' The facts and law involved in the two appeals being same and between same parties, one filed by the department and the other by the taxpayer and arising out of a raid conducted by the staff of the Directorate General of Intelligence and Investigation (Customs and Excise) Karachi, on the business premises of the taxpayer, it is intended to dispose of the said appeals by this consolidated order.
2. Sales Tax Appeal No,K-300 of 2004 filed by the department against the Order-in-Original No,59 of 2004, dated 21-4-2004 passed by the learned Collector of Sales Tax and Central Excise (Adjudication), Karachi-III, whereby the learned Collector by accepting the version of the respondent, hereinafter referred to as the taxpayer, has vacated the show-cause notice, dated 31- 1-2004 and the Sales Tax Appeal No,K-30 of 2009 (Old Number K-89 of 2005) filed by the taxpayer against the Order-in-Appeal No,12 of 2005 dated 18-3-2005 passed by the learned Collector of Sales Tax and Central Excise (Appeal), Karachi-III, whereby the learned Collector has set aside the Order-in-Original No,76 of 2004, dated 8-6-2004 passed by the learned Deputy Collector, Sales Tax and Central Excise (Adjudication) Karachi-III and ordered for confiscation of seized goods with impositions of fine equal to the value of the confiscated goods or in the alternative gave an option to the taxpayer to redeem the seized goods by paying the fine and the amount of Central Excise Duty and Sales Tax along with additional excise duty, additional sales tax and penalty @ 3% of the Sales Tax involved.
3. On the date of hearing, the Taxpayer was represented by Mr. Irshadur Rehman Advocate while the Department was represented by Syed Aftab Hussain as D.R.
4. Briefly stated the case of the department as contained in the contravention report/respective show-cause notices was that in pursuance of a credible information of manufacturing of excisable goods i,e,, cosmetics by the taxpayer, a sales tax registered person vide STRN 12-00-3004-057-64 as an importer/distributor/whole sale dealer of Chemicals, at their sales office situated at FL 4/9, Block-5, Gulshane-Iqbal, Rashid Minhas Road, Karachi, and supplying mainly to beauty parlors throughout the country, the staff of Directorate of Intelligence and Investigation (Customs, Central Excise and Sales Tax), Karachi, the detecting agency, conducted a raid on 4-12-2002 at the said premises. The taxpayer was found manufacturing and clearing of excisable goods i,e,, cosmetics without holding Central Excise License and payment of leviable Central Excise Duty under the shadow of Messrs Mackson Laboratories, another manufacturing unit of the taxpayer situated at Export Processing Zone, Karachi. On confirmation of manufacturing of excisable goods i,e,, cosmetics, by the team No,1 at the above sales office of the taxpayer, a search was also made by the team No,2 of the detecting agency at their registered office situated at Khawaja House, Arambagh, Karachi. The teams of the detecting agency recorded statements of the persons present there, prepared Musheernama, made inventory of the goods/stock and record available there. The resumed goods/stock and record was brought to the office of the Directorate Intelligence and. Investigation (Customs, Excise and Sales Tax) Karachi for further action under the law. The resumed goods and records showed that the taxpayer was manufacturing and clearing excisable goods i,e,, cosmetics without printing retails price, mainly to beauty parlors under the garb of chemicals without payment of central excise duty. It is found that the taxpayer was liable to pay Central Excise Duty amounting to Rs,1,246,844 along with additional duty and Sales Tax amounting to Rs,374,053 along with additional tax in respect of goods seized from the above Gulshan-e-Iqbal sales office. It was further found on the basis of record resumed that since 1997 to April, 2002 the respondent has cleared excisable goods worth Rs,5,211,990. Since retail price was not found printed on the containers the rate of excise duty was applied @ 100% of the value of the goods cleared without payment of excise duty and thus the respondent has evaded Central Excise Duty of Rs,5,211,990 and sales tax Rs,1,250,562.
5. On the other hand the case of the taxpayer is that, that the taxpayer is a Chemist and druggist deals in medicaments/ cosmeceutical products made of homeopathic, natural/herabal, ingredients and pharmaceutical chemicals to be sold only to qualified professionals from its Arambagh shop and sales office situated at ground floor of Plot No, FL 4/9, Rashid Minhas Road, Gulshan-e-Iqbal, Karachi. The taxpayer was registered as Commercial Importer, Distributors and Wholesaler of drugs, medicines and chemicals under the Sales Tax Act, 1990 vide Sales Tax Registration No,12-00-3004-057-064. In August, 2002 the sewerage/ drain water inundated the goods/stock of goods declared under Income Tax Amnesty Scheme, 2000 at Rs,1,500,000 and imported goods lying in the taxpayer's godown situated at Arambagh. In order to save the undamaged products and to scrape the damaged ones, these goods were then shifted to the temporarily acquired space at 1st Floor, FL 4/9, Gulshan-e-Iqbal, Karachi, the business premises of Messrs Kay's Institute of Research and Development (Kays Institute) which is the proprietary concern of Mrs. Shaista Iqbal, an independent unit registered under the Sales Tax Act, 1990 vide STRN No,12-00-2800-338-82, for wasting the damaged stock, damaged packing and replacing of container's labels and packaging where only the labels or packaging were damaged. The damaged stock was emptied in Plastic drums (which are alleged by the detecting agency as semi-finished goods) and the damaged labels and packaging were changed on different dates.
On 4-12-2002 at about 1-00 p.m. a raid was conducted at the sales office of the taxpayer situated at FL-4/9, Gulshan-e-Iqbal, Karachi at about 1-00 p.m., by more than twelve staff members of the Director General Intelligence and Investigation (Customs, Sales Tax and Central Excise), Karachi without a search warrant or a statement as provided under section 165 of the Criminal Procedure Code and against the provision of section 18 of the Central Excise Act, 1944 and the Rule 201 of the Central Excise Rules, 1944 and provisions of sections 38, 40, 40A of the Sales Tax Act, 1990 and the instructions of the C.B.R. As contained in STGO.9/1999, read with applicable provisions of sections 96, 103 and 165 of the Code of Criminal Procedure, 1898. The detecting team allegedly held that said changing of containers and replacement of damaged labels by new ones and of packaging, as repacking, an excisable activity and malafidely alleged that the taxpayer was manufacturing excisable goods i,e,, cosmetics without a Central Excise License required for that purposes and clearing the said goods without payment of excise duty. The detecting team harassed Syed Saifuddin, whom they allegedly designated as chemist, the two labourers working there, and took all the stock/goods available at the sales office and even all the goods and record available at the 1st floor of the building which were the sole ownership and property of the said Kay's Institute and the said Saifuddin and the two workers to their office situated at B-70, KDA Scheme No,1, Karsaz Road, Karachi. The other team of the detecting agency comprising of equal number of staff members simultaneously conducted raid at their Arambagh Office and after conducting raid also took the taxpayer/proprietor, Muhammad Iqbal Khawaja to the said office along with record resumed form the Arambagh shop. The detecting agency then made inventories of goods and record resumed, recorded statement of the allegedly designated chemist, of the appellant and of the two labourers and prepared Musheernama and got their respective signatures on the statements Musheernama etc. Under duress and harassment. They were released at about 3-00 a.m. It was further the case of the taxpayer that they were not involved in any type of manufacturing activity. No manufacturing of cosmetics was carried out nor could be done without a burner, microscope, deinoized water, hydrogen peroxide in concentrated form, preservatives, raw materials (which are used in manufacturing of goods of the respondents are about 70 in number), a weighing balance etc. Neither of these necessary equipments which are essential for any type of manufacturing of cosmetics etc., were found by the detecting agency. They labels, empty bottles, plastic drums either empty or filled with damaged medicaments; the only raw material wax dana (in sealed packets) etc., found at the first floor of the sales office situated at FL 4/9, Gulshan-e- Iqbal, Karachi were the sole property of Kay's Institute. In past also the said Kays Institute used to purchasing and exporting such goods to Messrs Maksons Laboratories, Karachi Export Processing Zone, as per export documents available on the tribunal's record. Their goods were medicaments and not cosmetics. The medicament stock/ goods found were either out of goods imported from KEPZ or were out of stock declared under the. Income Tax Amnesty Scheme, 2000 under the Income Tax Ordinance, 1979. The respondent supplied these medicaments/topical herbal/homeopathic/aryovedic based medicines, in their generic names, to the qualified professionals and these goods were not meant for retail sale.
6. In adjudication, the backlog/previous liabilities' case filed by the department, was adjudicated by the learned Collector (Adjudication) vide Order-in-Original No, 59 of 2004 dated 21-4-2004 in favour of the taxpayer by holding that the goods were not cosmetics but were medicaments; no manufacturing was proved at the Arambagh Office; the raid/stock taking conducted on 4-12-2002 in the registered premises of the respondent was done without getting authorization from the Collector or Central Board of Revenue as required by section 38, read with sections 40 and 40A of the Sales Tax Act, 1990 and STGO. 9/1999 and against the provisions of the Cr.P.C. Relevant to search and seizure under the Central Excise Act, 1944 and of the Sales Tax Act, 1990; the taxpayer has availed amnesty for such goods; the Director General Intelligence has not been empowered under Rule 226 of the Central Excise Rules, 1944 read with S.R.O. 543(I)/75 dated 8-5-197.5 and the case was time barred.
7. Being aggrieved against this treatment the department has filed Central Excise Appeal No,K-300 of 2004 in the Appellate Tribunal, Customs, Excise and Sales Tax at Karachi, which has been transferred to this Tribunal i,e,, Inland Revenue Tribunal. It has been urged in the memo of appeal that the detecting agency has visited the premises of the taxpayer by virtue of powers of free access vested in them under rule 197 of the Central Excise Rules, 1944 read with S.R.O. 543(0/75, dated 18-5-1975. The taxpayer was involved in manufacturing of excisable goods i,e,, cosmetics and various printed labels, labelled and unlabelled bottles etc., were found. The sales tax record and some private record available in the resumed files showed that the taxpayer were engaged in manufacturing and clearance of cosmetics products. It was further their case that the learned Collector has misread various documents particularly, the wealth reconciliation statement 30-6- 2001 where the taxpayer has declared Rs,1,500,000 as income meaning thereby that they have sold their stock in the previous year. The amnesty was irrelevant in the case.
8. In adjudication of the case of present liabilities the learned Deputy Collector (Adjudication), Karachi-III, vide his Order-in-Original No,76 of 2004 dated 8-6-2004, adjudicated the said case in favour of the taxpayer by holding that the raid conducted by the detecting agency at the business premises of the appellant was in violation of the provisions of STGO. 9/1999 and that no authorization from the competent authority was obtained for conducting the raid as required under sections 40 and 40A of the Sales Tax Act, 1990 read with requirements laid down under Cr.P.C. And held that the detecting agency have failed to prove that the respondent had undertaken the manufacturing of cosmetics at their Gulshan-e-Iqbal address and ordered for release of the resumed goods etc.
9. ' Aggrieved against the said Order-in-Original the Director I General of Intelligence and Investigation (Customs and Excise), Karachi filed an appeal to the Collector of Customs, Sales Tax and Central Excise (Appeals) Karachi-III. The said appeal was decided vide Order-in-Appeal No,12 of 2005 (the impugned order in Sales Tax Appeal No,30/K-09) whereby the learned Collector set aside the Order-in-Original and order confiscation of seized goods and imposed a fine of an equal value of the seized goods with the option to the taxpayer appellant to resume the seized goods on payment of fine and leviable duties and taxes and penalty.
10. Being aggrieved against this treatment the taxpayer has filed Sales Tax/Central Excise Appeal No,K-89 of 2005 in the Appellate Tribunal, Customs, Excise and Sales Tax at Karachi, which has been transferred to this Tribunal i,e,, Inland Revenue Tribunal and was given new number as ST No,30/K-09. It has been urged in the memo of appeal that the Director General of Intelligence and Investigation (Customs and Excise), Karachi was not an aggrieved person and the appeal filed by him before the Collector Appeals being incompetent, the Collector appeals has legally erred in entertaining the said appeal. The learned Collector Appeals erred in holding that the raid conducted by the detecting agency of the business premises of the appellant was legal under Rule 197 of the Central Excise Rules, 1944 and in holding that all ,statements were recorded, inventory was made and Musheernama was prepared at the spot; the learned Collector illegally observed that the appellant was engaged in manufacturing of excisable goods at their Gulshan-e-Iqbal premises and in observing that the Amnesty of stock was irrelevant. The learned Collector Appeals erred in relying on various documents which were either bogus or were illegally resumed and in ignoring the authentic documents of export made by the Kays Institute, of the packing material, raw material (wax dana), equipment's, machines (.There were no machines found) and labels which were in fact that property of the Kays Institute of Research and Development and in concluding that these equipments were for the consumption of the appellant for manufacturing of excisable goods and the learned Collector erred in observing that the goods/stock resumed was not medicament but cosmetics against his own findings in Order-in-Original No,12 of 2005 and the appellant was required to print retail price on its containers. The learned Collector Appeals has erred in setting aside the Order-in-Original No,76 of 2004, in ordering confiscation of illegally seized goods/ medicaments, imposing of fine/and for redemption of such goods for payment of fine, excise duty, sales tax and additional duty and tax and penalty.
11. Heard the learned representatives of the parties. The bone of contention as appeared from the facts of both the appeals is the raid conducted by the detecting agency on 4-12-2002 on the business premises of the taxpayer. The DR argued that the detecting agency have visited both the premises of the taxpayer under the authority of rules 197 of the Central Excise Rules, 1944 read with S.R.O. 543(I)/1975, dated 18-5-1975. He further argued that the detecting agency has free access by virtue of the said provisions of law. On the basis of the inventory of the resumed goods and record, he tried to prove that the taxpayer was manufacturing excisable goods and clearing the same against the provisions of the Central Excise Law and Rules. On the other hand it was argued by the learned advocate for the taxpayer that the relevant law for search and seizure, both in Central Excise and Sales Tax are pari materials and contained in section 18 of the Central Excise Act,1944 and Rules 201 of the Central Excise Rules, 1944 read with sections 96, 103 and 165 of the Criminal Procedure Code, and provisions of sections 40 and 40A of the Sales Tax, Act, 1990. It was argued by the learned advocate for the taxpayer that the colourable exercise of powers of searching the Premises of Sales Officer of the taxpayer situated at FL-4/9, Gulshan-e-Iqbal Karachi and Arambagh office by two teams of twelve members each of the staff members of the detecting agency, and their alleged claiming of such search upon credible information of manufacturing excisable goods by the taxpayer is not a mere visit and inspection under the Rule 197 of the Central Excise Rules, 1944 which provides only for an inspection. It was a raid for the purposes of seizing of alleged excisable goods. He continued that for conducting a raid and searching a premises, the relevant provisions are contained in section 18 of the Central Excise Act, 1944 and Rules 201 of the Central Excise Rules, 1944, and provisions of sections 40 and 40A of the Sales Tax Act, 1990 and the instructions contained in STGO. 9 of 1999 read with the provisions of sections 96, 103 and 165 of the Cr.P.C. He contended that as per provisions of section 18 of the Central Excise Act, 1944 or section 40 or 40A of the Sales Tax Act, 1990 all searches to be made by following the above referred provisions of the Cr.P.C. Which make it mandatory for the detecting agency to obtain a warrant of search form the Illaqa Magistrate and associate respectable and neutral public witnesses of the locality except in special circumstances and if there was an immediate threat or danger of the removing or destroying of the goods and record intended to be resumed, the detecting agency has to make a statement of belief as per provisions of section 165 ibid and then only a raid could be made legally. Relying on the following case-law on the issue the learned advocate for the appellant contended that the raid was illegal from all angles: AIR 1960 SC 210; PTD 1991 SC 630; 2003 PTD 1034 SC; 2003 PTD 2037 and 2004 PTD 1731.
12. If reasons for non-compliance of section 103, Cr.P.C. Are not furnished, such recovery can not be relied upon ref: 1999 PCr.LJ 1546; Where it relates to search and seizure it cannot be considered reliable without compliance of section 103 ref: PLD 1997 SC 408; The Investigating Officer must bring on record the details of all those persons who refused to attend and witness the search ref: 1997 PCr.LJ 603; PLD 1996 SC 574.
13. The learned advocate has also highlighted the irregularity/ illegality, going to the root of the case, committed by the detecting agency in conducting the raid and in recording the statements of Syed Saifuddin, to whom the detecting agency allegedly designated as chemist, the owner, Muhammad Iqbal Khawaja, of labourers, in the preparation of Musheermama and inventory of resumed stock and goods etc. It was further argued by the learned advocate that since the search was illegal and unauthorized, the record, statements, assets illegally resumed could not be used as an evidence against the taxpayer and the same should be returned to the taxpayer without any condition. He relied on 2004 PTD 1731; 2007 PTD 2356; PLD 1968 Karachi 599; PLD 1969 SC 153. The learned advocate further relied on PLD 1977 Lahore 318 and 2003 PTD 2037 to contend that all the subsequent proceedings based upon illegal act of unauthorized search are illegal and non- existent in the eye of law.
14. The submission of the learned advocate in the light of the relevant provisions of the Central Excise and Sales Tax law and the case-law reported appears to be forceful. The raid of the taxpayer's both premises conducted by two teams each consisting of twelve staff members of the Director Intelligence and Investigating (Customs, Excise and Sales Tax) upon alleged information of manufacturing of excisable goods could in no way be termed as mere an inspection and the said exercise of raid and seizure could not be stretched to mean a mere inspection under the provisions of rule 197 of the Central Excise Rules, A 1944 The way the said staff entered into the premises of the taxpayer, the statement recorded and the goods and record resumed is out and out a raid because an inspection is by eye, search by hands and that inspection would not allow the uncovering of anything not visible merely by walking around the premises in the absence of clear judicial ruling. Reliance may be placed in ref: Food Consultants (Pvt.) Limited v. Collector of Customs and others reported as 2004 PTD 1731. Further, the respondent department has itself admitted, in backlog case No, Order-in-Original 12 of 2005 (a case made out of the very same raid) their action under rule 201 of the Central Excise Rules, 1944 in para "1" in their parawise comments to the reply of show-cause by the taxpayer wherein it was contended by them that " However, it is clarified that the Senior Intelligence Officer of Intelligence Office is empowered to exercise duties under Rule 201 of the Central Excise Rules 1944 vide. S.R.O. No,543(0/75 dated 8-5-1975".
15. It was further argued by the learned advocate that the show-cause notice did not mention sub- rule of rule 10 of the Central Excise Rule, 1944 and hence the show-cause notice is a vague, patently illegal and without lawful authority. We do not find any force in the argument of the learned advocate as particulars of sub rules of rule 10 ibid are provided therein and held that the show- cause notice is not vague or illegal in this aspect.
16. While arguing on other grounds of Appeal No,K-300 of 2004 (the backlog case), the learned advocate for the taxpayer raised the contention that the Appeal No,K-300 of 7004, to the tribunal, is barred by 178 days and the said appeal, though, as per its title has been filed by the Collector but it has been incompetently signed by the Assistant Collector and the appeal is without any verification or supporting affidavit and accordingly the appeal is incompetent.
16. While confronted, the learned departmental representative, in rebuttal, after going through the record conceded that the impugned order-in-original appears to have been dispatched on 21-4- 2004 but he contended that the Certified True Copy of the said order-in-original has been supplied on 18-10-2004 and since the appeal was filed on 15-12-2004 it is within time. Regarding filing of appeal by the incompetent person the learned departmental representative contended that it makes no difference if in the title of the appeal the nomenclature of the appellant was shown as Collector but the same was signed by the Assistant Collector. He further contended that non- verification of appeal or non-filing of the supporting affidavit along with the appeal is not fatal in law.
17. The learned advocate for the taxpayer on the other hand argued that the departmental appeal is barred by limitation by 178 days under section 35-B of the Central Excise Act, 1944 as the said order in original has been dispatched on 21-4-2004 and the department itself has not asserted in the memo of appeal that the order-in-original was not served upon them or the fact of passing the order. Was not within their knowledge or when the facts of passing the order came to their knowledge. He argued that at least the department has acquired the knowledge of the passing of the said Order-in-Original on 25-8-2004 when the department has applied for the certified true copy of the said order and even from that date sixty days expires on 24-10-2004 and from this angle, too, the appeal filed on 15-12-2004 is hit by limitation. It was further the argument of the learned counsel for the respondent that the appeal was without an application for condonation of delay. The learned advocate for the respondent relied upon the cases ref: 2003 PTD 2657; 2002 PTD 399; 1987 PTD (Trib.) 54; 1985 CLC 1072; PLD 1970 SC 558; 1988 SCMR 1256; 1997 SCMR 860 and PLD 1991 SC 400.
18. It is observed that the question of limitation is not a mere technicality but a matter of compliance of substantive law as vested rights are created in favour of the other party which right might not be taken away from him lightly. The law settled by the Superior Courts is that the limitation starts running from the date of knowledge where an order/judgment is not conveyed to a party for either reasons. It has been held in Qureshi Vegetable Ghee Mills Ltd. v. Commissioner of Income Tax and 3 others reported as 2002 PTD 399 that "it is well settled by now that where a judgment has not been conveyed to a party limitation starts running from the date of knowledge.
The proposition canvassed on behalf of the appellant-company is that unless result of the appeal is communicated limitation would not start running cannot be accepted because then it would mean that it would not be possible to file an appeal if the Tribunal does not intimate the result to the party. In that case even the appellant's appeal before the High Court was defective because it has not been filed on the basis of intimation but on the basis of knowledge." The learned advocate further argued that the departmental appeal was filed by incompetent person, as since the nomenclature of the appellant as per title of the appeal is Collector then it is only the Collector who can sign and verify the memo of appeal and no other person can sign or verify the same. It was contended by him that since the appeal is without verification or a supporting affidavit the same is incompetent on this score, too. He relied on ref: 2006 PTD (Trib.) 1466. The contention of the learned advocate for the taxpayer appears to be correct as relied it is the person who files an appeal must sign it. Under the law no other person except the appellant could sign an appeal until and unless the appeal has been filed under express authority of the appellant in favour of his attorney. The Assistant Collector Enforcement and Collection might be an aggrieved person but the said appeal must have been filed by him as attorney of the Collector, the appellant. The appeal is also admittedly without verification or a supporting affidavit. Accordingly the departmental appeal is held to be incompetently filed.
19. While supporting the action of the Collector Adjudication in holding that the detect in agency had no powers under Rule 226 of the Central Excise Rule, 1994 it was contended by him that the detecting, agency has no powers or authority under Rule 226 of the Central Excise Rules, 1944 as no such powers has been given to the them under S.R.O.543(I)/75 dated 8-5-1975. It is further argued by him that the detecting agency had no authority to resume such record pertaining to past liabilities nor could any duty or tax be lawfully determined on the basis of such illegally resumed record. The contentions of the learned advocate appears to be correct.
20. While arguing on specific grounds relating to S.T.A. No,30/K-9 (the present liability case), the learned advocate of the taxpayer argued that the Collector appeal could not hear and decide an appeal (Appeal. No,12 of 2005 impugned in Sales Tax Appeal No,30/K-9), incompetently filed by the Director General of Intelligence and Investigation (Customs and Excise), Karachi under section 34B of the Central Excise Act, 1944 as the Director Intelligence and Investigation (Customs and Excise) is not a Central Excise Officer aggrieved by the Order-in-Original 76 of 2004. For filing an appeal under section 34B ibid the appellant must be an aggrieved party. The learned advocate submitted that since no power under section 34B of the Central Excise Act, 1944 has been vested in the Director General of Intelligence and Investigation (Customs and Excise), Karachi under S.R.O.
543(1)/75 dated 8-5-1975, the Director General of Intelligence and Investigation (Customs and Excise), Karachi could not competently file the appeal to the Collector as he is not an aggrieved party. The learned advocate relied upon 2006 PTD (Trib.) 1466; 2004 PTD 2987; 2004 PTD 1957; 2004 PTD (Trib.) 2425. The learned advocate further argued that a Court or Tribunal should apply correct law and the learned Collector Appeal could not hear or decide an appeal which was filed incompetently. He relied in 2004 PTD (Trib.) 2425. From the survey of the case-law and the applicable provision of law we are of the opinion that the Director General of Intelligence and Investigation (Customs and Excise), Karachi is not an aggrieved party and he could not file an appeal and the learned Collector Appeals could not dwell upon that appeal to pass order in appeal against the said Order-in-Original.
21. On merit of the cases it was argued by the learned advocate that the department has failed to prove any manufacturing activity at the business premises of the appellant. He contended that for manufacturing of cosmetic the essential equipment like a burner for melting the wax which is used for manufacturing of emulsions and creams: a weighing balance for measuring exact requisite amount of a raw material; a pH meter to check maintain the required pH ratio of acid--alkali strength in the production of cosmetic etc., for obtaining the required effectiveness result; a microscope for examination of various raw materials before their usage for production are required and any of these essential equipments were not found by the detecting agency nor mentioned in the inventory list available on record. Besides, requisite raw material which are about 70 in numbers, not single drop of deionized water or distil water, hydrogen peroxide in concentrated form or preservatives used for manufacturing of cosmetics were found by the detecting agency. The only one raw material i,e,, wax dana, and that too, found in sealed packets was the sole property of the Kays Institute of Research and Development which was a separate and independent sales tax and income tax registered unit of Mrs. Shaista and caters for all the import requirements of Messrs Maksons Laboratories, Karachi Export Processing Zone. The learned advocate further submitted that except for medicaments/cosmeceutical all the goods illegally resumed by the detecting agency were the property of the said Kays Institute of Research and Development which goods the said Kays Institute used to export to the said Maksons Laboratories through proper export documents which are available on the Tribunal's record. He submitted that on the basis of statements recorded under duress and harassment and on the basis of documents which are either bogus, irrelevant or were illegally resumed, no case of manufacturing is made out, the Collector has without any positive evidence of manufacturing of cosmetics, particularly in the absence of the essential equipments required, raw materials etc., held that the taxpayer was manufacturing cosmetics at their business premises at Gulshan-e-Iqbal.
22. It was further contended by the learned advocate for the taxpayer that the reconciliation of sales, purchases and stock filed and available on record has not been contradicted by the respondent. The amnesty is relevant in the matter as it is also the goods out of the stock of amnesty which have been resumed by the detecting agency.
23. Regarding non-printing of retail price it was argued by the learned advocate that the goods were not cosmetics but medicaments/ cosmeceutical products used as topical medicine. These goods mainly of Unani, homeopathic, aryuvedic ingredients were sold by their generic names to the qualified professionals and were not meant for retail sale. Their ingredients were invariably printed on each labels of the goods available out of stock declared amnesty scheme or imported from KEPT.. These goods being medicaments fall under chapter 30.03, 90.10 and 90.20. Otherwise also the printing of retail price on imported goods was introduced from 1-4-2003 in accordance with S.R.O. 574(1)/2002, dated 31-8-2020 read with CEGO No,1 of 2003. No such question of printing on stock available out of stock declared under Amnesty arises.
24. In view of the above discussion we are of the considered opinion that the raid conducted by the detecting agency of both the premises of the taxpayer on 4-12-2002 was un-authorized and illegal and it could not be termed as mere inspection under Rule 197 of the Central Excise Rules, 1944. The powers of free access as contemplated under Rule 197 ibid are limited to the inspection of building, the plant, the machinery, and the stocks, and the accounts and checking of record etc., but only for the purposes 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 the Rules. A bare reading of the Rule 197 ibid does not give an impression that it confers the appropriate officer with the powers of raid, search and seizure. The power of search and seizure has been provided under Rules 201 of the Central Excise Rules 1944 read with section 18 of the Central Excise Act, 1944 which provides that all searches made under this Act or the Rules thereunder and all arrests made under this Act shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1898 (V of 1898), relating respectively to searches and arrests made under that Code. Neither the detecting agency has obtained a warrant of search from the Magistrate nor any apprehension of removal of goods was recorded by them. The actions of the detecting agency were specifically intended and designed to probe investigate and discover the presumed illegal tax avoidance for which the goods, record and accounts were seized. These acts could not be termed as routine inspection but were akin to raid and investigation into a criminal matter or an offence. It is further to note that a free access to any property does not mean search and seizure for the purposes of collection of evidence against a taxpayer. That object can only be achieved by observing the provisions of the Code of Criminal Procedure as contained in sections 96, 103 and 165 thereof. Reliance, may be had to the Food Consultant's case reported as 2004 PTD 1731. The record, the above discussion and arguments by both the sides clearly shows that the provisions of Central Excise Act, Central Excise Rules and the relevant provisions of the Sales Tax Act, relating to search and seizure were not followed, thus, the power exercised by the detecting agency is held to be H illegal in the light of settled law on the issue. All proceedings conducted on the basis of such illegal raid are also held to be illegal.
25. It is further observed that not only the appeal (Sales Tax Appeal No,K-300/2004) to the "Tribunal" against Order-in-Original No,59 of 2004 has been filed incompetently but the said appeal is also barred by limitation and is not maintainable. It is further held that the Appeal No,12 of 2005 against Order-in-Original No,76 of 2004 was incompetently filed by the Director of Intelligence and Investigation (Customs and Excise) Karachi, who was not an aggrieved person within the meaning of section 34-B of the Central Excise Act, 1944, to the Collector Appeals. Since the said first appeal was filed by an incompetent person, the Collector Appeals could not dwell upon the said first appeal and pass an order thereon. Accordingly, the order of the Adjudicating Authority has attained finality. On merits also the department has failed in making out a case of manufacturing of excisable goods i,e, cosmetics, either at sales office of the taxpayer situated at plot No, FL 4/9.
Rashid Minhas Road, Gulshan-e-Iqbal, Karachi or their office at Arambagh.
26. In view of the above, the impugned Order-in-Original No,59 of 2004 is hereby maintained and the departmental Appeal No,K-300/2004 is hereby dismissed. The appeal of the taxpayer S.T.A. No, 30/K-9 (old number K-89 of 2005) is hereby allowed and the Order of the Collector Appeal is set aside and the order of the adjudicating authority is held to be in field since based on law and merits of the case and otherwise also it has attained finality in the circumstances of the case. Both the appeals have been disposed of accordingly.