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Ganesh Chandra Mrig Versus Superintendent ( (Prev.) , Commissionerate of Central Excise, Customs and Service Tax, Bhubaneswar-II

2010 (5) TMI 912 - ORISSA HIGH COURT

W.P.(C). No. 3591 of 2010 - Dated:- 18-5-2010 - A. S. Naidu And B. N. Mahapatra, JJ. For the Petitioner : M/s. L. Pangari, S. R. Pani, S. K. Mishra For the Opp. Party : M/s P. K. Ray & S. B. Mohanty JUDGMENT B. N. Mahapatra, J. The petitioner who is the Managing Director of M/s Aryan Ispat Power Pvt. Ltd. (for short 'the Company) has filed this writ petition for declaring the summons issued to him by the opp. party vide Annexure-9 as arbitrary and illegal and for quashing the said summon .....

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rse of search, some documents relating to manufacturing and despatch of sponge iron were seized. Consequent upon such search operation, the PUCEC initiated proceedings to enquire into the alleged violation of provisions of the Central Excise Act, 1944 (for short 'the Act') and the Rules framed thereunder against the Company. In course of enquiry, the Superintendent of the PUCEC issued summons dated 26.11.2009 (Annexure-1) under Section 14 of the Act to the petitioner to appear before him .....

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d 02.01.2010 (Annexure-3) was also communicated authorizing the said Senior Manager (Finance) to appear and depose before the opposite party on behalf of the Company. Thereafter, opposite party issued summons dated 14.01.2010 (Annexure-4) to Sri Chandrakar, Senior Manager (Finance) to adduce evidence and produce documents. Pursuant to which, the Senior Manager (Finance) had appeared before the opposite party on different dates; produced various documents as per letters dated 05.01.2010, 14.01.20 .....

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said summons (Annexure-7), the petitioner by a letter dated 03.02.2010 (Annexure-8) addressed to the opp. party reiterated that the Senior Manager (Finance), who deals with the Excise matters of the Company, is the right person to depose on behalf of the Company. Again on 05.02.2010, the opposite party issued another summons (Annexure-9) under Section 14 of the Act asking the petitioner to appear before him in person on 25.02.2010 at 11.0 AM. Hence, the writ petition. 3. Mr. L.Pangari, learned c .....

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nd Finance related matters of the Company to appear and depose before the opposite party on behalf of the Company with the declaration that his statement would be binding on the Company. The Company has been fully co-operating with the Department in the process of enquiry of the alleged violation of the provisions of the Central Excise Act and the Rules framed thereunder. Since the Department has already examined the Senior Manager (Finance), there is absolutely no need to summon any other offic .....

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gari relying upon a circular bearing C.B.E. & C Letter F.No.208/122/89- CX.6 dated 13.10.1989 forcefully argued that the said circular is binding on the Departmental authorities. To strengthen his argument, he relied upon decisions of the Calcutta High Court in Srei Infrastructure Finance Limited Vs. Union of India, 2009 (238) E.L.T. 579(Cal.) and Collector of Central Excise, Patna Vs. Usha Martin Industries, 1997 (94) E.L.T. 460 (S.C.). The petitioner has deposited ₹ 93.0 lakhs under .....

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opposite party that he is not looking after the business activities of the Company and cannot say anything about that, even if he is made to appear before the Department, he cannot but reiterate the same thing. It is the case of colourable exercise of powers by the opposite party vested under Section 14 for extraneous consideration. 4. On being noticed, a counter affidavit has been filed by the opposite party. Mr. P.K.Ray, learned Senior Advocate appearing on behalf of the opposite party-Depart .....

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of the Constitution. The questioning of legality of summons stalling enquiries and retarding investigation process to find out actual facts with the participation and in the presence of parties is deprecated by the apex Court. Paragraph 4 of the writ petition reveals that the petitioner has authorized Senior Manager (Finance) only to deal with Excise and Finance related matters and no such authorization has been given to the said Senior Manager with regard to administration, day-to-day business .....

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had authorized him. The said Senior Manager denied his knowledge about the purchase of raw materials, production and despatch of sponge iron from the factory. On the other hand, he told that he receives such information from other Department/Section of the plant and accordingly he maintains records. Sri B.K.Chandrakar, Senior Manager (Finance) was arrested as per the provisions of Section 9 &9AA of the Act for violating various provisions of the Act and the Rules under reasonable belief that .....

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m the factory premises appeared to have happened with the knowledge and approval of the Company, who is the beneficiary of such illegal activities. The Company has paid the Central Excise duty on their own which they realized. Ascribing mala fide design, extraneous consideration, harassment and colourable exercise of the powers as alleged by the petitioner is nothing but a figment to get rid of the provisions of the statute. 5. In the rejoinder, it is stated that the petitioner has never questio .....

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e), Sri G.S.Garcha, Executive Director, Sri Dhananjay Swain, Deputy Manager (Process) appeared before the opposite party, who examined them on various dates. They produced all the documents they were asked to produce by the opposite party for the purpose of enquiry as per the details given in Annexure-13. These documents were filed in addition to the documents seized under Panchanama dated 04.11.2009 (Annexure-14). Regarding the operational activities of the plant, Sri G.S. Garcha, Executive Dir .....

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mpany and not in possession of any document relating to any business activity of the Company. The opposite party has issued summons to the petitioner in mechanical manner. Insisting upon personal appearance of the petitioner, who is neither able to give any statement nor can produce any document regarding the day-to-day operation, accounts, central excise matter, production process, finance etc. of the company is an abuse of process causing harassment to the petitioner who is an old man of 72 ye .....

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ce or to produce a document or any other thing in any inquiry which such office is making for any of the purposes of this Act. A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned. (2) All persons so summoned shall be bound to attend, either in person or by anauthorized agent, as such officer may direc .....

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193 and Section 228 of the Indian Penal Code, 1860 (45 of 1860)." A plain reading of Section 14 reveals that the said Section vests power in the Central Excise Officer who has been empowered by the Central Government to that behalf to summon any person whose attendance he considers necessary either to give evidence or to produce documents in course of the enquiry or any other thing in any enquiry which such office is making for any of the purposes of the Act. A summons to produce documents .....

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n goods manufactured or produced in certain parts of India. 7. In the case in hand, search and seizure operation was conducted in the business premises of the petitioner on 04.11.2009 by the officials of PUCE. Consequent upon such search and seizure, summons were issued to the petitioner, who is the Managing Director of the Company, in exercise of powers under Section 14 of the Act. In response to such summons, the petitioner under Annexure-2 intimated the opposite party that he was stationed at .....

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y. Stating the above reason, the petitioner requested the opp. party to dispense with his personal appearance. 8. Perusal of the writ petition, counter affidavit, rejoinder affidavit reveals that summons were issued to different employees of the Company to appear and produce various documents and books of account. Their statements were recorded in respect of the books of account, documents seized in course of search and seizure operation as per Panchanama and the documents produced relating to t .....

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case the opp. party feels it necessary, he can issue summons to any person and record their statements. 9. Needless to say that to achieve the objective of unearthing the amount of excise duty evaded by any person liable to pay such excise duty and to plug leakage of excise duty legitimately due to the public exchequer, various measures have been provided in the Central Excise Act, 1944 and the Rules framed thereunder. One of such measures is search and seizure operation in the business premises .....

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f the assessee. The departmental authority mainly needs the assistance of the persons connected with the business activities of the assessee to understand the contents of the seized books of account. In the process, the empowered officer issues summons to any person whose attendance he considers necessary either to give evidence or produce document or things in his possession. In case, the departmental authority does not get proper assistance from the assessee in respect of whom search and seizu .....

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different activities of business. Thus, division of work and responsibility is inevitable for successful running of a business. This is more so in case of a manufacturing concern. One person certainly cannot manage/look after various activities involved in a manufacturing process. Different persons having specialized knowledge and experience are engaged to look after different business activities like purchase of raw materials, manufacturing process, sale of finished products, maintenance of ac .....

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in about any document, record of the company pertaining to any particular activity only because he holds a very important post in the Company. 10. In S.M.S. Pharmaceuticals Ltd. (2) v. Neeta Bhalla, (2007) 4 SCC 70, the apex Court categorically held that there may be a large number of Directors, but some of them may not assign themselves in the management of the day-to-day affairs of the company and thus are not responsible for the conduct of the business of the company. 11. In National Small In .....

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sible for the conduct of the business of the Company. 12. In the instant case, the Managing Director expresses his inability to explain the day-to-day affairs of the Company. The specific reason for which the petitioner has expressed his inability to appear and depose before opposite party in response to the summons issued is that he is stationed at New Delhi and is not looking after day-to-day affairs of the Company. In such circumstance, even if the petitioner appears before opposite party, he .....

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the Act under Annexures-1, 7 and 9 were issued to the petitioner, as revealed from those summons, is that the opposite party believes that the petitioner was in possession of certain documents and records that were material for the purpose of enquiry with regard to the allegation of violation of provisions of the Central Excise Act, 1944 and the Rules framed thereunder against the Company. The summons as well as the counter is silent as to any particular fact and/or document and record that is m .....

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al appearance of the Managing Director is necessary for which summons under Section 14 has been issued to him to appear personally. It appears, the opp. party is more interested in the personal appearance of the Managing Director than to apply his mind to the books of account, documents seized in course of search and seizure and the documents produced thereafter to find out the amount/quantum of Excise Duty evaded, if any. In this context, we feel it necessary to refer to the Circular bearing C. .....

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to enforce recovery of dues which are under dispute. Action under this section is to be taken only as a last resort in cases where assesses are not cooperating or investigations are to be completed expeditiously. This section should not be used for harassing the top management for forcing them to pay up demands which are disputed by them. For recovery of demands normal procedure under the law should be followed. If any instance of issue of summons to Managing Directors and other Directors witho .....

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pecific evidence requiring presence of the petitioner. 14. Law is well settled that every action of the State or its instrumentality should be fair, legitimate and above board and without any affection or aversion. (See T.M.Hassan Rawther V. Kerala Financial Corporation, AIR 1988 SC 157; E.P.Royappa Vs. State of Tamil Nadu, AIR 1974 SC 555; State of Andhra Pradesh & Anr. Vs. Nalla Raja Reddy, AIR 1967 SC 1458) Since the purpose of conducting a search and seizure in any business house particu .....

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