Customs, Excise and Gold Tribunal - Tamil Nadu
V.K. Thampi vs Collector Of Customs And Central Excise on 27 July, 1987
Equivalent citations: 1988ECR312(TRI.-CHENNAI), 1988(33)ELT424(TRI-CHENNAI)
ORDER S. Kalyanam, Member (J)
1. This appeal is directed against the order of the Collector of Customs and Central Excise, Cochin, dated 19.6.1986 imposing a duty of Rs. 17,47,091.53 and a penalty of Rs. 5 lakhs on M/s. Vitco Rubber Industries Ltd. which is the proprietory concern of the appellant, under Rules 9(2), 52 A, 173Q and 226, a fine of Rs. 50,000/- in lieu of confiscation of the land, building, plant, machinery etc. under Rule 173Q and a further fine of Rs. 5,000/- under Rule 173Q in lieu of confiscation of tread rubber under seizure and a penalty of Rs. 2,000/- on Shri V.K. Thampi, the appellant herein, under Rule 226 of the Central Excise Rules, 1944 (hereinafter referred to as "the Rules").
2. On the basis of intelligence the Central Excise Officers of Erna-kulam Division searched the business premises of one Shri Narayanan-kutty, a dealer in tread rubber on 2.8.1985 at about 6.30 p.m. Scrutiny of the accounts relating to the business of the said Narayanankutty and the statement recorded from him revealed that a substantial quantity of tread rubber, manufactured in the appellant's factory, had been clandestinely removed without payment of any Excise duty,. The authorities in continuation of the investigation effected a search of the appellant's factory and residence on 3.8.1985 and recovered a number of incriminating documents and records evidencing manufacture and clearance of tread rubber without payment of Central Excise duty. Appellant, Shri V.K. Thampi also gave a statement which was inculpatory in nature and confessional in character with reference to the production and clandestine removal of goods without payment of excise duty. The appellant also stated that he had not taken any Central Excise licence as per law nor made any declaration for not taking any such licence. It is in these circumstances, after further investigation, proceedings were instituted .against the appellant, which eventually culminated in the present impugned order now appealed against. Shri Dinesh, the learned counsel for the appellant at the outset submitted that inasmuch as the appellant did not respond to the show cause notice and participate in the personal hearing, the evidence on record factually remains unrebutted with the result the appellant confines himself only to the question of law in assailing the impugned order.
3. In the present case a show cause notice was issued to the appellant and others concerned prior to adjudication, on 29.1.1986 and the same was received by the appellant and others on 31.1.1986. The appellant was specifically called upon in the show cause notice to show cause against the proposed action thereunder within 30 days of the receipt of the notice. It was further stated in the show cause notice that, "if no cause is shown against the action proposed to be taken within 30 days of receipt of this notice..., the case will be decided ex parte".
The show cause notice also specifically mentioned that in case the appellant wished to be heard in person before the case was decided, he could mention in his explanation as to whether he wished to be heard. Since no reply was received from the appellant to the aforesaid show cause notice, the adjudicating authority gave a further chance to the appellant and others by issuing a reminder on 13.5.1986 directing the appellant to reply to the said notice within 7 days thereof. It was specifically mentioned therein that the case would otherwise be decided ex parte on available records. Unfortunately, the appellant did not appear and there was no representation of any kind on behalf of the appellant with the result the adjudicating authority on consideration of all the materials in extenso passed the impugned order on 19.6.1986 which is now appealed against.
4. Shri Dinesh, the learned counsel for the appellant submitted that immediately on receipt of the show cause notice the appellant entrusted the brief to an advocate at Cochin and the advocate sent a communication on 3.3.1986 to the adjudicating authority requesting him to furnish the relevant documents referred to in the show cause notice. After the reminder to the show cause notice dated 13.5.1986 was received by the appellant on or about 20/21st May, 1986, the appellant contacted his advocate who "advised him to wait till the documents were received". The learned counsel contended that since the advocate who was engaged by the appellant, had not acted with due diligence, whatever may be the reason, the appellant cannot be made to suffer on that score and, therefore, the ex parte order may be set aside and the appellant afforded an opportunity to put forth his case on merits.
5. The learned counsel further contended that the impugned order itself is not in accordance with law inasmuch as Rule 233A of the Rules imposes on the adjudicating authority a statutory obligation to give the appellant an opportunity of being heard by fixing up a date of hearing-It was urged that the requirement regarding personal hearing is independent of the opportunities to submit a written representation against the show cause notice and this independent opportunity cannot be done away with by clubbing the two requirements in the show cause notice. The learned counsel also in this connection placed reliance on the rulings of the Tribunal in the case of 'Orient Woollen Textile Mills Pvt. Ltd. v. Collector of Customs, Bombay', reported in 1986 (25) ELT 57k (Tribunal) and the case of 'Mubarakdin Bidi Factory v. Collector of Central Excise, Indore (M.P.), reported in 1987 (27) ELT 474 (Tribunal), and contended that the ratio of the said rulings would squarely apply to the facts of the present case. It was further urged that the show cause notice itself is defective and- the impugned order also is not sustainable in law ex facie since the name of the proprietory concern and the proprietor have been treated as one and the same in some places and differently in some other places, indicating thereby a non-application of mind on the part of the adjudicating authority. The impugned order was assailed as bad in law on the ground that the adjudicating authority has not properly understood, much less appreciated the legal status and character of the assessee as different from his proprietory concern. The learned counsel furtKer submitted that while the penalty has been levied on the proprietory concern of the appellant, the appellant has also been visited with a penalty and imposition of penalty twice over is not warranted in law. It was further contended that in terms of Rule 173Q of the Rules special reasons must be shown before effecting the confiscation of the plant and machinery which have not been shown in the impugned order. The learned counsel also commented upon the non-consideration by the adjudicating authority under the impugned order the retraction of the inculpatory statement by the appellant. Finally, the learned counsel also submitted that the adjudicating authority sanctioned on 4.4.1986 an advance reward to the officers who are responsible for detection and investigation of the case well before the impugned order came to be passed and therefore was activated by a "pecuniary bias" and also by a preconceived notion in passing the adjudication order which would vitiate the very order itself. In any event it was submitted that the quantum of fine and penalty is very excessive and harsh which would call for modification in the facts and circumstances of this case.
6. Shri K.K. Bhatia, the learned S.D.R. contended that the plea relating to a second opportunity after the issuance of the show cause notice on grounds of principles of natural justice is utterly without substance and the issue has also been dealt with by the High Court of Kerala in O.P. No. 5638/86 U by order dated 11.8.1986. The learned S.D.R. further urged that if the appellant has not availed himself of the opportunity to show cause and seek for a personal hearing, he must be deemed to have waived the same in law. The learned S.D.R. urged that the reasons now adduced about inaction on the part of the appellant's counsel at the earlier stage, would not avail the appellant. The Iearned S.D.R. furtner submitted that the concern of the appellant being admittedly a proprietory concern, the appellant cannot complain or have any grievance that the adjudicating authority had not understood the legal status and character of the appellant different from its proprietory concern. The learned S.D.R. drew our attention to the fact that the notice issued in the name of the firm has also been received by the appellant and the appellant also has been served with a separate notice. The appellant, representing the firm, has received the show cause notice. Admittedly the firm is not a partnership firm but it is only a proprietary concern. The learned S.D.R. submitted that the reward awarded by the Collector is only for detection and investigation as per the regulations and no prejudice or bias can be attributed to the adjudicating authority on that score. The learned S.D.R. further urged that there was no retraction by the appellant at all and the appellant has also not produced any copy of the letter of retraction. The learned S.D.R. submitted that the adjudicating authority has considered all the relevant materials under the impugned order for imposing fine and penalty and the quantum cannot be said to be harsh or excessive having regard to the magnitude of tax evasion.
7. We have carefully considered the submissions made before us. The admitted fact remains that the show cause notice dated 29.1.1986 was received by the appellant on 31.1.1986. Since the appellant did not at all reply to the show cause notice, a reminder was also sent by the Collector under registered post on 13.5.1986 which was admittedly received by the appellant. The only plea of the appellant is that the appellant had entrusted the matter to an advocate at Cochin who would claim to have sent a communication to the adjudicating authority on 3.3.1986 asking for the copies of the documents referred to in the show cause notice. When the appellant received the original show cause notice in January, 1986 he did not respond to the same either himself or through the advocate. The present plea that a communication was addressed by an advocate on 3.3.1986 has not been in any way substantiated before us except the ipse dixit on the part of the appellant. No doubt an affidavit has been filed by the advocate Shri Rajasekharan Nair that he prepared a letter addressed to the Collector of Central Excise, Cochin on 3.3.1986 requesting for the copy of the relevant documents and sent it by post along with his vakalat. To a specific query from the Bench the learned counsel admitted that the office of the Collector of Central Excise at Cochin is at a distance of about 3 to 4 km. from the residence of the learned advocate who was originally engaged by the appellant. If no reply had been received from the office of the adjudicating authority, one would naturally expect the appellant to react to such a situation in order to find out as to why there was no response to the communication from his counsel, particularly when the counsel is residing in the close vicinity of the office of the Collector of Central Excise, Cochin. No doubt this exercise could have been done by the learned counsel as well. Be that as it may, the further facts remain that the adjudicating authority gave a reminder on 13.5.1986 which was admittedly received by the appellant and admittedly shown to the appellant's counsel. Even in such a situation neither the appellant nor his counsel would react and the advocate merely "advised him to wait till the documents were received". When the adjudicating authority has given enough opportunities to the appellant and when the appellant having received the earlier communication as well as the reminder, has not responded to the same, in our view, there is no other alternative to the adjudicating authority except to pass an order with reference to the materials available on record. The plea of the learned counsel that one more opportunity should have been afforded to the appellant in terms of Rule 233A of the Rules is not legally tenable. The purport of Rule 233A is that before a person is called upon and fastened with a liability and proceeded against, he should be given, before an order confiscating any property or imposition of any penalty, a written notice stating the ground on which it is proposed to confiscate such property or imposing such penalty and a reasonable opportunity of making a representation in writing within such time as may be specified in the notice against the ground of confiscation or imposition of penalty mentioned therein and of being heard in the mattet. In the instant case the show cause notice clearly specifies this statutory requirement. We have gone through the show cause notice. It is clearly stated in the show cause notice that the appellant should show cause within the stipulated time against the proposed action therein and the appellant also was specifically requested to state whether he wished to be heard in person. In spite of the fact that a sufficiently long time was given, neither the appellant nor his counsel responded to the show cause notice even though admittedly the same was received by the appellant on 31.1.1986 itself. The inaction on the part of the appellant in not responding to the show cause notice and his not expressing a desire for a personal hearing for a month and more would only indicate that the appellant, by necessary implication, waived the right of reply to the show cause notice as well as the personal hearing. We would also like to note in this context the fact that the adjudicating authority did not proceed to adjudicate the matter immediately but gave one more opportunity to the appellant by sending a reminder on 13.5.1986 which was also admittedly received by the appellant and shown to the appellant's counsel as well. Even in such a situation if the appellant and the appellant's counsel chose to be complacent in not responding to the show cause notice or expressing a desire to be heard, the conclusion is irresistible that the appellant had waived the right of reply to the show cause notice as well as the personal hearing by conduct and by acquiescence. This circumstance, in our opinion, would not leave the adjudicating authority with any other option except decide the issue on the basis of the materials available on record. The plea of the learned counsel for the appellant that the requirement regarding personal hearing and an opportunity to submit a written representation cannot be clubbed with the show cause notice, is without any substance. This salutary Rule of show cause has been enacted in conformity with the principles of natural justice in that a man should be heard before he is proceeded against in an action of confiscation or penalty and afforded a reasonable opportunity of being heard. One cannot make a fetish of this concept of the principles of natural justice by making it a ceremonial formality stretching it to a ritualistic rigmarole as ritual as it were. In this connection we would like to refer to the order of the Kerala High Court in O.P. No. 5638/86 U, filed by the appellant, seeking a writ of certeorari or any other appropriate writ or order for quashing the impugned order on grounds of violation of the principles of natural justice. The question that was canvassed before the High Court was the same as was contended before us and the High Court has observed, "2. It would appear that the petitioner has got into a difficult situation for defaults not attributable with the Department, at any rate directly and substantially. The petitioner certainly has got serious handicaps in the resultant situation. That is apparently due to the fact that there has not been an effective or prompt attention paid by the person with whom the matter had been entrusted. That, at any rate, is a prima facie impression gatherable from the materials on record ...
3. It is difficult to posit a case of an arbitrary violation of the principles of natural justice in the above circumstances."
The audi alteram partem rule embodies the principle that a reasonable opportunity of being heard is to be given to the interested person. This requirement is satisfied if in spite of an adequate notice by the authority to him to present his case, he does not come forward to take advantage of the opportunity. The Supreme Court in the case of 'Shahoodul Haque v. Registrar, Cooperative Societies, Bihar', reported in AIR 1974 SC 1896, has observed :
"We have no hesitation in coming to the conclusion that, even if the appellant was being punished, so that Article 311 could apply, he had been, in the circumstances of the case, given sufficient opportunity to explain his conduct. He had failed to avail of that opportunity. It could not, therefore, be said that the requirements of natural justice or of Article 311 of the Constitution had been contravened."
(emphasis supplied) An adjudicating authority is entitled to proceed ex parte if the person concerned does not appear before if in response to a notice issued by it and the ratio decidendi of the ruling of the Supreme Court in AIR 1962 SC 646 is apposite in this context. The Supreme Court in that case held that there was no violation of principles of natural justice when the Rent Controller fixed the standard rent in the absence of the landlord who failed to appear and produce evidence in spite of opportunities given. The Constitution Bench of the Supreme Court in that case referred with approval to the earlier ruling of the Supreme Court in 'Union of India v. T.R. Varma', reported in AIR 1957 SC 882. The Supreme Court further observed, "If however, the landlord chose to be absent in spite of repeated intimation to him, he cannot be heard to say that the enquiries were made in his absence and are, therefore, bad. To hold in such circumstances that there has been a violation of the principles of natural justice would be to put a premium on the recalcitrance of a party. Even in the ordinary courts of law, if a party chooses to be absent in spite of notice, evidence is recorded ex parte and the party who chooses to be absent cannot be heard to say that he had no opportunity of being present or of cross-examining the persons whose statements were recorded by the court.... Such an opportunity was clearly given to the landlord in the present cases. If anybody is to blame for the ex parte order of the Rent Controller it is the landlord himself."
8. The rulings of the Tribunal referred to and relied upon by the learned counsel in this context are not relevant and applicable to the facts and circumstances of this case. In the 'Orient Woollen Textile Mills case', referred to supra, there is a clear finding that two letters were written by the appellants and their advocate seeking extension of time to reply to the show cause notice and the adjudicating authority in the order in that case had not dealt with the request made by the appellants in that case for extension of time as to whether it was granted or not granted. The specific request for copy of the documents was also not responded to in that case and, therefore, it was held that there has not been proper consideration of any of the issues involved in the matter. In the 'Mubarakdin Bidi factory' case, (supra), reliance was placed on some documents by the adjudicating authority in the show cause notice and the appellant therein made a special request for the supply of the same while denying the charges levelled in the show cause notice and the copy of the documents were not supplied. The appellant also, it has been found factually in that case, was not given adequate opportunity to inspect the documents. We do not see any relevance of the case law cited to the facts of this case. In our opinion, the rulings referred to have absolutely no application or relevance to the facts of the present case where admittedly the appellant did not give any reply at all to the show cause notice in spite of being served with a reminder notice and given more than adequate time.
9. We do not find any substance in the plea of the learned counsel that the show cause notice and the impugned order are ex facie defective for want of application of mind. The adjudicating authority, by way of abundant caution, has issued a show cause notice to the appellant and Vitco Rubber Industries which is a proprietory concern and the appellant has received the same. A copy of the show cause notice has also admittedly been sent to the appellant's name which also, he duly received. When the appellant as sole proprietor of Vitco Rubber Industries has received a notice sent in the name of the concern, it passes our comprehension as to how it could with any justification be contended by the learned counsel that the adjudicating authority has lost sight of the legal status and character of the appellant in passing the order of adjudication. In law even a firm is not a juristic person or a legal entity and it is only a creature of contract and its rights and liabilities depend on the terms thereof. It is only for certain purposes, as for instance, suing and being sued, the firm is recognised as an entity. But the essence of the concept of firm is that it is a convenient name or description of individuals entering into combination upon a joint venture. Even under the Partnership Act, a notice to a partner who habitually acts in the business of the firm of any matter relating to the affairs of the firm operates as notice to the firm. It is not a mere question of constructive notice or inference of fact, but a rule of law which imputes the knowledge of the agent to the principal, or, in other words, the agency extends to receiving notice on behalf of his principal of whatever is material to be stated in the course of the proceedings. When this is the case with reference to a 'firm', a fortiori it follows that in respect of a proprietory concern, the proprietor is no different from the concern and any notice to such a proprietory concern received by the proprietor is a notice to the proprietor in respect of all proceedings. In the instant case admittedly two separate show cause notices were sent, one in the name of the appellant-concern and the other in the appellant's individual name. Therefore, the plea of the learned counsel that the impugned order is bad in law by reason of misapplication of mind on the ground that the adjudicating authority misconstrued or has not properly construed the "legal status and character" of the appellant in passing the impugned order is utterly bereft of any substance.
10. The plea of the learned counsel in regard to the pecuniary bias and pre-conception before passing the impugned order on the ground that reward for detection and investigation was sanctioned to the officers concerned, is legally untenable. The maxim nemo judex in re sua literally means that a man should not be a judge in his own cause. It has also come to mean that a judge must be impartial. This is known as the rule against bias. It is only a direct pecuniary interest, that would disqualify a person from acting as a judge. Therefore, by sanctioning reward pecuniary bias of any kind as understood in law, cannot be attributed to the adjudicating authority. In this connection we would like to note that the learned counsel has not filed any certified copy or authenticated copy in regard to the alleged sanction of reward. No affidavit had been sworn to by anyone in this regard. Nevertheless without standing on technicalities, we went through a copy of the document produced by the counsel. We are at a loss to understand as to how giving of reward to officers by Government in exercise of its administrative power would in any way prejudice the mind of the adjudicating authority or cause any bias in his adjudication. To a specific query from the Bench as to whether the appellant apprehended any personal bias on the part of the adjudicating authority against the appellant, the learned counsel fairly submitted that the appellant did not have any such apprehension at all. The learned counsel only urged that the adjudicating authority could be said to have had some "pecuniary bias" inasmuch as certain rewards were granted, though administratively during the pendency of the adjudication proceedings, and, therefore, the appellant could justly entertain an apprehension in his mind that the adjudicating authority had prejudged the issue to levy a penalty. We have no hesitation to dismiss this plea as utterly without substance and untenable in the facts and circumstances of the case. As stated above, grant of advance rewards is purely an administrative exercise by the Government in terms of certain regulations and it would be far-fetched for one to contend that by reason of such advance reward in certain cases of detection and investigation the adjudicating authority would in any way be prejudiced against an appellant or would have a tendency to impose penalty on the person concerned because imposition of a penalty or fine has nothing to do with the administrative act of granting reward for detection or for investigation.
11. As rightly contended by the learned S.D.R. except the ipse dixit on the part of the appellant about the alleged retraction, not even a copy of the letter of retraction has been filed before us nor the learned counsel for the appellant would give us the date on which such a retraction was sent by the appellant. To a specific query in this regard, the learned counsel fairly submitted that the plea in regard to retraction is purely on the basis of instructions given by his client, though he himself did not have any office copy of such alleged retraction. We, therefore, do not find any merit in this plea which remains totally unsubstantiated, much less probabilised even.
12. The last question that survives for our consideration is with reference to the quantum of fine and penalty. The learned counsel for the appellant is not correct in his plea that special reasons have not been given for confiscation of the plant, land and machinery etc. We have carefully gone through the detailed judgment of the adjudicating authority and he has given proper reasoning not only for the conclusion reached but also for effecting confiscation of the plant, land and machinery. The quantum of duty, in our opinion, has been correctly arrived at on relevant data referred to by the adjudicating authority in the impugned order. No doubt imposition of penalty is in exercise of judicial discretion by a quasi-judicial authority. Taking into consideration the facts and circumstances of this case, we are inclined to hold that interests of justice would be met if the penalty of Rs. 5 lakhs imposed on M/s. Vitco Rubber Industries is reduced to Rs. 2 lakhs (Rupees two lakhs) and we order accordingly. We also reduce the quantum of fine from Rs. 50,000/- to Rs. 25,000/- (Rupees twenty-five thousand) in respect of the land, plant and machinery imposed under the impugned order. We confirm the quantum of fine of R.s. 5,000/- levied under the impugned order in lieu of confiscation of the tread rubber under seizure. Since the appellant-firm is a proprietory concern and the appellant its 'sole proprietor thereof, we do not think that imposition of a separate penalty on the appellant in a sum of Rs. 2,000/- under the impugned order is called for inasmuch as the appellant's proprietory company, M/s. Vitco Rubber Industries, has already been fastened with a penal liability for the various contraventions and charges levelled against. In this view of the matter we set aside the penalty of Rs. 2,000/- imposed on the appellant, Shri V.K. Thampi. Except for the above modifications, the appeal is otherwise dismissed.