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Ganpat Lal Kishan Lal Johri Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)(21)ELT600TriDel
AppellantGanpat Lal Kishan Lal Johri
RespondentCollector of Central Excise
Excerpt:
.....same premises. however, the licence granted earlier in favour of the appellant and renewed from year to year uptil that date [p. 49 of the paper book] may be amended to include the names of the partners, so as to avoid any legal complications in the future; (iv) nevertheless, the identical licence issued in 1963 was renewed in 1966, 1967 and 1968 as well (as will appear on a close examination of all the entries made at the bottom of the licence and in particular the last for 1968--rather obscured by the printed matter) without any amendment made therein; (v) a duplicate licence issued for 1969, "in lieu of the original being lost" [at page 50 of the paper book], however, purports to licence the appellant as a sole proprietory concern, the sole proprietor being kishanlal s/o ganpatlal.....
Judgment:
1. The material facts in this Revision Application, to the Government of India, transferred to the Tribunal and heard as an Appeal pursuant to Section 82-K of the Gold (Control) Act (hereinafter referred to as the Act), briefly, are- (a) the Appellant was a H.U.F. business firm till 1-4-1965, when it was converted into a partnership concern; (b) the H.U.F. was licensed as a dealer and, on its conversion into a partnership w.e.f. 1-4-1965, the change was brought to the notice of the Department by a letter dated 1-6-1965; (c) thereafter, it was the Appellant, as a partnership firm, that was filing the returns, and, apart from otherwise dealing with the Department, was granted renewals of the licences from time to time till 1976; (d) nevertheless, the Appellant's business premises were raided and the entire stock of gold weighing about 2359.050 grams, was seized on the ground that the business in gold by the Appellant was unauthorised and appropriate entries in regard to a quantity of 134.320 gms. of gold ornaments were not made in the statutory accounts; (e) in a notice, dated 28-5-1976, requiring the Appellant to show cause as to why the seized ornaments should not be confiscated under S. 71 and a penalty imposed under S. 74 of the Act, it was alleged, inter alia, that- (i) the business was that of a sole proprietory concern till 1-4-1965 and no approval was obtained on a change in its constitution and induction of four persons as partners. The business was conducted with an invalid licence between 1-4-1965 and 4-4-1975; (ii) the G.S. 12 register disclosed a balance of 2756.130 gms, whereas, on physical verification, a less quantity of gold only 2359.050 gms was found; (iii) about eight issue vouchers were not entered in the G.S. 12 register; (iv) accordingly, the Appellant had contravened the provisions of S. 27 of the Act, read with the rules of the Gold Control (Forms, Fees, etc.) Rules, 1968, (the Rules, for short) and S. 55 of the Act; [Pp. 52-53 of the Paper Book].

(f) the Appellant, in two letters dated 29-6-1976 (pp. 25-37 of the Paper Book), submitted that- (i) in reality, there was no change except that a partnership deed was executed between the members of the H.U.F. which was running the business earlier in the same name and style. Even so, the execution of the deed of partnership was duly intimated to the Superintendent, Central Excise, Gwalior, on 1-6-1975, although in terms of the Defence of India Act, 1962, Part IIIA (applicable to Gold Control and infoice at the relevant time), no intimation at all was necessary. The provisions of the Act which came into force on 1-9-1968 were inapplicable to the offence, if any; (ii) the periodical renewal of licence till the date of the seizure, notwithstanding the intimation of the constitution of the partnership, lends credence to the belief that the departmental records were duly amended and anyhow, if not, the Appellant is not at fault; (iii) a duplicate of the licence was issued in 1969 and owing, perhaps, to the loss of the earlier licence, erroneous particulars were entered in the duplicate; (iv) all along, the licence had been renewed and there is no provision in the Act that can render it invalid. A licence, once granted or renewed could be cancelled in terms of S. 50 of the Act, but that is not what is proposed to be done ; (v) the retention of the various documents, registers etc. seized beyond the statutory limit of fifteen days, in terms of S. 65 of the Act without any lawful or valid extension of the said period was also without jurisdiction; (vi) the seizure of the gold under S. 66(i) of the Act was without jurisdiction, no reason for it having been given; (vii) about eight sale vouchers totalling 134.320 gms. were yet to be entered in the G.S. 12 and 262.000 gms. of ornaments were sent on approval and vouchers for their sales could not be finalised; (viii) accordingly, no offence was made out in terms of any of the provisions of the Act. The seizure was unjustified and no penalty could be imposed; (i) the Appellant was H.U.F. (Hindu undivided family) prior to 1965 and it was converted into a partnership concern; (ii) the change in the constitution was not got approved and, in terms of S. 116(2) of the Act, it was only the licence issued originally to the H.U.F. that could be deemed to have been issued under the Act; (iii) the change in the constitution of the Appellant could not be saved in terms of S. 116(2) of the Act, being inconsistent with the provisions thereof. Accordingly, after 1-9-1968, when the Act came into force, the licence with the change in the constitution of the firm could not be deemed to be issued or continued under the Act; (iv) the Appellant, as a partnership firm, had been dealing, therefore, on an invalid licence right from 1-9-1968; (v) consequently, the ornaments seized are liable to be confiscated and the Appellant liable to be penalised; (vi) nevertheless, the licence may be permitted to be duly amended from the date of the Adjudication Order in the name and style of a partnership firm with a view to obviate the stoppage of business altogether; (vii) in the view he had taken, the charge under S. 55 of the Act for the discrepancies in the G.S. 12 register did not survive, because it is only a licensed dealer that is obliged to keep and maintain the register. Accordingly, a penalty of Rs. 2,000 was levied on the Appellant for breach of S. 27 of the Act and the ornaments seized were allowed to be redeemed on payment of a fine of Rs. 10,000.

(h) in Appeal, against the aforesaid Order, it was held by the learned Gold Control Administrator that- (i) the discrepancy between the entries in the G.S. 13 Register and on physical verification shows that certain ornaments were not accounted for in the prescribed statutory record ; (ii) the change in the constitution of the firm had not the approval of the appropriate authority; (iii) accordingly, the confiscation of the gold ornaments as well as fine in lieu thereof is reasonable; (iv) in view, however, of the renewal of the licence, a lenient view could be taken.

Accordingly, the penalty imposed in a sum of Rs. 2,000 was set aside.

(a) the order of the Appellate authority suffered from inherent contradictions. While the penalty was set aside in view of the repeated renewals of the licence by the Department itself, still, it was found that the approval of the Department for the change in the constitution of the Appellant was not obtained; (b) if the Appellant did not have a valid licence, the seized gold ornaments were not liable to confiscation since the Appellant was not legally obliged to maintain any statutory record; (c) once it was held by the learned Gold Control Authority that the Appellant acted bona fide in the matter of licence, the ornaments seized were not liable to confiscation for contravention of S. 27 of the Act; (d) confiscation of the seized gold on the grounds that accounts were not properly maintained could not have been sustained since the charges under S. 55 were dropped. Even if it is held to survive, it could only be limited to ornaments weighing 134.320 grams in respect of which alone it was alleged that vouchers had not been accounted for in the Register; (e) in terms of S. 71 of the Act, it is only the gold in respect of which any provision of the Act or Rules has been contravened that can be confiscated and no other. Assuming for a moment that the provisions of the Act or the Rules had been violated, still, there is, in the facts and circumstances of the case, no gold that can be confiscated, for there was less gold than what was accounted for in the register. It is not a case, where, as it usually happens, there is an excess of gold on physical verification, than what is actually accounted for in the register. In such a case, the excess gold is the gold in respect of which there has been a contravention and, accordingly, it could be confiscated, subject to the other requirements of the provision and S. 79. But whereas in this case, there is a deficit, there can be no order of confiscation in regard to the deficit gold in absentia [Reliance on AIR 1976 All.

35-Kashinath v. Collector of Central Excise'].

3. After the hearing of the case was concluded, the case was reopened with a view to satisfy ourselves as to the manner in which the Appellant was described in the applications for renewal of licence from time to time after the change in the constitution of the Appellant in 1965. Shri Anand for the Respondent, produced the original applications for renewal for the years 1970, 1972--1983 (13 in all) and filed the photocopies thereof in one set before us as per our direction. A perusal of the said original applications for renewal disclose that- (a) in the application for renewal for the year ending 31-12-1970, the firm was described as M/s. Ganpatlal Kishanlal. The applicant's name was Johri Kishanlal described as partner and son of Ganpatlal.

The application was signed for Ganpatlal Kishanlal by a person described as partner. The endorsement on the said application by the Assistant Collector shows that the licence G/GWL/99/63 was renewed for the year 1970; (b) the schedule to the application was also signed for Ganpatlal Kishanlal by a person described as partner and appears to have been verified and found to be correct; (c) the application for renewal for the year 1972 shows that application was made on behalf of M/s Ganpatlal Kishanlal and a list of five names was furnished. The application was signed by one amongst those five, namely Bhagwan Dass, describing himself as partner. The schedule was also sent by him as partner. The endorsement on the said application shows that the licence was renewed for the year 1972; (d) the names of the partners were similarly furnished in the application for renewal for the year 1973 as well. The Licence No. 99/63 was duly renewed as heretofore; so also for the year 1975; (e) for the year 1976, once again the application furnished names of all the partners but then the endorsement on the application shows that Licence No. 99/63 was renewed for the year 1976 and amended as per Collector's letter No. Gold/15/76, dated 1-2-1977 (the order of adjudication in these proceedings); (f) the application for renewal for the year 1977 likewise shows the names of all the partners. The endorsement is a certificate to the effect that no statement made by the applicant for the renewal of licence is incorrect or false and no business was transacted by the applicant from 27-2-1976 due to the case booked against them and the turnover figures for the period between 1-11-1975 to 27-2-1976 are not available as the records were seized; (g) the other applications for renewal produced are more or less identical and not material.

4. It would appear to us in the facts of the case and the submissions made that- (a) (i) it is only the gold in respect of which any provision of the Act or Rules had been contravened that can be confiscated, in terms of S. 71 of the Act; (ii) even so, the provision alleged to have been contravened was not merely S. 55 of the Act, requiring the maintenance of a true and complete account by a dealer of the gold in his possession but S. 27 of the Act, read with Gold Control (Forms, Fees etc.) Rules, as well; (iii) S. 27 of the Act prohibits business as a dealer without a valid licence; (iv) if, therefore, the Appellant was carrying on a business as a dealer without a valid licence, he contravenes S. 27 of the Act and the gold in respect of which the said provision was contravened was the entire stock in trade rather than merely the gold which fell short on physical verification. It may be that confiscation of the entire gold, or any gold for that matter, in the facts of the case, cannot, in terms of S. 71 of the Act, sustain in so far as the contravention of S. 55 is concerned and that was why the charge of violation of S. 55 was also dropped. Confiscation of gold for contravention of S. 27 stands on a different footing. It is in respect of the stock in trade that S. 27 had been contravened, if at all; (b) the crucial issue is, therefore, not the violation of S. 55 of the Act, but the contravention of S. 27 and the Rules; (i) the licence that was granted in 1963 in terms of R. 126E of the Defence of India Rules (P. 49 of the Paper Book) was in the name and style of "Sarvashri Ganpatlal Kishanlal". The word "Shri" before "Sarvashri" was scored out. There was no description of the Appellant as a sole proprietory concern. Nor was the name of proprietor given therein as was done in the duplicate licence granted in 1969 [P. 50 of the Paper Book]; (ii) the Appellant had informed the Superintendent, Central Excise by letter on or about 1-6-1965 of the change in the constitution of the Appellant. [Copies at pages 17 and 51 of the Paper Book]. In the said letter, it was stated, inter alia, that the Appellant was carrying on business in gold hitherto as a H.U.F. On account of differences between the members of the H.U.F., the business of the Appellant was converted into a partnership but in the same premises.

However, the licence granted earlier in favour of the Appellant and renewed from year to year uptil that date [P. 49 of the Paper Book] may be amended to include the names of the partners, so as to avoid any legal complications in the future; (iv) nevertheless, the identical licence issued in 1963 was renewed in 1966, 1967 and 1968 as well (as will appear on a close examination of all the entries made at the bottom of the licence and in particular the last for 1968--rather obscured by the printed matter) without any amendment made therein; (v) a duplicate licence issued for 1969, "in lieu of the original being lost" [at page 50 of the Paper Book], however, purports to licence the Appellant as a sole proprietory concern, the sole proprietor being Kishanlal s/o Ganpatlal at the identical address; and the duplicate licence was renewed for the years 1970 and 1971 as well; at the bottom appears the rubber stamp of the Appellant and the signature of Kishanlal, described as a partner; (vi) this was notwithstanding that as set forth in para (3) supra, the applications for renewal for the year 1970 and for the subsequent years had consistently described the signatory thereto as a partner and by and large furnished the names of all the partners; (d) in the aforesaid facts and circumstances, it is not unreasonable to infer that- (i) the licence for the years 1963-68 could not obviously have been issued in favour of a sole proprietory concern. (This is clear on its comparison with the licence at page 49); and the duplicate licence at page 50 was entirely erroneous; (iii) in the light of the letter dated 1-6-1965 [copies at pages 17 and 51 of the Paper Book] and the partnership deed adverted to therein, the Appellant could be only a H.U.F. till the advent of the partnership; (iv) description of the partners as sons of Ganpatlal in the aforesaid letter-the erstwhile coparceners in the H.U.F.-negates the induction of strangers into the partnership; (v) the request for amendment of the licence so as to include the names of the partners either went unheeded or was thought unnecessary because the existing licence could comprehend a partnership as well or there is no provision for the inclusion by amendment of the names of the partners; (vi) by and large, the applications for renewal were always signed by one of the partners describing himself to be such and the names of the other partners were also furnished; (vii) if, therefore, despite all this, the renewal for the licences was effected from the year 1969 onwards, as would appear from a duplicate copy of the licence in the name of sole proprietor Shri Kishanlal, could it be said that the Appellant was at fault The entries in the duplicate licence, as already stated, were incorrect as can be found on comparison with the original licence at page 49/C; (viii) in the circumstances, the Appellant cannot be held to be responsible for the mis-description in the duplicate copy and subsequent renewals of licences in the name of a sole proprietory concern; (ix) nor was the business in reality that of a sole proprietory concern as set forth in the notice to show cause even till 1-4-1965.

It was a H.U.F. concern till then. As a H.U.F. concern, all the coparceners in the H.U.F. were the owners thereof and one would think that there is little difference whether the selfsame coparceners carry on the business as H.U.F. or as a partnership, for purposes of licensing under the Act; (e) be that as it may, even if it be that the Appellant was not in possession of a valid licence, thanks to errors of the licensing authorities, and are thus technically in violation of the provisions of S. 27, the offence, if any, should not call for the confiscation of the entire stock in trade of the Appellant. The Appellant could not have been visited with such a consequence for the errors of the Respondent.

5. In the premises, we allow the Appeal and set aside the order of confiscation of the entire stock in trade and hereby direct that the same should be returned to the Appellant. If, however, it had already been redeemed by payment of Rs. 10,000, the said amount should be refunded. The penalty had already been set aside by the learned Gold Control Administrator.


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