By this single order, we intend to dispose of the aforesaid seven appeals with more or less same facts and common question of law, filed by Messrs Excel Tobacco Company (Pvt.) Ltd., Bhoon Road, Chakwal (hereinafter called as appellant) against the Federal Excise Order-in-Appeal No, 412 of 2009 dated 3-7-2009 passed by Collector (Appeals), Islamabad, Order-in-Appeal No, 93 of 2007 dated 3-12-2007 passed by the Collector (A) and Order-in-Appeal No,2 of 2009 dated 27-3-2010 passed by the Commissioner Inland Revenue (Appeals-I), Islamabad.
In the first instance we intend to dispose of Appeal No,19/FE/IB/2009. Following table shows amount of detail and tax involved in it.
A.No. Show-Cause Notice No. and Date Nature of case Amount of Duty 019/2009 C.No.I V.CE/ADJ/DC/200/2003/186 dated 3-1-2004, Addl. Collector, Rawalpindi.Seizure/contraventionC.E. Duty Rs. 663.314
2. Brief facts of the case are that it was reported by the Directorate General, Intelligence and Investigation (Customs, Sales Tax and Excise), Islamabad that an information was received that the management of Messrs Excel Tobacco Company, (Pvt.) Ltd. Bhoon Road, Chakwal, was engaged in evasion of Central Excise duty and Sales Tax. In pursuance of above information, the staff of Directorate General, Intelligence and Investigation (Customs, Sales Tax and Excise), Islamabad, visited factory premises of Messrs Excel Tobacco Co. (Pvt.) Ltd., Bhoon Road, Chakwal on 9-9-2003. Checked the prescribed Central Excise record and stock taking of raw/packing material and manufactured goods etc., was conducted in the presence of Excise Attorney and Inspector Central Excise, Stock taking of finished goods at production hall was also undertaken at 1200 hours, which was for the time between 0900 to 1200 hours reflecting quantum of production of cigarettes in the factory. According to the prescribed Central Excise record 771 Kgs of cured tobacco was in balance as on 8-9-2003, whereas as per physical stock taking 3732 Kgs. Cured tobacco was found available. Consequently the cured tobacco and manufactured cigarettes along with raw/material were taken into possession vide memo. Dated 9-9-2003. A number of plastic drums/wooden boxes of cured tobacco and empty cartons of filter rods were also found lying in the factory which being vital evidence to prove the quantum of production of cigarettes on the basis of raw material were also taken into possession and subsequently all the seized goods were given in the custody of Mr. Muhammad Yaseen, Inspector, Central Excise and the licensee.
During scrutiny of record of the factory, very important and vital documents i,e, fake A.R. Book, Tobacco receipt/consumption Register, weightiest/humidity Register and file containing vouchers relating to receipt of cured tobacco along with a draft pad/stock taking report recovered and the same were taken into custody according to law in the presence of management and Central Excise staff. Scrutiny of said record revealed that huge quantity of tobacco was received and consumed by the factory without payment of Central Excise duty for manufacturing of different brands of Cigarettes during the period September, 2002 to September, 2003 and the Cigarettes were fraudulently removed from the factory against fake A.Rs without, payment of central excise duty and sales tax leviable thereon. It was further observed that the Company was not maintaining purchase/sales register as required under section 22 of the Sales Tax Act, 1990 to suppress the actual purchases and consumption of different raw/packing materials for production as well as actual sale of cigarettes. Statements of the Excise Attorney, 1/Cs tobacco section/production hall and excise Inspector were recorded on the spot.
3. On 10-9-2003, the staff again visited factory of Messrs Excel Tobacco Co. (Pvt.) Ltd., Chakwal and it was found that the said factory was engaged in illegal production of different fake/counterfeit brands of cigarettes i,e, Flights, Gold Street and Time Square with description as "Made in A.J.K" on packets thereof without any legal authority/ agreement and prior intimation to the Central Excise authorities. Accordingly the finished goods along with raw/packing material were taken into possession vide seizure memo dated -10-9-2003.
4. On 13-9-2003, the machinery of Messrs Excel Tobacco Co. (Pvt.) Ltd., Chakwal, used for manufacture of counterfeit cigarettes and evasion of duty/tax was also seized vide memo. Dated 13-9-2003 being liable to seizure/confiscation under Rule 210 of Central Excise Rules, 1944 and subsequently the factory was sealed. On 16-9-2003, the current prescribed central excise documents of Messrs Excel Tobacco Co., were also taken into possession.
5. After preliminary investigation of the case, a complaint under section 9-A(6) of the Central Excise Act, 1944 was lodged in the Court of Special Judge (Customs and Taxation), Rawalpindi vide No,12(11) DGCl/RC/2003 dated 26-9-2003 against the management of Messrs. Excel Tobacco Co, and concerned Central Excise staff. The Honorable Court has taken cognizance of the said complaint and issued notices to the nominated persons.
6. The manufactured goods and raw material were liable to confiscation besides penal action against the management as well as concerned Central Excise staff for violating of sections 3, 4(2) and 14(2) of Central Excise Act, 1944 and Rules, 7, 9, 42-B, 43 44, 45, 49, 51, 52, 52-C, 53, 54, 174, 226 and 248 of Central Excise Rules, 1944 read, with section 3-B and Rule 10(2) of Central Excise Act/Rules ibid and S.R.O. 333(I)/2002 dated 15-6-2002 punishable under sections 9 and 17 of Central Excise Act, 1944 and Rules, 210 of Central Excise Rules, 1944. Sections 3, 6, 14, 22, 23 and 26 of the Sales Tax Act, 1990, read with sections 34 and 36(1) ibid punishable under sections 33 and 37 of the Sales Tax Act, 1990.
7. The case was adjudicated upon by the adjudicating authority who ordered the outright confiscation of seized goods including machinery being used/involved in evasion of duties and taxes and a penalty of Rs,26,694, being 5% of amount of duties of excise evaded was imposed.
Moreover an equivalent amount of penalty levied and recoverable along with additional duty and additional tax was also imposed.
8. Being dissatisfied with the treatment meted out by the learned Additional Collector the Registered Person preferred appeal before the learned Collector of federal excise taxes, Islamabad who after considering the facts and circumstances of the case upheld the order-in-original. Now Taxpayer/Registered Person is in 2nd appeal before this Tribunal.
Summarized grounds of appeals as well as the arguments of the learned AR are hereby reproduced as under:--
(1) The investigation agency has no locus standi as far as the adjudication proceedings are concerned. They have been cited only as proforma respondent. They can at best be asked to assist the- department or the public prosecutor but they cannot represent the revenue department before this honourable forum.
It is pertinent to note that no interest has been shown and no comments have been filed by the Collector, Federal Excise and Sales Tax, Rawalpindi who is the main respondent in this case because he, as subsequent developments have shown, does not support the case made out by the investigating agency.
(2) The officers of the Directorate General of Customs Intelligence, are not empowered to proceed under any of the provisions of Customs Act, 1969 incorporated through section 12 of the Central Excise Act, 1944, because section 12 of the Central Excise Act,: 1944 (Section 15 of Federal Excise Act, 2005) does not figure anywhere in S.R.O 543(I)/75 dated 8-5-1975 that authorizes officials of Customs Intelligence to exercise powers of Central Excise officers and there is no mention in the said notification of the powers that became available through incorporation under section 12 of the Central Excise Act, 1944.
(3) That officials of Customs Intelligence were not invested with the powers of section 163 of the Customs Act under S.R.O. 227(1)/70 dated 25-9-1970. The raids as such were illegal and void in the eye of law. Zaffar Ali v. Pakistan (1998 CLC 770), S.M. Yousaf v. Collector of Customs, Karachi PLD 1968 Kar.509, Shokat Hussain v. Zulfiqar Ahmad PLD 1981 Lah.13, Anwar Beg v. Nazir Azhar PLD 1979 Kar. 687; PLD 1977 Lahore 924, Mohd Zubair v. Government of Pakistan PLD 1986 Pesh. 186, Deputy Collector v. Muhammad Mir 1989 SCMR 311, 1991 SCMR 590 and PLD 1996 Kar. 68 and 2003 PTD 2037.
(4) The raiding party consisting of officials of Custom Intelligence could not conduct search to seize documents and material required for purposes of investigation and prosecution by exercising powers available under Rules 197 and 201 of the Central Excise Rules, 1944. It has been held by superior courts that rules do not give them powers of search as envisaged under section 18 of the Central Excise Act, 1944.
(PLJ 2004 Lahore 1936, AIR 1960 SC 210, AIR 1958 Raj. 296).
(5) The Lahore High Court through their recent judgment issued in Writ Petition No, 2559 of 2003 has declared the raid and seizure conducted by the raiding party unlawful and all subsequent actions void and nullity in the eyes of law. In view of the doctrine of 'poisonous fruit of poisonous treethe material allegedly collected as a result of illegal raid and search cannot be used as evidence. No search for the purposes of seizure of goods and documents can be conducted under Rules 197 and 201 of the Central Excise Rules, 1944. This position has been confirmed by Lahore High Court in their judgment relating to Messrs Food Consultants v. Collector, C.E.&ST. Lahore and the Writ Petition mentioned above.
(6) It is an established principle of law that all acts based on illegal search and seizure also become unlawful and nullity in the eye of law. Therefore the entire edifice of prosecution case built on these illegal actions falls to ground. In this connection reference is made to the judgments cited at PLD 1958 SC 104, PLD 1971 SC 124, PLD 1975 Kar. 482, PLD 1981 Lah. 13 and PLD 1986 Pesh.
186.
(7) Moreover, as has been held by the Superior Courts no credence can be attached to the recovery effected in violation of section 103 of Code of Criminal Procedure, 1898. Contrary to legal requirement no respectable inhabitant of the locality was associated with any of these illegal operations conducted by the investigating agency. Therefore, material allegedly collected through these illegal acts cannot be considered as valid pieces of evidence in the light of the famous doctrine of 'poisonous fruitof 'poisonous tree.
(1995 MLD 1532, 1994 PCr.LJ 475, 1992 MLD 2205, 2002 YLR 1231, 2002 MLD 1075, and PLD 1997 SC 408 and 2003 PTD 2037.
(8) That unlawful seizures contravened Article 24 of the Constitution that lays dawn the principle that no person shall be deprived of his property save in accordance with law. (AIR 1954 SC 447).
(9) It is pertinent to note that no documents intended to be used against the appellants have been produced and proved before any forum as required under law: It is significant to intention that none of the documents claimed to be in possession of the raiding party belonged to the appellants because nothing in fact was recovered from their premises. The raiding party, however, had brought some papers and documents with them to implicate the appellants at the behest of their multi-national rivals. It is on this account that these documents have still not been exhibited and proved as required under law.
(10)Independent and separate seizures were affected and separate cases were made out and registered at various places outside the territorial jurisdiction of adjudicating officers who decided these cases without jurisdiction. Those cases could not be bracketed and brought up to influence and prejudice the proceedings before these adjudicating officers. The adjudication officers were not competent to take into consideration and adjudicate cases that related to seizures and recoveries made outside their territorial jurisdictions. (Ref: S.R.O. 967(1)/2007 dated 20-9-2007 and the case cited at PTCL 2007 Cl.
60. (sic)
(11) No statement recorded under section 161, Cr.P.C. (section 14 of the Central Excise Act, 1944) is admissible in evidence. Section 162, Cr.P.C. Requires that such statements are not to be signed and cannot be used for enquiry or trial.
(12) The correct position with regard to installation of machinery is given in the Letter C.No,IV.CE/MISC/HQ/176/2003 issued in November, 2003 by Assistant Collector Central Excise, Rawalpindi (Copy enclosed). The investigation agency cannot challenge such official confirmation without any evidence.
(13) Both order-in-original and order-in-appeal have not been passed within the period stipulated in sections 31(3) and 33(2) of the Federal Excise Act, 2005 and are, therefore, to be declared as null and void and of no legal effect.
(14) Order passed by the Assistant Collector is beyond his pecuniary jurisdiction under old law.
10. We have heard the arguments and perused the relevant record available on file.
COUNTERFEIT: The persons, firms and companies having no factory or having factory of their own and getting excisable goods manufactured in duly licensed, factories of the other manufacturers according to their own specification and/or under their own brand names or trade names are not required to take out separate licenses. Manufacturer's agreements interne are commercial transaction entered in to ordinary course of business. Goods manufactured in the duly licensed factories of the licensee manufacturer under their desired brand names, is neither counterfeit nor offence. In this case there is no complaint rather parties owning brand has supported this fact. Stand of the department is that it was furnished late to them. Hence it is not the case of counterfeit.
ENTRY, SEARCH AND SEIZURE:
11. We would like to discuss the domain of the powers of the Custom Intelligence Offices with respect to entry, search and seizure. As per section 12 of the Central Excise Act, 1944, Federal Government may, by notification in the official gazette, declare that any of the provisions of the Customs Act, 1969, relating to the levy of, and exemption from, customs duties, draw-back of duty, warehousing, offences and penalties, confiscation, and procedure relating to offences and appeals, shall, with such modifications and alterations as it may consider necessary or desirable to adapt them to the circumstances, be applicable in regard to like matters in respect of the duties imposed by section 3. Now we come to the Notification No,227(I)/70, dated 25th September, 1970 which is hereby reproduced as under:-- In exercise of the powers conferred by section 12 of the Central Excise and Salt Act, 1944 (I of 1944), and in supersession of the Ministry of Finance Notification No,S.R.0.72(R)/67, dated 17th May, 1967, the Central Government is pleased to declare that the provisions of sections 157, 162, 163,168, 169, 170, 185-F, 186, 193 and 194 of the Customs Act, 1969 (IV of 1969) shall, mutates mutandis be applicable in regard to matters provided for in those sections in respect of the duties imposed by section 3 of the Central Excise and Salt Act, 1944 (I of 1944).
Vide Notification No,227(I)/70, dated 25th September, 1970. Central Government has declared that provision of sections 157, 162, 168, 169, 170, 185-F, 186, 193 and 194 of the Customs Act, 1969 (IV of 1969) shall, mutatis mutandis be applicable in regard to matters provided for in those sections in respect of the duties imposed by section 3 of the Central Excise and Salt Act, 1944. Through words "mutatis mutandis" legal effect has often been held is to write those sections of Customs Act in Central Excise Act, 1944 just as if they had been actually written in it with pen or printed in it and the moment you have those clauses in later Act, you have no occasion to refer the former Act at all.
Now I would like to reproduce the first line of section 168:-- Section 168-Seizure of things liable to confiscation.--
(1) The appropriate officer may seize any goods liable to confiscation under this Act.
From the words "Under this Act" would mean Central Excise Act, 1944 B after its incorporation from Customs Act into Central Excise Act, 1944. Now question is applicability, certainly by whom; Central Excise Officer In-charge of Circle or Officers of Central Excise in supervisory jurisdiction. Here relevant section for discussion is section 168 which says that appropriate officer may seize any goods liable to confiscation. Officer of Custom Intelligence is not the appropriate officer because he is not vested with powers of seizure. When section 168 which is to be read as part of Central Excise and Salt Act, 1944. Customs Intelligenc e Officer while acting as Central Excise Officer, he is only vested with the powers 13, 14, 19, 26 of said Act and 197, 199, 200,201 of said Rules vide Notification No, S.R.0 543(1)/75 dated 8th May, 1975 which is hereby reproduced as under:-- POWER OF THE OFFICERS OF THE DIRECTORATE GENERAL OF CUSTOMS INTELLIGNECE AND INVESTIGATION Notification No, S.R.O. 543(1)/75, dated 8th May, 1975.--- In exercise of the powers conferred by clause (b) of section 2 of the Central Excises and Salt Act, 1944 (I of 1944), read with Rule 4 of the Central Excise Rules, 1944, and in supersession of its Notification No,S.R.0.1073(K)/67, dated the 5th June, 1967, the Central Board of Revenue is pleased to invest the officers of the Directorate General of Customs Intelligence and Investigation, not below the rank of Deputy Superintendent, with the powers of a Central Excise Officer under sections 13,14, 19 and 26 of the said Act and Rules 197, 199, 200 and 201 of the said Rules.
12. We think it appropriate to embody these rules in this order to facilitate further elaborate discussion:- 197:--Authorized officers to have free access to premises, equipment, stocks and accounts [relating to excisable goods and excisable services.]----Any officer authorized in writing by the Collector in this behalf, shall have free access at all [***] times to any premises licensed under these Rules and to any place where excisable services are processed, stored, (or where excisable services are provided or rendered,) sold or manufactured, or to any place where composition for match heads, saltpeter or splints or veneers for the manufacture of matches are made, processed or stored, and may, with or without notice to the owner, inspect the building, the plant, the machinery, and the stocks, and the accounts and may at any time check the records made of the goods stocked in, or removed from, the factory, warehouse or place, or their transfer within a factory, to that part of the premises, if any, in which they are to be used for the manufacture of any other commodity, [or the account books, sales registers and bill of charges books used in the premises where excisable services are provided or rendered], whether for the purpose of testing the accuracy of any return submitted under these Rules, or of informing himself as to any particulars regarding which information is required for the purposes of the Act or these Rules.
200:---Power to stop and search vessels, carts, etc., and to seize goods which appear to be contraband.---Any officer duly empowered by the Collector may stop and search any, vessel, cart or other means of conveyance for excisable goods, composition for match heads, saltpeter, or splints and veneers for the manufacture of matches and may seize and remove or detain any goods in respect of which it appears 'to him that duty should have been but has not been levied, or that any contravention of the provisions of the Act or these Rules has occurred.
201:---Power to enter and search,---The [C.B.R.] may empower any officer of any department under its control to,---
(i) enter and search at any time, by day or by night any land, building enclosed place, premises, vessel, conveyance or other place upon or in which he has reason to believe that excisable goods, saltpeter or splints or veneers for the manufacture of matches are processed, sorted, stored, manufactured [or carried or excisable services provided or rendered] in contravention of the provisions of the Act or these. Rules; and
(ii) In case of resistance break open any door and remove any other obstacle to his entry upon or into and search of such land, building, enclosed place, premises, vessel, conveyance or other place.
General.---Rule 201 enables the authorized officer to make a search only for the investigation of an offence under the Act and Rules the power of search given under Chapter XIV of the Criminal Procedure Code is incidental to the conduct of investigation which the Police Officer is authorized by law to make. The provisions of section 165 of 'the Code must be followed in the matter, of searches under Rule 201 of these Rules. The recording of reasons under section 165 does not confer on the officer jurisdiction to make a search, though it is a necessary condition for making a search.
Section 165 of the Code lays down various steps to be followed in making a search: The recording of reasons is a step in the matter of search and to ignore it is to ignore the material part of the provisions governing searches. If that can be ignore, it cannot be said that search is carried out in accordance with the provisions of the Code of Criminal Procedure. It would be a search made in contravention of the provisions of the Code.
13. Section 26 and Rule 200 deal with the same scenario which covers moving vessels, carts and other means of conveyance carrying contraband item or items without the payment of duty. The philosophy behind is that these moving vehicles carrying goods are supposed to be with documented proof of payment of duty or with issued gate passes mentioning specific timings and destination on it. In case of failure to produce these prescribed documentation requisite to accompany the goods, Intelligence officer has been vested with the powers of seizure. Same is the general practice in the field. Officer of custom intelligence on information or on reasonable suspicion intercept the vehicle coming out of factories on the way when find without prescribed accompanying documentation seizes the goods which are liable to confiscation. It is pertinent to mention here that S.R.O. 388(1)182, dated 22nd April, 1982 is not relevant being related to exercise the power under various provisions of Customs Act, 1969 and not under the Central Excise Act, 1944.
14. Coming to Rule 197 which deals with licensed premises. Powers to inspect the premises, goods, machinery and check the record have been given. Powers of seizure has not been conferred.
Reason is obvious because duty is leviable on goods manufactured liable to be stored in an approved go down like EB4. If some raw material is found deficient or excessive, variation may be due to continuous process of manufacturing and entries in record are to be made at particular time and not after every minute or hour. Here philosophy of criminology says that all the crimes which consist of Commission of an affirmative act are proceeded by some covert or overt conduct which gray be divided into three stages. The first stage exists when the culprit first entertains the idea or intention to commit a crime. The 2nd stage is preparation; third stage is reached when culprit takes deliberate overt acts to commit the offence which is attempt. Attempt begins where preparation ends. In cases of manufacturing units-attempt starts when manufacture goods are tried to be taken out of the gate without payment of duty. Although a manufacturer produces more and shows less in record with inens rea that he will take out excessive production without payment of duty yet it is the intention or preparation and not the attempt because he can change his mind at any time and can decide to pay the duty. So in such situation courts have held that difference in record and actual production can constitute a contravention and not the seizure. That's why legislature has not authorized to intelligence officer for seizure within the licensed premises. This was also essential for harmonious working within the department. Domain of Incharge central excise officer, was not to be interfered within the licensed premises with exception of inspection and checking of record. Within the licensed premises if on inspection some elements of contravention is found, it can be reported to the higher heir chary of Central Excise Officer. If, at all, some seizure is necessitated, Appropriate Central Excise Officer Incharge or Officer in supervisory jurisdiction can be asked to do the needful. Law has set the limits interest the functionaries Law forbids any of functionaries to usurp or meddle into matter of other functionary. Such usurping the powers of a functionary by another leads to complete fiasco. According to our understanding the machinery as envisaged under the Central Excise law has delicately established an equilibrium and harmony among supervisory and detective functionary limiting them not to go beyond their limits. Article 4 of the Constitution of Pakistan read with Article 5(2) commands each and every citizen and functionary to remain within its bound. Custom Intelligence Officer is not to be considered as omnipotent. The manner of exercising power is colorable exercise if it is violation of law as laid down in case. It has not to be stamped by Tribunal. Reliance has been placed on PLD 1969 SC 14, PLD 1983 SC 457.
15. In long life history of working of the Central Excise Officer and Customs Intelligence Officer, it never happened to create such like situation. Customs Intelligence Officer used to intercept the consignment on the road, check the requisite documents to be carried with consignment, if not found in order could seize the goods liable to confiscation along with the vehicles also. His this power is well within his legal domain under section 26 and Rule 200 of C.E. Rules which dealt with searching vessel, cart or other means of conveyance and not the licensed premises. In order to ensure smooth functioning of the system F.B.R. Has decided not to give unlimited and unfettered powers of Central Excise Officer to the officer of the detecting agency and split the same to the requisite extent creating an equilibrium/harmony keeping in view the job requirement and sanctity of the licensed/regulated business which was immensely significant because according to Constitution of Pakistan every citizen shall have the right to enter upon, any lawful profession or occupation, and to conduct any lawful trade or business.
Providing that nothing in this Article shall prevent:--
(a) the regulation of any trade or profession by a licensing system; Or
(b) the regulation of trade, commerce or industry in the interest of free competition therein; or
16. Undoubtedly Custom Officer has power to visit licensed premises not for raid but for inspection.
He is not supposed to be on fishing expedition operating in the mode of search. If he finds some discrepancy on ground with some prescribed record, he can ask Central Excise Office to make seizure if required. Now question is if in-charge central excise officer does not go by his dictates, can ask higher officers in Central Excise hierarchy like Superintendent, Assistant Collector, Deputy Collector. And Collector. All 'of them are not corrupt. After all both of functionaries are controlledby the same F.B.R. Seizure by Custom. Intelligence Officer within licensed premises that too of excisable or non-excisable items like packing/advertisement material, machinery etc. Is nothing but transgression of his lawful domain. If there would have been any irregularity in search same could not affect the seizure of the excisable articles under the. Search, but here in this case seizure which is the main basis to erect the structure is without jurisdiction and lawful authority. So the raiding party had no powers to conduct search to seize documents and goods by exercising powers under Rules 197 of Central Excise Rules within licensed premises. Undoubtedly inspection and search are two distinct actions having different requisite touchstones. Where the legislature has expressly prescribed one or more particular modes of dealing with the matters specified therein, then it excludes any other method of doing acts. If the statute enacts that it shall be done in such a manner and in no other manner, it has been laid down that those requirements are in all cases absolute, and that neglect to attend to them will invalidate the whole proceedings.
17. It is a- settled law that, proceedings initiated on a wrong legal presumption becomes totally unlawful. Famous Persian verse, (sic).
Which is applied with full force on the 'facts of this case. This Persian verse has explained a very prominent legal maxim. It means "a wall raised on a tilted brick shall remain tilted, take it to any height". Meaning thereby that the superstructures raised on wrong foundation remains defective and the whole of it is likely to crumble on identification of said defect. Reliance can be placed on PLD 1987 Quetta 235 (Syed Allah Dost) v. Haji Muhammad Alam and others the relevant para of the said judgment reads as follows:-- "Additionally it may be seen that when law specifies a particular procedure there it is obligatory for the functionary of the State to adhere to the same and comply it in all respects. Thus any negligence, failure or omission to do so invalidate the proceedings on account of which whole superstructure raised on such defective foundation automatically crumbles."
In this behalf the reliance was further placed inter alia on the following cases:--
(i) Mansib Ali v. Amir All (PLD 1971 SC 124)
(ii) Muhammad Yousaf Khattak v. S.M Ayub and others (PLD 1972 Peshawar 151)
(iii) E.A Evans v. Muhammad Ashraf (PLD 1964 SC 536).
(iv) Mir Dost Muhammad v. Government of Balochistan and 3 others (PLD 1980 Quetta 1).
Hence action of seizure within licensed premises is without jurisdiction and unlawful.
SEIZURE OF MACHINERY:
18. Although Customs Intelligence Officer has not got the powers of seizure but in this case seizure of the machinery for main production is a very unique action. Even if this seizure would have been made by appropriate Central Excise Officer, it was not warranted under the law. It is the business growth which has top priority. Tax growth has primary nexus with business activity. If businessm an/Manufacturer will earn something, he will pay some share to public exchequer. In this case not only non-excisable goods like packing material and advertisement material have been seized but also machinery i,e, main source of production has also been seized and factory have been locked/sealed. It is the fundamental principle that only those goods can be seized which are liable to confiscation. Neither packing or advertisement material nor machinery was liable to confiscation. The department has defended this action on the plea of being useful for evidence.
This could have been done by saying that machinery will not be removed from the factory, if action would have been from competent Central Excise Officer.
19. Now the question is under what provision of law, machinery that too installed in licensed premises of central excise is liable to seizure. After ascertained liability of tax in recovery preceding such property might have been attached. The learned DR has failed to show as any provision of law which can justify seizure of machinery. Section 210 empowers to the adjudicating authority to order for seizure and not to the detecting agency. As already pointed out if this action would have taken by the competent/appropriate Central. Excise Officer even then he had to seek prior permission from the F.B.R. Needless to mention here that Rule 57 was omitted just to avoid such drastic action. This drastic action has deprived the State from future revenue if the unit remained in operation it would had paid some share to Government Exchequer.
20. The nutshell of the above discussion is that order passed by the forums below for confiscation of seized goods including machinery are hereby set aside. The demand of the principle amount of Rs663,314 along with Additional Duties/Additional Tax, penalties is hereby dropped. The Customs Intelligence authorities/Central Excise authorities are hereby ordered to handover the seized goods/machinery and de-seal the factory subject to NOC by the NAB Court. In case of auction of any of seized goods the amount received in Government Exchequer will be refunded/adjusted in favour of Taxpayer/Registered Person.
Appeals Nos. 6, 7, 8, 9, 10 and 3/FE/IB/2009,
21. Now we take up Appeals Nos. 6, 7, 8, 9, 10 and 3/FE/ 1B/2009, which have been directed against the Orders-in-Appeal No, 93 of 2007 dated 3-12-2007 passed by the Collector (Appeals), Islamabad and 2 of 2009 dated 27-3-2010 passed by the Commissioner Inland Revenue (Appeals- I), Islamabad. Following table shows the detail of show-cause notice and duty/taxes involved in these appeals:-- Sr.
No.Appeal No. Show-Cause Notice No. and DateNature of Case Duty and Taxes involved Reduced Amount 1.06/2009 C.No,C.E. And ST/Coll/Adj/01/200 4/2850 dated 27.2- 2004, Collector RawalpindiContravention/Seizure C.E.Duty Rs.698,597,095 S.Tax Rs. 204,839,479 Total Rs. 903,436,574Rs. 709,682,300 2.07/2009 C.No.C.E. and ST/Coll/Adj/02/200 4/4445 dated 9-4- 2004, Collector RawalpindiContravention C.E.Duty Rs. 64,472,448 Rs. 21036.257 3.08/2009 C.No.C.E. and ST/Coll/Adj/13/200 4/111 43 dated 13-10- 2004Contravention C.E.Duty Rs.
228,195,617 S.Tax Rs. 57,390,094 Total Rs. 285,585,711Rs. 278,208,469 4.09/2009 C.No,C.E. And ST/Coll/Adj/04/200 4/5040 dated 22-4- 2004, Collector RawalpindiContravention/Seizure C.E.Duty Rs. 15,873,900 S.Tax Rs. 5,704,579 Total Rs. 21,578,479 5.10/2009 C.No,C.E. And ST/Coll/Adj/06/200 4/809 4/8125 dated 15-4-2004, Collector RawalpindiContravention C.E.Duty Rs.
177,716,430 S.Tax Rs. 53,257,939 Total Rs. 230,974,369Not reduced 6.03/2009 C.No,C.E. And ST/Coll/Adj/04/200 4/806 5 dated 27-2- 2004, Collector RawalpindiContravention C.E.Duty Rs.
177,716,430 S.Tax Rs. 53,257,939 Total Rs. 230,974,369Rs. 8,597,114
22. Briefly stated the facts of the case are that a credible information was received that the management of Messrs Excel Tobacco Company (Pvt.) Limited, Chakwal was engaged in the evasion of central excise duty and sales tax. In pursuance of the above information, the staff of Directorate General, Intelligence and Investigation (Customs and Excise), Islamabad visited factory premises of Messrs Excel Tobacco Co. (Pvt.) Limited. Chakwal on 9-9-2003 and on subsequent dates, made seizure- in licensed premises of factory and go down. The department decided to send the case to the adjudicating officer separately, which has been dealt with in F.E. Appeal No, 19 of 2009. The department also seized a private register showing the transfer of tobacco into the factory and on the basis of this private register applied a formula of manufacturing one cigarette from one gram of tobacco, presumed that so many cigarettes would have been manufactured and then sold without paying of leviable tax. This liability of past clearances without payment of duty resulted into calculation of Rs,114,174,169 of leviable taxes and this amount was included in Federal Excise Appeal No, 06/FE/IB/2009 as contravention case. An amount of Rs,9,146,799 on the basis of recovery memo dated 9-9-2003 and 10-9-2003 was added in Appeal No,07/FE/IB/2009.
Then in pursuance to further information, officers of Customs Intelligence carried out indiscriminate raids in different cities throughout the country. They recovered the private record of a go down situated at 18 kilometer Shabab Studio Multan Road, Lahore, Bhoon Road, Chakwal, 35-D, Sharif Colony, Canal Park, Gulberg-II, Lahore, 290-291/N, Poonch Road Samanabad, Lahore, H. No, 66-A, Block 6, Latifabad and H. No, 2419-A/115, Jail Road, Hyderabad. They also recovered truck billies from Messrs Shama Goods Transport Co, G.T. Road, Gujrat. The department then considering the sales record made the reverse calculation to detect the quantum of tobacco as the duty was also leviable on tobacco. The investigating agency then calculated the revenue involved in different appeals given in the table shown above. All of these contravention cases were submitted to the Adjudicating Officer, Rawalpindi, who passed orders-in-original. Feeling aggrieved, appellant filed first appeal before the Collector and Commissioner Inland Revenue, who upheld the orders-in- original. Now the appellant has come in second appeal before US.
23. Arguments from both sides as embodied in Appeal No, 19 have been repeated. The learned AR is of the view that the department has badly failed to prove his version on the standard norms of justice on thetouch stone of the Qanun-e-Shahadat, which is equally applicable in the proceedings of quasi-judicial form. Learned AR added the ground that order-in-original was time barred under section 31(3) of Federal Excise Act, 2005 and section 36(3) of Sales Tax Act. All these cases are based on presumptive calculation without confronting the record being adversely used against the appellant with the show cause notice. Such a seizure is violative of the provisions of section 103, Cr.P.C., two respectable witnesses of the locality in presence of which the place is to be searched has not been associated. The learned DR has rebutted the objections raised by the appellant.
24. After hearing the respective contention of the parties; we proceed to record our findings as follows:-- THE FACTORY SEARCH AND SEIZURE: This issue has already been discussed in detail while recording finding in Appeal No, 19 ibid. Undoubtedly, the Custom Intelligence Officer have obtained search warrant in many of the cases but it has already been concluded that Custom Intelligence Officer was not vested the power of seizure. For this job he had, to associate the concerned Incharge of the Central Excise Officer or officer having the jurisdiction to effect seizure. So the seizure is not made by the competent authority. Here the question arises that places from where recoveries had been made are not licensed one. It is not a regulated business, after obtaining a valid requisite license from the government. Such persons are not to raise the objection regarding validity of seizure by an officer of the Custom Intelligence.
JURISDICTION: The learned AR has vehemently argued that cases on the basis of recovered record from Lahore, Hydarabad, etc., have been sent for adjudication to Rawalpindi-Islamabad on the plea that the factory is situated within the territorial jurisdiction of Adjudicating Officer, Rawalpindi. Jamshaid Yousaf, SIO has disclosed that he was not involved in the proceedings of search and seizure in the factory premises at Chakwal because he was posted at Lahore. Investigating Officer of the initial case. Regarding seizure at the factory premises was Mr. Ejaz Ahmed, SIO and Ahmed Nawaz Superintendent. If they would have raided in different cities in pursuance to the initial raid, then, definitely Adjudicating Officer at Rawalpindi had got valid jurisdiction. Here the raids at Lahore have been conducted by Mr. Jamshaid Yousaf who had got his posting at Lahore. He was authorized to conduct raid in Lahore within his territorial jurisdiction. These were independent raids and territorial jurisdiction of the Adjudicating Officer was also at Lahore. Similarly, raids conducted by the officers at Hydarabad and resultantly, cases of recoveries were to be submitted before the Adjudicating Officer, Hydarabad who had the territorial jurisdiction. The learned AR contends that on the basis of these Independent raids, independent cases have been registered. It is nowhere mentioned that cases of the seizure be submitted to the adjudicating authority at Lahore and Hydarabad while the contravention cases were to be adjudicated by the Adjudicating Officer, Rawalpindi. As per view of the learned AR three main ingredients of the jurisdiction are very important; firstly; is authority vested by law, secondly; territorial jurisdiction and thirdly pecuniary jurisdiction. If the raiding officer posted within the territorial jurisdiction of Lahore or Hydarabad has no jurisdiction to make contravention or seizure outside his territorial jurisdiction at Rawalpindi, how can the adjudicating authority had jurisdiction to hear the case, which has been framed as a result of the raid outside of his territorial jurisdiction. In Central Excise and Custom Law, only that Adjudicating Officer is competent to adjudicate only those cases in whose territorial jurisdiction seizure has been made.
Private record has also been seized and in result of the seizure of private record contravention cases have been prepared. The adjudicating authority at Rawalpindi has no jurisdiction to entertain and adjudicate upon these cases. On the other hand, the learned legal advisor states that main source of evasion is the factory which is situated within territorial jurisdiction of Rawalpindi-Islamabad. Furthermore it is a civil kind of liability and contravention case can be sent to the adjudicating officer at Rawalpindi within whose jurisdiction the factory is situated.
25. After having heard the respective contentions of the parties, we refrain to record our finding on the said issues because the Forums below have not specifically recorded their findings in the light of these arguments. Hence, we find it appropriate to remand the case to the authority passing order-in-original to record his specific finding on the said issue after scrutinizing all of the record and discussing the relevant law.
26. We have gone through small portion of record. It appears that after raids each and every document recovered was used to calculate federal duty, sales tax to exaggerate the figure of evasion to the climax without considering the aspect that it is being hit by philosophy of double jeopardy. On abilities, AR, stock register, trial balance, distribution or sale record; independent and separate calculations are made without keeping in mind that it is resulting in duplication.
If sale record is made basis then tobacco record is not to be made a basis. Prosecuting agency has to select one of these because cigarette is manufactured by tobacco and from one quantity of tobacco, cigarettes are not to be manufactured twice in imagination. Strange enough that from sale record quantity of tobacco has again been calculated through reversal method and tobacco record recovered has again been made basis for presumptuous calculation that so many cigarettes on the formula of one gram for one cigarette would have been manufactured, cleared without payment of duty and sold in imagination without having any evidence of sale.
If from sale record Prosecuting Agency is Calculating the tobacco used in it by applying the formula of one gram for one cigarette, through reversal method, then again calculation of Federal Excise duty, sale tax on tobacco record recovered from manufacturing premises of appellant and claiming to the tune of Rs,114,74,169 in Appeal No,06/FE/IB/2009 an amount of Rs,91,46,799 in Appeal No, 7 of 2009, are nothing but a case of double jeopardy. Hence these are to 'be dropped/deleted.
We are unable to reconcile the figure. Chart furnished by the department shows taxes figures as below while aforementioned figures in appeal does not tally:-- Receipt and Issue of Cured Tobacco for Manufacturing as shown in Register From To Quantity FED Sale Tax Aug-02 Sept-03 6,87 Kgs 57,667 0 195,450 Packs 820,890 182,941 Receipt & Issue of Cured Tobacco for Manufacturing as shown in Register From To Quantity FED Sale Tax Sep-02 Jan-03 260.061 Kgs 2,182,952 0 17,214,400 Packs 58,233,000 17,039,726 Receipt & Issue of Cured Tobacco for Manufacturing as shown in Register From To Quantity FED Sale Tax June-03 July-03 81052 Kgs 680,350 0 4,666,900 Packs 16,589,160 4,406,112 Supply of (finished) goods through A.R.
From To Quantity FED Sale Tax July-03 Sep-03 6555(Packrites) 13,764,500 3,137,840 Total 92,328,519 24,766,619 Grand Total 117,095,138 There are discrepancies in figures in chart and that of figures shown in Appeals Nos. 6 and 7 for the seizure of record from licensed premises, perhaps this difference is due to adjustment of duties tax paid by the appellants but it is not of much relevancy because we have already declared this seizure in licensed premises as unlawful, without jurisdiction while recording finding under Appeal No, 19/FE/IB/2009. Hence, these amounts are ordered to be dropped/deleted even on this score.
Learned AR has pointed various duplications made in different appeals. Of course these are to be thrashed.
27. Learned AR has argued that the production capacity of similar units be compared with this unit.
Payment made by other similar units are that during the year, 2002 Messrs Burley Tobacco Fateh Jang had paid Rs,5.190 million, Messrs Central Tobacco Chakwal paid Rs,5.581 million and Excel Tobacco paid Rs,2.494 million which is almost 50% of the duty paid by similar units. Such a huge demand is not justified from any angle. He referred the recommendation of ADRC signed by one of Collector/Member which could not the finalized due to registration of F.I.R. In this report total payment of Rs,50 million has been recommended to be paid in Government Exchequer that too with a payment plan in easy installment. Just a fact is brought into notice of the Bench it may not be considered as acceptance by Taxpayer. In view of this argument of learned AR we would like to say this Bench is quasi-judicial forum of law. We have to go by evidence. It is not our domain to go outside the evidence.
28. We have a glance on record, mainly it is sale record. Register does not show any mark or print of Messrs Excel Tobacco, these are without any mark of the company. The record shown to us is a photo receipt, of rent which shows "Cel" tobacco, perhaps "Ex" in prior might not have come in photo copy. We have seen entries of one of sale register which is neither printed nor stamped.
Inward and Outward entries from different cities like Sadiq Abad, Mirpur, Faisalabad etc. Are reflected but entry against city of Chakwal is stated to be picked up. Register only shows Chakwal and not Eicel Limited (Pvt.) Ltd. Chakwal. Prosecution Agency has to prove this fact through some documentary/oral Corroborative connecting evidence. It is not out of place to mention here that while issuing the show cause notice, each and every document relied upon was to be given its copy to the taxpayer along with show-cause notice but the huge and voluminous record has been kept in the safe custody of the custom intelligence office; even it has not been made part of the Court file at the time of first adjudicating level. We have observed that staff of the custom intelligence, brings this record during the argument and then take it back after showing documents under discussion during the court proceedings. Prosecution agency if has danger of record being stolen, at least all of record in the shape of attested copies should be annexed and made as part of file of First Adjudicating Authority. Learned legal advisor states that some of the attested copies of the documents were provided to Taxpayer but learned AR states that it is the vested right of the taxpayer to receive each and every copy of the alleged evidence along with the show cause at the time of receiving the notice, so that he could scrutinize each and every entry of the said documents. In this case, the taxpayer has opted for even denial from the ownership of the go down. Two CPUs, two Hard Disks, Computer and its record alleged to be recovered have never been opened in the presence of taxpayer or private witnesses, which is R clear violation of section 103 of Cr.P.C. On the other hand, learned LA has argued that detecting agency is not supposed to prepare the forged record against the taxpayer. There is a huge evidence to connect the taxpayer with evasion. No doubt a huge record is alleged to be recovered from the premises shown in the contravention reports but the law has given a proper procedure to prove the allegation. Definitely there are statements of different persons to whom the prosecution could call for recording their statements to connect the record with sale and manufacturing. Admittedly excise duty is leviable not on the basis of theoretical yield but on actual production, Central Excise staff is posted round the clock at the factory supervising production and clearance. Custom intelligence Officer if gets hold of the excisable goods being removed from the factory outside the gate or on the road without gate pass or payment of duty i,e, case in actual sense and on the firm footing. T If manufacturer denies ownership, seized goods are with the department, duty can he recovered through auction. The case in hand on the basis of alleged private record; then making the presumptuous calculation that this quantity of tobacco might had resulted in so much production and then would have removed without payment of duty is a case which has to be proved through strong evidence. It is the deeming scenario which could have deemed to have been done in the past. All the links and nexus are to be established through un-rebuttable strongest evidence to bring the petitioner into net of conviction. There should be no missing link. The contention of the learned AR is that impugned order has been passed mechanically on the basis of a set formula that what the raiding/ investigation agency has written i,e, sacred and petitioner's version is not to be adjudged on the standard norms of evidence. Undoubtedly document does not speak itself but these are to be corroborated and supported with some oral evidence, which could connect links to bring the taxpayer into the net of burdening with liability. So in this scenario we feel appropriate to set aside the orders of both the forums below and U remand these cases to the authority passing order in original with the following directions:--
(i) First of all to record his specific finding on the assumption of jurisdiction;
(ii) Secondly; this formula that one cigarette is prepared by one gram tobacco, element of wastage has been ignored; he will record his finding to discuss on this aspect as well.
(iii) He will provide each and every copy to taxpayer of the document intended to be used adversely against him.
Documents used against the taxpayer will be exhibited/marked through production of corroborative connecting evidence if oral then subjected to cross-examination and taxpayer will be provided full opportunity to cross examine and Taxpayer be provided full opportunity to negate/rebut the evidence and if he wants , to produce some evidence, he will be provided opportunity.
(v) Rule out any duplication if made.
Nutshell of the above discussion is that all these appeals are disposed of in the manner as indicated above.