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Madhumilan Syntex Pvt. Ltd. and anr. Vs. Union of India (Uoi) and anr. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Petition No. 104 of 1984
Judge
Reported in1987(11)ECC296; 1987(13)LC51(MP); 1985(19)ELT329(MP)
ActsCentral Excise Act, 1944 - Sections 3, 4, 11A, 11A(1), 11A(2), 14, 35, 35A, 35B, 35E and 35E(2); Companies Act, 1956; Central Excise (Amendment) Act, 1978; Central Excise Rules, 1944 - Rules 9B, 9B(1), 9B(2), 9B(4), 10, 56, 56(1), 173B, 173B(4), 173CC, 173I and 173Q; Industries (Development and Regulation) Act - Sections 18A; Constitution of India - Article 226
AppellantMadhumilan Syntex Pvt. Ltd. and anr.
RespondentUnion of India (Uoi) and anr.
Appellant AdvocateK.K. Venugopal, ;V.S. Kokje and ; Karpey, Advs.
Respondent AdvocateJ.P. Gupta and ;B.O. Nema, Advs.
Cases ReferredTitaghur Paper Mills Co. Ltd. v. State of Orissa
Excerpt:
jurisdiction - high court cannot go into the question of facts in a writ petition. per justice gyani--maintainability of writ petition--mere availability of an alternative remedy is not a bar to maintainability, especially if order challenged is without jurisdiction and violates the principles of natural justice--constitution of india : article 226.demand - without show cause notice, unsustainable--cesa: section 11a.taxable event - section 3 only imposes the rate of duty, not when such duty is to be imposed. since excise duty is an indirect duty on manufacture or production and is ultimately passed on to the consumer, it can be levied at any convenient stage--central excises and salt act, 1914 : section 3.show cause notice - justified when two of the four samples were not in conformity.....p.d. mulye, j.1. the petitioner no. 1, madhumilan syntex private ltd. which is a company registered under the companies act, 1956 and of whom petitioner no. 2 is the managing director owns a factory at biora wherein they manufacture spun yarn. this product is covered by item 18, schedule 1 of the central excises and salt act, 1944.2. according to the petitioners in the manufacture of their product, they use as raw material cellulosic fibre and non-cellulosic waste. by blending and processing of these raw materials, the final products spun yarn is produced. therefore, the product falls in para (i) of item 18-iii of the first schedule of the central excises and salt act. further according to the petitioners their product does not contain any man-made fibre of non cellulosic origin and,.....
Judgment:

P.D. Mulye, J.

1. The petitioner No. 1, Madhumilan Syntex Private Ltd. which is a company registered under the Companies Act, 1956 and of whom petitioner No. 2 is the Managing Director owns a factory at Biora wherein they manufacture spun yarn. This product is covered by Item 18, Schedule 1 of the Central Excises and Salt Act, 1944.

2. According to the petitioners in the manufacture of their product, they use as raw material cellulosic fibre and non-cellulosic waste. By blending and processing of these raw materials, the final products spun yarn is produced. Therefore, the product falls in para (i) of Item 18-III of the First Schedule of the Central Excises and Salt Act. Further according to the petitioners their product does not contain any man-made fibre of non cellulosic origin and, therefore, they have been classifying the product by paying the duty in accordance with the Tariff Item 18-III(i) of the said Act.

3. That respondent No. 4 by a demand notice dated 7th February, 1984 (Annexure A) without any prior notice or hearing, raised a demand asking the petitioners to pay within 10 days a sum of Rs. 26,47,749.39 on the assumption that the product cleared by the petitioners during the period from 15th August, 1983 to 6th February, 1984 was covered under Tariff Item No. 18-III(ii); that on the same day i.e. 7th February, 1984, vide Annexure B respondent No. 4, Superintendent of Central Excise, Ujjain sent a memo to the effect that the product classified by the petitioners is in reality an item falling under Tariff Item No. 18-III(ii) and shall be cleared only on payment of duty accordingly. The petitioners have therefore, filed this petition challenging the said order.

4. The grievance of the petitioners has been that no prior notice or any opportunity of hearing was afforded to the petitioners before issuing the memo Annexure B and, therefore, the demand and the order applicable to future clearance is against the principles of natural justice and is clearly without jurisdiction.

5. Further, according to the petitioners they have been and are manufacturing yarn out of cellulosic fibre and non-cellulosic waste; that they do not use any cellulosic fibre as raw material for the said product; that the petitioners have been filing classification lists under Rule 173-B of' the Central Excise Rules, in which full description of each item of the goods produced is given as also the tariff item under which the goods are covered. These classification lists have been approved by the respondents and the goods are cleared only after the classification lists are approved; that even after such approval the Department feels that due to some error on their part the duty has been short levied. The only course left open to them by law is to follow the procedure prescribed by Section 11A of the said Act which provides for service of notice of show cause as to why the duty alleged to be short levied be not recovered from the assessee. Therefore, the demand notice dated 7th February, 1984 (Annexure A) is without jurisdiction and illegal for the reason that neither show cause notice as provided by Sub-section (1) of Section 11A of the Act was given before the issue of the demand nor any opportunity of making a representation was given to the petitioners; that the Assistant Collector of Central Excise has not determined the amount of duty of excise due from the petitioners in accordance with Sub-section (2) of Section 11A of the Act. He has, therefore, no jurisdiction to demand any amount on account of short levy.

6. Further according to the petitioners the non-cellulosic fibre and non-cellulosic waste are two different things and if a product is made out of non-cellulosic waste it cannot be classified under Tariff Item No. 18-III(ii); that the very fact that 'non-cellulosic waste' of all sorts has been classified separately as sub-item IV of Item 18 shows that non-cellulosic waste is not the same thing as non-cellulosic man-made fibre covered by Item 18 of the Tariff. By an amendment made by the petitioners as per order of this Court dated 31-3-84, they have averred that after this petition was admitted for hearing on 9-2-84 and a stay order was passed on the same day, having come to know of the filing of the petition and of the stay order the respondents mala fide and with a view to flout the proceedings before this Court issued two show cause notices on 11-2-84 back-dating them as if they have been issued on 9/10-2-84 and 9-2-84 which have been annexed to the returns filed by the respondents as Annexures R. 8 and R. 9. Notices were also issued to the employees of the petitioners for recording their statements.

7. On 18-2-84, before the time given for reply to the show cause notice has expired, petitioner No. 2, who was also served with a show cause notice applied for extension of time as per Annexure D. On 22-2-84 the statement of petitioner No. 2 was recorded under Section 14 of the Central Excises and Salt Act. On the following day statements of the employees were also recorded. In reply to the show cause notice, the petitioners while refuting the allegation submitted that since the demand had already been issued there was no question of showing cause against its issuance and that as the matter was sub judice it would not be proper to continue the hearing on the show cause notices; that on 2-3-84 the petitioners wrote a letter to respondent No. 3 requesting him for adjournment of persona! hearing in view of the pendency of this petition in this Court or to grant time to bring a stay order from this Court. However, the respondent No. 3 did not adjourn the case but passed the final order on 5-3-84 itself, copies of which have been filed by the respondents along with their returns as Annexures R. 10 and R. 11. In addition the same day another show cause notice was also issued calling upon the petitioners why the penalty should not be imposed on them. Thus, in short, the grievance of the petitioners has been that the classification once made could not be amended or modified in this manner, principles of natural justice have been violated by not giving any proper and adequate opportunity to the petitioners and that the impugned orders were passed with a pre-determined decision which speaks of bias and thus the orders being mala fide and without jurisdiction deserves to be quashed. That at any rate the excess demand for the period 15-8-83 to 6-2-84 could not be made retrospectively, but such a demand would apply only from 6-2-84 onwards and not prior to it.

8. The respondents have challenged and contested the petitioners' claim on various grounds. According to the respondents the petitioners filed two classification lists for their products effective from 7-7-83 and September, 1983 respectively as per Annexures R. 1 and R. 2, according to which they classified their cellulosic spun yarn containing non-cellulosic waste under Tariff Item No. 18III(i). The classification lists were approved by the Assistant Collector of Central Excise, Ujjain, the proper Officer in the case on the basis of the declaration given by the petitioners; that the Inspector of Central Excise in-charge of the petitioners' factory drew samples of the spun yarn manufactured by the petitioners under Rule 56 of the Central Excise Rules and sent them to the Chemical Examiner for test, who gave his report relating to these samples; that out of these four results two relating to samples sent under Test Memo No. 1/83 were found to agree with the petitioners' declaration. The result of test report of the sample sent under Test Memo No. 2/83 and 3/83, however, did not agree with that declaration. It is this product represented by the samples sent under Test Memo No. 2/83 and 3/83 which is the subject matter of this petition. The Inspector of Central Excise informed the petitioners regarding the results of the Chemical Examiner's tests as per Annexure R. 5 dated 24-12-83. Respondent No. 4 also informed the petitioners by letter dated 7-2-84 .Annexure R. 6 and thus sent a demand notice calling upon the petitioner to deposit Rs. 26,47,749.39 being the differencial amount of duty for the period 15-8-83 to 6-2-84. Thus, the procedural irregularity caused as a result of the demand No. 1/84 under Section 11A stood rectified with the issue of the show cause notice on 9/10-2-84, Thus according to the respondents an appealable order having been passed by the Assistant Collector of Customs the petitioner had an alternative remedy of filing an appeal which they have not availed of and consequently the facts in question being also disputed, this writ petition deserves to be dismissed on this short ground alone as it also cannot be denied that the respondent No. 3 had the jurisdiction to entertain and decide the matter; which is based on the report of the Chemical Examiner; that the petitioners have not disputed the results of the Chemical tests. They have, therefore, prayed that this petition deserves to be dismissed.

9. The learned counsel for the petitioner submitted that the respondents has made the demand for the excise duty for the period 15-8-83 to 6-2-84 which could not be made retrospectively as the classification list submitted by the petitioners was approved, according to which they were paying the excise duty till that period. He, therefore, submitted that there was no power of review under the Act under which the order of classification once made could be reviewed. Such a power is only vested in the Collector of Central Excise, according to the provisions of Section 35E(2) of the Central Excises and Salt Act, 1944, which provides that-

'The Collector of Central Excise may, of his own motion, call for and examine the record of any proceeding in which an adjudicating authority subordinate to him has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order and may, by order, direct such authority to apply to the Collector (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Collector of Central Excise in his order.'

and that Sub-section (3) further provides that-

'No order shall be made under Sub-section (1) or Sub-section (2) after the expiry of two years from the date of the decision or order of the adjudicating authority.'

It was, therefore, submitted that the Collector of Central Excise alone has the jurisdiction to change the classification, if he so desires, within the specified period and consequently the respondent No. 3, namely the Assistant Collector of Central Excise had no jurisdiction to review his order by making a demand by changing the classification without giving a show cause notice as in the present case the show cause notice is just a farce as the respondent No. 3 had already made up his mind by calling upon the petitioner to pay the enhanced duty by changing the classification retrospectively. He therefore, submitted that the demand made for the period 15-8-83 to 6-2-84 deserves to be quashed.

10. The learned counsel for the petitioners further submitted that reclassification under Rule 173-B is void, without jurisdiction and cannot be modified retrospectively, but can be made operative only from 5-3-84 and onwards after giving a chance of hearing to the petitioners in the proper sense of the term in an unbiased manner, which, apparently in this case does not appear to be possible in view of the fact that respondent No. 3 has already made up his mind on the basis of which he has made a demand for enhanced duty with retrospective effect. He also submitted that according to Rule 9-B of the Rules framed under the Act, only provisional assessment of duty can be made. But once the classification has been finalised, it cannot be changed or modified in this manner.

11. He further submitted that as no chance of hearing was given to the petitioners, principles of natural justice have been violated because even though the circular issued by the Central Excise Department says that one month's time should be given to give reply to the show cause notice, the same has been flouted in the present case on the ground that the petitioners were seeking adjournment on flimsy ground to while away thetime anyhow. In any case, according to the learned counsel no past levy of tax under Rule 173-B could be made as that Rule is prospective. Further according to the learned counsel for the petitioner the provisions of Rule 173-B are not at all attracted to the facts of the present case as the form submitted by the petitioner showing the ingredients of yarn was treated and classified as covering under Item 18-III(i) of the Schedule. Therefore, the respondents very well know what material is being utilised by the petitioners for manu- facturing that type of yarn and it is on the basis of that classification alone duty was being levied and collected from the petitioners and consequently on the basis of the report of the Chemical Examiner, from the samples obtained from the petitioners, without giving any opportunity of hearing or leading evidence on the point, the respondents have hurriedly assumed that the product manufactured by the petitioners is covered by Item 18-III(ii) and by no stretch of imagination, in absence of any other evidence, it could be assumed that the petitioners have been manufacturing the said product right from the beginning i.e. 15-8-83 and, therefore, this retrospective demand for the period 15-8-83 to 6-2-84 cannot be sustained in law.

12. The learned counsel for the petitioners also submitted that noncellulosic fibre and non-cellulosic waste are two different things and if a product is made out of non-cellulosic waste it cannot be classified under Tariff Item No. 18-III(ii) because the very fact that 'non-cellulosic waste' of all sorts has been classified separately as sub-item IV of Item 18, shows that non-cellulosic waste is not the same thing as non-cellulosic man-made fibre covered by Item No. 18 of the Tariff. He, therefore, submitted that the contention of the respondents that non-cellulosic fibres and non-cellulosic waste are one and the same thing is, therefore, erroneous. According to the learned counsel the words 'man-made fibre' used in item 18-III(i) and (ii) would have to be related to the words 'man made fibres' used in Item No. 18-1, considering the words used in sub-item I of Item 18 and sub-item IV of Item 18, it has to be interpreted that non-cellulosic waste is not manmade fibre and spun yarn produced from non-cellulosic waste cannot be covered under Clause (ii) of sub-item III of Item 18.

13. The learned counsel for the petitioners, therefore, submitted that as the impugned order passed by respondent No. 3 is a nullity, even if an appeal against that order is provided under Section 35 of the said Act, the appellate order would also be a nullity and in support of these submissions the learned counsel placed reliance on the decisions reported in AIR 1958 SC 86{Madras Rubber Factory Ltd. v. Assistant Collector of Central Excise, Madras); 1983 Excise Law Times, 34 (Indian Organic Chemicals Ltd. v. Union of India); 1983 Excise and Customs Reporter, 1888 (Nuchem Plastics Ltd., Faridabad v. The Collector of Central Excise, Delhi); 1983 Excise Law Times, 84 {Cosmic Radio v. Union of India); AIR 1957 Madras 496; AIR 1958 Punjab 327; AIR 1965 SC 1375; 1959 Calcutta Weekly Notes 162 and 1963 Excise and Customs Reporter 728.

14. The learned counsel for the respondents on the other hand submitted that the Annexure R.1 dated 7-7-83 which is the form supplied by the petitioners, the word mentioned therein is 'waste' and not 'man-made fibre'. He, therefore, submitted that it was for the petitioners to give the necessary details in the said form about their product and as they are not in conformity with the specification given in Item 18-111-Cellulosic spun yarn the petitioners cannot be allowed to contend that the product is covered by Item 18-111(0 and not by Item 18-III (ii) and admittedly when it is not in conformity with the specification mentioned in item 18-III(i), the contention of the petitioners that waste should be treated as covering the item of yarn under item 18 III(i) cannot be accepted. He further submitted that Rule 56 of the Rules, which is reproduced below, provides for taking of samples for excise purposes;

'Rule 56. Taking of samples for excise purposes.-(1) The manufacturer shall permit any officer to take samples of any manufactured or partly manufactured goods or any intermediate or residual product resulting from the manufacture thereof, in his factory.

(2) The officer referred to in Sub-rule (1) shall conduct the test from the samples taken under that Sub-rule and communicate to the manufacturer the result of such test.

(3) (a) Where the officer is of the opinion that the samplss after completion of the test can be restored to the manufacturer, the officer shall send a notice in writing to the manufacturer requesting him to collect the samples within such period as may be specified in the notice.

(b) if the manufacturer fails to take delivery of the samples within the period specified in the notice referred to in Clause (a), the samples shall be disposed of in such manner as the Collector of Central Excise may direct.

(4) Where a manufacturer is aggrieved by the result of the test, he may, within ninety days of the date on which the result of the test is received by him, request the Assistant Collector, Central Excise that the samples be retested.'

Relying on this Rule the learned counsel further submitted that as per Annexure-R.3 dated 28-7-83 samples were taken and on the basis of the report of the Chemical Examiner intimation was given to the petitioner about the result. Therefore, if the petitioners were aggrieved, they could have requested the Assistant Collector of Central Excise that the samples be retested as provided under Clause (4) of Rule 56. But no such prayer was made by the petitioners in Annexure R.5 dated 24-12-83. He, therefore, submitted that the petitioners having not availed of the alternative remedy of appeal, this petition deserves to be dismissed on this short ground alone as admittedly the petitioners have now admitted that they have filed an appeal against the impugned order of the Assistant Collector of Central Excise. The learned counsel further submitted that whether the product manufactured by the petitioners falls under the category of item No. 18-III (i) or (ii) being a disputed question of fact, cannot be decided in this petition by this Court.

15. So far as the principles of natural justice are concerned, he submitted that no doubt before making a modification no notice was given to the petitioners, but the mistake has been rectified by giving a show cause notice subsequently and, therefore, the petitioners now cannot be allowed to urge that no such opportunity was given to them as would be clear from the tenor of their letter addressed to respondent No. 3 and in support of his various submissions he placed reliance on the decisions reported in AIR 1963 SC 1319; 1981 Excise Law Times 114 (Bawa Potteries Mehrauliv. Union of India); 1982 Excise Law Times 112 (Patel Prabhudas Purshottamdas v. Union of India); 1984 Excise Law and Customs Reporter 1509 (Indian Textile Paper Company Ltd. v. The Collector of Central Excise, Madurai); 1983 Excise Law Times 2506 (Ganesh Metal Corporation v. Collector of Central Excise, Madras); 1984 Excise & Customs Reporter 1022{Reichhold Chemical Ltd, Madras v. The Govt. of India Revenue, Ministry of Finance, New Delhi): 1979 Tax Law Reporter 2454; 1979 Excise Law Times 402; and AIR 1983 SC 603.

16. The learned counsel for the respondents therefore submitted that there is no question of bias as alleged by the petitioners because the Respondent No. 3 had the authority and jurisdiction to modify the classification list, when on the basis of the report of the Chemical Examiner it was found that the yarn manufactured by the petitioners is not covered by Item 18-III(i) because for waste there is a provision in sub-item IV of Item 18 under the heading 'non-cellulosic wastes, all sorts'. Therefore according to the learned counsel there is a distinct provision made for wastes. He, therefore, submitted that the contention raised on behalf of the petitioner has no force. He also submitted that the authorities cited on behalf of the petitioner on the point of review do not at all apply to the facts of the present case as the facts in those cases, namely 1981 Excise Law Tiroes 565 and 1983 Excise Law Times, 34 are quite different.

16. In order to appreciate the rival contentions, it would be useful and necessary to quote the relevant provisions of the Act and the Rules. Item 18 of Sch. I of the said Act is as under :

'18. I. Man-made fibres, other than mineral fibres :

(i) Non-cellulosic Eighty-five rupees per

kilogram. '

(ii) Cellulosic Ten Rupees per kilogram.

II. Man-made filament yarns :

(i) Non-cellulosic-

(a) other than textured Ninety-five rupees per

kilogram.

(b) textured One hundred and five

rupees per kilagrame

Explanation.- 'Textured yarn' means

yarn that has been processed to

introduce crimps, coils, loops or

curls along the length of the filaments

and shall include bulked yarn and

stretch yarn.

(ii) Cellulosic Twenty rupees per kilogram.

(iii) metallized Eighty-five rupees per

kilogram.

III. Cellulosic spun yarn :

Yarn, in which man-made fibre of

cellulosic origin predominates in

weight and, in or in relation to

the manufacture of which any

process is ordinarily carried

on with the aid of power-

(i) not containing, any man-made Six paise per count per

fibres of non-cejlulosic origin. kilogram.

(ii) containing man-made fibres of Eighteen rupees per kilogram

non-cellulosic origin.

Explanation I.-'Count, means the size of grey yarn (excluding any sizing material) expressed in English Count.

Explanation.-For multiple fold yarn, 'count' means the count of the basic single yarn.

Explanation III.-Where two or more of the following fibres, that is to say,

(a) man-made fibre of cellulosic origin;

(b) cotton;

(c) wool or acrylic fibre, or both;

(d) silk (including Bimlipatam jute or mesta fibre);

(e) jute (including Bimlipatam)

(f) man-made fibre of non-cellulosic (jute or origin, other than acrylic fibre); mesta fibre;

(g) flax;

(h) ramie;

in any yarn are equal in weight, then, such one of those fibres, the predominance of which would render such yarn fall under that sub-item or Item (hereafter in this Explanation referred to as the applicable subitem or Item), among the sub-items and Item Nos. 18-III, 18 A, 18B, 18C, 18D, 18E, 18F-I 18F-II, which, read with the relevant notification, if any, for the time being in force issued under the Central Excise Rules, 1944, involves the highest amount of duty, shall be deemed to be predominant in such yarn and accordingly such yarn shall be deemed to fall under the applicable sub-item or Item, as the case may be.

IV. Non-cellulosic Wastes, all sorts Nine rupees per kilogram.

Explanation.-This item includes only wastes arising in, or in relation to, the manufacture of man-made fibres (other than mineral fibres) and man-made filament yarns.'

Section 11A of the said Act is as follows :

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

(1) When any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded a 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 is erroneously been made requiring him to show cause why he should not pay the amount specified in the notice :

Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement 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) The Assistant Collector of Central Excise shall, after considering the representation if any, made by the person on whom notice is served under Sub-section (1), determine the amount of duty of excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.

(3) For the purposes of this section-

(i) 'refund' includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;(ii) 'relevant date' means :-(a) In the case of excisable goods on which duty of excise has not been levied or paid or has been short levied or short paid.(A) where under the rules made this Act a monthly return, showing particulars of duty paid on the excisable goods removed during the months to which the said return relates, is to be filed by a manufacturer or producer or a licensee of a warehouse, as the case may be, the date on which such return is so filed;(B) where no monthly return as aforesaid is filed, the last date on which such return is to be filed under the said rules;(C) in any other case, the date on which the duty is to be paid under this Act or the rules made thereunder;(b) in case where duty of excise is provisionally assessed under this Act or the Rules made thereunder, the date of adjustment of duty after final assessment thereof;

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

Section 35E is as follows :

'Section 35E. Powers of Board or Collector of Central Excise to pass certain orders.-

(1) The Board may, of its own motion, call for and examine the record of any proceeding in which a Collector of Central Excise as an adjudicating authority has passed any decision or order under this Act for the purpose of satisfying itself as to the legality or propriety of any such decision or order and may, by order, direct such Collector to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the Board in its orders.

(2) The Collector of Central Excise may, of his own motion, call for and examine the record of any proceeding in which an adjudicating authority subordinate to him has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order and may, by order? direct such authority to apply to the Collector (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Collector or Central Excise in his order.'

(3) No order shall be made under Sub-section (1) or Sub-section (2) after the expiry of two years from the date of the decision or order of the adjudicating authority.

(4) Where in pursuance of an order under Sub-section (1) or Sub-section (2) the adjudicating authority or the authorised officer makes an application to the Appellate Tribunal or the Collector (Appeals) within a period of three months from the date of communication of the order under Sub-section (1) or Sub-section (2) to the adjudicating authority, such application shall be heard by the Appellate Tribunal or the Collector (Appeals), as the case may be, as if such application were an appeal made against the decision or order of the adjudicating authority and the provisions of this Act regarding appeals including the provisions of Sub-section (4) of Section 35B shall, so far as may be, apply to such application,

17. Rule 9B of the Central Excise Rules, 1944 is as follows :-

'Rule 9B. Provisional assessment to duty.- (1) Not with standing anything contained in these rules :

(a) where the proper officer is satisfied that an assessee is unable to produce any document or furnish any information necessary for the assessment of duty on any excisable goods; or

(b) where the proper officer deems it necessary to subject the excisable goods to any chemical or any other test for the purpose of assessment of duty thereon; or

(c) where an assessee has produced all the necessary documents and furnished full information for the assessment of duty, but the proper officer deems it necessary to make further inquiry (including the inquiry to satisfy himself about the due observance of the conditions imposed in respect of the goods after their removal) for assessing the duty,

the proper officer may, either on a written request made by the assessee or on his own accord, direct that the duty leviable on such goods shall, pending the production of such documents or furnishing of such information or completion of such test or enquiry, be assessed provisionally at such rate or such value (which may not necessarily be the rate of price declared by the assessee) as may be indicated by him, if such assessee executes a bond in the proper form with such surety or sufficient security in such amount, or under such conditions as the proper officer deems fit, binding himself for payment of the difference between the amount of duty as provisionally assessed and as finally assessed.(2) * * *(3) The Collector may permit the assessee to enter into a general bond in the proper Form with such surety or sufficient security in such amount or under such conditions as the Collector approves for assessment of any goods provisionally from time to time :

Provided that, in the event of death, insolvency or insufficiency of the surety or where the amount of the bond is inadequate, the Collector, may in his discretion, demand a fresh bond and may, if the security furnished for a bond is not adequate, demand additional security.

(4) The goods provisionally assessed under Sub-rule (1) may be cleared for home consumption or export in the same manner as the goods which are not so assessed.

(5) When the duty leviable on the goods is assessed finally in accordance with the provisions of these rules, the duty provisionally assessed shall be adjusted against the duty finally assessed, and if the duty provisionally assessed falls short of or is in excess of, the duty finally assessed, the (assessee) shall pay the deficiency or be entitled to a refund, as the case may be.'

Rule 173B of the said rules is reproduced below :

'Rule 173-B. Assessee to file list of goods for approval of the proper officer.-

(1) Every assessee shall file with the proper officer for approval a list in such form as the Collector may direct, in quintuplicate showing-

(a) the full description of (i) all excisable goods produced or manufactured by him, (ii) all other goods produced or manufactured by him and intended to be removed from factory, and (iii) all the excisable goods already deposited or likely to be deposited from time to time without payment of duty in his warehouse:

(b) the Item number and sub-item, if any, of the First Schedule to the Act under which each such goods fall;

(c) the rate of duty leviable on each such goods; and

(d) such other particulars as the Collector may direct.

(2) The proper officer shall, after such inquiry as he deems fit, approve the list with such modifications as are considered necessary and return one copy of the approved list to the assessee who shall, unless otherwise directed by the proper officer, determine the duty payable on the goods intended to be removed in accordance with such list.

(2A) All clearances shall subject to the provisions of Rule 173-CC, be made only after the approval of the list by the proper officer. If the proper officer is of the opinion, that on account of any inquiry to be made in the matter or for any other reason to be recorded in writing there is likely to be delay in according the approval, he shall either on a written request made by the assessee or on his own accord, allow such assessee to avail himself of the procedure prescribed under Rule 9B for provisional assessment of the goods.

(3) Where the assessee disputes the rate of duty approved by the proper officer in respect of any goods, he may, after giving an intimation to that effect to such officer, pay duty under protest at the rate approved by such officer.

(4) If in the list approved by the proper officer under Sub-rule (2) any alteration becomes necessary because of-

(a) the assessee commencing production, manufacture or ware housing of goods not mentioned in that list, or

(b) the assessee intending to remove from his factory any nonexcisable goods not mentioned in that list, or

(c) a change in the rate or rates of duty in respect of the goods mentioned in that list, or, by reason of any amendment to the First Schedule to the Act, a change in the Item number and sub-item,

the assessee shall likewise file a fresh list or an amendment of the list already filed for the approval of such officer in the same manner as is provided in Sub-rule (1).

(5) When the dispute about the rate of duty has been finalised or for any other reasons affecting rate or rates of duty, a modification of the rate or rates of duty is necessitated, the proper officer shall make such modification and inform the assessee accordingly.

(6) The Collector may exempt by a general order any class of assessees, who manufacture wholly goods which, for the time being, are exempt from paying duty, from filing the list under Sub-rule (1):

Provided that as and when duty exemption is withdrawn or modified or no longer applicable, the assessee shall comply with the provisions of Sub-rule (4) as if he had filed a list earlier and the list had been approved with 'nil' rate of duty.

18. It is not in dispute that in determining the meaning or connotation of words and expressions describing an article or commodity, there is one principle fairly well settled which is that the words or expressions must be construed in the sense in which they are understood in the trade by the dealer and the consumer. It is they who are concerned with it and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the Statute was enacted as has been held in the decision reported in AIR 1979 SC 300 (Porritts & Spencer (Asia) Ltd. v. State of Haryana).

19. The dictionary meaning of 'yarn' is fibre, as of cotton, wool, silk, fax, spun and prepared for use in weaving, knitting etc. As the learned counsel for the petitioners frankly conceded that this Court cannot go into the questions of facts in a writ petition, this Court is not called upon to decide whether the product of yarn manufactured by the petitioners is in fact covered by Item 18-III(i) or 18-III(ii) of the First Schedule.

20. It is also clear that Section 11A of the said Act is in substitution of Rule 10 of the Central Excise Rules. This section was introduced by the Amending Act 25 of 1978 and became operative from 17th November, 1980. The term 'levy' appears to be wider in its import than the term 'assessment'. It may include both 'imposition' of a tax as well as 'assessment'. The term 'imposition' is generally used for the levy of a tax or duty by legislative provisions indicating the subject matters of the tax and the rates at which it has to be taxed. The term 'assessment' on the other hand is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax or duty on account of particular goods or property.

21. Section 3, which is included in Chapter II of the said Act, relate to levy and collection of duty, under the heading 'Duties specified in the First Schedule to be levied.' Sub-section (3) of the said section provides that different tariff values may be fixed; (a) for different classes or descriptions of the same excisable goods; or (b) for excisable goods of the same class or description (i) produced or manufactured by different classes of producers or manufacturers; or (ii) sold to different classes of buyers: Provided that in fixing different tariff values in respect of excisable goods falling under Sub-clause (i) or Sub-clause (ii), regard shall be had to the sale prices charged by the different classes of producers or manufacturers or, as the case may be, the normal practice of the wholesale trade in such goods. This makes it clear that different tariff values may be fixed for different classes or description of the same excisable goods. Therefore, this is the charging section.

22. This section imposes the duty at the rates set forth in the Schedule on all excisable goods produced or manufactured in India. It does not lay down the stage at which the duty is to attach or the date with reference to which the rate has to be applied. This section impliedly also does not indicate that the rates of duty as in force on the date of manufacture or production is to be considered, for the reason that though excise duty is a tax on manufacture or production it need not necessarily be levied at the stage of manufacture or production and it may even be levied at the stage the excisable article reaches the retailer. The inference is further supported by Section 4 of the Act, which deals with the determination of the value for purposes of duty. The material point of time with reference to which the value is determined under that section is the time of removal of the article chargeable with duty from the factory and not the time when it is manufactured or produced. It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, i.e. its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the Taxing Authority the said tax can be levied at a convenient stage so long as the character of the impost, that is it is a duty on the manufacture, or production, is not lost. The manner of levy and collection of the duty is, however, left to be prescribed by Rules. This is the effect of the words 'there shall be levied and collected in such manner as may be prescribed' as they occur in Section 3.

23. Thus, after having heard the learned counsel and after going through the authorities cited, we are of opinion that this is not a case of reviewing the classification as such, as was argued on behalf of the petitioners, as Rule 56 empowers the Inspector to take samples. In the present case admittedly four samples were taken from the petitioners' factory out of which two of them were not found in conformity with the specifications laid down in Item 18-III(i). Therefore, it cannot be said that the respondents on the basis of the report of the Chemical Examiner could not have issued notice to the petitioners.

24. Although Rules made under an Act cannot override the Act but they may be used as contemperence expositio of an ambiguous provision in the Act especially when they are to have effect as if enacted in the Act. It is for this reason that Rule 10 has now been incorporated in the main statute as Section 11A referred to above. 'Levy' is a word of very wide import. The term 'imposition' is narrower and is generally used for the levy of a tax or duty by legislative provisions indicating the subject matter of the tax and the rate at which it has to be taxed. The term 'levy' is, however, wider and includes imposition and all stages up to assessment.

25. However, in our opinion, Section 35 of the Act does not prohibit taking of original proceedings, such as proceedings for reassessment under Section 11A of the Act or proceedings for penalty under Rule 173Q on the ground that the assessee by contravening certain provisions or by false statements evaded payment of duty. The original proceedings under Section 11A and the penalty and the best judgment proceedings under Rule 173-Q can be taken even after assessment under Rule 173-I becomes final in appeal. Therefore, it cannot be contended that once the classification is made, the Assistant Collector, Central Excise had no jurisdiction to reconsider the matter on the basis of the new facts and the materials subsequently made available regarding the manufacturing of the product. But it also cannot be disputed that the Superintendent of Central Excise, Ujjain, acted in a hasty manner by issuing the notice and that it is also now clear that it is only after the filing of the writ petition in which the stay order was passed that the respondent No. 3 thought of giving show cause notice to the petitioners and that without giving adequate opportunity to the petitioners passed the impugned order. Natural justice requires that quasi-judicial authority must inform the person proceeded against, the material which it proposes to use against him so that he may meet the inference likely to be raised from that material. Even when the material used is within the knowledge of the person proceeded against, he must be told that it would be used against him, and unless he is so informed, he would have no opportunity of offering his explanation for meeting the inference that the authority seeks to draw from it.

26. In the present case there is no material on record to indicate that right from 15-8-83 the petitioners have been manufacturing the yarn product which is covered by item 18-lll(ii). Therefore, in our opinion, the excess duty on that basis from 15-8-83 to 6-2-84 could not be demanded retrospectively. But at best it could be demanded prospectively from 7-2-1984, if after giving proper and adequate chance of hearing to the petitioners it is found that at least some of the product of yarn manufactured by the petitioners is covered by Item 18-III(ii) and that they could also be penalised if it is found, on evidence, that they have been manufacturing a product contrary to the classification which was approved, the ingredients of which are not in conformity as prescribed in item 18-III(i) as mentioned in Rule 173B(4) of the Rules.

27. Therefore, the demand for Rs. 26,47,749.39 cannot be sustained and has to be quashed and, in our opinion, to that extent only this petition deserved to be allowed. However, we are unable to agree with the submission made by the learned counsel for the petitioners that once the classification is made and approved, it is only the Collector of Central Excise who has the jurisdiction to suo moto revise the same within the period prescribed.

28. As regards the disputed question of fact as to whether on the basis of the report of the Chemical Examiner the product manufactured by the petitioner falls under item 18-III(i), or (ii) now that the petitioners have already filed an appeal before the Collector of Central Excise, it will be open to the Collector after considering the facts and circumstances of the case, to give adequate opportunity of hearing to the petitioners including an opportunity of adducing evidence and decide the appeal on merits. The Collector of Central Excise is a high public officer. It cannot be assumed that he would be biased and would not decide the appeal in an impartial manner. At least the petitioners have no justification to assume without any reason bias at the hands of the Collector. It must be realised that when the legislature in its wisdom and with all solemnity makes statutory provisions for appeals and revisions it is the duty of the courts to respect it and enforce it. Right of the departmental appeal and revision has been provided and that remedy should not normally be bypassed.

29. In the result this petition succeeds partly and is allowed to the extent that the demand for recovery of Rs. 26,47,749.39 for the period 15th August, 1983 to 6th February, 1984 is quashed,. However, the Collector of Central Excise, before whom the appeal is filed, shall decide the appeal in accordance with law in the light of the observations made above. The Bank guarantee furnished by the petitioners shall remains in force till the decision of the appeal pending before him as the question of public revenue is involved. In case it is found that the petitioners are liable to pay the excess duty and/or penalty with effect from 7-2-84 and onwards an adjust- ment shall be made out of the amount furnished under the Bank guarantee. The petition is disposed of accordingly with no order as to costs. The amount of security deposit on verification be returned to the petitioners.

V.D. Gyani, J.

30. The facts of these cases have been very succinctly recapitulated by my learned brother Mulye, J. Therefore, it is not necessary to record them here. Similarly, the applicability of the rules framed under the Central Excises and Salt Act, 1944 (hareinafter referred to as the Act) and the tariff Items under which the manufactured yarn is covered, has been lucidly dealt with in detail by my learned brother.

31. In these petitions the question of applicability of Item No. 18-III(i) or 18-III(ii) is involved. The petition, as originally presented (M.P. No. 104/84), was essentially and substantially based on violation of principles of natural justice, as the demand notice issued by the Assistant Collector, Central Excise (respondent No. 3) was contrary to the principles of natural justice. The respondents' action in issuing a demand notice without service of a show-cause notice under Section 11A of the Act was arbitrary, without jurisdiction and contrary to the principles of natural justice.

32. As the subsequent events turned out to be the petition (M.P. 104/84) was required to be amended in view of the changed circumstances resulting from the action of the respondents after filing of the petition and during its pendency. The petition as such has three prominently demonstrable facets (a) The petition as originally presented, (b) the amendment made at a latter stage in view of the changed circumstances, referred to above, essentially relating to the applicability of the tariff Item, whether the manufactured yarn is covered by Item 18IH(ii) or 18III(i) of the Act, which in turn depends on the reports of chemical analysis and about which there is a lot of controversy, and (c) the conduct of the respondents. In my view, no doubt in a writ petition the conduct of the parties is not merely relevant but at times materially important. However, much can be said on either side. So leaving aside the question of conduct for a while, this order is essentially confined to the first facet, which is indicated above. Subsequently amended petition contains much of controversial facts, which may even necessitate recording of evidence and it cannot be disputed that where basic facts are disputed and complicated questions of law and facts depending on evidence are involved, the Writ Court is not the proper forum for seeking the relief, but in this petition there is no dispute with regard to the basic facts. The dispute is essentially of a highly scientifically technical nature as regards the contents and components of yarn, which is again based on reports of Chemical analysis, a highly controversial fact. Therefore, without adverting to such facts, the basic facts as admitted by the respondents in their return are reproduced for facilitating applicability and appreciation of the principles of natural justice in the light of the facts undisputed and indisputable :

'It is admitted that the petitioner company owns a factory at Biaora, District Rajgarh, within the jurisdiction of this Hon'ble Court, wherein spun yarn is manufactured.'

'The issue of demand by respondent No. 4 as mentioned in this para (para 4) by the petitioner is admitted. This demand was served on the petitioners on 8-2-1984.'

'The procedural irregularity of not following the provisions of Section 11A in toto has been rectified by issue of a show-cause notice (R/8) in modification of the demand.'

'M/s. Madhu Milan Syntex Ltd., Biaora, the petitioner Company submitted classification lists R/l and R/2(1) supplementary effective from 7-7-1983 and (ii) Number 4/83 effective from Sept., 1983 of their products as required under Rule 173-B of the Central Excise Rules, 1944. Both the classification lists mentioned above, filed by the petitioner Company, were approved by the respondent No. 3 on the basis of the description of the goods as declared in the classification list under Item No. 4 Annexure R/l, R/2.'

'It is admitted that the petitioners classified their goods vide classification lists Nos. Supplementary dated 7-7-83 and 4/83 effective from Sept. 1983.'

'Issue of letter No. MMY/CL/83-84/111 dated 7-2-84 (R/6) by the respondent No. 4 is admitted.'

'The petitioners contention that action under Section 11A has not been taken in a proper manner, is admitted so far as the initial stage of issue of demand No. 1/84 is concerned.

'Except for issue of the demand, notice No. 1/84, without following the procedure outlined in Section 11A, there is nothing which violates the petitioners rights. The slip in the demand notice stands rectified by issue of show cause notice (R/8).'

33. Section 11A of the Act is also the main plank of Shri Gupta's argument for justifying the action taken by the respondents. He has no doubt also relied on Rule 173-B for the same. Shri Venu Gopal, learned counsel appearing for the petitioners has on the other hand submitted that Rule 173-B is not available to the respondents in view of Section 35 and Section 35A of the Act. Shri Gupta, learned counsel for the respondents, has, therefore, mainly relied on Section 11A of the Act for deriving the power and respondents' authority justifying their actions.

34. Section 11A, as it existed in the form of a rule in the earlier stages before being engrafted in the Act itself, envisaged and prescribed the necessity of a show-cause notice before any action being taken thereunder. A show-cause notice is not an empty formality. A show-cause notice, as of necessity, envisages something more than a mere notice. Where the law requires giving of a show-cause notice, it postulates the opportunity of showing cause to be adequate. It is not merely enabling a party to make a mere representation, because enabling a mere representation to be made is not the same thing as giving of an opportunity of showing cause. The expression 'showing cause' connotes an opportunity of leading evidence in support of one's allegations and contraverting the charges or allegations as are made against the person called upon to show cause. A mere opportunity of submitting an explanation is not enough. Showing cause inherently involves an opportunity to lead evidence in rebuttal of the material on which the proposed action is based. Needless to add, it contemplates an opportunity of cross-examination as well.

35. A reasonable time has to be afforded for showing cause and the factual position, as it emerges from the record, cannot be disputed. The factual position that such a reasonable time has not been given to the petitioners cannot justifiably be disputed. A Notification issued by the Government of India lays down that a month's time should be given for showing cause and the time can be further extended, if necessary. Leaving aside the extension of time, even the bare minimum time has not been given. Even if the said Notification is construed as directory, there is no justification for not affording a reasonable time, which in fact was sought by the petitioners. Although it has been contended by the respondents that the 'error' in non-compliance of Section 11A, so far as it relates to the issuance of a show-cause notice, was subsequently rectified but the real question is, arid which is much debated before us, whether such a rectification can in fact rectify the 'error' and whether this can be called such an 'error' which is curable. It is to be noted that the documents, which are placed on record as show-cause notice and the demand notice, Annexures-R/7 and R/8, merely modify the demand. The element of bias is writ large in the whole action. Therefore, it is violative of the principles of natural justice to keep the demand alive and still claim rectification of an 'error' in procedure. This, as has been said above, cuts on the root of the principles of natural justice. Natural justice is not an empty procedural formality. It should not merely in fact be made the basis of an action, whether administrative or quasi-judicial. In the instant case it is quasi-judicial and it must appear from the record that the principles of natural justice have in fact been substantially followed. But this is not the case here. The action of the respondents as comprised in and represented by the documents, Annexures-R/7 and R/8, the socalled show cause notice, the demand notice, cancellation of classification lists, they are all vitiated and liable to be quashed and are accordingly quashed. This should all have been done and now should be done by affording a real and meaningful opportunity of showing cause.

36. There is yet another aspect of these petitions. The petitioners have already preferred an appeal before the Collector of Central Excise and the same is pending. But this appeal was preferred in the changed circumstances which is the creation of the respondents in view of the finding on initiation of action. The subsequent action in issuing the demands without a show cause notice is quashed. As the right of appeal is a valuable right in the procedure laid down by the Act, the opportunity to show cause is yet another valuable right of an assessee to the excise duty. It cannot be gainsaid that consideration of the rival contentions by the appellate authority would result in depriving the assessee of a valuable opportunity of showing cause to a competent officer, whose action is found to have been vitiated. It is, therefore, desirable and necessary to start the proceedings afresh with the issuance of a show-cause notice and affording an opportunity to the assessee as contemplated by Section 11A of the Act.

37. The chronology of dates and events which ultimately led to the passing of the order dated 5-3-1984 (Annexure R/ll), confirming the demand dated 7-2-1984, goes to indicate how the principles of natural justice have been violated in the instant case. The classification list dated 7-7-1983 (Annexure R/4) and the approval granted by the competent officer on 30-7-1983 (Annexure R/l), supplementary classification list dated 25-9-1983 (Annexure R/2) and the approval granted thereon by the competent officer on 15-10-1983 (Annexure R/2) were duly assessed, i.e. monthly assessment, and this was done up to December, 1983. On 7-2-1984 a demandnote (Annexure-A) was issued without any show-cause notice. The present writ petition was filed challenging the demand note on 9-2-1984. The petition was admitted and a stay order was granted the same day. On 11-2-1984 two show cause notices (Annexures R/8 and R/9) were served on the petitioners. These notices are dated 9/10-2-1984. By these notices the 'error' was sought to be rectified and the petitioner was called upon to show cause why the demand issued on 7-2-1984 be not levied in view of the report of the Chemical Examiner (dated 24-12-1983-Annexure R/5). The petitioners on 18-2-1984 and 25-2-1984 apprised the authorities about the resultant injustice and the pendency of the present writ petition. However, quite unmindful of the requests made by the petitioners, the orders, Annexure R/10 and Annexure R/11, were passed by the respondents. It is on the basis of these two orders passed on 5-3-1983 that the respondents urged that an alternative remedy of appeal is available. It was also urged that while issuing the show- cause notices, Annexures R/8 and R/9, the respondents were not aware of the pendency of the present writ petition. Be that as it may, but the fact remains that by pleading ignorance of the pendency of the present writ petition what is sought to be suggested and submitted is that the show cause notices were innocuous and the respondents were quite fair in their actions. Had it been so, at least while passing the orders, Annexures R/10 and R/ll, on 5-3-1984, they were definitely in know of the petition and the fairness demands that they should have refrained from passing any such orders. Having passed the orders, now when the petition has been heard on merits at length, it cannot justifiably be urged that the petitioner has an alternative remedy of appeal. As has been held, the opportunity to show cause has been denied to the petitioner, as contemplated by Section 11A of the Act, and in any event the respondents were expected to follow the Notification, prescribing a period of 30 days for showing cause, providing for further extension, if necessary. But the same has not been followed. The availability of alternative remedy, which in the instant case was certainly not available, when the petition was presented and it was only after passing the orders, Annexures R/10 and R/ll, that it can be urged that an alternative remedy was available to the petitioners. But, even then mere availability of an alternative remedy is not a bar to the maintainability of a petition under Article 226 of the Constitution of India, particularly in a writ of certiorari when the order challenged is one without jurisdiction and violates the basic principles of natural justice. This situation of an alternative remedy is a creation of the respondents subsequent to the filing of the petition. A mere reading of Section 11A of the Act goes to show that before taking any action a show-cause notice is a must. Since it was not given and subsequently issued keeping the demand alive, such a show-cause notice does not fulfil the requirements of natural justice and the action in absence of such a notice as a statutory requirement is liable to be quashed and is accordingly quashed. The orders, Annexures R/10 and R/11, are quashed. So also the demand dated 7-2-1984 (Annexure A). The classification lists, filed by the petitioners and the approvals granted thereon, shall remain intact so long as a proper opportunity of showing cause is not afforded to the petitioners and the same is not cancelled in accordance with law.

38. It was submitted by the respondents, placing reliance on Swadeshi Cotton Mills etc. v. Union of India (AIR 1981 S.C. 818) that if urgency and exigency so require, the principles of natural justice may be excluded in their application at the predecisional stage. On this count the respondents want to justify their action of not issuing a show-cause notice before issuing the demand for Rs. 26,477,49.39. A little probing of this case would indicate that it has no application to the facts of the instant case. The statute itself provides in case of urgency to take over a Mill without giving an opportunity of hearing to the management. Such is not the case under the Central Excises and Salt Act. On the other hand, Section 11A of the Act specifically enjoins the authorities to give a show cause notice. Under Section 18A of the Industries (Development and Regulation) Act, the Central Government can take over an industry but only after an investigation. But under Section 18AA(1), an undertaking can be taken over without such investigation on the ground that production has been or is likely to be effected, The question was whether the management ought to be given a hearing before the undertaking is taken over under Section 18AA(1) The Government argued against such a right because (1) action under this provision was urgent and this excluded natural justice; (2) while the statute preconditioned take over under Section 18A by investigation. It did not do so in case of take over under Section 18AA(1) and this shows that parliament excluded hearing in such a case. The Court rejected both the arguments. Urgency may not always exclude natural justice. Natural justice is a flexible concept and the competent claims of 'hurry and hearing' are to be reconciled. The Court stated that the 'Rule of fairplay must not be jettisoned save in very exceptional circumstances where compulsive necessity so demands. The Court must make every effort as cardinal rule to the maximum extent possible with to salvage this situational modification.' As has been observed by the Supreme Court in the said case, Section 18AA does not exclude the application of the audi alterant partem rule at the predecisional stage, a short measure fair hearing adjusted, attuned and tailored to the exigency of the situation. 'One should not go mere by the outward manifestation of the order but should consider the preorder stage as well. If it involves adjudiction, then hearing must be afforded even if the resultant order is purely administrative in form. {State of Assam v. Bharat Kala Bhandar, AIR 1967 S.C. 1766). There was no such urgency in the instant case. The only urgency, rather anxiety shown to have existed was the loss of revenue-but that could hardly be a ground for excluding the application of the principles of natural justice by not affording a reasonable opportunity to show cause to the petitioners, as required by Section 11A of the Act.

39. The respondents have placed strong reliance on Titaghur Paper Mills Co. Ltd. v. State of Orissa (AIR 1983 S.C. 603), on the basis that the learned counsel appearing for the department urged that in view of the alternative remedy available, this petition deserves to be dismissed. Shri Venu Gopal, learned counsel appearing for the petitioners, on the other hand has distinguished this case and has rightly shown that this was a case of the petition which was dismissed in limine and in that case the Supreme Court was right in pointing out that an alternative remedy was available to the party. The facts are materially different. When the petition had originally been filed, there was no case of an alternative remedy being available to the petitioners. The respondents by passing the orders, Annexures R/10 and R/ll, have made a ground for urging the existence of an alternative remedy, which otherwise could not have been urged. The situation was aggravated by passing these orders, which could have been salvaged by assuring and affording a real and meaningful opportunity to show cause to the petitioners, of course with reference to the Court. But instead of doing so, the respondents proceeded to pass these orders in disregard of the Notification, referred to above.

40. As the respondents have charged the assessee with wilful misstatement and suppression of material facts and fraud in their return, the question of time in initiation of proceedings does not arise and as proposed by my learned brother, Mulye, J. in his order, the interests of the revenue can well be safeguarded by allowing the Bank Guarantee furnished by the petitioners to continue, with which I fully agree. As the above order proceeds on admitted position, other rival contentions based on controversial facts are not gone into.

With this explanatory note, I concur with the order of my learned brother, Mulye, J. of which I had the advantage of going through.


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