1980 (9) TMI 95 - HC - Customs

Show Cause Notice - Extension of period without being heard - Validity - Explanation if unsatistactory - Finding of fact

Summary

Issues Involved:

1. Legality of the show cause notice issued beyond the six-month period.
2. Consideration of the petitioners' explanation by the competent authorities.

Detailed Analysis:

1. Legality of the Show Cause Notice Issued Beyond the Six-Month Period:

The primary issue raised by the petitioners is that the show cause notice for adjudication, confiscation, and penalty was illegal as it was issued beyond the six-month period without affording them an opportunity to show cause against the extension of this period. The relevant facts are that the premises of the petitioners were raided on February 12, 1971, and primary gold and gold ornaments exceeding the statutory limits were seized. The show cause notice was issued on October 15, 1971, approximately ten months after the seizure. The petitioners argued that the extension of the period for issuing the show cause notice was done without giving them an opportunity to oppose the extension, rendering the notice and subsequent orders void.

The court examined Section 79 of the Gold (Control) Act, 1968, particularly the second proviso, which allows the Collector of Central Excise or Customs to extend the period for issuing a show cause notice. The court noted that unlike Section 110(2) of the Customs Act, which requires "sufficient cause being shown" for an extension, Section 79 of the Gold (Control) Act does not contain such a requirement. The court referenced the decision in Assistant Collector, Customs v. Mathotra, A.I.R. 1972 S.C. 689, and the Allahabad High Court's decision in P.N. Agarwal v. Union of India, 1973 Tax. L R. 2166, which highlighted the difference in the wording of the two statutes. The court concluded that the absence of the phrase "on sufficient cause being shown" in Section 79 meant that the Collector's power to extend the period was not contingent on showing sufficient cause. Therefore, the show cause notice issued within the extended period was deemed valid.

2. Consideration of the Petitioners' Explanation by the Competent Authorities:

The second issue raised by the petitioners was that the competent authorities did not consider their explanation regarding the possession of the seized gold. The petitioners claimed that they had purchased "standard gold bars" from a licensed gold dealer on the day of the raid and had not yet made the necessary entries in their registers. The court reviewed the order passed by the Collector of Customs and found that this explanation had been considered but was not found acceptable. The court noted that the seized gold was "primary" gold, not "standard gold," and that the petitioners did not specify the quantity of standard gold obtained from the dealer. Additionally, the standard gold bars should have had specific markings as per Rule 6 read with Schedule II, which were not present on the seized gold.

The court also referred to Sections 42 and 32 of the Gold (Control) Act, which impose restrictions on the possession of primary gold and standard gold bars by certified goldsmiths and licensed dealers. The court concluded that the explanation offered by the petitioners was false and that the findings of the competent authorities were based on evidence and not perverse. Therefore, the contention that the explanation was not considered was dismissed.

Conclusion:

The court rejected the petition, upholding the validity of the show cause notice issued within the extended period and confirming that the petitioners' explanation had been duly considered and found unacceptable. The rule was discharged, and there was no order regarding costs.