1. The Revision Application filed before the Central Govt. against Order-in-Appeal No. S/49-82/82/GC dated 29-4-1982 passed by the Appellate Collector of Customs, Bombay, statutorily stood transferred to the Tribunal for being heard as an appeal.
The appellant Shri Shantilal G. Jain filed an application for issue of a Gold Dealer's Licence. After the receipt of the application it appears that the department considered the application in terms of Rule 2 of the Gold (Control) (Licensing of Dealers) Rules, 1969 (for short 'The Rules"). Thereafter show cause notice dated 23.6.1981 was issued to Shri Shantilal G. Jain calling upon him as to why his application should not be rejected since the demand for gold in the city has gone down in the year 1980. The figures of turnover of gold ornaments as compiled on the bais 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 ornaments in the area has been consistently going down from the year 1978 and there-fore, having regard to Rule 2 (f) of The Rules no fresh licence need to be issued and thirdly on the ground that the turn-over of gold and gold ornaments in the Collectorate has been going down and therefore, there was no need to increase the number of licence dealers.
4. Having regard to his findings the Deputy Collector rejected the application of the appellant.
5. Feeling aggrieved by the order the appellant herein preferred an appeal before the Appellate Collector unsuccessfully. Hence this appeal.
6. During the hearing of this appeal Shri D.H. Shah, appellant's learned advocate, made the following submisslons:- (1) The authorities below have not adopted objective criteria for refusing the licence.
(2) The authorities below proceeded on the assumption that Rule 2(f) requires them to reject the licence. They have not considered the licencing provision contained in the Act.
(3) The authorities below have ignored the orders of the Government of India in similar matters and also the instructions issued from time to time by the Govt. of India.
(4) He contended that the Metropolitan City cannot be treated in par with other cities. The Metropolitan City has demand for gold ornaments not only within the city but also outside the city and from all over the India and abroad.
(5) The authorities below also failed to note that the present appellant has been in the gold dealers business since six years prior to the date of his application and this factor has been totally ignored.
(6) Since the Govt. of India had not framed any Rule in exercise of their power under Section 27 (6) (A), issue of fresh licence cannot be restricted.
(8) The adjudicating authority without affording reasonable opportunity to the appellant had relied on material, the notice of which had not been given to the appellant. Shri Shah contended that in the show cause notice all that had been stated was that the demand for gold in the city has gone down in the year 1980. But then, the adjudicating authority namely, the Deputy Collector, did not take into consideration the turn over of the city but only considered the turn-over of the Greater Bombay. Further, it was not the turnover of the year 1980 which was taken into consideration but the turnover 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 derailment'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 adjudicating authority sets out the figures in his order.
7. Shri Shah also submitted that on 16-12-1981 the Greater Bombay Jewellers and Bullion Dealers Association made representation to the Government and in that representation they have stated that the average turnover of the existing gold dealers in Greater Bombay In the year 1980 was 8245.776 gms. which is very high. Shri Shah then relied on the directions issued by the Government of India laying down the norms. The norms fixed in the year 1972 was not less than 12 Kgs. in a city per dealer. Shri Shah submitted that since the average annual turnover of a gold dealer in Bombay in the year 1980 was being 8245.776 gms. far exceeds the norms fixed by the Government of India, therefore, there is need for issue of fresh licences.
8. In support of his contention that unless and until the Govt. of India mades Rule under Section 27 (6) (A), the Issue of licences cannot be restricted. Shri Shah relied on the decisions of the Madras High Court In B. Narsimha Chettiar and Ors. v. The Central Govt and Ors.
9. In support of his contention that the authorities below have ignored the Government of India's decisions as well as the circular instructions, Shri Shah relied on the two orders of the Government of India. One dated 1.10.1981 and made in order No. L-83 of 1981 wherein Shri J. Datta, who was then the Additional Secretary to the Govt. of India, who latter became the Chairman of Central Board of Excise and Customs observed: "The Government observe that in rejecting the applicant's case for a fresh licence reliance has been placed on the declining volume of business but the availability of business per head of dealer had not been considered in order to find out whether such business will provide for a reasonably decent living for a new dealer. The Govt.
have already laid down norms in this regard and the case should be considered afresh on the basis of those norms." The second decision relied on by Shri Shah is the one dated 11.6.1982 bearing order No. L-23 of 1982. In this order Shri Datta observed: 'The Govt. observe that the Deputy Collector in rejecting the application has gone into irrelevant considerations beyond his competence and unnecessarily raised the controversy on a point which has been settled on an all-India basis by the Government. It is not open to an individual subordinate authority to the Government 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 to be able to do so, a dealer after taking into account a profit of Rs. 10/- per gram of gold and manufacturing charges, (which vary according to the design of the ornament) which would be about 50 paise per gramme, should sell on an average 20 gms. worth of ornaments of gold per day in order to make his establishment profitable and make a gross in- come of Rs. 30/- per day. On this basis, the minimum turnover for a viable unit should be about 7 Kgs. per annum. Informal enquiries with the trade also show that the minimum transaction of a viable unit dealing in gold in a rural area should be 5 to 6 Kgs. per annum. In an urban area, where the rent, cost of establishment and labour would be considerably higher, the minimum turnover of a viable unit should be about 10 to 12 Kgs. per annum. Considering that import of gold have been banned for the last several years and whatever gold is available in the country has to re-circulate, the fact that during the year 1969 the average turnover of a dealer for the entire country was only about 13.6 Kgs. is a significant pointer." 11. Shri Shah finally prayed that the orders passed by the authorities below may be set aside and there may be direction for issue of a gold dealers licence to the applicant.
12. Shri Mondal, appearing for the Collector, however, supported the order passed by the Collector. He contended that the issue of licence is within the discretion of the licensing authority. Since the discretion has been properly exercised, Shri Mondal submitted, that the same should not be interfered with. Shri Mondal further submitted that the price of gold is going up and the turnover had gone down.
Therefore, there are no good grounds to increase the number of licenses. Shri Mondal submitted that the appeal may be rejected.
13. We have carefully considered the submissions made on both the sides and perused the available records of the case. We entirely agree with Shri Shah that the adjudicating authority namely the Deputy Collector Shri Moheb. A.M. did not act as an impartial judge. He freely made use of the materials collected behind the back of the applicant. The perusal of his order shows that he was trying to pre-empt the arguments available to the applicant, if his order was to be challenged before the Appellate Authority. As a matter of fact, his bias attitude is reflected even while stating the facts of the 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 be argued that the department has no right to take the figures of the entire Collectorate as Rule 2 (f) does not speak of the demand existing in the Collectorate' but only speaks of demand which arise in the city, town or district. If the Collectorate consists of several cities, towns or districts, the department is required to take each such city, town or district to determine the demand for ornament which is likely to arise therein. Even a casual reading of Rule 2 (f)(ii) shows that this point will be a vital one for the defence. It has been, therefore, subsequently decided that the Department is not right in quoting figure of turnover in a Collectorate as a whole.
Bombay Collectorate consists of (i) Greater Bombay, which is also a city extending its jurisdiction from Colaba to Dahisar in the North and Mulund in the North East. (2) Thana District, which consists of the following towns and cities as per the latest census report having a population of 3,339,965 and (3) Kulaba (Raigad) District which consists of the following towns and cities having a population of 1,483,459.... It is, there- fore, necessary that depending on the origin of the application, the Department, is required to see whether in that particular area, the demand is going up or down taking into consideration the figures of turnover as shown in the returns files by the existing dealers in that area. Keeping this in view an exercise has been made to find out the turnover of the existing dealers in these areas." It is clear from the above observation of the Deputy Collector that instead of adjudicating on the basis of the allegation made in the show cause notice, he made out a new case for the department. In his order the Deputy Collector states: "It has been, therefore, subsequently decided that the Deptt. is not right in quoting figures of turnover in a Collectorate as a whole." It is not clear from his order who had subsequently decided or when this decision was taken. Again the Deputy Collector after referring to the population of the three districts observed: "Keeping this in view an exercise has been made to find out the turnover of the existing dealers in these areas." Who did the exercise? And when that exercise was done? Whether any opportunity was given to the appellant before doing the above exercises? Shri Shah's complaint was that no such opportunity was given.
"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." 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 the void order will have no effect. On this ground alone the orders passed by the authorities below are liable to be set aside.
17. Since the parties to this appeal had addressed arguments on merits and since the issue involved is of considerable importance and is likely to recur again and again we proceed to consider the issue on merits also.
18. Under the act, no person shall commence or carry on business as a dealer in gold unless he holds a valid licence issued in this behalf by the Administrator. The Act also provides for renewal of the licence so issued from time to time.
"No application for the issue of a licence to commence or carry on business as a dealer shall be granted unless the Administrator, having regard to such matters as may be prescribed in this behalf and after making such enquiry in respect of those matters as he may think fit, is satisfied that the licence should be issued." 20. The matters to which regard shall be had before issuing a licence are set out In Rule 2 of The Rules. They are :- "(a) Whether the application has been made in the presc ibed form and the prescribed fees have been duly deposited; (b) the experience of the applicant with regard to the dealing in, or making, manufacturing, preparing, repairing or polishing of ornaments; (c) whether the premises where the applicant intends to carry on business as a licensed dealer is suitable and secure for the carrying on of such business; (d) whether any licence previously held by the applicant had been cancelled (or not renewed) under any law for the time being in force; (dd) whether the applicant is a person who does not hold a valid licence to carry on business as a licensed dealer in his name or is a person who is not a partner of a firm which holds such licence; (e) whether the applicant has been convicted of an offence, or any penalty has been imposed on him, under :- (iii) any other law for the time being in so far as such law prohibits, restricts or regulates the bringing into or taking out of India of any goods (including coins, currency, whether Indian or foreign, and foreign exchange) or the dealing in such goods by way of acquisition or otherwise; (ee) whether the applicant has been detained 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 regard to all the matters set out in Rule 2 of The Rules and not to one only or a few only.
22. In the instant case, the authorities below appear to have considered only Clause (f) of Rule 2 and no other Clauses of Rule 2.
One of the matters required to be considered was the experience of the applicant with regard to the dealing in or making, or manufacturing, preparing, repairing or polishing of ornaments. In his reply to the show cause notice the applicant had stated that for the past six years he had been working with M/s. Multanmal Ganeshmal and Co., at Wadala and has become a partner subsequently in that firm and excepting gold business, be knows no other business. The authorities below did not consider the appellant's experience with regard to dealing in, making, manufacturing, preparing, repairing, polishing of ornaments. The authorities below appear to have proceeded on the assumption if the total turn over of all the dealers during the three years preceding the year in which the application was received was declining then no fresh licence should be issued. They assumed that Clause 2 (f) is in the nature of an injection against issue of fresh licence when there is decrease in the turn over. This is a wrong assumption. As seen earlier while considering the application for a new licence one of the factor to be taken into consideration is what is set out in Clause (f) of Rule 2 and that is not determinative. Even if there had been decrease in the turn over during the preceding three years the licensing authority is not precluded from issuing a licence if the applicant otherwise deserves.
23. The turn over criterion is an aid to ascertain whether granting of additional licence would affect the business of the existing dealers or would it become uneconomical for the new entrant. For this purpose, it is necessary for the Administrator of Gold Control Officer, who exercise the powers of the Administrator, to find out the volume of business which would yield reasonable profit to the existing dealers and to the new entrant. This aspect has been pointedly brought to the notice of the Administrator by the Govt of India Ministry's letter No.F. 32/23/71-GC.II dated 8-3-1972. In paragraph 5 of that letter it was stated: "In the very nature of things, it is not possible to lay down specific guidlines about the quantum of turnover 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." In the same letter what should be the minimum turn over for a viable unit was also set out.
"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 (dd) was introduced to prevent growth of monopolies in the gold trade. Paragraph 2 of this letter reads: "The matter has been re-examined in the light of the changed circumstances. The matters mentioned in Rule 2 of the Gold Control (Licensing of Dealers) Rules are not conditions of a mandatory nature governing the grant of a dealer's licences. It may not be necessary that in each and every case all criteria mentioned there in should be fully satisfied. These rules give discretion to the licensing authority." 26. Further in one of the Revision Applications Shri J. Datta, Additional Secretary to the Government of India, had observed : "The Govt. observe that in rejecting the applicant's case for a fresh licence reliance has been placed on the declining volume of business but the availability of business per head of dealer had not been considered in order to find out whether such business will provide for a reasonably decent living for a new dealer. The Govt.
have already laid down norms in this regard." 27. The order of the adjudicating authority as well as the Appellate authority suffers from the vice pointed out by Shri Datta in the above order: Except stating that there was decline in the turn over neither the Deputy Collector nor the Appellate Collector had made any attempt to find out the availability of business per each existing dealer. As per the norms laid down by the Government of India in the year 1972, 1.2 Kgs. of gold was considered as an economically viable unit for a dealer. Shri Shah had contended that average annual turnover of the gold dealer in Greater Bombay was 8245.776 gms. Shri Shah has urged that it was an official-figure. If that be so It far exceeds the norm laid down by the Government of India. Therefore, even if there had been a decline in the turnover as a whole granting of additional licence would not make the existing unit not viable.
28. In his order the Deputy Collector had set out the number of dealers as well as the total turn over and the average turn over In the year 1978. The average turn over per dealer was 12,719.428 grams and in the year 1979 the average turn over per dealer was 11,638.060 grams and in the year 1980, it is 8,245.776 grams. The average turn over far exceeds the norms fixed by the Government of India. Therefore, there was no justification to restrict the issue of new licences.
29. The hollowness of the reasoning or the in application of the mind by the authorities below is demonstrated by the very order of the Deputy Collector. The applicant'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 turn over 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 non renewal of certain licences or on account of eviction from the premises the dealers not being able to carry on the business. Therefore, the decline in turn over by itself should not be made a basis for non issue of fresh licences.
31. The Gold (Control) Act, 1968 had been in operation since 1969. It is not known whether any record had been maintained as to the number of existing dealers on the date of coming into force of the Act; the new licences issued year-wise, the number of licences not renewed and the number of licences opted out of business. All these aspects would be relevant in considering the application for new licences. The very fact that as many as 90 new licences were issued during the year 1979, even though there was a decline in the total as well as average turn over shows that the authorities were satisfied that issue of 90 new licenses would not affect the business of the existing dealers and also that the new entrants could make decent living.
32. It is further necessary to point out that as the law now stands, the existing dealer's licence can be renewed if the annual turn over does not fall below 600 gms. Thus, It is not actually the turn over as a whole of all the dealers in a city or town that is very relevant in considering the application for a new licence. Whether granting of fresh licence would adversely effect the existing licence holders, or would it not be in the Interest of the general public or the new licenser would not be able to make a decent living are relevant.
33. The right to carry on any business in a Fundamental Right of a citizen of India under Article 19(1) (g) of the Constitution of India.
Under Article 19 (6) reasonable restrictions can be imposed in the public interest. Therefore, it is permissible to make a law making it obligatory for a person to obtain gold dealers licence in order to carry on gold dealers business. But then, while considering the application for gold dealers licence the Fundamental Right guaranteed under the Constitution cannot be altogether ignored. In this connection it may be pointed out that in the decision of the Madras High Court referred to earlier the Madras High Court considered the relevancy of the "turn over" to the licencing provisions. The Court observed: "It passes one's comprehension as to how the prescription of a particular turn-over achieves the object of the Act." As a matter of fact, the Madras High Court held Rule 3(ee) 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 application for the licence either by the Deputy Collector or by the Collector (Appeals). We, therefore, while allowing this appeal set aside their orders and remand the matter to the Deputy Collector for consideration afresh in the light of the observation contained in this order.
36. As the application for the new licence was made in the year 1981 and since seven long years had elapsed, the Deputy Collector is directed to consider the application afresh within three months from the date of receipt of this order.