9911796707
TMI Blog1989 (7) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 1988 and restraining the defendants from taking any action pursuant to or on the basis of the notice dated 27th March, 1986 and impugned ex parte order dated 29th January, 1988, and/or the operation of the notice and the impugned ex parte order be stayed. 2. For better appreciation of respective contentions of the learned counsel for parties, it is necessary to refer to, in brief, the facts of the case. 3. Plaintiff is a public limited company, incorporated under the Companies Act, 1956, having its registered office in New Delhi. Plaintiff entered into a colloboration agreement with M/s. Pilkington Tiles, U.K., for the manufacture of glazed tiles in India. In the year 1969, plaintiff was granted industrial licence and in the year 1971, plaintiff obtained excise licence for the manufacture of glazed tiles, from the Government of India in a backward area in Haryana. 4. The authorised capital of the plaintiff company is Rs. 1 Crore 50 lakhs. The major shareholding is held by M/s Pilkington Tiles, U.K. and by the public in India. Shri H.L. Somany is the Chairman of the Company and the Board of Directors consists of the Government nominated Directors, reputed advocates, industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintiff to clear its products on provisional basis, upon plaintiff's submitting a bond under B-13, supported by a bank guarantee, to the satisfaction of the Registrar of this Court. 7. Plaintiff was clearing the goods on provisional basis and was also submitting the bond, supported by bank guarantee, to the satisfaction of defendants' department and the High Court of Delhi. 8. Plaintiff has followed strictly all the terms of the bond and there is no dispute. Plaintiff has paid the duty, as demanded by the proper officer, from time to time and submitted the bond along with bank guarantee. The huge payment has been made by plaintiff on the basis of provisional assessment, which is to be adjusted/refunded after the final approval of the price list/final assessment, till date. 9. Till the filing of the suit, it is alleged, that the assessment was still provisional. 10. On January 13, 1981, in the writ petition, this Court recorded the statements of the parties and directed the plaintiff to file fresh statement/amendment in the price list, submitted by plaintiff, from time to time, with the authorities, by March 31, 1981 along with documentary evidence. The proper officer was furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... places in India as well the residential premises of the Chairman and other senior officers/executives of the plaintiff company. During these searches, no incriminating material was found. The residential premises of Mr. Daga was also searched on the same day, in his absence. The documents, left by Mr. Gupta, on October 2, 1985 were taken into possession by the officers. In these searches, it is alleged, no material could be found by the officers, indicating either directly or indirectly any involvement of the company, in any act with the acts of Mr. Vyas. The bed-room of Mr. Daga was locked and the same was sealed with the condition that the room would be searched when Mr. Daga returned to India. 14. On October 20, 1985, Mr. Daga returned to India and immediately on his return, plaintiff informed the officer of defendant No. 2's department, about the return of Mr. Daga. Immediately, the bed-room was searched and no incriminating material was found. 15. The officers of the department of defendant No. 2, contacted various dealers/persons, out of 200 dealers of the plaintiff all over India, behind the back of plaintiff. Among these dealers, none stated having given any extra money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plaintiff under Rule 173Q(1) of the Rules. 19. According to plaintiff, the aforesaid notice has been issued by the Collector without applying his mind. Before issuing a notice, the Issuing Authority should examine the facts properly, by applying his mind, whether a prima facie case has been made out or not. In the present case, it is alleged that the Authority had not examined the facts of the case, nor the Authority had considered the matter, whether any prima facie case was made out or not. 20. Since the final assessment was yet to be made, so no notice under Section 11A of the Act could be issued. As in the plaintiff's case, the duty of excise was provisionally assessed in accordance with the Rule 9B, so the case fell under Section 11A(3)(ii)(b). The relevant date, not having come into existence because of the final assessments, having not been initiated, so the provisions of Section 11A and the limitations of time, given thereunder, were totally inapplicable to the demand in dispute. 21. As the price list, filed by plaintiff, was still pending final approval as required under Rule 173C of the Rules, so the Collector has no power under Rule 173C to finally approve the price l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tituted both the prosecutor and the judge of the cause. The Board, without hearing the plaintiff, transferred the case of plaintiff from the Collector of Defendant No. 2 to defendant No. 1. The transfer is illegal and without jurisdiction. 26. Plaintiff has not been given any proper opportunity to file reply to the show cause notice. Plaintiff had been demanding the inspection of various documents and files, relating to the branch offices of the plaintiff. On January 13, 1988, this Court passed an order in the writ petition, filed by plaintiff for quashing the original/provisional assessment. In the order, it is alleged, that the original/provisional assessment made by the Assessing Authority alongwith the show cause notice, was set aside by virtue of the order and fresh assessment was directed to be made. Despite this, plaintiff received an ex parte order dated January 29, 1988, passed by defendant No. 1. In the order, plaintiff has been directed to pay forthwith an amount of Rs. 86,31,847.45 of Central Excise duty, as demanded in the show cause notice, under Section 11A of the Act. For the alleged offence on the part of plaintiff for evading the payment of Central Excise duty, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer of Mr. Vyas has got no relevance to the facts of the present case. Some dealers were contacted by the officers of the Department and in their statements, they pointed out that the amount over and above the declared price, was paid to the plaintiff company. By virtue of the notification, issued from time to time, officers of the Directorate of Revenue Intelligence, are duly empowered by the Central Board of Excise and Customs, as Central Excise Officers, to exercise the powers of a Central Excise Officer, under the provisions of the Act and the Rules. As such, the officers, who conducted the searches, were duly authorised to do so and further to record the statements under Section 14 of the Act. Scheme of reward has also been mentioned in the written statement. As regards Rule 9(1) of the Rules defendants have alleged that the same has not been relied upon in the final order of adjudication. 31. Under Rule 173C of the Rules, as assessee is required to pay the duty, so determined by him, for each consignment, but this determined duty has to be based on the actual price, charged by the assessee. In the present case, plaintiff had been charging over and above the declared pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... framed : 1. Whether the suit is maintainable because of the provisions of the Central Excises and Salt Act, 1944, and the Rules framed there under? OPP 2. Whether the suit is bad for non-joinder of necessary and proper parties, namely, Collector of Central Excise, New Delhi and Directorate of Anti-Evasion, New Delhi? OPD 3. Whether the show cause notice dated March 27, 1986 and the order dated January 29, 1988, are liable to be set aside on the grounds, as mentioned in plaint? OPP 4. Relief. 35. Before coming to the issues, it is necessary to refer to the objection, taken by defendants, with regard to the notice under Section 80 of Civil Procedure Code. In para 70 of the plaint, plaintiff alleged that a notice dated January 5, 1988, under Section 80 C.P.C. was given, but no reply was received from defendants. 36. In reply, defendants alleged that no such notice was received by defendant No. 1. In other words, service of notice on defendant No. 2 has not been denied. 37. In fact, there was no serious contest to this, so, no issue was framed on this point. 38. Plaintiff filed an affidavit to the effect that notice under Section 80 of Civil Procedure Code was also served upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. Collector of Customs and Another, 1980 (6) E.L.T. 89 (Calcutta); Gwalior Rayon Mfg. (Wvg.) Co. v. Union of India and Ors, 1982 (10) E.L.T. 844 (M.P.) and Union of India v. Tarachnd Gupta & Bros. 1983(13) E.L.T. 1456 (S.C.). 44. Mr. Sat Pal, learned counsel for defendants, on the other hand, urged that this Court has no jurisdiction to go into the various allegations, as Excises and Salt Act, 1944, is a complete code and all the remedies are made by plaintiff in the suit. There was no lack of jurisdiction on the part of any of the Authorities, while initiating the action against defendants. Under Section 35, an appeal can be filed to the Collector (Appeals). Under Section 35B, appeals can be filed before the Appellate Tribunal. Mr. Sat Pal has further contended that in case of non-application of mind, on the part of an Authority or lack of jurisdiction, then, the same can be challenged by way of writ petition, under Article 226 of the Constitution of India. 45. He has placed reliance upon judgments in cases Dhulabhai etc. v. State of Madhya Pradesh and Another, A.I.R. 1969 S.C. 78 and Madras Rubber Factory Ltd., Madras v. Union of India and Another, 1981 (8) E.L.T. 879 (D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltras vires cannot be brought before Tribunals constituted under the Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals. (4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit. (5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected, a suit lies. (6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case, the scheme of the particular Act must be examined because it is a relevant enquiry. (7) An exclusion of jurisdiction of the Civil Court is not readily to be inferred unless the conditions above set down apply." On the facts and circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f enforcement of that liability machinery has been provided by the Act. Having regard to the complicated nature of the questions which arise in the determination of liability to pay duty of customs the Legislature has invested the power of determining liability and the manner of enforcement thereof upon a specially authorised hierarchy of tribunals. An appeal lies against the order of the Assistant Collector of Customs against an order imposing duty as well as an order refusing to refund duty, and the grievance may be carried to the Central Board of Revenue. In our judgment, the jurisdiction of the Civil courts is by clear implication of the statement excluded." There is then a further observation that in certain cases a civil suit will lie, but that is when the provisions of the statute have not been acted upon or the authority has acted in violation of the fundamental principles or judicial procedure etc. That no doubt is not the case in the present case. I would, therefore, come to the conclusion that the present suit is not maintainable unless it is shown that there has been a breach of the procedure prescribed by the Customs Act, 1962. It is not sufficient to say that the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndant No. 1 failed to consider the order dated January 13, 1988, passed by the High Court of Delhi and the reply filed by plaintiff. In my view, the order cannot be challenged on these allegations by way of a suit. 54. However, the jurisdiction of the civil court is not excluded in those cases where the provisions of the particular Act have not been complied with, or the statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure. If the Authority or Tribunal acts without jurisdiction, or the order is clearly bad for lack of proper jurisdiction, then, the same can be challenged, either by invoking the jurisdiction of the High Court, under Article 226 of the Constitution or by filing a suit, even though, the alternate remedy of filing an appeal is provided under a Special Act. 55. In the plaint, plaintiff has alleged that the show cause notice and the impugned order are without jurisdiction, illegal, mala fide, void ab initio and nullity. However, I am not deciding this issue on the mere allegations, having been made by plaintiff in the plaint. In view of my decision, which I am going to give on the show cause notice, I hold that the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds, as mentioned in the plaint? 62. In the first place, Mr. Anand has raised the following three grounds of challenge, to the entire proceedings of defendants, including the search, show cause notice and the Order dated January 29, 1988 : (i) Defendant No. 2 has propounded a reward scheme, for the officials of the Central Excise Departments. Mr. Anand has urged that in order to get the benefits under the scheme, cases of evasion were sought to be made out against plaintiff, without proper and factual justification. Under the scheme, a reward up to 20 per cent of the duty and penalty levied and realised, is payable to the officials. Out of this amount, a reward to the tune of 25 per cent of the expected final reward, can be paid as soon as the show cause notice is issued and even before the explanation of the assessee. In the present case, advance reward has already been paid to the officers of the defendant No. 2, thereby implying the pre-determination of the case at the high level. The scheme of reward itself violates the Rule of law and the proceedings in the present case are vitiated on account of departmental bias. (ii) The Central Board of Excise and Customs could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy or short payment of central excise duty, unless there is a final determination of the assessment value. Section 11A applies to reopening of the assessment for recovery of the duty, which has escaped assessment. 65. Mr. Anand has placed reliance on the judgments in cases Ghanshyam Dass v. Regional Asstt. Commissioner of Sales Tax, A.I.R. 1964 S.C. 766, Binny Ltd., Madras v. Superintendent, Central Excise, Guindy and Others, 1979 (4) E.L.T. 65, International Computers Indian Manufacturers Ltd. and Another v. Union of India & Others, 1981 (8) E.L.T. 632, and Andhra Re-Rolling Works, Hyderabad v. Union of India and Others, A.I.R. 1986 S.C. 1964. Mr. R.K. Anand has further urged that the cause of action for invoking Sec. 11A of the Act, accrues only from the rele- vant date, as defined under Sec. 11A, which in case of provisional assessment means the date of adjustment of duty after final assessment under Rule 9B. 66. All these submissions were considered at length by the Division Bench in Duncans Agro Industries Ltd. v. Union of India, C.W. 1708 of 1987. It is however not disputed that the goods were cleared on the basis of provisional assessment. The final assessment was made aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act or the Rules with intent to evade payment of duty could be the subject matter of proceedings for levy and collection. These provisions show that Rule 10 and 10A as originally enacted did not create a right to levy the excise duty. It merely laid down a rule of limitation. The statute of limitation assumes the existence of a cause of action and does not define it or create one (see "R.C. Jall v. Union of India", A.I.R. 1962 S.C. 1281). The intention of the law of limitation is, not to give a right where there is none, but to interpose a bar after a certain period to enforce an existing right (See "Hari Nath Chatterjee v. Madhur Mohan Goswami", I.L.R. 20 Calcutta 8 (PC). The cause of action for invoking the provisions of Section 11A is the fraudulent evasion of excise duty and not a right created by any provision relating to limitation". Hence the arguments, advanced by Mr. Anand, have no force. 67. The next contention of Mr. Anand is, that the show cause notice dated March 27, 1986, is illegal, mala fide, against the principles of natural justice and fair play and without juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law, for the time being in force or at a price, the maximum fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price of the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof. (iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers (being related persons) who sell such goods in retail; (b) where the normal price of such goods is not ascertainable for the reason, that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed." 72. Plaintiff has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77. The word "ordinarily", has been interpreted, in several cases. The word "ordinarily" means `in the majority of cases', but not invariably. 78. As already stated above, plaintiff has proved that it has about 200 dealers all over India. The officials of the Department recorded the statements of about 62 dealers/persons out of 200 dealers. It is also on record that out of 62 dealers, only 5 dealers alleged extra payment to Shri Vyas. 79. Defendants have filed the copies of the statements of 5 dealers, recorded by the officials of the Department. 80. In his statement, Shri T.V.L. Santhanam, partner of M/s. Lakshmi Trading Corporation, stated that his firm used to place orders with plaintiff for supply of tiles and the payment used to be made to plaintiff by means of Demand Drafts. With regard to the extra payments, he stated that these extra payments were made to Shri M.L. Vyas, who was the Sales Executive of the plaintiff Company. These payments were made upon the direction of Mr. Vyas. This amount of extra money was paid by means of Demand Drafts, sent to Mr. Vyas, at his residential address. He has also stated that these extra payments were made to Mr. Vyas, because he told ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of Mr. Vyas was also recorded under Section 14 of the Act. In his statement, Mr. M.L. Vyas admitted that he was the Sales Executive of plaintiff and he had started a side business during his tenure as Sales Executive. He admitted that he was not getting extra money from all the dealers but only from some of the dealers. He has also stated that he did not share this extra amount with anyone and that the Company was not aware of it. 86. Mr. Vyas has categorically denied that either the Company or any of its Directors or officials, was involved in the collection of extra money by him. The money, so received by him, was deposited in his or his wife bank account or in a joint account. This he did in his personal capacity. 87. It appears that Mr. Vyas was getting the extra money from certain dealers by misusing his position as Sales Executive, as there was a short supply of the glazed tiles. 88. Plaintiff has also placed on record the statements of certain dealers, whereby the dealers have specifically stated that no extra amount was paid. Out of 200 dealers, only 5 dealers have alleged extra payment to Mr. Vyas. 89. There was no material before the Collector to suggest that ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, duty of excise is chargeable on the excisable goods with reference to their values such value is the normal price at which the goods are ordinarily sold by assessee to a buyer in the course of the wholesale trade. 97. In my view, there was non-application of mind, on the part of the Authority, issuing the show cause notice. 98. Thus, the provisions of the Act have not been complied with. In issuing the show cause notice, fundamental principles of judicial procedure were also not complied with, as there was no material before the Collector to suggest any involvement of the Company. 99. For this reasons, the show cause notice dated March 27, 1986 is illegal and without jurisdiction and is liable to be set aside. 100. As the show cause notice dated March 27, 1986 is illegal and without jurisdiction, so, on this ground alone, the order dated January 29, 1988, cannot be sustained. 101. Issue No. 3 is decided accordingly. 102. Under the facts and circumstances of the case, I grant the following reliefs : (i) I pass a decree for declaration in favour of plaintiff and against defendants, thereby declaring the notice dated March 27, 1986, as illegal and without jurisdiction and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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