TMI Blog1990 (8) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... s held by some courts that value should be determined for the purposes of excise duty on the basis of the manufacturing cost plus profits. The controversy ultimately was raised before the Hon'ble Supreme Court in Union of India v. Bombay Tyre International Ltd. which was decided by the Hon'ble Supreme Court on 7th October, 1983. The decision of the Hon'ble Supreme Court is reported in AIR 1984 SC 420 = 1983 (14) E.L.T. 1896 (SC). The Hon'ble Supreme Court after considering the section in detail finally settled the controversy by holding that certain post manufacturing expenses were not deductible from the price to arrive at assessable value. 3. The petitioner company during the above mentioned relevant period have been filing price list deducting post manufacturing expenses from wholesale price for the purposes of payment of excise duty. On 8th December, 1978 a show cause notice was issued to the Company by the Excise Department in relation to Saharanpur factory inter alia asking the Company as to why their wholesale dealers should not be treated as 'related persons' in terms of clause (c) of sub-section (4) of Section 4 of the Act and also why the deduction claimed by them from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which the company sold the cigarettes to its wholesale dealers was not the sole consideration for sale and the assessable value of the cigarettes has to be determined in accordance with the provisions of Rule 5 of the Central Excise (Valuation) Rules, 1975. It was also laid down as to what factors would be considered while determining the assessable value under Rule 5. The operative portion of the order of Director General of Inspection as Collector of Central Excise was as follows :- "(a) pending provisional assessments shall be finalised by the respective proper officers and where the assessments had already been finalised, differential duty demanded, on the basis of the revised assessable value(s) of the cigarettes, keeping in view the findings above, and the Company shall pay the differential duty (whether on finalisation of the provisional assessments or otherwise as aforesaid; and (b) penalty of Rs. 1,00,00,000.00 (rupees one crore only) is imposed on the Company under Rule 173Q of the Central Excise Rules, 1944. However, I do not propose to order confiscation of land, building, plant, machinery, materials etc." This order was delivered by Director General of Inspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial duty of Rupees eighty crores and odd was demanded from the petitioner has been challenged by means of the present petition. 11. We have heard Sri S.N. Verma, Senior Advocate on behalf of the petitioner and Sri N.S. Hedge, learned Additional Solicitor General of India on behalf of the respondents. 12. Learned counsel for the first petitioner has made three submissions. His first submission is that the price lists which were submitted at Calcutta during the meetings held between 26-6-1986 to 16-7-1986 had been accepted consequently they became final and binding on the Excise Department. The order of the Director General exhausted itself and as such the subsequent demand order dated 28th April, 1988 is wholly without jurisdiction. The second submission of the learned counsel is that the impugned demand order dated 28th April, 1988 is void in law as no opportunity had been afforded to the petitioner-company before issuing the said demand. The third submission of the learned counsel is that the order dated 28th April, 1988 is contrary to the Director General's order dated 10-4-1986. 13. Learned Additional Solicitor General of India has, however, submitted that the petitioner h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the petitioner that once the figures were certified by the Superintendent of Central Excise after discussion in the meeting at Calcutta the matter became final and consequently the impugned demand notice could not have been issued by the Assistant Collector of Central Excise. 16. Sri P. Das, Assistant Collector of Customs and Central Excise, Saharanpur has filed a counter affidavit. In para 11 of the counter affidavit it has been stated by him that the alleged Calcutta meeting which was held between 26th June, 1986 to 16th July, 1986 was departmental in nature in order to arrive at the procedure for calculation of duty liability on the petitioner-company, only in respect of the common points pertaining to all the five units of the petitioner-company falling under the different jurisdiction of the petitioner's Collectorates. No final calculation was taken at that time. The quantification and calculation for computation of differential duty payable by the petitioner-company was done strictly on the basis of the directions contained in the order dated 10th April, 1986 as finalisation and quantification of the amount of duty payable by the petitioner-company was not do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear the signatures of the Assistant Collector, Saharanpur at all. Only the words found on the documents are 'checked and found in order' and thereafter signatures of the Superintendent of Central Excise, Saharanpur have been appended. They are neither notices of demand nor there is any intrinsic evidence prima faice to show that the documents were final determination of differential duty in respect of the Saharanpur factory. It can also not be called a certificate certifying the amount of differential duty payable by the petitioner company. 19. The order of the Director General dated 10th April, 1986 clearly directs that pending provisional assessments shall be finalised by the respective proper officers and thereafter differential duty demanded on the basis of the revised assessable value of cigarettes keeping in view of the findings given by the Director General. In accordance with the order dated 10th April, 1986 issued by the Director General, therefore, a proper demand notice had to be issued by the proper officer concerned viz. Assistant Collector of Central Excise, Saharanpur. In the present case no order had been issued after the meeting at Calcutta to the company asking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y right in him adversely affecting the Excise Department. 22. Learned counsel for the petitioner has argued that since in spite of the letter dated 30th August, 1986 to the Collector of Central Excise and the letter dated 28th March, 1987 issued by the Assistant Collector of Central Excise since no reply was received from the said officers it should be taken that they had accepted the fact that the differential duty had been finally calculated in the meeting which was held at Calcutta. We are unable to accept this contention. The mere fact that no reply were given to these letters cannot possibly wipe out the liability against the petitioner-company. From these letters also it is clear that discussions were going on in regard to the payment of the differential duty and nothing had been finalised. The final compliance of the order dated 10th April, 1986 could have only been done by the issuance of the demand order by the Assistant Collector of Central Excise. This having not been done, it cannot be said that whatever transpired at Calcutta had become final. In fact, the impugned order now which has been issued on 28th April, 1988 is the final demand order which has been issued in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining the permission of the proper officer on the form. 26. Rule 9B of the Rules provides for provisional assessment to duty. Clause (c) of this Rule specifically lays down that where an assessee has produced all the necessary documents and furnished full information for the assessment of duty, but the proper officer deems it necessary to make further inquiry, for assessing the duty, the proper officer may, either on a written request made by the assessee or on his own accord, direct that the duty leviable on such goods shall, pending the production of such documents or furnishing of such information or completion of such test or enquiry, be assessed provisionally at such rate or such value as may be indicated by him. It further provides that the assessee in such a case shall execute a bond in the proper form with such surety or sufficient security in such amount, or under such conditions as the proper officer deems fit, binding himself for payment of the difference between the amount of duty as provisionally assessed and as finally assessed. 27. It is not disputed that the proper officer in the case of the petitioner-company is the Assistant Collector of Central Excise, Sahar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on has to be considered by the prescribed authority and then only the amount has to be determined. The scheme is in consonance with the rules of natural justice. An opportunity to be heard is intended to be afforded to the person who is likely to be prejudiced when the order is made before making the order thereof. Notice is thus a condition precedent to a demand, under sub-section (2)......." 31. In the instant case, admittedly, the notice had been issued to the petitioner under Section 11-A(1) of the Act. The notices were referred for adjudication to the Director General of Inspection, Customs and Central Excise as Collector of Central Excise. The petitioner filed reply to the show cause notices and were heard at length by the Director General and it was only thereafter that the Director General passed the order dated 10th April, 1986. At this place, it would be relevant to quote para 17.7 of the order of the Director General dated 10th April, 1986. It is quoted below: "17.7. In the instant case detailed show cause notices were issued, evidence and documents on which the allegations are made were fully mentioned therein. The company's representatives inspected the records rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period, that is, from 1st October, 1975 to 28th February, 1983, and that the lists and calculations submitted by the petitioners were certified by the respondents. From these averments, it is clear that all the relevant facts, which were required for passing the final assessment order, were placed by the petitioner company in the meeting held in Calcutta between 26th June, 1986 and 16th July, 1986. It is the further case of the petitioners that, in that meeting, statements of price list for the relevant period were prepared and were signed and certified by the respondent No. 4, namely, the Superintendent of Central Excise. 36. In paragraph 11 of the counter affidavit of the Assistant Collector of Central Excise, Saharanpur, it has been further stated that in this meeting, the petitioners supplied data to work out the differential duty levied on account of various Heads. At that stage, only arithmetical checking of the data supplied by the company was undertaken by the officers of the Saharanpur Division and no demand was issued. Subsequently, when the petitioner desired the respondents to issue demands based on these calculations, it was found that the data supplied was not comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a similar matter by the petitioner company against the Collector of Central Excise. 38. It is, no doubt, true that the judgment of the Patna High Court arose out of a similar dispute which was the subject matter of dispute before the Director General of Inspection in respect of their factory at Munghyr (Bihar), which was also decided by the Director General by his order dated 10th April, 1986. 39. In our opinion, the circumstances in which the judgment was delivered by the Patna High Court were different from the one in the instant case. In the case before the Patna High Court, after the decision of the Director General on 10th April, 1986, a formal notice of demand was issued to the petitioner company on 17th July, 1986. This notice clearly stated that the demand notice was issued to the petitioner company and was to be finalised only after the decision of the P.M.E. (post manufacturing expenses) case which is pending in the Hon'ble Supreme Court. It was also stated in the said notice that the revised price lists and the detailed calculations have been checked and verified by the officers of the Patna Collectorate and only thereafter a demand was issued to the petitioner comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t giving an opportunity, the revised demand would be held to be invalid as contravening the principles of natural justice. This is not the case here. 40. Learned counsel for the petitioner relied upon many cases of the Supreme Court in regard to the principles of natural justice. It is not necessary for us to refer to each of the judgments separately, as the principle laid down in all the cases is similar. We would like to refer a specific decision in the case of State of Kerala v. K.T. Shaduli Grocery Dealer (AIR 1977 SC 1627). Learned counsel for the petitioner has relied upon paragraphs 2 and 3 of this judgment. It lays down that the law is well settled that the Tax authorities entrusted with the power to make assessment of tax discharge quasi-judicial functions and they are bound to observe principles of natural justice in reaching their conclusions. It has been further held that one of the rules which constitutes a part of the principles of natural justice is the rule of audi alteram partem which requires that no man should be condemned unheard. It is indeed a requirement of the duty to act fairly which lies on all quasi judicial authorities and this duty has been extended a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en proved beyond doubt against the petitioner-company and accordingly he held that company is liable to penal action under Rule 173-Q of the Rules. In this order he brought it to the notice of the petitioner that an appeal against the order dated 10th April, 1986 lies to the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi, within three months from the dale of its communication and that appeal has to be filed in accordance with the provisions of Rule 216 of the Rules. Petitioner-company admittedly did not file any appeal against the order dated 10th April, 1986 and as such the order dated 10th April, 1986 has become final. In pursuance of the order dated 10th April, 1986 Assistant Collector of Central Excise has issued a demand order dated 28th April, 1988 which has been impugned in the present petition. Whether this order is contrary to the Director General's order dated 10th April, 1986 has to be considered by an authority to whom an appeal lies against the order dated 28th April, 1988. This Court under Article 226 cannot act as Court of appeal. Whether the order dated 28th April, 1988 is contrary to the Director General's order is based on facts as well on the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise Department also it has been stated that appeal lies against the order dated 28th April, 1988 before the Collector of Central Excise (Appeals). We consequently agree with the submission of the learned Additional Solicitor General that the petitioner has an alternative remedy by way of filing an appeal under Section 35 of the Act and the present petition is not maintainable in so far as the merits of the demand is concerned which has been impugned in the present petition. 47. In the end learned counsel for the petitioner also urged that the impugned order dated 28th April, 1988 is invalid for the reason that the said order has not been approved by the Director General. We do not agree with this submission. The Director General's order dated 10th April, 1986 had become final and it was in pursuance of the findings recorded by the Director General that a formal order of demand had to be issued by the Assistant Collector of Central Excise which has been done in this case. No question of fresh approval by the Director General arises. The order has been passed in pursuance of the directions issued by the Director General. In view of the above the petition is dismissed. The inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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