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Anna Match Works and anr. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu
Decided On
Reported in(1986)(6)LC61Tri(Chennai)
AppellantAnna Match Works and anr.
RespondentCollector of Central Excise
Excerpt:
.....this order of the board that the present appeals are directed." 3. when the appeals were heard, shri raghunathan, who had appeared inter alia for the present applicants made four main submissions, on the following points:- (i) the collector of central excise, madras, had no jurisdiction to adjudicate the cases ; (ii) in view of contradictions between the initial and subsequent statements of the persons concerned, none of these statements should have been relied upon; (iii) the evidence based on the labels of the appellants was unreliable and should not have been relied upon; and (iv) there were anomalies in regard to the orders passed by the board on the question of penalties.4. on the first point, namely that of jurisdiction, shri raghunathan submitted that the matches in these cases.....
Judgment:
1. In this application under Section 35G of the Central Excises and Salt Act, 1944, arising out of the Tribunal's Order dated 4-8-1984, the applicants have required us to refer to the High Court the following question : "Whether the Collector of Central Excise, Madras, has jurisdiction to adjudicate the case regarding the seizure of match boxes in Yadameri Village, Chittoor District in the jurisdiction of the Collector of Central Excise, Hyderabad ?" 2. The facts of the case as found by the Tribunal are contained in paragraphs 4 to 9 of the order under reference, which are reproduced below :- "4. We shall set out only briefly the facts of these cases, since they have been exhaustively dealt with by the Collector of Central Excise, Madras and in less detail by the Central Board of Excise and Customs, respectively, in the Order-in-Original dated 25-5-1977 and the Order-in-Appeal dated 20-2-1980.

5. Shri Margabandhu is the proprietor of Messrs. Anna Match Works.

Anna Match Works, Kalyanam Match Works, Mahalakshmi Match Works and Saravana Match Works are all situated at Gudiyattam, which is within the Collectorate of Central Excise, Madras. On 20-10-1971, the Central Excise Officers of the Madras Central Excise Collectorate along with the Central Excise Officers of the Hyderabad Central Excise Collectorate searched two houses in Yadamari in the Hyderabad Central Excise Collectorate and seized altogether 2336 bundles of matches. Some of these bundles were found to bear duplicate or triplicate serial numbers. All the bundles bore the labels of different match factories in Gudiyattam, including the four match factories of the respective appellants. Statements were recorded from various persons including Shri Margabandhu and other persons who were said to have transported the matches as lorry drivers, or to have accompanied the matches when transported. Investigations were also carried out at Gudiyattam and the accounts of the appellant match factories were checked. It is agreed by both sides that no specific irregularities were found in these accounts.

However, based on the existence of repeat numbers on the bundles, lack of documents to show payment of duty and statements of various persons and by connecting the seized bundles with the match factories on the basis of approved labels affixed on the bundles proceedings were initiated by the Collector of Central Excise, Madras, against 10 persons including the present appellants. In a Show Cause Notice dated 5-4-1972, they were charged with having contravened Rules 173F, 173G(1), 173G(2) and 173G(4) for having allegedly failed to determine their liability for the duty due on the matches and for having failed to debit duty in their Personal Ledger Accounts for the matches so removed and for having otherwise infringed the above-mentioned Rules.

6. In the course of the adjudication proceedings, one Shri Sankaran who claimed to be a brother of Shri Margabandhu, came forward with the claim that he was the owner of the said matches. The Collector of Central Excise, Madras, did not, however, entertain this claim and adjudicated the case by his order dated 29-3-1973.

7. Shri Sankaran went in a writ petition to the Madras High Court and subsequently in a writ appeal. The Division Bench, which heard the writ appeal, passed the following order : 'That the Department is directed to give notice to the appellant herein and allow him an opportunity to make his representations, consider the same and then pass an order in respect of the liability of the goods concerned to duty.' 8. The Department apparently took this order as setting aside the order passed by the Collector. A fresh show cause notice dated 6-3-1975 was issued to the 11 persons, including all the present appellants and also Shri Sankaran. It was brought out during the course of arguments of Shri Jagadeesan that this show cause notice was in all material respects the same as the earlier show cause notice dated 5-4-1972 except for the inclusion of Shri Sankaran as one of the persons to whom the notice was addressed. Thereafter, the Collector proceeded with the adjudication. He ultimately ordered release of 94 bundles of matches, and confiscated the remaining 2242 bundles of matches, but directed their release to Shri Margabandhu on a fine of Rs. 4,484/- in lieu of confiscation and other charges as found payable under the law. He imposed various p enalties on the respective match factories. He also imposed separately a penalty of Rs. 10,000/- on Shri Margabandhu. As regards Shri Sankaran, the Collector held on the evidence that he was not the real owner of the goods, and refrained from imposing any penalty on him.

9. Appeals against the above order were filed to the Central Board of Excise and Customs. The Board held that the penal action taken by the Collector was sustainable in law. The Board however added that penalties at lower rates would meet the ends of justice, and accordingly scaled down the penalties imposed by the Collector.

(However, there are some anomalies as between the original and 'scaled down' penalties which will be referred to later in this order) It is against this order of the Board that the present appeals are directed." 3. When the appeals were heard, Shri Raghunathan, who had appeared inter alia for the present applicants made four main submissions, on the following points:- (i) The Collector of Central Excise, Madras, had no jurisdiction to adjudicate the cases ; (ii) In view of contradictions between the initial and subsequent statements of the persons concerned, none of these statements should have been relied upon; (iii) The evidence based on the labels of the appellants was unreliable and should not have been relied upon; and (iv) There were anomalies in regard to the orders passed by the Board on the question of penalties.

4. On the first point, namely that of jurisdiction, Shri Raghunathan submitted that the matches in these cases were admittedly seized in Yadameri, a place falling within the jurisdiction of the Collector of Central Excise, Hyderabad. The case was, however, adjudicated by the Collector of Central Excise, Madras. Shri Raghunathan contended that only the Collector of Central Excise, Hyderabad, had the jurisdiction to adjudicate these cases. He referred to Section 33, Central Excises and Salt Act, which provides that confiscation or penalty may be adjudged without limit by a Collector of Central Excise. He also referred to Rule 2(ii)(A), Central Excise Rules, 1944 containing a definition of the term "Collector". In accordance with this definition, the Collector for the area in which the seizure was made was the Collector of Central Excise, Hyderabad. According to him, the fact that the factories of the appellants from which the matches were alleged to have been illegally removed were admittedly situated within the jurisdiction of the Collector of Central Excise, Madras, did not give the latter officer jurisdiction to adjudicate the cases.

5. Shri Raghunathan was asked whether at the time of adjudication any of the appellants had objected to the matter being adjudicated by the Collector of Central Excise, Madras. Shri Raghunathan replied that no such objection was raised before the Collector but he contended (though he could not point to any specific passage in the Board's order) that it was raised before the Board. (We found however from page 20 of the Collector's order (in the cyclostyled copy) that Shri Raghunathan did raise the point before the Collector and the latter had discussed this argument in page 24 of his order).

6. When Shri Raghunathan was asked whether he could cite any judicial authority for his proposition, which amounted to saying that the jurisdiction in such a case would vest in the Collector in whose territorial jurisdiction the seizure was made, and not the Collector in whose territorial jurisdiction the illicit removal was alleged to have taken place, Shri Raghunathan stated that he had not been able to find any judicial decision either way.

7. Shri Raghunathan was also asked whether he could point out any specific prejudice which had been caused to the appellants because of the cases having been adjudicated by the Collector of Central Excise, Madras and not the Collector of Central Excise, Hyderabad. Shri Raghunathan could not point out any specific prejudice, but contended that in law the Collector of Central Excise, Madras, had no jurisdiction.

8. In the present context, it is not necessary to set out the arguments of Shri Raghunathan with reference to the points at (ii), (iii) and (iv) in para 3 above.

9. On behalf of the Department Shri S.K. Choudhury, Senior Departmental Representative, had opposed Shri Raghunathan's argument on the question of jurisdiction. Shri Choudhury pointed out that Gudiyattam was within the jurisdiction of the Collector of Central Excise, Madras. Since the offences were those of illicit removal from factories in Gudiyattam, the Collector of Central Excise, Madras, was clearly entitled to adjudicate those offences. In the alternative, Shri Choudhury submitted that this was a question regarding territorial jurisdiction and not regarding territorial jurisdiction and not regarding lack of inherent jurisdiction. He submitted that a defect in territorial jurisdiction would not vitiate the Collector's order, so long as it had been passed in compliance with the principles of natural justice.

10. In its order, the Tribunal did not accept Shri Raghunathan's argument on the ground of jurisdiction, and rejected it in the following terms :- "40. We have carefully considered the arguments advanced on both sides. As mentioned earlier, Shri Jagadeesan has adopted Shri Raghunathan's arguments on the question of jurisdiction.

41. It is not the case of the appellants that the Collector of Central Excise, Madras, had no jurisdiction to decide a case of this nature. It is, however, their case that he did not have territorial jurisdiction, since the seizures were made outside his Collectorate.

Shri Raghunathan drew our attention to the definition of 'Collector' in Rule 2(ii) (A) of the Central Excise Rules. This however, does not settle the point raised. Shri Raghunathan's argument basically is that where adjudication follows a seizure, the territorial jurisdiction should be determined with reference to the place of seizure and not with reference to the place in which the offence or illegal removal is alleged to have taken place. When specifically asked whether he could cite any judicial authority for this proposition, Shri Raghunathan fairly stated that he could not do so.

We find great difficulty in holding that in such a case the Collector within whose jurisdiction the factory of the manufacturers was situated did not have jurisdiction to adjudicate a case of illicit removal from that factory. There is no controversy on the point that the manufacturers who are the present appellants had their factories within the jurisdiction of the Madras Central Excise Collectorate. Licensing of their factories and excise control on them was exercised by officers of that Collectorate. Classification lists were to be approved, and R.T. 12 returns and gate passes covering all removals were to be submitted to officers of that Collectorate. When, therefore, an apparent offence was disclosed in the operations of these licensees, within the jurisdiction of that Collectorate, it is very difficult to see how it can be contended that the Collector with territorial jurisdiction over their factories was not competent to adjudicate the case.

42. In this connection we may observe that there are situations where the law contemplates more than one authority having jurisdiction in a particular matter. It is well known that penalty proceedings under the Central Excises and Salt Act are of a quasi-criminal nature. In a somewhat similar situation, Section 178 of the Criminal Procedure Code provides that an offence m >y be inquired into or tried by a court having jurisdiction over any of a number of local areas. On that analogy it could be said that in the present case the jurisdiction to adjudicate could have been exercised by either of the two Collectors.

43. We, therefore, find no substance in the argument that the proceedings are vitiated by lack of jurisdiction on the part of the adjudicating officer." 11. The Tribunal rejected the appeal before it, except for setting aside the separate penalty imposed on Shri Margabandhu, proprietor of Anna Match Works, and reducing the penalty on M/s. Mahalakshmi Match Works (who are not parties to the present Reference Application).

12. The two Reference Applications are framed on similar terms. The applicants have sought to controvert certain of the observations made by the Tribunal while reaching its finding, vide para 10 above. They have further contended that in para 41 of its order the Tribunal had observed that when Shri Raghunathan was specifically asked whether he could cite any judicial authority for his proposition that where adjudication follows a seizure, the territorial jurisdiction should be determined with reference to the place of seizure and not with reference to the place in which the offence of illegal removal is alleged to have taken place, he could not do so. The applications go on to submit that the learned representative of the Department could not also cite any authority against this proposition and that the Tribunal itself had not indicated any judicial decision on this issue. It has therefore been submitted that this legal issue deserves to be referred to the High Court for a decision in the interests of both the Department and the trade.

13. The present Bench was specially convened to hear the reference applications, as the order of the Tribunal had been passed by this Bench. The two applications were taken up for hearing on 19-9-1985.

14. Shri Bhatia, the learned representative of the Department, raised a preliminary objection that in the present case the reference application had been received on 26-11-1984 (the actual date as seen from the Tribunal's records is 19-11-1984). Since more than 120 days had passed after receipt of the application, Shri Bhatia contended that a reference could not now be made to the High Court, in view of the provisions of Sub-section (1) of Section 35G of the Act.

15. In reply to a question from the Bench, Shri Bhatia agreed that the reference applications had been filed within the time limit of 60 days from the date of service of the order which was the subject matter of the reference application.

16. The Bench pointed out to Shri Bhatia that the applicants had filed the reference applications well within time. Because of administrative reasons, it had not been possible for the Tribunal to constitute the appropriate Bench and take up the reference applications for hearing before expiry of the period of 120 days stipulated in Section 35G(1).

The Bench referred to the parallel provisions in the Income-tax Act wherein it has been held that the time limit for making such a reference was directory and not mandatory and that a reference could, if otherwise admissible, be made even after expiry of the time limit.

Following the same principle, the Bench overrules Shri Bhatia's objection and proceeded to hear Shri Raghunathan.

17. Shri Raghunathan reiterated the submissions made in the reference application, namely that on the question raised in the reference application, there was no decision by any Court and therefore that the issue deserved to be referred to the High Court for a decision in the interests of both the Department and the trade.

18. The Bench indicated that it was inclined to agree that there was justification for a reference on the point of law involved, though the question would have to be reformulated. The Bench incidentally pointed out to Shri Raghunathan that certain of the submissions in the reference application seemed to be based on an incomplete understanding of the Tribunal's order or of the relevant judicial decisions. Thus, in the reference application it had been stated that the Tribunal expressed that under Section 178 of the Criminal Procedure Code any one of the two Collectorates may exercise jurisdiction. It was pointed out to Shri Raghunathan that para 43 of the Tribunal's order made it very clear that Section 178 of the Cr. P.C. was only referred to as providing an analogy, in a somewhat similar situation (emphasis added).

Again, there is a reference to the Tribunal's observation that penalty proceedings under the Central Excise Act are of a quasi-criminal nature. The reference applications contain the statement that the quasi-judicial proceedings under the Central Excise Act are not quasi-criminal proceedings. It was pointed out to Shri Raghunathan that this statement in the reference applications was contrary to the pronouncements of the Supreme Court and High Courts in regard to parallel provisions of Sales Tax and Customs law (e.g. the judgment of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa, A.I.R. 1970 S.C. 253 ; and the judgment of the Calcutta High Court in the case of Manicklal Sen and Anr. v. Additional Collector of Customs and Ors., A.I.R. 1965 Calcutta 527). Shri Raghunathan admitted that he had not been aware of these authorities at the time the reference applications were drafted.

19. The Bench observed that it was tentatively of the view that a question of law on the lines of that proposed by the applicants did arise from the Tribunal's order dated 4-8-1984 and that the question was not covered by any specific judicial pronouncements. The Bench therefore indicated that it was tentatively of the view that the question, re-formulated as below in order to relate to Tribunal's order, should be referred to the Hon'ble High Court: "Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the proceedings before the Collector of Central Excise, Madras, leading to his order dated 29-3-1973, were not vitiated by lack of jurisdiction on the part of the adjudicating officer." 20. Shri Raghunathan stated that the applicants would be satisfied if the question as re-formulated above was referred to the Hon'ble High Court.

21. On behalf of the respondent Collector, Shri Bhatia submitted that the Tribunal had taken a proper and correct view on the question of jurisdiction. In particular, he submitted that the applicant's reliance on the definition of "Collector" in Rule 2(ii)(A) of the Central Excise Rules was misconceived. The Bench pointed out to Shri Bhatia that the present Bench was not a forum to discuss or decide whether the Tribunal's findings were correct. The question was only whether the applicants had made out a case for reference to the High Court on a question of law arising out of the order. Shri Bhatia was asked to state whether he could cite any specific judicial decisions which would obviate the need for a reference to the High Court. He submitted that he could not cite any such specific judicial decision in this regard.

22. The Bench then confirmed its tentative decision to refer to the Hon'ble High Court the question as re-formulated (vide para 19 above).

The question as reformulated was again read out. Neither Slid Raghunathan nor Shri Bhatia had any further comments to make.

23. This statement of the case was made out and copies made available to both parties. The statement of the case was taken up for consideration on 20-9-1985. Neither Shri Raghunathan nor Shri Bhatia suggested any amendment to the statement. Accordingly the same is taken as finalised.

24. We accordingly, in terms of Section 35G of the Central Excises and Salt Act, 1944, refer the following question of law arising out of our order dated 4-8-1984 to the Hon'ble High Court: "Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the proceedings before the Collector of Central Excise, Madras, leading to his order dated 29-3-1973, were not vitiated by lack of jurisdiction on the part of the adjudicating officer."


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