2019 (4) TMI 1931 - HC - Indian Laws

Principles of natural justice - Levy of toll tax and fine - misuse of Toll Tax exemption on fake documents - no reasons have been assigned in any of the orders for taking action against the petitioners and raising huge demand of toll and fine against them - Vires of Rule 58 of Jammu and Kashmir Levy of Toll Rules, 1995 Rules - Jurisdiction of the Deputy Excise Commissioner, Lakhanpur - demand of excise duty - alternative remedy - HELD THAT - The petitioners had got certain export permits issued on the basis of import permits issued by the authorities in the State of Goa. These were for export of IMFL manufactured in the State of Jammu and Kashmir. Levy of tolls tax was exempted in case IMFL manufactured in the State is exported outside the State. Vires of Rule 58 of Jammu and Kashmir Levy of Toll Rules, 1995 Rules - HELD THAT - A person, who is charged with evasion of tax, cannot be allowed under any normal circumstances to raise issue that checking of evasion for tax should be in the manner which suits him and not in the manner which achieves the object for which the provisions have been enacted. It is not somebody's fundamental right to evade taxes as everyone is duty bound to pay taxes due under the Statute and the State is entitled to collect the same but in the process the State is not allowed to harass the honest tax payers. Due process of law is required to be followed - in the case in hand the manner provided in Rule 58, to check evasion of tax in the form of misuse of exemption, cannot be said to be ultra vires to the provisions of the Act. Jurisdiction of the Deputy Excise Commissioner, Lakhanpur - HELD THAT - Section 8 talks about the offences for which fine can be levied. The same is permissible in case any person adopts any devise to evade payment of toll tax. Section 13 deals with the Officers who can exercise the powers under Section 8 of the Act. It provides that the Officer in-charge of the Toll Gate may impose fine on any person guilty of an offence under Section 8. Hence, to claim that the Officer at the Toll Post was not competent to levy fine as the same could be done only by the Officers in the office, is totally misconceived, hence, is rejected. Violation of Principles of natural Justice - HELD THAT - In the cases in hand, the petitioners were not confronted with the material which was collected by the respondents, on the basis of which it was found that export of IMFL/Beer from the State was on the basis of fake documents. The stand taken by the petitioners was that, in case opportunity was afforded to the petitioners, they could have proved that the documents, on the basis of which export permits were issued, were not fake - While invoking Rule 43 of the Marine Products Export Development Authority Rules, 1972, show cause notice was issued, after a series of meetings with the buyer, but still when notice for cancellation of certificate of registration was issued, the language used therein to the extent that it has been proved beyond doubt' was held to be bad, amounting to pre-judging the issue. It was opined to be in violation of principles of natural justice. Grant of opportunity of hearing to any party against whom action is sought to be taken is sine-qua-non. The action of an authority deserve to be deprecated and any order passed in violation of principles of natural justice can be set aside only on that ground as the same entails civil consequences. In the case in hand, it is not demand of toll only which has been raised against the petitioners alleging that they had wrongly availed of the exemption, rather fine to the tune of ten times of the toll has also been levied. Impugned order also deserves to be set aside on the ground of its being totally non-speaking. No reasons have been assigned in any of the orders for taking action against the petitioners and raising huge demand of toll and fine against them - In the case in hand a perusal of the impugned order shows that the same is totally non-speaking and lacking in reasons, hence, the same deserves to be set aside on this score as well. Excise Duty - HELD THAT - With reference to the raising the demand for excise duty, a perusal of the notice dated 29.07.2010 shows that reference has been made to certain enquiry conducted regarding genuineness of the Import and Export permits, on the basis of which the petitioner claimed exemption from payment of excise duty under the Jammu and Kashmir Excise Act, Svt. 1958. There is no dispute about the fact that the material, which was produced before the Enquiry officer and the report of enquiry, on the basis of which show cause notices were issued to the petitioners, were not served on the petitioners. They were not associated during the process of enquiry - Regarding the contents of the reply, only what was mentioned in the impugned demand notices was that the reply was considered and found lacking merit'. None of the issues raised by the petitioners in their replies were dealt with. Hence, orders were totally non-speaking, besides being in violation of principles of natural justice. Alternative Remedy - H ELD THAT - As far argument of learned counsel for the respondents regarding alternative remedy of appeal available to the petitioners is concerned, the name needs to be noticed and rejected as vires of the provisions of the Rules is under challenge in the bunch of petitions and the appellate authority will not be competent to examine the same. Even otherwise the writ petitions were entertained by this Court against the demand notices issued more than 8 years back. The ground raised by the petitioners is that they were condemned unheard and there has been violation of principles of natural justice. Impugned demand notices are set aside with liberty to the competent authority to issue action oriented show cause notices to the petitioners and thereafter proceed further in the matter in accordance with law, after affording due opportunity of hearing to the petitioners - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Jurisdiction of the Deputy Excise Commissioner, Lakhanpur.
2. Violation of principles of natural justice.
3. Vires of Rule 58 of the Jammu and Kashmir Levy of Toll Rules, 1995.
4. Validity of demand notices for excise duty and toll tax.
5. Alternative remedy of appeal.

Detailed Analysis:

1. Jurisdiction of the Deputy Excise Commissioner, Lakhanpur:
The petitioners argued that once the goods left the toll barriers, the Deputy Excise Commissioner at Lakhanpur had no jurisdiction to demand toll tax or issue show cause notices. The court rejected this argument, stating that Section 8 of the Tolls Act allows the Officer in-charge of the Toll Gate to impose fines for evasion of toll tax. The court held that the Deputy Excise Commissioner had the authority to assess toll and levy fines, as provided under Section 13 of the Tolls Act.

2. Violation of Principles of Natural Justice:
The court found that the petitioners were not given a fair opportunity to be heard. The initial notices were more in the nature of demand notices rather than show cause notices, and the petitioners were not confronted with the material collected against them. The court cited the principles laid down by the Supreme Court in ORYX Fisheries Private Limited v. Union of India, emphasizing that a show cause notice should not pre-judge the issue and must allow the noticee an effective opportunity to rebut the allegations. The court held that the impugned orders were in violation of the principles of natural justice.

3. Vires of Rule 58 of the Jammu and Kashmir Levy of Toll Rules, 1995:
The petitioners challenged the vires of Rule 58, arguing that it exceeded the powers vested in the State under the Tolls Act. The court upheld the validity of Rule 58, stating that Section 8 of the Tolls Act is broad enough to cover any device to evade payment of toll. The court noted that Rule 58(i) authorizes officers to watch the movement of goods to ensure they reach the declared destination, and Rule 58(ii) provides for debarring an industrial unit from claiming toll exemption if found guilty of evasion. The court found that these provisions were within the powers granted under Section 17 of the Tolls Act.

4. Validity of Demand Notices for Excise Duty and Toll Tax:
The court found that the demand notices were non-speaking and lacked reasons. The notices did not address the issues raised by the petitioners in their replies. The court emphasized that any order affecting the rights of parties must be reasoned and speaking, as per the principles laid down in Kranti Associates (P) Ltd. v. Masood Ahmed Khan. The court set aside the impugned demand notices on the grounds of being non-speaking and in violation of principles of natural justice.

5. Alternative Remedy of Appeal:
The respondents argued that the petitioners had an alternative remedy of appeal under the Tolls Act. The court rejected this argument, noting that the vires of the Rules was under challenge, and the appellate authority would not be competent to examine this issue. The court also noted that the writ petitions had been entertained for over eight years, and the petitioners claimed they were condemned unheard.

Relief:
The court allowed the writ petitions, setting aside the impugned demand notices. The court granted liberty to the competent authority to issue action-oriented show cause notices and proceed in accordance with law after affording due opportunity of hearing to the petitioners. The court directed that the process should be completed within six months from the date of receipt of the order.