1989 (7) TMI 121 - HC - Central Excise

Search - Warrant of search - Demand - Valuation - Interest on delayed payments - Writ jurisdiction

Issues Involved:

1. Mala fide search and procedural irregularities.
2. Vagueness of the show cause notice.
3. Non-furnishing of documents and information.
4. Competency of search officers.
5. Violation of principles of natural justice.

Detailed Analysis:

1. Mala Fide Search and Procedural Irregularities:

The petitioners contended that the search conducted in the factory, office, and residence of the Executive Director was mala fide and should be quashed due to several procedural irregularities and non-conformity with Section 105-C of the Customs Act read with Section 165 Cr. P.C. They argued that the search was a result of a general policy decision rather than specific intelligence. The court, after reviewing the records, concluded that the warrant of search was preceded by recording of reasons by the Directorate of Anti-Evasion and the jurisdictional Assistant Collector. Hence, this contention was rejected.

2. Vagueness of the Show Cause Notice:

The petitioners argued that the show cause notice was vague and issued without application of mind, making it impossible to understand the basis for the allegations. The court found that the show cause notice and the statement of objections indicated a prejudged conclusion by the Collector, which could lead to unnecessary harassment. The court agreed with the petitioners that the notice was vague and quashed the show cause notice in so far as it related to the proposed additions and the demand for differential duty.

3. Non-Furnishing of Documents and Information:

The petitioners claimed that the adjudicating authority proceeded with the enquiry without furnishing copies of all documents and information relied upon against them. The court noted that the Department had furnished some documents and sample work-sheets, but the petitioners demonstrated that the additional realizations shown by the Department were based on hypothetical assumptions. The court found that the Department's method of arriving at the revised assessable value was arbitrary and whimsical.

4. Competency of Search Officers:

The petitioners raised an additional ground regarding the competency of the search officers, arguing that they were not 'Proper Officers' as defined in the Customs Act and Central Excise Rules. The court upheld the validity of the notification issued under Section 2(b) of the Act, which conferred the necessary powers on the officers of the Directorate of Anti-Evasion. The court referred to several decisions from other High Courts upholding the validity and legality of the notification.

5. Violation of Principles of Natural Justice:

The petitioners contended that the proceedings of the adjudicating authority violated principles of natural justice. The court agreed that the show cause notice and the statement of objections indicated a prejudged conclusion, which could lead to unnecessary harassment. The court found that the petitioners had made out a case that they should not be exposed to such harassment and quashed the show cause notice.

Conclusion:

The writ petition was allowed in part. The show cause notice, in so far as it related to the proposed additions and the demand for differential duty, was quashed. The Department was given liberty to issue a fresh show cause notice in accordance with the court's order and the law. The challenges to the validity of the search, the order of seizure, and the competency of the officers were rejected.

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