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Petitioner: Messrs EXCEL TOBACCO COMPANY (PVT.) LIMITED, CHAKWAL VS Respondent: COLLECTOR, FEDERAL EXCISE TAX, ISLAMABADC.
Court Name: Appellate Tribunal Inland Revenue Judge(s): Munsif Khan Minhas, Ikram Ullah Ghauri Title:Messrs EXCEL TOBACCO COMPANY (PVT.) LIMITED, CHAKWAL vs COLLECTOR,
FEDERAL EXCISE TAX, ISLAMABADC. Case No.: C. No,19/FE/IB of 2009, C.Nos.6 to 10 and 3/FE/IB of 2009 Date of Judgment:2011-06-01 Reported As: 2011 PTD (Trib.) 2297 Result: Order accordingly Judgment ORDER 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
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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.
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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
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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
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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:-
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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
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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.…
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