Bombay High Court
V. Ananthraman vs Union Of India (Uoi) on 16 September, 2002
Equivalent citations: 2003(1)BOMCR675, (2002)4BOMLR871, 2002ECR572(BOMBAY), 2003(151)ELT278(BOM), 2003(3)MHLJ721
Author: J.P. Devadhar
Bench: V.C. Daga, J.P. Devadhar
JUDGMENT J.P. Devadhar, J.
1. In this petition, the Petitioners have challenged the validity of the Show Cause Notice dated 29th September, 1988 (Exhibit - 'S' to the petition) issued by the Central Excise Authorities, in so far as it seeks to levy penalty upon the Petitioners under Rule 209A of the Central Excise Rules, 1944 ('Rules' for short).
2. Ordinarily, we would not have taken up the onerous responsibility of adjudicating the show cause notice on ourself in exercise of writ jurisdiction, but in the facts of this case, we are satisfied that the condition precedent for invoking Rule 209A of the Central Excise Rules being not satisfied question of taking any penal action against the Petitioners does not arise at all and hence instead of permitting the authorities to adjudicate we have decided to hear the matter on merits itself.
3. The facts having bearing of the subject-matter of the present petition are as follows :
In the year 1985, relevant to the present petition, the Petitioners were holding high ranking position as Production Manager, Deputy General Manager and General Manager (Taxation) in Larson and Tu-bro Limited (hereinafter "Company" for short). The said company in the year 1985 decided to manufacture Programmable Controllers in collaboration with M/s. Yaskawa Electrical Manufacturing Company Limited, Japan. The said Programmable Controllers or Programmable Logic Controllers are electronic automatic data processing machines which according to the Petitioners were classifiable under Tariff Item No. 33DD of the First Schedule to the Central Excises and Salt Act, 1944 ('Act' for short). These machines monitor a given situation or a set of situations in a plant or a machine or equipment and give corresponding information and instructions.
4. On 11th November, 1985, the company submitted an application to the excise authorities along with product literature seeking licence under Rule 174 of the Central Excise Rules, 1944 ('Rules' for short) and also sought approval of classification of the Programmable Logic Controllers ("PLC" for short) under Tariff Item No. 33DD of the Central Excise Tariff. The Central Excise Collectorate, Bombay had also issued a Trade Notice dated 29th November, 1985 stating therein that the PLC would be classifiable under Item No. 33DD of the Central Excise Tariff. Accordingly, the Respondents granted requisite licence to the company and also by their letter dated 3rd March, 1986 returned the classification list duly approving classification of PLC under Item No. 33DD of the Central Excise Tariff.
5. With effect from 1st March, 1986, the First Schedule to the Central Excise Tariff Act (sic) was repealed and the duty on PLC under Section 3 of the Act became payable at the rates set forth in the Schedule to the Central Excise Tariff Act, 1985 ("CET" for short). By a letter dated 22nd July, 1986 the Petitioners filed revised classification list seeking approval of PLC under the new Tariff Heading No. 84.71 of the CET, which according to the Petitioners corresponds to Item No. 33DD of the erstwhile Tariff. The Superintendent of Central Excise after seeking certain clarifications from the Petitioners, by a letter dated 28th November, 1986 informed the Petitioners that the classification of the PLC under Heading No. 84.71 is approved.
6. As new exemption became available to the PLC's in the year 1987-88 budget, the company filed revised classification list classifying the goods under Chapter Heading No. 84.71 which was also approved by the Excise authorities on 1st May, 1987. It is the case of the Petitioners that on 8th May, 1988, Central Excise officers had visited the factory and verified the manufacturing process of the PLC's which are classified under Heading No. 84.71 of the CET. Subsequent classification list filed by the Petitioners were also approved by the Excise authorities vide letter dated 21st/24th June, 1988. Thus, it is clear that the Excise authorities all through accepted and approved the classification of the PLC under the erstwhile Item No. 33DD of the First Schedule, and thereafter under Heading No. 84.71 of the Schedule to the Tariff Act.
7. Thereafter, by a show cause notice dated 29th September, 1988 the Collector of Central Excise called upon the company to show cause as to why the PLC's manufactured and cleared by the company during the period from 1st March, 1986 should not be classified under Heading No. 85.37 of the CET instead of Heading No. 84.71 of the CET and the differential duty amounting to Rs. 51,17,257.17 on the clearance of the impugned goods during those period should not be demanded and recovered from the company. The said show cause notice was also directed against the Petitioners and the Petitioners calling upon them to show cause as to why the penalty should not be imposed upon them under Rule 209A of the Rules for knowingly removing and clearing the PLC on which no proper Central Excise Duty has been paid under the Rules.
8. Challenging the validity of said show cause notice both the Company and the Petitioners filed separate writ petitions in this court. Writ Petition No. 1021 of 1989 filed by the company was admitted by this Court and the adjudication of the show cause notice was stayed against the company. However, when the said petition filed by the company was taken up for final hearing, by an order dated 6th August, 2002 the company was permitted to withdraw the petition so as to allow the Respondents to adjudicate the show cause notice against the company in accordance with law regarding the classification of the goods. The present petition relates to challenging the said show cause notice dated 29th September, 1988 in so far as it purports to penalise the Petitioners under Rule 209A of the CER.
9. Mr. Shah, learned Counsel appearing on behalf of the Petitioners submitted that the show cause notice issued to the Petitioners seeking to penalise them under Rule 209A of the CER is without jurisdiction because, when the condition precedent for invoking Rule 209A is not fulfilled initiating penal action against the Petitioners under Rule 209A of the Central Excise Rules did not arise at all. In other words, the submissions was that when the issue in the notice pertained to proper classification of the goods and not confiscation of the goods, initiating penal action against the Petitioners under Rule 209A of the CER was wholly unwarranted because Rule 209A can be invoked only when a person deals with any excisable goods which he knows or has reason to believe that the said goods are liable for confiscation. It was submitted that all along the Respondents had approved the classification list submitted by the company from time to time and even the Trade Notice issued by the Excise Authorities clearly shows that the PLC's were classifiable under Tariff Heading 84.71 and hence the goods manufactured and cleared by the company as per the approved classification under Tariff Heading No. 84.71 of the CET cannot be faulted. It was submitted that even if the Respondents wanted to change the classification of the goods in the absence of fulfilment of requisite precondition set out in Rule 209A the Respondents will have no jurisdiction to proceed against the Petitioners and the proposed action against the Petitioners would be ex facie, illegal and void. It was submitted that no offence is committed by the Petitioners and hence, the show cause notice issued against the Petitioners was liable to be quashed and set aside.
10. Mr. S.M. Shah, learned Counsel appearing on behalf of the Respondents on the other hand submitted that this Court should not entertain the writ petition at the show cause notice stage as the petitioners have approached this Court prematurely even before the show cause notice is adjudicated upon by the Excise Authorities. It was submitted that it was open to the Petitioners to urge all contentions before the Excise Authorities and no order be passed in favour of the Petitioners. This argument is advanced by the Counsel orally as the Revenue has not chosen to file affidavit in reply right from the date of filing of the petition in 1988 till date. This petition was taken up for final hearing on 8th February, 2002, when the Counsel for the Revenue sought adjournment to file affidavit in reply to the petition. Accordingly two weeks time was granted to the Respondents to file their affidavit in reply to the petition. Thereafter, the above petition was adjourned from time to time on 29th January, 2002, 28th February, 2002, 19th August, 2002 and 26th August, 2002. However, the Respondents have not chosen to file their affidavit in reply to the petition till date. Even today, when the matter is taken up for final hearing, the respondents have not tendered any affidavit in reply to the petition and have chosen to argue the matter without any affidavit in reply. In view of the callous attitude of the Respondents in filing the affidavit in reply in spite of several opportunities given, we have no alternative but decide the matter on the basis of oral submissions made by the Counsel for the Revenue.
11. We have heard both the Counsels and perused the record placed before us. From the records it is evident that the goods manufactured by the company were duly licensed and the classification lists filed by the company from time to time were duly approved by the Respondents from time to time. Thus, the clearances effected by the company during the relevant period were as per the approved classification. Under the circumstances if the Respondents want to change the classification of the goods from Tariff Headings 84.71 to 85.37 and seek to recover the differential duty, it will not be a case of confiscation of goods so as to attract Rule 209A of the CER. The Apex Court in the case of Collector of Customs, Baroda v. Cotspun Limited has held that the demand contrary to the approved classification list/price lists has to be prospective from the date of the show cause notice. The Apex Court in that case has further held that the differential duty cannot be recovered on the ground of short-levy, when the duty has been levied and collected on the basis of an approved classification list. Thus, in light of the aforesaid decision of the Apex Court, it may be open to the Respondents to vary the approved classification list, but differential duty cannot be recovered on the ground of short-levy. In the present case while seeking to vary the classification of the goods and recover differential duty, the Respondents have resorted to Rule 209A with a view to penalise the Petitioners. Rule 209A of Central Excise Rules, 1944 reads as under :
"209A. Penalty for certain offences. - Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding three times the value of such goods or five thousand rupees, which is greater."
12. On perusal of the aforesaid Rule, it is evident that the penal action can be taken against the person concerned, only if the Excise Authorities have reason to believe that the said person was involved in acquiring possession of or in any way concerned in transporting, removing or selling the goods which he knew or had reason to believe are liable for confiscation under the Act or the Rules. In the instant case, the show cause notice does not disclose any reasons or the basis on which the Revenue considers that the goods in question were liable to be confiscated. On the contrary the specific case of the Respondents in the show cause notice is that the goods cleared on the basis of approved classification under Tariff Heading No. 84.71 are liable to be classified under Tariff Heading No. 85.37 and the differential duty is liable to be recovered from the company. It is not the case of the revenue that any goods have been clandestinely removed so as to invoke penal provisions against the Petitioners.
13. From the particulars set out in the writ petition which is not controverted by the Revenue, it is evident that at the relevant time, even the excise authorities were of the opinion that the PLC's were classifiable under Tariff Heading No. 84.71 of the CET. The classification list submitted by the company was thoroughly scrutinised by the Excise Officers and after obtaining necessary particulars from the company from time to time the said classification lists were approved. When the classification list submitted by the company were duly approved by the Respondents and the goods were cleared on payment of the excise duty as per the approved classification list, invoking penal action under Rule 209A of the Central Excise Rules does not arise at all. Neither in the show cause notice nor in the oral submissions made by the Counsel, the Revenue could substantiate their action in invoking Rule 209A of the Central Excise Rules. In absence of any particulars set out in the show cause notice as to basis of invoking Rule 209A, it will be impossible for the Petitioners to show cause and in such circuinstances, it will be an exercise in futility to permit the authorities to adjudicate upon the show cause notice.
14. Under the circumstances, we are of the opinion that the impugned show cause notice issued by the Respondents in so far as it pertains to initiating penal action against the Petitioners under Rule 209A of the Central Excise Rules is totally devoid of merit and the same is liable to be quashed and set aside.
15. For all the above reasons the petition succeeds. The impugned show cause notice dated 29th November, 1988 (Exhibit - 'S' to the petition) is quashed and set aside in so far as it pertains taking penal action under Rule 209A of the Central Excise Rules. Rule is accordingly made absolute in terms of prayer Clause (a) of the petition.
16. However, in the facts and circumstances of the case, there will be no order as to costs.