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SCA/3179/1990 7/ 7 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 3179 of 1990
For
Approval and Signature:
HONOURABLE
MR.JUSTICE J.M.PANCHAL
HONOURABLE
MR.JUSTICE BANKIM.N.MEHTA
=====================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=====================================================
ECHJAY
INDUSTRIES LTD. & 2 - Petitioners
Versus
UNION
OF INDIA & 2 - Respondents
=====================================================
Appearance
:
MR
DG TRIVEDI, for Petitioners
MR JM
MALKAN, Asstt. Solicitor General of India, for
Respondents
=====================================================
CORAM
:
HONOURABLE
MR.JUSTICE J.M.PANCHAL
and
HONOURABLE
MR.JUSTICE BANKIM.N.MEHTA
Date
: 10/04/2006
ORAL
JUDGMENT
(Per
: HONOURABLE MR.JUSTICE J.M.PANCHAL)
By
filing the instant petition under Article 226 of the Constitution,
the petitioners have prayed to issue a writ of certiorari, or any
other appropriate writ or direction to quash the order dated January
31, 1990, passed by the Collector of Customs and Central Excise,
Rajkot, by which the petitioner Nos.2 & 3, who are Managing
Director and General Manager respectively of the petitioner
No.1-Company, are visited with penalty of Rs.25000/- and Rs.10,000/-
respectively, in terms of Rule-173Q(1) of the Central Excise Rules,
1944. In the alternative, the petitioners have prayed that Rules 221
and 225 of the Central Excise Rules, 1944 be declared ultra vires the
provisions of the Central Excise and Salt Act, 1944.
2. The
petitioner is a Company incorporated under the provisions of the
Companies Act, 1956. It is engaged in the business of manufacturing
?Sforgings and forged?? products. The forgings are products made by
roughly shaping the steel by the process of rolling or forging. Prior
to August 1, 1983, Tariff Item 26AA(ia) of the erstwhile Ist Schedule
to the Act specifically covered ?Sforged or rolled shapes and
sections??. There was total exemption on all such forged or rolled
shapes and sections, which were made from duty paid steel vide
Exemption Notification dated November 30, 1963. After August 1, 1983,
Tariff Item 26AA was recast and in its place, erstwhile Tariff Item
25 was legislated. The said tariff entry read ?Spieces roughly
shaped by rolling or forging of iron or steel not elsewhere
specified. The earlier exemption was also continued vide Notification
dated August 1, 1983. This position continued till February 28, 1986
when the new Tariff Act was brought into force. The petitioner No.1
carried out its activities under L-4 Licence and had submitted
classification lists, which were approved by the competent
authorities. After the new Tariff Act came into force, Tariff Item
25(8) was recast in the form of Tariff Heading 72.08, which was
identical with the wordings of the erstwhile Tariff Item 25(8).
Therefore, the petitioners kept on filing classification lists
classifying their forgings under Tariff Heading 72.08. The exemption
available earlier was also continued vide Notification dated August
1, 1983 as amended by Notification dated February 10, 1986. From May
29, 1986 onwards, the petitioners sought to avail of the Modvat
Credit on steel used only for manufacture of forgings for railway
tyres. The petitioners also filed a classification list to this
effect, which was approved by the competent authorities. On September
25, 1986, the Assistant Collector of Central Excise visited the
premises of the petitioner No.1-Company and effected large scale
seizure of the forgings for railway-tyres. As a consequence of
seizure, a show-cause notice was issued claiming that forgings for
tyres fell under Chapter Heading 86.07 and not under Chapter Heading
72.08. The petitioners filed reply and contested the claim advanced
in the show-cause notice. However, the Collector vide order dated
January 31, 1990 confirmed the show-cause notice and imposed penalty
of Rs. 15 Lakhs on the petitioner No.1 as well as penalty of
Rs.25,000/- and Rs.10,000/- respectively on the petitioner Nos.2 &
3. The imposition of penalty on the petitioner Nos.2 and 3 is subject
matter of challenge in the instant petition.
3. This
Court has heard Mr.D.G.Trivedi, learned counsel appearing for the
petitioner and Mr.J.M.Malkan, learned Assistant Solicitor General of
India appearing for the respondents, at length and in great detail.
4. During
the course of hearing of the petition, Mr.Dilip C.Sampat, Assistant
Manager, (Excise) of the petitioner No.1 has filed an affidavit in
support of the petition mentioning, inter alia, that the order dated
January 31, 1990 passed by the Collector, Customs and Central Excise,
Rajkot was challenged by the petitioner No.1-Company before the
Customs, Excise and Gold (Control) Appellate Tribunal, Special Bench
-B, in Appeal No.E.898/90-B1, and the Tribunal had allowed the same
by order dated September 30, 1993 on merits as well as holding that
the demands were time-barred, against which, Civil Appeal No.3943 of
1994 was filed by the Collector of Central Excise, Rajkot before
Supreme Court of India, which was rejected vide order dated September
19, 1994 and, therefore, the petition should be allowed. It may be
stated that along with the affidavit, the deponent has annexed xerox
copy of order dated September 30, 1993 passed by the Customs, Excise
and Gold (Control) Appellate Tribunal, Special Bench ‘B’ in Appeal
No.E.898/90-B1 and xerox copy of order dated September 19, 1994
passed by the Supreme Court in Civil Appeal no.3943 of 1994.
5. The
copy of the affidavit filed by Mr.Dilip C.Sampat, Assistant
Manager,(Excise) of the petitioner No.1, with annexures, was served
on the learned counsel for the respondents. No affidavit-in-reply has
been filed on behalf of the respondents controverting the averments
made in the affidavit filed by Mr.Dilip C.Sampat, Assistant Manager
(Excise) of the petitioner No.1-Company on March 27, 2006. As the
appeal filed by the Company is allowed by the Tribunal by setting
aside the order of Collector, Central Excise, Rajkot, and confirmed
by the Supreme Court, this Court is of the opinion that penalty
imposed on the petitioner Nos.2 & 3 cannot be sustained.
Mr.J.M.Malkan, learned Assistant Solicitor General of India, on
instructions, states at the Bar that the order passed by the
Collector, Central Excise, Rajkot imposing penalty on the petitioner
Nos.2 & 3, which is challenged in this petition, is liable to be
set aside in view of the fact that the appeal filed by the Company
against the said order was allowed by the Tribunal vide order dated
September 30, 1993 and the order of the Tribunal is upheld by the
Supreme Court in Civil Appeal No.3943 of 1994, which was disposed of
on September 19, 1994. As the Court is inclined to grant relief
claimed in Paragraph-28(A) of the petition, the learned counsel for
the petitioners does not press the prayer made in Paragraph-28(B) to
declare that Rules 221 & 225 of the Central Excise Rules, 1944
are ultra vires the Central Excises & Salt Act, 1944.
For
the foregoing reasons, the petition partly succeeds. The order dated
January 31, 1990 passed by the Collector, Customs & Central
Excise, Rajkot imposing penalty of Rs. 25,000/- and Rs. 10,000/- on
the petitioner Nos.2 & 3 respectively under Rule 173Q(2) of the
Central Excise Rules, 1944 produced at Annexure-E is hereby set
aside. The prayer made by the petitioners to declare that Rules 221
and 225 of the Central Excise Rules, 1944 are ultra vires the Central
Excise & Salt Act, 1944 is rejected as not pressed. Rule is made
absolute to the extent indicated hereinabove. There shall be no order
as to costs.
[
J.M.PANCHAL,J.]
[BANKIM
N.MEHTA,J.]
(patel)
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