IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:07.06.2010 CORAM: THE HON'BLE MR.JUSTICE P.JYOTHIMANI WRIT PETITION Nos.32046 of 2004,13863, 24389 and 24390/ 2005 and connected miscellaneous petitions. .. WP.No.32046 of 2004: M/s.Rajam Industries (P) Ltd., rep. By its Managing Director Mr.D.Selvaraj No.2/95 Mount Poonamallee Road Kattupakkam Chennai 600 056. .. Petitioner vs. The Deputy Commercial Tax Officer Sriperumbudur Assessment Circle Varadarajapurm Poonamallee Chennai 600 056. .. Respondent WP.No.13863 of 2005: M/s.Rajam Industries (P) Ltd., rep. By its Managing Director Mr.D.Selvaraj No.2/95 Mount Poonamallee Road Kattupakkam Chennai 600 056. .. Petitioner vs. 1.The Additional Director General Directorate of Central Excise Intelligence, South Zonal Unit C-3, C Wing Rajaji Bhavan Besant Nagar, Chennai 600 090. 2.The Commissioner of Central Excise IV Commissionerate MHU Complex Nandanam, Chennai 600 035. .. Respondents WP.Nos.24389 & 24390 of 2005: M/s.Rajam Industries (P) Ltd., rep. By its Managing Director Mr.D.Selvaraj No.2/95 Mount Poonamallee Road Kattupakkam Chennai 600 056. .. Petitioner vs. The Deputy Commercial Tax Officer Sriperumbudur Assessment Circle Varadarajapurm Poonamallee Chennai 600 056. .. Respondent Writ Petitions filed under Article 226 of the Constitution of India praying for issuance of a Writ of Certiorari as stated above. For petitioner : Mr.V.T.Gopalan,Sr.Counsel in WP.13863/05 for Ms.B.Karpagam For petitioner : Mr.Ramakrsihna Reddy Wps.32046/04, 24389&24390/05 For respondents : Mr.P.Mahadevan in all the Wps. Senior Central Govt.Standing Counsel. .. COMMON ORDER All these writ petition are filed by the same petitioner M/s.Rajam Industries (P) Ltd., Chennai. 2. W.P.No.13863 of 2005 is filed by the petitioner against the show-cause notice issued by the first respondent, the Additional Director General, Directorate of Central Excise, Intelligence, South Zonal Unit, pointing out certain omissions and commissions constituting contraventions of various provisions of Central Excise Rules in the manufacture and removal of excisable goods viz., Oorvasi Brand detergent soap and washing powder without payment of duty and noting that the petitioner is liable for payment of Central Excise duty as per the Rules apart from penal action, penalty and interest, under section 11AC and 11AB of the Central Excise Act, 1944 and directing the petitioner to show-cause as to why SSI exemption availed from time to time in 1999, 2000, 2001 and 2002 should not be denied as the turnover exceeded Rs.3 crores and as to why the excise duty amounts should not be waived during the relevant periods on the SSI exemptions stated to have been claimed wrongly and as to why penalty and interest should not be recovered. 3. W.P.No.32046 of 2004 relates to the consequential proceedings of the Deputy Commercial Tax Officer, Poonamallee revising the assessment order based on the above said show-cause notice issued by the Additional Director General of Central Excise, Intelligence and imposing a tax amount of Rs.1,98,14,537/- and penalty of Rs.26,57,74,222/- for the assessment year 1998-99. 4. W.P.Nos.24389 and 24390 of 2005 relate to the notices issued by the Deputy Commercial Tax Officer for revision of assessment for the assessment year 1999-2000 and 2000-2001. 5. The petitioner is a company registered under the Companies Act being the manufacturer and dealer of detergent cake and detergent powder in the name and style, Oorvasi Brand, for which the petitioner is having a valid Central Excise Certificate and the petitioner is also assessed to sales tax under the Tamil Nadu General Sales Tax Act as well as Central Sales Tax Act. a) The petitioner has units at Porur, Poonamallee and Kattupakkam and it started one more unit at Iyyappathangal in March, 1999 and another unit at Pondicherry in November, 2001. The unit at Poonamallee was closed in 2001 and the Porur unit was closed in March, 2002. b) The raw materials required for the manufacturing of detergent cake and detergent powder are Stone powder, Soda Ash, Sodium Silicate, Acid Sturry, Sodium lauryl sulphate, Sodium sulphate and perfumes. It is stated that Linear Alkyl Benzene (LAB) and Sulphuric acid are the raw materials to manufacture acid slurry. Since the petitioner is not having the facility to manufacture Acid slurry and as such, procuring all the above mentioned raw materials including Acid slurry from raw material suppliers with whom the petitioner is stated to have no connection either by investment or by any other interest and the suppliers of raw materials would not be permanent suppliers and they are variable depending upon the selling rates and quality of raw materials supplied. c) It is stated that the property at Iyyappathankal stands in the name of the Managing Director of the company and his wife and a portion of the said property was leased out to M/s.Chitra Industries and M/s.Mano Industries before the petitioner started manufacturing detergent soap in the year 1999. It is stated that the said M/s.Chitra Industries is the manufacturer of Acid slurry and the said unit is an SSI unit with negligible production capacity and even if the entire production is supplied to the petitioner, it would not be 15% of the monthly requirement of the petitioner. d) Likewise, it is stated that the consumption of LAB by the said M/s.Chitra Industries is also of low quantity. It is stated that the other tenant, M/s.Mano Industries is manufacturing Sodium silicate and its supply is 20% of the monthly requirement of the petitioner. e) It is stated that the first respondent issued various notices about certain irregularities about which the petitioner used to attend the office of the first respondent and explain. However, the impugned show-cause notice dated 30.6.2003 was issued by the first respondent to the effect that the petitioner evaded Central Excise duty to the tune of crores of rupees, asking the petitioner to show-cause. f) It is the case of the petitioner that along with the show-cause notice no document was enclosed and no opportunity was given to the petitioner to examine witnesses or to verify documents and in spite of requesting for various documents, the first respondent did not furnish the same and even for the purpose of providing Xerox copies of documents mentioned in the show-cause notice, the first respondent demanded Rs.40,000/- and in fact, the petitioner was ready to take copies by using its own Xerox machine and that was not allowed and the petitioner has been harassed for the past two years. g) In the meantime, the first respondent appointed the second respondent as the adjudicating authority based on the impugned notice. It is the case of the petitioner that the show-cause notice has foreclosed the entire issue and the first respondent has already arrived at a conclusion as if the petitioner has committed excise duty evasion and the notice is a pre-determined one and taking advantage of the misuse of powers by the subordinate staff of the petitioner company, grave allegations have been made against the petitioner. h) The petitioner is not the manufacturer of Acid slurry and the allegation is that there was purchase of LAB from Tamil Nadu Petro Products Limited. It is also stated that none of the statements obtained from various persons were given in the presence of the petitioner and no document was recovered from the petitioner pertaining to the use of LAB or purchase of LAB by the petitioner and the allegations are based on assumptions and presumptions and the show-cause notice issued with foreclosed and pre-judged mind is not valid in law and it is in violation of the principles of natural justice and against the law laid down by the Supreme Court as well as Karnataka High Court and this Court. 6. The show-cause notice is challenged on various grounds including that it is opposed to the principles of natural justice; that the notice has pre-determined the issue against the petitioner; that the notice has been issued on assumptions and presumptions; that the first respondent has failed to note that LAB is not the raw-material for manufacturing detergent cake or detergent powder; that the allegations made are pertinent to the sale of LAB by Tamil Nadu Paper Products Limited to various purchasers; that none of the statements were recorded in the presence of the petitioner; that the witnesses have not been examined in the presence of the petitioner; and that no opportunity was given to the petitioner to cross-examine the witnesses, apart from raising other grounds. 7. Likewise, in respect of revised assessment order for the year 1998-99 which is challenged in W.P.No.32046 of 2004, it is stated that the petitioner filed return for the year 1998-99 under the Tamil Nadu General Sales Tax Act, and accepting the same, the assessment order was passed on 31.5.2000. It is stated that thereafter, certain documents were seized form the petitioners office and the Enforcement Officials of the Sales-tax Department inspected the place of business on 6.12.2000 and sales registers, purchase register and sales invoices maintained by the petitioner after 13.11.2000 were seized and after 6.12.2000, there was no communication from the respondent. 8. In the meantime, in the year 2003, the Central Excise Department issued a notice dated 30.6.2003, which is impugned in W.P.No.13863 of 2005 and the show-cause notice is now pending and no adjudication order has been passed. However, the respondent issued a revised assessment order dated 2.8.2004, which was received on 25.10.2004 through registered post. The said order was sent by the respondent on 21.10.2004 only, as it is evident from the postal cover. The said revised assessment order was passed solely based on the show-cause notice issued by the Central Excise Department, without any independent materials. When the show-cause notice issued by the Central Excise Department is pending adjudication, merely based on show-cause notice, the revised assessment order was passed by reopening the assessment after five years. 9. It is stated that before passing the revised assessment order, there was no notice sent through registered post as contemplated under the Rules and no notice was affixed at the premises and no official of the respondent informed the petitioner company. As per section 16 of the Tamil Nadu General Sales Tax Act, any revision of assessment can be made only within five years from the date of original assessment. In the present case, the original assessment was on 31.5.2000 and the respondent did not initiate the revised assessment proceedings before 31.3.2004, however, the respondent has falsely stated as if the proposal for revision of assessment was made and sent through an Office Assistant which was revised and later, it was affixed without even stating about the date of affixture of the proposed notice. The sending of notice through registered post is the proper method as per Rules. 10. It is stated that even for the year 2003-04, the assessment order was passed on 4.8.2004 finding that Rs.89,978/- is available as excess tax in the account of the petitioner as on 4.8.2004 and if really the impugned order of revision had been passed on 2.8.2004, there would have been any mention about the excess tax of Rs.89,978/- in the order allegedly passed on 4.8.2004 for the year 2003-04. 11. The revision of assessment is challenged on various grounds including that the same has been done after a period of five years by reopening the assessment order for the year 1998-99; that the same has been passed in violation of the principles of natural justice as no opportunity was given and no notice was served; that the service of notice is against Rule 52 of the Rules framed by way of amendment in the year 1984 and as per the ratio laid down in Gopal Das Uttam Chand vs. Sales Tax Officer, Dehradun [25 STC 229] and Kunwar Industries & Another vs. The Sales Tax Officer, Ghaziabad [53 STC 385], the affixture of notice can be made only after the notice sent through registered post is returned unserved and such procedure has not been followed; that the affixture of any notice is also denied; that as per the judgments of various High Courts, every employee of the assessee is not the agent, but one who is nominated as Manager or authorized to receive notice alone are entitled to receive and in the case of companies, notice has to be served on the Principal Officer, that only to avoid such doubts Rule 52 provides for the mode of service by registered post and the said procedure has not been followed and that the respondent having passed the order on 2.8.2004, chose to send the same through registered post on 21.10.2004 which was received by the petitioner on 25.10.2004 and there is delay at every stage. 12. On merit also, it is stated that no independent material is available to take action against the respondent for revision of assessment order, that the mere pendency of show-cause notice issued by the Central Excise Department is not a ground for the purpose of revision of assessment, unless there is a direct evidence for the purpose of revision, that the allegation that the petitioner purchased raw materials from bogus and fictitious dealers is not correct for the reason that the purchase was effected from Tamil Nadu Petro Products Limited which is a Government of Tamil Nadu undertaking and that the revised assessment order has been passed on assumptions and presumptions. 13. Likewise, the impugned notices of revision issued by the Commercial Tax Department for the assessment year 1999-2000 and 2000-01 are challenged in W.P.Nos.24389 and 24390 of 2005 on various grounds including that the show-cause notice issued by the Excise Department challenged in W.P.No.13863 of 2005 has been stayed by this Court; that the principles of natural justice have been violated; that there is absolutely no ground for issuing notices of revision for the said assessment order and that the impugned notices were issued with foreclosed mind. 14. While admitting the writ petition in W.P.No.13863 of 2005, wherein the show-cause notice issued by the Additional Director General of Central Excise Department is challenged, this Court granted an order of stay on 26.4.2005. The first respondent in the said writ petition, along with the counter affidavit, has also filed an application to vacate the order of interim stay. 15. In the counter affidavit filed on behalf of the first respondent, the Additional Director General of Central Excise Department, it is stated that on information of large scale evasion of central excise duty by several detergent manufacturers in Tamil Nadu, simultaneous search operations were conducted on 13.11.2000 in Chennai, Trichy, Coimbatore and Madurai covering the premises of Oorvasi Brand detergent manufacturing units of the petitioner M/s.Rajam Industries Private Limited, also called as, RIPL, M/s.Raji Industries, Trichy, their main dealers, raw material suppliers, etc. leading to the seizure of documents and offending goods at dealers premises situated at Tambaram and Dharmapuri. It is stated that on receipt of information regarding certain irregularities by the petitioner, RIPL, simultaneous search operations were also made on 30.10.2000 by the Headquarters Preventive Unit of Chennai-II Central Excise Commissionerate resulting in the seizure of some documents. 16. The petitioner made voluntary payment of Rs.1 lakh towards its duty liability. Due to wider ramifications of the issue, since many persons were involved, the records were transferred to Chennai-II Commissionerate of the first respondent and thereafter, a full-fledged investigation was taken up. It was found that the petitioner, RIPL was a habitual offender since 1980 leaving no documentary evidence at the units or office. It is stated that RIPL at Chennai is controlled by its Managing Director, D.Selvaraj, who has also controlled M/s.Raji Industries at Trichy which has been functioning in the name of his employee, Thiru.Veerasamy. While explaining the modus operandi of the petitioner, it is stated that Linear Alkyl Benzene (LAB) and Sulphuric Acid are the major raw materials in the manufacture of detergents and Soda ash, Soapstone powder, Silicate, aromatic chemicals, etc. are other raw materials. The raw material viz., Linear Alkyl Benzene (LAB) was procured from Tamil Nadu Petro Products Ltd., and in the process of manufacture, LAB is sulphonated with Sulphuric Acid to get Acid slurry and Acid slurry is mixed with other raw materials to get detergents in a particular ratio. 17. It is stated that the evidence collected during investigation revealed that the petitioner was procuring the raw materials, viz., (i) LAB from Tamil Nadu Petro Products Limited through its consignment agents, M/s.Industrial Chemical Agency, Chennai, (ii) Soda Ash from its consignment agents/dealers, M/s.Tuticorin Alkali Chemicals Ltd., M/s.Gujarat Heavy Chemicals Ltd., M/s.Tata Chemicals Ltd. and M/s.Saurashtra Chemicals Ltd., (iii) Sulphuric Acid from M/s.Adheswara Chemicals & M/s.GGK Industries, Pondicherry, M/s.Krishna Agro Chem, M/s.Krishna Indchem and M/s.Madras Chemicals at Gummidipoondi, (iv) Aromatic compounds  Essence from M/s.Bush Boak Allen Ltd and its dealers of M/s.Credenza in fictitious names and (vi) Clay powder and soap stone powder as well as packing materials have also been procured in fictitious names; and these materials were procured in huge quantity in fictitious names at concessional rates of sales tax in Form-XVII. 18. It is also stated that during investigation, various evidences were collected showing that Oorvasi brand detergents manufactured in various units of RIPL and Raji Industries using the unaccounted materials were removed to various dealers in Tami Nadu, Andhra Pradesh and Karnataka without cover of invoices and there was employment of several transport brokers who dispatched several loads of Oorvasi Brand soap/detergents from RIPL and Raji Industries and for the supply of detergents made by the petitioner to its dealers, the dealers made payments to the petitioner in the form of demand drafts favouring raw material suppliers of the petitioner viz., Tamil Nadu Petro Products Ltd., M/s.Nuvodaya Chemicals and M/s.Guru Chemicals and also effected cash payments. 19. The evidence which was gathered was explained in the show-cause notice and more than 160 statements were recorded from dealers of Oorvasi soaps, transporters, raw material suppliers, personnel of RIPL, suppliers of packing materials etc. and even on the dates of initial search made on 13.11.2000 and 14.11.2000 there was detention/seizure of removed goods at the dealers premises at Tambaram and Dharmapuri. It is stated that during the time of investigation, the petitioner made voluntary payments on various dates aggregating to Rs.51 lakhs being part payments towards duty liability due on the past clearances and the Managing Director D.Selvaraj admitted the clandestine removal from the units of RIPL, during investigation. It is stated that the said Selvaraj apprehending arrest sought for anticipatory bail which was granted on 30.4.2002 in spite of opposition subject to the condition of depositing of Rs.3 crores by the petitioner on or before 3.6.2002, but the said condition was not complied with by the petitioner and the Directorate of the first respondent preferred appeal before the High Court in Crl.O.P.No.10630 of 2002 and Crl.M.P.No.5560 of 2002 was also filed before the learned Principal Sessions Judge for cancellation of bail since there was failure on the part of the petitioner in appearing before the police daily and the same is pending. 20. It is stated that the petitioner indulged in procuring raw materials viz., LAB, Sulphuric acid, Acid slurry and other raw materials in fictitious names which were put to use in the manufacture of excisable goods, viz., detergent soap/powder with the brand name, Oorvasi. It is stated that the evidence recorded shows that there was clandestine removal of goods by the petitioner. The seizure of several documents and goods was explained in detail in the impugned show-cause notice dated 30.6.2003 and the petitioner was examined from time to time and statements were recorded on 23.4.2001, 18.10.2001, 14.2.2002 and 6.5.2002 by the Senior Intelligence Officer and the entire investigation spanned over a period of two years culminated in the issuance of show-cause notice dated 30.6.2003 demanding duty of Rs.28.87 crores after conducting searches covering 53 premises leading to seizure of documents and offending goods and recording of statements from 162 persons. 21. It is stated that the petitioner was provided with details of documents sought to be relied against it in the notice and subsequently, the petitioner was provided with copies of the same from time to time as they were voluminous in nature. It is stated that it was the petitioner who was delaying the proceedings by insisting for supply of all the pages of files/registers in which only some pages were relevant. The first respondent, by letter dated 27.8.2004, stated that copies of relied upon documents as listed in Annexure A, B to C-1 were supplied on various dates viz., 29.12.2003, 2.1.2004 and 11.2.2004 to the authorized representative of the petitioner and the petitioner was even permitted to inspect various other documents and the representative of the petitioner gave acknowledgment for having received copies of such documents. It is stated that copies of documents mentioned in Annexure B-1, B-II and C-1 were furnished and as regards Annexure C-II, the petitioner was permitted to bring its own Xerox machine and take copies and the documents mentioned in Annexure C-II to SCN were made available to the representative of the petitioner who had engaged photocopying machine and received copies vide acknowledgments dated 29.10.2004, 29.11.2004, 13.12.2004, 24.12.2004, 24.1.2005, 18.2.2005 and 31.3.2005 and therefore, it is not correct to state that documents were not furnished. 22. The second respondent was assigned with the function of adjudication by the Central Board of Excise and Customs, New Delhi. It is stated that the impugned show-cause notice has made allegations and listed evidence in support of the allegations and there is no prejudging of the matter and the petitioner is entitled to the principles of natural justice by offering explanation to the allegations by way of reply and of being heard before passing of an order-in-original by adjudging the case and even the order-in-original is appealable and adequate machinery is provided in the Central Excise Act, 1944 and no case has been made out against the petitioner since it is only at show-cause notice stage. It is stated that there is no necessity that the statements should be recorded in the presence of the petitioner during investigation. 23. It is stated that the duty evasion as alleged in the impugned show-cause notice was quantified by taking into account all documentary evidence collected in the matter and the petitioner would be afforded adequate opportunity to defend itself by way of reply and personal hearing by the adjudicating authority. It is stated that quantification of duty liability was made on scientific and rational manner commensurate with potential of the petitioner who had indulged in offences in successive manner unmindful of investigatory process. There was no harassment of the petitioner by the respondent. It is stated that the petitioner without submitting its explanation to the show-cause notice, approached this Court by filing the writ petition, which is not maintainable. The show-cause notice was issued within the extended period of limitation as per proviso to section 11A(1) of the Central Excise Act based on the documentary evidence available. 24. In the reply affidavit filed by the petitioner, it is stated that the Managing Director of the petitioner company is a prominent public service oriented person who was even elevated as Member of Legislative Assembly from Srivaikuntam constituency and Oorvasi products were sold for lesser price for the benefit of the people while compared to other detergent cakes. It is reiterated that the show-cause notice was issued on the basis of fabricated and forcible statements obtained from other dealers and stockists and the statements were obtained behind the back of the petitioner. It is reiterated that the show-cause notice was issued on the basis of presumptions and assumptions and for the malpractices indulged by some of the dealers, the petitioner cannot be made liable. It is stated that 161 statements were obtained behind the back of the petitioner and the statements were obtained by way of coercion. It is stated that as far as the condition of deposit of Rs.3 crores for anticipatory bail granted to the petitioner is concerned, against the same a criminal O.P. was filed and the said portion of the order was stayed and the matter is pending. It is stated that claim of Rs.28.87 crores without giving an opportunity to the petitioner is unlawful and even before an opportunity is given and before explanation