Delhi High Court
Lal Chand Tilak Raj vs Union Of India on 12 March, 1986
Equivalent citations: 1989(42)ELT549(DEL)
Author: B.N. Kirpal
Bench: B.N. Kirpal
JUDGMENT B.N. Kirpal, J.
1. The challenge in this writ petition is to the action which has been taken against the petitioner for the alleged violation of the defense of India Act and Gold Control Rules, 1962 as amended, read with Gold Control Act, 1968. The petitioner is admittedly a gold dealer and carried on business as such in its premises at Amritsar.
2. On the 5th December, 1966 it is alleged that the petitioner received from the G.P.O. Amritsar an insured post parcel bearing No. 772, dated 24th November, 1966. This parcel is stated to have been sent to it by M/s. Chandra Kant K. Shah, Licensed Gold Dealers, 189, Mumba Devi Road, Bombay. The parcel is stated to have contained old gold ornaments in the shape of 12 bangles and 1 ring and weighed approximately 550 grams. According to the petitioner these ornaments were covered by sale Bill No. 411, dated 24th November, 1966.
3. On 5th December, 1966 the delivery of this parcel was taken but the same was seized by the Customs Officers under the Provisions of the Customs Act, 1962.
4. On 8th April, 1976 the petitioner received a show cause notice from the Superintendent, Customs (Prevention). Amritsar asking the petitioner to show cause as to why the seized 13 pieces of gold ornaments should not be confiscated on the allegation that they had been made out of smuggled gold.
5. The petitioner filed its reply denying the allegations contained therein. According to the petitioner the purchase of the gold was duly covered by a valid bill. The Assistant Collector of Customs after giving a personal hearing passed an order dated 19th September 1967 ordered the confiscation of the said gold.
6. An appeal was filed against the said order. The Appellate Collector of Customs vide order dated 31st August, 1968 rejected the appeal. The petitioner then filed a revision petition before the Joint Secretary to the Government of India, Ministry of Finance challenging the order of Assistant Collector, Amritsar, as confirmed by the Appellate Collector of Customs on 31st August, 1968. This revision petition was heard and allowed by Joint Secretary to the Government of India vide his order dated 10th January, 1973. In the said order it was observed as under :-
"The observe that seizure in this case has been made under Section 110 of the Customs Act, 1962 on reasonable belief but there is nothing in this case to verify objectively the existence of reasonable belief in the minds of seizing officer at the time of seizure. Section 123 ibid has not been invoked in the Show Cause Notice. The only point relied upon by the Department is the high purity of the gold (Crude Gold and unfinished ornaments mentioned as bangles.) Under the circumstances of the case Government of India do not consider that the illicit nature of the gold and ornaments has been established.
In view of the foregoing Government of India allow the revision application and direct that the consequential relief be granted to the petitioners."
7. While proceedings under the Customs Act were going on the petitioner received a Show Cause Notice dated 2nd August, 1968 from the Assistant Collector of Customs, Amritsar purported to have been issued under the defense of India (Amendment) Rules, 1963. The relevant terms of the show cause notice are as follows :-
"Whereas it appears that M/s. Lal Chand Tilak Raj of Amritsar, and Chandra Kant K. Shah, of Bombay, have contravened Rule 126(H)(IG)(2)(bb) of the defense of India (Amendment) Rules, 1963 inasmuch as one insured parcel No. 772, dated 24-11-1966 addressed to M/s. Lal Chand Tilak Raj and sent by Chandra Kant K. Shah, was taken over by the Customs Prev. Staff Amritsar. Immediately after having been received by Sh. Janak Raj partner of the firm on 5-12-1966 in G.P.O. Amritsar. On examination of the said parcel 13 pieces of Gold weighing 550 grams approximately valued at Rs. 8250/- were recovered. The parcel was not covered with any bill or invoice and as such the 13 pieces of gold were seized under Rule 126(L) for contravention of provisions of the aforesaid rules M/s. Lal Chand Tilak Raj failed to produce any evidence documentary or otherwise, regarding its legal acquisition or transaction. The said M/s. Lal Chand Tilak Raj of Amritsar and Chandra Kant K. Shah of Bombay are hereby required to show cause to the Deputy Collector, Customs and Central Excise. The Mall Road, Amritsar as to why the penalty should not be imposed upon them under Rule 126(L)(16) of the defense of India (Amendment) Rules 1963 and why the seized goods in respect of which the offence appears to have been committee should not be confiscated under Rule 126(M) of the said Rules."
8. The petitioner sent a reply to the said show cause notice but the Deputy Collector of Customs and Excise vide his order dated 14th January, 1970 ordered the confiscation of the said gold under Rule 126(M). A penalty of Rs. 1000/- in addition to the confiscation of the gold was ordered. The case of the petitioner before the Deputy Collector had been that the goods were covered by a bill and, therefore, there was no basis for the issuance of the said show cause notice.
9. The petitioner then filed an appeal against the aforesaid order of the Deputy Collector of Customs. By order dated 22nd June, 1971, the Collector of Central Excise, Chandigarh rejected the appeal by observing that the voucher No. 411 dated 24th November, 1966 pertaining to the purchase of the aforesaid gold was produced by the petitioner on 7th December, 1966 whereas the seizure had been effected on 5th December, 1966.
10. The petitioner then filed a revision petition against the said order. By order dated 4th June, 1973 the said revision petition was dismissed. The material portion of the said order reads as under :-
"It has been contended that although the seizure took place on 5-12-1966, the Show Cause Notice was issued only on 2-8-1968 and the defense of India Rules were repealed by that time, the notice was invalid. It is, however, observed that by virtue of the saving provisions contained in Section 117(2) of the Gold Control Ordinance 1968, the liability of the applicant continued even after the repeal of the defense of India Rules. It was further contended that the bills produced by the applicant were verified at the seller's end who had confirmed the sale. However, the seller only confirmed having sold old ornaments in his bill, whereas the goods seized were not ornaments at all, nor were they old. It was further argued that ornaments of 24 carat purity are not unknown, as evidenced by the Bombay Bullion Association by-law, which refers to 99% purity of ornaments. The bangles, it is claimed, had also designs on them, and therefore, should be considered as ornaments. These arguments are not tenable, because the items had not been considered as ornaments, not on the sole ground that they were of high purity. It has also been observed that Shri Janak Raj himself in his statement had said that the contents of the parcel were ornaments in unfinished and crude form. The panchnama further described the items as crude and unfinished. Since the items were unfinished they had been correctly considered to fall outside the purview of 'ornaments' as defined under the defense of India Rules, under which only an article which is in a finished form, fit for use as personal adornment, could be so classified. Further it is observed that Shri Janak Raj himself had stated that they had ordered for the items so as to make new ornaments out of them, which when coupled with high purity of the items, indicates that these were not being ordered for sale as ornaments as such. The crudity of the items was further confirmed by the adjudicating officer who examined them. For the foregoing reasons, the charge against the applicant is satisfactorily established and the Collectors' order in appeal is correct in law and based on facts. The revision application is accordingly rejected."
In the present writ petition filed under Article 226 of the Constitution it is the aforesaid order dated 4th June, 1973 and the earlier orders which had been passed has been challenged.
11. The perusal of the show cause notice, as well as the order passed by the Deputy Collector of Customs and the Collector of Central Excise, shows that the charge against the petitioner under the provisions of the defense of India Rules was that the gold which had been seized was not accompanies by a bill. The petitioner had alleged that this was not so. According to the petitioner is had produced the voucher on 5th December, 1966. Curiously enough the Central Government has not adverted to this aspect at all. The Joint Secretary has not dealt with the contention of the petitioners to the effect that the invoice was produced before the authorities as and when it was asked to produce the same. The question as to the purity of the ornaments or whether they were finished or unfinished was not the subject matter of the show cause notice. As already noted, the only reason for the issuance of the show cause notice under the defense of India (Amendment) Rules was that the goods was not accompanied by a bill. In reply to this show cause notice, the petitioners had specifically dealt with this contention in the following words :-
"It is further mentioned for your information that we were given a personal hearing by the learned Appellate Collector of Customs, Delhi, in connection with our appeal pending with him in this case. During the course of this personal hearing we had occasion to refer to the bill seized by the Customs Deptt. Amritsar along with the relevant gold ornaments. The original bill issued by our suppliers in this case was very much in existence on the learned Collector of Customs file which can be verified by Your Honour."
If the Central Government had come to the conclusion that the aforesaid contention of the petitioner, namely, the bill was seized by the Customs Department, Amritsar along with the relevant gold ornaments, was incorrect, only then penalty could have been levied and goods ordered to be confiscated under the defense of India (Amendments) Rules. This aspect of the case, however, has not been dealt with by the Joint Secretary. The impugned order has been passed on grounds which are not mentioned in the show cause notice. The only ground which was mentioned in the show cause notice on the other hand has not been dealt with by the Joint Secretary. The principles of natural justice require that in order to give an effective opportunity it is necessary to inform the petitioner the case which he has to defend. In the present case it has not been done. The grounds on which the Joint Secretary has rejected the revision petition of the petitioner are not set out in the show cause notice. This being so, the impugned order has to be quashed.
12. For the aforesaid reasons, the writ petition is allowed and the impugned order dated 4th June, 1973 passed by the Joint Secretary to the Government of India is quashed. As a consequence thereof, the respondents are directed to return to the petitioner the gold which it had seized.
13. There will be no order as to costs.