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Kashinath Seth and anr. Vs. the Collector, Central Excise, Allahabad and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Writ Nos. 6249 of 1971 and 563 of 1972
Judge
Reported inAIR1976All35
ActsCode of Civil Procedure (CPC) , 1908; Constitution of India - Article 141; Gold (Control) Act, 1968 - Sections 55, 55(2) and 66; Gold (Control) (Amendment) Act, 1971 - Sections 71, 73, 74 and 75
AppellantKashinath Seth and anr.
RespondentThe Collector, Central Excise, Allahabad and ors.
Appellant AdvocateDhar, Adv.
Respondent AdvocateStanding Counsel
Excerpt:
.....on all the courts - the ratio of a decision must be confined to the factual background. (ii) gold control - sections 55 , 66, 71, 73, 74 and 75 of gold (control) act, 1968 and article 19 of the constitution of india - sections 71 and 73 of gold (control) act, 1968 declared unconstitutional by the supreme court - dealer to make entries in the prescribed register and forms - authorities to check and verify the business transactions carried on by the dealer - failure to maintain the accounts for a period of more than a week - held, contravened the provisions of section 55 - held , seizure of entire stock in trade - illegal and in excess of the powers conferred upon the authorities. - cantonments act[c.a. no. 41/2006]. section 346 & cantonment fund (servants rules, 1937, rules 13,..........unreasonable restriction on the right of a person to acquire, hold and dispose of gold articles or gold ornaments. it may be applied indiscriminately and cannot, therefore, be held as saved by clauses (5) and (6) of article 19 of the constitution.'8. sections 71 and 73 have since been amended by gold (control) amendment act, 1971 (act no. 21 of 1971). it will be convenient at this stage to read the two sections 71 and 73* prior to and after their amendment.after amendment.prior toamendment.after amendment.'71.confiscation of gold. -'71.confiscation of gold: -(1)any gold in respect of which any provision of thisact or any rule or order made thereunder hasbeen, or is being, or is attempted to be, contravened, shall be liable to confiscation.(1)any gold in respect of which any provision of.....
Judgment:
ORDER

R.B. Misra, J.

1. These are two petitions under Article 226 of the Constitution challenging the constitutionality of Section 71 read with Sections 73. 74, and 75 of the Gold (Control) Act, 1968 being violative of Article 19 of the Constitution of India. As the two petitions involve common questions of facts and law they are being disposed of by one common judgment.

2. In Writ Petition No. 6429 of 1971, petitioner No. 1 is a Partnership firm, It carries on the business in gold, ornaments and articles of gold under the name and style of M/s. L. Kashi Nath Seth, at Lucknow. The petitioner firm is a licensed dealer under the Gold (Control) Act 1968. It is authorised to acquire ownership, possession, custody and control of gold, ornaments and articles of gold in accordance with the provisions of the Gold (Control Act.

3. On 27th April 1971, at about 11.00 A. M., the Superintendent of theCentral Excise Department, Lucknow and other officials along with other persons of the staff raided the business premises of the petitioner and conducted a search. During the course of search, the officials of the Excise Department found ornaments kept on the ground floor for sale for which there was no licence. They further found that the account books of thefirm were not maintained for certain period and the forms prescribed under the Gold (Control) Act were also not maintained. One piece of foreign gold was found from the possession of one of the artisans working at the business premises of the petitioner. The officials of the Excise Department took into custody 2583 pieces of ornaments, which weighed 22,151.370 grams. The petitioner protested against the search of premises and the seizure of the aforesaid goods, but the officials of the Excise Department did not release the goods. The oetitioners, thereupon, filed a writ petition under Article 226 of the Constitution challenging the search and seizure of the ornaments from the shop. It was later on, numbered as writ petition No. 2939 of 1571. The writ petition was eventually allowed by order dated 10th August, 1971. The decision in that case is reported in AIR 1972 All 16. In that case, this Court held that the respondent had seized the ornaments in respect of which no contraventior of the Act was alleged or ascertained and that there was nothing on the record to show that the respondents had a reasonable belief that the particular ornaments, which had been seized, were those ornaments in respect of which contravention of the Act had taken place. Thus, in the absence of the existence of the condition precedent, the officials acted in excess of their authority in seizing the ornaments. Special Appeal filed against that judgment was also dismissed. The appellate judgment is also reported in AIR 1972 All 231.

4. In the meantime, the petitioner was given a notice dated 11th October,1971 to show cause why the goods mentioned in the notice should not be confiscated under Section 71 of the Gold (Control) Act. The petitioners have come to challenge the said notice and the proceedings consequent thereto on the ground that Sections 71. 73. 74 and 75 of the Gold (Control) Act, 1968 are all ultra vires.

5. In writ petition No. 563 of1972 the petitioner has also challenged the seizure besides the notice dated 19th January, 1972, to show cause why the goods mentioned in the said notice be not confiscated and the penally be not imposed,

6. Thus, the question for consideration in the two writ petitions is whether Sections 71, 73, 74 and 75 are ultra vires being violative of Article 19 of the Constitution.

7. Shri S. N. Kacker appearing for the petitioners, contended that Sections 71 and 73 were held unconstitutional by the Supreme Court in Badri Prasad v. Collector of Central Excise, AIR 1971 SC 1170. While dealing with the provisions of Sections 71 and 73 of the Gold (Control) Act, the Supreme Court observed as follows:--

'There does not however seem any justification for an order of confiscation of gold under Section 71 of the Act merely because of a failure to comply with Section 16 relating to declaration. It is no doubt true that the owner is to be given a hearing in terms of Section 79 and he has a right of appeal under Section 80 but the provision of Section 73 which allows the levy of a fine in lieu of confiscation not exceeding twice the value of the thing in respect of which confiscation is authorised appears to be unduly harsh. In this connection, a reference may be made to Section 18 of the Wealth Tax Act and the penal provisions contained therein. Under the Wealth Tax Act the penalty in case of failure to furnish the return without reasonable cause is a sum equal to two per cent, of the tax for every month during which the default continues but not exceeding in the agreegate 50 per cent, of the tax. It will be noticed that the fine there is imposed only on failure to pay the tax but in case of gold in respect of which no declaration has been made under Section 16 or the factum of pawn of which has not been communicated in writing to the Administrator the owner ipso facto becomes liable to pay an unconscionably high penalty. Section 71, therefore, appears to place an unreasonable restriction on the right of a person to acquire, hold and dispose of gold articles or gold ornaments. It may be applied indiscriminately and cannot, therefore, be held as saved by Clauses (5) and (6) of Article 19 of the Constitution.'

8. Sections 71 and 73 have since been amended by Gold (Control) Amendment Act, 1971 (Act No. 21 of 1971). It will be convenient at this stage to read the two Sections 71 and 73* prior to and after their amendment.

After amendment.

Prior toamendment.

After amendment.

'71.

Confiscation of gold. -

'71.Confiscation of gold: -

(1)

Any gold in respect of which any provision of thisAct or any rule or order made thereunder hasbeen, or is being, or is attempted to be, contravened, shall be liable to confiscation.

(1)

Any gold in respect of which any provision of thisAct or any rule or order made thereunder hasbeen, or is being or is attempted to be, contravened, together with anypackage, covering or receptacle in which such

gold is found, shallbe liable to confiscation: -

Provided that where it is established to thesatisfaction of the officer adjudging the confiscation that such gold or other thing belongs tc a person other than the person who has, by any act or omission,rendered it liable to confiscation, and such act or omission was without theknowledge or connivance of the person to whom it belongs, it shall not be orderedto be confiscated but such ether action, as isauthorised by this Act may be taken against the person whohas, by such act or omission, rendered it liable to confiscation.

(2)

Any package, covering or receptacle (including itsother contents) in which any sold liable toconfiscation under sub-section (1) is found shallalso be liable to confiscation.

(2)

Where any package, covering or receptacle referredto in sub-section (1) contains any goods, such contents shall also be liable to confiscation.

(3)

Where any gold liable to confiscation under sub-section (1) ismixed with other goods in such mannerthat such gold cannot be separated from those othergoods, the whole of such goods shallbe liable to confiscation.

(3)

Where any gold is liable to confiscation under sub-section (1),it shall be so liablenotwithstanding any change in its form, and where such gold is mixed with other goods in such manner that it cannot be separatedfrom those other goods, the whole ofsuch goods, including the gold, shallbe liable to confiscation.

(4)

Any gold which is liable to confiscation under sub-section (1), shall be so liable notwithstanding any change in itsform.'

(4)

On and from the commencement of the Gold (Control)Amendment Act, 1971, the proviso to sub-section (1) shall also apply to any gold or other thing which is liable to confiscation under sub-section (2) or sub-section (3).'

9. The contention on behalf of the petitioners is that even the amendment brought in by Act No. 21 of 1971 does not save the sections and they are still unconstitutional in view of what has been held by the Supreme Court in Badri Prasad v. Collector of Central Excise, (AIR 1971 SC 11701 (Supra),

10. Strong reliance was placed by Sri S. N. Kacker on Badri Prasad v. Collector of Central Excise (AIR 1971 SC 1170) (Supra). In that case, the Supreme Court did not see any justification for an order of confiscation of the gold under Section 71 of the Gold (Control) Act merely because of failure to comply with Section 16 of the Act relating to declaration and the levy of fine in lieu of confiscation not exceeding twice the value of the thing in respect of which confiscation is authorised under Section 73 of the Act to be unduly harsh. On that basis, it is now sought to be argued that the rigour of the sections has not been taken away even by the respective amendments in those sections and Sections 71, 73, 74 and 75 are unconstitutional forthe reasons given by the Supreme Court in that case.

11. The observations made by the Supreme Court in Badri Prasad v Collector of Central Excise, (AIR 1971 SC 1170) (Supra) must be confined strictly to the factual background in which it was given in that case.

12. In Badri Singh v. State. 1973 All WR (HC) 663, a Division Bench of this Court laid down the following proposition regarding the interpretation of law accepted by the Supreme Court:

'An interpretation of law accepted by the Supreme Court is binding on all the courts under Article 141 but circumspection has to be exercised in precisely as-certaining as to whether any such rule or law was actually laid down by the Supreme Court in its decision. The Supreme Court has time and again cautioned against the unwarranted extension of the ratio of one case to a different set of facts which may attract different provisions of lawThe ratio of a decision must be con-fined strictly to the factual background inwhich it was given and surely there is no justification for reading in it some principle or rule relating to a point which did not arise for adjudication in that case. That is why the Supreme Court felt the necessity of striking a note of warning against such misconception as is likely to arise if the background in which a point was actually decided is not taken into consideration,'

13. In the reported case, the petitioner had fairly extensive business of money lending. In pursuit of his business, he advanced money to a large number of persons, who pledged ornaments made of gold or containing gold and other precious stones, or silver. It included a seasonal business of agriculturists taking loans from him in the sowing season and repaying the same with interest by redeeming the pledged ornaments. The loans were not always redeemed quickly and there were instances of ornaments lying with the petitioner under pledge for 10 to 15 years. He also owned along with other members of his family substantial quantities of gold ornaments. As he had a strong room for keeping those valuables, his friends and relations also used to keep their gold ornaments and articles with him for safe custody.

14. On a raid by the Inspectors of the Excise Department, under the authority of the Collector of Central Excise, a large number of ornaments and articles of gold were seized from his premises. The validity of the search and seizure was challenged in that case on the ground that inasmuch as the time to furnish declaration under Section 18 of the Act had been extended since the commencement of the Act from time to time upto 30th April, 1969 the search, which took place, was unjustified. The vires of various provisions of the Act were challenged on various grounds. The Supreme Court, however, declared Sections 71 and 73 of the Gold (Control) Act to be ultra vires and it was only because under Section 71 of the Act, even the pawned articles in possession of a dealer were to be confiscated, merely because he did not make a declaration, as required under Section 16 of the Act. Thus, for the fault of the licenced dealer with whom the articles had been pawned by the actual owner thereof the owner's property was to be confiscated. In these circumstances, the Supreme Court held that there was absolutely no justification for confiscating the pawned articles merely for non-compliance of Section 16 of the Act in making the required declaration. The Parliament, in these circumstances, intervened and amended the section and now a Proviso has been added in Section 71 and the proviso contemplates that where it is established to the satisfaction of the officer adjudicating the confiscation that suchgold or other things belong to a person, other than the person, who has, by any act or omission, rendered it liable to confiscation, and such act or omission was without the knowledge or connivance of the person to whom it belonged, it shall not be ordered to be confiscated, but such other action, as is authorised by the Act, may be taken against the person, who has, by such contravention, rendered it liable to confiscation. This Proviso clearly contemplates that for the fault of the pawnee, the property of the pawner shall not be confiscated. Prior to the amendment, even the goods of the pawner in possession of the pawnee could be confiscated for the fault of the pawnee in not making the required declaration under Section 16 of the Act.

15. Likewise, Section 73 of the Gold (Control) Act contemplated levy of fine of twice the amount or the value of the goods sought to be confiscated. That section was found by the Supreme Court to be unduly harsh. In lieu of confiscation of the goods, there was absolutely no justification for imposing a fine of twice the amount of the value and thus it was struck down by the Supreme Court. The Parliament consequently, amended Section 73 of the Act as well and removed the word 'twice'.

16. Shri S. N. Kacker laid undue emphasis on the observations made by the Supreme Court that the confiscation of the property merely for non-compliance of Section 16 of the Gold (Control) Act in not making a declaration was a general observation and, on that basis, he contended that the confiscation of the property for the defiance of Section 16 of the Act was too harsh a punishment for the offence committed by the licensed dealer. As observed earlier, the observation of the Supreme Court has to be viewed in the background of the facts of the particular case.

17. The vice of smuggling has assumed such a large proportion that the Government has to intervene and punish the smugglers or those abetting smuggling with strong hand and, therefore, the Parliament imposed severe punishment. The confiscation of the property or the imposition of fine in lieu thereof cannot be challenged on the ground of severity. Courts cannot question the wisdom of the Legislature. The Legislature knows the exigency of the situation and can make laws for mitigating the vice. If the smuggling of gold in the country is to be checked by the prevention of the conversion of the smuggled gold into gold articles or ornaments, there is no unreasonableness in prescribing the punishment of confiscation of the gold or gold ornaments or imposing a fine in lieu thereof. The punishment of confiscation or levy of fineper se cannot be challenged in Court The observation made by the Supreme Court in that case, therefore, in my opinion, must be viewed in the back-ground of the facts of the particular case. The Supreme Court never sought to declare Section 71 of the Gold (Control) Act as ultra vires on the ground that the confiscation of property merely for non-compliance of Section 16 of the Act was unreasonable. The observations only meant to emphasise that the confiscation of the property of the real owner in the hands of the pawn broker merely for the fault or omission of the pawn broker to make the declaration under Section 16 of the Act was unreasonable and, therefore, it was struck down. But, now the section has been amended, as stated earlier, and the unreasonableness has now been mitigated by adding a proviso to Section 71 and by removing the word 'twice' in Section 73 of the Gold (Control) Act. If Section 71 without any amendment, was held to be ultra vires, then the other sections, namely, Sections 73, 74 and 75 could also not have been saved because they are interdependent on Section 71 of the Act and they could not independently stand. In view of the fact that Sections 71 and 73, after amendment, are intra vires, the other sections dependent on Sections 71 and 73 could not be held to be ultra vires.

18. In writ petition No. 563 of 1972, the petitioner has also challenged the seizure of the goods also. Section 55 of the Gold (Control) Act provides:

'55. Accounts.-

(1) Every licensed dealer, every licensed refiner and every certified goldsmith shall keep, in such form and in such manner as may be prescribed, a true and complete account of the gold owned, possessed, held, controlled, bought or otherwise acquired or accepted or otherwise received, or sold, delivered, transferred or otherwise disposed of, by him in his capacity as such licensed dealer or refiner or certified goldsmith, as the case may be, and different forms of accounts may be prescribed for different classes of licensed dealers, refiners or certified goldsmiths.

(2) Every licensed dealer, every licensed refiner and every certified goldsmith shall as and when he buys or otherwise acquires or accepts or otherwise receives, or sells, delivers, transfers or otherwise disposes of, any gold, enter in the accounts referred to in Sub-section (1) the prescribed particulars of such gold and the prescribed particulars of the person from whom such gold was bought, acquired, accepted or otherwise received or to whom such gold was sold, delivered, transferred or otherwise disposed of.

(3) No licensed dealer or refiner and no certified goldsmith shall, in his capacity as licensed dealer or refiner, eitherown or have in his possession, custody or control any gold wnich has, not been, included in the accounts referred to in Sub-section (1).'

19. Sub-section (2) of Section 55 of the Gold (Control) Act enjoins on the dealer to make the entries in the register and forms prescribed under the Act when the dealer buys, sells or transfers gold. If that is not done and the entries are left to be made after several days, the very purpose for which the accounts are sought to be maintained shall be defeated and the dealer may not choose to fill in the forms for months together and, in that event, it will be difficult for the authorities to check and verify the business transactions carried on by the dealer. The maintenance of the accounts relating to the transaction of sale and purchase ensures check on the parties on the various transactions. The petitioner, on his own admission, failed to maintain the accounts, as required under the Act and the Rules, for a period of more than a week. He, therefore, contravend the provisions of Section 55 of the Gold (Control) Act.

20. Section 58 of the Gold (Control) Act authorises the Gold Control Officer to make a search if he has reason to suspect that any provision of the Act has been or is being or is about to be contravened, enter and search, at any reasonable time, any refinery or the business premises of a licensed dealer or a certified goldsmith.

21. The seizure of the petitioner's entire stock in trade, including those items of ornaments, which were accounted for in the account books, was wholly illegal and in excess of the powers con-ferred upon the authorities under Section 66 of the Gold (Control) Act

22. In the earlier writ petition No. 6429 of 1971, the search and seizure were challenged and this Court allowed the writ petition on the above ground as would be evident from the case of L. Kashi Nath v. The Collector, Central Excise, Allahabad, AIR 1972 All 16. The judgment of the learned Single Judge was upheld by the Division Bench in Spl. Appeal. In view of the decision of this Court, only those ornaments and articles of gold could legally be seized which were not accounted for by the petitioner in his account books. The officials of the Excise Department exceeded their power in seizing the entire stock. The seizure of the entire stock was, therefore, illegal and unwarranted.

23. For the reasons given above, writ petition No. 6429 of 1671 must fail and is, accordingly, dismissed. Writ Petition No. 563 of 1972, however, is allowed, in part, to the extent that the seizure of the entire stock of the petitioner by the officials of the Excise Departmentwas illegal. The respondents are directed to return back the ornaments to the petitioner forthwith. In the circumstances of the case, the parties will bear their own costs.


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