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TMI Blog1990 (4) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... ompounded out of raw materials. They are mixed together in the proportion and in accordance with the formula set out in the publication Ayurved Sar Sangraha and marketed in containers. Prior to 1-3-1975, Dant Manjan Lal as also the other ayurvedic preparations manufactured by the appellant were treated as Exclusively Ayurvedic Medicines" within the scope of the description carried T.I. 14E, not containing alcohol, opium, Indian hemp or other narcotic drugs or narcotics other than those medicines which are exclusively Ayurvedic. And by virture of their express exclusion from the scope of T.I. 14E, they were not treated as excisable to duty. 3. On 1-3-1975, a residuary item, being Item No. 68, came to be introduced. Even though Ayurvedic Medicines had been specifically excluded from the scope of T.I. 14E as aforesaid, the Excise Department nevertheless took the view that the said medicines would with effect from 1-3-1975 fall under T.I. 68 and be liable to duty. There is no dispute that during that period immediately after the introduction of T.I. 68 on 1 3 1975. Dant Manjan Lal and other Ayurvedic preparations were being cleared only on payment of duty. 4. On 1-3-1978, the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation 234/82. Insofar as the appellant s unit in Naini is concerned, the matter was remanded by Collector (appeals) New Delhi, to the Assistant Collector, Central Excise, Allahabad with the direction that the matter should be decided by reference to the particular book of Ayurvedic systems of medicines in which the ingredients used by the appellants in the manufacture of Dant Manjan Lal and the process employed for the production of this preparation have been described or alternatively by obtaining the expert advice of the Drugs Controller. In the remand proceedings, as aforesaid, the appellant made detailed submissions on merits. The appellant also pointed out to the Assistant Collector that since no power was being used by the appellant in the manufacture of Dant Manjan Lal, the said product would in any case be exempt from duty vide Notification No. 179/77-C.E., dated 18-6-1977 as amended by Notification 74/83-C.E., dated 1-3-1983. 8. In the meanwhile proceedings relating to the appellant s units in Patna and Nagpur had become the subject matter of appeals, filed both by the appellant and by the Collectors concerned. The said proceedings were adjudged in June and July 1985, v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 12. On 8-8-1986, i.e. more than 5 months after the seizure of goods on 17-2-1986 the factory of the appellant was visited again by Central Excise Officers, when certain documents and records were resumed and the statements of some of the factory Officers recorded. 13. A show cause notice was issued to the appellant which revealed for the fresh time in paragraph 5 thereto that the seizure on 17-2-1986 was effected because there was reasonable belief that M/s. Baidyanath are manufacturing Dant Manjan Lal falling under Tariff Item 68 with the aid of power; without Central Excise licence, without maintaining any records as provided in the Central Excise Act and Rules and clearing the same without payment of Central Excise Duties and gate passes . It will be seen that the reasonable belief as mentioned in the notice was sought to be sustained on the basis of certain facts set out in paragraph 6 which had allegedly come to the notice of the Department on 8-8-1986 and which are mentioned as (i) Shri K.N. Mehrotra s statement of 8-8-1986 in which he is alleged to have misled the Department; (ii) Shri Sada Nand Mishra s statement dated 8-8-1986 in which he is alleged to have admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectively as Annexure F . The short point was that since the product Dant Manjan Lal was being manufactured exclusively in accordance with the formulae described in the authoritative book Ayurveda Sar Sangraha which is specified in the First Schedule to the Drug and Cosmetics Act, 1940, it was fully covered by the definition of Ayurvedic (including Sidha) or Unani drug appearing in Section 3(a) of the Drug and Cosmetics Act, 1940. There could now be no room for doubt or controversy that it was an Ayurvedic medicine falling under T.I. 68 and entitled to exemption under Notification 234/82 dated 1-11-1982. 16. The order passed by the learned Additional Collector is not a speaking order at all in as much as it does not deal with several vital issues raised in the two replies submitted by the appellant and in its communication about the approval and notification of the publication Ayurved Sar Sangraha in the Schedule to the Drug and Cosmetics Act, 1940 including (i) the illegality of the seizure effected on 17-2-1986, when the proper officer had no reasonable belief that the goods lying on the premises were liable to confiscation in terms of Section 110 of the Customs Act, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omes classifiable under T.I. 68, in view of the Explanation added to the said item effective from 19-6-1980. Having regard to these facts it would not be permissible to hold that for the purpose of its entitlement to exemption it falls outside the scope of the expressions all drugs, medicines, pharmaceuticals and drug intermediates not elsewhere specified , or All bulk drugs and medicines not elsewhere specified as used in Notifications 62/78 and 234/82. 20. The learned Additional Collector s reliance on the statements of Shri Sada Nand Mishra and Shri Sharma is completely misplaced. The learned Additional Collector s reliance on order/s/invoices resumed by the officers and the insinuation that they had been manipulated is completely uncalled for. Such corrections or insertions as appear in the said orders had been made originally (and not subsequently as has been erroneously assumed) and the fact could have been easily verified from copies available with the suppliers. Similarly, the insertions/corrections found in the bills were made by the suppliers, a fact which could have been easily verified from the originals. The appellant had in certain cases received raw materials be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position, the learned Addl. Collector was justified in holding that the goods had been manufactured in violation of the law and therefore were liable to seizure and confiscation. 27. In this respect he would in particular draw attention to the discussion and findings recorded in the order in original which go to show that the appellants were liable to pay the duty and the imposition of fine and penalty was also justified. 28. We consider that the submissions of the learned counsel have a strong force. The seizure of goods of a manufacturer is an action which very seriously affects the operation of a unit and results in temporary deprivation of use of his own property by a citizen. Therefore the power to seize is required to be exercised very carefully and cautiously and it is necessary to ensure that all the pre-requisites for such an action are duly satisfied. 29. One of the most important pre-requisites of course is that the seizing officers must have a reason to believe that a violation of law has in all probability taken place or is likely to take place (in those cases where an attempt is an offence). That apart the grounds on which the seizure is proposed to be made or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the learned counsel the departmental action of seizure was to say the least premature. In fact in view of the pending proceedings the officers could not possibly have a reason to believe that the goods were liable to seizure at that stage. Even otherwise in view of the Superintendent s enquiry and letter dated 19-12-1985 certifying that no power was being used in manufacture of their product, there could not be at the face of it of any cause for seizure in the normal course; And officers could not have foreseen, on the date of seizure as to what would happen in future and could not have known what the documents taken subsequently and the statement recorded subsequently would disclose. Indeed the departmental officers could have at the most a suspicion and could not possibly have a reason to believe that the goods were liable to seizure; And the utmost they could do, in the circumstances, was to take an appropriate undertaking. 32. We also take note of the learned counsel s submissions that it was not communicated to them as to on what grounds the seizure was being made at the time it was effected (or soon thereafter). 33. In view of the above position, we consider that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n when the change in the notification did no longer affect their liability. This type of action could not be seriously objected to by the department as a citizen is entitled to plan and organise his work in such a way as to be liable to minimum taxation only. 37. We also note that in the written memorandum the appellants have accepted occasional use of power operated machines for sealing the containers. This would have affected the case and would have been a point in favour of the department if only it could be shown that in the first instance the products were excisable and liable to duty. Since as observed above, this question is yet to be finally determined by the authorities concerned, therefore this by itself does not help the department s case at this stage. 38. Since it has not been contradicted that the goods had been duly accounted for in the records maintained in the normal course of business and were still in the factory at the time of seizure and the duty liability had not yet been finally determined, we hold that the goods were not liable to seizure and confiscation and the penal action against the appellants was premature. 39. We therefore set aside the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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