2020 (12) TMI 1100 - HC - Central Excise

Court upholds writ despite alternative remedy; orders fresh consideration and quashes discriminatory order

The court found the writ application maintainable despite the availability of an alternative remedy under the Central Excise Act due to procedural ... Writ jurisdiction under Article 226 and availability of alternative remedy - Principles of natural justice and service under statutory procedure - Service of orders under Section 37C of the Central Excise Act - Classification of goods - textile/fabric produced by weaving or knitting versus articles of plastic - Discrimination in imposition of central excise and uniformity of levy - Remand for fresh adjudication after quashing of invalid orderWrit jurisdiction under Article 226 and availability of alternative remedy - Maintainability of writ petition despite existence of statutory appeal under Central Excise Act - HELD THAT: - The Court held that availability of an alternative statutory remedy is a discretionary consideration and does not operate as an absolute bar to exercise of writ jurisdiction. In the facts of the case the Court found good grounds to entertain the petition despite the remedy of appeal under Section 35B, having regard to (i) the manner in which the adjudicating order was passed, (ii) prima facie absence of opportunity of hearing, and (iii) a specific contention of discriminatory treatment vis-a -vis similarly situated manufacturers in other States. The Court applied the established exceptions where writ jurisdiction may be exercised notwithstanding an alternative remedy (enforcement of fundamental rights, failure of natural justice, orders wholly without jurisdiction or vires challenged) and followed precedent recognising that central excise must be collected uniformly and discrimination may warrant writ relief.Writ petition entertained and preliminary objection of alternative remedy rejected.Service of orders under Section 37C of the Central Excise Act - Principles of natural justice and service under statutory procedure - Validity of service of the Order in Original under Section 37C and consequence for adjudication - HELD THAT: - The Court held that the impugned Order in Original was not validly served in terms of Section 37C since the department did not show compliance with the primary mode of service (tender or registered post with acknowledgement) before resorting to affixation. Relying on the Supreme Court's exposition that statutory procedure for service must be followed ('the thing must be done in that way or not at all'), the Court found service by pasting at factory gate on a person who was not shown to be an authorized agent amounted to a miscarriage of justice. Consequently, defective service vitiated the Order in Original.Impugned Order in Original quashed on account of invalid service; matter remitted for fresh adjudication after proper service and hearing.Classification of goods - textile/fabric produced by weaving or knitting versus articles of plastic - Remand for fresh adjudication after quashing of invalid order - Prima facie characterisation of the products as fabrics/textiles and treatment of CBEC Circular/Collectorate Trade Notice - HELD THAT: - On prima facie examination the Court observed that the products (Agro Shade Net and Geo Grid) are produced by knitting/weaving processes (Raschel knitting and weaving) and that the Chemical Examiner described one sample as a knitted fabric. The Court noted the legal proposition in Porritts & Spencer that 'textile' in popular sense means a woven/knitted fabric irrespective of raw material, and observed that the CBEC Circular/Order No.8/92 and the Ahmedabad Trade Notice appear to have emphasised the nature of raw material (HDPE strips) rather than the method of production. The Court declined to decide the ultimate validity of the Circular/Trade Notice but recorded that those instruments prima facie appear contrary to the law laid down by the Apex Court and directed that the Union of India re-examine the Circular/Trade Notice. The Court also recorded the petitioners' specific plea of discrimination (many manufacturers treated the goods as textiles) and directed that this plea be specifically addressed in the fresh adjudication.Prima facie the goods are fabrics/textiles; the CBEC Circular and Trade Notice to be re-examined by Union of India and the adjudicating authority to decide afresh, dealing specifically with discrimination.Remand for fresh adjudication after quashing of invalid order - Relief and consequential directions following quashing of the Order in Original - HELD THAT: - The Court quashed and set aside the impugned Order in Original dated 30.6.2020 and remitted the matter to the adjudicating authority for fresh consideration in accordance with law after affording adequate opportunity of hearing to the writ-applicants. The Union of India was directed to first reconsider the CBEC Circular/Order No.8/92 and Ahmedabad Trade Notice No.78/94 in light of the Court's observations so that the adjudicating authority can apply the outcome in the fresh adjudication. The Court also directed termination of any recovery proceedings initiated on the strength of the impugned Order and required the fresh exercise to be completed within six months.Order in Original quashed and matter remitted for fresh hearing; Union to re-examine Circular/Trade Notice; recovery proceedings terminated; fresh adjudication within six months.Final Conclusion: The writ petition was partly allowed: the Court entertained the writ despite availability of statutory appeal, quashed the impugned Order in Original dated 30.6.2020 for defective service under Section 37C and other prima facie defects, remitted the matter to the adjudicating authority for fresh consideration after affording hearing, directed the Union to re-examine the CBEC Circular/Order No.8/92 and Ahmedabad Trade Notice No.78/94, and ordered termination of recovery proceedings based on the quashed order with the fresh exercise to be completed within six months. Issues Involved:1. Maintainability of the writ application due to the availability of an alternative remedy.2. Legality and validity of the impugned Order in Original dated 30.6.2020.3. Appeal provisions under Sections 35 and 35B of the Central Excise Act.4. Compliance with the mandatory provisions of Section 37C of the Central Excise Act, 1944.Detailed Analysis:1. Maintainability of the Writ Application:The court addressed whether it should entertain the writ application despite the availability of an alternative remedy under Section 35B of the Central Excise Act. The court referred to previous judgments, emphasizing that the rule of exclusion of writ jurisdiction due to the availability of an alternative remedy is discretionary and not absolute. The court held that the writ application is maintainable due to the following reasons:- The manner in which the Order in Original was passed, allegedly without giving the writ-applicants an opportunity for a hearing.- The specific contention of discriminatory treatment was not adequately addressed by the authority.- Sections 35 and 35B do not provide for any appeal against circulars or trade notices issued by the Board or Collectorate.2. Legality and Validity of the Impugned Order:The court examined the impugned Order in Original dated 30.6.2020, which classified the goods under Chapter Heading 39269099 and confirmed the demand for Central Excise duty. The court found procedural lapses and potential discrimination in the treatment of the writ-applicants compared to other manufacturers. The court noted that the impugned order did not adequately address the specific plea of discrimination raised by the writ-applicants, who argued that similar products were classified differently in other states, leading to an unfair competitive disadvantage.3. Appeal Provisions under Sections 35 and 35B:The court clarified that Sections 35 and 35B of the Central Excise Act do not provide for an appeal against circulars or trade notices. The court cited a Full Bench decision stating that a writ petition is the only remedy against trade notices, as the statute does not provide any appeal mechanism for such notices.4. Compliance with Section 37C:The court found that the service of the impugned order did not comply with the mandatory provisions of Section 37C of the Central Excise Act. The order was served by affixing it at the factory premises without attempting service by registered post with acknowledgment due, as required by the statute. The court relied on the Supreme Court's decision in Saral Wire Craft Pvt. Ltd., emphasizing that proper service is crucial for ensuring that the affected party has the opportunity to respond.Conclusion:The court quashed the impugned Order in Original dated 30.6.2020 and remitted the matter to the respondent for fresh consideration, ensuring compliance with the principles of natural justice and addressing the issue of discrimination. The court also directed the Union of India to re-examine the CBEC Circular/Order No.8/92 and the Ahmedabad Collectorate Trade Notice No.78/94. The entire exercise was to be completed within six months, and any recovery proceedings based on the impugned order were to be terminated.