Madhya Pradesh High Court
Elora Tobacco Company Limited vs Union Of India on 6 March, 2024
Author: Sushrut Arvind Dharmadhikari
Bench: Sushrut Arvind Dharmadhikari
1
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI
&
HON'BLE SHRI JUSTICE DEVNARAYAN MISHRA
ON THE 6 th OF MARCH, 2024
WRIT PETITION No. 25163 of 2023
BETWEEN:-
ELORA TOBACCO COMPANY LIMITED THROUGH ITS
DIRECTOR/ AUTHORIZED REPRESENTATIVE SHRI
DHARMENDRA SINGH PARMAR REGISTERED OFFICE
AT 3558 PLOT NO. OLD 48, 1ST FLOOR GANESH PURA B
STREET NO.4 NARAG COLONY, TRI NAGAR NEW DELHI
110035 AND MANUFACTURING UNIT 14-B, SECTOR F,
INDUSTRIAL AREA, SANWER ROAD, INDORE (MADHYA
PRADESH)
.....PETITIONER
(SHRI MANU MAHESHWARI - ADVOCATE FOR THE PETITIONER)
AND
1. UNION OF INDIA THROUGH CENTRAL BARD OF
INDIRECT TAXES AND CUSTOMS DEPARTMENT
OF REVENUE MINISTRY OF FINANCE NORTH
BLOCK, CENTRAL SECRETARIAT, NEW DELHI
(DELHI)
2. ADDITIONAL DIRECTOR DIRECTORATE
GENERAL OF GST INTELLIGENCE 4TH FLOOR,
CHINAR INCUBE BUSINESS CENTRE
HOSHANGABAD ROAD BHOPAL (MADHYA
PRADESH)
3. ADDITIONAL DIRECTOR GENERAL
DIRECTORATE GENERAL OF GST INTELLIGENCE
4TH FLOOR, CHINAR INCUBE BUSINESS CENTRE
HOSHANGABAD ROAD BHOPAL (MADHYA
PRADESH)
4. COMMISSIONER CGST AND CENTRAL EXCISE
MANIK BAGH PALACE, POST BAIG NO. 10 INDORE
(MADHYA PRADESH)
Signature Not Verified
Signed by: SEHAR HASEEN
Signing time: 14-03-2024
17:06:49
2
5. ADDITIONAL COMMISSIONER OF CENTRAL
EXCISE MANIK BAGH PALACE INDORE (MADHYA
PRADESH)
6. ASSISTANT COMMISSIONER CGST AND
CENTRAL EXCISE DIVISION II COMPLEX, OPP
WHITE CHURCH AB ROAD INDORE (MADHYA
PRADESH)
.....RESPONDENTS
(SHRI N. VENKATRAMAN, SR. ADVOCATE (ADDITIONAL SOLICITOR
GENERAL OF INDIA)[Appeared through V.C.] WITH SHRI PRASANNA
PRASAD - ADVOCATE FOR THE RESPONDENTS)
This petition coming on for admission this day, Justice Sushrut Arvind
Dharmadhikari passed the following:
ORDER
Heard on the question of admission and interim relief.
In this petition under Article 226 of the Constitution of India, the
petitioner has challenged the legality, validity and propriety of the show cause
notice dated 8.06.2022(Annexure P-10) and show cause notice dated
03.08.2022(Annexure P-11) issued by the respondent no. 2 and 3.
2. Brief facts of the case are that the petitioner is a public limited
company duly incorporated and registered under the provisions of Companies
Act, 1956 and is involved in the business of manufacturing cigarettes having its
registered office at 3558, Plot No. Old 48, 1st Floor Ganesh Pura B Street No.
4 Narag Colony, Tri Nagar New Delhi. The petitioner's manufacturing unit is
situated at 14-B, Sector F, Industrial Area, Sanwer Road, Indore.
3 . The cigarettes manufactured by the petitioner is an excisable product
which is liable to be assessed for the Central Excise Duty under the provisions
of Central Excise Act, 1944;(as well as GST laws).
4 . The petitioner has filed the present petition seeking quashment of
show cause notice No. 25/DGGI/RUI/ADD/GST/2022-23 dated 08.06.2022
issued by the respondent no.2 alleging that the petitioner has manipulated
manufacturing and production of cigarettes and has evaded the GST and cess
which is payable to the respondents, as also the show cause notice No.
50/DEGI/RUI/ADD/C.Ex./2022-23 dated 03.08.2022 issued by the respondent
no.3 alleging to demand the excise duty comprising Basic Excise Duty(BED)
and National Calamity Contingent Duty(NCCD). The impugned show cause
notices have been issued on the premise that petitioner has concealed the
information of production capacities of its machines installed in the premises.
5. Learned counsel for the petitioner contended that the duty assessed
has been arrived at by the respondents based on the parameters of production
capacity of the cigarette manufacturing machines whereas the duty ought to
have been assessed on actual production basis.
6 . Learned counsel for the petitioner further contended that the entire
manufacturing process takes place 24x7 under the supervision of the
respondent officers. As per Rule 6 of the Central Excise Rules, 2002, the
cigarettes manufactured can be removed only after the Superintendent or
Inspector of Central Excise assesses the duty payable. Until and unless such
goods are cleared by the respondent authorities, the goods cannot be moved
out of the premises of the petitioner, therefore, there cannot be any tax evasion
on the part of the petitioner. The respondents themselves monitored the actual
production of cigarettes in the factory premises. Even the machines are sealed
immediately after the working hours and de-sealed only in the morning by the
Excise Officers themselves, therefore no possibility of evasion is ruled out.
Without considering the aforesaid aspect of the matter, the show cause notices
have been issued which are without application of mind and, therefore, the same
are liable to be set aside.
7. Per contra, Shri V.R. Venkatraman, Additional Solicitor General
vehemently opposed the prayer and submitted that the only ground raised by
the petitioner in the petition is that the show cause notice and demand raised is
only on the basis of production capacity. The quantification of demand and its
rationale is a pure question of fact, which this Court under original jurisdiction,
with respect cannot sit upon it to decide. Even though there was a complete
control of the unit under the Excise Officers, the possibility of irregularity in
assessment cannot be ruled out, when the petitioner and the Excise Officers are
hand in glove. He further contended that issuance of show cause notices is the
result of elaborate investigation, gathering of evidence, summoning of witnesses
and proper application of mind which is concluded over a period of two years.
Even necessary disciplinary/criminal action has already been initiated against the
officers who are not following instructions in relation to physical control duty in
true letter and spirit. It is absolutely incorrect to say that the show cause notices
have been issued even on the production capacity of machines. More than 250
distinguished evidences have been relied upon and the tax demand has been
concluded based on the number of cigarettes that were produced from the
utilization of filter rods by the petitioner resulting into demand of Rs. 2022.91
Crores (GST Rs. 1946.23 Crores and CE Rs. 76.68 crores) for the period July,
2017 to June 2020. He further goes on to contend that had the show cause
notice and the demand of tax based on production capacity, then as per the
assessment made by the panel of chartered engineering, calculation of tax
evaded by the petitioner comes to Rs. 4238.62 Crores(GST 4059.16 Crores CE
179.45 crores) for the same period, which is not the case herein.
8. Learned Sr. counsel further contended that this Court cannot exercise
the writ jurisdiction under Article 226 of the Constitution in as much as,
disputed question of facts are involved in the present case. It is not the case of
the petitioner that show cause notices have been issued without
jurisdiction/competence of the issuing authority. Moreover, the same has been
issued after lot of investigation and based on the reports. The petitioners are
having statutory efficacious alternative remedy under the CGST Act before
approaching this Court directly. Hence, the writ petition deserves to be
dismissed with a heavy cost.
9. Heard, learned counsel for the parties and perused the record.
10. No writ against a demand notice or show cause notice is
maintainable in a routine manner. A writ against a show cause notice or demand
notice can be entertained only on limited grounds viz., if the same has been
issued by an incompetent authority having no jurisdiction or if an allegation of
malafides are raised. Even in such case, the authority against whom such
malafides is alleged, the authority has to be impleaded in his personal capacity.
1 1 . The impugned demand notice has been issued by following the
procedures contemplated in accordance with the provisions of the Act and
Rules and a communication has been given to the person concerned. On receipt
of any such demand, the person against whom such notice is issued, may either
comply with the demand made or raise objections before the competent
authority or appellate authority in case of any objections to the demand so
made. In the event of objections, an adjudication is certainly warranted and such
an adjudication must be done based on the documents and evidences available
on record. However, such an elaborate adjudication cannot be done by the High
Court under Article 226 of the Constitution of India.
12. The power of judicial review under Article 226 of the Constitution of
India is to ensure whether the processes through which a decision is taken by
the competent authority is in consonance with the Act and Rules or not, but not
the decision itself. Thus, all disputed facts and circumstances are to be
adjudicated before the competent authority or before the appellate authority
concerned. This certainly is the reason why the High Courts are not entertaining
a writ petition against the show cause notices and competent authorities and
notices. The demand notices are issued based on initial determination made by
the original authorities. In the event of any objection, then an adjudication must
be done with reference to the documents and evidences. In the present case, if
at all any dispute arises regarding the calculation, the petitioner is at liberty to
approach the competent authority or the appellate authority by preferring an
appeal in the manner prescribed. However, a writ petition need not be
entertained at this stage and High Court cannot adjudicate the issues relating to
huge economic offence of stealthily procuring raw materials clandestine
manufacturing and fraudulent supply of filter cigarettes of various brands during
a particular period without payment of taxes, as alleged by the respondents
resulting into issuance of show cause notices which were issued after
conducting a detailed investigation in the matter by them. Even if the
procedures are not followed by the authorities before issuance of show cause
notices, they are bound to do so in accordance with the provisions of the Act
and Rules.
13. Various grounds have been raised while challenging the show cause
notice, however, the fact remains that the Respondents have only issued a show
cause notice and the petitioner has been asked to explain as to why the evaded
tax amount be not recovered from the petitioner. A writ against a show cause
notice or demand notice can be entertained only on limited grounds viz., if the
same has been issued by an incompetent authority having no jurisdiction or if an
allegation of malafides are raised.
14. This Court is supported in its view by the judgment passed by the
Apex Court which is as follows:
Union of India and Another Vs. Kunisetty Satyanarayana reported
in 2006 (12) SCC 28 wherein it has been held as under:
"13. It is well settled by a series of decisions of this Court that
ordinarily no writ lies against a charge-sheet or show- cause notice vide
Executive Engineer, Bihar State HousingBoard v. Ramesh Kumar Singh
[(1996) 1 SCC 327 : JT(1995) 8 SC 331], Special Director v. Mohd.
GhulamGhouse [(2004) 3 SCC 440 : 2004 SCC (Cri) 826 : AIR2004 SC
1467], Ulagappa v. Divisional Commr., Mysore[(2001) 10 SCC 639],
State of U.P. v. Brahm Datt Sharma[(1987) 2 SCC 179 : (1987) 3 ATC
319 : AIR 1987 SC943] , etc
14. The reason why ordinarily a writ petition should not be
entertained against a mere show-cause notice or charge-sheet is that at
that stage the writ petition may be held to be premature. A mere charge-
sheet or show-cause notice does not give rise to any cause of action,
because it does not amount to an adverse order which affects the rights
of any party unless the same has been issued by a person having no
jurisdiction to do so. It is quite possible that after considering the reply
to the show-cause notice or after holding an enquiry the authority
concerned may drop the proceedings and/or hold that the charges are
not established. It is well settled that a writ lies when some right of any
party is infringed. A mere show-cause notice or charge-sheet does not
infringe the right of any one. It is only when a final order imposing some
punishment or otherwise adversely affecting a party is passed, that the
said party can be said to have any grievance.
15. Writ jurisdiction is discretionary jurisdiction and hence such
discretion under Article 226 should not ordinarily be exercised by
quashing a show-cause notice or charge sheet."
15. Even otherwise, this Court finds force in the submission advanced
by learned Senior Counsel as regards the alternative remedy in as much as , that
the petitioner instead of approaching this Court should have availed the
alternate efficacious remedy under the CGST Act.
16. The Apex Court in catena of judgments has held that when the
statute provides for efficacious remedy, the same should have been availed by
the litigants instead of approaching the High Courts:
(i) Hindustan Coca Cola Beverage Private Ltd vs. Union of India
and others reported in (2014) 15 SCC 44, wherein it has been held as under:
"when the statute provides for statutory appeal, the said
remedy is to be availed by the litigating parties".
(ii) In Hameed Kunju vs. Nizam reported in (2017) 8 SCC 611, the
Apex Court held that:
"any petition under Article 227 of Constitution of India
should be dismissed in limine where there is statutory provision of
appeal."
(iii) In the case of Ansal Housing and Construction Limited vs. State
of Uttar Pradesh and others reported in (2016) 13 SCC 305, it is held that
"when there statutory appeal is provided, then the said
remedy has to be availed."
(iv) In the case of Union of India Vs. Coastal Container
Transporters Association [SLP(C) 2276 of 2019]. For ready reference,
relevant para is reproduced below:
"19. On the other hand, we find force in the contention of the
learned senior counsel, Sri Radhakrishnan, appearing for the
appellants that the High Court has committed error in entertaining the
writ petition under Article 226 of Constitution of India at the stage of
show cause notices. Though there is no bar as such for entertaining the
writ petitions at the stage of show cause notice, but it is settled by
number of decisions of this Court, where writ petitions can be
entertained at the show cause notice stage. Neither it is a case of lack of
jurisdiction nor any violation of principles of natural justice is alleged
so as to entertain the writ petition at the stage of notice. High Court
ought not to have entertained the writ petition, more so, when against
the final orders appeal lies to this Court. The judgment of this Court in
the case of Union of India & Anr. v. Guwahati Carbon Ltd. (supra) relied
on by the learned senior counsel for the appellants also supports their
case. In the aforesaid judgment, arising out of Central Excise Act, 1944,
this Court has held that excise law is a complete code in order to seek
redress in excise matters and held that entertaining writ petition is not
proper where alternative remedy under statute is available. When there
is a serious dispute with regard to classification of service, the
respondents ought to have responded to the show cause notices by
placing material in support of their stand but at the same time, there is
no reason to approach the High Court questioning the very show cause
notices. Further, as held by the High Court, it cannot be said that even
from the contents of show cause notices there are no factual
disputes. Further, the judgment of this Court in the case of Malladi
Drugs & Pharma Ltd. v. Union of India 5, relied on by the learned senior
counsel for the appellants also supports their case where this Court has
upheld the judgment of the High Court which refused to interfere at
show cause notice stage."
(v) The Apex Court in the case of Malladi Drugs and Pharma Ltd. vs.
Union of India and Another reported in (2020) 12 SCC 808, has held that :
"entertaining a writ petition by passing the statutory remedy
against a show cause notice and it is held that the High Court has
rightly dismissed the writ petition against a mere show cause notice and
there is no reason to interfere with the show cause notice."
17. In view of the aforesaid discussion and in the light of various
pronunciations of Apex Court, the petition is accordingly dismissed. The
interim order granted by this Court stands vacated. However, the petitioner
would be at liberty to avail the statutory alternative remedy in accordance with
law, if so advised. No order as to cost.
(S. A. DHARMADHIKARI) (DEVNARAYAN MISHRA)
JUDGE JUDGE
sh
