V.A. Ramraj and Others vs Collector of Central Excise, Madras and Others

Chief Justice

These three writ are directed against the judgment of Koshal J who refused to issue a rule the nature of a writ of prohibition as against the

respondent from the taking any further action in teh pursuance of the samples of tobacco taken by the Excise Officials from the appellant

warehouse. W. A. 501 of 2976 is against W. P. 4328 of 2975 W.A. 30 of 1977 is aginst W. P. 4327 of 1975 and W. A. 31 of 1977 is against

W. P., 4698 of 1975. the facts relevant for our purposes and which are almost similar in all the appeals can be referred to EAch of the appellant is

a person holding a L-5 licence under teh Central Excises and Salt Act 1944 read with the rules made thereunder. Under this licence the petitioner

were entitled to keep a bonded warehouse and store tobacco therein, maintain stock registers and be bound by the various rules and regulations in

the matter of storage of the tobacco which is admittedly excisable and for removal of such excisable commodity from the bonded warehouse. We

are narrating the relevant facts in W.P. 4328 of 1975. Teh stock in teh warehousing of the above petitioner was checked and weighted on 17-6-

1975. The stock in teh warehouse of the above petitioner was checked and weighted on 17-6-1975. Though the entries tin teh stock books and

the accounts were found to be in order on physical verification an apprehension was entertained in the minds of teh Excise Officials that in the

certain lots. the variety of the tobacco found at the time of the check may not correspond to those that should have been actually in stock and other

documents. Entertainign a suspicion that there has been an illicit removal and a clandestine replacement of an inferior quality of tobacco, samples

were drawn from the stock in the warehouse on the date of inspection and as is the common practice, the samples were examined by a trade panel

for ascertaining the whether or not the tobacco found in these lots were the same as teh ones that should have been in stock as per the earlier

description. Apprehending a further process of such investigation undertaken by the respondent each of the writ petitioner has come to this court

for the issue of Writ of Prohibition from arresting or prosecuting the petitioner in furtherance of the analytical report on the samples taken and to the

prevent them from the making such inspection as according to the petitioner they are not authorised by law.

The main contention of the appellants is that there is no express power to take samples from the unmanufactured tobacco in a boned warehouse

nd if an suspicions is entertained that there is a different in quality of the tobacco found at the time of check with reference to the tobacco

admittedly warehoused by a lawful permit there is no authority or a specific rule which would empower the Excise authorities to take samples

therefrom, to take action against the warehouses. As it is the omitted case that an endorsement has been made on the date of check, that there are

no discrepancies in the stock registers, no further actin is possible merely because the Excise authorities are subjectively satisfied that there is a

difference in quality of the tobacco as compared to the stock found entered therein and action u/s 13 of the Central Excises and Salt Act, 1944 is

not possible in law. It is also stated that, even if the power to take samples is traceable to any provision of the main enactment of the rues made

thereunder, it is an uncanalised power vested in the respondents and it is therefore unreasonable and has to be struck down.

If the counter affidavit it is stated that the action of the department in having taken samples from the bonded warehouse is justified on the ground

that, though duty is leviable on tobacco on its quantity removed from the warehouse, the Department is interested in ensuring that the tobacco

received into the warehouse is properly accounted for and does not escape revenues and that no tobacco is illicitly removed or substituted by an

inferior quality which i brought into the warehouse in order to keep the weight as disclosed. It is contended that the Department is enjoined to

ensure that tobacco received into the warehouse is not illicitly removed by evading payment of duty and inferior quality of tobacco is brought into

the warehouse in its place. It is said that they have the power u/s 13 of the Central Excises and Salt Act, read with Rules 144 and 151 to take such

action as is necessary in a particular case and according to circumstances and therefore it is said that the taking of samples is to achieve the object

of the Act and in pursuance of the rules made thereunder and such a provision not being unreasonable but in the interests of the revenue of the

State is sustainable in law and the writ of prohibition sought for by each of the appellants is without any justification whatsoever.

Before considering the objections of the writ petitioners, it is necessary to arefer succinctly tto the Centtral Excises and Salt Act, 1944 and the

Rules madce thereunder. TThe Central EExcises and Salt Act and tthe Custtoms Act of 1962 are twin enactments subserving similar objectives,

tthe primary intendment of both being to ckeck evasion of excise duty or customs duty. These enactments beeing quasi-fiscal and quasi-penal in

nature have to be inntterpreted stricttly. u/s 12 of the Central Excises and Salt Act, the Central Goveernment may by a notificatiiion in the official

Gazettte dclare that any of the provisions of the Custtoms Act relating to the levy of Customs duty, warehusing, offences, confiscation procedure

relating to offences, etc., shall, with such modifications and alterattions as it may consider neceessary or desirable to adapt them to the

circumstances, be applicable in regard to like mattters in respectt of the duties imposed by Section 3 of the Act. Under Secttion 3 of the Central

Excises and Salt Act, authority is given for the leevy and collection in such manner as may be prescribed duties of excise on all excisable goods

other than salt which are produced or manufacured in India at the rates specified in the Firstt Schedule. Column 4 of the First Schedule to tthe

Cenntral Excises and Salt Act, refers to tabacco. Tabacco is explained as a commodity, which means any form of tabacco whether cured or

uncured or whetther manufactured or not and includes the leaf, stalks and stems of the tabacco plant. A differentt scale of duty is prescribed for

various varietiies of unmanufactured tabacco. For example, for unmanufactured tabacco, if flue cured and used for the manufacture of smoking

mixtures for popes and cigaretttes tthe duty is Rs. 40. If it is other tthan flue cured and used for the same purposes., tthere is no tax at all. We have

referred to the abbove only to nottice the variattion in the rattes of excise duty eccording to the quality of the toabbacco. TThe Central

Government has admitttedly issued a Notification u/s 12 of the Centtral Excises and Salt, Act declaring Seection 110 Customs Act of 1962 to be

applicable to the levy of duty and exempttion from dutties ettc. as adaptable to the Excise Act also but invocable according to the circumstances of

each case. Section 110 of the Customs Act provides that if the proper officer has reason to believe that any goods are liable to confiscation under

the Act, he may seize such goods. Section 13 of the Act confers a power on any Central Excise Officer fuly empowered by tthe Central

Government tto arrest any person whom he has reason to beliieve to be liable to bee punishedc undr the Actt. Section 37 touching upon the rule

making power of tthe Central Government enables iit to makee any rules generally tto carry into effect the purpose of the Act and in particular

authorise and rgulate inspection of factories and provide for the taking of samples and for the making of tests aof any sunbstance produced thereiin

and for the inspection or search of place or for the proper levy and collection of duties imposed by this Act on any excisable goods.

Rule 144 of the Central Excise Rules 1944, imposes a ban on tthe warehouse keeper not to take any goods out of the warehouse unless so

permitted by the statutory authoritties.

Rule 151 provides for offences witt respect to warehosiing. says -

Offennces with respect to warehousing :- It the owner of goods warehoused, or the warehouse keeper, by himself for by any person in his

employ or with his connivance, commits any of tthe following offences,- (a)......(b)......(c) warehouses goods in, or removes goods from, a

warehouse otherwiise than as provided by these rules......(d)......

he is said to have committed an ofence and he shall be liable to a pennalty besides all the goods warehhoused, removed or concealed in

contraventttion of this rule shall be liable to confiscation.

Rule 223-A enables tthe Collector tto take an account of goods in a warehouse at least once in every year. No doubt, this rule lays an accent on

the quyantity warehoused but does not expressly refer to the quality of the goods.

It may be necessary also to refer to rule 56 which has been relied upon by the larned counsel for the petitioners. Rule 56 of the Centtral excise

Rule, 1944, provides for taking of samples for excise purposes. This rule is referable to goods which are manufactured or parttly inanufactured and

takiing of samples of any such goods. It permits the officer to take samples of such goods and test tthem for purposes of ascertainiing any

infringment of the excise rules.

It is thus seen from an analysiis of the provisions which are relevant for purposes of this case that throughout the ttexture of the Centtral Excise

Act, runs a warp in the nature of lynx eyed supervision by the authorities over the licence holders and in partiiicular the keepers of a bounded

warehouse-against removing duttiable goods without authority or warehouse goods in the bonded warehouse euqlly without such authority. In the

context of the scheme of the Central Excise Ac read with the Customs Act, ass set out hereinbefore it appears that the primary obnjective of the

Excise Act hereinafter referred to as the ACt, iis to ensure tht no loss of revenue is susttained by the Satte by reason of any activity irregularly or

illegally committed by tthe warehouse keeper. Thee irregularties and illegalities may occur in myriad ways. It is no doubt true that excise dutty is

levied on the weight of tabacco. But so long as it is not in dispute ttha there are varieties of tabaccos which are susceptible to varied rates of duty,

it is impossible tto conceive ta, if the warehouse keeper dexterously manages to keep the weight but substiitutes the quality of tabacco to ensure

such weight that operatiion also might and in a loss of revenue to the State. In order, therefore, to ensure that tthere is no such loss to the State, in

Excise Officials functioning under the Actare enabled to inspect thewarehouse from time to time. IIt may be that tthe stock register miightt not

disclose any discrepancy in weight. But if in the course of inspectiion aitt is found that the quality of the tobacco found in tthe warehouse is different

from the quality which wentt into the warehouse under a lawful permit, tthen also the Central Excise autthorities do have the power to act in

accordance with law. We have alreadyseen tthat Section 13 of the Act enables the Central Excise Officer to arrest any person whom he has

reason to beliieve to be liable to punishmentt unde this Act. The punishment referred to in Section 13 of gthe Act, has to be read in conjuncttion

with the inttendmentt of tthe Legislature to penalise the licence holder for any of the contraventions of the provisionss of the Act or the Rule made

thereunder.

Rule 144 of tgthe Rules lays an embargo on te warehouse keeeper from removiing tthe goods from any warehouse except on payment of duty.

Rule 151 of the Rules provides for the imposition of a penalty as also confiscation, if it is found that the warehouse keeper or his agent

warehousees goods in or removes goods from a warehouse otherwise than as provided for by tthese rules.

Rule 223-A is a processual provision which envisages the levey of a penalty where itt is found that there is a deficiency in the weitht of the

commoditty. The cuumulative effect of this enaforcement provision which are quasi-penal in nature read with tthe oject of the enactmentt which is

to consolidate the law relating to Central Excise duties and which is factually a statutory instrumentt preventing evasion of tax, is that these runs in

the vein of this state a power in the Excise authorities to take such actions ass the circumstancees of a case demands, in order to avoid evason of

tax. If, as in the insttant case, suspicion is enttertained that the goods found zt the time of the check are not te same as the goods which wer

warehouseed in zt the time of the issuance of the lawful permit to house the goods, that te natural inferece is tht there has been aremoval of the

goodss which were warehoused and a letting in of the goods which were ot permjittted. In order to satisfy whetther there hass bee such an illegal

removal and a consequeential unauthorised substtituttioh, the excse oficial in thhe course of his check under Rule 223-A would be right in ttaking a

samples from the suspected substituted goods in order tto satisfy himself whether there has been a violation fo fule 151(c)read with rule 144 of

tgthe Rules. The excisd official is exericsing powers under a fiscal enactiment. He may not, atherefore, be expected to have the necesssary

expertise to render his opinion whetther the alleged substituted goods are of tthe same qualitty as those goods which entered into the warehhouse

on a lawful permit. In order to secure an analytical report, the practice appears to be tto call a committee of expertts in the same trade to render an

opinion thereon. This is neither an unreasonable method of ascertaining the quality of the goods in the warehouse, nor could it be said to be an

illegal exercise of power in the Central Excise Official who is acting in the course o his nvestivation tto detect an irregularity or illegality committted

by the warehouse keeper. Theerefore, it follows that notwithstanding the fact that there is no discrepancy in the weight ass shown in the stock

register, if a bona fide suspicion is entertained that there is a difference in quality in the goods found at the tome of entry is found in the stock

registerm then it appears to us that th statutory officials have the right to take samples.

We have already referred to tthe factt that the officer has the power to confiscatte goods if they ettered into the warehouse without a lawful

permit. The learned counsel, while conceding that the power of confiscatgion is vested in the statutory officials, would say that there is no power to

take samples. The power to take samples is only a means to an end. It gives also an additional opportunity to tthe alleged delinquent toprove

otherwise and establish tthat there has no substituttion of tthe goods. We are unable to agree that an Officer, who has the power to confiscate

goods which has found an illegal entry into the warehouse, cannot seize a muc smaller quanttity for purposes of substantiating that ttthere has been

a substitution in the goods. The substtitution might result in evasion of tax because there are varied rattes of duties according to the qualitty of

ttabacco. Weightt of course is one of the incidents for consideration but quality, ahaving regard to the nautre and variety of duties accofding to the

qualiituy of the batacco, is also equally an essential ingredientt to detect unauthorised substitution. It is in this conttext that reliance is place upon

Rule 56. Rule 56 is a speecial rule touching upon the taking of samples of any majufacttured or partly manufactured goods. The sense behind this

rule is easily understandable. In the case of manjufacturer, he may claim athat certain excisable commodities have been useed. In order to sattisy

themseelves that there has been a sue of the authorised percentage of excvised goods in the manfuctured commodity, a speecific provision is made

faor sample of those goods. This would nott, however, imply that tte excise authorities in the coursee of their investigation whoc detectt tthe

commission of any offence, are precluded from atakjng samples of excise goods other than the mauacttured goods.

We agree witth Koshal J. when he says -

In factt, it is not Rule 56 which confers on the excise authoritties the powser to ttakee samples. TThat rule only regulates such power, which is

conferred by the 1944 Act read with the 1952 Act, and tthat ower is the power of seizure which, ass already sttated by me, would include the

lesser power of taking samples.

We have already referred to the fact that the Central excise officials have tthe rightt to confiscate or seize the goods if, inttheir opinion, ann offence

has been committted by tthe warehouse keeper. Such a larger power would certtainly include a lesser power of taking samples.

The decision referred to by the learned single Judge ass well as referred to before us reported in Ramalinga Choodambikai Mills Ltd. Vs. The

Government of India and Others, , does not apply tto tthe act of tthis case. In fact, Ramanujam J. in that casee, sshould be understood to have said

tthat, when the taking of samples is admittedly provided for in Rule 56, then undoubtedly the excise autthorities are competent to have the samples

tested in order to subserve the purpose of taking of such samples. We are nable to hold that the decision is appositte for purposes of our case. We

are concerned with a case where the excise officialss, instead of confiscatting the entire suspeectted substittuted goods, adopted a step in aid

thereto, by taking samples in order tto investigate further to find whether there hass been such an improper substtitution. We are therefore,

sattisfied tht the taking of samples in the peculiar circumstances of this case is authoriseed under the Actt and the said power is neither

unreasonable oruntramelled.

TTThe nexttt point urged is whether tthe excise officials could arrest a person. This power is expressly proviced for in Section 13(1) of tthe Act.

If the excise official has reason to believe that the petitioner had substittuted goods lying in their warehouse withoutt thepermission of the excise

authoritties and if, accoring to their beliief they differ from the goods which was earlier permitted, then the excise officials are duly empowered to

arrest the person involved in such an activity. The apprehensions entertained by the appellants are that there was a threattened arestt. So long as

the power of arrestt is comprehensible under thje provissions of the Act and is expressly provided for, then we are unable to accept the conention

of the appellants that no threat of arrest could be extendeed to them.

The lastt bu feeble cntention of thelearned counsel for the appellants was thatt analysis ofthe samples by a panel of tradeers, who are in fact

competitors in the profession is unauthoriseed. As poitted ou by Koshal J. it is for the authoritiees tto dettermine as to whatr sortt of eviidence

would be sufficient tto supportt the inttended prosecution or farther statutory action. If the prosecuttion is laid on the basis of the opinion of the

Penal and if the Court accepts it, tthen the appellants can have no comlaint. The metthodology tto be adoptted by the investigattng agency iin order

tto sustan their conviction and belief that an offence has been committed under the Central Excise Act cannot be challenged in these proceedings.

The writt of prohibition is an extraofdinary writ which could be asked for only in casees where there is a total absence of jurisdiction in the

autthority to take action or where there is an open eexcessive ecercise of such jurisdiction;. Neiitther of these two primoridial condittions which

would prevent an authoritty from taking action under tthe appropriate acts of I egislature are present here. In fact, we have found that the Cenntral

excise officialxs have tthe right to confiscate the goods, if they suspeect any unauthorised entry of subarrest the delinquent, if they have a

reasonable belief that an offence under the Actt has been committted and,. therefore, the writ of prohibition ass soughtt for was rightly refused by

the learned Judge.

These writ appeals fail and they are dismissed. There will be no order as to costs.

Learned cunsel for the appellant seeks for leave to appeal to the Supreme Court against our judgment. In our judgmentt, we have dealt with

the provisions of the Central Excise Actt andthe Customs Act, whiich are self explanatory, and our decision in bassed on the interpretation of those

provisions. The subject matter, in our opinion, does not raise any substantial question of law of general importance, which has to be decided by the

Supreme Court. Accordingly, we see no reason to grant leave.