G.B. Patnaik, J.
1. This appeal is directed against the appellate order of the learned Sessions Judge, Mayurbhanj Baripada, in Criminal Appeal No. 66-M of 1978 acquitting the respondents of the charge under Section 9(1)(b) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Act').
2. The two respondents who are the Manager and Proprietor respectively of the firm called M/s. Mayurbhanj Match Manufacturing Company, Rairangpur, faced trial before the Chief Judicial Magistrate, Mayurbhanj, for having committed offences under Section 9(1) (b) and (bb) of the Act on the allegation that they evaded the payment of duty under the Act and contravened the provisions of statutory rules, made under the Act. The respondents are engaged in manufacturing match in their factory at Rairangpur and match is an excisable commodity, for removal of which, duty is payable under the Act. The Superintendent of Central Excise (P.W.5) having received some information that the accused-respondents are evading payment of excise duty, made a surprise check along with his staff (P.W.s 1 and 2) of the factory premises on 4.8.1973. At that point of time, accused Ghasiram was absent, but accused Biswanath was present. On being, asked to produce the books of accounts, said Biswanath produced all the books which were available. P.W.5 took those books along with him for examination after granting proper receipt (Ext.1). On scrutiny, it was found that there exists lot of variations between the quantity of matches manufactured and removed as accounted for in the statutory register called R.G. 1 and the corresponding entries in the private account books of the accused persons. On the next day, i.e. on 5.8.1973, P.W.5 along with his staff again went to the factory and seized the books of accounts under seizure list (Ext.2) and returned those books which were not relevant for his purpose. On being asked to explain the difference, accused Biswanath gave a statement (Ext.3) asking for some time to explain the details. The seized books of accounts were then brought to the headquarters and after necessary examination, it was found that the accused persons have evaded payment of excise duty to the tune of Rs. 86,602/- between 1971-72 and 26th July, 1973. A show cause notice to the accused-respondents was given and thereafter a complaint was filed in the Court of the Sub-Divisional Judicial Magistrate, Rairangpur, by the Assistant Collector of Central Excise. It was alleged in the complaint petition that the manufacturer violated the provisions of Rule 9(1), 52, 52-A and 53 of the Central Excise Rules, 1944 (hereinafter referred to as the 'Rules') punishable under Section 9(1)(b) of the Act.
3. On the basis of the said complaint, the learned Magistrate took cognisance of the offence and summoned the accused persons to appear and face trial. In the meantime, the accused persons filed a writ petition being O.J.C. No. 1916 of 1975 challenging the maintainability of the criminal proceeding on the ground of limitation. This Court disposed of the said writ application by holding that there cannot be any prosecution for the the offence alleged to have been committed for any period prior to 19.5.1973 since the same is barred by limitation, but for the remaining period, i.e. period with effect from 20.5.1973 up to July, 1973, the criminal case should proceed. The learned Magistrate thereafter proceeded with the trial of the case. The charge against the accused persons was to the effect that during the period 20.5.1973 to 26.7.1973, the accused persons evaded payment of excise duty to the tune of Rs. 13,824.50 in violation of the provisions of Rules 9(1), 52, 52-A and 53 of the Rules and thereby committed an offence punishable under Section 9(1) (b) and (bb) of the Act.
4. During the arguments it was contended by the learned counsel appearing for the defence that the provision of Section 9(1)(bb) of the Act having been inserted in the statute by Amending Act 36 of 1973 which received the Presidential assent on 1.9.1973 and the alleged offence being in relation, to a period prior to the same, the accused cannot be made liable for the said offence. The Public Prosecutor conceded to the said position and, therefore, the only charge against the accused persons was under Section 9(1)(b) of the Act.
5. The prosecution in support of the case examined five witnesses and exhibited a number of documents. On behalf of the defence no witness was examined, but five documents were exhibited. On consideration of the evidence on record, the learned trying Magistrate who was the Chief Judicial Magistrate, came to hold that both the accused persons were guilty of the offence under Section 9(1)(b) of the Act and accordingly convicted them under the said section and passed a sentence of fine of Rs. 1,500/-, in default to undergo rigorous imprisonment for four months against each of the accused persons. The learned Magistrate acquitted both the accused persons of the charge under Section 9(1)(bb) of the Act.
6. On an appeal being carried to the learned Sessions Judge, the learned Sessions Judge came to the conclusion that it could not be said that the accused persons evaded the payment of duty payable under the Act in absence of any evidence of clandestine removal and assessment. So far as the search and seizure are concerned, the learned Session Judge negatived the contention of the accused and held that the same were legal and in accordance with law, but considering the documents, the learned Sessions Judge came to the conclusion that there was no satisfactory evidence to show that the documents were seized from the possession of the accused and that they related to the production and marketing of matches by the Mayurbhanj Match Manufacturing Company. Having come to the aforesaid findings, the learned Sessions Judge set aside the conviction and sentence passed by the learned trying Magistrate and acquitted the accused persons.
7. Mr. Rath, the learned Additional Standing Counsel for the Central Government, contends 'that the learned Sessions Judge committed gross error of law in holding that the offence in question has not been committed since the prosecution has failed to establish that there was a demand of the payment which the accused failed to pay. He further submits that there is absolutely no justification to discard Exts. 6, 7 and 8 which are the private accounts of the firm showing production and sale of matches. The order of acquittal passed by the learned Sessions Judge being based on the aforesaid two grounds, which are not sustainable in law, is liable to be set aside.
8. Mr. K.N. Jena, the learned counsel for the accused-respondents, reiterates the stand that liability to pay excise duty accrues only when an assessment is made, amount quantified and demand is made and since admittedly that has not been done, the offence in question has not been committed. He further emphasises that the prosecution has failed to establish removal of matches without payment of duty and consequently, the appellate court, namely, the learned Session Judge, was justified in coming to the conclusion that no offence, as alleged, has been committed by the accused-respondents.
9. Before examining the rival contentions it would be profitable to note some of the provisions of the Act and the Rules made thereunder. Section 3 of the Act provides:-
'(1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates, set forth in the First Schedule'.
'Excisable goods' has been defined in Section 2(d) to mean.
'...goods specified in the First Schedule as being subject to a duty of excise and include salt.'
The word 'prescribed' has been defined in Section 2(g) to mean, 'prescribed by rules made under the Act'. Item 38 of the First Schedule is 'Matches' on which the rate of duty payable is sixtyfive nayepaise for every one thousand matches or fraction thereof. Rule 7 of the Rules prescribes:-
'Every person who produces, cures or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such persons as may be designated, in, or under the authority of these Rules, whether the payment of such duty or duties is secured by bond or otherwise.'
Rule 9 of the Rules prohibits removal of excisable goods without payment of excise duty and without obtaining permission of the proper officer for such removal. A careful scrutiny of the aforesaid provisions shows that an excise duty is levied upon 'goods' and the taxable event is the manufacture or production of goods. See, AIR 1967 SC 1512, Shinde Brothers v. Deputy Commr., Raichur. The duty of excise, in essence, therefore is a duty on manufacture or production of goods, though, as a matter of convenience, it may be levied at the time when goods leave the place of production. Undoubtedly, therefore, Section 3 of the Act is not susceptible of any other interpretation than that the excise duty is leviable no sooner than the manufacture or production is completed and the liability to pay accrues on completion of production or manufacture even though the Government under the rule-making power for recovery of tax devises some other machinery and determines the point of recovery.
10. The question which, therefore, remains to be considered is whether the respondents have evaded the payment of any duty payable under the Act so as to attract the provision of Section 9(1)(b) of the Act. I would now examine the evidence on record, oral and documentary, to find out whether the respondents have evaded payment of duty. Ext. 3 is a document written and signed by Biswanath Agarwal on 5.8.1973 indicating the seizure of several books and registers from the factory premises of the respondents and it further indicates that Biswanath was not able to explain the entries in question. Ext. 4 is a chart prepared by the excise authorities in reference to the entries in R.G. 1 and the private account book No. 9 and the said chart indicates the difference so far as the quantity of manufacture is concerned during different periods. Ext. 11 is an application filed by Biswanath Agarwal on 8.9.1973 before the excise authority, pursuant to the summons issued by the excise authority under Section 14 of the Act to produce documents of the company. It has been clearly stated therein that all papers and books excepting Gate-pass Book, Address Book and Handframe filling register have been seized by the excise authorities and, therefore, no further papers remained within the factory premises to be produced. Ext. 12 is the letter of Biswanath Agarwal seeking permission of the excise authority to see the seized books of accounts for verification and taking extracts and Ext. 13 is the acknowledgment of said Biswanath to the effect that the books of accounts and papers seized by the excise authorities on 5.8.1973 have been examined and necessary extracts have been taken. Exts. 6, 7 and 8 were seized under seizure list (Ext. 2) and all these documents were the private account books of the factory in question. P.W. 1, the Inspector of Central Excise, has stated in his evidence that on getting reliable information that matches are being clandestinely manufactured and are removed without payment of excise duty in the factory premises, a surprise check was made by him along with P.W. 2 and on reaching the factory premises he examined the accounts from R.G. 1, which is a statutory register maintained by a manufacturer of matches. On the direction of the Superintendent of Central Excise, Biswanath Agarwal brought out all registers and records from the almirah and at that point of time Santosh Kumar, brother of accused Biswanath, was trying to snatch away some of the registers, but was prevented by P.Ws. 1 and 2. As it was evening, the documents in question were taken by the excise authorities by giving a proper receipt (Ext. 1) and those registers were again brought to the factory premises on the next day and after necessary verification were duly seized under seizure list (Ext.2) after furnishing a copy of the same to Biswanath. Ext. 2/1 is the endorsement of Biswanath to the effect that he has received a copy of the seizure list. Biswanath on being asked to explain the discrepancies was not able to do so and wanted some time so that his brother Santosh could come and explain. Ext. 9 is the Cash-memo Book of the Mayurbhanj Match Manufacturing Company from 2.4.1973 to 30.7.1973 and Exts. 9/1 to 9/24 are the memos relating to the period 20.5.1973 to 26.7.1973, Exts. 10 to 10/9 are the gate-passes issued by the factory for the aforesaid period i.e. 20.5.1973 to 26.7.1973. P.W. 1 further stated that from these records it was established that during the period 20.5.1973 to 26.7.1973 though according to the statutory register, the Company had manufactured 1266 packets and cleared 696 packets by paying duty thereon, the private account books show that the manufacture is to the tune of 1788 bags and clearance is to the tune of 1389 bags. Thus, there has been an evasion of payment of excise duty to the tune of Rs. 13,824.50. In cross-examination of this witness, nothing substantial has been elicited to discredit his version. P.W. 2 who had accompanied P.W. 1 fully corroborates the version of P.W. 1. He has categorically stated that during the period 20.5.1973 to 26.7.1973, there has been an evasion of excise duty on matches to the tune of Rs. 13,824/- as per the private records maintained by the accused and Exts. 6, 7 and 8 are the private account books which were seized from the premises of the accused persons. After perusing the evidence of P.Ws. 1 and 2, I find them wholly reliable since their evidence is mostly based on records seized from the factory premises of the respondents. P.W. 3 is a witness to the seizure made on 5.8.1973 under seizure list (Ext.2) and his signature on the seizure list is Ext. 2/2. He was declared hostile since he did not support a part of the prosecution case and was cross-examined by the Public Prosecutor. P.W. 4 is another seizure witness who proves his signature (Ext. 2/3) on the seizure list (Ext.2), but he also turned hostile to the prosecution. P.W. 5 is the Excise Superintendent who had visited the factory premises along with P.Ws. 1 and 2 on 4.8.1973 and again on 5.8.1973 when the relevant documents were seized under seizure list (Ext.2). He further proves the order of the Collector directing prosecution and Ext. 14 is the prosecution report under the signature of Assistant Collector (Ext. 14/1).
From the aforesaid evidence, oral and documentary, discussed above, the conclusion is irresistible that the accused persons have evaded payment of duty on the matches manufactured by them and the prosecution has been able to bring home the charge beyond reasonable doubt.
11. The learned Session Judge has come to the conclusion that there would be a contravention of Rule 9 only when the manufacturer clandestinely removes matches without paying the duty assessed by the excise authority and since there has been no assessment or demand, the accused persons have not contravened the provisions of Rule 9. In my opinion, the said conclusion of the learned Sessions Judge is wholly erroneous and contrary to the provisions of Section 3 of the Act. As I have already discussed earlier, the liability to pay duty on matches accrues on completion of the manufacture of the matches and that apart the entries in the private account books show that there has been excess of manufacture and removal of matches from the accounts maintained in the statutory register called R.G. 1. Consequently, the conclusion of the learned Session Judge is not warranted by law.
12. The learned Sessions Judge has come to the conclusion that the search and seizure made by the excise authorities are not illegal, but has further held that the documents (Exts. 6, 7 and 8) were not seized from the possession of the accused-respondents. This conclusion, in my opinion, is contrary to the evidence on record which I have discussed earlier. In view of the categorical assertions made by Biswanath in Ext. 3 and 11, the conclusion of the Sessions Judge must be held to be erroneous and, therefore, the reasonings of the learned Sessions Judge in support of the order of acquittal are not justified in law.
13. In the ultimate result, therefore, the judgment of acquittal passed by the learned Sessions Judge in Criminal Appeal No. 66-M of 1978 is set aside and the accused-respondents are found guilty under Section 9(1)(b) of the Act and are convicted thereunder. So far as the sentence is concerned, the sentence awarded, by the trying Magistrate in consideration of the amount of evasion, is justified and is affirmed, that is to say, the respondents are sentenced to pay a fine of Rs. 1,500/- each, in default to undergo rigorous imprisonment for four months each.
14. The Criminal Appeal is accordingly allowed.