BHAGWAN R. DASWANI, PROPRIETOR, SULUR AGENCIES, COIMBATORE Vs. THE COLLECTOR OF CENTRAL EXCISE, COIMBATORE AND THE COLLECTOR OF CENTRAL EXCISE, DADAR (W), BOMBAY

JUDGEMENT

(1.) This petition is for writ of declaration that the search conducted by the officer attached to the first respondent on 23.1.1990 from the place of residence of the petitioner and seizure of Indian currency totalling to Rs.83,42,070/- from the residence of the petitioner as illegal and without authority of law.

(2.) The averments made in both the writ petitions are one and the same which are as follows: The petitioner is a registered dealer in camphor. He was assessed under Tamil Nadu General Sales Tax and Central Sales Tax. He was assessed to Sales Tax upto 1988-89. After 23.1.19 90, he was not doing any business; He was an income-tax assessee also having agricultural income. The petitioner was not manufacturing any products. Therefore, he has not obtained any licence under the Central Excise Act. The petitioner was the sole distributor for M/s. Twin City Organics and M/s. Dye Distributors India Limited, Bombay who are the manufacturers of camphor. The petitioner's assessment for sales tax was completed based on the books of accounts and receipts and Gate Passes issued by the manufacturers outside the State of Tamil Nadu. According to the market situation, prices are fixed and sold to small dealers who manufacture and sell camphor tablets in small scale, to the manufacturers of Ayurvedic medicines and for temple uses. When it is sold to the manufacturers of Ayurvedic medicines, the percentage of profit is higher. While so, on 23.1.1990, the first respondent' officers searched the residence of the petitioner and recovered Indian currency totalling to a sum of Rs.83,47,070/-; statements were obtained by coercion. In fact, the petitioner told the officers that Indian currency was the unaccounted cash accumulated by the sale of camphor and also Isoborneol; profit was earned by sale at a higher price than the invoice price. The officers seized the cash on the allegation that the petitioner violated the provisions of Excise and Salt Act. Immediately on 31.1.1990, the petitioner informed the Income Tax Department that he did a substantial business yielding a profit of Rs.80 lakhs. While he was planning to pay advance tax which was due on 15.3.1990, the search was conducted. By letter dated 31.1 .1990, the petitioner requested the Income Tax Department to move the Central Excise Department to transfer of funds of Rs.43 lakhs as advance tax payable by him by 15.3.1990. Accordingly, the Assistant Director of Income Tax (Investigation), Coimbatore issued a warrant and requested the officers of the first respondent by letter dated 20.3.1 990 under Section 132(A)(1)(c) of the Income Tax Act for the delivery of assets and books of accounts to them. The Assistant Commissioner of Income-Tax, Special Investigation, Circle-II, Coimbatore passed assessment order for the assessment year 1990-91, under Section 143(3) of the I.T. Act on 18.3.1993; thereby, the Income Tax was assessed to Rs.83,67,510/- and levied income tax and surcharge of Rs.43,37,7 49/- and also levied interest under the Sections 234-A, 234-B and 234-C, a sum of Rs.60,92,277/- totalling to Rs.1,06,05,026. Against that order, appeal was filed to the Commissioner of Income-tax (Appeals) and the appellate authority has held that when the cash has been fully assessed under Section 69 of the Act, in the absence of positive evidence for the source of cash, no set-off could be granted. The liability to Excise Duty, if any, will be that of the manufacturer and not that of the agent. Therefore, the assessment was confirmed by the Commissioner. With regard to the levy of interest, the petitioner filed W.P.13527 of 1993 and interim stay was granted. The Income Tax Department's reasoning is to the effect that the liability under the Central Excise Act is only on the manufacturer; the petitioner has nothing to do with the activities of the manufacturer; he is not liable to pay any Excise Duty; the Excise Duty on such goods had already been levied and it cannot be levied once again.

(3.) The petitioner filed a Criminal Miscellaneous Petition before this Court for return of currency. Since Criminal Procedure Code is not applicable, the petitioner filed W.P.No.4836 of 1990 praying for mandamus to return Rs.40,44,858/- and balance of Rs.42,97,212/- to be paid to the Income Tax Department. He also filed another W.P.5045 of 1 990 for a declaration that Notification No.68/63 issued under Section 12 of Central Excise Act applicable to the Central Excise Act as ultra vires. The second respondent issued a show cause notice. Challenging that, the petitioner filed W.P.12110 of 1990. The matter was heard at length before the Division Bench of this Court. Ultimately, the Division Bench dismissed the writ petition as pre-mature holding that the adjudication proceedings will decide the issue. Since the issue has not been decided and there was no finding on the legal issues raised by the petitioner, the petitioner filed the present writ petition. The search and seizure itself was illegal. The mahazar shows that the Central Excise Officers seized the currency on the reasonable belief that it constituted material evidence to the enquiry conducted by the officers and also on the reasonable belief that the petitioner violated the provisions of the Central Excise Act. The mahazar is vague and does not spelt out any offence under the Central Excise Act. Further, the search and seizure was not valid as the reasonable belief was not with respect to the violation of the specific provisions of the Central Excise Act; further, no provision under the Central Excise Act enables the search of the residential premises of a dealer; that the currency was unaccounted was not a ground for seizure under the Central Excise Act. It must relate to duty, under Section 3 of the Central Excise Act. The reason to believe must be corelated to any subjective satisfaction of the officers who conducts search to a prima facie conclusion that there was evasion of payment of duty and that can be stopped by such search and seizure of available materials. The expression, "reason to believe" is not synonymous with subjective satisfaction. If the manufacturer failed to pay Excise Duty or clandestinely removed the goods without payment of Excise Duty, such duty cannot be recovered from the person who dealt with such goods. If such goods are available with any person, the officer can seize the goods which were removed clandestinely. But the officer cannot seize the currency on the reasonable belief that it was the sale proceeds of such goods. Therefore, the search and seizure itself is illegal and the currency seized has to be returned. The Central Excise officers derive powers of the Customs officers by virtue of notification No.68/63, dated 4.5.1963 issued under Section 12 of the Central Excise Act. Section 121 deals with confiscation of sale proceeds of the smuggled goods. Therefore, to the present seizure, Section 121 is not applicable. The remedy available under the statute, viz., to approach the authorities under the Customs Act is not effective, but only illusory and hence, the present writ petition has been filed.