1972 (6) TMI 27 - HC - Central Excise

Summary

Issues Involved:
1. Legality of the seizure of goods.
2. Applicability of Rule 9(2) of the Central Excise Rules, 1944.
3. Violation of Article 19(1)(f) and (g) of the Constitution.
4. Bona fide purchaser's protection against seizure.

Detailed Analysis:

1. Legality of the Seizure of Goods:
The petitioner, Shakti Textiles Corporation, filed a petition under Article 226 of the Constitution for the release of 306 bags of yarn seized by the respondent, the Collector of Central Excise, Madurai-2. The seizure was made under Rule 206(3) of the Central Excise Rules, 1944, based on an order dated October 30, 1971. The petitioner argued that the seizure was illegal, as there was no provision for the seizure of goods in the hands of a bona fide purchaser who had paid the excise duty. The Court, however, upheld the legality of the seizure, citing Section 110 of the Customs Act, 1962, as adapted under Section 12 of the Central Excises and Salt Act, 1944. The Court stated, "If the proper officer has reason to believe that any goods are liable to confiscation under the Act, he may seize goods."

2. Applicability of Rule 9(2) of the Central Excise Rules, 1944:
The petitioner contended that Rule 9(2) should not apply as the goods were not in the possession, custody, or control of the manufacturer. The Court, however, found that "the goods, in question, as alleged by the respondent, being non-duty paid, their removal from the premises was in direct contravention of Sub-rule (1) of Rule 9, and such goods under-sub-rule (2) of the Rule shall, among other things, be liable to confiscation." The Court emphasized that the liability attaches to the non-duty paid excisable goods and runs with them, regardless of their subsequent possession or ownership.

3. Violation of Article 19(1)(f) and (g) of the Constitution:
The petitioner argued that the seizure violated their fundamental rights under Article 19(1)(f) and (g) of the Constitution. The Court dismissed this contention, stating, "The power of seizure in itself is justified by the fact that it is applied to the offending goods." The Court further noted that the power conferred upon the Excise Officers by Section 12 of the Excises and Salt Act, read with Section 110 of the Customs Act, is reasonable and in public interest, intended to safeguard the revenue legitimately due to the Union.

4. Bona Fide Purchaser's Protection Against Seizure:
The petitioner claimed to be a bona fide purchaser for value and argued that it took all necessary precautions by ensuring that the excise duty was accounted for in the invoices. The Court, however, held that "innocence or bona fides of such a third party does not appear to be relevant to the liability of such goods to confiscation." The Court ruled that the liability of the offending goods to confiscation is absolute and not dependent on the mens rea of any party. The Court reasoned that allowing otherwise would defeat the purpose of Rule 9, as goods could be removed without payment of duty and passed on to third parties to evade confiscation.

Conclusion:
The petition was dismissed with costs, affirming the legality of the seizure and the applicability of Rule 9(2) of the Central Excise Rules, 1944. The Court upheld that the seizure did not violate Article 19(1)(f) and (g) of the Constitution and that the liability of non-duty paid goods to confiscation is absolute, irrespective of the bona fides of the purchaser. The petitioner's claim as a bona fide purchaser did not exempt the goods from confiscation.