1976 (9) TMI 170 - HC - Central Excise

Issues Involved:
1. Denial of natural justice
2. Wrong valuation of properzi rods
3. No contravention of Rule 173-C
4. Bar of limitation under Section 40(2)
5. Bar of finality under Section 35(2)
6. Unreasonable exercise of statutory powers
7. Alternative remedy

Issue-wise Detailed Analysis:

(1) Denial of Natural Justice:
The petitioner argued that the Collector considered certain despatches to Ahmedabad and Bombay, which were not mentioned in the show cause notice, nor was the petitioner informed during the proceedings. The court agreed that this omission violated the principles of natural justice, as the petitioner was not given an opportunity to address these despatches. The court cited the Supreme Court's observation that a quasi-judicial authority must disclose the material it intends to use against a party to allow for a fair defense.

(2) Wrong Valuation of Properzi Rods:
The Collector determined the assessable value of the properzi rods at Rs. 7,325/- per m.t., based on sales to an Indore party and despatches to Ahmedabad and Bombay. The court found this valuation flawed because the petitioner was not informed about the despatches during the proceedings. Additionally, the sales to the Indore party were of defective rods, not good quality rods, and thus could not serve as a basis for valuation. The court emphasized that the correct assessable value should be determined based on the wholesale price at the nearest market, which in this case was Renukoot, not Ahmedabad or Bombay.

(3) No Contravention of Rule 173-C:
The court held that even if the petitioner did not disclose the correct price in the price list, it did not contravene Rule 173-C. The rule requires the filing of a price list in a prescribed form and manner, which the petitioner did. The court noted that Rule 173-Q does not penalize false information unless it is proven that the information was supplied with an intent to evade duty. The court referenced the Supreme Court's reasoning in Union of India v. Shree Ram Durga Prasad (P) Ltd., which supported the view that filing a price list, even if incorrect, does not constitute a contravention of Rule 173-C.

(4) Bar of Limitation under Section 40(2):
The petitioner argued that the penalty proceedings were barred by the six-month limitation period under Section 40(2) of the Central Excises and Salt Act. The court, however, interpreted "other legal proceeding" in Section 40(2) as limited to judicial proceedings or proceedings in a court of law, not departmental proceedings. Therefore, the penalty proceedings initiated by the Collector were not barred by Section 40(2).

(5) Bar of Finality under Section 35(2):
The petitioner contended that the order of the Appellate Collector, which became final under Section 35(2), precluded the Collector from re-evaluating the assessable value in penalty proceedings. The court disagreed, stating that the penalty proceedings under Rule 173-Q were independent and could be initiated even after the finality of the refund order. The court noted that the inquiry into whether the petitioner submitted a false price list with an intent to evade duty was not undertaken in the refund proceedings.

(6) Unreasonable Exercise of Statutory Powers:
The court acknowledged the petitioner's argument that the imposition of a heavy penalty was unreasonable, especially given that the petitioner had acted with the approval of the excise authorities and in conformity with the Central Government's decision. However, the court noted that if the Collector's findings of intentional suppression of sales were correct, the imposition of a penalty would be justified. The court did not find the Collector's exercise of discretion unreasonable but ultimately held that the findings on which the penalty was based were unsustainable.

(7) Alternative Remedy:
The respondents raised a preliminary objection, arguing that the petitioner should seek redress through the appeals filed under the Central Excises and Salt Act. The court, however, decided to entertain the writ petition, citing the denial of natural justice, the incorrect valuation, and the misconceived penalty proceedings as sufficient grounds to intervene under Article 226.

Conclusion:
The court allowed the petition, quashing the impugned show cause notices and the orders passed by the Collector, Central Excise, Nagpur, in all thirteen cases. The petitioner was awarded costs, and the security deposit was ordered to be refunded.

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