1997 (1) TMI 86 - SC - Central Excise

Whether principle of natural justice have been violated? Held that - The appellants by their letter dated 9-1-1985 had requested the authorities to furnish the certified copy of the check list prepared at the time of the raid with a view to enabling them to check and verify the particulars. In reply thereto the Income Tax Officer expressed his inability to provide the required documents. We have extracted the passage from his reply in the earlier part of this judgment. This contends the learned counsel for the appellants severely prejudiced the appellants right to offer a proper explanation and to that extent the principle of natural justice stood violated. We fail to appreciate why the authorities could not furnish the required information to the appellants. To say that the documents are not readily available with the officer is no ground to deny vital information to a person who is to be visited with a penalty under the Act. We are of the view that the failure to supply this important piece of information to the appellants has prejudiced the appellants and to that extant we agree with Mr. Diwan that the principle of natural justice would stand violated. Appeal allowed.

Summary

Issues Involved:
1. Contravention of Section 55 of the Gold (Control) Act, 1968.
2. Contravention of Sections 36 and 55 of the Gold (Control) Act, 1968.
3. Validity of GS-11 and GS-12 forms.
4. Principles of natural justice.
5. Legality of the penalty imposed.

Summary of Judgment:

1. Contravention of Section 55 of the Gold (Control) Act, 1968:
The appellant was served a show cause notice alleging contravention of Section 55 of the Gold (Control) Act, 1968, read with Rule 13 of the Gold Control (forms, fees, and miscellaneous matters) Rules, 1968. The notice stated that gold ornaments weighing 5014.170 gms. were found short in the stock of the dealer. The Tribunal concluded that the appellant had breached Section 55 of the Act by not entering certain vouchers in their accounts, independent of the defective forms GS-11 and GS-12.

2. Contravention of Sections 36 and 55 of the Gold (Control) Act, 1968:
The Tribunal also found that there was a shortage of gold and a consequent contravention of Sections 36 and 55 of the Act. The appellant contended that the shortfall was inaccurately calculated and challenged the correctness of the shortfall worked out from the entries in GS-11 and GS-12.

3. Validity of GS-11 and GS-12 forms:
The Supreme Court had previously ruled in Manik Chand Paul & Ors. v. Union of India & Ors. that the GS-11 and GS-12 forms were defective and did not disclose a true and complete account of the gold in the possession of licensed dealers. The Court expressed that no penal action should be taken based on these forms until the defects were remedied. Despite this, the Tribunal erroneously relied on these forms to determine the shortfall.

4. Principles of natural justice:
The appellant argued that their right to a fair hearing was violated as the authorities failed to provide necessary documents and information. The Income Tax Officer expressed his inability to furnish the certified copy of the checklist prepared during the raid, which prejudiced the appellant's ability to offer a proper explanation. The Court agreed that the failure to supply this information violated the principles of natural justice.

5. Legality of the penalty imposed:
The Tribunal initially imposed a penalty of Rupees Five Lakhs, which was later reduced to Rupees Two Lakhs. The appellant contended that the penalty under Section 74 of the Act was only envisaged if there was surplus gold liable for confiscation. The Supreme Court found that the penalty was based on defective forms GS-11 and GS-12, which did not accurately reflect the gold in possession, and thus the penalty could not be sustained.

Conclusion:
The Supreme Court allowed the appeal, set aside the impugned order, and directed the refund of the penalty paid. The Court emphasized that the Tribunal's reliance on defective forms GS-11 and GS-12 was erroneous and that the principles of natural justice were violated by the authorities' failure to provide necessary documents. The writ petition was disposed of as infructuous in light of the decision in Manik Chand's case. There was no order as to costs.