Madras High Court
T.H.Mohammad Farishta Garib vs Deputy Commissioner Of Central ... on 15 April, 2021
W.P.Nos.9398 to 9400 of 2018
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 15.04.2021
CORAM
THE HONOURABLE MR. JUSTICE S.M.SUBRAMANIAM
W.P.Nos.9398 to 9400 of 2018
W.M.P.Nos.11205, 11207 & 11209 of 2018
T.H.Mohammad Farishta Garib
Former Partner of M/s.Hamma Steel Industries,
(Since dissolved)
Plot No.2/159/Flat No.G1(Ground Floor),
Trent Bridge Apartments, ECR,
Injambakkam
Chennai-600 115. .. Petitioner in W.P.No.9398 of 2018
T.H.Mohammed Firdous
Power of Attorney Holder for
T.H.Mohammad Farook
Former Partner of M/s.Hamma Steel Industries,
Both are residing at
No.9, Bishop Waller Avenue South
Mylapore,
Chennai-600 004. .. Petitioner in W.P.No.9399 of 2018
T.H.Mohammad Farook
Former Partner of M/s.Hamma Steel Industries,
No.9, Bishop Waller Avenue South
Mylapore,
Chennai-600 004. .. Petitioner in W.P.No.9400 of 2018
vs.
1/14
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W.P.Nos.9398 to 9400 of 2018
1.Deputy Commissioner of Central Excise
Perungudi Division,
No.690, E.V.R. Periyar Building(4th floor)
Anna Salai, Nandanam,
Chennai-600 035.
2.Superintendent of GST and Central Excise
Sholinganallur I Range, Sholinganallur Division,
No.692, 4th floors, M.H.U Complex,
Nandanam
Chennai-600 035. .. Respondents in all W.P's
COMMON PRAYER : Writ Petitions filed under Article 226 of the
Constitution of India, to call for the records and quash the order passed by
the 1st respondent in Order-in-Original No.7 of 2011 dated 28.07.2011 and
to further forbear the second respondent from initiating any recovery
proceedings based on the recovery notice issued by it in O.C.Nos.49, 50, 51
of 2018 dated 14.03.2018, 12.03.2018 against the petitioners.
In all W.P's
For petitioners : Mr.Karthik Ranganathan
For Respondents : Mr.A.P.Srinivas
SPC for RR1 and 2
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W.P.Nos.9398 to 9400 of 2018
COMMONORDER
The relief sought for in these writ petitions is to quash the order passed
by the first respondent in Order-in-Original No.7 of 2011 dated 28.07.2011.
2. The learned counsel appearing for the writ petitioners made a
submission that the petitioners were running a Partnership Firm and the
manufacture of Hot Re-rolled products falling under Chapter subheading
8469.80 and Plastic Molded Parts falling under Chapter Heading 72 of the
Central Excise Tariff Act, 1985. The firm was operating under the then
Compounded Levy Scheme (CLS) as per Section 3A of the Central Excise
Act, 1944 read with Sub-rule 3 of Rule 96ZP of then Central Excise Rule,
1944. As per the provisions of the Hot Re-rolling Steel Mills Annual
Capacity Determination Rules, 1997, the Commissioner of Central Excise
(CCE) had fixed the Annual Production Capacity (APC) of the petitioner's
firm as 4204.74 Metric Tonnes with effect from 01.09.1997. The monthly
lump sum duty was fixed at Rs.1,05,118 for every month.
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W.P.Nos.9398 to 9400 of 2018
3. The scheme opted by the petitioners was Compounded Levy Scheme as
per Section 3A of the Central Excise Act, 1944 read with Sub-rule 3 of Rule
96ZP of then Central Excise Rule, 1944.
4. The learned counsel for the petitioners reiterated that the Production
Unit stopped its production activities with effect from 26.04.1999. Relying
on the said factor, the petitioner is of the opinion that the very claim of
excise duty is untenable and contrary to the provisions of the Act as well as
the Rulings of the Hon'ble Supreme Court of India. It is contended that the
petitioner/Company stopped its production activities on 26.04.1999 and the
fact was communicated to the respondent/Department in vide letter dated
03.05.1999. The said letter was communicated and the same was not
disputed by the respondent. In view of the fact that the respondent had
admitted these facts regarding the closure of the Production Unit, there is no
reason to issue show cause notice for recovery of excise duty.
5. The learned counsel appearing for the petitioner cited the judgment of
the Hon'ble Supreme Court of India in the case of Bhuwalka Steel
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W.P.Nos.9398 to 9400 of 2018
Industries Limited vs. Union of India reported in [2017] 79 taxmann.com
299(SC), wherein the Hon'ble Apex Court considered the issue whether an
assessee can be compelled to pay duty calculated without any regard to the
actual production and the relevant paragraphs are extracted hereunder:
45. Whether an assessee who chooses once to pay duty in
terms of Rule 96ZP(3) can be compelled to pay duty calculated
in accordance with the said rule for all times to come without
any regard to the actual production? is a question which
requires examination.
46. It is possible that in a given case an assessee choosing at a
given point of time to make payment of duty on monthly basis
calculated in terms of sub-rule (3) but a few months later (for
that matter even a month later), for various legitimate reasons,
production may fall considerably below the ACP (of the
assessees factory). It is possible, in some cases there can be
total cessation of the manufacturing activity for reasons beyond
the control of the assessee. If the option exercised by an
assessee under Rule 96ZP(3) is held to be good for eternity it
would not only lead to illogical consequences but also to an
unconstitutional collection of taxes without there being a
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W.P.Nos.9398 to 9400 of 2018
taxable event. We do not see anything in Rule which prevents
the assessee from opting out of the Scheme of Rule 96ZP(3).
47. After availing the scheme for a month by paying the duty in
advance, if the assessee ends up in a situation of not being able
to produce the quantum of goods equivalent to 1/12 of his ACP,
we see no reason which compels the assessee to continue the
availment of concessional rate of duty (for the next month) on a
quantum of production which he is unable to achieve. In our
opinion the assessee must have an option to make the payment
of duty in accordance with Rule 96ZP(1) at a higher rate but on
the actual production. For those assessees who chose to pay the
duty at higher rate in accordance with sub-rule (1) the benefit
of section 3A(4) is available. The rule does not bar it. However
the question remains how frequently the assessee is entitled to
exercise such an option; whether it is annual or monthly is a
matter which requires a further examination.
6. Relying on the above findings of the Hon'ble Apex Court of India, the
learned counsel for the petitioner reiterated that it is an unconstitutional
collection of taxes without there being a taxable event. When there is no
production activities during the relevant point of time, the question of
collection of excise duty does not arise at all. In the present case, the factum
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W.P.Nos.9398 to 9400 of 2018
regarding the closure of production unit is duly informed to the
respondent/Department and the said letter was acknowledged by the
Department. This being the factum, there is no reason whatsoever to issue
the impugned order by the respondent. This apart, it is contended that the
impugned order itself was not communicated to the writ petitioner and it
was communicated belatedly along with recovery notice which was issued
during the year 2018. For all these reasons, the writ petition is to be
allowed.
7. The learned Senior Standing Counsel appearing on behalf of the
respondent objected the said contention by stating that the petitioner
acknowledged the original order passed by the first respondent dated
10.03.2003 and the address stated is M/s.Hamma Steel Industries,
Inchambakkam, Thiruvanmiyur, Chennai-41. With the same address, the
petitioner filed an appeal before the Commissioner of Central Excise
[Appeals] and the said appeal was allowed. Against the said order of the
Commissioner, the respondent/Department approached the Customs, Excise
and Service Tax Appellate Tribunal, in which also the address of the
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W.P.Nos.9398 to 9400 of 2018
petitioner has been stated as M/s.Hamma Steel Industries, Inchambakkam,
Thiruvanmiyur, Chennai-41. The appeal was allowed and the order of the
Commissioner dated 28.08.2003 was set aside by the Tribunal.
8. The learned Senior Standing Counsel contended that all along, the
notices before in the appellate proceedings as well as the proceedings before
the Tribunal were received by the writ petitioner and the subsequent order
dated 28.07.2011 which is impugned in the writ petition was also sent to the
last known address. Therefore, the very contention that the order was not
received is false and in-correct. In fact, the impugned order was affixed in
the last known address given by the petitioner and the said procedure was
followed in duly compliance of the Rule. Thus, the writ petitioner cannot
say that the order was not communicated. Therefore, the writ petition now
filed after a lapse of 7 1/2 years cannot be entertained and liable to be
rejected on the ground of laches.
9. The learned Senior Counsel on merits also contended that the writ
petitioner had opted for "Compounded Levy Scheme". The writ
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W.P.Nos.9398 to 9400 of 2018
petitioner/Company was operating under the Compounded Levy Scheme as
per Section 3A of the Central Excise Act, 1944 read with Sub-rule 3 of
Rule 96ZP of then Central Excise Rule, 1944, during the relevant point of
time. This fact was admitted by the writ petitioner even in the affidavit filed
in support of the writ petition. When the petitioner had opted to pay the
excise duty under the Compounded Levy Scheme, now they cannot say that
they have stopped the production unit on 26.04.1999. Therefore, they are
not liable to pay for the entire financial year. Admittedly, the production
unit was closed on 26.04.1999. Therefore, they have liable to pay excise
duty for the entire year under the Compounded Levy Scheme. The Appellate
Tribunal has elaborately considered these issues and set aside the order
passed by the Commissioner. The very findings of the Appellate Tribunal
are clear in this regard and paragraph No.2 of the order of the Tribunal
dated 24.03.2010 is extracted hereunder:
"2. None appears for the respondent inspite of notice
having been served by pasting on the premises of the assessee.
We, therefore, heard the learned SDR and perused the
records. We find that the Commissioner (Appeals) had relied
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upon certain decisions of the Tribunal in coming to the
conclusion that the abatement is available under Section
3A(2) of the Central Excise Act, 1944 for the period of closure
of the mill. However, the Revenue seeks to rely upon the
decision of the Hon'ble Bombay High Court [Aurangabad
Bench] in Rajuri Steels Pvt. Ltd. Vs.CCE, Aurangabad-2008
(225) ELT 189 (Bom.), holding that benefit of proviso to Sub-
section (3) and sub-section(4) of erstwhile Section 3A of the
Central Excise Act, 1944 is not available to the assesssee if it
had enjoyed benefit of excise duty under procedure prescribed
by Rule 96ZP(3) of the erstwhile Central Excise Rules, 1944.
Since this decision has been passed subsequent to the passing
of the impugned order, interest of justice require that the case
be decided afresh in the light of the Bombay High Court
decision cited supra and for this purpose we set aside the
impugned order and remand the case to the adjudicating
authority who shall pass fresh order after extending a
reasonable opportunity to the assessees of being heard in
their defence.
10. With reference to the judgment of the Hon'ble Supreme Court of India
in the case of Bhuwalka Steel Industries Limited vs. Union of India cited
supra, the learned Senior Standing Counsel referred paragraph No.58 which
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reads as under:
58. Therefore, we find it difficult to accept the
submission of the respondent that the issue is covered by the
judgments of this Court in Venus Castings and Supreme
Steels. In our opinion, for the reasons mentioned above,
these two judgments require a further examination. Apart
from that, these judgments did not deal with vires of Rule
96ZP(3). However, in view of the fact that Supreme Steels is
a decision rendered by a Bench of three learned Judges, we
deem it appropriate that the question of law be settled by a
Bench of an appropriate strength. We, therefore, direct the
Registry to place the matter before Hon’ble the Chief Justice
of India for further orders.
12. As per the said judgment, the Hon'ble Supreme Court of India has
not granted any relief and paragraph Nos.45 to 47 are the clarifications
issued for the questions raised before the Hon'ble Supreme Court. The said
paragraphs are no way connected with the Compounded Levy Scheme
opted by the petitioner. Once the petitioner is falling under a particular
scheme, the benefit of scheme is extended and the liability is also to be
fixed based on the terms and conditions of the scheme. In the present case,
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W.P.Nos.9398 to 9400 of 2018
the petitioner had opted for the scheme and admittedly, the production unit
was closed on 26.04.1999. The excise duty is to be paid for the whole year
as per the Scheme which was formulated with reference to the provisions of
the Act and Rules.
13. This Court is of the considered opinion that the judgment of the
Hon'ble Supreme Court is regarding the general question which was raised
before the Hon'ble Apex Court and further, the said judgment has been
referred to the larger bench. However, the fact remains that the petitioner in
the present case had opted for Compounded Levy Scheme which was not
dealt with by the Hon'ble Apex Court. Therefore, the case on hand is to be
decided independently with reference to the terms and conditions of the
Compounded Levy Scheme which was framed under the provisions of the
Act and Rules. When the petitioner admits that he was paying the excise
duty under the Compounded Levy Scheme and he is bound by the scheme
and further, the petitioner admitted the fact that the production unit was
closed with effect from 26.04.1999, the petitioner is liable to pay excise
duty for the whole year as claimed by the Department. Apart from this, the
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W.P.Nos.9398 to 9400 of 2018
writ petition is filed after a lapse of 7 1/2 years from the date of passing of
the impugned order on 28.07.2011. Therefore, the writ petitions stand
dismissed both on merits as well as on the ground of latches. No costs.
Consequently, connected miscellaneous petitions are also closed.
15.04.2021
ssb
Index: Yes/No
Internet:Yes/No
Speaking order/Non-Speaking Order
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W.P.Nos.9398 to 9400 of 2018
S.M.SUBRAMANIAM, J.
ssb
To
1.Deputy Commissioner of Central Excise
Perungudi Division,
No.690, E.V.R. Periyar Building(4th floor)
Anna Salai, Nandanam,
Chennai-600 035.
2.Superintendent of GST and Central Excise
Sholinganallur I Range, Sholinganallur Division,
No.692, 4th floors, M.H.U Complex,
Nandanam
Chennai-600 035.
W.P.Nos.9398 to 9400 of 2018
15.04.2021
https://www.mhc.tn.gov.in/judis/
