The Honourable Mr.MARKANDEY KATJU, Chief JusticeandThe Honourable Mr v. The Customs

IN THE HIGH COURT OF JUDICATURE AT MADRASDated: 01.03.2005Coram:The Honourable Mr.MARKANDEY KATJU, Chief JusticeandThe Honourable Mr.Justice D.MURUGESANW.A.No. 2794 of 2002andW.A.M.P.No. 4720 of 2002-------------Madras Fertilizers Limited,Manali,Madrs – 600 068.Rep. by its Chairman & Managing Director,Mr.N.Y.Mahajan… Appellant/ Petitionervs.1. The Customs, Excise and Gold (Control) Appellate Tribunal, South Regional Bench, Sasthri Bhawan, Haddows Road, Nungambakkam, Chennai – 600 006. Rep. by its Assistant Registrar2. Office of the Commissioner of Central Excise (Appeals), Nungambakkam High Road, Chennai – 600 034.3. The Asst.Commissioner of Central Excise, Chennai “A” Division, Commissionerate-I, 317, Anna Salai, Chennai – 600 018.4. The Superintendent of Central Excise, 317, Anna Salai, Chennai – 600 018.… RespondentsAppeal filed under Clause 15 of the Letters Patentagainst the order passed in W.P.No.421 of 2001 dated 11.06.2001.(WP No.421/01 Presented under Article 226 of the Constitution ofIndia to issue a Writ of certiorarified Mandamus calling for therecords of the first respondent in Appeal No.13/St/162/99 andE/368/99 in final order No.548/2000 dated 26.4.2000 and of the https://hcservices.ecourts.gov.in/hcservices/ Second respondent in original Appeal No.197/98 (M.I) dated20.11.1998 and to quash the same and direct the second respondentto consider the appeal in merits the Appeal E No.156/98 (M.I)filed by the petitioner on 20.10.1998).For Appellant :::: Mr.Arvind P. Datar, Senior Counsel for Mr.Utham ReddyFor Respondents :::: Mr. V.T.Gopalan,2 to 4 Addl. Solicitor General of India, for Mr.S.Manikumar, S.C.G.S.C J U D G M E N TTHE HONOURABLE THE CHIEF JUSTICEThis writ appeal has been filed against the impugnedjudgment of the learned single Judge dated 11.06.2001.2. We have heard the learned counsel for the parties, andhave perused the impugned judgment and the records.3. The appellant is a Public Sector Undertaking, and 51% ofits shares are held by the Central Government. It is engaged inthe manufacture of fertilizers. The relevant period in this caseis from 05.03.1976 to 29.2.1977, for which period the appellantcleared complex fertilizers claiming the benefit of exemptionunder Notification No.25/70-CE dated 01.03.1970. The AssistantCollector had initially allowed the exemption on 05.03.1976, butthe Department took the stand that the appellant was not entitledfor the benefit of this notification and accordingly, a showcause notice dated 07.06.1976 was issued. The Assistant Collectorsubsequently passed an order confirming the denial of exemptionagainst which order W.P.No.152 of 1977 was filed before thisCourt to quash the said order, and W.P.No.455 of 1977 claimingrefund of duty paid on NPK fertilizers. These writ petitionswere allowed by the learned single Judge, but subsequentlyW.A.Nos. 507 & 508 of 1980 were allowed in favour of theDepartment by a Division Bench of this Court by judgment dated10.03.1986, which order was confirmed in appeal by the SupremeCourt by its order dated 20.01.94.4. Thus, the facts of the case disclose that the appellanthad claimed the benefit of Notification No.25/70 issued underRule 8 of the Central Excise Rules exempting mixed fertilizersfalling under Item-14 of Schedule I to the Central Excise andSalt Act, 1944. 5. The issue as to whether the appellant was entitled to thebenefit of the said notification went upto the Supreme Court, and https://hcservices.ecourts.gov.in/hcservices/ the Supreme Court by its order dated 20.01.94 in Civil AppealNos. 4531 & 4532 of 1986 held that the mixture manufactured bythe appellant does not satisfy all the conditions prescribed bythe notification, and hence the appellant cannot get the benefitof the said notification. The appeals were consequently dismissedby the Supreme Court.6. After dismissal of the appeal by the Supreme Court by itsorder dated 20.01.94, the Assistant Collector (Central Excise)wrote a letter to the appellant on 11.03.1994 demanding Rs.8.94crores. This was disputed by the appellant, and the matter wasdiscussed with the Principal Collector, who by letter dated19.01.95 informed the appellant that it had to pay the undisputedbalance amount of Rs.4.84 crores with interest at 17.5%. Thisamount was duly paid by the appellant, and it appears that after1995 the entire dispute was treated as closed. 7. However, surprisingly, the appellant after three yearsreceived a letter on 5.2.1998 from the Department asking it topay additional amount of Rs.3.1 crores on or before 11.02.1998,failing which recovery proceedings would be initiated against itunder Rule 230. 8. It is alleged by the appellant that since it is a PublicSector Undertaking it could not file any case/appeal withoutclearance by a Higher Powered Committee in view of the decisionsof the Supreme Court referred to later in this judgment . Hence,against the fresh demand of Rs.3.1 crores, the appellant wrote aletter on 24.04.1998 to the High Powered Committee seekingpermission to file a petition before the Supreme Court againstthe fresh demand of Rs.3.1 crores. The appellant has alleged thatit did not seek permission to file appeal before the Commissioner(Appeals), because the demand raised in the letter dated 5.2.1998was not in pursuance of any show cause notice. Further, it couldnot be treated as an assessment order or an appealable order. 9. The High Powered Committee refused to grant permission tothe appellant to file a petition before the Supreme Court, butinstead passed the following order: - “ The Committee, having, regard to the factthat the dispute under consideration hadarisen out of fresh demand did not permitMadras Fertilizers Limited to file a petitionin the matter in the Supreme court. TheCommittee instead advised Madras FertilizersLimited to agitate the matter before theCollector (Appeals).”10. Consequently, the appellant filed an appeal before theCommissioner (Appeals) on 27.10.98 pursuant to the directions ofthe High Powered Committee. However, the appeal was dismissed bythe Commissioner (Appeals) by order dated 20.11.98 as barred by https://hcservices.ecourts.gov.in/hcservices/ limitation. Against the order of Commissioner (Appeals), theappellant filed an appeal before the Customs, Excise and Gold(Control) Appellate Tribunal (CEGAT), which was dismissed by theTribunal by its order dated 26.4.2000. Aggrieved, the appellantfiled a writ petition before this Court, which was dismissed bythe impugned order dated 11.06.2001 by a learned single Judge,and hence this appeal.11. In a long string of decisions of the Supreme Court, ithas been repeatedly emphasized that disputes between the CentralGovernment and the Public Sector Undertakings should first gobefore the High Powered Committee constituted by the CentralGovernment, so as to conciliate the matter. Reference to theserulings have all been given in the latest decision of the SupremeCourt in Mahanagar Telephone Nigam Ltd. v. Chairman, CentralBoard, Direct Taxes, AIR 2004 SC 2434. 12. In Collector of Central Excise, Calcutta v. Jeesop andCo. Ltd., (1999) 9 SCC 181, reference to which has been made inthe decision in Mahanagar Telephone Nigam Ltd. case (supra), theSupreme Court observed: -“ Litigation between Central Government andPublic Sector Undertakings is not to beresorted to without the matter being examinedby a High Powered Committee of Secretaries andits clearance obtained.”The Supreme Court in the above said decision i.e., Collector ofCentral Excise, Calcutta v. Jeesop & Co. Ltd (supra) has reliedon its earlier decisions in Oil and Natural Gas Commission v.Collector, 1992 (61) E.L.T 3(SC) and Oil and Natural GasCommission v. Collector, 1994 (70) E.L.T 45 (SC).13. In Chief Conservator of Forests v. Collector, (2003) 3SCC 472, the Supreme Court observed: -“Under the scheme of the Constitution, Article131 confers original jurisdiction of theSupreme Court in regard to a dispute betweentwo states of the Union of India or between oneor more States and the Union of India. It wasnot contemplated by the framers of theConstitutions or the C.P.C that two departmentsof a State or the Union of India will fight alitigation in a Court of law. It is neitherappropriate nor permissible for two departmentsof a State or the Union of India to fightlitigation in a Court of law. Indeed, such acourse cannot but be detrimental to the publicinterest as it also entails avoidable wastageof public money and time. Various departmentsof the Government are its limbs and, therefore,they must act in co-ordination and not inconfrontations. Filing of a writ petition byone department against the other by invokingthe extraordinary jurisdiction of the HighCourt is not only against the propriety and https://hcservices.ecourts.gov.in/hcservices/ polity as it smacks of indiscipline but is alsocontrary to the basic concept of law whichrequires that for suing or being sued, theremust be either a natural or a juristic person.The States/Union of India must evolve amechanism to set at rest all inter-departmentalcontroversies at the level of the Governmentand such matters should not be carried to aCourt of law for resolution of the controversy.In the case of disputes between public sectorundertakings and Union of India, this Court inOil and Natural Gas Commission and another v.CCE (1992 Suppl (2) SCC 432) called upon theCabinet Secretary to handle such matters. InOil and Natural Gas Commission and another v.CCE (1995 Suppl (4) SCC 541), this Courtdirected the Central Government to set up aCommittee consisting of representatives fromthe Ministry of Industry, the Bureau of PublicEnterprises and the Ministry of Law, to monitordisputes between Ministry and Ministry of theGovernment of India, Ministry and public sectorundertakings of the Government of India andpublic sector undertakings in betweenthemselves, to ensure that no litigation comesto Court or to a Tribunal without the matterhaving been first examined by the Committee andits clearance for litigation. The Governmentmay include a representative of the Ministryconcerned in a specific case and one from theMinistry of Finance in the Committee. SeniorOfficers only should be nominated so that theCommittee would function with status, controland discipline.”Thus, the High Powered Committee constituted in pursuance of theorders of the Supreme Court was in the nature of in-houseconciliation to avoid litigation between the Government and thePublic Sector Undertakings. All Public Sector Undertakings hencehave to necessarily approach the High Powered Committee beforefiling any appeal/case. 14. Mr.V.T.Gopalan, learned Additional Solicitor General ofIndia, appearing for the Central Government, submitted that theappellant should have filed an appeal while simultaneouslyapproaching the High Powered Committee in order to savelimitation. However, Mr.Arvind P.Datar, learned senior counselfor the appellant, submitted that such an appeal could be filedonly against an assessment order/adjudication order. As alreadystated above, after dismissal of the appellant’s appeal by theSupreme Court on 20.01.94 the Assistant Collector issued letterdated 11.3.94 demanding Rs.8.94 crores from the appellant. Thiswas disputed by the appellant, and the matter was discussed withthe Principal Collector of Customs and Central Excise, who byletter dated 19.01.1995 informed the appellant that it had to payundisputed balance amount of Rs.4.84 crores with interest at https://hcservices.ecourts.gov.in/hcservices/

17.5%, and this amount had been paid by the appellant. Thus, itis alleged that after 1995 the entire dispute was closed. It wasonly subsequently that the appellant received a letter on5.2.1998 asking it to pay additional amount of Rs.3.1 crores onor before 11.2.1998. Thus, it is alleged that the letter dated5.2.98 was not an assessment or adjudication order. It was only aconsequential letter, as the matter had already been concluded bythe decision of the Supreme Court.15. Since the appellant is a Public Sector Undertaking ithad to get clearance from the High Powered Committee forlitigating the matter. Against the demand raised by theCommissioner of Central Excise (Appeals) by letter dated 5.2.98,the appellant wrote a letter on 24.4.1998 to the High PoweredCommittee seeking permission to file a petition before theSupreme Court against the fresh demand of Rs.3.1 crores. Theappellant states that it did not seek any permission to file anyappeal before the Commissioner (Appeals) because the demandraised in the letter dated 5.2.1998 was not in pursuance of anyshow cause notice or assessment/adjudication order. In fact, thecontroversy had already been adjudicated by the judgment of theSupreme Court dated 20.01.1994. The High Powered Committeerefused to grant permission to file appeal before the SupremeCourt, but gave permission to file an appeal before the Collector(Appeals), which order was received by the appellant on25.7.1998. The appellant then filed an appeal before theCommissioner (Appeals) on 27.10.98.16. Learned senior counsel for the appellant submits that atthe relevant point of time the appellant had 90 days to file anappeal under Section 35 of the Central Excise Act, 1944, and theCommissioner of Central Excise (Appeals) could condone the delayby a further period of 90 days. Thus, the appeal could have beenpreferred within 180 days. Although the appeal was filed afterthe period of 261 days from the date of receipt of the impugnedorder, the time taken to approach the High Powered Committee andobtain its order/permission was 92 days. If this period of 92days is excluded, the appeal has been filed after 169 days, whichis well within the total period of 180 days.17. We agree with the submission of the learned seniorcounsel for the appellant. At the relevant time, the prescribedperiod for filing appeal under Section 35 of the Central ExciseAct, 1944 was 90 days from the date of receipt of the order, andthe Commissioner of Central Excise (Appeals) could condone thedelay by further period of 90 days. Since the appellant hadnecessarily to approach the High Powered Committee (in view ofthe decisions of the Supreme Court referred to above) in ouropinion the period spent in pursuing the matter before the HighPowered Committee has necessarily to be excluded. 18. On the facts of the case, and since there has alreadybeen considerable delay in the matter, we condone the delay infiling the appeal before the Commissioner (Appeals). 19. The learned Senior Counsel for the appellant has reliedon the decision of the Supreme Court in Union of India and Others https://hcservices.ecourts.gov.in/hcservices/ Vs. Madhumilan Syntex Pvt. Ltd., 1988 (35) E.L.T. 349 and urgedthat a prior show cause notice must be served to the personagainst whom any demand is proposed to be made. A demand withoutnotice or hearing is invalid, and post facto show cause noticecannot be regarded as adequate in law. The learned Senior Counselfurther submitted that the show cause notice must set out thedetails of the claim, documents relied on, etc., and the mannerin which the demand amount has been computed. He furthersubmitted that this has not been done in the present case, andhence the impugned demand notice is illegal. 20. Apart from that, the learned Senior Counsel for theappellant has also submitted that the dispute relates to theperiod from 05.03.1976 to 29.03.1977. The Supreme Court judgmentwas rendered on 20.01.1994. Thereafter, the Assistant Collector(Central Excise) wrote the letter dated 11.03.1994 to theappellant demanding Rs.8.94 crores. Since, this was disputed, thematter was discussed with the Collector who by letter dated19.01.1995 informed the appellant that it had to pay the amountof Rs.4.84 crores with interest, which was duly paid by theappellant, and the dispute was closed in the year 1995.Subsequently, the appellant received the letter dated 05.02.1998demanding the additional amount which has been challenged herein.The learned Senior Counsel submitted that this letter dated05.02.1998 was illegal, since it was time barred by virtue ofSection 11A of the Central Excise Act and the proviso to thatprovision does not apply because there was no deliberatesuppression by the appellant. He also submitted that this issuewas raised before the Commissioner but he has not dealt with thesame.21. Since, we are remanding the matter to the Commissioner(Appeals) all the aforesaid submissions can be made before theCommissioner (Appeals). 22. In view of the above, we set aside the impugned orderof the learned single Judge dated 11.06.2001; of the CEGAT dated25.04.2000, and the Commissioner of Central Excise (Appeals)dated 20.11.98, and remand the matter to the Commissioner ofCentral Excise (Appeals) to pass a fresh order on merits in thelight of the observations made above expeditiously. The impugneddemand shall stand stayed till the decision by the Commissioner(Appeals).23. In the result, the appeal is allowed, and the matter isremanded to the Commissioner (Appeals). No costs. Consequently,W.A.M.P is closed.pv/smSd/Asst.Registrar/true copy/Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ Copy to:1. The Assistant Registrar The Customs, Excise and Gold (Control) Appellate Tribunal, South Regional Bench, Sasthri Bhawan, Haddows Road, Nungambakkam, Chennai – 600 006. 2. Office of the Commissioner of Central Excise (Appeals), Nungambakkam High Road, Chennai – 600 034.3. The Asst.Commissioner of Central Excise, Chennai “A” Division, Commissionerate-I, 317, Anna Salai, Chennai – 600 018.4. The Superintendent of Central Excise, 317, Anna Salai, Chennai – 18.+ 1 cc to Mr.Uttam Reddi Advocate SR No. 9339+ 1 cc to Mr.S.Manikumar, SCGSC (SR No.9432)JRG(CO)SR/18.3.2005 Judgment in W.A.No. 2794/ 2002