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TMI Blog2013 (3) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... d the reasons. Regarding search in respect of units not mentioned - intelligence report to cover the similar units within jurisdiction of other commissionerates. - held that:- The search is a serious matter. There cannot be general order for search: either the report should have indicated the names of such units and then agreed upon by the empowered officer, or the empowered officer should have indicated the same. The search conducted on M/s. N.K. Laminates and Brij Kattha Industries is valid; whereas the search conducted on Kanchan Udyog is illegal. - Writ Petition (Tax) Nos. 1289-1290 & 1334 of 2003 - - - Dated:- 27-10-2010 - Yatindra Singh and Rajes Kumar, JJ. Shri Bharat Ji Agrawal, S.D. Singh and Dinesh Prakash, Counsels, for the Petitioner. Shri S.P. Kesarwani and B.K.S. Raghuvanshi, for the Respondent. ORDER The petitioners are manufacturers. However, classification of their product is disputed. It is for this reason a search was conducted at their units under Central Excise Act, 1944 (the Excise Act). These writ petitions revolve around legality of the same. The facts 2. The Central Government has framed Central Excise Rules, 1944 (the Rules) und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the petitioners. Points for determination 11. We have heard Sri Bharat Ji Agrawal, Sri SD Singh, and Sri Dinesh Prakash, counsel for the petitioners and Sri S.P. Kesarwani and Sri B.K.S. Raghuvanshi for the respondents. The following points arise for determination : (i) Whether the goods manufactured by the petitioners are exempt from excise duty? (ii) Whether there is any reason to believe for conducting the search? (iii) Whether the reasons should be personally recorded by the empowered officer? (iv) Whether the approval for search was to be obtained from the Director General, Central Excise Intelligence (the DGCEI)? (v) Whether there was no application of mind for ordering search? Ist point : Exciseable or non not decided 12. The counsel for the petitioner submits that: The petitions are manufacturing Kattha; It is exempt from excise duty; and No search could be conducted in the premises. 13. The case of the petitioners is that the goods manufactured by them is Kattha. In this regard they submit that : The other wings of the Government treat it as Kattha; The raw material of their product is Gambier. Except Kanpur, it is treated as Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant. 20. The Department has produced the original record of the case where the reasons were recorded. A photostat copy of the documents were also given to the counsel for the petitioners. 21. The record indicates that even prior to the amendment of the exemption notification, there was doubt, whether the goods manufactured by the petitioner from Gambier was exempt from excise duty or not. In this connection, investigations were going on. 22. The Superintendent of the Department submitted a note (see Appendix-1) on 22-3-2003. It indicated the following reasons for conducting the search : (i) The Units are engaged in manufacture of product by processing Gambier and Khair wood and under the guise of Kattha, no excise duty is being paid; (ii) The Food and Adulteration Department has clarified that neither Kattha can be manufactured from Gambier, nor the product manufactured from Gambier can be marketed as Kattha; (iii) The goods manufactured from Gambier is not Kattha as per clarification from the Food and Adulteration Department and ISI specifications for Kattha; (iv) The goods manufactured from Gambier classified in the CSH 3201 as Tanning Extract, on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Supreme Court in the Ramkishan case was concerned with the constitutionality of Section 41 of Madras General Sales Tax Act, 1959 (the Madras Act). The proviso to sub-section (2) of Section 41 [Section 41(2)] of the Madras Act provided that so far as may be, all searches be made in accordance with provisions of CrPC. The Madras High Court had held that : (i) Sub-sections (2) to (4) of Section 41 of Madras Act were ultra vires the Constitution; (ii) The warrant issued by the Magistrate for search of the residential accommodation was bad as Magistrate had not applied his mind before issuing the same. The Supreme Court reversed the Madras High Court judgment on the first point but agreed with its second conclusion and dismissed the appeal. 28. In the Ramkishan case, the Court was not concerned with the question involved in the present writ petitions; there the court was concerned with the constitutionality of the Madras Act and was considering whether sufficient safeguards were provided under Section 41 of the Madras Act or not. It is in this light that the Supreme Court made some observations. 29. The Supreme Court in the Ramkishan case was neither concerned with the que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason applies here. The order for conducting the search cannot be voided on the ground that the empowered officer has not personally recorded the reasons. 36. The object of search is to find out goods or documents that may be useful and necessary in the proceeding pending or contemplated under the Excise Act. The only requirement for the search is that there should be reasons to believe to conduct the search and they should be relevant. This is also so held in Durga Prasad v. H.R. Gomes, 1983 (13) E.L.T. 1501 : The object of grant of power under S. 105 is not search for a particular document but of documents or things which may be useful or necessary for proceedings either pending or contemplated under the Customs Act ... [T]he power of search granted under S. 105 of the Customs Act is a power of general search. But it is essential that before this power is exercised, the preliminary conditions required by the section must be strictly satisfied, that is, the officer concerned must have reason to believe that any documents or things, which in his opinion are relevant for any proceeding under the Act, are secreted in the place searched. 37. The note submitted by the Superin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e letter that was to be sent and not about the approval for conducting search by the Department. 45. In our opinion, there was neither any requirement, nor was it indicated by the empowered officer to get approval of the DGCEI for the search. 5th point : There cannot be general order : 46. The counsel for the petitioners submitted that: The names of the units are not indicated in the note of the empowered officer; There cannot be general order to search all the units in Kanpur; It cannot be said that there has been any application of mind. 47. The note of the Superintendent indicates three units namely, M/s. N.K. Laminates, M/s. Brij Kattha, and M/s. Balram Wood Products. There is also recommendation for writing a letter to the DGCEI informing him details of the intelligence report to cover the similar units within jurisdiction of other commissionerates. The report is confined to three units though the recommendations is there for the other similar units in the Kanpur Commissionerate. 48. The empowered officer agreed with the report. Out of these three, two are at the petitioners in the first and third WPs. There is nothing on record to show that there was spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification No. 76/86, as amended. No Central Excise formalities like Registration, payment of Central Excise duty etc. were made by these units. The Food Adulteration Department has very categorically clairified that Kattha cannot be manufactured from Gambier and resultant product obtained from the processing the Gambier cannot be marketed as Kattha. The aforementioned notification is only relevant as far as Kattha is concerned and exemption was granted to Kattha only. However, the product so obtained from the processing of Gambier along with some other raw materials does not fall within the ambit of Kattha as per clarification received from the Food Adulteration Department and as well as on the basis of ISI specifications from Kattha. Thus, the product so obtained from the processing of Gambier may rightly be classified in the CSH 3201 as Tanning Extract [on the basis of classification of Gambier in the Customs Tariff and as mentioned in corresponding Bill of Entry, so filed by the importers], and liable for payment of Central Excise Duty @ 16% adv. On the basis of various records/information submitted/resumed from M/s. N.K. Laminates, M/s. Bij Kattha M/s. Balram Wood Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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