Gold Control Act penalties and exemptions: post-delivery RBI gold lost exemption, and higher confiscation-based penalty required specific notice.

Gold purchased from the Reserve Bank ceased to be covered by the statutory exemption once it was sold and delivered, because the protection under the Gold (Control) Act extended only while the gold remained in Government or RBI possession or control. A licensed dealer could not shift its business premises merely by routing the sale through a commission agent, and the accounting restrictions continued to apply to the transaction. A higher penalty under Section 74 could not be imposed where the notice invoked only Section 75 and no prior notice or opportunity was given on the specific footing that the gold was liable to confiscation; the penalty was therefore confined to the lesser amount permissible under the notice. Writ relief was available notwithstanding an alternative remedy because the action offended natural justice.

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Issues: (i) whether gold purchased from the Reserve Bank of India continued to enjoy the exemption under the Gold (Control) Act, 1968 after delivery to the purchaser; (ii) whether sale through a commission agent at Bombay satisfied the requirement that a licensed dealer carry on business only at the premises specified in the licence and whether the accounting provisions applied to the transaction; and (iii) whether a penalty under Section 74 of the Gold (Control) Act, 1968 could be imposed when the show-cause notice was issued only under Section 75 and no prior notice was given on the footing that the gold was liable to confiscation.

Issue (i): whether gold purchased from the Reserve Bank of India continued to enjoy the exemption under the Gold (Control) Act, 1968 after delivery to the purchaser.

Analysis: Section 3 of the Gold (Control) Act, 1968 excluded only gold belonging to, or in the possession, custody or control of, the Government or the Reserve Bank of India. Once the gold was sold and delivered to the purchaser, it ceased to remain in such possession or control. The protection under the exemption therefore ended on purchase, and the petitioner could not rely on Section 3 after acquisition of the gold.

Conclusion: The contention failed and the exemption was unavailable to the assessee after purchase.

Issue (ii): whether sale through a commission agent at Bombay satisfied the requirement that a licensed dealer carry on business only at the premises specified in the licence and whether the accounting provisions applied to the transaction.

Analysis: Section 27(7)(b) imposed a mandatory restriction that a licensed dealer could not carry on business at any premises other than those specified in the licence. The definition of dealer included a commission agent, but that did not mean that a dealer transacting through a commission agent automatically acquired the commission agent's premises for purposes of the licence. The petitioner could not shift its own licensed business premises to Bombay merely because the sale was routed through commission agents. As to Section 9 and Section 55, the authorisation did not permit the petitioner to dispose of the gold in the manner adopted, and nothing in Section 55 exempted such gold from the requirement of accounting.

Conclusion: The contentions failed and the statutory restrictions and accounting requirements applied against the assessee.

Issue (iii): whether a penalty under Section 74 of the Gold (Control) Act, 1968 could be imposed when the show-cause notice was issued only under Section 75 and no prior notice was given on the footing that the gold was liable to confiscation.

Analysis: Section 75 provided a limited penalty for contraventions where no express penalty was otherwise provided, while Section 74 applied only where the conduct rendered the gold liable to confiscation and exposed the person to a higher penalty. The notice issued to the petitioner invoked only Section 75 and alleged two contraventions. No confiscation proceeding or notice under Section 74 was initiated, and the finding that the gold was liable to confiscation was reached without affording the petitioner an opportunity to meet that case. In such circumstances, the higher penalty under Section 74 could not be sustained. The Court also held that the availability of an alternative statutory remedy did not bar writ relief where the impugned action was taken in violation of natural justice.

Conclusion: The penalty under Section 74 was unsustainable, and the levy had to be confined to the maximum penalty permissible under Section 75.

Final Conclusion: The petition succeeded only to the extent of setting aside the higher penalty and substituting the penalty permissible under the notice and the applicable penal provision.

Ratio Decidendi: A higher statutory penalty that depends on a finding of liability to confiscation cannot be imposed without notice and opportunity on that specific basis, and a show-cause notice under a lesser penal provision cannot support imposition of a more severe penalty.

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