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Hindustan Safety Glass Works Ltd. Vs. Assistant Collector, Central Excise - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Writ No. 786 of 1984
Judge
Reported in1985(21)ELT38(All)
ActsCentral Excise Act, 1944 - Sections 4, 4(1), 4(4), 11A, 14, 35, 35A and 36; Central Excise Rules, 1944 - Rule 173C(9); Central Boards of Revenue Act, 1963; Orissa Sales Tax Act; Constitution - Article 226; Central Excise (Valuation) Rules, 1975
AppellantHindustan Safety Glass Works Ltd.
RespondentAssistant Collector, Central Excise
Appellant AdvocateRajesh Kumar and ;S.P. Gupta, Advs.
Respondent AdvocateR.S. Dhawan, Standing Counsel
DispositionPetition allowed
Excerpt:
.....well approach the court for redress. in that case, the determination would now be made under the central excise (valuation) rules, 1975. the legal position in this respect has been clearly laid down by the supreme court in the union of india and ors. ..14. these observations clearly imply that the scope of enquiry, where determination is to be made under section 4(1)(a), continues to be different from the one where it is to be made under section 4(1)(b). the material which may be required to be produced by an assessee for determination of the excisable value under the rules of 1975, but is not relevant to an enquiry where determination is to be made under clause (a), cannot be required to be produced by him through the aid of summons under section 14. the enquiry under clause (a) can..........excises and salt act, 1944 (briefly, the act) served upon the petitioner m/s hindustan safety glass works limited, bamrauli, allahabad (hereinafter, the glass works) brought them to this court again through the present petition under article 226 of the constitution assailing it as without jurisdiction and seeking, inter alia a writ in the nature of mandamus commanding the assistant collector (central excise), allahabad to approve the price list no. 12/84/(g) of april 13, 1984 submitted by the glass works under the provisions of section 4(1)(a) of the act. the petition was heard by us at some length on the prayer jointly made by sri s.p. gupta appearing for the glass works and sri r.s. dhawan representing the assistant collector. they requested us to dispose of the matter finally at.....
Judgment:

V.K. Mehrotra, J.

1. The summons dated September 4, 1984 issued in exercise of powers under Section 14 of the Central Excises and Salt Act, 1944 (briefly, the Act) served upon the petitioner M/s Hindustan Safety Glass Works Limited, Bamrauli, Allahabad (hereinafter, the Glass Works) brought them to this Court again through the present petition under Article 226 of the Constitution assailing it as without jurisdiction and seeking, inter alia a writ in the nature of mandamus commanding the Assistant Collector (Central Excise), Allahabad to approve the price list No. 12/84/(G) of April 13, 1984 submitted by the Glass Works under the provisions of Section 4(1)(a) of the Act. The petition was heard by us at some length on the prayer jointly made by Sri S.P. Gupta appearing for the Glass Works and Sri R.S. Dhawan representing the Assistant Collector. They requested us to dispose of the matter finally at the admission stage itself and this is why we are proceeding to do so.

BACKGROUND

2. The Glass Works has a factory at Bamrauli in the district of Allahabad wherein it manufactures articles like wind screens, door screens, back screens, etc., for motor vehicles and also mirrors. This is being done under a licence obtained by the Glass Works for its factory at Bamrauli. The case of the Glass Works is that normally it sells these goods to buyers in the course of wholesale trade at the factory premises at Bamrauli and also from its depots at various places in the country to which it transports its goods for sale from the factory. The wholesale prices at which sales are made at the factory premises differ widely from prices at which sales are made at various wholesale depots for a variety of reasons inherent in the nature of the articles which are manufactured and sold by the Glass Works, These goods are not excisable articles, but the dispute in that regard is not the subject matter of the present petition wherein the Glass Works has come to this court for redress on the assumption that these goods are subject to levy of Excise Duty under the Act.

3. The determination and payment of Excise Duty is made according to the procedure laid down in the Central Excise Rules, 1944 (briefly, the Rules). Chapter VII-A of these rules is entitled 'Removal of Excisable Goods on Determination of Duty by Producers, Manufacturers of private Warehouse Licensees'. Commonly, the rules contained in this Chapter are spoken of as self assessment procedure. We shall refer to the relevant rules wherever necessary. The provisions of the Act which may be noticed by us in the first instance are those of Sections 4, 11A, 14, 35, 35A, etc., some of which we may read, to the extent it is necessary. We begin with Section 4 which, in its material parts, is in these terms :

4. Valuation of excisable goods for purposes of charging of duty of excise-(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section, be deemed to be-

(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale :

Provided that-

(i) where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons), each such price shall, subject to the existence of the other circumstances specified in Clause (a), be deemed to be the normal price of such goods in relation to each such class of buyers ;

(ii) where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in Clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed shall, in relation to the goods so sold, be deemed to be the normal price thereof;

(iii) * * * * *

(b) where the normal price of such goods in not ascertainable for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed.

(2) Where, in relation to any excisable goods the price thereof delivery at the place of removal is not known and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price.

(3) The provisions of this section shall not apply in respect of any excisable goods, for which a tariff value has been fixed under subsection (2) of section 3.

(4) For the purpose of this section,-

(a) * * * * * *

(b) 'place of removal' means-

(i) a factory or any other place or premises of production or manufacture of the excisable goods; or

(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed ;

(c) * * * * * *

(d) * * * * * *

(e) * * * * * *

4. The case of the Glass Works, which has not been disputed before us, has been that the classification lists which it had been submitting for the past several years and even the list dated April 13, 1984 were all for determination of the price under Section 4(1)(a). The summons which had been served upon it required it to produce documents which had no relevance, whatsoever for determination of the price under this provision. The summons, which is in the prescribed form in appendix IX, called upon the Glass Works '... to produce the documents and records mentioned in the Schedule..-' This Schedule mentioned the following documents :

SCHEDULE

1. Total value of goods transacted through your Branch Offices during the Annual year 1982-83, 1983-84 and 1984-85 till July, 1984 (value as per approved price-lists).

2. Total amount realised on sale of the above goods to independent buyers for the relevant period as above.

3. Total amount of freight and insurance incurred on transportation of the goods during the relevant period.

4. Relevant invoices and branch records to prove the correctness of the above informations.

5. Balance-sheet for the Annual year 1982-83 and 1983-84.

6. Copies of price-lists (effective during the relevant period in respect of your other units manufacturing comparable goods.

7. Latest price-lists in effect in different depots of yours spread all over India. We may add that in its opening part the summons mentioned as its subject 'the case of approval of price list No. 15/6/84, dated 18-2-1984 and 12/84 (G) effective from 16-4-1984' and opened with the recital that 'the case about approval of price list as referred to above under Section 4 of the Central Excises and Salt Act, 1944, and the Central Excise Rules, 1944' was to be dealt with.

5. Section 14 of the Act provides in Sub-section (1) that :

(1) Any Central Excise Officer duly empowered by the Central Government in this behalf shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any enquiry which such officer is making for any of the purposes of this Act. A summons to produce documents or other things may be for the production of certain specified document or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned.'

6. Rule 173(c)(9) of the Rules which enables the officer concerned (called the proper officer in the Rules) to require production etc. of documents or tender evidence says that:

(9) The Proper Officer may, where he considers it necessary during the course of any enquiry in connection with a price list submitted by an assessee,-

(a) require any person to produce or deliver any document or thing relevant to the enquiry ; and

(b) examine any person acquainted with the facts and circumstances of the particulars shown in the price-list.

7. Section 35 says that :

'35. Appeals.-(1) Any person deeming himself aggrieved by any decision or order passed by a Central Excise Officer under this Act or the rules made thereunder (not being an order passed under Section 35A) may, within three months from the date of such decision or order, appeal therefrom to the (Central Board of Excise & Customs as constituted under the Central Boards of Revenue Act, 1963), or, in such cases as the Central Government directs, to any Central Excise Officer not inferior in rank to an Assistant Collector of Central Excise and empowered in that behalf by the Central Government. Such authority or officer may thereupon make such further inquiry and pass such order as he thinks fit, confirming, altering or annulling the decision or order appealed against :

Provided that no such order in appeal shall have the effect of subjecting any person to any greater confiscation or penalty than has been adjudged against him in the original decision or order.

(2) Every order passed in appeal under this section shall, subject to the power of revision conferred by Section 36, be final.'

8. Both under Section 14 of the Act and Rule 173-C(9) of the Rules the production of documents can be ordered during any inquiry 'for any of the purposes of the Act' and of documents 'relevant to the inquiry'. A direction for production of documents unrelated to the inquiry is not countenanced. This, to our mind, is a reasonable meaning to be given to these provisions else the power may become uncanalised and may some time result in demand for wholesale production of documents totally unconnected with the inquiry. True it is that arbitrary exercise of power under these provisions may not normally be expected as urged by Sri Dhawan, yet the rationale of the guiding factor of production only of documents relevant to the inquiry contained in these provisions can hardly be doubted. Whenever, therefore, a direction for production of documents is made through a summon, like in the present case, the very first question that must be gone into is whether the documents ordered to be produced have any relevance to the inquiry for which they had been ordered to be produced. In fact, the intendment of these provisions clearly is that the authority making the direction would have no jurisdiction to call for any document which is not relevant to the inquiry. And, if it does, the person required to produce the document can very well approach the court for redress.

9. The stand of the Assistant Collector, vehemently put forward by Sri Dhawan before us, is that the Act provides an alternative forum to the Glass Works under Section 35 whereunder an appeal against the summons for production of documents could be taken to the Central Board of Excise and Customs which could go into the question of relevancy also. We have extracted the necessary part of Section 35 earlier which shows that an appeal lies only against '...any decision or order passed...under this Act or the Rules made thereunder...'

10. That summons issued under Section 14 does not fall in the category of a decision is not in doubt and has not been characterised as such even by Sri Dhawan. What he, however, says is that it is an 'order' passed by the Assistant Collector and is consequently appealable under Section 35. We have considered the submission with the seriousness it deserves, but we find it difficult to accept it. We find in Chapter VI, in which Section 35 occurs, a set of provisions relating to adjudication of confiscations and penalty which includes provisions for appeals and revisions. When we look at Section 35 itself we find that the word 'order' seems to have been used in the sense of an order in enforcement of a decision. This is clear when we read the provision to Section 35 laying down that no order passed in appeal confirming, altering or annulling the decision or order appealed against shall be such as will have the effect of subjecting any person to any greater confiscation or penalty than has been adjudged against him in the original decision or order. And, Sub-section (2) of Section 35 makes an order passed in appeal final subject to one passed in revision under Section 36 by the Central Board. The nature of the order which admits of an appeal or can be passed by the appellate authority is, thus, contemplated as one resulting in some confiscation or penalty. The word 'order' in Section 35 would not take within its sweep a mere direction to produce some documents which, by itself, cannot involve the consequence of any confiscation or penalty.

11. In the case of Vijai Engineering Corporation v. Union of India and Ors. (Writ petition No. 514 of 1984 connected with other petitions decided on November 13, 1984) a Division Bench of this Court, speaking through N.D. Ojha, J., did not go into the question whether the writ petitions directed against the seizure of account books and goods and issuance of show cause notice why excise duly may not be levied were maintainable in view of the Supreme Court decision in Titagurh Paper Mills Co. Ltd. v. State of Orissa, A.I.R. 1983 S.C. 603, inasmuch as, the petitions had an alternative remedy both against the order of seizure and the order requiring them to show cause under Chapter VI-A of the Act, raised by Sri Dhawan. The Supreme Court was dealing with an order of assessment made by the Sales Tax Officer under the Orissa Sales Tax Act in Titagurh Paper Mills Co. Ltd. case and dismissed the petition on the ground that the petitioners had an equally efficacious alternative remedy by way of an appeal and a second appeal and thereafter by approaching the High Court for opinion under the Act. This decision, upon which reliance was placed before us also by Sri Dhawan. is not apposite in the instant case.

12. Summons, as understood in legal parlance, is an intimation requiring a person to whom it is issued to appear to give evidence and/or produce some documents, etc. It is not an order in the sense that it decides any question or communicates a decision taken. It merely intimates the person concerned that he is required to appear before the named authority for giving evidence and/or to produce a document, etc. True it is that issuance of summons normally follows an order for such issuance by the authority concerned but that order is not a consequence of any determination of a question at issue nor is it in execution of any such determination. In the instant case, we have no doubt that the order which is made appealable under Section 35 does not embrace within its ambit an order for issuance of summons under Section 14. We, therefore, find it difficult to sustain the plea that the Glass Works had an alternative remedy under the Act which dis-entitled it from approaching this Court under Article 226 of the Constitution in the first instance.

THE REAL QUESTION

13. Under Section 4, the value of the excisable goods for purposes of charging duty of excise is to be, where the case is covered by Clause (a) of Sub-section (1), the normal price thereof as mentioned in that clause where it is ascertainable but when it is not ascertainable its determination is to be made under Clause (b) of Sub-section (1) in the manner prescribed by the Rules. In that case, the determination would now be made under the Central Excise (Valuation) Rules, 1975. The legal position in this respect has been clearly laid down by the Supreme Court in the Union of India and Ors. etc. v. Bombay Tyre International Limited and Ors.- A.I.R. 1984 S.C. 420. Their Lordships examined the provisions of the Act and the Rules and a number of their earlier decisions and observed, inter-alia (in paragraph 48 of the Report) that:

'From what has gone before, we consider that the true position under the Central Excises and Salt Act, 1944 as amended by Act XXII of 1973 can be set forth as follows :

(i) The price at which the excisable goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal as defined in Sub-section (4) (b) of Section 4 is the basis for determination of excisable value provided, of course, the buyer is not a related person within the meaning of Sub-section (4) (c) of Section 4 and the price is the sole consideration for the sale. This proposition is subject to the terms of the three provisos to Sub-section (1) (a) of Section 4.

(ii) Where the price of excisable goods in the course of wholesale trade for delivery at the time and place of removal cannot be ascertained for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in the manner prescribed by the Central Excise (Valuation) Rules, 1975 should be taker as representing the excisable value of the goods...'

They also said (in paragraph 33 of the Report) that'... I was not the intention of Parliament, when enacting the new Section 4 to create a scheme materially different from that embodied in the supersede Section 4. The object and purpose remained the same, and so did the central principle at the heart of the scheme. The new scheme was merely moicomprehensive and the language employed more precise and definite. As in the old Section 4, the terms in which the value was denned remained the price charged by the assessee in the course of wholesale trade for delivery at I the time and place of removal...'

14. These observations clearly imply that the scope of enquiry, where determination is to be made under Section 4(1)(a), continues to be different from the one where it is to be made under Section 4(1)(b). The material which may be required to be produced by an assessee for determination of the excisable value under the Rules of 1975, but is not relevant to an enquiry where determination is to be made under Clause (a), cannot be required to be produced by him through the aid of summons under Section 14. The enquiry under Clause (a) can only be in respect of the matters specifically mentioned in that clause and no other. Any document which is not relatable to the matter mentioned in Clause (a) cannot be required to be produced for determination of the value under that clause and if a demand for production of material unrelated to the requirement of Clause (a) is made, the authority making the demand can be restrained from doing so.

15. A copy of the summons under Section 14 in the present case is annexure '7' to the writ petition and it requires the Glass Works to produce the documents mentioned in the schedule to the summons which has been extracted earlier in this judgment. A persual of the documents mentioned in the schedule would show that wholesale demand for production of a large number of documents, which can possibly have no relevance to the approval of the price list No. 12/84-G, dated 13-4-1984 effective from 16-4-1984, when we keep in mind the admitted position that the classification lists which the Glass Works had been submitting for the past several years and even the list dated April 13, 1984 were all for determination of the price under Section 4(1)(a), was made by the Assistant Collector. This obviously is not permissible in law. For example, value of goods transacted through Branch Offices cannot be said, by any stretch of imagination, to have relevance for determination of the price under Clause (a) of Section 4(1) where the price at which such goods are ordinarily sold for delivery at the place of removal is ascertainable. If the value of goods delivered at the place of removal is not known and where the value is to be determined with reference to the price for delivery at a place other than the place of removal then alone can the price of goods in regard to which transactions are made through Branch Offices becomes relevant. Likewise, the price list effective in different Depots all over India cannot be said to have relevance to determination of he value of goods for purposes of charging Excise Duty under Clause (a) of Section 4(1). In the view that we are taking we do not find it necessary to deal with every item of the schedule. The fact remains that the summons under challenge requires the Glass Works to produce documents many of which do not appear to be relevant to enquiry to be made by him.

16. Sri Dhawan took pains to take us through the Valuation Rules of 975 with a view to support his plea that the documents which were asked for trough the summons were not irrelevant or unnecessary. We have mentioned earlier that those Rules are only attracted where determination is to be made under Clause (b) of Section 4(1). The position admits of no doubt in view f what the Supreme Court has said in Bombay Tyre's case.

17. We may also notice a submission made by Sri S.P. Gupta to the fleet that under the garb of the summons the Assistant Collector was trying p re-open the question of the liability of the Glass Works for payment of excise Duty on the past transactions or, in any case, was trying to fish out me material to do so. He invited our attention to Section 11-A which says.-

'11-A. 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 are short-paid or erroneously refunded by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words 'six months', the words 'five years' were substituted.

Explanation :-Where the service of the 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) ...

(3) ...'

18. Without going into the validity or otherwise of this submission we may observe in passing that proceedings under Section 11-A may be initiated against any assessee only upon existence of the conditions precedent therefor and the authority under the Act cannot be permitted, as it were, to collect material for its initiation by directing wholesale production of documents and making a roving and fishing enquiry for the purpose. After all, the provisions of the Act including Section 14, are meant to be administered fairly with a view to ensure the interest of the revenue but without causing unnecessary harassment to the assessee.

CONCLUSION

19. We have come to the conclusion, for the aforesaid reasons, that the summons dated September 4, 1984 (annexure '7' to the writ petition) deserve to be quashed. We quash it. It will, however, be open to the Assistant Collector to proceed afresh in accordance with law and require the Glass Works to produce for his perusal such documents as are material, albeit by issuing summons under Section 14, if occasion arises therefor. The petition succeeds in these terms Parties are left to bear their own costs.


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