Rajasthan High Court - Jodhpur

M/S Divya Upchar Sansthan vs Directorate Gen. Of Goods And ... on 7 August, 2023

Bench: Augustine George Masih, Vinit Kumar Mathur

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HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Civil Writ Petition No. 8526/2022

1. M/s Divya Upchar Sansthan, Through Its Partner Manish Grover (Age__) Having Principal Place Of Business At SCO-15, Kalgidhar Enclave, Baltana, Shimla Highway, Zirakpur, Punjab-1406033

2. Manish Grover S/o Late Ramesh Grover, Aged About 51 Years, Partner In M/s Divya Upchar Sansthan Having Principal place of Business At SCO-15, Kalgidhar Enclave, Baltana, Shimal Highway, Zirakpur, Punjab-1406033

3. Smt. Bhawna Grover W/o Manish Grover, Aged About 47 Years, Partner In M/s Divya Upchar Sansthan Having Principal Place Of Business At SCO-15, Kalgidhar Enclave, Baltana, Shimla Highway, Zirakpur, Punjab-1406033

----Petitioners Versus

1. Directorate General Of Goods And Service Tax Intelligence, Chandigarh Zonal Unit, Central Revenue Building, Sector -17C, Chandigarh -160017

2. Director General (Adjudication), Directorate General Of Goods And Service Tax Intelligence, West Block-VIII, Wing No.6, 2Nd Floor, R.k. Puram, New Delhi - 110066

3. Additional Director General (Adjudication), Directorate Of General Of Goods And Service Tax Intelligence, Third Floor, NTC House-15, N.M. Road, Ballard Estate, Mumbai - 400001

4. Central Board Of Indirect Taxes And Custom, Through Its Chairman, Department Of Revenue, North Block, New Delhi-110001

5. Commissioner, Central Goods And Service Tax, G-105, New Industrial Area Basni, Near Diesel Shed, Jodhpur

6. Union Of India, Through The Secretary Ministry Of Finance (Revenue Department), North Block, New Delhi

7. M/s Gagan Pharmaceuticals, Through Its Partner Brijesh Sharma Having Principal Place Of Business At 3-B, RIICO, Industrial Estate, Near Police Line, Agro Food Park, RIICO, Sriganganagar - Rajasthan 335002

----Respondents

For Petitioner(s) : Mr. Vikas Balia, Sr. Advocate assisted by Mr. Sanjeet Purohit, Mr. Falgun Buch, Mr. Prateek Gattani, Mr. Priyansh Arora For Respondent(s) : Mr. Rajvendra Saraswat

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HON'BLE THE CHIEF JUSTICE AUGUSTINE GEORGE MASIH HON'BLE MR. JUSTICE VINIT KUMAR MATHUR

Order

07/08/2023

1. The present writ petition has been filed against Show Cause

Notice dated 28.09.2020 issued by respondent No.1- Directorate

General, GST Intelligence, Chandigarh Zonal Unit, Chandigarh

besides other prayers.

2. Briefly, the facts noted in the present case are that petitioner

No.1 being a partnership Firm namely M/s. Divya Upchar Sansthan

is having principal place of business at SCO-15, Kalgidhar Enclave,

Baltana, Shimla Highway, Zirakpur, Punjab. The petitioner-firm is

engaged in the business of promoting, trading and manufacture of

Ayurvedic Medicines falling under Chapter 30 of the First Schedule

of the Central Excise Tariff Act, 1985. The petitioner No.1 is a firm

registered with the Goods and Service Tax (erstwhile Central

Excise Act, 1944). The petitioner Nos. 2 & 3 are partners in

petitioner No.1- Firm. The petitioners had the business

transactions with respondent No.7- M/s. Gagan Pharmaceuticals

having principal place of business at Sriganganagar, Rajasthan.

The petitioner-Firm made their purchase of goods/ material/

medicines from the respondent No.7. The officials respondent

authorities on the basis of an intelligence input, issued show cause

notice dated 28.09.2020 to the petitioners and the respondent

No.7. The respondent No.7- M/s. Gagan Pharmaceuticals,

Sriganganagar has assailed the notice issued to it by way of filing

a writ petition before this Court. In the same fashion, the

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petitioners were also issued the show cause notice by the

respondent No.1 which has been impugned in the present writ

petition and a prayer has been made for quashing of the same

besides other prayers.

3. A reply has been filed by the respondent - Union of India,

wherein a preliminary objection has been raised on the

maintainability of the writ petition before The High Court of

Judicature for Rajasthan at Jodhpur.

4. Heard learned counsel for the parties on the maintainability

of the writ petition before this Court.

5. Learned counsel for the official respondents vehemently

submitted that neither is the petitioner-Firm situated/located in

the State of Rajasthan, nor has any part of the cause of action

arisen to the petitioner-Firm within the territorial jurisdiction of

this Court. Learned counsel submits that it is an admitted position

that the petitioner-Firm is located in the State of Punjab, the show

cause notice has been issued to it by the respondent No.1, who is

also located in the State of Punjab, hence, no part of cause of

action has taken place in the State of Rajasthan, thus, the present

writ petition is not maintainable, and merely because the show

cause notice emanates from a file on the basis of which the show

cause notice was issued to respondent No.7- M/s. Gagan

Pharmaceuticals, Sriganganagar, will not give the petitioner-Firm a

right to file the writ petition before this Court.

6. Learned counsel for the official respondents argued that

Clause (v) of the Circular dated 03.03.2015 cannot be read

against the petitioner-Firm to fall in the Category of "Noticee" and,

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therefore, it will not give rise to any cause of action to the

petitioner-Firm to file the present writ petition before this Court.

He, therefore, prays that the writ petition may be dismissed only

on the ground of lack of territorial jurisdiction of this Court.

7. Per contra, Mr. Vikas Balia, learned Senior Counsel for the

petitioners vehemently submitted that in view of Sub-clause (2) of

Article 226 of the Constitution of India, this Court is having the

territorial jurisdiction to entertain the present writ petition.

8. The learned Senior counsel while relying upon the judgments

of Hon'ble the Supreme Court in the cases of Oil & Natural Gas

Commission V/s Utpal Kumar Basu & Ors. reported in

(1994) 4 SCC 711 and Kusum Ingots and Alloys Ltd. V/s

Union of India (UOI) & Ors. reported in 2004(6) SCC-254,

vehemently submitted that the part of cause of action has arisen

to the petitioner-Firm within the territorial jurisdiction of this Court

and, therefore, the writ petition is maintainable.

9. The learned Sr. Counsel while taking us to the pleadings of

the writ petition as mentioned in paragraphs 20 & 21 of the writ

petition, tried to demonstrate that the part of the cause of action

has arisen to the petitioner-Firm and, therefore, the writ petition

before this Court is maintainable. The learned Sr. Counsel further

submitted that the entire proceedings emanates from the file on

the basis of which the show cause notice has been issued to the

petitioners as well as respondent No.7- M/s. Gagan

Pharmaceuticals, Sriganganagar. He submits that manufacturing of

goods, on the basis of which it has been alleged that Central

Excise Duty was not paid, was made at the factory located at M/s.

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Gagan Pharmaceuticals, Sri Ganganagar, Rajasthan. The show

cause notice to M/s. Gagan Pharmaceuticals, Sri Ganganagar was

issued in June, 2020 and based on the same, the consequential

show cause notice has been issued to the petitioner-Firm.

Therefore, this Court has territorial jurisdiction to entertain the

present writ petition.

10. Learned counsel submits that since the show cause notice to

the petitioner-Firm has been issued for evasion of the Central

Excise Duty on the manufacturing of the goods made by M/s.

Gagan Pharmaceuticals, Sri Ganganagar and subsequently, sold to

the petitioner-Firm, therefore, the same is treated to be in the

same transaction and, therefore, this Court has jurisdiction to

entertain the present writ petition.

11. He further submits that certain proceedings were held by the

respondent-Department at DGGI, New Delhi and DGGI, Mumbai

but ultimately, the show cause notices have been issued to the

petitioner-Firm in Chandigarh and to the respondent No.7 at

Jodhpur. He also submits that there will be multiplicity of

proceedings if the same is allowed to be continued at Jodhpur and

Chandigarh, thus, it will be in the fitness of things that both the

show cause notices are allowed to be adjudicated by same

authority at Jodhpur. At the same time, he also prays that the

proceedings pending at Chandigarh may be ordered to be

transferred to Jodhpur.

12. Learned Sr. Counsel further submits that two adjudications

arising out of the same transaction of the show cause notices are

in clear violation of the Department's own Circular dated

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03.03.2015 which provides that the case has to be transferred to

Commissioner of that "noticee" from whom higher demand of duty

has been made and since in the present case, the duty demanded

from M/s Gagan Pharmaceuticals, Sri Ganganagar is more than

the petitioner-Firm, therefore, the adjudication has to be

transferred to respondent No.5- Commissioner, CGST, Jodhpur

which is within the territorial jurisdiction of this Court. He further

submits that the separate adjudication by different authorities

may lead to different outcomes regarding same transaction and

may result in multiplicity of proceedings, thus, it is argued that it

is in the interest of justice to issue necessary directions for

common/consolidated adjudication of both the show cause notices

by respondent No.5, who is located within the territorial

jurisdiction of this Court.

13. We have given our thoughtful consideration to the

submissions made before this Court.

14. The undisputed facts which emerges from the pleadings are

that the petitioner-Firm and its registered office of business is

located in the State of Punjab. The authority, who has issued show

cause notice to the petitioner-Firm, is located in the State of

Punjab. The business transaction of the petitioner-Firm was with

respondent No.7- M/s. Gagan Pharmaceuticals, Sriganganagar,

who is located in the State of Rajasthan. The show cause notice

has been issued to the petitioner-Firm and service of the same

was also effected in the State of Punjab although the show cause

notice emanates from the file of the respondent-Department which

is common to both the petitioner-Firm and respondent No.7 for

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issuance of notices. It is also clear that the evasion of the Tax

liability on both petitioner-Firm as well as the respondent No.7 is

not similar and they are held liable for the violations/infractions

respectively at their own ends. The petitioners were receiving the

goods for onward sale etc. in the State of Punjab were

manufactured by the respondent No.7 in the State of Rajasthan.

15. The pleadings with respect to the cause of action or part of

cause of action which arose to the petitioners read as under:-

"20. It is further humbly submitted here that entire proceedings in the present case has been initiated on the basis of proceedings initiated on M/s Gagan Pharmaceutical, Sri Ganganagar by the respondent No.1 and the same is sole reason for issuance of the impugned show cause notice by the Respondent No.1.

21. At this juncture it would not be out of place to mention here that initially a show cause notice issued by the respondent No.1 was proposed for adjudication at Delhi DGGI centre along with the adjudication of the show cause notice issued to the respondent No.7. Thereafter the proceedings have been transferred to Mumbai office along with the adjudication proceeding of the show cause notice issued to the respondent no.7. Thereafter all such proceedings including the proceedings of the adjudication of the show-

cause notice issued to the respondent No.7 transferred to Chandigarh office. Since, the issuance to the show cause notice to the petitioners as well as the respondent No.7, the place of adjudication as well as officers liable for adjudication for both of the show cause notices issued to the petitioners as well as respondent No.7 were the same be it, Chandigarh office or Mumbai office or the Delhi office. It is needless to mention here that since the petitioners entire show-cause notice is based on the transactions entered with the respondent No.7. Therefore, the earlier officers the respondent No.1 have

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rightly connected the show-cause notices issued to the petitioners as well as respondent No.7. However, most unfortunately proceedings regarding adjudication of the show-cause notice issued to the respondent No.7 has been transferred to the Jodhpur office of the respondent No.1. However, proceeding regarding adjudication of the show cause notice of the petitioners were remain pending at the Chandigarh office. It is worthwhile to note here that, since the show cause notice issued to the petitioner are well connected with show-cause notice of the respondent No.7 because of the issuance of the show cause notice to the petitioner were only on transactions as entered with respondent No.7. Therefore, under no stretch of the imagination show cause notice of the respondent No.7 would be separately and independently adjudicated without the adjudication of the show cause of the petitioners. Therefore, it is a need of hour that both of these show cause notices i.e. show-cause notice issued to the petitioner as well as show-cause notice issued to the respondent No.7 would be adjudicated by the same officer and the same office i.e. Jodhpur office (respondent No.5)."

16. On a careful scrutiny of the above mentioned facts clearly

show that no part of cause of action has arisen within the

territorial jurisdiction of this Court. Merely because the petitioner-

Firm was having a business transaction with respondent No.7 and

certain evasions having been pointed out in the same, will not give

any cause of action to the petitioner-Firm to approach this Court

by way of filing the present writ petition.

17. Secondly, merely because the show cause notice has been

issued to the petitioner-Firm on the basis of a common file

maintained by the official respondents, will not be relevant to draw

a presumption that part of cause of action has arisen to the

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petitioner-Firm in the territorial jurisdiction of this Court, merely

because on the basis of the same common file, the show cause

notice has been issued to the respondent No.7.

18. The Hon'ble Supreme Court in the case of Kusum Ingots

and Alloys Ltd. V/s Union of India (UOI) & Ors. reported in

2004(6) SCC-254 held as under:-

"5. On the other hand, the contention of the learned counsel appearing on behalf of the respondent is that as no cause of action arose within the territorial jurisdiction of the High Court of Delhi, the writ petition has rightly not been entertained.

Cause of Action:

6. Cause of action implies a right to sue. The material facts which are imperative for the suitor to allege and prove constitutes the cause of action. Cause of action is not defined in any statute. It has, however, been judicially interpreted inter alia to mean that every fact which would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court. Negatively put, it would mean that everything which, if not proved, gives the defendant an immediate right to judgment, would be part of cause of action. Its importance is beyond any doubt. For every action, there has to be a cause of action, if not, the plaint or the writ petition, as the case may be, shall be rejected summarily.

7. Clause (2) of Article 226 of the Constitution of India reads thus:

"(2) The power conferred by clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories."

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8. Section 20(c) of the Code of Civil Procedure reads as under:

"20 OTHER SUITS TO BE INSTITUTED WHERE DEFENDANT RESIDE OR CAUSE OF ACTION ARISES.

Subject to the limitation aforesaid, every suit shall be instituted in a court within the local limits of whose jurisdiction -

(c) the cause of action, wholly or in part, arises."

9. Although in view of Section 141 of the Code of Civil Procedure the provisions thereof would not apply to a writ proceedings, the phraseology used in Section 20(c) of the Code of Civil Procedure and Clause (2) of Article 226, being in pari materia, the decisions of this Court rendered on interpretation of Section 20(c) of CPC shall apply to the writ proceedings also. Before proceeding to discuss the matter further it may be pointed out that the entire bundle of facts pleaded need not constitute a cause of action as what is necessary to be proved before the petitioner can obtain a decree is the material facts. The expression material facts is also known as integral facts.

10. Keeping in view the expressions used is Clause (2) of Article 226 of the Constitution of India, indisputably even if a small fraction of cause of action accrues within the jurisdiction of the Court, the Court will have jurisdiction in the matter.

11. In Mussummat Chand Kour v. Partap Singh (15 IA

156), it was held:

"... the cause of action has no relation whatever to the defence which may be set up by the defendant, nor does it depend upon the character of the relief prayed for by the plaintiff. It refers entirely to the ground set forth in the plaint as the cause of action, or, in other words, to the media upon which the plaintiff asks the court to arrive at a conclusion in his favour."

12. This Court in Oil & Natural Gas Commission v. Utpal Kumar Basu and Ors. (1994 (4) SCC 711) held that the question as to whether the court has a territorial jurisdiction to entertain a writ petition, must be arrived

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at on the basis of averments made in the petition, the truth or otherwise thereof being immaterial.

13.This Court in Oil and Natural Gas Commission's case (supra) held that all necessary facts must form an integral part of the cause of action. It was observed:

"So also the mere fact that it sent fax messages from Calcutta and received a reply thereto at Calcutta would not constitute an integral part of the cause of action..."

17.Recently, in National Textile Corpn. Ltd. and Ors. vs. M/s Haribox Swalram and Ors. [JT 2004 (4) SC 508], a Division Bench of this Court held :

"As discussed earlier, the mere fact that the writ petitioner carries on business at Calcutta or that the reply to the correspondence made by it was received at Calcutta is not an integral part of the cause of action and, therefore, the Calcutta High Court had no jurisdiction to entertain the writ petitioner and the view to the contrary taken by the Division Bench cannot be sustained. In view of the above finding, the writ petition is liable to be dismissed..."

18.The facts pleaded in the writ petition must have a nexus on the basis whereof a prayer can be granted. Those facts which have nothing to do with the prayer made therein cannot be said to give rise to a cause of action which would confer jurisdiction on the court.

19.Passing of a legislation by itself in our opinion do not confer any such right to file a writ petition unless a cause of action arises therefore.

20.A distinction between a legislation and executive action should be borne in mind while determining the said question.

21.A parliamentary legislation when receives the assent of the President of India and published in an Official Gazette, unless specifically excluded, will apply to the entire territory of India. If passing of a legislation gives rise to a cause of action, a writ petition questioning the constitutionality thereof can be filed in any High Court of

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the country. It is not so done because a cause of action will arise only when the provisions of the Act or some of them which were implemented shall give rise to civil or evil consequences to the petitioner. A writ court, it is well settled would not determine a constitutional question in vacuum.

22.The court must have the requisite territorial jurisdiction. An order passed on writ petition questioning the constitutionality of a Parliamentary Act whether interim or final keeping in view the provisions contained in Clause (2) of Article 226 of the Constitution of India, will have effect throughout the territory of India subject of course to the applicability of the Act.

Forum Conveniens

30.We must, however, remind ourselves that even if a small part of cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a determinative factor compelling the High Court to decide the matter on merit. In appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens. (See Bhagar Singh Bagga v. Dewan Jagbir Sawhany, AIR 1941 Cal; Mandal Jalan v. Madanlal, (1945) 49 CWN 357; Bharat Coking Coal Limited v. M/s Jharia Talkies & Cold Storage Pvt. Ltd. (1997) CWN 122; S.S.Jain & Co. & Anr. v. Union of India & Ors. (1994) CHN 445; M/s. New Horizon Ltd. v. Union of India, AIR 1994 Delhi 126)."

19. In view of authoritative pronouncements of the judgments by

the Hon'ble Supreme Court, the arguments of learned Sr. Counsel

that the proceedings out of the present show cause notice have

started from a file of even number from which the proceedings

were started against the respondent No.7, has no bearing giving

rise to any cause of action to file the present writ petition before

this Court. Further, merely because the petitioner-Firm is having a

business transaction with respondent No.7, who is located in the

State of Rajasthan and on certain transactions, the evasion of duty

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is alleged will not give any cause of action to the petitioner-Firm

for filing writ petition before this Court for the simple reason that

the evasion, if any, done by the petitioners were taken note of by

the authorities located in State of Punjab and, therefore, they

have rightly issued show cause notice to the petitioners for

undertaking the proceedings in the State of Punjab.

20. Coming to the Circular dated 03.03.2015, para 5 of the same

reads as under:-

"(v) Cases to be adjudicated by the executive Commissioners, when pertaining to jurisdiction of multiple Commissionerates, shall be adjudicated by the Commissioner in whose jurisdiction, the noticee from whom the highest demand of duty has been made, falls. In these cases, an order shall be issued by the Director General, CEI exercising the powers of the Board assigning appropriate jurisdiction to the executive Commissioner for the purposes of adjudication of the identified case."

21. A bare perusal of the same goes to show that the same is

not relevant for adjudication of the controversy in hand as it

cannot be construed that by way of Clause (v) of the Circular

dated 03.03.2015 gives a cause of action to the petitioners in the

present set of facts. When there is no part of cause of action

having arisen in the territorial jurisdiction of this Court, the

argument with respect to the multiplicity of the proceedings is

noted to be rejected only on the ground that both the show cause

notices issued to the petitioners as well as to the respondent No.7

will be adjudicated on the facts and pleadings submitted before

the concerned authorities and if the authorities will be of the view

that there is any evasion of duty, the appropriate findings in