1971 (12) TMI 115 - HC - Central Excise

Summary

Issues Involved:

1. Legality of the seizure of gold ornaments by the Central Excise Department.
2. Compliance with the Gold (Control) Act, specifically Section 55 and Section 66.
3. Validity of the Department's reasonable belief for seizure.
4. Justification for the retention of 3770.015 grams of gold.
5. Burden of proof regarding the accounted or unaccounted status of the gold.
6. Seizure of substituted gold ornaments.

Issue-wise Detailed Analysis:

1. Legality of the Seizure of Gold Ornaments by the Central Excise Department:

The petitioner-respondent challenged the seizure of 2583 pieces of gold ornaments weighing 22151.370 grams, arguing it was illegal, arbitrary, and intended to harass. The Department conducted a raid based on information about dealing in foreign gold and found that Forms G.S. 10, 11, and 12 were not maintained from April 19 to 26, 1971. The Department seized the entire stock without verifying the accounts, which was later admitted by their counsel, T.N. Sapru. The learned Single Judge ruled that the seizure was beyond the scope of powers conferred under Section 66 of the Gold (Control) Act, as the seizure was made without checking the accounts, making it illegal and without jurisdiction.

2. Compliance with the Gold (Control) Act, Specifically Section 55 and Section 66:

Section 55 mandates licensed dealers to maintain true and complete accounts of gold transactions. The petitioner-respondent argued that although Forms G.S. 10, 11, and 12 were not posted, corresponding vouchers were maintained. Section 66 allows seizure if there is a reasonable belief of contravention of the Act. The Department's seizure was based on the non-posting of forms, but the vouchers were available. The learned Single Judge found that the seizure did not comply with Section 66 as it was not based on a reasonable belief but rather on a roving enquiry.

3. Validity of the Department's Reasonable Belief for Seizure:

The Department claimed a reasonable belief that the petitioner-respondent contravened Section 55 by not maintaining forms. However, the learned Single Judge ruled that the belief must be honest and based on reasonable grounds. The Department seized the entire stock without verifying the accounts, indicating a lack of reasonable belief. The Court cited various precedents, emphasizing that "reason to believe" must be based on relevant materials and not mere suspicion.

4. Justification for the Retention of 3770.015 Grams of Gold:

The Department retained 3770.015 grams of gold, arguing it was unaccounted for. The learned Single Judge held that the initial seizure being illegal, the retention of any portion of the stock was also illegal. The Department's own admission that a major portion of the gold was accounted for undermined their claim of reasonable belief for retaining the remaining portion. The Court emphasized that the seizure and retention were part of one transaction and could not be separated.

5. Burden of Proof Regarding the Accounted or Unaccounted Status of the Gold:

The Department argued that the burden of proof was on the petitioner-respondent to show the gold was accounted for. However, the Court held that the Department first needed to prove that the seizure was validly exercised under a reasonable belief. The petitioner-respondent maintained that all gold was accounted for with corresponding vouchers, and the Department did not challenge the vouchers' authenticity. The Court concluded that the burden of proof was irrelevant since the initial seizure was invalid.

6. Seizure of Substituted Gold Ornaments:

The Department seized an equivalent number of ornaments instead of the specific items mentioned in the vouchers, claiming they were unidentifiable. The Court ruled that Section 66 permits the seizure of "such gold" in respect of which there is a reasonable belief of contravention. The seizure of substituted ornaments was deemed unwarranted as the Department did not establish that the original items were unaccounted for. The Court found the seizure without due regard to the Act's provisions.

Conclusion:

The appeal was dismissed with costs, affirming the learned Single Judge's decision that the seizure and retention of the gold were illegal and beyond the jurisdiction conferred by Section 66 of the Gold (Control) Act. The Department failed to establish a reasonable belief for the seizure, and the petitioner-respondent's stock was accounted for with corresponding vouchers.