Confiscation of seized gold requires proof of knowledge or connivance; technical breach justified reduced penalty.

Confiscation of seized gold could not be sustained where the Department's own show cause notice and recorded statements accepted that the gold had come through a certified goldsmith and belonged to the claimant, and no allegation of the claimant's knowledge or connivance in any contravention was made. On that footing, confiscation was rightly set aside. The reduction of penalty from Rs. 9,000 to Rs. 500 was also justified because the appellate finding treated the breach, if any, as only technical, given that the gold was brought for purity testing and belonged to the claimant. The appellate order was therefore sustained in full.

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Issues: (i) whether confiscation of the seized gold was liable to be set aside on the basis of the material in the show cause notice and the recorded statements; (ii) whether the reduction of penalty from Rs. 9,000 to Rs. 500 required interference.

Issue (i): whether confiscation of the seized gold was liable to be set aside on the basis of the material in the show cause notice and the recorded statements.

Analysis: The Department's own show cause notice proceeded on the basis of the statements of the persons concerned and alleged contraventions against the certified goldsmith and the person in possession of the gold. That footing showed acceptance of the version that the gold had come through the certified goldsmith and belonged to the claimant. In those circumstances, confiscation could not be sustained unless there was a finding that the claimant had knowledge of, or had connived in, the contravention by the gold dealer. No such allegation had been made.

Conclusion: The confiscation was rightly set aside and no interference was called for.

Issue (ii): whether the reduction of penalty from Rs. 9,000 to Rs. 500 required interference.

Analysis: The appellate finding accepted that the seized gold belonged to the claimant and had been brought for testing of purity. On that basis, any lapse on the part of the gold dealer was at best technical in nature. In such circumstances, reduction of penalty was treated as justified.

Conclusion: The reduction of penalty did not call for interference.

Final Conclusion: The order of the appellate authority was sustained in full, and the challenge to it failed.

Ratio Decidendi: Where the Department's own notice proceeds on a version consistent with lawful receipt of the gold and no allegation of knowledge or connivance is made against the claimant, confiscation cannot be sustained merely on suspicion, and a penalty may be reduced where the breach is only technical.

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