Madhya Pradesh High Court
Grasim Industries Ltd. vs Collector Of Customs And C. Ex. on 27 January, 1995
Equivalent citations: 1995ECR572(MP), 1995(77)ELT74(MP)
ORDER A.R. Tiwari, J.
1. This petition, presented under Article 226 of the Constitution of India, seeks quashment of "notice to show cause" No. V(28)15-26/93/Adj 40615, dated 4-8-1993 (Annexure P/l) issued by Respondent No. 1 (Collector), requiring the petitioner to explain -
(i) As to why Modvat credit to the tune of Rs. 13,36,07,056/- taken wrongly in the RG-23A Pt.II register of Sodium Sulphate during the period from 1-8-1988 to 9-9-1991 and utilised towards payment of duty on Sodium Sulphate during the period from 1-8-1988 to 30-6-1993 be not disallowed and demanded under Rule 57(I) of the Central Excise Rules, 1944 (for short 'Rules').
(ii) As to why Duty of excise, quantified at Rs. 2,48,20,810/- payable towards duty on clearance of 1,18,916 M.T. of Sulphuric acid during the period from 1-7-1988 to 24-7-1991, on which exemption from payment of duty under Notification No. 217/86-C.E., dated 1-3-1986, was wrongly availed, be not recovered under Section 11A of the Central Excises and Salt Act, 1944 (for short 'Act')
(iii) As to why Penalty be not imposed under Rules 173 Q and 209 of the Rules on the ground of contravention of statutory provisions as referred to in para 7 of the notice.
2. Factual matrix is terse. The petitioner is the Company within the meaning of the Companies Act, 1956 and is engaged in business of manufacturing and dealing in, inter alia, Viscose Staple Fibre (VSF) and Sodium Sulphate. It has installed plants for this purpose at Nagda also. Caustic Soda and Sulfuric acid are used in manufacture of VSF and Sodium Sulphate as Components/raw materials. The petitioner availed of the Modvat credit in respect of Sulphuric acid and Caustic 'Soda, when used as raw materials for manufacture of Sodium Sulphate since March, 1986 to the knowledge of Excise Department. Earlier show cause notices, based on assumption of these being not raw materials, were withdrawn on contest. Circular No. 24/90, dated 11-4-90 (Annexure P/6) was issued in exercise of the powers under Section 37B of the Act ruling that duty paid on Caustic Soda and Sulphuric acid used in the manufacture of VSF, could be utilised towards payment of duty on Sodium Sulphate which was procured as a bye-product. Based on this circular, Collectorates issued Trade Notices in confirmation of availability of such credit, christened as Modvat, in conformity of the aforesaid circular (Annexure P/6). Feeling freedom from fetter of circular, respondent No. 1 issued the notice (Annexure P/l) which is impugned in this petition as being without jurisdiction.
3. Respondents have filed elaborate reply in oppugnation.
4. The petitioner then submitted the rejoinder to the reply on 14-11-1994 and the responents in turn presented additional reply to the reply on 6-1-1995.
5. I have heard both the sides on admission of the petition.
6. Shri J.P. Gupta learned Senior Counsel, assisted by counsel Shri N. Khetan and Shri P.B.S. Nair, urged that -
(a) Section 37B of the Act conferred power on the Central Board of Excise and Customs, constituted under the Central Board of Revenue Act, 1963 to issue instructions and directions to Central Excise Officers for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods to be observed and followed by the officers and other persons employed in the execution of the Act. Circular (Annexure P/6) contained such instructions and directions and as such notice (Annex. P/l) manifestly in conflict with P/6, was violative of the mandate contained in Section 37B and was, thus, required to be incinerated as ultra vires of the powers of respondent No. 1. P/l thus, in the face of binding P/6, stood anaesthetized.
(b) Earlier show cause notices suffered from same infirmity and were thus withdrawn. That being so, there was no properiety or permissibility to persist in same error by issuance of equally infirm notice (P 1). The matter thus needed to be nibbed in the bud.
(c) The manufacturer, assured of modvat credit and exemption, was not liable to be flagellated by arbitrary notices at will particularly in the face of Circular of 11-4-1990, Consequential Trade Notices, event of not passing on the liability of duty element to consumers and doctrine of issue - estoppel.
(d) Notice (P 1) is without jurisdiction.
(e) Apart form these facts, the notice was barred by limitation.
7. Shri P.K. Saxena learned Sr. Counsel assisted by Counsel Shri Kanga, dubbed the aforesaid contentions as non-meritorious and contended that -
(a) Circular (P/6) did not clog quasi-judicial power of adjudicating authority and did not put ban or bar in appreciating facts and factors in their true perspective and periphery and in raising demand where law stated 'speed' and broke the 'breakers'. It was inutile and futile to slip under the umbrella of Section 37B, deeming it to be protective for the petition and position as assumed.
(b) There is no question of absence of logical look or jurisdictional competence.
(c) Demerits of the case apart, the petition resting on mere show cause notice, merits to be mortalised on the fulcrum of prematurity on one hand and of existence of effective and efficacious remedy of showing cause and pursuing further course, if orders turned out to be adverse eventually and were liable to be categorised as untenable.
8. Further proceedings on notice (P/l) were stayed by this Court on 7-12-1993.
9. In an effort to mollify the mordicant missile, hurled to mortalize the petition at its infancy, the counsel for the petitioner urged that even in cases of notices, fouled by proclivity of positive harm or harassment and thus fraught with serious consequences, this Court can, and in a given case, should entertain the case and exanimate the course as the one impeached herein. When 'manner' is sly, counsel submits, 'matter' becomes meanful.
10. Mr. Justice Frankfurter enunciated the Rule in Vitarette v. Seaton; (1959) 359 US 535:3 L.Ed 2d 1012 in the following terms.
"An executive agency must be rigorously held to the standards by which it professes its action to be judged.... He that takes the procedural sword Shall perish with the Sword."
11. "Show cause notices" are not the end, but beginning of the matter. "Absence of jurisdiction: and "erroneous exercise of jurisdiction" are not liable to be intermixed. It is not suggested that notice is not under the relevant Act or Provision or not by the proper authority. Writ Court, these days, is receiving matters which can appropriately be contested at other forums fixed by relevant Acts. Is it not the time, ripe indeed, to exercise restraint, halt rush and push such cases towards their proper destination? The calendar of Court is quite congested. Should the writ Court then be not more strict to prevent inflow of cases which can be examined elsewhere and possibly with specific expertise?
12. In AIR 1994 SC 754; State of U.P. and Anr. v. Labh Chand, the Apex Court fittingly illumined the path as under :
"When a Statutory Forum of Tribunal is specially created by a statute for redressal of specified grievances of persons on certain matters, the High Court should not normally permit such persons to ventilate their specified grievances before it by entertaining petitions under Article 226 of the Constitution is a legal position which is too well settled."
13. Later in AIR 1994 SC 2377 (State of Andhra Pradesh v. T.G. Lakshmaiah Setty and Sons) the Supreme Court in reiteration ruled that orders of assessment, rendered under Tax laws, should be tested under the relevant Act and in no other way. Earlier it was held in AIR 1992 SC 2279; (Shyam Kishore v. Municipal Corporation of Delhi) that recourse to writ jurisdiction is not proper when more satisfactory solution is available on the terms of the statute itself. In my view, writ court is not supposed to be killer of all evils visible in whatever shape or stage. In a recent verdict, Supreme Court has asked the High Courts to exercise their "extraordinary and discretionary power under writ jurisdiction with caution."
14. The implication is that authorities, empowered under various Acts, are expected to function properly and to show greater responsibility to avoid steps which are avoidable. They are required, nay expected, to do the rational thing ever unwilling to explore other alternatives before electing to do that. Lord Keynes observed that "Men will do the rational thing but only after exploring all other alternatives". Preamble to the Constitution of India promises dignity and this then demands doing of rational thing imprimis. In my view, the day should be deemed as done when men could afford to search alternatives. Truth must be seen to triumph.
15. System, designed for good and against bad, should operate in a manner which does not produce tax evaders or avoiders; which promotes honesty and perishes hollowness. That kind of surge of an urge has to be preserved and persevered. There is no laxity in law and like the other side of the coin, there is no holiday in morality. After all, law is an instrument, not end. Justice is its function and validation. There is no lis like 'Law versus justice' Let there be harmony, not antinomy.
16. Tax Laws are not like duddery. New problems when in sight, should be-tackled through new solutions in proper light. Distortion of photo-picture is inevitable if you are unwilling to adjust your antenna to the Set. Interpretative instinct is welcome but has to be legal and logical - should be open but not oppressive. No system serves the cause if it is permitted to be perversive. Show cause notices are neither harbinger of doom, nor declarant of failure. System offers enough to "look forward" to "with hope". Robert Frost, in "The death of Hired Man" commented :-
"And nothing to look backward to with pride, And nothing to look forward to with hope"
Authorities should surely perform in a way which may grant them coveted occasion to look backward with pride as true servants of law and great citizens of the great country and assessees should spurn assumptions and presumptions which may deny them event to look forward to with hope. In my view, issue as raised is not anfractuous. Life, punctuated with will and skill, can be tearful or cheerful depending on attitude and approach of the liver. As to law, it is neither inclement, nor petrified, Course would be much the poorer, if it were so. Tentative observations, embodied in notice under challenge, do not clinch the issue. The omega, which may be appeasable or adverse, is yet to be said.
17. It is, thus, inutile to contend that proper authorities would or might elect to be unjust and equally futile to assume that proceedings, born and beginning with notices, inevitably excoriates the noticees. Assessees and adjudicators are not sworn enemies or ought not to appear that way but are governed by respective rights and responsibilties manifested by law. The object behind notices is to hear the converse and adverse view and decide the matters 'Sine ira et Studio'. There is neither pride, nor prejudice or there ought to be none. There has to be 'fair play' in action. This is amply demonstrated by the system which does not permit condemnation without being heard. There is no case or cause to feel that departmental adjudications are like courses from Ceaser to Ceaser's wife. It is aptly said that the world is comedy to those who think but tragedy to those who feel. It is prudent to stop feeling and start thinking.
18. In order to do justice to the industry of learned lawyers of both the sides, I have allowed this order, which could have been bit briefer to grow in size to say as to what is likely to ail and fail.
19. Having said so, I should permit the objection of the respondents to prevail and say 'monosyallabic no' to the plea and prayer at this stage in view of the position of law and prudence of course, as noticed above. At times, silence is gold indeed. And to avoid prejudice to both the sides, I have noted points, as posed and opposed, but have opted to express no opinion on merits of matter.
20. This course is thus hurtless and harmless.
21. Now that I say 'no', I should add that the petitioner shall have freedom to file reply to Annex. P/l by 28-2-1995 and to take all objections, including the ones resting on the linchpin of jurisdiction, limitation, estoppel etc. and contest it in conformity with law.
22. All contentions raised herein, for or against, are thus left open and litigable.
23. With these observations, I decline admission and dismiss this petition summarily with no orders as to costs. In the result, the interim order passed on 7-12-1993 stands vacated.
24. C.C. to both sides on charges.