IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 11.11.2008 CORAM THE HONOURABLE MR.A.K.GANGULY, CHIEF JUSTICE AND THE HONOURABLE MR.JUSTICE F.M.IBRAHIM KALIFULLA W.P.No.10512 of 2008 Fifth Pillar India, Rep. by its General Secretary, T.Retna Pandian S/o Thurai Pandian, 1, Anna Main Road, Kodambakkam, Chennai – 600 024. ... Petitioner -vs- 1. The Secretary, Department of Revenue, North Block, New Delhi-110 001. 2. The Chairman, Central Board of Excise & Customs, Ministry of Finance, Department of Revenue, North Block, New Delhi – 110 001. 3. The Chief Commissioner, Central Excise Chennai Zone, 124, Uthamar Gandhi Salai, Chennai – 600 034. 4. The Commissioner of Central Excise, Chennai IV, MHU Complex, 692, Anna Salai, Chennai – 600 035. 5. The Managing Director, Hyundai Motors India Limited, Plot No.H-1; SIPCOT Industrial Park, Irungattukottai, Sriperumpudur Taluk, Kancheepuram District. ... Respondents Petition under Article 226 of The Constitution of India, praying for the issuance of a Writ of Mandamus, directing the respondents 1 to 3 to submit its action taken report on the allegations against Hyundai Motor India Limited, situated at SIPCOT, Sriperumpudur, Kancheepuram District and further to issue suitable directions to the https://hcservices.ecourts.gov.in/hcservices/ respondents to take appropriate action on the basis of the report and recommendations of the investigating team. For Petitioner ::Mr.K.M.Vijayan Senior Counsel for Mr.Su.Srinivasan For Respondents 1 to 4 ::Mr.M.Ravindran ASGI, assisted by Mr.A.S.Vijayaraghavan ACGSC For Respondent 5 ::Mr.N.Venkataraman Senior Counsel for Mr.G.Rm.Palaniappan - - - - O R D E R F.M.IBRAHIM KALIFULLA, J. This is a public interest litigation and the petitioner seeks for the issuance of writ of Mandamus to direct the respondents 1 to 3 to submit their action taken report in respect of the allegations reported against M/s.Hyundai Motor India Limited, situated at SIPCOT, Sriperumpudur, Kancheepuram District with a further direction to the respondents for taking appropriate action on the basis of the report and the recommendations of the investigating team. 2. The petitioner claims itself to be a Trust registered under the Trust Act. It is stated to have taken up a tirade against corruption in public life. In the present writ petition, the petitioner has alleged that the 5th respondent which is a car manufacturing unit has indulged in large scale tax evasion as well as Central Excise duty by under pricing the cars exported to its associate enterprises in the foreign countries and that in spite of such malpractice being brought to the notice of the concerned authorities, no steps have been taken to unearth such corrupt practice. 3. In the affidavit filed in support of the writ petition sworn to by the General Secretary of the petitioner's Trust, it is alleged that by mis-declaring and undervaluing the cost of production of the export products, the profits of the 5th respondent have been drained illegally by its parent organisation in Korea and such mis- declaration has caused and continue to cause several hundred crores of loss in foreign exchange earnings to the State exchequer and that the reduced profits of the 5th respondent also caused loss in corporate tax payment. According to the petitioner, the 5th respondent thus violated Section 4 of the Central Excise Act, 1944, Section 14 of the Customs Act, 1962, and Sections 6(3)(g) and 7(1)(a) of FEMA. It is further stated that the then jurisdictional Range https://hcservices.ecourts.gov.in/hcservices/ Officer of Central Excise took up the issue initially in his communication dated 09.08.2004 and 16.12.2004 and that instead of initiating proper verification, the said Range Officer was pulled up by the 4th respondent himself stating that there is no Central Excise angle and if any other angle is involved, it should be referred to the Intelligence Agency. It is also stated that the said Range Officer took up the issue further by addressing a communication to the 4th respondent on 15.02.2006, apart from the communication to the Office of the Prime Minister and Finance Minister in his communication dated 29.07.2006. 4. According to the petitioner though the said Range Officer was directed to meet the second respondent on 19.10.2006, he was informed that according to the Board there was nothing to be enquired into the allegations raised by the said Range Officer through Prime Minister’s Office. 5. The sum and substance of the allegations as raised by the Range Officer as canvassed by the petitioner is about the under valuation of cars and CKD parts to their Parent/Group companies, that the profits of the 5th respondent are drained out to the parent company at Korea resulting in loss to the Government of India by way of foreign exchange to the tune of several hundred crores of Rupees. 6. It is also alleged that from August, 2007 a rebate of Rs.20,00,00,000/- a month (refund of duty accumulated in CENVAT account) is given back to the 5th respondent which is due to the fact that huge CENVAT accumulation had taken place because of procurement of large quantities of inputs for such undervalued exports to their parent/associate companies and that if such undervalued exports were not there, there would not have been accumulation of CENVAT credit. In was therefore contended that the 5th respondent would have been paying more Central Excise Duty as well as higher foreign exchange earning on the exports. There is also an allegation to the effect that the Chairman of the Parent company viz., Hyundai Motor Corporation viz., Mr.Chung Mong-Koo was arrested for bribery and slush fund scandal on 29.04.2006 at Seoul, South Korea on the allegation that he had embezzled about $106 million of company’s money to create slush fund. It is stated that the Chairman of the Hyundai Motor Corporation was subsequently convicted on 04.02.2007 and sentenced to 3 years imprisonment over slush fund scandal. It is also stated that the 5th respondent has taken steps to start another plant adjacent to its existing plant and therefore every effort should be taken to check the mala fide and unfair system being carried out at the instance of the respondents. 7. On behalf of the respondents 1 to 4, the Commissioner of Central Excise and Service Tax, Large Taxpayer Unit, Chennai has sworn to a counter affidavit. In the said counter affidavit, it is stated that Mr.Sameul C.Wilson, Superintendent of Central Excise https://hcservices.ecourts.gov.in/hcservices/ presently attached to the Ministry of Commerce and posted as Authorised Officer in the Special Economic Zone at SIPCOT, Sriperumbudur is the person behind the present litigation and the petitioner has been used as a tool by the said Mr.Sameul C.Wilson. It is stated that the petitioner never made any representation to the concerned authorities about the issue raised in this writ petition and that the petitioner has used various communications addressed by the said Mr.Sameul C.Wilson who was the Range Officer working within the jurisdiction of the 5th respondent unit. It is therefore contended on behalf of the respondents 1 to 4 that since based on the relevant enquiries held into the allegations raised by Mr.Sameul C.Wilson it was found out that there was no basis in any of the allegations, the present writ petition at the instance of the said individual does not merit any consideration. It is specifically stated in paragraph 5 of the counter affidavit that at the instance of the 5th respondent, there was no loss of Central Excise duty. In paragraph 6 of the counter affidavit it is stated that under the Central Excise Statute as an assessee, the 5th respondent was required to file monthly ER-1 returns furnishing the required details as regards the export market, that such reports are subject to scrutiny and due audit and that such audit mechanism was two-fold i.e. an Internal Audit Formation of Central Excise Department and an independent Central Excise Revenue Audit by Comptroller and Auditor General. It is further stated that such Audit had taken place in respect of the 5th respondent company and as a result of such exercise, no under valuation of cars exported were reported and that no irregularities were found. 8. It is stated that whatever communications addressed by Mr.Sameul C.Wilson was also duly replied by the concerned authorities and that it was found that there was no basis in the allegations raised by Mr.Sameul C.Wilson. In paragraph 8 of the counter affidavit, it is stated that a Special Team comprising of 13 officers drawn from various formations of the Central Excise Department were formed during February, 2006 which included Mr.Sameul C.Wilson and that at the end of their study they were not able to point out any anomaly or irregularity in the pricing of exported cars or with regard to the valuation of cars and spares. It is also stated that prior to the study made by the Special Team, the 5th respondent was subjected to a detailed investigation/study by Director (Costs), Chennai at the request of the Jurisdictional Commissioner of Central Excise, Chennai – IV and in the report dated 16.12.2005, the said authority made it clear that he was not able to find any anomaly with regard to pricing of export cars. It is also stated that to the same effect was the report of the Commissioner of Central Excise, Chennai- IV, dated 25.08.2006 submitted to the Chief Commissioner of Central Excise, Chennai Zone. 9. As far as the price variation relating to the export of cars is concerned, it is stated in paragraph 9 of the counter affidavit https://hcservices.ecourts.gov.in/hcservices/ that as per the report of the Revenue Risk Analysis team, it was due to several duty concession that accrued to the 5th respondent, while exporting cars and that it is a prevalent practice adopted by most of the manufacturers/exports to price their export goods at a competitive price, which is lesser than the domestic sector since the units would have already obtained break-even and gained profits on the domestic sector and that only variable cost has to be met. 10. In paragraph 12 & 13 of the counter affidavit, it is pointed out that the export of cars by the 5th respondent had increased to 40% of its total production, that there was no allegation in the petition that the credit taken on the inputs or input service is wrong and that the credit earned was allowed to be adjusted as against the duty payable on the final products cleared by the manufacturer. The benefits availed by the 5th respondent by virtue of high percentage of exports made by it by invoking Rule 3 and 5 of the CENVAT Credit Rules as well as Rule 19 of the Central Excise Rules were stated to be well in order and therefore the same cannot be found fault with. 11. In paragraph 14, it is specifically stated that there was no under valuation or revenue loss as alleged by the petitioner. In paragraph 16 of the counter affidavit it is specifically denied that the 5th respondent was receiving back an amount of Rs.20 crores from the Government every month as refund (rebate) of the unutilized CENVAT credit accumulated due to such improper exports. It is reiterated that the 5th respondent was not granted any refund in 2004 under Rule 5 of the CENVAT Credit viz., refund of accumulated credit. On the other hand it is stated that rebate was sanctioned to the 5th respondent on account of exports made under payment of duty in terms of the provisions of Rule 18 of the Central Excise Rules 2002 which was valid in law. In paragraph 17 it is stated that the transfer of Mr.Sameul C.Wilson was after his completion of normal tenure of 2 years and that the same was not a vindictive action. It is further stated that the said transfer was never challenged by the said Mr.Sameul C.Wilson. Ultimately it was contended that the intense study and audit to verify the various allegations of Mr.Sameul C.Wilson were made which confirmed that there was no revenue loss or under-valuation as put forth by him and therefore the writ petition should be dismissed with exemplary costs. 12. On behalf of the 5th respondent, its General Manager- Finance (Taxation) has sworn to the counter affidavit. The 5th respondent also reiterated the various facts relating to the detailed exercise carried out by the high level authorities of the Central Excise Department and contended that the department having bestowed its best attention to enquire into the allegations at different levels and found that there was no truth in any of the allegations of Mr.Sameul C.Wilson, the present writ petition on the very same set of allegations at the instance of the petitioner should be rejected. It is stated that the various communications addressed by Mr.Sameul https://hcservices.ecourts.gov.in/hcservices/ C.Wilson to the 5th respondent were duly replied by them refuting the allegations levelled against the 5th respondent. 13. In paragraph 9 of the counter affidavit, the 5th respondent has furnished the particulars of the total value of exports made by it during the years 2003-04 to 2007-08. In the data furnished therein it is shown that while the total value of exports to their associated enterprises in the foreign countries ranged between 6.77% to 573.45% of the total value of exports which ranged between Rs.1002.03 crores to Rs.3929.89 crores, the exports to Non Associated Enterprises during the said period ranged between Rs.995.25 crores to Rs.3356.44 crores. In the same paragraph, the 5th respondent has also shown that the prices of the Santro model cars manufactured by it are exported to its related party KIA Motor was US$ 4423 while the exports to unrelated party at Algeria and South Africa was US$ 4116 and US$4036 respectively. It is further stated that the price were all based on market driven factors and the allegations of Mr.Sameul C.Wilson which has been the basis for the petitioner's present writ petition were all highly imaginary and were not based on relevant factors. 14. In paragraph 10, the 5th respondent has pointed out that its Santro base model cars which was priced ex-showroom at Rs.3.49 lakhs in 1998 is even now offered at Rs.3.54 lakhs in 2008 after 10 long years. In paragraph 17, the 5th respondent has stated that its accounts were audited both by internal audit and the CERA periodically and the CERA audit was conducted between 03.02.2006 and 17.03.2006 covering the financial year 2004-05 and neither of the audit parties have found any irregularity in the pricing of export cars by the 5th respondent. It is further submitted that the price variation between domestic clearances and export clearances and exports was due to several duty concessions that accrued to the 5th respondent while exporting cars. 15. In paragraph 30 of the counter affidavit, the 5th respondent has furnished the amount of duty and taxes paid by it under different heads. According to the 5th respondent since its inception, it has so far paid Rs.10,711 crores as Excise Duty, Rs.2387.31 crores as Customs Duty, Rs.121.50 crores as Service Tax, Rs.1807 crores towards Income Tax and Rs.1128 crores towards Sales tax / VAT aggregating Rs.16,154.81 crores of revenue to the exchequer. It is also stated that between March, 1999 upto the year ending 31.03.2008, the 5th respondent has realized earnings in foreign currency on accrual basis to the tune of Rs.13,403 crores. In paragraph 31, the 5th respondent has stated that it has got 4606 employees on its rolls, 11234 as Trainees / Apprentices / Contract Workers, 14,000 suppliers / vendors' employees and 5,000 dealers' employees and thereby providing employment opportunities to 34,840 persons both directly and indirectly. https://hcservices.ecourts.gov.in/hcservices/ 16. In paragraph 32 to 35 it is stated that as one of the largest Central Excise Duty payers for 8 long years, the 5th respondent has received the Highest Tax Payer Award for two years and that it has been declaring profits year after year since its very inception. It also claims to have the credit of highest tax payer of income tax amongst the automobile sector all over India and highest tax payer of southern India. It is also stated to have secured the status of five star export house and won the top exporter of the year award sponsored by various independent agencies. It claims to export cars to more than 90 countries since 1999 and continues to retain and remain as market leader in the automobile industry. It is stated to have rolled out its 10,00,000th car in September 2007 which is stated to be a record for the automobile industry in India. It is also stated to have erected its second plant in February 2008. Apart from the above, it is also claimed that it contributes Rs.100/- for every car sold domestically for carrying out its philanthropic activities in the field of educational and vocational training, environment, road safety, natural calamities and disasters, art, science and culture & technology. Its contributions is stated to have been carried out in the Community Development Programme which includes health, cultural exchange programme and heritage scholarship programmes, natural calamities and disasters relief programmes. 17. While the pleadings of the respective parties are as stated above, we also heard Mr.K.M.Vijayan, learned senior counsel appearing for the petitioner, Mr.M.Ravindran, learned Additional Solicitor General of India appearing for the respondents 1 to 4 and Mr.N.Venkataraman, learned senior counsel appearing for 5th respondent. 18. Mr.K.M.Vijayan, learned senior counsel appearing for the petitioner in his submissions while reiterating the contention that valuable foreign exchange to the tune of several hundred crores were lost due to the misfeasance committed by the 5th respondent also contended that the jurisdictional Commissioner report was blindly followed by all the higher authorities up to the Ministry level without verifying the relevant documents. 19. It is stated that the 5th respondent failed to produce the cost statement of different cars produced by them nor the cost audit conducted by the relevant authorities in order to ascertain the correct facts. The learned senior counsel contended that the approach made to the authorities under the Right to Information Act also did not yield the required result. The learned senior counsel contended that though 14 officers stated to have examined the issue none of them considered the documents produced by the Regional Office or gave any finding on it. It was further contended that no authority compelled the 5th respondent to submit the documents as sought for by the Regional Office in several letters. It was lastly https://hcservices.ecourts.gov.in/hcservices/ contended that none of the authorities touched the core issue viz., that the 5th respondent made exports to its parent/associate group companies at below the cost of production value which was illegal under Section 4 of the Central Excise Act and Section 14 of the Customs Act. It is contended that not declaring the real export value is an offence under the provisions of FEMA. 20. Mr.M.Ravindran, learned Additional Solicitor General of India, in his submissions pointed out that when a complaint relating to evasion of Central Excise duty was received in the Office of the Commissioner of Central Excise, Internal Audit Section, Chennai-4, Special Teams were formed to conduct audit on the 5th respondent by way of an internal audit. The learned ASG pointed out that in the Office Order No.4/2005, dated 20.12.2005, a team of officers for holding Internal Audit section was formed to function with effect from 01.02.2006. He also pointed out that in the Audit team constituted on 13.02.2006, Mr.Samuel C.Wilson himself was a team head as Superintendent in respect of Poonamallee-IV Range in whose jurisdiction the 5th respondent factory was located and that the report of the said Audit Team dated 13.02.2006, discloses the particulars relating to the sale of cars both in the domestic market as well as exports and that the sale value of the exports were found to be on the lower side which was attributable to the duties and taxes forgone and the export incentive such as Duty Free Credit Entitlement Scheme benefits and Target Plus Scheme benefits. The said report was a detailed one which contains every minute information relating to the products manufactured by the 5th respondent, sale value, the extent of sales both domestic as well as foreign countries, the price factor, the Custom and Excise benefits as well as the tax benefits availed by the 5th respondent, its market strategy, its relationship with its owners and shareholders, its purchase information, its approved audit plan by Additional Commissioner of Central Excise, future expansion plan as well as the evaluation of internal controls etc., 21. The learned Additional Solicitor General of India also referred to the subsequent report of the Commissioner of Central Excise, Chennai-IV dated 24.08.2006, addressed to the Chief Commissioner of Central Excise, wherein the various allegations levelled against the 5th respondent by Mr.Samuel C.Wilson were enquired into and stated that all his allegations were false, baseless and motivated and that the whole episode was stage managed by Mr.Samuel C.Wilson, to wreck vengence as he was shifted from a sensitive post to an insensitive post. The learned Additional Solicitor General submitted that the th Commissioner also recommended for initiating appropriate disciplinary action against Mr.Samuel C.Wilson for the various acts unbecoming of a Government Servant listed out in paragraph 5 of the letter. https://hcservices.ecourts.gov.in/hcservices/ 22. The learned Additional Solicitor General of India further contended that the attempt of the petitioner in resorting to the present writ petition was solely based on the information furnished by Mr.Samuel C.Wilson which was nothing but an attempt to malign the image of the respondents 1 to 4 and there was no truth in any of the allegations levelled against the 5th respondent in the mater of either tax evasion, revenue loss or loss of foreign exchange earnings. 23. Mr.N.Venkataraman, learned senior counsel appearing for the 5 th respondent in his submissions contended that after the issue was raised by Mr.Samuel C.Wilson on 09.08.2004, which was continued by him in his communications dated 20.09.2004, 04.11.2004, 17.12.2004, 07.04.2005 and 04.05.2005, as many as 14 authorities at different stages starting from the Deputy Commissioner of Central Excise up to the Prime Minister's Office considered his allegations on different dates and found that there was no iota of truth in any of its allegations. The learned senior counsel would contend that such consideration was made by the Deputy Commissioner of Central Excise, Commissioner of Central Excise, Chief Commissioner of Central Excise, Appellate Officer in the Central Board of Excise and Customs (CBEC), New Delhi, Director (CX) CBEC, New Delhi, Central Information Commission, Transfer Pricing Officer, Income Tax, Internal Audit Team of Central Excise, Central Excise Revenue Audit (CERA), Under Secretary to the Government of India, Director (Costing), Central Excise, Special Audit Team and Officers of the Customs who had permitted the exports apart from the Office of the Prime Minister. The learned Senior Counsel after referring to various reports of the authorities submitted that when none of the high level authorities could make out any misdeeds in the pricing of the products of the 5th respondent as well as in the payment of tax, custom duty and earning of foreign exchange, the present allegations of the petitioner are solely based on the very same allegations of Mr.Samuel C.Wilson, which were found to be lacking in truth in every respect. The learned Senior Counsel therefore contended that the petitioner's prayer in the writ petition lacks bona fide and the same is liable to be rejected by awarding exemplary costs. 24. Having heard the learned counsel for the respective parties and having bestowed our earnest consideration to the various submissions of the learned counsel as well as the material papers placed before us, we are of the view that the petitioner failed to make out a case for consideration for the grant of relief as prayed for in the writ petition. 25. At the outset, we have to point out that for filing this writ petition, the petitioner solely relied upon the statements and allegations of Mr.Samuel C.Wilson, who is presently working in the Department of Central Excise and who was the Range Officer in the year 2004 in the Zone were the 5th respondent factory is situated. https://hcservices.ecourts.gov.in/hcservices/ 26.