JUDGMENT S.D. Agarwala, J.
1. The petitioner in the present writ petition is a company incorporated under the Indian Companies Act and is carrying on the business of manufacturing and selling cigarettes and smoking tobaccos of diverse kind throughout India. It owns five factories in the country. The factories are located at Bangalore in the State of Karnataka, Kidderpore in the State of West Bengal, Munger in the State of Bihar, Parel in the State of Maharashtra and Saharanpur in the State of Uttar Pradesh.
2. During the period 1st October, 1975 to 28th February, 1983 cigarettes manufactured by the petitioner-company were subjected to excise duty under Section 4 of the Central Excises and Salt Act, 1944, hereinafter referred to as the 'Act'. There was controversy between the petitioner-company and the Excise Department in regard to interpretation of Section 4 of the Act. It was held by some courts that value should be determined for the purposes of excise duty on the basis of the manufacturing cost plus profits. The controversy ultimately was raised before the Hon'ble Supreme Court in Union of India v. Bombay Tyre International Ltd. which was decided by the Hon'ble Supreme Court on 7th October, 1983. The decision of the Hon'ble Supreme Court is . The Hon'ble Supreme Court after considering the section in detail finally settled the controversy by holding that certain post manufacturing expenses were not deductible from the price to arrive at assessable value.
3. The petitioner company during the above mentioned relevant period have been filing price list deducting post manufacturing expenses from wholesale price for the purposes of payment of excise duty. On 8th December, 1978 a show cause notice was issued to the Company by the Excise Department in relation to Saharanpur factory inter alia asking the Company as to why their wholesale dealers should not be treated as Pelated persons' in terms of clause (c) of Sub-section (4) of Section 4 of the Act and also why the deduction claimed by them from their alleged ex-factory prices to the wholesale dealers towards the alleged post manufacturing expenses should not be dis-allowed.
4. Another similar notice was issued to the petitioner-company in respect of Saharanpur factory on 29th January, 1979. On 13th September, 1985 a third notice was issued asking the petitioner-company to show cause as to why deductions claimed by them in their price list relating to the period from 1st October, 1975 to 28th February, 1983 should not be dis-allowed and further why the elements as discussed in the notice should not be added to the ex-factory price for arriving at the assessable value under Section 4 of the Act. The Company was further asked to show cause as to why the Central Excise duty amounting to Rs. 1,03,29,29,365.43 p. short paid by them during the period from 1st October, 1975 to 28th February, 1983 should not be demanded from them by finalising the provisional assessments under Section 11A of the Act. In fact, provisional assessments had been made by the Excise Department on the basis of the price lists submitted by the petitioner company and show cause notices have now been issued to the petitioner company as to why the prices be not revised and they were asked to pay a sum of Rs. 1,03,29,29,365.43 p. alleged to be short paid by them during the period 1st October, 1975 to 28th February, 1983.
5. Similar notices had also been issued to the petitioner company in respect of other four factories of the petitioner other than the factory at Saharanpur which is situated in Uttar Pradesh. Since the dispute in respect of all the five factories was common and common questions arose, the Central Board of Excise and Customs by its order dated 10th September, 1984 assigned the adjudication proceedings of those show cause notices to the Director General of Inspection, in the Directorate General of Inspection and Audit (Customs and Central Excise), New Delhi as Collector of Central Excise. In pursuance of this order Director General of Inspection heard in detail various contentions raised on behalf of the petitioner company in respect of Saharanpur factory as well as in respect of other factories and ultimately disposed of the show cause notices by recording detailed findings to the effect that the company and its wholesale dealers are not 'related persons' within the meaning of Section 4(4)(c) of the Act, the price at which the company sold the cigarettes to its wholesale dealers was not the sole consideration for sale and the assessable value of the cigarettes has to be determined in accordance with the provisions of Rule 5 of the Central Excise (Valuation) Rules, 1975. It was also laid down as to what factors would be considered while determining the assessable value under Rule 5. The operative portion of the order of Director General of Inspection as Collector of Central Excise was as follows :-
" (a) pending provisional assessments shall be finalised by the respective proper officers and where the assessments had already been finalised, differential duty demanded, on the basis of the revised assessable value(s) of the cigarettes, keeping in view the findings above, and the Company shall pay the differential duty (whether on finalisation of the provisional assessments or otherwise as aforesaid; and
(b) penalty of Rs. 1,00,00,000.00 (rupees one crore only) is imposed on the Company under Rule 173Q of the Central Excise Rules, 1944. However, I do not propose to order confiscation of land, building, plant, machinery, materials etc."
This order was delivered by Director General of Inspection of 10th April, 1986.
6. It is not disputed by the petitioner that this order dated 10th April, 1986 has not been challenged by them and it has become final.
7. In accordance with the operative portion of the order quoted above in clause (a) it was directed that pending provisional assessments shall be finalised by the respective proper officers and differential duty shall be demanded on the basis of the revised assessable value of the cigarettes keeping in view of findings given in the order. It was further directed that the Company shall pay differential duty whether on finalisation of the provisional assessments or otherwise as directed in the order. The Company was further directed to pay a sum of Rs. 1,00,00,000.00 (rupees one crore) as penalty.
8. The case of the petitioner is that after the order dated 10th April, 1986 was passed a meeting as approved by the Central Board of Excise and Customs was held at Calcutta by a team of officers of the Collectorates having jurisdiction over five factories of the petitioner-company including the Collectorates involved in the issue of the show cause notice alongwith the officers of the petitioner-company. It is further case of the petitioner-company that the meeting was arranged to ascertain the total amount of differential duty payable by the petitioner-company in respect of five factories including Saharanpur factory in terms of the order dated 10th April, 1986. The meeting was held during the period 26th June to 16th July, 1986. It has been further alleged that during the course of the meeting the amount allegedly said to be outstanding towards the excise duty was worked out and quantified for the relevant period i.e. 1st October, 1975 to 28th February, 1983 and the figures were duly quantified and certified by the opposite party No. 4 viz. Superintendent of Central Excise.
9. It is further case of the petitioner that after these figures were finalised they have paid amount of differential duty.
10. On 28th April, 1988 Assistant Collector of Central Excise sent a formal order of demand of differential duty for the period from 1st October, 1975 to 28th February, 1983 asking the petitioner-company to pay the differential duty of Rs. 80,30,20,263.55 p. immediately failing which action under the Act would be taken to recover the said amount. It is this order dated 28th April, 1988 by which differential duty of Rupees eighty crores and odd was demanded from the petitioner has been challenged by means of the present petition.
11. We have heard Sri S.N. Verma, Senior Advocate on behalf of the petitioner and Sri N.S. Hedge, learned Additional Solicitor General of India on behalf of the respondents.
12. Learned counsel for the first petitioner has made three submissions. His first submission is that the price lists which were submitted at Calcutta during the meetings held between 26-6-1986 to 16-7-1986 had been accepted consequently they became final and binding on the Excise Department. The order of the Director General exhausted itself and as such the subsequent demand order dated 28th April, 1988 is wholly without jurisdiction. The second submission of the learned counsel is that the impugned demand order dated 28th April, 1988 is void in law as no opportunity had been afforded to the petitioner-company before issuing the said demand. The third submission of the learned counsel is that the order dated 28th April, 1988 is contrary to the Director General's order dated 10-4-1986.
13. Learned Additional Solicitor General of India has, however, submitted that the petitioner has an alternative remedy of filing an appeal under Section 35 of the Act and as such the present petition is not maintainable.
14. In regard to the first submission in para 18 of the petition it has been stated that in pursuance of the order of the Director General dated 10th April, 1986 meeting as approved by the Central Board of Excise and Customs was held at Calcutta by a team of officers of the Collectorates having jurisdiction over five factories of the petitioner-company alongwith the officers of the petitioner-company. The purpose of the meeting was to ascertain total amount. of differential duty payable by the petitioner company in respect of its five factories including Saharanpur factory. The said meeting was held during the period 26th June, 1986 to 16th July, 1986. It has been alleged that the representatives of the five different Collectorates were present at the said meeting. It has also been alleged that the opposite party No. 3 viz. Assistant Collector of Excise, Saharanpur, opposite party No. 4 Superintendent of Central Excise, Saharanpur and the Range Inspector of Central Excise, Saharanpur attended the said meeting. The matter was discussed and the differential duty was quantified after queries and clarifications had been sought by the Assistant Collector of Central Excise regarding interest on wholesale dealer's investment, interest of inventories held by the petitioner-company both before and after removal of goods from the factory and claimed as a deduction on account of post manufacturing expenses. It has also been alleged that the petitioner company by letter dated 2nd July, 1986 replied to all the queries and thereafter computation of liability was allowed to proceed to its conclusion.
15. In para 20 it has been further alleged that after detailed deliberation and meeting between the company's representatives and the opposite parties outstanding excise duty were worked out and quantified for the relevant period i.e. 1st October, 1975 to 28th February, 1983 in the light of the order dated 10th April, 1986 issued by the Director General and the figures arrived at were duly quantified and certified as correct by the Superintendent of Central Excise, Saharanpur, opposite party No. 4. The statements of figures which have been worked out have been attached as Annexures '6' and '7'. In view of these facts it has been alleged by the learned counsel for the petitioner that once the figures were certified by the Superintendent of Central Excise after discussion in the meeting at Calcutta the matter became final and consequently the impugned demand notice could not have been issued by the Assistant Collector of Central Excise.
16. Sri P. Das, Assistant Collector of Customs and Central Excise, Saharanpur has filed a counter affidavit. In para 11 of the counter affidavit it has been stated by him that the alleged Calcutta meeting which was held between 26th June, 1986 to 16th July, 1986 was departmental in nature in order to arrive at the procedure for calculation of duty liability on the petitioner-company, only in respect of the common points pertaining to all the five units of the petitioner-company falling under the different jurisdiction of the petitioner's Collectorates. No final calculation was taken at that time. The quantification and calculation for computation of differential duty payable by the petitioner-company was done strictly on the basis of the directions contained in the order dated 10th April, 1986 as finalisation and quantification of the amount of duty payable by the petitioner-company was not done at Calcutta. The meeting at Calcutta was convened with a view to determine the differential duty payable on account of a few items common to all Cigarette factories. In the said meeting petitioner supplied data presumably with the help of their computers to work out differential duty liability on account of the advertisement charges and interest on security deposits. It has further been stated that only arithmetical checking of the data furnished by the petitioner company was undertaken by the officers of Saharanpur Division and no demand as such was issued. Subsequently, when the petitioner desired that the Assistant Collector of C. Ex. should issue demand based on these calculations it was found that the data supplied was not complete. Fresh meeting was again held at Calcutta on 10th and 11th September, 1986 which apart from the concerned Collectors, other officers of the department also attended the said meeting alongwith the senior representatives of the petitioner-company. It is consequently alleged that the differential duty worked out at Calcutta in the meeting held on 26th June, 1986 to 16th July, 1986 was not final. In para 12 of the counter affidavit it has been specifically denied that whatever data were made available by the petitioner company in the course of the meeting at Calcutta were got arithmetically verified but no certificate was issued as alleged by the petitioner-company. No final calculation/decision was arrived at Calcutta. It has been further stated that the differential duty payable by the petitioner-company was to be calculated by the different Collectorates on the basis of guidelines provided by the Director General in his order dated 10th April, 1986. The quantification of the liability was neither completed nor conveyed to the party at that stage. In para 13 it has been stated that the alleged documents, Annexures '6' and '7' to the petition was not final calculation of duty. Only figures which were supplied by the petitioner-company were checked from the record of the petitioner company.
17. In effect, it has been seriously disputed by the Assistant Collector of Central Excise that a differential duty of the petitioner was finalised in the meeting held between 26th June, 1986 to 16th July, 1986.
18. We have perused Annexures '6' and '7' which have been relied upon by the learned counsel for the petitioner. They do not bear the signatures of the Assistant Collector, Saharanpur at all. Only the words found on the documents are 'checked and found in order' and thereafter signatures of the Superintendent of Central Excise, Saharanpur have been appended. They are neither notices of demand nor there is any intrinsic evidence prima faice to show that the documents were final determination of differential duty in respect of the Saharanpur factory. It can also not be called a certificate certifying the amount of differential duty payable by the petitioner company.
19. The order of the Director General dated 10th April, 1986 clearly directs that pending provisional assessments shall be finalised by the respective proper officers and thereafter differential duty demanded on the basis of the revised assessable value of cigarettes keeping in view of the findings given by the Director General. In accordance with the order dated 10th April, 1986 issued by the Director General, therefore, a proper demand notice had to be issued by the proper officer concerned viz. Assistant Collector of Central Excise, Saharanpur. In the present case no order had been issued after the meeting at Calcutta to the company asking it to pay differential duty by the Assistant Collector of Central Excise and as such it cannot be said that the directions issued by order dated 10th April, 1986 had been complied with and that the order dated 10th April, 1986 had exhausted itself. By the mere checking of certain data by a Superintendent of Central Excise it could not possibly be held to be a final adjudication of differential duty payable by the petitioner-company. In the circumstances it is not possible to accept the submissions raised by the petitioner-company that the differential duty was finally calculated in the meeting held on 26th June, 1986 to 16th July, 1986. Learned counsel for the petitioner in support of this submission has also relied upon Annexure '8' to the petition which is dated 30th August, 1986 and Annexure '9' which is dated 28th March, 1987 to strengthen his submission that the calculations made in the meeting held on 26th June, 1986 to 16th July, 1986 had been finalised.
20. Annexure '8' is a letter dated 30th August, 1986 written by the petitioner-company to the Collector of Central Excise. In this letter it does mention what actually transpired in the meeting held at Calcutta. It set up a case that total amount of duty on account of the order dated 10th April, 1986 was worked out on the revised price lists and clearances and calculations were checked and found in order by the Excise Officers of all concerned Collectorates. In the said letter it has not been stated that any demand order was issued after the alleged finalisation of working out of the differential duty by the Assistant Collector of Central Excise. The letter was only for clarification. Annexure '9' is a letter dated 28th March, 1987. This letter is addressed by Commercial Manager of the petitioner company to the Assistant Collector of Central Excise, Saharanpur. In this letter it has been stated as follows :-
"We now enclose Receipted Challans for Rs. 78 lakhs being the final instalment towards resolution of all disputed Central Excise Duty Liabilities on account of Post Manufacturing Expenses, Freight, Administrative Charges and the amounts due under the Director General's Order No. 1/86 dated 10th April, 1986 as discussed with the C.B.E.C."
21. This letter also does not speak of any demand order and in pursuance of which the money was deposited. Voluntary deposit by an assessee cannot create any right in him adversely affecting the Excise Department.
22. Learned counsel for the petitioner has argued that since in spite of the letter dated 30th August, 1986 to the Collector of Central Excise and the letter dated 28th March, 1987 issued by the Assistant Collector of Central Excise since no reply was received from the said officers it should be taken that they had accepted the fact that the differential duty had been finally calculated in the meeting which was held at Calcutta. We are unable to accept this contention. The mere fact that no reply were given to these letters cannot possibly wipe out the liability against the petitioner-company. From these letters also it is clear that discussions were going on in regard to the payment of the differential duty and nothing had been finalised. The final compliance of the order dated 10th April, 1986 could have only been done by the issuance of the demand order by the Assistant Collector of Central Excise. This having not Keen done, it cannot be said that whatever transpired at Calcutta had become final. In fact, the impugned order now which has been issued on 28th April, 1988 is the final demand order which has been issued in pursuance of the order dated 10th April, 1986. We consequently are unable to accept the first submission made by the learned counsel for the petitioner. The alleged certificates issued by the Superintendent, Central Excise were in fact no certificates and no final determination of differential duty and they could not bind the Assistant Collector of Central Excise who is assessing authority and the proper officer. They did not exhaust the order of the Director General dated 10-4-1986 and as such it cannot be said that the demand order dated 28-4-1988 was without jurisdiction.
23. In order to consider the second submission made on behalf of the petitioners, it is necessary to examine a few provisions of the Central Excises and Salt Act, 1944 and the Rules framed thereunder. Section 3 of the Act provides that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into any part of India as, and at the rates set forth in the Schedule of the Central Excise Tariff Act, 1985.
24. Section 4 lays down the manner how valuation of an excisable goods shall be made for the purposes of charging of duties of excise. It provides that where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section, be deemed to be the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale.
25. Rule 9 of the Rules provides for the time and manner of payment of duty. It lays down that no excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf whether for consumption, export, or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may require, and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form.
26. Rule 9B of the Rules provides for provisional assessment to duty. Clause (c) of this Rule specifically lays down that where an assessee has produced all the necessary documents and furnished full information for the assessment of duty, but the proper officer deems it necessary to make further inquiry, for assessing the duty, the proper officer may, either on a written request made by the assessee or on his own accord, direct that the duty leviable on such goods shall, pending the production of such documents or furnishing of such information or completion of such test or enquiry, be assessed provisionally at such rate or such value as may be indicated by him. It further provides that the assessee in such a case shall execute a bond in the proper form with such surety or sufficient security in such amount, or under such conditions as the proper officer deems fit, binding himself for payment of the difference between the amount of duty as provisionally assessed and as finally assessed.
27. It is not disputed that the proper officer in the case of the petitioner-company is the Assistant Collector of Central Excise, Saharanpur. It is also not disputed that only provisional assessment had been made under Rule 9B of the Rules for the period from 1st October, 1975 to 28th February, 1983.
28. The notices were issued by the Collector of Central Excise under Section 11A of the Act asking the petitioner company to show cause as to why it should not pay the excise duty, which had been short paid by reason of the fraud, collusion and wilful mis-statements or suppression of facts with intent to evade payment of duty. As has already been stated above, the notices which had been issued to the petitioner company, were referred to the Director General of Inspection by the Central Board of Excise and Customs as Collector of Central Excise. Section 11A(2) of the Act, which is relevant for this submission made by the petitioner, is quoted below:
"11-A(2). The Assistant Collector of Central Excise or, as the case may be, the Collector of Central Excise shall, after considering the representation, if any, made by the person on whom notice is served under Sub-section (1), determine the amount of duty of excise 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."
29. The above Sub-section (2) of Section 11A of the Act provides for the manner in which an opportunity is to be given to a person to whom a notice has been issued under Section 11A of the Act. It provides that the Assistant Collector of Central Excise shall determine the amount of duty of excise short levied after considering the representation, if any, made by a person to whom notice has been served under Section 11A(1) of the Act. The only statutory requirement, therefore, before issuing a notice of demand after issue of a notice under Section 11A(1) of the Act is the consideration of a representation made by the person to whom the notice has been served.
30. Section 11A of the Act came up for consideration before the Hon'ble Supreme Court in Gokak Patel Volkart Ltd. v. Collector of Central Excise, Belgaum . The Supreme Court opined as under :
"The provisions of Section 11A(1) and (2) make it clear that the statutory scheme is that in the situations covered by Sub-section (1), a notice of show cause has to be issued and Sub-section (2) requires that the cause shown by way of representation has to be considered by the prescribed authority and then only the amount has to be determined. The scheme is in consonance with the rules of natural justice. An opportunity to be heard is intended to be afforded to the person who is likely to be prejudiced when the order is made before making the order thereof. Notice is thus a condition precedent to a demand, under Sub-section (2)...."
31. In the instant case, admittedly, the notice had been issued to the petitioner under Section 11A(1) of the Act. The notices were referred for adjudication to the Director General of Inspection, Customs and Central Excise as Collector of Central Excise. The petitioner filed reply to the show cause notices and were heard at length by the Director General and it was only thereafter that the Director General passed the order dated 10th April, 1986. At this place, it would be relevant to quote para 17.7 of the order of the Director General dated 10th April, 1986. It is quoted below:
"17.7. In the instant case detailed show cause notices were issued, evidence and documents on which the allegations are made were fully mentioned therein. The company's representatives inspected the records relied upon the Department and they took copies of the same. The Company was duly heard personally to its full satisfaction. In the circumstances, and keeping in view the observations made by the different courts, I do not believe that principles of natural justice have been violated by not producing the witnesses for cross-examination by the Company, especially in view of the line of enquiry adopted and where the allegations have been proved mostly on the basis of company's own documents which, in fairness, I must concede the company has, without hesitation, accepted as bona fide and genuine."
This order dated 10th April, 1986, has become final as no challenge has been made to the same.
32. From the paragraph, quoted above, it is clear that Company's representatives inspected the records, the petitioner company was duly heard personally and further found that the allegations had been proved mostly on the Company's own documents, which, the company accepted as bona fide and genuine. In the circumstances, it cannot be said that there was lack of any opportunity of hearing so far as the petitioner was concerned when the order dated 10th April, 1986 had been passed. In our opinion, the principles of natural justice, as contemplated by Section 11A(2) of the Act was more than complied with and, as such, after the decision given by the Director General on 10th April, 1986, the proper officer had only to finalise the assessment and demand differential duty.
33. In the instant case, the specific grievance of the petitioner is that after the order was passed on 10th April, 1986, further opportunity was not given to the petitioner company before issuing a demand notice dated 28th April, 1988, and, as such, the order is void as being violative of the principles of natural justice.
34. In para 18 of the petition, it is the petitioners' own case that a meeting took place in Calcutta during the period from 26th June, 1986 to 16th July, 1986 wherein the petitioners' representatives as also the officers of the excise department were present and discussions took place in regard to the passing of the final assessment order in pursuance of the directions issued by the Director General in his order dated 10th April, 1986.
35. In para 20 of the petition, it has been specifically stated that the outstanding towards excise duty was worked out and quantified for the relevant period, that is, from 1st October, 1975 to 28th February, 1983, and that the lists and calculations submitted by the petitioners were certified by the respondents. From these averments, it is clear that all the relevant facts, which were required for passing the final assessment order, were placed by the petitioner company in the meeting held in Calcutta between 26th June, 1986 and 16th July, 1986. It is the further case of the petitioners that, in that meeting, statements of price list for the relevant period were prepared and were signed and certified by the respondent No. 4, namely, the Superintendent of Central Excise.
36. In paragraph 11 of the counter affidavit of the Assistant Collector of Central Excise, Saharanpur, it has been further stated that in this meeting, the petitioners supplied data to work out the differential duty levied on account of various Heads. At that stage, only arithmetical checking of the data supplied by the company was undertaken by the officers of the Saharanpur Division and no demand was issued. Subsequently, when the petitioner desired the respondents to issue demands based on these calculations, it was found that the data supplied was not complete and, thereafter, a fresh meeting was again held at Calcutta on 10th and 11th September, 1986, in order to finally determine the differential duty payable by the petitioner company. The fact, that the meeting was again held at Calcutta on 10th and 11th September, 1986, has not been denied in the rejoinder affidavit. We have already held that the alleged certificate issued by the Superintendent of Central Excise was not the final determination of differential duty, as no formal notice of demand was issued thereafter. From these facts, it is clear that before issuing a final demand for a differential duty, the petitioner was afforded an opportunity twice; once in the meeting which was held at Calcutta during 26th June, 1986 to 16th July, 1986 and again on 10th and 11th September, 1986. After discussions and the meetings, referred to above, it was only thereafter that the demand notice was issued to the petitioner company on 28th April, 1988. It is pertinent to note that along with the impugned demand notice dated 28th April, 1988, the Assistant Collector of Central Excise had enclosed ninety charts for the period from 1st October, 1975 to 28th February, 1983, and another chart showing the quantum of duty paid, actual amount of duty payable and the differential duty to be paid. From the order, therefore, it was clearly brought to the notice of the petitioner company the manner in which the differential duty had been calculated on the basis of the data and price lists which was supplied by the petitioner company itself. In our opinion, therefore, it cannot be said that in spite of the two meetings held in Calcutta, referred to above, it was necessary, in law, to issue any further notice before issuing a formal notice of demand dated 28th April, 1988. We do not find any prejudice having been caused to the petitioner, as the petitioners did get ample opportunity to place their case before the Assistant Collector of Central Excise, who was the proper officer to determine the differential duty, as directed by the Director General in his order dated 10th April, 1986.
37. Learned counsel for the petitioners has in support of his submission relied upon a decision of the Patna High Court in Civil Misc. Writ No. 1213 of 1990, decided by a Division Bench of the Patna High Court on 16th May, 1990. This decision was given by the Patna High Court on a petition filed in a similar matter by the petitioner company against the Collector of Central Excise.
38. It is, no doubt, true that the judgment of the Patna High Court arose out of a similar dispute which was the subject matter of dispute before the Director General of Inspection in respect of their factory at Munghyr (Bihar), which was also decided by the Director General by his order dated 10th April, 1986.
39. In our opinion, the circumstances in which the judgment was delivered by the Patna High Court were different from the one in the instant case. In the case before the Patna High Court, after the decision of the Director General on 10th April, 1986, a formal notice of demand was issued to the petitioner company on 17th July, 1986. This notice clearly stated that the demand notice was issued to the petitioner company and was to be finalised only after the decision of the P.M.E. (post manufacturing expenses) case which is pending in the Hon'ble Supreme Court. It was also stated in the said notice that the revised price lists and the detailed calculations have been checked and verified by the officers of the Patna Collectorate and only thereafter a demand was issued to the petitioner company. After this formal notice of demand had been issued, another notice dated 16th June, 1988 was issued by the Superintendent of Central Excise, calling upon the petitioner company to pay additional excise duty in addition to the amount which had already been paid by the petitioner company in pursuance of the demand dated 17th July, 1986. It may be noted that this demand which was made on 16th June, 1988, was a demand after the issuance of a formal demand by the proper officer to the petitioner company in pursuance of the order of the Director General dated 10th April, 1986. The question, therefore, which was under consideration before the Patna High Court was as to whether the demand for the additional amount of excise duty made by the Excise authorities from the petitioner company can be held to be justified or not. The said demand was made by the excise officer on the basis of some additional information which they received and no notice to show cause was issued to the petitioner company. The Patna High Court categorically held that on 17th July, 1986, the Assessing Authority has revised the assessment value of the goods, manufactured by the petitioner company and made an assessment subject to finalisation of the P.M.E. case pending in the Supreme Court. This differential duty, as determined, was paid by the petitioner company and, as such, a further revision of assessable value and the demand of differential duty without issuing a show cause notice was invalid. In the instant case, as we have already detailed the facts above, a notice of demand had not been issued in pursuance of the order of the Director General dated 10th April, 1986. It was issued, for the first time, on 28th April, 1988, which is the impugned order in the present petition. There is no fresh demand or revision of any demand, as was in the case before the Patna High Court. In the circumstances, in our opinion the decision given by the Patna High Court does not apply to the facts of the present case and further it does not advance the argument raised on behalf of the petitioners that there was a violation of the principles of natural justice in the instant case. We agree with the decision of the Patna High Court, that in case after the issue of a formal demand in pursuance of the order of the Director General dated 10th April, 1986, the excise authorities revised the said demand without giving an opportunity, the revised demand would be held to be invalid as contravening the principles of natural justice. This is not the case here.
40. Learned counsel for the petitioner relied upon many cases of the Supreme Court in regard to the principles of natural justice. It is not necessary for us to refer to each of the judgments separately, as the principle laid down in all the cases is similar. We would like to refer a specific decision in the case of State of Kerala v. K.T. Shaduli Grocery Dealer . Learned counsel for the petitioner has relied upon paragraphs 2 and 3 of this judgment. It lays down that the law is well settled that the Tax authorities entrusted with the power to make assessment of tax discharge quasi-judicial functions and they are bound to observe principles of natural justice in reaching their conclusions. It has been further held that one of the rules which constitutes a part of the principles of natural justice is the rule of audi alterant pattern which requires that no man should be condemned unheard. It is indeed a requirement of the duty to act fairly which lies on all quasi judicial authorities and this duty has been extended also to the authorities holding administrative enquiries involving civil consequences or affecting rights of parties.
41. In this case, it has been further observed as follows :-
" It is, therefore, not possible to say that in every case the rule of audi alteram partem requires that a particular specified procedure to be followed. It may be that in a given case the rule of audi alteram partem may import a requirement that witnesses whose statements are sought to be relied upon by the authority holding the inquiry should be permitted to be cross-examined by the party affected while in some other case it may not. The procedure required to be adopted for giving an opportunity to a person to be heard must necessarily depend on facts and circumstances of each case."
42. In the instant case, the legal position has already been examined. The opportunity which is required to be given by the Statute under Section 11A(2) of the Act is a representation to be made by a person to whom the notice is served under Section 11A(1) of the Act. In the instant case, the petitioner company did file their representation by filing replies to the show cause notices, it was heard by the Director General before giving its final decision on the notices issued under Section 11A(1) of the Act. Even after the decision of the Director General on 10th April, 1986, the petitioner company was repeatedly given an opportunity in the meetings held at Calcutta in order to enable it to place its case before the authorities concerned. In view of the above, we are satisfied that the impugned order dated 28th April, 1988 is not violative of the principles of natural justice or void, as urged by the learned counsel for the petitioner. The second submission made by the learned counsel for the petitioners, consequently, in our opinion, does not have substance.
43. The third submission made on behalf of the petitioner and the submission made by the learned Additional Solicitor General of India that an alternative remedy is available to the petitioner shall be considered together.
44. The Director General in his order dated 10th April, 1986 recorded categorical findings in regard to the disputed issues relating to the show cause notices. These findings are contained in para 18.1 of the order. The Director General further found that the charges of misrepresentation and suppression of facts have been proved beyond doubt against the petitioner-company and accordingly he held that company is liable to penal action under Rule 173-Q of the Rules. In this order he brought it to the notice of the petitioner that an appeal against the order dated 10th April, 1986 lies to the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi, within three months from the date of its communication and that appeal has to be filed in accordance with the provisions of Rule 216 of the Rules. Petitioner-company admittedly did not file any appeal against the order dated 10th April, 1986 and as such the order dated 10th April, 1986 has become final. In pursuance of the order dated 10th April, 1986 Assistant Collector of Central Excise has issued a demand order dated 28th April, 1988 which has been impugned in the present petition. Whether this order is contrary to the Director General's order dated 10th April, 1986 has to be considered by an authority to whom an appeal lies against the order dated 28th April, 1988. This Court under Article 226 cannot act as Court of appeal. Whether the order dated 28th April, 1988 is contrary to the Director General's order is based on facts as well on the interpretation of the order dated 10th April, 1986. This question can more appropriately be dealt with by an appellate authority before whom order dated 28th April, 1988 is challenged.
45. Section 35 of the Act clearly provides that any person aggrieved by any decision or order passed under the Act by a Central Excise Officer lower in rank than a Collector of Central Excise may appeal to the Collector of Central Excise (Appeals) within three months from the date of the communication to him of such decision or order. Section 35A lays down the procedure in appeal. Sub-clause (3) of Section 35A provides that the Collector (Appeals) may after making such further inquiry as may be necessary pass such order as he thinks fit confirming, modifying or annulling the decision or order appealed against or may refer the case back to the adjudicating authority with such directions as the case may be after taking additional evidence if necessary. Sub-clause (4) of Section 35A further provides that the order of the Collector (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision.
46. Since the order dated 28th April, 1988 is by Assistant Collector of Central Excise, an appeal lies to the Collector of Central Excise (Appeals) under Section 35 of the Act. Section 35A of the Act gives very wide power to the Collector of Appeals as stated above. It has power to confirm, modify or annul the decision. He has also power to refer the case back for fresh adjudication. He is further obliged to give reasons for his decision. This, in our opinion, is an ample safeguard protecting the rights of an appellant and consequently it is an efficacious alternative remedy available to the petitioner against the impugned order dated 28th April, 1988. He can also urge before the Collector (Appeals) whether the order dated 28th April, 1988 is contrary to the Director General's order dated 10th April, 1986. In view of the above, we are of the opinion that so far as the third submission of the learned counsel for the petitioner is concerned it is not possible for this Court to go into this question. This question can appropriately be gone into by the Collector (Appeals) in case an appeal is filed by the petitioner before him under Section 35 of the Act. In the counter affidavit filed on behalf of the Excise Department also it has been stated that appeal lies against the order dated 28th April, 1988 before the Collector of Central Excise (Appeals). We consequently agree with the submission of the learned Additional Solicitor General that the petitioner has an alternative remedy by way of filing an appeal under Section 35 of the Act and the present petition is not maintainable in so far as the merits of the demand is concerned which has been impugned in the present petition.
47. In the end learned counsel for the petitioner also urged that the impugned order dated 28th April, 1988 is invalid for the reason that the said order has not been approved by the Director General. We do not agree with this submission. The Director General's order dated 10th April, 1986 had become final and it was in pursuance of the findings recorded by the Director General[that a formal order of demand had to be issued by the Assistant Collector of Central Excise which has been done in this case. No question of fresh approval by the Director General arises. The order has been passed in pursuance of the directions issued by the Director General.
In view of the above the petition is dismissed. The interim order dated 16-1-1990 continued from time to time is hereby vacated.