Karnataka High Court
Doddaballapur Spinning Mills Ltd. vs Asstt. Collector Of C. Ex. on 29 August, 1990
Equivalent citations: 1991(31)ECC379, 1992(61)ELT539(KAR), 1990(3)KARLJ431
ORDER M.P. Chandrakantaraj Urs, J.
1. The petitioner is the Doddabalapur Spinning Mills, Doddaballapur. In this petition under Arts. 226 and 227 of the Constitution it has challenged the competence of respondent 1 to issue the show cause notice as at Annexure-G dated 26-12-1984, to the petition as well as the correctness and legality of the order passed thereon as at Annexure - A dated 25-2-1986.
2. The facts leading to this petition may be stated briefly and they are as follows. Test was conducted of the yarn produced by the petitioner-Company at its manufacturing unit on 14-11-1984 out of the samples obtained from the manufacturer by the 1st respondent. Once again a similar test of the samples obtained was conducted on 16-12-1984. The result of two tests, according to the 1st respondent-Assistant Collector of Central Excise, Cantonment Division, Bangalore, was that the yarn was of over 100 counts. The report indicated that the test conducted showed that the counts of the yarn in question were 103, less the tolerance permitted upto 3 per cent. Pursuant to that the show cause notice impugned as at Annexure - G was issued calling upon the petitioner inter alia to show cause why he should not be subjected to proceedings for recovery of short levy in the sum of Rs. 80,645.40 being the difference in excise duty leviable in respect of yarn having a count of less than 92 and yarn having a count of more than 92. In the same notice, the Assistant Collector called upon the petitioner-Company to show cause why penalty proceedings should not be initiated for violation of Rule 173Q(1)(a) of the Central Excise Rules, 1944 for wilfully suppressing the information and material with the intention to commit fraud and deprive the State of its revenue. The petitioner-Company by its letter dated 18-12-1984 stated that there must have been some mistake in the report of the test conducted by the department and therefore fresh test may be conducted of the samples which were still in their possession as only one sample out of four had been tested and the remaining three had not been so tested. That was addressed to respondent 1. Similarly, it was followed [by] a letter to the Superintendent of Central Excise at Bangalore remitting the cost of the test required to be paid with a request that the test may be conducted afresh with one of the samples still lying with the department. It transpires that such a re-test was conducted and that also revealed that the yarn subjected to test was of 102.5 counts subject to the permissible tolerance. Thereafter the petitioner was informed to appear before the 1st respondent-Assistant Collector of Central Excise for a personal hearing. On request, the matter stood adjourned to some subsequent dates. On 29-1-1986 a telegram was sent requesting for a week's adjournment on the ground that the Managing Director of the Company was out of station. Thereafter, the impugned order came to be passed on 25-2-1986 ex parte. Aggrieved by the same, this court is moved in its special jurisdiction under Art. 226 of the Constitution for the following reliefs.
(a) Quash the order passed by respondent-1 bearing No. C. No. V/18A/30/2/85 B. 4, dated 14-2-1986 issued on 25-2-1986 (Annexure - A) by issue of writ of certiorari or any other appropriate writ or order or direction as the case may be, holding that the said order or direction are passed without jurisdiction and are illegal;
(b) To quash proviso to Section 33 of the Central Excises and Salt Act, 1944 by issue of appropriate writ or order or direction as the case may be holding that the said proviso to Section 33 provides for un-restricted and unguided power and excessive delegation of power, as against the main Section 33 of the Act, which is ultra vires and unconstitutional;
(c) Issue writ of prohibition or any other appropriate writ or order or direction as the case may be prohibiting the respondent-1, his agents/servants/subordinates from demanding any duty on the cotton yarn cleared by the petitioner from the period from 15-6-1984 to 5-12-1984.
3. Mr. G. Chander Kumar, learned Counsel for the petitioner, has strenuously contended that the proviso to Section 33 of the Central Excises and Salt, 1944 (hereinafter referred to as the Act) is void and unenforceable; as such, it should be struck down. Elaborating his submission he further submitted that the proviso was ambiguous and endowed the Central Board of Revenue with unguided and arbitrary power. It was also his contention, assuming that the proviso was valid, the exercise of that power in a manner resulting in the issuance of circular based on Central Board of Excise and C. Circular No. 27/77-CX. VI, dated 29-11-1977 as amended by Board's letter 208/14/79-CX. 6, dated 18-11-1980; A-11013/219/80/A-IV, dated 28-2-1981 and Circular No. 41/81, dated 7-5-1981 was arbitrary. (But it has been brought to our notice by the learned Counsel for the Union Government-3rd respondent herein that in fact the power exercised by the Central Board of Revenue is as per notification dated 8-11-1959 by which the power was conferred on the Deputy Collectors, Assistant Collectors and on the Superintendents of Central Excise, the power indicated in clause (a) of Section 33 of the Act). It may be so. But the question is whether the proviso is bad for the reasons stated by the learned Counsel for the petitioner. Applying the golden rule of construction, we are unable to see any arbitrariness or arbitrary conferment of power on the Central Board of Revenue by the proviso to Section 33 of the Act. The marginal note to the section indicates that the section deals with the power of adjudication and is as follows :
"S. 33. Power of adjudication. Where by the rules made under this Act anything is liable to confiscation or any person is liable to a penalty, such confiscation or penalty may be adjudged -
(a) without limit, by a Collector of Central Excise;
(b) up to confiscation of goods not exceeding five hundred rupees in value and imposition of penalty not exceeding two hundred and fifty rupees, by an Assistant Collector of Central Excise :
Provided that the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) may, in the case of any officer performing the duties of an Assistant Collector of Central Excise, reduce the limits indicated in clause (b) of this section, and may confer on any officer the powers indicated in the clause (a) or (b) of this section."
4. In clause (a) of Section 33 of the Act, the Collector of Central Excise is give unfettered powers to adjudicate in regard to confiscation of property of unlimited value as well as imposition of penalty like manner to unlimited extent of liability. In contrast as per clause (b) of Section 33 of the Act the confiscation of goods if they do not exceed Rs. 500/- and the imposition of penalty does not exceed Rs. 250/-, that power may be exercised by Assistant Collector of Central Excise. Therefore, in clause (b) of Section 33 of the Act, the guidance is there as to the nature and extent of power conferred by the Legislature. All that the proviso does is to enable the Central Board of Revenue constituted under the Central Excise and Customs Act, 1963 (Act 54 of 1963) so constituted to bring about some changes in the rank of the officers to exercise the power. It is a high power body which is expected to act with responsibility and with the required amount of judiciousness and wisdom cannot be in doubt. If so understood, when that power is delegated, if the delegate is a high authority then that in itself acts as a check and such authority is expected to act in consonance with the policy and the purpose underlying the delegation.
5. Even otherwise we find that Section 12A of the Act provides for the power of Central Excise Officers. That is a term defined under Section 2(b) of the Act. Therefore, any further delegation of the powers to be exercised under clause (a) and (b) in terms of Section 33 of the Act can only be to the Central Excise Officers who administer the Act and to no one else; to that extent the legislative guidance is implicit in the Act itself and it cannot be said that the power conferred on the Board is either arbitrary or unguided. For these reasons we must reject Mr. Chander Kumar's argument regarding the unconstitutionality of the proviso to Section 33 of the Act as violative of Art. 14 of the Constitution. The observation of the Supreme Court in this behalf should be cited which is as follows :
"......... This delegation of authority however, is not unguided or uncontrolled, for the discretion given to the appropriate Government to set up a Commission of Inquiry must be guided by the policy laid down, namely, that the executive action of setting up a Commission of Inquiry must conform to the condition of the section, that is to say, that there must exist a definite matter of public importance into which an inquiry is, in the opinion of the appropriate Government, necessary or is required by a resolution in that behalf passed by the House of the People or the Legislative Assembly of the State. It cannot be said that an arbitrary and uncontrolled power has been delegated to the appropriate Government and that, therefore, the law itself is bad." (See Ram Krishna Dalmia v. Justice Tendolkar ).
6. It was next contended that the notification referred to by the learned Counsel provided for the Additional Collector to exercise power under Section 33(a) up to Rs. 1,00,000/- in value; Deputy Collector up to Rs. 50,000/- in value; Assistant Collector up to Rs. 10,000/- in value and Superintendent up to Rs. 5,000/- in value being the amount of duty involved with corresponding specified amounts imposable as penalty was clearly in excess of the power conferred on the Board. The thrust of the argument is that where there is only power to reduce the amount with reference to Clause (b) of Section 33 of the Act as per the plain reading of the proviso, there is no power to enhance the jurisdiction of the Assistant Collector to adjudicate in respect of matters in which duty involved is Rs. 10,000/- in value and impose penalty up to Rs. 5,000/-, when the section itself restricts his limit to Rs. 500/- and Rs. 250/- for purposes of confiscation and for imposition of penalty. We must observe that such enhancement prima facie appears to be in excess of the power conferred on the Central Board of Excise. But, we do not think, that on the facts of this case we should interfere with the said notification because though the impugned show cause notice proposed levy of penalty for suppressing material in order to commit fraud with intent to deprive the State of its legitimate revenue, no penalty as such came to be imposed by the impugned order. Therefore, when a person is not aggrieved then that person need not ask this Court to strike down something with which he is not affected or with which he cannot be said to be aggrieved.
7. Therefore, we must reject the contention on the short ground we have stated though there was force in the argument submitted.
8. Similarly, the short point urged that the first respondent-Assistant Collector of Central Excise had no authority to impose penalty in excess of the sum specified by Section 33(b) also must be rejected by us as no penalty whatsoever has been imposed.
9. It was then argued by Mr. Chander Kumar that the Assessee-Company had no adequate opportunity to present its case before the 1st respondent. But we have already noticed while narrating the facts that sufficient opportunity was given and it was not properly utilised by the Company. When it asked for a week's further time, then it was the duty of the Company to go and ascertain to which future date the case had been adjourned. To contend that a fresh notice should have been sent intimating the date, in our opinion on the facts and circumstances of the case does not appear to be wellfounded. Earlier, adjournments had been granted and the petitioner knew the case against him and he failed to make adequate representation and present his defence which he had been called upon to present in the original notice itself. Therefore, it cannot be said to have been denied adequate opportunity. We reject that contention.
10. It was then further argued that the notice was defective as it was also a notice under Section 11A of the Act as it called upon the petitioner to make good certain sum which was said to be the amount short levied for the specified period between 16th June, 1984 and 5-12-1984. But then we do not find real substance in that argument, that the show cause notice was without jurisdiction because it combined both penalty to be imposed under Section 33 as well as recover the short levy under Section 11A of the Act. As long as the notice made the person liable to answer the queries in the notice whether they were by separate notice or by a single notice would not make a difference and that cannot be a ground. There is no law which prohibits issuance of a notice proposing more than one action against the same person who is liable to answer both the queries pertaining to the proposed actions.
11. It was next and lastly contended that the notice insofar as it purported to be under Section 11A of the Act could not be held to be one with jurisdiction inasmuch as the period covered by the notice was in respect of a period that was anterior to 14-11-1984 on which date the samples were taken by the Department. The next sample was taken on 6-12-1984. Therefore, any short levy that occurred on account of difference in the count of the yarn declared by the assessee was established only for that period. There was no material whatsoever before the first respondent to call upon the petitioner to show cause for the period anterior to 14-11-1984 when no samples were taken nor test conducted. We feel that ground has been well taken. Unless there was reason as a matter of fact, then the first respondent could not have invoked his power under Section 11A of the Act to reopen the question of short levy. Short levy must be something which should be demonstrable on the basis of material examined. It cannot be made on surmises. It the material for the period 14-11-1984 and 6-12-1984 disclosed by the tests conducted that the count was higher than 92, then there was jurisdiction to raise the question of short levy for that period. But if no such test was conducted for the period anterior to 14-11-1984, then there could have been no material. Therefore, we do feel compelled to record a finding in favour of the petitioner-Company that assessment of short levy cannot be relatable to the production of yarn for the period between 15-6-1984 to 13-11-1984. The petitioner must succeed in having the impugned notice of demand quashed.
12. We however, reserve liberty to the first respondent to work out the value of short levy for the period 4-11-1984 to 5-12-1984 and issue a fresh demand notice for the same. The impugned notice of demand is quashed.
13. In the light of our discussion above, the petition is allowed to the extent indicated. In other respects, it is dismissed.
14. There will be no order as to costs in the circumstances of the case.