Rajasthan High Court - Jaipur
M/S Kaizen Organics Pvt Ltd vs Union Of India & Ors on 6 March, 2013
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR :: ORDER :: D.B. CIVIL WRIT PETITION NO.12226/2011 M/s. Kaizen Organics Pvt.Ltd. Vs.Union of India & Ors. D.B. CIVIL WRIT PETITION NO.3994/2010 M/s. Kaizen Organics Pvt.Ltd. Vs. Union of India D.B. CIVIL WRIT PETITION NO.552/2011 M/s. Kaizen Organics Pvt.Ltd. Vs. Union of India & Ors. D.B. CIVIL WRIT PETITION NO.1175/2012 M/s. Kaizen Organics Pvt.Ltd. Vs. Union of India & Ors. Date of Order : 6th March, 2013 HON'BLE THE CHIEF JUSTICE MR. AMITAVA ROY HON'BLE DR. JUSTICE SMT. MEENA V. GOMBER Mr.M.P.Devinath with Mr.Sameer Jain for the petitioners. Mr.Anil Mehta, Mr.Ajay Shukla for the respondents. ***** BY THE COURT (PER HON'BLE THE CHIEF JUSTICE) :
The impugnment common in these petitions, is in essence, mounted against the decision of the revisional authority under Section 35EE of the Central Excise Act, 1944 (hereinafter referred to as 'the Act') negating the petitioner's assailment of the decision of the concerned central excise authorities to withdraw the acceptance of the proof of export of its six consignments as well as the consequential show cause notice(s) issued for realization of the corresponding amounts of excise duty with interest thereon as well as penalty for the alleged contravention of the relevant provisions of the Central Excise Rules, 2002 (hereinafter referred as 'the Rules'). The extra dimension in D.B.Civil Writ Petition No.12226/2011 pertains to the bar of limitation prescribed by Section 35EE of the Act, for which the petitioner's revision application thereunder, has already been rejected, as belated. The issues, in substance, being identical, the petitions were heard analogously and the present adjudication would answer the same.
We have heard Mr.M.P.Devinath with Mr.Sameer Jain, learned counsel for the petitioners and Mr.Anil Mehta & Mr.Ajay Shukla for the respondents.
In the outlined backdrop of the instant scrutiny, the facts in bare essential, would only be scripted as the determination of the debate involved, would logically eventuate in the resultant legal consequences, even in absence of specific references to all the impugned orders involved.
The petitioner has introduced itself to be a manufacturer of Menthol Powder, Menthol Crystal, D.M.O and Menthol Oil falling under headings No.29061100, 30039021 and 33012590 of the First Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as CETA) and engaged in exporting them without payment of duty under Rule 19 of the Rules. Between October, 2005 to April, 2006, it accordingly, cleared six consignments covered by ARE-1 Nos.KAIZEN/05-06/20 dated 31.10.2005, KAIZEN/05-06/23 dated 22.12.2005, KAIZEN/05-06/29 dated 07.03.2006, KAIZEN/05-06/30 dated 18.3.2006, KAIZEN/06-07/1 dated 22.4.2006 and KAIZEN/06-07/3 dated 28.4.2006 for export under the letter of undertaking submitted to the jurisdictional Assistant Commissioner, Central Excise, Division-II, Jaipur. It also submitted the proof of export before the said authority for acceptance under the above provision of the Rules, whereafter the said authority vide orders/letters No.V(Tech) CE-II/SCN/63/05/1189-90 dated 31.1.2006, V(Tech)CE-II/POE/Kaizen/06/05 dated 20.06.2006 and V(Tech)POE/14/2006/2731-32 dated 22.8.2006, accepted the same. It was thereafter that, by letter No.V(Tech)Adj./55/2006/4462 dated 26.10.2006, that the said authority withdrew the acceptance of the proof of export covering the consignments. Though meanwhile, as the petitioner claims, the consignments had been duly exported after being inspected by the customs authorities at the port concerned, in terms of the relevant instructions issued by the Central Board of Excise & Customs (hereinafter referred to as 'the Board'), a show cause notice dated 27.10.2006 followed, encompassing all the six consignments requiring the petitioner to show cause as to why the central excise duty of Rs.69,73,481/- would not be recovered from it under Section 11A of the Act, together with interest contemplated under Section 11AB thereof. It was also required to reply as to why penalty should not be imposed upon it under the provisions of the Rules, as referred to therein. It was imputed in the said notice, inter alia, that though the proof of export submitted by the petitioner/assessee had initially been accepted, on a later scrutiny thereof on the basis of its version carried in its letter dated 15.9.2006, in response to a query made that it manufactures Menthol of various grades and that some of their products conformed to the specifications BP/USP, but it does not market the same as it does not not hold any drug licence, it transpired that it had mentioned BP/USP in its Bills of Lading/Shipping Bills alongwith the descriptions of its products represented to be exported which did not tally with those, depicted in their corresponding ARE-1s. Reference was also made in the notice to some other cases of such mismatch between description of the commodities laid for export, as referred to in the AREs, and those mentioned in the other documents. According to the Revenue, the plea of the petitioner/assessee that the incompatibility in description was a matter of mistake, was not tenable as thereby, the central excise tariff headings did differ. It maintained in the notice that the goods which were sought to be exported were different from those cleared from the petitioner's factory covered by ARE-1s and that, as it admittedly did not have a drug licence to manufacture those mentioned in their Bill of Lading/Shipping Bills, it was apparent that those had not been manufactured by it, and thus it, under the guise of export, diverted the same, valued Rs.4,27,29,663/-, in the local market with an intention to evade central excise duty. The petitioner/assessee was also required to produce all evidence, documentary or otherwise, at the time of submission of its explanation in support of its defence.
The petitioner, on 14.12.2006, submitted its reply to the show cause notice maintaining that it had actually exported the goods covered by ARE-1s, after the acceptance of proof thereof by the jurisdictional Assistant Commissioner, Central Excise, Division-II, Jaipur. It asserted that the exported consignments were of Menthol Powder which had been cleared under the respective ARE-1s. It admitted that it did not hold the drug licence for the manufacture of Menthol Powder as per any pharmacopoeia standards, either British or United States. While pointing out the admission of the Revenue in the show cause notice of the actual export of the consignments involved, the petitioner/assessee maintained that it manufactures Menthol of various grades, some whereof, conformed to the specifications BP/USP and insisted that as the consignments had been cleared for export by the customs authorities on due examination thereof there, in fact, was no causative variation in the description of goods, warranting the action proposed. It contended that in absence of any tangible evidence of diversion of the goods for domestic purposes, the inference to that effect was unfounded. It referred, in particular, to Para 7.3 and 7.4 of Chapter-8 of the CBEC's Excise Manual of Supplementary Instructions, delineating the procedure for examination of the goods by the customs authority to establish the identity and quantify thereof, for export and the consequential incentives therefor, as contemplated under the Act and the Rules. It thus contended that the consignments having been cleared for export on due verification thereof by the customs authorities so authorized to undertake that task, the accusation of evasion of duty by it, was untenable. The petitioner's/assessee's appeal before the Commissioner(Appeals), Jaipur and the revision under Section 35EE against the proposed consequential action for realization of central excise duty with interest and penalty, having been rejected, it seeks the invocation of the writ jurisdiction of this Court for redress.
In D.B.Civil Writ Petition No.12226/2011, the petitioner incidentally had preferred appeal before the Central Excise Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as 'the Tribunal') under Section 35B of the Act impugning the order of rejection passed by the Commissioner(Appeals), Jaipur. The Tribunal having rejected the appeal as not maintainable, as the subject-matter thereof was covered by the eventualities contemplated in clauses (b) & (c) enumerated under the proviso to Section 35B(1), it thereafter sought refuge under Section 35EE of the Act and preferred a revision thereunder. As admittedly, this revision application was at the time of institution was not only barred by time in terms of sub-section (2) of Section 35EE, but also beyond the period extendable by the revisional authority under the proviso thereto, interference was declined on the ground of bar of limitation. Contending that as the petitioner had been pursuing its relief bona fide before the wrong forum i.e. the Tribunal, the learned revisional authority ought to have adjudicated its application under Section 35EE on merits, the petitioner has sought the remedial intervention of this Court.
The respondents have in their reply reiterated their stand in the show cause notice. According to them, not only such mismatch, in the description of goods in the AREs and other documents, in the six consignments of Menthol Crystal had been detected, it is also writ large on the face of the contemporaneous documents, that such anomalies have been noticed in other instances covered by ARE-1s No.29 dated 7.3.2006, 30 dated 18.3.2006, 01 dated 22.4.2006 and 03 dated 28.4.2006 of the petitioner's goods cleared as being organic chemicals of Chapter- 29, whereas the goods exported were pharmacopoeia products of Chapter 30 of the Schedule to the CETA. While reiterating that Menthol Powder with pharmacopoeia standards as IP (Indian Pharmacopoeia), BP (British Pharmacopoeia) and USP (United States Pharmacopoeia) is a drug for which licence under the Drug and Cosmetics Act, 1940 and the Rules framed thereunder, is an absolute essentiality, it has asserted the acceptance of proof of export had been validly withdrawn. It has been pleaded as well that the petitioner's contention of inadvertent mistake in the matter of description of his consignments, was wholly unconvincing. The respondents pleaded that as admittedly the petitioner did not have a drug licence, it could not have manufactured Menthol Powder/Crystal with pharmacopoeia standards as sought to be represented in its Bill of Lading/Shipping Bills etc., contrary to its AREs, they endorsed the issuance of show cause notice and the action proposed thereby. They have dismissed the petitioner's plea of litigating bona fide in a wrong forum as only an excuse even otherwise untenable in law and thus, insisted the same had been rightly rejected by the revisional authority.
Mr.M.V.Devinath vis-a-vis D.B.Civil Writ Petition No.12226/2011 has insistently argued that as the petitioner at all relevant points of time had been pursuing the appeal before a wrong forum, the revisional authority under Section 35EE ought to have condoned the delay by accepting its plea of litigating bona fide in a wrong forum. Pleading that the language in Section 35B dealing with appeals to the Tribunal might have contributed to the election of the wrong forum by the petitioner, the learned counsel has urged that in the attendant facts and circumstances, the delay ought to have been condoned and the petitioner's challenge ought to have been examined on merits. Without prejudice to these, Mr.Devinath argued that as the petitioner's revision under Section 35EE has been dismissed only on the ground of delay without any adjudication on merits, there is no merger thereof with the decision of the Commissioner(Appeals) and thus, it is entitled to lay its challenge to the impugned actions of the respondents authorities under Article 226 of the Constitution of India, independently de hors such dismissal. Referring to Rule 19, the learned counsel has urged that the underlying purpose thereof being to permit export of excisable goods without payment of duty from the factory of a producer or a manufacturer thereof, subject to the conditions, safeguards and procedure to be specified by the Board, the petitioner's consignments having conformed to such prescriptions and been exported, after exhaustion of all the procedural requisites, the withdrawal of the acceptance of the proof of export and the proposed action of realization of the excise duty with interest and penalty being patently illegal and in contravention of the letter and spirit of the Act and the Rules ought to be adjudged null and void. As the petitioner's consignments had been exported after being cleared by the customs authorities, the purported difference in the description thereof as depicted in the AREs and the other documents pertaining thereto, notwithstanding, being satisfied that the said variations were neither material nor did have any bearing on the identification of the goods, the respondents were estopped in law from referring to the impugned actions, he urged.
According to Mr.Devinath, in absence of any evidence of diversion of the petitioner's consignments to the domestic market, and in the face of the admitted factum of export thereof, absence of any drug licence of the petitioner to manufacture the same products with pharmacopoeia standards did not, by any means, signify any attempt on its part to export goods not manufactured by it for evading central excise duty. The learned counsel, therefore, has insisted that the withdrawal of the proof of export and the proceedings initiated by the show cause notice dated 27.10.2006 ought to be declared null and void and the impugned decisions of the appellate/revisional authority under the Act be set aside. To reinforce his contentions, reliance was placed on the decisions of the Apex Court in Steel Authority of India Ltd. Vs. Collector of Central Excise, 1996 (82) E.L.T.172 (S.C.); Chandi Prasad & Ors. Vs. Jagdish Prasad & Ors., (2004) 8 SCC 724; Coal India Ltd.& Anr. Vs. Ujjal Transport & Ors., (2011) 1 SCC 117 and of the Bombay High Court in Global Traders Vs. Union of India, 2004(174) ELT 434; Vimal Nath Vs. Union of India, 2008(232) E.L.T. 592 (Bom.).
In emphatic controversion of the above, Mr.Anil Mehta and Mr.Ajay Shukla have insisted that not only plea of bona fide litigating in a wrong forum is perverse and untenable on the face of it, the petitioner having preferred revision petition in time, in the other cases in hand, its endeavour to pass off the goods covered by the AREs to be manufactured by it and exported as contemplated under Rule 19 is clearly belied by the coeval records, including its own documents, namely Bill of Lading, Shipping Bills etc., pertaining to the same. Not only there is a misdescription of the goods, the AREs if are compared, with its other documents pertaining thereto, it being admitted that it did not possess a drug licence to manufacture Menthol Crystal/Powder with pharmacopoeia standards, it is patent that the goods sought to be exported by it, had not been manufactured by it and thus, it was not entitled to the benefit of exemption from payment of central excise duty. The learned counsel has urged that the petitioner having been found to have indulged in endeavours of export of goods not manufactured by it to deliberately evade central excise duty payable thereon, the impugned actions cannot be faulted with and in face of such enormous public revenue involved, the impeachment thereof ought to be dismissed with costs.
The learned counsel for the Revenue relied on the decisions of the Apex Court in Commissioner of Customs and Central Excise Vs. Hongo India (P) Ltd. & Anr., (2009) 223 CTR (SC) 225.
The pleaded facts alongwith the documents on record and the competing arguments have received our due consideration. Before adverting to the dissensus bearing on the merits, apt it would be to deal with the aspect of delay for which the petitioner's revision under Section 35EE had been rejected. Indubitably, by the time it filed its revision petition under Section 35EE, not only the period of limitation prescribed therefor had expired but also the term of relaxation grantable had lapsed. The power of the High Court to condone the delay in presentation of reference application under the unamended Section 35H(1) of the Act beyond the prescribed time by applying Section 5 of the Limitation Act, 1963 was dilated upon in Hongo India (P) Ltd. (supra). Their Lordships of the Supreme Court, on an elaborate survey of the provisions of the Act, with particular reference to Sections 35, 35B, 35EE, 35G and 35H, in authoritative terms, concluded that the scheme thereof predicated complete exclusion of Section 5 of the Limitation Act. In doing so, not only the decisions suggesting a different approach vis-a-vis other enactments were clearly distinguished in the face of the framework of the Act, it sustained the verdict of the jurisdictional High Court sharing the same view against its power to condone the delay after the expiry of the period prescribed by the relevant provisions of the Act. Their Lordships, with reference to Section 29 of the Limitation Act, 1963, propounded that even in a case where such special law did not exclude the provisions of Sections 4 to 24 of that enactment by an express reference, it was nonetheless open to the court to examine whether and to what extent, the nature of those provisions or the nature of the subject matter and scheme of the special law, did exclude their operation. It was held that the applicability of the provisions of the Limitation Act, therefore, was not to be judged in terms thereof, but by the provisions of the Central Excise Act, which suggest that the time limit prescribed thereunder is absolute and unextendable by a court under Section 5 of the Limitation Act. That it is the duty of the court to respect the legislative intent and that liberal interpretation contrary thereto ought not be granted, was also underlined.
In Coal India Limited (supra), the appellants being aggrieved by the award made under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act, 1996') filed appeal under Section 34 thereof before the territorial High Court, though an application ought to have been made before the concerned district court. When this was detected, on their prayer, the High Court permitted the withdrawal of the appeal, whereafter the appellants filed an application under Section 34(3) of the Act 1996 read with Section 14 of the Limitation Act, 1963 for excluding the time spent bona fide in prosecuting the proceedings before the High Court with the prayer for condonation of delay. Noticeably, the High Court while permitting the withdrawal of the appeal, did observe that the question of condonation of delay would be considered by the district court before which the application ought to be made. The learned District Judge, however, dismissed the application for condonation of delay and this decision was sustained by the High Court. The Hon'ble Apex Court in this factual background referring to Section 34(1) and its earlier decision in Consolidated Engineering Enterprises Vs. Principal Secretary, Irrigation Department & Ors, (2008) 7 SCC 169 held that in absence of any exclusion of Section 14 of the Limitation Act, 1963, the same would apply to the application under Section 34 of the Act. Taking that view, it was held that the application filed by the appellant before the district court was in time.
In Steel Authority of India Limited (supra), as the text of that decision would reveal, the assessee was left at liberty to avail the remedy under Section 35G of the Act and to seek the benefit of Section 14 of the Limitation Act, 1963 in accordance with law. So far as the aspect of the limitation is concerned, this decision as such therefore does not enunciate a legal proposition of application of Section 14 of the Limitation Act, 1963 in the eventualities contemplated by the various provisions of the Act and, in particular, Section 35, 35B, 35EE, 35G and 35H of the Act. Not only, to reiterate, in Hongo India (P) Ltd. (supra), the scheme of the Act was distinguished from that of the Act 1996, while examining the applicability of the provisions of the Limitation Act, 1963 enlarging the period of limitation by the latter for preferring appeal/revision/reference thereunder, going by the coram thereof as well, according to us, this verdict is of decisive relevance. We are therefore left unpersuaded by the petitioner's plea for condonation of delay on the ground of its bona fide litigating before a wrong forum. The assertion of the respondents to the effect that in the other accompanying instances, the petitioner had rightly identified the forum, in the overall factual backdrop cannot also be lightly discarded.
However, the above rejection of the petitioner's revision application under Section 35EE being only on the ground of limitation and not on merits, the arguments against merger thereof with the order of the Commissioner(Appeals), Jaipur has substance.
In the above premise, having regard to the identicalness of the issues seeking adjudication of this Court in all the petitions, we are not inclined to reject D.B.Civil Writ Petition No.12226/2011 only on this count and instead, propose to examine the same on merits as well.
The pleaded facts relating to the petitioner's consignments unmistakably demonstrate that the petitioner's claim for exemption from central excise duty is traceable to Rule 19 of the Rules, whereunder any excisable good may be exported without payment of duty from the factory of a producer or a manufacturer or the warehouse or any other premises, as may be approved by the Commissioner, subject to such conditions, safeguards and procedure, as may be prescribed by notification by the Board. That the mismatch in the description of the goods covered by the consignments of the petitioner is writ large if the AREs are read in juxtaposition with its other documents, namely Bill of Lading, Shipping Bills etc. is self evident. It is admitted by the petitioner that the commodity i.e.Menthol Crystal/Powder with pharmacopoeia standards as described in its Bill of Lading, Shipping Bills etc., could not have been manufactured by it, in absence of a drug licence. It is also an unimpeachable conclusion in view of the requirements to that effect prescribed by the Drug and Cosmetics Act. In other words, the petitioner cannot/could not have claimed the benefit of Rule 19 for such goods not having been manufactured by it. Such exemption of excise duty would not only be opposed to the letter and spirit of this provision of the Rules, but would also result in its undue enrichment at the cost of public revenue. Actual export of the consignments of the goods not manufactured by the petitioner per se would not entitle it to the benefit of Rule 19. The identification of the goods, thus, claimed to have been exported is of definitive significance and can by no means be compromised with, notwithstanding the fact that initially, the acceptance of the proof of export had been issued by the authorities and the same had been cleared for export after examination of the same at the place of export as required by CBEC guidelines to ascertain the identity and the quantity thereof. Though the respondents have not refuted the petitioner's plea of its goods having been subjected to such scrutiny, its explanation that the misdescription was a result of some inadvertent mistake, lacks in persuasion, more particularly, in view of its knowledge of not being the manufacturer of Menthol Crystal/Powder with pharmacopoeia standards as entered in its documents, namely Bill of Lading and Shipping Bills and thus, not being entitled to avail the benefit of central excise tax exemption under Rule 19 for exporting the same. Absence of any evidence for the diversion of these goods to the domestic market, ipso facto, in our estimate, does not, in the wake of apparent misdescription thereof, entitle it to the benefit of Rule 19 of the Rules. Having regard to the underlying purpose of the incentive as envisaged in this provision, the producer or manufacture ought to be adjudged to be eligible strictly in terms of the prescriptions thereof and no deviation is permissible. The proposed action of the respondents authorities on the ground of misdescription of the goods by the petitioner, on a cumulative consideration of all above, in our estimate, cannot be construed to be untenable. The view taken by the Revenue, having regard to the entire gamut of the facts involved, does not appear to be wholly implausible and absurd so as to be discarded as preposterous. Thus its plea of similar antecedents of the petitioner also cannot be lightly ignored. The relief claimed by the petitioner is statutory in nature and would be logically available to it on strict compliance of the prescriptions in connection therewith. The mere contingency that at some earlier point of time, the acceptance of the proof of export had been issued by the concerned excise authorities, would not entitle it to the benefit of Rule 19, in the singular facts and circumstances of the case.
The petitioner did initiate the impugnments against the withdrawal of the acceptance of the proof of export and the proceedings stemming from the show cause notice leading to institution of the instant proceedings. No final decision, as yet, has been taken by the excise authorities on the reply/explanation filed by it to the show cause notice(s). The present determination has been based on the materials laid before this Court for the present. As the show cause notice(s) would demonstrate, it is open for the petitioner to produce relevant records, documents and other evidence to substantiate its plea of export of goods manufactured by it, making those worthy of the exemption from payment of central excise duty as envisioned by Rule 19 of the Rules. In this context, it is worth-mentioning that the observations made hereinabove and the conclusions reached are in the context of the debate addressed in the instant petitions and it would be open for the petitioner to participate in the proceedings arising out of the show cause notice(s) inspite of this adjudication. In such an eventuality, needless to say, the respondents would take an appropriate decision in accordance with law in the said proceedings without being influenced by the above observation after affording due opportunity of participation to the petitioner.
These petitions, however, at this stage, in view of the findings recorded hereinabove, are dismissed. The stay applications are also rejected. No costs.
A copy of this order be placed in all the files.
(Dr. MEENA V. GOMBER),J. (AMITAVA ROY),C.J. Skant/-
All corrections made in the judgment/order have been incorporated in the judgment/order being emailed.
Shashi Kant Gaur, P.A./Mohit Tak, Jr. P.A