TMI Blog1970 (8) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the Petitioners are that the Petitioners were manufacturing cloth on a large scale and evading payment of central excise duty thereon. Cloth manufactured in a unit of four powerlooms or less belonging to any owner is exempt from excise duty. According to the Excise Authorities the Petitioners were running about 1400 unauthorised powerlooms outside the main premises of their factory at Fergusson Road, Bombay. According to these Authorities, the Petitioners had floated about 100 bogus concerns in order to show that these 1400 powerlooms were engaged in the manufacture of cloth by purchasing yarn from those bogus concerns, manufacturing cloth therefrom and in turn selling the cloth to those bogus concerns. These 100 bogus concerns are alleged to be the creation of the Petitioners and in fact the cloth in the said 1400 powerlooms was being manufactured for the Petitioners. The Excise Authorities allege that the Petitioners have by these methods evaded excise duty amounting to over Rs. 90 lakhs. 3.On 11th March, 1963 the Excise Authorities served on the Petitioners an order of that date Ex. C to the Petition. The said order is signed by the Respondent No. 4 and is addressed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioners in the Petition and the affidavits filed by them in rejoinder are as follows. According to the Petitioners, there is no provision of law entitling the Excise Authorities to seize the Petitioners' goods or books of account or other documents and the Petitioners being the owners thereof are entitled to have the same returned to them. The Petitioners also contend that the Excise Authorities had disregarded the mandatory provisions of Section 18 of the Central Excise and Salt Act, 1944 (hereinafter for the sake of brevity referred to as the Excise Act) read with Section 165 of the Criminal Procedure Code, 1898 and therefore the searches carried out by the Excise Authorities and the seizure of goods and books of account were illegal and the Excise Authorities were bound to release and return all the said goods and documents. The Petitioners also contend that as now Section 110 of the Customs Act, 1962 was applicable having been incorporated in the Excise Act and no show cause notice having been issued within six months of the seizure of the goods, books of account and documents under Section 110(2) the Petitioners were entitled to have the goods, books of account and documents re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contend that they are not liable to return to the Petitioners the goods and documents seized by them from the Petitioners. 9.We have stated hereinabove briefly the respective contentions of the parties contained in their affidavits. We shall set them out in greater detail wherever necessary for dealing specifically with the contentions of the parties. 10.It is necessary for appreciation of the contentions raised on behalf of the parties to refer to some provisions of law. Section 12 of the Excise Act provides that the Central Government may by notification in the Official Gazette declare that any of the provisions of the Sea Customs Act, 1878 relating to the levy of and exemption from customs duties, 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 the like matters in respect of the duties imposed by Section 3 of the Excise Act. Pursuant to the power conferred on the Central Government by Section 12, the Central Government has from time to time issued the necessary notifications. We are concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments useful for or relevant to proceedings under the Excise Act and Excise Rules without obtaining a search warrant from a Magistrate. Section 110 provides for seizure of goods and documents. 11.Mr. Nariman appearing for the Petitioners contended that the Central Government had no power to issue a Notification under Section 12 of the Excise Act making the provisions of the Sea Customs Act, 1878 or Customs Act, 1962 pertaining to searches and seizures applicable as Section 12 of the Excise Act did not provide for making provisions with regard to searches and seizures applicable. It only provided for making applicable those provisions which pertained to levy of and exemption from customs duties, offences and penalties, confiscation and procedure relating to offences and appeals with regard to duties imposed by Section 3. It, however, appears to us that searches for and seizures of documents and movable property is a part of procedure relating to offences in respect of duties imposed by Section 3 of the Excise Act. Rule 9(1) of the Excise Rules provides for time and manner of payment of duty. Sub-rule (2) provides that if any excisable goods are in contravention of sub-rule (1) de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the Sea Customs Act, 1878 made applicable by the said Notification shall also have effect as if enacted in the Excise Act. If that position be correct, Mr. Bhabha further contended that under Section 8(1) of the General Clauses Act on the repeal of the Sea Customs Act, 1878 and coming into force of Customs Act, 1962 with effect from 1st February, 1963 the reference in the Notification dated 26th November, 1960 to Sections 172 and 178 of the Sea Customs Act, 1878 should be read as reference to Sections 105(1), 110(1) and (3) of Customs Act, 1962. Section 8(1) of the General Clauses Act reads as follows : "8(1). Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals and re-enacts, with or without 'modification, any provision of a former enactment, then references in any other enactment or in any instrument to the provision so repealed shall, unless a different intention appears, be construed as references to the provision so re-enacted." While this argument would be correct if the reference to the provisions of the Sea Customs Act, 1878 had been contained in Section 12 of the Excise Act itself, it may not be correct when the refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Notification dated 26th November, 1960 issued under Section 12 of the Excise Act also stood repealed. In other words from 1st February, 1963 until 4th May, 1963 when certain provisions of the Customs Act, 1962, were applied by a fresh Notification Section 178 which pertained to seizure of goods did not apply and Section 110(3) had not yet been applied. He therefore contended that in March 1963 when the Petitioners' goods were seized there was no power in the Excise Authorities to seize the goods and the seizure being illegal the goods must be return to the petitioners. There is however no substance in this contention. By virtue of Section 38 of the Excise Act the Notification issued under Section 12 of the said Act applying Section 178 as modified by the said Notification had the effect as if it was enacted in the Excise Act. The said Notification was not repealed by Customs Act, 1962. The said Notification was in terms superseded by the Notification of 4th May, 1963. Section 178 of the Sea Customs Act, 1878 as modified by the Notification of 26th November, 1960 therefore continued to apply until 4th May, 1963. The seizure of goods in March 1963 was carried out under the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were received from unauthorised parties and were to be seized. We are of the view that this is an indication of application of mind and objective determination that the goods had escaped duty and were liable to confiscation. Apart from this we have now on record the affidavits of Respondent No. 1 who directed the seizure showing that he had applied his mind and come to an objective conclusion that the goods were liable to confiscation. 16.We have referred to the contention of the Excise Authorities that by virtue of Section 8(1) of the General Clauses Act, Sections 105(1), 110(1) and (3) must be read in the Notification dated 26th November, 1960 with effect from 1st February, 1963 when the Sea Customs Act, 1878 was repealed by the Customs Act, 1962. We have rejected this contention. The Petitioners argued that if the above contention be correct, sub-section (2) of Section 110 and proviso thereto would also be attracted as Section 8(1) of the General Clauses Act made the provisions of the new Act applicable with "all variations and modifications" and sub-section (2) and proviso thereto were such modifications. He contended that sub-section (2) and the proviso thereto put a restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any search. If an authority wishes to seize goods it must undoubtedly enter upon certain premises and look for the goods. But this looking for the goods is not the same thing as a search under a search warrant or an order for search which attracts the provisions of Section 165 Cr. P. C. This contention appears to us to be correct. We are of the view that the power of seizure under Section 178 is quite independent of a search. This is part from the contention that offending goods seized as a result even of an illegal search may not be liable to be returned, with which aspect we shall deal later when we deal with the searches for and seizure of documents. We are supported in our view that the power of seizure under Section 178 of the Sea Customs Act, 1878 is independent of a search by a Division Bench judgment of M.C. Shah and Miabhoy, JJ. of this Court in the case of A.J. Bulter v. Mohanlal Co. 60 Bom. L.R. 194. In the judgment of Miabhoy, J. it is observed at Page 202 as follows : "In this connection it is useful to turn to the provisions contained in Section 178 of the Indian Sea Customs Act. Under this section power is conferred not merely upon the Customs Collectors but a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Central Excise for a period not exceeding six months." 20.In this connection the admitted facts are that on 16th September, 1963 the Respondent No. 1 made an application to the Collector of Central Excise, Respondent No. 5, for extension of time for giving notice under Section 124(a) of Customs Act, 1962 corresponding to Rule 9(2) of the Excise Rules. On 20th September, 1963 an order of extension for a further period of six months was in fact made. The fact of the extension was communicated to the Petitioners on 17th February, 1964. The Petitioners thereafter wanted copy of the order, but this was never supplied to them. On 10th March, 1964, a show cause notice was in fact served by the Excise Authorities on the Petitioners under the provisions of Section 124(a) of Customs Act, 1962 and Rule 9(2) of the Excise Rules. It is obvious from these dates that if the date of seizure under the provisions of Section 110(1) be taken as 4th May, 1963 and there is an extension of time for giving show cause notice by six months, the notice served by the Excise Authorities on the Petitioners is within the extended period and the Petitioners would not be entitled to have the goods returned to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ridge v. Baldwin, 1964 L.R. A.C. 40. This contention of the Petitioners is taken in an affidavit dated 28th August, 1970 made and filed during the course of arguments. Mr. Nariman cited the decision of the Supreme Court in the case of State of Orissa v. Dr. (Miss.) Binapani Dei - A.I.R. 1967 SC 1269 and contended that an order which affected civil right passed without an opportunity of hearing is a nullity. 22.Mr. Bhabha for the Excise Authorities contended that the order of extension was being challenged after a period of over 6 years. The Petitioners became aware of the order of extension on or about 17th February, 1964. They could have challenged its validity, as also the validity of the show cause notice issued pursuant to the extension by a separate petition. He contended that this affidavit amounted to an amendment of the present Petition at a time when a substantive petition for the same relief would have to meet the objection of inordinate delay. He further contended that the Petitioners, alleged right to get back the goods became complete according to the Petitioners in September 1963 and in any event on 4th November, 1963 and today even a suit for recovery back of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be given to the Petitioners to show cause against the extension it would involve several questions of law and fact and in any case it would be difficult to pronounce on the validity of the said order in this petition. We are however of the view that any such opportunity given to an alleged smuggler or tax evader would defeat the very purpose of the investigation. It is notorious that smugglers and tax dodgers stop at nothing in tampering with evidence and suborning witnesses once the nature of the evidence and the cause for delay is disclosed to them, as it must be, if they are to be given an opportunity of being heard. It is not that their right to the return of goods is taken away by the order of extension. It is merely postponed. The confiscation of goods would ultimately depend upon the order to be made under Rule 9(2) of the Excise Rules. In our opinion, by an order of extension important civil rights are not affected. Such opportunity would also be contrary to the purpose of the Excise Act. Following the judgment of the Mysore High Court, we are of the view that the order of extension is not void on account of absence of opportunity given to the Petitioners to show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search. Section 18 of the Excise Act provides that all searches made under the Act or any rules made thereunder shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1898 relating to searches made under that Code. The parties are agreed that the reference with regard to searches is to Section 165 Cr. P. C. It therefore follows that searches under Rule 201 must be carried out in accordance with Section 165 Cr. P.C. The documents have been seized from the same place from which the offending goods have been seized. Under Rule 201 the Excise Authorities had the power to enter and search premises in which they had reason to believe that excisable goods evading excise duty were stored. If on search they found not only goods but also documents, their power to search for and seize documents is not limited as long as they enter and research the place where they have reason to believe that excisable goods are stored. 26.It has been contended on behalf of the Petitioners that the search contemplated by Rule 201 of Excise Rules and Section 18 of the Excise Act does not include the power to seize any documents. The Petitioners further contend that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low mentioned premises are used as a place for the deposit of documents pertaining to manufacture of cotton fabrics on powerlooms belonging to Jalan Group of Industries, Bombay". The grounds for the belief obviously are (a) information laid before the Respondent No. 1 and (b) due inquiry into the said information. It is true that in the order the Respondent No. 1 has not set out the names of his informants the nature of the information and what inquiry he has held into the correctness of the information. But any such statement would only defeat the purpose of the search. It may be that the grounds are not sufficiently communicative. But this has to be so from the very nature of the proceedings. (2) The Respondent No. 1 has not expressed in the order an opinion that but for the order for search the documents he required could not be obtained without undue delay. It is true that there is no expression of such an opinion in the order. (3) There are no grounds recorded in writing in the impugned orders for the belief that anything necessary for the purpose of an investigation into an offence which the Respondent No. 1 is authorised to investigate may be found in the place to be se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not carried out by a subordinate officer who was not in his own right a person competent to make search. The recording of reasons for the delegation was therefore not necessary. (6) Sub-section (5) of Section 165 Cr. P. C. requires that copies of any record made shall forthwith be sent to the nearest Magistrate "empowered to take cognisance of the offence". It is contended on behalf of the Petitioners that this has not been done. There is no dispute about the fact that no copies of the record were sent to a Magistrate. But we think that it was unnecessary to do so, because as the words of the sub-section indicate that the copies have to be sent to "the nearest Magistrate empowered to take cognisance of the offence" indicating that the investigation is into an offence. The action taken by the Respondent No. 1 was under Rule 9(2) of the Excise Rules pertaining to assessment of evaded excise duty, offences under the Excise Act are under Section 9 of that Act. The Respondent No. 1 was carrying out any investigation into an offence which any Magistrate was empowered to take cognisance of. There was therefore no need to sent any copies of any record to the nearest Magistrate. 29.I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode. This was a case of an investigation into an offence of resisting the search. The Supreme Court clearly laid-down that recording of the reasons did not confer on the authority concerned the jurisdiction to carry out the search and it did not lay down the consequences of an illegal search. In our case we have held that the search has been carried out substantially in accordance with the provisions of the Criminal Procedure Code. As laid down by the Supreme Court, the recording of the reasons is undoubtedly an important step in the matter of search. But we are of the view that in this case this important step has not been ignored. 31.The next case cited on behalf of the Petitioners is the judgment of the Supreme Court in the case of Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver, A.I.R. 1968 SC 59. After holding that Section 165 Cr. P.C. applied to searches carried out under Section 41(2) of the Madras General Sales Tax Act I of 1959, the Supreme Court observed that Section 165 provided safeguards for the citizens. In that case the High Court had held that the search warrants were bad. This finding was not challenged in the Supreme Court. With regard to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person whose premises are sought to be searched. It may also be that because of the illegality of the search, the Court may be inclined to examine carefully the evidence regarding the seizure. But beyond these two consequences no further consequence ensues and the seizure of the article is not vitiated. Mr. Bhabha also invited our attention to a judgment of the Kerala High Court in the case of A.A. Beeravoo v. Collector of Central Excise Customs, Cochin, 1965 (2) Cr. L. J. 279. It follows the judgment in A.I.R. 1963 SC 822 and sets out the effect of A.I.R. 1960 SC 210. In the judgment of Govindan Nair, J. it is stated as follows : "Assuming therefore that the search and the seizure in this case are illegal, it does not necessarily follow that the material collected as a result of that search and seizure cannot afford evidence for the conclusions reached and the decision relied upon by Counsel for the Petitioner in A.I.R. 1960 SC 210 has laid down nothing more than that a person whose premises are sought to be searched without authority of law can resist and even use force in so resisting such a search." 33.We have held that the provisions of Section 165 Cr. P.C. have be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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