Madras High Court
M/S.Rajam Industries (P) Ltd vs The Deputy Commercial Tax Officer on 7 June, 2010
Author: P.Jyothimani
Bench: P.Jyothimani
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:07.06.2010 CORAM: THE HON'BLE MR.JUSTICE P.JYOTHIMANI WRIT PETITION Nos.32046 of 2004,13863, 24389 and 24390/ 2005 and connected miscellaneous petitions. .. WP.No.32046 of 2004: M/s.Rajam Industries (P) Ltd., rep. By its Managing Director Mr.D.Selvaraj No.2/95 Mount Poonamallee Road Kattupakkam Chennai 600 056. .. Petitioner vs. The Deputy Commercial Tax Officer Sriperumbudur Assessment Circle Varadarajapurm Poonamallee Chennai 600 056. .. Respondent WP.No.13863 of 2005: M/s.Rajam Industries (P) Ltd., rep. By its Managing Director Mr.D.Selvaraj No.2/95 Mount Poonamallee Road Kattupakkam Chennai 600 056. .. Petitioner vs. 1.The Additional Director General Directorate of Central Excise Intelligence, South Zonal Unit C-3, C Wing Rajaji Bhavan Besant Nagar, Chennai 600 090. 2.The Commissioner of Central Excise IV Commissionerate MHU Complex Nandanam, Chennai 600 035. .. Respondents WP.Nos.24389 & 24390 of 2005: M/s.Rajam Industries (P) Ltd., rep. By its Managing Director Mr.D.Selvaraj No.2/95 Mount Poonamallee Road Kattupakkam Chennai 600 056. .. Petitioner vs. The Deputy Commercial Tax Officer Sriperumbudur Assessment Circle Varadarajapurm Poonamallee Chennai 600 056. .. Respondent Writ Petitions filed under Article 226 of the Constitution of India praying for issuance of a Writ of Certiorari as stated above. For petitioner : Mr.V.T.Gopalan,Sr.Counsel in WP.13863/05 for Ms.B.Karpagam For petitioner : Mr.Ramakrsihna Reddy Wps.32046/04, 24389&24390/05 For respondents : Mr.P.Mahadevan in all the Wps. Senior Central Govt.Standing Counsel. .. COMMON ORDER
All these writ petition are filed by the same petitioner M/s.Rajam Industries (P) Ltd., Chennai.
2. W.P.No.13863 of 2005 is filed by the petitioner against the show-cause notice issued by the first respondent, the Additional Director General, Directorate of Central Excise, Intelligence, South Zonal Unit, pointing out certain omissions and commissions constituting contraventions of various provisions of Central Excise Rules in the manufacture and removal of excisable goods viz., Oorvasi Brand detergent soap and washing powder without payment of duty and noting that the petitioner is liable for payment of Central Excise duty as per the Rules apart from penal action, penalty and interest, under section 11AC and 11AB of the Central Excise Act, 1944 and directing the petitioner to show-cause as to why SSI exemption availed from time to time in 1999, 2000, 2001 and 2002 should not be denied as the turnover exceeded Rs.3 crores and as to why the excise duty amounts should not be waived during the relevant periods on the SSI exemptions stated to have been claimed wrongly and as to why penalty and interest should not be recovered.
3. W.P.No.32046 of 2004 relates to the consequential proceedings of the Deputy Commercial Tax Officer, Poonamallee revising the assessment order based on the above said show-cause notice issued by the Additional Director General of Central Excise, Intelligence and imposing a tax amount of Rs.1,98,14,537/- and penalty of Rs.26,57,74,222/- for the assessment year 1998-99.
4. W.P.Nos.24389 and 24390 of 2005 relate to the notices issued by the Deputy Commercial Tax Officer for revision of assessment for the assessment year 1999-2000 and 2000-2001.
5. The petitioner is a company registered under the Companies Act being the manufacturer and dealer of detergent cake and detergent powder in the name and style, Oorvasi Brand, for which the petitioner is having a valid Central Excise Certificate and the petitioner is also assessed to sales tax under the Tamil Nadu General Sales Tax Act as well as Central Sales Tax Act.
a) The petitioner has units at Porur, Poonamallee and Kattupakkam and it started one more unit at Iyyappathangal in March, 1999 and another unit at Pondicherry in November, 2001. The unit at Poonamallee was closed in 2001 and the Porur unit was closed in March, 2002.
b) The raw materials required for the manufacturing of detergent cake and detergent powder are Stone powder, Soda Ash, Sodium Silicate, Acid Sturry, Sodium lauryl sulphate, Sodium sulphate and perfumes. It is stated that Linear Alkyl Benzene (LAB) and Sulphuric acid are the raw materials to manufacture acid slurry. Since the petitioner is not having the facility to manufacture Acid slurry and as such, procuring all the above mentioned raw materials including Acid slurry from raw material suppliers with whom the petitioner is stated to have no connection either by investment or by any other interest and the suppliers of raw materials would not be permanent suppliers and they are variable depending upon the selling rates and quality of raw materials supplied.
c) It is stated that the property at Iyyappathankal stands in the name of the Managing Director of the company and his wife and a portion of the said property was leased out to M/s.Chitra Industries and M/s.Mano Industries before the petitioner started manufacturing detergent soap in the year 1999. It is stated that the said M/s.Chitra Industries is the manufacturer of Acid slurry and the said unit is an SSI unit with negligible production capacity and even if the entire production is supplied to the petitioner, it would not be 15% of the monthly requirement of the petitioner.
d) Likewise, it is stated that the consumption of LAB by the said M/s.Chitra Industries is also of low quantity. It is stated that the other tenant, M/s.Mano Industries is manufacturing Sodium silicate and its supply is 20% of the monthly requirement of the petitioner.
e) It is stated that the first respondent issued various notices about certain irregularities about which the petitioner used to attend the office of the first respondent and explain. However, the impugned show-cause notice dated 30.6.2003 was issued by the first respondent to the effect that the petitioner evaded Central Excise duty to the tune of crores of rupees, asking the petitioner to show-cause.
f) It is the case of the petitioner that along with the show-cause notice no document was enclosed and no opportunity was given to the petitioner to examine witnesses or to verify documents and in spite of requesting for various documents, the first respondent did not furnish the same and even for the purpose of providing Xerox copies of documents mentioned in the show-cause notice, the first respondent demanded Rs.40,000/- and in fact, the petitioner was ready to take copies by using its own Xerox machine and that was not allowed and the petitioner has been harassed for the past two years.
g) In the meantime, the first respondent appointed the second respondent as the adjudicating authority based on the impugned notice. It is the case of the petitioner that the show-cause notice has foreclosed the entire issue and the first respondent has already arrived at a conclusion as if the petitioner has committed excise duty evasion and the notice is a pre-determined one and taking advantage of the misuse of powers by the subordinate staff of the petitioner company, grave allegations have been made against the petitioner.
h) The petitioner is not the manufacturer of Acid slurry and the allegation is that there was purchase of LAB from Tamil Nadu Petro Products Limited. It is also stated that none of the statements obtained from various persons were given in the presence of the petitioner and no document was recovered from the petitioner pertaining to the use of LAB or purchase of LAB by the petitioner and the allegations are based on assumptions and presumptions and the show-cause notice issued with foreclosed and pre-judged mind is not valid in law and it is in violation of the principles of natural justice and against the law laid down by the Supreme Court as well as Karnataka High Court and this Court.
6. The show-cause notice is challenged on various grounds including that it is opposed to the principles of natural justice; that the notice has pre-determined the issue against the petitioner; that the notice has been issued on assumptions and presumptions; that the first respondent has failed to note that LAB is not the raw-material for manufacturing detergent cake or detergent powder; that the allegations made are pertinent to the sale of LAB by Tamil Nadu Paper Products Limited to various purchasers; that none of the statements were recorded in the presence of the petitioner; that the witnesses have not been examined in the presence of the petitioner; and that no opportunity was given to the petitioner to cross-examine the witnesses, apart from raising other grounds.
7. Likewise, in respect of revised assessment order for the year 1998-99 which is challenged in W.P.No.32046 of 2004, it is stated that the petitioner filed return for the year 1998-99 under the Tamil Nadu General Sales Tax Act, and accepting the same, the assessment order was passed on 31.5.2000. It is stated that thereafter, certain documents were seized form the petitioners office and the Enforcement Officials of the Sales-tax Department inspected the place of business on 6.12.2000 and sales registers, purchase register and sales invoices maintained by the petitioner after 13.11.2000 were seized and after 6.12.2000, there was no communication from the respondent.
8. In the meantime, in the year 2003, the Central Excise Department issued a notice dated 30.6.2003, which is impugned in W.P.No.13863 of 2005 and the show-cause notice is now pending and no adjudication order has been passed. However, the respondent issued a revised assessment order dated 2.8.2004, which was received on 25.10.2004 through registered post. The said order was sent by the respondent on 21.10.2004 only, as it is evident from the postal cover. The said revised assessment order was passed solely based on the show-cause notice issued by the Central Excise Department, without any independent materials. When the show-cause notice issued by the Central Excise Department is pending adjudication, merely based on show-cause notice, the revised assessment order was passed by reopening the assessment after five years.
9. It is stated that before passing the revised assessment order, there was no notice sent through registered post as contemplated under the Rules and no notice was affixed at the premises and no official of the respondent informed the petitioner company. As per section 16 of the Tamil Nadu General Sales Tax Act, any revision of assessment can be made only within five years from the date of original assessment. In the present case, the original assessment was on 31.5.2000 and the respondent did not initiate the revised assessment proceedings before 31.3.2004, however, the respondent has falsely stated as if the proposal for revision of assessment was made and sent through an Office Assistant which was revised and later, it was affixed without even stating about the date of affixture of the proposed notice. The sending of notice through registered post is the proper method as per Rules.
10. It is stated that even for the year 2003-04, the assessment order was passed on 4.8.2004 finding that Rs.89,978/- is available as excess tax in the account of the petitioner as on 4.8.2004 and if really the impugned order of revision had been passed on 2.8.2004, there would have been any mention about the excess tax of Rs.89,978/- in the order allegedly passed on 4.8.2004 for the year 2003-04.
11. The revision of assessment is challenged on various grounds including that the same has been done after a period of five years by reopening the assessment order for the year 1998-99; that the same has been passed in violation of the principles of natural justice as no opportunity was given and no notice was served; that the service of notice is against Rule 52 of the Rules framed by way of amendment in the year 1984 and as per the ratio laid down in Gopal Das Uttam Chand vs. Sales Tax Officer, Dehradun [25 STC 229] and Kunwar Industries & Another vs. The Sales Tax Officer, Ghaziabad [53 STC 385], the affixture of notice can be made only after the notice sent through registered post is returned unserved and such procedure has not been followed; that the affixture of any notice is also denied; that as per the judgments of various High Courts, every employee of the assessee is not the agent, but one who is nominated as Manager or authorized to receive notice alone are entitled to receive and in the case of companies, notice has to be served on the Principal Officer, that only to avoid such doubts Rule 52 provides for the mode of service by registered post and the said procedure has not been followed and that the respondent having passed the order on 2.8.2004, chose to send the same through registered post on 21.10.2004 which was received by the petitioner on 25.10.2004 and there is delay at every stage.
12. On merit also, it is stated that no independent material is available to take action against the respondent for revision of assessment order, that the mere pendency of show-cause notice issued by the Central Excise Department is not a ground for the purpose of revision of assessment, unless there is a direct evidence for the purpose of revision, that the allegation that the petitioner purchased raw materials from bogus and fictitious dealers is not correct for the reason that the purchase was effected from Tamil Nadu Petro Products Limited which is a Government of Tamil Nadu undertaking and that the revised assessment order has been passed on assumptions and presumptions.
13. Likewise, the impugned notices of revision issued by the Commercial Tax Department for the assessment year 1999-2000 and 2000-01 are challenged in W.P.Nos.24389 and 24390 of 2005 on various grounds including that the show-cause notice issued by the Excise Department challenged in W.P.No.13863 of 2005 has been stayed by this Court; that the principles of natural justice have been violated; that there is absolutely no ground for issuing notices of revision for the said assessment order and that the impugned notices were issued with foreclosed mind.
14. While admitting the writ petition in W.P.No.13863 of 2005, wherein the show-cause notice issued by the Additional Director General of Central Excise Department is challenged, this Court granted an order of stay on 26.4.2005. The first respondent in the said writ petition, along with the counter affidavit, has also filed an application to vacate the order of interim stay.
15. In the counter affidavit filed on behalf of the first respondent, the Additional Director General of Central Excise Department, it is stated that on information of large scale evasion of central excise duty by several detergent manufacturers in Tamil Nadu, simultaneous search operations were conducted on 13.11.2000 in Chennai, Trichy, Coimbatore and Madurai covering the premises of Oorvasi Brand detergent manufacturing units of the petitioner M/s.Rajam Industries Private Limited, also called as, RIPL, M/s.Raji Industries, Trichy, their main dealers, raw material suppliers, etc. leading to the seizure of documents and offending goods at dealers premises situated at Tambaram and Dharmapuri. It is stated that on receipt of information regarding certain irregularities by the petitioner, RIPL, simultaneous search operations were also made on 30.10.2000 by the Headquarters Preventive Unit of Chennai-II Central Excise Commissionerate resulting in the seizure of some documents.
16. The petitioner made voluntary payment of Rs.1 lakh towards its duty liability. Due to wider ramifications of the issue, since many persons were involved, the records were transferred to Chennai-II Commissionerate of the first respondent and thereafter, a full-fledged investigation was taken up. It was found that the petitioner, RIPL was a habitual offender since 1980 leaving no documentary evidence at the units or office. It is stated that RIPL at Chennai is controlled by its Managing Director, D.Selvaraj, who has also controlled M/s.Raji Industries at Trichy which has been functioning in the name of his employee, Thiru.Veerasamy. While explaining the modus operandi of the petitioner, it is stated that Linear Alkyl Benzene (LAB) and Sulphuric Acid are the major raw materials in the manufacture of detergents and Soda ash, Soapstone powder, Silicate, aromatic chemicals, etc. are other raw materials. The raw material viz., Linear Alkyl Benzene (LAB) was procured from Tamil Nadu Petro Products Ltd., and in the process of manufacture, LAB is sulphonated with Sulphuric Acid to get Acid slurry and Acid slurry is mixed with other raw materials to get detergents in a particular ratio.
17. It is stated that the evidence collected during investigation revealed that the petitioner was procuring the raw materials, viz., (i) LAB from Tamil Nadu Petro Products Limited through its consignment agents, M/s.Industrial Chemical Agency, Chennai, (ii) Soda Ash from its consignment agents/dealers, M/s.Tuticorin Alkali Chemicals Ltd., M/s.Gujarat Heavy Chemicals Ltd., M/s.Tata Chemicals Ltd. and M/s.Saurashtra Chemicals Ltd., (iii) Sulphuric Acid from M/s.Adheswara Chemicals & M/s.GGK Industries, Pondicherry, M/s.Krishna Agro Chem, M/s.Krishna Indchem and M/s.Madras Chemicals at Gummidipoondi, (iv) Aromatic compounds Essence from M/s.Bush Boak Allen Ltd and its dealers of M/s.Credenza in fictitious names and (vi) Clay powder and soap stone powder as well as packing materials have also been procured in fictitious names; and these materials were procured in huge quantity in fictitious names at concessional rates of sales tax in Form-XVII.
18. It is also stated that during investigation, various evidences were collected showing that Oorvasi brand detergents manufactured in various units of RIPL and Raji Industries using the unaccounted materials were removed to various dealers in Tami Nadu, Andhra Pradesh and Karnataka without cover of invoices and there was employment of several transport brokers who dispatched several loads of Oorvasi Brand soap/detergents from RIPL and Raji Industries and for the supply of detergents made by the petitioner to its dealers, the dealers made payments to the petitioner in the form of demand drafts favouring raw material suppliers of the petitioner viz., Tamil Nadu Petro Products Ltd., M/s.Nuvodaya Chemicals and M/s.Guru Chemicals and also effected cash payments.
19. The evidence which was gathered was explained in the show-cause notice and more than 160 statements were recorded from dealers of Oorvasi soaps, transporters, raw material suppliers, personnel of RIPL, suppliers of packing materials etc. and even on the dates of initial search made on 13.11.2000 and 14.11.2000 there was detention/seizure of removed goods at the dealers premises at Tambaram and Dharmapuri. It is stated that during the time of investigation, the petitioner made voluntary payments on various dates aggregating to Rs.51 lakhs being part payments towards duty liability due on the past clearances and the Managing Director D.Selvaraj admitted the clandestine removal from the units of RIPL, during investigation. It is stated that the said Selvaraj apprehending arrest sought for anticipatory bail which was granted on 30.4.2002 in spite of opposition subject to the condition of depositing of Rs.3 crores by the petitioner on or before 3.6.2002, but the said condition was not complied with by the petitioner and the Directorate of the first respondent preferred appeal before the High Court in Crl.O.P.No.10630 of 2002 and Crl.M.P.No.5560 of 2002 was also filed before the learned Principal Sessions Judge for cancellation of bail since there was failure on the part of the petitioner in appearing before the police daily and the same is pending.
20. It is stated that the petitioner indulged in procuring raw materials viz., LAB, Sulphuric acid, Acid slurry and other raw materials in fictitious names which were put to use in the manufacture of excisable goods, viz., detergent soap/powder with the brand name, Oorvasi. It is stated that the evidence recorded shows that there was clandestine removal of goods by the petitioner. The seizure of several documents and goods was explained in detail in the impugned show-cause notice dated 30.6.2003 and the petitioner was examined from time to time and statements were recorded on 23.4.2001, 18.10.2001, 14.2.2002 and 6.5.2002 by the Senior Intelligence Officer and the entire investigation spanned over a period of two years culminated in the issuance of show-cause notice dated 30.6.2003 demanding duty of Rs.28.87 crores after conducting searches covering 53 premises leading to seizure of documents and offending goods and recording of statements from 162 persons.
21. It is stated that the petitioner was provided with details of documents sought to be relied against it in the notice and subsequently, the petitioner was provided with copies of the same from time to time as they were voluminous in nature. It is stated that it was the petitioner who was delaying the proceedings by insisting for supply of all the pages of files/registers in which only some pages were relevant. The first respondent, by letter dated 27.8.2004, stated that copies of relied upon documents as listed in Annexure A, B to C-1 were supplied on various dates viz., 29.12.2003, 2.1.2004 and 11.2.2004 to the authorized representative of the petitioner and the petitioner was even permitted to inspect various other documents and the representative of the petitioner gave acknowledgment for having received copies of such documents. It is stated that copies of documents mentioned in Annexure B-1, B-II and C-1 were furnished and as regards Annexure C-II, the petitioner was permitted to bring its own Xerox machine and take copies and the documents mentioned in Annexure C-II to SCN were made available to the representative of the petitioner who had engaged photocopying machine and received copies vide acknowledgments dated 29.10.2004, 29.11.2004, 13.12.2004, 24.12.2004, 24.1.2005, 18.2.2005 and 31.3.2005 and therefore, it is not correct to state that documents were not furnished.
22. The second respondent was assigned with the function of adjudication by the Central Board of Excise and Customs, New Delhi. It is stated that the impugned show-cause notice has made allegations and listed evidence in support of the allegations and there is no prejudging of the matter and the petitioner is entitled to the principles of natural justice by offering explanation to the allegations by way of reply and of being heard before passing of an order-in-original by adjudging the case and even the order-in-original is appealable and adequate machinery is provided in the Central Excise Act, 1944 and no case has been made out against the petitioner since it is only at show-cause notice stage. It is stated that there is no necessity that the statements should be recorded in the presence of the petitioner during investigation.
23. It is stated that the duty evasion as alleged in the impugned show-cause notice was quantified by taking into account all documentary evidence collected in the matter and the petitioner would be afforded adequate opportunity to defend itself by way of reply and personal hearing by the adjudicating authority. It is stated that quantification of duty liability was made on scientific and rational manner commensurate with potential of the petitioner who had indulged in offences in successive manner unmindful of investigatory process. There was no harassment of the petitioner by the respondent. It is stated that the petitioner without submitting its explanation to the show-cause notice, approached this Court by filing the writ petition, which is not maintainable. The show-cause notice was issued within the extended period of limitation as per proviso to section 11A(1) of the Central Excise Act based on the documentary evidence available.
24. In the reply affidavit filed by the petitioner, it is stated that the Managing Director of the petitioner company is a prominent public service oriented person who was even elevated as Member of Legislative Assembly from Srivaikuntam constituency and Oorvasi products were sold for lesser price for the benefit of the people while compared to other detergent cakes. It is reiterated that the show-cause notice was issued on the basis of fabricated and forcible statements obtained from other dealers and stockists and the statements were obtained behind the back of the petitioner. It is reiterated that the show-cause notice was issued on the basis of presumptions and assumptions and for the malpractices indulged by some of the dealers, the petitioner cannot be made liable. It is stated that 161 statements were obtained behind the back of the petitioner and the statements were obtained by way of coercion. It is stated that as far as the condition of deposit of Rs.3 crores for anticipatory bail granted to the petitioner is concerned, against the same a criminal O.P. was filed and the said portion of the order was stayed and the matter is pending. It is stated that claim of Rs.28.87 crores without giving an opportunity to the petitioner is unlawful and even before an opportunity is given and before explanation is received from the petitioner, the amount has been quantified and therefore, there is nothing to adjudicate. It is stated that copies of 161 statements stated to have been obtained are to be provided and that is a statutory and mandatory requirement to be complied with in conformity with the principles of natural justice.
25. It is, after filing of the writ petition, having realised that the second respondent has no authority to act as an adjudicator, the Commissioner of Central Excise (Adjudication), No.121, M.G.Road, Nungambakkam was appointed in the place of the second respondent. It is reiterated that inasmuch as in the show-cause notice the first respondent arrived at and quantified the amount of Rs.28.87 crores towards evasion of tax, there is nothing further to adjudicate on the issue. It is stated that the respondents admitted that personal hearing during adjudication would be given and when the procedure is to examine and cross-examine the witnesses by recording evidence, the action on the part of the respondents in quantifying the amount of tax evasion in the show-cause notice itself clearly shows the motive and pre-determined and pre-judged attitude of the respondents.
26. Likewise, in respect of revised assessment order passed by the Deputy Commercial Tax Officer, challenged in W.P.No.32046 of 2004, the respondent filed a counter affidavit stating that there is no infirmity or violation on the part of the assessing authority in passing the assessment order and the assessing authority considered the objections in judicious manner and therefore, the petitioner has no locus standi to file the writ petition against the order of assessment. While it is admitted that for the year 1998-99 the assessment order was passed on 31.5.2000, it is stated that there was an inspection conducted by the Enforcement Wing in the place of the petitioner on 6.12.2000 and it was found that the dealers purchased raw materials like, stone powder, acid slurry, sodium silicate, soda ash and aromatic compounds such as lemon oil, etc. and the raw materials were used in such a way putting into a proportionate ratio and the mixture was then put into the extruder machine and detergent was brought out and the entire process was being done with the help of machines only and hence, the products were machine made soaps taxable at 16%.
27. It is stated that after processing various records recovered on 30.10.2000 and 13.11.2000, the Additional Director General of Central Excise, Chennai issued the show-cause notice on 30.6.2003 proposing to levy penalty as per Rule 209A of the erstwhile Central Excise Rules, 1944. It is stated that the revised assessment order shows that the quantity of soap produced during the year 1998-99 and all relevant materials were taken note of for the purpose of passing the revised order of assessment and for detergent cakes for the year 1998-99, tax was imposed at the rate of 16% and for spent oil it was charged at 11% as per law and additional sales tax of 2% was also proposed and the penalty at 150% of tax due for willful non-disclosure of taxable turnover was proposed and these are all within the powers of the respondent. It is stated that the notice was served by affixture as per Rule 52(1)(d) and in spite of affixture, the petitioner did not file any objection even though reasonable time was given till 1.8.2004 and hence, the petitioner did not avail the opportunity granted and therefore, the order of revised assessment was passed under section 16(1) of the Tamil Nadu General Sales Tax Act which is perfectly in order.
28. Mr.V.T.Gopalan, learned senior counsel appearing for the petitioner in all these writ petitions submitted that the impugned show-cause notice issued by the Additional Director General of Central excise, Intelligence on the face of it is pre-determined and the show-cause notice was issued as a mere formality. It is submitted that when the show-cause notice quantifies and fixes the liability and responsibility of the petitioner, there is nothing more for adjudication. He would rely upon the judgment of the Supreme Court in Siemens Ltd., vs. State of Maharashtra [(2006) 12 SCC 33] and M/s.Madurai Metal Industries Ltd., vs. Union of India [1991 WLR 59]. He would submit that non-furnishing of documents along with show-cause notice is in violation of the principles of natural justice. He would rely upon the judgments in Sahi Ram vs. Avtar Singh [(1999) 4 SCC 511], Government of A.P. vs. A. Venkata Raidu [(2007) 1 SCC 338] and Kumaon Mandal Vikas Nigam Ltd., vs. Girja Shankar Panj [(2001) 1 SCC 182]. It is also his submission that even in the counter affidavit, the first respondent admitted that excise duty was quantified and in such event, by applying the judgment of the Supreme Court in 2006 (12) SCC 33 (cited supra), there is nothing more for adjudication.
29. In respect of other cases, learned senior counsel has submitted that the revision of commercial tax was made by the authority and also show-cause notice was issued for subsequent years 1999-2000, 2000-01. He would rely upon the judgments of the Supreme Court in A.I. Lawyers Forum for Civil Liabilities vs. Union of India [(1999) 9 SCC 281] and State of U.P. vs. Anil Kumar Ramesh Chandra Glass Works [(2005) 11 SCC 451].
30. On the other hand, by relying upon the judgment of the Supreme Court in Special Director and another vs. Mohd.Ghulam Ghouse and another [(2004) 3 SCC 440], it is the contention of Mr.V.Manoharan, learned Special Government Pleader that when there are voluminous documents, the non-furnishing of documents will not be lethal to show-cause notice. Learned Special Government Pleader would also submit that the transactions clearly show the evasion of tax and therefore, the petitioner cannot find fault with the authority.
31. I have heard the learned senior counsel for the petitioner and the learned Special Government Pleader for the respondents and given my anxious thoughts to the issues involved in the matter.
32. First of all, in respect of the impugned show-cause notice issued by the Additional Director General, Directorate of Central Excise, Intelligence, challenged in W.P.No.13863 of 2005, a reference to the same which runs to 68 pages, explains various stages of investigation which was going on nearly for two years.
33. It shows that search operations were conducted in various places like, Chennai, Trichy, Coimbatore and Madurai. It is also seen that during investigation, several documents were seized including the one in Annexure-A 1 to 6, 11, 22 to 27, 34, 37 to 45, Annexure-BII - 1 to 3, 7, 21, 38 and 46 and there were follow up actions taken on various persons, like raw material suppliers, packing material suppliers, transporters, agents, bankers, dealers, etc. leading to the seizure of offending goods. It is seen that during investigation enquiries were conducted with dealers of Oorvasi including M/s.Mohan Agencies and it was verified from the Commercial Tax Department that the petitioner for years together, used Form-XVII which facilitated to procure raw materials at concessional rate of 3% against the normal rate of 11% and availed the benefit of SSI exemption.
34. The impugned show-cause notice also shows that the first respondent found that the petitioner effected the supply of LAB in the names of various persons like, Madhava Rao, Nandagopal, Chandratanjaju, Nagarajan and Sanjay Kumar Jain. It is the case of the petitioner that the petitioner has not associated with the said Madhava Rao in respect of various irregularities However, that is not for this Court at this stage, to verify about the correctness of such statement, since the matter is at show-cause notice stage.
35. The show-cause notice also shows that on verification conducted at the declared addresses of the parties in whose names LAB was supplied by Tamil Nadu Petro Products Limited, it was found that LAB was actually purchased by the petitioner and the addresses of parties are fictitious. The show-cause notice shows that the investigation revealed the procurement of Acid slurry by the petitioner from Nuvodaya Chemicals Pvt. Ltd. (NCPL), etc. in fictitious names, apart from many other instances, as narrated.
36. In all, the impugned show-cause notice shows that all the materials were detected on verification and enquiry and they prove the activities of clandestine removal of goods by the petitioner under the invoices of misnomer parties such as, M/s.Star Trading Corporation and New Udayam Enterprises. The show-cause notice also shows the evidence gathered regarding removal on the part of the petitioner and Raji Industries, stated to have been run by the Managing Director of the petitioner, though run in the name of one of the employees. On verification with various transport companies, evidence was gathered from such transport companies regarding various vehicles. It also shows that various statements were obtained from persons at the helm of affairs of the establishments supplying raw-materials to Oorvasi Brand detergent manufacturing units, transporters of LAB, Sulphuric Acid, Soda Ash and finished goods, landlords of the premises taken on rent in the name of Star Trading Corporation and New Udayam Enterprises, dealers of Oorvasi detergents at several places and transportation of raw materials procured by RIPL as well as finished goods dispatched by RIPL who were enquired under summons on various dates.
37. The case of the petitioner in respect of those statements obtained during investigation is that the concerned individuals were not examined in the presence of the petitioner or its authorized representative and therefore, those statements should be stated as statements obtained behind the back of the petitioner and they cannot be used against the petitioner. Of course, that may not be a correct stand. The statements obtained during preliminary investigation stage cannot certainly be used against the delinquent at the final stage when the punishment is imposed and such punishment which may be imposed ultimately can be challenged if the final order of punishment is passed by relying upon the preliminary investigation wherein statements were obtained in the absence of delinquent officer.
38. The law is well settled that those statements obtained during preliminary investigation are only for the purpose of making a prima facie case against the delinquent so as to enable the authority to proceed further. Therefore, it does not mean that those documents would be put against the petitioner. During preliminary investigation, statements from various persons need not be required to be obtained in the presence of persons concerned and at the stage of preliminary investigation, there is no question of examination or cross-examination of witnesses who are giving statements and such statements are the only basis for proceeding further against the petitioner like, FIR which is a starting point for arriving at a prima facie conclusion against the person charged. Thereafter, when adjudicating process starts, necessarily those persons who gave statements in the preliminary investigation are to be dealt with by examining them.
39. It is true that at that time, the petitioner would be given opportunity to cross-examine those persons who desire to give evidence in the adjudicating process. Therefore, the contention raised on behalf of the petitioner that the statements from various persons during preliminary investigation were obtained in the absence of the petitioner and therefore, they cannot be relied upon for issuing the show-cause notice is not sustainable.
40. Nevertheless, the petitioner is entitled to have copies of those statements obtained during preliminary investigation to enable it to give proper explanation to the show-cause notice. If it is found that the petitioner has not been furnished with copies of those statements/documents which are relied upon by the authorities concerned in the show-cause notice, certainly this Court would interfere and compel the authorities to furnish copies of statements/documents which are relevant before proceeding with the adjudicating process. On the facts of the present case, admittedly the process of adjudication has not commenced and the entire case stands at preliminary stage of giving show-cause notice.
41. As stated above, the preliminary investigation itself has taken a period of nearly two years during 2001 to 2003 and then, the show-cause notice has been issued. It has been the case of the petitioner that the petitioner was approaching the first respondent for the purpose of various documents and in that process, two years had gone and the petitioners approached this Court by filing the present writ petition against the show-cause notice in the year 2005 mainly on the ground that the first respondent has arrived at a conclusion against the petitioner and therefore, there is no question of submitting any explanation to the show-cause notice.
42. It is relevant to point out that in the counter affidavit filed by the first respondent, the first respondent has clearly stated that various documents including the statements obtained from various persons have been furnished to the petitioner and some of the statements and documents are not relevant for the purpose of the case against the petitioner. It is stated that the petitioner obtained those documents by way of Xerox copies by using its own machine. It is also not difficult to conclude at this stage that if any other documents are relied upon by the first respondent in the show-cause notice including the statements obtained, the petitioner is certainly entitled to copies of such documents/statements before the petitioner is directed to give explanation. Therefore, up to paragraph-10 of the impugned show-cause notice, there is nothing to conclude that any decision has been arrived at against the petitioner except gathering materials and calculating amount of tax liable to be paid on the basis of the materials gathered.
43. In paragraph-11 of the impugned show-cause notice, while making the summary, the first respondent has stated that the proprietors of two concerns viz., Thiru.Alexander and Thiru Janardhanam were actually employees of the petitioners and they have not responded to the summons. The relevant portion of the show-cause notice is as follows:
Oorvasi Dealers had obtained demand drafts for huge sums running to several crores favouring parties such as TPL in addition to making cash payments on account of Oorvasi Detergent soaps and powders ordered for and received by them from the units of RIPL and Raji Industries without the cover of bills, under the bills of Victory Agency for a lesser quantity and value and under the bills of misnomer parties such as Star Trading Corporation and New Udayam Enterprises. The dealers have unequivocally confirmed ordering of supplies by contacting RIPL on all the occasions. Thus, the first respondent department satisfied with the materials available and obtained during investigation that its initial burden has been discharged as per section 11A of the Central Excise Act, 1944 by exercising the term, extended period.
44. Ultimately, in paragraph-14 of the impugned show-cause notice, when the first respondent has arrived at a contravention of rules, it is stated as follows:
14.1. RIPLs Units at Chennai and Pondicherry and Raji Industries at Trichy during the relevant period had indulged in acts of omissions and commissions constituting contraventions of the provisions of the following Central Excise Rules:
(a) Rule 9(1) of the erstwhile Central Excise Rules, 1944, Rule 4 of the erstwhile Central Excise (No.2) Rules, 2001, read with section 38 A of the Central Excise Act, 1944 and Rule 4 of the Central Excise Rules, 2002 inasmuch as they manufactured and clandestinely removed the excisable goods (Oorvasi brand detergent soaps and powder) without payment of duty with an intent to evade duty;
(b) Rule 52A of the erstwhile Central Excise Rules, 1944, Rule 11 of the erstwhile Central Excise (No.2) Rules 2001, read with section 38A of the Central Excise Act, 1944 and Rule 11 of the Central Excise Rules, 2002 inasmuch as they clandestinely removed the excisable goods (Oorvasi brand detergent soaps and powder) without cover of Central Excise documents such as Invoice;
(c) Rule 53 of the erstwhile Central Excise Rules, 1944, Rule 10 of the erstwhile Central Excise (No.2) Rules 2001 read with section 38A of the Central Excise Act, 1944 and Rule 10 of the Central Excise Rules, 2002 inasmuch as they failed to maintain proper daily stock accounts as to production and clearance;
(d) Rule 173C of the erstwhile Central Excise Rules, 1944, Rule 11 of the erstwhile Central Excise (No.2) Rules 2001, read with Section 38A of the Central Excise Act, 1944 and Rule 11 of the Central Excise Rules, 2002 inasmuch as they failed to declare the actual value of clearances to the department and resorted to double set of invoices;
(e) Rule 173F of the erstwhile Central Excise Rules, 1944, Rule 6 of the erstwhile Central Excise (No.2) Rules 2001, read with section 38A of the Central Excise Act, 1944 and Rule 6 of the Central Excise Rules, 2002 inasmuch as they failed to determine the Central Excise duty payable and failed to discharge the same;
(f) Rule 173G of the erstwhile Central Excise Rules, 1944 read with section 38A of the Central Excise Act, 1944 and inasmuch as they failed to follow the Central Excise procedures;
(g) Rule 226 of the erstwhile Central Excise Rules, 1944 read with section 38A of the Central Excise Act, 1944 inasmuch as they failed to maintain proper records and accounts.
And thus have rendered themselves liable for
(a) payment of Central Excise Duty due on the clandestinely removed goods under Rule 9(2) of the erstwhile Central Excise Rules, 1944 read with proviso to section 11A (1) and section 38A of the Central Excise Act, 1944;
(b) penal action under Rule 9(2), 52A(8), 173Q and 226 of the erstwhile Central excise Rules, 1944 Rule 25 and 27 of the erstwhile Central Excise (No.2) Rules 2001 read with section 38A of the Central Excise Act, 1944 and Rule 25 and 27 of the Central Excise Rules, 2002;
(c) payment of penalty under section 11 AC of the Central Excise Act, 1944;
(d) payment of interest under section 11 AB of the Central Excise Act, 1944.
45. On the basis of such view, the terms of show-cause in paragraph-15 show as follows:
15.1. Now therefore, M/s.Rajam Industries Pvt. Ltd. are required to show cause to Commissioner of Central Excise, Chennai-IV Commissionerate, M.H.U.Complex, 483, Anna Salai, Nandanam, Chennai-600 035 as to why:
(a) the SSI exemption availed by them from time to time under Notification No.No.8/99-C.E. dt.28.02.1999, No.8/2000-C.E. dated 1.3.2000, No.8/2001-C.E. Dt.1.3.2001, No.8 & 9/2002-C.E., dt.1.3.2002 should not be denied as their turnover had exceeded Rupees Three Crores in the preceding financial years respect5ively as detailed in Annexure-D to this show-cause notice and why duty should not be demanded under Rule 9(2) of the erstwhile Central Excise Rules, 1944 read with first proviso to section 11A(1) and section 38A of the Central Excise Act, 1944;
(b) an amount of Rs.24,32,19,251/- Rupees twenty four crores thirty two lakhs nineteen thousands and two hundreds fifty one only being the Central Excise duty not paid on the Oorvasi brand detergent soaps and washing powder manufactured and clandestinely cleared from their Chennai units (Iyyappanthangal, Kattuppakkam, Porur, Poonamallee) during the period June 1998 to March 2002 and an amount of Rs.44,77,439/- being the Central Excise differential duty on the SSI exemptions claimed wrongly during the said periods should not be demanded under rule 9(2) of the erstwhile Central Excise Rules, 1944 (read with section 38A of the Central Excise Act, 1944) in terms of proviso to section 11A(1) of the Central Excise Act, 1944;
(c) why spent acid should not be classified under the heading Chapter Heading 2807 of CET.
(d) why duty of Rs.16,68,391/- payable on spent acide for the period June, 1993 to March 2001 as detailed in Annexure-D should not be demanded under proviso to section 11A(1) of the Central Excise Act, 1944;
(e) a penalty should not be imposed on them separately under Rule 9(2), 52A(8), 173Q, 226 of the erstwhile Central Excise Rules, 1944, Rule 25 and 27 of Central Excise Rules, 2002;
(f) a penalty should not be imposed on them under section 11AC of the Central Excise Act, 1944;
(g) interest should not be demanded under section 11AB of the Central Excise Act, 1944; and
(h) an amount of Rs.51,00,000/- paid vide T.R.6 challans as detailed earlier by RIPL voluntarily should not be adjusted towards duty liability due from them during the relevant periods.
15.2. Now, therefore, M/s.Rajam Industries Private Ltd., Thuthipet, Pondicherry are required to show cause to the Commissioner of Central Excise, Pondicherry as to why:
(a) the SSI exemption availed by them from time to time since 2001 under Notification No.8/2001-CE dated 1.3.2001, No.8 & 9/2002-CE dt.1.3.2002 should not be denied as their turnover had exceeded Rupees three crores in the preceding financial years respectively as detailed in Annexure-D to this show-cause notice and why duty of Rs.1,36,28,434/- on the Oorvasi brand detergent soaps and washing powder manufactured and clandestinely cleared from their Pondicherry unit during the period November 2001 to March 2002 should not be demanded under first proviso to section 11A (1) of the Central Excise Act, 1944;
(b) a penalty should not be imposed on them separately under rule 25 and 27 of the Central Excise (No.2) Rules, 2001 read with section 38A of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002.
(c) a penalty should not be imposed on them separately under section 11AC of the Central Excise Act, 1944; and
(d) interest should not be demanded under section 11AB of the Central Excise Act, 1944.
15.3. Now, therefore, M/s.Raji Industries, Trichy are required to show cause to the Commissioner of Central Excise No.1, Williams Road, Trichy Cantonment, Trichy 620 001 as to why
(a) an amount of Rs.2,70,99,790/- Rupees Two crores Seventy Lakhs Ninetynine thousands and seven hundred and ninety only being the Central Excise duty not paid on the Oorvasi brand detergent soaps and washing powder manufactured and clandestinely removed during the period April 1998 to March 2002 should not be demanded under Rule 9(2) of the erstwhile Central Excise Rules, 1944 (read with section 38A of the Central Excise Act, 1944) in terms of first proviso to section 11A(1) of the Central Excise Act, 1944 and;
(b) a penalty should not be imposed on them separately under Rule 9(2), 52A(8), 173Q, 226 of the erstwhile Central Excise Rules, 1944, Rule 25 of the Central Excise (No.2) Rules, 2001 read with section 38A of the Central Excise Act,1944; Rule 25 of the Central Excise Rules 2002;
(c) a penalty should not be imposed on them under section 11AC of the Central Excise Act, 1944; and
(d) interest should not be demanded under section 11AB of the Central Excise Act, 1944.
15.4. Now therefore, Shri D.Selvaraj, Managing Director of RIPL, is required to show cause to the Commissioner of Central Excise, Chennai-IV Commissionerate, Chennai-35 as to why penalty should not be imposed on him under Rule 209A of the erstwhile Central Excise Rules, 1944, Rule 26 of the erstwhile Central Excise (No.2) Rules 2001, read with section 38A of the Central Excise Act, 1944, Rule 26 of the Central Excise Rules, 2002 for the omissions and commissions committed in respect of goods manufactured and cleared from the units of RIPL, Chennai which he knew and had reasons to believe were liable to confiscation under the Central Excise Acts and Rules as applicable.
15.5. Now therefore, Shri D.Selvaraj, Managing Director of RIPL is required to show cause to the Commissioner of Central Excise, Pondicherry Commissionerate, Pondicherry as to why penalty should not be imposed on him under Rule 26 of the erstwhile Central Excise (No.2) Rules, 2001, read with section 38A of the Central Excise Act, 1944 Rule 26 of the Central Excise Rules 2002 for the omissions and commissions committed in respect of goods manufactured and cleared from the Pondicherry unit of RIPL, which he knew and had reasons to believe were liable to confiscation under the Central Excise Acts and Rules as applicable.
15.6. Now therefore, Shri D.Selvaraj, Managing Director of RIPL, and Shri.Veerachamy Pro. of M/s. Raji Industries, Trichy are required to show cause to the Commissioner of Central Excise No.1, Williams Road, Trichy Cantonment, Trichy 620 001 as to why penalty should not be imposed on them under Rule 209A of the erstwhile Central Excise Rules 1944, Rule 26 of the erstwhile Central Excise (No.2) Rules 2001, read with section 38A of the Central Excise Act, 1944 Rule 26 of the Central Excise Rules 2002 for the omissions and commissions committed in respect of goods manufactured and cleared from the unit of Raji Industries, Trichy which he knew and had reasons to believe were liable to confiscation under the Central Excise Acts and Rules as applicable.
15.7. M/s.Tamil Nadu Petroproducts Ltd., Manali, Chennai 600 068, M/s.Industrial Chemical Agency, Chennai M/s.Tuticorin Alkali and Chemicals Ltd., M/s.Gujarat Heavy Chemicals Ltd., M/s.Madras Industrial Chemicals Agency, M/s.Balaji Chemical Industries, T.Nagar, Chennai, Sanjeev Kumar Jain of M/s.Nidhi Traders, Karaikkal, Sri Chellakani of S.Ponnaiah Chettiar and Co. and Tirumal & Co., Sri V.S.Krishnan of Krishna Agro Chem and Krishna Ind Chem. Pvt. Ltd., M/s.Sri Ram Chemicals, M/s.Nuvodaya Chemicals Pvt. Ltd., M/s.GeeGeeKhay Chemical Industries, M/s.Surya Chemicals, M/s.Adheswara Chemicals Pvt.Ltd. and M/s.Mahaveer Surfactants Pvt. Ltd. M/s.Southern Aromatics and Chemicals Industries, Bush Boake Allen India Ltd., M/s.Credenza, Chennai are hereby required to show cause separately to the Commissionerate of Central Excise, Chennai-IV Commissionerate, Chennai-35, Commissioner of Central Excise, Pondicherry, Commissioner of Central Excise No.1, Williams Road,Tiruchirappalli as to why a separate penalty should not be imposed on them under Rule 209A of the erstwhile Central Excise Rules, 1944, Rule 26 of the erstwhile Central excise (No.2) Rules 2001, read with section 38A of the Central Excise Act, 1944 and Rule 26 of the Central Excise Rules 2002 for the offence committed in respect of alleged abetting the evasion of Central excise duty by suppression of production and clandestine removal of Oorvasi branded detergent soaps and powder from the Chennai (Kattuppakkam, Iyyappanthangal, Porur, Poonamallee) Pondicherry Units of RIPL and Raji Industries, Trichy by supplying the raw materials in fictitious buyers names to the aforesaid Oorvasi detergent soap manufacturing units. and thereafter directed the petitioner to file its reply within 30 days from the date of receipt of the notice.
46. The main grievance of the petitioner appears to be that in paragraph-15 of the impugned show-cause notice, the first respondent has quantified the amount of central excise duty not paid by the petitioner under various heads and also stated that the petitioner is liable to pay penalty and interest. The contention as submitted by the learned senior counsel for the petitioner is that the quantum of central excise duty payable is not to be ascertained at the time of show-cause notice and it has to be decided at the time of adjudication and therefore, the fixation of the said amount would amount to prejudging the entire issue, and by relying upon the judgment of the Supreme Court in Siemens Ltd. v. State of Maharashtra [(2006) 12 SCC 33], he contended that this is a case where the Court should interfere at the show-cause notice stage itself.
47. It is true that in the counter affidavit filed by the first respondent, the first respondent has stated that the duty evasion has been quantified by taking into account all documentary evidence collected in the matter, however, the first respondent has categorically stated that the petitioner would be afforded adequate opportunity to defend itself by way of reply, personal hearing, etc. before the adjudicating authority. Therefore, according to the first respondent, the quantification of tax evasion is based on investigation and documentary evidence and not a final decision arrived at which will be left to the adjudicating authority. It is also stated in the counter affidavit that quantification of duty liability has been made on scientific and rational manner commensurate with the potential of the petitioner which has indulged in offences in successive manner unmindful of investigatory process. But, it is stated that the department has not asked the petitioner to pay duty without resorting to collection of evidence, without any investigation and without issuing show-cause notice.
48. It is in that background we have to refer to the judgment of the Supreme Court in Siemens Ltd. v. State of Maharashtra [(2006) 12 SCC 33]. That was a case where municipal tax and cess payable for the goods supplied from a company as per the provisions of the Bombay Provincial Municipal Corporations Act, 1949 in respect of two factories of the said company situated at Aurangabad and Kharghar which are outside the jurisdiction of the city limits of Navi Mumbai and within the territorial jurisdiction of the Bombay Municipal Corporation in respect of which supplies were directly made to the dealers and the Corporation gave a direction to the appellant establishment at Kalwe to pay tax. That demand was given in the form of show-cause notice based on certain complaints and routine investigations with vendors regarding transactions from the appellant factory at Kalwe and by the show-cause notice, the appellant was directed to make payment of cess with interest with the following words, you are also requested to attend hearing at above address at 11.00 a.m. on 4.7.2005. I am enclosing herewith the photocopies of the bills raised by Aurangabad-Daman divisions to the Navi Mumbai vendees. When the High Court refused to interfere by exercising its jurisdiction under Article 226 of the Constitution of India, stating that it is always open to the petitioner to file its reply to the show-cause notice and produce documents, it was, taking note of the contents of the counter affidavit filed wherein the Corporation has clearly stated that the appellant was liable to pay cess, the Supreme Court held as follows:
9. Although ordinarily a writ court may not exercise its discretionary jurisdiction in entertaining a writ petition questioning a notice to show cause unless the same inter alia appears to have been without jurisdiction as has been held by this Court in some decisions including State of U.P. v. Brahm Datt Sharma [(1987) 2 SCC 179], Special Director v. Mohd. Ghulam Ghouse [(2004) 3 SCC 440] and Union of India v. Kunisetty Satyanarayana [(2006) 12 SCC 28], but the question herein has to be considered from a different angle viz., when a notice is issued with premeditation, a writ petition would be maintainable. In such an event, even if the court directs the statutory authority to hear the matter afresh, ordinarily such hearing would not yield any fruitful purpose. (See K.I.Shephard v. Union of India [(1987) 4 SCC 431]). It is evident in the instant case that the respondent has clearly made up its mind. It explicitly said so both in the counter-affidavit as also in its purported show-cause notice.
10. The said principle has been followed by this Court in V.C., Banaras Hindu University v. Shrikant [(2006) 11 SCC 42], stating: (SCC p.60, paras 48-49) 48.The Vice-Chancellor appears to have made up his mind to impose the punishment of dismissal on the respondent herein. A post-decisional hearing given by the High Court was illusory in this case.
49.In K.I.Shephard v. Union of India [(1987) 4 SCC 431] this Court held: (SCC p.449, para 16) It is common experience that once a decision has been taken, there is a tendency to uphold it and a representation may not really yield any fruitful purpose. (See also Shekhar Ghosh v. Union of India [(2007) 1 SCC 331] and Rajesh Kumar v. DCIT [(2007) 2 SCC 181]).
A bare perusal of the order impugned before the High Court as also the statements made before us in the counter-affidavit filed by the respondents, we are satisfied that the statutory authority has already applied its mind and has formed an opinion as regards the liability or otherwise of the appellant. If in passing the order the respondent has already determined the liability of the appellant and the only question which remains for its consideration is quantification thereof, the same does not remain in the realm of a show-cause notice. The writ petition, in our opinion, was maintainable.
49. Likewise, in the judgment of Division Bench of this Court relied upon by the learned senior counsel for the petitioner in Messrs.Madurai Metal Industries v. Union of India (1991 Writ LR 59), show cause notice which was impugned reads as follows:
Thus it is proved beyond any shadow of doubt that the dealers have been clandestinely indulging in massive purchases and sales suppressions by manoeurving and manipulating their accounts deliberately and willfully not only to evade payment of Excise duty, but also the tax legitimately due to the Commercial Taxes Department.
It was in that context, the Division Bench held that even though at the stage of issuing show-cause notice whether it is a disciplinary action or under any other statute, it is premature for the High Court to examine the propriety or otherwise of such proceedings and held that if the show-cause notice has foreclosed the entire issue by prejudged mind, the Court could interfere. The relevant portion of the judgment is as follows:
9. The above principle obliges us to countenance the case of the petitioner. As rightly contended by the learned counsel for the petitioner, the impugned show cause notices cannot be allowed to stand by merely directing the third respondent to proceed further impartially and with care on the basis of the impugned show-cause notices. The learned Single Judge, as already noted, seems to be of the view that the disciplinary enquiry will stand on a different footing. The basic principle is that a show cause must be a real show cause, keeping an open mind with regard to the subject matter of the enquiry proposed that if the show cause bears out a foreclosed or a prejudged mind, that will violate the principles of natural justice. We could not distinguish cases arising under other circumstances from cases relating to disciplinary action, with regard to application of this basic principle.
50. It is true that in Union of India v. Bajaj Tempo Limited [(1998) 9 SCC 281], the Supreme Court held that in tax matters, interference with show-cause notice under Article 226 of the Constitution of India is remote, especially when the issue involved in the writ petition relates to questions of fact. That was a case where a trade notice was issued against the assessee in the form of show-cause notice, and the Supreme Court held that the items involved in the notice are several and in respect of each of the items, finding has to be given in the adjudicating process and in the show-cause notice, nothing has been done by the authority in respect of each of the said items or goods. Therefore, it was held that the proper course of action is to direct the assessee to submit explanation to the show-cause notice so as to enable the authorities to record their findings of fact. The operative portion of the judgment is as follows:
3. It is clear that the question of eligibility to the duty demanded depends on the facts found relating to the process by which the end-product on which duty is demanded came into existence. The items in question are several and in each case a finding has to be given on the facts pertaining to the particular item. This has not been done by any authority in respect of any of these items or goods. There is thus no finding of fact on which the question of exigibility to excise duty on any of the items or goods can be decided. The appropriate course for the assessee in each case was to reply to the show-cause notice enabling the authorities to record their findings of fact in each case and then if necessary, the matter should have been proceeded to the Tribunal and thereafter to this Court. The trade notice was not decisive of the question either before the Tribunal or in this Court.
51. Again, while dealing with the Foreign Exchange Management Act, 1999 and Foreign Exchange Regulation Act, 1973, it was held that against show-cause notice issued for violations of statutory requirements, the High Court cannot interfere under Article 226 of the Constitution of India unless it is satisfied that the show-cause notice should be treated as a nullity for jurisdiction of the authority even to investigate about the facts. That was in Special Director v. Mohd. Ghulam Ghouse [(2004) 3 SCC 440] and the relevant paragraph is as follows:
5. This Court in a large number of cases has deprecated the practice of the High Courts entertaining writ petitions questioning legality of the show-cause notices stalling enquiries as proposed and retarding investigative process to find actual facts with the participation and in the presence of the parties. Unless the High Court is satisfied that the show-cause notice was totally no est in the eye of the law for absolute want of jurisdiction of the authority to even investigate into facts, writ petitions should not be entertained for the mere asking and as a matter of routine and the writ petitioner should invariably be directed to respond to the show-cause notice and take all stands highlighted in the writ petition. Whether the show-cause notice was founded on any legal premises, is a jurisdictional issue which can even be urged by the recipient of the notice and such issues also can be adjudicated by the authority issuing the very notice initially, before the aggrieved could approach the Court. Further, when the Court passes an interim order it should be careful to see that the statutory functionaries specially and specifically constituted for the purpose are not denuded of powers and authority to initially decide the matter and ensure that ultimate relief which may or may not be finally granted in the writ petition is not accorded to the writ petitioner even at the threshold by the interim protection not granted.
52. In State of U.P. v. Anil Kumar Ramesh Chandra Glass Works [(2005) 11 SCC 451], again while dealing with U.P.Trade Tax Act, 1948 in respect of a show-cause notice issued under the said Act, the Supreme Court held that the scope of interference by the High Court under Article 226 of the Constitution of India against such show-cause notice is remote. The Supreme Court also held that in tax matters it is not proper for the High Court to interfere with the functions under Article 226 of the Constitution of India. Paragraph-6 of the judgment reads thus:
6. In our view, the High Court proceeded on an incorrect basis. Hence, the decision cannot stand. In any event, this Court had repeatedly held that Article 226 should not be permitted to be invoked in order to challenge show-cause notices unless accepting the fact in the show-cause notices to be correct, either no offence is disclosed or the show-cause notices are ex facie without jurisdiction. That could not be said as far as the eight show-cause notices in question are concerned. The High Court, therefore, should not have interfered and should have left the respondents to pursue their remedy by way of an appeal under Section 9 of the Act from the order of assessment which, according to the High Court, had admittedly been passed before the writ petition had been filed by the respondent.
53. It is equally well settled that alternative remedy is not a constitutional bar to the High Court jurisdiction. As it was held by the Supreme Court in Whirlpool Corporation v. Registrar of Trade Marks [(1998) 8 SCC 1], it is a self-imposed restriction. In that case, the Supreme Court reiterated that where there is violation of fundamental rights including the principles of natural justice or want of jurisdiction, the writ petition is maintainable. The findings of the Apex Court in the above said judgment are as follows:
14. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for any other purpose.
15. Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ or petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evoluntionary era of the constitutional law as they still hold the field.
54. It is also well settled that the concept of natural justice relating to show-cause notice includes the production of various documents and materials relied on by the authorities in the show-cause notice that unless copies of those documents are furnished, the other party cannot be expected to give an effective reply, which forms part of the principles of natural justice, as laid down by the Supreme Court in Sahi Ram v. Avtar Singh [(1999) 4 SCC 511] in the following words:
13. The Central Government will, therefore, give a show-cause notice to the respondent as above-stated (with a copy to the appellant) setting out all the factual material relied upon against the respondent by the State of Haryana in his cancellation order dated 27.4.1984 and the material relied upon by the Central Government in its order dated 24.11.1984. The show-cause notice will be accompanied by copies of all such documents as were relied upon against the respondent by the State of Haryana and by the Central Government. After receiving the explanation of the respondent and the objections of the appellant to the said explanation of the respondent and the rejoinder of the respondent, if any thereto, the Central Government will give a hearing to the respondent and to the appellant, and will pass a reasoned order and submit the same to this Court within four months from today, after communicating the same to the appellant and the respondent and the State of Haryana. The Central Government shall also decide whether the breaches and irregularities were committed by the respondent or by Shri R.L.Sharma. The aggrieved parties can file objections thereto thereafter in this Court.
55. By applying the judicial dictum laid down as narrated above, even though an overall reference to the show-cause notice shows that various materials have been relied upon which are culled out during the investigation by the first respondent and that the first respondent has found prima facie that there has been violation of the provisions of Central Excise Rules, especially relating to payment of duty since SSI exemptions were availed and reduced quantum of duty was paid, while the liability is to the extent of 11%, in the ultimate paragraphs, especially in paragraph-15, which I have elicited above, the first respondent has arrived at the quantum of excise duty stated to have been evaded by the petitioner which can only be consequential to the decision that SSI exemption availed by the petitioner has been misused and even before such a decision regarding SSI exemption whether the same has been used by the petitioner in proper manner or not, certainly the quantifying of tax evasion by saying that the petitioner clandestinely removed the goods from its Chennai unit, amounts to prejudging the issue.
56. Even though the second respondent is an authority below in rank to the first respondent, in the adjudicating process, he has to first decide as to whether various prima facie materials stated to have been obtained during investigation are acceptable and it depends upon the examination of various persons whose statements were obtained in the preliminary investigation which is certainly subject to cross-examination on the side of the petitioner. Even before such decision is arrived at regarding allegation of misuse of SSI exemption for the purpose of determining the excise duty evasion, the quantifying of the amount of duty evaded on the basis of clandestine removal stated to have been done by the petitioner, that is, the difference between the duty paid on SSI exemption and duty liable to be paid if the petitioner is not entitled for SSI exemption, certainly amounts to prejudging the entire issue. When the first respondent has decided that the petitioner is liable to pay the difference of duty by concluding that there has been a violation in SSI exemption obtained by the petitioner, it is not known as to what else remains to the second respondent to decide as to the first point, whether the petitioner having obtained SSI exemption has misused the same and therefore, liable to pay the duty as per the Act at enhanced rate.
57. It is this aspect of the show-cause notice which, in my considered view, has prejudged the issue and certainly it would tend to prejudice the mind of the adjudicating authority, since, in normal circumstances, the adjudicating authority under the Act has to go as per the factual position mentioned in the show-cause notice. It is no doubt true that in cases of this nature where the investigation was conducted for a period of nearly two years in examining and recording statements under section 161 Cr.P.C. and effecting seizure of various materials, certainly, the authority would have proceeded for investigation and made up his mind prima facie and expressed his view. In such situation, there is nothing wrong in arriving at such prima facie conclusion which should be only for the purpose of issuing show-cause notice and not for the purpose of giving a finding on the issue, which is the duty of the adjudicating authority.
58. In a case like that of the present one, at the initial stage of issuing show-cause notice itself, if the first respondent has entered into the adjudication which certainly requires an opportunity of being give to the petitioner to cross-examine the persons who gave statements against him, such act, in my considered view, is a clear violation of the principles of natural justice which cannot be said to be an empty formality. In spite of such conclusion arrived at by the first respondent, it cannot be presumed that the adjudicating authority will independently apply his mind and decide the issue. Moreover, on an analysis of the entire show-cause notice, as I have elicited earlier, even though a large portion of it, is relating to the factual finding arrived at after investigation, the various indiscriminate words like, clandestine removal, deliberate conduct, etc., by the first respondent investigating authority, is not expected to be used, for maintaining a healthy trend at the time of issuing show-cause notice.
59. A show-cause notice, as it was held by a Division Bench of this Court presided over by Nainar Sundaram,J (as His Lordship then was), is the basis and it must be impartial and its fairness and impartiality can be culled out. On the facts and circumstances of the present case the first respondent, on being prima facie satisfied with the facts, and after making factual assertions, has chosen to give the show-cause notice. In the show-cause notice, the first respondent should have explained about the facts and asked the other side to give explanation and should not have arrived at a conclusion that the other side has committed a mistake, in which event, the explanation will be an empty formality only.
60. In that view of the matter, I am of the considered view that the impugned show-cause notice has to be set aside in so far as it relates to the quantification of the amount liable to be paid by the petitioner towards the difference of excise duty and the observation that the petitioner had clandestinely removed the goods. In such view of the matter, W.P.No.13863 of 2005 stands allowed and the impugned show-cause notice stands set aside, however, with liberty to the first respondent to issue a fresh-show-cause notice by removing the above said infirmities which alone have forced me to interfere with the show-cause notice impugned in the writ petition.
61. In so far as W.P.No.32046 of 2004 is concerned, a bare reading of the impugned order of revision passed by the respondent, Deputy Commercial Tax Officer dated 2.8.2004 shows that the same has been passed in pursuant to the show-cause notice issued by the Additional Director General of Central Excise, Intelligence dated 30.6.2003 which is impugned and stands set aside in W.P.No.13863 of 2005. Of course, the petitioner has raised one other point as to the service of notice as required under the relevant rules, especially rule 52 of the Tamil Nadu General Sales Tax Rules, 1959. As per the said Rules, the process of affixture should be resorted to only after the modes referred to in Rule 52(1)(a),(b) and (c) are exhausted.
62. While Rule 52(1)(a) of the Tamil Nadu General Sales Tax Rules provides for giving or sending a notice to a dealer or Manager or Agent, Rule 52(1)(b) provides that if the dealer, Manager or Agent is not found, the notice may be given or sent to any adult member of dealers family and as per Rule 52(1)(c) which enables service of notice by registered post if Rule 52(1)(b) is not possible to be confirmed and it is only thereafter, as a last mode, affixture of service has to be resorted as per Rule 52(1)(d). Rule 52(1)(a) to (d) are as follows:
Rule 52(1)(a) by giving or tendering it to such dealer of his manager or agent or the legal practitioner appointed to represent him or to his authorised representative; or Explanation.- Endorsement by person who delivers the notice, etc. of having tendered or given it will be proof for the purpose of this sub-rule.
Rule 52(1)(b) if such dealer or his manager or agent or the legal practitioner appointed to represent him, or his authorised representative is not found, by giving or tendering it to any adult member of his family;
Rule 52(1)(c) If the address of such dealer is known to the assessing authority, by sending it to him by registered post; or Rule 52(1)(d) If none of the modes aforesaid is practicable, by affixing it in some conspicuous place at his last known place of business or residence.
63. On the facts of the case, it is the case of the department that affixture was effected. It is the case of the petitioner that no notice was received under anyone of the modes stated in Rule 52(1)(a), (b) and (c) and in the absence of any averment made by the respondent in the counter affidavit that efforts were taken to send the notice by registered post, it is not possible to accept the contention raised by the respondent in the counter affidavit.
64. That apart, a reading of the impugned proceedings of the respondent shows that it is not as if the respondent has found out certain materials for the purpose of making revision of assessment, especially when, admittedly, for the year 1998-99 the assessment was already made in April, 2000 itself. The respondent having made inspection on 6.12.2000, took four years time to pass the impugned order of revision of assessment. Only after the Additional Director General of Central Excise issued the show-cause notice on 30.6.2003, the impugned order was passed on 2.8.2004. Inasmuch as I have held that the impugned show-cause notice issued by the Additional Director General of Central Excise is not valid in law and remanded the matter for the issue of a show-cause notice afresh, the impugned order of revision of assessment is also not sustainable and accordingly, the writ petition, W.P.No.32046 of 2004 stands allowed and the impugned order stands set aside, however, with liberty to the respondent to take appropriate action after the adjudicating process by the Excise Department as stated above is completed.
65. The same view should also be followed in respect of other writ petitions, W.P.Nos.24389 and 24390 of 2005 challenging the notices issued for revision of assessment for the years 1999-2000 and 2000-01. The said notices are set aside with liberty to the respondent to issue fresh notices and take appropriate action after the adjudicating process by the Excise Department as stated above is completed.
66. Accordingly, the following orders are passed:
(i) W.P.No.13863 of 2005 stands allowed and the impugned show-cause notice of the first respondent dated 30.6.2003 stands set aside with liberty to the first respondent to issue a show-cause notice afresh by removing the infirmities stated above, which have alone forced me to interfere with the show-cause notice impugned, and proceed with the same further in accordance with law.
(ii) W.P.No.32046 of 2004 stands allowed and the revised assessment order passed by the respondent for the year 1998-99 stands set aside, with liberty to the respondent to proceed afresh either after the adjudicating process by the Excise Department as stated above is completed or on finding any fresh materials, by following the procedures established by law.
(iii) W.P.Nos.24389 and 24390 of 2005 stand allowed and the impugned notices for revision of assessment for the years 1999-2000 and 2000-01 stand set aside with liberty to the respondent to issue notices afresh after the conclusion of adjudicating proceedings by the Excise Department as stated above or on finding any new materials and in the manner known to law.
(iv)No costs.
(v) Connected miscellaneous petitions are closed.
Index:Yes Internet:Yes kh 07.06.2010 To
1. The Deputy Commercial Tax Officer Sriperumbudur Assessment Circle Varadarajapurm Poonamallee Chennai 600 056.
2.The Additional Director General Directorate of Central Excise Intelligence, South Zonal Unit C-3, C Wing Rajaji Bhavan Besant Nagar, Chennai 600 090.
3.The Commissioner of Central Excise IV Commissionerate MHU Complex Nandanam, Chennai 600 035.
P.JYOTHIMANI,J.
P.D.Common Order in W.P.Nos.32046/04, 13863, 24389 & 24390/05 Dated:07.06.2010