1987 (8) TMI 223 - AT - Central Excise

Summary

Issues Involved:

1. Whether the imposition of penalty on the appellant firm was legal and within jurisdiction.
2. Whether the show cause notice issued was adequate and met the requirements under Section 79 of the Gold (Control) Act, 1968.
3. Whether the explanation provided by the appellant firm regarding the alleged shortage of gold ornaments was valid and should have been accepted by the authorities.

Detailed Analysis:

1. Legality and Jurisdiction of Penalty Imposition:

The appellants contested the imposition of a penalty by the Collector of Customs & Central Excise under Section 74 of the Gold (Control) Act, 1968. The penalty was imposed on the appellant firm due to a detected shortage of gold ornaments during a statutory records check. The authorities formed an opinion that the partners of the appellant firm committed acts rendering the gold ornaments liable for confiscation under Section 71 and thus liable for penalty under Section 74. However, the Tribunal found that the imposition of penalty on the appellant firm was without jurisdiction and illegal. The Tribunal emphasized that the show cause notice did not propose any penalty against the firm, nor did it make any allegations of contravention of the Gold (Control) Act against the firm.

2. Adequacy of Show Cause Notice:

The appellant firm argued that no show cause notice was issued to them, and alternatively, that the notice did not make any allegations of contravention of Section 71 or 74 against the firm, nor did it propose any penalty. The Tribunal agreed with this contention, highlighting that Section 79 of the Gold (Control) Act mandates giving a notice in writing to the owner or other person concerned before confiscation or penalty imposition. The notice must inform the grounds for the proposed penalty and provide an opportunity for representation. The Tribunal found that the show cause notice on record did not meet these requirements as it did not make any allegations against the appellant firm, propose any penalty, or ask the firm to show cause. Consequently, the imposition of penalty on the appellant firm was deemed without jurisdiction and illegal.

3. Validity of the Appellant's Explanation:

On the merits, the appellant firm explained that the alleged shortage of gold ornaments was due to a partner placing the jewelry in a drawer and forgetting to inform the others. This explanation was provided on the spot but was not accepted by the authorities. The appellant firm also presented evidence that the stock was verified and certified by authorities on 12-9-1983, showing the balance of ornaments, including the alleged shortage. The Tribunal noted that the explanation was supported by both oral and documentary evidence. However, since the Tribunal had already concluded that the penalty imposition was illegal due to the inadequate show cause notice, it did not delve further into the merits of the explanation.

Conclusion:

The Tribunal allowed the appeal, setting aside the penalty imposed on the appellant firm. It ordered the return of the penalty amount if paid. The Tribunal's decision was based on the finding that the show cause notice did not meet the mandatory requirements under Section 79 of the Gold (Control) Act, rendering the penalty imposition without jurisdiction and illegal. The Tribunal emphasized that participation in adjudication proceedings by the appellant firm did not cure the initial defect of the inadequate show cause notice.