New Decent Footwear Industries Vs. Union of India (Uoi) and anr. - Court Judgment

S.B. Sinha, C.J.

1. This writ petition is directed against Orders dated 29.05.2001 and 14.09.2001 passed by the Customs, & Gold (Control) Appellate Tribunal (hereinafter referred to as 'the Appellate Tribunal')

2. The petitioner is a partnership firm. It is engaged in manufacture of shoes. During the relevant year, namely, 12.08.1991 to 31.03.1994, the petitioner firm was having two units; unit No. 1 located at 4/33, Reshham Katra, Tajganj, Agra and unit No. 2 at 4/37, First, Reshham Katra Tajganj, Agra. The distance between the two premises was only 2000 feet.

3. Shoes used to be manufactured with the aid of power in unit No. 2, whereas the same was done without the aid of power in unit No. 1. According to the petitioner, the position inter-changed.

4. Footwear 'in or in relation to the manufacture of which any process is ordinarily carried with the aid of power'is classifiable in sub-heading 6401.11 of the Central Excise Tariff ( in short, 'the Tariff'). It is thus liable for central excise duty, whereas by reason of various notifications issued in this regard from time to time and in particular notification No. 49 of 1986 dated 28.01.1986 'footwear manufactured without the aid of the power' are exempt from payment of such duty.

5. The petitioner would contend that it stated manufacturing footwear with the aid of the power in unit No. 1 where for due intimation was given to the Central Excise Officer. The said unit was also licensed/registered under the Central Excise Rules (in short, 'the Rules'). Unit No. 2, however, was not required to be licensed/registered under the said Rules.

6. However, the petitioner would contend that a declaration used to be made every year, which requirement the petitioner had been complying with.

7. On or about 03.09.1993, the Officers of Central Excise Division, Agra inspected the factory premises, i.e. both the units of the petitioner. No machine was allegedly found in unit No. 2, ie.., where the manufacture of shoes used to be made without the aid of power. On enquiry, allegedly the partners of the petitioner firm explained to the said Officers that unit No. 2 was engaged in the manufacture of footwear without the aid of power while unit No. 1 was using power for manufacture of footwear.

8. A notice was issued to the petitioner by the Commissioner on 18.07.1996 asking the petitioner to show-cause as to why central excise duty amounting to Rs. 85,13,523/- be not demanded from it in terms of Rule 9(2) of the Rules and for the said purpose the period of limitation as specified in the proviso appended to Section 11A of the Central Excise Act, 1944 ( in short, 'the Act') was sought to be invoked. Penal action was initiated against the partners of the petitioner firm also.

9. Allegations inter alias were made in the said proceedings that the presence of some footwear at the premises of unit NO. 1 with the word 'hand made' engraved thereon indicated that the said brand of footwear supplied to M/s. Bata India Ltd. by the petitioner were actually being manufactured at unit No. 1 and they were merely transferred to unit No. 2 only for availing the benefit of notification No. 49 of 1986. The petitioner refuted the said allegations in their reply.

10. However, by reason of the adjudication order dated 01.04.1998, the Commissioner imposed a duty where for a demand of Rs. 34,24,393/- for the aforementioned period was raised and further a penalty of Rs. 10 lacs was imposed besides imposing penalties on the partners of the petitioner firm and M/s. Bata India Ltd.

11. An appeal was preferred there against by the petitioner firm before the learned Appellate Tribunal. A contention was raised therein on behalf of the petitioner firm that n the facts and circumstances of this case, proviso appended to Section 11A of the Act was not applicable. Various factual contentions had also been raised by the petitioner.

inter alias

(i) The entries in the Outward Register maintain din unit No. 2 also contained goods cleared from unit No. 1 and thus the claim of the petitioner that the goods manufactured and cleared from unit No. 2 were without the aid of power, was not true.

(ii) That a number of power operated machines like buffing machines, pasting machine, etc. installed at unit No. 1 were being used for completion of manufacture of footwear for unit No. 2.

(iii) It relied upon an admission by the petitioner that goods were sent to 'Neelco' i.e. unit No. 1.

(iv) That the date of dispatch in the Outward Register did not tally with the dates mentioned in the Challans, had to been controverter. This strengthens the inference that footwear manufacture in unit No. 2 had been sent to unit No. 1 for completion of the manufacture process with the aid of power.

(v) The petitioner had not distinguished between the movement of stores and raw materials from the head office to unit No. 1 from dispatch of footwear manufactured without power in unit No. 2, which was a strong circumstantial evidence suggesting that in fact manufacturing activity requiring use of power was completed with the aid of power.

(vi) The onus was on the petitioner to show that the movement of goods from head office to unit No. 1 did not include footwear manufactured in unit No. 2.'

13. An application was filed by the petitioner thereafter before the learned Appellate Tribunal for rectification, which was also dismissed.

14. Dr. A.M. Singhvi, the learned senior counsel appearing on behalf of the petitioner inter alias would submit that the learned Appellate Tribunal misread and misinterpreted Section 11A of the Act vis-a-vis the proviso appended thereto.

15. The learned counsel would contend that in absence of any finding of existence of the jurisdictional fact for invoking the said proviso, the extended period of limitation of 5 years could not have been invoked in the facts and circumstances of this case.

16. The learned counsel has pointed out that the finding of the learned Appellate Tribunal purported to be relying on or on the basis of the finding of the Commissioner are contradictory to and inconsistent with each other.

17. It was submitted that having regard to the fact that appropriate proceedings were also initiated against M/s. Bata India Ltd. and they having been specifically exempted, the question of collusion by and between the petitioner and M/s. Bata India Ltd. would not arise, particularly when admittedly all the shoes manufacture by the petitioner are supplied only to M/s. Bata India Ltd. It was argued that in view of the agreement entered into by and between the petitioner and M/s. Bata India Ltd. in terms whereof the entire product was to be supplied to the latter, the question of making unlawful gain of excise duty not arise.

18. The learned counsel would contend that, in any event, the petitioner having not been permitted to cross-examine the workers whose evidences had been relied upon, the impugned Order cannot be sustained.

19. The learned counsel in support of the said contention has relied upon Q State of Kerala v. K.T. Shaduli Grocery Dealer, etc. reported in : AIR1977SC1627 .

20. Mr. K.K. Sud, the learned Additional Solicitor General appearing on behalf of the respondents, on the other hand, would submit that the onus of proof in the facts and circumstances of this case was upon the petitioner herein.

21. The learned counsel would contend that the findings of the fact arrived at by the Commissioner vis-a-vis the learned Appellate Tribunal was on the basis of registers maintained by the petitioner.

22. According to the learned counsel, such findings of fact cannot be interfered with by this Court in exercise of its writ jurisdiction under Article 226 of the Constitution of India (in short, 'the Constitution').

23. It was contended that the petitioner had an alternative remedy by way of filing an appropriate application before the learned Appellate Tribunal for reference of the question of law to this Court in terms of Section 35C of the Act and in that view of the matter this Court should not exercise its discretionary jurisdiction under Article 226of the Constitution, particularly when such a reference would also be barred by limitation.

24. Dr. Singhvi, in reply submitted that existence of alternative remedy could not be a bar in this Court's exercising its jurisdiction under Article 226 of the Constitution as a jurisdictional issue has been raised. Reliance in this connection has been placed on Dr. Smt. Kuntesh Gupta v. Management of Hindu Kanya Mahavidyalaya, Sitapur (U.P.) and Ors. Reported in : 1987(32)ELT8(SC) and Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors. reported in : AIR1999SC22 .

25. Section 11A of the Act reads thus :-

'11A. Recovery of duties not levied or not paid or short- levied or short-paid or erroneously refunded.-

(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show-cause why he should not pay the amount specified in the notice.

Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty, by such person or his agent, the provision of this sub-section shall have effect.

Explanationn. -- Where the service of notice is stayed by an order of a Court, the period of such stay shall be excluded in computing the aforesaid period of six months or five years, as the case may be.

(2) The Assistant Collector of Central Excise or, as the case may be, the Collector of Central Excise shall, after considering the representation, if any, made by the person on whom notice is served under Sub-section (1), determine the amount of duty of excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.

(3) For the purposes of this section -

(i) 'refund' includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(ii) 'relevant date' means,-

(a) in the case of excisable goods on which duty of excise has not been levied or paid or has been short- levied or short-paid -

(A) where under the rules made under this Act a monthly return, showing particulars of the duty paid on the excisable goods removed during the month to which the said return relates, is to be filed by a manufacturer or producer or a licensee of a warehouse as the case may be, the date on which such return is so filed;

(B) where no monthly return as aforesaid is filed, the last date on which such return is to be filed under the said rules;

(C) in any other case, the date on which the duty is to be paid under this Act or the rules made there under;

(b) in a case where duty of excise is provisionally assessed under this Act or the rules made there under, the date of adjustment of duty after the final assessment thereof;

(c) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund.

26. A bare perusal of the said Section 11A(1) of the Act would show that the Central Excise Officer may within a period of 6 months from the relevant date may demand excise duty, which has not been levied or paid or has been short-levied or short-paid or erroneously refunded. Proviso appended thereto, however, applies in the event such non-levy or short-levy of excise duty or short-paid or erroneously refund of excise duty has occasioned by reason of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of the Act or of the Rules made there under. Commission of fraud, collusion or misstatement or suppression of facts, etc. by the manufacturers is the sine qua non for invoking the proviso appended to Section 11A of the Act.

27. The power of the Central Excise Officer to levy additional excise duty or impose penalty in terms of Section 11A and the proviso appended thereto are thereforee different and distinct. They are required to be exercised in different fact situation. Whereas may mistake in the matter of levy, short-levy or non-levy of excise duty, etc. comes within the purview of Section 11A of the Act, the Central Excise Officer, however, when takes recourse to the proviso must bring on records, sufficient materials to prove the existence of jurisdictional facts referred to therein.

28. The principal question, thereforee, which would arise for consideration is as to whether the proceedings are without jurisdiction.

29. A statutory authority, as is well known, must exercise its jurisdiction within the four corners of the Statute. it is indeed trite that before a statutory authority exercises its jurisdiction, the jurisdictional facts thereforee must exist.

30. It is also well settled that with a view to ascertain as to whether such jurisdictional facts exist or not, the statutory authority must pose onto itself the right question so as to enable it to arrive at correct findings of fact.

31. The question, which was required to be posed and answered in this case, was as to whether it is a case where any duty of excise has not been levied or paid by reason of fraud, collusion or any willful misstatement or suppression of facts or of the rules made there under with intend to evade payment of duty.

32. When two different periods of limitation are fixed by a statute with a view to achieve two different objects, the larger period of limitation cannot be invoked unless and until the statutory authority finds existence of requisite jurisdictional fact thereforee, the burden of proof in relation whereto would be on the Revenue.

33. The right question, which should have, thus, been posed and answered, was whether there had been a failure on the part of the petitioner to disclose the fact that although the shoes were being manufactured with the aid of power, a part of such manufacture was shown to have been made without the aid of power with a view to make unlawful gain of excise duty.

34. The learned Tribunal having not posed unto itself the right question with a view to arrive at the right conclusion has committed a misdirection in law.

35. Misdirection of law would amount to a jurisdictional error. (See B. Govinda Reddy v. T. Suresh Babu reported in : 2001(1)ALD457 .

36. It is beyond any cavil of doubt that jurisdictional error can also be committed while acting without jurisdiction although the statutory authority of the Tribunal does not lack inherent jurisdiction. (See Animine Ltd. v. Foreign Compensation Commission, 1969 (2) A.C. 147.

37. The learned Appellate Tribunal inter alia based its decision on a purported finding of the Commissioner to the effect that the goods manufactured and cleared without payment of duty from unit No. 2 without the aid of power, which was not correct, as from a perusal of the order passed by the Commissioner as contained in Annexure 'P-9', it does not appear that such a finding had been arrived at by the Commissioner.

38. Yet again, the learned Appellate Tribunal held that from the order of the Commissioner, it would appear that the date of dispatch indicated in the Outward Register did not tally with the date mentioned in the challan is not controverter by the petitioners. But such a finding does not appear to have been arrived at by the Commissioner.

39. The learned Appellate Tribunal has arrived at a finding of fact that the petitioner had disclosed that they have been claiming the benefit of notification No. 49 of 1986.

40. In a situation of this nature, particularly when a huge amount of duty is imposed and penalty is levied, in our opinion, the learned Appellate Tribunal ought to have arrived at its own independent finding based on the materials on records and should not have proceeded only on the basis of the findings of the Commissioner.

41. Furthermore, it appears that it failed to take into consideration that the Department had been able to prove its allegation of collusion with M/s. Bata India Ltd. inasmuch as it had not been shown how the petitioner or M/s. Bata India Ltd. made unlawful gain of excise duty.

42. For the said purpose, in our opinion, reference ought to have been made to the agreement entered into by and between the petitioner and M/s. Bata India Ltd.

43. It is accepted at the bar that the learned Appellate Tribunal in the order dated 29.05.2001 in the appeal preferred by M/s. Bata India Ltd. held :-

'21. On perusal of the records and on consideration of the submission made before us we are of the view that the penalty imposed on the present appellants under Rule 209A cannot be sustained in law for the reason that the impugned order has not disclosed any basis for holding that the appellants had any prior knowledge or much less reason to believe that the goods received by them were liable to confiscation.'

44. Thus, the element of culpability of the parties as was required for invoking the proviso appended to Section 11A of the Act was absent.

45. The petitioner appears to have intimated the officials about the change of the units, which were being run with the aid of power and without the aid of power.

46. Furthermore, the learned Appellate Tribunal does not appear to have adverted itself to the question as to the effect of the workman being not allowed to be cross-examined by the petitioners. Such refusal of cross-examination would amount to violation of principles of natural justice. No contention has been raised by the respondents that for one reason or the other the petitioners have not been prejudiced thereby.

47. In K.T. Shaduli Grocery Dealer (Supra), it has been held :-

'... The question is what is the content of this provision, which imposes an obligation on the Sales Tax Officer to give and confers a corresponding right on the assessed to be afforded, a reasonable opportunity 'to prove the correctness or completeness of such return.' Now, obviously 'to prove' means to establish the correctness or completeness of the return by any mode permissible under law. The usual mode recognized by law for proving fact is by production of evidence and evidence includes oral evidence of witnesses. The opportunity to prove the correctness or completeness of the return would, thereforee, necessarily carry with it the right to examine witnesses and that would include equally the right to cross-examine witnesses examined by the Sales Tax Officer. Here, in the present case the return filed by the assessed appeared to the Sales Tax Officer to be incorrect or incomplete because certain sales appearing in the books of Hazi Usmankutty and other wholesale dealers were not shown in the books of account of the assessed.'

48. In K. Raghuram Babu v. Director General of Railway Protection Force, New Delhi and Ors. reported in : 2001(6)ALD18 , it was held thus :-

'11. Right of cross-examination, as is well known, is a valuable right. No evidence shall be admissible unless the witness is permitted to be cross-examined. Such a right can neither be taken away directly or indirectly.'

49. The decision of the Tribunal is partly based without taking into consideration the relevant factors. It also took into consideration factors, which were irrelevant and not germane for passing the impugned order.

50. When a quasi-judicial order is based on several grounds, some of which are untenable, the same may not be sustainable unless the court exercising the power of judicial review comes to the conclusion that those findings, which are good, are sufficient to uphold the same.

51. In this case, the Tribunal has also wrongly placed the burden of proof upon the petitioner. Having regard to the provisions contained in the proviso appended to the proviso to Section 11A of the Act, the same would be on the Department.

52. In view of the afore-mentioned findings, we are, thereforee, of the opinion that the matter requires a fresh reconsideration at the hands of the learned Appellate Tribunal.

53. The submission of the learned Additional Solicitor General to the effect that this Court should not exercise its jurisdiction under Article 226 of the Constitution inter alias on the ground that there exists an alternative remedy in terms of Section 35C of the Act cannot be accepted.

54. In Swapan Ray v. Indian Airlines Limited and Ors. reported in 1996 (1) CHN 147, it has been held :-

'28. The submission of Mr. Mazumder to the effect that the petitioner should have taken recourse to the provisions of the Industrial Disputes Act cannot be accepted. There cannot be any doubt that in a case of this nature the delinquent employee should normally take recourse to the provision of the Industrial Disputes Act. However, that does not mean that only because there exists alternative remedy, this court will refuse to exercise its discretionary jurisdiction. Alternative remedy as is well known is a self- imposed restriction. Rule was issued in this writ application on 21.4.1987. The matter has been pending in this court for more than 8 years now. To ask the petitioner to avail alternative remedy at this juncture in my opinion would be wholly improper.

In Miss Meneek Custodji Sur arji v. Sarafazali Nawabali Mirza, reported in : AIR1976SC2446 the Apex Court has held :

'It is true that this principle is not rigid and inflexible and there can be extraordinary circumstances where despite the existence of an alternative legal remedy, the High Court may interfere in favor of an applicant, but this was certainly not one of such extraordinary cases.' In L. Hirday Narain v. Income-Tax Officer, Bareilly, reported in : [1970]78ITR26(SC) the Apex Court has held :--

'But Hirday Narain moved a petition in the High Court of Allahabad and the High Court entertained that petition. If the High Court had not entertained his petition, Hirday Narain could have moved the Commissioner in revision, because at the date which the petition was moved the period prescribed by Section 33-A of the Act had not expired. We are unable to hold that because a revision application could have been moved for an order correcting the order of the Income-Tax Officer under Section 35, but was not moved, the High Court would be justified in dismissing as not maintainable the petition, which was entertained and was heard on the merits.'29. Reference in this connection may also be made to Dr. Bal Krishna Agarwal v. State of U.P. and Ors., reported in 1995 Lab. IC 1396 wherein it has been held :-- 'Having regard to the aforesaid facts and circumstances we are of the view that the High Court was not right in dismissing the Writ Petition of the appellant on the ground of availability of an alternative remedy under Section 68 of the Act especially when the Writ petition that was filed in 1988 had already been admitted and was pending in the High Court for the past more than five years. Since the question that is raised involves a pure question of law and even if the matter is referred to the Chancellor under Section 68 of the Act it is bound to be agitated in the Court by the party aggrieved by the order of the Chancellor, we are of the view that this was not a case where the High Court should have non-suited the appellate on the ground of availability of an alternative remedy.'

55. Furthermore, in this case, the petitioner herein has not only raised jurisdictional question, but also has alleged violation of principles of natural justice.

56. In Whirlpool Corporation (Supra), The Apex Court has in no uncertain terms laid down that where inter alias violation of principles of natural justice is alleged or a jurisdictional question is raised, existence of alternative remedy by itself may not be a bar to invoke the jurisdiction of High Courts under Article 226 of the Constitution.

57. In Dr. Smt. Kuntesh Gupta (Supra), it has been held :-

'12. The next question that falls for our consideration is whether the High Court was justified in dismissing the writ petition of the appellant on the ground of availability of an alternative remedy. It is true that there was an alternative remedy for challenging the impugned order by referring the question to the Chancellor under Section 68 of the U.P. State Universities Act. It is well established that an alternative remedy is not an absolute bar to the maintainability of a writ petition. When an authority has acted wholly without jurisdiction, the High Court should not refuse to exercise its jurisdiction under Article 226 of the Constitution on the ground of existence of an alternative remedy. In the instant case, the Vice-Chancellor had no power of review and the exercise of such a power by her was absolutely without jurisdiction. Indeed, the order passed by the Vice- Chancellor on review was a nullity; such an order could surely be challenged before the High Court by a petition under Article 226 of the Constitution and, in our opinion, the High Court was not justified in dismissing the writ petition on the ground that an alternative remedy was available to the appellant under Section 68 of the U.P. State Universities Act.'

58. For the reasons aforementioned, we are of the opinion that the impugned order cannot be sustained, which is set aside accordingly and the matter is remitted back to the learned Appellate Tribunal for consideration of the matter afresh.

59. Before we apart, however, we intend to make it clear that we have not independently arrived at any decision and any observation made herein may not be construed to be final determination of any question. The learned Appellate Tribunal, thereforee, would be entitled to arrive at its own decision on the basis of the materials on record and on the basis of such other or further materials, which may be produced before it by the parties.

60. Having regard to the facts and circumstances of the case, we are also of the opinion that the petitioner herein should produce before the learned Appellate Tribunal the agreement entered into by and between itself and M/s. Bata India Limited so as to enable the learned Appellate Tribunal to come to a conclusion as to whether the petitioner could make any unlawful gain by evading payment of excise duty, although M/s. Bata India Limited thereby was not benefited.

61. In view of the aforementioned findings, this petition is disposed of accordingly. However, in the facts and circumstances of the case, there shall be no orders as to cost.