TMI Blog1997 (4) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 of prices in the name of consolidated amount over and above the basic prices from different independent buyers against ex factory sales for the period from January, 1981 to March, 1982. (b) Central excise duty amounting to ₹ 35,11,816.00 (Rupees thirty five lakhs eleven thousand eight hundred and sixteen) 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te classification of the products under tariff head for the period from January, 1981 to February, 1984. (f) Central excise duty amounting to ₹ 45,68,295.85 (Rupees forty five lakhs sixty eight thousand two hundred ninety five and eighty five paise) being the differential duty 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 appended in notification No. 55/79-CE dt. 1.3.1979 as amended by notification No. 60/82-CE dt. 28.2.1982 and accordingly they availed of exemption of duty at the rate applicable on marine plywood, despite the fact that Kitply conformed the specification of commercial plywood during period from January, 1981 to February, 1984. (g) Central excise duty amounting to ₹ 66,13,379.80 (Rupees sixty six lakhs thirteen thousand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 buyers after much persuasion and the differential amount in between the prices indicated in the price list and the assessable value were adjusted through deception. Illustrations were also cited in the notices about the alleged fraud, those were committed in the transactions relating to the classification of the goods. The notices contained the instances of alleged dubious method of removal of high rated products under different trade names for availing of exemption of duty. The Revenue copiously 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 materials o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -A of the Central Excise Rules. Mr. Chowdhury further, submitted, that the learned Single Judge on its own held that 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 vitiated by non-application of mind; Mr. M.L. Lahoty, the learned Counsel appearing for the respondents (petitioners) supported the judgment with his persuasive argument. According to Mr. Lahoty. In the face of adjudication of classification and valuation the impugned notices were without jurisdiction. According to the learned Counsel on a true construction of the provisions contained in Section 4 of the Act read with the adjudication of classification and the valuation, the Revenue has had no jurisdiction to initiate the impugned proceeding. Mr. Lahoty, the learned Counsel appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted person within the meaning of Sub-section (4)(c) of Section 4and the price is the sole consideration for the sale. This proposition is subject to the terms of three provisos to Sub-section (1)(a) of Section 4; (ii) Where the price of excisable goods in the course of, wholesale trade for delivery at the time and place of removal cannot be ascertained for the reason that such goods are not sold or. for any other reason, the nearest ascertainable equivalent thereof determined in the manner prescribed by the Central 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 where the tariff value has been fixed in respect of any excisable goods under Sub-section (2) of Section 3. In the aforesaid decision the Supreme Court pronounced in categoric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 deal with the permissibility of the deductions claimed. This aspect of the matter regarding valuation since decided by the Supreme Court and the principles of law are definitively delineated, this matter should not detain us any further. In this proceeding we are directly concerned with the powers conferred under Section 11A. The provision is introduced by the Legislature for recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. When any duty of excise has 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of law for exercising of the said power. The word evade means to escape from by trickery or cleverness with a view to defeat the legal o' Ration of payment of duty, deliberately to evade the payment of duty. The dominant motive of the assessee to evade the tax with a view to defeat the provision of law 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. Chemphar Drugs and Liniments, Hyderabad, reported in (1989) 2 SCC 127, Padmini Products v. Collector of Central Excise, Bangalore, reported in (1989) 4 SCC 275 and Tamil Nadu Housing Board v. Collector of Central Excise, Madras and Anr. reported in 1995 Supp (1) SCC 50: The learned Single Judge though addressed itself to the applicability of the provisions of Section 11A did not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aud 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 Calcutta Discount Co. Ltd. v. Income-tax Officer, reported in AIR 1961 SC 372 in support of his contention as to whether the condition precedent for exercising jurisdiction under Section 11A can be investigated by the Supreme Court in an application under article 226 of the Constitution of India. We have given our anxious consideration on this issue. The impugned notices prima facie disclose grounds for exercising of power under Section 11A. The allegations contained therein require adjudication on 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 involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genteel subject of tax avoidance, as was referred to by the learned Single Judge. At some point of time tax dodging without 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 doing he neither comes under any liability nor incurs blame. The opinion of Lord Sumner was reverbated in the observation of Lord Tomlin in I.R.C. v. Duke of Westminster reported in 1935 All ER 239-- Every man is entitled, if he can, to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then; however unappreciative the Commissioners of Inland Revenue or his fellow tax payers may be of his ingenuity, he cannot be compelled to pay an increased tax. However a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rning given, albeit in another context by Lord Atkin, who himself dissented in the Duke of Westminster's case, in United Australia Ltd. v. Barclays Bank Ltd. When these ghosts of the past stand in the path of justice, clanking their mediaeval chains, the proper course for the judge is to pass through there undeterred. 1936, a bare half century ago, cannot be described as part of the Middle Ages but the ghost of the Duke of Westminster and of his transaction, be it noted a single and not a composite transaction, 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. A. Raman Co. reported in 67 ITR 11 and C.I.T. v. B.M. Kharwar reported in 72 ITR 603. In B.M. Kliarwar, the Supreme Court observed as follows: The taxing authority is entitled and i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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