TMI Blog1976 (9) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 rods became leviable on the basis of rate ad valorem. However, by a notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, 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 duty paid on such quantiy. Rule 173-I provides for assessment of duty by the proper officer on the basis of information contained in the return filed by the assessee under Rule 173-G and after such further inquiry a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication 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 Collector, by an order made on 28th April, 1971, permitted the petitioner to pay the duty by valuing properzi rods from Hindalco ingots at Rs. 5,005/- per m.t. under Rule 9-B. Some proceedings were taken by the Superintendent, Central Excise, and the Assistant Collector Central Excise, for recovery of short levy for the earlier period on the basis t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 been selling the properzi rods manufactured by it in wholesale to other cable manufacturers under open market condition, prior to 28th February, 1970. In support of this allegation, it was stated in the notices that the petitioner sold to lots of 9,260, m.t. and 9,951, m.t. at the ex-factory price of Rs. 7,400/- per m.t. on 2nd January, 1970 and 10th Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in the show cause notices and the petitioner was not given any opportunity to give its explanation in respect of these despatches. The Collector held that it was imperative for the petitioner to have mentioned that price in the price list under Rule 173-C at which list properzi rods sent to Bombay and Ahmedabad under consignment to self were eventually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contention that has been raised before us is that the Collector in holding the petitioner liable for contravention of Rule 173-C took into account certain despatches to Ahmedabad and Bombay which were not referred to in the show cause notice nor was the petitioner s attention drawn to them at any stage during the proceedings before the Collector and, therefore, princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, he must be told that it would be used against him, for, unless he is so informed he would have no opportunity of offering his explanation for meeting the inference that the authority seeks to draw from it. In Collector of Central Excise and Land Customs, Shillong v. Sansawarmal Purohit, 1969 (Assam LR (SC) 11) the Supreme Court observed that - a quasi-judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 Collector fixed the wholesale-price on the basis of the despatches made to Ahmedabad and Bombay. As earlier stated the attention of the petitioner was never drawn to those despatches either in the show cause notices or at any other in the show cause notices or at any other stage during the proceedings and the Collector was, therefore, not entitled to take into account the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, were of defective rods and not of the goods of like kind and quality within the meaning of Section 4(a). The Collector first, ought to have decided whether the contention of the petitioner that these sales related to defective rods was true. In the absence of any finding by the Collector overruling the petitioner s stand that the sales to Indore party were of defective rods, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essable 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 possible that because of scarcity of good quality properzi rods available in the market the Indore party paid a somewhat high price for the defective rods which the petitioner sold. But from these stray sales it could not be assumed that the good quality rods were capable of being sold at Satna at the same or higher price. As earlier stated, there was no finding that there was any whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions 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 information. Further, under sub-rule (2) of Rule 173-C the proper Officer while approving the price list can modify the value shown in the list so as to bring it to the correct value. Now if the Rule requires the manufacturer to enter the correct price, he would become liable to penalty under Rule 173-Q on every, occasion the proper officer modifies the list. Such a consequence could not have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 nil assessment made by the proper Officer. Later on, the excise authorities entertained doubt about the fact that the goods were exempted. notice was issued demanding duty, but it was beyond time under Rule 10. The notice was sought to be supported under Rule 9(2). But this was negatived by the Supreme Court on the ground that there was no contravention of Rule 9(1) as necessary applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pression 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 legal proceeding, within the meaning of Section 48 of the Bombay Sales Tax Act, 1953, and in the Gujarat case it was held that a proceeding before the District Court for appointment of a member of the Managing Committee of a trust was any legal proceeding within Section 56 B of the Bombay Public Trusts Act. 26. Section 40(2) of the Act came up for construction before the Supreme Court in Public Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 pointer in the direction that the expression other legal proceeding is limited to proceeding taken in a Court of Law and does not cover proceedings before departmental authorities. A departmental proceeding like a penalty proceedings is commenced by issue of a notice to the assessee by the adjudicating authority. It would be inappropriate to say that by issuing a notice the authority concerned institutes a proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 generis rule for construing the general words other legal proceeding in Section 171. We may here mention that in construing Section 446 of the Companies Act, 1956, which corresponds to Section 171 of the Companies Act, 1913, the Supreme Court held that the expression other legal proceeding will not include reassessment proceedings under Section 147 of the Income-tax Act, 1961: (See S.V. Kondaskar v. V.M. Deshpan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed 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 to the Collector in penalty proceedings under Rule 173-Q, to hold that the assessable value on the basis of which refund was ordered was wrong. In other words it was contended that penally proceedings, if at all, could be taken only on the basis that the assessable value accepted in proceedings for refund was the correct value. It was argued that as an order of the Appellate Collector became final under Section 35 (2), subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions 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 and proceedings for best judgment assessment under Rule 173-Q can be taken even after the assessment under Rule 173-1 has become final in appeal. Similarly, the finality of the refund order in appeal cannot affect the jurisdiction to initiate these original proceedings under Rule 10 and Rule 173-Q. 33. In Amalgamated Coal fields v. Janapada Sabha - AIR 1964 SC 1013, a case on which the learned counsel for the petitioner placed re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 price than shown by it in the price lists. These matters are not enquired into either in the proceedings for assessment or in the proceedings for refund. The order of the Appellate Collector in the refund proceedings, therefore, had no bearing upon the penalty proceedings. The Collector was not bound in the penalty proceedings to accept the assessable value of the goods on the basis of which the refund was ordered. If the Collector right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty 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. The letter of the Central Government dated 16th May, 1972 communicated to the excise authorities the decision taken by the Central Board of Excise that for assessments during the period from 1st March, 1970 to 23rd May, 1971 the assessable value of properzi rods should be determined by adding a sum or Rupees 510/- per m.t. to the price at which the particular lot of ingots used in the manufacture of rods was purchased. The argument of the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edy 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 the petitioner. Further, the Collector in finding out the assessable value of properzi rods removed by the petitioner during the relevant period, proceeded on wrong principles contrary to those laid down in Section 4. In the circumstances, it would not be a sound exercise of discretion on our part to dismiss the writ petition on the ground that the petitioner can get redress in the appeals filed by it. 39. I allow the petition and quash the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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