ORDER

Civil Appeal No. 3897 of 1986

1. This appeal by the assessee is directed against the order of the Customs, Excise and Gold Control Appellate Tribunal (CEGAT for short) rendered in Appeal No. G/90/85-NRB dated 30-7-1986. Briefly stated the facts giving rise to this appeal are as under.

2. On 21-9-1982, officers of the Income Tax Department raided the business premises of the appellant around 9.30 a.m. and prepared an inventory of gold and gold ornaments found in the premises. After the weighment of the gold and gold ornaments was completed, a copy thereof was delivered to the appellant which showed that 62,190.830 gm of gold ornaments were found in actual stock, whereas the aggregate balance of gold ornaments in their books of account maintained under the Gold (Control) Act, 1968 (hereinafter called the Act) was 67,537.100 gm on that date. The officers of the Central Excise Collectorate, Delhi were called at about 1.00 p.m. and were associated with the exercise undertaken by the Income Tax authorities. N. K. Zaveri, partner of the appellant firm who was present at the relevant point of time informed the authorities that the transactions reflected under Voucher No. 7489 to 7496 and 7507 to 7511 as well as Receipt (Purchase) Vouchers 1439, 1922 and 1923 had not been entered in the GS-11 and GS-12 accounts. The authorities took this fact into consideration and thereafter reduced the shortage which would have worked out to 5446.217 gm to 5014.170 gm. The appellant contends that its partner had raised a protest during the search and had foowed it up by a letter dated 6-11-1982. In the letter of protest, it was mentioned that the officers had taken down the weights on the tags to the ornaments without correlating them to entries in the books and the weights were recorded without a meticulous corelation with the relevant entries. It is not necessary to indicate in detail the nature of the protest. But suffice it to say that the weight, as mentioned, was not accurate. On 21-1-1983, the Assistant Collector of Customs and Gold, Central Excise Collectorate, New Delhi served the appellant with the show-cause notice. After indicating the aforesaid facts in paras I to 3 of the show-cause notice, the appellant was informed that prima facie : (i) there had been a contravention of Section 55 of the Act read with Rule 13 of the Gold Control (Forms, Fees and Miscellaneous Matters) Rules, 1968 (hereinafter called the Rules) in relation to the gold ornaments weighing 5014.170 gm valued at Rs. 8,02,267 found short in the stock of the said dealer and (ii) the appellants have, by their acts of omission and commission rendered themselves liable to penal action under the Act.

3. The appellants were, therefore, asked to show cause why penal action should not be taken against them. To the show-cause notice was appended a list of gold items found during the search. Twenty-nine items were shown in that list with quantity and weight, in some cases, gross weight and in some cases, net weight. A reply to this show-cause notice was sent by the appellants on 21-2-1985. In between the reply and the show-cause notice, it appears that this Court ruled in Manick Chand Pal v. Union of India ((1984) 3 SCC 65 : 1984 SCC (Cri) 389 : (1984) 3 SCR 461 at p. 478 that the GS- 11 and GS- 12 Forms required to be maintained under Section 55 of the Act read with Rule 11 of the Rules brought into force with effect from 31-10- 1975, were defective and did not disclose the true and complete account of the gold in the possession and custody of the licence dealers. It went on to illustrate how the said forms were defective after the omission of Form GS-10 since it also did not take care of the loss of weight (ghat) which would necessarily fall on remaking, melting, refining and polishing of new ornaments from old ornaments etc. Suffice it to say that this Court felt that after the omission of GS-10, the obligation on the dealer to maintain the accounts in Forms GS-11 and GS-12