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TMI Blog2010 (4) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of the Gold (Control) Act, 1968 ("GCA") disposing of their revision application. The impugned order holds the confiscation of 11.512 kg of gold coins and ornaments forming part of Lakshmi gold buried in the foundation of Moti Doongri Palace and of 644 gold coins to be unsustainable in law. The penalty of Rs. 5 lakhs imposed on Petitioner No. 1 Col. Sawai Bhawani Singh, as the karta of the HUF, was remitted. However, the seizure and confiscation of the remaining gold was sustained and the fine in lieu of confiscation of such gold was reduced from Rs. 1.5 crores to Rs. 80 lakhs. To that extent the Petitioners were still aggrieved and therefore filed this petition. Background Facts 2. Between 11th February 1975 and 13th June 1975, the officers of the Income-tax Department acting under the authorization of the Director of Inspection (Investigation), conducted searches under Section 132 of the Income Tax Act, 1961 ("IT Act") at various premises at Jaipur belonging to and/or occupied by the members of the erstwhile ruling family of Jaipur, including the petitioners. The authorized officers came across considerable quantities of gold in the form of coins, bars, sovereigns, pie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f confiscation, as provided for under Section 73 GCA. The option to redeem the same had to be exercised within three months from the date of receipt of the order. After redemption, the primary gold, except gold mohars and other gold articles of ancient origin and historical interest, were permitted to be sold to a licensed dealer or got converted into ornaments. A certificate has to be furnished by the owners within one month of taking back the gold into their possession. As regards the gold mohars and other gold articles of ancient origin and historical interest, they were not to be melted but registered with the competent authorities under the Antiquities & Treasures Act, 1972. The Administrator's order in appeal 4. Aggrieved by the above order, the Petitioner filed a Gold Control Appeal which was disposed of by an order dated 31st March 1980 passed by the Gold Control Administrator ('Administrator') under the Department of Revenue, Ministry of Finance, Government of India. It was held by the Administrator in the aforementioned order dated 31st March 1980 that the source of the seized gold had been fully explained and was covered by the gold mentioned in the Covenant of 1949 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the late Maharaja as the karta of the HUF had failed to declare the gold in question, it would be against the canons of natural justice and equity if the other members of the HUF were deprived of their legitimate share. (c) At the highest, the entire share of the late Maharaja could be confiscated. (d) There was no justification for the confiscation of Lakshmi gold which was buried at the time of construction of the palace and which consisted of 16 gold coins, studded and unstudded gold ornaments weighing in all 11.512 kgs. (e) However, four pieces of gold in item E (1) which were part of the photo frame could not be held to be covered by the declaration made since they were not to be found in the list attached to the declaration. The list included only hookas and gold plated articles. (f) There was no justification for confiscation of 644 gold coins weighing 4.281 kgs mentioned as item B (3) of the Administrator's order since they were declared. (g) After deducting the value of Lakshmi gold as well as the value of 644 gold coins, both of which were not liable for confiscation, the value of the remaining gold worked out to about Rs. 483 lakhs. One-sixth share of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the question was whether the HUF of the late Maharaja was in existence. It was submitted that till such time the said suit was decided, the present petition should be deferred. It was further pointed out that Income Tax Reference No. 438 of 1983 has also been adjourned sine die on the same ground. 9. Although the present petition was also being adjourned from time to time for the same reason, this Court felt that the question arising for consideration in the present petition could be decided independent of the outcome of the suit. If the Petitioners succeeded, the said amount would become refundable to the estate of the late Maharaja and if not, the writ petition would in any event be dismissed. If any amount was recoverable after accounting for any other undisputed statutory or determined legal liability the question of the respective shares of the individual Petitioners could thereafter be decided in accordance with the decision in Suit No. 870 of 1986. Submissions of counsel 10. This Court has heard the submissions of Mr. Shyam Moorjani, Advocate for Petitioner Nos. 3 and 4, Mr. Manoj Kumar Rathi, learned counsel for the Petitioner Nos. 1 and 2 and Mr. S.K. Dubey, lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities. Therefore, there was no question of confiscation of any gold said to belong to the late Maharaja in terms of the GCA. It is pointed out that the late Maharaja had duly declared the entire gold at the time the Covenant was drawn up. The declared gold was listed out in the Schedule to the Covenant of 4th April 1949 between the Maharaja and the Government of India. Further, on 8th February 1963 the Maharaja made a declaration under the Defence of India Rules. It is submitted that declarations so made could be taken to be sufficient for the purposes of the GCA and the failure to make a separate declaration under the GCA should be viewed as an irregularity at the highest. Moreover, no sooner did the Petitioner No.1 realize that there was gold in the possession of the legal heirs, he made a declaration under the Voluntary Disclosure Scheme (VDS) under the Income-tax Act and the Collector of Customs and the Gold Control Officer before the searches took place. Therefore, the existence of the gold was in the knowledge of the Central Government even prior to the searches. In the circumstances, there was no justification for imposing a penalty of Rs. 80 lakhs in lieu of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f gold then clearly the above finding by itself should have been sufficient for the entire proceedings to be held illegal and treated as closed. 17. The Central Government agreed with the above finding and held that the confiscation of the Lakshmi gold weighing 11.512.400 kgs as well as 10.858.000 kgs gold was not justified. The Central Government also agreed that the confiscation of 644 gold coins was not justified. However, while the Administrator in his order dated 31st March 1980 held that four pieces of gold in Item No. E (1) weighing 4.285.000 kgs were part of the photo frame and hence articles covered by the declaration, the Central Government differed and held that they were not so included and therefore not declared. It is not understood how in a revision application filed by the Petitioners, such a finding could be rendered by the Central Government. 18. Be that as it may, no provision of the GCA has been cited either by the Administrator or the Central Government to justify the determination of the "nominal" one-sixth share of the total value of the gold as that of the late Maharaja's and valuing it at "slightly more than Rs. 80 lakhs" and further ordering that a fine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In any event, that is not the case made out in the show cause notices. 21. The GCA does not contain any provision which indicates what should happen if a person who was supposed to make a declaration during his life time fails to do so and later, after his death, the said default is discovered. The GCA also does not contain any provision whereby the liability for the failure by the deceased person to make a declaration during his lifetime gets transferred to his legal heirs. Under Section 16 (3) it is possible to fasten liability on a person on whom the gold devolves for not making a declaration. There is, under Section 99 GCA, a presumption of ownership of the person in whose possession the gold is found. Still, there is no provision which states that the liability of a person under the GCA survives his death. The inescapable conclusion is that proceedings under the GCA which have not been initiated against a person during his lifetime cannot be initiated and continued against his estate after his life time. 22. There are other aspects which buttress the above conclusion. Section 71 of the GCA provides for confiscation of any gold in respect of which there is a contravention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act, the period of six months specified in the second proviso shall be computed from the date on which such order for fresh adjudication is made." 23. Although in the show cause notices in the instant case the case was that the failure to make declaration was that of the petitioners, in the adjudication that followed that was held to be not proved even by the authorities themselves. The only liability found and sought to be enforced was that of the late Maharaja who was dead five years prior to the show cause notice. There is no provision in the GCA that permits this. Sections 71, 73 and 79 of the GCA do not permit instituting proceedings under the GCA against a person five years after his death much less seizing gold notionally determined to belong to him. Also, no such determination could be arrived at without following the mandatory procedure under Sections 78 and 79 vis-a-vis such person. There is a plain impossibility of complying with Section 79 GCA vis-à-vis a dead person. 24. In Commissioner of Income-tax v. Ellis C. Reid the Division Bench of the Bombay High Court while interpreting the Section 2 (2) of the Income-tax Act 1922 and the definition of 'assessee' under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussed next. In Union of India v. Mustafa & Najibai Trading Co. the Supreme Court was interpreting the provisions of the Customs Act 1962. In para 33 of the judgment a reference was made to the earlier decision in Collector of Customs v. D. Bhoormall (1974) 2 SCC 544 where while discussing Section 167 (8) of the Sea Customs Act 1878, it was held that "proceedings for confiscation of contraband goods are proceedings in rem and the penalty of confiscation is enforced against the goods irrespective of whether the offender is known or unknown and it is not necessary for the Customs authorities to prove that any particular person is concerned with their illicit importation or exportation and it is enough if the Department furnishes prima facie proof of the goods being smuggled stocks." It was further explained that "the second kind of penalty which is enforced against the person concerned in the smuggling of the goods is one in personam and in the case of the said penalty, the Department have to prove further that the person proceeded against was concerned in the smuggling." Further, as regards the first kind of penalty it was against the goods and it was enough that the Department furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y used in sub-section (2) of Section 59-A, there cannot be any doubt whatsoever that commission of a forest offence is one of the requisite ingredients for passing an order of confiscation, but the question as to whether the order of acquittal has been passed on that ground and what weight should be attached thereto is a matter which, in our opinion, should not be gone into at this stage." 31. The above decision cannot help the Respondents since phraseology of Sections 16 and 71 GCA does not permit the extension of the liability of a person after his death. Even if confiscation under the GCA were to be considered to be a civil liability, it has to mandatorily be preceded by an adjudication under Section 78 GCA which simply cannot happen in the case of a dead person. Importantly, neither the decision in Sujit Kumar Rana nor the decision in Mustafa & Najibai Trading Co. deal with the case of the liability of a dead person either under the Customs Act or under the Forest Act 1927. 32. To summarise this part of the discussion it is reiterated that proceedings under the GCA which have not been initiated against a person during his lifetime cannot be initiated and continued against h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions in coming to the above conclusion. First, it agreed that Petitioner No. 1 took voluntary retirement and relinquished charge of the Para Commando Regiment only on 23rd November 1974 whereas the search took place on 11th February 1975, only three months thereafter. This was too short a period for him to know all the details of the vast properties and other duties and responsibilities that he had as a karta. The central government accepted the contention that "it would be wrong to hold Col. Bhawani Singh guilty of the offence of not declaring the gold as the karta of the family." The central government accepted that Col. Bhawani Singh had by serving in the army "risked his life in spite of his parentage and position in life in the service of the nation and so devoted was he to the cause of the country that he was commanding the Para Commando." The central government also agreed that "a person of such high devotion to the country's cause would not go and break the laws of the country knowingly." 37. Once it was clear that none of the Petitioners was liable under the GCA the only logical step was to drop the entire proceedings against them. Yet, inexplicably the central go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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