Lawful acquisition claim raised before notice can justify waiver of pre-deposit and stay of recovery when hardship is shown.

Where a claim of lawful acquisition of gold is raised before issuance of the show cause notice, the departmental authority must examine that claim at the threshold. If the issue is not properly verified before notice and the proceedings later reflect a procedural lacuna, waiver of pre-deposit and stay of recovery may be justified, especially where the applicant also shows financial hardship. The text states that, on these facts, the applicant was entitled to waiver of pre-deposit of the penalty and to stay of its recovery during the appeal.

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Issues: Whether the applicant was entitled to waiver of pre-deposit and stay of recovery of the penalty pending appeal in the circumstances of the seizure and the claim of lawful acquisition of gold.

Analysis: The claim of lawful acquisition of gold had been raised before the show cause notice was issued, and the departmental authorities were required to examine it. Once the notice had been issued, verification of that claim could not properly be carried out at the stage of adjudication. The proceedings were therefore found to suffer from a procedural lacuna, and the applicant's financial position was also noted to be precarious.

Conclusion: The applicant was held entitled to waiver of pre-deposit of the penalty and stay of its recovery during the pendency of the appeal.

Ratio Decidendi: Where a claim of lawful acquisition is raised before issuance of the show cause notice, the authority must examine it, and a failure to do so may justify waiver of pre-deposit and stay of recovery when hardship is also shown.

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