2012 (11) TMI 113 - HC - Central Excise

Seizure - discretionary powers of commissioner - Alleged that stock was not handed over at the petitioner s shop premises but the same was being transported to a different place Held that - it is not in dispute that the seized beer suffered duty. - Mere existence of discretionary power shall not entitle the authority to exercise such power in a mechanical manner without being conscious of the gravity of the offence - condition directing payment of the value of the seized duty paid liquor, is wholly irrational and unreasonable - order, to the extent of stipulating the condition of payment of the value of the seized stock, is set aside - respondents are directed to refund the sum representing the value of the seized stock, to the petitioner

Issues:
1. Mandamus to declare the action of respondents in not releasing the bank guarantee/challan as illegal and arbitrary.
2. Refund of the value of the seized stock.
3. Interpretation of Section 47-A of the A.P. Excise Act, 1968.
4. Exercise of discretion by the Commissioner in imposing conditions for compounding offenses.

Analysis:
1. The petitioner filed a Writ Petition seeking a mandamus to declare the action of the respondents in not releasing the bank guarantee/challan as illegal and arbitrary. The petitioner, a holder of a liquor license, had his stock seized during transportation, leading to a criminal case. The petitioner complied with the conditions set by the respondents for compounding the case by paying a compounding fee and the value of the seized stock. However, the petitioner sought the return of the bank challan, arguing that once the compounding fee is paid, he should not be liable for the value of the seized stock. The court examined the facts and held that the petitioner should be refunded the value of the seized stock as the Commissioner did not exercise discretion reasonably in imposing the condition for payment.

2. The court considered the interpretation of Section 47-A of the A.P. Excise Act, 1968, in light of previous judgments. The petitioner relied on a Single Judge's decision equating "compounding fee" and "compensation," stating that once the fee is paid, the owner should not pay the full value of the seized stock. However, a Division Bench interpreted the provision differently, allowing the Commissioner to order compounding by collecting the sum of money or the value of the stock seized. The court noted that the discretion vested in the Commissioner should be exercised reasonably and not mechanically, especially when the offense is not grave in nature.

3. The court emphasized that the discretion given to the Commissioner under Section 47(2) of the Act allows for flexibility in imposing conditions for compounding offenses. In this case, where the seized beer had already suffered duty and there were no allegations of unlawful activities by the petitioner, the court found the condition of paying the value of the seized stock to be irrational and unreasonable. The court directed the respondents to refund the sum representing the value of the seized stock to the petitioner, as the Commissioner had not justified imposing such a penalty.

4. The judgment highlighted the importance of exercising discretionary power reasonably and rationally, especially when imposing conditions for compounding offenses. The court set aside the condition of payment of the value of the seized stock, emphasizing that the Commissioner's discretion should consider the gravity of the offense and not result in undue penalties for the petitioner. Consequently, the Writ Petition was allowed, and the respondents were directed to refund the amount to the petitioner, rendering a related petition infructuous.

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