1. The appeal filed against the Order No. GC/10-5/Adj/76 dt. January, 1979 passed by the Collector of Central Excise & Customs, Pune, before the Gold Control Administrator, statutorily stood transferred to the Tribunal.
2. The brief facts necessary for the disposal of this appeal may be stated as under: On 11-4-76 the Inspector of Central Excise (Prev.) Headquarters, Pune, visited the business premises of M/s S.G. Kaigaonkar and checked the statutory registers as well as the actual stock of gold and gold ornaments. The statutory registers were found written upto 31-3-76. There were certain sale receipts for the period during 3-4-76 to 11-4-76. Even after taking the said receipts into consideration the two appellants in whose presence the checking was done could not satisfactorily account for the new gold ornaments weighing 1548.750 gms. valued at Rs.74,100/-. The Central Excise Inspector seized the excess gold ornaments in the reasonable belief that the appellants had contravened the provisions of the Gold Control Act. The appellants 1 and 2 in their statement recorded on the date of seizure stated that they.were disturbed mentally and were working since morning without taking food and that they would appear in Poona office along with their third partner on 14-4-76 and would make detailed statements. The statement of the appellant, Shri Shivram Gopal Kaigaonkar was recorded on 17-4-76. While admitting the seizure of the excess gold ornaments and not writing the registers G.S. 11 and G.S. 12 since 1-4-76 he had stated that due to old age he was not looking after the business of the firm and his two sons, namely the appellants 2 and 3 were looking after the business of the firm.
3. The statement of the appellant No. 2, Shri Ashok Shivram Kaigaonkar was recorded on 21-4-76. In his statement among other things he had stated that his father had retired from the business due to old age.
His brother Shri Subhash Kaigaonkar and himself have been looking after all the transactions of the said firm and are responsible for the transactions. It was also stated by him that his brother, Shri Subhash was looking after purchase of gold ornaments from Bombay, Nagar, Kolhapur and Karwar and he was looking after the transactions at Ahmednagar. He too admitted about non-maintaining of the registers G.S.11 and G.S.12 but stated that the registers were not available at Ahmednagar, and therefore, the transactions between 1-4-76 to 11-4-76 were not entered in the registers. He however stated that excess gold ornaments found on 11-4-76 were purchased by his brother, Shri Subhash from Bombay and Kolhapur, but then Shri Subhash did not keep the vouchers in the shop and kept them in his suitcase. He also produced certain bills in proof of purchase. The appellants, Shri Subhash corroborated the version of his brother. He further stated that he had taken a sum of Rs.25,000/- with him for the purchase of gold ornaments.
He expressed surprise as to how his brother and father did not inform the Central Excise Inspector on the date of seizure.
4. After further investigation show cause notices were issued to the appellants, 1, 2, and 3 and also the firm, appellant No. 4 alleging contravention of the provisions of Section 55 of the Gold Control Act read with Rule.11 of the Gold Control (Forms, fees, etc.) Rules, 1968.
They were called upon to show cause as to why penalty under Section 74 should not be imposed and why the seized gold ornaments should not be confiscated under Section 71. In their reply to the show-cause notice besides challenging the show cause notice they contended that unless and until the accounts were posted upto date, it could not be stated that there was excess or shortage in stock vis-a-vis, book balance.
They reiterated the contention that the excess found were purchased by their partner Shri Subhash from Kolhapur and Bombay. They also sought cross-examination of all the witnesses.
5. The Collector of Central Excise and Customs, Pune, who held the adjudication after consideration of the evidence on record ordered confiscation of the seized gold ornaments but allowed redemption on payment of a fine of Rs.15,000/-. He also imposed a personal penalty of Rs.5,000/- on each of the appellants 1, 2, and 3. Being aggrieved by the order as stated earlier the appellants preferred an appeal before the Gold Control Administrator.
6. During the hearing of this appeal, Shri Wazifdar, the appellants' learned Advocate submitted that the first appellant had since died and the other appellants are the legal representatives of the first appellant. His further submissions were : (1) During the adjudication proceedings the appellants had requested the Collector to furnish them a copy of the enquiry or the investigation report and also requested them for cross-examination of the investigating officer. The Collector had rejected their request. Therefore, they preferred an appeal before the Gold Control Administrator. The appellants received a reply requiring them to prefer the appeal after the adjudication order was passed. Against the said letter dt. 1-7-77, they filed a writ petition before the High Court and the High Court directed the Gold Control Administrator to consider their appeal and accordingly the Gold Control Administrator passed the order dt. 5-12-78. In this order the Gold Control Administrator had permitted the appellants to make a fresh application for production of other documents and also to make a request for examination of any particular witness including the officers of the department. But then the Collector proceeded with the adjudication proceeding by wrongly interpreting the Administrator's order and thus the appellants were denied of the opportunity of cross-examining the investigating officer and seeking production of their documents.
(2) The appellants 'were prosecuted for the same offence before the Chief Judicial Magistrate, Ahmednagar, and that the learned Magistrate had acquitted the appellants after going into the merits of the case and the judgement of the learned Magistrate conclusively establishes that the appellants had not contravened any of the provisions of the Gold Control Act, and therefore, the order of confiscation and personal penalty are liable to be set aside.
(3) The learned Collector ought to have accepted the appellants' explanation regarding non-maintenance of the accounts between 1-4-76 to 11-4-76. It was urged that there was an admission by the Gold Control Supdt., before the Criminal Court that G.S.11 and 12 registers were not available at Ahmednagar and they were required to be brought from Poona and further those registers required to be embossed with the seal of the Gold Control Officer. If in the circumstances if the appellants could not make entries it cannot be said that they intentionally violated the provisions of the Gold Control Act.
(4) The learned Collector ought to have accepted the explanation as to the seized gold ornaments particularly in view of the statements of 'the sellers and the documents in the form of vouchers. It was urged that the third appellant who made the purchases was not required to verify the title of his sellers and therefore, the learned Collector was unjustified in considering the evidence of the seller of the ornaments in favour of M/s. Indian Jewellery Creators, and (5) The first appellant was an aged person. The evidence disclosed that he had retired from the business and that his sons were carrying on the trade and in the said circumstances no personal penalty should have been imposed on him.
7. Shri Senthivel for the respondent Collector however submitted that the adjudicating authority had given very valid reasons as to why the explanation offered by the appellants regarding the excess gold ornaments cannot be accepted. He relied on the reasons given by the adjudicating authority in his order. Shri Senthivel contended that just because the appellants were acquitted by the Criminal Court, the order passed in an adjudication proceedings would not become null and void.
Shri Senthivet further submitted that all the first three appellants were the partners of the 4th appellant, a partnership firm and under law penalty can be imposed on the firm as well as on the partners.
Therefore, there is no illegality in the order of personal penalty imposed on the appellants. Shri Senthivel also urged that it is not mere non-maintaining of the accounts. There was no explanation as to the possession of the excess new gold ornaments. In the circumstances the order of confiscation was legal and he therefore prayed that the appeal may be rejected.
8. I have carefully considered the submission made on both sides and perused the records of the case.
9. The following facts are either undisputed or over which there is no controversy. The 4th appellant, M/s S.G. Kaigonkar was a partnership firm. The appellants, 1,2 and 3 were the partners of that firm. The appellants 2 and 3 are the sons of the appellant No. 1. The firm at the relevant time held the gold dealers licence. On the date of checking, namely, on 11-4-76 G.S. 11 and 12 registers were found written upto 31-3-76. Though there were transactions between 1-4-76 and 11-4-76 they were not entered in any of the statutory registers. The 1st and 2nd appellants who were present during checking of the accounts and physical verification of the ornaments could not give any explanation for the possession of new gold ornaments weighing 1548.750 gms. The seizing officers before the seizure did take into consideration the transactions that took place between 1-4-76 to 11-4-76 which were covered by purchase and sale vouchers. The two appellants referred to above did not and could not produce vouchers for the new gold ornaments seized on 11-4-76. They undertook to appear at Poona on 14-4-76. They however did not appear on that day. On 17-4-76 the statement of the 1st appellant was recorded. Even on that day he did not offer any explanation as to the gold ornaments seized on 11-4-76. It was only on 21-4-76 during the course of his statement the second appellant, Shri Ashok Kaigaonkar sought to explain that the excess gold ornaments were purchased by his brother, namely, the 3rd appellant at Kolhapur and Bombay and he also produced the vouchers in support of the purchase.
His version was corroborated by his brother, the 3rd appellant. Further their versions were also corroborated by the statements of the sellers.
The Collector however refused to be convinced of the explanation and the evidence in support of their explanation.
10. Before going into the merits of the appeal let me dispose of the legal contentions taken by Shri Wazifdar, the appellants' learned Advocate. His first contention was that even though the Gold Control Administrator permitted the appellants to seek production of the documents and seek cross-examination of the witnesses including the officers of the Central Excise & Customs, the Collector proceeded with the adjudication without affording a fresh opportunity, and therefore, the order is bad in law. During the hearing of the appeal the Bench questioned Shri Wazifdar as to whether any request was made to the Collector for production of additional evidence or to make available any witness including the official witnesses for cross-examination.
Shri Wazifdar frankly admitted that no such request was made. He however contended that their earlier request made for production of investigation report -and cross-examination of the investigating officer was not waived or given up and 'therefore, the Collector should have given them that opportunity. There is no force in this contention.
The Gold Control Administrator had held that the appellants cannot as a right claim for the copy of investigation report. Therefore, it cannot be contended that the Collector committed any error when he observed that his order was upheld by the Gold Control Administrator. Since the appellants did not make any request for production of other documents or for cross-examination of any witness, the present contention that the request earlier made subsisted and that the Collector should have voluntarily given an opportunity to the appellants cannot be accepted as a correct proposition. When the appellants have been permitted by the Gold Control Administrator to produce documents and seek cross-examination of any witness, if they wanted they should have made a request before the Collector after the Gold Control Administrator's order was communicated to the Collector. In the absence of such a request the grievance now made cannot stand scrutiny. Therefore, the said contention is rejected.
11. The second legal contention of Shri Wazifdar was that for the same offence the appellants were prosecuted before the competent Criminal Court and that the Criminal Court had acquitted not on technical ground but on merits and therefore the order of the Collector shall have to be set aside.
12. If a competent Criminal Court after trial had ordered acquittal the judgement should no doubt be respected. But then the acquittal by itself would not be sufficient to invalidate the confiscation and the penalty imposed in an adjudication proceeding. The scope of enquiries before the Custom Authorities and before the Magistrate and altogether different. The nature and the extent of proof before the two authorities are not the same. I have gone through the judgement of the learned Magistrate. On the basis of the evidence that were placed before him the learned Magistrate held that the charge had not been proved. The learned Magistrate had mainly relied on the evidence of the defence witnesses to arrive at his conclusion, but the reasons given by the adjudicating authority for not accepting the explanation of the appellants were not considered in the judgement. Further the probability or otherwise of the version of the appellants herein were not examined. In the circumstances I am not inclined to accept the contention of Shri Wazifdar that because the appellants were acquitted by the Criminal Court the order of the adjudicating authority shall have to be set aside. Shri Wazifdar in fairness to the department had admitted that the department had filed an appeal against the acquittal order and that the appeal had been admitted and is pending consideration. Further, on going through the allegations contained in the show cause notice and the charge framed by the learned Magistrate I find that the scope of adjudication was wider in its ambit than the prosecution. In the circumstances the contention of Shri Wazifdar that because the appellants were acquitted by the Criminal Court, the confiscation of gold ornaments and penalty should be set aside cannot be accepted.
13. The next question that arises for consideration is whether the learned Collector was not justified in not accepting the explanation offered by the appellants, 2 and 3 and the documentary evidence produced by the appellants. As has been rightly contended by Shri Senthivel the learned Collector had assigned very cogent reasons for non-acceptance of the explanation offered by the appellants. During the course of this order I have set out the undisputed facts. On the date of seizure, namely, on 11-4-76 though two of the partners were present they could not give any explanation as to the possession of the excess gold ornaments found in the shop. The subsequent explanation given was that the 3rd appellant, Shri Subhash purchased the gold ornaments at Kolhapur and Bombay and brought them to the shop but did not inform the other two appellants and also kept the vouchers in his brief-case and as such the other two appellants could not give any explanation on the date of seizure. It was not the case of the appellants that Shri Subhash was not in the town from 11-4-76 till 21-4-76 on which day the above explanation was put forward for the first time. According to the statement of the first two appellants it was the appellants 2 and 3 who were looking after the bus-ine's. The statement of the second appellant was that he was looking after the transactions at Ahmednagar and his brother was making purchases from Bombay, Nagar, Kolhapur and Karwar.
This indicates that the appellant, Shri Subhash was actively taking part in the business of the firm. On 11-4-76 the Central Excise Officers visited the shop and seized the gold ornaments of the value of Rs. 74,100/-. According to the statement of the 2nd appellant, Shri Subhash who had gone to Shirdi returned back on the same night i.e. on the night of 11-4-76. The father of Shri Subhash as well as his elder brother would have informed Shri Subhash about the seizure of the gold by the Central Excise Officers. If the gold seized were purchased by Shri Subhash at Kolhapur and Bombay as contended later and if they were evidenced by vouchers and if those vouchers were kept by Shri Subhash in his brief-case one would have expected Shri Subhash and his brother to proceed straight to the office of the Central Excise and make a statement and produce the documents. Neither Shri Subhash nor Shri Ashok nor their father adopt the above course. On the other hand even on 17-4-76 the 1st appellant did not give any explanation for the excess gold ornaments. It was only on 21-4-76 the so called purchase and the production of the vouchers takes place. Having regard to the ordinary human conduct this explanation cannot be accepted as true and the learned Collector had rightly rejected the said explanation. If once the statement of Shri Subhash and his brother Shri Ashok are disbelieved then there is no need to consider the evidence of the sellers or the vouchers produced in proof. The Collector however did consider the vouchers and the statements, of the sellers and he had given valid reasons for not accepting their statement also. I do not consider it necessary to refer to the order passed by the Collector in this regard. Since I agree with the finding of the Collector that the explanation offered regarding excess gold is unbelievable, I do not propose to consider the other evidence, namely, the statements of sellers and the vouchers because I imply that they are all got up for the purposes of.the case.
14. In the above view of the matter even if one accepts the explanation for not maintaining G.S.11 and 12 the order of confiscation passed by the Collector cannot be seriously challenged. This is not a case of mere non-maintaining of accounts. It is a case of not giving any explanation as to the possession of the new gold ornaments weighing 1548.750 gms. at Rs.74,100/-. I, therefore, uphold the order of confiscation and levy of redemption fine in lieu of confiscation.
15. The only other aspect that remains for consideration is about the personal penalty. As has been seen earlier the Collector did not impose any penalty on the firm. He had, however, imposed penalty on all the three partners. Shri Wazifdar contended that there was evidence to show that the 1st appellant was a old man and he had retired from the partnership. Therefore no personal penalty should have been levied on him. Shri Senthivel however contended that, all the partners were responsible for the transactions carried out by the firm and therefore, there is no illegality in the order passed by the Collector.
'Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly' 'Provided that nothing contained in this sub-section shall render any such person liable to any punishment, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence'.
16. From the combined reading of the above provisions it would be clear that in the case of a company or a partnership firm every person who is responsible for the conduct of the business of the company or the firm as well as the company would be liable to be proceeded against for the offence under the Act. The appellants did not contend that any one of them was constituted as the managing partner of the firm. But then before a partner could be proceeded against there should be evidence that he was in charge of and was responsible to the compny for the conduct of the business of the company. Even a person who is in charge of or is responsible to the company for the conduct of the business could also escape punishment if that person proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
17. In the instant case there was positive evidence to establish that the 1st appellant was not in charge of and was not responsible to the company for the conduct of the business at the relevant time. In his statement recorded on 17-4-76 he had stated that due to old age he was not looking after the business of the firm and his two sons were looking after the business. His first son Shri Ashok in his statement on 21-4-76 also stated that his father had retired from the business.
He and his brother were looking after all the transactions of the firm.
The department had not placed any evidence to establish that the 1st appellant was in charge of and was responsible to the firm for the conduct of its business. In the absence of that evidence and having regard to the statements of the appellants 1 & 2 the Collector committed an error in law in imposing a personal penalty on the 1st appellant. I, therefore, set aside that part of the order of the Collector by which he imposed a personal penalty on the 1st appellant.
The penalty if paid shall be refunded.
18. Subject to the above modification this appeal fails and the same is rejected.