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Hindustan Aluminium Corporation Ltd. Vs. Controller of Aluminium and ors. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtDelhi High Court
Decided On
Case NumberCivil Writ Appeal No. 1104 of 1975
Judge
Reported inAIR1976Delhi225; ILR1976Delhi336
ActsEssential Commodities Act, 1955 - Sections 6(A); Aluminium (Control) Order, 1970; Constitution of India - Article 226;
AppellantHindustan Aluminium Corporation Ltd.
RespondentController of Aluminium and ors.
Advocates: F.S. Nariman,; Soli J. Sorabjee,; N.R. Khaitan,;
Cases ReferredCalcutta Discount Co. Ltd. v. Income
Excerpt:
(i) essential commodities act (1955)--aluminium (control) order, (1970) clauses 5a, 7 & 9 (as amended)--seizure of the entire stock-contravention of clauses 5a and 7--effect--order of seizure, if bad in part whether the whole order vitiated.; the petitioner company manufactures aluminium and aluminium rods. it was alleged that the petitioner did not dispatch goods during june, 1975 because of non-availability of strucks from transporters. because of accumulation of stocks, the third respondent was directed to inspect the factory and the records of the petitioner company. the total stock of aluminium finished products lying inside the factory on inspection were found to be 2805.039 m. tons on 1-7-76. but on 1-7-75 and 2-7-75, 1017.930 m. tons of aluminium product was dispatched. on.....s. rangarajan, j.(1) the petitioner company, which manufactures aluminium, has filed this petition under article 226 of the constitution to quash the show cause notice dated 21-8-75 (copy of which is annexure z to the petition) issued by the collector of mirzapur (r-5), giving the petitioner an opportunity of making a representation and of being heard concerning why 2032.512 m. tons of aluminium which was seized by the superintendent of central excise srp ii (r-3) on 16th/17th july, 1975 should not be confiscated. for contravention of the orders referred to in the said notice.(2) after issuing a notice to the respondents to show cause why this writ petition should not be admitted the learned counsel for the petitioner and the learned counsel for the respondents were heard. it was felt the.....
Judgment:

S. Rangarajan, J.

(1) The petitioner company, which manufactures aluminium, has filed this petition under Article 226 of the Constitution to quash the show cause notice dated 21-8-75 (copy of which is Annexure Z to the petition) issued by the Collector of Mirzapur (R-5), giving the petitioner an opportunity of making a representation and of being heard concerning why 2032.512 M. Tons of aluminium which was seized by the Superintendent of Central Excise Srp Ii (R-3) on 16th/17th July, 1975 should not be confiscated. for contravention of the orders referred to in the said notice.

(2) After issuing a notice to the respondents to show cause why this Writ Petition should not be admitted the learned counsel for the petitioner and the learned counsel for the respondents were heard. It was felt the petition required examination; it was admitted and the respondents were given an opportunity to file further retunis and the petitioner also to file further rejoinder. Having regard to nearly rupees two crores worth of aluminium, said to be a scarce metal, having been seized and since holding up such huge stocks of this metal at the present moment would not be in the national interest this Writ Petition was, as requested by both sides, heard very early; the learned counsel on both sides were heard further at considerable length.

(3) The facts leading to this petition may now be noticed. Aluminimn is an essential commodity under the Essential Commodities Act, 1955 (hereinafter called the Act). Under the said Act the Central Government made an order called the Aluminium (Central) Order, 1970 (hereinafter referred to as the Control Order). The Central Government introduced, on 3-10-1974, clause 5-A, under the power conferred on it under section 3 of the Act, giving the Central Government power to regulate production, supply of distribution of aluminium. By another order, contained in the Notification dated 5th October 1974, the Central Government directed that no producer or manufacturer of aluminium shall undertake production or engage in the supply or distribution of any or all forms of aluminium specified in the Schedule of the Control Order except to the extent and in the manner specified by the Central Government or Controller or or the authorised officer in pursuance of clause 5-A. The first respondent is the authority appointed by the Central Government for the purpose of the Control Order. A certain procedure was prescribed with regard to provisions of clause 5-A which the first respondent had to follow.

(4) By an order dated 15-7-1975 the Central Government amended various clauses of the said Control Order; yet another order of the same date had amended clause 9 of the said Control Order. By two separate orders of the same date the Central Government provided for levy and free sale of aluminium and also fixed sale price of levy of aluminium. The relevant provisions of the Control Order would be noticed later; it would, however, be appropriate to notice even at the outset that introduction of clause 9 and the fixing of prices became necessary on account of the anticipated rise in prices of various types of aluminium; even in March 1975 there had been a rise of about Rs. 400 per ton. On the 28th of May 1975 the Financial Express had published a news about the anticipated still higher price rise in aluminium. The excise authorities were authorised on 15th of July 1975 to exercise powers of seizure under the Aluminium Control Order.

(5) The excise officials as well as the Controller of Aluminium and his staff seemed to have worked in close collaboration. From and after the 15th of July 1975 the excise officials of the rank of Superintendent of Central Excise and above were authorised to make seizure of stocks of aluminium with held from sale.

(6) On the 1st of July 1975 the third respondent visited the petitioner's aluminium factory at Renukoot as per the personal instructions given to him by the Assistant Collector of Excise and also submitted a report (dated 4-7-75) of his inspection to the Assistant Collector. It will be convenient to refer to the facts referred to in the said report, which was made available to us during the hearing by Shri Harish Chandra, learned counsel for the respondents I to .4, the same having been referred to in the aflidavit filed in opposition to this petition by the Controller (R-1). The total stock of aluminium finished products lying inside the factory on 1-7-1975 was checker and found to be 2805.039 M. Tons. The percentage check weighment was also done (this was possible) to verify the correctness of the weights as marked on the packages, and the weights were found to be in order. 'The stock balance was checked and co-related with relevant records and found to tally. Out of the total stock of 2805.039 M. Tons the position of ingots and proper rods was as follows:

'(1) Ingots E. C. Grade 257.946 M. T. (2) Ingots Commercial Grade 385.961 M. T. (3) Ingots Master Alloys 56.422 M. T. (4) Properzi Rods E. C. Grade 811.036 M. T. (5) Properzi Rods Commercial Grade 439.297 M. T. Total 1950.662 M. T.

(7) The stock of properzi rods of Commercial Grade of 439.297 M.T. was lying accamulated since March 1975 because of orders issued by the Aluminium Controller not to sell the same without permission. The closing stock position of 2805.039 M.Ts included 570.518 M. Tons, the break-up of which was as follows: 439.297 M.T. as stated above plus 74.799 M.T. (E.C. Grade) lying in the factory awaiting orders from the Director General of Supplies & Disposals and the stock of Master alloy of 56.422 M.T. meant for exclusive use inside the factory, for further fabrication of slabs and billets. The dispatch position from July 1974 to May 1975 was found to be normal but during the month of June 1975 the dispatch was poor (2436.320 M.T.). 3643.753 M.T. had been dispatched during February 1975; 5108.682 M.T. had been dispatched during March 1975; the dispatch figures for the other months varied approximately from 3800 to 5000 M.T. It was stated to the third respondent by the petitoner company during his visit that dispatches could nut be made due to non-availability of trucks from transporters during June 1975 and hence the stocks had accumulated. On 1-7-1975 and 2-7-1975 1013.930 M.T. of aluminium product had been dispatched (including 724.595 M.T. of properzi rods and 158.400 M.T. of ingots). The third respondent enquired from the various transport offices stationed at Renukoot verbally and learnt from them that they could not supply trucks to the petitioner company as per its requirements since the trucks were engaged in transportation of bidi leaves. But the third respondent also referred in his report to the corresponding figures of dispatches for the months of June 1974 (4797.903 M.T.) and June 1973 (5428.312 M.T.).

(8) It appears that a complaint had been made to the Aluminium Controller even as early as on 17-5-1975 by the Hindustan Chains Pvt. Ltd. that inspire of completing financial arrangement? with the petitioner, aluminium had not been dispatched for the last several months. Our attention was also drawn to another complaint, dated June 17, 1975, by the National Screw and Wire Products Ltd. that inspire of financial arrangements having been made as early as on 1st June 1975 and giving L/C covering dispatch up to Rs. 10 lakhs no dispatch had been cffected till the 10th of June 1975 and that even after giving them a fresh L/C for Rs. 60 lakhs no dispatch had been made. There was yet another complaint dated 24-6-1975 by the Kamain Engineering Corporation Ltd. to the effect that the petitioner had completely suspended supplies of aluminium from the first week of June 1975.

(9) It is needless to refer to more materials on this quesiton; even the above-referred to complaints were adverted to by Shri Harish Chandra during the hearing without any specific averments in the reply in this regard. He explained that he was referring to the concerned files and furnished true copies of the same to us,

(10) It is, however, seen that the petitioner had been writing to the Assistant Collector of Central Excise about accumulation of stocks due to shortage of trucks and asking for permission to store the finished goods in areas adjacent to the bonded store rooms (vide Annexure B dated 28-5-1975; also Annexure B dated 4-6-1975 writ- tea in cootinuation). The petitioner also wrote circular letters on 10-6-1975 to the transporters to place adequate number of trucks for dispatch of goods (copies of which are to be found in Annexure C mraked collectively) and 20th June 1975. The transporters also had written to the petitioner stating that because of the bidi patta season they were unable to spare more trucks and promised to improve the supply of trucks (vide letters dated 21-6-1975 from five of the transporters and 23-6-1975 from two of the transport operators). On 24-7-1975 the Deputy Secretary to the Government of India and Controller of Aluminium (Shri M. S. Bhatnagar) had written to the petitioner as follows:

'IThas come to the notice of the Government that you have often to face difficulty in procuring trucks for the transport of aluminium metal to the various allottees. It is also understood that there have been a few cases where trucks did not deliver goods to the consignees. I am accordingly to enquire whether you would like Government to move the Transport Department of the State Government to provide you adequate number of trucks for transport of the metal'.

(11) By letter of the same date the petitioner had thanked Shri Bhatnagar for the letter and had requested him to take up the matter with the 'Transport Department of the State for providing trucks. This was after the seizure.

(12) Earlier, on 21-6-75 i.e. before the seizure, Shri Bhatnagar had written to the petitioner stating that on 13-6-1975 Shri B. N. Saxena, Chief Resident Executive of the company, had called on him in his office, that he had been directed to obtain, on top priority basis, information regarding the dispatch of EC/CG metal to the allottees during the month of June 1975. The information asked for should have been supplied within a period of 8 days. Since the same had not been supplied the Government felt that the petitioner was suppressing information. The petitioner was, thereforee, directed to supply the information positively by 23-6-75. On 23-6-75 the petitioner replied setting out certain difficulties like the non-availability of teleprinter circuit between Delhi and Renukoot for not more than a couple of hours over a whole month and even telephone lightening calls materialising only once in a blue moon. The Controller was informed that when they were able to get in touch with Renukoot for a few minutes they got information that more than 500 tonnes had been dispatched and that more dispatches were expected. By letter dated 25-6-75 the petitioner company informed the Controller of some further dispatches.

(13) At this stage reference was made to letter dated 3-7-75 written by the petitioner to the Superintendent of Central Excise (third respondent) in reply to his verbal query regarding accumulation of stocks. In addititon to the alleged shortage of trucks it was mentioned that availability improved with effect from 23-6-75. Reference was made to the dispatch on 1st and 2nd of July 1975 of 536.126 M.T. and 477.804 M.T. (total 1013.930) which included 450.043 M.T. and 422.895 M.T. of Ec Grade metal in the shape of ingots and properzi rods. They were giving priority to Ec metal. The third respondent was informed that with reference to 439.274 M. Tons of commercial grade properzi rods they could not dispatch the same on account of restrictions imposed on sale by the Controller in March 1975. 74.799 M. Tons of aluminium ingots were lying in the godowns awaiting certain amendments which had not been carried out by the Dirctor General of Supplies & Disposals. By a letter dated 4-7-1975 (copy of which is Annexure J to the petition) the Controller of Almuminum (Shri M. S. Bhatnagar) had referred to the checking of the premises of the company being done by the officials of the Central Excise Department and the petitioner was directed that the metal found in possession of the petitioner at the premises mentioned, including at Renukoot, should not be disposed of until further orders were issued by the Controller. By a subsequent letter dated 5-7-1975 the third respondent also informed the petitioner not to remove from the factory aluminium ingots and properzi re-draw rods, both Ec and Commercial Grade, with effect from 5-7-1975, without permission from the Assistant Collector of Central Excise, Allahabad. The third respondent had also made an endorsement on the petitioner's register (copy of which is Annexure F to the rejoinder) concerning the said restriction on removal except with the permission of the Assistant Collector of excise, Allahabad. In reply to the said letter from the Controller the petitioner wrote to the Controller (copy of which is Annexure M to the petition) for dispatch instructions pointnig out the hardship that would be caused by undue blockage of huge amount of money. On 11-7-1975 the Controller pointed out in his letter (copy of which is Annexure N to the petition) that the supplies had never been less than 50 per cent whereas it had fallen down to 25 per cent of production in June. The petitioner was asked to explain the reasons for the lower supplies. It was in response to this letter that on 15-7-1975 the petitioner's reply (copy of which is Annexure N to the petition) was sent to the Controller informing him about the position up to that date setting out the figures pertaining to the period 1st to 4th of July 1975 both in respect of production and deliveries of EC/CG metal. The difficulty faced in the matter of transport was also referred to.

(14) It is necessary to notice at this stage that on 11-7-1975 the Controller had informed the petitioner (copy of which is Annexure V to the petition) that 1575 tonnes of Ec Grade aluminium should be supplied on tup periority basis to four State Electriccity Boards including Gujarat within the next two or three days and the State Electricity Boards were asked to make necessary financial arrangements. The Gujarat State Eelectricity Board alone had made fiananical arrangements; 500 tonnes had been directed to be suppled to the said Board; even in respect of this financial arrangement the petitioner had no knowledge earlier than the 16th only when it had the bank advice. The fact to be noticed here is that the other three State Electricity Boards had not made any financial arrangement by that lime. It has also to be noticed further that there were only 473.456 tonnes of Eg aluminium in stock with the petitioner when the said letter was received.

(15) By a further letter dated 23-7-1975 (copy of which is Annexure W to the petition) the Deputy Secretary to the Govt. of India had informed the petitioner that the Gujarat and Maharashtra State Electricity Boards had made financial arrangements to the extent of Rs. 39.5 lakhs and Rs. 45 lakhs, respectively, and the petitioner was directed to supply 500 tonnes each of Ec grade aluminium metal to them at the rule that was prevailing on ll-7-l-?75. Since the Punjab and Tamil Nadu Boards were also expected to complete the financial arrangements shortly there was a direction that the metal should be supplied to them also at the same price. The third respondent in his letter dated 29-7-1975 (copy of which is Annexure X to the petition) informed the petitioner that 500 tonnes of Ec grade aluminium should he supplied to the parties mentioned in the letter of 23-7-1975 out of the stocks seized on 16-7-1975 and that Excise Duty should be charged on the basis of the prices prevailing on the date of clearance. About the payment of prices at the old rates and yet having to pay Excise Duty on the increased prices the petitioner complained to the second respondent by letter dated 25-7-1975 (copy of which is Annexure Y to the petition). The validity of such price fixation and Excise Duties does not have to be decided in this petition.

(16) Going back a few days we may notice what happened on 16-7-1975. The third respondent who was empowered under the Control Order searched and seized 2032.512 M.Tons of aluminium from the petitioner's Renukoot factory. The break-up of the said stock (in tonnes) was as follows :

E.C. C.G. Total Ingots 211.473 580.960 792.433 Wireroos 492.905 747.174 1.240.079 Total 704.378 1,328.134 2,032.512

(17) The goods seized were kept on supurdnama as it seems to be permissible under the U.P. amendment of Section 6-A of the Control Order. In the supurdnama (pp 11 to 14 of the file produced by the Collector) there is a reference as follows on page 13 :

'20.Brief facts of the case. As ordered by the Collector, Central Excise. Allahabad in the night of 15-7-75. a batch of two P.1.0's and one Inspector from S.R.P.I I under charge of Shri H. B. Chaudhary, Superintendent S.R.P.II, I.D.O. Allahabad, proceeded to Renukoot. On reaching there at about 08.45 A.M. on 16-7-1975, the Central Excise Officers visited the Aluminium Factory and there seized the following items of Aluminium Products lying inside the factory as ordered by the Collector.

(18) The details of the said 2032.512 M. Tons were given and the above said scizure was said to be effected for contravention of the Control Order. The Controller made a report dated 8-8-1975 to the District Magistrate along with a statement of facts (pp 4 to 10 of the said file). He specifically referred in para 5 of his report to the contravention having taken place in respect of '1525 M. Tons' and the same being liable to be confiscated giving details thereof in the concluding paragraph of the Statement of Facts. Paragraph 16 of the Statement of Facts referred to the said stock of 1525 M. Tons said to have been 'withheld as on 1-7-1975'. The seizure, it may be recalled, was of 2032.512 M. Tons as mentioned in paragraph 14 of the said Statement of Facts.

(19) Thereafter the Collector (R-5) issued a notice to show cause as required by Secton 6-B of the Act (copy of which is Annexure Z to the petition) stating, inter alia, as follows; 'It was thus established sufficiently by July 15 that the Company withheld from sale during the period ending July 1st, 1975 Aluminium Ingots and also Wire Rods produced by it and it had thus committed a flagrant violation of Clause 7 read with Clause 5A of the Aluminium (Control) Order, 1970, that the stock of 1525 tonnes of Aluminium. . . . in respect of which contravention ...... has taken place was liable to be confiscated under Section 6A of the Essential Commodities Act, 1955' (emphases added). The Collector went on to say as follows:

''ONconsideration of the above report, I am satisfied that the Company had held stocks in violation of the Law and no satisfactory Explanationn was ever submitted by them, there has been contravention of the Orders referred to above and the aforesaid stock of Aluminium is liable to be confiscated under Section 6A of the Essential Commodities Act, without prejudice to any other action or legal proceedings that may be taken against the Company under the aforesaid Act or any other Law or order having the force of Law. I accordingly propose to confiscate the said stock of Aluminium on the grounds stated above.

You are hereby given an opportunity of making representation in writing within ten days of the service of this Notice'. There is probably some ambiguity about the reference to 'said stock' but the pleadings appear to proceed on the basis that the show cause notice was in respect of the entire stock of aluminium which was seized.

(20) Before dealing with the respective contentions of the parties it is necessary to read sections 6-A, 6-B and 6-C of the Act which deal with the confiscation of the essential commodity, issue of show cause notice before confiscation and also the appeal against certain orders:

'6-A.Where any essential commodity is seized in pursuance of an order made under section 3 in relation thereto, it may be produced, without any unreasonable delay, before the Collector of the district or the Presidencytown in which such essential commodity is seized and whether or not a prosecution is instituted for the contravention of such order, the Collector, if satisfied that there has been a contravention of the order, may order confiscation of the essential commodity so seized:

Provided that without prejudice to any action which may be taken under any other provision of this Act, no foodgrains or edible oil- seeds seized in pursuance of an order made under section 3 in relation thereto from a producer shall, if the seized foodgrains or edible oilseeds have been produced by him, be confiscated under this section. 6B.No order confiscating any essential commodity shall be made under section 6A unless the owner of such essential commodity or the person from whom it is seized-

(A)is given a notice in writing informing him of the grounds on which it is proposed to confiscate the essential commodity;

(B)is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation; and

(C)is given a reasonable opportunity of being heard in the matter.'

6C(1) Any person aggrieved by an order of confiscation under section 6A may, within one month from the date of the communication to him of such order, appeal to any judicial authority appointed by the State Government concerned and the judicial authority shall, after giving an opportunity to the appellant to be heard, pass such order as it may think fit, confirming, modifying or annulling the order appealed against.

(2)Where an order under section 6A is modified or annulled by such judicial authority, or where in a prosecution instituted for the contravention of the order in respect of which an order of confiscation has been made under section 6A, the person concerned is acquitted, and in either case it is not possible for any reason to return the essential commodity seized, such person shall be paid the price thereforee as if the essential commodity had been sold to the Government with reasonable interest calculated from the day of the seizure of the essential commodity; and such price shall be determined-

(I)in the case of foodgrains, edible oilseeds, or edible oils, in accordance with the provisions of sub-section (3B) of section 3;

(II)in the case of sugar, in accordance with the provisions of sub-section (3C) of section 3; and

(III)in the case of any other essential commodity, in accordance with the provisions of sub-section (3) of section 3.'

Section 7(a) prescribes certain penalities in respect of any person contravening, whether knowingly, intentionally or otherwise, any order made under section 3. It is also necessary to read clauses 9 to 11 of the Control Order:

'9.Powers of examination, entry, search, and seizurc. (1) The Controller, or such Gazetted Officer of the Central Government or of the State Government, as may he authorised by the Central Government in this behalf, may- (a) examine-

(I)any books, accounts or rccords relating to the production or manufacture of aluminium and belonging to or under the control of a producer or manufacturer,

(II)any books, accounts, or records relating to the purchase, sale or other transaction in aluminium and belonging to or under the control of a dealer.

(III)any stocks of aluminium belonging to or under the control of any producer, manufacturer or dealer, (b) enter or search-

(I)any premises where aluminium is produced, manufactured or sold or where the Controller or the officer authorised has reason to believe that a contravention of this order in respect of the aluminium has been, is being, or is about to be committed.

(II)any vehicle or other conveyance which is being or is about to be used or which the Controller or the officer authorised has reason to believe, is being or is about to be used, for carrying aluminium;

and the Controller or the officer authorised to make the examination. entry or search may seize-

(I)any aluminium in respect of which he has reason to believe that a contravention of this order has been.is being or is about to be, committed and any packages, coverings or receptacles in which such aluminium are found;

(II)any vehicle or other conveyance used in carrying such aluminium, if he has reason to believe that such vehicle or other conveyance is liable to be forfeited under the provisions of the Essential Commodities Act, 1955 (10 of 1955);

(III)any books of accounts and documents which in his opinion would be useful for, or relevant to any proceedings under the said Act: Provided that such books shall be returned as soon as may be after such seizure and in any case not later than thirty days from the date of seizure after copies thereof or extracts there from, as certified by the Controller or other officer, who seized the same, have been taken.

(2)The provisions of the Code of Criminal Procedure 1973 (2 of 1974) relating to search and seizure shall, as far as may be apply to searches and seizures under this cluase.

10.Compliance of orders'. Every producer, manufacturer or dealer or any other person, to whom any order or direction is issued under any powers conferred by or under this order shall comply with such order or direction.

11.Appeal : Any producer, manufacturer or dealer or any other person aggrieved by any order or direction issued under this order, may, within 30 days from the date of receipt of a copy of such order or direction, prefer an appeal to the Central Government and thereupon the Central Government may confirm, reverse or modify such order of direction.'

(21) In terms of clause 9 of the Control Order any premises where aluminium is produced, manufactured or sold or where the Controller or an authorised officer has reason to believe that the contravention of the Order is being or is about to be committed, may be entered or searched and such Controller or authorised officer may seize any aluminium in respect of which he has reason to believe that a contravention of this Order has been, is being or is about to be committed and any packages, coverings or receptacles in which such aluminium is found. It would have been open to the third respondent the authorised officer in this case, to have seized not only the aluminium in respect of which contravention of the Order had taken place but also the aluminium in respect of which contravention was being or was about to be committed. The pre-condition, however, is that the Controller or the authorised officer must have reason to believe that a contravention of the Control Order had been made or was being or was about to be made. But as it was noticed earlier this is not what the third respondent did or said despite his having seized 2032.512 M. Tons of aluminium, he had himself said that contravention had taken place only in respect of 1525 M. Tons (for the period ending 30th June 1975). In view of stocks having been moved out on 1st and 2nd July 1975 and the restraint order of 4th July 1975 he could not obvioirsly bring himself to say that any contravention was about to be committed.

(22) It seems a fair inference from the report of the third respondent dated 4-7-1975 itself that in addition to the 439.297 M. Tons of Commercial Grade properzi rod which the petitioner could not dispatch on account of the restrictions on sale imposed by the Controller the petitioner had also dispatched, on the 1st and 2nd of July 1975, 1013.930 M. Tons of aluminium product. To this has to be added 74.799 M. Tons of aluminium ingots of E.C. Grade lying in the factory godown awaiting orders of the Director General of Supplies & Disposals, in respect of 1575 tonnes of Ec Grade aluminium, which was to be supplied on a top priority basis to four State Electricity Boards as ordered on 11-7-75, (subsequent to the order of 4-7-75 restraining sales except as ordered), it was seen that until the 16th, on which date alone the financial arrangements made by Gujarat in respect of 500 tonnes became known to the petitioner, there could not, in the very nature of things, be any withholding from sale.

(23) The third respondent had referred in his report of 4-7-75 to the non-availability of trucks as reported by the transport operators but it does not appear that he had himself expressed any view of his own concerning the same; he had only indicated what the rate of dispatches were in the previous years for the same period. No affidavit of the third respondent had been filed in reply to the show cause notice or at the stage prior to the issue of the rule; there was a full-dressed argument even at that stage and the petitioner's counsel had severely commented on the absence of the affidavit from the third respondent the authorised officer, explaining how he had reason to believe and how the first respondent could not speak for the third respondent concerning the belief of the latter. The reply affidavit of the third respondent was filed later, on 7-12-1975 (rule was issued on 3-12-1975), wherein he has stated as follows:

'THEofficials of the petitioner company sought to explain away the unusual stocks by saying that the supplies could not be made due to non-availability of trucks. I, however, was of the view that the availability of trucks could have been arranged and managed by the petitioner if it had intended to'.

(24) Even this does not positively suggest any withholding of stock.

(25) The first respondent however, was not inclined to believe the story of non-availability of trucks; he probably thought that if such large quantities could be dispatched on the 1st and 2nd July 1975 the same must have been possible earlier; he commented about 'truant trucks'. It seemed to us also that the petitioner company had at least been dragging its feet in the month of June 1975 owing to the anticipated price rise. After the inspection the petitioner company probably realised the seriousness of the situation and thereforee had managed to send away nearly 1300 M. Tons on the footing that this might account fully for the stocks found on 1-7-1975, namely, 1894 tonnes less 439.297+74.799+56.422 i.e. 570.518. This might even be assumed to have been done, in the view most favorable to the respondents, to avoid seizure. But the question is whether when the stocks in respect of which contravention was alleged, had been dispatched long before 16-7-1975 they were still available for being seized. There is no difficulty about how much was produced or what exactly was produced because each ingot bears, the batch number ; the number of pieces, as and when they are produced, they are duly accounted for. The third respondent has not explained why he seized the entire stock of 2032.512 M. Tons on 16-7-75 when he visited the factory. On this point a reading of the report of the first respondent to the Collector itself shows that the contravention was only in respect of 155 tonnes. Even in the present affidavit the third respondent has not stated that he had reason to believe that there was or was going to be any contravention of the Control Order in respect of any stock in excess of 1525 M. Tons Out of the stocks which had accumulated owing to the petitioner company dragging its feat in the month of June 1975, after taking into account 570.518 M. Tons in the manner explained above and what had been dispatched in July 1975, there would have been practically nothing left; no goods would thereforee be stated to have been withheld in violation of the Control Order. The question of the likelihood of future violation does not appear to have been even present in the mind of the third respondent on 16-7-75; it could not have been present to his mind because of the restraint order of 4-7-75 as explained above. Yet he unaccountably seized the entire stock of 2032.512 M. Tons which was in the factory on 16-7-75. The petitioner contends that this was due to the third respondent having been directed to do so and his not applying his own mind. The third respondent has explained in paragraph 7 of the above-said affidavit that the subject of withholding of supplies by the petitioner company was discussed by him with the Collector of Central Excise, Allahabad, and, as he had reason to believe that the petitioner company was withholding from making supplies of the metal, it was thought that he should immediately proceed to Renukoot and seize all the stock of ingots and properzi rods ( Ec and Cg grade in respect of 'both of them) lying with the petitioner company 'in respect of which the said contravention was believed to have been made'. The belief obviously cannot in any case extend to goods in excess of 1525 M. Tons.

(26) There has been some controversy before us as to whether the terms of the orders made by the Central Government were in fact known to the third respondent or not. But it seems needless to go into this question in view of the fact 'that despite clause 9 enabling action to be taken with reference to likely contraventions of the Order in future the belief of the third respondent did not include any future likelihood of contravention but it was confined to the goods in respect of which the said contravention was believed to have been made (i.e.) in respect of 1525 M. Tons. It seems somewhat ironical that by the time action was taken, on the 16th July, 1975, in respect of the 1525 tonnes of aluminium, on the facts available to both R-3 and R-1 (deduction what could not be disposed of) there was no aluminium still remaining with the petitioner company of that quantity, as on 16-7-1975, in respect of which it would be stated that a contravention of the Control Order had taken place. The only course open to the respondent on 16-7-1975 would have been to prosecute the petitioner for alleged violation of the Control Order; if the respondents are able to establish this it could still be done; they could not seize goods in respect of which contravention had not taken place merely because of contravent having taken place in respect of goods actually dispatched when there was no reason to believe that there was likelihood of contravention in future.'

(27) While on the one hand reference was made in the report of the first respondent to the Collector to 1525 tonnes having been the quantity in respect of which violation had taken place he had still applied for confiscation in respect of the entire quantities seized; this is at least the view which was presented in the affidavit filed by the first respondent. This is not even easy to understand.

(28) Even the reasons which the first respondent mentioned in paragraph 16(iv) of his affidavit, as leading to belief regarding withholding from sale by the petitioner company in contravention of the Control Order do not appear to be all of them correct. Paragraph 16(iv) may be read:

'INreply to para 16(iv). it is submitted that Respondent No. 3. by virtue of the stock discovered in the premises of the petitioner on Jnly 1. 1975. and the failure of the petitioner approaching Respondent No. 3 for permitting removal of metal from the Renukoot factory. as required by Respondent No. 3 in his letter dated 5-7-1975 had adequate reason to believe that the petitioner was withholding from sale the stock produced by .' in contravention of the said Control Order and. thereforee, the seizure effected by him was in order'.

(29) Regarding the firs) reason given in support of the said belief. namely, the quantity discovered at- the premises of the petitioner on 1-7-75. there was failure to note that the said stock was cleared mostly on 1st and 2nd July 1975: these facts were known to all concerned; in respect of merely the balance impediments had been placed on their being sold except with permission. Regarding the second reason, namely, the failure of the petitioner to approach the third respondent for removal of the metal from the factory as directed by the third respondent in his letter dated 5-7-75 (copy of which is Annexure L to the petition) it has to be noticed that by letter of the same date i.e. 5-7-75 (copy of which is Annexure M to the petition) the petitioner company had requested the Controller to favor them with immediate dispatch instructions to which there was no further reply before 16-7-75. Both these reasons, thereforee, do not appear to be either correct or even adequate to justify the reason to believe mentioned by the first respondent as having been entertained by the third respondent. The reason to believe mentioned in paragraph 5 of the said affidavit, apart from being different from what had been mentioned in the affidavit of the first respondent is in a sense opposed to the report sent by the third respondent because he had not stated expressly in the said report that he had reason to believe that the high stocks were on account of the same being withheld from sale in contravention of the Control Order.

(30) The reason to believe that any contravention of the Control Order had taken place (to which aspect alone the discussion in this judgment has to be and is confined in the circumstances explained above) is a pre-condition to the seizure of goods. It is well established that any exercise of statutory power interfering with the property rights of citizens is possible only after strictly complying with the pre-conditions for the exercise of such a power. The reason to believe in this case, thereforee, must relate to the period of time when the impugned seizure was made, namely, on 16-7-1975; in other words, even any subsequent acquisition of belief in this regard would be of no avail (vide the observations of Rajagopala lyyangar, J. in Collector of Customs v. Nathella Samnathu Chetty and another) : 1983ECR2198D(SC) and Shah, J. in M. G. Abrol v. Amichand Vallamji and others : AIR1961Bom227 . The question of application of mind fell for consideration by the Supreme Court in Barium Chemicals Ltd. v. A. J. Rana and others : [1972]2SCR752 though it was in the context of a different expression, namely, 'considers it necessary', having been employed in that statute. The following observations were made by H. R. Khanna, J., speaking for the Supreme Court :

'The words 'considers it necessary' postulate that the authority concerned has thought over the matter deliberately and with care and it has been found necessary as a result of such thinking to pass the order. The dictionary meaning of the word 'consider' is 'to view attentively, to survey, examine, inspect (arch), to look attentively, to contemplate mentally to think over. meditate on, give heed to, take note of, to think deliberately, to think oneself, to reflect' (vide Shorter Oxford Dictionary). According to Words and Phrases-Permanent Edn. Vol. 8-A to 'consider' means to think with care. It is also mentioned that to 'consider' is to fix the mind upon with a view to careful examination; to ponder, study : meditate upon, think or reflect with care'.

(31) The above observations would be appropriate even to the context of 'reason to believe' in so far as it would bear upon the application of mind because reason to believe cannot be said to exist unless there is application of mind as to whether a particular state of affairs exists or does not exist at a particular time.

(32) A decision of the Division Bench of the Allahabad High Court under the Gold Control Order, 1968 in relation to the expression ' reason to believe' in The Collector, Central Excise v. L. Kashi Nath Jewellers : AIR1972All231 confirming a decision of the single Judge of the same Court (reported in the same volume at p. 16) was also cited in support of the proposition that excessive seizure would render the entire seizure invalid in the view that the transaction is one and indivisible. Gopi Nath. J., speaking for the Division Bench, explained how this power of scizure had to be exercised strictly under authority of law. He referred to carlier decisions of the Supreme Court in Wazir Chand v. State of Himachal Pradesh : 1954CriLJ1029 and Hamdard Dawakhana v. Union of India : 1960CriLJ671 . In that case a major portion of the gold seized had been returned by the Department on its own discovery that it was illegal. Gopi Nath, J. observed as follows:

'IFthat part of the gold had not been returned there could be no escape from the position that on the own showing of the Department the seizure of the entire stock was illegal. Will it make any difference in principle, so far as, the retention of a small portion of the stock illegally seized is concerned? In our opinion the initial seizure being bad, retention of any portion of the gold so seized will be illegal on the principle that this part of the stock was also not seized under a reasonable belief as required'.

(33) If the power of seizure was not validly exercised when the entire stock was seized no distinction could be made between the stock released subsequently and what was retained. On the facts of the present case, which have been set out earlier, it is clear that the third respondent did not in fact (at least could not) have reason to believe that the goods which were seized on 16-7-1975 were those in respect of which contravention of the Control Order had been made.

(34) Between the 4th and 16th July 1975 restraint had been placed on sales and dispatches; this had been lifted only with reference to 1575 tonnes of Ec Grade aluminium metal; financial arrangements in no case were complete till the date of seizure. In no view of the matter, thereforee, does it seem possible to justify the seizure in this case on the ground of any actual withholding from sale, which is the only belief said to have been entertained by the third respondent. On this sole ground the seizure would have to be quashed.

(35) Even on the respondents own showing the seizure of 2032.512 M. Tons was far in excess of the quantity of the aluminium metal of 1525 tonnes which alone at best was claimed to have been withheld from sale. In no view of the matter, thereforee, could the seizure he justified; it is even needless to be detained by the further question argued on behalf of the petitioner, whether the third respondent was being really directed from above and R-5 had really made up his mind before issuing notice. On the facts it is plain that there was no application of mind to the aspects which were relevant and material for effecting seizure.

(36) Mr. R. K. Garg, learned counsel for the fifth respondent nonetheless, made a valient effort to resist this petition. In the first place he contended that the petitioner company did not avail of the alternative remedy available to it under the Act within thirty days. Clauses 10 and 11 of the Control Order which have already been read do not seem to provide for any appeal to the Central Government against seizure of goods; the Central Government could only 'confirm, reverse or modify' any 'order or direction'. Seizure is an act in respect of there could not be any modification or reversal; the seizure has only to be quashed if it is illegal. On. any representation made by the aggrieved party the Central Government may. if it is so satisfied, direct release of seized goods, but this would, we expect, be different technically speaking, from setting aside the seizure, which can be quashed by invoking the jurisdiction of this Court under Article 226 of the Constitution. The argument of existence of an alternative remedy of which the petitioner did not avail docs not seem to have force. Even in the view that an appeal lay. which the petitioner did not file, on the view we have taken on facts which are indisputable and are on record, the seizure was patently illegal. in such a situation it will be the bounden duty of this Court to exercise its jurisdiction under Article 226 of the Constitution. Where an executive authority acts without jurisdiction and subjects a person to unnecessary proceedings and unnecessary harassment the High Courts will issue appropriate orders or direction to prevent such consequences (vide the observations of Shah, J. in Calcutta Discount Co. Ltd. v. Income-tax Officer : [1961]41ITR191(SC) . The seizure alone furnishes the basis of the jurisdiction of the Collector (R-5) to issue a show cause notice. The issue of the show cause notice itself will fall if the seizure is found to be illegal and is liable to be quashed.

(37) Mr. Garg argued that the Collector could himself go into the question of the validity of the seizure in terms of section 6-A of the Act, which has already been read. As we read the said provision the Collector appears to have no jurisdiction to go into the validity of the seizure; he could only confiscate goods, out of those seized, in respect of which contravention is established. Only if the seizure is valid would the Collector have jurisdiction to go into the question whether there has been any contravention of the Control Order in respect of the whole or portion of the goods seized. But this is entirely different from saying that the Collector could go on with the enquiry, postulated in sections 6-A and 6-B, when the seizure itself, on which alone his jurisdiction to make an enquiry depends, is found to be illegal. No question of the petitioner going through such an enquiry, and later on filing an appeal under section 6-C of the Act if the Collector's order goes against him, could consequently arise. The petitioner would not only be subjected to harassment if such an enquiry is allowed to go on when the seizure itself is seen to be illegal' but even from the point of view of public interest it seems that aluminium worth nearly rupees two crores would be held up for a period much longer than necessary and this would surely be detrimental to the nation's economy particularly at the present time. It is in this view of the matter that we have heard the petition as early as we could, as suggested by learned counsel for both sides, so that the parties could know what the position is, in law, and act on that footing.

(38) Mr. Garg finally made a request to us that, as happened in Barium Chemicals (which was concerned with the mere return of documents in respect of which a direction was made that documents would not be returned to the parties with a view to make a fresh order), we may also direct that the stocks seized may be allowed to be detained by the .Collector for a period of at least a month or so in order to enable the authorities to pass the required orders or take other action. We have considered this request carefully. In our view the goods seized, in respect of which a belief was entertained that the withholding was in contravention of the Control Order, were not available for being seized having been sold and dispatched even before the seizure, it would not be proper, thereforee, to order that the goods in respect of which no such violation had been established and in respect of which no such belief as required by law seems even possible, should be detained, even for a temporary period. as suggested by Mr. Garg.

(39) If the respondents arc able to prove that there was contravention of the Control Order in respect of goods, which had been dispatched before actual seizure was or could be effected it will be open to them to prosecute the petitioner in respect of such contravention. We do not think, thereforee, that it would be appropriate for us to express any opinion on the question whether there had been in fact any contravention or not.

(40) In the result the seizure of 2032.512 M. Tons is quashed. The show cause letter (copy of which is Annexure Z to the Writ Petition) is also quashed. We do not, however, make any order as to costs in the circumstances. This Writ Petition is accepted accordingly.


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