Bombay High Court
J.B.A. Printing Inks Ltd. vs Union Of India And Others on 1 January, 1800
Equivalent citations: 1980CENCUS92D, 1980(6)ELT121(BOM)
ORDER
1. This is a petition for an appropriate writ for setting aside the impugned orders dated 7th August, 1973, 5th November, 1974 and 23rd May, 1975 passed by the Assistant Collector, the Appellate Authority and the Revisional Authority respectively.
2. The petitioner is a limited Company carrying on business of manufacturing inter alia Printing Inks and Synthetic Resins including Maleic Resins which is the product in question in this petition. Fumaric Acid is one of the ingredients of Maleic Resins.
3. On the 1st June, 1971, a Notification was issued by the Central Government attracting concessional duty at 10% ad valorem to Maleic Resins. In that Notification the expression "Maleic Resins" was defined as meaning :
Synthetic Resins manufactured by reacting Maleic Acid and/or Maleic Anhydride with one or more of the following components, namely,......".
By another Notification dated 9th June, 1973, the words "and/or Fumaric Acid" were inserted in the earlier Notification of 1st June, 1971 after the words "Maleic Anhydride". Thus by the later Notification dated 9th June 1973, the concessional rate of duty at 10% ad valorem was also attracted to Synthetic Resins manufactured by reacting Fumaric Acid with certain components.
4. Under the Central Excise Rules, the petitioner submitted a classification list dated 13th September, 1971 in respect of Maleic Resin. The Excise Department drew samples and communicated its approval of the petitioner's classification by the Department's letter dated 17th/21st October, 1971. On 6th April, 1972, the department forwarded to the petitioner the results of the chemical examination conducted by the department. The petitioner proceeded to clear the goods at the concessional rate, filed its monthly returns and assessment orders were also passed for the period June 1971 till August 1972.
5. By a show cause notice dated 21st December, 1972 (issued on 6th January, 1973) issued by the Superintendent of Central Excise it was proposed to vary the classification of the petitioner's product to "other resin" under Tariff Item No. 15A(1)(i) with effect from 1st June, 1971 being the date of the first Notification, and the petitioner was called upon the show cause why its product should not be thus classified from 1st June, 1971. On 30th January, 1973, the petitioner sent its replies to this show cause notice. On 7th August, 1973, the Assistant Collector passed his order classifying the petitioner's product as other than Maleic/Phenolic and Alkyd resins dutiable at the tariff rate of 40% ad valorem and ordered the petitioner to pay the differential amount of duty involved for the period 1st January 1971 onwards on demand being issued by the Superintendent of Central Excise 21st August, 1973, a sum of Rs. 31,165.59 was demanded from the petitioner which the petitioner paid under protest. Being aggrieved by the ordered dated 21st August, 1973 passed by the Assistant Collector, the petitioner preferred the requisite appeal on 10th September, 1973 to the Appellate Authority, which by its order dated 5th November, 1974 dismissed the petitioner's appeal invoking Rule 10 of the Excise Rules. The relevant excerpts of that order are as under :
"In respect of the applicability of Rule 10, I find that the differential demand has been made with effect from 1.6.1971 while the show cause notice was issued on 6.1.1973. There is no doubt that the demand pertains to short levy and not to `no levy.' The duty, therefore, can be demanded under rule 10 only. I, therefore, uphold the demand relating to the period from 7.1.1972 onwards and the demand for the period prior to this date i.e. 7.1.1972 is set aside. The order of the Assistant Collector is otherwise confirmed.
6. Thereafter the petitioner preferred a revision application to the revisional authority, which by its order dated 23rd May, 1975 held that the Notification dated 9th June, 1973 did not have retrospective effect and hence the petitioner could not get the benefit of the earlier Notification dated 1st June, 1971 because the petitioner's product was based on Fumaric Acid which was not mentioned in the earlier Notification, of 1st June, 1971. It was further held that "the demand raised on the petitioners was correct in law". Hence the present petition.
7. Mr. Dada, the learned Counsel appearing on behalf of the petitioner, urged that having regard to the chemical composition of fumaric Acid which is a derivative of Maleic Acid, the Maleic Resins manufactured by the petitioner out of the Fumaric Acid was entitled to the concessional rate of excise duty under the Notification of 1st June, 1971. Mr. Dada further urged that the later Notification of 9th June, 1973 merely makes explicit what was implicit in the earlier Notification of 1st June, 1971. Mr. Dada relied upon certain passages in the Encyclopedia Britannica Vol. 9 at page 914 under the heading "FUMARIC AND MALF'C ACIDS" as under :
"Fumaric acid.........is obtained by heating maleic acid alone to 150 C. or by heating it with hydrochloric acid or hydrobromic acid. It may also be obtained..........by heating maleic acid to 210 C. ..........
"Both acids yield acetylene by the electrolysis of aqueous solutions of their alkali salts, and on reduction both yield monobromosuccinic acid; while by the addition of hydrobromic acid they both yield monobromosuccinic acid. From this behaviour it follows that the two acids are structurally identical.........
"........maleic acid readily yields an anhydride, whereas fumaric acid does not".
Reliance on these excerpts can be of no avail to the petitioner. Even assuming that Fumaric Acid is a derivative of Maleic Acid, what is important is that the Notification dated 1st june, 1971 in terms defines Maleic Resins as meaning synthetic resins manufactured by reacting inter alia Maleic Acid, and not Fumaric Acid, with certain components. In this Notification reference to Fumaric Acid is conspicuous by its absence. If in this Notification it had been the intention to include Fumaric Acid or any other derivative of Maleic Acid within the definition of Maleic Resins, it would have been so stated expressly or by necessary implication. The clear and urequivocal definition of Maleic Resins in this Notification negatives the extended meaning sought to be given by Mr. Dada on the ground that Fumaric Acid is a derivative of Maleic Acid and hence the Maleic Resins manufactured by the petitioner with Fumaric Acid was also assessable to concessional rate of duty under the earlier Notification of 1st June, 1971.
8. In the alternative it was urged by Mr. Dada that the Notification of 9th June, 1973 must be construed as amending the definition of Maleic Resins in the earlier Notification of 1st June, 1971 with retrospective effect from the date of the earlier Notification, viz., 1st June, 1971. In support of this contention Mr. Dada drew upon the phraseology in the later Notification dated 9th June, 1973, namely, "In the said Notification" (referring thereby to the earlier Notification dated 1st June, 1971), the words "and/or Fumaric Acid" shall be inserted after the words " Maleic Anhydride". It is not difficult to repel this contention urged by Mr. Dada. On a plain reading of the Notification of 9th June, 1973, no retrospective effect can even remotely be spelt out.
9. It is, however, on Mr. Dada's next submission that the real controversy between the parties revolves.
10. It was urged by Mr. Dada that the reliance placed by the Appellate Authority on Rule 10 of the Excise rules is misconceived as no show cause notice had been issued under that rule and that in any event the requisites of Rule 10 had not been observed by the department. On the other hand, it was urged by Mr. Dalal, the learned Counsel appearing on behalf of the respondents,that the show cause notice dated 21st December, 1972 sufficiently complied with the requirements of Rule 10.
11. At this stage, reference might straightway be made to Rule 10 which is in force prior to 6th August, 1977 reads as under :-
"10. (1) When duties or charges have been short-levied through inadvertence, error, collusion or mis-construction on the part of an officer, or through mis-statement as to the quantity, description or value of such goods on the part of the owner, or when any such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded, the proper officer may, within three months from the date on which the duty or charge was paid or adjusted in the owner's account-current, if any, or from the date of making the refund, serve a notice on the person from whom such deficiency in duty or charges is or are recoverable requiring him to show cause to the Assistant Collector of Central Excise why he should not pay the amount specified in the notice.
(2) The Assistant Collector of Central Excise, after considering the representation, if any, made by the person on whom notice is served under sub-rule (1), shall determine the amount of duty or charges due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined within ten days.......".
In passing it may be stated that by Rule 173J the period of one year was substituted for the period of three months mentioned in Rule 10(1). Nothing, over, on this aspect as far as the present controversy in concerned.
12. Thus, what emerges from Rule 10 is that it is incumbent on the proper officer (i) to serve a notice on the party; (ii) that the notice must require the party to show cause to the proper officer why he should not pay a certain amount; (iii) that this amount must be stated and specified in the notice; and (iv) that the amount which the authority shall determine as payable by the party, shall not exceed the amount mentioned in the show cause notice. Thus on a plain reading of rule 10, there emerges in bold relief that the show cause notice must in terms call upon the party to give his explanation why he should not be ordered to pay the amount specifically mentioned in the show cause notice itself without leaving the amount either to conjecture, speculative reasoning or calculations.
13. Now with these requirements of Rule 10 in the forefront, it would be pertinent to analyse the show cause notice and the impugned orders. Paragraph - 1 of the show cause notice states that it appeared that the petitioner had filed in the Office of the superintendent of Central Excise, a classification list declaring its product as " Maleic Resins" whereas on the scrutiny of its composition it appeared that the petitioner's product feel under sub-tariff "other Resins" of Tariff 15A for the reasons stated in the annexure to the show cause notice. By paragraph - 2, the petitioner was called upon to show cause to the Assistant Collector of Central Excise why the petitioner's product should not be classified as "other Resin" from 1st june, 1971, i.e. from the date of the earlier Notification. Paragraph - 3 directed the petitioner to produce at the time of showing cause such evidence as it intended to rely upon and to indicate whether it desired to be heard in person. The notice concluded with the warning that if no cause was shown the case would be decided ex parte. The annexure to the show cause notice stated that the petitioner declared its product as "Maleic Resins" falling under Tariff Item No. 15A (1)(ii) under its classification list of 13th September, 1971. After stating the composition of the petitioner's product, the annexure reproduced the definition of Maleic Resins as contained in the Notification dated 1st June, 1971. The annexure concluded as under :-
"From the above it is clear that product JBA 400-C does not qualify exemption as "Maleic Resins" as per wording of abovesaid Notification. The product `JBA 400-C' manufactured by Messrs J.B.A. Printing Inks Private Limited. Bhandup is, therefore, liable to duty at appropriate rate as "other resin" under TI No. 15A (1)(i)."
14. There is nothing whatsoever in this show cause notice or the annexure to indicate that Rule 10 was being invoked by the department. There is no mention of any specified amount in this notice which the authority was calling upon the petitioner to show cause why it should not be paid. This is left to conjecture or at best to calculation which may or may not be acceptable to one party or the other depending upon the quantity of goods cleared and other factors, determinable or otherwise. This is exactly the mischief that Rule 10 seeks to eliminate by providing that the amount shall be specified in the show cause notice. When the authority issues a show cause notice under Rule 10, the party against whom such notice is issued must be made manifestly aware that he is being called upon the show cause why he should not pay a particular sum which must therefore be specified in the show cause notice itself. The present show cause notice does nothing of the kind. Instead it relegates the petitioner to conjecture or at best to calculation regarding the amount in question and which calculation may or may not be acceptable to the department. Mr. Dalal urged that it was not essential that any amount should have been mentioned in the show cause notice because when the petitioner was called upon to show cause why he should not be liable to pay duty under Tariff Item 15A(1)(i) it was merely a matter of calculation of the excess duty which the petitioner was liable to pay depending upon the quantity of goods removed by the petitioner. This is exactly where the rub lies, for that is exactly what Rule 10 not only does not contemplate, but eliminates by providing that the actual amount must be stated and specified in the show cause notice itself, eliminating thereby any possibility of a controversy regarding the quantum in respect of which the party is called upon the show cause why he should not pay.
15. I entirely agree with Mr. Dalal when he says that it was not necessary for the department to state in the show cause notice that is was issued under Rule 10, as long as the requirements of Rule 10 were complied with. However, the point at which issue can legitimately be taken up with Mr. Dalal, as done by Mr. Dada, is that on the plain reading of the show cause notice, the amount not having been specified, the essential requirement of that Rule was not complied with and that is no merit in Mr. Dalal's contention that for the purpose of Rule 10, all that is necessary is that the party must be intimated on what ground the duty is sought to be revised and that if that is done it is sufficient compliance with Rule 10.
16. What also cannot be lost sight of is that even in the petitioner's memo of appeal before the Appellate Collector the petitioner has in terms stated that differential duty involved in this case is beyond doubt a short levy and as such the only provision which could have been invoked for its recovery was Rule 10 and that the show cause notice is not a proper notice under Rule 10 and as such the impugned proceedings and order could not be sustained. This reveals that the petitioner was left groping in the dark whether or not the show cause notice was intended to be under Rule 10. It also reveals that even at that stage, the petitioner had urged that it was not a show cause notice as required by Rule 10. To this, the answer of the appellate authority, in its impugned order, is merely that the duty could only be demanded under Rule 10 and on that ground upheld the demand for the period 7th January, 1972 onwards without even specifying the amount the petitioner was required to pay. Thus, the appellate order is not in compliance with Rule 10(2) which provides for the determination of the amount of duty which shall not be in excess of the amount specify in its order the amount which the petitioner was required to pay without leaving the quantum to calculations and other factors. merely calling upon the petitioner to pay duty "for the period 7-1-1972 onwards" is not tantamount to determination of the amount the petitioner was required to pay. it was incumbent that such amount had to be stated in the order, which it was not.
17. In its revision application the petitioner also took up the contention that the show cause notice was not a proper notice under Rule 10 by recapitulating the ground urged earlier by the petitioner in its memo of appeal before the appellate authority. It was further stated by the petitioner that the appellate authority erred in not upholding the petitioner's contention that the show cause notice dated 6th January, 1973 did not contain the provision of law and as such it was bad in law. Mr. Dalal relied on this latter aspect in contending that the petitioner's only grievance was that it had not been mentioned in the show cause notice that it was issued under Rule 10. To accede to this contention would be to take a narrow and restricted meaning of the contentions urged by the petition in its revisional application, instead of reading it as a whole in its broad perspective. It must also be remembered that the petitioner's revisional application was not prepared by an Advocate and hence in such a revisional application prepared by the party itself, to look for niceties and subtlety of language would be tantamount to defeating what in lay language the petitioner has urged, viz. that the show cause notice was not a proper show cause notice under Rule 10 and thereby meaning that it did not comply with the requirements of that Rule. The answer of the revisional authority is merely that the demand raised against the petitioner was correct in law. Even assuming that the show cause notice was issued under Rule 10, the revisional authority has not dealt with the aspect whether the show cause notice met with the requirements of that Rule and, if so, how. It is futile for Mr. Dalal to urge that any concession should be made in favour of the authority. On the contrary a fiscal provision must be strictly construed against the department and if any concession must be made, it must be in favour of the citizen.
17th January, 1980.
18. Mr. Dalal urged that it was not open to the petitioner to raise in the petition an entirely new point regarding the validity of the show cause notice. Mr. Dalal relied on the decision of the Division Bench in Kanji Kurji v. Kala Gopal, 59 Bom. L. R. 846, where it was urged for the first time that the petitioner would be protected under Section 5 of the Tenancy Act. It was thereupon held by the Division Bench that whatever merits there may be in this contention, this question was never raised;or argued either before the Collector or before the Tribunal, and that in the exercise of writ jurisdiction the Court was merely concerned with finding out whether there is an error apparent on the face of the record and hence the Division Bench did not allow the petitioner to argue an entirely new point which was never canvassed before the Tribunal and which had not been dealt with by them and in respect of which it could not be said that there was an error apparent on the face of the record. Mr. Dalal also relied on the decision of the Supreme court in Bachan Singh and other v. Gauri Shankar Agarwal and others, , where it was held that a new plea cannot be entertained in writ proceedings. I respectfully agree with these decisions. however, the ration in those case can possible have no application to the facts in the present case before me where it abundantly clear that apart from the fact that from the very outset the petitioner was let in wonderment whether the notice had been issued under Rule 10, the petitioner had in so many words specifically raised the point that the provision of Rule 10 had not been complied with. Hence it cannot be said that this point has been raised for the first time in the present proceeding. Furthermore, in ground 14(h) of the petition it is stated that the proceedings and the demand are not valid under Rule 10 as the original show cause notice was not issued in terms of the provisions of that Rule. It is elucidated that the show cause notice does not state the amount alleged to be short- levied, that the order dated 7th August, 1973 passed by the 3rd respondent is also not valid as the order does not mention or specify the amount of short levied duty required under the provisions of Rule 10 and that the proceedings which have been held valid under Rule 10 are, therefore, misconceived and are liable to be set aside. Curiously enough in respect of these contentions raised in paragraph 14(h) of the petition, the affidavit-in-reply is silent. it is, however, not on the basis of this lacuna in the affidavit-in-reply that the contentions of Mr. Dada must be upheld but on the basis of the merits of his contentions which cannot be said to have been taken up for the first time in this petition.
19. Mr. Dalal urged that even though no specific amount had been mentioned in the show cause notice no prejudice had been caused to the petitioner as the amount was merely a matter of calculation. There is no merit in this contention, inasmuch as the sine que non of Rule 10 is that the show cause notice must necessarily specify the amount in respect of which the party is called upon to show why he should not pay. Mr. Dalal relied on the decision of the Supreme Court in The Kesava Mills Co. Ltd. and another v. Union of India and others, . In that case it was held that when a textile mill company and the persons concerned have received a fair treatment and also all reasonable opportunities to make out their own cases before Government they cannot be allowed to make any grievances of the fact that they were not given a formal notice calling upon them to show cause why their undertaking should not be taken over or that they had not been furnished with a copy of the report, more so when Government gave them ample opportunity to reopen and run the mill on their own if they wanted to avoid the take-over. In absence of any resources with them to do so, insistence on a formal hearing in such circumstances in nothing but insistence on an empty formality. it was further observed that it is not possible to lay down any general principle on the question as to whether the report of an investigating body or of an inspector appointed by an administrative authority should be made available to the persons concerned in any given cases before the authority takes a decision upon that report. The answer to this question also must always depend on the facts and circumstances of the case. In the circumstances of the case the non-disclosure of the report of the Investigating Committee did not cause any prejudice whatsoever to the textile mill company or the persons concerned.
20. That decision and the observation of the Supreme Court can be of no assistance to the present respondents. It can hardly be said that the requirement of Rule 10 making it incumbent for the authority to state a specific amount is an empty formality. The facts and circumstances in Kesava Mills Co. Ltd. case before the Supreme Court have not the slightest semblance or bearing to the facts and circumstances of the matter before me. In the circumstances, the final ground of challenge urged by Mr. Dada be accepted and the contention of Mr. Dalal to the contrary must be rejected.
21. The summarise (i) it is not necessary that a show cause notice under Rule 10 must state the rule under which it is issued as ling as the requirements of that rule are satisfied; (ii) the notice must require the party to show cause to the proper officer why he should not pay a certain stated amount; (iii) the amount must be stated and manifestly specified in the notice itself; (iv) the party must not be relegated to conjecture, speculation or calculations in order to ascertain the amount in respect of which the show cause notice is issued; (v) the amount determined by the authority as payable shall not exceed the amount specified in the show cause notice; and (vi) such amount which the party is ordered to pay must be stated and manifestly specified in the order without relegating the party to conjecture or calculations for ascertainment of the amount ordered to be paid. None of these mandatory requirements of Rule 10 have been compelled with in this case. Hence the show cause notice and the impugned orders are liable to be set aside.
22. In the result, the petition is allowed in terms of prayer (a). The respondents shall refund to the petitioner the amount of Rs. 31,165.59 paid under protest within four months from today. There will be no order as to costs. Rule is made absolute accordingly.