Warehoused excise duty evasion requires reliable proof of surreptitious removal; a defective demand notice does not negate liability.

An offence of evasion involving warehoused excisable goods is complete when goods are surreptitiously removed without payment of duty, and a defective or excessive later demand notice does not erase that liability. However, conviction still depends on reliable proof of removal or substitution. Here, the evidence on the non-burnt warehouse was unreliable because of procedural irregularities in seizure, custody, and panchnama preparation, and the prosecution did not prove any mismatch with the stock records. As to the burnt warehouse, the cause of fire and the quantity destroyed were not satisfactorily established, and suspicion could not replace proof. The article therefore states that the factual foundation for evasion was not proved.

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Issues: (i) Whether an offence under Section 9(b) of the Central Excises and Salt Act, 1944 could be negatived merely because the demand notice for duty under the warehousing rules was defective or excessive. (ii) Whether the prosecution proved that the accused had evaded payment of excise duty by surreptitiously removing tobacco from the warehouses or by substituting inferior tobacco in its place.

Issue (i): Whether an offence under Section 9(b) of the Central Excises and Salt Act, 1944 could be negatived merely because the demand notice for duty under the warehousing rules was defective or excessive.

Analysis: The obligation to pay duty on warehoused excisable goods arose from the statutory warehousing scheme, and not from a later demand notice. The rules governing warehousing provided that goods could not be removed except on payment of duty, and if goods were removed without payment or not accounted for, the proper officer could raise a demand for the amount due. The offence of evasion was complete when the goods were surreptitiously removed from the warehouse without payment of duty. A defect in the later demand notice could not undo an offence already committed.

Conclusion: The defective or excessive demand notice did not by itself defeat liability under Section 9(b); the lower appellate court was wrong on that legal approach.

Issue (ii): Whether the prosecution proved that the accused had evaded payment of excise duty by surreptitiously removing tobacco from the warehouses or by substituting inferior tobacco in its place.

Analysis: In respect of the non-burnt warehouse, the evidence about the quality and quantity of the tobacco recovered was found unreliable because of procedural irregularities, including the manner of seizure, custody, and preparation of the panchnama. The prosecution therefore failed to establish that the stock found differed from the stock cards or that any tobacco had been removed without payment of duty. In respect of the burnt warehouse, there was no satisfactory evidence as to the origin of the fire or the exact quantity of tobacco destroyed, and suspicion, however strong, could not substitute for proof. The record also did not establish with certainty that the accused had removed the tobacco before the fire.

Conclusion: The prosecution failed to prove evasion of duty or the commission of an offence under Section 9(b).

Final Conclusion: The appeal could not succeed because the prosecution failed to establish the essential factual foundation for evasion of excise duty, and the acquittal was upheld.

Ratio Decidendi: An offence of evasion of duty on warehoused excisable goods is complete upon surreptitious removal without payment of duty, but conviction cannot stand unless such removal is proved by reliable evidence; a defective subsequent demand notice does not negate the offence, yet suspicion or procedural irregularity alone cannot establish guilt.

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