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2018 DIGILAW 1739 (GAU)

Golden Tobacco Limited v. Union of India

2018-12-13

ACHINTYA MALLA BUJOR BARUA

body2018
JUDGMENT & ORDER : 1. Heard Ms. M. Hazarika, learned senior counsel for the petitioner and Mr. B. Sharma, learned Standing Counsel for the Central Excise Department. 2. The facts in a nutshell leading to this writ petition is that the petitioner Golden Tobacco Company (in short GTC) had arrived at an arrangement with another company namely North Eastern Tobacco Company Limited (in short NETCO). The arrangement was that the NETCO will undertake the manufacture of certain cigarette products in the North Eastern Region, which would be marketed by the petitioner GTC. It is also taken note of that the company NETCO is made up of 51% share holding of another company of the Government of Assam, namely, Assam Industrial Development Corporation (AIDC) and the balance 49% of share was of the petitioner GTC. 3. In the resultant arrangement, an issue had arisen as to whether any evasion of payment of excise duty by NETCO would make the petitioner GTC also liable for the same and enable the Department to impose the said burden on the petitioner GTC. 4. In the aforesaid process and upon issuing a show cause notice, an original adjudication order No.4/1987 was passed by the Director (Legislation and Adjudication) in the Directorate General of Inspection and Audit (Customs and Central Excise), New Delhi on 16.10.1987. As per the adjudication, it was held that a differential duty of Rs.43,25,130/- is payable by the company NETCO under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 116 of the Central Excise and Salt Act, 1944. By the said adjudication, a penalty of Rs.1,00,000/- was also imposed on the company NETCO and the petitioner GTC under Rule 9(2) of the aforesaid Rules. By the adjudication, a conclusion was arrived at that the printed price of the cigarette products were undervalued by NETCO while manufacturing and the GTC wile marketing it, had sold it at a higher price. Accordingly, a conclusion was arrived at that there is a flow back of financial gain in favour of the GTC in respect of such transaction. 5. As because of the flow back in favour of the GTC, it was stated that the penalty of Rs.1,00,000/- was imposed on the NETCO as well as GTC. Accordingly, a conclusion was arrived at that there is a flow back of financial gain in favour of the GTC in respect of such transaction. 5. As because of the flow back in favour of the GTC, it was stated that the penalty of Rs.1,00,000/- was imposed on the NETCO as well as GTC. It is to be taken note of that the said adjudication dated 16.10.1987 was pursuant to a show cause notice on the C.No.V-4/1- ADJ-86 dated 24.02.1986 of the Collector of Central Excise, Shillong against the company NETCO. 6. The adjudication by the Director (Legislation and Adjudication) was carried to an appeal both by GTC as well as by NETCO before the Central Excise Service Tax Appellate Tribunal (in short CESTAT), New Delhi. The CESTAT by its order dated 21.03.2001 allowed the appeals in favour of the two appellants, which according to the Department was done without going into the merits of the case. 7. Being aggrieved, the Department preferred an appeal before the Supreme Court, which was registered as Civil Appeal Nos. 6398-6403 of 2002. The Supreme Court in its order dated 31.07.2018 arrived at a conclusion that the CESTAT had allowed the appeal of the petitioner GTC and NETCO without referring to the finding of the original authority as regards the flow back that took place in favour of the petitioner GTC. Accordingly, the order of the CESTAT dated 21.03.2001 was interfered with and the matter was remanded back for a fresh adjudication. 8. In the aforesaid circumstance, the CESTAT upon a de-novo hearing, had passed the order date 27.10.2010 in Excise Appeal No.153-154 of 1988. In paragraph 18 of its judgment dated 27.10.2010, the CESTAT had arrived at a conclusion that in view of the evidence as appeared in paragraph 5.15.1 to 5.15.2 at pages 74 to 77 of the order of the original authority, the methodology followed by the GTC in the transaction in question was evident. Accordingly, the CESTAT had arrived at a conclusion that the exclusive control of the petitioner GTC over the marketing of the goods, was sufficient by itself to take a view that it was GTC that was beneficiary of the result of realization of higher sales price. Accordingly, the CESTAT had arrived at a conclusion that the exclusive control of the petitioner GTC over the marketing of the goods, was sufficient by itself to take a view that it was GTC that was beneficiary of the result of realization of higher sales price. Accordingly, by the said order of 27.10.2010, the CESTAT had arrived at the following finding:- “(1) There were goods with deceptively similar brand manufactured by NETCO and the same was marketed by GTC by declaring MRP on the packets much lower than the MRP of the regular brands. The MRP on the packets of deceptively similar brand was embossed instead of being printed as per the mandate of the law. The embossed MRP was barely visible. (2) In respect of the above mentioned deceptively similar brands, there was realisation of sale price over and above the declared MRP, embossed on the packets. (3) There was flow back of the funds arising out of realisation of higher sale price from the distributors to GTC. (4) There was deliberate mis-declaration of MRP with reference to which the rte of excise duty was to be determined and this had been done as part of well thought plan to evade duty. (5) The liability for duty shall be attributable to NETCO which was a job worker according to conception of both sides and longer limitation period under provision of Section 11A(1) of the Central Excise Act, 1944 would be available to the Department for demand of short paid duty. (6) For contravention of law, imposition of penalty was justified. (7) Levy of duty was justified in the fitness of circumstances of the case for contravention of the provisions of law.” 9. From the aforesaid findings of the CESTAT, it is discernible that there was a conclusion of there being a flow back of funds in favour of the GTC due to higher sales price being adopted by them for the purpose of marketing of the cigarette products. A further conclusion was that in view of the above, there was a justification for levy of the duty as imposed by the original order dated 16.10.1987 for there being a contravention of the provisions of law. A further conclusion was that in view of the above, there was a justification for levy of the duty as imposed by the original order dated 16.10.1987 for there being a contravention of the provisions of law. Accordingly, the appeals preferred by the GTC and NETCO were dismissed by modifying its earlier order of adjudication dated 16.10.1987 by holding that NETCO shall be liable for payment of the duty imposed in the adjudication order. 10. The implication of the order dated 27.10.2010 is that the levy of excise duty upon NETCO to the extent of Rs.43,25,130/- was maintained and further the imposition of penalty of Rs.1,00,000/- upon the petitioner GTC was also maintained. 11. The petitioner GTC being aggrieved by the imposition of penalty of Rs.1,00,000/- by the original order of 16.10.1987 as upheld by the appellate order of the CESTAT of 27.10.2010 preferred an appeal before the Supreme Court, which was numbered as Civil Appeals No.1468-1469 of 2011. In the said appeal, the Supreme Court had passed the following order:- “Issue notice, subject to payment of the entire amount to the respondent, a condition precedent, within three months from today. It is made clear that if any of the appellants does not pay the aforesaid amount, its appeal shall stand dismissed without further reference to the court. 12. It is taken note of that by the said order, the notice was issued upon the respondents therein on a condition that the entire amount as adjudicated by the CESTAT be deposited within three months and in the event, the petitioner GTC does not deposit the said amount, the appeal shall stand dismissed without any further reference to the Court. Subsequently, when the entire amount as conditionally required by the order dated 25.04.2011 was not paid by the petitioner GTC, the Supreme Court by the order dated 27.08.2012 had dismissed the appeal. In the aforesaid circumstance, the demand notice dated 28.09.2015 has been issued by the Assistant Commissioner of Central Excise, Guwahati Central Excise Division-1 requiring the petitioner GTC to pay the entire arrear amount of the excise duty, which was imposed upon the company NETCO by the original adjudication order dated 16.10.1987. As the original amount of Rs.43,25,130/- was adjudicated sometime in the year 1987, therefore, further interest thereupon was added and accordingly the outstanding arrear which the petitioner GTC was required to pay was Rs.121,55,25,379/-. As the original amount of Rs.43,25,130/- was adjudicated sometime in the year 1987, therefore, further interest thereupon was added and accordingly the outstanding arrear which the petitioner GTC was required to pay was Rs.121,55,25,379/-. The said demand of the amount of Rs.121,55,25,379/- has been assailed in this writ petition. 13. The core contention of the petitioner in the writ petition is that the original amount of Rs.43,25,130/- having been imposed by the adjudicating authority upon the company NETCO, the same cannot be now imposed upon the petitioner GTC with the added interest thereon. A perusal of the notice dated 29.09.2015 reveals that in arriving at its conclusion as to why the petitioner GTC is required to pay the amount leviable, the Assistant Commissioner of Excise, Guwahati had taken into consideration of a given paragraph in the order of the CESTAT dated 27.10.2010, wherein a conclusion was arrived at that the petitioner GTC having been controlling the manufacturing and marketing, therefore the levying of the tax and the recovery of the loss of revenue would be attributable to the petitioner GTC. In arriving at its conclusion, the Assistant Commissioner further takes recourse to the order dated 25.04.2011 of the Supreme Court which required the petitioner GTC to pay the entire amount determined by the CESTAT by making the issuance of the notice conditional. The Assistant Commissioner of Central Excise, Guwahati also relies upon a further order of the Delhi High Court dated 27.08.2012 filed by the Commissioner of Central Excise against the petitioner GTC for fixing the liability upon GTC pursuant to the order dated 27.10.2010 of the CESTAT. 14. The Court takes into consideration that by the order dated 27.10.2010, the CESTAT had imposed the liability of payment of the evaded excise duty upon the company NETCO while at the same time, imposed a penalty of Rs.1,00,000/- upon the GTC. In the aforesaid circumstance, the purport of the appeal filed by the Commissioner of Central Excise in the Delhi High Court against the petitioner GTC would be for seeking a modification of the order of the CESTAT dated 27.10.2010 to the extent that the liability of the tax imposed be now made on the petitioner GTC. In the aforesaid circumstance, the purport of the appeal filed by the Commissioner of Central Excise in the Delhi High Court against the petitioner GTC would be for seeking a modification of the order of the CESTAT dated 27.10.2010 to the extent that the liability of the tax imposed be now made on the petitioner GTC. In the said appeal, the Delhi High Court by referring to the order dated 25.04.2011 of the Supreme Court in Civil Appeal No.1468-1469 of 2011 had concluded that the grievance raised by the Central Excise Department cannot be gone into and the entire controversy has been settled by the Supreme Court as indicated above. In other words, the conclusion of the Delhi High Court is that the Delhi High Court had not gone into the claim of the Central Excise Department to pass an appropriate order modifying the order of the CESTAT dated 27.10.2010 to the extent of imposing liability of the tax upon the petitioner GTC. 15. What further remains now is to examine the purport of the order dated 25.04.2011 of the Supreme Court in Civil Appeal No.1468-1469 of 2011. As extracted above, the order of 25.04.2011 of the Supreme Court provides that in the appeal preferred by the petitioner GTC, notice was issued subject to the condition that the petitioner GTC deposits the entire amount adjudicated in the order of the CESTAT dated 27.10.2010 with further provision that in the event, the said amount is not deposited, the appeal shall stand dismissed without further reference to the court. The order of the Supreme Court of 25.04.2011 clearly depicts that it is a conditional order enabling the petitioner GTC to deposit the entire amount adjudicated in the CESTAT order of 27.10.2010 and avail the benefit of the notice being issued. 16. A corollary to it would be that in the event the petitioner GTC does not avail the opportunity of depositing the entire amount, the appeal automatically stood dismissed. In view of the above, now it is required to examine as to whether the stand taken by the Assistant Commissioner that the order of the Supreme Court dated 25.04.2011 amounts to a modification of the order dated 27.10.2010 of the CESTAT to the extent that the liability to pay the tax has now been imposed upon the petitioner GTC. 17. 17. A bare perusal of the order dated 25.04.2011 of the Supreme Court would reveal that the said order was not passed upon any adjudication and on the other hand it was merely an order enabling the petitioner GTC to take the benefit of issuance of a notice by depositing the entire amount. A corollary to which would be that in the event, the benefit is not accepted by the petitioner GTC, the appeal stood automatically dismissed and there was no notice being issued. The petitioner GTC having opted for the second option not to deposit the entire amount and face the wrath of the appeal being dismissed, cannot now be transformed to be an adjudication by the Supreme Court as regards the liability of the petitioner GTC to pay the entire amount as adjudicated by the CESTAT in its order dated 27.10.2010, wherein the liability to pay the tax was imposed on the other company NETCO. 18. The expression ‘adjudication’ has been defined in the Black’s Law Dictionary to mean (i) the legal process of resolving a dispute or the process of judicially deciding a case; or (ii) a judgment. A judgment on the other hand is defined in the Black’s Law Dictionary to mean a Court’s final determination of the rights and obligations of the parties in a case. 19. Reading the meaning of the expression ‘adjudication’ and ‘judgment’, which invariably requires a final determination as well as a legal process for resolving a dispute, the order dated 25.04.2011 of the Supreme Court in Civil Appeal No.1468-1469 of 2011 can neither be construed to be an adjudication nor it can be construed to be a judgment. The only provision in the said order of 25.04.2011, as indicated above, was merely a provision enabling the petitioner GTC to deposit the entire amount and get the issuance of a notice in their appeal, which again in other words, is merely an order which is conditional in nature without there being any adjudication or a final determination. 20. The only provision in the said order of 25.04.2011, as indicated above, was merely a provision enabling the petitioner GTC to deposit the entire amount and get the issuance of a notice in their appeal, which again in other words, is merely an order which is conditional in nature without there being any adjudication or a final determination. 20. In view of the aforesaid conclusion as regards the purport of the order dated 25.04.2011 of the Supreme Court in Civil Appeal No.1468-1469 of 2011, the conclusion arrived at by the Commissioner of Central Excise in the demand notice dated 28.09.2015 that the order of the Supreme Court of 25.04.2011 had suitably modified the provisions of the order of the CESTAT dated 27.10.2010 to the extent that the liability to pay the excise duty now vests upon the petitioner GTC, is found to be unacceptable. 21. It is also taken note of even the order of the Delhi High Court does not come to the aid of the Commissioner of Central Excise inasmuch as, all that the Delhi High Court provided that the Court had refused to go into the appeal filed by the Central Excise Department seeking a modification of the order of the CESTAT dated 27.10.2010 and make the petitioner GTC liable for the entire amount of the tax imposed merely by stating that the controversy has already been settled by the Supreme Court. 22. The said view taken by the Delhi High Court also cannot give a different meaning to the order of the Supreme Court dated 25.04.2011 and all that it states is that the order of the Supreme Court would have to be read as it is. 23. For both the aforesaid reasons, the demand notice dated 28.09.2015 is set aside. 24. The respondent Central Excise Department shall be at liberty to proceed in the matter as indicated in the order of the CESTAT dated 27.10.2010. The writ petition stands allowed to the extent indicated above.