income Tax
\nOfficer. Further, CBDT had issued a circular on 30.8.1965 addressed to all
\nCommissioners of Income Tax and Wealth Tax stating that where gold was
\nseized in a search or a raid by the Income Tax Authorities, necessary
\ninformation should be given to the Gold Control Officer. It was submitted
\nthat the circular issued by the CBDT was binding on subordinate Income Tax
\nAuthorities. That it was in compliance with the said circular that the
\nIncome Tax Authorities informed the Gold Control Officer about the seizure
\nof the said gold, in response to which the Gold Control Officer visited the
\nIncome-tax office and seized the gold under section 66 of the 1968 Act.
\nTherefore, it was urged that there was no illegality in making the seizure.
\nThat, when the Gold Control Officer went to take over the gold, he had
\nknowledge that in respect of such gold, certain provisions of the 1968 Act
\nhad been contravened. It was next submitted that section 8 of the Gold
\n(Control) Act cannot apply to seized gold and if the interpretation place
\non behalf of the appellants is accepted, it would render section 66
\nredundant. It was next urged that the judgment of this Court is Tarsem
\nKumar’s case (supra) was given in relation to the provisions of the Income
\nTax Act. That the said 1968 Act was self-contained Act. In this connection,
\nit was submitted that the power of seizure under section 132 of the Income-
\nTax Act was limited to assets found as a result of search whereas the power
\nunder section 66 of the Gold (Control) Act was an omnibus power of seizure,
\nwhich was not restricted by any preconditions. In this connection, it was
\nurged that in case of a seizure under section 132 of the Income Tax Act,
\nsearch was a precondition which requirement was not there in section 66 of
\nthe 1968 Act. Hence, it was contended that the judgment of this Court in
\ncase of Tarsem Kumar (supra) did not apply to section 66 of the 1968 Act.
\nLastly, it was submitted that the adjudicating proceedings were separate
\nand independent of the prosecution proceedings and in view of the
\nconcurrent findings of the Gold Control Authorities under section 71(1) and
\nunder section 74, no interference is called for.\n<\/p>\n
The short point which we are called upon to decide is the validity of the
\nseizure of primary gold on 30.8.1974 by the Gold Control Officer. For that
\npurpose, we have to examine the scheme of the 1968 Act. Chapter XII made
\nprovisions for entry, search, seizure and arrest. Under section 58 any Gold
\nControl Officer authorised by the Administrator may search the business
\npremises of a dealer, if he had reason to suspect that any provision of the
\nAct had been contravened. Section 66 conferred power on the Gold Control
\nOfficer to seize any gold if he had reason to believe that in respect of
\nsuch gold any provision of the Act had been contravened. It has been
\nvehemently urged before us on behalf of the appellants that the Gold
\nControl Officer had no authority to take over and seize the gold from
\nIncome-tax department. Under section 64(b). any Gold Control Officer may,
\nduring the course of enquiry in connection with the contravention of any
\nprovisions of the Act, require any person to produce or deliver any
\ndocument or article or relevant to such enquiry. In our view, the words any
\nperson” in section 64(b) included all revenue officers of the Government.
\nThis is borne out by section 105 under which all officers of the Government
\nengaged in collection or prevention of evasion of revenue were required to
\nassist the Gold Control Officer in execution of the provisions of the 1968
\nAct. Hence, the Gold Control Officer acted within his authority when he
\ntook over the said gold from the Income-tax department on 30.8.1974. In the
\ncase of The Collector of Customs, Madras v. Nathella Sampathu Chetty<\/a>
\nreported in, AIR (1962) SC 316, the expression “reason to believe” in
\nsection 178(1) of the Sea Custums Act came up for consideration. Section
\n178(1) prescribed that where goods to which that section applied were
\nseized in the reasonable belief that they were smuggled, the burden of
\nproving that they were not smuggled shall be on the person from whose
\npossession they were seized. It was held by this Court that where
\ncircumstances existed to raise a reasonable suspicion that goods seized had
\nbeen obtained illicitly, that was sufficient to constitute “a reasonable
\nbelief that the goods were smuggled”. In the case of Narandas M. Kapadia
\nv. Union of India & Ors., reported in (1977) Crl. L.J. 1303, the Calcutta
\nHigh Court has held that in order to seize goods liable to confiscation
\nunder section 110(1) of the Customs Act, the officer concerned must have
\nreason to believe that goods were improperly imported. That when a
\nchallenge was thrown, it was necessary to find out whether the officer had
\nin fact formed the belief and whether there was material relevant or
\ngermane upon which he could have formed the belief. If there existed some
\nmaterial upon which such a belief could be formed, the Court is not
\nconcerned with the propriety of the belief or sufficiency of the material.
\nApplying the above principles to the facts of the present case, we find
\nthat seizure in this case was made by the officers of Income-tax department
\non 28.8.1974 and all that the Gold Control Officer did was to take over the
\nseized gold. When the Gold Control Officer on 30.8.1974 went to take over
\nthe said gold, he had knowledge of the huge quantity of gold seized by the
\nIncome-tax department. He had the knowledge that the seized gold was
\nillegally possessed by the appellants, which by itself was a contravention
\nof the 1968 Act. The circumstances were so eloquent that they themselves
\npresented “reason to believe” that the provisions of 1968 Act had been
\ncontravened. Some of the gold bars had markings and even stamp of purity
\nembossed on them. These writings also provided reason to believe that the
\nprovisions of the Act had been contravened. In the circumstances, there
\nexisted grounds upon which the belief of contravention of the Act was
\nentertained by the seizing officer. It was urged before us on behalf of the
\nappellants that “seizure” connotes taking possession of the goods contrary
\nto the wishes of the person from whom it is taken. It was submitted that in
\nthe present case, the seized gold was taken from the Income-tax department
\nand not from the appellants and consequently, there was no seizure in law
\nor in fact. It this connection, reliance was placed on the judgment of this
\nCourt in Tarsem Kumar’s case (supra). We do not find any merit in these
\narguments. Firstly, as stated above, the Gold (Control) Act, 1968 is a self
\ncontained Act, Under section 64(b), the Gold Control Officer was empowered
\nto call upon “any person” to produce any document or thing relevant to his
\nenquiry into contravention of the provisions of the Act. Under section 105,
\nall officers engaged in collection or prevention of evasion of revenue were
\nrequired to assist the Gold Control Officers in the execution of the
\nprovisions of the said Act. Under section 111, the said Act was given an
\noverriding effect over all other laws inconsistent thereto. That mere
\npossession was an offence punishable under section 85(l)(ii) of the Act. On
\nthe other hand, the purpose of seizure under section 132(5) of the Income-
\nTax Act is not to punish the assessee but to assess his tax liability.
\nSection 132 of the Income Tax Act confers power on Income Tax Authorities
\nto realize the income tax dues of the assessee from his assets. After
\nrealizing the dues, the balance value is returned to the assessee. On the
\nother hand, when gold was seized from the possession of the person
\nconcerned, it was not only liable to confiscation under the 1968 Act but he
\nwas liable to be prosecuted for the offence of possessing gold. Further,
\nthe object behind section 132 of the Income Tax Act is to ascertain the
\nsource of income with which the assessee acquires an undisclosed asset.
\nConsequently, search under section 132(1) is made a precondition to seizure
\nunder section 132(5) (as it stood at the material time). Lastly, as stated
\nabove, possession ipso facto was made an offence under the said 1968 Act,
\nwhich not only provided for prosecution for possessing gold on the
\nappointed date but it also provided for confiscation under section 74(1).
\nThe power of seizure under section 132(5) of the Income Tax Act was limited
\nto the assets found as a result of the search, whereas the power under
\nsection 66 of the Gold (Control) Act was omnibus. It was not restricted by
\nany preconditions. In the circumstances. we hold that the scheme of section
\n132(5) of the Income Tax Act. as it stood at the relevant time, was
\ndifferent from that of the Gold (Control) Act, 1968. Therefore, the
\njudgment of this Court in Tarsem Kumar’s case (supra) has no application to
\nthe facts of the present case. Secondly, it may be pointed out that on
\n30.8.1965, the CBDT has issued a circular to all Commissioners of Income
\nTax and Wealth Tax stating that where gold was seized in a search\/raid by
\nIncome Tax Authorities, necessary information should be given to the Gold
\nControl Officer. This circular was binding on all subordinate Income Tax
\nAuthorities, in terms of section 119 of the Income Tax Act, 1961. This
\ncircular has to be read in the light of sections 64(b) and 105 of the Gold
\n(Control) Act. As stated above, section 64(b) conferred power on Gold
\nControl Officer to ask any person, which included Income Tax Officer, to
\nproduce before him the primary gold which the Income Tax Officer had
\nseized. Under section 105, the Income Tax Officer as a revenue Officer, had
\nto assist the Gold Control Officer. It is, therefore, clear that under the
\nprovisions of the Gold (Control) Act, the officer was empowered to call
\nupon the Income Tax Officer to produce the seized gold before him for
\ntaking action under the Gold (Control) Act. In the circumstances, we are of
\nthe view that there was no illegality in the matter of seizure of primary
\ngold on 30.8.1974 by the Gold Control Officer.\n<\/p>\n
In the case of Vasantlal Ranchhoddas Patel v. Union of India,<\/a> reported in
\n68 (BLR) 223, the Assistant Enforcement Officer obtained a search warrant
\nfrom Chief Presidency Magistrate. Bombay, on 23.7.1964 under section 19 of
\nFERA. authorizing him to search shop No. 157 situate at Mumba Devi Road,
\nBombay and to seize incriminating documents, foreign exchange, account
\nbooks etc. In pursuance of this warrant, the Assistant Enforcement Officer
\nsearched the premises on the same date. No incriminating documents or other
\nmaterials were found. The appellant was present in the shop. He was
\nsearched by the officers of the Enforcement Directorate in the presence of
\npanchas and four packets containing diamonds were found on his person. They
\nwere, therefore, seized. There was a safe in the shop which was also sealed
\nby the said officers. One of the Enforcement Officers thereafter informed a
\nCustoms Officer about the seizure of the diamonds. On 23.7.1964, Customs
\nOfficer went to the shop but as the panchnama had already been made and as
\nthe diamonds had been recovered by the Enforcement Officers, the Customs
\nOfficer did not once again seize them. On 24.7.1964, the safe was opened.
\nIt was found to contain seven packets of diamonds. These articles were
\nseized by the officers of the Enforcement Directorate. All the packets of
\ndiamonds remained in the custody of the Enforcement Directorate till
\n4.9.1964, when the Customs Officers took charge of the diamonds from the
\nEnforcement Directorate and seized them under section 110 of the Customs
\nAct. The appellant applied to the Chief Presidency Magistrate for orders
\ndirecting the officers of the Enforcement Directorate to return the
\ndiamonds. On behalf of the Enforcement Directorate, it was urged that the
\ndiamonds had not been seized under the search warrant issued by the learned
\nMagistrate but they had been reized under section 151 of the Customs Act,
\n1962. This contention was accepted by the learned Magistrate who held that
\nas the Customs Authorities had taken charge of the diamonds according to
\nlaw, he could not order their return. The appellant thereafter filed Misc.
\nWrit Petition on the original side of the Bombay High Court praying for
\nreturn of the diamonds. The writ petition was summarily dismissed. Being
\naggrieved the matter came before the Division Bench of the High Court. If
\nwas held that under section 1 10 of the Customs Act, before any action
\ncould be taken, it was necessary that the proper officer should entertain
\nthe belief that the goods were liable to confiscation under the Act. That
\nthe belief must be entertained at the time when the goods were seized. It
\nwas held on facts that the goods were seized by the Enforcement Directorate
\non 23rd and 24th July, 1964 and they were taken over by the Customs
\nAuthorities on September 4, 1964. The Division Bench rejected the argument
\nadvanced on behalf of the appellants that the transfer of custody of the
\ngoods by the officers of the Enforcement Directorate to the Customs
\nOfficers did not constitute seizure under section 110 of the Customs Act .
\nIt was held that section 110 of the Customs Act does not place any
\nlimitation as to the person from whose possession the goods believed to
\nliable to confiscation can be seized. As stated above, the Gold (Control)
\nAct, 1968 was a self-contained Act; that under section 64(b) the Gold
\nControl Officer had wide powers to direct any person to produce the
\ndocument or thing relevant to the inquiry into contravention of the
\nprovisions of the Act; that section 66 did not place any limitation as to
\nthe person from whose possession the goods liable to confiscation could be
\nseized and under section 105, all revenue officers were duty bound to
\nassist the Gold Control Officer in execution of the provisions of the Act.
\nIn the circumstances, the judgment of this Court in the case of Gian Chand
\nv. State of Punjab,<\/a> reported in AIR (1962) SC 496 has no application. For
\naforestated reasons, the take over of gold on 30.8.1974 constituted lawful
\nseizure under Section 66.\n<\/p>\n
The last point which we have to decide is – whether the appellants herein
\nwere entitled to claim immunity from confiscation of gold and imposition of
\npenalty under the Voluntary Disclosure of Income and Wealth Ordinance,
\n1975? In this connection, the following facts may be noted. On 8.10.1975,
\nthe President of India promulgated Voluntary Disclosure of Income and
\nWealth Ordinance, 1975. The said Ordinance was repealed subsequently by the
\nVoluntary Disclosure of Income and Wealth Act (No. VIII of 1976). The Act
\nconferred complete immunity from proceedings for confiscation, penalty and
\nprosecution. On 27.12.1975, appellant No. 1 as Karta herein filed the
\ndeclaration under the VDS, 1975 and claimed immunity. On 5.6.1976, the
\nOfficer took the decision that the declaration in respect of the seized
\ngold could not be accepted. It was further held that as the show-cause
\nnotice was issued under the 1968 Act on 20.9.1974 and as the declaration
\nwas filed on 27.12.1975, the appellants were not entitled to immunity.
\nLearned counsel appearing on behalf of the appellants urged that in the
\npresent case, proceedings were not pending on the relevant date and in
\nsupport of his submission he contended that the initial order dated
\n26.6.1976 passed by the Collector was set aside by the Appellate Authority
\non 21.11.1977 and the proceedings were remanded for de novo trial and,
\ntherefore, till the commencement of de novo adjudication, there were no
\nproceedings pending and consequently the appellants were entitled to
\nimmunity. We do not find any merit in this argument. As stated above,
\nproceedings were initiated vide show-cause notice dated 20.9.1974 whereas
\nthe Ordinance came to be promulgated on 18.10.1975 and appellant No. 1
\nfiled his declaration on 27.12.1975. Under the Ordinance, a declarant was
\nentitled to claim immunity from penalty, confiscation and prosecution under
\nGold (Control) Act, if before making the declaration the gold was not
\nseized and no proceeding was pending in respect of that gold before any
\nauthority under that Act. Since, proceedings were pending at the time of
\nfiling of the declaration, the appellants were not entitled to immunity.\n<\/p>\n
It was next contended on behalf of the appellants that since there was no
\nseizure in fact or in law, the appellants were entitled to claim immunity
\nunder the VDS, 1975. In this connection, it was argued that seizure in the
\npresent case was not in accordance with sections 58, 59 and 66 of the Gold
\n(Control) Act and consequently, it was void and, therefore, the appellants
\nwere entitled to claim immunity under the VDS, 1975. It was submitted that
\nin the present case, the declaration of appellant No. 1 was refused only on
\nthe ground that there was seizure of gold but once this fact is
\ndemonstrated to be incorrect then ipso facto the reason for depriving the
\nappellants of the benefit of the scheme would fail. In this case, we have
\nheld that the seizure of the gold on 30.8.1974 was in accordance with the
\nprovisions of the 1968 Act and since the declaration was filed after the
\nsaid seizure, the appellants were not entitled to claim immunity.\n<\/p>\n
To sum up, we find that the seizure of the gold on August 30, 1974 was
\nlawful and in accordance with Section 66 of the 1968 Act. However, in
\nabsence of any evidence of recovery of primary gold from the western
\nbedroom and the telephone room and in the absence of any material to show
\nthat the appellants had knowledge of the said gold hidden in the ornamental
\ntop of the cupboard in the eastern bedroom, the contravention of the
\nprovisions of the 1968 Act is not established against the appellants and
\nconsequently the orders of confiscation and penalty are not sustainable.\n<\/p>\n
For the aforestated reasons, the appeal is allowed and the impugned
\njudgment and order of the Division Bench of the High Court dated 5.1.1994
\nis set aside. The order of the Appellate Authority dated 5.11.1981
\nconfirmed in Revision vide order dated 10.7.1982 to the extent of absolute
\nconfiscation of seven gold bars, one gold brick, gold coins and sovereigns,
\nmore particularly described in the panchnama dated 30.8.1974 (page 95 of
\nVol. II) with personal penalties on each of the two appellants herein, are
\nset aside. Consequently, we direct that the said gold, if not disposed of
\nso far. shall be returned to the appellants within two months from the date
\nof the receipt of the copy of this judgment and order by the Collector of
\nCustoms (Preventive), Bombay. If, however, the said gold is disposed of.
\nits sale price shall be paid to the appellants with interest @ 6% p.a. from
\nthe date of disposal till payment. In the facts and circumstances of this
\ncase, there will be no order as to costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Gopaldas Udhavdas Ahuja And Anr vs Union Of India And Ors on 6 July, 2004 Bench: Ruma Pal, S.H. Kapadia 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 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-219810","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nGopaldas Udhavdas Ahuja And Anr vs Union Of India And Ors on 6 July, 2004 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/gopaldas-udhavdas-ahuja-and-anr-vs-union-of-india-and-ors-on-6-july-2004\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Gopaldas Udhavdas Ahuja And Anr vs Union Of India And Ors on 6 July, 2004 - 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