Andhra Pradesh High Court - Amravati
M/S Jmb Rocks vs The State Of Andhra Pradesh on 6 October, 2020
1
*HON'BLE SRI JUSTICE D.V.S.S. SOMAYAJULU
+ WRIT PETITION Nos.8356, 8361 and 8366 of 2020
% 6th October, 2020
W.P.No.8356 of 2020
# M/s. JMB Rocks
... Petitioner
AND
$ The State of Andhra Pradesh and 2 others
... Respondents.
W.P.No.8361 of 2020
# M/s. Sri Durga Bhavani Granites
... Petitioner
AND
$ The State of Andhra Pradesh and 2
others.
... Respondents.
W.P.No.8366 of 2020
# M/s. Salasr Granites
... Petitioner
AND
$ The State of Andhra Pradesh and 2
others.
... Respondents.
! Counsel for the Petitioners : Sri N. Vijay
^ Counsel for the respondents : Government Pleader for
Mines & Geology
< Gist:
> Head Note:
? Cases referred:
1) 1993 (3) ALT 199
2) 2006 (143) STC AP (Page 18)
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HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU
WRIT PETITION No.8356; 8361 and 8366of 2020
COMMON ORDER:
This Writ Petition is filed by the petitioner seeking a relief of mandamus against the issuance of the show cause notice, date 15.04.2020, by which the petitioner was demanded to pay a certain sum of money representing the seigniorage fee, market value and penalty, failing which it was stated that necessary action will be initiated.
There is an express reference to Rule 26(3) of the Andhra Pradesh Minor Mineral Concession Rules, 1966 (in short "the Rules") in this notice,which was last amended in March-2016 and it is therefore contended that the notice itself is untenable in law.The learned Government Pleader for Mines and Geology has filed his counter and opposed the prayers.
Since the pleadings are completed the Writ Petitionswere taken up for hearing with the consent of both the Counsels.
This Court has heard Sri N. Vijay,learned counsel for petitioner and the learned Government Pleader for Mines and Geology.
Sri N. Vijay,learned counsel for the petitioner has essentially raised two main questions in this Writ Petition. 3 According to him Rule 26(3) of the Rules,as amended in 2016, made the unaccounted consumption or possession of minerals without proof of payment of revenue a penal offense and so this sort of levy/penalty can only be imposed after a due/proper trail like a sentence by the Court of Law and not by an officer of the Department. He argues that the show cause notice is without jurisdiction and is liable to be quashed. He also argues that the show cause notice is issued on the basis of the estimation based on the electricity consumption charge which is a very unscientific method of assessing the alleged quantity of minor mineral for which fee has not been paid. He, therefore, argues that without the application of mind or on a scientific basis the show cause notice has been issued. Apart from that he also raised an issue that the records could not be producedas they were with the GST Department and that ulterior and for political motives a show cause notice has been issued. He also relied uponL. Venkateswara Rao v Singareni Collieries 1 , wherein it was held that Rule 26 (2) of the Rules, 1966 was held to be valid and it was meant to be used only against bulk users or consumers. He also relies upon the judgment of a Division Bench of this Court, reported in Sreerama Oil Company v Commissioner of Commercial Taxes2, wherein the action of the Commercial Tax authorities in assessing the turnover on the basis of consumption of electricity was struck 1 1993 (3) ALT 199 2 2006 (143) STC AP (Page 18) 4 down.Theratio of the case before the Division Bench, according to the learned counsel, was applicable in principle to the present set of facts.
Learned Government Pleader for Mines and Geology argues that the petitioner has already challenged the show cause notice in W.P.No.8361 of 2020 and obtained an interim order.He also argues that the petitioner did not furnish the records as demanded. He also states that an inspection was held on 04.12.2019 and that on 23.12.2019 a request was made for the production of various records but the same was not done.In these circumstances, the learned Government Pleader for Mines and Geology submits that the alternative method for calculation had to be adopted basing on the electricity consumption. Learned Government Pleader also submits that Rule 8(IV) of A.P.Mineral Dealers License 2017 authorizes the imposition of penalty as per the provisions of Rule 23(3) of the Rules. He submits that the show cause notice by itself cannot be challenged and that since there is an effective alternative remedy the writ itself is not maintainable. Therefore, he prays that he Writ Petition should be dismissed.
COURT:
The primary contention urged by the learned counsel for the petitioner is that Rule 26(3) (2) of the Rules talks of imposition of penalty and imprisonment which may extend to 5 two years or with fine which may extend to Rs 5,00,000/- along with the market value of the mineral and the seigniorage fee. The counter affidavit does not deal with the issue raised by the petitioner that the penalty etc.,can only be imposed only by the jurisdictional criminal Court.In Para 8 of Writ affidavit it is very clearly averred that only the jurisdictional Criminal Court can impose these penalties after a due trail and it is stated very clearly that the officers do not have the authority to impose the penalty. This critical issue has not been answered, however, it is stated that the mere issuance of a show cause notice cannot be presumed as an imposition of a penalty.
This argument would have been correct if the show cause notice did not tabulate the amounts and then come to the conclusion that a huge sum of Rs.6.74 crores is due and should be paid within 15 days from the date of receipt of the notice. A reading of the show cause notice shows thatthe department has decided that the petitioner has evaded the payment of duty on 3,722 Cubic meters.The department proceeded to calculate the amounts under three heads i.e., a) Normal seigniorage fee b) Market Value c) Penalty. The show cause notice says that an opportunity is given to the petitioner to show cause why action should not be initiated for the "realization" of this amount.6
Therefore, an ex-facie reading of this show cause notice makes it clear that the department has already come to a conclusion that there is an evasion and that a penalty should also be levied. The action still to be taken,according to the show cause notice, is an action to "realize"or to recover the sum of Rs.6,74,99,600/-.Having considered the show cause notice in this light this Court finds that the contention urged by the petitioner is correct. The show cause notice should have stated that appropriate action will be initiated and the petitioner maybe liable for payment of seigniorage fee, market value and fine etc., but it is not so. There are clear conclusions in the show cause notice.
There is also sufficient strength in the submission of the counsel for the petitioner that this sort of a demand can only be made after adjudication by a Court of competent jurisdiction.
The old Rule 26(3)(2) is as follows:
"Rule 26 (3) (ii): If no documentary proof is produced in token of having paid the mineral revenue due to the Government by any person who used or consumed or in possession of any mineral including the processed mineral, he shall notwithstanding anything contained in sub-rule (1) be liable to pay five times of the normal Seigniorage Fee as penalty in addition to normal Seigniorage fee leviable under the rules.
Explanation:-It shall be competent to the officer nominated by the Director of Mines and Geology to 7 determine the question whether quarrying operation or transportation of minerals are carried or not within the meaning of this rule."
The amended Rule 26(3)(ii) of the Rules 1966 is as follows:-
"Rule 26 (3) (ii): If no documentary proof is produced in token of having paid the mineral revenue due to the Government by any person who used or consumed or in possession of any mineral including the processed mineral, he shall be punishable with imprisonment for a term which may extend to two years or with fine which may extend to Rs.Five lakhs along with the Market Value of the mineral and Seigniorage Fee prevalent at that time or both and the lease or permit if any already granted may, at the discretion of the officer authorized in this behalf, be liable to be terminated or cancelled.
The reading of the amended Rule 26 (3)(ii) of the Rules shows that the following penalties can be imposed:-
"A) Punishment by imprisonment for a term which may extend to two years (or) with fine which may extend to Rs 5,00,000/- along with the market value of the mineral and seigniorage fee (or) both."
Therefore, in the opinion of this Court, this is the punishment that can be imposed by a Court of competent jurisdiction only. The earlier Rule has been drastically amended and the words fine "along with"market value and seigniorage fee or both have been incorporated.Higher punishment is proposed and the power to sentence the 8 defaulter to imprisonment is also given.It is clear that the power of imposing the punishment of imprisonment with or without fine/market value etc.,is conferred exclusively to the Courts of competent jurisdiction only and the same cannot be exercised by the Assistant Director of Mines&Geology (Respondent No.3). The fine to be imposed is also linked to the market value and the seigniorage fee. Imprisonment upto two years or fine along with market value etc.,or both are the alternatives.
As per the law of the land, theseare within the exclusive domain of the Courts only. Rule 8(4) of the Andhra Pradesh Mineral Dealer'sLicense Rules, 2000,on which the respondent relies upon merely states that penalty can be imposed.This Rule does not override the amended Rule 26(3)(ii) of the Rules and it does not authorize the 3rd respondent to decide on the punishments.The old Rule may have authorized the officials to levy penalty but in this Court's opinion the new Rule by prescribing punishment of imprisonment upto two years or with fine and market value of the mineral etc., or both has taken this power out of the purview of the 3rd respondent and the like. As rightly submitted by the petitioner this is a penal provision and like all penal provisions it should be very strictly construed.The law is well settled and need not be repeated here. The power to impose such punishments of imprisonment with other penalties is exercisable by the Competent Court's alone.
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The learned counsel for the petitioner also relied upon the Division Bench judgment of the Andhra Pradesh High Court in Sreerama Oil Company's case (2 supra), wherein the Division Bench upheld a similar plea that was advanced. Although this was in relation to the tax on the turn-over by the Commercial Tax Department the principle or the ratio is applicable to the present case also. The Division Bench held that it is not safe to take electricity consumption into consideration for fixing the turnover of the mill. The Division Bench held that no test check was conducted in the presence of the petitioner. It was also held all the mills cannot be presumed to be similarly circumstanced. It is also a fact that in the present case, the show cause notice does not show that any test was conducted to assess the rate of consumption of electricity for production of color granite slab / finished product. In the opinion of this Court there are a large number of variables which can affect the consumption of electricity like for example the age of the machinery,the size / density of the raw material, the skill of the worker,the ambient air temperature in the area and so on.This list is only illustrative and not exhaustive.Unless,all such variables are considered and their effect is eliminated no demand cannot be made on the basis of the electricity consumption alone. It should also be ensured that the recording of the electricity consumption is correct by cross checking the electricity meter etc. Instances abound when writs are filed questioning the 10 demand by the Electricity authorities that the recording is not correct due to a faulty electricity meter etc. This method also cannot be called a "best judgment assessment" until the variables are ruled out and aproper test check is done.In the opinion of this Court such assessment, merely on the basis of the energy consumption record, cannot be the basis for the demand.In fact, there is no statutory backing for this method also and nothing to the contrary was pointed out during the hearing.Other than stating this is a 'scientific' method nothing was pointed out to support the same. It is left to the wisdom of the authorities with their expertise to evolve a proper method which may serve the purpose in such cases. Needless to say, it is hoped that a method will be evolved to meet the emerging situations.Whatever be the method it must have a scientific rational basis plus the statutory backing.
The last issue that survives is about the maintainability of the Writ Petition. As per the submission of the learned Government Pleader a Writ Petition does not lie against a show cause notice, particularly when there is an alternative remedy. However, this is not an absolute rule and is in fact a rule of selfimposed restriction. If the show cause notice is issued without any statutory support or basis this Court can interfere as per the settled law. Here in this case as this Court holds that the method in which the demand was quantified is totally unscientific/without any statutory backing and as the 3rd respondent has abrogated to himself the power which is to 11 be exercised by the Courts alone, this Court holds that the writ is maintainable.
The show cause notice dated 05.04.2020 is set aside for all the reasons detailed above.It is left open to the respondents to evolve an appropriate method to take action strictly in accordance to law keeping in view the findings in this matter. Accordingly, the Writ Petition is allowed. There shall be no order as to costs.
As a sequel, pending miscellaneous applications, if any, shall stand closed.
__________________________ D.V.S.S.SOMAYAJULU, J Date: 06.10.2020.
Note: LR Copy to be marked.
B/o Ssv