Fedders Lloyed Corporation Pvt. ... vs Union Of India And Ors.
1992 Latest Caselaw 364 Del

JUDGMENT

Gokal Chand Mital, C.J.

(1) In this writ petition the petitioner has challenged the show cause notice dated 27th March, 1986 issued by the Collector, Central Excise under section 11-A of the Central Excise & Salt Act, 1944 (hereinafter referred to as the Act) which seeks to raise the demand of excise duty amounting to Rs. 19.76 crores approximately.

(2) The facts of the case as briefly stated are that the petitioner is a company registered under the Companies Act, 1956 and is engaged in the manu facture of air-conditioners and refrigerators.

(3) For the period prior to 1975, the petitioner company had filed price list as required by Rule 173(c) for the air-conditioners and refrigerators. It was selling its product exclusively through their dealers, namely, M/s. Lloyd Sales Corporation (hereinafter referred to as LSC) and M/s. Lloyd Electric and Engineering Company (hereinafter referred to as LEECO). It may be pointed out here that Lsc and Leeco are allegedly owned by the same family members who had control over the petitioner company. The Assistant Collector approved the price list vide his orders dated 26th March, 1975 wherein it was held that the assessable value under section 4(a) of the Act shall be the price charged by Lsc and Leeco from the wholesale dealers.

(4) Against the aforesaid decision of the Assistant Collector, the petitioner company filed an appeal before the Collector (Appeals) who by his order dated 11th June, 1976 rejected the same. While the appeal before the Collector (Appeals) was pending, the Superintendent Central Excise issued a demand notice for payment of Rs. 33,63,966.50 on the basis of the order dated 26th March, 1975 passed by the Assistant Collector.

(5) Aggrieved by the aforesaid orders passed by the Collector (Appeals) and against the above mentioned demand, the petitioner company filed a writ petition being Cwp No. 1319/76 which was decided by a learned Single Judge of this Court vide judgment dated 1st February, 1979. By this judgment the learned Single Judge quashed the notice of demand issued by the Superintendent Central Excise on the basis of the order dated 26th March, 1975 passed by the Assistant Collector of Central Excise and order dated 11th June, 1976 passed by the Collector (Appeals), He, however, granted liberty to the respondents to re-determine the wholesale cash price in accordance with law after affording opportunity to the petitioner. Thereafter the petitioner was served with a notice dated 15th July, 1985 from the Excise Department which was challenged int this Court in Cwp No. 2989/85. The said notice was, however, withdrawn by the respondents on 27th March, 1986.

(6) On the same day the Collector, Central Excise, New Delhi in exercise of his power under section 11-A of the Act issued show cause notice dated 27th March, 1986 to the petitioner company. In this notice, inter alia, it has been alleged that the petitioner company and Lsc are related persons in terms of section 4(4)(c) of the Act and separate legal entities have been created to suppress the real value of their products with the deliberate intention to avoid payment of Central Excise Duty. It was further alleged that the petitioner's so-called ex-factory sales were in fact a strategy to claim lower assessable value since the petitioner company either marketed through Lsc who sold the goods at higher price or a part of the sales value was received by Lsc or M/s. Air Serco in the form of service charges in whose business the petitioner had extra commercial interests. It was also alleged that the petitioner had deliberately under-valued the goods and paid less duty of Central Excise to the Government with deliberate intention of reasons of fraud, willful mis-statement and suppression of facts, by not declaring the correct value of the goods and appears to have contravened the provisions of Rule 173C and 173F of the Central Excise Rules, 1944 (hereinafter referred to as the Rules) and Section 4 of the Act. By this notice the petitioner company was directed to show cause within 30 days of the receipt as to why the Central Excise duty amounting to rs. 19,76,08, 1.96.36 should not be recovered 'under section 11-A of the Act. The afore said show cause notice has been challenged in the present writ petition.

(7) By order dated 8th August, 1986 the writ petition was admitted but while declining the stay of proceedings, this Court ordered that in case there is any demand, the same will not be payable till further orders of this Court.

(8) During the pendency of the writ petition pursuant to the show cause notice, the Principal Collector of Central Excise passed the adjudication order dated 21st March, 1989. By this order the Principal Collector held that proviso to Section 11-A was applicable in the facts of this case and he confirmed the payment of duty of Rs. 1.11.29,087.20 and imposed a penalty of Rupees 10 lakh on the petitioner company under rule 173C of the Rules. It may be mentioned here that this order is appealable before the Customs, Excise & Gold (Control), Appellate Tribunal (hereinafter referred to as CEGAT) During the course of hearing of the case we were informed by Mr. Sharma, the learned counsel for the petitioner that an appeal against the aforesaid order has already been filed by the petitioner company before CEGAT.

(9) Mr. Sharma, the learned counsel for the petitioner urged the following contentions: 1.That there must be a finding of fact by the Competent Authority that any duty of excise has not been levied or paid or had been short levied or short paid by reason of fraud, collusion or any willful misstatement or suppression of facts under any provision of the Act or the Rules made there under before such an Authority could issue a show cause notice under section 11-A of the Act. 2. The validity of issuance of a notice under section 11-A of the Act is pre- conditioned by the specific findings mentioned therein and the correct scope of the power conferred under sub-section (1) had to be construed from the provisions of sub-section (1) alone without referring to the proviso thereto. The proviso merely extends the period of limitation from "six months" to "five years" within the power under sub-section (1) can be exercised if the conditions precedent are shown to exist by the Revenue. 3. The approval of the pricelist is determination of the assessable value itself in accordance with the provisions of section 4 on the basis of which duty leviable is collected before the exciseable goods are allowed to be removed, provisions of section 11-A do not empower re-opening of a decision itself pertaining to determination of the assessable value once determined under Rule 173-c and 173-1, except through the mechanism of the provisions enacted in section 35-E of the Act. 4. In the absence of any enabling provision in the Rules or in the Act to rectify a mistake apparent on the fact of the record, provisions of section 11-A can utmost be construed to empower the Excise Officer to correct a mistake apparent on the face of record showing that duty has been short-levied or short-paid For rectifying such errors, a mere look at the records is enough. But a fresh look into the same facts is not permissible. 5. Assuming but not admitting that in any view of the provisions of section 22-A(1), the period of limitation of 5 years for exercising this power is not available because the existence of jurisdictional facts have not been brought about by reason of any fraud, collusion or willful misstatement or suppression of facts or contravention of any provisions of the Act or Rules made there under with intent to evade payment of duty by the petitioner. 6. The petitioner and Lsc and Leeco cannot be held to be related persons within the meaning of section 4(4)(c). There is no interest directly or indirectly in the business of each other within the meaning of Clause (c) of Sub-section 4 of Section 4 of the Act. 7. The notice has asked to show cause only against calculation of the amount of short levy and not against the alteration of the approved pricelist on the basis of which short levy was alleged. Unless notice provided material for disapproval or alteration of the price list previously approved and modification thereof, owing to suppression of any material facts no demand could be determined within the meaning of Sub-section (1) of Section 11-A of the Act.

(10) Mr. Madan Lokur, the learned counsel for the respondents, however, raised a preliminary objection that the writ petition itself is not maintainable. He submitted that in the present case the Principal Collector in exercise of his power under section 11-A of the Act has issued a show cause notice to the petitioner which contains detailed allegations in the statement of facts as to how the petitioner has contravened the provisions of Rules 173C and 173F of the Rules. Since the said notice has been issued by an authority who has power under the statue to issue such a notice, the petitioner was not entitled to invoke the writ jurisdiction. In support of his contention the learned counsel referred to the decision of the Supreme Court in Carl Still G.M.B.H. vs The State of Bihar, and M/s. Jaishri Engineering Co. (P) Ltd. vs Collector of Central Excise, Bombay, .

(11) The learned counsel for the respondents further submitted that during the pendency of the writ petition the adjudicating authority has already passed the order dated 21st March, 1989 which was appealable before the CEGAT. In fact the petitioner has also filed an appeal before the CEGAT against the aforesaid order dated 21st March, 1989. In view of this, the only remedy for the petitioner is to pursue the appeal before the CEGAT and the writ petition is liable to be dismissed. Before dealing with the contentions of the parties it may be relevant to refer to section 11-A(1) of the Act which is as follows;- "SECTIONII-A: Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date. serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, of this Act or the rules made there under with intent to evade payment of duty, by such person, or his agent, the provisions of his sub-section shall have effect, (as if, for the words "Central Excise Officer", the words "Collector of Central Excise" and) for the words "six months", the words "five years" were substituted. Exploitation-where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of six months or five years, as the case may be."

(12) Thus under section 11-A of the Act where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion, or any willful mis-statement or suppression of facts, or contravention of any of the provisions of the Act, or the rules made there under with intent to evade payment of duty, show cause notice can be issued to the person chargeable with duty and consequently recoveries made. From this it is clear that the intention of the Legislature is to deal with fraudulent evasion of excise duty in the manner provided therein. From the impugned show couse notice it will be seen that the said notice contains clear allegations that the petitioner company and Lsc are related persons in terms of section 4(4)(c) of the Act. There are further allegations that separate legal entity had been created by the petitioner to suppress the real value of their products with deliberate intention to evade payment of the excise duty and the petitioner had deliberately under-valued the goods and paid less duty of Central Excise to the Government with deliberate intention by reasons of fraud, willful, mis- statement and suppression of .facts by not declaring the correct value of the goods and separate legal entity had been created to suppress the real value of the products. Even pursuant to the said show cause notice a detailed adjudication order had already been passed on 21st March, 1989 which is appealable before the CEGAT and in fact the petitioner had already been passed on 21st March, 1989 which is appealable before the CEGAT and in fact the petitioner had already filed an appeal before the CEGAT. Thus the action of the respondents in issuing the impugned show cause notice was neither without jurisdiction nor unwarranted in law. We, therefore, uphold the preliminary objection raised by the learned counsel for the respondents. As such the present writ petition filed by the petitioner is not maintainable and is liable to be dismissed on this short ground.

(13) Beside the question whether there was any fraud, collusion, willful mis- statement or suppression of facts, is a question of fact which could be adjudicated only by the authority created under the statue for this purpose. To adjudicate upon findings of facts, the jurisdiction of High Court cannot be invoked. It this connection reliance can be invoked. In this connection reliance can be placed on M/s. Jaishri Engineering Co. (supra).

(14) For the reasons -discussed above, we are of the view that there is no merit in the writ petition and the same is dismissed with no order as to costs.