RALETRONICS LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) THE first petitioner in W.P. 20461/89 is a Company engaged in the manufacture of television (T.V.) sets at Bangalore. For the sake of convenience it will be referred as the 'Manufacturing Company'. The petitioner in the other W.P. 20452/89 is referred for the sake of convenience as Bush India which is not carrying on any manufacturing activity in Karnataka but elsewhere.

(2.) THE Manufacturing Company sells the T.V. sets to several dealers including Bush India. The T.V. sets are sold ultimately in the trade name of the particular manufacturers or sellers as in the case of Bush India. The Manufacturing Company filed its price list under Section 4 of the Central Excises and Salt Act, 1944 ('the Act' for short) read with Rule 173C of the Rules in respect of the articles manufactured by it. Price lists were approved. The price list mentioned the price of the T.V. sets and the discount allowable to the wholesale dealer and only thereafter wholesale price was arrived at. Subsequently, by a notice dated 3 -10 -1989 the Manufacturing Company was asked to show cause as to why differential duty on the two models referred in the notice should not be demanded under Section 11A of the Act. The notice also proposed to impose penalty on the Manufacturing Company. The notice stated that the Manufacturing Company suppressed the cost of raw materials and using of certain items/components which are essential for the manufacture of the T.Vs. and there was an attempt to undervalue the assessable value of T.Vs. to fall below Rs. 5,000/ - in order to evade higher rate of duty. Prior to the issuance of the above notice, the factory premises of the Manufacturing Company was searched and various records, files and documents were seized on 20 -3 -1989. On 14 -3 -1989 the administrative premises of the Manufacturing Company was searched and many documents were seized. The writ petition further states that the second respondent carried out investigation with regard to the value at which the T.V. sets were sold by the Manufacturing Company, throughout India without the knowledge of the Company and the second respondent seems to have seized a large number of documents from various places in India. The petitioners contend that the second respondent has only a limited territorial jurisdiction and therefore he had no jurisdiction to investigate outside the said jurisdiction and seize the documents situated beyond his territorial jurisdiction. In the second writ petition Bush India challenges the show cause notice issued to the said Company by the second respondent proposing to levy penalty under Rule 209A of the Rules on the ground that Bush India and two others named in the show cause notice knew or had reasons to believe that the excisable goods manufactured by the Manufacturing Company were liable for confiscation and that Bush India and two others referred in the notice concerned themselves in aiding, abetting, planning, selling and dealing with the said excisable goods. Since Bush India is located outside the territorial jurisdiction of the second respondent his competence to issue notice and initiate proceedings against Bush India is under challenge.

(3.) THE learned Counsel for the respondents, on the other hand, contended that the jurisdiction of the authority depends upon the place where the cause of action arises for any proceeding to be taken and when the alleged tax evasion occurred at Bangalore the second respondent has every jurisdiction to go into the question, for which purpose he may collect the material from whatever source he can gather and that in the instant case the second respondent got the investigations done outside his territorial jurisdiction through the respective competent officers of the said places. The learned Counsel also pointed out that when an assessee has several factories located at different places, a notification is issued empowering one of the officers of the department to exercise an all India jurisdiction to avoid the practical difficulty of making a proper assessment order. This does not mean that when a factory is situated at Bangalore the Collector at Bangalore is denied of any power to investigate into the alleged tax evasion by the manufacturer at Bangalore and this investigation can be effectively conducted only by collecting materials from other places because the assessable value of an article shall have to be gathered by reference to various factors. For example, in the instant case, the information with the respondents reveal that the Manufacturing Company and Bush India and a few of the directors adopted a device to show on record that a higher discount is allowed though as a fact no such high discount was allowed to the wholesale dealers. This could be verified and information could be collected only by investigating the transactions held outside the territorial jurisdiction of the second respondent because the various dealers are situated outside the said territory. The very purpose of the investigation will be lost if such a meaningful jurisdiction is not read into the jurisdiction of the second respondent. The learned Counsel for the Department also referred to the definition of the term 'proper officer' found in Rule 2(xi), which reads thus : ''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 any process of production of, or trade in, such goods or containers thereof whether as a grower, curer, wholesale dealer, broker or commission agent or manufacturer, or intended grower, curer, wholesale dealer, broker, commission agent or manufacturer, are situate;' I find considerable force in this submission of the Standing Counsel for the Central Government. The second respondent is vested with the jurisdiction to enforce the provisions of the Act in respect of the excisable goods manufactured within his territorial jurisdiction. However the tax evasion activity may involve investigation not only within the said territory but also outside. If the manufacturer at Bangalore and a dealer at Bombay join hands to evolve a device in order to reduce the tax liability, the authority at Bangalore necessarily should have the power to investigate not only at Bangalore but have the appropriate material collected from outside his territorial jurisdiction. It cannot be the purpose of the law that in every case the second respondent should approach the Board to invest him with the further power to cover the area of investigation situated beyond his ordinary territorial jurisdiction. Second respondent is not interfering in any manner with the jurisdiction of a similar authority situated elsewhere. In fact Section 14 indicates that any Central Excise Officer duly empowered the Central Government in that behalf shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any enquiry. Section 14 is not confined to the persons or the documents within the territorial jurisdiction of the concerned officer. Sections 18 and 22 provide for the search and seizure; all that they require is proper authorisation. In the instant case the materials were collected from various places in India through the officers having territorial jurisdiction over the said areas. The second respondent has not gone to those various places to collect the materials either by way of search or seizure. It is always open for the second respondent to rely upon the materials supplied to him by other officers of the department or by someone else. A person against whom proceedings are initiated is entitled to know the basis for the proposal only and not the basis for the anterior investigation held departmentally. This apart, it is now quite well settled that for the purpose of investigation under Section 11A of the Act the legality of the search and seizure under which the evidence was collected is entirely irrelevant. It is well settled now that illegality of search and seizure does not vitiate the relevancy of the evidence collected, vide Pooran Mal v. Director of Inspection (Investigation) of Income Tax, New Delhi and Ors. : [1974]93ITR505(SC) and Dr. Partap Singh and Anr. v. Director of Enforcement and Ors. : 1986CriLJ824 . The evidence collected under an illegal search does not get vitiated in any manner and if so, while considering the validity of show cause notice issued under Section 11A, it is entirely irrelevant to consider as to how the second respondent collected his evidence. Mr. Chanderkumar, learned Counsel, relied on a decision of the Tribunal reported in Ramnarain Bishwanath v. Collector of Customs, Calcutta [ ] as part of his argument to contend that the second respondent cannot go beyond his territorial jurisdiction for the purpose of investigation. On the other hand, the question before the Calcutta Bench of the Tribunal was slightly different. Under the Customs Act the cause of action arises initially when the act of import takes place and if so, the jurisdiction under the Act has to be exercised by the authority having the territorial jurisdiction over the place where the cause of action arises.