Supreme Court of India
GOPALDAS UDHAVDAS AHUJA AND ANR.versusUNION OF INDIA AND ORS.
- Citation
- 2004 INSC 393
- Decided
- 6 July 2004
- Disposal
- Appeal(s) allowed
- Bench
- RUMA PAL
Holding
The seizure of the gold on 30 August 1974 was lawful under section 66 of the Gold (Control) Act, 1968, but the appellants were not in conscious possession of the gold, so the proviso to section 71(1) applied and the confiscation and penalty orders were set aside.
Summary
The appellants, Gopaldas Udhavdas Ahuja and his widow, were found to possess primary gold that had been seized by Income‑Tax authorities in August 1974 and subsequently taken over by a Gold Control Officer under the Gold (Control) Act, 1968. They claimed they were unaware of the gold hidden in a secret compartment and sought immunity under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, arguing that the seizure was illegal and that their acquittal in criminal proceedings should bar confiscation. The Supreme Court examined whether the Gold Control Officer’s takeover constituted a lawful seizure, whether the appellants had conscious possession of the gold, and whether the voluntary disclosure scheme could be invoked. The Court held that the takeover was a valid seizure under section 66 of the 1968 Act, but found no evidence that the appellants knew of the gold in the eastern‑bedroom cupboard, so the proviso to section 71(1) applied, rendering the confiscation and penalty orders unsustainable. Consequently, the Court set aside the High Court’s decision, ordered the return of the undisposed gold (or payment of its sale price with interest), and dismissed the penalty.
Issues considered
- The legality of the Gold Control Officer’s seizure of gold seized earlier by Income‑Tax authorities under section 66 of the Gold (Control) Act, 1968.
- Whether the appellants were in "conscious possession" of the primary gold, i.e., possessed it with knowledge, as required by sections 8(1), 71(1) and 85(1) of the 1968 Act.
- The effect of the appellants’ acquittal in criminal proceedings on the separate confiscation proceedings under section 71(1).
- Whether the appellants were entitled to immunity under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, given that confiscation proceedings were already pending.
- The relationship between the provisions of the Income‑Tax Act, 1961 and the Gold (Control) Act, 1968 in the context of seizure and confiscation.
Legislation cited
- Customs Act, 1962s. 110
- Defence of India Ruless. 126A, s. 126H
- Gold (Control) Act, 1968s. 105, s. 16(1), s. 16(5), s. 64(b), s. 66, s. 71, s. 71(1), s. 71(1) proviso, s. 74, s. 8(1), s. 85, s. 8(6), s. 988, s. 98B
- Income Tax Act, 1961s. 119, s. 132, s. 132(5)
Subjects
Gold (Control) Actconfiscationconscious possessionvoluntary disclosureseizuresection 66section 71section 85section 988Income Tax Actpenalty
Judgment
A GOPALDAS UDHAVDAS AHUJA AND ANR.
v
UNION OF INDIA AND ORS.
JULY 6, 2004
B (RUMA PAL AND S.H. KAPADIA. JJ.]
Gold (Control) Act, 1968 :
Sections 7l (1), 71 (I) proviso and section 74--Possession of gold in
C contravention of the Act-Confiscation order-Sustainability of-Held :
Gold \l'US luwfully seized but conscious possession ofgold by possessor not
estublished-Hence, possessor entitled to benefit of proviso to section
71 ( l )---Confiscation order and levy o,fpenalty thus not sustainable and set
aside.
D
Sections 64(b), 66 and 105--Search and seizure of primary gold by
Income Tax Authorities--Taking over of seized gold by Gold Control
Ofjicer--Legality and validity of-Held: Sections 64(b) and 105 empower
the Gold Control Officer to call upon Income Tax Officer to produce sei::ed
E gold before him for taking action---Circulur of CBDT that Income Tax
Officer to give necessary information to Gold Control Officer on seizure-
Also power of seizure under 1968 Act and 1961 Act different-Further,
when gold was seized by Gold Comrol Officer he had reason to believe
that the provisions of Act had been contravened-Hence, take over of
F primary gold by Gold Control Officer law/id seizure-Income Tax Act,
1961-Section 132(2).
Sections 71(1) and 85 read with Sections 8(1) and 98B-Possession
of gold in contravention of the Act--Confiscation of primary gold under
Section 7 l ( l) and prosecution for illegal possession under Section 85(1)-
G Possession--Nature of---Held : Possession ipso facto is prohibited-
Mens rea, in the sense ofknowledge ofpossession of unauthorised articles
is essential ingredient of offence-Hence, possession is conscious
possession-In absence, possessor to prove beyond reasonable doubt that
he had no knowledge ofpossession cf unauthorised articles under proviso
H to section 71 in case of confiscation and under section 98B in case of
942
G.U. AHUJA v. U.O.l. 943
prosecution. A
Sections 71(1), 85(1J(ii) read with 8(1)-Confiscation of primary
gold under Section 71 (}) and prosecution for illegal possession under
Sectio1185(1)-Recove1y of incriminating articles being the same-Acquittal
order in prosecution proceedings-Effect of, on confiscation order-Held: B
Confiscation proceedings are separate and independent of prosecution
proceedings-Mere acquittal does not result in nullifj;ing confiscatio11
order-However, ll'hen possessor proved beyond reasonable doubt that he
had no knowledge of possession of gold under section 98B, confiscation
proceedings cannot stand against acquittal-Section 98B.
c
• Sections 71 {I), 74 and 85-Voluntary Disclosure of Income and
Wealth Ordinance, 1975-Conjiscation of gold, levy of penalty and
prosecution-Immunity ji-om under the Ordinance-Claim of-Held :
Under the Ordinance declarant is entitled to claim immunity if before
marking the declaration the gold was not seized and no proceeding was D
pending before any authority under the Act-Proceedings initiated with
regard lo confiscation ofgold were pending at the time offiling declaration
and also seizure made was in accordance with /aw-Hence, declorant not
entitled to immunity.
E
Words and Phrases :
'Reason to believe' and 'any person '-Meaning of in the context of
section 66!64(b) of the Gold (Control) Act, 1968.
F
Income Tax Authorities conducted search of the residential
premises of appellant No. 1-Karta of HUF, in his presence and
recovered primary gold and gold items weighing 37,398.300 gms worth
Rs. 18.70 lacs. Panchnama was prepared. In accordance with the
Circular issued by CBDT, Income Tax Authorities intimated the Gold
Control Officer about the recovery and on 30.8.1974 the Officer took G
over the custody of the seized gold in presence of appellant No. 1·from
the Income Tax Authorities and prepared a Panchnama. Gold Control
Officer issued notice to the appellants-appellant No. I and his step
mother as to why gold should not be confiscated and penalty not
'ii. imposed under section 71(1) and 74 of the Gold (Control) Act, 1968. H
944 SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A It alleged contravention of section 8(1) read with section 8(6) and
section 16(1) read with section 16(5) of the Act as the appellants
possessed primary gold which they failed to dispose of within the given
time in terms of Rule I 26H(l )(8) of Defence of India Rules and failed
to file declaration in respect of gold articles. appellants were also
B charged for the offence of possession of authorized gold under Section
85(l)(ii) read with section 8(1) of 1968 Act. Appellants contended that
the entire gold was recovered from a secret cavity inside the dome of
one cupboard in the eastern bedroom and they were unaware of the
same and also did not possess the keys of the secret vault.
c Authorised Officer ordered <:onfiscation of the gold bars, coins
and sovereigns and imposed penalty holding that the entire gold was
seized from one cupboard in the eastern bedroom. On remand of the
matter by the Appellate Authority, Authorised Officer again held that
the appellants were in conscious possession of gold and ordered for
D confiscation but this time held that the gold was recovered from
cupboard in eastern bedroom and also from the cupboard in western
bedroom and telephone room. Thereafter, in appeal and revision
application order of the Authorised Officer was again upheld. In the
meantime, appellant No. 1 on 27.12.1975 had filed declaration under
E Voluntary Disclosure of lncom,e and Wealth Ordinance, 1975,
promulgated on 18.10.1975. The declaration was also rejected since it
was filed after commencement of proceedings under I 968 Act.
Appellants then filed writ petition for a declaration that the said gold
was unlawfully seized and as such were entitled to immunity from
F proceedings for prosecution, confiscation and penalty. In the meantime,
before the trial court, the appellaints proved beyond doubt that they
were not in conscious possession of gold and the court acquitted the
appellants for the offences under section 85(1)(ii) read with section 8(1)
of 1968 Act. High Court upheld the acquittal order. This Court also
upheld the order later.
G
Single Judge of High Court al1lowed the writ petition and quashed
the orders of confiscation and penalty holding that the appellants were
innocent possessors of the said gold. Aggrieved respondent filed LPA.
Division Bench allowed LPA upholding the orders of the Authorised
H Officer on the ground that appellants were in conscious possession of
G.U. AHUJA v. U.0.1. 945
I
gold as it was found in several c:Upboards. It also held that the findings A
of the criminal c?urt were not·relevant for adjudicating confiscation.
Hence the present appeal.
Appellants contended that merely taking over the primary gold
from Income Tax officers by Gold Control Officer does not constitute B
seizure under section 66 of the 1968 Act and is in contravention of
section 132(5) of the lncotne Tax Act; that primary gold held in
contranntion of section 8(1) was an offence under section 71(1) and
also under section 85(1) and the word 'possession' in sections 8(1),
71(1) and 85(1) refers to conscious possession; that the appellants were C
acquitted for offence under section 85(1) read with Section 8(1) and,
as such were entitled to the benefit of acquittal in the matter of
confiscation also; that the Single Judge rightly concluded that the
appellants were not in conscious possession of the said gold; and that
there were no proceedings pending when the declaration was tiled and
also there was no seizure in law and therefore, appellants were entitled D
to claim immunity under Voluntary Disclosure Scheme, 1975.
Respondents contended that there was no illegality in the seizure
made since the Income Tax Authorities recovered the said gold from
the residence of the appellants during the search and informed the E
Gold Control Officer about the seizure in compliance with the circular
issued by CBDT and the said officer visited the officer of Income Tax
Department on 30.8.1974 and in the presence of appellant No. l, took
over the gold; that the seizure of gold was made under a reasonable
belief that the provisions of the Act had been contravened; that the F
recovery was made from more than one cupboard and appellant No.
2 produced the keys with which the secret locker in the cavity on top
of the cupboards in the western bedroom was opened; that section 66
of the Act was a self-contained Code and therefore, it was not necessary
to refer to the provisions of the Income Tax Act, 1961; that possession
ipso facto, was an offence under the Act and appellants were found to G
be in possession of huge gold bars of primary gold and gold articles;
that the acquittal in prosecution proceedings cannot affect the
concurrent findings of fact reached by the adjudication authorities
both being separate and independent; that the presumption of culpable
mental state under section 988 of the Act had no relevance to the H
946 SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A proceedings for confiscation and penalty; and that the appellants were
not entitled to immunity as prior to their declaration under VDS,
proceedings for confiscation had been initiated.
'
Allowing the appeal, the Court
B
HELD : 1. The seizure of the gold on 30.8.1974 was lawful and
in accordance with Section 66 of the Gold (Control) Act, 1968.
However, in the absence cf any evidence of recovery of primary gold
from the western bedroom and the telephone room and in the absence
C of any material to show that the appellants had knowledge of the said
gold hidden in the ornamental top of the cupboard in the eastern
bedroom, the contravention of the provisions of the 1968 Act is not
established against the appellants and consequently the orders of
confiscation and penalty are not sustainable and are set aside. With
D regard to the gold which is disposed of, appellants are directed to be
paid the sale price with 6% interest p.a. from the date of disposal till
payment and the gold which is not disposed of, is to be returned to the
appellants. (980-E-F; 981-A-B(
2. I. Under the Gold (Control) Act, possession of primary gold was
E made an offence under section 85(1 )(ii) read with section 8(1 ). The said
Act provided for a special machinery for confiscation of unauthorised
gold under section 71(1) and for trial of the person concerned under
section 85(1 ). The word "possession" in all the above provisions is to
be read as conscious possession. Under section 71(1), any gold in
F respect of which there existed contravention was liable to be confiscated.
Where it was established to the satisfac:tion of the Authorised Officer,
that the owner had no knowledge of the act or omission on the part
of the holder, which made it liable to confiscation then it could not be
confiscated. Therefore, reading sections 8(1), 71(1) including the
G proviso, 85(1) with section 98B, it is clear that possession ipso facto was
prohibited. It was an overt act which was made an offence not only
for prosecution under section 85(1) but also in the matter of confiscation
under section 71 (I). Since possession was an offence, knowledge of
possession of the unauthorised article w~1s an essential ingredient of the
H said offence. Where a statute forbids an act, doing of that act itself
G.U. AHUJA V. U.0.1. 947
supplies mens rea. In such a case, the prosecution need only to prove A
commission of the prohibited act and it is for the person concerned to
bring himself within the statutory defence, as provided for in the
proviso to section 71(1). 1967-C-GI
lnder Sain v. State of Punjab, 119731 2 sec 372, relied on. B
2.2. The evidence on record shows that the officers who took part
in the raid were officers from Income Tax Department. They saw the
collection of gold and not the place from which the gold was recovered.
There was no exact record to show from where the items of gold were C
found. Each witness gave different versions. Their versions are self-
contradictory and conflicting with each other. All these contradictions
have taken place: b·ecause there was no contemporaneous record to
prove recovery and that the Panchnama prepared was faulty as it did
not indicate the place from which the gold was recovered. Therefore,
recovery of three gold bars from the telephone room and western D
bedroom was not proved. Further, from the evidence it also stood
established that the ornamental top of the cupboard in the eastern
bedroom could not be opened. The screws were rusted and old and had
to be cut. Appellants did not have the keys to open the said vault as
such the improvised keys had to be prepared by the locksmith. The E
entire primary gold, except the idols, was found at this place. In the
proceedings against appellants with regard to seizure of gold bars
having foreign markings one of the witnesses deposed that the entire
primary gold was recovered from one cupboard and also the first order
of the Authorized Officer is to the same effect. Therefore, the appellants F
were not in conscious possession of primary gold and they were entitled
to the benefit of the proviso to section 71(1). 1970-D-E; 971-B-G)
2.3. According to Section 988 of the Gold (Control) Act, 1968
wherever mens rea, in the sense of knowledge of the wrongfulness, was G
a necessary ingredient of an offence under the Act, the Court shall
presume its existence. However, such presumption is rebuttable. The
explanation to sub-section (I) of section 98B provides for an inclusive
definition of culpable mental state which included knowledge of the
wrongfulness of an act or omission prohibited by the statute. Under
section 98B(2), the accused is required to prove beyond reasonable H
948 SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A doubt that he did not possess the requisite mental state. In the instant
case, appellants rebutted the statutory presumption of the culpable
mental state placed on them by section 988 beyond reasonable doubt
that they had no knowledge of the gold hidden in the ornamental top
of the cupboard in the eastern bedroom. Hence, it would be unjust,
B unfair and oppressive to allow the decision of the Authorised Officer
in confiscation proceedings to stand ai:ainst acquittal by the competent
criminal court, which acquittal was confirmed by the High Court and
by this Court. 1966-C-E; 968-H; 969-A-BI
lnder Sain v. State of Punjab, 119731 2 SCC 372, referred to.
c
3. A combined reading of sections 8(1), 71(1) and 85 of the 1968
Act made it clear that the legislature intended to provide for two
separate proceedings before two different forums and there is no
conflict of jurisdiction between the Authorised Officer acting under
D section 71(1) to direct confiscation on being satisfied that an offence
has been committed and the Magistrate making an order on conviction
of an accused under section 85(1) and that mere acquittal in the trial
before the Magistrate, in every case, cannot result in setting aside ipso
facto, of the orders of the confiscation of seized articles passed by the
E competent authority under the Act. The confiscation proceedings were
separate and distinct from prosecuti1on proceedings under the Act.
However, that difference did not entitle the Authorised Officer to
proceed arbitrarily in making an order for confiscation. 1969-C-FI
F Capt. M. Paul Anthony v. Bharat Gold Mines Ltd., 119991 3 SCC
679 and Div!. Forest Officer v. G. V Sudhakar Rao, 11985] 4 SCC 573,
relied on.
Pasupuleti Venkateswarlu v. The Motor & General Traders, 119751
1 SCC 70; Rajesh D. Darbar v. Narasingrao Krishna.Ji Kulkarni & Ors.,
G 120031 7 sec 219; Ram Chandra Singh v. Savit1·i Devi & Ors .. (20031
8 SCC 319 and Tukaram G. Gaokar v. R.N Shukla, AIR (1968) SC 1050,
referred to.
4.1. The Gold (Control) Act, 1968 is a self contained Act. Section
H 66 confers power on the Gold Control Officer to seize any gold if he
G.U. AHUJA v. U.0.1. 949
had reason to believe that in respect ofSuch gold, any provision of the A
Act had been contravened. Section 66 does not place any limitation as
to the person from whose possession the goods liable to confiscation
could be seized. Under section 64(b), the Gold Control Officer is
empowered to call upon "any person" to produce any document or
thing relevant to his enquiry into contravention of the provisions of the B
Act. The words "any person" includes all revenue officers of the
Government. This is borne out by section 105 under which all officers
of the Government engaged in collection or prevention of evasion of
revenue were required to assist the Gold Control Officer in execution
of the provisions of the 1968 Act. [973-G-H[
c
Gian Chand v. State of Punjab, AIR (1962) SC 496, distinguished.
Vasantlal Ranchhoddas Patel v. Union of India, 68 BLR 223,
referred to.
D
4.2. On 30.8.1965, CBDT had issued a Circular to all
Commissioners of Income Tax and Wealth Tax stating that where gold
was seized in a search/raid by Income Tax Authorities, necessary
information should be given to the Gold Control Officer. This Circular
was binding on all subordinate Income Tax Authorities, in terms of E
section 119 of the Income Tax Act, 1961. This circular has to be read
in the light of sections 64(b) and 105 of the Gold (Control) Act under
which it is clear that the officer was empowered to call upon the Income
Tax Officer to produce the seized gold before him for takin!! action
under the Gold (Control) Act. [974-A-C, E, F[
F
4.3. The object behind section 132 of the Income Tax Act is to
ascertain the source '.of income with which the assessee acquires an
undisclosed asset. The purpose of seizure under section 132(5) of the
Income Tax Act is not to punish the assessee but to assess his tax
liability. Section 132 of the Income Tax Act confers powers on Income G
Tax Authorities to realize the income tax dues of the assessee from his
·assets. After realizing the dues, the balance value is returned to the
assessee. Consequently, search under section 132(1) is made a
precondition to seizure under section 132(5) as it stood at the material
time. On the other hand, when gold was seized from the possession of H
950 SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A the person concerned, possession ipso facto ,was made an offence under
the said 1968 Act, which not only pro\'ided for prosecution for
possessing gold on the appointed date but also provided for confiscation
under section 74(1) of the 1968 Act. The power of seizure under section
132(5) of the Income Tax Act was limited to the assets found as a result
B of the search, whereas the power under section 66 of the 1968 Act was
omnibus. It was not restricted by any preconditions. In the
circumstances, the scheme of section 132(5) of the Income Tax !ct, as
it stood at the relevant time, was different from the scheme of the 1968
Act. 1976-H; 977-A-Cj
c Commissioner of Income Tax , .. Tarsem Kumar, 119861 3 SCC 489,
distinguished.
4.4. In the instant case, the officers of Income-tax department
seized gold on 28.8.1974 and the Gold Control Officer took over the
D seized gold on 30.8.1974. When he went to take over the said gold, he
had knowledge of the huge quantity of gold seized by the Income Tax
Department was illegally possessed by the appellants, which by itself
was a contravention of the 1968 Act. Some of the gold bars had
markings and even stamp of purity 'embossed on them. These writings
E also provided reason to believe that the provisions of the Act had been
contravened. The circumstances were so eloquent that they themselves
presented "reason to believe" by the seizing officer that the provisions
of 1968 Act had been contravened. Therefore, there was no illegality
in seizure of primary gold by the Gold Control Officer from the
F Income Tax Department. 1976-A-C; 977-FJ
Collector of Customs. Madras •v. Nathella Sampathu Chetf)1, AIR
(1962) SC 316 and Narandas M Kapadia v. Union ofIndia & Ors., (1977)
Crl. L. J. 1303, referred to.
G 5. Under the Voluntary Disclosure of Income and Wealth
Ordinance, 1975, a declarant was entitled to claim immunity from
penalty, confiscation and prosecution under Gold (Control) Act, if
before making the declaration the gold was not seized and no proceeding
was pending in respect of that gold before any authority under that
H Act. In the instant case, gold was seized on 30.8.1974 in accordance
G.U. AHUJA v. u.o.r. [KAPADIA, J.] 951
with the provisions of the 1968 Act, proceedings were initiated vide A
show-cause notice dated 20.9.1974 whereas the Ordinance came to be
promulgated on 18.10.1975 and appellant No. 1 filed his declaration
on 27.12.1975 after the said seizure. Since proceedings were pending
at the time of filing of the declaration, the appellants were not entitled
to claim immunity. [979-D-H; 980-A-B] B
u~
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2335 of
1996.
From the Judgment and Order dated 5.1.94 of the Bombay High Court
in A. No. 19 of 1992 in W.P. No. 2406 of 1982. C
C.A. Sundaram, Shridhar Y. Chitale, S.V. Pikale, Girish Pikale and
Abhijat P. Medh for the Appellants.
N.K. Bajpai, S.R. Bhat, Ms. Binu Tamta, B.V. Bairam Das and V.K. D
Verma for the Respondents
The Judgment of the Court was delivered by
KAPADIA, J. : This appeal by special leave is directed against the
judgment and order of the Division Bench of the Bombay High Court dated E
5.1.1994 passed in Appeal No. 19of1992, by which the Division Bench
allowed the appeal preferred by the respondents, thereby setting aside the
judgment and order passed by the learned Single Judge dated 11.9.1990
in Writ Petition No. 2406 of 1982 and consequently confirming the order
of the Adjudicating Authorities confiscating the primary gold, weighing F
37,398.300 gms. and valued at Rs. 18.70 lacs, under section 71(1) of the
., Gold (Control) Act, 1968 (hereinafter referred to for the sake of brevity
as "the 1968 Act") with imposition of penalties on each of the appellants
herein under section 74 of the said Act.
The undisputed facts are as follows :
G
The appellants are the son and widow respectively of one Udhavadas
Ahuja. Udhavdas had married twice - first to the mother of appellant no.
I who died on 19.2.1950 and next to appellant no. 2 on 1.7.1950. Appellant
no. 1 was born on 16.2.1950. Udhav's grandll'other Bhojibai died on H
952 SUPREME COURT REPORTS [2004) SUPP. 2 S.C.R.
A 4.7.1951. On August 28, 1974, the Income Tax Commissioner issued an (
authorization under section 132 of the Income Tax Act, 1961 authorizing
search and seizure at Gopi Kunj, situate at Shivaji Park, Bombay, being
the residential premises of appellant no. 1. Pursuant to the authorization,
R.D. Mahadeshwar, Asstt. Director of Inspection, Income-tax department
B conducted the search and recovered primary gold and other gold items,
more particularly described in the panchnama (at page 95 of Volume-II).
At the time of search, appellant no. 1 was present. The primary gold and
the gold items collectively weighed 37,398.300 gms. valued at Rs. 18.70
lacs as on August 30, 1974. Thereafter, the Income Tax Authorities
C intimated the Gold Control Officer appointed under st:ction 4 of the 1968
Act. On August 30, 1974, the said officer attended the Income Tax Office
and in the presence of appellant no. 1, who was the Karta of Kewal Ram
Ahuja, Hindu Undivided Family, took over the custody of the said gold
from the Income-tax department. The Gold Control Officer also prepared
the above panchnama. On 20.9.1974, the Gold Control Officer, Bombay
D served a s~ow-cause notice on the appellants calling upon them to explain
why the said primary gold should not be confiscated under section 71(1)
of the 1968 Act and also why penalty should not be imposed on each of
the appellants under section 74 of that Act. The show-cause notice inter
a/ia alleged contravention of section 8(1) read with section 8(6) and section
E 16(1) read with section 16(5) inasmuch as the appellants had in their
possession primary gold which they failed to dispose of within six months
from 1.3.1967 as provided for in rule 126H (l)(B) of the Defence of India
Rules. By the said show-cause notice, it was further alleged that the
appellants had failed to file the declaration in respect of gold articles, other
F than the gold bars which constituted contravention of section 16(1) read
with section 16(5) of the said Act. The appellants claimed during the
investigation that the seizure was illegal; that taking over of the gold from
Income tax Authorities did not amount to seizure in fact or in law. They •
contended that there was no contravention of the provisions of the Act as
they were not in conscious possession of the said gold recovered from their
G residence. The appellants claimed that entire gold was recovered from a
secret cavity/vault inside the dome of one cupboard in the eastern bedroom
and that they were not aware of the s<ecret cavity or the contents thereof.
The appellants also claimed that they were not in possession of the keys
of the secret vault. In the meantime, on 18.10.1975, Voluntary Disclosure
<
H of Income and Wealth Ordinance 1975 was promulgated. It was replaced
G.U. AHUJA v. U.0.1. [KAPADIA, J.] 953
by Act No. Vlll in 1976. On 27.12.1975, appellant no. I as Karta filed a A
' declaration under said Voluntary Disclosure Scheme. To complete the
chronology of the events, the Collector of Customs (Preventive), Bombay
(hereinafter referred to for the sake of brevity as "Authorized Officer")
ordered confiscation of the gold bars, gold coins and sovereigns under the
provisions of section 71 (I) read with section 8( I) of the 1968 Act.
B
However, the appellants were given an option to redeem the gold coins and
sovereigns weighing 7,719.90 gms. on payment of fine of Rs. 1.5 lacs in
lieu of confiscation. By the said order, the Authorized Officer imposed
penalty of Rs. ! lac on each of the appellants. This order of the Authorized
Officer held that the entire gold was seized from one cupboard in the
eastern bedroom. The order passed by the Authorized Officer on 26.6.1976 c
was, however, set aside by the Gold Control Administrator in appeal
(hereinafter referred to for the sake of brevity as "the Appellate Authority").
By order dated 21. l l. ! 977, the Appellate Authority remanded the case for
de novo adjudication by accepting the contention of the appellants herein
that the order passed by the Authorized Officer on 26.6.1976 was in breach D
of principles of natural justice. On remand, the Authorized Officer once
again came to the conclusion, after considering the evidence on record that
the gold seized was in conscious possession of the appellants. However,
this time, the Authorized Officer held that the gold seized was recovered
from cupboard in the eastern bedroom, from the cupboard in the western E
bedroom and from the cupboard in the telephone room. He, therefore,
concluded that the appellants were in conscious possession of the seized
gold. The Authorized Officer, therefore, held that there was contravention
of section 8( I) read with section 8(6) as far as primary gold was concerned
and since the appellants failed to file declaration with regard to other gold
items, there was contravention of section 16(1) read with section 16(5) of
F
1968 Act. Therefore, by his order dated 14/28.2.1980, the Authorized
I'
Officer directed absolute confiscation of the primary gold, gold sovereigns,
gold coins and other gold items. He also imposed a personal penalty of
Rs. I lac each on the two appellants. Being aggrieved by the said order,
the appellants herein carried the matter in appeal once again to the Gold G
Control Administrator, New Delhi, being Appeal No. 91 of 1981. It was
contended before the Appellate Authority that the entire gold was recovered
from one place i.e. from a secret vault inside the dome of the cupboard
in the eastern bedroom. The appellants relied upon the statements of two
• panchas. However, the Appellate Authority vide order dated 5.11.1981 H
954 SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A found that the statements made by the officers from the Income-tax
<
department thai: gold was recovered from different places were truthful.
The Appellate Authority rejected the testimony of locksmith and the
panchas. On the state of these findings. the Appellate Authority held that
the appellants \\ere in conscious possession of the said gold. The order
B passed by the Authorized Of1icer confiscating the said gold was upheld.
However. the Appellate Authority ordered redemption of gold idols found
in the pooja room on payment of fine of Rs. 5000. The Appellate Authority
also reduced the personal penalty of Rs. I lac imposed on each of the
appellants to Rs. 50000 each. Being aggrieved, the appellants herein
preferred Revision application to respondent no. I \\hi ch was dismissed
C on 10.7.1982. At this stage, it may be mentioned that by order dated
5.6.1976, the Crold Control Officer found that appellants· declaration undP.r
Voluntary Disclosure Scheme unacceptable as according to him the
declaration was filed by appellant no. I as Karta after commencement of
proceedings under the 1968 Act. Being aggrieved by the dismissal of
D revision application filed by the appellants, Writ Petition No. 2406 of 1982
was filed in the Bombay High Court for a declaration that the said gold
was unlawfully seized and, therefore, the appellants were entitled to
immunity from proceedings for prosecution. confiscation and penalty. The
appellants also sought return of the said gold. The said writ petition was
E filed on 18.10.1982. In the meantime, the appellants who were charged for
offences under section 85( I )(ii) read with section 8( I) of the 1968 Act were
acquitted by the Addi. Chief Metropolitan Magistrate. Bombay on 24.3.1983.
The Criminal Appeal No. 443of1983 filed by the Gold Control Authorities
against the order of acquittal was dismissed by the Bombay High Coun
F on 8/9.3.1991. By judgment and order dated 11.9.1990, the learned Single
Judge held in Writ Petition No. 2406 of 1982, mentioned herein above that
the appellants were innocent possessors of the said gold. Accordingly, the
Trial Judge quashed the orders of penalty and confiscation passed by the
Gold Control Authorities. Being aggrieved, the department herein, filed
Letters Patent Appeal No. 19 of J 992 before the Division Bench of the
G Bombay, High Cou11. By impugned judgment dated 5.1.1994, the Division
Bench allowed the L.P.A. No. 19 of 1992 on the ground that the appellants
were in conscious possession of the gold as it was found in several
cupboards in the eastern bedroom, western bedroom and the telephone
room. The Division Bench held that the findings of the criminal court were
H not relevant for the purposes of adjudicating confiscation under section
G.U. AHUJA v. U.0.1. [KAPADIA, J.] 955
71(1) of the said Act. consequently, the Division Bench confirmed the A
orders passed by the Gold Control Authorities. Hence, the appellants have
filed this appeal by way of special leave. Lastly, it may be mentioned that
by order dated 7.4.1994, this Court dismissed Special Leave Petition
(Criminal) filed by the Assistant Collector of Customs, Bombay against the
Judgment of the Bombay High CoUli confirming the acquittal of the B
appellants by the learned Magistrate.
Mr. C.A. Sundaram, learned senior counsel appearing on behalf of
the appellants submitted that the Gold Control Authorities took over the
gold from Income-tax department in contravention of section 132(5) of the
Income Tax Act and consequently, there was no seizure in law and, C
therefore, the appellants were entitled to claim immunity under Voluntary
Disclosure Scheme. In this connection, it was urged that in fact there was
no seizure as the Gold Control Officer merely took over the gold from
Income-tax depa1iment and to get over this lacunae, respondent no. 2
herein seeks to contend that gold was returned to the appellants by the D
Income-tax authorities and it was thereafter seized from the appellants by
Gold Control Officer appointed under section 4 of the Act. In this
connection, reliance was placed on the panchnama dated 30.8.1974 (Vol.
II page 95) to show that the gold was seized by the Gold Control Officer
from Income-tax depa1iment. It was submitted that such seizure was also E
contrary to section 132(5) of the Income Tax Act. In this connection,
reliance was placed on the judgment of this Comi in the case of
Commissioner of Income Tax V. Tarsem Kumar reported in [1986] 3 sec
489.
Learned senior counsel for the appellants next contended that though
F
.• under the 1968 Act any primary gold held in contravention of section 8( I)
was liable to be confiscated under section 71 (1 ), the proviso thereto
protected such gold from confiscation for contravention of the provisions
of the Act in the absence of knowledge or connivance on the part of the
owner in such contravention. In view of the said proviso, it was submitted G
that there l'las no absolute bar to the possess~n of the primary gold under
the 1968 Act. In this connection, it was urged that mere possession of
primary gold was an offence under sections 71(1) and 85(1) of the Act;
that, therefore, the word "possession" in sections 8(1 ), 71 (I) and 85(1)
referred to conscious possession. H
956 SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A Learned counsel for the appellants next contended that the appellants
were prosecuted by the Gold Control Authorities for offences under section
85( I)( ii) read with section 8( I) of the Act in respect of retention of
possession of primary gold; that they were also prosecuted for not filing
declarations under section 16( I) i~, respect of gold coins, sovereigns and
B gold idols; that on the first count the appellants proved beyond reasonable
doubt that they had no knowldege of the primary gold bars, coins and
sovereigns; that consequently, they were acquitted and, therefore, the
appellants were entitled to the benefit of acquittal not only in criminal trial
but also in the matter of confiscation of the said property. It was urged that
in the impugned judgment, the Division Bench of the High Court had erred
C in holding that findings recorded by the criminal coun had no bearing on
adjudication under section 71 (I) and section 74 of the said Act. In this
connection, reliance was placed on the judgment of this Court in the case
of Pasupaleti Venkateswarlu v. The Motor & General Traders reponed in
[1975] 1 SCC 770; Rajesh D. Darbar v. Narasingrao Krishnaji Kulkarni
D & Ors. reported in [2003] 7 SCC 219; Ram Chandra Singh v. Savitri Devi
& Ors. reported in [2003] 8 SCC 319 and Capt. M Paul Anthony v. Bharat
Gold Mines Ltd & Anr. reported in [1999] 3 SCC 679. Learned counsel
for the appellants further contended that the mens rea was a sine qua non
for confiscation of gold under the Act; that the proceedings under the Act
E were quasi criminal in character and consequently, the judgment of the
learned Magistrate acquitting the appellants was binding on the departmental
authorities adjudicating the question of confiscation. In any eve1>t, it was
urged, that the learned Single Judge in the writ petition had discussed the
entire evidence and had come to the conclusion that the appellants were
F not in conscious possession of the gold; that the said gold was found only
at one place, namely, in the cavity on the cupboard in the eastern bed room
of the flat; that the locksmith had to prepare a key to open the locker in
the cavity in which the gold was found, that the screws were rusted and
they had to be cut to open the top which showed that the appellants were
not in conscious possession of the- said goJd. It was submitted that the above
G facts were not considered by respondents no. 2 and 3 herein and, therefore,
their orders suffered from errors apparent on the face of the record and
consequently, the learned Single Judge of the High Court was right in
exercising the power of judicial review. That the Division Bench had erred
in ignoring the findings of the learned Single Judge. Lastly, learned counsel
H for the appellants submitted that in any event, an option of redemption
G.U. AHUJA v. U.0.1. [KAPADIA, J.] 957
should have been given to the appellants. That, in the present case, no A
' reasons have been given by the Collector for not exercising his discretion
in the matter of grarit of redemption. In this connection, reliance was placed
on the judgment of this Court in the case of Hargovind Das & Ors. v.
Collector of Customs & Ors. reported in AIR [1987] SC 1982.
B
Per contra, Mr. N.K. Bajpai, learned counsel appearing on behalf of
the department contended that the Income-tax authorities had recovered the
said gold from the residence of the appellants during the search on
28.8.1974. That in accordance with a circular issued by the Central Board
of Direct Taxes, the Gold Control Officer was informed about the seizure.
That the said officer visited the office of Income-tax department around C
30.8.1974 and in the presence of appellant no. I took over the gold from
the Income-tax department under section 66 of the 1968 Act. In this
connection, reliance was placed on the panchnama dated 30.8.1974. It was
urged that all the statutory authorities rejected the claim that the appellants
were not in conscious possession of the gold on the ground that the D
recovery was made from more than the one cupboard; that appellant no.
2, on being asked, produced the keys with which the secret locker in the
cavity on top of the cupboards in the western bedroom was opened; that
the said keys were recovered from the cupboard in the western bedroom
and, therefore, the appellants were in conscious possession of the said gold, E
which rightly confiscated under section 71(1) of the Act.
Learned counsel for the respondent further submitted that section 66
of the Act empowered the gold Control Officer to seize primary gold in
respect of which he had reason to believe that any provision of the Act F
had been contravened. That in this case, the seizure of gold was made under
a panchnama in presence of appellant no. I in the reasonable belief that
the provisions of the Act had been contravened . In this connection,
reliance was placed on the copy' of the panchnama (at page 95, volume-
1!), which bears the signature of appellant no. I. Further, a circular had been
issued on 30.8.1965 by CBDT addressed to all Commissioners of Income G
Tax & Wealth Tax stating that when the gold is seized in a search by
Income-tax authorities, necessary information should be given to the Gold
Control Officer. It was submitted that the circular issued by the CBDT was
binding on the subordinate authorities. Therefore, it was urged that there
~ was no illegality in making the seizure. It was further submitted that the H
958 SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A judgment of this Cou11 in Tarsem Kumur 's case (supra) was not applicable
(
as it was given prior to insertion of section l 32A in the Income Tax Act.
It was urged that section 66 of the said Act was a self contained Code and
it was, therefore, not necessary to rder to the provisions of the Income Tax
Act, 196 I.
B
Learned counsel for the respondent next submitted that mens rea was
not a necessary ingredient of sub-section {l) of section 71. That possession,
ipso fucto, was an offence under the Act. That the appellants were found
to be in possession of huge gold bars of primary gold contrary to section
C 8( I). They were also found in possession of undeclared gold articles in
contravention of section 16. In such a case, it was submitted that the claim
of the appellants that they were not in conscious possession of the primary
gold as their defence was unbelievable. Learned counsel further submitted
that in view of sections 8(1), 71(1) and 85(1), an absolute liability was
imposed and, therefore. there was no merit in the argument advanced on
D behalf of the appellants that the gold was not liable to be confiscated till
conscious possession therefore stood proved. Lastly, it was urged that the
applicability of the proviso to section 71(1) had to be adjudged by the
adjudicating authority and not by the officer who had seized the primary
gold. It is for the adjudicating authority to decide the claim of the benefit
E under the proviso to section 71 ( \ )1. Hence, it was urged that, the seizure
cannot be held to be illegal in the present case.
Learned counsel for respondent no. 2 next submitted that under the
1968 Act, adjudication and prosecution were two independent proceedings
F and they were permissible on the same set of facts. That the possibility of
different conclusions being reached by two different Authorities under the
same Act cannot be ruled out. That adjudication and prosecution were
independent of each other and the procedures to be adopted in the two
proceedings were also different. In this connection, reliance was placed on
the judgment of this Court in th<: case of Tukaram G. Gaokar v. R.N.
G Shukla, AIR ( 1968) SC I 050. It was further submitted that the presumption
of culpable mental state under section 988 of the Act had no relevance
whatsoever to the proceedings for confiscation and penalty. That the
factum of acquittal in prosecution proceedings cannot affect the findings
of fact reached by the statutory authorities in adjudication. That there was
H no provision in the Act which gives a superior status to the outcome of
G.U. AHUJA v. U.0.1. [KAPADIA, J.] 959
the prosecution proceedings. In the circumstances, it was submitted that the A
factum of acquittal in prosecution proceedings cannot affect findings of
fact reached by the Adjudicating Authority.
Learned counsel for the respondent lastly submitted that the voluntary
disclosure scheme was introduced vide Voluntary Disclosure of Income & B
Wealth Ordinance, 1975. That under sub-section 5 of section ISA, primary
gold which had been seized or confiscated under the 1968 Act was not
entitled to immunity. That in present matter, on 20.9.1974, the Gold
Control Officer issued the show-cause notice calling upon in appellants to
show-cause as to why the said gold should not be confiscated under section
71(1) whereas appellant No. I tiled the declaration as a Ka11a only on C
27.12.1975. Therefore, the appellants were not entitled to immunity as
prior to their declaration on 27.12.1975, proceedings for confiscation had
been initiated. For the aforestated reasons, it was urged that there is no
merit in the civil appeal and the same deserves to be dismissed.
D
For the sake of clarity, we may point out that by order dated I 0.7 .1982
passed by the Appellate Authority, seven gold bars, one gold brick, gold
coins and sovereigns (more particularly described in the panchnama dated
30.8.1974 - Vol. II page 95) stood absolutely confiscated with personal
penalty on each of the two appellants herein, whereas the gold idols and E
pooja articles were ordered to be redeemed on payment of tine. This order
of the Appellate Authority was confirmed in Revision by respondent No.
6 vi de order dated I 0.7.1982. By the impugned judgment of the Division
Bench of the High Cou11, the orders passed by the Appellate Authority and
the Revisional Authority were upheld. Consequently, our judgment is F
confined only to absolute confiscation of the aforestated gold bars, gold
bricks, gold coins and sovereigns.
Before examining the provisions of the 1968 Act, it is necessary to
refer to the various provisions of law which existed prior to the Gold
(Control) Act, 1968. On 12.12.1962, the Defence of India Act, 1962 was G
enacted replacing an Ordinance issued on 26.10.1962. Under section 3 of
the 1962 Act, the Central Government framed Defence of India Rules,
1962. In the 1962 Rules, as originally framed, there was no provision
dealing with control of gold. By Defence of India (Amendment) Rules,
1963, a new Pa11 XIIA was inserted w.e.f. January 9, 1963. By this H
960 SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A amendment, rules l26A to l26Z were inserted. Rule l26A(d) defined
"'gold"' as, inter alia, including primary gold, ornament or any other article
of gold. Rule l 26H provided for restrictions on possession of gold. The
effect of rule l 26H was that, except in the manner provided under the said
rule, no person could acquire or buy primary gold. Rule 126-l required
B declaration to be made of the possession of gold other than ornaments. It
provided that every person, not b·eing a dealer, shall. within thirty days
from the commencement of the 1963 Amendment Rules, make a declaration
as to the quantity, description and other particulars of gold. Under rule
I26M, gold seized was liable to be confiscated. Under the said rules power
was given for search and seizure of gold in respect of which there has been
C contravention of the said rules. The net effect of the aforesaid rules was
that acquisition, possession or control of primary gold, without declaration,
became illegal.
On 1.3.1967, the Defence of India Rules, 1962 were fu11her amended
D by Defence of India (4th Amendment) Rules, 1966, which imposed a ban
on the possession of primary gold. Under the Amended Rules, no person,
other than a dealer, was entitled to own or possess primary gold after expiry
of six months from the commencement of Defence oflndia (4th Amendment)
Rules, 1966. The effect of the said Amendment was that within six months
E from 1.3. I 967 (i.e. by 1.9.1967), no person, other than a dealer, could be
in lawful possession of the primary gold.
On 22.6.1968, Part XIIA of Defence of India Rules, I 962 was
repealed and replaced by Gold (Control) Ordinance, 1968. The ordinance
F was itself repealed by Gold (Control) Act, 1968 w.e.f. 1.9.1968. The Act
was enacted to provide for the control of the production, manufacture,
supply, distribution, use and possession of gold ornaments and articles of
gold. The basic object was to reduce the internal demand for the gold in <
India. Under section 2U), gold was defined to mean gold, including its alloy
in any shape or form including primary gold, gold articles and ornaments.
G Under Section 2(r), primary gold was defined to mean gold in unfinished
or semi finished form including gold bars, ingots, slabs, pellets, sheets etc.
Under section 4, the administration of the Act was placed in the overall
charge of the Gold Control Administrator. Under section 5(2), price of the
gold to be sold and brought was to be fixed by the administrator, in
H consultation with the Reserve Bank of India. Under section 8(1), retention
G.U. AHUJA v. U.0.1. (KAPADIA, J.] 961
of possession of gold was prohibited. Section 8(1), which is relevant for A
the present case, read as under :
"8. Restrictions regarding acquisition, possession and disposalof
gold. - ( 1) Save as otherwise provided in this Act, no person shall
B
(i) own or have in his .possession, custody or control, or
(ii) acquire or agree to acquire the ownership, possession,
custody or control of, or
c
(iii) buy, accept or otherwise receive or agree to buy, accept or
otherwise receive,
any primary gold."
Under section 8(1 ), possession of the primary gold after the Act came D
into operation was contrary to law unless the same was held in the manner
as provided by the Act. An essential pre-condition for assumption of
jurisdiction under section 8(1) was that the article must be primary gold.
Section 8(1) placed an absolute embargo on retention of the possession of
the primary gold on and after 1.9.1968 when the said Act came into E
operation. Under section 8(6), the Gold Control Administrator was
empowered under special circumstances of any case to authorize any
person(s) to buy, acquire, sell, transfer or otherwise dispose of primary gold
or article. However, the normal rule was against the retention of the
possession of primary gold. Chapter XII dealt with entry, search and F
seizure. Section 58 read with section 66 empowered the Gold Control
Officer on reasonable suspicion to seize such gold in respect of which he
holds a reasonable belief of contravention of the provisions of the Act.
However, the Gold Control Officer who was a seizing officer was not
required to decide the question on actual contravention which had to be
decided by the Collector (hereinafter referred to as "Authorized Officer") G
in the adjudication proceedings under sections 71(1)and 74 of the Act. If
the Authorized Officer found such actual contravention, he could order
confiscation under section 71 (I) of the Act. Sections 66 and 71 (I) are
relevant for the purposes of this case and accordingly, they are quoted
hereinbelow : H
962 SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A "66. Power ro sei:e - (I) If any Gold Control Officer has reason
(
to believe that in respect of any gold any provision of this Act
has been, or is being, or is attempted to be, contravened, then he
may seize -
(a) such gold along with the package, covering or receptacle,
B if any and the contents thereof, in which the gold is
found;
(b) any other goods in which any quantity of such gold has
been mixed.
c
(2) Any Gold Control Officer may seize -
(a) any document or other thing which, in his opinion. will
be useful for. or relevant to, any inquiry or proceeding
D for the contravention of any provision of th is Act or
any rule or order made thereunder;
(b) any conveyance or animal which has been, or is being,
or is attempted to be, used for the transport of any gold
in relation to which any provision of this Act or any
E rule or order made thereunder has been or is being, or
is attempted to be contravened.
(3) Any document or other thing seized under sub-section (2) shall
not be retained by the Gold Control Officer for a period exceeding
F six months from the date of the seizure unless the reasons for
retaining the same are recorded by him in writing and the approval
of the Administrator for such retention is obtained :
Provided that the Administrator shall not authorize the
G retention of the document or other thing for a period exceeding
thirty days after all proceedings, for which the document or other
thing is useful or relevant, are completed.
(4) The person from whose custody any document or other thing
H is seized under sub-section (2) may make copies thereof or take
G.U. AHUJA v. U.0.1. [KAPADIA, J.] 963
extracts therefrom in the presence of the Gold Control Officer or A
any other person empowered by him in this behalf, at such place
and at such time as the Gold Control Officer may appoint in this
behalf.
(5) If a person legally entitled to the document or other thing B
seized under sub-section (2) objects for any reason to the approval
being given by the Administrator under sub-section (3), he may
make an application to the Central Government stating therein the
reasons for such objection and requesting for the return of the
document or other thing.
c
(6) On receipt of the application under sub-section (5), the Central
Government may, after giving the applicant an opportunity of
being heard, pass such orders as it may think fit.
71. Confiscation of gold. - (I) Any gold in respect of which any D
provision of this Act or any rule or order made thereunder has
been, or is being, or is attempted to be, contravened, together with
any package covering or receptacle in which such gold is found,
shall be liable to confiscation.
E
Provided that where it is established to the satisfaction of the
officer adjudging the confiscation that such gold or other thing
belongs to a person other than the person who has, by any act or
omission, rendered it liable to confiscation, and such act or
omission was without the knowledge or connivance of the person F
to whom it belongs, it shall not be ordered to be confiscated but
such other action, as is authorized by this Act, may be taken
against the person who has, by such act or omission, rendered it
liable to confiscation."
Therefore, under the scheme of section 66 read with section 71, the G
officer seizing such gold was not to decide issues, such as, collusion,
connivance, knowledge of possession etc. The belief that the officer had
to form under section 66 was only in respect of the gold, whoever its owner
be. The ownership of the gold or the person in whose possession the gold
was kept was not relevant for the purposes of section 66. Before acting H
964 SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A under section 66, existence of a reasonable belief that the provisions of the
Act had been contravened was essential.
Chapter XIV dealt with adjudication and appeals. Section 83 gave
power to the Authorized Officer to summon witnesses; to receive evidence
B on affidavits and issue commissions for examination of witnesses. Chapter
XV dealt with offences and their trial. Section 85( I )(ii) inter alia provided
that whosoever had in his possession any primary gold in contravention
of the Act or rules thereunder shall be punished with imprisonment or fine,
without prejudice to any other action that may be taken under the Act.
Section 988 referred to circumstances in which the Cow1 had to raise
C statutory presumption. For the purposes of deciding this case, sections
85( I) and 988 are relevant and they are quoted herein below :
"85. Punishmentfor illegal possession, etc. ofgold:-( I) Whoever,
in contravention of the provisions of this Act or any rule or order
D made thereunder, -
(i) makes, manufactures, prepares or processes any primary
gold; or
E (ii) owns or has in his possession, custody or control any
primary gold; or
(iii) buys or otherwise acquires, or accepts or otherwise
receives, or agrees to buy or otherwise acquire or to
accept or otherwis•: receive, any primary gold; or
F
(iv) sells, delivers, transfers or otherwise disposes of, or
agrees to sell, deliver, transfer or otherwise dispose of,
or exposes or offrrs for sale, delivery, transfer or
disposal, any primary gold; or
G
(v) melts, assays, refines, extracts, alloys or converts any
gold or subjects it to any other process; or
(vi) makes, manufactures, prepares, repairs, polishes or
H processes or places any order for the making,
G.U. AHUJA v. U.0.1. [KAPADIA, J.] 965
manufacturing, preparing, repairing, polishing or A
' processing, of any article or ornament; or
(vii) buys or otherwise acquires, or accepts or otherwise
receives, or agrees to buy or otherwise acquire or to
accept or otherwise receive, or sells, delivers, transfers B
or otherwise disposes of, or agrees to sell, deliver,
transfer or otherwise dispose of, or exposes or offers
for sale, delivery, transfer or other disposal, any article
or ornament; or
(viii) owns or has in his possession, custody or control any C
article or ornament; or
(ix) carries on any business or transaction in gold for which
a licence or ce1tificate is required to be obtained by or
under this Act; or D
(x) carries on business as a banker or money-lender;
shall, without prejudice to any other action that may be taken
under this Act, be punishable - E
(a) if the offence is under Cl. (i), (ii), (iii), (iv) or (viii), [the
offence under Cl. (viii) being a contravention of sub-section
(3) of Section 55] and the value of the gold involved therein
exceeds one lakh of rupees, with imprisonment for. a term F
which may extend to seven years and with fine;
Provided that in the absence of special and adequate reasons
to the contrary to be recorded in the j_udgment of the Court such
imprisonment shall not be for a term of less th;;n six months.
G
(b) in any other case, with imprisonment for a term which may
extend to three years, or with fine, or with both.
98B. Presumption ofculpable mental state. -(I) In any prosecution
for an offence under this Act which requires a culpable state on H
966 SUPREME COURT REPORTS [2004) SUPP. 2 S.C.R.
A the part of the accused, the Cou11 shall presume the existence of (
such mental state but it shall be open to the accused to prove the
fact that he had no such mental state with respect to the act
charged as an offence in that prosecution.
Explanation. - In this section, '"culpable mental state'' includes
B
intention. motive. knowledge of a fact and belief in, or reason to
believe, a fact.
(2) for the purposes of this section, a fact is said to be proved
only when the Cou11 believes it to exist beyond reasonable doubt
c and not merely when its existenc'e is established by a preponderance
of probability."
Section 988 of the 1968 Act was similar to section l 38A of the
Customs Act, 1962. It made a drastic change in the concept of mens rea
D as a necessary ingredient of an offence. According to the provisions of this
section wherever mens rea, in the sense of knowledge of the wrongfulness,
was a necessary ingredient of an offence under the Act, the Cou11 shall
presume its existence. However, such presumption was rebuttable. The
explanation to sub-section (I) of Section 988 provided for an inclusive
E definition of culpable mental state which included knowledge of the
wrongfulness of an act or omission prohibited by the statute. Under section
988 (2), the accused was required to prove beyond reasonable doubt that
he did not possess the requisite mental state. The provisions of sections
85(1) and 988 were similar to sections 9, 10 of the Opium Act, which came
F for consideration before this Court in the case of Inder Sain v. State of
Punjab reported in [1973) 2 SCC 372. In that case, the appellant got a
parcel of apples released from the railway. While he was carrying the
parcel, he was intercepted by the police and the parcel was found to contain
opium. He was convicted under section 9. The only question was : whether
the appellant was in possession of opium. It was held by this Cou11 that
G if possession is an offonce then there must be proof that the accused was
knowingly in possession of the article. That knowledge involved in
possession of the unauthorised article had to be proved. It was fu11her held
that the word ·'possession", in such cases, connotes possession with
knowledge. In the said judgment, this Court has drawn a dichotomy
<
H between the law pe11aining to presumptions and the law relating to the
G.U. AHUJA v. U.O.I. (KAPADIA, J.] 967
burden of proof. It was held that though knowledge is an essential A
ingredient of the offence of possession, it is a different thing to say that
the prosecution should prove that the accused was knowingly in possession.
It was held that by virtue of Section I 0, similar to section 988 of the 1968
Act, the onus of proof was placed on the accused to prove that he did not
knowingly possess the article. This is after the prosecution showing by B
evidence that the accused was in possession of the article.
The analysis of the various provisions of the 1968 Act (repealed in
1990) shows that the Act made possession of primary gold an offence.
Under the Act, possession of primary gold was made an offence under
section 85( I )(ii) read with section 8( 1). The said Act provided for a special C
machinery for confiscation of unauthorised gold under section 71 (I) and
for trial of the person concerned under section 85(1 ). The word "possession"
finds place in all the above provisions. In the light of the judgment of this
Court in the case of Jnder Sain (supra), we have to read the word
"possession" as conscious possession. Under section 71(1), any gold in D
respect of which there existed contravention was liable to be confiscated.
Provided, where it was established to the satisfaction of the Authorised
Officer, that the owner had no knowledge of the Act or omission on the
part of the holder, which made it liable to confiscation, then it could not
be confiscated. Therefore, reading sections 8(1), 71(1) including the E
proviso, 85(1) with section 988, it is clear that possession ipso facto was
prohibited. It was an overt act which was made an offence not only for
prosecution under section 85(1) but also in the matter of confiscation under
section 71(1). Since possession was an offence, knowledge in possession
of the unauthorised aiticle was an essential ingredient of the said offence. F
Where a statute forbids an act, doing of that act itself supplies mens rea.
In such a case, the prosecution needs only to prove commission of the
prohibited act and it is for the person concerned to bring himself within
the statutory defence, which in the present case was provided for in the
proviso to section 71 ( l ). However, in view of section 988, the accused had
to prove beyond reasonable doubt that he had no knowledge in the G
possession of the unauthorised article. In the present case, the appellants
were charged for offence of possession of unauthorized gold under section
85(1)(ii) read with section 8(1) of the Act. They were acquitted. The
judgment of the trial cou1t was confirmed by the High Court and by this
Court. In the trial, they proved beyond doubt that they were not in H
968 SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A conscious possession of the primary gold. In the circumstances, one of the
points for determination in this civil appeal is - what is the effect of an
order of acquittal in the prosecution under section 85(l)(ii) read with
section 8( I) on the order of confiscation passed under section 71 (I) read
with section 8( I) by the Authorized Officer in respect of the primary gold.
B In both the proceedings, the basic faci:s were common. The recovery of
incriminating a11icles was the same in both the proceedings. The same
witnesses were examined in both the proceedings. The same charge of
possession was there in both the proceedings. The said charge was sought
to be proved by same set of officers in both the proceedings. The witnesses
and the officers who saw the recovery were common in both the proceedings.
C However, the criminal court on consideration of the entire evidence came
to the conclusion that both the accuse:d had no knowledge of the gold
concealed in the ornamental top of the cupboard in the eastern bedroom
from where the entire gold was seized whereas the Authorised Officer in
the proceedings under section 71 (I) of the Act ordered confiscation on the
D ground that recovery was made from the cupboards in the eastern and
western bedroom and from the telephone room; that appellant No. 2 had
produced the key with the help of which the secret vault in the cupboard
in the western bedroom could be opened and, therefore, the appellants were
in conscious possession of the said gold. It was further held by the
E Authorised Officer that when the gold in respect of which any provision
of the 1968 Act had been contravened, such gold, ipso facto, attracted
confiscation.
In the case of Capt. Af Paul An1hony v. Bharat Gold Mines Ltd.
F reported in [ 1999] 3 sec 679 it has been held that where department and
criminal proceedings are based on identical facts and where charges were
sought to be proved by the policy officers and the panchas who raided the
house and effected recovery and where same set of witnesses were (
examined in both the proceedings but the criminal court on examination
of the evidence came to the conclusion that no recovery was made from
G the house and that raid was not proved it would be unjust, unfair and
oppressive to allow the findings recorded by the enquiry officer to stand
against acquittal by judicial pronouncement. The present case is on the
stronger footing than the case of Cap!. M Paul Anthony (supra). In the
present case, in view of section 988, a very heavy burden was placed on
H the appellants in the criminal proceedings. It was for the appellants to rebut <
•
G.U. AHUJA v. U.0.1. [KAPADIA, J.) 969
the statutory presumption of the culpable mental state placed on them by A
section 988. Under section 988, the appellants had to prove beyond
reasonable doubt, which they did, that they had no knowledge of the gold
hidden in the ornamental top of the cupboard in the eastern bedroom.
Hence, it would be unjust, unfair and oppressive to allow the decision of
the Authorised Officer in confiscation proceedings to stand against acquittal B
by the competent criminal court, which acquittal was confirmed by the
High Court and by this Cou11.
We may clarify that our above observation should not be taken to
mean that there is no difference between depa11mental proceedings under
section 71 ( 1) and prosecution for illegal possession under section 85( I). C
A combined reading of sections 8( I), 71 (I) and 85 of the 1968 Act made
it clear that the legislature intended to provide for two separate proceedings
before two different forums and there is no conflict of jurisdictions between
the Authorised Officer acting under section 71 ( 1) to direct confiscation on
being satisfied that an offence has been committed and the magistrate D
making an order on conviction of an accused under section 85(1) and that
mere acquittal in the trial before the Magistrate, in every case, cannot result
in setting aside, ipso facto, of the orders of confiscation passed by the
competent authority under the Act. That merely because there was acquittal
in the trial before the Magistrate, due to paucity of evidece or otherwise, E
would not entail nullification of the order of confiscation of the seized
articles in every case. (See Div!. Forest Officer v. G. V. Sudhakar Rao,
reported in [1985) 4 SCC 573). In any event, on a plain reading of sections
8( I) and 71 (I) it is clear that the Authorised Officer was required to be
satisfied that an offence under the Act had been committed. That the
confiscation proceedings were separate and distinct from prosecution under
F
the Act. However, that difference did not entitle the Authorised Officer to
proceed arbitratily in making an order for confiscation.
In the light of the above discussion, the first point for determination
is - whether from the circumstances one can say that the appellants were G
in conscious possession of primary gold. As indicated above, the adjudication
proceedings under section 71 ( 1) concluded before the criminal case. The
judgment of the criminal court was not before the Authorised Officer.
However, the basic controversy befoi·e the Authorised Officer was -
' whether the entire primary gold (bars) was recovered from the ornamental H
970 SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A top of the cupboard in the eastern bedroom as alleged by the appellants,
or whether some of the gold bars were also recovered from the cupboards
in the western bedroom and the room in which the telephone was placed
as alleged by the department. According to the department, appellants were
in conscious possession of the gold bars because some of the bars were
B found from the cupboards in the western room which were opened with
the keys handed over by Ishwaribai . appellant No. 2 herein. According to
the department, since primary gold was recorded from western bedroom
and telephone room in addition to 1:he recovery from the ornamental top
of the cupboard in the eastern bedroom, the appellants were in conscious
possession. The orders of the Authorised Officer and the Gold Control
c Administrator show that even according to the department, gold bars
hidden in the ornamental top of the cupboard in the eastern bedroom were t
not apparently visible but the fact that some of the remaining gold bars
were recovered from the other rooms proved that the appellants had
knowledge of the gold bars. Therefore, the key question to be answered
D is - whether recovery of the gold from western bedroom and telephone
room was proved by the depaitmem. At the outset, it may be stated that
the evidence on record shows that the officers who took part in the raid
were officers from Income-tax department. They saw the collection of gold
and not the place from which the go.cl was recovered. There was no exact
E record to show from where the items of gold were found. Each witness
gave different versions. Their versions are self-contradictory and conflicting
with each other. The original panchnama was not produced. The copy of
the panchnama did not indicate the place from which the items were
recovered. Even the specific key supplied by appellant No. 2 herein,
F Ishwaribai, with which the locker in the western bedroom was allegedly
opened, was not separately seized. There was no contemporaneous record
to show from which place what was recovered. In all, eight gold bars were
seized. According to Mahadeshwar, one of the key witnesses from the
Income-tax department, five of the bars were recovered from the ornamental
top of the cupboard in the eastern bedroom. This statement was made
G before the Authorised Officer. However, later on in the criminal trial he
has deposed that two to three bars were recovered from that place. Before
the Authorised Oficer, Mahadeshwar stated that two gold bars were
recovered from the western bedroom _whereas in the criminal trial he has
deposed that one gold bar was recoven:d from the western bedroom. Before
H the criminal court, he deposed that two bars were found in the telephone f
G.U. AHUJA v. U.0.1. [KAPADIA, J.) 971
room, whereas before the Authorised Officer he deposed that he was not A
sure. According to Ms. Thadani, one of the witnesses in the raiding party
from the Income-tax department, only one gold bar was recovered from
the telephone room. No recovery memo was prepared by her. According
to Kundalgaonkar, one of the witnesses to the recovery, one gold bar was
recovered from the westt"n bedroom. However, in his confidential record, B
he stated that two gold bars were recovered from that room. Similarly, in
his report to Shri Vaidya, Kundalgaonkar has stated that Ishwaribai gave
the keys to him whereas in the criminal trial he has deposed that she gave
the keys to Mahadeshwar. All these contradictions have taken place
because there was no contemporaneous record to prove the recovery and C
the panchnama prepared was faulty as it did not indicate the place from
which the gold was recovered. In conclusion, none of the witnesses were
able to give a coherent story as to where the primary gold was found.
Therefore, recove1y of three gold bars from the telephone room and
western bedroom was not proved.
D
On the other hand, from the evidence, it stood established that the
ornamental top of the cupboard in the eastern bedroom could not be
opened. The screws were rusted and old. They had to be cut. The entire
gold was found at this place. The opening of the ornamental top was
difficult. That improvised keys had to be prepared by the locksmith, who E
was the witness for the department. That they were made to open the
locker/vault inside the ornamental top. The evidence shows that the.
appellants did not have the keys to open the said vault. That the entire
primary gold, except the idols, was found from the ornamental top of the
cupboard in the eastern bedroom. At this stage, it may be mentioned that F
some of the gold bars had foreign markings for which proceedings were
taken against the appellants under the Customs Act. They were exonerated
Y of the charge of smuggling. However, in those proceedings, it was deposed
by Mahadeshwar that the entire primary gold was recovered from one
cupboard. Further, in his order dated 26.6.1976, the Authorized Officer
held that entire gold was seized from one cupboard. In the circumstances, G
the appellants were not in conscious possession of primary gold and they
were entitled to the benefit to the proviso to section 71 (I).
The next point which we are called upon to decide concerns legality
of seizure of primary gold, more pa11icularty· described in the panchnama H
972 SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A dated 30.8.1974 (at page 95 of Volume-I!). On August 28. 1974, the
residential premises of appellant No. l Gopaldas was searched and primary
gold was seized. A panchnama for the same was prepared by the officers
of lncome-tax department. The said search and seizure operations were
carried out by RD. Mahdeshwar. Assistant Director of Inspection, Income-
B tax depa11ment, Bombay, pursuant to authorization from Commissioner of
Income Tax in terms of Section 132 of Income Tax Act, 1961. Gopaldas,
appellant No. I, was present at the time of search. The Income Tax
Authorities gave intimation of the concealed gold bars to the Gold Control
Officer. who was informed about the recovery of huge quantity of gold
C from the residence of the appellants. On August 30, 1974, the Gold Control
Officer attended the Income-tax office and, in the presence of Gopaldas,
took over the custody of the seized gold from the Inco1:ie-tax department.
Thereafter, the above panchnama was prepared, which was signed by
appellant No. 1 herein. On 20.9.1974, the Gold Control Officer served a
show-cause notice on the appellants calling upon them to explain why
D proceedings under section 71(1) and section 74 of the 1968 Act should not
be initiated. In the show-cause notice, it was alleged inter a/ia that the
appellants had contravened section 8(1) read with section 8(6) and section
16( l) read with section 16(5) ina3111uch as the appellants had in their
possession, custody and control primary gold in the form of gold bars; that
E they had failed to dispose of the same within six months from 1.3: 1967
in terms of rule l 26H of Defence of India Rules and that they had failed
to file a declaration in the prescribed form in respect of 682 gold
sovereigns, one gold coin and four ,;;old idols (hereinafter referred to as
"the gold ai1icle ). The appellants submitted their reply to the show-cause
F notice vide letters dated 29.10.1974. They claimed that Bhojibai had
purchased the said gold much prior to the Defence of India Act, 1962. They
claimed that they were not aware of the existence of the said gold as it was
concealed in the cavity under an ornamental top over the cupboard in the
eastern bedroom from which the entire gold was recovered by the officers
of the Income-tax depai1ment and cor.sequently they were not in conscious
G possession of the said gold.
Mr. Sundaram. learned senior counsel appearing on behalf of the
appellants submitted that the Gold Control Officer merely took over the
primary gold from the Income-tax officers which did not constitute a
H seizure under the 1968 Act. That in any event, such take over was not f
G.U. AHUJA v. U.O.I. [KAPADIA, J.) 973
permissible under section 132(5) of the Income Tax Act, 1961. He urged A
that there was no second seizure as alleged by respondents no. 2 and 3
herein; that the said plea was taken to prevent the appellants from claiming
immunity under voluntary disclosure scheme. In any event, it was submitted,
that if there were two seizures, one in the Income Tax Act on 28.8.1974
and the other under the 1968 Act on 30.8.1974, it would tantamount to the B
gold having been seized by the Gold Control Officer from Income Tax
Authorities which would be no seizure in law. He relied upon the judgment
of this Court in the case of Tarse1i1 Kumar's (supra). He elaborated this
point by alleging that in order to get over the judgment of this Court in
Tarsem Kumar's case, the said respondents have sought to contend that
the primary gold was returned to the appellants by Income-tax department C
and seized thereafter by Gold Control Officer from the appellants. That this
contention was not possible as there was no document to e·stablish that gold
was returned by the Income-tax depa1im~nt to the appellants. That this
stand of the respondents herein was self serving and incorrect as the
panchnama (at page 95 of Volume-II) itself stated that primary gold was D
seized from Income-tax department by the Gold Control Officer. It was
urged that inter-departmental seizure was impermissible under the Income
Tax Act, 196 I as well as under the 1968 Act.
Learned counsel for the appellants next contended that even section
66 of the 1968 Act was not applicable as seizure connotes taking possession E
of the goods contrary to the wishes of the person from whom it is taken.
In this connection, it was submitted that section 3 of the 1968 Act
made the Act inapplicable to any gold in possession of the Government.
It was contended that on and from 28.8.J 974, the said gold was in
possession of Income-tax department and, therefore, the said 1968 Act was F
inapplicable. It was urged, that in the circumstances, since there was no
seizure in law or fact, the appellants were entitled to claim immunity under
the Voluntary Disclosure Scheme, 1975 (hereinafter referred to as "the
VOS, 197 5").
Per contra, Mr. Bajpai learned counsel appearing on behalf of the G
depaitment submitted that section 66 empowered the Gold Control Officer
to seize any gold in respect of which he had reason to believe that any
provision of the Act had been contravened. That the seizure of gold in this
case was made under a panchnama in presence of Gopaldas in the
reasonable belief that the provisions of the Act had been contravened. In H
974 SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A this connection, reliance was placed 011 the copy of the panchnama (at page
No. 95 of Volume-II), which specifically recorded that the Gold Control
Officer had reason to believe that the provisions of the Act had been
contravened in respect of primary gold, gold sovereigns and gold coins.
in all weighing 37.389.300 gms. value at Rs. 18.70 lacs, and seized from
B Income Tax Officer. Further, CBDT had issued a circular on 30.8.1965
addressed to all Commissioners of Income Tax and Wealth Tax stating that
where gold was seized in a search or a raid by the Income Tax Authorities,
necessary information should be given to the Gold Control Officer. It was
submitted that the circular issued by the CBDT was binding on subordinate
C Income Tax Authorities. That it was in compliance with the said circular
that the Income Tax Authorities informed the Gold Control Officer about
the seizure of the said gold, in response to which the Gold Control Officer
visited the Income-tax office and seized the gold under section 66 of the
1968 Act. Therefore, it was urged that there was no illegality in making
the seizure. That, when the Gold Control Officer went to take over the gold,
D he had knowledge that in respect of such gold, certain provisions of the
1968 Act had been contravened. It was next submitted that section 8 of
the Gold (Control) Act cannot apply to seized gold and ifthe interpretation
place on behalf of the appellants is accepted, it would render section 66
redundant. It was next urged that the judgment of this Court is Tarsem
E Kumar's case (supra) was given in relation to the provisions of the Income
Tax Act. That the said I 968 Act was self-contained Act. In this connection,
it was submitted that the power of seizure under section 132 of the Income-
Tax Act was limited to assets found as a result of search whereas the power
under section 66 of the Gold (Control) Act was an omnibus power of
F seizure, which was not restricted by any preconditions. In this connection.
it was urged that in case ofa seizure under section 132 of the Income Tax
Act, search was a precondition which requirement was not there in section
66 of the 1968 Act. Hence, it was contended that the judgment of this Court v'
in case of Tarsem Kumar (supra) did not apply to section 66 of the 1968
Act. Lastly, it was submitted that the adjudicating proceedings were
G separate and independent of the prosecution proceedings and in view of
the concurrent findings of the Gold Control Authorities under section 71 (I)
and under section 74, no interference is called for.
The short point which we are called upon to decide is the validity of
H the seizure of primary gold on 30.8.1974 by the Gold Control Officer. For f
G.U. AHUJA v. U.0.1. [KAPADIA, J.] 975
that purpose, we have to examine the scheme of the 1968 Act. Chapter XII A
made provisions for entry, search, seizure and arrest. Under section 58 any
Gold Control Officer authorised by the Administrator may search the
business premises ofa dealer, ifhe had reason to suspect that any provision
of the Act had been contravened. Section 66 conferred power on the Gold
Control Officer to seize any gold if he had reason to believe that in respect B
of such gold any provision of the Act had been contravened. It has been
vehemently urged before us on behalf of the appellants that the Gold
Control Officer had no authority to take over and seize the gold from
Income-tax department. Under section 64(b)~ any Gold Control Officer
may, during the course of enquiry in connection with the contravention of
any provisions of the Act, require any person to produce or deliver any C
document or article or relevant to such enquiry. In our view, the words "any
person" in section 64(b) included all revenue officers of the Government.
This is borne out by section 105 under which all officers of the Government
engaged in collection or prevention of evasion of revenue were required
to assist the Gold Control Officer in execution of the provisions of the 1968 D
Act. Hence, the Gold Control Officer acted within his authority when he
took over the said gold from the Income-tax department on 30.8.1974. In
the case of The Collector of Customs, Madras v. Nathe/la Sampathu Chetty
reported in, AIR (1962) SC 316, the expression "reason to believe" in
section 178( 1) of the Sea Custums Act came up for consideration. Section E
178(1) prescribed that where goods to which that section applied were
seized in the reasonable belief that they were smuggled, the burden of
proving that they were not smuggled shall be on the person from whose
possession they were seized. It was held by this Court that where
circumstances existed to raise a reasonable suspicion that goods seized had F
been obtained illicitly, that was sufficient to constitute "a reasonable belief
that the goods were smuggled". In the case of Narandas M. Kapadia v.
'f Union ofIndia & Ors, reported in (1977) Crl. L.J. 1303, the Calcutta High
Court has held that in order to seize goods liable to confiscation under
section 110(1) of the Customs Act, the officer concerned must have reason
to believe that goods were improperly imp01ted. That when a challenge was G
thrown, it was necessary to find out whether the officer had in fact formed
the belief and whether there was material relevant or germane upon which
he could have formed the belief. If there existed some material upon which
such a belief could be formed, the Court is not concerned with the propriety
of the belief or sufficiency of the material. H
976 SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A Applying the above principles to the facts of the present case, we find
that seizure in this case was made by the officers of Income-tax department
on 28.8.1974 and all that the Gold Control Officer did was to take over
the seized gold. When the Gold Control Officer on 30.8.1974 went to take
over the said gold, he had knowledge of the huge quantity of gold seized
B by the Income-tax department. He had the knowledge that the seized gold
was ii legally possessed by the appellants, which by itself was a contravention
of the l 968 Act. The circumstances were so eloquent that they themselves
presented ""reason to be! ieve .. that the provisions of 1968 Act had been
contravened. Some of the gold bars had markings and even stamp of purity
C embossed on them. These writings also provided reason to believe that the
provisions of the Act had been contravened. In the circumstances, there
existed grounds upon which the belic:f of contravention of the Act was
entertained by the seizing officer. It was urged before us on behalf of the
appellants that "seizure'' connotes taking possession of the goods contrary
to the wishes of the person from whom it is taken. tt was submitted that
D in the present case, the seized gold was taken from the Income-tax
department and not from the appellants and consequently, there was no
seizure in law or in fact. It this connection, reliance was placed on the
judgment of this Court in Tarsem Kumar's case (supra). We do not find
any merit in these arguments. Firstly, as stated above, the Gold (Control)
E Act, l 968 is a self contained Act, Under section 64(b), the Gold Control
Officer was empowered to call upon "any person"" to produce any
document or thing relevant to his enquiry into contravention of the
provisions of the Act. Under section I 05, all officers engaged in collection
or prevention of evasion of revenue were required to assist the Gold
F Control Officers in the execution of the provisions of the said Act. Under
section I I I, the said Act was given an overriding effect over all other laws
inconsistent thereto. That mere possession was an offence punishable under
section 85( l )(ii) of the Act. On the other hand, the purpose of seizure under
section 132(5) of the Income-Tax Act is not to punish the assessee but to
assess his tax liabil.ity. Section 132 of the Income Tax Act confers power
G on Income Tax Authorities to realize the income tax dues of the assessee
from his assets. After realizing the dues, the balance value is returned to
the assessee. On the other hand, when gold was seized from the possession
of the person concerned, it was not only liable to confiscation under the
1968 Act but he was liable to be prosecuted for the offence of possessing
H gold. Further, the object behind section 132 of the Income Tax Act is to
G.U. AHUJA v. U.0.1. [KAPADIA, J.] 977
asce11ain the source of income with which the assessee acquires an A
undisclosed asset, Consequently, search under section 132( I) is made a
precondition to seizure under section 132(5) (as it stood at the material
time). Lastly, as stated above, possession ipso facto was made an offence
under the said 1968 Act, which not only provided for prosecution for
possessing gold on the appointed date but it also provided for confiscation B
under section 74(1 ). The power of seizure under section 132(5) of the
Income Tax Act was limited to the assets found as a result of the search,
whereas the power under section 66 of the Gold (Control) Act was
omnibus. It was not restricted by any preconditions. In the circumstances,
we hold that the scheme of section 132(5) of the Income Tax Act, as it C
stood at the relevant time, was different from that of the Gold (Control)
Act, 1968. Therefore, the judgment of this Court in Tarsem Kumar's case
(supra) has no application to the facts of the present case. Secondly, it may
be pointed out that on 30.8.1965, the CBDT has issued a circular to all
.commissioners oflncome Tax and Wealth Tax stating that where gold was D
seized in a search/raid by Income Tax Authorities, necessary information
should be given to the Gold Control Officer. This circular was binding on
all subordinate Income Tax Authorities, in terms of section 119 of the
lricome Tax Act, 1961.This circular has to be read in the light of sections
64(b) and 105 of the Gold (Control) Act. As stated above, section 64(b) E
conferred power on Gold Control Officer to ask any person, which
included Income Tax Officer, to produce before him the primary gold
which the Income Tax Officer had seized. Under section 105, the Income
Tax Officer as a revenue Officer, had to assist the Gold Control Officer.
It is, therefore, clear that under the provisions of the Gold (Control) Act,
the officer was empowered to call upon the Income Tax Officer to produce F
the seized gold before him for taking action under the Gold (Control) Act.
'r In the circumstances, we are of the view that there was no illegality in the
matter of seizure of primary gold on 30.8.1974 by the Gold Control Officer.
In the case of Vasantlal Ranchhoddas Patel v. Union of India, G
reported in 68 (BLR) 223, the Assistant Enforcement Officer obtained a
search warrant from Chief Presidency Magistrate, Bombay, on 23.7.1964
under section 19 of FERA, authorizing him to search shop No. 157 situate
at Mumba Devi Road, Bombay and to seize incriminating documents,
foreign exchange, account books etc. In pursuance of this warrant, the H
978 SUPREME COURT REPORTS (2004] SUPP. 2 S.C R.
A Assistant Enforcement Officer searched the premises on the same date. No ,.
incriminating documents or other materials were found. The appellant was
present in the shop. He was searched by the officers of the Enforcement
Directorate in the presence of panchas and four packets containing
diamonds were found on his person. They were, therefore, seized. There
B was a safe in the shop which was also sealed by the said officers. One of
the Enforcement Officers thereafter informed a Customs Officer about the
seizure of the diamonds. On 23.7.1964, Customs Officer went to the shop
but as the panchnama had already been made and as the diamonds had been
recovered by the Enforcement Officers, the Customs Officer did not once
again seize them. On 24.7.1964, the safe was opened. It was found to
c contain seven packets of diamonds. These articles were seized by the
.•
officers of the Enforcement Directorate. All the packets of diamonds
remained in the custody of the Enforcement Directorate till 4.9 .1964, when
the Customs Officers took charge of the diamonds from the Enforcement
Directorate and seized them under section 110 of the Customs Act. The
D appellant applied to the Chief Presidency Magistrate for orders directing
the officers of the Enforcement Directorate to return the diamonds. On
behalf of the Enforcement Directorate, it was urged that the diamonds had
not been seized under the search warrant issued by the learned Magistrate
but they had been reized under section 151 of the Customs Act, 1962. This
E contention was accepted by the learned Magistrate who held that as the
Customs Authorities had taken charge of the diamonds according to law,
he could not order their return. The appellant thereafter filed Misc. Writ
Petition on the original side of the Bombay High Court praying for return
of the diamonds. The writ petition was summarily dismissed. Being
aggrieved the matter came before the Division Bench of the High Court.
F If was held that under section 110 of the Customs Act, before any action
could be taken, it was necessary that the proper officer should entertain
the belief that the goods were liable to confiscation under the Act. That (
the belief must be entertained at the time when the goods were seized. It
was held on facts that the goods were seized by the Enforcement
G Directorate on 23rd and 24th July, 1964 and they were taken over by the
Customs Authorities on September 4, 1964. The Division Bench rejected
the argument advanced on behalf of the appellants that the transfer of
custody of the goods by the officers of the Enforcement Directorate to the
Customs Officers did not constitute seizure under section 110 of the
H Customs Act . It was held that section I IO of the Customs Act does not
G.U. AHUJA v. U.0.1. (KAPADIA, J.] 979
place any limitation as to the person from whose possession the goods A
believed to liable to confiscation can be seized. As stated above, the Gold
(Control) Act, 1968 was a self-contained Act; that under section 64(b) the
Gold Control Officer had wide powers to direct any person to produce the
document or thing relevant to the inquiry into contravention of the
provisions of the Act; that section 66 did not place any limitation as to the B
person from whose possession the goods liable to confiscation could be
seized and under section I 05, all revenue officers were duty bound to assist
the Gold Control Officer in execution of the provisions of the Act. In the
circumstances, the judgment of this Court in the case of Gian Chand v.
State of Punjab, reported in AIR ( 1962) SC 496 has no application. For C
aforestated reasons, the take over of gold on 30.8.1974 constituted lawful
seizure under Section 66.
The last point which we have to decide is - whether the appellants
herein were entitled to claim immunity from confiscation of gold and
imposition of penalty under the Voluntary Disclosure of Income and D
Wealth Ordinance, 1975? In this connection, the following facts may be
noted. On 8.10.1975, the President of India promulgated Voluntary
Disclosure of Income and Wealth Ordinance, 1975. The said Ordinance
was repealed subsequently by the Voluntary Disclosure of Income and
Wealth Act (No. VIII of 1976). The Act conferred complete immunity from E
proceedings for confiscation, penalty and prosecution. On 27.12.1975,
appellant No. l as Karta herein filed the declaration under the VOS, 1975
and claimed immunity. On 5.6.1976, the Officer took the decision that the
declaration in respect of the seized gold could not be accepted. It was
further held that as the show-cause notice was issued under the 1968 Act F
on 20.9.1974 and as the declaration was filed on 27.12. I 975, the appellants
were not entitled to immunity. Learned counsel appearing on behalf of the
y appellants urged that in the present case, proc,eedings were not pending on
the relevant date and in support of his submission he contended that the
initial order dated 26.6.1976 passed by the Collector was set aside by the
Appellate Authority on 21.11.1977 and the proceedings were remanded for G
de nova trial and, therefore, till the commencement of de nova adjudication,
there were no proceedings pending and consequently the appellants were
entitled to immunity. We do not find any merit in this argument. As stated
above, proceedings were initiated vide show-cause notice dated 20.9.1974
whereas the Ordinance came to be promulgated on 18.10.1975 and H
980 SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A appellant No. I filed his declaration on 27.12.1975. Under the Ordinance,
a declarant was entitled to claim immunity from penalty, confiscation and
prosecution under Gold (Control) Act, if before making the declaration the
gold was not seized and no proceeding was pending in respect of that gold
before any authority under that Act. Since, proceedings were pending at
B the time of filing of the declaration, the appellants were not entitled to
immunity.
It was next contended on behalf of the appellants that since there was
no seizure in fact or in law, the appellants were entitled to claim immunity
C under the VDS, 1975. In this connection, it was argued that seizure in the
present case was not in accordance with sections 58, 59 and 66 of the Gold
(Control) Act and consequently, it was void and, therefore, the appellants
were entitled to claim immunity under the VDS, 1975. It was submitted
that in the present case, the declaration of appellant No. I was refused only
on the ground that there was seizure of gold but once this fact is
D demonstrated to be incorrect then ipso facto the reason for depriving the
appellants of the benefit of the scheme would fail. In this case, we have
held that the seizure of the gold on 30.8.1974 was in accordance with the
provisions of the 1968 Act and since the d1~claration was filed after the said
seizure, the appellants were not entitled to claim immunity.
E
To sum up, we find that the seizure of the gold on August 30, 1974
was lawful and in accordance with Section 66 of the 1968 Act. However,
in absence of any evidence of recovery of primary gold from the western
bedroom and the telephone room and in the absence of any material to
F show that the appellants had knowledge of the said gold hidden in the
ornamental to'p of the cupboard in the eastern bedroom, the contravention
of the provisions of the 1968 Act is not established against the appellants
and consequently the orders of confiscation and penalty are not sustainable.
For the aforestated reasons, the appeal is allowed and the impugned
G judgment and order of the Division Bench of the High Court dated 5.1.1994
is set aside. The order of the Appellate Authority dated 5.11.1981 confirmed
in Revision vide order dated 10.7.1982 to the extent of absolute confiscation
of seven gold bars, one gold brick, gold coins and sovereigns, more
pa1ticularly described in the panchnama da.ted 30.8. l 974 (page 95 of Vol.
H II) with personal penalties on each of the two appellants herein, are set
G.U. AHUJA v. U.0.1. [KAPADIA, J.] 981
aside. Consequently, we direct that the said gold, if not disposed of so far, A
shall be returned to the appellants within two months from the date of the
receipt of the copy of this judgment and order by the Collector of Customs
(Preventive), Bombay. If, however, the said gold is disposed of, its sale
price shall be paid to the appellants with interest @ 6% p.a. from the date
of disposal till payment. In the facts and circumstances of this case, there B
will be no order as to costs.
N.J. Appeal allowed.
'
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Gold (Control) Act"Sign in to search