TaxTMI 
TaxTMI 
1981 (6) TMI 29
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.... premises of the assessee known as " Shree Sadan " between November 18 and November 21, 1964. In the course of the search, a large quantity of gold in various forms was recovered from the strong room in the cellar. The gold which was recovered was in the form of 154 gold coins and 8 gold bars. The value of the gold found was Rs. 2,83,320. The Central Excise officials seized the gold on December 17, 1964. Proceedings under r. 126L(16) of the Defence of India Rules, 1963 (Gold Control) were initiated against the assessee. The assessee unsuccessfully challenged the seizure of the gold and the proceedings taken against him by the Central Excise Dept. before this court and the Supreme Court. The Collector of Central Excise, Baroda, passed the following order against the assessee on September 30, 1975, in the proceedings taken out against the assessee: " Therefore, I confiscate the eight gold bars and 154 gold coins under section 71 of the Gold (Control) Act, 1968 (corresponding to rule 126M of the Defence of India (Amendment) Rules, 1968). In lieu of confiscation, the owner, Shri J. A. Shodhan, may pay a fine of one lakh of rupees and redeem the confiscated gold, within three months ....
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....he did not challenge the finding of the Tribunal that the assessee was the owner of the gold articles which were seized by the Central Excise officials as stated above. Therefore, question No. 1 which is set out above, will have to be answered in the affirmative and against the assessee. Grievance of Mr. Shah, however, was that the full market value of the gold articles was not includible in the net or assessable wealth of the assessee. He submitted that the assessee had omitted to declare those gold articles within the prescribed period in contravention of r. 126L(1) and retained possession of the undeclared gold in contravention of r. 126L(10) of the Gold Control Rules. Mr. Shah contended that the result of the contravention of rr. 126L(1) and 126L(10) was that it rendered the undeclared gold articles liable to seizure under r. 126L and ultimate confiscation under r. 126M. In this connection, Mr. Shah invited our attention to a letter, annex. D, dated May 22, 1965, addressed to the assessee by the Superintendent of Central Excise (Gold), wherein it was stated to the effect that the gold seized under the Gold (Control) Rules was liable to be confiscated. Mr. Shah submitted that....
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....the market value of a property, must assume that there is an open market and the property can be sold in such a market and on that basis the value has to be determined. Mr. Shah also does not dispute that while valuing the gold articles in question under s. 7(1) of the Act, it is to be assumed that there was an open market in which the gold articles could be sold and on that basis their value has to be determined. Mr. Shah submitted that even while assuming that there is an open market where the gold articles could be sold, the fact that they were liable to be confiscated cannot be ignored. According to Mr. Shah, the liability to be conficated would remain attached to the gold articles when they are sold in the open market and, therefore, to that extent, their value will be diminished. Therefore, the value of the gold articles will not be equivalent to their full market value. Mr. Shah submitted that in order to determine the correct value of the gold articles, their market value will have to be appropriately reduced bearing in mind the above liability. In support of this argument Mr. Shah placed strong reliance on the decision of the House of Lords in IRC v. Crossman [1937] AC ....
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....5), as if their true effect were to make the existence of an open market a condition of liability instead of merely to prescribe the open market price as the measure of value." and in a later passage at page 770: " But the purpose of s. 7, sub-sec. (5), is not to define the property in respect of which estate duty is to be levied, but merely to afford a method of ascertaining its value. If the view entertained by the Court of Appeal were correct it would follow that any property which could not be sold in the open market would escape estate duty altogether. That seems to be quite an unnecessary and unnatural construction to place upon the language of the statute ............... I think that full justice is done to the meaning of the sub-section if the property to be valued is determined by the earlier sections and s. 7 is treated as being merely a statutory direction as to the method by which the value is to be ascertained. In order to comply with that statutory direction, it is necessary to make the assumptions which the statute directs. This is not to ignore the limitations attached to the share." It was held that the value of the shares for the purpose of estate duty wa....
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.... restriction, limitation or impediment on the ownership of the assessee. Therefore, in our opinion, the mere fact that the gold articles in question were liable to be confiscated, does not in any way affect the market value of the articles under s. 7(1) of the Act as urged by Mr. Shah. It was not disputed by Mr. Shah that it is to be assumed that there is an open market and gold articles could be sold in such market, and on that basis the value has to be determined. Seizure of the gold articles also did not in any way affect the, ownership of the assessee. It was only a temporary measure, akin to an attachment before judgment. If the gold articles were confiscated, the assessee would have lost his ownership over them, but till that event occurred the assessee continued to be the owner thereof. There cannot be said to be any cloud over the title of the assessee over those articles unless and until they were confiscated. Mr. Shah also did not dispute that the assessee was the owner of these articles. His only contention was that in view of the possibility of the gold articles being confiscated their value in the open market would diminish. As discussed above, we are unable to accept ....