Calcutta High Court
M/S. Avery India Limited & Anr vs Union Of India & Ors on 3 March, 2010
Author: Indira Banerjee
Bench: Indira Banerjee
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Order Sheet Serial No........
G.A. No. 3637 of 2007
W.P. No.95 of 2006
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
ORIGINAL SIDE
In the matter of :
M/S. AVERY INDIA LIMITED & ANR.
Vs
UNION OF INDIA & ORS.
Before:
The Hon'ble Justice
INDIRA BANERJEE
Date: 03.03.2010
JUDGMENT
In this writ application, the petitioners have inter alia challenged a show-cause notice No.V(84) 17/Kol-H/2002/731 (A) dated 27 th March, 2002 wherein it has been alleged that the petitioner No.1 had undervalued excisable goods falling under Chapter 72.00, 84.00 and 90.00 of the Central Excise Tariff Act, 1985 by removing a substantial volume of excisable goods from its factory on the pretext of repair and/or servicing, resulting in short payment of duty on spare parts amounting to Rs.3,20,97,303/- during the period from April, 1986 to February, 2002 as detailed in Annexure A to the said notice.
The petitioner No.1 manufactures inter alia weighing machines, scales, weigh bridges and parts thereof, which are excisable goods falling under Chapters 72.00, 84.00 and 90.00 of the Central Excise Tariff Act, 2 1985, hereinafter referred to as the Excise Tariff Act. The petitioner is liable to Central Excise under the Central Excise Act, 1944, hereinafter referred to as the Central Excise Act.
In 1991, a search was conducted by Central Excise authorities inter alia at the registered office of the petitioner No.1 as well as its manufacturing unit and various documents were seized.
A panchanama and/or seizure list was prepared wherein the documents seized have been mentioned. According to the petitioners the seized documents are still in the custody of the respondent authorities.
A show cause notice No. V(8423.00) 15/CE-Cal-1/92/1617-1618 dated 5 th March, 1992 was issued to the petitioner, pursuant to which adjudication proceedings were started for the financial years 1986 to December, 1991.
Pursuant to the show-cause notice of 5 th March, 1992, adjudication proceedings were commenced and an order of adjudication was passed. Being aggrieved by the order of adjudication, the petitioners filed an Appeal being Appeal No.E (SP)-4042/93 along with a stay petition No. (SP) - 333/93 before the Customs and Gold (Control) Appellate Tribunal. The stay petition and the appeal were disposed of by an order No.S 584A 654/Cal/93 3 dated 29 th September, 1993. The appeal was allowed and the proceedings were remanded to the Collector for de novo adjudication in the light of the settled legal position with regard to the maintainability of a show-cause notice under Section 11 A of the Central Excise and Salt Act, 1944 when the assessment was provisional.
On 12 th April, 2002 the petitioner received the impugned Notice No. V(84) 17/Kol-H/2002/731 (A) dated 27 th March, 2002 issued by the Assistant Commissioner of Central Excise, Kolkata II calling upon the petitioner to show cause why duty amounting to Rs.3,20,97,303/- should not be determined for the period from April, 1986 to February, 2002, under Rule 9 (b) of the Central Excise Rules 1944 and Rule 7 of the Central Excise Rules, 2001, on the grounds as mentioned in the show-cause notice.
The impugned show-cause notice has apparently been issued upon recourse to certain documents and records for calculation of Rs.3,20,97,303/-, which have neither been annexed to nor disclosed in the show-cause notice. According to the petitioners the documents were not disclosed to the petitioners in spite of requests and reminders both oral as well as in writing.
A writ petition being W.P.249 of 2005, filed by the petitioners, was disposed of by an order dated 24th February, 2005, whereby the excise 4 authorities were directed not to proceed with the adjudication proceedings, without supplying copies of documents, relied upon in the show-cause notice, to the petitioner.
The petitioners have contended that after the order dated 24 th February, 2005 was passed, the petitioners and/or their representatives visited the office of the concerned respondents several times and also wrote several letters including letters dated 2 nd December, 2005, 12 th December, 2005 and 16 th December, 2005 requesting supply of copies of the documents relied upon in the show cause notice, but to no effect.
According to the petitioners, the petitioners wrote a letter dated 22 nd December, 2005, calling upon the respondent Commissioner to supply copies of documents relied upon in the show-cause notice, in terms of the order dated 24 th February, 2005, within a fortnight, failing which it would be deemed that the respondents did not intend to proceed with the impugned show-cause notice any further. There was, however, no reply to the said letter either.
In the circumstances, the writ petitioners filed the instant writ petition seeking orders, restraining the concerned respondents from further proceeding against the petitioner on the basis of the impugned show cause notice dated 27 th February, 2002, as the concerned respondents had not 5 furnished the petitioners with the documents relied upon in the said impugned show cause notice, notwithstanding the order dated 24 th February, 2005 in W.P. 249 of 2005.
After this writ application was filed, the respondent Commissioner of Excise issued a communication No. V (84)15/17/Kol-H/2002/3056 dated 07.05.07 forwarding to the petitioners the show-cause notice No.V(8423.00) 15/CE-Cal-1/92/1617-1618 dated 5 th March, 1992 issued by the Commissioner of Central Excise, Kolkata I and an order No.S 584 A 654 Cal/93 dated 29 th September, 1993 of the CEGAT disposing of stay petition No.(SP)-333/93 and Appeal No.E (SP)-4042/93, and contending that those were the only documents relied upon in the impugned show-cause notice.
From the said communication, it is patently clear that there were no materials with the respondent Collector, other than materials on the basis of which the show cause notice dated 5 th March, 1992 had been issued. Notwithstanding the appellate order remanding the proceedings started pursuant to the show cause notice dated 5 th March, 1992 for fresh adjudication, on the issue of maintainability of a show cause notice under Section 11A of the Central Excise Act, 1944 when the assessment was provisional, the respondent Collector did not decide the aforesaid issue. Instead of de novo adjudication, the respondent Collector issued the 6 impugned show-cause notice which inter alia covers the period covered by the earlier show-cause notice dated 5 th March, 1992.
In exercise of powers conferred by Section 37 of the Central Excise Act, 1944 and in supercession of the Central Excise Rules, 1944, the Central Government framed Central Excise Rules, 2002. Rule 7 of the said Rules provides as follows:
"Rule 7. Provisional assessment. -(1) Where the assessee is unable to determine the value of excisable goods or determine the rate of duty applicable thereto, he may request the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, in writing giving reasons for payment of duty on provisional basis and the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, may order allowing payment of duty on provisional basis at such rate or on such value as may be specified by him.
(2) The payment of duty on provisional basis may be allowed, if the assessee executes a bond in the form prescribed by notification by the Board with such surety or security in such amount as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, deem fit, binding the assessee for payment of difference between the amount of duty as may be finally assessed and the amount of duty provisionally assessed.
(3) The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall pass order for final assessment, as soon as may be, after the relevant information, as may be required for finalizing the assessment, is available, but within a period not exceeding six months from the date of the communication of the order issued under sub-rule (1):
Provided that the period in this sub-rule may, on sufficient cause being shown and the reasons to be recorded in writing, be 7 extended by the Commissioner of Central Excise for a further period not exceeding six months and by the Chief Commissioner of Central Excise for such further period as he may deed fit.
(4) The assessee shall be liable to pay interest on any amount payable to Central Government, consequent to order for final assessment under sub-rule (3), at the rate specified by the Central Government by notification issued under section 11AA or section 11AB of the Act from the first day of the month succeeding the month for which such amount is determined, till the date of payment thereof.
(5) Where the assessee is entitled to a refund consequent to order for final assessment under sub-rule (3), subject to sub-
rule (6), there shall be an interest on such refund at the rate specified by the Central Government by notification issued under section 11BB of the Act from the first day of the month succeeding the month for which such refund is determined, till the date of refund.
(6) Any amount of refund determined under sub-rule (3) shall be credited to the Fund:
Provided that the amount of refund, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to -
(a) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person; or
(b) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person."
On a perusal of Rule 7 referred to above, it is patently clear that provisional assessment can only be made upon request of the assessee in writing. There can be no provisional assessment in the absence of request from the assessee. In this case, there was apparently no request for provisional assessment, from the petitioners.
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In any case, as submitted by Mr. Mittal, provisional assessment could only be made where the assessee was unable to determine the value of excisable goods on account of unavailability of documents or information or where there were doubts with regard to the correct classification of the goods.
In any case, it is well-settled that no show cause notice under Section 11A of the Central Excise Act, 1944 can be issued, where the assessment is provisional. A show cause notice can only be issued after final assessment, which has not yet been done.
The suggestion on behalf of the respondents that the impugned notice is not under Section 11A of the Central Excise Act, 1944, but a show cause notice for finalization of assessment is not acceptable. There is no provision in the Central Excise Act, 1944 or the Rules and Regulations thereunder for issuance of show cause notice for finalization of provisional assessment.
Moreover, Mr. Mittal rightly pointed out that provisional assessment had to be finalized by the Assistant Commissioner within a period not exceeding six months from the date of communication of the order of provisional assessment. The Commissioner could, for sufficient reasons, recorded in writing extend the time for finalization of assessment by another 6 months. If the assessment was not finalized within one year also, the 9 Chief Commissioner could grant further extension for such period as he found reasonable, provided there were good and sufficient reasons for the inability to complete assessment within one year. It would, however, be obligatory for the Chief Commissioner to record reasons. In the instant case, there does not appear to be any order of extension and in any case, no reasons have been disclosed. The time for finalization of provisional assessment has long expired.
The impugned show-cause notice smacks of total non-application of mind and apparent inconsistencies. The impugned show cause notice is in effect and substance, a show cause notice under Section 11A, which as observed above, could not have been issued as long as assessment was provisional. Moreover, on the one hand, the assessee has been directed to show cause why duty amounting to Rs.3,20,97,303/- calculated at the appropriate rate should not be finalized for duty under Rule 9B of the Central Excise Rules, 1944 and Rule 7 of Central Excise Rule (No.2), 2001, but at the same time, at the 2 nd page of the show-cause notice, it is stated "now provisional assessment is finalized under the Rule 7 of the Central Excise (No.2) Rules, 2001 read with erstwhile Rule 9B of the Central Excise Rules, 1944." The impugned show cause notice is liable to be set aside on the ground of patent non-application of mind alone, apart from patent inconsistency and illegality on the face of the impugned show cause notice. 10
No documents have been disclosed to the petitioner, save and except the earlier show cause notice dated 5 th March, 1992 and the Appellate Order of the Tribunal arising from proceedings that commenced pursuant to the said show cause notice dated 5th March, 1992.
In the affidavit-in-opposition filed on 6 th April, 2006, the respondents have contended that the records pertaining to the impugned show-cause notice dated 27 th March, 2002 are missing for which a First Information Report was lodged with the police on 30 th October, 2004. The respondents would proceed with the show-cause notice as and when the records were traced.
According to the petitioner, the respondent authorities have taken contradictory and inconsistent stands. On the one hand the respondent authorities are in their Affidavit-in-Opposition contending that records pertaining to the show-cause notice dated 27 th March, 2002 have gone missing. On the other hand, the respondents have supplied only the show cause notice dated 5 th March, 1992 and the appellate order dated 29 th September, 1993, contending that only those documents and not the documents that have gone missing, were relied upon by the Department for issuance of the impugned show-cause notice.
It is true, that an earlier writ petition was filed challenging the impugned show cause notice inter alia on the ground of the same being 11 violative of the principles of natural justice, since documents relied upon by the respondent Collector had not been disclosed to the petitioners. However, the failure of the respondent Collector to comply with the order dated 24 th February, 2005 of this Court directing the concerned respondents to supply the documents relied upon in the impugned show cause notice, to the petitioners gave rise to a fresh cause of action to the petitioners.
Even though the respondent Collector did not proceed with adjudication in terms of the impugned show cause notice, without disclosing and/or supplying the requisite documents, the proceedings could not indefinitely have been kept pending against the petitioners. There is substance in Mr. Mittal's contention that there being no materials except the show cause notice dated 5 th March, 1992 and the appellate order dated 29 th September, 1993, the impugned show cause notice and all proceedings pursuant thereto are liable to be quashed.
The short question in this writ petition is, whether the impugned notice pertaining to the period from 1986 to 2002 was legally sustainable under Section 11A (1) of the Central Excise Act, 1994.
Section 11A of the Central Excise Act, 1944 as amended in 2000 provides as follows:
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"11-A Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded- (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded whether or not such non-levy or non-payment, short-levy or short-payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the Rules made thereunder. A Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:
Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if, for the words "one year", the words "five years" were substituted."
Section 11A (1) makes it amply clear that a show cause notice has to be issued within one year from the relevant date. Only in exceptional cases of fraud, collusion, wilful misstatement or suppression of facts or contravention of the Excise Act or the Rules framed thereunder to evade payment of duty, the proviso to Section 11 A (1), which provides for extended period of limitation of five years from the relevant date, is attracted.
The impugned notice in so far as the same relates to the Financial Years 1986 to 2001, has apparently been issued beyond the period of limitation of one year from the relevant date. Even if there were any 13 allegation of short levy or short payment by reason of fraud, collusion or misstatement or suppression of facts or contravention of any provisions of the Central Excise Act, 1944 or the Rules framed thereunder with intention to evade payment of duty, even then the notice would have to be served within five years from the relevant date. No show cause notice could in any circumstances have been issued on 27 th March, 2002 for any period prior to 27 th March, 1997.
The impugned show cause notice has apparently been issued on the same set of facts for which the show cause notice dated 5th March, 1992 for the period from 1986 to 1992, has been issued. This is evident from the communication dated 7 th May, 2007 of the respondent authorities, contending that the only documents relied upon in impugned show-cause notice, were the earlier show-cause notice and the appellate order of CEGAT in proceedings arising out of the earlier show-cause notice.
In M/s. P & B Pharmaceuticals (P) Ltd. vs. Collector of Central Excise reported in 2003 (153) ELT 14 (SC) the Supreme Court held that where an earlier show cause notice had been issued in respect of the same subject matter, it could not be said that there was any wilful suppression or misstatement for invocation of the extended period of limitation. 14
The aforesaid proposition of law laid down in M/s. P & B Pharmaceuticals (P) Ltd. (supra) was reiterated in ECE Industries Ltd. vs. Commissioner of Central Excise, New Delhi, reported in 2004(13) SCC 719 = 2004 (164) ELT 236 (SC).
In Hyderabad Polymers (P) Ltd. vs. Commissioner of Central Excise, Hyderabad, reported in 2004 (166) ELT 151, the Supreme Court held that once an earlier show-cause notice on the same issue had been dropped, it could no longer be said that there was any suppression. The extended period of limitation would thus not be available.
The judgment in Hyderabad Polymers Pvt. Ltd. (supra) was referred to, relied upon and approved in Nizam Sugar Factory vs. Collector of Central Excise, A.P. reported in 2006 (197) ELT 465.
In M/s Anand Nishikawa Co. Ltd. vs. Commissioner of Central Excise, Meerut reported in 2005 (188) ELT 149 the Supreme Court held that when facts were known to both parties, it could not be said that there was suppression. The extended period of limitation could not be invoked.
In any case, for issuance of notice by invocation of the extended period of limitation, reasons were mandatory. In the absence of any explanation for initiation of proceedings after expiry of one year from the 15 relevant date, the impugned show-cause notice must be held to be barred by limitation, at least in so far as the same relates to the period upto 26 th March, 2001. It is admitted that the show cause notice is based on a show cause notice of March, 1992 and an Appellate Order dated 1993. The alleged acts of diversion of excisable goods in the garb of repair and servicing took place in 1991. The purported claims on which the impugned show cause notice is based, thus accrued before 1992.
Moreover, as held by the Supreme Court in Duncan Industries Ltd. vs. Commissioner of Central Excise, New Delhi reported in 2008 (217) ELT 517 (SC), cited by Mr. Mittal, there could not be two assessments for the same period. Two show-cause notices could not, therefore, have been issued in relation to the same period, that is the period from 1986 to February/March 1992. The impugned show cause notice cannot, therefore, be sustained.
Mr. Mittal rightly pointed out that under Rule 53(1) of the Central Excise Rules, 1944 and under Rule 10 sub-rule (1) of the Central Excise Rules, 2002, an assessee is required to maintain proper records on daily basis of goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and the duty actually paid. 16
In view of Rule 53(2) of the Central Excise Rules, 1944 and Rule 10 (3) of the Central Excise Rules, 2002, such records, were at all material times, required to be preserved for a period of at least five years from the end of the financial year to which the records relate. There being no obligation on the part of an assessee to maintain records beyond a period of five years, there could be no question of any show cause notice after expiry of the aforesaid period of five years as otherwise the assessee would be denied the opportunity of effective defence.
Now the question is whether this Court should reject the writ petition on the sole ground of existence of the alternative remedy of contesting the proceedings pursuant to the impugned show cause notice.
The power of this Court, under Article 226 of the Constitution of India to issue writs and orders is unfettered. The Constitution does not impose any limitation on exercise of power by the High Court under Article 226 of the Constitution of India. However, the Courts as a rule of judicial discipline, convenience and policy, refrain from exercising writ jurisdiction where there is an efficacious alternative remedy.
There are, however, well-known exceptions to the rule of alternative remedy. This Court would not reject a writ petition on the ground of alternative remedy where the proceedings impugned are in violation of 17 principles of natural justice, without jurisdiction, under a provision of law which is ultra vires or in violation of fundamental rights.
The respondent collector lacked authority to issue a show cause notice after five years from the relevant date. As such, the impugned show cause notice and the proceedings initiated on the basis thereof are in excess of powers. As the conditions precedent for exercise of jurisdiction to issue the impugned notice did not exist, the impugned show cause notice and proceedings on the basis thereof, are without jurisdiction.
Furthermore, non-disclosure and/or non-supply of documents relied upon in a show cause notice amounts to denial of natural justice, for which a writ petition might directly be entertained, notwithstanding any alternative remedy available to the petitioners. Non-availability of the documents is inconsequential. Documents cannot also be denied just because the authorities do not consider the same relevant.
In any case, the writ petition having been kept pending for about four years, and affidavits having been filed, pursuant to the directions of this Court, this Court is not inclined to reject this writ petition on the sole ground of existence of an alternative remedy, more so when the impugned notice is patently unsustainable in law.
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The impugned notice and proceedings pursuant thereto, cannot for the reasons disclosed above, be sustained and the same are set aside and quashed.
The writ petition is disposed of accordingly.
Certified photostat copy of the judgment be supplied to the parties subject to compliance of requisite formalities.
(Indira Banerjee, J.)