1. This is an appeal preferred by Prakash Cotton Mills Private Limited and its Director against the judgment dated July 16, 1980 delivered by Mr. Justice Aggarwal dismissing the Writ Petition filed by the appellants for quashing show cause notice dated August 30, 1975 and March 17, 1976 issued by the Assistant Collector of Central Excise, Bombay. Few facts giving rise to the filing of the petition are as follows :
2. Prakash Cotton Mills have a registered Office in Bombay and are owners of Textile Mills situate at Lower Parel, Bombay. The Textile Mill is duly licensed and employee large number of workers, who work on spindles and handlooms. The Mills have obtained an Excise Licence under Rule 174 of the Central Excise Rules, 1944 and the Licence specifies the place of manufacture of cotton fabrics, the place being the factory premises. On March 11, 1963. Officers of the Central Excise Department seized certain goods of the mills which were lying in the premises of M/s. Jalan Dyeing & Bleaching Mills, Bombay, which is the sister concern of the appellants. The Excise Officers attached several documents, books of accounts, vouchers and papers and mills filed Writ Petition No. 127 of 1963 in the Court to challenge the seizure of the goods. The Writ Petition was dismissed and so also the appeal preferred to the Supreme Court.
3. The Assistant Collector of Central Excise raided the premises of M/s. Jalan Dyeing & Bleaching Mills and M/s. Lokenath Tolaram , a partnership concern which is respondent No. 6 in this appeal and several other parties and recovered large number of documents and there upon issued a detention order. It is required at this juncture to state that respondent No. 5 to the original petition, i.e. Adarsh Vidyut Kargha Sahakari Samiti Limited, is a registered Co-operative Society constituted under the provisions of the Maharashtra Co- operative Societies Act. In the documents seized by the Excise authorities, it was noticed that Prakash Cotton Mills and M/s. Lokenath Tolaram, a partnership firm, had set a bogus Co-operative Society, i.e. respondent No. 5 to the petition for Securing benefits available under Exemption Notification dated January 5, 1957 as amended up to April 24, 1962. The modus operandi was that the employees of Prakash Cotton Mills were enrolled as members of the Co- operative Society and each member was shown to own 4 powerlooms. This modus was employed because the Government of India, Ministry of Finance (Department of Revenue) had issued Exemption Notification prescribing that unprocessed cotton fabrics manufactured by or no behalf of the same person is one or more factories commonly known as powerlooms (without spinning plants) in which less than 5 powerlooms in all but no roller locker machine are installed would be exempted from payment of the excise duty leviable thereon under the Central Excises and Salt Act, 1944. This exemption was not available to a manufacturer who commences production for the first time on or after April 1, 1961 by acquiring powerlooms from any other person who is or has been a licensee of a powerloom factory. According to the Excise authorities, Prakash Cotton Mills in collusion with M/s. Lokenath Tolaram, a partnership firm, set up a bogus Co-operative Society and enrolled members who are in the employment of the mills only to prepare evidence that each of the members owns less than 4 powerlooms from which unprocessed cotton fabrics is manufactured. The members of the Co-operative Society are alleged to have manufactured excisable fabrics for Prakash Cotton Mills and M/s. Lokenath Tolaram at several places in Bombay. The Excise authorities realised that excisable cotton fabric was not only manufactured by Prakash Cotton Mills and M/s. Lokenath Tolaram, a firm. but was removed and sold in the market without payment of duty. Thereupon the Excise authorities issued 35 show cause notices followed by demand notices in the month of June and August, 1964. Prakash Cotton Mills Challenged the demand notices by filing Miscellaneous Petition No. 324 of 1964 in this Court under Article 226 of the Constitution of India complaining that the demand notices were issued and the amounts are tried to be recovered by the Excise authorities without complying with the principles of natural justice in as much as proper opportunity was not given to the petitioners to show cause. The petition was decided in favour of the Mills and Civil Appeal No. 917(N) of 1971 preferred by the Excise authorities before the Supreme Court was withdrawn in the year 1975. The Excise authorities stated before the Supreme Court that in view of the judgment of the High Court that principles of natural justice was not observed, the Excise authorities would serve fresh show cause notices on the petitioners and would hold fresh proceedings.
4. It is required to be stated that the show cause notices which were struck down by the High Court for want of proper opportunity to show cause were also issued against the Co-operative Society - respondent No. 5 to the original petition - and the society had filed Writ Petition No. 235 of 1964 in this Court challenging the insurance of show cause notices. That petition was withdrawn by the society after securing leave from the Court to file a suit to challenge the show Cause notices and, accordingly, the society instituted Suit No. 210 of 1965 on the Original side of this Court and to that suit, Prakash Cotton Mills was joined as defendant No.4. In that suit, the insurance of two show cause notices is a subject matter, but these show cause notices are already quashed by the High Court in the petition filed by the Mills and the suit survives only for a declaration sought by the society that the Society is independent of Prakash Cotton Mills. The file Suit has not reached hearing because of the heavy pendency of matters in this Court.
5. After withdrawing the appeal filed in the Supreme Court, the Excise authorities served two fresh show cause notices dated August 30, 1975 and March 17, 1976 on the appellants and M/s. Lokenath Tolaram. The notices alleged that the appellants had contravened the provisions of Rules 9, 73, 47, 48, 52, 52A, 53, 54, 96-B and 96-C of the Central Excise Rules. The first notice thereafter set out in detail the contravention and call upon the appellants to show cause why penalty should not be imposed under Rules 9(2), 52-A(5), 210 and 226 of the Central Excise Rules and basic Central Excise Duty, additional duty and the handloom cess totalling Rs. 4,37,300.16 and Rs. 3,41,761.72 should not be recovered the Second show cause notice also complains of violations of various rules and calls upon the appellants to show cause as to why penalty should not be imposed and duty totalling Rs. 20,59,437.49 should not be charged under rule 9(2) of the Central Rules on the quantities of 85,43,925 sq. Metres of cotton fabrics manufactured on more than four powerlooms at Madanpura, Kurla and Currey Road, Bombay as shown in the Annexures to the Show Cause Notice. The Show cause notices set out exhaustively the seized documents on which reliance was to be placed as well as the statements of various persons recorded during the seizure proceedings. The appellants filed Miscellaneous Petition No. 816 of 1976 on May 14, 1976 to challenge the validity of these two show cause notices. The petition was admitted but the authorities were permitted to proceed with the enquiry but not to pass the final order. The appellants did not appear before the authorities, with the result that the enquiry could not proceed. Several grounds were raised in the petition and argued before the learned Single Judge and by the impugned judgment, all the contentions were turned down and the petition was dismissed. The order of the learned Single Judge is under challenge.
6. Mr. Parsurampuria, learned counsel appearing on behalf of the appellants, restricted his submission in this appeal to 3 or 4 contentions. The first submission urged by the learned counsel is that the two show cause notices suffer from vagueness and, therefore should be struck down in exercise of jurisdiction under Article 226 of the Constitution of India. It is not necessary to set out extensively the contents of the two show cause notices, but the perusal of the same leaves no manner of doubt that the complaint that the notices suffer from vagueness is without any merit. The learned counsel urged that the show cause notices did not state the period during which the fabric was manufactured and removed from the place of manufacture and that is a serious deficiency in the show cause notices. The submission is devoid of any merit because the annexures to the show cause notices clearly set out that the period in respect of the first cause notice was from March 1, 1961 to August 1, 1963 and in respect of the second show cause notice, from March 1962 to February 1963. The annexures to the show cause notices not only set out the period during which the excisable fabric was manufactured but also the category, the with, square metres, basic duty, additional duty and handloom cess payable thereon. When attention of Mr. Parsurampuria was invited to these annexures, the only answer given by the learned counsel is that the period and other details should have been mentioned in the body of the notices and not in the annexures. The submission is only required to be stated to be rejected. The contention that the notices suffer from vagueness cannot be accepted for another reason also. As pointed out by the learned Judge, the impugned two show cause notices are really in continuation of the earlier show cause notices which were struck down by this Court for violation of principles of natural justice. The appellants were fully conscious of what were the allegations and had not only taken inspection of the documents but had contracted the Excise authorities on several occasions and have discussed the matter. In face of this background, it is futile to suggest that the Show cause notices should be struck down on the ground of vagueness.
7. The Second contention urged by Mr. Parsurampuria is that the show cause notices complain of violation of Rule 9(2) of the Central Excise Rules but there cannot be any such violation because Rule 9(2) comes into operation when there is any contravention of sub-rule (1) of Rule 9 and sub-rule (1) is not at all attracted to the facts of the case. Rule 9(2) provides that if any excisable goods in contravention of sub-rule (1) are removed from any place specified therein, then the producer or manufacturer thereof shall pay the duty leviable on such goods upon written demand made by the Officer and shall also be liable to penalty and such goods shall also be liable to confiscation. Sub- rule (1) or Rule 9 prescribes that no excisable goods be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf until the excise duty leviable thereon has been paid. Mr. Parsurampuria urged that to attract provisions of sub-rule (2), it is necessary that there must be contravention of sub-rule (1) and sub-rule (1) can be contravened, provided excisable goods are removed from the place which is specified by the Collector without payment of duty. It was urged that the complaint of the Excise authority is that the goods were removed from the place of manufacture in occupation of the Co- operative Society, i.e. from Madanpura, Kurla, Currey Road, etc. and the Collector had not specified those places as required under Rule 9(1) and, therefore, the question of contravention of Rule 9(1) for adopting proceedings under Rule 9(2) does not arise. We must express our surprise at the courage shown in advancing this submission. The argument of the learned counsel is that if any excisable goods are manufactured at the place which is not specified by the Collector, then such goods are liable to payment of Excise duty and consequently can be removed without any obligation to pay excise duty. If such argument is accepted, then it would lead to atrocious results because it convenient for the manufacturer to manufacture excisable goods without any permission from the Collector and then bluntly claim that excise duty is not payable. Apart from the absurdity of such contention, the complaint made by the Excise authority is that the Co-operative Society is nothing but a creation of Prakash Cotton Mills for the purpose of avoiding payment of duty and the society is under the exclusive and absolute control of Prakash Mills. The Excise authorities claim that Prakash Cotton Mills have been permitted by the Collector to manufacture goods in their own factory premises but Prakash Cotton Mills have set up units at other places in the name of the Co-operative Society and are trying to avoid payment of duty by urging that the members of the Co-operative Society are entitled to the advantage of the exemption notification. The question as to whether the claim made by the Excise authorities is correct or otherwise, will have to be determined in accordance with the material which would be produced by the Mills in answer to the show cause notices, but it is impossible at this juncture to hold that the two show cause notices under challenge could not have been issued as the provisions of sub-rule (2) of Rule 9 are not attracted. The Second contention of the learned counsel, therefore, deserves to be repelled.
8. Mr. Parsurampuria then submitted that the show cause notices are given under Rule 9(2), but there is no provision under the Central Excises and Salt Act for the purpose of recovery of duty and, therefore, power cannot be conferred on the Excise authorities under the Rules. The learned counsel submitted that Rule 9(2) is ultra vires and bad because it cannot confer powers which are not provided by the Act. The submission is that the rules travel beyond the provisions of the Act. It is impossible to accede to the submission of the learned counsel. Section 37 of the Central Excises and Salt Act confers power on the Central Government to make rules to carry into effect the purposes of the Act and sub-rule (2)(ib) of Section 37 prescribes that rules can be framed to provide for the assessment and collection of duties of excise, the authorities by whom functions under this Act are to be discharged, the issue of notices requiring payment, the manner in which the duties shall be payable, and the recovery of duties not paid. It is therefore, obvious that the Act specifically confers power on the Central Government to frame rules for carrying out the purposes of the Act including the recovery of duty not paid. Rule 9(2) is accordingly framed with the statutory power flowing under Section 37 of the Act. The contention that the rules travel beyond the provisions of the Act is unsustainable in face of the provisions of Section 37(2)(ib) of the Act. Mr. Parsurampuria tried to rely upon some judgments of the Madras High Court which were delivered prior to insertion of sub-section (2)(ib) of section 37. We need not examine the judgments of the Madras High Court as those judgments are no good law after insertion of sub-section (2)(ib) in Section 37 of the Act.
9. The final submission of Mr. Parsurampuria is that show cause notices are issued by the Excise authorities after considerable delay and, therefore, on account of laches of over 13 years, the notices should not be proceeded with. It is impossible to accede to this submission. As mentioned hereinabove, the Excise authorities seized the documents and realised the evasion of the duty in the year 1964 and within a year thereof show cause notices as well as the demand notices were issued. Those show cause notices were struck down and the appeal preferred by the Excise authorities was withdrawn in the year 1975. Immediately thereafter fresh show cause notices which are challenged in this petition were issued. It is, therefore, difficult to accede to the submission of Mr. Parsurampuria that the show cause notices are bad on account of delay of 13 years. It is convenient for the appellants to ignore what transpired in the last 13 years by claiming that the impunged show cause notices are issued for the first time in the year 1975. The impugned show cause notices complain about the same violation which was cause for issuing earlier notices in the year 1965. It is also required to be stated that the sub-rule (2) of Rule 9 does not prescribe any period of limitation for imposing the duty, recovering duty and for confiscation of the goods. Mr. Parsurampuria urged that sub-rule (2) of Rule 9 should be struck down on the ground that it enables the authorities to recover escaped duty at any time. We fail to appreciate how rule can be struck down merely because it does not prescribe limitation. It is undoubtedly true that in case the authorities claim to recover escaped duty after a considerable long period, then the Court may consider whether it is proper to do so, but in the present case, the question does not arise because Excise authorities had taken steps immediately on realisation that the duty escaped by the maneuvering tactics adopted by Prakash Cotton Mills.
Mr. Parsurampuria also faintly argued that as long as the suit filed by the original respondent No. 5 i.e. Co-operative Society, in this Court for a declaration that the affairs of the Society are independent of Prakash Cotton Mills is pending, it is not permissible for the Excise authorities to issue show cause notices. We are unable to accede to the contention. The mere fact that the suit has been instituted by the Co- operative Society which is nothing but a creation of Prakash Cotton Mills cannot debar the Excise from serving show cause notices and proceeding with the same case. In case, the contention of the appellants is accepted, then it is extremely easy for the manufacturer who has evaded duty to file a suit and prevent the Excise authorities from taking action with the full knowledge that the suit would not be disposed of for decades. In our judgment, the mere pendency of the suit is no bar to the Excise authorities to proceed with the show cause notices. It was also suggested that the fresh show cause notices are not maintainable because earlier show cause notices in respect of the same grievances were struck down. The submission is without any merit because the earlier show cause notices were not struck down on merits but on a technical ground that sufficient opportunity was not given to the appellants to meet the complaint. In our judgment, there is no merit whatsoever in the appeal and the order of the learned Single Judge suffers from no infirmity. The appellants have filed the present proceedings only with a view to further delay the proceedings to ascertain whether the duty was evaded and whether the appellants are liable to pay the duty. We do not see any reason why such appellants should be permitted to take recourse to the proceedings under Article 226 of the Constitution of India.
10. Accordingly, appeal fails and is dismissed with costs.