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Dedhia Jewellers Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1984)(18)ELT396Tri(Mum.)bai
AppellantDedhia Jewellers
RespondentCollector of Customs
Excerpt:
.....act (hereinafter referred to as the act), confiscation of certain qualities of primary gold and gold ornaments seized from the appellants but giving them an option to redeem the same on payment of a fine of rs. 25,000/-. the collector also imposed, under section 74 of the act, a penalty of rs. 1,000/- on the appellant firm and rs. 500/- each on the two partners of the firm.2. the facts of the case, briefly stated, are that, on the basis of imformation, the superintendent, gold control, bombay, and his staff searched the licensed shop premises of m/s. dedhia jewellers, licensed gold dealers, on 22-10-1982 in the presence of witnesses. the statutory account books of the firm were scrutinised. the balance as on 22-10-1982 was arrived at as follows :- then, a declaration regarding the.....
Judgment:
1. This is an appeal against the Order-in-Original No. 9/83 dated 11-5-83 passed by the Collector of Customs (Preventive) Bombay, whereby he ordered, under Section 71 of the Gold (Control) Act (hereinafter referred to as the Act), confiscation of certain qualities of primary gold and gold ornaments seized from the appellants but giving them an option to redeem the same on payment of a fine of Rs. 25,000/-. The Collector also imposed, under Section 74 of the Act, a penalty of Rs. 1,000/- on the appellant firm and Rs. 500/- each on the two partners of the firm.

2. The facts of the case, briefly stated, are that, on the basis of imformation, the Superintendent, Gold Control, Bombay, and his staff searched the licensed shop premises of M/s. Dedhia Jewellers, licensed gold dealers, on 22-10-1982 in the presence of witnesses. The statutory account books of the firm were scrutinised. The balance as on 22-10-1982 was arrived at as follows :- Then, a declaration regarding the stock-in-trade as on the same date was obtained from Shri Jhaverilal Popatlal Dedhia, a partner of the firm present in the shop. Thereafter, the stock-in-trade was weighed with the following results :- Thus, there was excess unaccounted stock of new gold ornaments (22 cts) weighing 1207.000 gms. and 23.200 gms. (12 cts.) and primary gold weighing 28.200 gms. (22 cts). No satisfactory explanation was forthcoming in respect of the said excess stock which was, therefore, seized under the provisions of the Act.

3. In a statement recorded after the seizure, Shri J.P. Dedhia stated that he was not aware that the weight of plastic bangles (embedded with gold) was to be taken in gross weight and that he was tak ing the net weight of the gold content of the bangles. In a statement recorded on 26-10-1982, Shri Popatlal P. Dedhia, father of Shri J.P. Dedhia and the other partner of the firm, deposed that, on the day of search, he was out of station and further agreeing with the explanation given by his son. In a later statement recorded on 22-11-1982, Shri J.P. Dedhia deposed that the seized primary gold was the remnant which was returned by the goldsmith after the manufacture of ornaments of his shop.

4. By a notice dated 10-1-1983, the firm and the two partners were called upon to show cause why the seized gold and gold ornaments should not be confiscated under Section 71 of the Act and why penalties should not be imposed on them under Section 74 of the Act for contravention of the provisions of Sections 31(1) and 36(2) of the Act read with Rule 13(1) of the Gold Control (Forms, Fees and Miscellaneous Matters) Rules, 1968 and Section 55(3) of the Act. The firm in their reply denied all the charges. It was stated that the excess weight of 1230.200 gms. represented the weight of plastic and ivory bangles covered with gold strip. They were entering in the register only the net weight of the gold contents of the bangles. According to the practice followed by them since the beginning of business as a gold dealer, they were entering in the books only the net weight of the gold content of plastic and ivory bangles. Despite the fact that this position was brought to the notice of the Gold Control officers at the time of seizure, they did not care to record the gross weight and net weight. This accounted for the apparent excess over the recorded balance. The practice followed by them finds support in the note in the GS 12 Register which refers to grass weight as gross weight of the ornaments including weight of stones, gems, pearls but excluding weight of threads, lac and copper covered by gold sheet. The same position was explained in Trade Notice No. 5/75, dated 10-11-1975 issued by the Bombay Collectorate. As regards the primary gold weighing 28.200 gms.

it was stated that in a stock of 10 kilogrammes, this difference could not be considered as excessive. It was further stated that if the inventory of the entire stock-in-trade was made in the Panchnama, then it would have been possible to prove the weight of plastic or ivory content of the bangles.

5. After considering the submissions made before him in writing and in the course of the personal hearing, the Collector passed the impugned order which is now under challenge before us.

6. Shri D.H. Shah, the learned Counsel for the appellants, made the following points before us in the course of the hearing :- (i) The seizure was, procedurally speaking, illegal since it did not comply with the requirements of Jaw. It was incumbent on the part of the seizing officers to inventorize the articles in respect of which they believed the provisions of the Gold Control law had been violated. Only those articles which were prima facie offending could be seized. This is the clear ratio of the Allahabad High Court's decision by a learned Single Judge reported in AIR 1972 (All.) 16, in the case of Kashinath v. Collector of Central Excise, Allahabad.

The said decision was confirmed by a Division Bench of the High Court on an appeal being filed by Government-AIR 1972 (All.) 231.

(ii) The gross weight taken into account by Gold Control staff included the weight of ivory and plastic contents though these should have been excluded and a protest had been made in this behalf.

(iii) The Panchnama made on the spot did not also distinguish between gross weight and net weight. No inventory of the stock-in-trade was prepared nor were the items taken into possession by the officers listed with their description. It is for these reasons that the seizure was illegal.

(iv) On the very day of seizure Shri Z.P. Dedhia, Partner of the firm, had stated in writing that he was taking into account only net weight of the gold contents of plastic and ivory bangles and not their gross weight. This statement was later corroborated by his father. This position was further reiterated on the very next day in a representation to the Collector. The position was also confirmed by the seizing officer in his deposition. An affidavit filed in this behalf by Shri Z.P. Dedhia, has not been discussed by the Collector in his order.

(v) In his adjudication order, the Collector had accepted that the contention that the weight of plastic/ivory should not have been taken into consideration had force and that taking the gross weight would give a distorted version of the weight. However, he did not go to the logical conclusion that this position Jed. The allowance he made in this behalf was based on assumptions and presumptions.

(vi) Penalty can be imposed either on the firm or the Partners but not on both. Reliance was placed in this connection on the Calcutta High Court decision reported in AIR 1975 (Cal.) 337.

7. Though Shri Shah had at some stage in the hearing raised the plea of denial of sufficient opportunity for inspection of documents, for having the revaluation of the seized articles, etc., he ultimately gave up these grounds and prayed for disposal of the appeal in the light of the evidence on record. As such, we are not taking note of these objections.

8. The learned Departmental Representative Shri Krishan Kumar defended the Collector's order. He stated that the real question was whether the benefit of doubt should have been given by the Collector only in respect of 70 plastic/ivory bangles or in respect of 150 as claimed by the appellants. Shri Krishan Kumar stated that there was no basis for the statement that there were 150 bangles. The GS 12 Register does not throw any light on this aspect nor did the vouchers.

9. In his counter reply, Shri Shah stated that the Collector had not examined the vouchers, etc. In any case, the appellants could not have correlated them with the bangles. However, what was important was whether there were 150 bangles or not and this was borne out by the deposition of the investigating officer. The number taken as 70 was based on guess work.

10. We have carefully considered the submissions before us. Shri Shah vehemently contended before us that the seizure of the articles was riddled with irregularities and, therefore, it was illegal. It is true, as Shri Shah says, that the Panchnama does not make a distinction between gross. weight and net weight. in fact, it would appear from the Panchnama that the weighment particulars of the gold ornaments found on physical weighment of stock-in-trade were the gross weight. Though the Panchnama says that the partner of the shop could not satisfactorily account for the possession of the excess ornaments and primary golds, Shri Z.P. Dedhia in his statement recorded on the very day of seizure, had clearly stated that he was not aware that plastic and ivory bangles should be recorded in gross weight and that he was recording them in terms of net weight only. The very next day he had followed this up by a letter to the Collector of Customs (Preventive) in which he reiterated that the firm was taking into account only the net gold weight of plastic bangles and not the gross weight of the bangles. It was further stated therein that in-spite of the said explanation, the Gold Control staff took into account the gross weight of the bangles without giving any allowance for their plastic content. In this connection, it is relevant to note that the Bombay Collectorate Trade Notice No. 5/Gold/75 and the note in the GS 12 Register support the stand taken by the appellants. The said Public Notice and the notes state that the total weight of ornaments shall include the weight of stone, gems and pearls but shall exclude the weight of lac, thread and copper covered by gold. It stands to logic that if the weight of lac, thread and copper is to be excluded, the weight of plastic or ivory ought also to be excluded.

11. We cannot help observing that if the seizing staff had made an itemwise inventory and taken note of the objection raised by the partner of the firm that it was recording anly the net weight and not the gross weight, this confusion would have been avoided. What is more important is that under the Gold Control law, the Gold Control authorities are empowered to seize only those ornaments or articles of gold in respect of which they have reason to believe that contravention of the Gold Control law had taken place. This position of law has been very clearly enunciated by the Allahabad High Court in AIR 1972 (All.) 16, in which the High Court held that contravention of the provisions of the Act in respect of a particular item of gold or gold ornaments is a condition precedent for the exercise of the power of seizure. The Act does not authorise seizure or confiscation of any other articles or ornaments except those in respect of which the provisions of the Act are contravened. No substitute ornaments can legally be seized if the authorities fail to ascertain the particular ornaments in respect of which provisions of the Act are contravened. On an appeal being filed by the Government, the Division Bench of the Court upheld the above judgment and rejected the appeal. In the case before us, it is not stated clearly whether there was, in fact, any infringement of the provisions of the Gold (Control) Act. If the net and gross weights were ascertained separately, it is possible that the stock-in-trade of ornaments might have been found to tally with recorded balance. That this is so, is amply borne out by the Collector's order itself where he has conceded the appellants' contention that the weight of the plastic/ivory should not have been taken into consideration. The Collector further states that if the gross weight was to be taken, due allowance would have to be made for the weight of plastic/ivory. Other" wise, it would give a distorted version. On this basis, the Collector gave the benefit of doubt in the matter of gross weight in respect of 70 bangles. This has been based on the deposition of the ., Gold Control during the cross examination by the Counsel for the appellants.

In his deposition, Shri Machado, Supdt. had stated that he did not remember the exact number of bangles but that there could have been about 50 to 70 such bangles. The Collector chose to rely on this and gave allowance in respect of 70 bangles. Since the Supdt. could not remember the number of bangles nor was it recorded in the Panchnama and further, since the Collector had conceded the force of the Counsel's contention, we do not see any reason why the stand taken by the appellants, namely, that they had recorded only the net weight, should not have been accepted. As we said earlier, if the Panchnama had been more carefully drawn up, perhaps this position would have been confirmed or demolished. That, however, is in the realm of conjecture.

At this stage, we do not sec any reason why the benefit of doubt should not go to the appellants, particularly because the Gold Control staff did not go about their work properly in as much as they did not try to ascertain the particular pieces of ornaments in respect of which contravention of the Gold Control law had taken place. In fact, it would appear that it was the partner of the firm who produced the apparently excess quantity over the recorded balance and Gold Control staff would seem to have seized the same without in fact ascertaining whether they were the pieces which infringed the Gold Control law.

We also note that well before the adjudication on 11-5-1983, the Counsel for the appellants had filed before the Collector on 15-1-83 an affidavit of Shri Z.P. Dedhia in which he had spelt out at length the objectionable procedure followed by the seizing staff and their not having paid any heed to his objections thereto and how this led to the wrong seizure of gold ornaments. He had also made a statement in the affidavit that other gold dealers in Bombay were also following, like him, the practice of writing net weight only of plastic bangles.

However, the Collector's order does not discuss this statement made in the affidavit.

For all these reasons, we set aside the confiscation of gold ornaments which are directed to be released to the appellants within 2 months from the date of this order.

12. In so far as confiscation of excess primary gold found in stock is concerned, the appellants have at no stage furnished a plausible explanation. Their explanation that this represented the remmants of the gold handed over to them by the goldsmith who was making ornaments for them and that it was a small quantity in relation to 10 kgs. of ornaments, is not convincing. We, therefore, uphold the confiscation of the primary gold. However, the primary gold shall be allowed to be redeemed on payment of fine of Rs. l,0p0 (Rupees one thousand only).

13. As regards the penalty imposed on the appellants, we notice from the Calcutta High Court's decision in Tarak Nath Sen and Ors. v. Union of India and Ors. reported in AIR 1975 (Cal.) 337 that it has been held that a partnership is not a 'person' within the meaning of Section 3(42) of the General Clauses Act. The rights and obligations of a firm are really rights and obligations of individual partners of the firm.

Since the firm is not a legal entity and Section 140 of the Customs Act is inapplicable to the adjudication proceedings, imposition of penalties also upon the firm would, in effect, be imposition of double punishment on the partners on the same set of facts. The ratio of the said decision is applicable to the facts of the present case since Section 93 of the Gold Control Act which deals with offences by companies is not applicable to the present firm. In the circumstances, we set aside the penalty imposed by the Collector on the firm. However, in the light of our findings regarding the seized gold ornaments, we reduce the penalty on the 2 partners of the firm from Rs. 500 each to Rs. 100 each.


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