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TMI Blog2013 (4) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... by the authority, the show cause notice can be challenged by filing the writ petition, for which counsel for the petitioner, Shri A.N.Hoskar, has relied upon the judgments delivered in the case of Siemens Ltd. Vs. State of Maharashtra & Ors. [(2006) 12 SCC 33] and the case of Oryx Fisheries Private Limited Vs. Union of India & Others [(2010) 13 SCC 427]. 4. Learned counsel for the respondent-Department, Shri Ratnesh Kumar, heavily relied upon the judgments delivered in the cases Titaghur Paper Mills Co. Ltd. & Ano. Vs. State of Orissa & Ano. (AIR 1983 SC 603) and Assistant Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. & Ors. (AIR 1985 SC 330) and yet two another judgments delivered in the cases of Commissioner of Cus. & C.EX. Vs. Charminar Nonwovens Ltd. [2004 (167) E.L.T 372 (SC)] and Malladi Drugs & Pharma. Ltd. Vs. Union of India [2004 (166) E.L.T 153 (SC)] and submitted that this writ petition against the show cause notice is not maintainable. 5. In the case of Titaghur Paper Mills Co. Ltd. Arising out of sales tax matter, Hon'ble Supreme Court observed that the petitioner had efficacious remedy by way of appeal and second appeal under Sales Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s available. Hon'ble Supreme Court considered various earlier decisions and though deprecated such tendency of by-passing remedy under the Act and of obtaining interim order, Hon'ble Supreme Court observed that there may be cases where interim orders are required to be passed and in that situation, interim orders should be made in the interest of justice and in cases of gross violation of law and injustices are perpetuated or about to be perpetuated, then it is the bounden duty of the court to intervene and give appropriate interim relief. Be that as it may, substantially the said judgment pertains to grant of interim relief where other remedy is available to the parties, which has not been appreicated by Hon'ble Supreme Court. In the case of Dunlop India Ltd., Hon'ble Supreme Court specifically observed in the case before the Supreme Court, there was no question of balance of convenience being in favour of the respondent-company and the balance of convenience was certainly in favour of the Government of India and then Supreme Court observed that, very often some courts act as if furnishing a bank guarantee would meet the ends of justice and no governmental business or for that mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court may not exercise its discretionary jurisdiction in entertaining a writ petition questioning a notice to show cause, observed by making it clear that unless the same appears to have been without jurisdiction as has been held in the earlier decisions of the Supreme Court including the decisions rendered in the cases of State of U.P Vs. Brahm Datt Sharma [(1987) 2 SCC 179], Special Director Vs. Mohd. Ghulam Ghouse [(2004) 3 SCC 440] and Union of India Vs. Kunisetty Satyanarayana [(2006) 12 SCC 28]. Hon'ble Supreme Court also observed that, when notice is issued with premeditation, a writ petition would be maintainable and also held that in such an event, even if the court directs the statutory authority to hear the matter afresh, ordinarily such hearing would not yield any fruitful purpose and Hon'ble Supreme Court referred the case of K.I.Shephard Vs. Union of India [(1987) 4 SCC 431]. 9. In the case of Oryx Fisheries Private Ltd., Hon'ble Supreme Court in paragraph nos.31, 32 and 33, observed as follows:- "31. It is of course true that the showcause notice cannot be read hypertechnically and it is well settled that it is to be read reasonably. But one thing is clear that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s impugned are totally without jurisdiction or where private and public wrongs are so inextricably mixed up or where prevention of public injury and vindication of public justice demands that recourse to Article 226 of the Constitution be taken. In the case of Kirloskar Computer Service Ltd., various other judgments including the judgments rendered in the case of Titaghur Paper Mills Co. Ltd. and Dunlop India Ltd. were also considered. Therefore, in the light of the above, we have to examine whether the petitioner has made out a case of violation of principle of natural justice in issuing the notice impugned dated 15th October, 2012 and there is element of predetermined mind of the authority reflecting from the notice itself. However, counsel for the petitioner drew our attention to the backgrounds of the case which are also very relevant for the purpose of deciding this writ petition. 11. The petitioner's contention is that the petitionercompany entered into two contracts with two different parties namely Aravali Power Company Private Limited and Damodar Valley Corporation. The two contracts with two parties, according to the petitioner, are of different transaction - one for sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s all the documents with him as may be needed by him at this stage. The contention of the company is that its all affairs relating to tax in question is handled by Ashim Roy, who is the General Manager (F&A) and whatever he has stated company is accepting to be the statements on behalf of the company. The company also stated that the company does not want to state more than what Ashim Roy, General Manager (F&A), has stated before the authority under section 14 of the Act of 1944. The company's stand also is to the effect that the said authorized officer has issued summon to the Managing Director of the company on the ground that Ashim Roy did not give proper reply to the queries raised by the investigating team, Ashim Roy is one of the seniormost officials of the petitioner-company and is entirely acquainted with all taxation matters of the petitioner-company". 13. In paragraph no.9 of the said judgment, after taking note of the reasons given by the concerned authority, this Court observed as under:- "9. In view of the above stand of the petitioner and petitioner company, the Managing Director to whom all facts may not be in full knowledge and in better knowledge than the knowled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter the company may not take evasive stand and may not take false stand that the person who deposed was either not authorized or had no knowledge or had given statements without the knowledge of the company etc. This will advance the cause of justice and certainly rules out the delay that may be in the conduct of any inquiry. At the same time, it is not binding upon the Assessing Officer to accept that the person nominated by the company to be and as only witness who can be examined in the inquiry. The Enquiry Officer in the facts and circumstances of a particular case if is not satisfied with the statements on the ground of its being unreliable (prima facie) or any further explanation is required from the person who may be found to be relevant by the Assessing Officer from the statements of such witness, in that situation the Enquiry Officer may summon any of the persons irrespective of his status in the company. It appears that sometimes when the highest executive or higher person in the affairs of the company refuses or do not want to appear in response to the summon for giving evidence or for producing documentary evidence, then it may be misunderstood because of the sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 25th September, 2012 by filing writ petition, being W.P (T) No.6046/2012. In the said writ petition, this Court on 6th October, 2012, stayed the operation of the communication dated 25th September, 2012. 16. It appears that during the pendency of the above proceedings and wherein notice for appearance of Managing Director of the petitioner company and notice to reply questionnaires have been quashed/stayed, and who is petitioner no.2 in this petition, the impugned notice dated 15th October, 2012 has been issued. 17. The entire show cause notice we cannot quote to make our judgment bulky because the show cause notice is running in 42 pages. However, we can quote some of the portions of the notice which are relevant to find out whether present show cause notice has been issued with predetermined mind and in violation of the principle of natural justice or not? The contention of the Revenue against the petitioner is that these two contracts are composite and intricately related and in fact, it constitutes one contract creating tax liability on the basis of the value which can be determined on the basis of both the contracts and in the matter of both the companies referred a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the said authority has again reiterated and supported its decision taken in notice, in reply to the writ petition supported by affidavit. Reply affidavit to challenge to show cause notice is an art. Then the aggrieved person may presume, how the authority will take a decision contrary to the stand taken by the Department in the High Court and that too on oath! Such reason may be valid as well as, such impressions are also, if not well-founded, are liable to be rejected. 20. Keeping in mind the above legal position, we are examining, whether the observations made in the notice were only the reasons disclosed by the assessing authority to the petitioner so that the petitioner may reply the reasons for forming an opinion of levying tax and interest and for imposing penalty or the contents of that notice impugned are sufficiently demonstrating the some element of predetermined mind of the authority. 21. From the entire notice, it appears that the authority issuing notice appears to have tried to convince himself more, instead of putting questions to the assessee. The dispute is only with respect to interpretation of two contracts entered into between the parties - petitioner on on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e financial decision of the company, wherein one of the members is the Managing Director, Shri Sudhir Deoras and for the reason best known to the Commissioner, no presumption has been drawn against other members of the finance committee. Paragraph 15.4 is also relevant, which is as under:- "15.4 It is further observed that at Para 11 of Corporate Governance Report for the year 2011-12 (appearing on Page 21) of 49th Annual Report of TRF for the Financial Year 2011-12, it is mentioned that "The Managing Director and Controller of Accounts, who heads the Finance function, have submitted the required Certificate to the Board at its meeting held on May 8, 2012, wherein the Audited Accounts of the Company for the financial year 2011-12 were considered. Under the circumstances, Shri Sudhir L. Deoras, M.D., TRF, can not absolve himself for replying the questions mentioned in the Questionnaire and sought for under the provisions of Section 14 of the CEA' 44, on the grounds that he is not involved with 20 day to day taxation or routine matters". (Emphasis supplied) Above observations in the impugned show cause notice is when said Shir Sudhir Deoras has already once sucesssfully challenged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officers has been targeted, who himself in the earlier occasion made it clear to the Department that the person who is the competent officer and who is in know of the fact has already deposed before the authority. This Court already in earlier round of litigation observed that the person holding the position either in the Government or in the company should not make it a prestige issue and particularly when there are quashi-judicial proceedings initiated by the officers in exercise of statutory power having vast jurisdiction and power, more care is required. That vast jurisdiction and power may not be misunderstood to have been exercised to humiliate a person holding the position in a company and at the same time, who can be a competent authority or person to give statement before a competent officer has also been dealt with in the judgment of Sudhir Deoras & Ano. Vs. The Commissioner, Central Excise & Service Tax & Ano. (W.P (T) No.6556/2011). In these paragraphs of the show cause notice, more has been addressed on the way of working of the officers of the company not only about working of Sudhir Deoras but also against Nand Kumar Sarkar, controller of accounts and that too, perta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken from the petitioner, in reply to the affidavit, the evidence already recorded has also been relied upon only to substantiate that the grounds mentioned in the notice are correct. It will be very difficult for us to quote in detail what has been said in the reply affidavit because of the reason that it will make our judgment more bulky and therefore, we have referred a few lines from a detailed affidavit filed by the respondent- Department running in 42 pages. It appears that the respondents, on facts, on point of law, on the basis of conduct of the company, on the basis of the conduct of its officers and on the interpretation of the contract, tried to say that the stand which has been taken by the petitioner before the Commissioner, who issued the notice, is absolutely wrong on fact and in law and bona fidely. Such notice cannot be treated to be a notice to show cause in any manner. 26. We are of the considered opinion that the purported show cause notice is only a consequence of predetermined mind of the Officers issuing the notice and is fortified more seriously by the counter affidavit filed by the Officerin- charge of the respondents. 27. In such a situation, the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the considered opinion that the impugned show cause notice is liable to be quashed and hence, show cause notice dated 15th October, 2012 is set aside. However, since the show cause notice is set aside based on the above grounds, we hereby give permission to the authority to issue a fresh show cause notice to the petitioner and the authority may proceed to decide the matter without influenced by the reasons given in the show cause notice dated 15th October, 2012 or given in the reply counter affidavit. We are also making it clear that even subsequent notice may contain reasons for the satisfaction of the authority but may be reasonably wise so as to convey the reasons for issuance of the show cause notice to the petitioner but not indicating or reflecting that the decision has already been taken, nor such notice should be influenced by the show cause notice dated 15th October, 2012 or by the reply affidavit. 29. Since it is the challenge to only show cause notice, none of our observations may be interpreted as any opinion on the merit of the case of the Revenue or of the petitioner. In the peculiar fact, we are of the considered opinion that the matter should be heard by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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