Spl Siddhartha vs Union Of India (Uoi) And Ors.
2005 Latest Caselaw 879 Del

JUDGMENT

Swatanter Kumar, J.

1. On 9th February, 2005, Deputy Director, Directorate General of Central Excise (Intelligence) R.K. Puram, New Delhi addressed a letter to the Manager (Purchasing and Marketing) of respondent No. 3. The letter reads as under :-

"Sub: Investigation against M/s. SPL Siddhartha Ltd.-reg.

In response to this office summons dated 14.9.04, documents required for investigation in respect of case booked against M/s. SPL Siddhartha Ltd. were received vide your officer letter No. E.4(15)/94/PUR.I/CE dated 23.9.04.

On perusal of records it is seen that M/s. SPL Siddhartha had entered running rate contract for supply of Godown flooring material used as Dunnage vide your letter No. E.4(15)/94-PUR.I/Vol-III dated 2/3.4.2002 for a period of two years w.e.f. 18.3.2002.

It also appears that M/s. SPL Sidartha Ltd. have manufactured and supplied the subject goods to FCI without payment of appropriate Central Excise duty thereon.

In this regard I am directed to request that any further payment to M/s. SPL Siddhartha Ltd., in respect of supplies made by them to FCI, may only be made with the concurrence of this office.

This may please be treated as urgent."

2. The petitioner questions the correctness and jurisdiction of the said authority in law to issue such a letter on the basis of which it is alleged that the Food Corporation of India has stopped making any payment to the petitioner. Being seriously prejudiced by issuance of this letter, the petitioner has approached this Court under Article 226 of the Constitution of India with a prayer that said letter be quashed.

3. The petitioner is engaged in manufacture of Godown Dunnage flooring since 1995. According to the petitioner, in the manufacture of this flooring material, petitioner uses three different things. First plastic film using LDPE/LLDPE/HDPE is laminated on single side of Hessain Cloth. Simultaneously, there is another Hessain Cloth laminated on one side thereafter these two separate single side laminated sheets of Hessain clothes are bounded together using bitumen. By weight or percentage this flooring material has Hessain Cloth in excess of 50 per cent. In September, 2004, the officers of the Central Excise Department visited the petitioner's factory and started making inquiries about the products manufactured by the petitioner. The petitioner fully co-operated and on the same date records of the petitioner were seized and taken into custody by the officers of the respondent. In December, 2004, a sample of the product manufactured by the petitioner was drawn by the Department and sealed, sent for testing to the Chemical Examiner, Central Revenue Control Laboratory, New Delhi for testing. On 2nd March, 2005, the officers of the respondent entered into the premises of the petitioner and seized the finished goods, as also the raw material which practically brought the business of the petitioner standstill. Thereafter the petitioner wrote letter to the Food Corporation of India which is impugned in the present writ petition.

4. The contention raised on behalf of the petitioner is that the letter in question has been issued without any authority in law and is arbitrary exercise of power. It is also contended that in terms of the notification Nos. 29/2004-C.E. and 30/2004-C.E. both dated 9th July, 2004, the petitioner would be entitled to the exemption of duty in regard to the goods manufactured by the petitioner in accordance with the process indicated in the writ petition itself. Further, it is also the submission that there as no cause for the authorities to write such a letter which would adversely affect the business of the petitioner without any fault on its side.

5. On the other hand, learned counsel appearing for the respondents contends that in terms of the provisions of the Act, the petitioner is liable to pay the duty and there is huge amount due from the petitioner. In terms of section 121 of the Act, the Department has the right to confiscate the sale proceeds of the smuggled goods. As the goods were taken out of the factory, without payment of requisite duty, they would be smuggled goods and the sale proceeds received there from could be confiscated by the Department.

6. It is not necessary for us to go into the merits or otherwise of the respective contentions raised on behalf of the parties. Suffice it to say that the above order is not an order of confiscation even of sale proceeds. The letter ex-facie does not satisfy even the ingredients of section 121 of the Act. It requires FCI to make the payment to the petitioner but with concurrence from the office of the Directorate General of Central Excise. This cannot be treated in law or otherwise an order of confiscation of sale proceeds as contemplated under section 121 of the Act. At least that is our prima facie view. It is for the concerned authorities to determine finally whether the goods produced by the petitioner are chargeable to excise duty or not.

7. As such, we would refrain from making any observation in that regard. It is also for the authorities concerned to examine whether the plea of bonafide taken up by the petitioner in relation to the dunnage material having weight more than 50 % of jute in the goods manufactured and its not being invited for any duty, would also have to be considered by the concerned forum in the proceedings.

8. During the course of hearing, it was brought to our notice that the petitioners themselves had conceded before the authorities that they would make the payment of Rs. 40 lacs without prejudice to their rights, but keeping in view the huge liability of excise duty demanded by the Department, they should be directed to pay more amount as the liability is stated to be of Rs. 3.8 crores. Learned counsel appearing for the FCI had stated before the Court that FCI has to pay more than a crore of rupees to the petitioner on account of the supplies made by them in this regard. In regard to balance equity between the parties, we are of the considered view that it would be in the interest of justice to require the Food Corporation of India to pay a sum of Rs. 50 lacs directly to the Director General of Central Excise (Intelligence) or to such other nominated authority within two weeks from today. Learned counsel for the UOI also stated that report of the Chemical Analysis had already been received and show cause notice is being issued to the petitioner. The show cause notice, if so desired by the respondents, be issued within one week from pronouncement of the order to which the petitioner will file reply/objections within four weeks thereafter and the Competent Authority shall take a decision within four weeks thereafter. The order so passed be communicated to the petitioner, who shall be at liberty to challenge the same in accordance with law. Upon such payment, the respondents shall not take any coercive step, including enforcing the letter dated 9th February, 2005 for the remaining demand in any manner whatsoever, till the proceedings are completed by the concerned respondents in accordance with law or for a period of 10 weeks which ever is earlier and an order of assessment in accordance with law is passed against the petitioner.

9. In view of our above discussion, we are of the opinion that letter dated 9th February, 2005 is not an order passed in exercise of jurisdiction by the competent authority under section 121 of the Customs Act and will not be given effect to within a period of 10 weeks or till conclusion of the proceedings, whichever is earlier. The writ petition is accordingly disposed of while leaving the parties to bear their own costs.