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Collector of Central Excise Madras-34 Vs. R. Seshammal and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Judge
Reported in[1983]144ITR509(Mad)
ActsIncome Tax Act, 1961 - Sections 132; Gold (Control) Act, 1968 - Sections 16
AppellantCollector of Central Excise Madras-34
RespondentR. Seshammal and anr.
Appellant AdvocateK.N. Balasubramanian, Adv.
Respondent AdvocateS.B. Subramaniam and ;Nalini Chidambaram, Advs.
Cases ReferredKochanmdi Naidu v. Nagayasami Naidu
Excerpt:
.....applicable by officer empowered to effect seizure - nothing in instant case to show that gold control officer had reason to believe that provision of act has been or is being attempted to be contravened by any person. (ii) licensed dealer - whether any proceeding was pending in respect of gold seized before any authority under gold (control) act - proceeding under act against licensed dealer are cancellation or suspension of license, imposition of confiscation and prosecution for contravention of provisions of act - no proceeding under gold (control) act had commenced as there was no accusation charge or issue of show cause notice - held, no proceeding under gold (control) act was pending in respect of seized gold when first respondent made declaration. - - 4. on or after..........seizure prior to the declaration made by the first respondent she cannot claim immunity under the gold control act. (4) as the assistant collector of central excise has directed the ranger to get a statement from the first respondent, proceedings must be deemed to have been initiated prior to the declaration made by the first respondent and consequently she cannot claim immunity. 2. all the above four contentious were rejected by this court holding- (1) there is a full disclosure as required by ss. 14 and 15 of act 8/76. the i. t. dept. has accepted that there is full and proper disclosure. it is not open to the collector of central excise to say that there has been on valid and full disclosure. (2) as the i. t. authorities have not exercised the power of sal and sold the gold and.....
Judgment:

Venugopal, J.

1. The first respondent's husband, Rathinaswamy Chettiar, was carrying on business in gold and gold jewelry under the name and stalk of Sri Nataraja Vilas Jewellery Hall at Chindambaram. He died on November 7, 1971, and thereafter the business was being carried on by his legal heir and the first respondent. On September 3, 1972, the intelligence wiling of the I. T. Dept. searched the residence and business premises of the first respondent and seized 21Kgs. of old and new gold jewellery and primary gold worth about Rs. 4,48,319. The ITO passed a summary assessment order under s. 132(5) of the I. T. Act, determining the total income at Rs. 6,90,390 and the tax liability at Rs. 6,30,775. On October 8, 1975, the President of India promulgated the Voluntary Disclosure of Income and Wealth Ordinance, 1975, and the Ordinances was subsequently repealed by the Voluntary Discolors of Income and WEalth Act (Act No. 8 of 1976). The first respondent filed voluntary returns as per ss. 14(1) and 15 of the Act and paid the tax in respect of the income declared and also informed the Asst. Collector of Central EXcise, Pondicherry,. and forwarded to him extracts of the entire in Form G. S. 10 regarding the gold and gold ornament owned and possessed by her and declared under Act 8/76. The first respondent then requited the Deputy Director of Inspection, income-tax to releases the gold and gold jewellery seized from her permissed. As the Collector of Central Excise (appellant herein) refused to give currency for the releases the first respondent filed a writ petition before this court. Opposing the release of the gold and gold jewellery it was contended on behalf of the /Collector of Central Excise that :

(1) The first respondent has not made a full and proper discolor of the gold and gold jewellery seized from her and she has not made a declaration as contemplated under s. 16(1A) of the Act.

(2) At the time the first responded made the declaration, she did not own, posses or control the gold and gold jewellery as they were a; already seized by the I. T. Dept.

(3) As the Central Exise authorities were also associated with the I. T. authorities in the search and seizure conducted on September 8, 1972, the seizure must be deemed to have been made by the Central Exise authorities, and as there was seizure prior to the declaration made by the first respondent she cannot claim immunity under the Gold Control Act.

(4) As the Assistant Collector of Central Excise has directed the Ranger to get a statement from the first respondent, proceedings must be deemed to have been initiated prior to the declaration made by the first respondent and consequently she cannot claim immunity.

2. All the above four contentious were rejected by this court holding-

(1) There is a full disclosure as required by ss. 14 and 15 of Act 8/76. The I. T. Dept. has accepted that there is full and proper disclosure. It is not open to the Collector of Central Excise to say that there has been on valid and full disclosure.

(2) As the I. T. authorities have not exercised the power of sal and sold the gold and gold jewellery seized, the first respondent contained to be the owner of the property and she must be taken to won and possesses the gold and gold jewellery in respect of which she made the voluntary discloures.

(3) It is not case of the appellant in the counter or in the show cause notice that the each was made by the Gold Control authorities in terms of s. 58 of the Gold Control Act. The fact that the Inspector of Central Excise assisted the I. T. authorities in making the seizure will not make it a serizure under the Gold Control Act.

(4) From the mere fact that the range officer of the centrol Exise Department has been directed to record a statement from the son of th first respondent, it cannot be consisted that a proceeding under the Gold Control Act was pending at the time the declaration was made by the first respondent.

3. On these findings the learned judge of this court held that there was a voluntary discolors of income and wealth under ss. 3(1) and 15(1) of Act 8/76 and having complied with the provisions of s. 16 of that Act and also s. 16 of the Gold Control Act. the first respondent will be entitled to immunity from the penal provisions under the Gold control Act. On these findings the leaned judge allowed the writ petition. Hence the present writ appeal.

4. On or after the enactment of the Voluntary Discolor of Income and Wealth Act, 1976 (hereinafter to be referred to as : Act 8.76'), any persons cam make a declaration of income high he has failed or omitted to disclose before the commencement of the Act and enjoy immunity from the provision of the I. T. Act on payment of tax on the disclose income at the special rates specified in the Schedule to the Act. (vide s. 3 of the Act). Where money, bullion, jewellery or other valuable article belonging to a person were seized as a rule of reach under the I,. T. Act or the W. T. Act, such a person can also make a declaring of both income and wealth and after payment of tax chargeable in respect of the income and wealth, he enjoys immunity from penalty, prosecution, etc., under the I. T. Act and W. T. Act. The person cans also claim immunity from penalty/prosecution, under the Gold (Control) Act if before making the declaration-

(10 the gold or bullion was not seized as a result of the search made under the Gold (Control) Act; and

(2) no proceeding was pending in respect of that gold before any authority under the Gold (Control) Act (vide s. 16(5) (a) and (c) of the Act).

5. Thirdly in case where the god is owned, passed held or controlled by licensed dealers, necessary entire should be made in the accounts, registers and documents maintained under the Gold (Control) Act, under intimation to the Gold Control Officer before the 1st day of February, 1976, and such other steps as are necessary fro him to comply with the requirements of the Act in relation to such gold (vide s. 16(1A) of the Act). The case of the first respondent is that she has complied with all the three requisites set forth above for claiming immunity under the Gold Control Act, whereas the appellant contends that that three requisites for claiming immunity are not fulfilled in his case. The short questions is whether all the three essential requisites for claiming immunity under the Gold (Control) Act are complied with in the instant case.

6. The first questions to be conceded is whether the gold in the instant case was seized under the provisions of th Gold (Control) Act. In the letter dated 13th September, 1972, written by the Asst. Director of the I. T. Dept. to the Asst. Collector of Central Excise, it is stated that two Inspectors of Central Exise were present at the time when the I. T. Dept. to the Asst. Collector of Central Exise were present at the search and as tow inspectors of that Central Exise were present at the time of require the gold must the taken to have been seized under the Gold (Control) Act and as the seizure under the Gold (Control) Act was prior to the declaring made by the first respondent, she is not entitled to the immunity claimed. In the case, Gain Chand v. State of Punjab, : 1983(13)ELT1365(SC) , the inspector of place on receiving information that some smugglers were on the point of transporting gold, organized a raid and in the course of search, certain bars of gold were found on the person of some of the minutes of the house and th gold found wa seized and they were charge-sheeted under ss. 411 and 414 of the Indian Penal Code. Later, the case was dropped and the customs authorities having taken possession of th gold from the place authorities proceeded to take action under s. 167 of the Sea Customs Act. The question arose whether there was seizure by the customs authorities within the meaning of s. 178A of the Sea Customs Act. The Supreme Court pointed out that the expression 'seized' in the context in which it is used means 'take possession of contrary to the wishes of the owner of th property. ' On the same analogy the seizure contemp-lated under the Gold (Control) Act must be both actual and physical and not fictional or symbolic to deemed seizure. Secondly, the seizure must be in accordance with the provisions reading to desire under the Gold (Control) Act and by the officer empowered to effect the seizure. Any gold Control officer authorized in this behalf has reason to suspect that any provision of th Gold (Control) Act has been, or is being or is about to be contravened, th may is any, in which the gold is found. This power of search and seizure is provided under ss. 58, 59 and 66 of th Gold (Control) Act. In the instant case there is nothing to show that the Gold Control Officer has reason to believe that in respect of any gold any of the provisions of the Act has been or is being or is attempted to be contravened by any person. The I. T. Dept. which conducted the search was least concerned with the contravention of th gold (control) Act. Secondly, there is nothing to indicate that th two inspectors who were present at the time of search are Gold Control Officers authorized to effect the search and seizure as provided under the Gold (Control) Act. Even granting for arguments' sake that there was a seizure by the Gold Control Officer th seizure came to an end after the expiry of six months under s. 66(3) of the Gold (Control) Act so that there wa no seizure subsisting or in operation on the date when the first respondent made the declaration under Act 8/. 76. Thus, in any view of the matter, the first respondents claim for immunity cannot be defeated on there ground that before the declaration was made the gold was seized under the provisions of the Gold (Control) Act.

7. The next question to be consider is whether any proceeding was pending in respect of the gold before, any authority under there Gold (Control) Act. On September 8, 1872, the Asst. Collector of I. T. with a copy to the Range Officer, Central Excise, Chindambaram, to record a statement from Rs. Balasubramaiam, son of late Rs. Rathinasamy Chettiar. In pursuance of this letter, when the Range Officer, Chindambaram, went to record the statement from Rs. Balasubramaiam, he was informed that the statement was already sent to the Asst. Collector of Central Exise. Pondicherry. The Range Officer procured a copy of the statement and sent the same to the Asst., Collector of Central Excise, Pondicherry. On these facts, the learned counsel for the appellant contended that since a letter was addressed with a copy of the Range Officer, to record a statement from R. Balasubramaiam, proceedings under the Gold (Control) Act must be deemed to have been commenced on September 8, 1972, and as proceedings under the Gold (Control) Act were pending at the time when the first respondent made the declaration under Act 8/76, she was not entitled to the immunity claimed.

8. The word 'proceeding' is derived in the Shorter Oxford Dictionary as 'doing a legal action or process, any Act one by the authority of a court of law. ' In words and Phrases, Permanent End., Vol. 34, a number of American decision a referred to for ascertaining the meaning of the word 'proceeding'. It is aid that th term 'proceeding' is a very comprehensive terms and generally speaking means 'a necessarily embraces the requisite steps by which a judicial action is invoked. ' In the decision, Ramanathan Chettiar In re : AIR1942Mad390 the court, while interpreting the word 'proceeding' in the Stamp Act, held :

'The words suite or proceeding have been interpreted in various senses in different statutes occurring to the intent and scope of the statute, somethings in a narrow sense and sometimes in a wide sense..... In its narrow sense, it (Proceedings) is a step in any action or in an independent proceeding analogous to an action by which a litigation is initiated.'

9. In Ganga Naicken v. Sundaram Ayyar : AIR1956Mad597 , court held :

'A proceeding' may in some enactments mean na action or that which instated an action and in other enactments it may also mean a stop in an action......... the world, 'any proceedings' in section 89 of the Judicature Act, 1873, was understood to be equivalent to 'any action' and not any step in an action......'Any other proceeding in the action' in the rules of the Supreme Court Order 26, rule 1, mean any proceeding with a view to containing the action, i.e., a step forwards, not one backward.'

10. In the decisions Kochanmdi Naidu v. Nagayasami Naidu : AIR1961Mad247 , the court was considering a petition for transfer of some criminal proceedings to a civil court to be tried along with a suit in the civil court. The court held that there term 'proceedings' was not a technical expression with a define meaning attached to it, but one the ambit of whose meaning would be governed by the statue. From the decisions cited above it is clear that the massing to be attributed to the word 'proceeding' would spend upon the scope of the enactment wherein the expression was used and with difference to the particular context wherein it occurs. A proceeding is said to have commenced if a prescribed course of action for the enforcement of legal right or taking a requisite step by which judicial action in involved or a step in aid or action for contravention of any provisions of the Act. It is in that she the word 'proceeding' has been used under s. 16(1A) of Act 8/76. The proceedings contemplated under the Gold (Control) Act against a licensed dealer are-

(1) Cancellation or suspension of licence;

(2) imposition of confiscation and penalties s a result of adjudication;

(3) Prosecution for contravention of the provision of the Act.

11. For commencing any of these proceedings against a licensed dealer there must be an occasion or a charge and issue of a show-cause notice to a linsesed dealter. Without an accustion or charge and issue of a show-case notice, no proceeding under the Gold (Control) Act can be said to have been commence against a licensed dealer within the meaning of s. 16(1A) of Act 8/76. In the instant case, there has been no accusation or charge or issue of show-cause notice to the first respondent. No proceeding under the Gold (Control) Act can be said to have commenced against the first respondent when the made the declaration under Act 8/76. It is no doubt true that one September 8, 1972, the Asst. Collector of Central Excise, Pondicherry, addressed a latter to the Asst. Director of I. T. with a copy to the Range Officer, Central Exise, Chidambaram, to record a statement from R. Balasubramaiam, son o late R. Rathinasamy Chettair. But, in pursuance of the latter no statement was recorded by the Range Officer, Chidambaram, from Rs. Balasubramaiam. Even before the receipt[t of the letter, Balasubramanaim has already sent a statement to the ASst. Collector of Central Excise, Pondicherry. Thus, it can be seen that even before the Range Officer went to records the statement, Balasubramanaim, of his own volition, has sent a statement by post to the Asst. Collector of Central Exise, Pondicherry. Such a voluntary statement cannot be construed s taking a prescribed course of action or tasking the requisite step against the licensed dealer for contravention of the provisions of the Gold (Control) Act. Moreover, the declaration under Act 8/76 was made by the first respondent. By no stretch of imagination can it be aid that a proceeding was pending against her at the time when she made the declaration disclosing her wealth and income under Act 8/76. the various letters exchanged between the Central Excise and the I. T. Depts. (vide pp. 15, 25 and 27 of the paper book filed by the appellation) admit that no proceedings have been initiated against the first respondent under the Gold (Control) Act. A similar admission is also made in the counter to the writ petition filed by the appellant. AS no proceeding under the Gold (Control) Act can be said to be pending against the declarant or against the gold seized, she is entitled to the immunity claimed.

12. The learned counsel for the first respondent contended that even conceding fro arguments sake that a proceeding was pending against the first respondent before the declaration, the proceeding came to be terminated by the acceptance of a return under the Gold (ControL) Act. For the claim of immunity made by the first respondent what is relevant to be considered is whether any proceedings was pending when the first respondent made the declaration under Act8/76. the fact that the proceeding came to be subsequently terminated has no relevance for the purpose of considering the immunity under s. 16(5) (c) of Act 8/76. On this point we hold that no proceeding under the Gold (Control) Act was pending in respect of the seized gold when the first respondent made the delcartion.

13. Under s. 16(1A) of Act 8/76, where gold is owned, possessed, held or controlled by a person in this capacity as a licensed dealer, necessary entries should be made by him in the accounts, registers and documents maintained under the Gold (Control) Act under intimation to the Gold Control Officer, before the 1st Day of February, 1976, and such other steps as are necessary for him to comply with the requirements of that Act in relation to such gold should also be taken by him before that date. The learned counsel for the appellant contended that in pursuance of s. 16) (1A), the first respondent should have made the declaration in From No. GS 3 and since no such declaration was made there is noncompliance of s. 16(1A) of Act 8/76. the declaration in Form No. GS 3 declaring the stock of gold must be by a person owing or acquiring gold other than a licensed dealer. It is, therefore, clear that the declaration in From No. GS 3 is not applicable to the case of a licensed dealer,. Rule 15 of th Gold Control (Forms, Fees and Miscellaneous Matters) Rules, 1968, provides that the return in the case of a licensed dealter must be in From No. GS 17. Rule 11 provides that the account of gold referred to in s. 55 of the Gold (Control) Act shall be kept by the linsesed dealer in forms Nos. Gs 11 and GS 12. In the instant case the first respondent's son, Balasubramaniam, wrote a letter to the Asst. Collector of Central Excise, Pondicherry, enclosing a return in Form No. GS 17 for the quarter ending DEcember 31, 1975. On receipt of the above letter, the Asset. Collector of Central Excise, Pondicherry acknowledged the same and directed Balasubramaniam to make the necessary entire as 'receipt' in the dealer's account. the Central Excise Officer has verified the entire in the books and affixed his signature in token thereof. Thus, m from the records produced it is seen that under the direction from the Asset. ?Collector of Central Exise the RAnge Officer, Chidamabaram, verified the entire made in the ledger by Balasubramaniam on May 16, 1976, and initialed from No. S. 10 books. The entire in G. S. 10 inclined the gold Jewellery declared by the first respondent as owned and possessed under the voluntary declares scheme. The quarterly return in GS. 17 also contained a statement that 21,660 gms. of gold and gold jewelry seized by the I. T. Dept, have been included s per the voluntary disclosure scheme. As the quarterly return in Form No. GS. 10 sent by Balasubramaniam to the Superintendent of Central Excise and the entire made in From NO. Gs. 10 have been verified buy the Range Officer on July 16, 1976, it is obvious that there has been full compliance of s. 16(1A) of Ct 8/76 and thus the first respondent is entitled to the immunity claimed by her.

14. The learned counsel for the appellant next contended that the declaration of wealth under Act 8/76 wa only of 21,000 grams of gold whereas what has been declared under the Gold (Control) Act in Forms NOs. GS what has been declare under the Gold (Control) Act in Forms Nos. GS 10 and 17 was 24,010 grams of gold and no immunity from the provisions of the Gold (control) Act can be granted in respect of the excess quantity of gold not covered by the declaration made under Act 8/76. In the quarterly return of receipt, issue and stock of gold sent in From No. GS. 17 by the licensed dealert, it is clearly stated that the entire quantity of gold that has been seized during the search and seizure by thee I. T. Dept. is disclosed in the return in Form No. GS. 17. It is not the case of the appellant that gold which has not been seized by the I. T. Dept. has been included in the return sent by the licensed dealt in Form No. GS 17. It is also not the case of the appellant that the declaration made under Act 8/76 was not in respect of the entire quantity of gold seized by the I. T. Dept. and there was some quantity of gold left uncovered by the declaration made by the first respondent under Act 8/76. All that is established in this case is that there is a discrepancy in the weight of gold noted by the I. T. Dept. and the Central Excise Dept. The weight of th seized gold and ornaments as noted by the I. T. Dept. is bound to be accurate, as it is stated that gold ornaments were weighted by the approved value's and th gold contents were determined after excluding the weight of stones and lacquer used in making the gold ornaments. In the list prepared by the Central Exise Dept. The weight of gold is stated to be only approximate., It can be further seen that they have not excluded the weight of stones and lacquer contents in the gold ornaments. This accounts for thee discrepancy in the weight of gold as determined by the I. T. Dept. and the Central Excise Dept. From this discrepancy in weight, the arguments to strenuously built up, that the declaration made under the Gold (Control) Act was in respect of a larger quantity of gold than what was disclosed under Act 8/76 and hence no immunity can claimed in respect of the excess quantity of gold, has to be reject.

15. The learned counsel for the appellant lastly contended that declaration in Form Nos. Gs 10 and 17 wa made by Balasubramaniam, while the writ petition for the return of the seized gold and ornaments wa made by his mother, the first respondent herein, and the writ petition is not maintainable. Such a plea has not been taken in the counter or in the grounds of apple filed before this court. That part, the contention raised also lacks substance. As already stated the first respondents, husband, Rathinasamy Chettiar, was carrying on business in gold and gold jewellery at Chidambaram. After his death, the business was carried on by his wife) the first respondent herein) and his son, Balasubramaniam. At the time of search by the intelligence wing of th I. T. Dept. the business was carried on the in the status of an AOP and the first respondent as a member of the AOP, made the declaration under Act 8/76. Under Act 8/76, any member constituting the AOP can file the declaration. Balasubramaniam, the son of the first respondent, as the licensed dealer, submitted the return in Forms Nos. GS 10 and 17 under the provisions of the Gold (Control) Act. The first respondent as the person making the declaration under Act 8/76 and as a member constituting the AOP, is entitled to the return of the gold and gold ornaments seized during the time of raid by the intelligence wing of the I. T. Dept. In this view, the writ petition filed by the first respondent is certainly maintaniable.

16. In the result, the writ appeal stand dismissed with costs of th first respondent. Counsel's Fee Rs. 500. The first respondent will be entitled to get a release to the gold and gold jewelry seized under the search made on September 3, 1972, subject to payment of all subsisting tax liabilities of the first respondent, imposed as a result of the search made on September 3, 1972.

17. AS soon as the judgment was pronounced the learned counsel for the appellant requests fro grant of permission for leave to appeal to the Supreme Court. As no substantial question of law of public importance fit to be decided by the Supreme Court arises on the findings given by us, we do not think that this is a fit case where special leave to appeal to the Supreme Court can be granted. Hence, the leave asked fro is refused.

18. This writ apple having been set down on this day for being spoken to, m the court made the following order.

19. The order of the court was delivered by

Venugopal, J.

20. The matter as posted today for being spoke to.

21. This court has given the direction that the first respondent will be entitle tot get a release of the gold and gold jewellery seized under the search made on September 3, 1972, subject to payment of all subsisting liabilities of the first respondent, imposed s a result of the search made on September 3, 1972. The learned counsel for the second respondent stated that as stated in para. 4 of the counter-affidavit a sum of Rs. 13,97,805 is due by way of assessed tax for the assessment years 1972-73 to 1978-79 and the demand notices have also been served on the respective assessees, and the first respondent through her authorised representative has undertaken to pay the said arrears of tax by selling the gold after it is released to her, and in view of this undertaking the order may be clarified that the first respondent will be entitled to get a release of the gold only after paying all the subsisting tax arrears.

22. The leivns counsel fro the first respondent stated that the second respondent is entitled to retain custody of such jewels as are sufficient to satisfy the aggregate of the amounts referred to in sub-cls. (ii), (ii) and (iii) of s. 132(5) o the I. T. Act, 1961, and in this view the order passed by this court does not require any clarification.

23. It is not disputed that the representative of the fist respondent has undertaken to pay the assessed tax under both the I. T. Act as well as the W. T. Act, for the assessment year 1972-73 to 1978-79. Modes of recovering the assessed tax have been provided under ss. s 222 and 226 of the I. T. Act, 1961. It is, therefore, open to the second respondent to recover the areas of tax in th manner provided under the Act. However in view of the undertaking given by the first respondent that she will pay all the arrears of tax by selling the gold after it is released to her, the direction given by this court is modified by deleting the words 'imposed s a result of the search made on September 3, 1972.' The modified direction would red as under :

'The first respondent will be entitled to get a release of the gold and gold jewellery seized under the search made on September 3, 1972, subject to payment of all subsisting tax liabilities.'

24. The learned counsel for the first respondent stated that since tax arrears can be paid by the first respondent only after selling the gold in the custody of the second responded, a suitable direction may be given for facilitating the sale of gold by the first respondent to pay the tax arrears. Taking into account the difficulties faced by the first respondent in paying the tax arrears, the following further direction is given :

'The second respondent is entitled to retain that much of the jewellery and gold as may be reasonably adequate fro payment of all the subsisting tax liabilities and release the balance of gold and jewellery in. favour of the first respondent. AS and when the tax arrears are paid, gold and jewellery whose value may be approximately equal to the tax paid should be released in favour of the first respondent.'


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