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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE RAMASWAMI
Shri Vasudeva Bank Limited - Appellant
Versus
Union of India - Respondent
Case No : S.A. No. 726 of 1956
Decided On : 09 October 1958
CENTRAL EXCISE ACT, 1944 - SECTION 11, 40 - CENTRAL EXCISE RULES, 1944 - RULE 215 - CENTRAL EXCISE MANUAL, APPENDIX II, PAGE 144 - SEA CUSTOMS ACT, 1878 - SECTIONS 168, 189, 192 - LIMITATION ACT, 1908 - SECTION 2(7) - GENERAL CLAUSES ACT, 1897 - SECTION 3(20) - PLEDGE OF TOBACCO - REMOVAL OF TOBACCO FROM BONDED WAREHOUSE - ATTACHMENT OF TOBACCO FOR DUTY DUE ON OTHER TOBACCO - SUIT FOR DAMAGES FOR DETENTION OF TOBACCO - BAR OF SUIT UNDER SECTION 40 OF CENTRAL EXCISE ACT - LIMITATION UNDER SECTION 40(2) OF CENTRAL EXCISE ACT - GOOD FAITH OF EXCISE OFFICIALS.
Fact of the Case:
Rahamatullah, a tobacco merchant, had a warehouse licensed for storage of tobacco. He pledged the cheroot tobacco stored in his bonded warehouse to the plaintiff bank and borrowed money. The Excise Department noticed that certain quantities of cheroot tobacco were missing and claimed duty payable on the missing tobacco. The plaintiff bank wrote to the Department stating that it had a first charge on the tobacco and requested delivery of the tobacco. The Department attached the tobacco under Section 11 of the Central Excise Act, 1944, for duty due on beedi tobacco which was not paid by Rahamatullah. The plaintiff bank filed a suit for damages for detention of the tobacco and deterioration of its quality.
Finding of the Court:
1. The removal of the cheroot tobacco from the bonded warehouse of Rahamatullah to the bonded warehouse of Sundaram Pillai was permitted by the Excise authorities on the application of Sundaram Pillai, who was the surety for Rahamatullah. 2. The attachment of the cheroot tobacco by the Excise Department for duty due on the beedi tobacco was lawful and within the powers conferred by Section 11 of the Central Excise Act, 1944. 3. The plaintiff bank failed to show that the Excise Department unnecessarily and improperly withheld the tobacco, or that the detention of the goods was the direct cause of the alleged deterioration of the tobacco and its fetching a low price. 4. The plaintiff bank failed to establish want of good faith on the part of the Excise Officials.
Issues: 1. Whether the Excise Department broke open the lock of the godown and removed the goods to Sundaram Pillai's godown. 2. Whether the action of the Government in attaching the cheroot tobacco pledged to the plaintiff bank for the amount due on the beedi tobacco, is illegal and mala fide. 3. Whether by reason of any act or omission on the part of the Government servants negativing good faith, after the disposal of the claim petition preferred by the State in favour of the plaintiff bank, the defendant would be liable in damages.
Ratio Decidendi: 1. The plaintiff bank failed to prove that the Excise Department broke open the lock of the godown and removed the goods to Sundaram Pillai's godown. 2. The attachment of the cheroot tobacco by the Excise Department for duty due on the beedi tobacco was lawful and within the powers conferred by Section 11 of the Central Excise Act, 1944. 3. The plaintiff bank failed to show that the Excise Department unnecessarily and improperly withheld the tobacco, or that the detention of the goods was the direct cause of the alleged deterioration of the tobacco and its fetching a low price. 4. The plaintiff bank failed to establish want of good faith on the part of the Excise Officials.
Final Decision: The second appeal was dismissed without costs.
This second appeal is preferred against the decree and judgment of the learned District Judge of Tiruchirapalli in A.S. No. 156 of 1955, confirming the decree and judgment of the learned Subordinate Judge of Tiruchirapalli, in O.S. No. 252 of 1951.
2.One E.A. Rahamatullah, a tobacco merchant, had a warehouse licensed for storage of tobacco. This tobacco consisted of two varieties known as cheroot tobacco and beedi tobacco. Exhibit A-1 is a pattial of tobacco showing the purchase of 51 bags of tobacco. Exhibit A-2 is another pattial dated 20th August, 1946, showing the purchase of 45 bags of tobacco. Rahamatullah kept this tobacco in a warehouse licensed for storage of tobacco.
3.Under Rule 140 of the Central Excises and Salt Rules, the Collector is given power to appoint public warehouses and in like manner license private warehouses for the storage of excisable goods on which duty has not been paid, and Rule 144 says that the goods should not be removed from any warehouse except on payment of duty or where so permitted. Rule 152 says that subject to the limitation imposed by Rule 139, any owner of goods warehoused under these rules may at any time within two years from the date on which such goods were first warehoused and with the permission of the proper officer and on such conditions, remove such goods from one warehouse to another. In the case of a private warehouse under Rule 140 the licensee has to furnish a bond with such surety or sufficient security in such amount and under such conditions as the Collector approves, binding himself to pay the duty due on the goods deposited therein, or for the due and safe removal of such goods and for the due observance of the terms, conditions and requirements of the Act.
4.Rahamatullah, who stored the tobacco in his warehouse obtained a license from the Department for storing and he executed a security bond along with one Sundaram Pillai as surety to abide by the Excise Rules and for the payment of the amount due to the Government by way of duty, etc. The tobacco stored in such licensed godowns known as bonded warehouses can be removed only with the permission of the Excise Department on payment of duty payable on the goods. They could also be removed on permission from one bonded warehouse to another.
5.Rahamatullah pledged the cheroot tobacco stored in his bonded warehouse to the plaintiff bank and borrowed Rs. 4, 250, Rs. 2, 000 on 13th July, 1946 and Rs. 2, 250 on 9th September, 1946. This is stated to have been a key-loan.
6.In August, 1947, it was noticed by the Excise Department that certain quantities of cheroot tobacco were missing. The duly payable in respect of such tobacco was 1, 007-7-0. Sundaram Pillai who stood surety for Rahamatullah also became apprehensive as he suspected the transaction of Rahamatullah. He therefore applied to the Department to permit the removal of the tobacco from the godown of Rahamatullah to his own godown at Varaganeri, Tiruchirapalli, and Rahamatullah was agreeable to such removal and re-storage.
7.Therefore, on 21st August, 1947, on the application made by Rahamatullah permission was granted and the entire tobacco was removed from the godown of Rahamatullah at 99, Pallivasal, Tanjore Road, Tiruchirapalli, to the godown of Sundaram Pillai at No. 2, Varaganeri Road, Tiruchirapalli. It is this removal on 21st August, 1947, that has given rise to the present controversy.
8.The Department claimed that a sum of Rs. 1, 007-7-0 was due as duty in respect of the cheroot variety found missing or removed from the warehouse. The plaintiff bank then wrote to the Department on 25th August, 1947 (Exhibit A-3) stating that Rahamatullah had pledged with the bank on 13th July, 1946, 51 bundles of tobacco and borrowed Rs. 2, 000 on the security thereof and again pledged with the bank on 9th September, 1946, 45 bundles of tobacco and borrowed Rs. 2, 200 on the security thereof and executed an undertaking to keep the goods under the lock and seal of the
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