TMI Blog1996 (6) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 13-7-1992, calling upon the petitioners to show-cause as to why an amount of Rs. 2,47,05,641.22 as detailed in the annexure thereto for the period from 1-2-1992 to 30-6-1992 should not be demanded and recovered under Section 11A read with Section 11D of the Act with a consequent liability for penalty under Rule 210 of the Central Excise Rules, 1954 and giving the petitioners an opportunity to make their submissions in this regard. W.P. No. 11018 of 1992 has been filed with reference to the same show-cause notice, but seeking for a writ of declaration or any other appropriate writ or direction, declaring that Section 11D of the Act is ultra vires and unconstitutional, so far as the other writ petitions are concerned, they relate to similar show-cause notices issued relating to different periods demanding different sums of amount as set out hereunder :- Sl.No. W.P. No. Show-cause Notice and date Amount demanded Period covered 1. [1968/93] O.C. No. 3436/28-12-1992 2,17,46,031/- 7/92 to 10/92 2. 9785/93 O.C. No. 888/23-4-1993 2,46,51,772/- 11/92 to 3/93 3. 19324/93 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of duty from February, 1992, by availing the exemption under the exemption notification dated 25-7-1991. The case of the petitioner is that they were manufacturing the asbestos cement products some of them containing less than 25% by weight of fly ash identified as conventional products and the other category containing more than 25% by weight of fly ash known as UT Products simultaneously and marketing them. So far as the conventional products are concerned, the petitioners are not entitled to any exemption and the classification list filed and approved appears to make the goods exigible to excise duty. As far as UT Products are concerned, it is stated that the petitioners filed a classification list with the third respondent on 30-12-1991 claiming the benefit granted by the above notification dated 25-6-1991, but the third respondent, by his communication dated 3-2-1992 granted permission to the petitioners to clear the UT Products on the basis of the classification list submitted by them, however subject to the condition that the assessment of the UT Products would be provisional under Rule 9D of the Central Excise Rules, 1944 and the petitioners executing the necessary bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court at the stage of show-cause notices-cum-demand and it is not for this Court within the scope of these writ petitions to undertake an enquiry or adjudication into the correctness of conflicting factual claims of the petitioners or the respondents. 5. The petitioners, in the affidavit filed in support of the writ petitions, contend that the provisions of Section 11D of the Act are ultra vires and in excess of the legislative competence of Parliament under Entry 84 of List I of the VII Schedule to the Constitution since, according to the petitioners, the provision in the Act provides for the deposit of amounts which are collected as 'representing' excise duty, though, in fact, it may not be payable as such duty. The further grounds of challenge in the affidavit are that the show-cause notices are totally illegal and arbitrary inasmuch as the petitioners have not charged or collected any amount as excise duty or representing to be the excise duty in respect of UT Products from their customers, and the said move of the respondent is opposed to the price list submitted by the petitioners. The show-cause-cum-demand notices under challenge are also said to be pre-mature in that no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issues raised on merits before the authorities. The respondents further contend that only after verification of sale invoices of the petitioners, it was noticed that the petitioners had collected the duty element as part of the price and has not paid to the Government the amounts so collected necessitating the issue of demand-cum-show-cause notices which are said to be quite in accordance with law, just, fair and legal and not unconstitutional as alleged. The respondents also contend that since the petitioners had an effective alternative remedy under the Act the writ petitions are not maintainable. In other respects, the reasons, which according to the respondents, justify their provisional conclusion that the petitioners really charged and collected excise duty even in respect of exempted commodities which are set out in detail in the counter affidavit are correct and the claim of the petitioners, to the contrary, that they have not collected any amount representing excise duty is disputed as a false. It is also the contention of the respondents that the impugned demand-cum-show-cause notices were issued to confirm to the principles of natural justice and give an opportunity to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a portion of the price to be towards excise duty though the petitioners have availed of the exemption notification and cleared such goods without paying the excise duty. Suffice it to notice that the excess cost of production incurred in manufacturing the UT products and principles governing prudence of business are said to be the basis for charging identical price rates for both products. The petitioner-company's invoices and Depot vouchers are also sought to be explained with the statement of the petitioners in the whole sale price list and that particularly the remarks in Column No. 6 that the prices are "inclusive of excise duty as applicable". 8. At the time of hearing of the writ petitions, Sri Soli Sorabjee, learned Senior Counsel appearing for the writ petitioners, projected his challenge mainly based on the constitutional validity of Section 11D of the Act. It was the contention of the learned Senior Counsel that the Parliament lacked legislative competence to enact Section 11D of the Act and that, in any event, the absence of provision for any machinery or actual prescription of the competent authorities to adjudicate on any disputed claims of collection of any amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prevent undue and unjust enrichment and that, therefore, the amounts due to the Central Government under Section 11D of the Act can be recovered by the Authorities by having recourse to the machinery under Section 11A of the Act. In view of the above, according to the learned Counsel for the respondents, the alleged violation of Articles 14 and 265 of the Constitution is untenable and liable to be rejected. According to the respondents, the officers empowered to exercise powers under Section 11A are entitled to enforce the recovery of the amount due under Section 11D and the demand-cum-show cause notices issued are, therefore, quite in accordance with law and unassailable and the petitioners may go before the authorities to vindicate their rights and the writ petitions are, therefore, liable to be rejected. The learned Senior Counsel appearing on either side adverted to several judicial pronouncements and reference to them will be made before adverting to a consideration of the issues raised on either side. 10. In AIR 1964 SC 922 = 1964 (2) S.C.J. 229 (R. Abdul Quader Co. v. The Sales Tax Officer, Hyderabad), a Constitution Bench of the Supreme Court has considered the const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over to Government, merely because some dealers by mistake or otherwise have collected it as tax, it is difficult to see how such a provision can be ancillary or incidental to the collection of tax legitimately due under a law made under the relevant taxing entry. We do not think that the ambit of ancillary or incidental power goes to the extent of permitting the Legislature to provide that though the amount collected - may be wrongly - by way of tax is not exigible under the law as made under the relevant taxing entry, it shall still be paid over to Government, as if it were a tax. The Legislature cannot under Entry 54 of List II make a provision to the effect that even though a certain amount collected is not a tax on the sale or purchase of goods as laid down by the law, it will still be collected as if it was such a tax. This is what Section 11 (2) has provided. Such a provision cannot in our opinion be treated as coming within incidental or ancillary powers which the Legislature has got under the relevant taxing entry to ensure that the tax is levied and collected and that its evasion becomes impossible. We are therefore of opinion that the provision contained in Section 11 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meaning of Entry 54 of List II, nor can the State Legislature under the guise of incidental or ancillary power do indirectly what it cannot do directly. We are therefore of opinion that Section 11(2) is not within the competence of the State Legislature under Entry 54 of List II." 11. In AIR 1971 S.C. 946 = 1970 (3) SCR 455 (Ashoka Marketing Ltd. v. State of Bihar and Another), a constitution Bench of six learned Judges of the Apex Court considered the constitutional validity of some of the provisions contained in Section 20A of the Bihar Sales Tax Act, 1959. After referring to the decision in R. Abdul Quader and Company's case (supra), the provision under challenge in that case was considered to be not in truth one for levy or collection of an amount as tax which the State is not competent to levy or collect but for compelling a Registered dealer to pay over the amount collected on behalf of the State as tax so that it may be available to a person from whom it was unlawfully recovered. Apart from relying upon Entry 54 of List II support was sought to be drawn from Entries 6, 7 and 13 of List III of the VII Schedule to the Constitution also. While observing that State Legislatu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (8), in our judgment, the amount received by the State or appropriated by the State continues to have the character of a tax collected which the State is not entitled to collect." "We fail to appreciate how power to legislate in respect of Entries 6 and 13 would authorise the State Legislature to legislate in respect of recovery from the dealer of an amount which the dealer was in law not entitled to collect, but which he has collected. The power to legislate in respect of sub-sections (3), (4) and (5) of Section 20A does not fall under Entries 6, 7 and 13 of List III expressly, nor can it be said that the power to legislate is necessarily incidental to the power contained in Entries 6, 7 and 13 of List III. As already pointed out, this Court in the judgment in Abdul Quader's case (1964) 6 S.C.R. 867 has clearly held that the State has no power to legislate for recovering amount which is collected by the tax-payer in order to recoup himself for payment of tax which under the law he is not bound to pay. Even though the competence of the State to legislate was not sought to be supported under Entries 6, 7 and 13 of List III, the decision of the Court plainly implies that the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rers/producers to the agents or dealers and from them to the wholesalers and from them to the retailers before they reach the consumers. Excise duty can properly be levied and collected from the manufacturers/producers but not from all those who happen to sell or purchase the goods till they reach the ultimate consumer for the taxable event is only one and that is manufacture or production of particular goods. Excise duty can be collected only once at the point of collection declared by the statute but not on multiple points. Thus, it is clear that on the ground of persons other than manufacturers or producers or importers receiving the amounts as excise duty, they cannot be made to credit the same to the Central Government. As the ambit and scope of the above-said provisions is beyond the scope of relevant legislative entry and relevant charging sections, they cannot be said to be within incidental and ancillary power of the legislature. In view of the above discussion and applying principle No.(2) aforementioned, sub-section (1) of Section 11D of the Central Excise Act and sub-section (1) of Section 28B of the Customs Act cannot but be held to be beyond the legislative competence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State Government into a forum for adjudicating upon the merits of the claim made by newspaper employee against his employer under any of the provisions of this Act* Section 17 provides : "Where any money is due to a newspaper employee from an employer under any of the provisions of this Act, whether by way of compensation, gratuity or wages, the newspaper employee may, without prejudice to any other mode of recovery, make an application to the State Government for the recovery of the money due to him, and if the State Government or such authority as the State Government may specify in this behalf is satisfied that any money is so due, it shall issue a certificate for that amount to the Collector and the Collector shall proceed to recover that amount in the same manner as an arrear of land revenue." It is clear that the employee's claim against his employer which can form the subject-matter of an enquiry under Section 17 must relate to compensation awardable under Section 4 of the Act, gratuity awardable under Section 5 of the Act, or wages claimable under the decision of the Wage Board. If the employee wishes to make any other claim against his employer, that would not be cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Government or the specified authority mentioned under Section 17 power to enforce attendance of witnesses, examine them on oath, issue commission or pass orders in respect of discovery and inspection such as can be passed by the boards, Courts or tribunals under the Industrial Disputes Act. It is obvious that the relevant provisions of Section 11 of the Industrial Disputes Act, 1947, which confer the said powers on the conciliation officers, boards, Courts and tribunals cannot be made applicable to the State Government or the specified authority mentioned under Section 17 merely by virtue of Section 3(1) of the Act. 9. In this connection, it would be relevant to remember that Section 11 of the Act expressly confers the material powers on the Wage Board established under Section 8 of the Act. Whatever may be true nature or character of the Wage Board - whether it is a legislative or an administrative body - the legislature has taken the precaution to enact the enabling provisions of Section 11 in the matter of the said material powers. It is well known that, whenever the legislature wants to confer upon any specified authority powers of a Civil Court in the matter of holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entertained the first respondent's application, he was acting as the specified authority under Section 17 and not as an industrial tribunal. It is clear that under Section 17, the State Government would be entitled to specify any person it likes for the purpose of holding an enquiry under the said section. The powers of the authority specified under Section 17 must be found in the provisions of the Act itself and they cannot be inferred from the accidental circumstance that the specified authority otherwise is a member of the industrial tribunal; since there is no provision in the Act which confers on the specified authority the relevant and adequate powers to hold a formal enquiry, it would be difficult to accept the position that various questions which may arise between the working journalists and their employers were intended to be dealt with in a summary and an informal manner without conferring adequate powers on the specified authority in that behalf. The second respondent himself was impressed by this argument but he was inclined to hold that the necessary power could be assumed by him by implication because he thought that, in the absence of such implied power, his jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure to be followed in making the assessment leaves it to the Executive to evolve the requisite machinery and procedure. The whole thing, from beginning to end, is treated as of a purely administrative character, completely ignoring the legal position that the assessment of a tax on person or property is at least of a quasi-judicial character. Again, the Act does not impose an obligation on the Government to undertake survey proceedings within any prescribed or ascertainable period, with the result that a land-holder may be subjected to repeated annual provisional assessments on more or less conjectural basis and liable to pay tax thus assessed. Though the Act was passed about five years ago, we were informed at the Bar that survey proceedings had not even commenced. The Act thus proposes to impose a liability on land-holders to pay a tax which is not to be levied on a judicial basis, because (1) the procedure to be adopted does not require a notice to be given to the proposed assessee; (2) there is no procedure for rectification of mistakes committed by the Assessing Authority; (3) there is no procedure prescribed for obtaining the opinion of a superior Civil Court on question of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed as Manager nor call upon him to pay any amount which he determined as due from him. Chief Justice M.C. Chagla, speaking for the Division Bench, observed as follows:- "We were also told that if Legislature enacts any provision of the Law, it does so with some purpose and we must find some cases to which the particular provision of the law would attach, and it is said that if we give to Section 48 the meaning which we suggest is the proper meaning, then it would be difficult to find any cases to which Section 48 would be applicable. It is true that ordinarily the function of the Court should be not to render any legislation futile or infructuous, but it is equally the function of the Court not to alter the language of the Legislature in order to give effect to any piece of legislation. There are innumerable instances of what a learned Law Lord said of Legislature misfiring and often the Legislature by failure to use adequate language fails to achieve its object. We are not at all sure, in the first instance, that the Legislature ever intended to confer upon the Custodian the wide and drastic power of deciding liabilities of third parties, and even assuming we were satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us that any sum was due to the Custodian under the provisions of the Act, and inasmuch as the Advocate-General was not in a position to satisfy us, he failed. The position is identical today. The only change in the law that Section 48 (2) has brought about is that it has conferred a power upon the Custodian to decide and it has made his decision final. But the law is still the same today, viz. that what he can decide is something due under the provisions of the Act, and unless the Attorney General can satisfy us that this sum claimed by the Custodian from the respondents is due under the provisions of the Act, just as Section 48 was of no help to the Advocate General in that case, Section 48(2) can be of no help to the Attorney General in this case. What was argued in that case was that because a debt was due by a third party to the evacuee or the Custodian, the Custodian had the right to determine the liability of the debtor. We rejected that contention because we found nothing in any provision of the Act which conferred such a power upon the Custodian. We again look in vain through the provisions of the Act to find such a power conferred upon the Custodian, because what the Cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s adverted in answer to the above, to some of the decisions of the Apex Court laying down the principles of construction of statutes and contingencies when the Courts called upon to construe the provisions supply even the omissions to make the provisions purposeful and effective in the matter of their enforcement. In 1980 (1) S.C.J. 426 = AIR 1980 S.C. 485 (Commissioner of Income Tax, Central, Calcutta v. National Taj Traders), it was held as follows :- "10. Two principle of construction - One relating to casus omissus and the other in regard to reading the statute as a whole - appear to be well settled. In regard to the former the following statement of law appears in Maxwell on the Interpretation of Statutes (12 edn.) at page 33 : "Omissions not to be inferred. - It is a corollary to the general rule of literal construction that nothing is to be added to or taken from a statute unless there are adequate grounds to justify the inference that the legislature intended something which it omitted to express. Lord Mersy said: It is a strong thing to rend into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do.' 'We are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. They could have been enacted as one sub-clause by adding in conjunction `and' between the said two sub-clauses, in which event the clause would have read thus: 'In case it is a non-residential building which is used for the purpose of keeping a vehicle or adapted for such use, if the landlord required it for his own use or for the use of any member of his family and if he or any member of his family is not occupying any such building in the city, town or village concerned which is his own; and in case it is any other non-residential building, if the landlord or any member of his family is not occupying for purposes of a business which he or any member of his family is carrying on a non-residential building in the city, town or village concerned which is his own. If the two sub-clauses are not so read, it would lead to an absurd result. The non-residential building referred to in sub-clause (ii) is a building which is used for the purpose of keeping a vehicle or adapted for such use and all other non-residential buildings fall under sub-clause (iii). The State Legislature cannot be attributed with the intention that it required a more stringent proof by insisting upon proof of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, that Courts must seek to discover and translate the intention of the legislature or the rule making authority have been also relied upon. The observations are from the judgment of the minority opinion and cannot be relied upon as such, as an authoritative proposition or declaration of law. In 1991 (2) S.C.C. 87 (Surjit Singh Kalra v. Union of India), the Apex Court observed that Court can at times supply words which have been accidentally omitted having regard to the context and object and construe harmoniously the provisions to advance the remedy intended by the Statute by adopting a purposeful construction. It was held therein as follows:- "The tenant cannot be allowed to take up defence under Section 14 (1) (e) as against an application under Section 14B. There cannot be any defence unconnected with or unrelated to the claim or right of the plaintiff or applicant. That would be against our jurisprudence. It is unlikely that the legislature intended the result for which the counsel for the tenant contended. It will be a mechanical interpretation of the enactment defeating its purpose. Such an interpretation has never found favour with the Courts which have always adopted a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59 as applicable to Gujarat State which provided for penalty as also forfeiture of the amounts collected in contravention of Sections 15A and 46 of the said Act. The Apex Court repelled the challenge upholding the legislative competence of the State Legislature to enact such a provision in exercise of its powers under Entry 54 of List II of VII Schedule to the Constitution. V.R. Krishan Iyer, J. while speaking for the majority view, observed as hereunder:- "24. In a developing country, with the case of the people illiterate and below the poverty line, and most of the commodities concerned constitute their daily requirements, we see sufficient nexus between the power to tax and the incidental power to protect purchasers from being subjected to an unlawful burden. Social Justice clauses, integrally connected with the taxing provisions, cannot be viewed as a mere device or wanting in incidentality. Nor are we impressed with the contention turning on the dealer being an agent (or not) of the State vis-a-vis sales tax; and why should the State suspect when it obligates itself to return the moneys to the purchasers? We do not think it is more feasible for ordinary buyers to recover fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners that the absence of any machinery or the notification specifically of the authorities to deal with, determine and adjudicate upon any claim or objection as to whether or not a manufacturer has collected any amount from the buyer of any goods in any manner as representing duty of excise when really no such excise duty was payable to cast an obligation on him to forthwith pay the amount so collected to the credit of the Central Government renders the impugned exercise undertaken by the respondents by the issue of the demand-cum-show cause notices totally without jurisdiction and that the very demand-cum-show cause notice is not only arbitrary and unrea-sonable but also renders the same unconstitutional and liable to be set aside as being violative of Article 14 of the Constitution of India. Section 11D of the Act inserted by Central Act 40/1991 with effect from 20-9-1991 reads as follows:- "11D. Duties of excise collected from the buyer to be deposited with the Central Government:- (1) Notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any Court or is any other provision of this Act or the rules made thereunder, every per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct provides for recovery of any duty and any other sums of any kind payable to the Central Government by availing of the procedure deeming the said amount as if it were an arrear of land revenue. Inspite of all the above provisions, we find and notice a conspicuous omission in Section 11D of the Act any provision whatsoever to initiate any proceedings or entertain and adjudicate upon any dispute with reference to the liability to pay any amount said to have been collected by a person who was said to have so collected the amount from the buyer of any goods in any manner as representing the duty of excise but who seriously disputes or denies of having so collected. Neither any such provision is specifically made in Section 11D of the Act itself nor the statutory provision at last leaves into the rule making authority to make rules to provide for such machinery by engrafting any suitable enabling provision therefore, nor does any rule as such appear to have been made also to give effect to the purposes of the Act by providing any such machinery. Though when Section 11B was introduced by Act 25/1978 with effect from 17-11-1980 by a subsequent Central Act 40/91 with effect form 20-9-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Act which happen due to some mistake or error to be not levied or paid or has been short levied or short paid or erroneously refunded. The words 'short paid' or 'not paid' cannot be said to have relevance or by any means claimed to refer to even cases of any other payment or sum payable which is not really payment of duty leviable or exigible under the Act. Short levy, or short payment or erroneous refund equally postulates a pre-existing order of assessment or adjudication of duty liability by a competent authority under the provisions of the Act observing the procedure prescribed therefore or on compliance with the principles of natural justice and cannot by itself enable an Excise Officer to have resource to the procedure visualised under Section 11A of the Act to a case arising under Section 11D which really do not deal with a case of non-levy of duty or short levy or short payment of duty or erroneous refund of any such duty. On the other hand, having regard to the fact that Section 11D deals with a case where there was no liability to duty as such under the Act, but yet a person or a manufacturer has chosen to collect any amount from the buyer of goods as representin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well settled that the provisions in a taxing statue dealing with the machinery provisions have to be construed by the ordinary rules of construction, that is to say, in accordance with clear intention of the legislature which is to make a charge levied effective. The interpretation of a taxing provision has been held to necessarily involve the application of the well settled rule that construction should be preferred which makes the machinery workable, `ut res valeat potius qua pereat.' In Whitney's case (1926) A.C. (37), Lord Dunedin made the following observations:- "My Lords, I shall now permit myself a general observation. Once that it is fixed that there is liability, it is antecedently highly improbable that the Statute should not go on to make that liability effective. A Statute is designed to be workable and the interpretation thereof by a Court should be to secure that object unless crucial omission or clear direction makes that end unattainable. Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the Statute which determines what persons in respect of what property are liable. Next, there is the assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h or undermined by this order. On and from the date on which the respondent-Union of India take steps and provide for the required machinery, it shall be open to the respondent-Union of India or designated authority as the case may be to work out or quantify and determine the liability in the manner so prescribed or provided for in any liability thereof and recover the same in accordance with law. The consequence of our quashing the impugned proceedings is only to declare the position that the authority which has chosen to issue the impugned proceedings is neither the competent authority, nor the provisions sought to be relied upon by the said authority are the proper or legal procedure to be followed or observed or powers which could be legislatively invoked in undertaking an adjudication of a liability visualised under Section 11D of the Act when disputed and not only we declare such liability to be preserved for being vindicated and enforced but only in accordance with law but we grant such liberty to so determine and adjudicate the liability of the petitioners in accordance with law relating to the machinery provision that may be enacted. It is also well settled that the absenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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