Gauhati High Court
Sudarshan Plywood Industries Ltd. vs Union Of India (Uoi) on 16 February, 1995
Equivalent citations: 1995(79)ELT59(GAU)
JUDGMENT J.N. Sharma, J.
1. All these three Civil Rules raise the same question of law and facts and as such they are taken up for hearing together.
2. Civil Rule No. 856 of 1987 has been preferred against the show cause notice issued by the Respondent No. 4, the Additional Collector of Customs and Central Excise, Shillong on 9th October, 1985 under Section 11A of the Central Excises and Salt Act, 1944 (hereinafter called as the 'Act') for the alleged violation of various provisions of the Central Excise Act and Rules framed thereunder. The show cause notice intends to reopen various issues of classification and valuation earlier made and it is contended they were not res integra having been adjudicated upon and decided in favour of the petitioner.
3. In Civil Rule No. 650 of 1987, the show cause notice is dated 9-4-1987 and it is issued by the Respondent No. 2 in that Civil Rule.
4. In Civil Rule No. 1072 of 1987, the show cause notice is dated 9-10- 1987 and it is issued by the Respondent No. 4, the Additional Collector of Central Excise and Customs, Shillong.
5. In all the Civil Rules, the show cause notice is Annexure-A to the writ application. Out of the total eight allegations made in the impugned show cause notice, first four allegations (a) to (d) pertain to the question of valuation under Section 4 of the Act and particularly the addition of certain expenses incurred by the petitioners towards the price of goods sold both at ex-factory as well as at depots/branches. The rest of the allegations i.e. (e) to (h) pertain to the classification of the goods under Section 3 of the Central Excises Act. In short, the allegations are as follows :
(a) The 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 different periods.
(b) The company had charged and realised additional amount in the name of different heads, over and above the basic price in respect of the stock transfer, quantities sent to their branches, consignment sale agents, and marketing agents for different periods.
(c) The company effected some token ex-factory sales on fictitious assessable values declared to the department, to the local buyers.
(d) The company made some fake assessable values, had removed large quantity of their production to the extent of 98% to their branches.
(e) The company had suppressed the material facts while declaring the "defective" grades of Marine Plywood to the department for appropriate classification of the products.
(f) The company availed of exemption of duty at the rate applicable on Marine Plywood, despite the fact that Kitply conformed the specification of commercial Plywood during the period.
(g) The company had removed the grade concrete shuttering plywood under the garb of Marine Plywood deliberately by availing of concessional rate of duty applicable on Marine Plywood for the period from January, 1981 to February, 1984.
(h) The company had removed ex-factory, the prime quality of Commercial Plywood under the garb of defective grades deliberately by mis-classification was evident from the duplicate invoices bearing same number and date and other corresponding documents forwarded through banks and collection of amounts thereon for the period mentioned therein.
6. I have heard Sri M.L. Lahoty, learned counsel for the petitioners in all the Civil Rules and Sri K.N. Choudhury, learned Central Govt. Standing Counsel.
7. Shri Lahoty in addition to his oral submissions, also filed a written argument and Sri K.N. Choudhury also in addition to his oral submission filed a written argument. The submissions of Sri Lehoty are as follows :
(i) The entire proceedings arising out of the said show cause notice indicate a total non-application of mind and/or patently perverse approach of the Respondents in as much as all the said issues of classifications and valuations have been adjudicated upon more than a year before the issuance of the show cause notice by numerous quasi-judicial orders passed by the CEGAT, Collector (Appeals), Assistant Collector from time to time all of which were accepted and acted upon by the Respondents.
(ii) The Show Cause Notice issued on 9th October, 1985 for the alleged recovery of dues of excise for the period June 1980 to February 1984 by invoking Section 11A is impermissible and not maintainable as the entire matter of classification and valuation were in the thorough knowledge of the Respondents and therefore the invocation of the period of demand beyond six months of the Show Cause Notice is not legally permissible.
(iii) The issuance of the Show Cause Notice is under the teeth and deliberate disregard of the consistent judicial pronouncement made by the Hon'ble Supreme Court as also in wilful violation of the express statutory provisions. Once the existence of ex-factory sale is accepted, the mandate of the Apex Court is that only Section 4(1)(a) is attracted for the purpose of valuation and not Section 4(2) which had been held to be only a residuary provision.
(iv) Neither in the Central Excise Act nor under the Central Excise Rules, the Respondents are empowered to issue purported Show Cause Notice as both the price lists and classification lists were approved and finalised under Rule 173B and Rule 173C after issuance of specific Show Cause Notices, granting personal hearing and adjudication orders having been passed.
v(a) The disputes referred to in the said paragraphs pertain to the classifications of (1) Kitply Marine Grade, (2) Concrete Shuttering Plywood, (3) Defective Grade of Marine Plywood, (4) Defective Grade of Commercial Plywood, and the allegations totally unfounded and baseless have been made of mis-classification of the said products. It is submitted that all the said matters of classifications are settled by the Orders which are appended to the Writ Petition from pages 172 to 178, (Annexure I to J).
v(b) Vide Order-in-Appeal Nos. 97 to 98 of the Collector (Appeals), Central Excise, Calcutta (pages 172-174, Annexure I), has decided the matter of classification of the defective marine plywood and it has been held that the mere reading of the explanation appended to the Notification No. 55/79-CE., dated 1-3-1979 (Notification extracted at page 192) clearly affirms the view that marine plywood is expressly excluded from the category of commercial plywood. The goods of the petitioner are admittedly defective grade of marine plywood and merely they are defective they will not cease to be marine plywood. The allegation in para (e) of the Show Cause Notice, therefore, shows the total non-application of mind inasmuch as the allegation of mis-classification of defective grade marine plywood is absolutely baseless as the Appellate Order which was passed on 26-4-1984 was more than one and half year prior to the issuance of the impugned show cause notice on 9th October, 1985. Further the proviso of Section 11A is invoked for attracting the extended period of limitation of five years when the entire issue of classification has been judicially decided in favour of the petitioner to which the Respondent has full knowledge. Moreover, the Respondents have accepted the classification of the defective grade marine plywood themselves by acting upon the said order.
v(c) Likewise, the issue of classification of "Kitply" which is allegdly raised in paragraph (f) of the impugned Show Cause Notice stands also settled by the order No. 55/86, dated 17-11-1986 passed by Assistant Collector appearing in (pages 180 to 183 Annexure J). It is pertinent to mention that the said Order has been passed on remand under the direction of Collector (Appeals), Central Excise, Calcutta, vide his order, dated 27-9-1983 (in pages 175 to 178 - Annexure-J) whereby the Assistant Collector was directed to get the sample of the product chemically examined and after obtaining the Chemical Test Report the matter of classification be decided. The required test was carried and samples were forwarded to the National Test House, Alipur, Calcutta, who vide its Test Report affirmed the stand of the petitioner that the product "Kitply" conforms to the parameters of Marine Plywood IS-7-10-1976. The whimsical allegation of mis-classification of "KITPLY" made in paragraph (f) of the Show Cause Notice after the aforesaid Adjudication Order/Appeal order is therefore absolutely uncalled for.
v(d) The allegation of mis-classification of shuttering plywood made in sub-para (g) of the Show Cause Notice is likewise thoughtless. The said issue of classification of shuttering plywood has been adjudicated upon and all three authorities, the Assistant Collector, Collector (Appeals) and finally by the higher authority under the Central Excises Act, i.e. CEGAT vide its order No. 84/1989-D, dated 10-1-1989 has upheld the contention of the petitioner. It was declared that shuttering plywood was different from structural plywood in Trade Parlance and hence the department's case on classification is required to be dismissed.
Copy of the order No. 84/1989-D, dated 10-1-1989 is enclosed for ready reference herewith. As appeal has been preferred by the Respondent against the said CEGAT order, the allegation in para (g) of the Show Cause Notice, needs no further examination, v(e) The allegation in para (h) of the Show Cause Notice on misclassification of defective grade commercial plywood is also totally baseless in as much as Adjudication Order No. 122/83 appearing in pages 193 to 194 as Annexure 'L', the said issue has been decided in favour of the petitioner. It is pertinent to mention that earlier also the Show Cause Notice was issued for the same very classification on 30-5-1983 and after considering the reply of the petitioner and the entire evidence on record the said issue has been set at rest by the quasi-judicial authority.
(vi) The petitioner has annexed all the said judicial orders with the Writ Petition and also made specific averment in page 11 para 10, page 16 para 15 and in paras 21 to 26 at pages 22 to 31. In the Affidavit-in-Opposition filed by the Respondent in this Hon'ble Court at page 10 para 7, the validity of the said orders has not been disputed. Furthermore on the basis of the said orders the relevant classification lists/price lists were also finally approved as evident from page 16 para 15 of the Writ Petition.
Valuation issues : Charges Paras (a) to (d):-
(vii) Paragraphs (a) to (d) of the Show Cause Notice pertain to the allegation that the petitioner company has been realising the Consolidated/additional amount on and above the price and that the said Consolidated amount/additional amount is required to be added for the purpose of assessment under Section 4. In all the price lists submitted by the petitioner company from time to time a set of which are appended at pages 146 and 147 as Annexure 'F' for the purposes of analogy only, column 9 contains the declaration as to the nature and extent of the expenses without suppressing anything whatsoever. The petitioner has additionally furnished all required particulars by the letter dated 18-9- 1982 at page 143. Further column 13 recites the fact that the said price lists were approved almost a year before the show cause notice was issued, that too after investigating the entire matter. A set of adjudication orders are also annexed as Annexure-'F' from pages 148 to 171. For example for the order No. 64/84, dated 29-12-1984 page 152, it is evident from para 3rd at page 153 that the said statement of the petitioner in the price list was always in the knowledge of the department The Break-up Statement of such expenses (statement of the consolidated charges) has been referred to at page 148. Relying on the judgment of the Hon'ble Supreme Court in the Bombay Tyre International and after verifying both the factory sales bills and the bills of the Depot/Branches the matter has been decided. The petitioner company has annexed a chart as Annexure- 1 page 123 and additionally an abridged chart was also submitted in the course of arguments as to how the entire issue of the valuation for the different price lists and for the different periods has been examined and adjudicated upon. It is significant to point out that the said orders were passed almost after one year of the impugned show cause in the present Writ Petition. Not only that price lists were approved and final assessments have been made on the basis of the said Adjudication Orders.
(viii) In the Writ petition the petitioner company has made specific pleading to this effect from paragraph 21 page 22 and referred to the said price lists which have been finally approved pursuant to the adjudication orders passed by the Assistant Collector. In the Affidavit of the Opposition the contents of the said paragraphs are not refuted excluding a formal denial, as evident from page 13 paragraph 13 and page 10 paragraph 7. In the course of hearing before this Hon'ble Court the said factum had been accepted. The allegations in paragraphs (a) to (d) of the show cause notice therefore should have unjudicious and perverse approach the Respondents have adopted to malign the petitioner com- pany. Copy of the abridged chart is also enclosed for ready reference.
8. Shri K.N. Choudhury appearing for the Respondents submits as follows :
(i) The impugned show cause notice dated 9-10-1985 has been issued under Section 11A of the Central Excises & Salt Act, 1944 (hereinafter shortly referred to as the Act of 1944) against the petitioner/ assessee for violation of provisions of Rule 9(1) r/w Rules 173F, 173B, 173C, 173G (1) & (4) r/w Rule 53 and Rule 226 of the Central Excise Rules, (hereinafter shortly referred to as the Rules) inasmuch as, the petitioner/assessee by wilful mis-statement and suppression of material facts, evaded payment of Central Excise duty to the tune of Rs. 2,41,45,194.50 by misdeclaring the prices and mis-classification of the various goods manufactured by the petitioner Company to the proper officer for the purpose of assessment in their price lists and classification lists submitted from time to time for the period from June, 1980 to 24-2-1984. Before issuing the show cause notice, dated 9-10-1985, an intelligence was collected by the officers of the Directorate of Anti-Evasion to the effect that the petitioner/assessee was resorting to dubious methods of realising additional amounts from the wholesale buyers over and above the prices declared to the Department through under-valuation. On the basis of the intelligence, extensive enquiries were conducted at various places at Assam, Calcutta and other places and verified the bills/invoices pertaining to the petitioner company with reference to the assessable values declared which established the fact of evasion of duty through the aforesaid modus operandi. Accordingly simultaneous searches were conducted at the factories, registered office, Central Office, Godowns, residences of Directors, Managers etc. at Calcutta, Bombay, Nagpur, Ahmedabad, Delhi, Kanpur, Hyderabad, Madras, Tinsukia, Margherita and incriminating documents/records were seized on 24/25-2-1984 which clearly established evasion of duty.
The principal basis on which the writ petition has been structured is that the impugned show cause notice intends to re-open various issues of classification and valuation which are not res Integra having been adjudicated upon and decided in favour of the assessee.
The Respondents, inter alia, beg to submit as follows :
(i) Before averting to the facts of the case the respondents submit that the writ petition is pre-matured in as much as, the writ petition is not maintainable. Ordinarily this Hon'ble Court in exercise of its inherent power under Article 226 does not interfere with a show cause notice unless it can be shown that the authority lacks jurisdiction. It is not a case where the respondents lack jurisdiction to issue the impugned show cause notice. The basic ingredients for invoking the power under proviso to Sub-section (1) of Section 11A of the Act of 1944 are, there must be wilful mis-statement and suppression of fact with an intent to evade payment of Central Excise duty. In the instant case both the ingredients being present as would be evident from the facts leading to the issuance of the show cause notice, invoking the extraordinary power of this Hon'ble Court under Article 226 of the Constitution at this stage would be against the consistent judicial pronouncements of various High Courts and the Apex Court and would also entail abuse of the judicial process.
(ii) The contention of the assessee that the allegations contained in paras (a) to (d) of the impugned Show Cause Notice pertains to valuation and is covered by the judgment of this Court, dated 28-9-1994 rendered in Civil Rule No. 593/87 and connected Writ Petitions is not correct and is denied by the Respondents. The stand of the Revenue in this case is quite different from the earlier writ petitions. In this connection it would be pertinent to mention that the revenue in their counter affidavit filed in the earlier writ petition decided by this Hon'ble Court clearly admitted that there were factory gate sale, though nominal. It is on the basis of the said averment and following the ratio of Bombay Tyre International - 1983 (14) E.L.T. 1896 (S.C.) case, this Hon'ble Court allowed the earlier series of writ petitions. Therefore, the submission of the petitioner that where value under Section 4(1)(a) of the Act of 1944 is ascertainable, Section 4(2) cannot be attracted is untenable. It would be seen from allegations contained in paras (a) to (d) of the impugned show cause notice that the assessee adopted various dubious means to evade payment of duty. Firstly, consolidated charges were realised from different independent buyers over and above the basic price and, therefore, the same are to be included in the value. Secondly, the assessee charged and realised additional amounts in the name of forwarding, handling, packing, which are not allowable deductions and, as such, are to be added to the value under Section 4(2) of the Act of 1944. Thirdly, the assessee had effected some token ex- factory sales on fictitious assessable value, in as much as the price declared to the department to get their price list approved were not genuine.
Therefore the revenue's contention is that when the ex-factory price is not ascertainable and/or the ex-factory price is artificially low compared to the Depot sale price, it is open for the revenue to determine the value of the excisable goods in accordance with the provisions of Section 4(2) after allowing the admissible deductions as is sought to be done in the instant case. The above view has been upheld in Bombay Tyre International case [reported in (1984) 1 SCC 467]. That apart the selling organisation through whom the assessee's goods are being sold are all 'related persons' within the meaning of Section 4(4)(c) of, the Act of 1944 and, as such, Section 4(1)(a) is not applicable.
(iii) With regard to the allegations contained in paras (e) to (h) of the impugned show cause notice the petitioner/assessee's contention is that the same pertains to classification and the same having once adjudicated upon it is not open to the revenue to reopen the same.
A careful reading of the said allegations contained in paragraphs (e) to (h) would reveal that the assessee by suppressing material fact and wilful mis-statement availed exemption of duty by declaring 'Kitply Marine' grade as 'Marine Grade Plywood'. Secondly, the assessee removed shuttering plywood under the garb of Marine plywood and thereby availed concessional rate of duty applicable to Marine plywood. Thirdly, the assessee removed prime quality of Commercial Plywood under the garb of defective grades. It is not a case where the revenue is trying to raise a classification dispute afresh. What the assessee did in the instant case was removed/cleared excisable goods to avail concessional rate of duty and, thereby evaded substantial revenue.
(iv) The Respondents respectfully submit that Section 11A of the Act of 1944 provides a substantive provision and a complete Code for realisation of duty in case of Short Levy or short paid. However, before invoking the power under Section 11A, a show cause notice has to be issued. Therefore the power under Section 11A is independent of the provisions of Section 35A and Section 35E providing for appeal and revision respectively. The contention of the assessee in this regard that a classification/price list once approved cannot be reopened is without any legal basis and is liable to be rejected. That apart a bare perusal of provisions of Sub-section (3) of Section 35A and proviso to Sub-section (3) of Section 35E would clearly reveal that the power under Section 11A is independent."
(v) Section 11A provides a complete code and is an independent provision for recovery of duty short levied. In interpreting a fiscal statute it is the duty of the court to examine the substance and not merely the form of the language and should mould the taxing statute so far as possible to achieve the legislative intent and also to meet with the change of social needs. It is no longer duty of the court to interpret a statute, strictly to help the evasion. Court's duty is to construe in a manner which will suppress the evasion of duty.
9. Before proceeding further, let us have look at -
(i) Section 11A of the Act.
(ii) Rule 233A
(iii) Rule 9(1)
(iv) Rule l73F
(v) Rule 173B
(vi) Rule l73C
(vii) Rule 173G (1) and (4)
(viii) Rule 53
(ix) Rule 226 They are quoted below :
* * * * * * *
10. Section 11A of the Act came up for consideration before the Apex Court in the following cases.
(i) (1989) 2 SCC 127 (Collector of Central Excise, Hyderabad v Chemphar Drugs and Liniments, Hyderabad)
(ii) 1989 Supp (1) SCC 135 (Collector of Central Excise, Baroda v. Kosan Metal Products Ltd.)
(iii) (1988) 1 SCC 605 (Nat Steel Equipment Pvt. Ltd. v. Collector of Central Excise)
(iv) 1994 (3) SCALE - Rainbow Industries (P) Ltd. v. The Collector of Central Excise, Vadodara.
11. In (supra) it is observed that Section 11A basically provides for recovery of duties not levied or short-levied or short-paid or erroneously refunded. The Supreme Court in paragraph 9 has pointed out as follows :
"In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to Sub-section (1) of Section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short paid, or erroneously refunded by reasons of either fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability."
12. In (supra) the Supreme Court in paragraphs 4 and 5 pointed out that -
"When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a notice may be served on the concerned person within a period of six months. When a notice is served beyond the period of six months and after finalisation of the classification lists, the authority had no power to reopen the assessment except on the ground which supports the allegation that there had been fraud, collusion or any [wilful] mis-statement or suppression of facts on the part of the person concerned or the law is that the department is not entitled to issue a notice in a mechanical manner. There is no ground to support the allegation made."
13. In (supra), the Supreme Court pointed out that :
"when once of the judgment of the classification lists have been finalised and the refund had been finalised and the refund had been assessed and there was no intention to evade payment and in the absence of any proof of suppression of facts, notice under Section 11A cannot be issued."
14. In (supra), the Supreme Court pointed out as follows :
"However; once the Department accepted the price list, acted upon it and the goods were cleared with the knowledge of the Department, then in absence of any amendment in law or judicial pronouncement the reclassification should be effected from the date the Department issued the show cause notice. The reason for it is clearance with the knowledge of the Department and no intention to evade payment of duty."
In the instant cases, the price lists were submitted and approved under Rule 173C of the Rules of 1944. The said Rule contains complete code pertaining to the submissions/modifications/approval of the price lists. Once the price lists submitted under Sub-rule 1 and the said Rule is approved under Sub-rule 3 with or without modification, the same cannot be reopened or revised without establishing the requirement as mentioned above. The intention of the legislation is to give finalisation to the approved lists. Once approval is given, to finalise, this can be cancelled only by preferring an appeal under Section 35 of the Act. There is no other statutory provision either under the Act or under the Rules empowering the Excise authority to re-open /amend /modify the present approved price list.
15. The law on this point is not res integra. Reference in this connection may be made to the following cases :
(i) 1985 (22) E.L.T. 729 (Cal.) (Union Carbide (India) Ltd. v. Assistant Collector of Central Excise)
(ii) 1986 (23) E.L.T. 318 (Del.) (Ajanta Iron and Steel Company Pvt. Limited v. Union of India and Ors ).
In (supra), a single Judge of the Calcutta High Court in paragraph 13 of the judgment has pointed out as follows :
"Rule 173C of the Central Excise Rules upon a proper construction is intended to give finality to an approved price list."
In (supra), A Division Bench of Delhi High Court in paragraph 8 of the judgment has pointed out as follows :
"Once the list has been approved by one of the Assistant Collectors it becomes an approved list and accordingly the excise authorities can only take recourse to some other provisions of the Act."
In the case in hand, the price list contains all the particulars, yet they were not made approved instantly. Specific particulars were additionally supplied. The show cause notices were issued and adjudication orders were passed after examination of the sale by the Excise authority in all the Branches/Depots. It is clear that Rule 173C had been complied with threadbare. Therefore, the same process cannot be repeated time and again. In support of this position, a chart is given below to show that this contention is correct. This chart is with regard to the materials of Civil Rule No. 856 of 1987. Same is the position in the other Civil Rules also.
--------------------------------------------------------------------------------
Charges in Period Orders deciding the respec- Annexure to ShowCause tive issues the writ peti- Notice Valua- tion tion Matters:
--------------------------------------------------------------------------------
(a)Consolidat Jan., 1981 Order 56/85 dt. 5-7-1985 Annx. F Pg. ed amount to March, approving six price lists 148 Ex-factory. 1982 (b)Additional Jan.,1981 Order 64/84 dt. 29-11-1984 Annx. F Pg. amount to March, Price List 106-107 152 Exdepot Stock 1982 Transfer Order 23/84 dt. 17-4-1984 Annx. F Pg. Price List. 62 155 Order 125/83, dated Annx.G Pg. 10-8-1983 161 Price Lists 4,9,10/80 Order 124/83, dated Annx. G Pg. 10-8-1983 158 Price Lists 29,30,33, 79/80 (c) Differential April, 1982 to Order 8/85 dt. 28-1-1985 Annx. G Pg. Amount Ex- Feb., 1984 Price List 42/82 164 factory price & Regional price (d) Stock Trans- April, 1982 to Order 16/85 dt. 22-2-1985 Annx. H. Pg. fer Feb, 1984 Price List 19-26/83 166 Order 17/85 dt. 7-2-1985 Annx. H. Pg. Price Lists 25, 48, 56, 169 62, 63, 64, 67/83 Classification Matters: (e) Classifica- Jan., 1981 to Order-in-appeal 97-99 Annx. I Pg. tionofdefec- Feb., 1984 dated 26-4-1983 172 tive Marine Refund orders dt. 13-11- Plywood 1984, 27-9-1984 & 9-5- 1984 filed with Ad. affidavit (f) Classifica- Jan., 1981 to Order-in-appeal No. Annex. J Pg. tion of Kitply Feb., 1984 183-193/83 dt. 29-7-1983 175 Marine remanding eleven appeals. Order 65/86, 58/86, Annx. J Pg. 72/86 after de novo 179 adjudication Annx. JJ Pg. 183 Annex. J Pg. 187 (g) Concrete Jan., 1981 to Order 84/89, dt. Annx. A to Shuttering Feb. 1984 10-1-1989 written sub- Plywood as mission. Marine Plywood (h) Commercial April, 1982 to Order 122/83, dt. Annex. L Pg. Plywood as Feb., 1984 10-8-1983 192 defective plywood
--------------------------------------------------------------------------------
Annex-E/145 - Information regarding marketing pattern supplied.
Annex-A/46 - Exact break-up was given of consolidated charges.
Annex-F/152A - Price list 61 (1st May, 1981) containing consolidated
charges approved.
Annex-F/152B - Price list 62 (1st May, 1981) containing consolidated
charges approved.
16. In 1988 (33) E.L.T. 684 (Bom.) (Mahindra Re-Rolls Industries an Anr. v. Union of India and Ors.) a Division Bench of the Bombay High Com considered different provisions of the Act and the Rules and pointed out the once the price list is approved, the same cannot be reopened as sought to b done in the instant case. This decision is also an authority that the preliminar objection cannot be taken up by the Respondents that the writ application i not maintainable as there is alternative remedy. The Bombay High Court i paragraph 5 of the judgment pointed out as follows:
"The preliminary objection taken to the maintainability of the petition, is that the mere issue of a show cause did not warrant the filing of this petition. The petitioner should have replied to the notice, appeared at the enquiry and tried to convince the Collector of justness of their cause. It is well settled that the existence of an alternative remedy is not necessarily a bar to the maintainability of a petition under Article 226 of the Constitution of India. Whether the existence of an alternative and /or a statutory remedy, constitutes a bar to a petition of this nature would depend upon the facts and circumstances of each case. Here, the petition was admitted in the year, 1981. The show cause notice was the second attempt to get over Ashtana's verdict. In this background, the suggestion that the petitioners should have faced the enquiry and tried to convince the Collector of their point of view, would be to force them to face an unnecessary ordeal. After all, the Excise Officers have been trying to circumvent the Ashtana's verdict by circuitous methods. It would be unfair to the petitioners to compel them to undergo an enquiry, when the Collector's barely concealed opinion is made clear in the affidavit in reply. This, therefore, is one case where the existence of an alternative remedy - statutory or otherwise - would be a poor consolation to the affected persons. Besides, the very attempt to reopen the issue is illegal."
17. In 1980 (6) E.L.T. 669 (Del.) Electric Construction & Equipmet Company Limited v. Union of India and Ors.) The Delhi High Court in paragrap 10 of the judgment has laid down as follows :
"That having once accepted the price list for a particular period after an enquiry, it is not open to the respondents to revise this view without adopting the procedure envisaged in Rule 10 of the Central Excise Rules or Section 35A of the Act."
18. The next question is regarding valuation and the interpretation c Section 4(1)(a) vis-a-vis Section 4(2) of the Act. That matter has been settled a a recent decision of this court reported in 1994 (74) E.L.T. 528 (Gau.) (Saraa Plywood Industries Ltd. v. Union of India) where this court has held that the Respondents are bound to accept the sale price at the factory gate as basis for assessment of tax and they are bound to assess the tax on the basis of factor gate sales alone. That aspect of the matter need not be considered afresh as has already been settled by the decision of this court.
19. An argument was advanced on behalf of the Respondents as fo lows :
"Section 11A provides a complete code and is an independent provision for recovery of duty short levied. In interpreting a fiscal statute it is the duty of the court to examine the substance and not merely the form of the language and should mould the taxing statute so far as possible to achieve the legislative intent and also to meet with the change of social needs. It is no longer duty of the court to interpret a statute, strictly to help the evasion. Court's duty is to construe in a manner which will suppress the evasion of duty." This contention of Sri Choudhury is devoid of merit inasmuch as already I have found that the action of the Respondents does not have any support in law."
20. Under Section 11A proviso without establishing collusion or establishing intention to evade payment of duty, the Excise officer cannot invoke this proviso and this proviso is to be construed strictly and the burden to establish the situations visualised by the proviso is on the Department, to repeat the pronouncement of Supreme Court in 1994 (4) SCALE Tamil Nadu Housing Board v. Collector of Central Excise, Madras and Ors.) -
"When the law requires an intention to evade payment of duty then it is not mere failure to pay duty, it must be something more. That is, the assessee must be aware that the duty was leviable and it must deliberately avoid payment. The word 'evade' in the context means defeating the provision of law of paying duty. It is made more stringent by use of the word 'intent'. In other words the assessee must deliberately avoid payment of duty which is payable in accordance with law."
That is not the case here. As pointed out the matter was considered judicially earlier and decided and that is binding on the Excise Authority.
21. Accordingly, I hold as follows :
(1) Once the price list is approved and it is subjected to adjudication by a judicial authority, the same cannot be revised and/or modified without following the due process of law. In issuing the show cause notice in the instant case, the due process of law was not followed by the authority.
(ii) In order to entitle the Department to issue show cause notice in the absence of any amendment in law, the department can issue notice only when it finds that the person concerned is guilty of suppression of material facts or mis-statement or mis-representation.
(iii) When the factory gate sale is admitted, the Department is duty bound to assess the tax on the basis of the factory gate sale as provided under Section 4(1)(a) of the Act.
22. This being the settled position of law, the impugned action of the Respondents is without jurisdiction and without authority of law and as such all the show cause notices in all these three Civil Rules as mentioned above issued by the Respondents shall stand quashed.
23. Lord Denning remarked "the avoidance of tax may be lawful, but is not yet a virtue". But in law we are concerned with legality and not with morality or virtuous aspect. It was Lord Clyde in Ayrshire Punman Motor Services and D.M. Rihie v. The Commissioner of Inland Revenue (1929, 14 Tax Case 754 at 763 Source-Legal Quotations by Simon Jamon James) opined as follows :
"No man in this country is under the smallest obligation, moral or other, so as to arrange his legal relation to his business or to his property as to enable the Inland Revenue to put the largest possible should [sic] into his stores".
Diplock L.J. in 3 ALLER 39 at 69 (1969) in Commissioner of Customs & Excise v. Top Ten Promotion Ltd. observed as follows :
"There are few greater stimuli to human ingenuity than the prospect of avoiding fiscal liability. Experience shows that under this stimulus human ingenuity outstretches parliamentary prescience."
Avoidance of tax is lawful, evasion is illegal, one has a right to breathe through its tax loopholes.To close the loopholes, the legislature must put its foot, the court is not competent to make an exercise for it. The duty of the court is to find out whether within existing structure it is avoidance or evasion. In case of evasion only the court gets the jurisdiction to interfere. It is axiom' that no tax can be sought to be realised except upon clear and distinct legal authority, established by them who seek to impose the burden. It has been designated as a 'great rule' in the construction of fiscal law, that they are not to be extended by any laboured construction, one must adhere to the strict rule of interpretation.
24. The Civil Rules are allowed. I make no order as to costs.