Vide this appeal, the appellant - registered person has assailed the Order-in-Appeal No.110 of 2007 dated 26-5-2007 passed by the learned Collector of Customs, Sales Tax and Federal Excise (Appeals), Multan.
2. Facts leading for disposal of the instant appeal as contained in the show cause notice dated 11- 7-1994 are that the authorities received an information through Central. Board of Revenue Islamabad that the registered person was involved in the evasion of central excise duty and other government taxes by way of non-accountal of production in central excise prescribed record and clearing the same without payment of tax A constituted a raiding party headed by Assistant Collector Audit and Intelligence Multan. The raiding party visited unit on 6-2-1994 with collaboration of income tax department and reached factory at about 15-00 hours and met with Mr. Abdul Razzaq Viyani Accounts Manager! Attorney and asked him to provide central excise, income tax and private record maintained by different sections of the factory but he was reluctant to provide the same. In the meanwhile, General Manager of the unit escaped from the scene and the staff tactfully managed to recover the record from the office of the attorney and laboratory of the unit. The security staff of the factory on the direction of the Mills Management not only created hindrance in the performance of the smooth working of the raiding party but also mis-behaved with the government officials. The staff continued its work in polite way that all of a sudden at about 18-30 hours factory management put of the main switch of the office portion and 20 to 25 labourers entered in the office of attorney and taking benefit of darkness attacked the raiding party and after snatching a bag full of record ran way. Assistant Collector registered F.I.R. No. 36 of 1994 dated 6-2-199 with Police Station City Chishtian of the above occurrence. Assistant Collector also sought help from the local administration. District Management and local police also reached at the spot. The excise staff also recovered some private record from the quarter of Abdul Sattar Kaka, Special Sale Assistant in the presence of Assistant Collector and DSP Chishtian after preparation of proper recovery memo. Thorough audit of private record i.e. Delivery orders, sales register, contract register and central excise record was conducted which revealed that the registered person cleared 6,64,850 bags of 50 kg each containing 33242.500 M. Tons sugar during year 1991-1992 whereas in the central excise record 6,62,690 bags of 50 kg each containing 31334.500 M. Tons sugar were accounted for resulting in the clearance of the 38160 bags of 50 kg each containing 1908.00 M. Tons sugar without payment of central excise duty. The private diary for 1991 maintained by Mr. Abdul Razzaq Viyani Attorney of the appellant on which his name was embossed also shows the clearance of 38160 bags of sugar weighing 50 kg each without payment of central excise duty. The said diary not only confirmed the sale "of the record" sugar but also shows the registration number of tractor/trolley and trucks on which the sugar was transported. It was further alleged that the delivery order recovered from the private Almirah of Abdul Sattar Kaka also confirmed the sale of 38160 bags of sugar without payment of central excise duty amounting to Rs.41,02,200. The registered person in connivance with the central excise staff managed to steal some crucial documents such as delivery orders/sales registers etc. Which were recovered by the Assistant Collector after proper recovery memo. For which separate F.I.R. Was lodged against them.
3. On the basis of above mentioned allegation, the appellant was charged with the violation of sections 3 and 9 of Central Excise Act, 1944 read with rule 210 of Central Excise Rules, 1944 for violation of Rules 7, 9, 52-A, 53, 226, 236, 328, 241, 243 and 246 of Central Excise Rules, 1944 and was called upon to show cause as to why the evaded Central Excise Duty amounting to .Rs.41,02,200 may not be recovered and as to why action under above provisions of law may not be taken against him. The appellant submitted reply to show cause notice and also challenged the action taken by the authority i.e. Raid, search and seizure of record without obtaining search warrant in term of section 18 of the Central Excise Act, 1944. The adjudicating proceedings culminated in passing of Order-in-Original No. 10 of 1995 dated 26-2-1995 and the appellant was directed to deposit Central Excise Duty amounting to Rs.41,02,200 and a penalty equal to 10 times of the Central Excise Duty was also imposed. The order dated 26-2-1995 was assailed by filing appeal before the Collector (Appeals), Multan who rejected the same and upheld the order passed by Deputy Collector Customs and Central Excise Multan vide Order-in-Appeal No. 646 of 1997 dated 23-9- 1997.
4. The registered person instead of filing appeal before the Appellate Tribunal in term of section 35- B of the Central Excise Act, 1944 challenged the order dated 23-9-1997 in the Hon'ble Lahore High Court, Lahore by filing Writ Petition No.29024 of 1997 on legal grounds. The writ petition was allowed, order passed by Collector (Appeals) Multan was declared without lawful authority and set aside and the appeal of the appellant was deemed to be pending and the Collector (Appeals) was directed to decide it afresh in accordance with the law and in the light of observation made in the judgment dated 27-2-2004. The appeal of the appellant was again rejected by the Collector (Appeals), Multan vide impugned order dated 26-5-2007. However, the penalty was reduced equal to the amount of duty.
5. . The learned A.R. At the very outset of the court proceedings contended that he shall argue this case mainly on law points. He stated that the Collector constituted raiding party headed by Assistant Collector, Audit and Intelligence, Multan on 6-2-1994. The said raiding party along with staff of Income Tax department Multan raided the factory premises of the appellant without obtaining search warrant under section 18 of the Central Excise Act, 1944. The said raiding party had taken into custody the certain record from the factory premises and on the basis thereof proceedings for adjudication were initiated by the department. He further contended that the validity of raid, search and seizure of record was challenged before the adjudicating officer as well as first appellate authority but it was not addressed and as such the appellant filed Writ Petition No. 29024 of 1997 in the Hon'ble Lahore High Court, Lahore which was allowed vide order 27-7-2004 and an observation was made by his Lordship that the case of the appellant appearS to be covered by the judgment of Lahore High Court, Lahore rendered in the case of Messrs Food Consultant. He further contended that in case of Messrs Food Consultant, the raid, search, seizure of record and registration of F.I.R. Were challenged on the ground that the search was carried out without search warrant as required under section 18 of the Central Excise Act, 1944. The judgment of Hon'ble Lahore High Court, Lahore was challenged in the Hon'ble Supreme Court of Pakistan but the appeal of the department was rejected and the dicta laid down by Hon'ble Lahore High Court, Lahore was upheld vide judgment dated 19-7-2006 reported as "Collector of Sales Tax and others v. Messrs Food Consultant (Pvt.) Ltd." and "Messrs Diplex Beauty Clinic and others" reported as 2007 PTD 2356.
6. The learned A.R. Further contended that the in present case it is an admitted fact that the raiding party was constituted by the Collector which was headed by Assistant Collector, Audit and Intelligence, Multan. In support of his contention, he referred Para-1 of the show cause notice dated 11-7-1994 in which this fact was.Recorded that the raid was conducted by the raiding party who searched the premises of the appellant and record was seized without complying with the mandatory requirement of section 18 of the Central Excise Act, 1944 as no search Warrant was obtained from the Magistrate before raiding the premises of the appellant. He also relied upon Collector of Customs Lahore and another v. Universal Gateway Trading Corporation and another (2005 SCM R 37), Collector of Sales Tax and Central Excise (Enforcement) and another v. Messrs Mega Tech (Pvt.) Ltd., (2005 PTD (SC) 1933), Collector of Sales Tax and others v. Food Consultants (Pvt.) Ltd., and Messrs Diplex Beauty Clinic and others 2007 PTD 2356 and Chairman CBR and others v. Haq Cotton Mills (Pvt.) Ltd., (2007 PTD (SC) 1351)". According to A.R. The record and other articles recovered in illegal raid cannot be used against him as held in case Messrs Ahsan Yousaf Textile Mills (Pvt.) Ltd. Faisalabad v. Federation of Pakistan through Ministry of Finance Islamabad and 4 others (2003 PTD 2037), Messrs Food Consultants (Pvt.) Ltd., Lahore and others v. Collector #TBS PTD #TBE (Central Excise and Sales Tax) Lahore and 2 others (2004 PTD 1731). He also referred a Division Bench judgment in case "N.P. Water Proof Textile Mills (Pvt.) Ltd., through Director Karachi v.
Federation of Pakistan through Secretary Revenue Division/Chairman Central Board of Revenue Islamabad and another (2004 PTD 2952), Messrs Zakeria Enterprises v. Muhammad Musharfa and 7 others (2005 PTD 1200) and A.R.K. Textile through Proprietor v. Federation of Pakistan through Ministry of Finance Islamabad and 4 others (2006 PTD 494)". He further contended that the Collector (Appeals) rejected legal objection raised by the appellant by stating that " perusal of contravention case reveals that neither the staff searched the premises nor the provisions under section 18 of the Central Excise Act, 1944 were charged in the contravention report as well as show cause notice. Therefore, to follow the procedure the search was not mandatory on the part of the detecting officer." He contended that Section 18 is an enabling provision which empowers the appropriate officer to carry out search after fulfilling the requirement prescribed under Criminal Procedure Code. The mandatory requirement for carrying out search of any premises is that a search warrant was to be obtained by the Magistrate which is missing in the. Present case. He further contended that similar provisions are contained in the Customs Act, 1969 and Sales Tax Act, 1990. The hon'able Lahore High Court, Lahore in case of Messrs Food Consultant discussed all the enabling provisions relating to raid, search and seizure authorizing the officers of the department to exercise their powers but in accordance with above provisions.
7. On the other hand the learned D.R. Has supported the impugned order. According to him it was a mere visit under Rules 197 and 201 of the Central Excise Act, 1944. He further contended that the impugned order has been passed by the Collector in accordance with law and there is no legal infirmity and the same be maintained.
8. We have heard the arguments of rival sides and carefully perused the record. The A.R. Has mainly argued his case on law points. According to him as per Rules 197 and 201, any officer authorized by FBR or Collector shall have free access to business or manufacturing premises of a registered persons or any other place where any stock, business record or documents are kept but the said provisions would not permit to conduct raid, search and seizure. It would only give way to enabling provision contained in section 18 of the Act. According to him, Assistant Collector, Audit and Intelligence, Multan was not authorized to conduct raid, carry out search and make seizure of record without fulfilling the mandatory requirements in term of section 18 of the Act and following the provisions contained in sections 96, 98, 99-A, 100 and 103 of the Code of Criminal Procedure 1898. For the sake of convenience and ready reference, section 18 of the Act is reproduced below:-- "18. Searches and arrests how to be made.---All searches made under this Act or any rules made 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."
9. It is worth mentioning here that while deciding the writ petition filed by the appellant, the Hon'ble Lahore High Court, Lahore vide its judgment dated 27-7-2004 observed that the case of the appellant appears to be covered by the judgment of said court in case of Messrs Food Consultant (supra). The relevant portion of the judgment is reproduced below:--
(7) The submissions made by the learned counsel for the parties have been considered. The case of the petitioner appears to be covered by the judgment of this court in the case Messrs Food Consultant, supra, as regard interpretation of section 18 of the Act and Rules 197 and 201 of the Rules except that report does not show whether an order in original was passed on the basis. Of raid in the said case. I have, however, noticed that in the supplementary reply to the show cause notice, the objection based on section 18 was specifically raised and number of judgments of the superior courts were cited in support of the said contention. The ground was specially raised in the memo of appeal before the learned Collector but it was not adverted to by him in the impugned order.
10. It is an admitted position that no search warrant was obtained by respondent .No.1 as required under section 18 of the Central Excise Act, 1944. However, section 165 of Cr.P.C. Dispensed with the above condition subject to preparation of statement of grounds of belief which is also missing in the present case. Section 163 of the Customs Act, 1969 and section 40A of the Sales Tax Act, 1990 contained similar mandatory requirement for carrying out search without search warrant in term of section 162 of the Customs Act, 1969 and section 40 of the Sales Tax Act, 1990. All the above referred provisions of law are mandatory and the requirements contained therein were not fulfilled and complied with in this case.
11. Similar view were taken by the Hon'ble Supreme Court of Pakistan in the case of "Master Enterprises (supra), Messrs Mega Tech (Pvt.) Limited (supra), Messrs Haq Cotton Mills (Pvt.) Limited (supra), Messrs Ahsan Yousaf Textile Mills (Pvt.) Limited (2003 PTD 2037) in which it was held that "if the raid is declared illegal, the document and things recovered in such action would not be used against the said person. It was held in the aforesaid case as under:--
(19) Accordingly for the aforesaid reasons both raids are declared to be against the provisions of section 38 and therefore, illegal and void ab initio. All evidence, material, documents records or accounts taken into custody in the process shall be returned to the petitioners. Also none of these materials, records, books of accounts and articles etc. Shall directly or indirectly be used in adjudication proceedings against the respondents or to create demand based thereupon in any other manner. In case of second petitioner, the impugned notice dated 30-9-2002 admittedly having been issued on the basis of the material collected in the said illegal raid, dated 26-6-2002 also suffers from another illegality , inasmuch as no exceptional circumstances were brought home to order conduct of re-audit as contemplated in STGO No. 9 of 1999 dated 2nd September, 1999.
12. Further it is pertinent to mention here that the Hon'ble Lahore High Court, Lahore following the ratio settled in the said judgment decided the case of "Messrs Food Consults (Pvt.) Limited (2004 PTD 1731). Wherein, it was held that "The proceedings and actions taken in consequence of such raid, searches and seizure including the issuance of any show cause notice, registration of an F.I.R., the complaint, the prosecution or recovery proceedings would also be illegal, unlawful and without lawful authority." The aforesaid judgment was assailed by the department in the Hon'ble Supreme Court of Pakistan, but the same was upheld vide judgment reported as 2007 PTD 2356. The operating part of the above judgment reads as under:-- 13 Careful perusal of the respective pleadings, the relevant record, it is an admitted position that no search warrant was obtained as required under section 18 of the Central Excise Act, 1944 and the purported visit or access by the raiding party headed by Assistant Collector, Audit and Intelligence, Multan was raid designed at search and seizure of record and other things which for the above recorded reasons was illegal, without lawfully authority and consequently the issuance of show cause notice and subsequent proceedings including impugned order were also void, ab initio and illegal.
14. As a result, the appeal of the registered person is accepted and the impugned order is set aside. .