TaxTMI 
TaxTMI 
1988 (10) TMI 53
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....s true, then the maximum retail sale price at which the packets of cigarettes can be sold had been communicated to the trade clandestinely and a declaration had been made on the packages at which such packages will not be sold. This will clearly be a case of both suporessio veri and suggestio falsi. If on the basis of such mis declaration of the maximum retail price, excise duty is levied and paid, the provisions of Section 11-A of the Central Excises and Salt Act, 1944, are clearly attracted. This will be a case of short levy and also short payment by reason of "fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or the Rules". [paras 98, 99 & 150] Cigarettes - Declaration of sale price, less than actual maximum price, on packages for retail sale of cigarettes - Levy of Excise duty on "adjusted sale price" - Notification No. 201/85-C.E., dated 2-9-1985, as amended by Notification No. 210/85-C.E., dated 20-9-85, issued under Rule 8(1), not construable to frustrate the charge under charging Section 3 of the Central Excises & Salt Act, 1944. - The argument that if tax has been levied and collected in a....
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.... notice was moved before Bhagawati Prasad Banerjee J. On 18lh August, 1987 an interim order was passed by Bhagawati Prasad Banerjee J. to the effect that the respondents were allowed to proceed pursuant to the aforesaid show cause notice. It was further directed that the petitioner would be at liberty to submit their reply to the show cause notice without prejudice to the rights and contentions of the petitioner in the writ petition. The respondents were given liberty to conclude the proceedings and pass a final order on the proceedings. But the respondents were directed not to give any effect to or act upon or communicate the final order to the petitioner without leave of the Court. 2. The writ petition came up for hearing before Bhagabati Prasad Banerjee J. On 14th August, 1987 a rule Nisi was issued on the writ petition. But ultimately the writ petition was dismissed and the rule was discharged by an order dated December 24, 1987. All interim orders were vacated. 3. The writ petitioner, I.T.C. Limited, has now come up in appeal against the judgment and order passed by Bhagabati Prasad Banerjee J. on December 24,1987. 4. The impugned show cause notice was issued on 27th ....
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....t the hearing was in keeping with the case made out in the writ petition. 8. But the case has undergone a sea change in the Appeal Court. The main attack in the appeal against the show cause notice has been that the facts alleged in the show cause notice are not correct. The allegations of facts that have been made in the show cause notice cannot be justified. All the documents that were seized had not been correctly read and/or understood. The inferences of facts that have been drawn are vitiated because of non-application of mind to the facts of the case. The fact-finding authority has approached the case with a closed mind. Relevant evidence has been ignored. Irrelevant evidence has been relied upon. Documents have been misconstrued. 9. The allegations in the writ petition may be briefly summarised. The ITC Limited, hereinafter described as the Company, manufactures cigarettes at its five factories situated at Calcutta, Munger, Saharanpur, Bangalore and Bombay. The Company also contracts out from time to time the manufacture of cigarette to various other manufacturers who are seven in number. The Company manufactures and sells cigarettes in bulk on an average. Each of the ....
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.... retailers was known to the trade as well as to the excise authorities. The manufacturer could not control the retailer from charging excessive retail selling price. If the retailer sold cigarettes at a price higher than the maximum retail price printed on the packets, proceedings could be taken under the provisions of the Standard Weights and Measures (Packaged Commodities) Rules, 1977. 11. Although the duly of the manufacturer was to print the maximum retail price on the packets of cigarettes which were sold to the WSDs, there was no statutory guideline as to how the price was to be arrived at. The prices charged by the retailers were fluctuating and varied from place to place. The manufacturer had not laid down any price higher than the price printed on the cigarette packet at which the cigarettes were to be sold by the retailers. The company paid the following excise duly during the relevant period: (Rs. in Crores) 1983-84 475 1984-85 557 1985-86 669 1986-87 740 12. Sometime in February, 1967 [i] search and seizure proceedings took place in the various offices and establishments of the company. This was fo....
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....facts made by the respondent No. 3 in the show cause notice. It has been stated that on a true interpretation of the Exemption Notification the price printed by the manufacturer as the maximum price printed on the packages had to be taken as the excise value of the cigarette. No statutory rule had been laid down as to how the printed price was to be arrived at. So long as the cigarettes were so priced as to make the cost to the retailer, no higher than the printed price, the letter and the spirit of the law were complied with. No other interpretation of law could be made. Administrative interpretation of fiscal law was of paramount importance and the Government issued the Notification with full awareness of the true position in the cigarette industry. Any irrationality in the interpretation of law had to be avoided. The respondent No. 3 will not be able to conduct the enquiry with an objective mind. There was a real likelihood of bias. The respondent No- 3 was the Investigator and the Prosecutor in this case and was committed to finding. A potential witness was disqualified from being an adjudicator. 17. A number of grounds were also taken challenging the jurisdiction of the res....
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....directly nor indirectly any conclusion or inference of fact has been challenged in the writ petition. 22. The arguments that were advanced before Bhagwati Prasad Banerjee J. were confined to legal grounds only. In other words, the case that was made out before the Court below was within the compass of the allegations of facts made in the writ petition. In the judgment, the arguments advanced by Mr. Nariman, the Advocate, on behalf of the writ petitioner, have been summarised as under: "(a) That the respondents have acted illegally and without jurisdiction in issuing the impugned show cause notice dated 27th March, 1987, inasmuch as, there was no short levy and/or short payment of excise duty on the part of the petitioner company and in any event there was no mis-statement and/or mis representation made by the petitioner company in the matter of printing the sale price on the packages of cigarettes for the purpose of payment of excise duty. (b) That on the basis of rules of interpretation contcmporanea expositio (contemporary exposition) the respondents had no jurisdiction to attribute a different meaning to the definition of the words 'sale-price' after a lapse of so many ....
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....n the Appeal Court for the first time. Moreover, unless the disputes are raised in the petition, the respondent does not get a chance to refute the contentions on affidavit. 25. This case arises out of a show cause notice. The law is well-settled that if a show cause notice is issued by a statutory authority relying upon some facts, that notice can only be challenged before the Writ Court only on the ground that even if the facts are assumed to be correct, no case has been made out against the petitioner. If a prima facie case has been made out in the show cause notice, it is for the adjudicating authority to finally decide all the questions including questions of fact. 26. Several decisions were cited on the question whether correctness of the facts stated in the show cause notice can be investigated by a Writ Court on a challenge to the show cause notice itself. In the case of Lakshminarayan Ramniwas v. Collector of Customs and Others - A.I.R. 1961 Calcutta 616, it was held following an earlier judgment of this Court in the case of East India Commercial Company Limited v. The Collector of Customs - AIR 1957 Calcutta 606 that where the Assistant Collector of Customs had issu....
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....a bench comprising of A.K. Sarkar, K. Subba Rao and J.R. Mudholkar JJ. Subba Rao and Mudholkar JJ held that where a Collector of Customs proposed to take action under the provisions of the Sea Customs Act, read with the provisions of the Imports and Exports Act, 1947 the proceedings were quasi-judicial in nature. Whether a statute provides for a notice or not, it was incumbent upon the Collector to issue a notice to the importer disclosing the circumstances under which proceedings were sought to be initiated against him. Any proceedings taken without any notice would be against the principle of natural justice. It was observed: "If on a reading of the said notice it is manifest that on the assumption that the facts alleged or allegations made therein were true, none of the conditions laid down in the specified sections was contravened, the respondent would have no jurisdiction to initiate proceedings pursuant to that notice". 29. In that case, the question was whether breach of the condition of an import licence amounted to infringement of an order issued under Section 3 of the Imports and Exports (Control) Act, 1947. The allegation in the show cause notice was that because o....
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....ourt. On appeal, the judgment of the Division Bench of the Madras High Court was upheld by the Supreme Court. The case was heard by a Bench comprising of S.M. Sikri, R.S. Bachawat and K.S. Hegde JJ. Hegde and Bachawat JJ. were of the view that the notices issued to the writ petitioners were invalid as the offences alleged did not fall within the scope of Section 23A of the Sea Customs Act. Sikri J. took a contrary view. 36. But there was no difference of opinion on the question that the facts stated in the show cause notice must be taken to be correct in a proceeding challenging the validity of the show cause notice. Sikri J. observed at page 160B, paragraph 27 of the report: "Taking the facts as alleged by the Customs authorities to be true, as they must be taken to be true for the purpose of this application under Article 226, it seems to me that no case for the issue for a writ of prohibition has been made out". 37. Hegde J. (with whom Bachawat J. agreed) was also of the view that the facts alleged in the show cause notice must be taken to be correct. It was observed by Hegde J. that "the only question that arises for decision in these appeals is whether on the facts se....
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....e allegation that correct inferences of facts had not been drawn. 43. It is of interest to note that not only in the Court below but also in the Madras High Court where the same show cause notice was challenged by Asia Tobacco Company Limited, the argument was confined to certain legal issues only. No disputed questions of fact was raised. 44. Asia Tobacco Company Limited was one of the companies which was served with an identical show cause notice dated 27th March, 1987. Being served with the show cause notice, Asia Tobacco Company Limited moved a writ petition in the Madras High Court for quashing the notice on certain legal grounds. That case (Asia Tobacco Company Limited v. Union of India and Others - W.P. Nos. 5084 and 5822 of 1987) was dismissed by Mohan J. on 8th September 1987. A Division Bench of the Madras High Court on appeal affirmed the judgment. 45. A similar show causc notice issued to Duncan Agro Industries Limited was challenged in the Delhi High Court on certain points of law. That was the case of Dun can Agro Industries Limited v. Union of India and Others - 1989 (39) E.L.T. 211 (Del.) C.W.P. No. 1039 of 1987. There, a Division Bench of the Delhi High Co....
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....tes" and "sale price" of their cigarettes. 50. This is the basic charge in the show cause notice. It has been specified in sub-paragraph (e) of paragraph 12: "The Chairman/Directors/former Directors of I.T.C. have rendered themselves liable for penalties under the provisions of Rule 209-A and Rule 221 in as much as they had devised ways and means to suppress effective prices of all their brands of cigarettes, at which the cigarettes were sold in retail, fixed trade prices and trade margins right upto the retailer/smoker, communicated the effective prices to the trade in a clandestine manner, monitored the implementation of the instructions given to hold the effective prices at a desired and decided level which they knew and had reason to believe were higher than the prices printed on the cigarette packets, on which duty was paid at lower rates as a result of which duty had been evaded on the cigarettes which were liable to confiscation under the said Act and the said Rules. They, as the Directors of ITC, were fully and finally responsible for fixing and declaring the retail prices, .for communicating the same down the line up to the retailers and for deliberately keeping them....
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....cket. For this, the ITC could not be blamed. There was no flowback of any excess amount collected by the retailers to the ITC. 54. It was emphasised that the cigarette market was a fiercely competitive market. The ITC had to analyse the actual sale prices of various brands of cigarette sold by the ITC and the comparative brands of the rival manufacturers. If any particular brand of cigarette manufactured by ITC was being sold at a rate very much higher than the rate at which a similar brand of cigarette manufactured by a rival company was being sold, the ITC stood to loose its share of the business in the market. That is why the ITC had constantly to watch the effective price level in the market not only of the cigarettes sold by ITC but also cigarettes sold by the rival companies. 55. The case of the Excise Authorities is that the ITC not only fraudulently printed lower prices as maximum retail sale price on their packets. The margins allowed to the retailers were clandestinely communicated. The retailers adhered to the effective prices communicated by the company. It has been alleged in the show cause notice after analysing the evidence on record that it appeared that while....
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....le prices; ITC have made every effort to maintain and enforce the effective prices fixed by them; they had undertaken direct retail sales at effective prices; ITC resorted to giving price rebate in the event of the market price being higher than the effective prices fixed by them (which were higher than the printed prices) to reduce the prices to be desired level; that ITC did not expect their brands to be sold in general at the printed prices is evident from the fact that they have been giving special discount to special customers/special outlets to enable the brands to retail at the printed prices; that ITC directed the consumers who complained about non-availability of their brands of cigarettes at marked prices to their nearest wholesale dealers/special outlets who were given special discounts so that such agitated customers could buy the requirements at market prices. 56. Of the long list of allegations made in paragraph 11.1 there is no dispute about the fact that at a certain stage the ITC was allowing the retailers a margin of 10 paise only per thousand cigarettes. In other words, a retailer had to sell one hundred cigarettes to make a profit of one paise. To look at the....
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....e out and the adjudication proceedings should be stopped at the very threshold. 60. It has been contended by the Advocate General that every allegation in show cause notice is backed up by evidence. Mr. Sen has invited the Court to re-appraise the evidence. Since I am of the view that all the questions of fact should be agitated before the Adjudicating Authority. I have decided not to deal with the evidence in depth or in detail. But I am of the view that on the facts of this case, it will not be proper to shut out the adjudication proceedings at this stage. 61. I shall now examine some of the points of law that have been urged. It has been contended that even if the allegations of fact made in the show cause notice are taken to be correct, the Excise Authority has no jurisdiction to proceed with this case. 62. The first contention is that the show cause notice under Section 11-A of the Central Excises and Salt Act, 1944, has been issued by Sri Narendra Kumar Bajpai, the Director, Directorate of Anti-Evasion (Central Excise), Block No. 8. It has been contended that the alleged evasion of excise duty has taken place all over India. Only a Collector of Central Excise has bee....
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....in the Act. There is nothing in the Act which requires the Central Government or the Board to divide the country into several zones and appoint Officers of limited territorial jurisdiction to exercise power only within the specified zones. 66. On behalf of the appellant, reference was made to the Central Excise Rules and it was contended that the Notification would be ultra vires the Act read with the Rules. 67. The Rules have been framed by the Central Government in exercise of powers conferred by Section 37 of the Act. Section 37(1) empowers the Central Government to make rules to carry into effect the purposes of the Act. Section 37A is as under :- "Section 37A. Delegation of powers. - The Central Government may, by notification in the Official Gazette, direct that subject to such conditions, if any, as may be specified in the notification - (a) any power exercisable by the Board under this Act may be exercisable also by a Collector of Central Excise empowered in this behalf by the Central Government; (b) any power exercisable by a Collector of Central Excise under this Act may be exercisable also by a Deputy Collector of Central Excise or any Assistant Collect....
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....d Officer will exercise jurisdiction. The Central Government may specify a District or a State or several States or the entire territory of India as the area in which the Collector will exercise his jurisdiction. The Central Government under the Rules has a free hand to decide and specify the extent of the area of jurisdiction of a Collector. Rule 4 and 5 are as follows :- Rule 4. Appointment of Officers - The Central Board of Excise and Customs may appoint such persons as it thinks fit to be Central Excise Officers, or to exercise all or any of the powers conferred by these rules, on such officers. Rule 5. Delegation of power by the Collector - Unless the Central Government in any case otherwise directs, the Collector may authorise any officer subordinate to him to exercise throughout his jurisdiction, or in any specified area therein, all or any of the powers of a Collector under these rules. 72. The Board under Rule 4 can appoint any person to be the Central Excise Officer and invest such Officer with all the powers under the rules. There is no territorial limitation laid down in this rule. 73. The Notification No. 215/86-Central Excise, New Delhi dated 27-3-1986 ....
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....ement about the alleged evasion. It has been contended that the Director, who has been invested with the powers of a Collector throughout the territory of India, will approach the case with a closed mind. It has further been contended that since there is a scheme for rewarding the Officers for any detection of any excise fraud, the Director will be inclined to uphold the allegations of excise fraud. There is an element of pecuniary interest involved in this case. 79. The second part of the argument is misconceived because the Director himself will not get any reward if the Department succeeds in this case. 80. It has been contended on behalf of the appellants that the Director may be influenced by the prospect of some of the Officers of his Department getting the remuneration. 81. If the Director has no personal pecuniary interest in the matter, one fails to see how he can be charged with having any interest in the matter. If this argument is taken to its logical conclusion, so long as the reward scheme subsists, no Officer of the Excise Department, however, high his position may be, can hear any case of excise fraud. 82. So far as the question of press statement is con....
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.... decision or has made up his mind regarding the dispute. Section 11A authorises a Central Excise Officer to serve show cause notice upon the person chargeable with duty which has not been levied or paid or which has been short levied or short paid. A show cause notice may also be issued in a case where refund has been erroneously made to a person not entitled to the refund. The proviso to Section 11A lays down that where short levy or short payment or erroneous refund of excise levy has taken place because of fraud, collusion or any wilful misstatement or suppression of fact or contravention of any of the provisions of the Act or the Rules with intent to evade payment of duty, then the Collector of Central Excise will have jurisdiction and the period of limitation of six months will stand extended to Five years. Sub-section (2) of Section 11A specifically provides that the Collector of Central Excise, after considering the representation, if any, made by the person on whom a notice is served under sub-section (1), may determine the amount of duty of excise due from such person. Therefore, the Collector who issues the show cause notice will have to hear and decide the points raised ....
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....spirit and come to a judicial conclusion upon properly ascertained facts; though I would point out that the Income-tax Officer is not a court, he has not the procedure of a Court and he is to some extent a party or Judge in his own case". 85. This peculiarity of tax laws is also to be found in the scheme of the Central Excise Act. In the proceedings under Section 11A of the Act, a Collector has to combine the role of the party as well as the Judge. Although the show cause notice has been challenged as ultra vires in this case, the validity of Section 11A of the Central Excise Act, has not been challenged. Section 11 A of the Central Excise Act, envisages that if there is any short levy or short payment of tax occasioned by, inter alia, fraud or wilful misstatement, then the Collector will issue the show cause notice under Section 11(1) and pass a suitable order under Section 11 (2) after hearing the representations made by the per son on whom the show cause notice has been served. 86. Therefore, having regard to the scheme of the Revenue Laws in general and the Central Excise Act, in particular, I am of the view that the point of the Director being a Judge of his own case mad....
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....ure was intentional and the Legislature did not deliberately choose the simple device of reproducing the definition given in some other Act. But it cannot be said that the provisions of the Standards of Weights and Measures Act, 1976 or the Rules framed thereunder should be entirely overlooked even where there is no specific provision in the Notification. 92. In the Standards of Weights and Measures Act, 1976, the term "Adjust Sale Price" has not been defined. The terms "retail sale price" and "sale price" have been defined in the Standard of Weights and Measures (Packaged Commodities) Rules, 1977 and are as under :- 'retail sale price' means the maximum price at which the commodity in packaged form may be sold to the ultimate consumer, inclusive of all taxes, transport charges and other dues'; 'sale price' in relation to any commodity in packaged form means any one of the following prices, namely: (i) Price inclusive of freight but exclusive of local taxes, and where such price is mentioned on the package, there shall be printed on the package the words Max. Price.... local taxes extra"; (ii) retail sale price, and where such price is mentioned on the package, there....
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.... rates specified in the corresponding entry in column (2) of the said Table. The Table provided in the Notification is as under :- TABLE Description Rate (1) (2) Cigarettes (being cigarettes packed in packages) of which the adjusted sale price per one thousand - (i) does not exceed rupees sixty forty-two rupees per one thousand; (ii) exceeds rupees sixty but does not exeed rupees one hundred and seventy One hundred and twenty five rupees per one thousand; (iii) exceeds rupees one hundred and seventy but does not exceed rupees three hundred Two hundred and twenty five rupees per one thousand; (iv) exceeds rupees three hundred but does not exceed rupees five hundred fifty Four hundred rupees per one thousand; and (v) exceeds rupees five hundred and fifty Six hundred rupees per one thousand. Explanation. - For the purposes of this notification - (1) "adjusted sale price" in relation to each cigarette contained in a package of cigarette, means the unit price arrived at by dividing the sale price of such package by the number of cigarettes in such package : Provided that where the cigarettes are packed in packag....
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....ation of any law on the part of the company. If the goods have not been sold at the retail sale price printed by the company, the company is not at fault and the statute has not provided for any remedy in a case where the goods are sold at a price in excess of the printed price in retail sale. The retailers are liable to be punished for violation of the provisions of Standard of Weights and Measures (Packaged Commodities) Rules, 1977. But the manufacturer whose duty was to print the maximum retail price cannot be held liable. There is no infraction of law on the part of the manufacturer. If there is any lacuna in the Act, the manufacturer must get benefit of that. In a taxing statute, the benefit of doubt always goes to the taxpayer. It is well settled that the taxing statute would be strictly construed. A large number of cases on construction of taxing statutes were cited in this connection. 97. In my view, a simple matter has been sought to be made complex by elaborate citation of case laws and lengthy arguments. The law requires a manufacturer to declare the maximum retail price at which such packages may be sold in accordance with the declaration made on such packages. This ....
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....ufacturer has fixed and determined an amount as the maximum sale price for retail sale of a particular brand of cigarette and circulated the same to the trade chain for ultimate sale to consumers, but at the same time has deliberately printed on the packets a lower figure as the maximum sale price of such cigarettes, it will not be declaration of the maximum sale price as required under Explanation 2(b) of the Notification but really a misdeclaration. If the case made out in the show cause notice is true, then the maximum retail sale price at which the packets of cigarettes can be sold had been communicated to the trade clandestinely and a declaration had been made on the packages at which such packages will not be sold. This will clearly be a case of both suporessio veri and suggestio falsi. 99. If on the basis of such misdeclaration of the maximum retail price, excise duty is levied and paid, the provisions of Section 11A of the Central Excises and Salt Act, 1944, are clearly attracted. This will be a case of short levy and also short payment by reason of "fraud, collusion, or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act....
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....ng section should be strictly construed and no one should be charged to duly or tax by implication. Clear words are necessary to make a man liable to tax. 103. The Notifications under consideration in this case do not try to and in fact, cannot supplant the charging section. It merely grants certain reliefs to the ciegrette industry and also lays down a formula for quantification of the charge. The problem of valuation of excisable articles is always a vexed question. In the instant case, it has been decided to take the "adjusted sale price" of cigarettes as the basis for levy of excise duty. It was left to the manufacturers to fix the maximum retail price at which cigarettes may be sold by the retailers. But the retail price as declared by the manufacturers was to be the basis for levy of excise duty. Even under the Notification "cigarettes packed in packages" have been defined to mean in Explanation 2(b) of the Notification as cigarettes which are packed for retail sale, in packages which bear a declaration specifying the maximum sale price thereof as the amount specified in the declaration plus local taxes only". Therefore, the manufacturer is required to make a declaration s....
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.... This was done possibly to obviate the difficulty of calculation of the wholesale price of the goods. 106. In all the Notifications the rates of duty have been shown under Column 2 of the Table. The levy is on the adjusted sale price per one thousand cigarettes (being cigarettes packed in packages). The method of valuation has also been provided in the excise duty. 107. The point that is to be borne in mind is that Section 3 continues to be the charging section and the taxable event is the manufacture of cigarettes. The Notifications under Rule 8 could not be issued unless the manufacture of cigarettes came within the scope of the charge imposed by Section 3 of the Act. The Notifications issued under Rule 8 are only machineries for effectuating the charge. The Notifications provided the rates of duty and also the method of calculation of duty. The well-settled rule of construction is that the provisions which deal with the machinery of assessment should not be subjected to rigorous construction but should be construed in a way that makes the machinery workable. It is to be borne in mind that the Notifications do not create any charge of excise duty on manufacture of cigarette....
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....evy is on the maximum price as declared by the manufacturer. 110. If this argument is to be taken to its logical conclusion, it will mean that if a manufacturer prints the whole-sale price or a figure less than even the whole-sale price as the maximum retail price, then the Government has no option but to accept that as the maximum retail price and levy tax accordingly. This construction will lead to absurdity and cannot be accepted. 111. Moreover, the language of the Notification leaves no room for doubt that the manufacturer will have to declare the maximum price and that cannot be any price other than the price Fixed by the manufacturer at which such packages may be sold in accordance with the declaration made. If it is not possible for a retailer to sell the packages in accordance with the declaration made to the knowledge of the manufacturer or the manufacturer had fixed or had connived at fixation of a higher retail price than what had been actually printed on the packages as the maximum retail price, then it cannot be said that the manufacturer had declared a maximum price in accordance with which such packages may be sold. On the contrary, the inference will be that t....
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....ny to the dealers and the printed sale price is less than the actual sale price clandestinely fixed by the company, then the company cannot be heard to say that it has discharged its statutory duty of printing the maximum sale price on the basis of which the excise duty is to be calculated. If the declaration made by the company turns out to be false, then the provisions of Section 11A will be attracted and the amount that has been short levied or short paid because of misdeclaration will have to be recovered from the company. 116. It must, however, be noted that in a case of any penal provision, even in a taxing statute, the onus of proving false declaration or fraud must be on the revenue. Whether the onus has been discharged or not, however, is a question of fact. 117. It was fairy suggested that the provisions of Section 11A can only be applicable to a case of incomplete assessment or no assessment. The language of Section 11A is clear and unambiguous. Whenever there is a short levy or short payment of duty the section is clearly attracted. Whether there was a complete assessment or incomplete assessment is not relevant for this purpose. In this context the distinction so....
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.... length and over a number of days. Many other points were advanced. But I have considered in detail the main points of the arguments. Since I am of the view that the matter must go to the adjudicator and the case must be heard and decided in the adjudication proceedings, I have refrained from expressing any opinion on these aspects of the matter. The adjudicator will be at liberty to go into and decide all these questions. 123. Having regard to all aspects of the case, I see no reason to interfere with the judgement under appeal. The appeal is dismissed. All interim orders are vacated. There will be no order as to costs. [Order per : Umesh Chandra Banerjee. J]. - I have had the privilege of going through the judgment of my learned Brother and I respectfully record my concurrence with the conclusion reached, but since the matter has been argued at great length for days together, my judicial conscience prompts to record my own reasons in the matter. 124. Basically the writ court does not and ought not to interfere with the Findings of fact. As early as in 1964 the Supreme Court in Syed Yakub's case (Syed Yakub v. K.S. Radhakrishanan reported in AIR 1964 SC 477) observe....
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.... evidence or where the Finding is inconsistent with the evidence or contradictory of it or it has acted on material partly relevant and partly irrelevant or where the Tribunal draws upon its own imagination, imports facts and circumstances not apparent from the record or bases its conclusions on mere conjecture or surmises or where no person judicially acting and properly instructed as to the relevant law could have come to the determination reached. In all such cases the Findings arrived at are vitiated". 127. While dealing with the matter the Supreme Court in the last noted case considered in extenso the views expressed by Lord Radecliffe in Edward v. Bair Stow (1956) A.C. 14 as also the views expressed by Viscount Simonds in (1955) 3 WLR 410. Lord Radecliffe in the case noted above observed : "As I see it, the reason why the Courts do not interfere with Commissioner's findings or determinations when they really do involve nothing but questions of fact is not any supposed advantage in the Commissioners of great experience in matters of business or any other matters. The reason is simply that by the system that has been set up the Commissioners are the First tribunal to try ....
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...., there ought not to be any appraisal of evidence or collation of evidence. But the Court's duty is restricted to the fact as to whether there exists any evidence for the purpose of issuance of show cause notice or whether on the basis of the evidence on record any reasonable man can come to a conclusion for further enquiry into the matter by way of issuance of a show cause notice. The other aspect of the matter ought to be kept in mind while dealing on this score that this is not a trial, neither a High Court can be termed into an adjudicating authority - no proof as such is required but merely some evidence on record to show that there exists a prima facie case for the adjudicator to adjudicate on the basis of the show cause notice. In the event the revenue is successful in its bid to show that a prima facie case has been made out for adjudication, the Court's jurisdiction ends at that juncture. But in the event however the Court comes to a conclusion that there exists no evidence whatsoever and the issuance of a show cause notice is a mere perversity or in colourable exercise of power the Court ought not to hesitate to strike down the show cause notice, as harassment cannot be t....
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....hased on principal to principal basis, by approximately about 620 wholesale dealers and the wholesalers in their turn sell the cigarettes to secondary wholesalers numbering approximately 50,000 or directly to retailers. The secondary wholesalers in turn sell the cigarettes to retailers all over India including those in the farthest villages and remotest regions which the company approximates must number about 10 lakhs. The company, it is stated, has privity of contract only with the wholesalers and has no contract or relationship with the secondary wholesalers or the retailers. The appellant contended that in terms of the requirement of law, the company has paid from 1983 to 1987, a total sum of Rs. 2441 crores as and by way of excise duty. This duty admittedly has been paid by the company on the basis of the price printed on the cigarette packets as per the requirement of law. The appellant contended that the money paid was duly accepted without any protest and demur. 133. As appears from the record, prior to 1st March, 1983 the rate of excise duty for cigarettes was required to be determined with reference to value, that is, the wholesale cash price or the normal price of the ....
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....fraudulently declared to the proper officer and on the cigarette packets lower sale price with clear intent to evade payment of appropriate duty and availed itself the exempted rates as applicable to cigarettes with lower sale prices. The show cause notice further records that the company wilfully suppressed the fact that the prices printed on the cigarette packets were false and have been deliberately so printed lower to facilitate the payment of duty at lower rates as per the exemption granted under several Notifications and as such the company has rendered itself liable for payment of duty short paid in respect of all its five factories to the extent of Rs. 8,03,77,96,850.46 p. 136. Subsequent to the said show cause notice, a Corrigendum was issued by the self-same officer wherein it has been stated that the concept of effective prices has been arrived at on the basis of various prices actually fixed by ITC and circulated through its private and confidential prices circulars from time to time. 137. As appears from the show cause notice, the substance of the charge is that during 1st March, 1983 and 20lh February, 1987 the appellant had paid excise duty on clearance of ciga....
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....se notice, since there is first an exemption and secondly as the law stands in terms of the Notification, the appellant was at liberty to fix maximum price on the packet itself and the Central Excise Authority cannot claim realisation of any amount based on actual prices to consumers or effective prices in the retail market as the same was expressly exempted; what price would be marked at the packets, was left entirely to the manufacturer and no intervention, no enquiry, or any adjudication as to the correctness of the market price can be had. On the similar vein Mr. R.C. Deb appearing for the appellant in the appeal preferred by the shareholder also submitted that manufacturers' freedom to mark maximum price on the basis of the appropriate commercial consideration was not restrictive in nature and the Packaged Commodities Rules read with the Notifications expressly excluded approval of price thereby rendering a free hand to the manufacturer in the matter of fixation of maximum price. In other words, Mr. Deb contended, approval of price was expressly excluded on payment. It was contended that had it been the intention to levy duty on the basis of actual price charged to consumer, t....
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.... correct appreciation of the law on the subject, considering the well-settled principles of law. But non-consideration of relevant evidence or procedure without any evidence is an error of law which can be gone into by the writ court while dealing with the show cause notice. It does not amount to collation or appreciation of evidence. Syed Yakub's case (supra) has settled the law on that score. 142. It is at this juncture that the submission of Mr. Sen on the show cause notice itself ought to be noted. Mr. Sen submitted that analysis of the show cause notice will show that the basis of the principle allegation in the show cause notice is that the ITC had fixed effective price for its different brands clandestinely simultaneously with the printed price and had communicated the same down the line to the retailers for their compliance. On this aspect the show cause notice itself relies upon certain working sheets of branches as also of the wholesale dealers, certain blind notes, the sales analysis sheets and the launch reports together with the oral evidence of several persons. It is the submission of the appellant that the same does not amount to any evidence at all. Mr. Sen's def....
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....ctive price prevailing in the country would go to show and indicate, it was contended, that the same cannot be the creation of one agency, but of various agencies and it cannot but be a handy work of the different retailers' associations in different parts of the country. 143. In support of his contention Mr. Sen placed various documents, computerised charts as also the evidence taken by the Excise Officers after the search and seizure effected at the ITC Premises. The issue remains to be seen as to whether on the materials available on record, it can be said that there exists no evidence whatsoever for the issuance of a show cause notice. 144. Mr. Advocate-General in counter to the submission submitted that the action plan and the pricing strategy of the company unmistakably suggest that it is the ITC's manipulation which brings into existence the concept of effective price which is at variance with the printed price. Mr. Advocate-General further drew the attention of this Court to a document with the Heading "Revised Trade Price/Margin -W.E.F. 1986". This particular document as appears from the evidence has been in the handwriting of one Mr. Debashis Roy of ITC Ltd. and it ....
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.... the price structure is also apparent and clear from the same. As an illustration, Mr. Advocate-General drew the attention of this Court that India Filter King Cigarette is being sold to WD under the Heading "Price to W.D." at Rs. 876.20 and a price of S.W. in non-entry tax area has been fixed at Rs. 895.50 thereby having a total S.W. margin to the extent Rs. 4.40 and the price to retailer has been fixed at Rs. 899.90 leaving the retailers' margin cloumn .......(blank). Mr. Advocate-General also commented that with Rs. 899.90, the retailers are left with a margin of 10 P. after investing Rs. 900/- which is an absurdity. No person having investment of a sum of Rs. 900/- would be content with a total margin of 10 P. and admittedly this has been the creation of ITC Ltd. and that is also the precise reason, why the retailers have been asked to charge Rs. 19/- per packet of cigarette instead of Rs. 18/- as printed so as to give them a reasonable margin of Rs. 1.10 P. per packet. Mr. Advocate-General submitted very strongly that the same is the creation of ITC and not the resultant effect of the market force - neither this document can be said to be a working sheet, since it is prospecti....
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.... aside the show cause notice. The issue remains to be seen as to whether from the above, it can be said that there exists no evidence at all. In the event it appears to Court that there is likelihood of the same being taken into consideration by the adjudicator, the Court will not consider the matter further in that perspective, since the same is within the domain of the adjudicator. 145. From the narration as above, in my view, it cannot be said that it does not disclose even a prima facie case to be gone into by the adjudicator. In the instant case on the factual score, therefore, the allegations in the show cause notice, I am of the view does disclose at least prima facie that there is a case for adjudication before the concerned authority. As such, the contention of Mr. Sen as regards no evidence cannot be sustained. 146. The other aspect of the matter connected with the factual score is that by reason of the Notifications starting from 1st March, 1983 till September, 1985, a determinate standard has been fixed for the purpose of levy of excise duty. To read from the Notification a power for the Excise authorities to levy a duty on the basis of speculative and indetermina....
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....siderations are irrelevant in interpreting tax laws and there is no scope for any equitable construction to be put on a taxing statute. Numerous decisions have been cited in support of his contention in regard to the above. As regards interpretation of a fiscal statute and equitable considerations being irrelevant, there cannot he any doubt about the same and the law is well-settled on that score and I need not dilate much on that. But before proceeding into further, the learned Advocate-General's contention ought also to be noted at this juncture. Mr. Advocate-General contended that Exemption Notifications are complete Code in themselves and have got independent statutory force and the requirements of the Notifications are clear, precise and unambiguous. The clear requirement of the Notifications are to be complied with in order to avail benefit of the exempted rates of duty and no manufacturer can claim any larger benefit in respect of the fiscal liability than what is contemplated under the relevant Notification by adopting dubious methods. Mr. Advocate-General submitted that it is wrong to contend that the Notifications have made the maximum price printed on the packets as the ....
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....lanation 2, the Notifications envisaged an obligation on the part of the manufacturer to make a declaration on the packages of cigarettes for retail sale specifying the maximum sale prices thereof. It was contended that the obligation of the manufacturer in this respect is clear that the maximum sale price as determined by the manufacturer for the retail sale of a packet of cigarette shall be declared on such packets. But definition of the term "sale price" means the maximum price at which such packet may be sold in accordance with the declaration made. 149. I am in agreement with the contention of Mr. Advocate-General that this definition of sale price cannot be interpreted in isolation from the declaration of the maximum sale price. The charging provision as appears from the table under the Notification provides the rate of duty for cigarettes being cigarettes packed in packages of which the adjusted sale price ought to be taken note of for the purpose of calculation of duly. Having regard to the definition of adjusted sale price, it cannot but mean maximum retail sale price, and a plain reading of Explanation 2 under the Notification of 1983 makes the position abundantly clea....
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....iguous and unequivocal. The plain meaning of the expression maximum sale price as appearing in Explanation 2 of the Notification, it can only mean retail price and not maximum sale price to retailer and the words "May be sold" appearing in the Notifications ought to be interpreted as ordinarily sold to the ultimate consumer in the market. Otherwise, it would be doing a violent injustice to the language used in the Notification. 152. Strong criticism has been levelled by Mr. Sen as also Mr. Deb appearing for the appellant in the two appeals before us, that there exists no guidelines as appears from Drug Control Order, 1977. But on a plain reading of the instant Notification, the manufacturer of a cigarette is left free to allow as much margin as it likes or to fix whatever price as it likes. But the fact remains, it must give a true and correct declaration as regards the price of the package itself and the same cannot but be termed to be an independent obligation on the manufacturer which must be complied with in order to obtain benefit of the exempted rates of duty. 153. The next contention on behalf of the appellant is bias and the consequent disqualification of the responde....
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....ied himself from discharging his function. In support of his submissions, strong reliance has been placed on the decision of the House of Lords in Franklin's case (Franklin and Ors. v. Minister of Town & Country Planning reported in 1948 AC 87) in that decision Lord Thakerton observed : "I could wish that the use of the word 'bias' should be confined to its proper spheres. Its proper significance, in my opinion, is to denote a departure from the standard of even handed justice which the law requires from those who occupy judicial office, or those who are commonly regarded as holding a quasi-judicial office, such as, an Arbitrator. The reason for this clearly is that, having to adjudicate as between two or more parties, he must come to his adjudication with an independent mind without any inclination or bias towards one side or other in the dispute." 155. At this juncture, however, let us now consider the Press statement in a little bit more elaborately. The respondent No. 3 has not made any statement indicating the amounts alleged to have been evaded by the appellant-company nor did be make any announcement justifying the rate. He only answered certain enquiries of a Press Re....
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....ut since he is highly interested in dispensing the reward scheme amongst his officers which will not be possible, unless this adjudication goes against the appellant, it cannot but be said that the respondent No. 3 is interested in the adjudication proceeding and in coming to a conclusion of evasion of duty to its maximum extent so as to benefit the subordinate staff under him. Though some amount of discrepancy is there in the pleading, viz., in the petition and the affidavit-in-reply, but ignoring the same, however, the issue arises for consideration as to whether there can be any departmental or institutional bias as against the statutory authority, because of a reward scheme. Section 22 of the Central Excises and Salt Act, 1944 provides for penalty in the event of a vexatious search. Can it possibly be comprehended that the Director, Anti-Evasion Directorate would take his reputation and his career with a vexatious search in order to succeed in the remote possibility of obtaining a reward for his subordinate staff - in my view, the answer is in the negative. Incidentally it is to be noted that the Director, Anti-Evasion Directorate has been clothed with statutory power to adjudi....
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....ce. In this context the speech of the Member Budget was also taken recourse to wherein the Member Budget has stated: "The industry is highly competitive. Each one is trying to hold on to the area where they are having much shares, so we thought that the market force could take care of the situation. As far as revenue from this commodity is concerned, we have to have a particular target for this commodity and as long as it is coming from this commodity, we should not worry ourselves too much on this account. There is no doubt that there is a certain extent of avoidance or contravention of the law which relates to the selling of cigarettes at a price higher than what is printed and that is nothing new........after taking into account of these matters and then a conscious decision was taken that instead of keeping large amounts of revenue blocked, we should move over to a system on a purely experimental basis......." 161. The further statement of Minister of Finance, Department of Revenue, to the Public Accounts Committee has also been taken recourse to by the appellant. In that statement it has been recorded: "The declaration of the maximum retail price on all commodities de....
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....cuments and evidences were relied upon to show the appellant's involvement in the matter of a two-tier pricing system, but I am afraid, no observations can or ought to be made at this juncture. Suffice it to record, however, that merely because there is no requirement of law as regards approval of printed price, that by itself does not clothe an assessee to mis-declare a price which is not the actual end selling price. 164. On the issue of differential duty calculation, strenuous submissions have been made by Mr. Sen. But in my view, same cannot be also gone into by the High Court in the writ jurisdiction as the same is a question of fact to be decided by the adjudicator. In any event, it is only a rough and ready calculation which has been effected by the revenue authority and it is for the ITC to show before the authority concerned that the same suffers from any vice or the calculation is utterly baseless. Stage has not come for intervention for the writ court on this score. 165. Mr. R.C. Deb appearing for the appellant in the Second Appeal on behalf of the shareholder also contended that price printed by the manufacturer on the package itself is the only lawful basis of th....
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.... prima facie case at this stage of the proceeding would be sufficient to direct the matter to be proceeded with before the adjudicator since no proof is required at this juncture. 167. The other incidental issue is in regard to the 'flow back' on which strenuous submissions have been made by the appellant to the effect that unless there is definite evidence of 'flow back' by reason of the over-charging, question of contravention of any statutory provision does not and cannot arise neither any show cause notice can be issued on the basis thereof. A definite case has been made out by the Revenue that ITC Ltd. practised fraud on the exchequer. The revenue went on to say that a dual pricing strategy has been introduced and margin of the retailers has been slashed down to a minimum of 10 P. per thousand cigarettes for all brands would in effect, assuming everything in favour of the appellant, would go to show undue profit on the part of the ITC Ltd. 168. Slashing down the retailers' margin ought to be considered in little more greater detail at this juncture. Whereas, Mr. Sen submitted that it is the new rate of excise duty which could not give any better margin to a retailer and ....
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....then placed before him, but the same were placed before him from time to time as and when they were seized and recorded and relying upon such statement Mr. Advocate-General contended, question of there being any hot haste in the matter of issuance of the show cause notice does not and cannot arise. 171. Expeditious action of a government authority cannot be taken to be non-application of mind. The act or acts on the part of the governmental authority will have to be judged independently and if on the factual score it appears otherwise, then and in that event only the Courts will strike down the action by reason of the same being vitiated by non-application of mind. The contention of present day sluggish attitude of a governmental authority and assuming it be so, though however cannot be justified does not warrant the law courts to quash a show cause notice on the ground of non-application of mind by reason of the fact that the concerned officer has acted with utmost promptitude. Governmental action must be fair, reasonable and with utmost expedition. No amount of laxity can be allowed on that score. Order of the day as submitted cannot be said to be the basis of a governmental a....