Alladi Kuppuswami, J.
1. The Petitioner is a public limited Company having its registered office at Calcutta and its Factory at Maulali, Hyderabad. It manufactures and deals in iron and steel goods. Since the goods are excisable goods, the petitioner obtained a licence from the appropriate authorities of the Central Excise Departmant. The petitioner is paying excise duty under what is popularly known as 'Self Assensment Scheme' under chapter VII-A of the Central Excise Rules (referred to in this Judgment as the Rules). Under this Scheme, the assessee has to file with the proper officer for approval a list of goods in such form as the Collector may direct giving the full description of the goods, Item number and sub-item to the first schedule to the Act under which such goods fall, the duty leviable on such goods etc., before removing the excisable goods. The appropriate officer approves the list with such modifications as are considered necessary. Accordingly the assessee was submitting the list of goods which is known as 'Classification List' According to the petitioner it manufactures Steel Hoops and Steel Strips [which are sub-items (ii) and (iii) of Tariff Item 26AA] from duty paid Hot Rolled Strips and Steel Skelp which fall under sub-item No. (iii). The skelp which is used by the petitioner as raw material has already suffered excise duty which was paid by the Hindustan Steel Limited which is the manufacturer of skelp. Similarly, in the case of Hoops manufactured from H.R. Strips the duty was already paid by Tata Iron and Steel Company. According to the petitioner therefore, no duty is payable by the petitioner and as auxiliary duty is only a percentage of of the Excise duty, no auxiliary duty is payable. . On this footing the petitioner was submitting the classification list and removing the goods without paying excise duty. In the petition it is stated that this state of affairs was accepted by the Department without any comment from 1971 onwards. Further on one occasion when auxiliary duty was collected the petitioner applied for a refund of a sum of Rs. 9,000/-and the amount was refunded on 28-12-1973 by the Assistant Collector, Central Excise, I.D.O., II after examining the issue and being satisfied that no excise duty or auxiliary duty was payable in respect of the goods being manufactured by the petitioner's factory.
2. In the petition it is stated that on 31-1-1977 the Superintendent of Central Excise, (Preventive III), the third Respondent herein visited the Factory with his staff and purported to conduct a panchanama and desired to detain the plant and machinery. The Petitioner's Company Director and other officers protested against the proposed action and requested him to disclose the legal provisions under which he would take such action. As he did not respond petitioner served on him a letter D/-31-1-1977 protesting against the arbitrary procedure being adopted by the concerned Officer. In the Panchanama it is recited that the goods weighing about 127.205 Metric Tons was seized and the plant and machinery worth about Rs. 40 lakhs was detained.
3. The petitioner has filed Writ Petition No. 327 of 1977 praying for the issue of a Writ of Mandamus or any other appropriate Writ or directions directing the respondents, namely, the Union of India, the Collector, Central Excise and the Superintendent, Central Excise, to revoke the alleged oral seizure of goods and detention of plant and machinery purported to be effected on 31-1-1977 and permit the petitioner to clear its goods under the self-removal procedure under Chapter VII-A of Central Excise Rules in accordance with the classification list dated 25-6-1976 already approved by the authorities.
4. After the Writ Petition was filed a notice to show cause why penalty should not be imposed upon the petitioners and the Central Excise duty should not be demanded on the goods which may be hold to have been manufactured and removed without paying Excise Duty and why the seized goods, Plant and Machinery should not be confiscated under Rules 175-Q. The Petitioner thereupon filed Writ Petition No. 2542 of 1977 praying for the issue of a Writ of Certiorari or other appropriate Writ, Order or Direction quashing the said show cause notice and for consequential reliefs.
5. The main contention of the petitioner in Writ Petition No. 327 of 1977 is that the seizure of the goods and the detention of Piant and Machinery is illegal and contrary to the provisions of the Act and the Rules. Regarding the show cause notice issued, the contention of the petitioner is that no Excise Duty or Auxiliary Duty is leviable in respect of the goods and hence no case is made out for levying the duty or the penalty or for confiscation of the goods, Plant and Machinery.
6. In the counter affidavit it is contended that the classification list which was being subjected was found to be not correct and the duty is payable on the goods. As the goods do not fall within the description contained in items 2 and 3 of Item 26 AA. As the petitioner was removing the goods after submitting classification list which contained false description of the goods, the authorities are entitled not only to levy duty on the goods which had been removed but also to impose penalty and direct confiscation of the goods. It is also stated that the authorities were duly empowered under the Act to seize the goods and direct detention of the Plant and Machinery.
7. It is convenient to consider the legality of the action of the respondents in seizing the goods and directing of the Plant and Machinery in the first instance.
8. It was argued by Shri Anantha Babu, learned counsel for the petitioner that as no duty is leviable on the goods there is no power on the part of the authorities to seize the goods or direct detention of the plant and machinery. But in my view this is a matter which has to be properly decided in proceedings relating to the imposition of duty taken by the respondents. As has already been noted as a proceeding has been initiated by reason of the show cause notice which was the subject matter of W.P. 2542/77 the question whether the goods fall under one description or other and levy if liable will in any opinion is more satisfactorily be decided in such proceedings.
9. Shri Ananta Babu further argued that even assuming for a moment that the respondents are right in their contention that the duty is leviable on the goods, the seizure of the goods and the detention of the plant and machinery is illegal as it is contrary to the Act and the rules and 1 proceed to consider this submission.
10. I have been taken through the relevant provisions of the Act and the rules. I do not find any provision authorising the authorities to detain the plant and machinery. Rule 173-Q deals with confiscation and penalty. Under Sub-rule (2) it is provided that in certain circumstances the officer adjudging the case under Section 33 of the Act may in addition to the awar of confiscation and penalty under Sub-rule (1), direct the confiscation of any land, building, plant, machinery materials, conveyance, animal or any other thing used in connection with the manufacture, production storage, removad or disposal of such goods. This empowers an officer who is adjudging the case under Section 33 of the Act, to direct confiscation of any building, plant and machinery. Apart from this there is no other provision which enables the authorities to direct detention of plant and machinery prior to any adjudication. The rules which authorise seizure of goods or detention, namely, 100 and 200 do not contain any reference to plant and machinery. It is therefore, clear that the detention of plant and machinery recited in the panchanama is not authorised by any provision of law. The petitioner is therefore, entitled to a declaration to that effect so far as the detention of plant and machinery is concerned.
11. The next question is whether the respondents are entitled to seizure the goods. The learned counsel for the Central Government relies upon Section 110 of the Customs Act which was made applicable in regard to the duties imposed by Section 3 of the Central Excise Act pursuant to a notification made by the Central Government on 4th May, 1963 as amended on 6-2-1965 and 23-3-1968 issued in pursuance of the power conferred under Section 12 of the Central Excise Act which provides that the Central Government to issue notification declaring that any provision of the Sea Customs Act relating to levy on and exemption from Customs duties etc. 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.
12. Section 110 of the Customs Act is in the following terms :
'If the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods.'
The expression 'under this Act' is defined in the notification referred to above 'including reference to the Central Excises and Salt Act'. It was therefore submitted that if the goods were liable to confiscation under the Central Excise Act, they could be seized under the provisions of Section 119 of the Customs Act read with the notification made under Section 12.
13. The learned Central Government Counsel then drew my attention to Rule 173Q of the Central Excise Rules. The relevant part of the said rule is as follows :
'If any manufacturer, producer of licensee of a warehouse,
(a) removes any excisable goods in contravention of any of the provisions of these rules; or
(b) does not account for any excisable goods manufactured, produced or stored by him; or
(c) * * * *
(d) contravenes any of the provisions of these rules with intent to evade payment of duty.
then, all such goods shall be liable to confiscation.'
14. He submitted that this case conies under Rule 173-Q (a) or (d). In this case, however the goods were seized before they were removed. I do not therefore agree with the contention that this is a case where the manufacturer has removed any goods in contravention of the provisions of these rules. Sri Subrahmanya Reddy, however attempted to satisfy me that even though there is no actual removal, where there is an intention to remove the goods 173-Q (a) is attracted. He argued that in this particular case which is governed by the provisions of self-removal scheme the assessee is authorised to assess the duty himself according to the classification list submitted by him and after doing so he is entitled to remove the goods whenever he chooses. Therefore even if the goods are lying in the factory and the goods are seized at that time, he submitted that as the assessee is entitled to remove the goods at any time he chooses, the seized goods can be considered as goods which the assessee remove in contravention of the provisions of the rules. I am unable to agree with this submission. The expression used is 'if any manufacturer etc., removes any excisable goods in contravention of any of the provisions of these rules'. This will not in my opinion take in a case where the manufacturer has not removed the goods. The mere fact he is entitled at any movement to remove the goods under the self-removal scheme will not be sufficient to hold that the manufacturer has removed the goods even though the goods are still in the factory. When the self-removal scheme was introduced it was open to the legislature to have amended the rule to make it clear that even goods which are in the custody of the assessee would be liable to be seized. But no such provisions has been made. It is well settled that penal provisions have to be construed strictly and in favour of the assessee unless the court is compelled by the language to construe it otherwise. I am of the view that the language is very clear and leaves no doubt that what was intended to confer was the power to seize goods which the assessee removes in contravention of any of the rules and the power of seizure does not extend to goods which are still in the factory and which have not reached the stage of removal.
15. Sri Subrahmanya Reddy next relied upon Rule 173-Q (d) which provides for confiscation of goods in respect of which the manufacturer contravence any of provisions of the rules with intent to evade payment of duty. I am also of the view that these goods cannot be considered to be goods in respect of which the petitioner can be said to have contravened the rules with the intent to evade payment of duty. It is no doubt true that the petitioner was submitting classification list in which it took up the stand that it would not be liable to excise duty and this position was accepted for a number of years by the department. It is also true that the mere fact that the authorities had not questioned the position taken up by the petitioner dose not prevent them from levying duty whenever they come to the conclusion that the description in the classification list is not correct and according to the correct description duty is leviable. But the circumstance that the list was being accepted by the Department itself for a number of years would indicate that this is not a case of contravention of any of the rules with the in tent to evade payment of duty. I am, therefore, of the view that Rule 173-Q (d) is also not applicable.
16. Sri Subrahmanya Reddy relied lastly upon Rule 200. This rule provides that any officer may require any person who is in immediate possession, control or use of any vessel, cart, or other means of conveyance, to stop such vessel, cart or other means of conveyance and search it, for excisable goods may seize and remove or detain any such goods or articles in respect of which it appears to him that duty should have but has not been levied or that any contravention of the provisions of the Act or the Rules has occurred. He submitted that this is a case where it appear to the officer that duty should have been levied but has not been levied and that contravention of the provisions of the Act or the rules had occurred and therefore it is open to the authorities to seize the goods. This submission in my view proceeds upon a misconception of the true scope of the rule. The second part which authorises the authorities to seize and remove or detain goods in respect of which it appears to the officer that the duty should have but has not been levied or that any contravention of the provisions of the Act or the rules had occurred cannot be read in isolation. It is to be read along with the first part of the rule which refers to a person being in possession, control or use of any vessel, cart or other means of conveyance. The first part of the rule authorise the officer to require any such person to stop such vessel, cart or other means of conveyance, and search it for excisable goods. The second part authorise the officer to see such goods. It is, therefore, clear that the second part refer only to the goods found in possession of any person who is in control, or use of any vessel, cart or other means of conveyance which is searched. Rule 200 cannot have any application to goods lying in a factory. I, therefore, agree with the contention of the petitioner that Rule 200 has no application.
17. For all these reasons I am of the view that the seizure of the goods in the present case cannot be justified under any of the provisions of the Act or the rules relied on by the learned counsel for the Central Government.
18. In the result W.P. No. 327/77 is allowed. No. costs.
W.P. No. 2542 of 1977
19. This petition in directed against the notice to show cause why duty and penalty should not be levied and why the goods should not be confiscated. This is not a matter which can be satisfactorily gone into in a writ petition. Further, I consider the writ petition is premature as the petitioner has approached this court at the stage of a show cause notice only. It is open to him to appear before the authorities and contend before them that the duty, much less a penalty, in not leviable and no case for confiscation is made out. The learned counsel for the petititioner submitted that as the authorities have taken a definite stand in the counter-affidavit that duty is leviable in respect of these goods, no useful purpose will be served by the petitioner raising this contention before the authorities concerned. But it is well known that the preceedings regarding levy of duty and penalty are in the nature of quasi-judicial proceedings and this court has no doubt that the authorities concerned will approach the matter in the quasi-judicial manner not influenced by the stand taken in the counter affidavit. The learned counsel for the Central Government with his characteristic fairness submitted that the officer who has subscribed to the counter affidavit would not deal with a proceeding in the show cause notice. A further appeal is also provided against any such order. In the circumstances I do not consider it necessary to interfere at this stage when a show cause notice is issued by the authorities. The writ petition W.P. No. 2542 of 1977 is dismissed. No costs.