9911796707
TMI Blog1976 (9) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of manufacturing cables and conductors, the petitioner requires aluminium wire rods commonly known as properzi rods as an essential raw-material. The petitioner has a properzi mill at Satna for converting aluminium ingots into properzi rods. The petitioner acquires aluminium ingot primarily from two leading manufacturers in lndia, namely, Hindustan Aluminium Corporation Ltd., Renukoot (Hindalco) and Indian Aluminium Co. Ltd., Belgaum (India). The petitioner converts the aluminium ingots into rods and uses them in its cables factory. In order to fully utilise the capacity of the properzi mill, the petitioner also converts aluminium ingots belonging to other cable or conductor manufacturers. These others manufacturers send aluminium ingots of Hindalco or Indal Brand to the petitioner who converts the ingots into rods and realises conversion charges. 3. Before 1st March, 1970, excise duty on aluminium including ingots, wire rods etc., was linked with weight. As the duty was the same on ingots and wire rods, on duty was payable on the manufacture of properzi rods from duty-paid aluminium ingots. From 1st March, 1970, excise duty on aluminium ingots, wire bars and wire rod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 173-C has an important bearing in this case. This rule omitting the amendments, which were made later and with which we are not concerned in this petition, reads as follows : * * * * 5. Rule 173-D requires the assessee to furnish information regarding principal raw material if so required by the Collector. After the assessee complies with the provisions of Rules 173-B, 173-C and 173-D he himself determines his liability for the duty on the excisable goods intended to be removed and can remove the goods after payment of duty so determined. The procedure for payment of duty is contained in Rule 173-G which lays down that every assessee has to keep an account current with the Collector separately for each excisable goods and he has to pay the duty determined by him for each consignment by debit to such account current before removal of the goods. This rule further requires every assessee to submit monthly returns in the proper form showing inter alia the quantity of excisable goods removed on payment of duty and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properzi rods manufactured from Indalco ingots was shown at Rs. 4,500/- per m.t. instead of Rs. 4,600/-. It was explained that in the earlier price list Rs. 4,600/- per m.t. was shown as the price under the price under a mistake. Copies of correspondence which showed that the mistake was bona fide were also submitted. The revised lists of classification of goods and prices were also approved by the Officer on 6th August, 1970. From time to time between May, 1970 and May, 1971, the petitioner cleared and removed from its factory at Satna various quantities of properzi rods after payment of duty which was calculated on the basis of the prices approved by the proper Officer. Monthly returns in the prescribed form under Rule 173-G (3) were filed before the proper Officer from time to time. The proper Officer after making such inquiry as he considered necessary assessed the duty on the goods and completed the assessment memorandum as required under Rule 173-I. By a letter dated 3rd April, 1971, the proper Officer informed the petitioner that all properzi rods manufactured by the petitioner would be assessed on the value of Rs. 5,005- per m.t. On the petitioner's protest, the Deputy Coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he different producers, manufacturers or dealers at the ex-factory prices of the different items to the, said producers manufacturers or dealers prevailing on 28th February, 1970. This notification had the effect of fixing the maximum selling price of aluminium goods including properzi rods at the price prevailing on 28th February, 1970. The price so fixed was not uniform because different manufacturers sold their products at different rates on 28th February, 1970. By another notification issued on 24th May, 1971, uniform selling price for properzi rods was fixed at Rs. 5,815/- per m.t. inclusive of excise duty. 8. On 17th October, 1974, the Assistant Collector, Central Excise, issued the 13 impugned notices to the petitioner in respect of clearances of properzi rods made from May, 1970 to May, 1971. It was alleged in the notices that the petitioner contravened the provisions of Rules 173-C, 173-F and 173-G in that the petitioner did not file correct price list, did not determine correct assessable value and did not pay proper duty as required by the Rules. It was also alleged in the Justices that the scrutiny of the records of the petitioner showed that the Petitioner had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rods and that the stray sales of such rods could not form the basis for determination of the wholesale price of properzi rods manufactured by the petitioner. It was also submitted that the sale price of defective stuff could not be accepted as wholesale price of the quality goods. The petitioner further submitted that isolated sales of defective and unusable properzi rods did not mean or prove the existence of a potential wholesale market for the articles for being sold on wholesale market for the articles for being sold on wholesale basis at the place of manufacture because the petitioner never sold any quality properzi rods to any customer at any time. On 10th/11th September, 1975, the Collector, Central Excise, passed the thirteen impugned orders. The Collector did not decide whether the three sales of properzi rods to the Indore party referred to in the show cause notices related to the defective rods or whether the sales were of quality rods. The Collector also took into account certain despatches of properzi rods to Bombay and Ahmedabad between 12th March, 1970 and 29th May, 1970 under consignment to self. It may here be mentioned that these despatches were not referred to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rule 173-G to proper form. Thus there was also no contravention of Rule 173-G. As regards Rule 173-I, it is for the proper Officer to make an assessment on the basis of the returns and after such further inquiry as he may consider necessary. The assessments were duly made by the proper Officer from time to time. lt is difficult to understand as to how could the petitioner be made liable for any breach of Rule 173-I. Indeed, learned counsel appearing for the respondents has accepted before us that the contravention in the real sense was of Rule 173-C alone and it is for the contravention of this rule which resulted in evasion of duty that the petitioner has been punished by imposition of penalty under Rule 173-Q by the impugned orders passed by the Collector. 10. The arguments addressed at the bar in this petition can be divided under the following heads : (1) Denial of natural justice; (2) Wrong valuation of properzi rods; (3) No contravention of Rule 173-C; (4) Bar of limitation under Section 40(2); (5) Bar of finality under Section 35(2); (6) Unreasonable exercise of statutory powers; and (7) Alternative remedy. (1) DENIAL OF NATURAL JUSTICE 11. The first cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion as to the contravention of Rule 173-C was solely based on the despatches of goods made by the petitioner to Bombay and Ahmedabad which were referred to by the Collector in his finding on issue No. 4. These despatches were not referred to in the show cause notices and the attention of the petitioner was not drawn to them at any stage during the pendency of proceedings before the Collector. The petitioner, therefore, had no opportunity to meet the inference drawn from the aforesaid despatches by the Collector. Learned counsel for the respondents submitted that as these despatches were recorded in the petitioner's despatch register, this was a fact within the knowledge of the petitioner and no grievance can be made if facts within the knowledge of the petitioner were not brought to its notice during the inquiry. In my opinion, there is no substance in this argument. Natural justice requires that a quasi-judicial authority must inform the person proceeded against the material which it proposes to use against him so that he may meet the inferences that are likely to be raised from that material. Even when the material used is within the knowledge of the person proceeded against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Rs. 7,325/- per m.t. as the assessable value is something like this. The assessable value ought to be determined on the basis of the wholesale cash price charged by the petitioner from its customers in the course of transactions at arms length at the places of production, i.e. Satna, or at any place nearest to it. The petitioner sold the properzi rods consigned to self at Ahmedabad and Bombay between March and May, 1970 and the price at which these sales were made should from the basis for finding out the assessable value under Section 4(a). The petitioner did not produce any evidence that these sales were at a rate below the maximum control price and, therefore, it must be assumed that the sales were made at the control price. The control price was Rs. 7,325/- per m.t. because it was at this price that the petitioner sold a consignment of properzi rods on 16th February 1970 to M/s. P.V. Caboon Manufacturing Co. Pvt. Ltd., lndore, and this sale was nearest to the date 28th February, 1970, with reference to which the Central Government fixed the control price under Clause 4 of the Aluminum (Control) Order. 16. The reasoning of the Collector suffers from many infirmities. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 SC 225=(1973 Tax LR 1710) in which it was held that a wholesale market does not mean that there should be an actual place where articles are sold and bought on a wholesale basis and that these words can also mean the potentiality of the articles been sold on a wholesale basis. The first question to be examined by the Collector therefore, was whether there was any wholesale market in the sense as explained by the Supreme Court for the properzi rods manufactured by the petitioner at Satna. In other words, it ought to have been found whether there was potentiality of the articles being sold on a wholesale basis at Satna. As earlier state, the petitioner's case throughout was that there was no such wholesale market at Satna because the properzi rods manufactured by it were either used in the factory or returned to its customers. This case of the petitioner was not found to be untrue. The stray sales of properzi rods made on 16th February, 1970, and in January, 1970, to the Indore party could not furnish any basis for wholesale market at Satna during the period from May, 1970 to May, 1971, with which we are concerned in this case. Moreover, these sales, according to the petitioner, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the inquiry; and secondly, because Renukoot being nearer to Satna as compared to Ahmedabad and Bombay, the wholesale price prevailing at Renukoot had to be adopted under Section 4(a) as against the wholesale price, if any, prevailing at Ahmedabad or Bombay. In my opinion, therefore, the entire basis on which the Collector proceeded in fixing Rs. 7,325/- per m.t. as the assessable value of the properzi rods cleared by the petitioner during the relevant period is apparently erroneous being in contravention of Section 4(a) of the Act as also being against the principles of natural justice. 18. It was argued by the learned counsel for the respondents that when the petitioner sold rods of defective quality at Rs. 7,325/- per m.t., it must be held that the petitioner must have sold good quality rods at a higher price. The argument assumes that there were sales of good quality rods by the petitioner for which there in no finding or foundation. The sale of properzi rods was controlled by the Aluminium (Control) Order. Under clause 5 of that Order, aluminium rods could be sold to only such person or persons as may be specified by the authorities under the order. It is quite possibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the proper Officer. The gravamen of the charge against the petitioner is that the prices in these lists were not correctly shown. The question, therefore, to be determined is whether if a manufacturer files a list in the form and in the manner prescribed by Rule 173C showing the price of excisable goods but the price shown is not correct, can it be said that the contravenes the provisions of Rule 173-C within the meaning of clauses (a) and (d) of Rule 173-Q(1). In this connection it is relevant to note that Section 9 of the Central Excises and Salt Act, which provides for offence, and penalty, makes a person liable to a criminal offence not only when he removes an excisable goods in contravention of any of the provisions of the Act or any rule made thereunder, or when he fails to supply any information which he is required by Rules made under this Act to supply but also when he supplies false information. Rule 173-Q on the other hand does not say that a person shall be liable to penalty when the information supplied by him is false. The omission in this respect in Rule 173-Q is pertinent and it shows that the rule does not intend to penalise a person for giving false informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the information asked for. It was further held, that supplying of wrong information was punishable under Section 23 read with Section 22 of the Foreign Exchange Regulation Act, which provides that no person, when making an application or declaration to any authority or person for any purpose under the Act, shall give any information or make any statement which he knows or has reasonable cause to believe to be false or not true, in any material particular. The reasoning of the Supreme Court in Shree Ram Durga Prasad's case supports our view that if a manufacturer files a price list in the form and in the manner prescribed by Rule 173-C stating the price of excisable goods, he cannot be said to have contravened the provisions of that rule within the meaning of Rule 173Q even if the price stated by him is not correct, although he can be made liable for an offence under Section 9. This conclusion is further supported by the case of N.B. Sanjana's v. E.S. and W. Mills - AIR 1871 SC 2039. In Sanjana's case, the goods were removed after filing the required applications and forms under Rules 9 and 52 of the Central Excise Rules and showing that the goods were exempted and after there was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excises and Salt Act. This section, as in force at the relevant time, reads as follows: "No suit, prosecution, or other legal proceeding shall be substituted for anything done or ordered to be done under this Act after the expiration of six months from the accrual of the cause of action or from the date of the act or order complained of." 25. The argument of the learned counsel is that the expression "other legal proceeding, in this section should be interpreted in its natural sense to mean and proceeding taken in a manner prescribed by law or in pursuance of law irrespective of whether it is taken in a Court of law or before any authority or tribunal. Reference in this connection was made to G.G. in Council v. Shiromani Sugar Mills - AIR 1946 FC 16, where it was held that a proceeding under Section 46(2) of the Income-tax Act, 1922, before the revenue authorities for recovery of income-tax dues was a legal proceeding within the meaning of Section 171 of the Companies Act, 1913. Reference was also made to Abdul Aziz v. State of Bombay - AIR 1958 Bom. 279 and Jagmohandas v. Jamnadas - AIR 1965 Guj. 181. In the Bombay case it was held that assessment proceedings were "any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 40(2) bears a restrictive meaning conveying the idea of judicial proceedings or proceedings taken in a court of law. The rule of ejusdem generis is founded on the reasoning that had the Legislature intended the general words to be used in their unrestricted sense, it would have made no mention of the specific words as they, in such a case, would be superfluous. The rule applies when the following conditions exists: (i) the statute contains an enumeration of specific words; (ii) the subjects of enumeration constitute a class or category; (iii) that class or category is not exhausted by the enumeration; (iv) the general term follows the enumeration; and (v) there is no indication of a different legislative intent. (See Amar Chandra v. Excise Collector, Tripura - AIR 1972 SC 1863 at p. 1868. Sutherland, Vol. 2, pp. 399, 400). All these conditions for applicability of the rule are here satisfied. There is no indication in Section 40(2) or elsewhere in the Act that the general words "other legal proceeding" should be given their wide meaning and should not be construed in a limited sense by applying the rule of ejusdem generis. Indeed, the word "Instituted" in Section 40(2) is a po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the machinery of winding up of a company in the High Court for enforcing a debt in the nature of revenue from the company. (See Md. Amin Bros. v. Dominion of India - AIR 1952 Cal. 323). So a winding up petition may furnish another example of a judicial proceeding which, though not a suit or prosecution, may be taken for anything done or ordered to be done under the Act. An example of the same nature may be an insolvency petition under the Insolvency Acts. These examples are not exhaustive but they go to show that it is not a valid argument that the expression "other legal proceeding" in Section 40(2) will become redundant in case it is construed in a limited sense to mean judicial proceedings. 28. The cases relied upon on behalf of the petitioner are distinguishable as they relate to construction of enactments where the language used was different. In Section 171 of the Companies Act 1913, which was construed by the Federal Court in Shiromani Sugar Mill's case, AIR 1946 FC 16 the words used were "no suit or other legal proceeding shall be proceeded with or commenced". The mention of only one specific word "suit" could not obviously give rise to the application of ejusdem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eprive a person of his personal liberty in that he may be sentenced to a term of imprisonment. On the other hand, a penalty proceeding under Rule 173-Q can only deprive a person of his property. In our opinion, no reasonable doubt can be raised as to the validity of Section 40(2) or Rule 173-Q on the ground that no period of limitation is prescribed for proceedings under that Rule, although a period of six months is prescribed for a prosecution under Section 9 of the Act. The plea for a wide construction of Section 40(2) of the Act on the ground must, therefore, fail. 30. In my opinion, the penalty proceedings taken by the Collector against the petitioner under Rule 173-Q read with Section 33 of the Act were not governed by the period of limitation prescribed by Section 40(2) of the Act. (5) BAR OF FINALITY UNDER SECTION 35(2) 31. It was next contended by the learned counsel for the petitioner that by the order dated 30th July, 1974, the Appellate Collector in appeal confirmed the order of the Assistant Collector dated 9th April, 1973, granting refund and allowed further refund to the petitioner, and, as this order became final under Section 35(2), it was not open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never been doubted that reassessment proceedings can be taken under Section 147 for reopening an assessment which has been confirmed in appeal and attained finality under Section 254(4); [See In re : Halder & Sons, (1942) 10 ITR 79 (All)]. (a decision on the corresponding provisions of the Income-tax Act, 1922), in the context of reopening of assessment under Section 147 of the Income-tax Act, 1961, recently observed that "The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings". In my opinion, similar observations can be made in relation to the Central Excises and Salt Act and the Rules made thereunder. The scheme of the Rules is to provide for proceedings at three stages. First is the stage of assessment under Rule 173-1. The second stage is of re-assessment under Rule 10 read with Rule 173-J. The third is the stage of the proceedings under Rule 173-Q, which proceedings are combination of penalty proceedings and proceedings for best judgment assessment. The original proceedings for re-assessment under Rule 10 and penalty proceedings a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to the case of Commr. of Sales Tax, M.P. v. Amarjeet Singh, (1963) 14 STC 501 (Madhya Pradesh). It was held in this case that an order in appeal which became final under Section 22(5) of the Central Provinces and Berar Sales Tax Act, 1947, could not be revised by the Commissioner under Section 22-B. Section 22(5) of the Act provided that "every order passed in appeal shall, subject to the provisions of Section 22-A and 23, be final." On a construction of this section, it was held that power of revision under section 23-B could not be exercised against in appellate order. The position in the instant case, as already noticed, is entirely different. Here the appellate order relating to refund was not challenged in further appeal or revision contrary to the finality clause. What was done was that independent original proceedings under Rule 173-A were taken against the petitioner for levying penalty on the ground that it has contravened Rule 173-C by mix-stating the prices of the properzi rods and by not showing the correct price with a view to evade duty. This charge against the petitioner was levelled on the allegations that the petitioner had sold properzi rods at a much higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct contumacious or dishonest, or acted in conscious disregard of its obligation. It was further observed that penalty will not also be imposed merely because it is lawful to do so, and that whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of the relevant circumstances. 36. In the instant case, the Collector started penalty proceedings and imposed penalty on the ground that the petitioner concealed the Sales made to the Indore party and the sales made by it at Ahmedabad and Bombay. In the opinion of the Collector, the properzi rods removed by the petitioner during the relevant period ought to have been valued at the price obtained by it from the Indore party. Now, if this finding of the Collector be correct there can be no doubt that there was not merely technical breach of law but the true price of the properzi rods was suppressed with a view to evade duty. So on the findings reached by the Collector it cannot be said that he imposed penalty, merely for technic:l breaches or acted unreasonably in the exercise of his discretion in imposing penalty. 37.& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the respondents raised a preliminary objection that in view of the remedy of appeal which was open to the petitioner under the Central Excises and Salt Act, it will not be a sound exercise of discretion on our part to interfere under Article 226. The petitioner has filed appeals against the impugned orders and those appeals are pending. The petitioner's stand is that it has done so as a matter of abundant caution. Existence of alternative remedy is no doubt taken into account in deciding whether interference should be made under Article 226; but it does not take away the jurisdiction of the High Court to interfere in appropriate cases. Indeed, interference has been made uncle Article 226 in proper cases even at the stage of notice when it was found that the notice for re-assessment or for imposition of penalty was clearly in excess of authority: (See for example N.B. Sanjana v. E.S. & W. Mills, AIR 1971 SC 2039). In the instant case, on the facts admitted and found, there was no contravention of any rule within the meaning of Rule 173-Q and the penalty proceedings were misconceived. There was denial of natural justice in taking into account the material which was not put to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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