Full Judgment
Bhagabati Prasad Banerjee, J.
1. This writ application was moved by the petitioner company against a show cause notice dated 27th March, 1987 issued by Shri N. K. Bajpai, Director, Directorate of Ami Evasion (Central Excise) New Delhi, whereby the petitioner company was, inter alia, directed to show cause why Central Excise Duty to the extent of Rs. 803.75 crores which was allegedly short paid by the.petitioner company should not be demanded under the provisions of Section 11A of the Central Excises and Salt Act, 1944 read with Rule 9(2) of the Central Excise Rules.
2. The facts, in short, relevant for the purpose of determination of the questions raised in this case are as follows : --
The petitioner company is engaged in manufacturing of cigarettes having its registered office at Calcutta and have five factories situated at Bombay, Bangalore, Saharanpur Munger and Calcutta respectively. The petitioner company sells cigarette manufactured by it through wholeseller, secondary wholesellers and retailers. The petitioner company also had been getting their brands of cigarettes 'manufactured on job basis from other tobacco companies which are mentioned in the show cause notice. Prior to 1st March, 1983 the cigarettes were liable to excise duty under item 4 11(2) of the first schedule of the said Act and were liable to excise duty under Chap. 24 of the Central Excise Tariff Act, 1985. The valuation of the excisable goods for the purpose of charging the excise duty was made in accordance with the provisions of Section 4 of the said Act. The said Tariff Act as prescribed under the said item was as follows :
DateBasic DutyAddl. DutySpl. Excise Duty
1-3-83Rs. 440/- per thousand or 300%Rs. 160/- per thousand or 100% ad. val. plus Rs. 12/- thousand whichever is higher
Nil1-3-84Rs. 440/- per thousand or 300% ad. val. plus Rs. 20/- per thousand whichever is higher
Rs. 260/- per thousand or 175% ad. val. plus Rs. 12/- per thousand whichever is higherNil25-3-85-do--do-10% of basic2-9-85-do--do-Nil
3. Thereafter the Central Government, in exercise of its power under Rule 8 of the Central Excise Rules, issued Notifications from time to time granting exemption and providing for a lower and concessional rate of excise duty on cigarettes than ordinarily prescribed under the Act. Prior to 1st March, 1983 the amount of duty was required to be determined with reference to the wholesale cash price of the exercisable goods determined in accordance with the principles laid down under Section 4 of the said Act. After 1st March, 1983 by a Notification dated 27-2-86 issued under Rule 8 of the Central Excise Rules, the rates of duty for cigarettes were related to various specific slab rates for which different rates of cigarettes were placed depending upon the retail price of package of cigarette, in other words, the rate of excise duty was made specific for different values depending upon the retail price of the cigarettes and that the duty was levied according to the rates prescribed. For the purpose of determination of the amount of excise duty payable under the Notifications issued under Rule 8 of the said Rules, the Central Government from time to time issued Notifications changing the rates. It is not necessary to set out the said rates which were amended from time to time but only for the purpose of this writ application the rate introduced by the Notification dated 2-9-85 is mentioned for the purpose of understanding the case made out in the show cause noticeand the case made by the parties before this Court which is as follows :
TABLE
DescriptionRate
(1)(2)
Cigarettes (being cigarettes packed in packages) of which the adjusted sale price per one thousand --
(i)does not exceed rupees sixtyforty-two rupees per one thousand;(ii)exceeds rupees sixty but does not exceed 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;
The said Notification, inter alia, provided certain definitions which are necessary to be set out in this connection :
(a) 'adjusted sale price', in relation to each cigarette contained in a package of cigarettes, means the unit price arrived at by dividing the sale price of such package by the number of cigarettes in such package;
(b) 'cigarettes packed in packages', means cigarettes which are packed for retail sale, in packages which -
(a) contain 10 or 20 cigarettes, and
(b) bear a declaration specifying the maximum sale price thereof as the amount specified in the declaration, plus local taxes only;.
(c) 'sale price' in relation to a package of cigarettes means the maximum price (exclusive of local taxes only) at which such packages to be sold in accordance with the declaration made on such package.'
4. In the show.cause notice it was allegedthat the excise duty was short paid by thepetitioner company inasmuch as the petitionerdeliberately paid duty at a lesser rate on thebasis of declaration and printing incorretprices on the packages of cigarettes, and it is stated that on proper interpretation of the said Notification the petitioner Company was required to declare and state on the package of cigarette the maximum retail price or in other words, the price at which the said cigarettes are intended to be sold by the petitioner company. The petitioner company, it is alleged, printed a price as the sale price on packages of cigarettes knowing fully well that the same was not the price at which it is to be sold in the market by the retailer and on the basis of such wilful misstatement with regard to the sale price printed on the packages of cigarettes the petitioner took the advantage of the lower rate of duty, whereas the petitipner company at the same time fixed another price as the 'effective price' which was circulated through unsigned blind notes, circulars and instructions to the wholesellers and retailers and thereby controlling the prices prevailing in the market which was admittedly higher than the 'sale price' printed on the cigarettes. In the show cause notice the period for which the show cause notice was issued was from 1st March, 1983 to 27th Feb., 1987 and it was alleged that during this period the petitioner company declared and/or printed a sale price which was not the proper price and/or the maximum retail price, but deliberately printed a lower price and paid lesser duty on the basis of such lower price printed on the packages of cigarettes and thereby deliberately evaded Rs. 803.75 crore on account of excise duty.
5. The show cause notice was issued after the respondents had seized large number of documents and records on the basis of Searches conducted in various offices of the petitioner company situated at different parts of India and on examination of the seized documents and records as well as the statements obtained during such search and seizure, from varios persons including top officials of the petitioner company wherein it was admitted that the printed sale price was in some cases below the effective price; viz. the price at which the petitioner company intended the same to be sold in the market. It also transpired from the seized documents and records, particularly from various charges on which reliance was placed by the respondents in the affidavit-in-opposition, that the sale price printed in the packages of cigarettes were far below the effective price and that the petitioner company was controlling the margin' of profit of the wholesale dealers, secondary wholesale dealers and retailers to suit the convenience and design of the petitioner company. The petitioner company, it is alleged, had chosen to communicate such margin of profit in a clandestine manner drastically reducing the margin available to wholesale dealers, retailers immediately after the budgetary changes made in the year 1983 while increased their sale price and the sale realisation. It also transpired from the seized documents that by this pricing strategy process, the margin left for the retailers was reduced to only 10 paise per one thousand cigarettes and that it was stated that it was practically impossible on the part of any retailer to sell 1000 sticks of cigarettes at a total margin of profit of 10 paise only. The 'effective price' that was introduced by the petitioner company was the price at which the retailers would sell and as a matter of fact sold the goods at such effective prices in the market. It is stated that the petitioner company fixed one price for the purpose of levy and collecion of duty only and fixed another price for the purpose of selling the same in the market and that by this process it is stated that there had been large scale evasion of excise duty to the extent indicated above. From the various exhibits filed before this Court it is clearly evidentthat the effective price that was fixed for selling the goods in the market was higher than the maximum sale price printed on the package of cigarettes in most of the cases. It would be sufficient if only one such example is highlighted which is necessary for the purpose of understanding the main ground for challenge of the show cause notice before this Court. In one case the petitioner company printed Rs. 1.70 paise on the packages of a particular brand of cigarettes as sale price and according to the slab rate of duty prescribed in this behalf the petitioner company paid Re. 125/- per thousand and that by issuing circulars/blind notes/secret instructions, the petitioner company fixed another price as 'effective price' for the self same commodity at Rs. 2/-, and if the effective price of Rs. 2/- per packet was taken to be the maximum retail price as per the notifications, in that event the petitioner, company had to pay excise duty at the slab rate of Rs. 225/- per thousand cigarettes. From this example it will be evident that the difference between the printed price and the effective price had the effect of changing the slab rate altogether and according to the revenue it was the duty cast upon the petitioner to pay excise duty on the basis of the effective price and by not paying the same on that basis, the petitioner had evaded large amount of Central Excise Duty by wilful misstatement. But according to the petitioner the sale price that was printed on the packages of cigarettes was made strictly in accordance with the provisions of the said notification, i inasmuch as, the petitioner had no statutory obligation and/or duty to print a sale price at which the goods must be sold in the market. The petitioner had no manner of control over the retal price and the petitioner company could not be made table for selling the cigarette at a price higher than the printed price in the market. It is stated that, the revenue did not raise any objection to the pricing method adopted by the petitioner and when the rules were changed requiring the petitioner company to get the price list approved, the revenue also approved the price list as it is, submitted by the petitioner company. This state of affairs continued/until the search and seizure were made_ by_ therevenue whereupon certain papers and documents were obtained and on the basis of the examination of the same the impugned show cause notice was issued against the petitioner company on the allegation that the petitioner company by adopting a pricing strategy, fixing one price for the purpose of payment of excise and the other for the purpose of sale in the market and the marketing strategy was also fully controlled by the petitioner. This show cause notice by which the petitioner was called upon to pay the deficit excise duty paid by the petitioner during this period to the extent of Rs. 804.75 crores.
6. Mr. Nariman, the learned Advocate appearing on behalf of the petitioner made the following submissions in support of the writ application :
(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 misstatement and/or misrepresentation made by the petitioner company in the matter of printing the sale price on the packages of cigarette for the purpose of payment of excise duty.
(b) That on the basis of rules of interpretation contemporanea 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 years and to claim that the prices were not correctly declared and that for not correctly declaring the sale price there had been evasion of excise duty.
(c) On a true interpretation of the provision of Section 11A read with the provisions of Sections 35A, 35EE of the said Act the impugned notice is liable to be set aside inasmuch as, the power under Section 11A of the said Act could not be invoked in a case where payments have already been made on the basis of the price list and the matter was finally concluded andthat the provisions of Section 11A of the said Act , would only be invoked as a machinery provision in aid of the powers conferred on the appellate and revisional jurisdiction underSections 35A and 35EE of the said Act.
(d) That the notification No. 215/86 Central Excise New Delhi dated 27-3-86 was ultra vires the provision of the Act and did not and could not confer any power upon the respondent No. 3 -- Sri N. K. Bajpayee to exercise the powers of the collector under proviso to Sub-section (1) of Section 11A of the said Act and as such the impugned show cause notice issued by Sri N. K. Bajpai, respondent No. 3 is, on the face of it, was illegal and without jurisdiction.
(e) That the respondent No. 3 had disqualified himself to act as an adjudicator in the matter, inasmuch as, after the search and seizure he had made certain prejudicial statements in the press and that under the reward rules the respondent No. 3 and the officers working under him were entitled to a reward thereby created an interest in favour of the respondent No. 3 did his department and further the entire search and seizure throughout the country was made under the supervision and control of the respondent No. 3 who had occasion to know the affairs of the petitioners company not only from the materials recovered from the search and seizure but also from other sources including the Intelligence Report and as such on the ground of bias and 'personal interest' the respondent No. 3 should not be allowed to act as an adjudicator in the matter.
7. A preliminary objection was taken on behalf of the Revenue as to the maintainability of the writ application against the show cause notice and that such a preliminary objection has to be disposed of before I can proceed on to the merits of the case. Ordinarily a writ petition is not maintainable against a show cause notice inasmuch as, when a show cause notice is issued, the party gets an opportunity to place his case before the authority concerned and there are elaborate procedures by way of an appeal and/or revision againstsuch order passed in such proceedings. But when a case is made out that the show cause notice was issued without jurisdiction and without the authority of law or that the show cause notice on the basis of the admitted facts is not maintainable in law, the writ petition would be maintainable and the writ court can undertake a limited scrutiny on the points raised in the petition to find out whether there was any jurisdictional error and/or any legal infirmity in the proceeding. In the instant case it is alleged that the show cause notice was issued on the basis of an erroneous interpretation of the provisions of 'the notification in the question which was issued under Rule 8 of the said Rules and in law there had been no misstatement or misrepresentation regarding the sale price and there had been no evasion of excise duty. It was alleged that on the basis of the admitted facts, this point could be decided. In the writ petition it was alleged that the respondent No. 3 had no jurisdiction to act as a Collector on the strength of the notification No. 215/86 dated 27-3-86 and also alleged bias against the respondent No. 3, who had issued the show cause notice and who would be acting as an adjudicator in the matter. These questions raised in the petition, in my view could be appropriately decided in the present writ application. Of course, the question whether there had been evasion of duty in the facts and circumstances of the case is a mixed question of law and fact and that at this stage, the writ Court cannot go into the questions of fact far less disputed questions of fact. But if the writ Court can decide the question on the basis of the admitted facts, in that event, the writ petition could be held to be maintainable. If it appears to the writ Court that the proceeding suffers from a legal infirmity which goes into the root of the case and is not curable during the proceeding, in my view, the party cannot be directed to submit to the jurisdiction of the authority concerned and to undergo the proceeding which would ultimately fail. Considering the fact and circumstances of the case, I overrule the preliminary objection raised on behalf of the Revenue because of the nature of the allegations and points raised in the writ application, which will be dealt with hereunder:
8. Submission on point (a) : In support of the contention that the show cause notice issued without any authority of law or jurisdiction, Mr. Nariman, the learned Advocate, appearing on behalf of the petitioner made the following submissions;
Under the notification in question which was issued under Rule 8 of the said Rules the only requirement was on the part of the petitioner to print a sale price on each package of cigarette. There was no indication in the definition that it must be the actual sale price or the maximum retail price. Reference was also made to the definition of 'sale price', i under the Weights and Measures (Packaged Commodites) Act, 1976 and the rules framed thereunder (hereinafter referred to as the Packaged Commodities Rules) where certain guidelines are provided for fixing the maximum retail price and that in this particular case it is alleged that the petitioner company had no obligation or duty to print the maximum retail sale price or the actual market price at which the goods are likely to be sold in the market. The only requirement to print a sale price was solely for the purpose of payment of excise duty on the basis of such sale price printed thereon. The legislature did not provide any guideline for fixing of the sale price and/or any machinery for having supervision over such fixation of sale price, nor the legislature provide any provision for reviewing and/or revising the sale price so fixed. The petitioner's case is that whatever price that is printed on the package of cigarette was finally binding and conclusive on the parties which could not be reopened or questioned at a later stage. The petitioner company on coming to know that: the cigarettes manufactured by the petitioner company were sold at 10% above the printed price, started making representations before the revenue drawing their attention to this aspect of the matter, to which the revenue did not take any exception but on the contrary the revenue sought for suggestions from the petitioner company and ultimately with effect from 1-4-87 the duty is being levied on the ' basis of the length of the cigarettes and not on the basis of the sale price of such cigarettes to avoid the controversy. The petitionercompany alleged that the petitioner acted in the matter bona fide and paid duty on the basis of the declared price as per the schedule of rates provided in this behalf. As the revenue did not take any exception in the matter and as such according to the petitioner it must be deemed that the revenue who was responsible for administering the law accepted this position. Under the Packaged Commodity Rules there is a provision for prosecution for selling the commodities at price higher than the printed price. In this case, the petitioner sold the cigarettes at a price below the printed price to the wholeseller and the wholesale dealer and the secondary wholesellers also sold the cigarettes to the retailers art a price less than the printed price. The petitioner company it was stated was not concerned at what price the retailers would sell the same in the market. It is stated that if the retailer sells the cigarettes at a price higher than the printed price in that event such retailers were liable for prosecution under the Packaged Commodity Rules. Under the Package Commodity Rules there was no obligation upon the petitioner company to print a sale price at which the same was liable to be sold by the retailers.
9. The petitioner's case is that the fact that the cigarettes were sold in the market higher than the printed price was also known to the revenue. It-was evident from the fact that before the Public Accounts Committee (1985-86) the Member (Budget) stated in evidence that -
'It is leviable on the goods. It is the basis for classification of the goods for determining the duty payable. The formula would depend upon the amount which the Government would like to realise by way of excise duty. What we are interested is to collect a certain amount of duty from a particular industry, The rate of duty is accordingly fixed. Ad valorem duty is based on the value of the goods. Specific rate is directly related to the produce. So. it was decided that we could adopt a formula linked to printed retail price for classification of the goods for decidingthe amount of duty that this particular commodity should bear. Even at that time we were conscious of the fact that there could be an over charging of the prices by the' retailers. But according to Packaged Commodities Rules, the retailer were bound to sell the goods at that particular price; and if the prices were more there was a legal provision for taking action against the retailers.
10. Subsequently the notification was amended which required that, before printing the sale price, the petitioner had to get the price list approved by the revenue and as a matter of fact such sale prices as printed on the package of cigarettes was approved as it is, without taking any exception in spite of the fact that the revenue was all along aware that the cigarettes manufactured by the petitioner company were sold at a price 10% higher than the printed price. According to the petitioner on a true and proper construction of the term 'sale price' in the notification in question it must be held that it must not be the maximum price at which the said package may be sold in the market. The words 'may be' according to Mr. Nariman indicates that it is more directory and not mandatory. If it was the intention of the legislature that it must be sold and not may be sold, in that event the legislature should have used such expression in the notification in clear words. By any stretch of imagination, the words 'may be sold' in accordance with the declaration made on such packets cannot be held to mean that the commodity must be sold on the basis of the declaration so made by the petitioner company. If the intention of the legislature was that the 'sale price' must be the price at which the commodity must be sold in the market or capable of being sold in the market, in that event the legislature should have used the expression 'maximum retail price' or such other terms which might indicate that it must be the actual market price. According to Mr. Nariman, -the Packaged Commodity Rules provided twodifferent expression for 'sale price', in Section 2(s) of the Packaged Commodity Rules, one in Clause (i) and another in Clause (ii) and that the said two independent definitions disclosed standards and/or guideline to be followed differently, whereas the impugned notification did not provide any guideline and in the absence of the use of the words 'maximum sale price' without providing any definition therefor it must be held that the impugned notification only required the printing of a sale price which heed not be the retail price or the maximum sale price or the actual sale price at which the goods in question are sold and/or intended to be sold and/or capable of being soId.The definition of the sale price according to Mr. Nariman was nothing but a recommendatory price and not the market price. It is stated that the interpretation sought to be given by ihe revenue at this stage was nothing but an afterthought only for the purpose saddling the petitioner company with some huge liabilities which was unwarranted under the law.
11. It was further contended by Mr. Nariman that Section 11A of the said Act could only be invoked where short levy or short payment of duty could be ascertained and/or determined on the basis of some mistake committed by the parties on record. But provision of Section 11A could not be invoked alleging that there had been short levy and/or short payment of duty on the basis of some interpretation of the notification in question given in a manner which is contrary to the long standing practice and understanding which was accepted by the revenue. It was stated that the Revenue was fully conscious and aware of the sale price which was fixed by the petitioner for the purpose of payment of excise duty and was continuously administering the law on the basis that whatever price that is printed by the petitioner was made upon duty compliance with the law. Section 11A of the said Act did not contemplate a proceeding for recovery on the basis of review of the whole situation and/or mere change of the opinion after the lapse of so many years. It is stated that in a fiscal statute unless the wordsare clear, such a proceeding which is unwarranted in law could not be initialed by exercise of any inherent power.
12. On the question of interpretation of the fiscal notification Mr. Nariman relied on a case of the Supreme Court in Hansraj Gordhandas v. H. H. Dave, reported in : [1969]2SCR253 where the Supreme Court observed that it is well established that in a taxing statute there is no rule for any intendment. The entire matter is to be governed wholly by the language of the notification. If the taxpayer is entitled to get any benefit on the basis of the plain term of the expression, it could not be denied its benefit by resorting to any supposed intention of the Exempting Authority.
13. Reliance was also placed in the decision of this Court in case of M/s. Mangla Brothers v. Collector of Customs, reported in : AIR1985 Cal122 in which A. K. Sengupta, J. of this Court held that with the change of the officer there could not be any change of the opinion as that will amount to review of the order which the Custom Authority had not been conferred under the Customs Act. In this case goods were cleared under Section 47 of the Customs Act and thereafter the successors-in-office sought to review the same and contended that the goods were not liable to be cleared and in that context it was held that in the absence of power conferred to review an earlier order, the successor-in-office was bound by the earlier view.
14. Reference was also made to theseveral other decisions of several otherTribunals which is not necessary to set outinasmuch as this principle is well established: that a notification has to be construed on thebasis of the plain language used and in theabsence of express power conferred by law,there is no inherent power of review of astatutory order by the successor-in-office onthe basis of the change of opinion and cannotignore the decision already taken by thepredcessor-in-office.
15. Mr. Naranarayan Gooptu, Advocate General of State of West Bengal, appearingon behalf of the respondent No. 1, Union of India, submitted that the requirement of the notification was clear, precise and unambiguous. The notification defined the term 'sale pripe' which is an independent definition and the meaning is so clear that it does not require exercise of any skill or requires any extraneous aid for its interpretation. It was the statutory duty and/or the obligation on the part of the petitioner company to declare the maximum sale price of the packages of cigarettee. Mr. Advocate General submitted that on true and proper construction of the definition provided in the said notification, it was crystal clear that the petitioner had to declare the sale price correctly inasmuch as, on the basis of such sale price, duty was leviable and collected but it appeared that the petitioner had committed fraud, wilful misstatement and , suppression of fact by deliberating a printing price at a lower figure than really what was the maximum retail sale price thereof resulting in short levy and short payment of duty and under such circumstances, action could be taken straightway under Section 11A of the said Act against the petitioner company. It was further stated that under the exemption notification the petitioner had no liberty to declare any price as the sale price for the purpose of payment of duty. The maximum price thus printed, may be of recommendatory nature but such a price must be fixed bona fide and the same must be capable of being I sold in the market at that price. But in this i case the petitioner deliberately printed a lower price on the packages as the sale price for declaring the same to the exercise authority to avail of a lower rate of excise duty and at the same time fixed another price as the 'effective price' which was the market price and which was higher than the printed price, this according to Mr. Advocate General, amounts to fraud on the revenue and such a case is covered by provision of Section 11A of the said Act. It was further submitted that the overcharging of price by the retailers, if any, over the printed price has nothing to do with the exercise law, inasmuch as, it is only concerned with the manufacturer and the manufacturer in the instant case was under the statutory obligation of duty to fix and declare a maximum sale price on the packages. Such an act should be bona fide and should not be allowed to be done with an intention to evade the payment of lawful excise duty.
16. It was further submitted that whenthe prices are mentioned on the packages ofcigarette, in that event, the retailers are boundto sell the same at or below that price,otherwise it would be punishable under thePackaged Commodities Rule. When pricesare fixed by a manufacturer, the manufactureris wholly aware that under the existing law,namely, under the Packaged Commodities[ Rule, a price has to be fixed in such a mannerso that the same may be sold or capable ofbeing sold by the retailer in the ordinarycourse of trade or business. But in the instantcase, the petitioner fixed up a price in such a manner, that only 10 paise margin of profitwas left for the retailers for one thousandsticks of cigarettes, which is nothing but animpossibility and no reasonable man withordinary prudence could think that a retailercould sell one thousand pieces of cigarettesat a profit of .10 Paise only. It is furthersubmitted by Mr. Advocate General that theseized records and documents clearlyexhibited that the petitioner company wasfixing one price on the packages for thepurpose of payment of the excise duty at alower rate and simultaneously fixing anotherprice as 'effective price' at which the retailerscould sell the same at the market. From this,it is evident that the petitioner company wasmanouvring the whole affair in such a mannerthat the petitioner company had to pay lesseramount of excise duty and could earn hugeamount of profits by squeezing the margin ofprofits of the wholesellers and retailers andallowing the retailers to sell at a/price higherthan the printed price by fixing the effectiveprice. Mr. Advocate General submitted thatthe petitioner company could not be madeliable in cases where the retailers sell thegoods at a price higher than the printed priceof their own and if it can be shown that thepetitioner company had no hand in thismatter. But in the instant case the petitioner was controlling the retail market price by issuing of circulars/blind notes/secret instructions and that this was done with a mala fide motive and it would be evident from the 'fact that these blind notes, circulars/directions which were issued mostly unsigned and in some cases directed to the addressee that such notes should be destroyed after looking into it and this aspect of the matter became clear after recovery of the documents and papers on seizure. It is stated that this is a case where the petitioner company was conducting this affair in a clandestine manner and whole purpose was to cause loss to the revenue in a cool and calculated manner. Mr. Advocate General also pointed out that from the seized documents and records, it also appeared that the management decided to go on making representations perodically in a ritualistic manner complaining about the sale of the petitioner's cigarettes 10% above the printed price by the retailers and this fact, according to Mr. Advocate General, clearly indicated and established beyond doubt that the petitioner company was fully aware that what was done by the petitioner company by way of fixing the effective price over and above the sale price was illegal and unlawful. The petitioner company understood that the 'effective price' should have been the real sale price and should have been reflected on the package of cigarette for the purpose of payment of excise duty. It is further submitted that the maneuvring tactics was adopted by the petitioner company solely for the purpose of diverting the attention of the revenue, so that the revenue could not suspect that the petitioner had any role in the matter of selling the cigarettes at a higher price in the market. Mr. Advocate General submitted that this court should not interfere in a case like this, where fraud had been committed by the petitioner on the revenue in a highly sophisticated manner, which is required to be gone into in details by the adjudicating authority where the petitioner company will get every opportunity to place their defence and the adjudicating authority had to take a decision on the basis of the materials,documents and the records and upon hearing the petitioner and further if the decision ultimately goes against the petitioner the petitioner company had the liberty to file an appeal and/or revision and anything done in the matter would be open to further judicial review by the High Court or the Supreme Court.
17. Mr. A. K. Ganguly, the learnedAdvocate appearing on behalf of therespondent No. 2 Central Board of Excise &Customs; submitted that the notification inquestion did not create any difficulty and/orambiguity in the matter for ascertaining whatwas the duty cast upon the petitioner companyin order to avail of the concessional rate ofduty under the notification in question. Mr.Ganguly submitted, that the definition 'saleprice' should be read along with the definitionof the word 'cigarette packed in packages'and stated that if the said two definitions areread together, it makes abundantly clear, that,in order to avail of the concessional rate ofduty, the petitioner had to mention in thepackages of cigarette the maximum retailsale price and inasmuch as in the definitionof the words 'cigarette packed in packages',it is provided that for the purpose of thenotification, the cigarettes are packed forretail sale and must bear a declarationspecifying the maximum sale price and thedefinition of the word 'sale price' had to be. read in the context of cigarettes packed inpackages. Mr. Ganguly submitted that therecould not be any other possible interpretationof the word 'sale price'. Mr. Gangulysubmitted that it does not require any skill orextraordinary knowledge to understand theplain and the simple meaning of the words'sale price' which means that the petitionerhad to state the maximum retail sale price, inother words, the maximum price at which theI retailer can sell in the market. The expression'may be sold' in accordance with thedeclaration made on such package asappearing in the dfefinition of the 'sale price',implies that the manufacturer is duty boundto print the retail price of the packages ofwhich every retailer is enjoined under thelaw to sell the same to the consumers. It wassubmitted by Mr. Ganguly that no manufacturer under the scheme of the said exemption of notification, can be allowed to say that it would be proper compliance with the notification by merely printing a price, which is not the retail sale price. It is further submitted by Mr. Ganguly that it was not open to the petitioner to declare a price which according to the petitioner is not the retail sale price. The exemption of notification prescribed the requirements to be observed in order to avail the benefits thereunder and that in order to get benefit of such notification, the petitioner was required to declare the maximum retail sale price which it is stated admittedly had not been done and on the contrary, it was stated by Mr. Ganguly that the petitioner did not in fact print the maximum retail price but printed a price according to their choice which is not permissible at all. Mr. Ganguly stated that on plain reading of the notification in question if it is clear that the petitioner was under a , statutory duty to state the maximum retail sale price, in that event, the petitioner was guilty of wilful misstatement and suppression of material facts and the petitioner is guilty of not paying payment of proper duty and consequently the petitioner is liable to make good the loss caused to the revenue by such wilful misstatement contrary to the law. The petitioner it is stated, had no fundamental right to carry on business of intoxication like cigarette. The petitioners are granted only a privilege to do such a business on certain terms and conditions and strict payment of excise duty at the prescribed rate which is one of such conditions which the petitioner must comply. It is further submitted that the law recognised that the actual retail sale price of the Packaged Commodities to be one which every manufacturer is duty bound to print in accordance with Rule 2(s) read with Rules 3, 4 and 6 of the Standard of Weights & Measures (Packaged Commodities) Rules, 1977. 'Mr. Ganguly in support of this contention that exemptions of notification are to be construed in a manner which would ensure to the benefit of the revenue unlike the provision relating levy of tax, reference was made to the following case laws :
(a) Commr. of Income-tax v. Rule V. Naidu : [1956]59ITR529(SC) ,
(b) Nizam's Religious Endowment v. CIT, : [1966]59ITR582(SC) ,
(c) Controller of Estate Duty v. Venugopala, : [1976]105ITR593(SC) .
18. On the question that the statutedealing with evasion of tax should beconstrued literally as to prevent evasion,reliance was placed by Mr. Ganguly on apassage from Maxwel on Interpretation ofStatute, 12th Edition at page 137. It was furthersubmitted by Mr. Ganguly that it is a clearcase that as a result of such squeezing ofmargin and secret directions issued by thepetitioner company to the retailers to sell thecigarettes at an effective price which wasadmittedly higher than the maximum sale, price printed on such packages, which is theretail price, the petitioner benefited itself insome form or other, such as compelling thewhole sellers to keep in deposit huge moneyas a compulsory deposit and charging intereston the debit balance of such whole sellers. Itwas further submitted by Mr. Ganguly thatSection 11A of the said Act did not provideany condition precedent before exercise ofsuch power. The power can be exercised inthe instant case, if it could be established thatthere had been short payment of excise dutybecause of wilful misstatement and/or mis representation. It was submitted that on trueinterpretation of the notification it was a dutyof the petitioner company to print the pricecorrectly and if it is found that the petitionerhad not printed the price correctly andconsequently did not pay the proper duty, inthat event, there is no other restrictionimposed upon the power of the revenue torecover the same. It was further submitted byMr. Ganguly that on the basis of the materialson records it cannot be said that the Revenueacted without jurisdiction in issuing a showcause notice and that on true interpretationof the notification, it was made clear that thepetitioner availed of the concessional rate ina clandestine manner and as such thepetitioner is not entitled to any relief at thisstage before this Court.On Point 'B' :
19. Mr. Nariman next contended that the petitioners were encouraged or induced to follow the practice which they were following in the matter of printing sale price by the action and/or the inaction on the part of the revenue. It is stated that it is well established principle that under certain condition silence and/or inaction may constitute their representation in the positive language or conduct and in the instant case when the real state of affairs was known to the revenue, but still then the revenue was continuingly administering the law on the basis that the price that was printed by the petitioner, was printed on due compliance with the law. The statements made on behalf of the revenue before the Public Accounts Committee as well as the statements made by the Hon'ble Finance Minister in the Parliament indicated that the Officers of the Central Government understood the purport of the notification in the same manner as understood by the petitioner and in the facts and circumstances of the case, on the basis of the principle of contemporaneous exposition (contem-poranea expositio), it must be held that this principle of interpretation should apply in this case and the contemporary official statements, letters and others should be taken to be the meaning of the said notification as understood by the revenue and sought to be implemented by the revenue and the Court should apply that the principles of interpretation and should interpret the notification and hold that there was no statutory requirement on the part of the petitioner to print the maximum retail sale price at which the retailers can sell the same in the market but the only requirement under the notification was to print a sale price which may not be the correct price or the maximum retail sale price.
20. On the question that the meaning of the word 'sale price' should be interpreted to mean a mere recommendatory price which need not be the actual sale price or the maximum retail price on the basis of the principles of contemporary exposition Mr. Nariman relied upon the following case laws : --
(a) K. P. Verghese v. Income-tax Office, : [1981]131ITR597(SC) ,
(b) Desh Bandhu Gupta v. Delhi Stock Exchange, : [1979]3SCR373 ,
(c) Baleswar Bagarti v. Bhagarathi Das (reported in 12 Calcutta Weekly Notes Page 657 D.B. wherein Sir Ashutosh Mookerjee of the Calcutta High Court observed in the year 1908 that 'it is a well settled principle of interpretation that Courts in construing a statute will give much weight to the interpretation put upon it at the time of its enactment and since by those whose duty it has been to construe, execute and supply it 'which was noted with approval by the Supreme Court in : [1979]3SCR373 ,
(d) Commr. of Income-tax, Bangalore v. J. H. Gotla, ,
(e) State of Mysore v. M. H. Bellary, : (1966)ILLJ50SC ,
(f) The State of Orissa v. Dinabandhu Sahu & Sons, : [1976]3SCR966 and other case laws,
and also relied on a passage from Statutory Interpretation by F.A.R. Bennion, wherein it was observed at paras 252 and 253 that 'In the period immediately following its enactment, the history of how an enactment is understood forms part of the contemporaneous exposition and may be held to throw light on the legislative intention and that 'Official Statements by the Government Department administering an Act, or by any other authority concerned with the Act, may be taken into account as persuasive authority on the meaning of its provisions.' Relying on this principle it was contended that as the Revenue was continuously administering the law on the basis that the price printed by the petitioner on the commodity was final and binding and not open to question by the Revenue and that if it was not so in that event Revenue should have been taken exception or step where in fact the goods were being sold in the market at a price which was higher than the market price and that the Revenue had accepted by its conduct and by its expositions expressed by statements made before the Public Accounts Committee.
21. Mr. A. K. Ganguly the learned Counsel appearing on behalf of the revenue submitted that the principle of contemporaneous exposition in an extraordinary aid to the interpretation of only ancient statute and which has no application to interpretation of modern statute and in support of this contention reliance was placed on behalf of the revenue, on the decision of the Supreme Court of India in (a) Senior Electric Inspectors v. Laxminarayan Chopra, : [1962]3SCR146 ; (b) Raja Ram Jaiswal v. State of Bihar, : 1964 CriLJ705 and also upon the decision in the case of Governors of the Campbell College, Belfast v. Commr. of Valuation of Northern Ireland, reported in (1964) 2 All ER 705 at p. 725 and also relied on certain passages from some other text books corpus juris secondum. In those cases it was held that the principle of contemporaneous exposition applied only to the interpretation of ancient statute and not to the enactment which are comparatively modern. It was further submitted that this principle had no application to the interpretation of an exemption notification since until seizure of documents from various parts of India, it was not known to the revenue that the retail price of cigarette was different from the printed price on the packages. In other words, it was not known to the assessing authority concerned that the petitioner deliberately printed a lower price as retail sale price of the cigarette for the purpose of deliberately paying a lower duty for getting maximum benefit under the exemption notification.
On Point 'C :
22. Mr. Nariman contended that within the scope and ambit of the provision of Section 11A of the said Act, the impugned show cause notice could not be issued inasmuch as, it was contended that the said Section only provides machinery for the purpose of recovery of the duty by the government but the recovery in cases where assessment had been made or deemed to have been made under the law can be made only by the appellate authority under Section 35A or the Revisional Authority under Section 35EE of thesaid Act. It was further contended that Section 11A of the said Act was not a complete Code for recovery of the duty short paid. It is stated that the provision of Section 11A is only restricted to cases where assessment had not been made or completed and those sections 35A and 35EE of the Act are applicable to cases of completed assessments. Mr. Nariman pointed out that such a question had not been considered by any court up till now about the scope and ambit of the provision of Section 11A of the said Act as sought to be interpreted by Mr. Nariman and it was stated that the Court should give a harmonious construction considering the scope and ambit of those sections, so that the powers conferred by different parts of the statute do not overlap and do not create any ambiguity. According to Mr. Nariman the scope of Section 11A should only be restricted to cases where no assessment had been made and/or completed and that when assessments have been completed, it is found that something was due, in that event, the provision of Section 11A could be invoked for the purpose of recovery of the duty short paid. The question of final payment arises after the assessments had been completed. The question of recovery of any short duty or short levy in respect of completed assessment does not arise unless the appellate and/or revisional authority in exercise of power of appeal and/or revision was of the opinion that there had been short levy and/or short payment of duty and as soon as the assessments have been made, the assessing authority had no jurisdiction to contend that there had been short levy or short payment on account of some mistakes, unless of course the law has conferred power of review in the statute in question. In this connection Mr. Nariman relied on the decision of the case. Union of India v. Shree Ram Durga Prasad reported in : [1969]2SCR727 , in this case Supreme Court considered the scope of Section 12(1) read with Section 23A of the Foreign Exchange Regulation Act and Section 19 read with Rule 167 of the Customs Act (Rules) and that before a case can be held within the scope of Section 23A, it must be shown that there had been contravention of the restrictions imposed under Section 12(1) of thesaid Act and the requirement of Section 12(1) is satisfied if the stipulated declaration is furnished and it is supported by evidence in the prescribed form and that in this case, the contravention, if any, was really the contravention of Section 12(1) and Rule 5 and the Customs Authorities are concerned with and all that they have to see is that no goods are exported without furnishing declaration prescribed under Rule 12(1) and incidentally they cannot take any action for any minor mistakes in giving full export value in the said declaration. Supreme Court observed that as Section 12(1) being penal provision the court must! construe it as it would construe any other instrument that is to say -- it must look at all the surrounding circumstances, the mischief intended to be remedied and must above all! give effects to the words used in the section Mr. Nariman also relied on a decision of the CECAT Special Bench 'A' New Delhi in the! case of Modi Rayon and Silk Mills v. Collector of Central Excise, Meerut reported in 1987 (29) ELT 933 wherein it was held that ini order to enable to get refund under Section 11B, the manufacturer must prefer an appeal against the price list and the question of refund would only arise, if the price list is set aside and order for refund is made by the Appellate: and/or Revisional Authority. On behalf of the Revenue it was submitted that provisions of Section 11A and those of Sections 35A and 35EE are independent provisions and could only be exercised by the original. Appellate and Revisional Authorities respectively and it was contended that from the provisions of Section 35A and 35EE, it was made abundantly clear that Section 35A and Section 35EE did not incorporate the entire provision of Section 11A but only it was provided those powers which could not be exercised by the Appellate and/or Revisional Authorities beyond the period of limitation mentioned in Section 11A of the said. Act. This according to the learned counsel on behalf of the Revenue, made it abundantly clear that Section 11A is not intended to be used as a mere machinery provision but an independent provision and the powers conferred therein are independent from the powers conferred in other provisions of the Act. If it was an intention of the legislaturethat Section 11A is a machinery provision which could be exercised only in aid of the power conferred under Section 35A or Section 35EE, in that event, the legislature should not have incorporated only the period of limitation in the said two sections from Section 11A. By this it is made abundantly clear that the Section 35A and/or Section 35EE was quite independent of Section 11A, otherwise language used in Section 11A would become meaningless and the legislative intention will be fully defeated. It is stated by counsel on behalf of the Revenue Sections 11A and 11B were introduced solely for the purpose of providing a simple procedure for recovery of the duties not paid or short paid or short levied and at the same time the manufacturers were also provided with an easy provision for obtaining refund in case of payment was made in excess. Section 11B(1) of the said Act expressly provided that the calim for refund was not dependent upon an order from appellate and/or revisional authority inasmuch as Sub-Section (3) clearly provided the provision where the claim for refund will be made on the basis of an order passed in appeal or revision and Sub-section (1) thereof provides an easy provision for getting refund of the duty paid in excess. It is submitted that Section 11A of the said Act did not contemplate re-opening of an assessment but only enables the Excise Authority to recover the duty not levied or not paid short levied or short paid. The recovery is only confined to excise duty which had not been levied or short levied or short paid. It is submitted that Rule 2(l)(a) of the Central Excise Rules defines the expression 'assessment' to include even re-assessment and therefore it is submitted that the recovery proceeding under Section 11A may also amount to re-assessment of an assessment already made and it would be perfectly justified to do so in the exercise of power under Section 11A of the said Act read with Rule 52. It was contended that it was idle to contend the recovery proceeding under Section 11A could not be initialed save and except questioning the assessment orders itself before fhe Appellate and/or Revisional Authority. It was further submitted that the expression 'short paid' should not be given any narrow and/or restricted meaning in case where it isalleged that there had been large scale evasion of duty.
Submission on Point (d) :
23. The next submission of Mr. Nariman is that the notification No. 215/86-Central Excise, New Delhi dated 27th March, 1986 by which officers of the Directorate of Anti Evasion (Central Excise) were delegated with the powers of the ranks of the officers of Central Excise. By the said notification the Director of Anti Evasion was invested with the power of a Collector to exercise throughout the territory of India. The said notification was issued by the Central Board of Excise & Customs in exercise of the power conferred by Clause (b) of the Section 2 of the Central Excises & Salt Act, 1944 read with rule 4 of the Central Excise Rules, 1944. Mr. Nariman contended that Section 2(b) of Central Excises & Salt Act provides the definition of Central Excise Officers, which means any officers of Central Excise Department or any person invested by the Central Board of Excise & Customs constituted under the Central Board of Revenue Act, 1963 with any of the powers of the Central Excise Officers under this Act. It was pointed out that Rule 2(ii) defines the word 'Collector' and in the said definition various Collectors have been mentioned on whom jurisdiction was conferred in respect of a part of a State or whole of a State or two or more States together. Mr. Nariman submitted that Section 2(b) of the Act read with Rule 2(ii) of the said Rules clearly indicates that the Collector may be appointed in the manner indicated in the rule only in respect of the part of a State or whole of a State and that there is no provision or scope for appointing a Collector having jurisdiction throughout the territory of India. It was submitted that the impugned notification by which the Director of Anti Evasion of Central Excise Department was conferred power throughout the territory of India as Collector was ultra vires the provisions of the Act and the rule framed thereunder. According to Mr. Nariman Section 2(b) read with Rule 2(ii) of the said Rules makes it quite clear that it may appoint a Central Excise Officer but limited to a State or area. It is stated that there are already as many as five Collectors exercising jurisdictionin five different areas who are the appropriate Collectors in so far as the petitioner isconcerned. It was submitted that under thescheme of the Act and the rules framedthereunder, there is no scope for appointment of one single Collector over and above theCollectors already appointed which would create a good deal of confusion and there will be overlapping of jurisdiction of twodifferent offices. It was submitted that theAct and rules framed thereunder do notprovide any provision for conferring ofconcurrent jurisdiction, one with the localCollector and another with the Collector having jurisdiction all over India. Mr. Nariman submitted that under Rule 5 of the said Rules it is provided that unless the Central Government in any case otherwise directs,the Collector may authorise any officerssubordinate to him to exercise throughout hisjurisdiction or in any specified area therein all or any powers of a Collector under this rule. Reference was also made to Rule 6 which provided that the Collector may perform all or any of the duties or exercise all or any of the powers assigned to an officer under the said rule. Relying on these rules it was submitted that Central Government may appoint and/or delegate power upon any Collector to exercise jurisdiction in respect of any particular area but the Central Board of Excise & Customs had no such authority and/or jurisdiction to confer and/or to delegate the power to any of its officers to act and/or to discharge the powers and functions of a Collector throughout the territory of India. It was pointed out that Rule 4 of the said Rules which provides that the Central Boardof Excise of Customs may appoint such persons as it thinks fit to be the Central Excise Officers or. to exercise all or any of the powers conferred by this rule on such officers. Mr. Nariman strenuously argued that Rule 4 did notprovide any such power upon the Board to make such delegation of power and as such the notification in question is ultra vires theprovision of the Act and the rules framed thereunder. In this connection, it may be mentioned that the validity and/or legality of the notification in question was also the subject matter of challenge before the MadrasHigh Court, wherein the Madras High Court in case of M/s. Asia Tobacco Company (unreported) upheld the validity of the Notification No. 215/86-Central Excise, dated 27-3-86, firstly by a single Judge of the Madras High Court, which wus subsequently affirmed by the Division Bench of the Madras High Nariman submitted that the Madras High Court did not consider some of the points which were relevant for the purpose. It was contended by Mr. Nariman that the judgments of the Madras High Court did not consider that under the provisions of the said Act, there was no scope for conferring any concurrent jurisdiction and in this case relied on some of the provisions of the Income-tax Act, particularly Sections 116 to 128 of the Income-tax Act, 1961, where it was provided that the Director of Inspection can perform such function of any other Income-tax Authorities as may be assigned to them by the Board. It was pointed out that similarly Section 121 of the, Income-tax Act provides that Commissioners can perform their functions in respect of such areas or of such persons or class of persons as the Board may direct, but in the instant case under the provisions of Central Excises & Salt Act and the rules framed thereunder, the Central Board of Excise & Customs had not been conferred with any such powers which was specifically conferred under the Income-tax Act for conferring powers and functions to discharge in respect of any area or areas as a Collector. It was pointed out that in the absence of any specific provision in the Act or the rules framed thereunder, the notification has been issued illegally and that on the strength of the said notification, no lawful power could be conferred upon the respondent No. 3 to discharge the powers and functions of the Collectors and consequently the show cause notice which was issued by the respondent No. 3 was void and illegal. In this connection, Mr. Nariman relied on a decision of the Andhra Pradesh High Court in the ease of Sri Balaji Rice Company v. Commercial Tax Officer reported in 55 Sales Tax Case at page 292 wherein the Division Bench of Andhra High Court held that under the relevant provisions of the Andhra Pradesh Sales Tax Act, concurrentjurisdiction could not be conferred on two different authorities in respect of the same area. In that case it was found that without any guideline given in the Act, concurrent jurisdiction could not be conferred. Under the said scheme of the said Act, an officer should be given power with regard to a local limit and the local limit is related to a particular locality and the term 'local limit' does not mean limit throughout the State. All the areas in the State cannot be said to be a local limit and no such power could be conferred on any particular authority throughout the State on the strength of conferring jurisdiction over a local limit. Under the Scheme of the Act, the jurisdiction was sought to be localised and in that context, Andhra Pradesh High Court struck down the notification by which concurrent jurisdiction was conferred. It was contended on behalf of the Revenue that under Section 2(b) of the said Act read with Rule 4 of the said rules, it is abundantly clear that any officer of the Central Excise Department may be conferred with any of the powers of the Central Excise Officers by the Board and the decision of the Andhra Pradesh High Court in the case of Sri Balaji Rice Company had no application in this case. It was further argued by Mr. Nariman that in respect of the Collectors having territorial jurisdiction exercising power under Section 11A there is a provision for appeal but there is no provision for appeal from an order, if passed, by the respondent No. 3 in this case. It was further pointed out that the notification in question had brought about a situation which would lead (to?) the possibility of conflict of jurisdiction, and the notification would also be arbitrary and discriminatory violative of the provision of Article 14 of the Constitution. Relying upon the decision of the Andhra Pradesh High Court in the case of Shree Balaji Rice Flour Mills v. Commercial Tax Officer reported in 55 STC 292 : (1984 Tax LR NOC 32), it was submitted that there is a basic and grave infirmity in the notification. Accordingly it was submitted that the authority empowered to issue a show cause notice under Section 11A of the said Act had not issued the show cause notice and the respondent No. 3 had no jurisdiction to actas a Collector on the strength of the Notification No. 215/86 and as such the show cause notice was on the face of it void.
24. The learned Advocate General as well as Mr. A. K. Gangully, appearing on behalf of the respondents Nos. 1 and 2 submitted that under Section 2(b) of the said Act and Rule 4 of said Rules could not be given a limited and/or a narrow meaning as sought to be given by Mr. Nariman and it was contended that under those provisions, the Board had been conferred with the jurisdiction to invest power on any of the officers of the Central Excise Department with the powers of Central Excise Officers under this Act. Rule 4 of the said Rules specifically conferred power on the Central Board of Excise & Customs to appoint such person as they think fit to be Central Excise Officers or to exercise all or any of the powers conferred by this rule on such officers. On proper construction of Rule 4 of the said Rules it is clear that Central Board may appoint any such person with any of the powers of Central Excise Officers and to exercise all or any of the powers conferred by the rules. It may be mentioned that Section 2 provides that the definition given thereunder will prevail unless there is any thing repugnant in the subject or context. In other words, the definition provided thereunder is not final and conclusive. In the instant case the question is whether the respondent No. 3 was authorised by the notification in question to invoke the power under Section 11A of the said Act. In construing power of the Central Board of Revenue to issue such notification within the scope and ambit under this Act and rule framed thereunder, it was submitted that the Court will not declare an act ultra vires, merely because it does not fall within the wording used in the strict sense of the term. In other words, the question is whether in order to find out whether the Board had acted outside the power (ultra vires), the Court will lake into consideration the object for which such power was conferred and the Court should not be bound by the exact words used in the empowering Act, inasmuch as, whatever may fairly be regarded as incidental to or consequent upon those things that has to betaken into consideration. It was submitted that the Madras High Court correctly decided that the Notification in question was correctly issued an