Madras High Court
R.K.K.R. Steels Ltd. vs Central Board Of Excise And Customs on 14 December, 1994
Equivalent citations: 1995(76)ELT576(MAD)
Author: Shivraj V. Patil
Bench: Shivraj V. Patil
ORDER
1. In all the writ petitions the petitioners have sought for issue of writs in the nature of prohibition exhibiting the respondents from proceeding further or dealing with or adjudicating the matter with regard to the respective show cause notices issued to the petitioners and to pass such other orders as this Court deems fit on the facts and circumstances of the cases.
2. The facts leading to these writ petitions are almost similar and the counter affidavits filed by the respondents are also similar touching the questions of law except stating the nature of the disputes in different writ petitions such as the rate of duty and the applicability of exemption notification, classification disputes, wrong availment of 'MODVAT' credit and brand name issue. In this view it is enough to set out the facts in W.P. No. 6709 of 1994 and the substances of the counter affidavits filed by the respondents indicating their stand for the purpose of disposal of these writ petitions.
3. In Writ Petition No. 6709 of 1994 the petitioner has sought for a Writ of Prohibition to restrain the respondents 2 and 3 from taking any further proceedings pursuant to the show cause notice OC. 54/93 dated 11-01-1993 stating that the respondents 2 and 3 have no jurisdiction to initiate proceedings where the duty involved is more than Rs. 50,000/- as per Central Board of Excise and Custom (for Short, C.B.E.C) Circular No. 3 of 1992 dated 14-5-1992.
4. The petitioner placed an order dated 5-10-1989 for importing of a diesel generator set from East Germany for which the price payable was Rs. 20,96,250/- C.I.T., Madras after obtaining necessary import licence from the Controller of Imports and Exports, New Delhi : the petitioner had also opened an irrevocable letter of credit through the Indian Bank in favour of 'Technocommerz VE AHB', Berlin for the said amount. The set was imported as a single unit weighing 24.99 tonnes; the goods were cleared on payment of appropriate duty; and the set was classified under sub-heading 8502.13. Subsequently the said diesel generator set was sold to a concern called Diamond Cements, Jhansi, Madhya Pradesh under a purchase order dated 18-6-1992.
5. The third respondent issued a show cause notice to the petitioner dated 11-1-1993 (the impugned notice) stating that the petitioner had manufactured the diesel generator set without filing classification list, without observing central excise procedures and without payment of appropriate duty. The said show cause notice was issued calling upon to show cause to the second respondent as to why the diesel generator set manufactured/assembled at their factory with imported components, indigenously procured components as well as the components fabricated at the factory should not be classified as generator set under sub-heading 8502 of the Central Excise Tariff Act, 1985 and why duty amount of Rs. 14,66,250/- should not be demanded under Rule 9(1) of the Central Excise Rules read with Section 11A of the Central Excise Act, 1944, and why penalty should not be imposed under Rule 173Q for the said contravention of the Rules.
6. The petitioners submit that former the recovery of duty under Section 11A could be invoked by the Assistant Collector for period of six months and by the Collector of Central Excise for a period of five years, for short claim, non-levy or erroneous levy and refund of duty on account of fraud, suppression, collusion etc. By Finance Act, 1992 the provisions of Section 11A were substituted and the power to make a demand for recovery of duty which had been short levied, short paid, or erroneously refunded was conferred on the Central Excise Officer. The word "Central Excise Officer" are defined in Section 2(b) which reads :-
"'Central Excise Officer' means any Officer of the Central Excise Department, or any person (including an Officer of the State Government) invested by the Central Board of Excise and Customs constituted under the Central Board of Revenue Act, 1963 (54 of 1963) with any of the powers of a Central Excise Officer under this Act."
Consequently power under Section 11A could be exercised only by such Officers to whom the powers are delegated specifically by the first respondent. The provisions of new Section 11A were contained in clause 116 of the Finance Bill, 1992. The first respondent accordingly issued a Circular No. 3 of 1992/Cx. 6 dated 14-5-1992 wherein reference is made to the said clause 116 in the Finance Bill, delegating powers laying down monetary limits for adjudication as follows :-
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Designation of Officers Amount of duty involved
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1. Collector .... Without limit
2. Additional .... Upto Rs. ten lakhs.
Collector/Deputy Collector
3. Assistant Collector .... Upto Rs. fifty thousand.
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NOTES.
(a) Where simultaneously different cases involving the same issue are due to be adjudicated in a Collectorate all such cases will be adjudicated by the officer competent to decide the case where the duty involved is the highest amount.
(b) Confiscation of goods, any levy of penalties will follow from above powers of adjudication, based on merits of the case."
7. It is the further case of the petitioner that the pecuniary powers for making a demand under Section 11A have been prescribed by the first respondent and all officers functioning in the Central Excise Department are bound by these limits, and therefore the pecuniary limits of the second respondent is Rs. 50,000/- except in the case of approval of a classification list or a price list. Apart from the question of pecuniary jurisdiction the proceedings were also without jurisdiction since no manufacture of diesel generator set had taken place at the premises of the petitioner, where there was no manufacturing activity at all since the set was fully assembled in the factory of the manufacturer in Germany and it was imported as a single piece and only some indigenous materials such as cooling towers and diesel tanks were used as accessories to make the set operational.
8. According to the petitioner the pecuniary limits prescribed by the first respondent are binding on all officers and as such the second and third respondents would have no jurisdiction to issue the impugned show cause notice. Therefore the proceedings are without jurisdiction and are liable to be set aside. Section 11A as amended has conferred powers only upto 'Central Excise Officer', the scope of the powers of a Central Excise Officer has to be read in the conjunction with Section 2(b) which empowers the first respondent to delegate powers in such manner as it thinks fit, and once powers have been delegated, all Officers have to act in accordance with the parameters laid down by the first respondent. The impugned show cause notice issued is contrary to the mandatory provisions of the Circular above-mentioned. Consequently the second respondent has no jurisdiction to proceed with the case any further. Without any manufacturing activities having taken place in the premises of the petitioner the respondents 2 and 3 had no jurisdiction to issue any notice or take any proceedings. Further the Supreme Court (in "Bengal Immunity Co. v. State of Bihar" ) has held that in the case of Writ of Prohibition the question of alternative remedy will not arise when a quasi-judicial authority usurps jurisdiction which does not belong to it. Though the Petitioner has submitted a reply to the show cause notice raising the preliminary objection regarding jurisdiction the second respondent without considering the same has posted the case for hearing which shows that he has decided to examine the case on merits. Under the circumstances the Writ Petition is filed seeking Writ of Prohibition to the second respondent.
9. The respondents have filed counter affidavits in W.P. Nos. 9242, 9243, 10469, 12217 and 12218 resisting the claims of the petitioners stating that the impugned show cause notices issued to the petitioners in these Writ petitions by the third respondent to show cause to the second respondent are perfectly valid; that the said Circular No. 3/92 dated 14-5-1992 issued by the first respondent is applicable only to offence cases falling under Section 33 of the Central Excises and Salt Act, 1944 and not to demands arising out of classification and valuation matters. This is made clear by the words other than the cases relating to approval of classification lists and price lists". Since the action initiated by the respondents 2 and 3 is out of their competence and they are acting in accordance with law the writ of prohibition cannot be issued against them. As regards the submission of the petitioner that the Assistant Collector is likely to confirm the demand it is stated that it is an unwarranted presumption. The adjudication proceedings will be conducted in accordance with the Central Excises and Salt Act, 1944 and the Central Excise Rules. The Writ petitions are filed with the sole intention of delaying the adjudication proceedings to gain financial accommodation. The respondents in the counter affidavits have also stated with regard to the factual aspects in all the writ petitions. According to them having regard to the facts of the cases the disputes relates to classification disputes, rate of duty, wrong availment of modvat credit and brand name issue, and as such the impugned shows cause notices in relation to the facts of the cases are quite in order. According to the respondents even on facts the writ petitions have no merits and they are liable to be dismissed.
10. The learned counsel for the petitioner contended that, i. The Circular No. 3/92 - Ex. 6, dated 14-5-1992 issued under the powers of the Central Board of Excise and Customs Act under Section 2(b) read with Section 11A of the Central Excises and Salt Act, 1944 is binding on the respondents and it applies to all Central Excise cases where demand has been made for recovery of duty under Section 11A where duty either has not been levied or not paid or short levied or short paid, or erroneously refunded;
(ii) Consequent to the amendment to Section 11A the said circular has been issued giving power of recovery to any Central Excise Officer. Further the Board has fixed monetary limits for adjudication of all Central Excise cases except those relating to approval of Classification of price lists;
(iii) The Circular has not been issued under Section 33 of the Act and it does not contravene any of the provisions of the Act or Rules;
(iv) Section 33 deals with adjudication of offences and penalty. It has nothing to do with recovery of duty covered by Section 11A; and,
(v) It is clear from the Circular itself that it has been issued consequent to the amendment to Section 11A. In support of these submissions the learned counsel for the petitioners cited few decisions;
11. The learned Additional Central Government standing Counsel representing the respondents argued that,
(i) The writ petitions are filed challenging mere issue of show cause notices; the petitioners have already filed replies to the show cause notices; it is open to them to urge all the contentions that are raised in these writ petitions before the authorities; further in order to appreciate the contentions raised by the petitioners it is necessary to examine the facts of each case so as to apply the law governing them; and this Court may not be going into the disputed facts or hold a mini enquiry exercising the power under Article 226 of the Constitution of India when the petitioners have an alternative and efficacious remedy available to them.
(ii) The monetary limit prescribed in the circular in question is applicable only to offence cases falling under Section 33 of the Act.
(iii) The show cause notice issued and proposed actions are within the competence of the respondents 2 and 3 and therefore the writ petitions seeking writ of prohibition are not maintainable;
(iv) The apprehension of the petitioners that the Assistant Collector is likely to confirm the demand is unwarranted presumption; under Section 35(f) of the Act the Appellate authority has power to grant stay; and the adjudication proceedings will be conducted as prescribed under the Act and the Rules, and
(v) Having regard to the various provisions of the Act and Rules it cannot be said that the respondents 2 and 3 have no jurisdiction to issue show cause notice leading to adjudication proceedings are cited.
In support of these submissions few decisions are cited.
12. I have carefully considered the submissions made by the learned Counsel representing either parties. Having regard to the facts of the cases as can be gathered from the pleadings and contentions urged by the learned counsel for the parties, I am of the opinion that it is appropriate that the adjudicating authorities should go into the facts of the cases and consider all the contentions that may be urged by the parties and pass appropriate orders having regard to the various provisions of the Act and Rules and in particular consider the applicability of the Circular in question. In view of the following two decisions viz., (i) "Loharu Steel Industries Ltd. v. Collector of Central Excise" [1993 (66) E.L.T. 179 (Kar.)]; and (ii) "Asia Tobacco Co. Ltd. v. Union of India and Another" [1988 (33) E.L.T. 279 (Mad.)], it is not appropriate to entertain the writ petitions against issue of show cause notices, more so when the petitioners have already replied to the show cause notice raising the various contentions including the question of jurisdiction of the respondents to deal with, and complete the adjudication proceedings. It is appropriate that the adjudicating authorities pass orders on merits and in accordance with law including the question as to whether they have jurisdiction to deal with it having regard to the said Circular.
13. It is not disputed that the petitioners have the alternative and efficacious remedy also in case it becomes necessary for them to challenge the orders that may be passed by the authorities under the adjudicating proceedings. It is also stated that the appellate authority has got even the power to grant stay. This being the position, I do not propose to express one way or the other either on the respective contentions of the parties. In the view I have taken I think it is unnecessary to refer to the various other decisions cited by the learned counsel for the parties.
14. In the result, for the reasons stated above, I pass the following order :
i. The Writ petitions are dismissed;
ii. It is open to the petitioners to urge all the contentions that are available to them before the authorities in the adjudication proceedings;
iii. In case any one of the petitioners has not filed reply or the petitioners intent to file any additional replies they can do so within a period of two weeks from today;
iv. The adjudicating authorities shall take into consideration the replies and all the contentions that may be urged including the question of jurisdiction based on the circular and pass appropriate orders on merits and in accordance with law; and v. There shall be no order as to costs.