2008 (11) TMI 166 - HC - Central Excise

Court validates excise notification, denies quashing proceedings, defers liability decision.

The High Court upheld the validity of the notification under Section 12 of the Central Excise Act, denied the quashing of search and seizure proceedings, ... Procedure of Search - No doubt, procedure for search is the one provided in the Code of Criminal Procedure; but the provisions of Section 12 cannot be held to exclude the subject of search which is not foreign to machinery for levy of duty. There cannot be water-tight separation of subject matter dealt with in different statutory provisions and the Statute has to be read as a whole. The provision of Section 12 have to be liberally construed, as may be necessary to give effect to the objects of the Statute, We are, accordingly, unable to hold that notification dated 4-5-1963 is beyond the to scope of Section 12 Issues:1. Quashing of search and seizure proceedings, show cause notice, and notification.2. Scope of powers under Section 12 of the Central Excise Act.3. Cross-examination rights and segregation of liability for two companies.Analysis:Issue 1: Quashing of ProceedingsThe petitioners sought the quashing of search and seizure proceedings, a show cause notice, and a notification. The raid conducted on 21-3-2005 resulted in the seizure of documents, followed by the issuance of a show cause notice demanding the payment of excise duty with interest and penalty. The petitioners requested various documents for their defense and cross-examination of witnesses. While some cross-examinations were permitted, others were denied. The High Court dismissed the petition, stating that interference at this stage, while proceedings are pending adjudication, would not be appropriate.Issue 2: Scope of Powers under Section 12The petitioners contended that the notification dated 4-5-1963 was ultra vires the powers under Section 12 of the Central Excise Act. They argued that the power under Section 12 was limited to incorporating provisions of the Customs Act, 1962, which did not cover the subject of search. However, the Court disagreed, stating that while the procedure for search aligns with the Code of Criminal Procedure, Section 12 should be interpreted liberally to fulfill the objectives of the statute. The Court held that the notification was not beyond the scope of Section 12.Issue 3: Cross-Examination Rights and Segregation of LiabilityRegarding the request for a direction to segregate the responsibilities of the two companies and provide an opportunity for cross-examination, the Court declined to intervene at the current stage of pending adjudication. The Court left open the question of whether the denial of cross-examination or the joint liability of the companies prejudiced the defense, to be examined at a later stage. Ultimately, the petition was dismissed, and the Court directed for the necessary documents to be provided on payment.In conclusion, the High Court's judgment upheld the validity of the notification under Section 12, denied the quashing of proceedings at the current stage, and left the issue of segregation of liability and cross-examination rights to be determined during the ongoing adjudication process.