Civil Appeal Nos. 4458-4459 of 2015 (Arising out of SLP (C) Nos. 37108-37109 of 2012). Case: Dharampal Satyapal Ltd. Vs Deputy Commissioner of Central Excise and Ors.. Supreme Court (India)
| Case Number | Civil Appeal Nos. 4458-4459 of 2015 (Arising out of SLP (C) Nos. 37108-37109 of 2012) |
| Judges | Arjan Kumar Sikri and Rohinton Fali Nariman, JJ. |
| Issue | Central Excise Act, 1944 - Section 11A; Additional Duties of Excise (Goods of Special Importance) Act, 1957; Additional Duties of Excise (Textiles and Textile Articles) Act, 1978; Finance Act, 2003 - Sections 154, 154(4); Income Tax Act, 1961 - Sections 29, 80P(2), 269UD; Finance Act, 1982 - Section 51; Central Excise Rules, 1982 - Rules 9, 9(1... |
| Judgement Date | May 14, 2015 |
| Court | Supreme Court (India) |
Judgment:
Arjan Kumar Sikri, J.
1. Leave granted.
2. Union of India, vide Memorandum dated December 24, 1997, unveiled a new industrial policy for the North-Eastern region. In the said policy, in order to give stimulation to the development of industrial infrastructure in the North-Eastern region, the said region was made tax free zone for a period of ten years giving incentives to those who wanted to establish industries in that region. Pursuant thereto, the Notification dated July 08, 1999 was issued granting new industrial units that had commercial production on or after December 24, 1997 and certain types of industrial units that increased their installed capacity after that date, exemption on goods cleared from units located in growth centres and integrated infrastructure centres.
3. The aforesaid Notification was issued under the provision of Central Excise Act, 1944 as well as Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Additional Duties of Excise (Textiles and Textile Articles) Act, 1978. However, on December 31, 1999, another Notification was issued whereby exemption of central excise was withdrawn in respect of goods falling under Chapter 21.06 (pan masala) and Chapter 24 (tobacco and tobacco substitutes, including cigarettes, chewing tobacco etc.).
4. This withdrawal Notification was challenged by the Appellant by filing the writ petition in the High Court of Gauhati. The learned Single Judge dismissed the writ petition. However, appeal preferred by the Appellant was allowed by the Division Bench vide judgment dated December 03, 2012. In nutshell, the High Court held that the principal of Promissory Estoppel shall apply and once a promise was given by the Union of India assuring that no such duty would be charged for a period of ten years, it was not open for the Union of India to withdraw the same. Challenging that judgment, Union of India filed petitions for special leave. Leave was granted and the petitions were registered as Civil Appeal Nos. 8841-8844 of 2003.
5. After the filing of the aforesaid appeals, certain subsequent events took place. It so happened that vide Section 154 of the Finance Act, 2003 (hereinafter referred to as the 'Act of 2003'), withdrawal of the benefit was effected from retrospective effect. Effect thereof was to withdraw the benefit given under the Notification issued earlier. Validity of Section 154 was questioned and the issue was considered by this Court in R.C. Tobacco Private Ltd. and Anr. v. Union of India and Anr. (2005) 7 SCC 725 This Court upheld the constitutional validity of the aforesaid provision and repelled the challenge so laid. The effect was to disentitle the Appellant and other similarly situated from getting any such benefit by virtue of Section 154 of the Act of 2003 and knocking down the basis of the judgment of the High Court, which lost its validity on the aforesaid ground.
6. So far so good. The grievance of the Appellant and other similarly situated industries for not extending the benefit of Notification dated July 08, 1999 is buried down. However, after notifying Section 154 of the Act of 2003, which had nullified the effect of Notification No. 32 of 1999 retrospectively thereby annulling the effect thereof altogether, Respondent No. 1 herein passed recovery order dated June 03, 2003 for recovery of a sum of ` 2,93,43,244 (rupees two crores ninety three lakhs forty three thousand two hundred and forty four only) from the Appellant, which was the benefit that had been drawn by the Appellant for the period November 1999 till February 2001 in terms of the Notification No. 32 of 1999. By another order dated June 06, 2003 issued by Respondent No. 1, the Appellant was directed to pay the excise duty for the said period for which the benefit had been availed. He also rejected the pending claim of refund for the period from March 2001 till May 31, 2003. These recovery orders were challenged by the Appellant by filing appeal before the Commissioner (Appeals). Along with the appeal, the Appellant also filed an application for interim order seeking stay against the pre-deposit. On this application, orders dated March 31, 2004 were passed by the Commissioner (Appeals) directing the Appellant to deposit entire duty amount within a period of thirty days. This order of pre-deposit was challenged by the Appellant by filing four writ petitions in the High Court of Gauhati. The learned Single Judge of the High Court, however, dismissed these writ petitions vide orders dated May 18, 2004. The Appellant carried this issue of pre-deposit to a higher forum in the form of writ appeals before the Division Bench of the said Court. Interim orders dated June 11, 2004 were passed in the writ appeals directing the Commissioner (Appeals) not to dismiss the appeals preferred by the Appellant before him for non-deposit of the duty amount. In other words, interim stay against the pre-deposit was given. The Commissioner (Appeals) heard the appeals and passed the orders dated June 15, 2005 deciding the appeals in favour of the Appellant. He held that issuance of show-cause notice was mandatory before a valid recovery of demand could be made from the Appellant and, thus, remitted the matter to the adjudicating authority. After this final order was passed by the Commissioner (Appeals), writ appeals of the Appellant before the Division Bench were disposed of as infructuous in view of the fact that the Commissioner (Appeals) had passed an order on merits and, therefore, no cause survived which required further adjudication in those appeals.
7. Insofar as the order of the Commissioner (Appeals) is concerned, both the Appellant as well as the Revenue felt aggrieved thereby. The Appellant was not satisfied with the order of remand and the nature of relief granted even after accepting that issuance of show-cause notice was mandatory before passing a valid recovery of demand. The Respondents were aggrieved of the order passed on merit holding that show-cause notice was mandatory. Therefore, both the Appellant as well as the Revenue filed appeals aggrieved against the order dated June 15, 2005 passed by the Commissioner (Appeals). The Customs Excise & Service Tax Appellate Tribunal (for short 'CESTAT') decided these appeals vide common order dated My 28, 2007. It reversed the orders of the Commissioner (Appeals), which resulted in allowing the appeal filed by the Revenue and dismissing the appeal preferred by the Appellant. A perusal of the judgment of the CESTAT would reveal that it has primarily referred to the judgment of this Court in R.C. Tobacco and held that the matter stood concluded by the said judgment. The Appellant challenged the order of CESTAT by filing Central Excise Tax Reference No. 1 of 2008 before the High Court of Gauhati. This Reference was dismissed by the High Court on December 01, 2011 on the ground of res judicata holding that orders dated May 18, 2004 passed by the Single Judge dismissing the writ petitions of the Appellant had attained finality. The Appellant preferred Review Petition seeking review of the said order, which has also been dismissed by the High Court on June 05, 2012. In the present appeals, the Appellant has challenged both the orders dated December 01, 2011 passed in the Tax Reference as well as the order dated June 05, 2012 passed in the Review Petition.
8. From the brief narration of the background facts mentioned above, it is apparent that the frontal attack of the Appellant against the recovery orders passed by the Respondents is premised on the plea that no such recovery proceedings could be initiated without a show-cause notice Under Section 11-A of the Excise Act. The Appellant has also taken a plea in these appeals that order of the Single Judge at pre-deposit stage could not operate as res judicata on merits and, therefore, dismissal of the Tax Reference by the High Court, and consequently the Review Petition, is clearly erroneous and the High Court should have gone into the merits of the issue decided by CESTAT.
9. As noted above, CESTAT has decided the case against the Appellant on the ground that issue now raised is covered by the judgment of this Court in R.C. Tobacco (supra). As pointed out, in R.C. Tobacco (supra), this Court has already upheld the validity of Section 154 of the Act of 2003 thereby taking away the benefit of Notification No. 32 of 1999 retrospectively insofar as excisable goods falling under Chapter 24 are concerned. Conscious of the position that judgment in R.C. Tobacco (supra) stares at the face of the Appellant, Mr. Soli Sorabjee, learned senior Counsel who appeared for the Appellant, has also made an endeavour to show that the said judgment in R.C. Tobacco (supra) is in clear conflict with earlier three Judge Bench judgment of this Court in J.K. Cotton Spinning and Weaving Mills Ltd. v. Union of India (1987) Supp SCC 350. Thus, following three issues have arisen for consideration in these appeals:
(a) Whether order of the Single Judge at pre-deposit stage can operate as res judicata on merits?
(b) Whether recovery proceedings can be initiated without show-cause notice Under Section 11A of the Excise Act, which is mandatory?
(c) Whether there is a conflict between the three Judge Bench judgment in J.K. Cotton (supra) and R.C. Tobacco (supra)?
First issue is the basis for the judgment of the High Court.
10. For answering this issue, it would be necessary to take into account the complete implication thereof with reference to the nature of recovery orders passed by Respondent No. 1, challenge thereto before the Commissioner (Appeals) and interim order of pre-deposit passed by the Commissioner (Appeals) on March 31, 2004 as also the nature of challenge which was laid by the Appellant against the said order of pre-deposit in the writ petitions filed in the High Court, which were dismissed by the learned Single Judge on May 18, 2004.
11. By virtue of Notification...
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