1. By this petition, the petitioners seek an appropriate writ for setting aside the orders dated 4th September, 1965, 7th November, 1971 and 6th August, 1975 passed by the Officer on Special Duty, Central Excise, Bombay, the Appellate Authority and the Revisional Authority, respectively.
2. The case of the petitioners in the petition is that the 1st petitioner purchased certain lands at Udhna on which it constructed industrial sheds and let each of these sheds to petitioners 2 to 6 who carry on business of manufacturing cotton fabrics on power-looms at Udhna. The 1st petitioner is a partnership firm which came into existence from 1st February, 1960 at Udyog Nagar, Udhna, District Surat, and has 4 pirn winding machines at Udhna. The 2nd petitioner carries on business as the sole proprietor in the name and style of M/s. Prithvi Textiles from November 1960 and is the owner of 8 powerlooms at Udhna. The 3rd petitioner carries on business in the name and style of M/s. Dilip Textiles as the sole proprietor since March 1961 and owns 9 power-looms at Udhna. The 4th petitioner carries on business in the name and style of M/s. Kirti Textiles as the sole proprietor since March 1961 and owns 6 power-looms at Udhna. The 5th petitioner carries on business in the name and style of M/s. Shree Raj Textiles as the sole proprietor since March/April 1961 and initially owned 6 power-looms. Out of these, two were sealed by the Central Excise authorities in 1962, with the result that 4 power-looms are working in the shed of the 5th petitioner. The 6th petitioner carries on business in the name and style of M/s. Deepak Weaving Factory, as the sole proprietor, which initially owned 6 power-looms, two of which were sealed by the Central Excise authorities in about April 1962, with the result that 4 power-looms are in use. On 23rd May, 1964, a partnership firm of M/s. Shantikumar Dhairyawan & Co. was formed wherein the 2nd petitioner, one Dhairyawan Ramdas Asher and the 4th petitioner were partners, for the purpose of distribution of 70% of the production of petitioners 2 to 6. From time to time petitioners 2 to 6 applied for permission for special procedure under the Excise Rules and were separately granted permission and separate licences were issued to them by the Excise authorities. Petitioners 2 to 6 have been separately assessed and have separately paid their respective duty from 1961 to December 1964 to the Excise authorities at Surat.
3. In about July 1964, the Central Excise authorities at Surat instituted an enquiry into the working of petitioners 2 to 6 whether they were working as one unit or were separate units. The result of the enquiry was then inconclusive. However, 5 months later, namely, on 21st December, 1964, the Central Excise authorities (namely Assistant Collector Rangwani working under the Collectorate of Bombay), seized account books and other documents from the 1st petitioner's Head Office at Bombay and from the Bombay residence of the 2nd petitioner. Among the papers seized in the course of this raid were loose sheets containing calculations and other data and common balance sheets. On 24th December, 1964, the 2nd petitioner's statement was recorded by the Excise authorities. On 26th December 1964, the Excise authorities recorded the statement of the 3rd petitioner, the 2nd petitioner (on behalf of his further, viz., the 6th petitioner), and the 4th petitioner. On 5th January, 1965, the statement of the partner of the 1st petitioner and the statement of the 5th petitioner were recorded. These statements were inculpatory in nature and contained admissions that all these units were run not individually by the petitioners but as one unit.
4. On 23rd January, 1965, B. N. Rangwani, Assistant Collector of Central Excise, Bombay issued the requisite show-cause notice to the petitioners for contravention of Rules, 9, 43, 47, 48, 52, 52A, 53, 54, 96(B) and 96(C) of the Central Excise Rules, 1944. It was stated that the petitioners had removed cotton fabrics jointly manufactured by them on 33 power-looms belonging to them from the manufacturing premises without payment of appropriate Central Excise duty leviable thereon and without presentation of an application in the proper form and without the permission of the proper officer. The petitioners were called upon to show cause why penalty should not be imposed on them under Rules 9(2), 52A(5), 210 and 226 of the Rules and, inner alia, why sale proceeds amounting to Rs. 16,43,000/- on the cotton fabrics sold by the petitioners should not be confiscated. The evidence relied on by the excise authorities was set out in the show-cause notice, viz. books of accounts seized on 21st December, 1964 during the raid and the petitioners' statements recorded on 24th December, 1964, 26th December, 1964 and 5th January 1965. The show-cause notice gave an opportunity to the petitioners to take inspection of the seized documents before furnishing their reply.
5. On 9th February, 1965, B. N. Rangwani, the Assistant Collector of Central Excise Bombay, who had issued the show-cause notice, addressed a letter to the 3rd petitioner that in respect of the show-cause notice, the 3rd petitioner should directly correspond with the Officer on Special Duty at Bombay. On 15th February, 1965, petitioners 2 to 6 filed their reply to the show-cause notice, requesting for 'sympathetic consideration' of their case with 'broad outlook'. In this reply it was stated that petitioners 2 to 6 took their tax-marks and licences separately from genuine tax-marks owners in their individual names, that they had brought in their separate finances, that they had applied for separate power and had got separate connections from the Gujarat Electricity Board, that they were keeping separate electric meters and were separately paying charges every month, that separate rental was also paid by them individually in respect of the separate sheds rented by them, that they had maintained separate books of accounts and were purchasing yarn separately from the mills by their individual cheques from their individual bank accounts, that sales were made by them separately under separate invoices, challans and certificates and that the bales were packed and despatched separately by them in the lorries, that there were no inter-sales of cloth and that the collections of cloth sales were by each of them separately from the different dealers and were put by them in their respective bank accounts, that they all had their separate sales tax numbers, that the income tax assessments were made separately in the case of each individual petitioner, that the books of accounts of the petitioners were separate as also the excise registers and the relevant materials pertaining to the excise were separately maintained. It was further stated that petitioners 2 to 6 were contemplating forming a co-operative society for purchase and sale of the yarn cloth manufactured by them but that the project not fructify. It was urged that the sheets and the common balance sheets seized at the time of the raid were merely prepared in order to get a comparative idea to see how uneconomical it was to keep themselves as separate entities. It was further stated that in order to facilitate their working and to lower the production costs, they were taking certain liberties with each other but pleaded that such co-operation amongst themselves should not be misundertood.
6. By its letter dated 21st April, 1965, the Central Board of Excise informed the 3rd petitioner that by an order dated 15th March, 1965 investigation and adjudication relating to the case against the 3rd petitioner had been assigned to the Officer on Special Duty in the Central Excise Collectorate, Bombay, and that all correspondence should be addressed to him. On 6th April, 1965, the Officer on Special Duty, V. B. Gordon, addressed a letter to petitioners 2 to 6, fixing 14th April, 1965 as the date of hearing before him. On 9th April, 1965, the 1st petitioner also filed its reply stating that the 1st petitioner had let out sheds in the building to petitioners 2 to 6, that the 1st petitioner was doing pirn and winding on 'majuri' basis, that the 1st petitioner was not the manufacturer of any cloth nor did it have any tax mark or looms, that the 1st petitioner was separately assessed to income tax and had a separate sales tax registration number and that the 1st petitioner was a separate entity from petitioners 2 to 6.
7. On 4th September, 1965, by a well-reasoned and detailed order passed by the Officer on Special Duty, he held that the units run by the petitioners were actually owned and run as one single unit. After taking into account all the facts and circumstances, including the inculpatory admissions made by the petitioners and the material seized during the raid, the officer on Special Duty came to the conclusion that the actual running of the power-looms was a joint endeavour as it was found to involve less expenditure to operate jointly than individually, that the various profit and loss accounts from 1961 onwards showed that all the expenditure for the manufacture of cotton fabrics was accounted for in a combined manner, that the petitioners considered themselves to be partners and 'used this very word in their accounts, e.g. in the details of cost structure under (a) Fixed Expenses, Sr. No. 9, traveling Expenses for partners, Sr. No. 10. Partners Compensation, (b) in the details showing current working of 5 looms, at item No. 4 there is an entry 'partner's compensation'. The same item expenses in the proforma of current working of 26 looms prepared on 19th December, 1961 under the entry fixed salaries; 'Partner's compensation and Wages' appears. In the same accounts, the rent of the shed is also shown as a single payment of Rs. 150/- in one statement for 35 looms and of Rs. 100/- in the other statement for 26 looms.' The Officer on Special Duty came to the conclusion that on the basis of the documentary evidence as also on the basis of the admission made by the petitioners in their statements, it was established that the looms were operated as a single entity with the result that the individual owners of the units did not qualify for assessment at separate rates on the basis of the looms covered by their separate licences. Observing that in view of the admissions made by the petitioners, he was dealing with their case as leniently as possible, the Officer on Special Duty imposed some minor penalties and passed the following order :-
'Regarding the cotton fabrics produced by them from the period 1st March, 1961 to 31st December, 1964 I order that they should pay the differential compounded levy rates of duty in force at the material time on the basis of the total number of looms and shifts run by them taking all the 5 units as one individual factory. For arriving at the duty payable by them, the duty already realised be off-set and the differential amount realised.'
8. The petitioners' appeals to the appellate authority were rejected by a cryptic order, passed on 7th November 1971. Against that order, the petitioners preferred the requisite revision application which was rejected by the revisional authority on 26 July, 1975. Hence the present petition.
9. Mr. Shah, the learned Counsel appearing on behalf of the petitioners, challenged the impugned revisional order on the ground that by relying on the material seized during the raid, no person with judicial duties could have come to the conclusion that the petitioners were owners of 33 powerlooms and manufactured cloth as one unit from 1961 to 1964. Mr. Shah urged that the impugned revisional order was perverse, arbitrary and capricious which, recording to Ms. Shah, was highlighted by the fact that after 1964 the authorities had computed the petitioners as separate entities. Mr. Shah further urged that the revisional order had not dealt with the points in favour of the petitioner and hence should be set aside. Mr. Shah urged that the revisional authority had acted on conjecture, surmises and had based its finding on no evidence. According to Mr. Shah, the revisional authority erred in not relying upon the account books which had been accepted by the income tax authorities and instead, on relying on the material seized during the raid and on the incriminating statements of the petitioners before the excise authorities which according to Mr. Shah were extracted from the petitioners under coercion and misrepresentation. Mr. Shah relied on the authority of the Supreme Court in Omar Salay Mohemed Sait v. Commr. of Inc. Tax : 37ITR151(SC) , where it was held that on no account should the Tribunal base its findings on suspicions, conjectures and surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence or partly on suspicions, conjectures and surmises and if it does, its findings even on questions of fact are liable to be set aside. Mr. Shah also relied on the decision of the Kerala High Court in St. Teresa's Oil Mills v. State of Kerala : 76ITR365(Ker) , where it was held that accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable and that rejection of account books should not be light-heartedly done. Mr. Shah also relied on another decision of the Kerala High Court in M. Appukutty v. Sates Tax Office : AIR1966Ker55 , where it was held that the principles of natural justice demand that there should be a fair determination of a question by a quasi judicial authority, that arbitrariness will certainly not ensure fairness and that judicial process does not end by only making known to a person the proposal against him and giving him a chance to explain but extends further to a judicial consideration of his representations and the materials, and a fair determination of the question involved. It was further held that if the quasi-judicial authority disregards the materials available to it and refuses to apply its mind to the question and if it reaches a conclusion which has no relation to the facts before him, to allow those decisions to stand would be violative of the principles of natural justice. It was further held that arbitrary decisions can also result in violation of the principles of natural justice which is the fundamental concept of Indian jurisprudence and that in certain cases where an authority refuses to apply its mind to the question and makes a decision as it likes, it may amount to even a mala fide decision. Mr. Shah also relied on the decision of the Allahabad High Court in Krishna Bricks Field v. Sales Tax Commr., (1977) 40 S.T.C. 315. In that case a rough copy and a note book seized at the time of survey made by the sales tax authorities in April 1961, did not disclose any suppressed transaction for the assessment pertaining to the year 1962-63. It was held by the Allahabad High Court that the survey could not be made as the basis for rejecting the account books of the assessee for that year. Mr. Shah finally relied on the decision of the Orissa High Court in Jami Narasaya Prusty & Brothers v. State of Orissa, (1958), 9 S.T.C. 648, where it was held that errors apparent on the face of the record would be a ground for interference in exercise of writ jurisdiction.
10. There can possibly be no quarrel with any of the ratios propounded by these cases relied on by Mr. Shah. However, what must be considered is whether any of these ratios apply to the facts and circumstances of the matter before me. The answer is an unhesitating negative.
11. Amongst the documents, books and papers seized in the raid on 21st December 1964, were certain loose sheets containing figures and calculations which was one of the aspects taken into consideration by the revisional authority in holding that the various units of the petitioners were in fact one unit leaving little room for doubt that all the looms were in fact being operated jointly and that the so-called separate factories was merely a facade in order to derive full benefit of the concessional rates of excise duty admissible for small units and hence the units should be assessed to excise duty as one unit. It was on these loose sheets of papers that Mr. Shah concentrated the major part of his attack in an attempt to demonstrate that the revisional authority had not applied its mind by relying on those sheets of papers and by so doing its decision was perverse and based on no evidence. According to Mr. Shah, all the material and figures in the loose sheets were mere 'casual, hypothetical, theoretical and imaginary' and were merely 'round figures', prepared in contemplation of the petitioners forming a Co-operative Society, and did not tally with the books of accounts of the petitioners which had been accepted by the income tax authorities.
12. In an attempt to make good these submissions, Mr. Shah invited my attention to some of these sheets which have been annexed as Exs. A to K to the petition. Drawing my attention to the first sheet (Ex. A to the petition), Mr. Shah pointed out that it pertained to 35 looms whereas in existence were only 33 looms. He further urged that though in this sheet, the salaries of the Manager-Weaving Master, Assistant Manager-Supervisor and Carpenter-Electrician & Fitter, were shown as Rs. 350/-, Rs. 200/- and Rs. 100/-, respectively, no such persons had been in the employment of any of the petitioners. He further urged that the calculation of 25 working days for the total number of 35 weavers for two shifts at Rs. 95/- per weaver as shown on this sheet also was not correct because weavers were not engaged on daily basis but on piece work basis. According to Mr. Shah, the octroi duty at the rate of 1 1/2% shown as Rs. 200/- on the sheet was also not correct as no octroi duty had been levied from 1961 till 1965. Pausing here for a moment, it may be state that on this very sheet are stated 11 items under the heading 'Fixed Expenses'. Two of such items are 'traveling expenses for partners' and 'Partners' compensation'. Under the heading of 'salaries', 11 items of expenditure have been shown as salaries. Under this heading of 'salaries', payment of salaries to Manager-Weaving Master, Assistant Manager-Supervisor and the Carpenter-Electrician & Fitter are disputed by Mr. Shah on the ground that no such persons were employed by the petitioners. Coming to the second loose sheet (Ex. B to the petition), Mr. Shah urged that the current working of 35 looms shown therein was not correct as the looms which were actually working were 33 and not 35. Pausing here for a moment, in this sheet also, there are figures showing fixed salaries, wages and partners' compensation.
13. Regarding the third sheet (Ex. C to the petition), Mr. Shah urged that the reference therein only to 24 looms was incorrect as there were in fact 35 running looms in 1961 and 31 to 33 looms after 1961. It may be noted that in this sheet also appear figures showing the fixed salaries, wages and partners' compensation. Coming to the fourth sheet (Ex. D to the petition), Mr. Shah urged that the building which was shown in this sheet at a value of Rs. 83,820, belonged only to the 1st petitioner. Pausing here for a moment, it may be mentioned that in this statement the amounts in the partners account, has been shown by initials, viz. H.R., R.G., D.R., D.R., the middle two being the initials of petitioners 2 and 3. These amounts are shown to the very paise as also sales to various parties. For instance, a sale to Randhir Bros. has been shown at Rs. 13518.83, to Canara Bank Ltd. at Rs. 9020.63, to the Khatau Mills (D.W.F.) at Rs. 1297.52, to Khatau Mills (K.T.) at Rs. 5311.05, to one J.B. Contractor at Rs. 5698.35 and to one Maganlal Dalichand at Rs. 1284.62. The exactness of these figures as also those of the partners' account, negative Mr. Shah's contention that only imaginary and hypothetical figures in round sums are mentioned in the statements.
Regarding the sheet (Ex. E to the petition), Mr. Shah was critical of the fact that while it was headed 'gray Medium 61', in the petitioners' power looms only 60' Mulls could be produced.
14. These submissions of Mr. Shah are entirely without merit. The revisional authority has considered all the material on record in its entirety including no doubt these sheets and other material and papers seized during the raid and it is after considering all the factors that the revisional authority came to the finding it did. In exercise of powers under writ jurisdiction it is not open for me to re-appraise the evidence and to substitute my judgment for that of the revisional authority, which is what Mr. Shah virtually invites me to do. The order of the revisional authority is a balanced and detailed, well-reasoned order. To attack it on any of the grounds urged by Mr. Shah is thoroughly futile. After setting out the various grounds taken up by the petitioners, it is stated in para 3 of the order as under :-
'Government of India have gone through the relevant papers and the order-in-appeal passed by the Central Board of Excise and Customs, and observe that the seized documents though loose sheets are quite detailed and contain considerable factual material showing the combined working of the undertaking from time to time, there is specific mention of partners' compensation; there is a break up of the partners' accounts with the amounts credited to each particular partner whose initials have been given and there is also a document showing date by date the working of looms in shifts of each of the units in January 1963 and the units are indicated by initials e.g. P.T. for Prithvi Textiles, K.T. for Kirti Textiles, S.R.T. for Shree Raj Textiles, D.W. for Deepak Weaving Factory and D.T.M. for Dilip Textiles These documents seized from the premises of the six petitioners and the residential premises of Shri Ranjit Singh Gordhandas Kapadia at Bombay coupled with the statement which were recorded subsequently and singed by the concerned persons leaves little room for doubt that all the looms were in fact being operated jointly and that a facade of separate factories was put up in order to derive full benefit from the concessional rates of excise duty admissible for small units.'
15. These findings of the revisional authority based on the material before it, demonstrably bring to the forefront that all the factors urged by the petitioners and all the arguments placed by them before the revisional authority, were taken into consideration and that after analysing and sifting the material on record and the submissions made by the petitioners, it came to the conclusion that the petitioners had operated the looms as one unit and that the petitioners' version of their being separate and distinct units was a myth or in the words of the revisional authority, 'a facade' with the object of deriving full benefit of concessional rates of duties which otherwise the petitioners would not be entitled to as one unit. There is nothing in this revisional order which discloses any non-application of mind, much less any perversity as suggested by Mr. Shah. It is on the evaluation of the entire evidence and the material before it that the revisional authority came to the conclusion it did. Mr. Shah's contention that the revisional authority should not have ignored the books of accounts accepted by the income tax authorities is also futile and ignores the probability that if the income tax authorities had before them the wealth of material that the revisional authority had before it, it is problematic if the petitioners' books of accounts would have been at all accepted by the income-tax authorities.
16. After coming to the conclusion that all the looms were operated jointly as one unit, the revisional authority has drawn corroboration from certain other circumstances, namely, the admitted relationship between the petitioners. In para 4 of the order the revisional authority states as under :-
'Added confirmation is received on this point from certain other circumstances e.g.
(i) The apex body M/s. C.C. Industries which owned the premises had as its partner, Smt. Dhairyabala Ranjit Singh Gordhandas Kapadia, the owner of Prithvi Textiles.
(ii) The owner of M/s. Dilip Textiles, Dilip Ramdas and the owner of M/s. Shri Raj Textiles, Privin Ramdas are brothers;
(iii) The owner of M/s. Deepak Weaving Factory, Shri Gordhandas Vrandravandas is the father of Shri Ranjit Singh Gordhandas who is the owner of M/s. Prithvi Textiles.
(iv) M/s. C.C. Industries besides owning the premises where all the looms were located was also the owner of three pirn winding machines which fed all the looms.'
Mr. Shah is not right when he says that it is on these grounds that the revisional authority came to its conclusion against the petitioners. These are merely additional factors which the revisional authority has referred to by way of corroboration or confirmation of its earlier finding against the petitioners. In para 5 of the order it is stated :-
'Under these circumstances, Government of India conclude that all the six units were in fact closely interlinked and for all practical purposes were being run jointly. There is enough documentary evidence to show that the profits were also being shared as between the various owners. For these reasons, it is only right that the units should be assessed to excise duty as though they were one unit ......'
Mr. Shah urged that in the loose sheets there was no evidence to indicate that the profits were being shared by the petitioners and on that ground urged non-application of mind on the part of the revisional authority. This is merely an attempt at hair-splitting and need not detain me longer than it has.
17. Mr. Shah's grievance that the revisional authority ignored not less than 17 points in the petitioners' favour is also without substance. In the memorandum of appeal filed before the revisional authority, the petitioners had detailed 17 points in their favour, namely, '(1) shed at Udyognagar partitioned into 5 separate parts, (2) rent paid to C.C. Industries separately, (3) separate electric meters, (4) paid pirn winding charges separately, (5) obtained separate permits from T.C., (6) obtained separate Tax marks, (7) obtained separate C. Ex. licences, (8) Excise duty on loom basis paid separately, (9) separate banking accounts, (10) separate books of accounts, (11) purchased machinery, stores, yarn etc., separately, (12) sold cloth separately on separate bills and issued separate receipts, (13) separate Sales Tax numbers, (14) engaged labour separately and paid wages separately, (15) assessed separately by income tax, (16) each invested his own capital in his business, and (17) there was no inter-transfer of cloth'. Mr. Shah urged that there was nothing whatsoever in the revisional order which indicated that these 17 points or any of them had been taken into consideration by the revisional authority because there was nothing in the order to suggest why these points did not find favour with it. There is no merit in this contention. That these 17 points were in the contemplation of, and not ignored by, the revisional authority is to be found from the fact that there is reference in the revisional order that they were urged. Merely because they were not accepted by the revisional authority, which preferred to base its finding on the exposure of the petitioners' machinations as disclosed by the material seized during the raid and by their own self-exculpatory signed statements of admission, is no ground to urge that these 17 points were ignored by the revisional authority, which it did not. This would be a matter of appreciation of evidence, not warranting interference by the writ Court when it cannot be said that the revisional authority acted in any manner which was perverse or in a manner which no reasonable person would do.
18. It was urged by Mr. Shah that the petitioners' statements were recorded initially under coercion and thereafter by misrepresentation of leniency. Merely because the petitioners' chose to make a clean-breast and asked for a sympathetic consideration, does not a fortiori spell coercion or misrepresentation. These statements signed by the petitioners were recorded prior to the issue of the show-cause notice. No such grievance was made by the petitioners in their reply. It was only in their arguments before the revisional authority that this grievance was belatedly made for the first time as under :-
'It will be seen from the statements of petitioners 2 to 6 that although they were recorded on different dates i.e. one on 24.12.64, three on 26.12.64 and one on 5.1.65, the incriminating part of the statements running into 41 cyclostyled lines beginning with the words 'you have shown me the account books' and ending with less the Central Excise duty already paid by us' is exactly the same word for word. It is impossible for different persons to give such a long statement in exactly similar words. This supports the petitioners' statement that their statements were taken as desired by the Asstt. Collector to support his case, first by threat and later by inducement. These statements should not have been relied upon by the OSD and the Member.'
It was the grievance of Mr. Shah that despite this ground having been taken in the arguments there is nothing in the revisional order which indicates that it had been considered by the revisional authority nor has any reason been given by the revisional authority for rejecting it. There is no merit in this ground of challenge. Reading the revisional order as a whole, it is clear that it is not solely on the petitioners inculpatory admissions that the revisional authority found against the petitioners. The revisional order brings to the forefront that these inculpatory admissions made by the petitioners in their signed statements were merely an added circumstance taken into consideration by the revisional authority. These statements merely corroborate the material seized during the raid and the totality of the evidence against the petitioners, on the basis whereof the revisional authority found against the petitioners, and not merely on the basis of those statements alone.
19. Mr. Shah's contention that the perversity of the impugned order is disclosed by the fact that after 1964 the petitioners were considered as separate units, is also without substance. There is on record an order dated 3rd/4th October 1967 passed by the Assistant Collector which gives the reason why after 1964 the petitioners were considered as separate units, viz. that as urged by the petitioners, after 1964, 'the parties had taken particular care thereafter to operate the five weaving units independently in all respect in compliance of the requirements of the Central Excise Rules and regulations, ...' Thus after 1964, the petitioners' contention that the units were separate units, was in fact accepted by the excise authorities after due verification. After considering and accepting the petitioners' evidence the authority came to the conclusion that after 1964 the petitioners had been operating their units independently and not jointly as one unit. On the contrary, the subsequent order demonstrates the lack of mala fides in holding the petitioners' units as one unit for the earlier period, viz. 1961 to 1964. Thus the grievance of mala fides attributed to the revisional authority is merely a red herring sought to be laid by the petitioners in a desperate attempt to have willy-nilly set aside the revisional order on some ground or the other.
20. This brings me to the technical grounds urged on behalf of the petitioners, namely, that the Officer on Special Duty had no jurisdiction to decide the matter as he was an officer in the Bombay Collectorate whereas the petitioners carried on their manufacturing business in Surat within the jurisdiction of the Baroda Collectorate of Excise. It was urged that on that account, the proper officer who could have conducted the enquiry and passed the requisite order should have been from the Baroda Collectorate of Excise only. Mr. Shah invited my attention to a notification dated 10th July 1964 as corrected by notification dated 15th August 1964 appointing V. B. Gordon, Deputy Collector of Customs and Central Excise, to officiate as Collector of Customs and Central Excise, Grade II, and posted as Officer on Special Duty in the Central Excise Collectorate, Bombay, with effect from 7th July 1964. V. B. Gordon was invested with the powers of a Collector of Central Excise for the purpose of investigation and adjudication of such cases as may from time to time be assigned to him by the Central Board of Excise and Customs. On 15th March 1965, an order was passed assigning the investigation and adjudication of the present case relating to the petitioners to V. B. Gordon. Mr. Shah relied on certain rules, namely, Rules 2A(a)(b), Rule 2(11), Rule 4, and Rules 43 and 44 of the Central Excise Rules. It is unnecessary to advert at any length to these rules for the simple reason that the raid having taken place in Bombay from where the incriminating material, viz. documents, papers, etc., were seized from the residence of the 2nd petitioner at Marine Drive and Head Office of the 1st petitioner at Hanuman Street, and the evasion of duty having been detected in Bombay, the Officer on Special Duty of the Bombay Collectorate was competent to hold the enquiry and pass his order.
21. The next ground urged by Mr. Shah was of limitation. He urged that the assessment had become barred by reason of the provisions of Rule 10 of the Central Excise Rules. Rule 10 provides for recovery of duties or charges short-lived or erroneously refunded and reads as under :
'When duties or charges have been short-levied through inadvertence, error, collusion or mis-construction on the part of an officer or through mis-statement as to the quantity, description or value of such goods on the part of the owner, or when any such duty or charges, after having been levied, has been owing to any such cause, erroneously refunded, the person chargeable with duty or charged so short-lived or to whom such refund has been erroneously made, shall pay the deficiency or pay the amount paid to him in excess, as the case may be, on written demand by the proper officer being made within 3 months from the date on which the duty or charge was paid or adjusted in the owner's account-current, if any, or from the date of making the refund.'
Mr. Shah urged that in this matter there was a short-levy by reason of the inadvertence or error on the part of the officer in not having levied the correct duty in 1961 and in not properly verifying whether this was a case of assessment as one unit or several units. This contention must be advanced to be rejected. The suppression of correct facts by the petitioners which led to evasion of duty cannot possibly be attributed to inadvertence or error on the part of the officer concerned. It was only after incriminating material came to light by reason of the raid and seizure on 21st December 1964, that the evasion of duty resulting from the suppression by the petitioners of the correct facts were brought to the notice of the authorities whereafter the troubles of the petitioners began.
22. Mr. Shah also relied on Section 40(2) of the Central Excise Act. Section 40 provides for bar of suits and limitation of suits and other legal proceedings. Sub-section (2) reads as under :-
'No suit, prosecution or other legal proceeding shall be instituted for anything done or ordered to be done under this Act after the expiration of six months from the accrual of the cause of action or from the date of the act or order complained of.'
Mr. Shah urged that the words 'other legal proceeding' would include the issuance of a show-cause notice which should have been issued within six months from 1961 when additional excise duty was not correctly paid by the petitioners. This contention is fallacious. While the words 'other legal proceedings' read by themselves are wide enough to include any proceeding taken according to law, whether in a Court of law or before any Tribunal or authority, these words read in the context in which they appear in section 40(2) must necessarily be read as having a restrictive meaning as they must be read ejusdem generis with the preceding words, namely, 'no suit, prosecution or'. In coming to this conclusion, I am fortified by the decision of the Division Bench of the Madhya Pradesh High Court in Universal Cables v. Union of India, 1977 Tax.LR 1825, where it was held that the expression 'other legal proceeding' in the context of section 40(2) bears a restrictive meaning conveying the idea of judicial proceeding taken in a Court of law and does not cover proceedings before the departmental authorities. At page 1838 of the Report, it is observed as under :-
'.... 'Other legal Proceeding' is ordinarily wide enough to include any proceeding taken in accordance with law, whether so taken in a Court of law or before any authority or tribunal. The question, however, is whether in the context of Section 40(2) this wide meaning should be given to the said expression. Now the language of Section 40(2) is : 'no suit, prosecution or other legal proceeding shall be instituted'. 'Suit' and 'prosecution' which precede the expression 'other legal proceeding' can be taken only in a Court of law. 'Suit' and 'prosecution' belong to a class or category of legal proceeding which can be described as judicial proceedings or proceedings taken in a Court of law. This class or category is not exhausted by 'suit' and 'prosecution' for 'suit' is not comprehensive enough to include civil proceedings which are instituted by filing petition or applications. In this situation, the rule of adjusted generis persuades us to hold that the general words 'other legal proceeding' are limited to the same category of legal proceeding of which 'suit' and 'prosecution' are examples. In other words, the expression 'other legal proceeding' in the context of Section 40(2) bears a restrictive meaning conveying the idea of judicial proceedings or proceedings taken in a Court of law .... There is no indication in Section 40(2) or elsewhere in the Act that the general words 'other legal proceeding' should be given their wide meaning and should not be construed in a limited sense by applying the rule of adjustment generis. Indeed the word 'Instituted' in Section 40(2) is a pointer in the direction that the expression 'other legal proceeding' is limited to proceedings taken in a Court of law and does not cover proceedings before departmental authorities. A departmental proceeding like a penalty proceeding is commenced by issue of a notice to the assessee by the adjudicating authority. It would be inappropriate to say that by issuing a notice the authority concerned institutes a proceeding before itself. The word 'institute' is commonly used in the context of proceedings instituted in a Court of law like Suits or prosecutions. There are also other indications that the wide meaning of the expression 'other legal proceeding' was not intended by the Legislature. Now if the words 'other legal proceeding' are construed in a wide sense, recovery proceedings for realising duty and penalty under section 11 of the Act before the authorised officer and the Collector, on the assessee failing to pay the same, will be governed by the rule of six months' limitation provided in section 40(2). Similarly, the proceedings for reassessment under Rule 173-J read with rule 10 will be governed by section 40(2) and the period of limitation of one year prescribed by rule 173-J would become invalid. These consequences are somewhat startling and could not have been intended by the Legislature.'
I am in respectful agreement with the decision and observations of the Division Bench of the Madhya Pradesh High Court in the Universal Cables case.
23. On the other hand, reliance was placed by Mr. Shah on the decision in Abdul Aziz Ansari v. State of Bombay, : AIR1958Bom279 , where it was held that the phraseology 'any legal proceeding' in section 48(2)(ii) of the Sales Tax Act, 1953 was not confined merely to proceedings in a Court of law, and would mean in its normal connotation, a proceeding in accordance with law and that assessment proceedings under the Sales Tax Act were such proceedings. This decision can be of no assistance to the petitioners in view of the fact that the phraseology of section 48(2)(ii) of the Sales Tax Act is entirely different from the phraseology of Section 40(2) of the Central Excise Act. While in section 40(2) of the Central Excise Act, the words 'other legal proceeding' are succeeded by the words 'any suit, prosecution or' and hence must be read ejusdem generis in their plain context, no such construction is permissible in respect of section 48(2)(ii) of the Sales Tax Act which reads as under :
'Notwithstanding the repeal of the said Act and the said entries, the said repeal shall not affect or be deemed to affect -
X X X(ii) any legal proceeding pending on the 1st day of November 1952 in respect of any right, title, obligation or liability or anything done or suffered before the said date; and any such proceeding shall be continued and be disposed of as if this Act had not been passed.'
Thus the language of section 48(2)(ii) of the Sales Tax Act is far from comparable with the language of section 40(2) of the Central Excise Act and hence a wide connotation was given by the Bombay High Court to the words 'any legal proceeding' in section 48(2)(ii) of the Sales Tax Act.
24. Mr. Shah also relied on the decision of the Supreme Court in Public Prosecutor, Madras, v. R. Raju : 1972CriLJ1699 . Raju's case was considered by the Madhya Pradesh High Court in Universal Cables case (supra). Raju's case is no authority for the proposition canvassed by Mr. Shah. It is an authority that section 40(2) is not confined in operation to Government servants only and that it is applicable to any person including an assessee.
25. In the result, all the grounds of challenge urged on behalf of the petitioners must fail and the petition must stand dismissed with costs. Rule is discharged.