1. The petitioner is a registered firm of partnership. It is engaged in the manufacture of synthetic organic dyestuff falling under Tariff 14-D of the First Schedule to Central Excises and Salt Act, 1944 (hereinafter referred to as the Act).
2. It is common ground that on 11-9-1985, a group of Central Excise officials under the leadership of the 2nd respondent herein visited the petitioner's factory and informed a partner that on information, they had come to the factory to check up the accounts and the stock held in the finished goods store room of the factory. After checking the accounts and the stocks, they found no discrepancy. Subsequently, the officers visited the manufacturing hall of the factory premises and inquired about the materials stored in 30 drums, which were in the manufacturing hall. While it is the case of the petitioner that the 30 drums contained semi-finished goods, the officers who inspected, took the stand that they are finished goods and apprehended that they are kept for clandestine removal from the factory and consequently, they seized 30 drums of semi-finished dyestuff under mahazar dated 11-9-1985. Besides, they also seized number of records belonging to the Petitioner firm as enumerated in the mahazur. The seizure of both the dyestuff and the records is challenged in this writ petition.
3. The principal contention advanced by Mrs. Nalini Chidambaram, learned counsel for the petitioner is that only Section 110 of the Customs Act which is made applicable to the present Act, confers power on the proper officer to make seizure of the goods liable to confiscation under the Act and that before such power can be exercised, the proper officer must have reason to believe that such goods are liable to confiscation. According to the learned counsel, on the records as also corroborated by the averments in the counter-affidavit, the proper officer in the instant case never entertained any such belief and that therefore, the condition precedent to exercise of power of seizure is totally absent and consequently, the seizure is bad in law and is liable to be quashed.
4. Before I proceed to examine the above contention, it is convenient to refer to the counter arguments advanced by the learned counsel for the respondents. According to the learned counsel, this is a case where there was inspection and seizure simultaneously but not mere seizure and that the power was not exercised by the respondents under section 110 of the Customs Act; on the other hand, it was under Section 118(a) the said power was exercised. I must own, I am unable to appreciate the above contention particularly when the learned counsel was not able to lay his hands on any provision, which empowers the 2nd respondents and his subordinates who made the inspection on 11-9-1985 to make an inspection as also a seizure simultaneously. It is true in certain cases a right of inspection is vested in officers with or without notice to the owner; for example see Rule 197; that is either for the purpose of testing the accuracy of any return submitted under these rules or of informing himself as to any particulars regarding which information is required for the purpose of this Act or these rules. The other argument made by the learned counsel for the respondents with a things of frustration is that the seizure is permitted by the combined effect of all the rules, viz., 173(g), 226, 202, 118(a), 197, 173(a), 37(4), 49, 52 and 53. In particular, emphasis is made on the combined effect of rules 173Q and 37(4) of the Excise Act. It is also urged that confiscation includes seizure and therefore, seizure is not bad in law as contended by the learned counsel for the petitioner.
5. It is necessary to notice that under the Notification of the Government of India in the Ministry of Finance (Department of Revenue), Central Excises, No. 69/59 (G.S.R. No. 822 of 1959), dated the 18th July, 1959, the Central Government declared that the provisions of Sub-section (1) of Section 105, Section 110, Sub-section (2) of Section 115, clause (a) of Section 118, Sections 119, 120, 121, 124, 129 and clause (b) of Sub-section (1) of Section 142 of the Customs Act, 1962 (52 of 1962) relating to matters specified therein, shall be applicable in regard to like matters in respect of the duties imposed by Section 3 of the first mentioned Act, subject to the following modifications and alterations which the Central Government considers necessary and desirable to adopt these provisions to the circumstances, namely :-
1. In the said provisions. - (i) references to 'that Act' shall be deemed to be references to 'the Central Excises and Salt Act, 1944 (1 of 1944) and the Central Excise Rules, 1944', (ii) references to 'Assistant Collector of Customs' shall be deemed to be references to 'Assistant Collector of Central Excise', (iii) references to 'Officer of Customs' shall be deemed to be references to 'Central Excise Officer not inferior in rank to a Sub-Inspector', (iv) reference to 'proper officer' shall be deemed to be references to 'proper officer' as defined in Clause (ii) of Rule 2 of the Central Excise Rules, 1944, and (v) references to 'smuggled goods' shall be deemed to be references to 'excisable goods' which have been removed in contravention of any provisions of the Central Excise Rules, 1944.
2. In the proviso to Sub-section (2) of the said Section 110, the reference to 'Collector of Customs' shall be deemed to be a reference to Collector as defined in Clause (ii) of Rule 2 of the Central Excise Rules, 1944.
3. In the said Sub-section (2) of Section 115, - (a) the reference to 'smuggling' shall be deemed to be a reference to removal of excisable goods in contravention of any of the provisions of the Central Excise Rules, 1944, (b) the reference to 'the rules' shall be deemed to be a reference to the 'Central Excise Rules, 1944, (c) in the proviso the reference to 'goods which are sought to be smuggled' shall be deemed to be a reference to 'goods which are sought to be removed in contravention of any of the provisions of the Central Excise Rule, 1944.
4. In the said Clause (a) of Section 118 the references to 'goods imported' shall be deemed to be reference to 'excisable goods in respect of which any of the provisions of the Central Excises and Salt Act, 1944, have been contravened'.
5. In the said Section 124 the reference to 'under this Chapter' shall be deemed to be a reference to under any of the provisions of the Central Excise Rules, 1944.
6. In Sub-section (1) of the said Section 129 the reference to 'Customs authorities' shall be deemed to be a reference to Central Excise authorities.
Section 12 of the Act may be worthwhile to be noticed in this connection:-
"The Central Government may be notification in the Official Gazette declare that any of the provisions of the Customs Act, 1962, relating to the levy of and exemption from customs duties, drawback of duty, warehousing, offences and penalties, confiscation, and procedure relating to offences and appeals shall, with such modifications and alterations as it may consider necessary or desirable to adapt them to the circumstances, be applicable in regard to like matters in respect of the duties imposed by Section
The said provisions enables the Central Government by notification in the Official Gazette to declare that any of the provisions of the Customs Act, 1962 relating to the levy of and exemption from customs duties, draw back of duty, warehousing, offences and penalties, confiscation and procedure relating to offences and appeals shall with such modifications and alterations as it may consider necessary or desirable to adapt them to the circumstances, be applicable in regard to like matters in respect of the duties imposed by Section 3.
6. Section 105 of the Customs Act which is made applicable under the Notification aforesaid, vests the authority concerned to search the premises. It does not by itself authorise seizure. Section 110 which, as rightly, pointed out by the learned counsel for the petitioner, is the relevant provision authorising seizure. According to the said provision,
"If the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods :
Provided that where it is not practicable to seize any such goods, the proper officer may serve on the owner of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer."
(The rest of the provision is omitted as not relevant for the present purpose). I will be referring to this provision with further details in due course. Section 115 and Section 115(2) of the Customs Act deal with confiscation of conveyances. Therefore, this has no relevance to the present case. Section 118(a) of the Customs Act provides,
Where any excisable goods in respect of which any of the provisions of the Central Excises and Salt Act, 1944 have been contravened, in a package are liable to confiscation, the package and any other goods imported in that package shall also be liable to confiscation."
I must immediately point out here that Section 118(a) of the Customs Act as modified by the Notification alone is referred to by me. I am unable to agree with the learned counsel for the respondents that Section 118(a) of the Customs Act made applicable to the Central Excises and Salt Act, 1944 with suitable modifications referred to above, will justify the seizure made in the instant case. According to the plain meaning of the said provision, only the package in which are found excisable goods in respect of which any of the provisions of this Act have been contravened and any other goods contained in that package alone are liable to confiscation; in other words, it is the package as also goods other than excisable goods in respect of which any of the provisions of the Act have been contravened, are liable to confiscation under this provision. This provision does not enable the authorities concerned to seize the excisable goods in respect of which of the provisions of this Act had been contravened. I must emphasize that the expression 'any other goods' would only connote the goods other than excisable goods in respect of which there had been a contravention of this Act. Thus, I am to reiterate that the package containing excisable goods in respect of which there had been a contravention of this Act as also any other goods contained in the package are alone liable to confiscation under this provision. If that is so, the present seizure cannot be sustained under Section 118(a). Section 119 of the Customs Act provides that any goods used for concealing excisable goods in respect of which there had been a contravention of this Act, shall also be liable to confiscation. Therefore, even this provision cannot be resorted to by the respondents to justify the present seizure. So too, Rules, 120, 121, 124, 129 and 142(1) have no relevance as they do not relate to seizure.
7. Rule only prescribes the procedure to be followed by the assessee for maintenance of the accounts, etc. Rule 173Q deals with confiscation and penalty but not seizure. Further confiscation visualised by these rules is after the contravention of Sub-clauses (a) to (d). Even Rule 37 deals with annual returns of a unmanufactured products cured. I am unable to comprehend as to how the combined force of Rules 173Q and 37 has any relevance to the instant case. Rule 173A only refers to the power of the Central Government to notify in the Official Gazette as to the provisions of Chapter VII-A to be made applicable to excisable goods. Thus even this provision has no relevance at all. Rule 226 prescribes how entry books, stock account and warehouse registers should be maintained. Rule 202 empowers any officer who is authorised under Rule or Rule 201 to require any person who has the immediate possession, control or use of the land building, enclosed place, premises, vessel, conveyance or other place which he desires to search under these rules, or of any excisable goods, composition for match-heads or saltpetre for the manufacture of matches, process, sorted, stored, manufactured or carried thereupon or therein, to open or allow access to inspect or examine such place or conveyance or to open, unload, unpack or allow the inspection or examination of such articles and if such a person should fail to comply with such a requirement, the officer may cause anything to be done which he may deem necessary in order to exercise his powers under these rules these rules in a proper manner and further enables the officer to recover the cost incurred in this behalf. This again has no bearing on the present problem. As regards Rule 49, it refers to duty chargeable only on removal of goods from the factory premises or from an appropriate place of storage. Rule 52 insists on payment of duty before the dutiable goods are to be removed either from the place concerned and on an application to the Collector within the prescribed time. Rule 53 mandates that every manufacturer shall maintain stock account containing prescribed particulars. Even Section 37(4) only refer to rule making to power of the Central Government. Thus, none of the provisions in this Act or the Customs Act made applicable to this Act or the rules referred to by the learned counsel for the respondents is ever useful to the respondents to justify the seizure made in the instant case.
8. Let me now examine the petitioner's contention. In the mahazar dated 11-9-1985 (13 hours), this is what I find :-
Therefore, the warrant only enabled the officers concerned to make an inspection, but not seizure. In the other mahazar dated 11-9-1985 (10-30 hours), this is what I find :-
Thus, it is clear that the seizure was on the reasonable belief of the officer who conducted the inspection. Thus, it is patent that the reasonable belief is not of the proper officer, but of the 2nd respondent and others who obviously must be subordinates. Proper officer is defined in Rule 2(xi). According to that rule, proper officer means the officer in whose jurisdiction the land or premises of the producer of any excisable goods, or of any person engaged in process of production of, or trade in, such goods or containers thereof whether as a grower, cured, wholesale dealer, broker or commission agent or manufacturer, or intended grower, cured, wholesale dealer, broker commission agent, or manufacturer, are situate. In this case, it is seen from the counter-affidavit warrant was issued by the Preventive Assistant Collector of Excise and the search was by the 2nd respondent and others. Though in the affidavit a point has been taken that unless the proper officer entertained a bona fide belief that any goods are liable to confiscation under this Act, there can be no valid seizure, in the counter, it is not made clear as to who is the proper officer and whether the 2nd respondent who made the inspection and seizure, is the proper officer is within the meaning of the said rule. According to the rule, proper officer is the officer in whose jurisdiction the land or premises of the producer of any excisable goods is situate. (I have omitted the other portions as not germane for the present purpose). If that is so, it is the Head of the department who will be the proper officer in whose jurisdiction the land or premises of the producer of any excisable goods is situate. It is not in dispute that there is the Collector of Central Excise and Customs at Madurai. The seizure was within his jurisdiction. If that is so, the proper officer must be the Collector of Central Excise and Customs at Madurai. This will immediately establish that unless the said Collector of Central Excise and Customs (1st respondent herein) entertained any reasonable belief that the excisable goods are liable to confiscation, there can be no valid seizure.
9. I am to reiterate that the source of power for seizure has to be found in Section 110(1) of the Customs Act made applicable by the Notification to this Act with certain modifications referred to above and nowhere else. The reasonable belief on the part of proper officer is sine qua non for the exercise of power of seizure. In this case, that foundation is wholly absent. Then, the seizure is undoubtedly bad in law.
10. The decision reported in Ultramarine & Pigments Ltd. v. The Deputy Collector of Central Excise (Valuation), Madras and another (1983 E.L.T. 926) relied on by the learned counsel for the respondents has no bearing on the issued involved in this case. The ratio laid down therein is that
"If the petitioner has failed to enter the excisable goods in the R.G. 1 register and to maintain the accounts in respect of production, manufacture, delivery or disposal of goods, they are liable to seizure for contravening the provisions of Rules 53, 174(4), 173Q(1)(d) and 226 of the Central Excise Rules, 1944."
I prefer to follow the principle laid down in Smt. Pushpa Devi v. Union of India (1984 E.L.T. 72) which squarely applies to the instant case. Though in that case the matter arose under Gold (Control) Act, the provision in the instant case is almost in like terms in the Gold (Control) Act which fell for determination in the above reported case. The learned Judge of the Rajasthan High Court has observed :-
"The pre-requisite condition for the application of Section 66 of the Gold (Control) Act is the reasonable belief that the provisions of Gold (Control) Act have been or are being or are attempted to be contravened. In other words, the power under Section 66 extends to the seizure of such gold in respect of which contravention has either been made or is about to be made. In the present case, there is nothing on the record on the basis of which it could be said that there was any reason to believe that in regard to the gold owned or which was in possession, custody or control of the petitioner or her husband, any provision of the Gold (Control) Act has been or is attempted to be contravened or any breach of the provisions of the Gold (Control) Act has been committed. Therefore, the seizure of the Gold ornaments was invalid and illegal."
11. It may not be out of place of refer to Section 22 of the Act :-
"Any Central Excise of other officer exercising powers, under this Act or under the rules made thereunder who
(a) without reasonable ground of suspicion searches or causes to be searched any house, boat or place;
(b) vexatiously and unnecessarily detains, searches or arrests any person;
(c) vaxatiously and unnecessarily seizes the movable property of any person, on pretence of seizing or searching for any article liable to confiscation under this Act;
(d) commits, as such officer, and other act to the injury of any person, without having reason to believe that such act is required for the execution of his duty; shall for every such offence, be punishable with fine which may extend to two thousand rupees.
Any person wilfully and maliciously giving false information and so causing arrest or search to be made under this Act shall be punishable with fine which may extend to two thousand rupees or with imprisonment for a term which may extend to two years or with both."
Under Section 22, any Central Excise or other officer exercising powers under this Act or under the rules made thereunder who (a) without reasonable ground of suspicion searches or causes to be searched any house, boat or place shall for every such offence, be punishable with fine which may extend to two thousand rupees. This only shows that the search should be in accordance with Section 110 of the Customs Act made applicable to this Act with suitable modifications sated supra.
12. Rule 9 which is also brought to my notice by the learned counsel for the respondents refers to time and manner of payment of duty. Even this rule therefore will render no help to the respondents.
13. The conditional offer by the respondents as such from the counter affidavit is no cure to an illegal seizure.
14. In the result, the petition succeeds and is allowed with costs as prayed for.
15. Advocate's fee Rs 500/- (Rupees Five Hundred only).