1986 (11) TMI 44 - HC - Central Excise

Summary

Issues Involved:
1. Validity of the notice under Section 79 of the Gold Control Act, 1968.
2. Entitlement to return of seized gold.
3. Validity of the penalty imposed under Section 74 of the Gold Control Act, 1968.

Detailed Analysis:

1. Validity of the notice under Section 79 of the Gold Control Act, 1968:

The primary contention was whether the notice issued on 27th December 1974, but served on 11th January 1975, complied with Section 79 of the Gold Control Act. Section 79 mandates that a notice informing the owner of the grounds for confiscation or penalty must be given within six months from the date of seizure. The court emphasized the term "giving of notice," concluding that it means actual service or tender of the notice, not merely its issuance. The Supreme Court in K. Narasimiah and H.C. Singri Gowda clarified that "giving" notice is not complete until it reaches the intended recipient. Consequently, since the notice was served beyond the six-month period, it was deemed not compliant with Section 79.

2. Entitlement to return of seized gold:

Given the non-compliance with the six-month notice period under Section 79, the appellant gained a valuable right to the return of the seized gold. The court referenced the Supreme Court ruling in Charan Das Malhotra, which established that failure to issue a notice within the prescribed period entitles the individual to the return of the seized gold. Therefore, the appellant was entitled to the return of the gold seized on 9th July 1974.

3. Validity of the penalty imposed under Section 74 of the Gold Control Act, 1968:

The appellant argued that the penalty should fall since the gold was to be returned. However, Section 74 allows for a penalty if the conduct renders the gold liable for confiscation, irrespective of whether the gold is actually confiscated. The court noted that the contravention of Section 55 by the appellant rendered the gold liable for confiscation. Thus, the liability for penalty under Section 74 remained, even though the gold was to be returned due to procedural lapses under Section 79.

The court disagreed with the Gujarat High Court's view in Ambalal Morarji & Son, which suggested that failure to comply with the notice period also precludes penalty proceedings. The Kerala High Court maintained that confiscation and penalty are independent actions; the liability for penalty does not depend on the actual confiscation of the gold.

Remittance for Re-examination:

Given that the penalty was initially determined alongside the confiscation order, the court found it just to remit the matter back to the Additional Collector of Customs and Central Excise for re-examination of the penalty amount. The appellant had already paid the redemption fine of Rs. 20,000 and secured the return of the gold. The court directed that this amount be retained by the Department until the penalty proceedings concluded, with any excess amount to be refunded to the appellant.

Conclusion:

The appeal was allowed, setting aside the judgment of the learned single Judge and quashing the orders of the Additional Collector of Customs and Central Excise. The matter was remitted for re-determination of the penalty, affirming the appellant's liability for penalty while ensuring fairness in the quantum of penalty imposed. Each party was to bear their respective costs.