1989 (7) TMI 129 - HC - Central Excise

Summary

Issues Involved:
1. Maintainability of the suit under the Central Excises and Salt Act, 1944.
2. Non-joinder of necessary and proper parties.
3. Validity of the show cause notice dated March 27, 1986, and the order dated January 29, 1988.

Issue 1: Maintainability of the Suit
The plaintiff argued that the suit is maintainable as the proceedings, including the search, show cause notice, and the order dated January 29, 1988, are without jurisdiction, illegal, mala fide, void ab initio, and nullity. The court referenced several judgments, including H.C. Darbara Singh v. The Punjab State and Dhulabhai v. State of Madhya Pradesh, establishing that civil courts have jurisdiction if an authority acts without jurisdiction or violates fundamental principles of judicial procedure. The court concluded that the suit is maintainable, given the allegations of jurisdictional errors and non-compliance with statutory provisions.

Issue 2: Non-joinder of Necessary and Proper Parties
The defendants argued that the suit was bad for non-joinder of necessary parties, such as the Collector of Central Excise, New Delhi, and the Directorate of Anti-Evasion, New Delhi. The court held that the Collector and Directorate were not necessary parties since the Union of India was already impleaded as a defendant. The presence of the Collector or Directorate was not necessary for the court to adjudicate the issues effectively.

Issue 3: Validity of the Show Cause Notice and Order
The plaintiff challenged the show cause notice and the subsequent order on multiple grounds, including:
- The reward scheme for officials leading to departmental bias.
- Lack of jurisdiction of the Director of Publications to act as a Collector of Central Excise.
- The illegal and unilateral transfer of the case from the Collector to the Director of Publications.
- Non-application of mind and lack of material evidence against the plaintiff company.

The court found that the show cause notice was issued without proper jurisdiction and material evidence. The statements of only 5 out of 62 dealers recorded indicated extra payments to Mr. Vyas, the Sales Executive, without implicating the plaintiff company or its directors. The court noted that the total transactions involving alleged extra payments constituted less than 1% of the total sales, and there was no evidence of the plaintiff company's involvement in these transactions. Consequently, the court declared the show cause notice dated March 27, 1986, and the order dated January 29, 1988, as illegal and without jurisdiction.

Relief Granted:
The court decreed in favor of the plaintiff, declaring the show cause notice and the subsequent order as illegal and without jurisdiction, and granted a permanent injunction restraining the defendants from taking any action based on the impugned notice and order. The court also directed that the amount deposited by the plaintiff be accounted for in the records of the defendants.