1970 (3) TMI 59 - HC - Central Excise

Issues Involved:

1. Whether the accused evaded payment of Central Excise duty under Section 9(b) of the Central Excises and Salt Act, 1944.
2. Whether the demand for payment of duty by the Central Excise Department was arbitrary and improper.
3. Whether the accused substituted the original tobacco with inferior quality tobacco to avoid payment of duty.
4. Whether the accused set fire to the godown to cover up the removal of tobacco.

Detailed Analysis:

1. Evasion of Payment of Central Excise Duty:

The primary issue was whether the accused evaded payment of Central Excise duty under Section 9(b) of the Central Excises and Salt Act, 1944. The court examined the meaning of "evade" and concluded that it implies some step for escaping or avoiding the payment of duty by underhand dealings. The court stated that a person is said to evade payment of duty if he does something underhand with the object of escaping or avoiding the payment of duty in the manner and at the time and place provided by the rules framed under the Act. The court further clarified that the offence of evasion is complete the moment the goods are removed from the warehouse without payment of duty, regardless of whether a demand for payment is raised under Rule 160.

2. Demand for Payment of Duty:

The court addressed whether the demand for payment of duty by the Central Excise Department was arbitrary and improper. The Sessions Judge had found that the demand for 702 Md. 11 Srs. of tobacco was incorrect and improper, and thus the accused was not bound to pay an arbitrary amount. The court, however, clarified that the obligation to pay duty arises as soon as the goods are produced, cured, or manufactured, and in cases where they are moved to a warehouse, payment of duty is deferred until they are removed from the warehouse. The court held that the defect or impropriety in the notice of demand under Rule 160 cannot affect the offence which has already been committed.

3. Substitution of Original Tobacco:

The court examined whether the accused substituted the original tobacco with inferior quality tobacco to avoid payment of duty. The prosecution argued that the accused had removed 197 Md. 26 Sr. 13 Ch. of tobacco and replaced it with 147 Md. 11 Sr. 8 Ch. of inferior quality tobacco. The Sessions Judge found that the Panchanama prepared by the Central Excise authorities was not reliable and that the prosecution failed to establish the quality and quantity of tobacco found in the godown. The court agreed with the Sessions Judge, noting procedural irregularities and the lack of reliable evidence to prove that the accused removed any tobacco surreptitiously from the godown without payment of duty.

4. Setting Fire to the Godown:

The court considered whether the accused set fire to the godown to cover up the removal of tobacco. The prosecution alleged that the accused set fire to the godown when it became apparent that the authorities would check it by force. The court noted that while the circumstances created a suspicion that the fire was set to cover up the illegal removal of tobacco, suspicion alone cannot take the place of proof. The court found no evidence to show how the fire originated and that the prosecution failed to prove that the remains of tobacco in the godown did not correspond to the tobacco stored there.

Conclusion:

The court concluded that the prosecution failed to establish that the accused took any steps to evade payment of excise duty. The appeal was dismissed, and the order of acquittal was upheld. The court emphasized that the offence of evasion of duty is complete when the goods are removed from the warehouse without payment of duty, and any defect in the subsequent notice of demand cannot affect the offence already committed.

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