SATYABRATA SINHA, J.

(1) THIS appeal is directed against a judgment and order dated 9th February, 1999 passed by a learned Judge of this Court whereby and whereunder the learned Trial Judge directed release of the gold seized from the writ petitioner with the following directions :-

"1. On the petitioner paying an amount of Rs. 3,26,560/- to the respondents (this amount being in lieu of the duty payable on the gold seized) and on his furnishing a Bank guarantee to the extent of Rs. 5,00,000/- and a bond for Rs. 10,00,000/- (these two amounts being in lieu of any possible imposition of penalty) in favour of the respondent as prescribed under the customs act or the rules framed thereunder, the respondents shall release the seized gold in favour of the petitioner. The format of the Bank guarantee and bond shall be communicated by the respondents to the learned Advocate-on-record of the petitioner latest by 15th February 1999. The release of the gold shall be effected within one week from the date the aforesaid amount is paid, the Bank guarantee and the Bond are furnished.

(2) THE adjudication proceedings in all respects shall be completed within three months from today and final order passed during this period.

(3) IF the respondents do not complete the adjudication proceedings and pass the final order within three months from today, the petitioner shall become entitled to the refund of the aforesaid amount of Rs. 3,26,560/- with interest at the rate of 18% per annum. The Bank guarantee and the bond furnished by the petitioner shall also immediately stand discharged at the expiry of the three months period.

(4) THE petitioner shall fully cooperate with the respondent in the adjudication proceedings. If the petitioner fails to cooperate in such proceedings, after giving one notice of their intention to do so, the respondents shall also be at liberty to seek appropriate directions from this court, if any necessity so arises. "

2. Mr. Roychowdhury, learned Counsel, appealing on behalf of the appellant has principally raised two questions of law in this appeal :- (a) Whether the gold is a prohibited item within the meaning of the provisions of the Customs Act, 1962 ?and (b) Whether in view of the provisions contained in Section 125 of the said Act the learned Trial Judge ought not to have passed the impugned order as the discretion for exercising option to pay fine etc. could be made only in respect of the goods other than the prohibited goods?

3. In support of his said contention strong reliance has been placed by the learned Counsel on a decision of the Apex Court in Sheikh Mohd. Omer v. Collector of Customs, Calcutta and Ors.

4. Mr. Kapur, learned Counsel, appearing on behalf of the respondent on the other hand submitted that from a bare perusal of the provisions contained in Section 2 (33) of the Customs Act read with other relevant provisions thereof it would be evident that the gold is not a prohibited item. Learned Counsel further submitted that in any event keeping in view the fact that the learned Trial Judge had adjourned the matter on a number of occasions so as to ascertain from the appellants as to on conditions on which the gold could be released and the impugned order having been passed upon concession on the part of the appellant, this Court should not exercise its discretion in interfering with the matter.

(5) THE matter relating to export and import of goods is covered by the Foreign Trade (Development and Regulation) Act, 1992. Section 3 of the said Act reads thus -

"3. (1) The Central Government may, by Order published in the Official Gazette, make provision for the development and regulation of foreign trade by facilitating imports and increasing exports. (2) The Central Government may also, by Order published in the Official Gazette, make provision for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases and subject to such exceptions, if any, as may be made by or under the order, the import or export of goods. (3) All goods to which any order under Sub-section (2) applies shall be deemed to be goods the import or export of which has been prohibited under Section 11 of the Customs Act, 1962 (52 of 1962) and all the provisions of that Act shall have effect accordingly."

(6) SECTION 5 of the said Act provides that the Central Government may from time to time formulate and announce by notification in the Official Gazette the export and import policy and may also in like manner amend that policy. Pursuant to and in furtherance of the said provisions Export Import Policy for the year 1997-2000 had been taken, Clause 4. 1 whereof reads thus -

"4. 1 Exports and Imports shall be free except to the extent they are regulated by the provisions of this Policy or any other law for the time being in force. The itemwise export and import policy shall be, as stated in columns 3 to 5 of the book, titled "itc (HS) Classifications of Exports and Import Items" published and notified by the Director General of Foreign Trade and as amended from time to time. "

Item 2 provides for ITC (HS) Classification of Import and Export which contained as under -

710812 00 ???

Other Unwrought forms

Re stric ted

Not permitted to be imported ex cept against a licence or in accor ? dance with a. Public Notice issued in this behalf

Import permitted against Special Import Licence (SIL)

(7) SECTION 11 of the Customs Act, 1962 empowers the Central Government to prohibit importation and exportation of goods.

(8) SECTION 111 which deals with the power of the Commissioner to confiscate the goods inter alia provided for confiscation of improperly imported goods. Section 111 (d) of the Customs Act, 1962 reads thus -

"111. The following goods brought from a place outside India shall be liable to confiscation - (d) any goods which are imported or attempted to be imported or are brought within the Indian Customs water for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force."

(9) Section 125 of the Customs Act, 1962 provides for option to pay fine in lieu of confiscation which is to the following effect :-

"125. (1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods an option to pay in lieu of confiscation such fine as the said officer thinks fit: provided that, without prejudice to the provisions of the proviso to subsection (2) of section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable therein.

(2) Where any fine in lieu of confiscation of goods is imposed under subsection (1), the owner of such goods or the person referred to in Sub-section (1), shall, in addition, be liable to any duty and charges payable in respect of such goods. "

(10) A bare perusal of the said provision leaves no manner of doubt that if the goods are prohibited then the option is with the Customs Authority to confiscate without giving any option to pay fine in lieu thereof but when the goods are not prohibited then the Customs Authority has no other option but to allow grant of an option to the party to pay a fine in lieu of confiscation.

(11) THE principal question which, thus, arises for consideration is as to whether gold is a prohibiited item ? A Public Notice No. 51, dated 27th October, 1997 was issued which reads thus -

"attention is invited to Public Notice No. 214/ (PN)/92-97, dated 1st June, 1994 vide which import of gold and silver was allowed without licence by Reserve Bank of India or any other agency to be designated by the Ministry of Finance (Deptt. of Economic Affairs). In exercise of the powers conferred under paragraph 4. 11 of the Export and Import Policy 1997-2002 read with Col. 4 of the ITC (HS) Classification in Chapter 71, the Director General of Foreign Trade hereby notifies that these disignated agencies as mentioned in the Notification 80/97 referred above may import gold and silver for sale in the domestic market also without a licence or without surrender of SIL in respect of following entries of ITC (HS) Classifications of Export and Import Items 1997-2002 :-Gold: 710812 00 Other unwrought forms."

(12) THE same was further amended by a Public Notice No. 54 dated 4th November, 1997 which is to the following effect :-

"attention is invited to Public Notice No. 51/ (PN)/97-02 dated 27th October, 1997 on the above subject. In partial modification of the above Public Notice, it is hereby notified that the import of gold and silver shall be permitted to the nominated and authorised agencies by the Reserve Bank of India (RBI)/ministry of Finance. It is further notified that payment of Customs duty for import of gold and silver by such agencies without surrender of Special Import Licence (SIL) and by other importers against surrender of SIL shall also be made in Indian Rupees on payment of such Customs duties as may be notified by the Deptt. of Revenue from time to time. This issues in public interest."

(13) IT is, therefore, evident that the gold could be imported only against a Special Import Licence or by the agencies authorised by the Reserve Bank of India.

(14) THE entire case of the writ petitioner/respondent is that they have purchased gold from Standard Chartered Bank which was meant for sale. The said question is essentially a question of fact and as such we need not consider the same in this proceeding as such a question will have to be determined by the statutory authority.

(15) HAVING regard to the provisions of the customs act as also the 1992 Act, we are of the opinion that keeping in view the fact that a legal fiction has been created in terms of section 3 (3) of the said 1992 act, there cannot be any doubt whatsoever, that gold would come within the purview of a prohibited item. A legal fiction as is well known must be giving its full effect. In Gajraj Singh and Ors. v. State Transport Appellate Tribunal and Ors. it has been held as under -

"legal fiction is one which is not an actual reality and which the law recognises and the court accepts as a reality. Therefore, in case of legal fiction the court believes something to exist which in reality does not exist. It is nothing but a presumption of the existence of the state of affairs which in actuality is non-existent. The effect of such a legal fiction is that a position which otherwise would not obtain is deemed to obtain under the circumstances."

(16) IN Commissioner of Income Tax, Madras v. Urmila Ramesh the Apex Court observed :-

"even though the word "deemed" is not used in Section 41 (2) of the Act, as has been used in Section 10 (2) (vii) second proviso of the 1922 Act, nevertheless this provision creates a legal fiction whereby an amount received in excess of the written-down value is firstly treated as income and secondly regarded as income from business or profession and thirdly it is considered to be the income of the previous year in which the money payable became due. That this section creates a legal fiction has been held by this Court in Cambay Electric case where (at ITR p. 93) it was observed as under : (SCC p. 654, para 7)

"it is true that by a legal fiction created under Section 41 (2) a balancing charge arising from sale of old machinery or building is treated as deemed income and the same is brought to tax; in other words, the legal fiction enables the Revenue to take back what it had given by way of depreciation allowance in the preceding years since what was given in the preceding years was in excess of that which ought to have been given. This shows that the fiction has been created for the purpose of computation of the assessable income of the assessee under the head 'business Income'. It was rightly pointed out by the learned Solicitor General that legal fictions are created only for a definite purpose and they should be limited to the purpose for which they are created and should not be extended beyond their legitimate field. But, as indicated earlier, the fiction under Section 41 (2) is created for the purpose of computation of assessable income of the assessee under the head 'business Income' and under Section 80-E (1), in order to compute and allow the permissible special deduction, computation of total income in accordance with the other provisions of the Act is required to be done and after allowing such deduction the net assessable income chargeable to tax is to be determined; in other words, the legal fiction under Section 41 (2) and the grant of special deduction in case of specified industries are so closely connected with each other that taking into account the balancing charge (i. e. deemed profits) before computing the 8% deduction under Section 80-E (1) would amount to extending the legal fiction within the limits of the purpose for which the said fiction has been created. " we are unable to agree with the submissions of Shri Ranbir Chandra that reference to the language of Section 41 (2) in Cambay Electric case was only incidental. It is evident from the meaning and effect of Section 41 (2) of the Act in that case, which it did. The two provisions namely Section 10 (2) (vii) second proviso of the 1922 Act and Section 41 (2) of the Act both create a legal fiction, difference in language notwithstanding. "

(17) IN Aluminium Industries Ltd. v. Collector of Central Excise, it has been held as under: -

"4. By virtue of this proviso a legal fiction has been created. The price fixed under any law for time being in force has to be taken as the normal price of the goods. In that view of the matter, in the instant case, the price fixed by the notification dated 18-10-1978 will have to be taken as the normal price of the aluminium rods manufactured by the appellant."

(18) IN this view of the matter the definition of prohibited goods contained in Sub-section 2 (33) of the said Act pales into insignificance.

(19) FOR the reasons aforementioned there cannot be any doubt whatsoever that gold is a prohibited item which comes within the first part of Section 125 of the Customs Act.

(20) RELIANCE placed by Mr. Kapur upon a decision of the Full Bench of the CEGAT, West Regional Bench, Bombay in Hasmukh Dalpatrai Ganatra and Anr. v. Collector of Customs, Bombay has no application in the facts of the present case inasmuch as it was held therein that the goods were covered by valid import licence and as such they were held not to be prohibited goods. It was in that situation the decision of the Apex Court in Seikh Mohd. Omer (supra) the Supreme Court was distinguished wherein while considering the clause (d) of Section 111 of the Customs Act it was clearly held that prohibition may be complete or partial and any restriction on import or export is to an extent lead to prohibition.

(21) THIS aspect of the matter, in our considered opinion, must be held to be fortified in view of the provisions contained in Section 3 (3) of the 1992 Act.

(22) HOWEVER, the question remains as to whether in the facts and circumstances of the case this Court should interfere with the impugned order. It has not been the case of the appellant that the discretion which can be exercised by the statutory authority can in no circumstances be exercised by the Court. It is true that normally the Court may not exercise the discretion which can be exercised by a statutory authority but in the instant case the impugned order has been passed in a peculiar situation. The matter was heard by the learned Trial Judge on various dates. The case had been adjourned from time to time with a view to give opportunity to the appellant herein to state before the court as to how its interest can be best protected.

(23) IT is only on the suggestion of the learned Counsel appearing on behalf of the appellant that the learned Trial Judge passed the said order although no affidavit-in-opposition had been filed by them. In fact the writ application was disposed of with the consent of the parties. The learned Trial Judge was given the impression by the counsel for the appellant that the gold is not a prohibited item. Had the intention of the appellant been that no discretion should be exercised in favour of the writ petitioner/respondent in terms of Section 125 of the Customs Act, the appellant could not state the quantum of fine, as also the amount of Customs duty to be levied upon the writ petitioner by the authority concerned.

(24) FOR the reasons aforementioned we are of the opinion that it is not a fit case wherein this Court should exercise its discretionary jurisdiction in interfering with the order under appeal as the discretion exercised by the learned Trial Judge cannot in the opinion of this Court be said to be contrary to law. The Respondents have also complied with the said order.

(25) HOWEVER, keeping in view of the facts and circumstances of the case we extend the time for passing a final order by the appropriate authority by three months from the date of communication of this order.

(26) WITH the aforementioned modification this appeal is dismissed, but in the facts and circumstances of this case, there shall be no order as to costs.