Orissa High Court
Indulal Nautamlal & Co. vs Collector, Central Excise & Customs, ... on 11 March, 1987
Equivalent citations: AIR1989ORI15, [1990]69COMPCAS507(ORISSA), 1989(22)ECC53, 1987(30)ELT659(ORI), AIR 1989 ORISSA 15, (1987) 30 ELT 659, (1989) 22 ECC 53, (1987) 1 ORISSA LR 546, (1990) 69 COMCAS 507
Author: G.B. Patnaik
Bench: G.B. Patnaik
JUDGMENT Rath, J.
1. An order passed under Section 74 of the Gold (Control) Act, 1968 (Act 45 of 1968) imposing a penalty of Rs. 30,000/- on the petitioner for violation of the provisions of the Gold Control Act (for short, the Act) in respect of primary gold which is no longer available for confiscation is the occasion for this application under Articles 226 and 227 of the Constitution. The petitioner who is a licensed dealer in gold, purchased 2 Kgs. of gold from the Reserve Bank of India on 10-5-1978 and took delivery of the same on 19-5-1978 in a gold sale effected by the Reserve Bank of India in accordance with the authorisation made by the Administrator, After purchasing the gold the petitioner sold the same at Bombay itself through a commission agent who was also a licensed dealer since according to the petitioner, transporting the gold from Bombay to Cuttack was risky and expensive. Subsequent to the disposal of gold by the petitioner, the Administrator imposed restrictions on 2-6-1978 in Annexure-2 prohibiting sale of the purchased gold to any other licensed dealer, but however the. restrictions were not applicable to the sale effected by the petitioner it having been already presold.
2. A notice to show cause was issued to the petitioner by the opposite party in Annexure-7 on 16-6-1978 to show cause as to why a penalty should not be imposed upon it under Section 75 of the Act on the charge that it had contravened Sections 27(7)(b) and 55 of the Act read with Rule 13(1) of the Gold (Control) (Forms, Fees and Miscellaneous Matters) Rules, 1968 inasmuch as it had disposed of standard gold bars weighing 2 Kgs. allotted to it by the Reserve Bank of India without . bringing the stock to its licensed premises at Nayasarak, Cuttack, and without accounting it in statutory records in form GS-11 and issue of sale vouchers.
3. The petitioner showed cause contending that it was not required to bring the gold from Bombay to Cuttack and that the provisions of the Act relating to maintenance of accounts in statutory forms or issue of sale vouchers are limited to the gold acquired under Section 31 of the Act but not to gold acquired from the Government to which the provisions of the Act are not applicable. The opposite party negatived the contentions of the petitioner and by its order dated 23-1-1979 imposed the penalty as above vide Annexure-9 which the petitioner seeks to get quashed in this case.
4. Assailing the order, Mr. Mohanty, the learned counsel for the petitioner has urged that : --
1) Gold acquired by them from the Reserve Bank of India is exempt from the applicability of the provisions of the Act under Section 3 thereof and hence no proceeding against them can lie for contraventions of the provisions of the statute as alleged against them.
2) The prohibition contained in Section 27(7)(b) of the Act that Licensed dealers shall not carry on business as such dealer in any premises other than the premises specified in the licence would ipso facto cover the premises of the commission agent through whom the gold was sold since the definition of dealer in Section 2(h)(iii) also includes a commission agent.
3) Since Section 9 of the Act is a specific provision regarding disposal of the gold acquired under the authorisation of the Administrator, the requirements of Section 55 relating to accounts are not applicable to such gold and,
4) The notice in Annexure-7 having been issued under Section 75 of the Act and no notice having been issued under Section 74, as also no notice for confiscation having been issued under Section 79, imposing a penalty under Section 74 is bad in law and is to be quashed.
5. The contentions of the petitioner may be examined seriatum.
6. Point No. 1 : -- Section 3 of the Act so far as relevant merely states that nothing in the Act shall apply to or in relation to any gold belonging to, or in the possession, custody or control of the Government or the Reserve Bank of India. The exemption so contained in the Act only extends to gold either belonging to or in possession, custody or control of the Reserve Bank of India or the Government, but however such protection would cease to exist once the gold is sold and comes into the possession of the purchaser. Benefit of protection was thus no longer available once the petitioner purchased the gold. This submission of the petitioner must accordingly fail.
7. Point No. 2:-- Section 27(7)(b) is a mandatory provision containing prohibition that a licensed dealer shall not carry on business as such dealer in any premises other than one specified in his licence. "Licensed Dealer" has been defined in Section 2(m) as a dealer who holds a valid licence under Section 27 authorising him to carry on business as a dealer. "Dealer" has been defined in Section 2(h)(iii) so as to include a commission agent, broker, delcredere agent, auctioneer or other mercantile agent, by whatever name called. It is of course not in dispute that the petitioner disposed of the gold at Bombay through commission agents who were themselves licensed dealers. The contention of the petitioner that since it sold the gold at Bombay through commission agents who were themselves licensed dealers, it would ipso facto mean that the premises mentioned in petitioner's licence extended to the premises of the commission agents is a strange submission and is wholly devoid of merit. The premises licensed, so far as commission agents are concerned, are their premises in respect of which they are licensed. The petitioner, under the provisions of the Act, could only carry on its transactions from its own licensed premises. It however could not have, on its own, shifted its business premises to Bombay. The definition of dealer in Section 2(h)(iii) only means that a commission agent can be a dealer in his own right but not that any one transacting his business through him would automatically hold a licence in respect of his premises. Such a meaning would defeat in a large way, the very purpose of the Act and hence can never be upheld. The submission of the petitioner on this count must also fail.
8. Point No. 3 : -- The submission raised by the petitioner on this count is also without substance. Section 9 of the Act runs as follows : --
"9. Restrictions on the disposal of gold acquired under any authorisation made by the Administrator :-- Every person who acquires gold under any authorisation made by the Administrator shall observe such conditions and be subject to such restrictions as may be specified therein and shall furnish to the Administrator an account of such gold, if so required by the Administrator.
(2) No person receiving, accepting, buying or otherwise acquiring gold in accordance with any authorisation made by the Administrator shall--
(i) sell, deliver, transfer or otherwise dispose of, or agree to sell, deliver, transfer or otherwise dispose of, or
(ii) expose or offer for sale, delivery, transfer, or disposal of, such gold, except in accordance with such authorisation."
On a plain reading of the Section, it shows that in Sub-section (1) a person who acquires gold under the authorisation of the Administrator is required to observe the conditions and be subject to such restrictions as may be specified in the authorisation of the Administrator. Under Sub-section (2) such a purchaser is prohibited to sell, deliver, transfer or otherwise dispose of or agree to conduct himself as such or even expose or offer for sale, delivery, transfer or disposal of the gold except in accordance with such authorisation. It follows that if the authorisation does not specify as to how the gold acquired is to be sold or otherwise disposed of, the acquired gold cannot be dealt with Annexure-1 to the writ petition which is the authorisation for purchase of the gold did not contain any provision regarding disposal of gold either by sale or otherwise by the licenced dealers who purchased the gold. Instructions came only on 2-6-1978 which contained a prohibition that the licensed dealers shall not sell or otherwise dispose of any gold so purchased to any other licensed dealer but may use the gold in making or repairing ornaments or Articles or both and also could sell, deliver or transfer such gold not exceeding 100 grammes at a time to a certified goldsmith for the purpose of making, manufacturing, preparing or repairing of ornaments or articles or both. The petitioner having purchased the gold in accordance with the authorisation in Annexure-1, was not authorised to sell the same since the authorisation did not permit it to do so. There is nothing in Section 55 of the Act which exempts the gold purchased in accordance with Section 9 for being accounted for as is required under it.
9. The other submissions made by the petitioner that the imposition of penalty under Section 74 is vitiated since no notice for the same had been issued is however well taken. Sections 74 and 75 of the Act may be quoted :
"74. Liability to penalty : -- Any person, who in relation to any gold does or omits to do any act which act or omission would render such gold liable to confiscation under this Act, or abets the doing or omission of such an act, or is in charge of the conveyance or animal which is liable to confiscation under this Act, shall be liable to a penalty not exceeding five times the value of the gold or one thousand rupees, whichever is more, whether or not such gold has been confiscated or is available for confiscation.
75. Penalties for contravention, etc., not expressly mentioned:-- Any person who contravenes any provision of this Act or any rule or order made thereunder or abets any such contravention or who fails to comply with any provision of this Act, or any rule or order made thereunder shall, where no express penalty is elsewhere provided for such contravention or failure, be liable to such penalty, not exceeding one thousand rupees, for every such contravention, failure or abetment, as the case may be."
10. Notice to the petitioner was admittedly issued under Section 75 of the Act which prescribes the maximum penalty of Rs. 1000/- for every contravention of the Act or the Rule. Under the notice, the violations complained of were two fold :
(i) contravention of Section 27(7)(b) and (ii) contravention of Section 55.
Thus in accordance with the notice, a maximum penalty of Rs. 2000/- could be imposed on the petitioner. It is of profit to refer to the findings of the adjudicating authority, the opposite party and the order passed.
".....In the circumstances, violation of Section 27(7)(b) and 55 of the Gold (Control) Act, 1968 and Section 36 of the said Act read with Rule 13(1) of the Gold (Control) (Form, Fees and Miscellaneous Matters) Rules, 1968, are already established.
Order The two kilogrammes of gold are therefore clearly liable to confiscation under the Gold Control Act. However, since the gold are no longer available for confiscation, I impose a penalty of Rs. 30,000/- (Rupees thirty thousand) only under Section 74 of the Gold (Control) Act."
There is no case that a proceeding for confiscation of the gold was taken out against the petitioner. It is of course true that even if a proceeding for confiscation is not taken out, yet a proceeding under Section 74 for imposition of higher penalty would lie provided a proceeding for the same is initiated and an opportunity is afforded before the penalty is imposed. To attract the provision of Section 74 of the Act, it must be established that the conduct of the person to whom the notice is issued was such as would have rendered the gold involved liable for confiscation and hence a higher penalty was required to be imposed. No such opportunity was given to the petitioner and the finding that the gold was liable for confiscation was reached unilaterally. I am supported in this view by an earlier decision of this Court reported in (1975) 41 Cut LT 138, Alankar v. Union of India. That apart, the notice issued being under Section 75 which limits the amount of penalty to a lesser sum, a higher penalty under Section 74 could not have been imposed without notice for the same. Such a proceeding having not been taken, it must be held that the imposition of penalty under Section 74 of the Act was not possible and hence the order to that extent must accordingly be quashed.
11. Mr. A. B. Misra, the learned Standing Counsel of the Central Government however strenuously urged that the petitioner having not exhausted the statutory remedies available to it under the Act by way of appeal and revision, should be kept out of the Court and that it is not entitled to any relief. The submission is wholly devoid of merit. It was specifically urged by the petitioner in the writ petition that the order imposing penalty was in violation of natural justice as no notice under Section 74 had been issued. The allegations made are taken to be admitted by the opposite party on the principle of non-traverse since the statement has not been challenged. It thus remains a fact that the imposition of penalty under Section 74 on the petitioner was without compliance with the principles of natural justice. It is well settled that the two well recognised exceptions to the requirement of exhaustion of the statutory remedies before the extraordinary jurisdiction of the High Court is invoked, are (1) where the order impugned is passed without jurisdiction, and (2) where the order is passed in violation of natural justice. In AIR 1958 SC 86 State of U.P. v. Mohammad Nooh it was observed at page 94 :
".....If an inferior Court or tribunal of first instance acts wholly without jurisdiction or patently in excess of jurisdiction or manifestly conducts the proceedings before it in a manner which is contrary to the rules of natural justice and all accepted rules of procedure and which offends the superior court's sense of fair play the superior Court may, we think, quite properly exercise its power to issue the prerogative writ of certiorari to correct the error of the Court or tribunal of first instance, even if an appeal to another inferior Court or tribunal was available and recourse was not had to it or if recourse was had to it, it confirmed what ex facie was a nullity for reasons aforementioned......"
The decision was re-affirmed in AIR 1961 SC 1506, A.V. Venkateswaran v. Ramchand Sobhraj Wadhwani and AIR 1969 SC 556, Baburam Prakash Chandra v. Antarim Zila Parished now Zila Parished, Muzaffarnagar. It must be held that the principle is now firmly entrenched in our Constitutional Jurisprudence and admits of no exception. Even AIR 1983 SC 603, Tilaghur Paper Mills Co. Ltd. v. State of Orissa with Pinaki Sengupta v. State of Orissa relied upon AIR 1958 SC 86 and has in no way departed from the same. It was merely a decision where an assessment was challenged not on the ground of violation of natural justice or lack of jurisdiction, but on purely procedural irregularities and grounds touching upon the merits of assessment. AIR 1985 SC 330, Assistant Collector of Central Excise, Chandan Nagar, West Bengal v. Dunlop India Ltd., the other citation relied upon by the learned Standing Counsel is also wholly inapplicable. The case arose out of an interim order of stay and it is in that context but the Supreme Court observed that where a fiscal statute is involved, the Court must have a good and sufficient reason to by-pass the alternative remedy provided by the statute. The observations were made by taking judicial notice of the fact that the vast majority of the petitions under Article 226 of the Constitution are filed solely for the purpose of obtaining interim orders and thereafter prolong the proceedings by one device or the other so as to paralyse the collection of revenue. The decision would have no application where a final order of adjudication is challenged as being violative of natural justice or as being without jurisdiction.
12. A further contention raised by the learned Standing Counsel is that since admittedly the power to levy a penalty under Section 74 was available to the opposite party, a mere non-mention of the section in the notice would not deprive him of the power to impose penalty under Section 74 of the Act. We are not at all impressed by such submission. Sections 74 and 75 are both penal provisions. Section 74 authorises imposition of higher penalty than that of Section 75 and is applicable only if particular circumstances are proved. The general principle that a mere wrong mention of a provision in the order would not vitiate the same if the power is otherwise available in the statute would not apply in such a case where substantial and real prejudice is caused: to the person concerned. It cannot be said; that merely because Section 74 occurs in the statute, the petitioner is automatically put to notice that Section 74 of the Act may be invoked where the notice itself mentions only Section 75. To hold as such would be wholly repugnant to all sense of fair play, equity and justice and hence must be emphatically denied
13. In that view of the matter, it must be held that order imposing penalty under Section 74 of the Act cannot be sustained and notice having been issued under Section 75 of the Act, the penalty imposed must be in accordance with that section. The infraction of statutel complained of being two in number, the maximum penalty imposable under Section 75 would be Rs. 2000/- only. The mention of Section 36 in the order imposing the penalty is not an independent violation by itself and had also not been mentioned in the notice. We would thus, while vacating the order imposing the penalty of Rs. 30,000/- would reduce the same to a sum of Rs. 2,000/- only. A writ be issued accordingly,
14. In the result, the writ petition succeeds in part. Hearing fee is assessed at Rs. 200/-.
Patnaik, J.
15. I agree.