IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 08.08.2007 C O R A M : THE HONOURABLE MR.A.P.SHAH, THE CHIEF JUSTICE AND THE HONOURABLE MR.JUSTICE P.JYOTHIMANI W.P.Nos. 45294 of 2002 and 40902 to 40904 of 2005 and M.P. Nos. 43903 to 43905 of 2005 W.P.No. 45294 of 2002 Madurai Power Corporation (Pvt) Limited Flat G-1, No.1 Seshadri Road, Alwarpet Chennai-18. ... Petitioner -vs- 1. The Deputy Commissioner of Central Excise Bibikulam, Madurai I Division, Madurai-625 002. 2. The Commissioner of Central Excise Bibikulam, Madurai-625 002. 3. The Chief Commissioner of Central Excise 6/7, ATD Street, Race Course Road, Coimbatore 641 018. 4. Government of Tamil Nadu represented by Secretary to Government, Energy Department, Fort St. George, Chennai-9. 5. Tamil Nadu Electricity Board represented by its Chairman, 800, Anna Salai, Chennai-2. ... Respondents https://hcservices.ecourts.gov.in/hcservices/ W.P.No.40902 of 2005 Samalpatti Power Company (P) Limited "Sreyas Virat" 1st floor, No.14, Third Cross Road, Raja Annamalaipuram, Chennai-28 represented by its Chief Financial Officer and Company Secretary Mr.K.S.Kasturirangan .. Petitioner vs 1. Union of India represented by Ministry of Finance, Department of Revenue, North Block, New Delhi. 2. The Assistant Commissioner of Central Excise Hosur I Division, No.29, Thalli Road, Hosur-635 126. 3. The Additional Director General Directorate General of Central Excise Intelligence South Zonal Unit, C-3,"C" Wing Rajaji Bhavan Besant Nagar, Chennai-90. 4. The Commissioner of Central Excise Chennai III Commissionerate 26/1 (121) Mahatma Gandhi Road Nungambakkam, Chennai-34. 5. The Chief Commissioner of Central Excise Chennai III Commissionerate 26/1 (121) Mahatma Gandhi Road Nungambakkam, Chennai-34. 6. Government of Tamil Nadu represented by Secretary to Government, Energy Department, Fort St. George, Chennai-9. 7. Tamil Nadu Electricity Board represented by its Chairman, 800, Anna Salai, Chennai-2. ... Respondents https://hcservices.ecourts.gov.in/hcservices/ W.P.No.40903 & 40904 of 2005 G.M.R. Power Corporation (Pvt) Limited Pullianthope High Road, Basin Bridge Chennai-12 represented by its Associate Vice President Mr.I.Venkataramana ... Petitioner in writ both Petitions vs 1. Union of India represented by Ministry of Finance, Department of Revenue, North Block, New Delhi. 2. The Deputy Commissioner of Central Excise "B" Division, Chennai I Commissionerate No.317, Anna Salai, Chennai-18. 3. The Commissioner of Central Excise Chennai III Commissionerate 26/1 (121) Mahatma Gandhi Road Nungambakkam, Chennai-34. 4. The Chief Commissioner of Central Excise Chennai I Commissionerate 26/1 (121) Mahatma Gandhi Road Nungambakkam, Chennai-34. 5. Government of Tamil Nadu represented by Secretary to Government, Energy Department, Fort St. George, Chennai-9. 6. Tamil Nadu Electricity Board represented by its Chairman, 800, Anna Salai, Chennai-2. .. Respondents in both petitions. https://hcservices.ecourts.gov.in/hcservices/ For appellant :: Dr. Mr.Abhishek Singhvi in WP 45294/2002 Senior counsel for 40903 & 40904 for M/s R. Raghavan and R.Venkatavaradhan For appellants :: Mr.Arvind P.Datar in WP 40902 senior counsel for of 2005 for M/s R. Raghavan and R.Venkatavaradhan For Respondents 1 to 3 in WP.45294/05 :: Mr.V.T.Gopalan, Additional Solicitor General assisted by Mr.K.Ramakrishna Reddy. For respondent :: Mr.Raja Kalifulla Govt.Pleader No.6 in WP 40902 assisted by Mr.V.R.Thangavelu No.4 in WP 45294 Govt. Advocate No.5 in WP 40903 & 40904/2002 For 5th respondent :: Mr.C. Ramesh in WP 45294/2002 For 7th respondent : Mr. S.N.Kirubanandam in WP 40902 and 6th respondent in 40903 & 40904 Writ Petition No.45294/2002 filed under Article 226 of the Constitution of India praying this Court to issue a writ of prohibition, prohibiting the respondents 1 to 3 from proceeding with the SCN No.Nil dated "Nil" (received on 2nd December,2002) demanding excise duty of Rs.20,80,69,750.24 for quantity of 1,37,489.557 metric tons of Low Sulphur Heavy Stock (LSHS) procured in terms of Annexure I during the period July,2001 to August 2002. Writ Petition No.40902/2005 filed under Article 226 of the Constitution of India praying this Court to issue a writ of prohibition, prohibiting the respondents 2 to 5 from proceeding with the show cause notice No.13/2003 dated 4.4.2003 of the 3rd respondent seeking to demand duty of Rs.41,86,70,124/-[Rupees Forty One Crores Eighty Six lakhs seventy thousand one hundred and twenty four only] Writ Petition No.40903/2005 filed under Article 226 of the Constitution of India praying this Court to issue a writ of prohibition, prohibiting the respondents 2 to 4 from proceeding with the show cause notice No.4/2003 dated 5.11.2003 of the 3rd respondent https://hcservices.ecourts.gov.in/hcservices/ seeking to demand duty of Rs.14,42,37,805/- [Rupees Fourteen Crores forty two lakhs thirty seven thousand eight hundred and five only] Writ Petition No.40904/2005 filed under Article 226 of the Constitution of India praying this Court to issue a writ of prohibition, prohibiting the respondents 2 to 4 from proceeding with the show cause notice No.3/2003 dated 24.9.2003 of the 3rd respondent seeking to demand duty of Rs.138,32,96,154/- [Rupees one hundred thirty eight Crores thirty two lakhs ninety six thousand one hundred and fifty four only] COMMON ORDER (COMMON ORDER THE COURT WAS MADE BY THE HONOURABLE THE CHIEF JUSTICE) Writ Petition No. 45294 of 2002 is filed by Madurai Power Corporation (Pvt.) Limited. The other writ petitions are filed by different petitioners. But, since the issues involved in all the writ petitions are identical all these writ petitions have been heard together and are being disposed of by this common order. 2. Madurai Power Corporation (Pvt.) Ltd., i.e., petitioner in W.P.No. 45294 of 2002 is engaged in generation of electricity through its generating station situate at Paravai Village, Madurai. The company requires Low Sulphur Heavy Stock (LSHS) for using the same as the primary fuel in the generation of electricity. Notification No.3/2001 came to be issued under Section 5-A(1) of the Central Excise Act, 1944 whereby Low Sulphur Heavy Stock (LSHS) and Furnace Oil (FO) were exempted from excise duty for the use of power generation by the electricity undertakings owned by or controlled by the Central Government, or any State Government or any State Electricity Board or any Local Authority or a person licensed under Part II of Indian Electricity Act, 1910, to supply electrical energy or a person who has obtained sanction under Section 28 of Indian Electricity Act, 1910, to engage in the business of supplying electrical energy, except those who produce electrical energy not for sale, but produce it for their own consumption. The petitioner company applied for exemption from duty under the said Notification and a Registration Certificate was issued by the Competent Authority for procurement of LSHS at concessional duty for generating electricity in favour of the petitioner vide Registration No. AACCM7661 CX M0001 (RC No.1/2001) dated 11.05.2001 and 18.5.2001. The Competent Authority thereafter issued Annexure-I certificate in favour of the petitioner allowing the petitioner to remove the goods at concessional duty on execution of B-8 security bond and on furnishing a bank guarantee. Based on this Annexure-I certificate, the petitioner has been procuring LSHS without payment of duty from various installations of Indian Oil Corporation Limited. https://hcservices.ecourts.gov.in/hcservices/ 3. A show cause notice dated 07.02.2002 was issued to the petitioner company by the Assistant Commissioner of Central Excise, Madurai-I Division, Madurai asking the company to show cause as to why Annexure-I certificate dated 30.08.2001 (as amended on 30.12.2001) issued to the company for procurement of LSHS should not be cancelled and as to why the exemption granted under Notification No.3/2001 should not be denied to the company as the company is not eligible for exemption under Notification No.3/2001. The petitioner submitted a reply dated 18.02.2002 contending inter alia that as the petitioner by virtue of Section 26-A of the Electricity Supply Act, 1948 has satisfied all the conditions for issue of license under Part-II of the Indian Electricity Act, 1910, it must be deemed to possess a license under Part-II of the Indian Electricity Act, 1910 without the same being issued and that the company being under the control of the Tamil Nadu State Electricity Board is entitled to claim exemption. A personal hearing was granted by the Assistant Commissioner of Central Excise wherein the petitioner company through its counsel made submissions. However, no orders were passed in respect of these proceedings initiated vide show cause notice dated 2.7.2002. Thereafter, the Assistant Commissioner of Central Excise, Madurai-I Division, Madurai issued another notice dated 15.4.2002 on the same ground requiring the petitioner company to show cause as to why Annexure –I issued in terms of Notification No.3/2001 should not be cancelled. The petitioner company filed reply to the said notice, and the said proceedings remain pending in the files of the respondent. The Deputy Commissioner of Central Excise issued yet another show cause notice dated nil (received on 2.12.2002) calling upon the petitioner to show cause as to why the excise duty amounting to Rs.20,80,69,750/- (Rupees twenty crores eighty lakhs sixty nine thousand and seven hundred fifty only) payable on the LSHS procured by the petitioner, as detailed in Annexure-B to show cause notice, should not be demanded from the petitioner company under the provisio to sub-section (1) of Section11-A of the Central Excise Act, 1944 for the period from July 2001 to August 2002. The legality and propriety of the show cause notice is questioned by the petitioner company in the present writ petition on the ground that the same is arbitrary, illegal and wholly without jurisdiction. It is also alleged by the petitioner that the notice has been issued in mala fide exercise of power only with a purpose of meeting the revenue target on the basis of totally absurd view of the legal position especially when no decision has been taken on the earlier show cause notices issued to the petitioner. 4. W.P.Nos. 40902 of 2005, 40903 and 40904 of 2005 are filed by Samalpatti Power Company (Pvt) Limited and GMR Power Corporation (Pvt) Limited respectively. Both the companies are involved in generation of electricity and have been issued Registration Certificates for procurement of LSHS for generation of electricity on https://hcservices.ecourts.gov.in/hcservices/ concessional duty. Based on the Annexure-I certificate, the companies have been procuring LSHS without payment duty from various installations of Bharat Petroleum Corporation Limited. Similar notices have been issued to the petitioners under provisio to sub- section (1) of Section 11-A of the Central Excise Act, 1944 to show cause as to why the excise duty payable on LSHS procured by the petitioner, as detailed in Annexure-B to show cause notice, should not be demanded from the petitioners. In W.P.No. 40902 of 2005, the petitioner has challenged the show cause notice demanding payment of excise duty of Rs. 41,86, 70,124 (Rupees Forty one crores eighty six lakhs seventy thousand and one hundred and twenty four only) for the period from December, 2000 to February, 2003. In W.P.Nos.40903 and 40904 of 2005, the challenge is to show cause notices, one for the period from September, 1998 to September, 2002 for demanding payment of excise duty of Rs. 14,42,37,805 (Rupees fourteen crores forty two lakhs thirty seven thousand and eight hundred and five only) and another for the period from October, 2002 to February, 2003 for demanding payment of excise duty of Rs. 14,42,37, 805 (Rupees fourteen crores forty two lakhs thirty seven thousand and eight hundred and five only). 5. In order to appreciate the controversy raised, it would be necessary to take note of the factual background. In view of the large gap between the demand and supply position of electricity and State Electricity Boards not being able to meet the requirements of industries and general public, the Government of India in consultation with the State Electricity Boards decided to allow Independent Power Producers (IPPs for short) to enter power generation area under the control of the respective State Electricity Boards and in this regard, to enter into Power Purchase Agreement (PPA for short) in terms of which supply the entire power so generated to the grids of State Electricity Boards. Under Section 43-A of the Electricity Supply Act, 1948, the tariff structure of the IPPs is governed by the Central Government Notification. The Ministry of Power, Government of India, accordingly issued Notification dated 30.3.1992 stipulating various terms which would govern the PPA to be entered into between power generating companies and the State Electricity Boards. The PPAs entered into between the petitioners and the Tamil Nadu State Electricity Board are as per the terms of the said Notification dated 30.03.1992 and the entire electricity generated by the petitioners is to be supplied to the Tamil Nadu State Electricity Board (for short TNSEB). 6. The case of the petitioners is that the generation of electricity by the petitioner companies is fully controlled by the TNSEB, inasmuch as the petitioner companies cannot generate electricity, except in terms of the PPAs and in terms of Section 18 of the Electricity Supply Act, 1948, the statutory control regarding operations of generating stations vests with the respective State https://hcservices.ecourts.gov.in/hcservices/ Electricity Boards. Even the location of the petitioner companies is stipulated by the TNSEB. The projects of the petitioner companies have been approved by the TNSEB and in terms of the PPAs, the Government of Tamil Nadu has guaranteed to the companies the dues of the TNSEB under the said projects. The maintenance and unit wise closure of the units are controlled by the TNSEB and there is no permission to the petitioners to generate and supply to others, except TNSEB. As per the PPAs at the expiry of the PPA period, the petitioners’ generating companies shall be made over only to the TNSEB. The petitioners, therefore, contend that they are under the control of the TNSEB and can legitimately claim exemption under the relevant notification. It is, further, contended by the petitioners that by virtue of Section 26-A of the Electricity Supply Act, 1948 they possess license under Part-II of the Indian Electricity Act, 1910 and the same is a “deemed license”. It is, further, urged by the petitioners that the respondents are attempting to deny the exemption and when once the petitioner companies have been declared as licensees by the Government of Tamil Nadu and the State Electricity Board, the excise authorities cannot treat it as a non-license and deny the benefit. It is urged that none of the requirements of proviso to Section 11-A are satisfied in the present case, and thus, the benefit of longer period of limitation under the proviso is not available to the Department. In any event, the recourse to Section 11-A is not permissible unless Annexure-I certificate and the exemption are set aside and cancelled by the appropriate authority in accordance with the provisions of the Central Excise Act. 7. The respondents have filed separate counters to the writ petitions. The sum and substance of the defence is that the petitioner companies are allowed to remove the procured electricity without payment of duty based on the respective claims and the “bond undertakings” given by the petitioner companies to the effect that they will observe all the provisions of the Central Excise Rules and all such amendments there to as may be issued from time to time, so far as they relate to the use of excisable goods for industrial purpose without payment of the whole of duty, and the registration Certificates have been issued to facilitate the smooth functioning of the power generating units of the petitioners. However, consequent to the enquiries conducted and verifications made with reference to the status of the Units and the eligibility of the petitioner companies to the claim for exemption under Notification No.3/2001 dated 1.3.2001, as provided under Section 11 A of Central Excise Act, 1944 and in consonance with the principles of natural justice, the petitioners were issued with relevant notices to show cause as to why the Registration Certificates issued to them under the Rules should not be cancelled. The petitioner companies are not “deemed licensees” by virtue of Section 26-A of the Electricity Supply Act, 1948. On the other hand, a careful reading of the said section would disclose that the petitioner companies are exempted from obtaining license from the https://hcservices.ecourts.gov.in/hcservices/ authority appointed under Indian Electricity Act, 1910 by virtue of having drawn the authority directly from another Act of the Parliament namely Electricity Supply Act, 1948. Therefore, it cannot be contended that the petitioner companies are "deemed licensees" under the State Electricity Board. It is, further, contended that the petitioner companies are not owned by the Central Government/State Government/ Local Authority/State Electricity Board. The petitioners are private limited companies. Neither the Central Government/State Government nor any Local Authority or Tamil Nadu State Electricity Board has any shareholding in the petitioner companies and therefore, it does not have any control over the companies as such and in terms of PPAs the petitioners are being merely regulated by the TNSEB in respect of power supply to TNSEB. It is contended that the word “controlled by” is preceded by the word “owned by” in the said notification and it has to be construed that the word “controlled” must have a similar meaning to that of the word “owned”. Hence, the petitioner companies cannot be said to be controlled by TNSEB. On the question of limitation, it is submitted that the question whether the extended period of five years under the proviso to Section 11-A could be invoked has to be first determined by the authority and the authority cannot be said to be totally lacking in jurisdiction even to embark upon the enquiry or investigation of this issue so as to warrant interference in writ jurisdiction even at show cause notice stage. It is submitted that the impugned notices have been issued in terms of Section 11-A of the Act and there is no illegality in issuing the impugned notices. Hence, the writ petitions are not maintainable. 8. Mr.Abishek Singhvi and Mr.Arvind P.Datar, learned senior counsel appearing for the respective writ petitioners submitted that in all the cases permission to purchase goods without payment of duty was granted after satisfaction of the competent authority and a specific approval was granted under the Central Excise (Removal of Goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001 (for short ‘2001 Rules’). Learned counsel submitted that once the order is passed by the competent authority under 2001 Rules that could be rectified only through the appeal mechanism provided under Section 35E(2) of the Central Excise Act and unless the order is set aside under Section 35E(2) no recovery could be made under Section 11-A of the Central Excise Act. According to the learned counsel, Section 35E(2) covers situations where decisions or orders are granted after application of mind and these will be valid and binding till it is set aside in appeal. By invoking Section 11-A, the department is attempting to do indirectly what it cannot do directly and since, the remedy under Section 35E is barred by limitation, it now seeks to invoke the larger period under Section11A. 9. In reply, learned Additional Solicitor General appearing for the respondents submitted that the impugned show cause notices are https://hcservices.ecourts.gov.in/hcservices/ perfectly in conformity with the provisions of Section 11-A of the Central Excise Act and there is no illegality in the issue of such show cause notices and there is no need to refer to Section 35E(2) of the said Act. He submitted that after the amendment to Section 11-A which was necessitated on account of the judgment of the Constitution Bench in Collector of Central Excise, Baroda vs Cotspun Limited, 1999 (7) SCC 633 the power has been given to the authorities to issue show cause notices, despite the fact that non-levy or non-payment or short levy was short levy was on the basis of any approval, acceptance or assessment obviating the need to have the earlier order set aside before issuing the show cause notices. Therefore, the terms of Section 11A, as it now stands, will be a complete answer to the petitioners’ objection and the validity of Section 11A has not been questioned. He submitted that even otherwise Section 11A and Section 35E (2) are two separate fields and are intended for different purposes. The object of Section 11A is to enable recovery of dues for the period during which the assessee had cleared the goods on the basis of the approved classification list/price list or on the basis of any approval/acceptance or assessment. As far as Annexure-I certificate is concerned, he submitted that the authorities are required to find out as to whether the same is in the prescribed form, requisite bond had been given and declarations and undertakings were made. The self-assessment procedure and the Annexure-I certificate containing the undertakings to comply with the conditions of exemption notification and bond taken towards the value of the duty for such compliance normally excludes the procedure for making the assessment by the authorities and in any event, according to him, as per the terms of Section 11, it is open to the authorities even in the face of any approval, acceptance or assessment relating to the rate of duty to issue the impugned show cause notice. 10. It is well settled that under Article 226 of the Constitution of India, this Court having regard to the facts of the case has a discretion to entertain or not to entertain a writ petition. But, the Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, this Court would not normally exercise its jurisdiction. But the alternative remedy will not operate as a bar in at least three contingencies namely, where a writ petition has been filed for enforcement of any of the fundamental rights or where there has been violation of principles of natural justice or where the order or proceeding are wholly without jurisdiction or the vires of the Act is challenged (see Calcutta Discount Com. Ltd., vs ITO, Companies Distt.., AIR 1961 SC 372), East India Commercial Company Limited, Calcutta vs Collector of Customs, Calcutta, 1983 ELT 1342(SC), Whirpool Corporation vs Registrar of Trade Marks, Mumbai and others, 1998 (8) SCC 1.). Thus, the question to be examined in these proceedings is as to whether the impugned show cause notices issued under Section 11- A of the Act are wholly without jurisdiction. https://hcservices.ecourts.gov.in/hcservices/ 11. The submission of the learned senior counsel appearing for the petitioners is that once an order is passed by the adjudicating authority under 2001 Rules that could be rectified only through an appeal mechanism provided under Section 35E(2) of the Central Excise Act, and it is not permissible for the department to invoke Section 11-A. The amendment of Section 11-A does not contain an non-obstante clause nor the amended Section 11A over-ride or nullify Section 35E. Section 35E has to be read harmoniously with Section 11A. If there is no case of approval, acceptance or assessment, the Central Excise Officer can straightaway invoke Section 11A and demand duty for one year/five years, as the case may be. Section 11A does not over ride Section 35E and both sections have to co-exist and read harmoniously. It is only where short-levy, short payment, non-levy or non-payment occurs either on account of the approvals relating to rate of duty or valuation, demands can be sustained under Section 11A itself without having recourse to Section 35E. So far as 2001 Rules are concerned, recovery can be made if there is misuse of goods and does not concern with the person who has purchased the goods. 12. In Collector of Central Excise, Baroda vs Cotspun Limited (supra), the Constitution Bench of the Supreme Court held as follows: - (SCC page 637 paras.14 & 15) “ The levy of excise duty on the basis of an approved classification list is the correct levy, at least until such time as to the correctness of the approval is questioned by the issuance to the assessee of a show-cause notice. It is only when the correctness of the approval is challenged that an approved classification list ceases to be such. The levy of excise duty on the basis of an approved classification list is not a short levy. Differential duty cannot be recovered on the ground that it is a short levy. Rule 10 has then no application. 13. Parliament has amended Section 11A of the Central Excise Act by