1987 (8) TMI 87 - SC - Central Excise

Whether the proviso to Section 71(1) of the Gold Control Act also relates to primary gold? Held that - There will be no difficulty in not confiscating the primary gold under the proviso for after such release the owner of primary gold will not be entitled to retain possession of the same but will have to dispose it of or convert the same into ornaments. Therefore do not agree with the view expressed by the Division Bench of the High Court that the proviso to Section 71(1) of the Gold Control Act does not relate to primary gold. The Division Bench was greatly influenced by the fact that in view of Section 8(1) of the Gold Control Act the possession of primary gold cannot be retained by any person. But as already discussed above such an interpretation is not possible to be made of the proviso to Section 71(1). The interpretation that we have put on Section 71(1) will not run counter to the provision of Section 8(1) in view of the fact that although the primary gold is not confiscated it will not be allowed to be possessed by the owner but has to be disposed of by him or converted into ornaments in the manner as mentioned above or as directed by the Administrator by his said order dated 30-7-1976. Appeal allowed.

Issues Involved:
1. Interpretation of the proviso to Section 71 of the Gold Control Act, 1968.
2. Legality of the confiscation of primary gold.
3. Applicability of Section 8(1) of the Gold Control Act, 1968.
4. Compliance with Rule 126-H of the Defence of India (Fourth Amendment) Rules, 1966.

Issue-wise Detailed Analysis:

1. Interpretation of the Proviso to Section 71 of the Gold Control Act, 1968:
The primary issue in this case revolves around the interpretation of the proviso to Section 71(1) of the Gold Control Act, 1968. The proviso states that gold liable to confiscation shall not be confiscated if it is established that the gold belongs to a person other than the one who rendered it liable to confiscation, provided the act or omission was without the knowledge or connivance of the owner. The appellants argued that Ratanbai's failure to dispose of the gold did not involve the knowledge or connivance of the grandsons of Kesharimal Porwal, who were the owners of the gold. The learned Single Judge upheld this contention, while the Division Bench disagreed, stating that the proviso could not apply to primary gold as its possession was inherently illegal under Section 8(1) of the Gold Control Act.

2. Legality of the Confiscation of Primary Gold:
The confiscation of the primary gold by the Central Excise Authorities was based on the failure to comply with Rule 126-H of the Defence of India (Fourth Amendment) Rules, 1966, which required the disposal or conversion of primary gold within six months. The Collector of Central Excise found that Ratanbai had violated this rule and ordered the confiscation of the gold. The Division Bench of the High Court supported this view, stating that the possession of primary gold was illegal and mandatory confiscation was required under Section 8(1) of the Gold Control Act. However, the Supreme Court held that while the primary gold could not be retained by the owner, it should not be confiscated if the conditions of the proviso to Section 71(1) were met.

3. Applicability of Section 8(1) of the Gold Control Act, 1968:
Section 8(1) of the Gold Control Act prohibits any person from owning, acquiring, or possessing primary gold. The Division Bench of the High Court interpreted this section to mean that the possession of primary gold could never be legalized, and thus, the proviso to Section 71(1) could not apply to primary gold. The Supreme Court, however, found that while Section 8(1) prohibits the retention of primary gold, the proviso to Section 71(1) should still be interpreted to prevent confiscation if the gold was owned without the knowledge or connivance of the person rendering it liable to confiscation. The owner would then be required to dispose of or convert the gold as per the rules.

4. Compliance with Rule 126-H of the Defence of India (Fourth Amendment) Rules, 1966:
Rule 126-H required the owner of primary gold to either sell it to a licensed dealer or convert it into ornaments within six months from the commencement of the rules. Ratanbai failed to comply with this rule, leading to the confiscation of the gold. The Supreme Court acknowledged this failure but emphasized that the gold should not be confiscated if the owners were unaware of the omission. Instead, the gold should be released to the owners, who would then have to dispose of or convert it in compliance with the rules.

Conclusion:
The Supreme Court set aside the order of the Division Bench and modified the order of the learned Single Judge, directing that the seized primary gold be released to the appellants. The appellants were required to either sell the gold to a licensed dealer or convert it into ornaments, as specified by the Administrator. The appeal was allowed, but no order as to costs was made due to the peculiar facts and circumstances of the case.

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