Case: Phiroze Dinshaw Lam Phiroze Dinshaw Lam Vs. Union of India

3. Godrej, one of the corporate giants of this country, manufactures, among other goods, refrigerators. These refrigerators are packed in polythene covering only when they are to be delivered to dealers situated at a short distance from the factory but where they have to be delivered at distant places, they are packed in Corrugated Fibre Containers [C.F.Cs.] to protect them from damage in the course of transport and for convenient handling. In the proceedings relating to valuation under Section 4 of the Central Excises and Salt Act, 1944 for the period 1976-78, the question arose whether the value of C.F.Cs. should be included in the value of refrigerators for the purpose of value under Section 4 of the Central Excise Act. Godrej pleaded for exclusion which plea was rejected by the Asstt. Collector. On Appeal, the Collector (Appeals) upheld Godrejs contention. The matter ended there so far as the said period is concerned. In 1982-83, the Revenue served demand notices for a subsequent period, again including the value of C.F.Cs. in the value of refrigerators. Godrej went to Bombay High Court by way of Writ Petition No. 1110 of 1983 questioning the said notices. The Writ Petition came up for final hearing before a learned Single Judge in March, 1984. Meanwhile, this Court had delivered the judgment in Union of India & Ors. v. Bombay Tyre International in May, 1983, laying down the principles governing the said issue among others. At the hearing of the writ petition before the learned Single Judge, Godrej wanted to rely upon certain letters said to have been addressed to it by its dealers to support its claim for exclusion of the value of C.F.Cs. The Counsel for the Revenue opposed the admission of the said letters at that stage. In view of the said objection, the learned Single Judge declined to admit or rely upon the said letters. The writ petition was, however, allowed on other grounds. The letters which were actually handed over to the learned Single Judge in the Court; it is stated, remained in the record of the Court.4. The Revenue filed a Letter Patent Appeal (No. 429 of 1986) against the decision of the learned Single Judge which was dismissed by the Division Bench in June, 1986. The Division Bench too did not refer to or rely upon the said letters. A Special Leave Petition was preferred by the Revenue in this Court against the judgment of the Division Bench in the year 1987. Meanwhile certain developments took place, which are of immense relevance to the controversy herein. In June, 1987, the premises of Godrej all over the country were searched and several documents seized. One of the documents seized was a letter dated June 1, 1983, written by Sri Hathi (one of the appellants before us) addressed to certain Branch Managers. At that time Sri Hathi was the General Manager (Marketing) of Godrej. Under this letter, Sri Hathi requested the Branch Managers to obtain from certain trusted dealers ante-dated letters stating facts which supported Godrejs case for exclusion of the value of the C.F.Cs. The letters from the dealers were to be obtained as if they were written between May, 1976 and February, 1979. It were these letters prepared with an eye upon the principles enunciated in Bombay Tyre International -which were sought to be filed before the learned Single Judge at the hearing of Writ Petition No. 1110 of 1983 in March, 1984 but which were not actually looked into or relied upon by the learned Single Judge in view of the objection raised by the Revenue. At the time the letters were sought to be filed, the Revenue was, of course, not aware that they were fabricated. But the seizure of the said letter written by Sri Hathi (in course of searches conducted in June, 1987) convinced the Revenue that the said letters were all fabricated to buttress Godrejs case in the light of the decision in Bombay Tyre International. In the Special Leave Petition filed in this Court, the Revenue filed copies of the said letters along with the aforementioned letter of Sri Hathi contending that Godrej was guilty of fabricating evidence and of trying to mislead the Court by producing such fabricated evidence. It prayed that the writ petition filed by Godrej should be dismissed on the said ground alone without going into merits of the case. The Special Leave Petition came up for orders before a Bench of this Court on September 4, 1989. The Special Leave Petition was allowed and the matter remitted to the High Court under the following Order:"Special leave granted.We have heard counsels for the parties. Out attention has been drawn to certain letters (appearing at pages 102 to 122) of the present S.L.P. Paper Book). The said letters were indisputably not before the High Court or the authorities below at any relevant time. We are of the opinion that the questions herein should be considered in the light of these letters. The judgment and order of the High Court in that light require to be set aside. We accordingly set aside the judgment and order of the High Court and remand the matter to the High Court for consideration of the question afresh involved herein in the light of these letters. The High Court will consider the question of admissibility, relevance & the value of these letters and then come to a conclusion about the question of assessable value of the refrigerators and the consequence of that determination. The appeal is disposed of accordingly without any order as to costs.The matter was accordingly posted before a Division Bench of the High Court which thought it appropriate that the matter be heard by the very same learned Single Judge who had disposed of the writ petition earlier. Accordingly, it was posted before the learned Single Judge. By this time, however, Godrej had become thoroughly demoralised. Caught in the act of fabrication of evidence, it chose to abandon its case for exclusion of the value of C.F.Cs. It gave up the fight. It approached the Revenue authorities including the Central Board of Excise & Customs for a settlement. It said, it was prepared to accept the Revenues case and pay up all the duty due on that basis. It also offered to refund the amounts which were refunded to it on the basis of the orders of the Court. It is stated by the learned Counsel for Godrej that they even offered to pay up the duty for the period which had become time barred. There was no settlement. At that stage, the writ petition came up for hearing before the learned Single Judge. A few weeks before the writ petition actually came up for hearing, Godrej filed an application seeking to withdraw the writ petition. It was opposed by the Revenue who has been contending all along, i.e., before this Court as well as the Bombay High Court that inasmuch as Godrej has indulged in clear fabrication of evidence and has tried to defraud the court on the basis of such documents, it should be dealt with sternly so that it would serve as a lesson to others. It was submitted that any indulgent attitude in such matters will send a wrong signal and would serve as an encouragement to persons similarly minded. The writ petition was, however, disposed of under what is called "Minutes of the Order" on March 12, 1990. The Order reads :"MINUTES OF THEPetitioners agree and undertake to pay on or before 15th March, 1990 the sum of Rs. 3.80 crores (approximately) comprising of the excise duty of Rs. 26 lakhs (approximately) for the period April, 1979 to March, 1980 and Rs. 3.54 crores (approximately) for the period February, 1983 to February, 1987 being amount of duty payable on secondary packing. The aforesaid payment will be without prejudice to the rights and contentions of both the parties in all pending petitions before High Court (save and except those relating to the question of inclusion of cost of secondary packing in assessable value).2. In so far as the question whether assessment made on RT-12 (save and except assessment in respect of secondary packing as stated above) are provisional or final, this being a question of fact will be determined on the basis of record and as per the provisions of Central Excise Act & Rules, thereunder.3. Affidavit in reply dated 8th January, 1990 filed by the Respondents on 10th January, 1990. Affidavit in Rejoinder dated 28th February, 1990 to the aforesaid affidavit handed over by the petitioner to the Respondents and Affidavit in sur-rejoinder dated 9th March, 1990 on behalf of the Respondents are all taken on file of the Court and form the part of the record of these proceedings.On the above, Petitioners are permitted to withdraw the petition."

Court's reasoning:
7. The Order dated March 12, 1990, it is relevant to note, does not contain any reference to Revenues allegation of fabrication of evidence by Godrej nor to its request not to permit withdrawal-much less to the request of the Revenue, which is supposed to have been made before the learned Single Judge to prosecute Godrej, its officers and its dealers in a criminal court. The order merely provides for payment of duties due from Godrej subject to certain observations.The Godrej did indulge in an act of fabricating evidence which was un worthy of such a major company. It sought to buttress its case before the learned Single Judge on the basis of the said documents. It is another matter that they succeeded in their writ Petition de hors the said fabricated material. When, however, the letter of Sri Hathi was discovered during the searches conducted by the Revenue in June, 1987 and its misdeed stood exposed, Godrej was put on the defensive. The initiative passed to Revenue which contended not only that the writ petition filed by Godrej should be dismissed on the said ground but that it should be dealt with in a manner that it serves as a lesson to others. It is for this reason that the Special Leave Petition filed by the Revenue was allowed by this Court and the matter sent back to the High Court for deciding the writ petition in the light of the said letters. The High Court was asked to look into the relevance, validity and admissibility of the said letters which admittedly included the genuineness of the letters. With this turn of events, Godrej naturally became nervous. It did not want to proceed with the writ petition. It approached the Central Excise authorities at various levels for a settlement but that did not materialise. It also sought to withdraw its writ petition, which was opposed by the Revenue. But that happened when the writ petition came up for hearing before the learned Single Judge is important. The writ petition was disposed of under what is called "Minutes of the Order" providing for payment of duties by Godrej subject to certain observations. The Order neither refers to the contention of the Revenue relating to fabrication of evidence by Godrej nor does it refer to any request of Revenue to dismiss the writ petition on the ground of fraud sought to be perpetrated by Godrej. The Order does not also say that any request was made by the Revenue to direct the prosecution of Godrej, its officers and dealers responsible for the said Act. This circumstance assumes significance in view of the fact that the last para of the "Minutes of the Order" says that the affidavit of Godrej dated February 28, 1990 and the sur-rejoinder (dated March 9, 1990) are taken on the file of the Court and are made part of the record. In the affidavit dated January 8, 1990, Revenue had set out its case regarding fabrication by Godrej and asked for dismissal of the writ petition on that ground alone. Neither this affidavit not the sur-rejoinder, however, contain any request or prayer to direct the prosecution of Godrej and its officers and dealers. Two inferences follow (sic) from the above. The Revenue chose not to persist in its submission to dismiss the writ petition on the ground of the aforesaid fabrication and, at any rate, did not also ask for a direction to prosecute Godrej and its officers and dealers for the said act or it did put forward the said submissions but they were rejected. If the first inference is correct, then it is evident that not having asked for the prosecution at the appropriate stage, it cannot be allowed to ask for such prosecution after a gap of fifteen months. Its silence can be construed as abandonment of its pleas for dismissal of writ petition and/or for prosecution. If, on the other hand, the second inference is the correct one, then the Revenue ought to have either applied for review, pressing for appropriate directions or filed an appeal against the order disposing of writ petition. It did neither. It kept quiet for fifteen months and then moved a notice of motion to prosecute Godrej and other persons responsible.15. While we agree that the Division Bench was not wrong in making the direction which it did on the merits of the case, it does not appear to have bestowed sufficient attention to the above aspect and its impact while deciding upon the expediency contemplated by Section 340 of the Criminal Procedure Code. The Division Bench should have considered whether it is expedient to direct prosecution when the learned Single Judge had chosen not to make such a direction for one or the other reason pointed out above and on account of the silence on the part of Revenue for a period of fifteen months. It is quite possible that the Revenue was satisfied with the Order ["Minutes of the Order"] dated March 12, 1990 but changed its minds after fifteen months. It is not a question of jurisdiction or power but one touching the question of "expediency" contemplated by Section 340 of the Criminal Procedure Code.16. On a consideration of the relevant circumstances mentioned supra including the fact that Godrej has paid up all amounts due accepting the contentions of the Revenue, we think that an order levying penal interest would meet the ends of justice instead of the direction for prosecution made in the impugned order. We may mention that when during the course of hearing, we suggested this alternate course and wanted to know the response of the appellants thereto, they agreed with alacrity to the course indicated by us.