Hallmarking of Gold Jewellery: A tale of two districts

It is common knowledge that India is one of the highest consumers of gold, particularly in the form of jewellery. Since gold in its raw form is too delicate, it is always alloyed with some other metal for the purpose of jewellery making. This alloying of gold also makes the public extremely vulnerable to excessive adulteration which cannot be easily detected. Adulteration of gold is also not a new subject. Consumers are well aware of such pitfalls. However, they have no option other than trusting the words of a jeweller.

To instil this trust, the Reserve Bank of India (RBI) Standing Committee on Gold and Precious Metals identified Bureau of Indian Standards (BIS) in the year 2000 as the sole agency to operate the Hallmarking Scheme in India and entrusted BIS with the task of implementing the hallmarking scheme to protect consumers against cheating, develop export competitiveness and make India a leading market for gold jewellery in the world. 

Fast forward to 2018, vide S.O. 2421 dated 14.06.2018 (‘2018 Notification’) and by powers conferred by Section 14(1) of the Bureau of Indian Standards Act, 2016 (‘BIS Act’), the Central Government notified Gold jewellery and gold artefacts (Gold Jewellery) to be hallmarked. In furtherance of this Notification, the Central Government, vide S.O. 205(E) dated 15.01.2020 issued the Hallmarking of Gold Jewellery and Gold Artefacts Order, 2020 (‘2020 Order’). As per the 2020 Order, Gold Jewellery notified in the 2018 Notification shall be sold only by registered jewellers through certified sales outlets; after fulfilling the terms and conditions of certificate of registration as specified in Regulation 5 of the BIS (Hallmarking) Regulations, 2018; such Gold Jewellery shall conform to IS 1417:2016 (as amended) and shall bear hallmark under a certificate.

Also Read: Gold price forecast: 24 Carat Gold rate falls 5.7% within a month. Will it drop further?

The 2020 Order was amended from time to time wherein the jewellers operating from notified 288 districts were mandatorily required to comply with 2020 Order. At this juncture, it is important to mention that these 288 districts have not been notified on a random basis and have been consciously notified in a phased manner, the reason for which is the lack of hallmarking centres and proper testing facilities for gold jewellery. 

It can be logically deduced that the 2020 Order is not applicable to jewellers operating in ‘Free Districts’. In other words, these jewellers can continue selling un-hallmarked jewellery as they do not fall within the purview of the 2020 Order. However, a question may arise that whether a jeweller from Free District can buy Hallmarked jewellery from another jeweller in the notified district, for further sale?

To the extent buying of Hallmarked jewellery is concerned, there appears to be no issue as only registered jewellers can sell Hallmarked jewellery, but anyone can buy Hallmarked jewellery. The issue crops up when it comes to further sale of such Hallmarked jewellery by jewellers in Free District without complying with the 2020 Order.

Regulation 3(1) of the BIS (Hallmark) Regulations mandates that a jeweller shall apply for grant of certificate of registration to sell precious metal articles notified under Section 14(1) of the BIS Act. The BIS Authorities are interpreting above Regulation/Notification strictly, requiring jewellers operating in Free District to be registered in terms of BIS (Hallmarking) Regulations for further sale of already purchased Hallmarked Jewellery, which, in other words is indirect compliance of the 2020 Order. The above scenario is a classic example of Catch-22 situation wherein Free Districts are kept outside the purview of 2020 Order because of lack of proper institutions for hallmarking/testing and at the same time if the jeweller from Free District intends to act in furtherance of the intention of Govt. and sell Hallmarked jewellery, they are compelled to register under BIS (Hallmarking) Regulations/Order.

Such strict interpretation would not be in line with ‘Application clause’ of the 2020 Order and would defeat the entire purpose of demarcating notified/free district as well as conscious phase-wise roll-out of mandatory Hallmarking scheme. Thus, to address the above anomaly, suitable representations should be made by the relevant Industry Associations for carving out exception in the 2020 Order, and in absence of proper hallmarking/ testing facilities, jewellers from Free District should not be penalized or compelled to undergo hardships of registration under BIS for sale of Hallmarked jewellery as such without any further modification or changes. 

This column has been written by Brijesh Kothary, Partner, and Chitrartha Gupta, Senior Associate of Lakshmikumaran & Sridharan Attorneys. 

Disclaimer: The views expressed in this article are that of the respective authors. The facts and opinions expressed here do not reflect the views of www.financialexpress.com