Bombay High Court
Ewac Alloys Limited vs Union Of India on 13 July, 1995
Equivalent citations: 1995(80)ELT759(BOM)
Author: S.H. Kapadia
Bench: S.H. Kapadia
JUDGMENT Kapadia, J.
1. The short point which arises for determination in the present case is whether Respondent No. 2 was entitled to commence proceedings under the provisions of Section 11A(1) of the Central Excise Act against the petitioners on the ground of wilful suppression or wilful mis-statement as alleged.
2. The facts giving rise to this Writ Petition, briefly, are as follows:
3. At the relevant time, petitioners were the subsidiary of Larsen & Toubro. At that time Larsen & Toubro were the sole selling agents in respect of goods manufactured by the petitioner-Company. On 1st October, 1975 pursuant to the amendment of Section 4 of the Central Excise Act, show-cause notice was given on December 20, 1977 by the Assistant Collector of Customs. By the said show-cause notice, the petitioners were asked to explain whether secondary packing prices was included in the assessable value of the goods sold through Larsen & Toubro. By an Order dated 2nd June 1981, the Assistant Collector of Customs accepted the contention advanced on behalf of the petitioners herein that wooden boxes, which was a secondary packing, was used for the purposes of despatching of the goods to up-country customers and by the said Order dated 2nd June 1981, the Assistant Collector of Customs came to the conclusion that packing charges in respect of the wooden boxes cannot be included in the assessable value. Against the Order of the Assistant Collector dated 20th December, 1977, the Department did not prefer any appeal and the said Order became final. On 7th October, 1983, the Judgment of the Supreme Court in the case of Bombay Tyres [1984 (14) E.L.T. 1896 (SC)] came to be delivered. Thereafter on 24th July, 1985, Respondent No. 2 herein gave a show-cause notice to the petitioners stating that the abovementioned secondary packing ought to have been included in the assessable value and since they were not included, by the above show-cause notice, the Collector purported to demand duty, amounting to Rs. 21,11,853/- for the period June 1980 upto June 1984. At this stage it may be mentioned that after the Judgment of the Supreme Court in the case of Bombay Tyres petitioners have paid duty on the abovementioned packaging from July 1, 1984. By impugned Order dated January 20, 1987 the Collector came to the conclusion that the judgment of the Supreme Court referred to above, in Bombay Tyres case in 1983 indicated change in law right from the date when the new Section 4 came to be incorporated on 1st October, 1975 and in the circumstances, the Collector came to the conclusion that he was entitled to levy the abovementioned duty with penalty of Rs. 2,00,000/- under Rule 173Q(1) for the period June 1980 upto June 1984. After the issuance of the impugned Order the Department instituted Criminal proceedings. In the above circumstances, the Writ Petition No. 603 of 1987 has been filed by the petitioner-Company against the Order passed by the Collector under provisions of Section 11A(1) dated January 20, 1987. Petitioners have also filed Criminal Writ Petition No. 1169 of 1988 under Article 227 of the Constitution read with Section 482 of the Criminal Procedure Code to quash the proceedings vide Case No. 646 of 1987 in the Court of the Chief Metropolitan Magistrate, Bombay instituted by the Assistant Collector of Central Excise.
4. In the above circumstances, both the above both the above Writ Petitions are heard together since they raise common issue. Both the Writ Petitions are decided by this common judgment.
5. Mr. Bhatt, learned counsel appearing on behalf of the petitioners contended that in the present case, the second respondent could not have commenced proceedings in respect of the above mentioned period of five years, particularly when no case has been made of fraud, collusion or wilful suppression or wilful mis-statement of fact. Mr. Bhatt pointed out that the entire impugned Order proceeds on the basis that the law stood concluded by the judgment of the Supreme Court in Bombay Tyres' case decided in 1983 and under the said judgment, the secondary packaging in the present case, constituted a charge which was required to be included in the assessable value of the goods. Mr. Bhatt contended that in fact, the controversy as far as the secondary packaging is concerned stood concluded ultimately by the judgment in the second M.R.F. case decided by the Supreme Court in Union of India v. M.R.F. [. Mr. Bhatt contended that in the present case, right from July 1, 1984 i.e., after the judgment in Bombay Tyres' case, petitioners have included the secondary packaging charges in the assessable value. Mr. Bhatt contended that under Section 11A(1) of the Central Excise Act, the period of six months is prior to the issuance of the show-cause notice. However, by proviso, the Department is entitled to commence the proceedings even in respect of a larger period only in cases of fraud, collusion, wilful suppression of facts or wilful mis-statement. In the circumstances, it is contended that in the present case, the Department had no authority to commence proceedings, particularly when no case has been made out for fraud or collusion or wilful misstatement or wilful suppression of facts. Mr. Bhatt further contended that the impugned Order, therefore, passed by the Collector was without authority of law and consequently, the Criminal proceedings instituted by the Department were also liable to be quashed.
6. Mr. Mehta, learned counsel appearing on behalf of the Department contended that in the present case, petitioners' sole selling agents at the relevant time were Larsen & Toubro. According to Mr. Mehta, respondent No. 2 has given good reasons for commencing proceedings under the proviso to Section 11A(1), particularly because although the petitioners were fully aware that secondary packaging charges ought to be included in order to evade duty, they did not do so and in the circumstances the Collector was entitled to proceed under the proviso to Section 11A(1). Mr. Mehta also contended that in the present case, the criminal proceedings indicate the offence has been committed by the Company and, therefore, they were entitled to proceed under Rule 9(1) of the Central Excise Rules and that no interference is called for under Article 226 and Article 227 of the Constitution in the above two Writ Petitions.
7. We find considerable merit in the contentions advanced on behalf of the petitioners. It is now well settled by various judgments of the Supreme Court that under Section 11A of the Central Excise Act, the Excise Officer can initiate proceedings where the duty has not been levied or short-levied within six months from the relevant date. However, this period to commence proceedings under proviso to Section 11A(1) stands extended if the duty could not be levied or short-levied due to fraud, collusion, wilful mis-statement or wilful suppression of facts. In the case of Tamil Nadu Housing Board v. Collector of Customs (reported in 1994 (74) E.L.T. P. 9) as also in the case of Cosmic Dye Chemical v. Collector of Customs (reported in 1995 (75) E.L.T. 721), the Supreme Court has laid down that when the law requires intention to evade payment of duty, mere failure to pay duty will not attract proviso to Section 11A(1) and that the Excise Authority can only proceed if it is shown that the assessee was aware of the duty being leviable and yet he deliberately avoided paying the same. It is the deliberate avoidance of payment which attracts proviso to Section 11A(1). In the present case, we have seen the entire Order passed by the Collector on January 20, 1987. There is nothing to indicate wilful mis-statement or deliberate evasion of duty. On the contrary, after the judgment of Bombay Tyres given by the Supreme Court in 1983, petitioners have included the secondary packaging charges in the assessable value from 1st July, 1984. This fact is also recorded by the Collector. In the present case, therefore, in the absence of any wilful evasion of duty, the Collector was not entitled to commence proceedings under the said proviso to Section 11A(1). Consequently, the Order dated 20th January, 1987 is passed without any authority of law and the same is hereby set aside. Consequently, the criminal prosecution instituted by the Department vide Case No. 646 of 1987 is also quashed, particularly in view of the fact that the said case is instituted on the basis of the impugned Order dated January 20, 1987 which is hereby set aside.
8. Accordingly, Rule is made absolute in O.S. Writ Petition No. 603 of 1987 in terms of prayer (a). Rule is also made absolute in Criminal Writ Petition No. 698 of 1988 in terms of prayer (a). In the facts and circumstances of the case, however, there will be no order as to costs.