TMI Blog1989 (7) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Pursuant to the said search a show cause notice dated 18-1-1988 was issued by the Collector of Central Excise to the 1st petitioner Company and the 2nd petitioner, the Managing Director, besides the other seven persons connected with the Company and several other distributors of the products of the petitioner's Company referred to in the said show cause notice (Annexure J). This show cause notice is challenged by the petitioners on several grounds which will be dealt with later in their order. On the basis of the material and the information gathered from the documents and other records seized from the petitioners' various premises and on the basis of the further investigation and statement recorded, the Collector has proposed to quantify the excise duty on the suppressed value of the glass bottles removed, excess stock found, suppression of actual production figures, clandestine removal without paying its duty etc., in a sum of Rs. 51,51,656-96 P. 5. The several grounds urged challenging the search and seizure and also the show cause notice, are:- (i) that the search conducted in the factory, Office and the residence of the Executive-Director on several dates was ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and in support of this, affidavits of two of the mahazar witnesses are filed (Annexures F and F1.). It is also alleged that no receipt for the document seized was issued by the search officer immediately after the seizure. 10. The petitioners have raised an additional ground regarding the competency of the search officers who conducted the search (Vide Additional-ground 11.JA - raised in I.A. filed on 9-9-1987.). It was contended that the respondents 2 and 3 who conducted the search cannot be 'Proper Officers' as defined in S.2(34) of the Customs Act read with Rule 2(xi) of the Central Excise, Rules. The argument that proceeded on that basis was that there was no proper delegation of powers by the Central Government in accordance with Section 37A of the Central Excise Act and the delegation of powers in favour of respondents 2 and 3 under Notification No. 215/86 dated 27-3-1986 issued by the Central Board of Excise and Customs under Section 2(b) is also not in accordance with law. 11. Regarding the merits of the case, it was argued that there was no basis for the tentative conclusion by the 1st respondent, as is shown in the show-cause notice, about the alleged suppression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Bannerji agreed with the Madras High Court on Asia Tobacco Company case, and upheld the validity and legality of the Notification No. 215/86. (iii) In Dunkan Agro Industries v. Union of India - (1988) (1) Delhi Lawyer 215 - 1989 (39) E.L.T. 211 (Del.), the vesting of powers under the Central Excise Act on the Directorate (Audit), under Section 2(b) of the Act came up for interpretation before the Delhi High Court. Agreeing with the views expressed by the Madras and Calcutta High Courts in the decisions mentioned above, their Lordships upheld the power of the Central Government to appoint and invest the Directorate (Audit) to exercise the powers of investigation and adjudication of cases that may be assigned to him. 16. In reply to the contention urged by the petitioners as to one other preliminary point, namely - that the search was mala fide since it was carried out pursuant to a policy decision taken by the Central Government to raid all glass manufacturing units throughout the country and not as a result of any reliable information or material which prompted issue of search warrants in the petitioners case, Sri Datar produced for my perusal the relevant files relating to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to the Annexures to the show cause notice that it is impossible to make out the case of the Department from the abstract of the gross-duty and the liability which has escaped assessment, as per Annexure-'D' to the show-cause notice. 21. The petitioners have filed the copies of the Memos served on the Department's Counsel, and the matter was adjourned more than once so that the Department may furnish all the particulars to enable the petitioner to file a proper reply. The Department has furnished to the petitioners copies of the documents on the basis of which the revised assessable value was determined, and has set out how, according to the department, the petitioner - systematically undervalued its products in the invoices raised. 22. In the detailed statement filed on behalf of the respondents, the modus operandi adopted by the petitioners both as to the clandestine removal of goods without payment of duty and as to the flow-back, and, the additional realisations made in the form of debit-notes raised for over-due interest, washing charges, transportation and special packing etc., has been explained. The Department has also produced some sample work-sheets to show how the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority of the cases the Company has issued debit-notes as per Section 4 of the Central Excises Salt Act, 1944 read with Rule 5 of the valuation Rules, the procedure adopted by the department to redetermine the assessable value in respect of each variety of glass bottles manufactured and cleared by the petitioner is correct and as per law". The question that, therefore, arises for decision so far as D7 is concerned is: Whether there is any legal basis for arriving at the revised assessable value in respect of all the clearances made by the petitioner during the relevant period? 27. The case of the Department is made clear in their additional statement extracted above, that the Department has arrived at the revised assessable value on the presumption that the petitioner "must have undervalued the goods in respect of all clearances made". The method adopted by the Department has been subjected to serve criticism and attack by the petitioners, as arbitrary, whimsical and that the show cause notice is issued without application of mind. 28. The first thing that strikes anyone who looks at the figures of clearances as against the total value of realisations, it is more than 10 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides the usual breakages while handling. It is, therefore, argued with some emphasis that it was well nigh impossible for the Department to count all the bottles in the premises and take a total figure of 30,29,745 bottles for adopting the same as unaccounted or excess production cleared without payment of duty. It is therefore, vehemently argued by Sri Sundara Swamy that this Court should interfere at the stage of show cause notice for more than one reason and the same is liable to be struck down. 32. As regards items covered by Annexures-D4, D5 and D6 in Annexure-'D' the basis for arriving at the revised assessable value on the assumption of some discrepancies in the size of the bottles, is again challenged on the ground that there are no supporting documents for making the said additions. 33. So far as realisation by way of interest is concerned, the petitioners contention is that such a levy of interest on the consumers for the delayed payments is customary in the commercial field to charge interest for delayed payment and such recovery is only a collection of post sale interest, and that, therefore, it does not form part of the assessable value. It is also demonstrated fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether it has reference to packing materials). This addition represents the cost of packing materials and the invoices taken in fictitious names, according to the Department's case, while it was really the petitioner company which ordered, received and made payments for the same. 38. This addition is not one of the items referred to (in) the abstract of differential duty proposed to be added under various heads referred to in Annexure-D. Hence, this new ground should be rejected as an after thought and no allegation is shown to have been made in the show cause notice, either. Hence, I reject this new ground and the explanation put forward by the Department for rejecting the same. 39. The next contention which requires consideration is the criticism of the show cause notice itself read along with the statement of objections filed on behalf of the adjudicating authorities, the Collector. My attention is drawn to Paragraph 4 of the statement filed on behalf of respondent-1. The apprehension expressed by the petitioners is that the show cause notice and the statement made on behalf of the Collector are indicative of the basis or the prejudged conclusion as to what would be the in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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