Anilma Association And Ors. vs Union Of India & Ors.
1999 Latest Caselaw 859 Del

ORDER

Arun Kumar, J.

1. Since a short point is involved we have heard the learned counsel for the parties on the main writ petition for purposes of its final disposal with their consent.

2. By this petition under article 226 of the Constitution of India the petitioner has challenged the banning order dated 5th May, 1999 passed against the petitioner firm by the respondent railways.

3. Briefly the facts are that the petitioner is engaged in manufacturing of PVC cables which it used to supply to the Railways. The petitioner firm was on the approved list of suppliers of the said material to the Railways. The item manufactured by the petitioner is subjected to payment of excise duty under the Central Excise Act. On 13th February, 1998 the Department of Central Excise, Govt. of India issued a show cause notice to the petitioner alleging evasion of excise duty by the petitioner. On 28th May, 1998, the Commissioner of Central Excise confirmed a demand of duty in the sum of Rs.

63,50,509/- and a penalty of Rs. 50 lacs was also imposed. A further penalty of Rs.10 lacs was imposed on the partners of the petitioner firm. The petitioner challenged the said order by way of an appeal before the Central Excise & Gold Control Appellate Tribunal. Along with the appeal the petitioner also applied for stay of the direction regarding payment of duty and penalty. On the said application the Tribunal passed an order dated 22nd December, 1998 that in view of the fact that the petitioner had already deposited a sum of Rs. 55 lacs towards duty any further deposit was not being insisted upon. In other words requirement of pre-deposit of the balance amount by way of duties and penalties was dispensed with. The recovery of these amounts was also stayed during the pendency of the appeals.

4. It appears that the respondents came to know about the case of the Excise Deptt. against the petitioner. The petitioner had been all along claiming from the Railways full amount of the excise duty which it was supposed to pay to the excise department, by furnishing certificates to the Railways to the effect that it had already paid the full excise duty amount. In other words the petitioner was collecting more from Railways towards excise duty, while it deposited less with the excise authorities. The Railways felt that the petitioner had cheated them. The petitioner had collected excise duty @ 25% of value of goods from the Railways by furnishing false certificates and bills while the petitioner had deposited excise duty @ 15%. The petitioner had also purportedly cleared goods on duplicate challans to avoid payment of excise duty. The Railways accordingly issued a show cause notice dated 29th December, 1998 containing these allegations against the petitioner and proposing to ban business dealings with the petitioner. Along with the show cause notice a statement of charges and some of the documents relied upon were annexed. Since it has an important bearing on the case we reproduce the charges:

"Statement of charges/misconduct against M/s. Anilma Associates, New Delhi.

1. That the Commissioner of Central Excise, Delhi has charged M/s. Anilma Associates of having evaded payment of excise duty on a large/massive scale by using parallel set of invoices while supplying cables to railways.

2. That M/s. Anilma Associates have supplied signalling cables to Railways duly inspected by RDSO effecting some supplies by using parallel excise gate passes/invoices with the intention to evade excise duty. The details of some of the illustrative parallel invoices is annexed as Annexure-I.

3. That M/s. Anilma had received payment from the Railways for amount including the elements of excise duty against these invoices by giving false undertaking to the Railways that excise duty has actually been paid to excise department. M/s Anilma have thus misled the Railways that they had actually discharged the levy of excise duty.

4. That the excise Deptt. has already adjudicated upon and a total sum of Rs. 39,14,20/- has been charged on account of evasion of duty and penalty etc."

5. In this connection it is worthwhile to note that as per condition No.11 of the contract between the parties the petitioner was entitled to receive from the Railways, i.e. the purchaser, amount of excise duty paid by it to the excise department. For this the petitioner had to furnish certificates to the Railways before receiving the payment. A specimen of the certificate which the petitioner was required to submit to the Railways in this behalf is reproduced as under :-

"Excise duty - certified that the amount of excise duty as charged in our bill has been actually paid by us to the Excise Authorities. Certified that no refund has been afforded by Excise in respect of supplies made against this order. If any refund of the excise duty is received by us, the same will be refunded to the Government at once."

6. In the bills submitted by the petitioner to the Railways an amount calculated @ 25% of the value of the goods used to be added on account of excise duty and this payment the petitioner was admittedly always receiving from the Railways. Thus the allegation against the petitioner basically was that by filing false certificates of having paid the excise duty @ 25% of the value of the goods, the petitioner used to receive this payment from the purchaser, i.e. the Railways. The Certificate shows that the petitioner stated that the amount had been paid to the Railways. The fact, however, was that the petitioner either did not make any payment at all or it paid the excise duty to the excise authorities at a much lesser rate. There was also an allegation against the petitioner that some of the supplies made to the Railways were by using parallel excise gate passes/invoices with the intention of evading excise duty.

7. In response to the show cause notice the petitioner sent a reply on 25th February, 1999, raising objections mainly to the effect that the petitioner had challenged the action of the excise department by way of an appeal before the CEGAT and the appeal was pending. The petitioner further stated in the reply that the CEGAT had stayed the operation of the adjudication order and recovery of the amount. This was again a misrepresentation on the part of the petitioner because the CEGAT had only stayed recovery of the further amount. There was no stay of the operation of the adjudication order. The petitioner while raising technical objections in the reply also stated at the end that it reserved a right to file a further detailed reply to the show cause notice. Admittedly the petitioner appeared for a personal hearing before the Appropriate Officer along with his counsel in relation to the show cause notice. After the oral hearing the impugned banning order was passed on 5th May, 1999.

8. Learned counsel for the petitioner has challenged the banning order mainly on the following grounds:-

(1) In view of the pendency of appeal filed by the petitioner before the CEGAT, the respondent should not have proceeded to take any action against the petitioner on the same ground.

(2) The petitioner had reserved the right to file a further detailed reply to the show cause notice and that opportunity was not given to the petitioner before the impugned order was passed.

(3) The impugned banning order is cryptic and does not disclose any reasons in support of it.

9. We have carefully considered the arguments raised on behalf of the petitioner by the learned counsel. The proceedings before the excise department are totally independent and are based on the allegation of evasion of excise duty, by the petitioner. The cause of action for these proceedings had arisen on the basis of the provision of the Central Excise Act and the Rules framed thereunder. The impugned action, i.e. the banning order passed by the Railways is based on a totally different cause of action. For purposes of banning order the allegations against the petitioner are filing of false certificates with the Railways in order to obtain payment for excise duty allegedly having been paid to the excise authorities while the petitioner did not pay the same or paid it short. Thus the charge basically is cheating and fraud in obtaining payment from Railways by filing false certificates of having deposited the amount of excise duty at a particular rate. Therefore, we are unable to accept the contention that the Railways ought to have waited till the final outcome of the proceedings in the excise case. The action by the Railways was on, account of fraud and misrepresentation by the supplier. Further it is to be noted in this behalf that the petitioner continued making false representations to the Railways inasmuch as it was stated in the reply to the show cause notice that the CEGAT had stayed the operation of the adjudication order. As noted earlier the CEGAT had only stayed further recoveries of the amounts determined in the adjudication order. The operation of the order as such was never stayed.

10. To make good the submissions in this behalf, learned counsel for the Railways invited our attention to the Certificates which the petitioner used to furnish to the Railways alongwith the bills/invoices for purposes of obtaining payment. This was as per condition No.11 of the contract between the parties. The petitioner used to certify that it had, actually paid the amount of excise duty which it was claiming in the bills from the Railways. The bills being furnished to the Railways used to be for the supplies made by the petitioners to the Railways. In the bills the peti-

tioner used to mention the amount of excise duty separately and the same used to be received by the petitioner from the Railways in view of the Certificate referred to above. The fact, however, was that the petitioner used to receive excise duty @ 25% of the value of the goods from the Railways while it used to deposit excise duty with the excise authorities @ 15% of the value. This is besides alleged instances of evasion of excise duty. Learned counsel for the petitioner admitted in the course of hearing that the petitioner was depositing excise duty @ 15% of the value of the goods while it was claiming from the Railways payment on account of excise duty @ 25% of the value of the goods. The petitioner explained this allegation contained in the counter affidavit in its rejoinder saying "x x x these bills were drawn only on one day as per mistake on the part of the clerk concerned". This is no explanation. We find no merit in this contention raised on behalf of the petitioner to challenge the impugned order.

11. Regarding the submission of counsel for the petitioner that the petitioner did not get sufficient opportunity to reply to the show cause notice, it has to be noted that the petitioner was given full opportunity to reply to the show cause notice. It availed of the opportunity. The petitioner sent a reply on lines which it considered to be best in its interest. The petitioner cannot make a grievance on this account now. It appears that the approach of the petitioner was to somehow drag on the issue.

12. Further, the facts show that the petitioner had no answer on merits. The allegations against the petitioner were based on documents emanating from the petitioners. These are admitted documents. The reply to show cause notice was purposely confined to technical objections. The counsel for the petitioner even in the course of hearing before this Court admitted all the factual aspects. Copies of all the documents had been supplied to the petitioner when it asked for the same before filing replay to the show cause notice. The charges against the petitioner were clearly spelled out in a statement of charges, annexed to the show cause notice. The petitioner had sufficient opportunity to reply to the show cause notice and it deliberately chose not to file any reply to the main questions raised in the show cause notice. In order to side-track the issue it confined the reply to mere technical objections. Admittedly the petitioner was given personal hearing which it availed of by utilising services of an Advocate. In these circumstances it cannot be said that the petitioner did not have sufficient opportunity to reply to the show cause notice or there is any violation of principles of natural justice.

13. Lastly, it was argued that the impugned banning order is cryptic and does not give any reasons. At this stage we reproduce the order as under :_

"M/s. Anilma Associates had submitted a false undertaking to the Railways that full excise duty is actually being paid to excise department while in actual the firm has received higher amount of excise duty from the Railways and paid less amount to the excise department. So the firm cheated the Railways.

The representation made by you under your letter quoted above and oral hearing held on 17.3.1999 have been carefully considered and the Ministry of Railway (Railway Board), New Delhi have decided to ban business dealing with you with immediate effect for a period of 2(two) years or clearance of dues by M/s. Anilma Associates, with Excise Authorities, whichever is later."

14. A perusal of the order shows that reasons for the decision for banning business dealings with the petitioner are clearly spelled out. In the facts of the present case when on merits the petitioner had nothing to say and the allegations are admitted in view of documentary evidence emanating from the petitioner itself it cannot be said that the impugned lanning order is cryptic or without any reasons. It is stated in so many words in the order that the petitioner had submitted false undertakings to the railways regarding payment of full excise duty while actually it received higher amounts from the Railways and paid less to the Excise Deptt. and thus cheated the Railways. In view of this conduct of the petitioner, we are of the view that the Railways were not obliged to continue business dealings with the petitioner. As a matter of fact in view of the nature of allegations against the petitioner in the present case, we are inclined to take a view that the petitioner is not even entitled to invoke the jurisdiction of this Court under Art. 226 of the Constitution of India. This Court would decline to entertain a petition under Art. 226 of the Constitution of India by a party whose conduct is fraudulent.

15. Lastly, learned counsel for the petitioner suggested that the penalty imposed on the petitioner was highly disproportionate to the offence alleged by the petitioner. We are unable to agree with this submission. While holding that this Court would not normally like to interfere with the decision of the authorities in the matter of quantum of punishment, in the facts of the present case we are of the view that the penalty imposed is fully justified. For all these reasons this petition is dismissed with costs. Costs quantified at Rs.10,000/-.