GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

1997 (4) TMI 522 - GAUHATI HIGH COURT

1997 (4) TMI 522 - GAUHATI HIGH COURT - 1997 (58) ECC 12 - Writ Appeal 168, 169 and 170 of 1995 - Dated:- 9-4-1997 - V. D. Gyani And D. N. Chowdhury, JJ. JUDGMENT D. N. Chowdhury, J. These three appeals are preferred by the Revenue assailing the judgment and order of the learned Single Judge dated 16.2.1995 passed in Civil Rule Nos. 650, 856 and 1072 of 1987. The learned Single Judge disposed of the Civil Rules by a common judgment and order. The three appeals were therefore taken up together fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e, we shall hereafter only advert to the facts chronicled in the Civil Rule No. 856 of 1987. By notice bearing No. V-16B/3/Adj/85/73966-76 (B) dated 9th October, 1985 the writ petitioners were called upon to show cause to the Collector of Central Excise, Shillong for the following reasons:- (a) Central excise duty amounting to ₹ 1,63,922.50 (Rupees one lakh sixty three thousand nine hundred twenty two & fifty paise) being the differential duty as detailed in Annexure-'A' should .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

) being the differential duty as detailed in Annexure-'B' should not be demanded from and paid by the said company under Rule 9(2) of the said rules read with Section 11A of the said Act since the said company had charged and realised additional amount in the name of different heads such as forwarding, handling, packing and consolidated amount over and above the basic price in respect of stock transfer quantities sent to their branches, consignment sale agents, and marketing agents for t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er Rule 9(2) of. the said Rules read with Section 11A of the said Act since the said company had effected some token ex factory sales on fictitious assessable values declared to the department, to the local buyers and to the buyers outside Assam for the purpose of procuring some invoices to that effect with a view to substantiating those values during the period from April, 1982 to February, 1984. (d) Central excise duty amounting to ₹ 42,32,224.00 (Rupees forty two lakhs thirty two thousa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ire goods received under stock transfer basis at the prices incorporated in the said company's internal price lists published' and circulated secretly to their branch offices and sale agents for the: period ff 6m'April, 1982 to February, 1984. (e) Central excise duty amounting to ₹ 42,889.00 (Rupees forty two thousand eight hundred and eighty nine) being the differential duty as detailed in Annexure-'E' should not be demanded from and paid by the said company under Rule .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as detailed in Annexure-'F' should not be demanded from and paid by the said company under Rule 9(2) of Central Excise Rules read with Section 11A of the said Act since the said company had declared the so called brand "Kitply Marine" grade to the department as classifiable under marine grade plywood by deliberate suppression of material facts and got approval of their Kit Ply Marine grade as marine plywood for the purpose of duly liability as per SI. No. 4 of the table append .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tailed in Annexure-'G' should not be demanded from and paid by the said company under Rule 9(2) of Central Excise Rules read with Section 11A of the said Act since the said company had removed the grade concrete shuttering plywood under the garb of marine plywood deliberately by availing of concessional rate of duty applicable on marine plywood for the period from January, 1981 to February, 1984. (h) Central excise duty amounting to ₹ 47,20,604.00 (Rupees forty seven lakhs twenty t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed through banks and collection of amounts thereon for the period from April, 1982 to February, 1984. The notice indicated, about the simultaneous searches conducted at the factories, registered office, central office/head office, godowns and residences of the directors, managers and branch offices/consignment sale agents, offices at Tinsukia, Margherita of the petitioners company and the collection of records and documents in those searches. According to the Revenue the company was resorting to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion of facts, etc., arid accordingly the impugned notices were issued. The notices contained [details?] about The alleged instances of non-levy/short-Ievy. The thematic contents of the allegations as cited, in the notices were about the alleged deceit perpetrated on the Revenue with a view to evade the excise duties. A number of alleged instances were specified to establish that the bills submitted to the, Department by the assessee for substantiating the assessable value were procured from the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y enumerated the instances of alleged fraud and wilful misrepresentation committed by the assessee by citing documentary evidence. According to the Department the excise duty was not levied/short-levied/short-paid by reason of fraud, collusion or wilful misstatement or suppression of facts and accordingly the aforesaid notices were issued. As narrated earlier, the said notices were assailed in the Civil Rules and the learned Single Judge upon hearing the parties and on consideration of the mater .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the absence of any amendment in law, the department can issue notice only when it finds that the person concerned is guilty of suppression of material facts or misstatement or misrepresentation. (iii) When the factory gate sale is admitted, the department is duty-bound to assess the tax on the basis of the factory gate sale as provided under Section 4(1)(a) of the Act. Hence, the appeals. It was contended on behalf of the Revenue that whether on the basis of factual materials there was any frau .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

no valid reason for the learned Single Judge to quash the proceeding without adjudicating the facts, that too of disputed nature instead of allowing the fact finding authority to adjudge the same on evaluation of the factual elements. Mr. K.N. Chowdhury, the learned Counsel appearing on behalf of the appellants submitted that the Legislature authorised the Revenue for the recovery of the duties not levied or not .paid of short-levied or short-paid. When the Legislature authorised the; Revenue w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat the authority at all relevant time has had the competence to issue notice on the ground of suppression of material facts or misstatement, in the absence of any "finding arrived by the learned Single Judge that there was no misstatement or suppression of facts, the question of setting aside or quashing the impugned notices did not arise. The learned Counsel further submitted that the finding of the learned Single Judge in reaching his conclusion in sub-paragraph (iii) of paragraph 21 was .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

jurisdiction to initiate the impugned proceeding. Mr. Lahoty, the learned Counsel appearing for the respondents writ petitioners strenuously submitted that once the price list and classifications were approved and finalised under Rules 173-B and 173-C after a due adjudication, the question of issuing the purported show-cause notices did not arise. Mr. Lahoty took the pain in placing all the material facts and brought to our attention to the catena of decisions of the Supreme Court, various High .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

computation is to be made as per the scheme of (sic) tained in Section 4. The price at which the goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal is the normal price mentioned in Section 4(1)(a) of the Act where the buyer is not a related person and the price is the sole consideration for the sale. The value of excisable goods determined under Section 4(1)(a) are likely to vary according to circumstances as eviden .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for determination of the real value of an excisable article. The purport of Section 4 both old and new was summarised by the Supreme Court at para 47 pp. 503-04 (ECC page 107): (i) The price at which the excisable goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal as defined in Sub-section (4)(b) of Section 4 is the basis for determination of excisable value provided, of course, the buyer is not a related person wit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

entral Excise (Valuation) Rules, 1975, should be taken as representation the excisable value of the goods; (iii) Where wholesale price of any excisable goods for delivery at the place of removal is hot known and the value thereof is determined with reference to the wholesale price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery should be excluded from such price; (iv) Of course, these principles cannot apply w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

penses incurred on account of several factors which arc added to the increase of the value till the date of sale which would be the date of delivery are liable to be included where the sale is effected at the factory gate, the expenses incurred by the assessee up to the date of delivery on account of storage charges, outward handling charges, interest on inventories, charges for other services after delivery to the buyer, namely, after-sales service and marketing and selling organisation expense .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to the buyer, viz., after-sales service and marketing and selling organisation expenses cannot be deducted from the price, and (ii) where the sale is effected through the assessee's sales organization at a place or places outside the factory gate, even there the aforesaid expenses cannot be deducted. The Supreme Court in Madras Rubber Factory (supra) accordingly made the following observations: We agree that it is for each assessee to decide where to sell his goods. He can choose to sell his .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

me par as after-sale service charges and advertisement charges and hence cannot be deducted. Where, however, the freight charges are equalised in the manner indicated in the preceding paragraph, such charges can be deducted from the normal price; it is obvious that such deduction will be common to the price at the gate and at the depots outside the gave-because of the equalisation, the price will equally be uniform at the gate as well as at the depots. This aspect will become clearer once we dea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not been levied or paid or hag been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. The proviso to Section 11A empowered the authority concerned to initiate .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eeding where duty has not been levied or short-levied due to fraud, collusion or wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or the Rules made there under with the intent to evade payment of duty. The gist of exercising the proviso is fraud, collusion or wilful misstatement or suppression of facts with the intent to evade payment of duty. The limitation for recovery of duties under Section 11A is prescribed by the main provision and the said .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

R 204]. For an act of fraud, collusion or wilful misstatement or suppression of facts or contravention of any provisions of the Act or of the Rules with the intent to evade payment of duty, the authority may initiate a proceeding within the period prescribed in the proviso. Whether the excise duty has not been levied or has been short-levied or short-paid, etc., by reason of fraud, collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules with .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is the essence of the proviso to Section 11A of the Act. Mere failure to pay duty shall not attract the rigour of the proviso. Something positive other than mere inaction or failure on the part of the manufacturer or producer, conscious or deliberate withholding of information, when the manufacturer knew it otherwise, is the essential requisite of law for initiation of a proceeding under the proviso. The legal position in this regard is crystallised in Collector of Central Excise, Hyderabad v. C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

th Rule 233-A. According to the learned Single Judge since the price lists were submitted and approved under the Rules, the same cannot be reopened and revised. According to the learned Single Judge, once approval was given and finalised, the same cannot be reopened without the same being set aside on appeal. The learned Single Judge, therefore, held that once the price list is approved and subjected to adjudication by judicial authority, the same cannot be revised or modified without following .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

difficult to comprehend. The learned Single Judge in his judgment did not also reach any conclusion on the analysis of the facts that the writ petitioners-respondents were not responsible for any of those situations as visualised in Section 11A, even prima facie. The learned Single Judge while arriving at the aforesaid conclusion also took note of the fact that in order to entitle the Department to issue the show-cause notice in the absence of any amendment in law, the Department can issue noti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

from (he price for sale in course of wholesale trade of an article for delivery at the time and place of removal, i.e., the factory gate. If the price under Section 4(1)(a) is not ascertainable, the price in that event will be determined under Section 4(1)(b). In the event of fraud or misstatement, it is open for the Revenue to reopen the matter in accordance with law. Mr. Lahoty, the learned Counsel appearing for the respondents brought our attention to the decision of the Supreme Court in Cal .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

investigation of the disputed facts. The materials on record cannot lead to an inference that the allegations referred to in the show-cause notices are wholly non-existent and that there is no foundation or basis of the allegations of fraud, collusion, misstatement or suppression of facts. In the writ petitions there was no challenge as to the vires of the statutory provisions governing the matter nor there was any question regarding violation of fundamental rights involved in the said proceedi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and without jurisdiction. In M/s. Chemphar Drugs, M/s. Padmini Products and Tamil Nadu Housing Board (supra), relied on [by] the counsel for the respondents, observed that whether in a particular set of facts and circumstances there was any fraud, collusion or wilful misstatement or contravention of any provisions of the Act is a question of fact depending upon the facts and circumstances of a particular case. Rainbow Industries (P) Ltd. v. Collector of Central Excise, Vadoddra, reported in (199 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of duty. In Union of India v. Metal Box Co. of India Ltd., reported in (1996) 11 (sic) SCC 122 the Supreme Court made the following scathing observations in the matter of entertaining of the writ petition-in such matter: We find it difficult to sustain the judgment of the learned Single Judge and of the Division Bench, for more than, one reason. But first we 'must mention that the filing of, and entertaining, tie writ petition straightaway against a notice of demand issued by a Central Exci .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

contravening the law was taken kindly as will be apparent from the following opinion of Lord Sumner in I.R. v. Fisher's Executors, reported in 1929 AC 195-"My Lords the highest authorities have always recognised that the subject is entitled so to arrange his affairs as not to attract taxes imposed by the Crown so far as he can do so within the law, and that he may legitimately claim the advantage of any expressed term or of emotions that he can find in his favour in taxing Acts. In so .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

yers may be of his ingenuity, he cannot be compelled to pay an increased tax." However a perceptible shift of the paradigm with change of front became perceivable since the early forties of this century. Lord Green, M.R. in Lord Howard De Waldan v. I.R.C. reported in (1942) 1 KB 389 held,-"For years a battle of manoeuvre has been waged between the Legislature and those who are minded to throw the burden of taxation off their shoulders on to those of their fellow subjects. In that battl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iths v. J.P. Hamzan Ltd. (1963) AC 1, Morgan v. I.R.C. (1963) 1 All ER 481, Greenberg v. I.R.C. (1971) 3 All ER 136. The most significant change in the approach of the House of Lords towards the tax avoidance is discernible in W.T. Ramsay v. I.R.C. reported in (1981) 1 All ER 863. Lord Wilberforce cogently observed:- While the techniques of tax avoidance progress and are technically improved, the Courts are not obliged to stand still. Such immobility must result either in loss of tax, to the pre .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the courts below have fallen is that they have looked back to 1936 and not forward from 1982. They do not appear to have appreciated the true significance of the passages in the speeches in Ramsay's case of Lord Wilberforce and Lord Fraser, and, even more important, of the warnings in the Bunnah Oil case given by Lord Diplock arid Lord Scarman in the passages to which my noble and learned friend Lord Brightman refers and which I will not repeat. It is perhaps worth recalling the warning giv .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ransaction, with his gardener and with other members of his staff has haunted the administration of this branch of the law for top long. I confess that I had hoped that that ghost might have found quietude with the decisions in Ramsay and in Burnah. Unhappily it has not. Perhaps the decision of this House in these appeals will now suffice as exorcism.' The observations made in Westminster and Fisher's Executors (supra) were echoed in the earlier decisions of the Supreme Court in C.I.T. v .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version