S.K.H. Anjaneyulu Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. this appeal is directed against the order of collector of central excise (appeals), madras dated 27-6-1986, confirming the order of the assistant collector of central excise, vijayawada, dated 30-12-1985 and imposing a fine of rs. 4,000/- in lieu of confiscation of gold ornaments weighing 115.600 gms. under section 73 and a penalty of rs. l.000/- under section 74 of the gold control act, 1968 ('act' for short).2. the appellant is a pawn broker. on 23-3-1985 at about 4.00 p.m. the superintendent of customs and central excise, vijayawada, visited the appellant's shop at no. 53, pattabhi market, machilipatnam, and found the following ornaments :---------------------------------------------------------------------------------sl. description of the no. net qtty. purity value remarks.no. ornaments no. in gms. rs.--------------------------------------------------------------------------------1.gold bangles - 2 23.720 18 ct. 3,795/- new orna- ment with3.gold ear studs 2 1.400 18 ct. 224/- -do- 22.3.85 (without screws)5.gold ear studs 2 2.560 18 ct. 400/- -do- 21.3.85 (without screws) stones 3 12.200 18 ct. 1,965/- -do- found in loose8.ear studs 20 22.400 14 ct. 3,135/- -do- (without screws) with screws. 2 5.400 14 ct.755/- -do- ---------- ---------- the appellant was not present and one subramaniam was incharge of the shop. since the authorities had reason to believe that the above ornaments were kept for purpose of sale they were seized under mahazar.further proceedings instituted against the appellant, after due investigation, eventually resulted in the present impugned order now appealed against.3. shri chidambaram, the learned consultant for the appellant, at the outset submitted that the charge against the appellant is under section 27(1) of the act in that the appellant was dealing in gold ornaments as a dealer without a licence. it was urged that there is absolutely no evidence at all on record to indicate that the appellant was dealing in gold ornaments as a dealer. the impugned order is passed merely on the basis of surmises and on the ground that the ornaments under seizure were allegedly kept in the showcase of the appellant's shop. it was further contended that in order to sustain a charge under section 27(1) there must be acceptable legal evidence on record to show that the appellant was dealing in gold as a dealer in contravention of law or that the appellant was carrying on business as a dealer or had commenced business as a dealer without any licence. the learned consultant further urged that items covered by serial no. 8 and 9 above are ornaments of 14 ct. purity and could not have been manufactured in the recent times since it is common knowledge that nobody would normally buy 14 ct. ornaments when ornaments of 18 ct. purity is permissible in law. it was further urged that the appellant being a pawn broker came forward voluntarily to explain and account for the ornaments under seizure by a petition dated 29-3-1985 and major portions of the ornaments are covered by pawn tickets 700 and 708.4. the learned departmental representative, shri vadivelu, submitted that though there is no precise evidence on record to sustain a charge under section 27(1) against the appellant, the appellant being a pawn broker would be liable under section 6(2) of the act, since the ornaments were not accounted for as per law.5. i have carefully considered the submissions made before me. to a specific question, the learned departmental representative fairly conceded that no charge in terms of section 6(2) has been set out in the show cause notice much less any averments stated in that regard.when the appellant has not been called upon to meet a case of non-accountal as a pawn broker, of the ornaments under seizure as per section 6(2) of the act, the appellant cannot be visited with any penalty under that section in the absence of specific charge in relation thereto in the show cause notice. therefore, in the present case the only short question, i am called upon to decide is whether the materials on record are adequate enough to sustain a charge of contravention under section 27(1) of the act against the appellant. the main reason set out in the original order against the appellant is that the ornaments under seizure are new and the pawn tickets 700 and 708 do not tally with the ornaments either in terms of weight or quantity.another reason given by the original authority is that the ornaments being new could not have been pledged with the pawn broker and need not have been kept in the show-case. it is not disputed before me by the learned departmental representative that items 8 and 9 viz. 22 ear studs are of 14 ct. purity. one important factor i should like to take note of from the list of inventory is that the items covered by serial no. 3, 5 and 8 are without screws and normally one would not be able to deal with ear-studs as a dealer without studs having screws. the madras high court in the case of kanyalal chandrakumar v. union of india by judgment dated 17-4-1978 [published in cencus (madras) 74d (vol. vii 1979) (not cited at bar.), has held that mere possession by the pawn broker of some unaccounted jewels will not make the pawn broker a dealer in gold and that to make him a dealer, it must be shown that such a pawn broker is actually carrying on, directly or otherwise, the business of making, manufacturing, preparing, repairing, polishing, buying, selling, supplying, distributing, melting, processing or converting gold, whether for cash or for deferred payment or for commission. the high court has pointed out that possession of unaccounted gold jewels by a pawn broker may amount to an offence under the act in view of section 6(2) but that does not automatically follow that such a pawn broker who was in possession of gold jewels which he could not account, is a dealer in gold or gold jewels. in the present case except for the fact that the pawn broker has not accounted for the ornaments in question there is no other material indicating that the appellant has been dealing in gold or gold ornaments, section 27(1) says that no person shall commence or carry on business as a dealer unless he holds a valid licence issued in that behalf by the administrator. unless the petitioner has acted as a dealer, he is not required to take out any licence as required under section 27 of the act. therefore, it is not possible to say in this case that the infringement of section 27 of the act has been made out. in the present case the circumstances such as keeping the ornaments in the show-case and non-accountal may engender grave suspicion and suspicion however grave it may be cannot take the place of proof since the proceedings are penal in nature. unfortunately, in this case the authorities have not set out any charge nor made any everments against the appellant in respect of contravention under section 6(2) for non-accountal of the ornaments under seizure. the learned departmental representative also does not dispute this fact after referring to all the records such as show cause notice and the order of the original authority. in such a situation i am including to hold that the appellant is entitled to the benefit of doubt in respect of the charge under section 27(1) in the facts and circumstances of the present case. accordingly, by giving the appellant the benefit of doubt, i exonerate him of the charge under section 27(1) of the act and consequently the impugned order is set aside and the appeal is allowed.

Judgment:
1. This appeal is directed against the order of Collector of Central Excise (Appeals), Madras dated 27-6-1986, confirming the order of the Assistant Collector of Central Excise, Vijayawada, dated 30-12-1985 and imposing a fine of Rs. 4,000/- in lieu of confiscation of gold ornaments weighing 115.600 gms. under Section 73 and a penalty of Rs. l.000/- under Section 74 of the Gold Control Act, 1968 ('Act' for short).

2. The appellant is a pawn broker. On 23-3-1985 at about 4.00 P.M. the Superintendent of Customs and Central Excise, Vijayawada, visited the appellant's shop at No. 53, Pattabhi Market, Machilipatnam, and found the following ornaments :---------------------------------------------------------------------------------Sl. Description of the No. Net Qtty. Purity Value Remarks.No. ornaments No. in Gms.

Rs.--------------------------------------------------------------------------------1.

Gold Bangles - 2 23.720 18 Ct. 3,795/- New orna- ment with3.

Gold ear studs 2 1.400 18 Ct.

224/- -do- 22.3.85 (without screws)5.

Gold ear studs 2 2.560 18 Ct.

400/- -do- 21.3.85 (without screws) stones 3 12.200 18 Ct. 1,965/- -do- found in loose8.

Ear studs 20 22.400 14 Ct. 3,135/- -do- (without screws) with screws.

2 5.400 14 Ct.

755/- -do- ---------- ---------- The appellant was not present and one Subramaniam was incharge of the shop. Since the authorities had reason to believe that the above ornaments were kept for purpose of sale they were seized under mahazar.

Further proceedings instituted against the appellant, after due investigation, eventually resulted in the present impugned order now appealed against.

3. Shri Chidambaram, the learned Consultant for the appellant, at the outset submitted that the charge against the appellant is under Section 27(1) of the Act in that the appellant was dealing in gold ornaments as a dealer without a licence. It was urged that there is absolutely no evidence at all on record to indicate that the appellant was dealing in gold ornaments as a dealer. The impugned order is passed merely on the basis of surmises and on the ground that the ornaments under seizure were allegedly kept in the showcase of the appellant's shop. It was further contended that in order to sustain a charge under Section 27(1) there must be acceptable legal evidence on record to show that the appellant was dealing in gold as a dealer in contravention of law or that the appellant was carrying on business as a dealer or had commenced business as a dealer without any licence. The learned Consultant further urged that items covered by Serial No. 8 and 9 above are ornaments of 14 Ct. purity and could not have been manufactured in the recent times since it is common knowledge that nobody would normally buy 14 Ct. ornaments when ornaments of 18 Ct. purity is permissible in law. It was further urged that the appellant being a pawn broker came forward voluntarily to explain and account for the ornaments under seizure by a petition dated 29-3-1985 and major portions of the ornaments are covered by pawn tickets 700 and 708.

4. The learned Departmental Representative, Shri Vadivelu, submitted that though there is no precise evidence on record to sustain a charge under Section 27(1) against the appellant, the appellant being a pawn broker would be liable under Section 6(2) of the Act, since the ornaments were not accounted for as per law.

5. I have carefully considered the submissions made before me. To a specific question, the learned Departmental Representative fairly conceded that no charge in terms of Section 6(2) has been set out in the show cause notice much less any averments stated in that regard.

When the appellant has not been called upon to meet a case of non-accountal as a pawn broker, of the ornaments under seizure as per Section 6(2) of the Act, the appellant cannot be visited with any penalty under that section in the absence of specific charge in relation thereto in the show cause notice. Therefore, in the present case the only short question, I am called upon to decide is whether the materials on record are adequate enough to sustain a charge of contravention under Section 27(1) of the Act against the appellant. The main reason set out in the original order against the appellant is that the ornaments under seizure are new and the pawn tickets 700 and 708 do not tally with the ornaments either in terms of weight or quantity.

Another reason given by the original authority is that the ornaments being new could not have been pledged with the pawn broker and need not have been kept in the show-case. It is not disputed before me by the learned Departmental Representative that Items 8 and 9 viz. 22 ear studs are of 14 Ct. purity. One important factor I should like to take note of from the list of inventory is that the items covered by Serial No. 3, 5 and 8 are without screws and normally one would not be able to deal with ear-studs as a dealer without studs having screws. The Madras High Court in the case of Kanyalal Chandrakumar v. Union of India by judgment dated 17-4-1978 [published in Cencus (Madras) 74D (Vol. VII 1979) (not cited at Bar.), has held that mere possession by the pawn broker of some unaccounted jewels will not make the pawn broker a dealer in gold and that to make him a dealer, it must be shown that such a pawn broker is actually carrying on, directly or otherwise, the business of making, manufacturing, preparing, repairing, polishing, buying, selling, supplying, distributing, melting, processing or converting gold, whether for cash or for deferred payment or for commission. The High Court has pointed out that possession of unaccounted gold jewels by a pawn broker may amount to an offence under the Act in view of Section 6(2) but that does not automatically follow that such a pawn broker who was in possession of gold jewels which he could not account, is a dealer in gold or gold jewels. In the present case except for the fact that the pawn broker has not accounted for the ornaments in question there is no other material indicating that the appellant has been dealing in gold or gold ornaments, Section 27(1) says that no person shall commence or carry on business as a dealer unless he holds a valid licence issued in that behalf by the Administrator. Unless the petitioner has acted as a dealer, he is not required to take out any licence as required under Section 27 of the Act. Therefore, it is not possible to say in this case that the infringement of Section 27 of the Act has been made out. In the present case the circumstances such as keeping the ornaments in the show-case and non-accountal may engender grave suspicion and suspicion however grave it may be cannot take the place of proof since the proceedings are penal in nature. Unfortunately, in this case the authorities have not set out any charge nor made any everments against the appellant in respect of contravention under Section 6(2) for non-accountal of the ornaments under seizure. The learned Departmental Representative also does not dispute this fact after referring to all the records such as show cause notice and the order of the original authority. In such a situation I am including to hold that the appellant is entitled to the benefit of doubt in respect of the charge under Section 27(1) in the facts and circumstances of the present case. Accordingly, by giving the appellant the benefit of doubt, I exonerate him of the charge under Section 27(1) of the Act and consequently the impugned order is set aside and the appeal is allowed.