IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE: 30.4.2010 CORAM THE HON'BLE MR.JUSTICE M.JEYAPAUL W.P.No.25580 of 2003, W.P.M.P.No.31421 of 2003 and W.V.M.P.No.454 of 2005 M/s.Dagger Die Cutting rep by its Sole Proprietrix Mrs.Rukhsana Deshpande Plot NO.31-A/5 North Phase Developed Plots, Industrial Estate, Ambattur, Chennai 600 098. Petitioner vs. 1. The Commissioner of Central Excise, Chennai II Commissionerate, Chennai 600 035. 2. The Customs, Excise & Gold (Control) Appellate Tribunal, Shastri Bhavan Annexe Building (FF) No.26, Haddows Road, Chennai 600 006. Respondents Writ Petition filed under Article 226 of the Constitution of India praying to issue a writ of certiorari calling for the records of the second respondent culminating in Miscellaneous Order No.113 dated 25.4.2003 confirming the impugned order No.550 of 2002 dated 3.5.2002 in Appeal No.E/772 of 2001 and quash the same. For petitioner : Mr.J.Sivandaraj for M/s.Sivam Sivanandraj For respondents: Mr.K.Ravichandra Baabu, SCGSC ORDER The petitioner M/s.Dagger Die Cutting was started in the year 1993. It is engaged in manufacturing and selling of Leather Die Cutting Knives. The petitioner is registered as a small scale industry. It enjoys exemption in payment of excise duty. Excise duty payable on the total value of clearance was exempted to an extent of Rs.30,00,000/= for the period 1995-2000 and to the extent of Rs.50,00,000/= from 2000 onwards. The petitioner is also entitled to https://hcservices.ecourts.gov.in/hcservices/ duty credit via modvat and cum-duty benefits. Her husband Mr.Nilanjan Deshpande has started Dagger International a Concern involved in retailing the Die Cutting Knives. The first respondent Commissioner of Central Excise, Chennai II Commissionerate issued show cause notice dated 19.5.2000 claiming duty for the period from 1995-96 to 2000-2001. The duty has been claimed for the transactions that took place during the years 1995-96. The petitioner countered the claim of excise duty in the show cause notice issued by the first respondent by giving reply to the show cause notice. The first respondent passed an order dated 10.4.2001 confirming the duty demand of Rs.47,73,201/= against the petitioner in terms of proviso to section 11A of the Central Excise Act, 1944. Penalty was also imposed invoking the provision under section 11A of the Central Excise Act, 1944 and Rule 173Q of the Central Excise Rules, 1944. The petitioner took up the matter in appeal before the second respondent. The second respondent upheld the contention of the first respondent that price of M/s.Dagger International was to be accepted. However, the matter was remanded to the first respondent for grant of benefit of modvat credit and to treat the price as cum-duty in terms of the judgments of the Supreme Court. The first respondent also was directed to arrive at the exact amount of duty due on readjustment after giving an opportunity to the petitioner to produce evidence. The petitioner, thereafter, filed a petition before the second respondent seeking for rectification of the original order passed by it on 3rd May 2002. But, the said application was rejected as it was found meritless by the second respondent. 2. The petitioner challenges the order dated 25.4.2003 passed by the second respondent in the rectification application confirming the final order passed by the second respondent on 3.5.2002. 3. It is contended by the petitioner as follows:- The show cause notice issued by the first respondent is time- barred as it was sent after one year period prescribed in law. The impugned orders have been passed on the basis of allegations not contained in the show cause notice. The petitioner had no opportunity to counter the same. The principles of natural justice were blatantly violated. M/s.Dagger International was run by the husband of the Proprietrix of the petitioner who had tremendous experience and contact in the leather industry. Therefore, the petitioner agreed to manufacture the knives ordered by the clients of M/s.Dagger International. M/s.Dagger International and the petitioner are two separate and distinct entities. The petitioner is a manufacturing unit while M/s.Dagger International is a retail unit. M/s.Dagger International obtains purchase orders from its customers and places the same with the petitioner and buys the finished product from the petitioner for resale to its customer. The relationship between the petitioner and M/s.Dagger International is based on sound commercial considerations. There is no mutuality of interest between those two Concerns. There is also no financial flow and backup from https://hcservices.ecourts.gov.in/hcservices/ one Concern to another and the relationship is clearly at arm's length. There was no allegation of any clandestine activity with the intent to evade duty in the show cause notice issued by the first respondent. The allegation that M/s.Dagger International was a 'related person' is totally untenable. Therefore, the impugned order is liable to be quashed. 4. Learned Senior Central Government Standing Counsel appearing for the respondents would submit that the power of judicial review under Article 226 of the Constitution of India conferred on this court is very limited. 5. Per contra, learned counsel appearing for the petitioner would submit that in a case where a perverse order has been passed by the authority concerned, this court has ample power under Article 226 of the Constitution of India to go through the entire materials to test whether the order impugned is a perverse one. 6. The Supreme Court in BACHAN SINGH v. UNION OF INDIA ((2008) 9 SCC 161) has held as follows:- "It is well-known and well-settled proposition of law that in proceedings under Article 226 of the Constitution, the High Court cannot sit as a court of appeal over the findings recorded by the GCM. Judicial review under Article 226 of the Constitution is not directed against the decision but is confined to the decision-making process. Judicial review is not an appeal but a review of the manner in which the decision is made. The Court sits in judgment only on the correctness of the decision-making process and not on the correctness of the decision itself." 7. The Supreme Court in SHAMSHAD AHMAD v. TILAK RAJ BAJAJ ((2008) 9 SCC 1) has held as follows:- "Though powers of a High Court under Articles 226 and 227 are wide and extensive over all courts and tribunals throughout the territories in relation to which it exercises jurisdiction, such powers must be exercised within the limits of law. The power is supervisory in nature. The High Court does not act as a court of appeal or a court of error. It can neither review nor re- appreciate, nor reweigh the evidence upon which determination of a subordinate court or inferior tribunal purports to be based or to correct errors of fact or even of law and to substitute its own decision for that of the inferior court or tribunal. The powers are required to be exercised most sparingly and only in appropriate https://hcservices.ecourts.gov.in/hcservices/ cases in order to keep the subordinate courts and inferior tribunals within the limits of law. In Chandavarkar Sita Ratna Rao v. Ashalata S.Guram this court stated:(SCC p.458, para 16) "16. ... unless there was any grave miscarriage of justice or flagrant violation of law calling for intervention it was not for the High Court under Articles 226 and 227 of the Constitution to interfere. If there is evidence on record on which a finding can be arrived at and if the court has not misdirected itself either on law or on fact, then in exercise of the power under Article 226 and Article 227 of the Constitution, the High Court should refrain from interfering with such findings made by the appropriate authorities."" 8. It is true that the High Court does not act as a court of appeal. But, the power of this court to weigh the materials on record to test whether the order under challenge is perverse is well within the realm of the judicial review. During the course of weighing the evidence to test whether there was any perversity in the finding, if the court comes to a conclusion that there are materials to show that such a finding impugned could be arrived at and that there was no misdirection either on law or on facts, the court would not interfere with the findings of the Tribunal concerned. Further, the jurisdictional error committed by the Tribunal while exercising the power can also be corrected by this court invoking the powers of judicial review under Article 226 of the Constitution of India. 9. Learned Senior Central Government Standing Counsel appearing for the respondents would submit referring to the provision under section 35-L of the Central Excise Act, 1944 that the final order passed by the second respondent is subject to appeal before the Supreme Court. When the statute provides for appeal, this court has no jurisdiction to entertain the writ petition filed overlooking the appeal remedy available for the petitioner before the Supreme Court, he would submit. 10. Per contra, the learned counsel appearing for the petitioner would submit that section 35-L of the said Act has no application to the facts and circumstances of this case. Even otherwise, when a certiorari remedy has been sought for on the ground that there was violation of principles of natural justice also this court has every authority to entertain the writ petition under Article 226 of the Constitution of India. https://hcservices.ecourts.gov.in/hcservices/ 11. An order passed by the Appellate Tribunal relating to determination of any question having a relation to the rate of duty of excise or to the value of goods for the purpose of assessment shall be challenged by way of appeal to the Supreme Court as per section 35-L of the said Act. 12. The short question which arises for consideration is whether the issues involved in the present case has a relation to the rate of duty of excise or to the value of goods for the purpose of assessment. 13. In the instant case, the second respondent had not decided the rate of duty of excise or the value of goods for the purpose of assessment. The order impugned would explicitly state that the exact amount of excise duty would be adjudicated by the first respondent herein. No dispute has arisen with regard to the value of goods in this case. The value of goods is, in fact, admitted. The issue arisen in the instant case is as to whether the value disclosed by the petitioner is to be taken or that of M/s.Dagger International run by the husband of the Proprietrix of the petitioner. The petitioner has challenged the proceedings of the respondents on the ground that the show cause notice issued to the petitioner was time-barred and that the principles of natural justice were violated, for the orders passed by the respondents were based on materials not specifically referred to in the show cause notice. It is further contended by the petitioner that M/s.Dagger International is not a related party to the petitioner. As rightly submitted by the learned counsel appearing for the petitioner, the issues determined in this matter do not fall within the scope of section 35-L of the Act. 14. The Supreme Court in J.K.COTTON SPINNING & WEAVING MILLS CO. LTD. v. COLLECTOR OF CENTRAL EXCISE (AIR 1998 SC 1270) has observed that when the question sought to be determined in the appeal has neither any relationship to rate of duty of excise or to the value of goods for the purpose of assessment, no appeal would lie before the Supreme Court. 15. In a case where the assessee moved the High Court invoking the writ jurisdiction without moving the Commissioner of Income Tax to revise the order impugned, the Supreme Court in L.HIRDAY NARAIN v. INCOME-TAX OFFICER, BAREILLY (AIR 1971 SC 33) has held as follows:- "An order under Section 35 of the Income-tax Act is not appealable. It is true that a petition to revise the order could be moved before the Commissioner of Income-tax. But Hirday Narain moved a petition in the High Court of Allahabad and the High Court entertained that petition. If the High Court had not entertained his petition, Hirday Narain could have moved the Commissioner in https://hcservices.ecourts.gov.in/hcservices/ revision, because at the date on which the petition was moved the period prescribed by Section 33-A of the Act had not expired. We are unable to hold that because a revision application could have been moved for an order correcting the order of the Income-tax Officer under Section 35, but was not moved, the High Court would be justified in dismissing as not maintainable the petition, which was entertained and was heard on the merits." 16. Applying the above ratio, the court finds that even assuming for the sake of argument that an appeal before the Supreme Court would lie under section 35-L of the Central Excise Act, 1944, if the High Court had not entertained the writ petition filed under Article 226 of the Constitution of India, the petitioner would have very well moved the Supreme Court. Therefore, there is no justification for this court to dismiss the writ petition as not maintainable after a lapse of seven years from the date of admission of the writ petition before this court. 17. Following the aforesaid decision of the Supreme Court, the Madhya Pradesh High Court in TATA EXPERT LTD v. UNION OF INDIA (1985 (22) E.L.T. 732 (M.P.) has observed as follows:- "The only question that now survives for consideration is the contention of the respondents that since the petitioner had an alternative remedy of appeal u/s 35 of the Central Excise Act against the impugned orders the present petition is not tenable. The Supreme Court in Hirday Narain V. Income-tax Officer, Bareilly – AIR 1971 SC 34 held that once a writ petition has been entertained and the alternative remedy was time- barred, the petition should be held to be maintainable. Following this decision, this Court has held in a series of decisions that once a petition has been admitted, ti could not be dismissed on the ground of alternative remedy." 18. I am in full agreement with the aforesaid observation of the Madhya Pradesh High Court in the light of the ratio laid down by the Supreme Court in Hirday Narain's case. 19. Answering the objection that the writ petition was not maintainable as alternative remedy was provided under the statute, the Bench of the Andhra Pradesh High Court in GALADA CONTINUOUS CASTING LTD v. ASSISTANT COLLECTOR (1987 (32) E.L.T. 474 (A.P.)) has held as follows:- "In the counter-affidavit an objection is raised that the petitioner rushed to this court without https://hcservices.ecourts.gov.in/hcservices/ availing of the alternative remedies provided by the Act itself, and that this Court should not entertain the writ petition in such a situation. We are, however, of the opinion that having entertained the writ petition five years back, i.e., in August, 1982, and granted an interim order, it would not be a proper exercise of discretion to dismiss the writ petition today on the ground of alternative remedy. We are, therefore, not inclined to entertain the said objection at this stage of the proceedings." 20. The Supreme Court in U.P. STATE v. MOHD. NOOH (AIR 1958 SC 86), referring to Halsbury's Laws of England, has observed as follows:- "In the next place it must be borne in mind that there is no rule, with regard to certiorari as there is with mandamus, that it will lie only where there is no other equally effective remedy. It is well established that, provided the requisite grounds exist, certiorari will lie although a right of appeal has been conferred by statute." 21. In the instant case, the petitioner has prayed for the remedy of certiorari. When such a remedy has been sought for on the ground that the principles of natural justice were violated, even if the statute provides for an appeal remedy, the party aggrieved for such violation can invoke the jurisdiction of the judicial review under Article 226 of the Constitution of India. 22. The Supreme Court has ruled in WHIRLPOOL CORPORATION v. REGISTRAR OF TRADE MARS, MUMBAI AND OTHERS ((1998) 8 SCC 1) as follows:- "If an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged." 23. Where any of the fundamental rights is sought to be enforced, or violation of principles of natural justice is sought to be set right or the jurisdiction to pass an order by the authority concerned or the vires of the Act itself is under challenge, the plea https://hcservices.ecourts.gov.in/hcservices/ that there is alternative remedy available under the statute is not sustainable. 24. The learned Senior Central Government Standing Counsel appearing for the respondents, cited the decision of the Bombay High Court in COLOUR-CHEM. LTD v. UNION OF INDIA (1998 (98) E.L.T. 303 (BOM.)) wherein it has been held as follows:- "We have carefully considered the submissions of the learned Counsel for the petitioners. We however, do not find any fore in the same. The admitted position in this case is that an appeal is provided against the impugned order of the Tribunal to the Supreme Court under Section 35L of the Act. Since the Legislature has provided appeal against certain orders only to Supreme Court, in our opinion, it is not open to the aggrieved person to by pass the remedy provided by the Legislature by way of appeal to the Supreme Court and come to the High Court and try to challenge the same before the High Court in its writ jurisdiction. We are of the clear opinion that in such a situation, the High Court should not entertain the writ petition challenging the order against which appeal is provided only to Supreme Court because it would amount to usurping the powers of the Supreme Court in the guise of exercise of writ jurisdiction. In view of the above, we do not find any reason to entertain this writ petition of the petitioners." 25. That was a case where the Tribunal determined the rate of duty of excise under the impugned order passed by it. Considering the fact that as against the determination of excise duty by the Tribunal, only appeal would lie under section 35-L of the Act, the counsel appearing for the assessee admitted before the High Court of Bombay that appeal alone would lie. Under such circumstances, the aforesaid ratio was laid down by the Bench of the Bombay High Court. In the case on hand, firstly, it is found that there was no determination of excise duty by the second respondent. In fact, the second respondent was directed to determine the excise duty giving opportunity to the petitioner. Secondly, the writ petition which was filed in the year 1997 was taken up for disposal in the very same year. In view of the above, I find that the aforesaid ratio will not apply to the facts and circumstances of this case. 26. This court in NIVARAM PHARMA PVT. LTD. v. CEGAT, MADRAS (2006 (205) E.L.T. 9 (MAD.)) has held that when alternative remedy of appeal is available under the statute, the High Court shall not entertain the writ petition. https://hcservices.ecourts.gov.in/hcservices/ 27. That was a case where there was no allegation of violation of principles of natural justice. Further, it is not clear whether the remedy of certiorari was prayed for in the said case. In view of the above, I find that the above decision will not apply to the facts and circumstances of this case. 28. This court in DEVALA TEA FACTORY v. CENTRAL BOARD OF EXCISE & CUSTOMS, NEW DELHI (2009(242) E.L.T. 219 (MAD.) has held as follows:- "More so, admittedly, as against the order impugned in this Writ Petition, the petitioner has an appeal remedy before the Commissioner of Customs and Central Excise (Appeals), which is not availed of by it. Nothing also prevented the petitioner from availing such remedy. Without availing the said remedy, the petitioner has directly approached this Court under Article 226 of the Constitution of India by way of this Writ Petition, which is not maintainable." 29. Firstly, the court had found in the said case that appeal would lie before the Commissioner of Customs and Central Excise as against the order impugned. Secondly, there was no allegation in the said case that there was violation of principles of natural justice. The aforesaid case is factually distinguishable. 30. In view of the above discussion, I find that this court has jurisdiction to deal with the writ petition on three grounds viz., (1) The impugned order does not decide the issue relating to the determination of excise duty and therefore, no appeal would lie directly before the Supreme Court under section 35-L of the Central Excise Act, 1944. (2) Even if appeal remedy is available, when violation of principles of natural justice is alleged, the writ court has jurisdiction to deal with the matter. (3) After admission of the writ petition and entertaining the same for about seven years, the court is not justified in dismissing the plea of the writ petitioner on the ground that alternative remedy was provided under the statute. 31. The show cause notice was issued on 19.5.2000 demanding duty for the transaction during the period 1995-2000. The show cause notice simply says that there had been suppression and therefore, the period of limitation as provided in Section 11A of the Central Excise Act, 1944 stood extended. 32. Firstly, it is found that the show cause notice does not substantiate the charge of suppression. No averment was made in the https://hcservices.ecourts.gov.in/hcservices/ show cause notice that there was contravention of relevant provisions with intention to avoid payment of excise duty. Nor could there be any inference upon the facts alleged. 33. As per section 11A of the Central Excise Act, 1944, where any duty of excise has not been levied or paid or has been short levied or short paid, a Central Excise Officer may within one year from the relevant date, serve notice on the person chargeable with duty which has not been levied or paid or which has been short levied or short paid. But, in a case where any duty of excise has not been levied or paid or has been short levied or short paid by reason of fraud, collusion or any wilful mis-statement or suppression of fact with intent to evade payment of duty, a Central Excise Officer may within five years from the relevant date serve notice on the person chargeable with such duty. 34. There shall be a positive act on the assessee's part necessary to justify invocation of extended period of limitation. Mere usage of the words suppression of fact does not amount to suppression. (ASSOCIATED PIGMENTS LTD. v. SUPERINTENDENT OF CENTRLA EXCISE (1993 (68) E.L.T. 514(CAL.)) 35. The extended period of five years is inapplicable for some failure or negligence of the manufacturer to take out licence or pay duty when there was scope for doubt that the goods were not dutiable. There should be a specific charge that there was suppression of goods with an intention to evade duty. (PADMINI PRODUCTS v. COLLECTOR OF CENTRAL EXCISE (1989 (43) E.L.T. 195 (S.C.)). 36. In the instant case, it has been alleged in the show cause notice that the petitioner failed to take licence under Rule 174 of the Central Excise Rules, 1944. As per the law laid down by the Honourable Supreme Court, mere failure to take licence is not a ground for availing the extended period of limitation by the Revenue. 37. The extension of the period of limitation entails both civil and criminal consequences and therefore the acts of fraud or suppression must be specifically pleaded in the show cause notice. The allegation