Jharkhand High Court
M/S Kota Dall Mill vs Assistant Commissioner on 6 May, 2022
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(T) No. 2466 of 2021
M/s Kota Dall Mill ...... Petitioner
Versus
1. Assistant Commissioner, CGST & CX, Division-II, having his office at
Near Stadium Road, Sector-IV, P.O. Bokaro Steel City, P.S. Bokaro Steel
City, District-Bokaro.
2. Principal Commissioner, Central GST and Central Excise, having his
office at Central Revenue Building, 5A, Main Road, P.O. Doranda, P.S.
Chutia, District-Ranchi- 834001.
3. Commissioner (Audit), Central GST and Central Excise, Ranchi, having
his office at Grand Emerald, Ashok Nagar, P.O. Kadru, P.S. Argora,
District-Ranchi-834002. ......... Respondents
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CORAM: Hon'ble Mr. Justice Aparesh Kumar Singh
Hon'ble Mr. Justice Deepak Roshan
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For the Petitioner : Mr. Biren Poddar, Sr. Adv.
: Mr. Piyush Poddar, Adv.
For the Respondent- CGST : Mr. Amit Kumar, Adv.
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10/06.05.2022
Per Deepak Roshan, J: Heard learned counsel for the parties.
2. The instant writ application has been preferred by the petitioner
for following reliefs:-
(i) For issuance of an appropriate Writ(s), Order(s), and/or direction(s)
having the effect of directing Respondent No.1 to forthwith accept
the certificates filed along-with the Application dated 07.06.2021
(Annexure-7) in compliance of condition no.5 mentioned under
Exemption Notification No. 12/2012-Central Excise dated
17.03.2012(Annexure-1) and accordingly allow the exemption;
(ii) For issuance of an appropriate Writ(s), Order(s), and/or direction(s)
declaring that no excise duty is payable on the Food Items
manufactured by the petitioner as all the pre-requisite stipulated
under Notification No. 12/2012-Central Excise dated 17.03.2012
(Annexure-1) stands fulfilled and accordingly, permanently restrain
the Respondent-department from giving effect, in any manner, to
Impugned Order-in-Original dated 12.04.2021 (Annexure-6/1).
OR
(iii) For issuance of an appropriate Writ(s), Order(s), and/or direction(s)
declaring that the very assumption of jurisdiction by the
Respondent No.3 to issue Impugned SCN dated 24.07.2019
(Annexure-3) and act of Respondent No.2 of continuing
proceedings thereto and passing of Impugned Order dated
12.04.2021 (Annexure-6/1) is bad in law, arbitrary and void-ab-
initio and hence, the entire proceedings are a nullity and
accordingly quash the Impugned Order dated 12.04.2021
(Annexure-6/1);
(iv) For issuance of an appropriate Writ (s), Order (s), and/or
direction(s) as Your Lordships may deem fit and proper in the facts
and circumstances of this case in the interest of justice;
(v) For quashing and setting aside the purported letter contained in
F.No.V (30) 04/Misc./Tech/BOK-II/2020-21/523 dated 22.06.2021
(Annexure-12) issued by the Deputy Commissioner, CGST & C.
EX, Division-II, Bokaro, which was signed by the Deputy
Commissioner on 22.06.2021, seal of the Department was made on
30.07.2021 and served upon the representative of the petitioner on
03.08.2021 at 3.00 PM, inter alia, denying the request of the
petitioner for extension of time for submission of certificates of
exemption made vide letter dated 07.06.2021 (Annexure-7 of the
writ petition) as the said letter dated 22.06.2021 has been issued in
complete violation of the Circular No. 128/47/2019-GST dated
23.12.2019 (Annexure 13) issued by the Commissioner (GST-Inv.),
CBIC, Ministry of Finance, which provides for quoting of
Document Identification Number (DIN) in every communication
issued by the officers of the Department.
3. The brief facts of the case is that the petitioner entered into an
agreement with the Department of Social Welfare, Women & Child
Development, State of Jharkhand, Ranchi for supply of Supplementary
Nutrition Food namely Fortified Nutro Upma and Fortified Panjiri
(hereinafter referred to as the 'Food Items') under the Integrated Child
Development Services Scheme. The condition under the said agreement
was that the successful bidder shall be under obligation to install
manufacturing plant in the State of Jharkhand, within a period of 6 months
from the date of execution of the Agreement. Hence, as per the terms &
conditions of the agreement, the petitioner manufactured and supplied the
Food Items in the State of Jharkhand from its manufacturing unit in Kota,
Rajasthan. Thereafter, a plant was erected at Bokaro, which came into
existence on 20.12.2014. Therefore, the supplies from the said plant were
commenced from January, 2015 onwards.
The Food Items manufactured by the petitioner were exempted
from excise duty vide Notification No. 12/2012-Central Excise dated
17.03.2012, issued in exercise of powers conferred by Section 5A(1) of
the Central Excise Act, 1944 (hereinafter referred to as the 'Act') by the
Government of India. As per the said Notification, food preparations put
up in unit containers and intended for free distribution to economically
weaker sections of society under a programme duly approved by the
Central Government or any State Government is exempted. However, a
certificate from an officer not below the rank of the Deputy Secretary of
the Central or State Government, to the effect the food preparations have
been distributed free to the economically weaker sections of the society
under a programme duly approved by the Central or State Government
concerned, within 5 months from the date of clearance of such goods also
has to be submitted. The said period of 5 months was further extendable
by the jurisdictional commissioner.
The petitioner duly applied to the Department of Women & Child
development and Social Security, for issuance of the certificate mentioned
above. However, the State Government issued the said certificate only
after final payment of bills thereby the first consolidate certificate was
issued for a period of July 2014 to November, 2015. Similarly, the
certifications for the period thereafter up to June 2017 was issued in due
course of time.
4. A service tax audit was carried out by Bokaro Service Tax
Dvision/Bokaro Range-III (Service tax) for the Bokaro plant of the
petitioner wherein all the available documents and records were verified
along with original copies of available certificates; and a report for 'non-
payment of Central Excise Duty on manufacturing of Energy Dense
Fortified Product (Micronutrient Food) amounting to Rs. 37,49,70,757/-
for the period July, 2014 to March, 2016 was raised.
As per the said audit report, the benefit under the Exemption
Notification was not available to the petitioner as the certification from
the concerned State Government authority, as mentioned in the conditions
for availing the exemption has not been submitted by the petitioner within
the prescribed 5 months.
5. The case of the petitioner is that no opportunity of furnishing a
written reply to the said audit para was provided, but the said audit paras
were placed before the Monitoring Committee on 07.11.2017, which
without giving the assesse an opportunity of being heard, decided that the
amount was recoverable from the petitioner, failing which SCN was to be
issued. It is stated that further information was sought by the office of the
respondent No.1 from the petitioner. In response the petitioner submitted
the requisite information along with copies of certificates for
consideration and extension. Again, further information was sought from
the petitioner for which the petitioner sought time from the Respondent-
department.
It is stated that to the utter shock of the petitioner, a show cause
notice dated 24.07.2019 signed on 17.07.2019 was issued to the petitioner
by Respondent No.3, requiring the petitioner to show cause as to why
central excise duty should not be demanded along with interest and
penalty on the food items manufactured by the petitioner during the
impugned period. Vide letter dated 08.08.2019, the petitioner filed
preliminary objections to the SCN dated 24.07.2019 on the ground that
pre-show cause notice (SCN) consultation was not held. The petitioner
also objected that SCN dated 24.07.2019 was issued without investigation,
the Audit was undertaken without authority, the respondents do not have
the jurisdiction to adjudicate on the issue and that there is gross violation
of principle of natural justice. Hence, a prayer was made to set aside or
recall the SCN dated 24.07.2019.
It is stated that to the utter shock and surprise of the petitioner,
without disposing off the said preliminary objections dated 08.08.2019,
vide email dated 19.11.2020, the petitioner was sent a link with the
subject hearing in respect of the DSCN on 17.12.2020 at 12.10 PM and
thereafter, a letter dated 19.11.2020 (through e-mail dated 26.11.2020) has
been sent with directions to send/bring soft copy of defence reply as well
as written submission to be submitted in course of personal hearing. It is
stated that on 08.01.2021, personal hearing was granted in the matter to
the petitioner and thereafter, the Impugned Order dated 12.04.2021 was
passed by the respondent No.2 without considering the submissions of the
petitioner including the specific request for extension of time for
submission of certificate as per the condition mentioned under the
Exemption Notification.
6. Mr. Biren Poddar, learned senior counsel for the petitioner-firm
submits that in term of the Exemption Notification, the goods
manufactured by the petitioner were exempted from Central Excise Duty
subject to submission of the certificate from an authority not below the
rank of Respondent No.1. In reply to the show cause notice, the petitioner
requested the respondent no.2, who is a superior to the respondent no.1 to
consider the reply as a request/application for extension of time for
submission of certificate as per condition mentioned in the Exemption
Notification and allow the exemption benefit. However, the Respondent
No.2, did not consider the request of the petitioner and passed the
Impugned Order merely by holding that the request for extension of time
for submission of certificates have not been taken from Respondent No.1.
He further submits that thereafter merely to fulfill the
procedural/technical requirements in terms of the observations made in
the Impugned Order of submitting the request/application before the
Respondent No. 1, filed an application dated 07.06.2021 before the
Respondent No.1, requesting it to extend the time for submission of
certificate as per condition mentioned under the Exemption Notification.
He contended that as per Master Circular No. 1053/02/2017-CX
dated 10.03.2017 (Annexure-8) issued by the CBEC, it is mandatory
requirement of pre-show cause notice consultation by the Principal
Commissioner/Commissioner prior to issue of SCN in cases involving
demands of duty above Rs. 50 lakhs (except for preventive/officer related
SCN's). He further submits that without complying with the above
mandatory requirement, petitioner has been directly served with a SCN
dated 24.07.2019 issued by the Commissioner, CGST & CX (Audit),
Ranchi, concerning the period 2014-15, 2015-16, 2016-17 and 2017-18
(upto June, 2017) by invoking extended period of limitation, on the
allegation of evasion of payment of central excise duty amounting to Rs.
70,86,86,088/- due to non-compliance of the conditions as stipulated in
Notification No. 12/2012-CE dated 17.03.2012.
Mr. Poddar also contended that prior to issuance of SCN, on
08.08.2019, the petitioner filed a Preliminary Objection before
Commissioner CGST & CX (Audit), Ranchi, on the ground of non-
issuance of pre-consultation notice and without waiting for any
explanation from the petitioner, which is a violation of principle of natural
justice. He further submits that the aforesaid Preliminary Objection filed
by the petitioner, was never been disposed of by the Commissioner CGST
& CX (Audit), Ranchi.
On 08.01.2021, the petitioner filed its reply to the aforesaid show-
cause notice dated 24.07.2019. Vide Order-in-original dated 12.04.2021
the Adjudicating Authority passed an order confirming the demand as
mentioned in SCN. He further submits that as per the provisions of the
Act, the Adjudicating Authority is required to grant three opportunity of
personal hearing to the petitioner/noticee, but in the instant case the
petitioner was given only two opportunities of hearing i.e. on 17.12.2020
and on 08.01.2021, and therefore the finding recorded by the Adjudicating
Authority at page-309 to the effect that hearing was also fixed on
17.11.2020 is wrong and incorrect, as no such notice fixing date of
personal hearing on 17.11.2020 was ever communicated to the petitioner.
Mr. Poddar learned senior counsel further contended that there
was sufficient compliance with respect to submitting the exemption
certificate. The audit was conducted from 18.04.2017 to 20.04.2017 and
during the course of audit, the exemption certificate issued by the
Directorate of Social Welfare, letters submitted for issuance of certificate
to the Directorate by the petitioner were furnished to the Audit Team from
July, 2014 to November, 2015. Thereafter, the exemption certificate from
December, 2015 to August, 2016 was also furnished to the Audit Circle
vide letter dated 21.07.2017. Thereafter, the Jurisdictional Superintendent,
Central Excise sought figures of production and supplies vide email dated
16.05.2019. The petitioner, while submitting the respective figures to the
Jurisdictional Superintendent, Bokaro submitted 03 exemption certificates
issued by the Directorate of Social Welfare from December, 2015 to
August, 2016, December, 2016 to March, 2017 and April, 2017 to May,
2017 vide letter dated 23.05.2019 with email and speed post. Thus, the
Exemption Certificates were submitted by the petitioner before Audit
Circle, Bokaro and Jurisdictional Superintendent even before issuance of
SCN.
Mr. Poddar contended that why the submission of certificates
before Audit Team and Jurisdictional Assessing Officer should not be
treated as sufficient compliance, inasmuch as, the exemption notification
does not prescribe any Authority to whom the exemption certificate is to
be produced.
In support of above contention he relied upon the judgment passed
in the case of Commissioner of Central Excise, New Delhi Versus Hari
Chand Shri Gopal and Others, reported in (2011) 1 SCC 236; wherein the
doctrine of substantial compliance has been elaborated in para 32 and 34
of the judgment;
"32. The doctrine of substantial compliance is a judicial invention,
equitable in nature, designed to avoid hardship in cases where a party
does all that can reasonably be expected of it, but failed or faulted in
some minor or inconsequent aspects which cannot be described as the
"essence" or the "substance" of the requirements. Like the concept of
"reasonableness", the acceptance or otherwise of a plea of
"substantial compliance" depends upon the facts and circumstances of
each case and the purpose and object to be achieved and the context of
the prerequisites which are essential to achieve the object and purpose
of the rule or the regulation. Such a defence cannot be pleaded if a
clear statutory prerequisite which effectuates the object and the
purpose of the statute has not been met. Certainly, it means that the
Court should determine whether the statute has been followed
sufficiently so as to carry out the intent for which the statute was
enacted and not a mirror image type of strict compliance. Substantial
compliance means "actual compliance in respect to the substance
essential to every reasonable objective of the statute" and the Court
should determine whether the statute has been followed sufficiently so
as to carry out the intent of the statute and accomplish the reasonable
objectives for which it was passed.
34. The test for determining the applicability of the substantial
compliance doctrine has been the subject of a myriad of cases and quite
often, the critical question to be examined is whether the requirements
relate to the "substance" or "essence" of the statute, if so, strict
adherence to those requirements is a precondition to give effect to that
doctrine. On the other hand, if the requirements are procedural or
directory in that they are not of the "essence" of the thing to be done
but are given with a view to the orderly conduct of business, they may
be fulfilled by substantial, if not strict compliance. In other words, a
mere attempted compliance may not be sufficient, but actual
compliance with those factors which are considered as essential."
He concluded his argument by submitting that the writ application
is maintainable as there is gross violation of natural justice. It is well
settled that a writ can be entertained by the High Court under Article 226
of the Constitution of India if there is gross violation of natural justice.
Even on merits, the petitioner is having a good case as non-submission of
certificate was not the fault of the petitioner; rather it is the concerned
government official who did not provided the required certificate.
7. Mr. Amit Kumar, learned counsel for the respondents raised
preliminary objection with regard to maintainability of the instant writ
application and contended that the Order-in-Original No. 09/ Central
Excise/Pr. Commr/2021 dated 12.04.2021 has already been passed by the
respondent No.2 after following the principles of natural justice and this
petitioner, instead of availing an alternative remedy of appeal before the
Customs, Excise and Service Tax Appellate Tribunal (CESTAT), as
provided under Section 35 B of Central Excise Act, 1944 against the said
Order- in- Original, straightaway approached this Court.
He further submits that the Hon'ble Apex Court in catena of
judgments has held that the writ application can be entertained in the
exceptional circumstances where there is a breach of fundamental rights
or violation of principle of natural justice or on the point of jurisdiction or
the vires of any statute or delegated legislation is under challenge and in
the instant case does not fall in either of the exception.
Apart from other grounds on merit of the case he also stated that
the petitioner- firm had requested the respondent No.1 regarding extension
of time with respect to submission of certificates of exemption as per
Notification dated 17.02.2012 vide their letter dated 07.06.2021, which is
after passing of the Order-in-Original dated 12.04.2021 by the respondent
no.2 and since there is no provision in Central Excise Act, 1944 or its
circulars/notifications by which benefit of exemption (in the instant case
extension of submission of certificate) can be given by lower authority
once the Order-in-Original has been passed by higher authority.
8. Having heard learned counsel for the parties and after going
through the documents available on record and the averments made in
respective affidavits, it appears that a service Tax Audit was carried out
by Bokaro Service Tax Division for the Bokaro Plant of the petitioner
wherein all the available documents and records were verified along with
original copies of available certificates and in the said audit, a report was
made with regard to nonpayment of Central Excise Duty on
manufacturing of Energy Dense Fortified Product (Micronutrient Food).
As per the audit report, the benefit under Exemption Notification was not
available to the petitioner as the certification from the concerned State
Government authority, as mentioned in the condition for availing the
exemption has not been submitted by the petitioner within the 5 months as
prescribed in the exemption notification. Subsequently, a show cause
notice dated 24.07.2019 (Annexure-3) was issued by the Commissioner,
CGST & CX (Audit), Ranchi, concerning the period 2014-15, 2015-16,
2016-17 and 2017-18 (upto June, 2017) by invoking extended period of
limitation, on the allegation of evasion of payment of central excise duty
amounting to Rs. 70,86,86,088/- due to non-compliance of the conditions
as stipulated in Notification dated 17.03.2012 (Annxure-1). The petitioner
filed a preliminary objection on 08.08.2019 and finally in January, 2021
he filed show cause reply and thereafter, the Order-in-Original dated
12.04.2021 was passed.
9. It transpires that though it has been claimed by the petitioner-Firm
that he had requested respondent No.1 regarding extension of time with
respect to submission of certificate of exemption dated 17.03.2012;
however, from record it appears that a formal request letter was sent vide
letter dated 07.06.2021 which is after passing of the Order-in-Original
dated 12.04.2021.
Admittedly in the instant case, the Order-in-Original has
been passed and the thrust of argument of this petitioner is that principle
of natural justice has not been complied in this case, and as such, the
instant writ application is maintainable. However, after going through the
Order-in-Original it clearly transpires that the Adjudicating Authority has
held at page 47 of the order in O.I.O that opportunity of personal hearing
was given to the petitioner on 17.11.2020 through virtual mode as well as
physical mode, however, the noticee failed to appear. On 17.12.2020
again the petitioner was given an opportunity of personal hearing through
virtual mode as well as physical mode. In response to personal hearing
scheduled on 17.12.2020, the petitioner requested adjournment on the
ground that the authorized person was suffering from COVID-19 and
requested that personal hearing may be given on some other day. Finally,
personal hearing in the case was held on 08.01.2021 when the noticee
appeared and was represented by Sh. Mukesh Kasera, Manager (Finance)
and Sh. Rahul Lakhwani, Authorized representatives. In view of the
categorical finding in the Order-in-Original it clearly transpires that
principle of natural justice has been duly followed.
10. Learned senior counsel for the petitioner heavily relied upon the
judgment passed in the case of Radha Krishan Industries v. State of
Himachal Pradesh and Others, reported in (2021) 6 SCC 771 and
submits that the Hon'ble Apex Court has held that the power under Article
226 of Constitution can be exercised by the High Court not only for the
enforcement of fundamental right, but for any other purpose as well and
the High Court has the discretion to entertain a writ application. For
brevity para 27 and 28 of the judgment is quoted hereibelow:-
"27. The principles of law which emerge are that:
27.1. The power under Article 226 of the Constitution to issue writs can be
exercised not only for the enforcement of fundamental rights, but for any other
purpose as well.
27.2. The High Court has the discretion not to entertain a writ petition. One of
the restrictions placed on the power of the High Court is where an effective
alternate remedy is available to the aggrieved person.
27.3. Exceptions to the rule of alternate remedy arise where : (a) the writ petition
has been filed for the enforcement of a fundamental right protected by Part III of
the Constitution; (b) there has been a violation of the principles of natural
justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the
vires of a legislation is challenged.
27.4. An alternate remedy by itself does not divest the High Court of its powers
under Article 226 of the Constitution in an appropriate case though ordinarily, a
writ petition should not be entertained when an efficacious alternate remedy is
provided by law.
27.5. When a right is created by a statute, which itself prescribes the remedy or
procedure for enforcing the right or liability, resort must be had to that
particular statutory remedy before invoking the discretionary remedy under
Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a
rule of policy, convenience and discretion.
27.6. In cases where there are disputed questions of fact, the High Court may
decide to decline jurisdiction in a writ petition. However, if the High Court is
objectively of the view that the nature of the controversy requires the exercise of
its writ jurisdiction, such a view would not readily be interfered with.
28. These principles have been consistently upheld by this Court in Chand Ratan
v. Durga Prasad, Babubhai Muljibhai Patel v. Nandlal Khodidas Barot and
Rajasthan SEB v. Union of India among other decisions."
After going through the aforesaid judgment, it appears that the
law on the issue of maintainability has been reiterated in this case and the
Hon'ble Apex Court has categorically held that exceptions to rule of
alternative remedy arise where the writ petition has been filed for the
enforcement of fundamental right or there has been a violation of
principle of natural justice or the order or proceeding are wholly without
jurisdiction or the vires of legislation is challenged.
11. In the aforesaid judgment the Hon'ble Apex Court has also held
that when a right is created by a statute, which itself prescribes the remedy
or procedure for enforcing the right or liability, resort must be had to that
particular statutory remedy before invoking the discretionary remedy.
Coming to the facts of the case as stated hereinabove there
appears to be no violation of principles of natural justice. Moreover, the
petitioner has prayed for quashing of the Order-in-Original for which
there is a statutory remedy prescribed by the statute. It is also not the case
of the petitioner that the Order-in-Original is passed without jurisdiction.
In other words none of the exceptions as carved by the Hon'ble Apex
Court for maintainability of the writ application, bypassing the alternative
remedy, has been met out in the instant application. As such we are not
going into merits of this case and the instant writ application is dismissed
on the ground of maintainability itself with a liberty to the petitioner to
prefer an appeal under Section 35 B of Central Excise Act, 1944.
12. Needless to say that the petitioner-Firm would be at liberty to
raise all the grounds before the learned appellate authority including the
ground of substantial compliance with regard to submission of exemption
certificate, who shall deal each and every ground in accordance with law.
13. With the aforesaid observation, the instant writ application stands
dismissed. However there is no order as to costs. Pending IA, if any,
stands disposed of.
(Aparesh Kumar Singh, J.)
(Deepak Roshan, J.)
Amardeep/AFR
