Madhekar Oil Mills vs Superintendent of Central Excise and Others

P.S. Patankar, J.—This appeal arises out of the judgment and decree dated 18th March, 1981 passed by the Civil Judge, Senior Division, Solapur in Special Civil Suit No. 161 of 1976.

A few facts are as follows:

The plaintiff is a registered partnership firm manufacturing edible oils having Central Excise Licence granted by the Central Excise Department. The said Department carried out investigation of M/s. Vora Bhaichand Hemchand & Company, a firm of brokers and commission agents from Bombay. Certain suppressed books of accounts came to be seized. The said seizure disclosed that the plaintiff had sold 70 tonnes and 974 lbs of edible oil during the period from 11th November 1959 to 17th February, 1960 without making payment of central excise. A scrutiny of certain entries of the said suppressed accounts indicated that the said firm had received from the plaintiff 70 tonnes and 974 lbs. of oil during the period from 11th November 1959 to 17th February 1960. Further investigations were carried out in view of those facts and the private accounts of the plaintiff firm and other documents were also seized and scrutinised. They also disclosed that consignments pertaining to 70 tonnes and 974 lbs were received by the said firm, though the regular accounts did not reflect the said position. Therefore, the Central Excise Department issued a show cause notice to the plaintiff dated 31st January, 1963 and called upon the plaintiff to show cause why the duty should not be recovered and penalty should not be imposed on it under Rule 9(2) of the Central Excise Rules, 1944. A charge-sheet was also served along with the notice. The plaintiff sent a reply and inter alia contended that he should be given an opportunity to cross-examine a witness from M/s. Vora Bhaichand Hemchand. The Collector of Central Excise, Pune, adjudicated the matter. The said Collector replied not only upon the suppressed account books but also the letters which were written by the plaintiffs to the said M/s. Vora Bhaichand Hemchand and Company. Those letters were dated 12th February, 1960, 24th March 1960, 3rd April 1960 and 1st May, 1960. They showed that certain sales have been effected by the plaintiffs in favour of M/s. Vora Bhaichand Hemchand. They also mentioned about the truck number, barrels, transport charges and the amount given to the truck driver etc. when the edible oil was transported. On the basis of the material, the adjudication was made and it was held that the plaintiff had evaded payment of excise duty to the tune of Rs. 7,888.70. It was held that the plaintiff was liable to pay the same along with penalty of Rs. 2.000/-. The said order came to be passed on 6th October 1964.

Another notice was also issued to the plaintiff dated 31st October, 1963 alleging that the plaintiff had sold during the period from 1st March, 1960 to 7th June, 1960, 43 tonnes of edible oil to the same firm. It was sold without payment of excise duty and, therefore, it was liable to make payment. The plaintiff filed a reply and raised similar contention as mentioned above. This notice also came to be adjudicated by the Collector of Central Excise, Pune, who held that the plaintiff was liable to pay a sum of Rs. 11,190/- as he evaded the excise duty and penalty of Rs. 2.000/-. This order also came to be passed on 6th October, 1964.

The plaintiff preferred two appeals before the Board of Central Excise and Customs, New Delhi challenging the two orders. However, those appeals came to be dismissed on 31st July 1967. The plaintiff preferred two revisions before the Central Government. However, they met with the same fate. The orders in revisions were passed on 25th January, 1968. The demand notice came to be issued to the plaintiff dated 24th August, 1976. Therefore, the plaintiff filed the present suit on 6th October, 1976.

20th June. 1991.

The plaintiff prayed for declaration that the orders passed by the Collector of Central Excise, Pune, the Board of Central Excise and Customs, New Delhi and the Central Government dated 6th October, 1964, 31st July, 1967 and 25th January 1968 were null and void as they were passed in violation of the principles of natural justice. It was contended that the plaintiff was not given opportunity to cross-examine a witness from M/s. Vora Bhaichand Hemchand and to engage an Advocate. The plaintiff" also prayed for perpetual injunction restraining the defendants from recovering those amounts pursuant to the notice issued to him. The plaintiff also prayed for refund of deposit of Rs. 4,769.70 which was made before the Board of Central Excise and Customs, New Delhi. It was contended that the plaintiff was trading honestly and was under close and strict supervision of the Central Excise Authorities regarding manufacture and storage of the edible oil. There was no scope for him to sell the edible oil without payment of excise duty. It was further contended that the officers of the Excise Department were having regular checks and they have checked the quality, etc. of the oil produced by the plaintiff. It was, therefore, contended that the orders passed in adjudication were not legal and proper. They were not based upon proper consideration. The adjudicating authority did not take into consideration the documents properly and, therefore, the principles of natural justice and fair play were violated as the books of accounts and registers maintained by the plaintiff did not disclose any such illegality on the part of the plaintiff.

The written statement came to be filed on behalf of the defendants at Ex. 26. It was inter alia contended that the plaintiff never maintained the correct accounts. The adjudicating authority gave him personal hearing. At the time of personal hearing, the plaintiff did not insist upon or made any grievance about cross-examining any witness from M/s. Vora Bhaichand Hemchand. Further, there was no prayer made for making available services of an advocate. It was also contended that the adjudicating authority had passed speaking orders and also the order passed by the Central Government in revisions were speaking orders containing reasons. It was, therefore, contended that the plaintiff was given full opportunity and there was no violation of any principle of natural justice and fair play. It was further contended that jurisdiction of Civil Court was limited and cannot grant any of the prayers made by the plaintiff as the statutory authorities have adjudicated upon the liability of the plaintiff. It was also contended that the suit as filed was barred by limitation in view of Section 40(2) of the Central Excises and Salt Act, 1944.

The suit came to be heard by the learned Civil Judge, Senior Division, Solapur, who took the view that whether the Central Excise Authorities maintained close and strict supervision on the manufacture of the edible oils produced by the plaintiff or sealing of storage tanks and filter tanks, etc. was totally immaterial for the purpose of deciding the suit. The learned judge further held that there was no violation of any principle of natural justice. When adjudication took place before the Collector of Central Excise, Pune, the principles of natural justice and fair play were followed and, therefore, it cannot be said that the adjudication was arbitrary. There was no contravention of any of the Rules. It is further held that the amount of Rs. 4,960.70 which was deposited by the plaintiff in adjudication proceedings can be adjusted towards payment of duty and penalty. The learned Judge further held that the present suit cannot be said to be barred by limitation under the provisions of Section 40 of the Central Excises and Salt Act, though he held that the suit was premature in view of the provisions of Section 80 of the C.P.C. In the result, the learned Judge dismissed the said suit.

It may be incidentally noted that the plaintiff had challenged only part of the recovery of amounts sought to be made from the plaintiff. The total amount of recovery towards assessment came to nearly Rs. 19,078.50 and the penalty of Rs. 4.000/-. However, the plaintiff has challenged the recovery to the extent of Rs. 10,588.70 and the penalty of Rs. 4.000/- in this suit.

Two points arise for my consideration in view of the contentions raised by Mr. J.R. Lalit are:

(a) whether the adjudication proceedings were in violation of principles of natural justice, &

(b) whether the adjudication was in violation of any provision of law?

Mr. J.R. Lalit, appearing on behalf of the appellant, contends that the Court below has erred in holding that there was no violation of principles of natural justice and fair play. In his submission, his client was not permitted to have an advocate at the time of adjudication and was not permitted to cross-examine any person from M/s. Vora Bhaichand Hemchand and hence there was such violation. It is not possible for me to accept this contention for more than one reason. It is clear from the record that the plaintiff in the reply to the notice prayed that he should be permitted to cross-examine a witness from M/s. Vora Bhaichand Hemchand. Though in reply to the notice such a prayer was made, the plaintiff, did not insist upon the same at the time of the hearing. There is nothing on record to show that at the time of adjudication, the plaintiff insisted upon cross-examining any witness. Secondly, I find that the order passed by the adjudication authorities were based on various other documents. The authorities considered not only the suppressed accounts of M/s. Vora Bhaichand Hemchand but also letters which were written by the plaintiff himself dated 2nd February 1960, 24th March, 1960, 3rd April 1960 and 1st May, 1960. Those documents clearly showed that the plaintiff had despatched edible oil to the firm of M/s. Vora Bhaichand Hemchand by truck. Those letters mentioned about the truck number, the transport charges paid, advance granted to the truck drivers and the barrels of oil loaded. When after taking into consideration all those documents, the adjudicating authority passed the orders, it cannot be said that the orders were null and void because no person from M/s. Vora Bhaichand Hemchand was examined before the said authority. The said authority held the plaintiff liable on the basis of the material produced before it. Further, the said orders came to be confirmed in revisions by the Central Government and the Central Government had passed a speaking order giving cogent reasons for the same. It is, therefore, not possible to accept that there was violation of principles of natural justice and fair play on this count. Similarly, I find that the plaintiff did not insist upon making available the services of an advocate at the time of hearing before the adjudicating authority. There is nothing to substantiate its case. No evidence has been produced in that respect. Therefore, even on this ground it cannot be said that there was violation of principles of natural justice. Therefore, there is no substance in the contention that there was violation of principles of natural justice and fair play committed by adjudicating authority at the time of hearing.

As regards the second point, Mr. Lalit has failed to show that any of the rules of the Central Excise Rules, 1944 or any provisions of law was violated at the time of adjudication. There is no specific pleading in that respect and the plea and contention is absolutely vague. I feel that it was raised just to prejudice the Court. Therefore, this requires to be rejected just by mentioning.

In my view, it was not open for the plaintiff to challenge the orders passed by the adjudicating authority except on the limited grounds i.e. (1) the statutory authority had violated the principles of natural justice causing prejudice to plaintiff, (2) the orders passed were ultra vires the provisions of the enactment (3) or were passed mala fide.

The Central Excises and Salt Act, 1944 itself creates the adjudicating authorities. It provides for appeal and revision. Therefore, the remedies and machinery to enforce those remedies have been provided by the Act. The Act also gives finality to the orders which are passed by those authorities. Therefore, the intendment is absolutely clear. The statute creates a special right and liability and also provides for the determination of the said right and liability. Those rights and liabilities can be decided by the adjudicating authorities or tribunals, as prescribed. The remedies are also of the same nature which are associated with the Civil Courts. Therefore, the orders passed by the adjudicating authority cannot be challenged except on the limited grounds as mentioned above. I find that the plaintiff has totally failed to establish that there was violation of any of the principles of natural justice or fair play or that they were ultra vires any enactment. It is not the case of plaintiff that they were mala fide. Therefore, in my view, the plaintiff cannot succeed in the suit.

Though the Court below has held that the suit was premature, I am not considering this point and Mr. Lalit has fairly conceded that in case the Court is against on any of the points mentioned above, then the said point need not be considered. No other point is raised.

In the result, there is no substance in this appeal and the same is dismissed with costs.