Andhra HC (Pre-Telangana)
Union Of India And Anr. vs K. Ramula on 1 January, 1800
Equivalent citations: 1980(6)ELT24(AP)
ORDER Amareswari, J.
1. The two defendants, Union of India, Ministry of Finance and the Collector, Central Excise, Hyderabad, in O. S. No. 286 of 1972 on the file of the Court of the Fourth Addl. Judge, City Civil Court, Hyderabad are the appellants in this appeal.
2. The respondent-plaintiff filed a suit for release of his goods seized on 28-8-1971 or in the alternative for the recovery of their value of Rs. 36,000/- and for damages of Rs. 5,000/- for the loss of his business and reputation on account of the illegal and wrongful seizure of the goods.
The material facts relevant for the purpose of this appeal are as follows : -
The respondent-plaintiff is the sole proprietor of a Match Factory by name M/s. Free India Match Company situate in Hyderabad. The Brother of the plaintiff one K. Lakshminarayana was the manager of this company. There is another Match Factory by name Vasu Match Company and the sole proprietor is Mrs. Kusum who is the wife of the plaintiff's brother and Mr. K. Suresh is the son of the plaintiff and a power of attorney holder of Mrs. Kusum. On 14-8-1971 the officers of the appellants Central Excise Department visited one Shanti Match Company belonging to one Mr. Palani. All these Match Companies are duly licensed under the Central Excise Act. Till 1970 Palani was the Manager of Free India Match Company of the respondent plaintiff. During there visit in Shanti Match Company for the purpose of inspection the Central Excise Officials recovered a note book cut into two pieces hearing the seals of Free India Match Company. The accounts in the said cut note book contained one signature of the respondent- plaintiff and his brother. On a scrutiny of the register the Central Excise Officials suspected that the plaintiff and his brother Lakshminarayana had manufactured and removed without payment of excise duty huge quantities of matches without property accounting for them in the registers. As they suspected something fishy about the accounts, the cut note book was seized by them under a panchanama, which was marked as Ex. B- 3 on the same day i.e. 14-8-1971. On the same day they visited the respondent-plaintiff's match company and seized certain registers. Thereafter the plaintiff's house was searched under a search warrant on 19-8-1971 and they found five gross bundles of matches bearing the trade mark `Apolo' of Vasu Match Company, Hyderabad. During the course of their search they also found some account books of Free India Match Company. In addition to these two, they recovered some other documents also. These articles along with the books of free India Match Company were seized by the Central Excise Officials under a Panchanama Ex. B-4 dated 19- 8-1971. The place where the goods were found was not a licenced premises. The case of the respondent-plaintiff was that they were duty paid goods and sold to one Meenakshi General Stores and since the entire consideration was not received by him they were kept in his house and that the goods do not belong to him as they were already sold to Meenakshi General Stores and hence the seizure was illegal. On 26-8- 1971 the Central Excise Officials visited the Free India Match Company belonging to the plaintiff and showed the cut note book which was seized from Shanti Match Company on 14-8-1971, containing the accounts of the plaintiff's company for the period from 1-4-1965 to 31-3-1966 and asked the plaintiff whether the said register relates to Free India Match Company. The respondent-plaintiff denied that he said book had anything to do with their Free India Match Company and stated that it was brought into existence by Mr. Palani, who was their ex-manager and who was on economical terms with the plaintiff- respondent and was doing rival business of manufacturing of Matches. They also recorded a statement Ex. B-6 on the same day. On 26-8-1971 the plaintiff made a statement Ex. B-1 before the Central Excise Officials i.e., in the presence of the Central Excise Superintendent, Hyderabad. In the said statement he stated that certain records were taken from his Company on 14-8- 1971 and from his house on 19-8-1971 and a book which has been divided into two parts with the stamp of the Free India Match Company which has been seized by them on 14-8-1971, and that all the said books related to Free India Match Company and the names of the workers which was written in the cut register belong to Free India Match Company. He further stated that Mr. Palani was the manager of his company from July, 1963 till August, 1970 ad thereafter left the service and started another Match Company. Later on 18-8-1971, the Central Excise Officials again visited the Free India Match Company and verified the stores of matches in their store-room and Finishing rooms and found 11843 gross of matches (50's) in 601 bundles of 5 gross each, in store room and 274 bags of 30 gross each and in loose in the finishing rooms. According to the defendants the records revealed that the responded Free India Match Company did not account for all the goods manufactured in their factory and that they had illicitly manufactured 17273 gross of matches (50's) more and not accounted for in the relevant prescribed registers and evaded payment of Central Excise duty due thereon. They have therefore seized 11843 gross of matches (50's) which they valued about Rs. 28,000/- ex-duty manufactured by the respondent-company and on the ground that the licensee i.e., the respondent appeared to have contravened the Central Excise Rules with an intention to evade payment of Central Excise duty seized the same under a panchanama dated 28-8-1971, Ex. B-2. In the said Panchanama it was also stated that the respondent and his brother Lakshminarayana who is the manager was present at the time of drawing mahazar. The Panchanama was completed by 10.00 p.m. in the night. On 1-9-1971 the plaintiff-respondent addressed the Collector, Central Excise, Hyderabad stating that the Central Excise officials visited his premises and seized stocks of matches and also account books, that they did not make a panchanama or a search list as required by the provisions of Criminal Procedure Code, that they did not give a receipt for the goods seized nor did they make such list in his presence. He further informed the Collector, Central Excise that they recorded a statement from him, on 28-8-1971 dictating the contents thereof as it suited them and took his signature. No independent witnesses were called for either at the item of search and seizure from the factory premises nor at the time he was interrogated or when his statements were recorded. He further stated that the statement dated 28-8-1971 was written to the dictation of the Central Excise officials in the manner desired by them and not out of his free will. Thereafter the plaintiff issued a notice Ex. A-3 on 4-10-1911 to the Collector of Central Excise stating that in his representation dated 1-9-1971 he appointed out the irregularities committed by the Central Excise officials in the matter of search and seizure and the involuntary nature of the statements recorded from him to their dictation on 28-8-1971 under threat and duress, that on reply was sent to his representation dated 1-9-1971 and since the excisable goods seized from the premises tallied with the records of the R. G. 1 the officers have no right for seizing and removing them from his premises and inasmuch as the seizure was illegal thy are bound to return the goods, that if the same are not returned within a week of receipt of the said notice, the plaintiff will be constrained to take all steps necessary to recover the property illegally seized and removed and for costs.
To the letters dated 1-9-1971 nd 4-10-1971 Exs. A.1 and A.3 respectively a reply was sent by the appellants that a Panchanama was conducted on 19-6-1071 in respect of the house search, that statements was recorded from the plaintiff o 19-9- 1971, 26-8-1971 and 28-8-1971 and a statement was recorded on 8- 9-1971 from the plaintiff's brother Lakshminarayana, Manager of the Free India Match Company and a further statement of the plaintiff on 8-9-1971 and that all these have been acknowledged by him. A copy of the statement dated 28-8-1971 given by the plaintiff was also enclosed to the notice. In the said notice it was stated on behalf of the appellants that the goods manufactured by the respondent-company were seized by the officers on 28-8-1971 in the presence of independent witnesses and in the presence of the respondent-plaintiff himself, who is the proprietor and his brother Lakshminarayana who is the Manager of the Free India Match Company for infringement of the provisions of Central Excise and Salt Act and Rules, 1944, that the department proceedings are in progress and that he will be intimated further.
3. On 28-1-1972 the respondent-plaintiff gave a Lawyer's notice Ex. A- 7 stating that the seizure of goods on various dates was illegal, that the cut note book recovered from the Shanti Match Company belonging to Mr. Palani does not relate to his Company, that the same was manufactured by Mr. Palani who was their ex- manager who was on economical terms with the plaintiff and set up a rival match factory under the name Shanti Match Company, that the alleged book cut into two pieces brought and showed to the plaintiff on 26-8-1971 does not belong to his Company and that it is a fictitious book brought into existence by Mr. Palani with the help of others, who are enumically disposed towards him. In the notice it was further stated that the statement recorded by the Central Excise officials on 28-8-1971 was under a threat of arrest, coercion and undue influence an d to their dictation. It was further stated in the notice that in view of the endorsement "checked and found correct" in the R. G. 1 register that the stocks illegally seized are in conformity with the entries in the R. G. 1 register he has not infringed the Central Excise Act or the Rules. The whole procedure relating to the seizure was illegal, no Panchanamas were conducted, no independent witnesses were present. The stocks seized were worth about Rs. 36,000/- and were liable to be returned to the plaintiff, falling which he will be constrained to file a suit for the recovery of the same. Thereafter, it also appears that a criminal complaint has been filed against the plaintiff in CC No. 2977 of 1973. Ex. A-12 is the certified copy of the order dated 7- 11-1973 wherein the petition filed by the Central Excise officials to withdraw the complaint was allowed and the accused were acquitted of the charges. As the goods were not returned to the respondent- plaintiff, the plaintiff filed O. S. No. 286 of 1972 out of which this appeal arises for the return of the goods or in the alternative for recovery of a sum of Rs. 36,000/- and for damages of Rs. 5,000/- for the loss of plaintiff's business and reputation on account of the illegal and wrongful seizure of the goods.
4. The suit was resisted by the defendants contending that the search and seizure was in accordance with the provisions of the Central Excise and Salt Act and the examination of the various accounts with reference to the books seized in the course of their visit they had reason to believe that the respondent- plaintiff had contravened the provisions of the Central Excise and Salt Act, that at the time when the goods and records were six panchanamas have been prepared and signatures of independent witnesses were obtained an the inventory of the case was recorded in the presence of the plaintiff and other independent witnesses, that the Central Excise officers discharged their duties in good faith. They further contended that though the stocks that were found on one of the dates of the seizure tallied with the R. G. 1 register, the seizure was effected as the accounts were found fictitious with regard to the prior period. They valued the goods seized at Rs. 28,000/- exclusive of the duty paid. They further denied that the motive imputed by the respondent-plaintiff that since he failed to cater to the needs of the Central Excise Officers the goods were seized. They further contended that a show cause notice dated 17-1-1972 was issued to the respondent, plaintiff for the purpose of adjudication and the same was served on him on 21-2-1972 within six moths from the date of the seizure of the goods and that the goods are kept in the custody of the Central Excise officers pursuant to the orders of the Fourth City Magistrate, Hyderabad dated 25-5-1972. They further contended that the suit is not maintainable as no Civil Court can entertain the suit in view of Sections 35 and 36 of the Central Excise and Salt Act, 1944 which specifically provided for remedies to grievances, if any, and the suit is premature as the plaintiff did not wait for the departmental adjudication.
5. On the basis of these pleadings, the trial court framed as many as 15 issues. We shall only refer to such issues which are relevant for the purposes of the present appeal. Issue No. 1 was whether the 5 gross bundles of matches bearing the trade mark of Vasu Match Company recovered from the residence of the respondent-plaintiff belonged to Meenakshi General Stores and was kept in his premises pending payment therefor and if so, whether seizure of the same by the appellants Central Excise officers on 1-8-1971 is not illegal ? The second issue was whether the seizure of an account book cut into two pieces from Shanti Match Company belonging to one Mr. Palani on 14-8-1971 is true and whether the said book relates to the plaintiff's company and whether is a genuine of a fictitious one brought into existence with the collusion of Mr. Palani, an employee of the respondent- plaintiff ? Issue No. 3 was whether the statement of the respondent-plaintiff dated 28-8-1971 was voluntary or was it obtained by threat and coercion and whether the two persons who recorded the statement as authority to do so and if so, is it admissible in evidence against the respondent-plaintiff ? The next issue was whether the seizure of the entire stock of the respondent plaintiff on 28-8-1971 is legal and in accordance with the provisions of the Excise Rules governing seizure and whether nay panchanama for the seizure was prepared on 28-8-1971 or whether it was brought into existence by the second defendant i.e., the Collector, Central Excise. Hyderabad and his subordinate officers with the help of obliging witness. The other issue was whether the show-cause notice received by the plaintiff on 6-3-1972 is valid in law and whether the plaintiff is not entitled to the re-delivery of the goods seized on 28-8- 71 or in the alternative to recover a sum of Rs. 36,000/- the value thereof and whether the plaintiff is entitled to any damages for the illegal and wrongful seizure of the goods an 28- 8-1971. The further issue was whether the Central Excise officials acted in good faith while discharging their duties as public servants and whether the court has jurisdiction to entertain the suit in view of sections 35 and 36 of the Central Excises and Slat Act, read with Section 9, Civil Procedure Code and whether the suit is premature as the departmental adjudication was not yet over ?
6. On all these issues, the trial court after consideration of the evidence on record accepted the case of the plaintiff- respondent and held that the seizure of the account cut note book by the Central Excise Officers from Mr. Palani, the Ex-Manager of the respondent- plaintiff on 14-8-1971 is not true and that the said account book does not relate to the plaintiff's company, that the same is not genuine, and that the same was a fictious document brought into existence with the help and collusion of Mr. Palani. On the issue whether the statement dated 28-8-71 recorded from the plaintiff was obtained by threat of arrest and coersion, the lower court found in favour of the plaintiff. On the main issue whether the seizure of the entire stock and accounts of the plaintiff's company on 28-8-71 the lower court found that it is illegal an don't warranted by the Rules under the Excise Act governing seizure. On the issue whether the seizure was made as the plaintiff failed to eater to the needs of the Excise Officers, the trial court found that the evidence adduced on behalf of the plaintiff that the said action was taken as a demand of bribe was not complied with by the plaintiff is not true as the said allegation was not made either in the plaint or in the suit notice Ex. A-7 or in the earliest notices Ex. A-1 and A-3 hence there was no malice against the respondent- plaintiff. Having observed so, on issue No. 7 whether the Central Excise officers while effecting the seizure acted in good faith or not, the trail court has held that they did not act in good faith while discharging their duties as public servants. As regards the question of jurisdiction the trial court held that inspite Section s 35 and 36 which provides for special remedies in respect of any action taken under the Act, the Civil Court has jurisdiction in the matter as the act done was outside the provisions of the Act. The trial Court further held that since the act of seizure was not in good faith, the bar contained under Section 40 that no orders passed in good faith does not apply to the facts of the present case. On these findings the trial court decreed the suit of the plaintiff with costs directing the appellants-defendants to deliver back the goods seized in the condition in which they were seized or in alternative to pay their value of Rs. 30,000/- to the respondent-plaintiff, with interest at 6% per annum from the date of the suit till the date of realisation and further directed the appellants-defendants to pay a sum of Rs. 2,000/- towards damages with interest thereon at 6% per annum from the date of the suit till the date of realisation.
7. In this appeal Sri K. Subrahmanya Reddy the learned standing counsel for the Central Government has raised three contentions. It was submitted that the search and seizure affected by the officials of the Central Excise Department are in conformity with the provisions of the Central Excises and Salt Act and the Rules framed thereunder. The findings given by the trial court amounted to adjudication of the proceedings relating to the question whether the plaintiff was guilty of non-payment of excise duty and whether the plaintiff has contravened the provisions of the Central Excise Act ad the Rules. The only question that had to be decided by the trial Court was whether the search and seizure by the appellants-defendants is illegal or not. The trial Court exceeded in this jurisdiction in giving finding on the merits of the case and acted as an adjudicating authority under the provisions of the Act and therefore the judgment of the trial court is contrary to law and beyond its jurisdiction. The second point urged by the learned counsel was that the search and seizure were conducted by the appellants-defendants under the provisions of the Central Excise and salt Act ad the Rules made thereunder. It is self-contained enactment and in respect of every action taken under the Act special remedied are provided to appropriate authorities by way of an appeal and a revision. Hence the Civil Court has no jurisdiction to entertain the suit an decide the question whether the seizure and search are in accordance with law. The fact submission made by the learned counsel was that the finding given by the trial court that the defendants acted in bad faith is contrary to its own reasoning. having held that the story of the plaintiff that the defendants have acted in bad faith in conducting the search and seizure of the materials inasmuch as their request for a bribe of Rs. 4,000 has been rejected by the plaintiff is unbelievable, the trial judge erroneously held that the defendants acted in bad faith and granted Rs. 2,000/- towards damages in the absence of any other evidence.
8. On the other hand it is submitted by the learned counsel for the respondent-plaintiff that the entire procedure adopted by the defendants in making search of the premises and seizing the goods in contrary to law and the lower court has ample jurisdiction to go into the question in detail, that the =findings of the lower court are based on proper appreciation of evidence on record and that he suit is maintainable Inspite of the fact that special forums are provided under the Central Excise and Salt Act, and that the order of the trail Court doesn't merit any interference.
9. We will not take up the contentions raised on behalf of the appellants in seriatim. As already stated the first contention was that the search and seizure were conducted in conformity with the provisos of the Central Excises and Salt Act and the Rules and the finding that the same are contrary to the relevant provisions of the Act and the action of the appellants is illegal, is unsustainable. In order to appreciate this contention we have to refer to the relevant provisions of the Central Excises and Salt Act and the Rules made thereunder.
10. Rules 201 of the Central Excise Rules, 1944 relates to the power to enter and search. It is as follows : -
"The Central Government, may empower any officer of any department under its control to - (1) enter and search at any time by day or by night and land, building, enclosed place, premises, vessels, conveyance or other place upon or in which he has reason to believe that excisable goods saltpeter (or composition for match-heads) for the manufacture of matches are processed, softened, stored, manufactured, or carried in contravention of the provisions of the Act or these Rules."
Sub-rule (2) of Rule 201 is not necessary for the purpose of the present case.
Under Section 18 of the Central Excises nd Slat Act all searches made under the Act shall be carried out in accordance with the provisions of the Code of Criminal Procedure, relating to searches made under that Code.
11. Section 103 of the Code of Criminal Procedure requires that before making a search the officer shall call upon two or more respectable inhabitants of the locality in which the place to be searched is situate to attend and witness the search. Sub-clause (2) of Section 103 requires that the search shall be made in their presence, and a list of all things seized in the course of such search and of the places in which they are respectively found shall be prepared by such officer or other person and signed by such witnesses. Under sub-clause (3) of section 103, the occupant of the place searched, or some person in his behalf, shall in every instance, be permitted to attend during the search, and a copy of the list prepared under this section, signed by the said witnesses, shall be delivered to such occupant or person. The other sub-clauses are not necessary. No other provision of the Criminal Procedure Code is brought to the notice relating to searches.
12. Before we go to the question of seizure we will consider whether the search was effected by the defendants in accordance with the provisions of the Central Excises and Salt Act read with Section 103 of the Code of Criminal Procedure. As stated already Rule 201 of the Central Excise Rules empowers the Central Government to empower any officer to make the search of any premises where he has reason to believe that excisable goods are manufactured or stored or carried on in contravention of the provisions of the Act or the Rules. In the present case there is no dispute that the officers, who conducted the search are not competent to conduct the search nor there is nay dispute that matches are subject to payment of excise duty and they a re manufactured by the plaintiff-company the Free India Match Company. The Rule further requires that the officer must have reason to believe that excisable goods are manufactured or stored in contravention of the provisions of the Act and the Rules. On 14-8-71 the Superintendent of Customs and Central Excise, Headquarters Unit, Hyderabad aid a surprise visit to one Shanti Match Company belonging to one Mr. Palani. In the course of the verification of accounts, the officers have noticed one account book containing the rubber stamp of Free India Match Company, Chendhalaguda cut into two, wherein the accounts of box filling and frame filling were written. The Superintendent of Customs and Central Excise seized the note book cut into two and the pocket note book for further investigation. A Panchanama was prepared when the account book which was cut into two was seized and the proprietor of the said Company one Mr. Palani and two independent witnesses M S. Mani and E. Narayana signed the Panchanama. The said Panchanama is Ex. B-3 in the case. On the basis of the entries in the cut note book seized under the Panchanama Ex. B-3 from Shanti Match Company, the officers of the appellants-defendants searched the house of the respondent-plaintiff who was present in the house and found 5 gross bundle of matches bearing label of 14 Apolo Brand of Vasu Match Company, Hyderabad and R.G.I. Register of Free India Match Company, from 13-3-1963 to 24-12- 1963 for 1 to 13 pages. They also recovered Ex. B-4 register of Free India Match Company for the period 21-2-1963 to 31-3- 1964 in 1 to 15 pages and another similar register, for the period 25-12-63 to 31-3-1964 in 1 to 49 pages and another register for box filling, frame filling from 1-4-1968 to 31-3- 1969 in 1 to 162 pages wherein some pages were missing and similar other documents in all about 15 articles. The same were seized under a Panchanama Ex. B-4 dated 19-8-72 in the presence of Panchayatdars, who have signed the same and also obtained the signature of the plaintiff-respondent. This is evident from Ex. B-4 Panchanama. This was also spoken to by D.W.I. who is the inspecting officer, Customs and Central Excise who conducted the search and the seizure. From the evidence of D.W.1 it also appears that on 14.8.71 itself immediately after the cut book was seized from the Shanti Match Company they searched the plaintiff- respondent's company and recovered some registers and records after passing a receipt to the plaintiff-respondent. The said receipt is marked as Ex. B-5 dated 14-8-71.
After the recovery of the cut book in which the entries relating to the plaintiff's company were found the appellants officers felt that it was necessary to search the premises of the plaintiff's house and company as they had reason to believe that the plaintiff-respondent had evaded payment of tax for the goods manufactured during the relevant dates. We therefore, find that Rule 201 which empowers an officer to make a search of the premises where excisable goods are manufactured or stored and are processed in contravention of the provisions of the Act or the Rules is not violated.
13. We will next consider whether Section 103 of the Code of Criminal Procedure had been violated in making the search. Ex. B-4 is the Panchanama prepared on 19-8-71 when the appellants inspected the residential premises of the plaintiff under authorisation. The said Panchanama bears signature of the two Panchayatdars and also that of the respondent himself. In the Panchanama all the articles and the books seized were recorded in the presence off the witnesses and the plaintiff was present and he actually signed the panchanama Ex. B-4. This was also spoken to by D. W. 1, the Customs Inspecting Officer in his evidence. On 28-8-1971 the officers of the appellants visited the plaintiff's company did not account for all the goods manufactured in their company and they had illicitly manufactured 17,273 gross of matches (50's) more and not accounted for in the relevant prescribed registers and evaded payment of Central Excise duty thereon. They therefore, seized 11,843 gross of matches (50's) valued about Rs. 28,000/- under a panchanama E. B- 2. In the said panchanama it was stated that the plaintiff and his Manager, who is no other than his brother were present during the time of seizure and at the time of the preparation of the Mahazar. It was also stated that the Mahazar had been read over and explained in English and Urdu to to to the mediators and was admitted to be correct. D. W. 1 in his evidence also stated that Ex. B-2 Panchanama was written at the spot at the time of seizure of the goods. He also stated that the stock of match boxes used in the manufacture and the accessories were seized under Rule 173 (q) of the Central Excise Rules under a panchanama Ex. B-2. He also spoke to the fact that the seized cut book from the Shanti Match Company was sent to a hand-writing expert and his opinion was that the hand-writing in the seized cut book was that of P. W. 1 and 5, who are no other than the plaintiff's brother and the plaintiff himself. From these facts it is clear that the search made by the officers of the appellants-defendants is in accordance with Rule 201 of the Central Excise Rules read with Section 18 of the Central Excises and Salt Act by Section 18 of the said Act. There is no reason to disbelieve the evidence of D. W. 1 about the searches made and the panchanama conducted on the spot in the presence of the panaches and the plaintiff himself, as nothing was suggested to them in the cross- examination except stating that himself and Subba Rao D. W. 2 Inspector of Central Excise, Headquarters preventive Unit. Hyderabad demanded a bribe of Rs. 4,000/- from the plaintiff and his brother P. W. 1 and that on refusal, they seized the account books of the plaintiff without giving any receipt or under any panchanama. These suggestions were denied by D. W. 1 and the suggestion that this witness had demanded a sum of Rs. 4,000/- as bribe from the plaintiff was neither stated in the notices exchanged between the parties prior to the filing of the suit nor in the plaint filed on behalf of the plaintiff. We have therefore no reason to disbelieve the evidence of D. W. 1 that the search and seizure were conducted in accordance with the provisions to the Act. We also hold that the appellants officials had reason to believe that the excisable goods are manufactured or stored contrary to the provisions of the Act.
14. We may note a few decisions in this regard. In Radha Kishan vs. State of U. P. - a question came up whether a search conducted in contravention of Section 103 would vitiate the seizure of the articles Mudholkar, J. who spoke for the Court observed that if there is illegality of the search the Court may be included to examine carefully the evidence regarding the seizure, and the search can be resisted by the person whose premises are sought to be searched contrary to the provisions of Section 103. Beyond these two consequences no further consequence ensures and the seizure of the articles is not vitiated. As per the decision above cited, even if there is any irregularity in the search it would not make the seizure of the goods illegal.
15. To the same effect are the decisions in United Oil of the Mills vs. Collector of Customs A.I.R. 1968 Kerala 241 and Kochan Velayudhan vs. State of Kerala A.I.R. 1961.
16. We next turn to the provisions relating to the seizure of the goods. Section 12 of the Central Excises and Salt Act empowers the State Government by notification to apply any of the provisions of the Customs Act relating to levy of Customs duties and penalties, confiscation and procedure relating to offences and appeals shall with such modifications 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. By notification NO. 68/63 dated 4-5-1963 as amended by another notification dated 6-2-1965 and notification dated 23-3-68 the provisions of Section 110 of the Customs Act relating to matters specified therein were made applicable in regard to like matters in respect of the duties imposed by Section 3 of the Central Excises and Salt Act. Therefore by virtue of the notification issued under Section 12, Section 110 of the Customs Act is made applicable with regard to the seizure of goods which are liable for confiscation in the event of duty not being paid. Under Section 110, if the Officer has reason to believe that any goods are liable to be confiscated he may seize such gods. Therefore it cannot be disputed that the officers who are empowered in this behalf can seize the goods which are liable for confiscation because there was evasion of payment of duty on the part of the licensee. Hence the Central Excise Officers have power under Section 12 of the Act to seize the goods if they have reason to believe that here was evasion of duty payable on the said goods. As already stated the cut book seized under the Panchanama Ex. B-3 on 14-8-1971 from Shanti Match Company shows that the plaintiff was not maintaining the accounts properly and the officials prima facie felt that there was evasion of duty. That was followed by the visit of the premises of the plaintiff by the Central Excise Officials, which resulted in the seizure of the goods and records under a Panchanama Ex. B-4 dated 19-8-1971. In the statement made by plaintiff on 26-8-1971 which was marked as Ex. B-1 it is admitted by the plaintiff hat registers which were taken after searching his house on 19-8-71 and the book filing register which was divided into two parts with the stamp of Free India Match Company, Hyderabad which had been seized by the Officers of the defendants in the Shanti Match Company on 14-8-71 related to Free India Match Company. He further admitted that the names of the workers which were written in the cut register belongs to Free India Match Company. He also admitted that Mr. Palani, who is the Manager of the Shanti Match Company was the Manager of the plaintiff's Free India Match Company from 1963 till August 1970 and the registers here maintained by him. He further admitted that the registers seized by the officers of the appellants- defendants in the clerks. From Ex. B-2, which is the Panchanama dated 28-8-71 if is evident that on a scrutiny of the records of Free India Match Company according to the appellants revealed that he did not account for all the goods manufactured in the Company and that they had illicitly manufactured 17,273 gross of matches and not accounted for in the relevant prescribed registers and evaded payment of Central Excise duty thereon. This conclusion was based on verification of the Stores of matches and found as many as 11,843 gross of matches (50's) in 601 bundles of 5 gross each and 274 bags of 30 gross each and in lose in the finishing rooms. The Panchanama was signed by the panchas and Ex. B-2 shows that the plaintiff-respondent and his Manager Lakshminarayana were present at the time of drawing the Mahazar. It is commented by the learned counsel for the respondent-plaintiff that Ex. B-2 was not prepared on the spot and that the plaintiff's signature was not obtained on it. Though the plaintiff's signature was not obtained, we find from the evidence of D. W. 2, the Inspector of Central Excise, Headquarters Preventive Unit, Hyderabad, that the seizure was under a Panchanama scribed by him in the presence of the Panch witnesses. We see no reason to disbelieve the evidence of D. W. 2 about the Panchanama prepared by the Central Excise officials on 28-8-71. The only suggestion put to him and D. W. 1 in the cross-examination was that they had conducted search and seized by articles illegally because the plaintiff failed to give a bribe of Rs. 4,000/- as demanded and that was denied by D. Ws. 1 and 2 and the lower court also disbelieved this part of the evidence of the plaintiff and has brother P. W. 5 as the story of bribe was not mentioned either in the notices exchanged between the parties prior to the filing of the suit or in the plaint. We completely agree with the finding of the lower court that the evidence of P. Ws. 1 and 5 that the search and seizure were conducted as the plaintiff did not oblige the officers of the appellants- defendants by giving them a bribe is not true and excepting this there is no other suggestion in the cross- examination nor do we find any reaSon to disbelieve the evidence of D. W. 2 that Ex. B-2 Panchanama was prepared on 28-1-72 on the spot itself in the presence of panchas. From these facts we have no doubt that the appellants officers had reason to believe that the plaintiff had contravened the provisions of the Central Excise Act and the Rules made thereunder.
17. The learned Counsel for the respondent-plaintiff strenuously contended that the cut book which was seized from Shanti Match Company belonging to Mr. Palani was not produced before the Court nor Mr. Palani was examined and therefore the very basis on which the searches were conducted and seizure were made is illegal as it cannot be said that the defendants officers had reason to believe that the plaintiff contravened the provisions of the Act and the Rules. That there was a seizure is admitted by the plaintiff himself and in fact the suit itself was for release of the goods which according to the plaintiff were seized illegally. The cut book was no doubt not produced in the lower court. Whether the goods are liable for confiscation or any person is liable to pay any penalty on account of the breach of the provisions of the Act and the Rules is a matter to be adjudicated under Section 33 of the Central Excises and Salt Act by the competent authority. The only question with which we are concerned is whether the authorities under the Act have got the power to make search and seize the goods which are liable to excise duty and the only requirement for exercising that power is whether there was any material before the authorities for having "reason to believe" that he plaintiff had contravened the provisions of the Act and whether the goods are liable for confiscation. Though the cut book was not produced in the Court there is the evidence of D. Ws. 1 and 2, who are the Inspecting Officer of Customs and Central Excise, Hyderabad and the Inspector of Central Excise, Headquarters Preventive Unit, Hyderabad respectively. Both of them stated in one voice that they had recovered a cut book from Shanti Match Company on 14-8- 1971 in which they found entries relating to Free India Match Company of the plaintiff and on a scrutiny of the said book they felt they had reason to believe that the plaintiff has contravened the provisions of the Central Excises and Salt Act and therefore made a search of the plaintiff's premises and on scrutiny of the accounts they felt that the plaintiff had evaded payment of excise duty in respect of matches which are admittedly liable for payment of duty during the relevant period and therefore liable for confiscation. We do not find any reason to disbelieve the evidence of D. Ws. 1 and 2 nor do we find any illegality in the search and seizure conducted by the officials of the Central Excise Department. The lower court embarked upon an enquiry whether the plaintiff was guilty of violation of the provisions of the Act which according to us is a matter for adjudication under Section 33 of the Central Excises and Salt Act and the conclusion of the lower court that the search and seizure were contrary to law is absolutely unsustainable. From the evidence of D. Ws. 1 and 2 we also find that a show-cause notice was issued to the plaintiff and the departmental adjudication proceedings were started before the Collector of Central Excise.
18. The plaintiff has examined an many as five witnesses. P. W. 1 is no other than the plaintiff's own brother and P. W. 5 who is the plaintiff himself and P. W. 2 is friend of the co-son-in- law of P. W. 1, who is the brother of the plaintiff admits that the cut book was brought to their premises on 26-8-1971 bearing rubber stamp of Free India Match Company. But he says that the said register does not pertain to Free India Match Company. He admitted that it was he who wrote Ex. B-1 wherein his brother admitted that the cut book seized on 14-8-1971 from the Shanti Match Company belong to the Free India Match Company. But he explains that the statement was written by him to the dictation of D. W. 1, the Superintendent of Central Excise. He further states that the Central Excise Officials namely D. Ws. 1 and 2 demanded a sum of Rs. 4,000/- from his brother as illegal gratification and since they refused, the cut book was prepared by Mr. Palani, their ex-employee, with the connivance of the officials. Whether it is true or not that is a different matter. P. W. 1 clearly admits that he was shown a cut book which contain some entries relating to Free India Match Company on the basis of which a search of the plaintiff's premises was conducted. He also admits that adjudication proceedings are pending before the Central Excise Collector, Hyderabad. P. W. 2 is a person, who went to P. W. 1 on 28- 8-71 to bring P. W. 1 to his Saith Narsinga Rao and at that time he saw the Excise Officials. P. W. 2 stated in his evidence that the entire stock was taken away without giving any receipt. It is not desirable to place any reliance upon the evidence of this witness why went to P. W. 1 for the purpose of taking him to his Saith and there is no possibility for this man to witness that the stock was removed without giving any receipt whatsoever. It is not his case that he was there all the time during the time of seizure. According to P. W. 3 he went to the plaintiff's company on 28-8-71 and found a forty loaded with match boxes being taken away by the Central Excise people and he waited till p6 O'clock in the morning and that the Central Excise OFficials did not give any receipt. It is not possible to believe this witness when he says that he went to the plaintiff's company at 8 P. M. on 28-81971 and stayed there till 6 O'clock in the morning. we are not prepared to believe this witness, who is admittedly a close relation of P W. 1 being the elder brother of the son-in-law of P. W. 1 and there is no particular reason why he should stay in the factory from about 8 P. M. on 28-8-1971 till the next morning. According to P. W. 8 after closing his shop between 7 and 8 P. M. when he was going to his house he saw a lorry in the premises of the company he saw some people there. He says that in his presence no panchanama was conducted and no receipt was passed by the Excise officials. It was admitted in the cross- examination that he is the man who got the factory for rent for the plaintiff and his brother and even according to his own evidence he says that while going to his house after closing his shop he saw a lorry in the premises of the factory and later on he went inside the factory to find out what is happenings. we are not also much impressed with the evidence of P. W. 4 P. W. 5 is the plaintiff himself and we do not place any reliance on the evidence of the plaintiff which contains several contradictions and discrepancies. He stated in his evidence that the Central Excise Officials conducted search and seizure as he failed to oblige them by paying a sum of Rs. 4,000/- demanded by them towards bribe. As we have already stated this was not mentioned either in the plaint or in the notices exchanged between the parties prior to the suit. This itself shows that the plaintiff can go to any extent to speak falsehood. He also gave a statement on 28-8-71 that the cut book was shown to him and that it relates to his company, but says that it does not contain any admission as regards the entire found in the cut book. He is an interested witness and we are not prepared to place any reliance upon this evidence. We, therefore, reject the evidence adduced on behalf of the plaintiff with regard to the way in which the search and seizure were conducted and on a consideration of the material on record we hold that the search and seizure conducted by the Excise Officials are perfectly in accordance with the provisions of the Central Excises and Salt Act read with the relevant provisions of the Code of Criminal Procedure and the Customs aCt. wee set aside the finding of the lower Court in this regard and we hold that the seizure was lawful. The finding of the lower court are more in the nature of adjudication proceedings which is the exclusive domain of the authorities constituted under the Central Excises and Salt Act. Whether there was any contravention of the provisions of the Act and whether there was any evasion of payment of duty and whether the goods are liable to be confiscated is the subject matter of adjudication proceedings by the competent authority under section 33 of the Central Excises and Salt Act. From a reading of the judgment of the lower court we find that the lower court has embarked upon and enquiry into the merits of the case which it has no jurisdiction to do so. On this ground also we set aside the findings of the lower court.
19. It is next contended on behalf of the appellants that the search and seizure were conducted under the provisions of the Central Excises and Salt Act and any person aggrieved by any decision or order made under the date of such decision or order appeal to the Central Board of REvenue or to any Central Excise Officer as the Central Government directs. Under Section 36 of the Act, the Central Government may on the application by any person aggrieved by any decision or order passed under the Act or Rules made thereunder by any decision or order passed under the Act or Rules made thereunder by any Central Excise Officer or Central Board of Revenue and from which no appeal lies reverse or modify such decision or order. Since the search and seizure under the provisions of the Central Excise aCt and the Rules which is a special enactment where special forums are provided for remedies to the aggrieved parties, the Civil court has no jurisdiction within the meaning of section 9 of the Code of Civil Procedure. Thee jurisdiction of the Civil court its impliedly barred. This matter was discussed by the lower court in paragraph 23 of its judgment and it was held that under Rule 173(q) the goods and accessories are liable to be confiscated only when the plaintiff is guilty of contravention of the provisions of the Act and the Rules and since the lower court has found that the plaintiff was not guilty of any contravention of the provisions of the act and the rules they are not liable for confiscation and on that reasoning the trial Court held that the Tribunals constituted under the Act alone do not have jurisdiction in the matter and that the Civil Court also can go into the matter. We totally disagree with this reasoning given by the trial court whether the gods are liable to be confiscated for contravention of the provisions of the act and for evasion of payment of duty is a matter to be adjudicated under Section 33 of the Central Excises and Salt Act by a competent authority mentioned in the said section and if the said authority comes to the conclusion that the goods are liable to be confiscated there is a right of appeal and a further right of revision available to the aggrieved parties. The trial court has held that since the plaintiff has not contravened any provisions of the Act the goods are not liable for confiscation and that the seizure was illegal and the Civil Court is competent to adjudicate upon the matter. Sections 35 and 36 speak of the appeals and revisions against any decision or order of the authorities which is either appealable or revisable. That is a matter for adjudication by the appropriate authority under the Act and further the seizure and and search were effected under the provisions of the Central Excises and Salt Act and the Rules made thereunder. It is not a case where the authorities under the Act have no power at all to search and seize the goods in which case alone their action would be outside the provisions of the act. In such a case alone their action would be outside the provisions of the Act. In such a case it is true that the Civil Court has got jurisdiction to entertain the suit. But this is a matter where the contention of the plaintiff himself is the search and the seizure are done contrary to the provisions of the Act. We therefore hold that the seizure and search were conducted by the Central Excise Officials under the provisions of the Act. If such an action on the part of the Central Excise officials is illegal, it is open to the aggrieved partly to file an appeal under section 35 and 36 of the Act and hence we hold that the Civil Court has no jurisdiction to entertain the suit. Even assuming without admitting that the Civil Court can conduct and enquiry with regard to the fact whether the search and seizure are illegal, it cannot give a finding that the goods are not liable for confiscation as the matter is pending before the competent authority under section 33 of the Act. The finding of the Civil Court that the goods are not liable for confiscations the plaintiff has not contravened any provision of the Act is completely without jurisdiction and outside the purview of the Civil Court. We therefore, set aside the finding of the trial court in paragraph 23 that the goods are not liable for confiscation. WE also agree with the Counsel for the appellants that the Civil Court has no jurisdiction to entertain the suit.
20. Even assuming that the Civil Court has got jurisdiction to entertain the suit it cannot give a finding that the goods are not liable for confiscation and the only question it can decide is whether the search and seizure are in accordance with law or not. As we have already held that the search and seizure are in accordance with the provision of the Act the plaintiff's suit cannot be decreed.
21. The last submission made on behalf of the appellant was that the award of damages of Rs. 2,000/- for wrongful seizure of the goods on 28-8-1971 is illegal. As we have held that the seizure was neither wrongful nor illegal we disagree with the finding of the trial court. The lower court itself has found in para 10 of its judgment that the action of the Central Excise officers was not motivated by any malice against the plaintiff as suggested by him namely, that since he failed to cater to the needs of the Central Excise Officers the search and sassier were affected. Having disbelieved the story of the plaintiff that the Central Excise Officers demanded bribe of Rs. 4,000/- from the plaintiff. On his refusing to oblige them, they have resorted to the illegal seizure on that ground and that this theory was put forward only at the stage of evidence and that it was only an after thought, the finding in para 18 of its judgment that the Central Excise Officers while affecting the seizure did not act in goods faith while discharging their duties as public servants is wholly unsustainable. There is absolutely no warrant for this finding because excepting the allegation of the bribe no other suggestion was made to the defendants that they were deposing either false or their action was motivated by irrelevant consideration. Having disbelieved the theory of the request for a bribe on the part of the Central Excise Officers there is no evidence on which the lower court could come to the conclusion that the Central Excise Officials did not act in goods faith while discharging their duties. We, therefore, set aside the finding on issue No. 7 in para 18 of the Judgment that the Central Excise Officials did not act in goods faith as being one based on no evidence. The trial court awarded an amount of Rs. 2,000/- as damages on the ground that the seizure was wrongful. As we have held that the seizure was in accordance with the provision of the Act, the judgment of the lower court awarding a sum of Rs. 2,000/- as damages for wrongful seizure is set aside.
22. In view of the aforesaid discussion, the appeal is allowed and we set aside the judgment and decree of the lower court and dismiss the suit of the plaintiff without costs throughout.