TMI Blog2004 (7) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... g 37,398.300 gms. and valued at Rs. 18.70 lakhs; under section 71(1) of the Gold (Control) Act, 1968 (hereinafter referred to for the sake of brevity as "the 1968 Act") with imposition of penalties on each of the appellants herein under section 74 of the said Act. The undisputed facts are as follows: The appellants are the son and widow respectively of one Udhavdas Ahuja. Udhavdas had married twice-first to the mother of appellant No. 1 who died on February 19, 1950, and next to appellant No. 2 on July 1, 1950. Appellant No. 1 was born on February 16, 1950. Udhav's grandmother Bhojibai died on July 4, 1951. On August 28, 1974, the Income-tax Commissioner issued an authorisation under section 132 of the Income-tax Act, 1961, authorising search and seizure at Gopi Kunj, situate at Shivaji Park, Bombay, being the residential premises of appellant No. 1. Pursuant to the authorisation, R. D. Mahadeshwar, Assistant Director of Inspection, Income-tax Department conducted the search and recovered primary gold and other gold items, more particularly described in the panchnama. At the time of search, appellant No. 1 was present. The primary gold and the gold items collectively weighed 37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombay (hereinafter referred to for the sake of brevity as "authorised officer") ordered confiscation of the gold bars, gold coins and sovereigns and the provisions of section 71(1) read with section 8(1) of the 1968 Act. However, the appellants were given an option to redeem gold coins and sovereigns weighing 7,719.90 gms. on payment of fine of Rs. 1.5 lakhs in lieu of confiscation. By the said order, the authorised officer imposed penalty of Rs. 1 lakh on each of the appellants. This order of the authorised officer held that the entire gold was seized from one cupboard in the eastern bedroom. The order passed by the authorised officer on June 26, 1976, was, however, set aside by the Gold Control Administrator in appeal (hereinafter referred to for the sake of brevity as "the appellate authority"). By order dated November 21,1977, the appellate authority remanded the case for de novo adjudication by accepting the contention of the appellants herein that the order passed by the authorised officer on June 26, 1976, was in breach of principles of natural justice. On remand, the authorised officer once again came to the conclusion, after considering the evidence on record, that the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as according to him the declaration was filed by appellant No. 1 as karta after commencement of proceedings under the 1968 Act. Being aggrieved by the dismissal of revision application filed by the appellants, Writ Petition No. 2406 of 1982, was filed in the Bombay High Court for a declaration that the said gold was unlawfully seized and, therefore, the appellants were entitled to immunity from proceedings for prosecution, confiscation and penalty. The appellants also sought return of the said gold. The said writ petition was filed on October 18, 1982. In the meantime, the appellants who were charged for offences under section 85(1)(ii) read with section 8(1) of the 1968 Act were acquitted by the Additional Chief Metropolitan Magistrate, Bombay, on March 24, 1983. Criminal Appeal No. 443 of 1983, filed by the Gold Control authorities against the order of acquittal was dismissed by the Bombay High Court on March 8/9, 1991. By judgment and order dated September 11, 1990, the learned single judge held in Writ Petition No. 2406 of 1982, mentioned hereinabove, that the appellants were innocent possessors of the said gold. Accordingly, the trial judge quashed the orders of penalty and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntravention of section 8(1) was liable to be confiscated under section 71(1), the proviso thereto protected such gold from confiscation for contravention of the provisions of the Act in the absence of knowledge or connivance on the part of the owner in such contravention. In view of the said proviso, it was submitted that there was no absolute bar to the possession of the primary gold under the 1968 Act. In this connection, it was urged that mere possession of primary gold was an offence under sections 71(1) and 85(1) of the Act; that, therefore, the word "possession" in sections 8(1), 71(1) and 85(1) referred to conscious possession. Learned counsel for the appellants next contended that the appellants were prosecuted by the Gold Control authorities for offences under section 85(1)(ii) read with section 8(1) of the Act in respect of retention of possession of primary gold; that they were also prosecuted for not filing declarations under section 16(1) in respect of gold coins, sovereigns and gold idols; that on the first count the appellants proved beyond reasonable doubt that they had no knowledge of the primary gold bars, coins and sovereigns; that consequently, they were acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance was placed on the judgment of this court in the case of Hargovind Das K. Joshi v. Collector of Customs, AIR 1987 SC 1982. Per contra, Mr. N. K. Bajpai, learned counsel appearing on behalf of the Department, contended that the income-tax authorities had recovered the said gold from the residence of the appellants during the search on August 28, 1974. That in accordance with a circular issued by the Central Board of Direct Taxes, the Gold Control Officer was informed about the seizure. That the said officer visited the office of the Income-tax Department around August 30, 1974, and in the presence of appellant No. 1, took over the gold from the Income-tax Department under section 66 of the 1968 Act. In this connection, reliance was placed on the panchnama dated August 30, 1974. It was urged that all the statutory authorities rejected the claim that the appellants were not in conscious possession of the gold on the ground that the recovery was made from more than one cupboard; that appellant No. 2, on being asked, produced the keys with which the secret locker in the cavity on top of the cupboards in the western bedroom was opened; that the said keys were recovered from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nscious possession thereof stood proved. Lastly, it was urged that the applicability of the proviso to section 71(1) had to be adjudged by the adjudicating authority and not by the officer who had seized the primary gold. It is for the adjudicating authority to decide the claim of the benefit under the proviso to section 71(1). Hence, it was urged that the seizure cannot be held to be illegal in the present case. Learned counsel for respondent No. 2 next submitted that under the 1968 Act, adjudication and prosecution were two independent proceedings and they were permissible on the same set of facts. That the possibility of different conclusions being reached by two different authorities under the same Act cannot be ruled out. That adjudication and prosecution were independent of each other and the procedures to be adopted in the two proceedings were also different. In this connection, reliance was placed on the judgment of this court in the case of Tukaram G. Gaokar v. R. N. Shukla, AIR 1968 SC 1050. It was further submitted that the presumption of culpable mental state under section 98B of the Act had no relevance whatsoever to the proceedings for confiscation and penalty. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government framed the Defence of India Rules, 1962. In the 1962 Rules, as originally framed, there was no provision dealing with control of gold. By the Defence of India (Amendment) Rules, 1963, a new Part XIIA was inserted with effect from January 9, 1963. By this amendment, rules 126A to 126Z were inserted. Rule 126A(d) defined "gold" as, inter alia, including primary gold, ornament or any other article of gold. Rule 126H provided for restrictions on possession of gold. The effect of rule 126H was that, except in the manner provided under the said rule, no person could acquire or buy primary gold. Rule 126-I required declaration to be made of the possession of gold other than ornaments. It provided that every person, not being a dealer, shall, within thirty days from the commencement of the 1963 Amendment Rules, make a declaration as to the quantity, description and other particulars of gold. Under rule 126M, gold seized was liable to be confiscated. Under the said rules, power was given for search and seizure of gold in respect of which there has been contravention of the said rules. The net effect of the aforesaid rules was that acquisition, possession or control of primary gol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 8(1) was that the article must be primary gold. Section 8(1) placed an absolute embargo on retention of possession of primary gold on and after September 1, 1968, when the said Act came into operation. Under section 8(6), the Gold Control Administrator was empowered under the special circumstances of any case to authorise any person(s), to buy, acquire, receive, sell, transfer or otherwise dispose of primary gold or article. However, the normal rule was against the retention of the possession of primary gold. Chapter XII dealt with entry, search and seizure. Section 58 read with section 66 empowered the Gold Control Officer on reasonable suspicion to seize such gold in respect of which he holds a reasonable belief of contravention of the provisions of the Act. However, the Gold Control Officer who was a seizing officer was not required to decide the question of actual contravention which had to be decided by the Collector (hereinafter referred to as "authorised officer") in the adjudication proceedings under sections 71(1) and 74 of the Act. If the authorised officer found such actual contravention, he could order confiscation under section 71(1) of the Act. Sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g heard, pass such orders as it may think fit. 71. Confiscation of gold. -(1) Any gold in respect of which any provision of this Act or any rule or order made there under has been, or is being, or is attempted to be, contravened, together with any package, covering or receptacle in which such gold is found, shall be liable to confiscation: Provided that where it is established to the satisfaction of the officer adjudging the confiscation that such gold or other thing belongs 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 belongs, it shall not be ordered to be confiscated but such other action, as is authorised by this Act, may be taken against the person who has, by such act or omission, rendered it liable to confiscation." Therefore, under the scheme of section 66 read with section 71, the officer seizing such gold was not to decide issues, such as, collusion, connivance, knowledge of possession, etc. The belief that the officer had to form under section 66 was only in respect of the gold, whoever its owner be. The ownership of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rries on any business or transaction in gold for which a licence or certificate is required to be obtained by or under this Act; or (x) carries on business as a banker or moneylender; shall, without prejudice to any other action that may be taken under this Act, be punishable- (a) if the offence is under clauses (i), (ii), (iii), (iv) or (viii) (the offence under clause (viii) being a contravention of sub-section (3) of section 55) and the value of the gold involved therein exceeds one lakh of rupees, with imprisonment for a term which may extend to seven years and with fine: Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court such imprisonment shall not be for a term of less than six months; (b) in any other case, with imprisonment for a term which may extend to three years, or with fine, or with both. 98B. Presumption of culpable mental state. -(1) In any prosecution for an offence under this Act, which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be open to the accused to prove the fact that he had no such ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat by virtue of section 10, similar to section 98B of the 1968 Act, the onus of proof was placed on the accused to prove that he did not knowingly possess the article. This is after the prosecution showing by evidence that the accused was in possession of the article. The analysis of the various provisions of the 1968 Act (repealed in 1990) show that the Act made possession of primary gold an offence. Under the Act, possession of primary gold was made an offence under section 85(1)(ii) read with section 8(1). The said Act provided for a special machinery for confiscation of unauthorised gold under section 71(1) and for trial of the person concerned under section 85(1). The word "possession" finds place in all the above provisions. In the light of the judgment of this court in the case of Inder Sain [1973] 2 SCC 372; we have to read the word "possession" as conscious possession. Under section 71(1), any gold in respect of which there existed contravention was liable to be confiscated. Provided, where it was established to the satisfaction of the authorised officer, that the owner had no knowledge of the act or omission on the part of the holder, which made it liable to confiscati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act ordered confiscation on the ground that recovery was made from the cupboards in the eastern and western bedroom and from the telephone room; that appellant No. 2 had produced the key with the help of which the secret vault in the cupboard in the western bedroom could be opened and, therefore, the appellants were in conscious possession of the said gold. It was further held by the authorised officer that when the gold in respect of which any provision of the 1968 Act had been contravened, such gold, ipso facto, attracted confiscation. In the case of Capt. M. Paul Anthony v. Bharat Gold Mines Ltd. [1999] 95 FJR 1; [1999] 3 SCC 679 it has been held that where departmental and criminal proceedings are based on identical facts and where charges were sought to be proved by the police officers and the panchas who raided the house and effected recovery and where same set of witnesses were examined in both the proceedings but the criminal court on examination of the evidence came to the conclusion that no recovery was made from the house and that raid was not proved it would be unjust, unfair and oppressive to allow the findings recorded by the enquiry officer to stand against acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances one can say that the appellants were in conscious possession of primary gold. As indicated above, the adjudication proceedings under section 71(1) concluded before the criminal case. The judgment of the criminal court was not before the authorised officer. However, the basic controversy before the authorised officer was-whether the entire primary gold (bars) was recovered from the ornamental top of the cupboard in the eastern bedroom as alleged by the appellants, or whether some of the gold bars were also recovered from the cupboards in the western bedroom and the room in which the telephone was placed as alleged by the Department. According to the Department, the appellants were in conscious possession of the gold bars because some of the bars were found from the cupboards in the western room which were opened with the keys handed over by Ishwaribai, appellant No. 2 herein. According to the Department, since primary gold was recovered from the western bedroom and telephone room in addition to the recovery from the ornamental top of the cupboard in the eastern bedroom, the appellants were in conscious possession. The orders of the authorised officer and the Gold Control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red from that room. Similarly, in his report to Shri Vaidya, Kundalgaonkar has stated that Ishwaribai gave the keys to him whereas in the criminal trial he has deposed that she gave the keys to Mahadeshwar. All these contradictions have taken place because there was no contemporaneous record to prove the recovery and the panchnama prepared was faulty as it did not indicate the place from which the gold was recovered. In conclusion, none of the witnesses were able to give a coherent story as to where the primary gold was found. Therefore, recovery of three gold bars from the telephone room and the western bedroom was not proved. On the other hand, from the evidence, it stood established that the ornamental top of the cupboard in the eastern bedroom could not be opened. The screws were rusted and old. They had to be cut. The entire gold was found at this place. The opening of the ornamental top was difficult. That improvised keys had to be prepared by the locksmith, who was the witness for the Department. That they were made to open the locker/vault inside the ornamental top. The evidence shows that the appellants did not have the keys to open the said vault. That the entire prima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e within six months from March 1, 1967, in terms of rule 126H of the Defence of India Rules and that they had failed to file a declaration in the prescribed form in respect of 682 gold sovereigns, one gold coin and four gold idols (hereinafter referred to as "the gold articles"). The appellants submitted their reply to the show cause notice vide letters dated October 29, 1974. They claimed that Bhojibai had purchased the said gold much prior to the Defence of India Act, 1962. They claimed that they were not aware of the existence of the said gold as it was concealed in the cavity under an ornamental top over the cupboard in the eastern bedroom from which the entire gold was recovered by the officers of the Income-tax Department and consequently they were not in conscious possession of the said gold. Mr. Sundaram, learned senior counsel appearing on behalf of the appellants submitted that the Gold Control Officer merely took over the primary gold from the Income-tax officers which did not constitute a seizure under the 1968 Act. That in any event, such take over was not permissible under section 132(5) of the Income-tax Act, 1961. He urged that there was no second seizure as alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under a panchnama in the presence of Gopaldas in the reasonable belief that the provisions of the Act had been contravened. In this connection, reliance was placed on the copy of the panchnama, which specifically recorded that the Gold Control Officer had reason to believe that the provisions of the Act had been contravened in respect of primary gold, gold sovereigns and gold coins, in all weighing 37,398.300 gms. valued at Rs. 18.70 lakhs, and seized from the Income-tax Officer. Further, the Central Board of Direct Taxes had issued a circular on August 30, 1965, addressed to all Commissioners of Income-tax and Wealth-tax stating that where gold was seized in a search or a raid by the income-tax authorities, necessary information should be given to the Gold Control Officer. It was submitted that the circular issued by the CBDT was binding on subordinate income-tax authorities. That it was in compliance with the said circular that the income-tax authorities informed the Gold Control Officer about the seizure of the said gold, in response to which the Gold Control Officer visited the Income-tax Office and seized the gold under section 66 of the 1968 Act. Therefore, it was urged tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er may, during the course of enquiry in connection with the contravention of any provisions of the Act, require any person to produce or deliver any document or article useful or relevant to such enquiry. In our view, the words "any person" in section 64(b) included all revenue officers of the Government. This is borne out by section 105 under which all officers of the Government engaged in collection or prevention of evasion of revenue were required to assist the Gold Control Officer in the execution of the provisions of the 1968 Act. Hence, the Gold Control Officer acted within his authority when he took over the said gold from the Income-tax Department on August 30,1974. In the case of Collector of Customs v. Nathella Sampathu Chetty, AIR 1962 SC 316, the expression "reason to believe" in section 178(1) of the Sea Customs Act came up for consideration. Section 178(1) prescribed that where goods to which that section applied were seized in the reasonable belief that they were smuggled, the burden of proving that they were not smuggled shall be on the person from whose possession they were seized. It was held by this court that where circumstances existed to raise a reasonable s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Act. Under section 64(b), the Gold Control Officer was empowered to call upon "any person" to produce any document or thing relevant to this enquiry into contravention of the provisions of the Act. Under section 105, all officers engaged in collection or prevention of evasion of revenue were required to assist the Gold Control Officers in the execution of the provisions of the said Act. Under section 111, the said Act was given an overriding effect over all other laws inconsistent therewith. That mere possession was an offence punishable under section 85(1)(ii) of the Act. On the other hand, the purpose of seizure under section 132(5) of the Income-tax Act is not to punish the assessee but to assess his tax liability. Section 132 of the Income-tax Act confers power on the income-tax authorities to realise the income-tax dues of the assessee from his assets. After realising the dues, the balance value is returned to the assessee. On the other hand, when gold was seized from the possession of the person concerned, it was not only liable to confiscation under the 1968 Act but he was liable to be prosecuted for the offence of possessing gold. Further, the object behind section 132 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er obtained a search warrant from the Chief Presidency Magistrate, Bombay, on July 23, 1964, under section 19 of the FERA, authorising him to search shop No. 157 situate at Mumba Devi Road, Bombay, and to seize incriminating documents, foreign exchange, account books, etc. In pursuance of this warrant, the Assistant Enforcement Officer searched the premises on the same date. No incriminating documents or other materials were found. The appellant was present in the shop. He was searched by the officers of the Enforcement Directorate in the presence of panchas and four packets containing diamonds were found on his person. They were, therefore, seized. There was a safe in the shop which was also sealed by the said officers. One of the enforcement officers thereafter informed a Customs Officer about the seizure of the diamonds. On July 23, 1964, the Customs Officer went to the shop but as the panchnama had already been made and as the diamonds had been recovered by the enforcement officers, the Customs Officer did not once again seize them. On July 24,1964, the safe was opened. It was found to contain seven packets of diamonds. These articles were seized by the officers of the Enforcem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue officers were duty bound to assist the Gold Control Officer in execution of the provisions of the Act. In the circumstances, the judgment of this court in the case of Gian Chand v. State of Punjab, AIR 1962 SC 496, has no application. For the aforestated reasons, the take over of gold on August 30, 1974, constituted lawful seizure under section 66. The last point which we have to decide is-whether the appellants herein were entitled to claim immunity from confiscation of gold and imposition of penalty under the Voluntary Disclosure of Income and Wealth Ordinance, 1975? In this connection, the following facts may be noted. On October 8, 1975, the President of India promulgated the Voluntary Disclosure of Income and Wealth Ordinance, 1975. The said Ordinance was repealed subsequently by the Voluntary Disclosure of Income and Wealth Act (No. VIII of 1976). The Act conferred complete immunity from proceedings for confiscation, penalty and prosecution. On December 27, 1975, appellant No. 1 as karta herein filed the declaration under the VDS, 1975, and claimed immunity. On June 5, 1976, the officer took the decision that the declaration in respect of the seized gold could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the gold on August 30, 1974, was lawful and in accordance with section 66 of the 1968 Act. However, in the absence of any evidence of recovery of primary gold from the western bedroom and the telephone room and in the absence of any material to show that the appellants had knowledge of the said gold hidden in the ornamental top of the cupboard in the eastern bedroom, the contravention of the provisions of the 1968 Act is not established against the appellants and consequently the orders of confiscation and penalty are not sustainable. For the aforesaid reasons, the appeal is allowed and the impugned judgment and order of the Division Bench of the High Court dated January 5, 1994, is set aside. The order of the appellate authority dated November 5, 1981, confirmed in revision vide order dated July 10, 1982, to the extent of absolute confiscation of seven gold bars, one gold brick, gold coins and sovereigns, more particularly described in the panchnama dated August 30, 1974, with personal penalties on each of the two appellants herein, are set aside. Consequently, we direct that the said gold, if not disposed of so far, shall be returned to the appellants within two months from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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