The court emphasized the need for a clear prima facie case for confiscation before imposing harsh conditions for release of seized goods.

1. This petition seeks quashing of search and seizure conducted by respondent No. 2 Commissioner of Central Excise and for a direction to refund a sum of Rs. 1,10,75,019/- deposited by the petitioners under the threat of arrest. Further prayer is for return of the records of the petitioners. Prayer has also been made for not taking any coercive action of arrest or detention against the petitioners and his employees.

2. Case of the petitioner-firm is that it manufactured Aluminium and Zinc Alloy Ingots falling under Chapter Heading Nos. 76 and 79 of the Central Excise Tariff Act, 1985. The raw material is mainly imported. The customs duty paid is credited to the CENVAT account under the Cenvat Credit Rules, 2004 and credit is availed against liability to pay excise duty on the finished product. On 28-5-2008, search was conducted at the factory of the petitioner-firm which was followed by further search on 6-6-2008 and other dates.

3. The petitioners made request to provide copies of the documents which were seized or to allow them to make photocopies of the same. During search, the petitioners were informed that excess stock of raw material was found, for which the petitioners gave explanation. The petitioners sought provisional release of seized material against bond without bank guarantee, but the goods were not released.

4. The petitioners made a deposit of Rs. 1,10,75,019/- under duress. The respondent No. 2 also seized dross, apart from raw material, which according to the petitioners was not excisable and on that account not required to be entered in the record.

5. In the reply filed by the respondents, case of the respondents is that search and seizure were conducted on account of evasion of duty which was inferred from the following :-

#28;(a) received fake bills without actually receiving the material from its sister concern dealer namely M/s. Grand Metal Industries, Delhi & Faridabad, (b) the removal of CENVATable inputs without reversing the credit, (c) unaccountable sale of Dross (a by-product of alluminium ingot manufacturing), (d) unaccounted diversion of finished goods and unaccounted use and (e) sale of other metals recovered from imported inputs.#29;

6. It has further been stated that Shri Mayank Pareek admitted the facts that there was shortage of finished goods and that CENVAT credit has been taken wrongly. Further stand of the respondents vide letter dated 17-6-2008 (Annexure R-2) is that copies of most of the documents were already with the petitioners. The respondents advised the petitioners to furnish B-11 bond for value of seized goods with security of 25% of the face value by way of Fixed Deposit or bank guarantee. As regards the return of money, stand of the respondents is that the petitioners made the deposit voluntarily against the duty which may arise during the course of assessment.

7. We have heard learned counsel for the parties and perused the record.

8. Contention raised on behalf of the petitioners is that search was without any reason and the petitioners were forced to make the deposit even before the assessment and that continued detention of goods by offering to release them on arbitrary conditions was illegal. It is submitted that reasons were required to be recorded for search as well as for seizure and the said reasons were required to be furnished to the petitioners. Reference was made to provisions of Sections 105 and 110 of the Customs Act, 1962 which were applicable by virtue of notification issued under Section 12 of the Central Excise Act, 1944 and Section 165 of the Code of Criminal Procedure which was applicable by virtue of Section 18 of the said Act. It was submitted that condition for provisional release of goods by requiring Bond B-11 which was applicable only to release of finished goods and demand of Bank guarantee or cash security equal to 25% of value of goods was unreasonable.

9. On behalf of the respondents, it was submitted that the matter was being