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TMI Blog1988 (3) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... ty has gone down in the year 1980. The figures of turnover of gold ornaments as compiled on the basis of the returns filed by existing dealers was made an Annexure to the show cause notice. The appellant sent a reply dated 1-7-1981 stating, among other things, that for the past six years he had been working with M/s. Multanmal Ganeshmal Co. at Wadala and he had become partner subsequently in that firm. He had retired from the partnership and intends to start his own business. He further stated that that was the only business he knows. He also sought personal hearing. 3. The Deputy Collector of Customs (Preventive) Gold Control, Bombay, who held the enquiry after considering the reply to the show cause notice and after affording personal hearing, firstly held that the appellant would not become eligible for exemption from the operation of Rule 2 (f) of The Rules since he had been a partner for a period less than four years and since the application for licence was not made within sixty days after his retirement from the partnership firm. Secondly on the ground that the turn-over for the year 1978, 1979 and 1980 of the Collectorate, Bombay, shows that the demand for gold ornament ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver of three years namely, 1978, 1979 and 1980. But then, in the show cause notice issued there was no mention about the turnover for the year 1978. In the Annexure turnover given was for the years 1979 and 1980 and that too of the city of Bombay and not the Greater Bombay District. (9) The Deputy Collector, who was to act as a quasi judicial authority and who was required to act in a unbiased manner had acted as a departmental spokesman and in a biased manner. Elaborating his contention Shri Shah submitted that even though in the show cause notice the allegation was made was that the demand for gold in the city has gone down in the year 1980 the adjudicating authority had observed in his order." The department s stand is that the turnover of gold and gold ornaments in this Collectorate has been going down and, therefore, there is no need to increase the number of licensed dealers. This stand is valid even now after dividing the Collectorate into its various units like Greater Bombay, Thane City, Thane Dist., and Kulaba Dist." Further, either in the show cause notice or in the Annexure there was no mention of number of dealers operating in the Greater Bombay but the adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment to lay down his own norms ignoring the norms followed all over the country and thus creating untenable and somewhat discriminatory situation. The Deputy Collector is obliged to follow the norms laid down in the Govt. of India orders and to consider the applications on that basis." 10. Shri Shah then placed reliance on the Government of India s letter No. F. 132/23/71 -GC.II dated 8-3-1972. This letter contained instructions to ensure that application for grant of gold dealers licence are dealt with in accordance with the instructions and The Rules. (5) In the very nature of things, it is not possible to lay down specific guidelines about the quantum of turnover over which it could be said that there was need to increase the number of dealers, judging from the language of Rule 2(f) of the licensing Rules, it would appear that the need to increase the number of dealers would arise only when the average turnover of all the dealers in a particular town, city etc. is above the minimum quantity dealt with by a dealer to make him, a viable unit i.e. when after meeting the expenses of running his business he is able to earn enough profit to make his living. According to a survey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case. While narrating the facts the Deputy Collector stated that the applicant s application was verified in terms of Rule 2 of The Rules and it was observed that the demand for gold ornaments has been going down for the past three years and as such there was no need to increase the number of dealers in the city. But then, in the show cause notice issued to the appellant, there was not even an indication that the demand for gold ornaments have been going down for the three years prior to the date of application. If such material had been collected, it is not clear why in the Annexure to the show cause notice only turnover for the years 1979 and 1980 alone were given. 14. Realising the lacuna in the show cause notice the Deputy Collector observed in his order: I would like to clarify one vital point that may come up at a later stage. The department while issuing show cause notice asking the applicant to show cause as to why his application should not be rejected having regard to Rule 2 (f) has pointed out the figures of turnover of the dealers situated in the entire Collectorate for the past two years........................................................It will subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above exercises? Shri Shah s complaint was that no such opportunity was given. 15. The further observation of the Deputy Collector reads: Another point I would like to clarify is that it may be argued before the Appellate authority that the figures of turn over which are now given in this order were not supplied to the applicant at the time of issue of the show cause notice. In order that this order may not be set aside on this ground, I clarify the department s stand here. The department s stand is that the turn over of gold and gold ornaments in this Collectorate has been going down and, therefore, there is no need to increase the number of licensed dealers. (Emphasis supplied) The above observations clearly points out the direction in which the mind of the Deputy Collector was working. After the perusal of the D.C. s order we are satisfied that he had pre-determined to reject the application. His approach was totally biased and in any case not impartial. 16. Any order passed in violation of the principles of natural justice is a void order. The void order can neither be confirmed, nor modified, nor annulled. Therefore, the Appellate Collector s order confirming th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974); (f) the need to increase the number of licensed dealers in the city or town in which the dealer intends to carry on business or where the applicant intends to carry on business in a village, the need to increase the number of licensed dealers in the district within such village is situated having regard to - (i) the number of licensed dealers existing in such city, town or district, as the case may be, and (ii) the demand for ornaments which is likely to arise in such city, town or district, such demand being estimated on the basis of the turnover of the licensed dealers, existing therein, for a period of three years preceding the year in which such application for the issue of licence has been made and such turnover shall be determined on the basis of the accounts and returns submitted under the law for the time being in force in relation to gold." (The rest of this Rule are not relevant for our purpose). 21. Thus it is seen that the Administrator or Gold Control Officers to whom the powers of the Administrator are delegated is required to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was need to increase the number of dealers, judging from the language of Rule 2 (f) of the licensing Rules, it would appear that the need to increase the number of dealers would arise only when the average turnover of all the dealers in a particular town, city, etc. is above the minimum quantity dealt with by a dealer to make him a viable unit i.e. when after meeting the expenses of running his business he is able to earn enough profit to make his living. In the same letter what should be the minimum turn over for a viable unit was also set out. 24. In the Ministry s letter dated 7-11-1977 It was observed: The question of breaking the monopoly of the existing licensed dealers in certain places has also been engaging the attention of the Govt. It has come to the notice of the Govt. that in some places where there are one or two dealers they are monopolising the business by intentionally showing low turnover." 25. Again in the letter dated 28-9-1978 of the Ministry all the Collectors of Central Excise were directed that Rule 2 (d) was introduced to prevent growth of monopolies in the gold trade. Paragraph 2 of this letter reads: the matter has been re-examined in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant s application was rejected on the ground of decline in total turn over. It is now seen that during the year 1978, according to the figures given by the Deputy Collector, number of dealers were 1011. The total turn over was 1,28,59,342.291 grams. In 1979 the number of dealers were 1101. The total turn over was 1,28,13,504.750 gms. Thus it is seen that there was a decline in the turn over during the year 1979. But then, there is increase in the number of dealers. If the decline in the turn over is the sole criterion to reject the application for a new licence then no new licence could have been issued during the year 1979 because the total turnover as well as the average turnover of 1979 when compare to the total turn over and average turnover of 1978 was less. But then, as many as 90 new licences were issued during 1979. This demonstrate that turn over by itself is not a good ground to reject the application. 30. No effort was also made by the authorities below to find out the causes for the decline in the turn over. The decline in the turnover may be due to various factors such as the demand for ornaments being low or the reputed dealers stopping their business or due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." As a matter of fact, the Madras High Court held Rule 3(e) made under Section 27 (6) of the Act as ultra vires. The High Court observed : The prescription of a particular turnover in the past as a condition for eligibility for obtaining a renewal of a licence may have relevancy to and a bearing on the question, if the total number of licences to be granted as a defined area or region is restricted or limited and that question may possibly arise only if and when the Government of India makes special rules in exercise of its powers under Section 27 (6-A) of the Act. Since no such rules have been made now, there is no limitation on the number of licences that can be granted or renewed generally, without reference to the peculiar and particular situations of a city, town or district and that is the reason why I have observed that I am deciding this question without reference to the power of the Central Government under Section 27 (6-A) of the Act." 34. The above observations of the Madras High Court equally applies in the matter of granting of new licences. 35. On consideration of all the aspects we hold that there had been no proper consideration of the appellant s applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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