High Court · 2012

4. As noted above, both the writ petitions are against the show cause notic es issued by the Commissioner of Central Excise, Guwahati, by which the petition er has been called upon to show cause as to why the amounts mentioned in the not ices under Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 and The Chewing Tobacco and Un-manufactured Tobacco Packing M achines (Capacity Determination and Collection of Duty) Rules, 2010 should not b e demanded and recovered in terms of the Central Excise Act, 1944. By the impugn ed notices, the petitioner has also been called upon to show cause as to why int erest on the said amounts should not be charged and realized under Section 11(A) (B) of the Central Excise Act, 1944 read with the relevant rules of the aforesa id rules. The petitioner has also been directed to show cause as to why penalty should not be imposed in terms of the said rules. For a ready reference, the rel evant portion of one of the notices dated 6.12.2010, is reproduced below :- (cid:28)On scrutiny of the relevant records, it is noticed that 6314880 nos. pouches of Rajnigandha Pan Masala 4 gm. Pouches (RSP Rs. 6.00 per pouch) only were deemed to be produced with the installed / operated machines during the material period in terms of Rule 5 of the Pan Masala Packing Machines (Capacity Determination A nd Collection of Duty) Rules, 2008 as detailed in Annexure’A’ enclosed herewith. However, the said assessee is found to have manufactured 11890591 nos. of pouch es in excess of the quantity deemed to be produced during the material period. T his excess production of 11890591 nos. of pouches is attributable to the deemed production by 4 (four) more packing machines (11890591 pouches divided by 344448 0 pouches per operating machine per month) (As detailed in Annexure-A enclosed h erewith) in respect of which the said assessee did not discharge their duty liab ility of Rs. 2,04,000/- ( 4 x Rs. 51 lakhs) at the applicable rate in terms of N otification No. 42/2008-CE dated 01.07.2008 i.e. @ Rs. 51 lakhs per operating ma chine per month. Besides, the fact remains that it is not the intention of the legislature to all ow the excess manufactured quantity of finished goods beyond the deemed capacity of manufacture to escape payment of duty. By necessary implication, it follows that the said assessee in the instant case have short paid Central Excise duty by way of deliberate mis-construction of the provisions Rule 5 of the Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Rules, 2008 re ad with Notification No. 30/2008-CE(NT) dated 1.7.2008, as amended. In view of above, it appears that the said assessee have abstained from discharg ing duty liability to the tune of Rs. 2,04,00,000/- payable on the excess produc tion of 11890591 nos. of pouches of Rajnigandha Pan Masala 4 gm pouch (RSP Rs. 6 /- per pouch) in contravention of the provisions of Rule 5 of Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Rules, 2008 reach with Notification No. 42/2008-CE dated 01.07.2008 knowing fully well that they are b ound by Rule 6 of the Central Excise Rules, 2002 to make proper assessment of du ty payable on excisable goods. M/s. Dharampal Satyapal Limited, Shed No. OS/4/R/24, Industrial Estate, Bamunima idan, Guwahati - 781021 are, therefore, asked to show cause before the Commissio ner, Central Excise, Guwahati within 30(thirty) days of receipt of this notice a s to why - the said amount of Rs. 2,04,00,000/- (Rupees Two Crores & Four Lakhs) on (a) ly shall not be demanded and recovered from them in terms of Section 11A(1) of t he Central Excise Act, 1944 read with Rule 5 of Pan Masala Packing Machines (Cap acity Determination And Collection of Duty) Rules, 2008 and Notification No. 42/ 08-CE dated 01/07/2008 ; (b) Interest, as applicable, on the aforementioned amount shall not be charg ed and realized from the said assessee in terms of Section 11AB of the Central E xcise Act, 1944 read with Rule 9 of Pan Masala Packing Machines (Capacity Determ ination And Collection of Duty) Rules, 2008 and (c) Penalty shall not be imposed on them in terms of sub-rule (1) of Rule 17 of Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Rules, 2008. M/s. Dharampal Satyapal Limited, Shed No. OS/4/R/24, Industrial Estate, Bamunima idan, Guwahati - 781 021 are further asked to produce all the relevant documents at the time of showing cause upon which they intend to rely in support of their defense. Besides, the said assessee shall intimate in writing whether they desi re to be heard in person and / or through their authorized representative when t he case is posted for hearing. If no cause is shown against the proposed action within the stipulated period an d / or the said assessee fail to appear before the adjudicating authority, the c ase shall be decided ex-parte on the basis of available records without any furt her reference to them. This notice is issued without prejudice to any other action(s) or proceeding(s) that may be initiated against the assessee in terms of the provisions of the Cen tral Excise Act, 1944 and / or the Rules framed there under and / or any other l aw for the time being in force. (cid:29)

5. According to the petitioner, the impugned notices issued under the afore said rules of 2008 and 2010 notified under Section 3A of the Central Excise Act, 1944 are in complete derogation of the rules as well as Section 3A of the Act. Referring to the various provisions of the rules, it has been pleaded that the a uthority has acted without jurisdiction towards issuing the impugned notices in deeming the number of machines instead of actual number of machines and making c alculation on that basis.

6. The petitioner has further contended that while other similarly placed m anufacturers across the country are being charged in terms of Section 3A and the said Rules on the basis of the actual number of packing machines being operated , the petitioner is being discriminated against by being forced to pay on the ba sis of imaginative/ deemed number of packing machines. According to the petition er, the impugned notices are violative of Article 19(1)(g) of the Constitution o f India.

7. The respondents have filed their counter affidavit denying the contentio ns raised in the writ petition. As noted above, they have also raised a prelimin ary objection on maintainability of the writ petitions. It has been stated that having regard to the facts involved in the case, and more particularly, when the issue raised is at the stage of only show cause notices requiring the petitione r to make their position clear in the matter, this Court exercising its power of judicial review under Article 226 of the Constitution of India, will be relucta nt to exercise the said jurisdiction at this stage and that too when the dispute d question of facts are involved.

8. Commenting on the merit of the case of the petitioner, it has been conte nded that Rule 5 of the Rules specifies the quantity of notified goods deemed to be produced by the use of Single Operating Packing Machine with respect to the declared Retail Sale Price (per pouch) and that the petitioner was paying duty o n the basis of the deemed production per operating machine. But during the scrut iny of the records of their manufacturing units, it was noticed that they were m anufacturing far in excess of quantity deemed to be produced as per the said rul e, whereas they were discharging duty only to the extent of per machine wise dee med production. It has been contended by the respondents that the excess production of s 9. uch goods produced was attributable to the deemed production by additional packi ng machines, which were escaping levy of duty. According to the respondents, the assessee i.e. the petitioner failed to make proper assessment of their duty lia bility as required under Rule 6 of the Central Excise Rules, 2002 and with delib erate intention to evade payment of Central Excise duty, abstained from discharg ing duty payment of Central Excise Duty. The respondents have stated that the impugned show cause notices have be 10. en issued to the petitioner in terms of proviso of Section 11A(1) of the Central Excise Act 1944 read with Rule 5 of the Rules. Dealing with the question of mai ntainability of the writ petition, the respondents in their counter affidavit ha ve contended that the impugned show cause notices have been issued in consonance with the principles of natural justice and that the petitioner ought to have re sponded to the same instead of invoking the writ jurisdiction of this Court.

11. I have considered the submissions made by the learned counsel for the pa rties and the materials on record. While Dr. Kumar, learned counsel for the peti tioner exclusively referring to the pleadings and the documents annexed to the w rit petition and also the relevant provisions of the Acts and Rules, has argued that the impugned show cause notices are beyond jurisdiction of the authority is suing the same, Mr. B. Sharma, learned Standing Counsel, Central Excise, apart f rom arguing on maintainability of the writ petition at this stage, has argued th at the impugned show cause notices being based on relevant facts and authorizati on in law, the writ petitions are liable to be dismissed.

12. While Dr. Kumar, learned counsel for the petitioner has placed reliance on the decision in Hemraj Gordhandas Vs. H.H. Dave reported in 1978(2) E.L.T. J 350(SC), Mr. B. Sharma, learned Standing Counsel, Central Excise has placed rel iance on the decision in Special Director Vs. Mohd. Ghulam Ghouse reported in 20 04 (164) E.L.T. 141 (SC).

13. Since the respondents have raised a preliminary objection regarding main tainability of the writ petition, Dr. Kumar, learned counsel for the petitioner initially argued that the proceeding which is sought to be initiated or has been initiated by the impugned show cause notices, is time consuming and that by the time a decision is arrived at by the authority in the Central Excise, the petit ioner will suffer irreparable loss and injury. On being apprised that appropria te direction can be issued for early finalization of the matter, he argued that when the very jurisdiction and competence of the authority in issuing the impugn ed show cause notices have been raised, the writ petitions are required to be ad judicated upon on merit, exercising the power of writ jurisdiction. The decision on which the learned counsel for the petitioner has placed 14. reliance, is primarily on the interpretation of Taxing Statute. Needless to say that it is well settled that in a taxing statute, there is no room in intendment but regard must be had to the clear meaning of the words. According to the lear ned counsel for the petitioner, the authority which had issued the impugned noti ces could not have attributed to the petitioner, excess production of pouches in dicated in the impugned show cause notices to be the deemed production by four m ore packing machines. Mr. B. Sharma, learned Standing Counsel, Central Excise has drawn my att 15. ention to the provisions of the rules requiring the declaration to be filed by t he manufacturer. Rule 5 of the said rules speaks of quantity deemed to be produc ed. Rule 6(vii) requires the manufacturer of notified goods to declare the name of the manufacturer of each of the packing machine, its identification number, d ate of its purchase and the maximum packing speed on which they can be operated for packing of notified goods on various retail sale price. Annexure-D is the or der dated 9.8.2010 issued by the Deputy Commissioner of Central Excise notifying the gist of the declaration made by the petitioner which includes the number of pouches deemed to be produced per machine and annual production capacity under Rule 5 of the Rules. Annexure-I to Annexure-D series order dated 9.8.2010 is the declaration 16. made by the petitioner certifying the required declarations furnished to be true and correct in all respect and undertaking that in case of any particulars foun d to be untrue / incorrect, it would pay the additional amount of excise duty as per provisions of the Act and the Rules of the notifications issued thereunder.

17. The Apex Court in Mohd Ghulam Ghouse (Supra) dealing with the question o f maintainability of the writ petition challenging legality of show cause notice s deprecated the practice of the High Court entertaining writ petitions, questio ning the legality of the show cause notices, stalling of enquiries as proposed a nd retarding investigative process to find actual facts with the participation a nd in the presence of the parties. It is only in the case of deriving satisfacti on that the show cause notice is totally non est in the eye of law for absolute want of jurisdiction of the authority to investigate into facts, the High Court may entertain a writ petition. In paragraph 5 of the said judgement, it has bee n observed thus :- (cid:28)5. This Court in a large number of cases has deprecated the practice of the High Courts entertaining writ petitions questioning legality of the show cause notices stalling enquiries as proposed and retarding investigative process to fi nd actual facts with the participation and in the presence of the parties. Unles s, the High Court is satisfied that the show cause notice was totally non est in the eye of law for absolute want of jurisdiction of the authority to even inves tigate into facts, writ petitions should not be entertained for the mere asking and as a matter of routine and the writ petitioner should invariably be directed to respond to the show cause notice and take all stands highlighted in the writ petition. Whether the show cause notice was founded on any legal premises is a jurisdictional issue which can even be urged by the recipient of the notice and such issues also can be adjudicated by the authority issuing the very notice ini tially, before the aggrieved could approach the Court. Further, when the Court p asses an interim order it should be careful to see that the statutory functionar ies specially and specifically constituted for the purpose are not denuded to po wers and authority to initially decide the matter and ensure that ultimate relie f which may or may not be finally granted in the writ petition is accorded to th e writ petition even at the threshold by the interim protection, granted. (cid:29) The question necessarily arises as to whether the writ petitions should 18. be entertained at this stage of issuance of show cause notices requiring the pet itioner to respond to the same dealing with the queries raised therein. Though, no hurdle can be put against the exercise of the constitutional powers of the High Court, it is an well recognized principle which has gained judicial recogni tion that the High Court should direct the parties to avail itself all such reme dies one or the other before it resort to constitutional remedy.

19. The proceedings under Article 226 of the Constitution of India are not a substitute for a proceeding initiated by the impugned show cause notices. The o nly enquiry, which this Court can make under Article 226 of the Constitution at this stage, is whether there is prima facie material to sustain the impugned sho w cause notices. From the narration of facts stated above, I am of the considere d opinion that it cannot be said to be a case of proceeding against the petition er with a misconceived notion. If the authority which has issued the impugned sh ow cause notices, has derived the decision on the basis of the materials on reco rd to ask the petitioner to show cause to meet the allegations made in the impug ned notice. It is none of the business of this Court to sit on appeal on such de cision exercising its power of judicial review under Article 226 of the Constitu tion of India. By the impugned show cause notices, the petitioner has been furnished wi 20. th the facts to proceed against it in a particular manner and in tune with the p rinciples involved towards compliance of natural justice. They have been asked t o meet the queries made in the said notices. Instead of responding to the said s how cause notices, they have rushed to this Court raising the aforementioned gro unds which they could have easily raised before the said authority by responding to the notices. As has been held by the Apex Court in UOI Vs. Hindalco Industries report 21. ed in (2003) 5 SCC 194 in the matter of taxation, it is inappropriate for the Hi gh Court to interfere in exercise of jurisdiction under Article 226 of the Const itution either at the stage of show cause notice or at the stage of assessment w here alternative remedy by way of filling a reply or appeal, as the case may be, is available. Similar view has been expressed in UOI Vs. Bajaj Tempo Ltd. Repor ted in (1998) 9 SCC 281. In the said case also, the assessee instead of replying to the show cause notice, filed writ petition to deny its liability to pay the excise duty demanded. It was held that the appropriate remedy for the assessee w as not to file a writ petition but to reply to the show cause notice.

22. On perusal of the facts stated in the writ petition as well as discernib le from the impugned show cause notices, what cannot be lost sight of the fact i s that disputed facts are also involved in the writ petitions, which cannot be g one into by making a roving enquiry exercising the writ jurisdiction. Such dispu ted questions of fact be better left open to be resolved by the adjudicating aut hority, which has issued the impugned show cause notices.

23. The allegations contained in the impugned show cause notices require adj udication on investigation of the disputed facts. The materials on record cannot lead to an interference that the allegations in the show cause notices are whol ly nonexistent and that there is no foundation or basis of the allegations. In t he writ petitions there is no challenge as to the vires of the statutory provisi ons governing the matter nor there is any question regarding violation of fundam ental rights involved in the said proceedings. On examination of the materials o n record, it cannot be said that the notices are ex-facie nullity and without ju risdiction. The basic facts on the basis of which the authority has assumed juri sdiction on the subject matter to initiate and continue the proceeding, in my co nsidered view, requires investigation and adjudication. The initiation of procee ding cannot, under the circumstances, be said to be unauthorized and without jur isdiction.

24. In Union of India Vs. Metal Box Co. of India Ltd. reported in (1996) 11 SCC 122 the Supreme Court made the following scathing observations in the matter of entertaining of the writ petition in such matter: (cid:28)we find it difficult to sustain the judgement of the learned Single Judge and o f the Division Bench, fare more than one reason. But first we must mention that the filing of, and entertaining, the writ petition straightway against a notice of demand issued by a Central Excise Officer (Superintendent of Central Excise) in a matter involving valuation was inadvisable. It has been repeatedly deprecat ed by this court the latest decision being in Executive Engineer, Bihar State Ho using Board Vs. Ramesh Kumar Singh, which decision refers to and affirms the rat ion of the earlier decisions of this Court. (cid:29) & & & & & & & &.Article 226 is not meant to short-circuit or circumvent statuto

25. The Apex Court in Asstt. Collector of Central Excise, Chandan Nagar, Wes t Bengal Vs. Dunlop India Ltd & Others reported in (1985) 1 SCC 260 observed thu s :- (cid:28)3. ry procedures. It is only where statutory remedies are entirely ill-suited to me et the demands of extraordinary situations, as for instance where the very vires of the stature is in question or where private or public wrongs are so inextric ably missed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article 226 of the Constitution. But then the Court must have good and sufficient reason to bypass the alternati ve remedy provided by statute. Surely matters involving the revenue where statut ory remedies are available are not such matters. We can also take judicial notic e of the fact that the vast majority of the petitions under Article 226 of the C onstitution are filed solely for the purpose of obtaining interim orders and the reafter prolong the proceedings by one device or the other. The practice certain ly needs to be strongly discouraged. (cid:29)

26. For all the aforesaid reasons, I am of the considered opinion that the p etitioner should respond to the impugned show cause notices first by urging all the grounds including the jurisdictional issue, if available in law. We need not be presumptive that the authority dealing with the matter would be oblivious of the grounds which might be urged by the petitioner responding to the impugned s how cause notices, taking into account the totality of the facts and circumstanc es. It will be a sound discretion not to stall the proceeding initiated by the c ompetent authority through the impugned show cause notices by entertaining the w rit petitions. Consequently, the preliminary objection made by the respondents, stands upheld and the writ petitions are dismissed being not maintainable at thi s stage.

27. The petitioner may respond to the impugned show cause notices dealing wi th all the grounds urged in the writ petitions. In the event of such response be ing shown, the authority shall deal with the same towards taking a decision in t he impugned show cause notices. Depending upon the outcome of such a course of a ction, future rights and liabilities of the parties will govern.

28. Before parting with the case records, it is made clear that this order h as not touched the merit of the case of the either parties, which shall be decid ed by the authority dealing with the show cause notices and the reply, if any, f urnished by the petitioner. Needless to say that the said authority shall deal w ith the matter appropriately and strictly in accordance with law and facts invol ved.

29. Both the writ petitions are dismissed. There shall be no order as to cos ts.