1. The petitioner is a dealer in tobacco. There was a surprise inspection of his bonded warehouse by the Superintendent of Central Excise on three days, namely, 8-12-1969 to 10-12-1969, and a special stock taking was conducted under Rule 223-A of the Central Excise Rules. The stock taking revealed a shortage of 7477 kilograms of tobacco. In respect of the said shortage, the petitioner was called upon to pay duty, as well as penalty of Rs. 750 for violation of Rule 223-A. As against the said demand, the petitioner filed an appeal to the Collector of Central Excise, but without success. Then there was a revision to the Central Government which was also rejected. The petitioner has, therefore, come to this court seeking a writ of certiorari to quash the order of the revisional authority confirming the orders passed by the initial and appellate authorities.
2. In this writ petition mainly two contentions have been advanced. One is that Rule 223-A contemplates the passing of an order by the Collector directing special stock taking and that in this case, that there being no order by the Collector directing the special stock taking, and that as such the entire proceedings including the levy of the excise duty as well as the penalty are illegal. According to the petitioner, the formation of an opinion by the Collector under Rule 223-A before the special stock taking is a must and in this case, there is no material to show that the Collector in fact formed such an opinion as contemplated by Rule 223-A before the special stock taking was done. It is also pointed out by the learned counsel that the ordering of a special stock taking in addition to the annual stock taking interferes with the petitioner's right of ownership and, therefore, before the special stock taking is done, the pre-condition of forming of an opinion by the Collector that such a special stock taking is necessary, is to be satisfied. It is also contended by the learned counsel that the formation of an opinion by the Collector should be recorded in writing as that alone will safeguard against the arbitrary exercise of the power by the Collector. Rule 223-A is as follows :-
'. . . Account of stock of goods in a factory or warehouse to be taken and balance to be struck.- As often as the Collector may deem it necessary or proper, and at least, once in every year, the stock of excisable goods remaining in a factory, warehouse or store room licensed or approved for the storage of such goods shall be weighed, measured, counted or otherwise ascertained in the presence of the proper officer; and if the quantity so ascertained is less than the quantity which ought to be found in such premises (after taking into account receipts and deliveries, and making such allowance for waste by evaporation, or other natural causes, as the proper officer may consider reasonable, and as may be in accordance with any instructions issued by the Central Board of Revenue) the owner of such goods or if the premises be a public bonded warehouse, the keeper thereof,hall, unless the deficiency by accounted for to the satisfaction of the proper officer be liable to pay the full amount of duty chargeable on such goods as are found deficient and also a penalty which may extend to two thousand rupees.'
3. This section proceeds to say that as often as the Collector may does it necessary or proper, and at least once in every year, the stock of excisable goods remaining in a factory, warehouse or store room licensed or approved for the storage of such goods shall be weighed, measured, counted or otherwise ascertained in the presence of the proper officer. This section contemplates that in addition to the annual stock taking which is done once in a year, a special stock taking can be done as and when cosidered necessary by the Collector. It has been stated in the counter affidavit that the Collector's powers under this rule to direct special stock taking in the course of the year has been delegated to the Assistant Collector and that the Assistant Collector in fact instructed the Superintendent of Central Excise to conduct the special stock taking in relation to the petitioner. Rule 5 of the Central Excise Rules enables such a delegation. Under that Rule, the Collector may authorise any officer subordinate to him to exercise all or any of his powers under the Rules. Therefore, it is clear from the counter affidavit that a proper authority has felt it necessary to have a special stock taking done in the petitioner's warehouse and has directed the stock taking.
4. The only question then is whether the direction by the proper officer to conduct the stock taking is by a written order. I do not agree with the learned counsel for the petitioner that the direction to conduct a special stock taking should be only by a written order and cannot be oral. The Rule nowhere says that the Collector must form the opinion that stock taking is necessary, in writing. In such circumstances, even an oral direction by the proper officer to conduct a special stock taking will be in accordance with law. In this view, 1 cannot accept the contention of the learned counsel that there has been no formation of opinion by the Collector as contemplated by the opening words of Rule 223-A.
5. A similar contention based on the wording of Rule 223A was negatived by a Division Bench of this Court in W.P. No. 2609 of 1969 (K. Nataraja Pillai v. Union of India represented by the Secretary, Ministry of Finance, Government of India, New Delhi). In that case also there was a special stock taking and a result of which a deficiency discovered and action was taken to collect the excise duty and the penalty under Rule 223-A. The said levy was challenged on the ground that Rule 223-A prescribes a procedure for the special stock taking and unless that special procedure is strictly followed, the imposition of duty and penalty based on such stock taking was without jurisdiction. The Division Bench however expressed the view that Rule 223-A is self-active and self-explanatory too, that it enables (he Collector to take stock of excisable goods remaining in a bonded warehonse as often as he can but it is mandatory that such inspection should be undertaken at least once every year and that the Collector's decision to arrange for the special stock taking apart from the annual stock taking need not be communicated to the party. The reasoning in the said decision is against the petitioner's contention that the decision of the Collector's to arrange for the stock taking should be reduced in writing. Therefore, the petitioner's contention that the pre-condition prescribed for invoking Rule 223-A is not satisfied in this case has to be rejected.
6. The next contention advanced on behalf of the petitioner is that the percentage of driage allowed by the Collector is arbitrary and that the Collector should have accepted the entire deficiency as driage caused by natural causes. la this case as much as 49.4% which is the deficiency found on stock taking is claimed to be due to natural driage. A similar contention was urged in W.P. No. 2272 of 1973 (Dasaratharamun v. The Assistant Collector of Central Excise, Central Service Integrated Divisional Office, Salem, and this Court expressed the view that:-
'In respect of a particular quantity what will be the normal percentage of driage in the case of tobacco stored in the warehouse has to be considered by the authorities with reference to the nature and quality of the tobacco, the season during which the storage took place and other relevant materials. The respondents, who have been entrusted with the functions of the adminis-tration of the Act, can be expected to know as to what will be the normal percentage of driage with reference to a particular quantity of tobacco stored in the warehouse in a particular area. Therefore, when these authorities have considered the question of driage and have felt that the large percentage of driage claimed by the petitioner cannot be accepted, this Court, in the nature of things, cannot decide as to what will be the percentage of driage to be allowed in a particular case, without any material for deciding that question and without having the advantage of seeing the tobacco which was stored in the warehouse.'
7. The Division Bench in W.P. No. 2609 of 1969 has also expressed the view that it is not possible to lay down with any rigidity certain percentage of driage ought to be allowed as a matter of course throughout the country in respect of tobacco and that it has to depend on so many factors. The following passage in that judgment is pertinent.
'The Central Board of Excise and Customs increased the said margin. We do not find that the authorities have in any way acted arbitrarily as contended by the learned counsel for the petitioner. But it is argued that certain guide-lines should be provided for so as to prompt the authorities to act accordingly. In the nature of things we are of the view that it is impossible to prescribe such guide-lines. On the other hand, if such rigid formula is prescribed, it would be arbitrary. The effect of nature is variable from place to place and it is impossible to lay down with, any rigidity that a certain percentage of driage ought to be allowed as a matter of course throughout the country and wherever the goods are and wherever the bonded warehouse is. It is in this context that the executive has left to the expertise of the authorities concerned who are duly qualified, to weigh the pros and cons and arrive at a reasonable percentage as being due to such natural causes. Such percentage has been ascertained after due enquiry in the instant case and has been granted.'
8. In this case, the deficiency was found to be 49.4 per cent and the entire deficiency was claimed as loss due to driage and evaporation, But the authorities have held that only 5 per cent has been allowed as driage and the balance has been treated unaccounted. The petitioner has not produced any material before the authorities or before this court to conclusively establish that the deficiency of 49.4 percent could have been really the loss due to driage and evaporation. In the circumstances, therefore, there is no room for interference with the impugned order. The writ petition therefore fails and is dismissed. There will be no order as to costs.