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TMI Blog2004 (1) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... of. In 1988, dispute arose as to whether the products manufactured by petitioner No. 1 could fall within the category of Ayurvedic medicines or were in fact Cosmetics used for the care and condition of the skin and hair, and were liable to duty under the Central Excise Tariff Act, 1985, hereinafter called the 'Act 1985'. For that purpose, the provisions of Section 11A of the Central Excise Act, 1944, hereinafter called 'the Act 1944' were invoked and the matter was also examined as to whether the petitioner No. 1 had suppressed/concealed required informations/materials in that regard. After completing the inquiry required under the law, the Revenue accepted the plea of the petitioner No. 1 vide order dated 29-8-1989 passed by the Additional Commissioner, holding that the said products were Ayurvedic medicines and not Cosmetics. It was further held that as no material facts were suppressed by the assessee, provisions of Section 11A of the Act 1944 could not be invoked and proceedings initiated vide show cause notice dated 7-3-1988 were dropped. Assessee was allowed clearance of its products under Chapter 30 of the Tariff Act, 1985, as Ayurvedic medicines. Again, the same controversy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... az Ayurvedics, Okhla Industrial Area, New Delhi and Rs. 4,80,84,599/- (Rupees Four crores, eighty-lakhs, eighty-four thousand five hundred and ninety-nine only) and Rs. 92,39,773/- (Rupees Ninety-two lakhs; thirty-nine thousand, seven hundred and seventy-three only) on M/s. Shahnaz Ayurvedics, Noida under the provisions of Section 11AC of the Central Excise Act, 1944. I impose a penalty of Rs. 25 lakhs (Rupees Twenty-five lakhs(3) only) on M/s. Shaherb Cosmetics, under Rule 209A of the Central Excise Rules, 1944. (4)I impose a penalty of Rs. 50 lakhs (Rupees Fifty lakhs only) on M/s. Shahnaz Husain under Rule 209A of the Central Excise Rules, 1944". 3.Being aggrieved, assessee preferred appeals No. E/2787, 2925, 2926, 2927 and 2928 of 1998-NB-(C) before the CEGAT, which have been disposed vide impugned judgment and order dated 14-5-2003 (Annex. 10). By the said impugned order, the learned Tribunal set aside the order of interest only so far as the first clause is concerned. The second clause was modified to the extent that it was partly set aside imposing penalty on petitioner No. 2 under Rule 209A of Rules 1944 as having dealt with the excisable goods and as the same was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K.S. Rashid Sons v. Income Tax Investigation Commission Ors., AIR 1954 SC 207; Sangram Singh v. Election Tribunal, Kotah Ors., AIR 1955 S.C. 425; Union of India v. T.R. Varma, AIR 1957 SC 882; State of U.P. Ors. v. Mohammad Nooh, AIR 1958 SC 86; and M/s. K.S. Venkataraman Co. (P) Ltd. v. State of Madras, AIR 1966 SC 1089, held that Article 226 of the Constitution confers on all the High Courts a very wide power in the matter of issuing writs. However, the remedy of writ is an absolutely discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. The Court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision could not be adopted. 8.Another Constitution Bench of the Hon'ble Supreme Court, in State of Madhya Pradesh Anr. v. Bhailal Bhai etc. etc., AIR 1964 SC 1006, held that the remedy provided in a writ jurisdiction is not intended to supersede completely the modes of obtaining relief by an action in a civil court o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals is provided by the statute, party must exhaust the statutory remedies before resorting to writ jurisdiction. 11.Thus, the law can be summarized that rule of exclusion of the writ jurisdiction is not a law. Discretion should be exercised by the writ Court considering the facts and circumstances involved in each case. But where there has been violation of the principle of natural justice or failure of any rule of fundament procedural or Tribunal places erroneous interpretation on the statutory provision, or exceeds its jurisdiction, writ petition can be entertained, even if the Statute provides for appeal/revision. 12.A Constitution Bench of the Hon'ble Supreme Court in L. Chandra Kumar v. Union of India, 1997 (92) E.L.T. 318 (S.C.) = 1997 SC 1125, held that all decisions of the Tribunals whether created under Article 323A or 323B of the Constitution, are subject to the High Court writ jurisdiction under Article 226/227 of the Constitution and the remedy provided in the parent institute by way of special leave to Appeal under Article 136 of the Constitution is no bar. After considering a large number of its earlier judgments including Kesavananda Bharati Sripadagalvaru v. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 419, the Constitution Bench of the Hon'ble Supreme Court held that the jurisdiction of the High Court under Article 226 of the Constitution is couched in wide terms and the exercise thereof is not subject to any restrictions except the territorial restrictions, which are expressly provided under the Constitution. But the exercise of the jurisdiction is discretionary; it is not exercised merely because it is lawful to do so. The very amplitude of the jurisdiction demands that it will ordinarily be exercised subject to certain self-imposed limitations. 15.Similar view has been reiterated in State of Karnataka v. Vishwabharathi House Building Cooperative Society Ors., (2003) 2 SCC 412 by the Hn'ble Supreme Court observing that a Court may entertain a petition notwithstanding concurrent jurisdiction of the other forum/Court for the reason that "the power of judicial review of the High Court, which is a basic feature of the Constitution, has not been nor could be taken away". 16.In State of Orissa Ors. v. Gokulnanda Jena, (2003) 6 SCC 465, the Hon'ble Apex Court held that the power of the High Court to entertain writ petition is an original power and that power of judicial revi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory appeal. In other cases, if a party is relegated to appellate/revisional forum, the party after exhausting the said statutory remedy, may again approach the writ Court challenging the order of the said forum. Such a course is not permissible in case of appeal under Section 35L of the Act 1944. 21.The power of judicial review is basic feature of the Constitution and even the Parliament cannot take it away by amending the Constitution. Thus, it becomes difficult to assume that such a jurisdiction can be ousted merely by amending the statute without having any express provision for ouster of the said remedy, even while providing the statutory remedy of appeal directly before the Hon'ble Apex Court. Accepting the contention of the Revenue that under no circumstances writ can be entertained in view of the provisions of Section 35L of the Act 1944, the provisions of Section 35L have to be read re-writing the same adding the words "and no writ under Article 226 of the Constitution would be entertained." Adding or subtracting of any word or rewriting of the provisions could itself amount to an amendment to the Act, which is not permissible. [Vide Union of India v. Mohindra Supply C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low ever tried to find out by chemical analysis as what was the contents of the products and which constituent of the product had been having the dominant character. The reports of experts submitted by the petitioner were brushed aside without giving any reason, giving a hostile treatment to the petitioner while in cases of other assessees, reports of experts had been given due consideration/weightage. Findings of fact recorded by the Tribunal as well as by the adjudicating authority are perverse, being based on no evidence rather contrary to the evidence on record. Petitioner had always been disclosing all the information, which had been accepted by the Revenue throughout and orders impugned could not be passed merely because of the change of the opinion. Therefore, the Revenue erred grossly applying the proviso of Section 11A of the Act 1944. The case of the petitioners was squarely covered by the Chapter 30 and not 33 of the Tariff Act, 1985. Hence, the orders are liable to be set aside. 24.Shri B.N. Singh, learned Counsel appearing for the Revenue has vehemently opposed the averments made on behalf of the assessee contending that while dealing with the case under fiscal statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Firm Muar, AIR 1965 SC 1216, and Ahmedabad Urban Development Authority v. Sharda Kumar Jayanti Kumar Parawalla, AIR 1992 SC 2038. 28.In Martand Dairy Farm v. Union of India Ors., AIR 1975 SC 1492, the Hon'ble Apex Court observed that :- "Law is not always logic and taxation considerations may stem from administrative experience and other factors of life and not artistic visualization or neat logic and so "the literal, though pedestrian, interpretation must prevail." 29.Same view was subsequently reiterated in Member Secretary, A.P.S.B. for Prevention and Control of Water Pollution v. A.P. Rayons Ltd., AIR 1989 SC 611. It is also well settled that a very wide latitude is available to the legislature in fiscal matters but fiscal enactments require strict interpretation. 30.The Court is bound to give a literal interpretation if there is no ambiguity in the provision. In Patel Chhunibhai Dajibha Vs. Narayainrao K. Jambekar Anr., AIR 1965 SC 1457, the Apex Court observed that an interpretation of the provision without giving full effect to the language used, would be unsupportable and hence not permissible. In Martin Burn Ltd. v. The Corporation of Calcutta, AIR 1966 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee merely for the reason that assessee could not have transferred the liability of duty to consumers and it was not possible for him to recover the same at that stage. 36.In the instant case, relevant issue is regarding application of the proviso to Section 11A of the Act 1944. The proviso is read as a restriction to the generality of the main provision and it may also be termed as an exception to the main part of the statute but it has to be read in the context of the main proviso and not as an independent one. The proviso must be read with relation to the principal matter to which it stands as a proviso. It should not be treated as an independent enacting clause instead of being dependent on the main enactment. [Vide M/s. Sukhwinder Pal Bipan Kumar Ors. v. State of Punjab Ors., AIR 1982 SC 65; Indian Oil Corporation Ltd. v. Chief Inspector of Factories Ors., 1999 (113) E.L.T. 761 (S.C.) = (1998) 5 SCC 738; Mallawwa Ors. v. Oriental Insurance Company Ltd. Ors., AIR 1999 SC 589; Balchandra Anantrao Rakvi Ors. v. Ramchandra Tukaram (Dead) by LRs. Anr., (2001) 8 SCC 616]. 37.In CIT v. Indo Mercantile Bank Ltd., AIR 1959 SC 713, the Hon'ble Supreme Court he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so has to be strictly construed inasmuch as it carves out an exception to the general rule. The general rule enacted in the main part is not only to be unduly restricted by expanding the contents of the proviso which is intended to carve out the exception from the general rule." 42.In J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers, (1996) 6 SCC 665, while expanding the scope of proviso the Court held as under :- "A proviso to a provision in a statute has several functions and while interpreting a provision of the statute, the court is required to carefully scrutinize and find out the real object of the proviso appended to that provision. It is not a proper rule of interpretation of a proviso that the enacting part or the main part of the section be construed first without reference to the proviso and if the same is found to be ambiguous only then recourse may be had to examine the proviso as has been canvassed before us. On the other hand an accepted rule of interpretation is that a section and the proviso thereto must be construed as a whole, each portion throwing light, if need be, on the rest. A proviso is normally used to remove special cases from the gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew otherwise, is required before it is saddled with any liability, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case." 46.Similarly in Padmini Products v. Collector of Central Excise, 1989 (43) E.L.T. 195 (S.C.) = AIR 1989 SC 2278, the Hon'ble Supreme Court held that "mere failure or negligence on the part of the producer or manufacturer either not to take out a licence in case where there was scope for doubt as to whether licence was required to be taken out or where there was scope for doubt whether goods were dutiable or not, would not attract Section 11A of the Act." 47.In Cosmic Dye Chemical v. Collector of Central Excise, Bombay, 1995 (75) E.L.T. 721 (S.C.) = (1995) 6 SCC 117, Hon'ble Apex Court held that where the assessee acted under a bona fide impression based on the judgments of the High Court, he cannot be held guilty of suppression of facts etc. and provision of Section 11A of the Act 1944 were not attracted. 48.In Tamil Nadu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een an intention to evade duty and there had been something more positive than mere inaction or failure on the part of the assessee or conscious or deliberate withholding of information when the assessee knew otherwise, was required before he could be saddled with any liability beyond the period of general limitation, and unless the assessee is found to be guilty of any fraud or collusion or misstatement by suppression of fact with intent to evade payment of excise duty, the extended period of limitation cannot be applied. 51.In Collector of Central Excise, Ahmedabad v. ITEC (P) Ltd., Bombay, 2002 (145) E.L.T. 280 (S.C.) = (2002) 7 SCC 473, the Hon'ble Supreme Court considered the meaning of "related person". Section 4(4)(c) of the Act 1944 defines 'related person' as a person who is so associated by the assessee that they have interest, directly or indirectly in the business of each other. Therefore, if A has interest in the business of B but B does not have interest in the business of A, they will not be related person for the reason that "the mutuality of the interest between the two is apparent and in absence of any evidence regarding mutuality of interest, it cannot be held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act/negligence or omission for evasion of duty or furnishing the relevant facts regarding its product. If the classification has been approved by the Revenue having full facts before it, the assessee cannot be held responsible for the reason that the department cannot be permitted to take the benefit of its own mistake. (Vide G.S. Lamba Ors. v. Union of India Ors., AIR 1985 SC 1019; and Narender Chadha v. Union of India, AIR 1986 SC 638). 55.In Amrutanjan Ltd. v. Collector of Central Excise, 1995 (77) E.L.T. 500, the Hon'ble Supreme Court observed that as the Amrutanjan Pain Balm Ayurvedic was having contents like Menthol IP, Camphor IP, Turpentine IP and Methyl Salicylate IP as main ingredients, which was to be classified as Ayurvedic medicine under sub-heading 3003.30 of the Act 1985, as the ingredients in it were known both to Ayurvedic and western sciences and had been used in making the medicines, the real test is to determine as to whether the main ingredients have pharmaceutical quality and are usable in medicinal preparations. 56.In Adhyaksha Mathur Babu's Sakti Oushadhalaya Dacca (P) Ltd. Ors. v. Union of India Ors., AIR 1963 SC 622, the Constitution Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d only by registered medical practitioner or hospital or laboratory. It may explain that if a particular ailment for which the drug is prepared is included, which may lead to serious problems. So far as the medicinal preparations of the product are concerned, it can be governed from the technical and/or pharmaceutical references of the product and the Revenue is also at liberty to produce such material discrediting the case of the assessee. If a product has therapeutics or prophylactic uses, it should be classified as medicaments under Chapter 30 and the Court held that as the shampoo "Selsun" in that case had medicinal value, it was held to be classifiable under Chapter 30 and not 33. 59.In Shree Baidyanath Ayurved Bhavan Ltd. v. Collector of Central Excise, Nagpur, 1996 (83) E.L.T. 492 (S.C.) = (1996) 9 SCC 402, the Hon'ble Supreme Court held that scientific and technical meaning of the terms and expressions used in the tax laws may not be resorted to rather goods to be classified according to the popular meaning attached to them by those using the product. The issue involved there, had been as to whether the Dantmanjan Lal manufactured by the appellant-company fell within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in case of doubt the matter should be referred to the Drug Controller. The matter was referred to the Drug Controller who, as stated above, has opined that it is an Ayurvedic medicament. If the Department was still entertaining any doubts, they could have referred the matter to the Advisor, Ayurveda/Sub-Commissioner in the Office of Drug Controller of India, Director General of Health Services, New Delhi. This was not done." 61.The Hon'ble Supreme Court categorically held in this case that the ratio of Shree Baidyanath (supra) has no bearing in a case like instant. 62.Similar view has been taken in Commissioner of Central Excise v. Pandit D.P. Sharma, 2003 (154) E.L.T. 324 (S.C.) = (2003) 5 SCC 288, and distinguishing the case of Shree Baidyanath (supra) and following the judgment in Sharma Chemical Works, the Court held that "Himtaj Oil" was an Ayurvedic medicament. 63.In M/s. Colfax Laboratories Ltd. v. State of Goa, [2003 (158) E.L.T. 18 (S.C.) = JT (2003) 8 SC 203, a similar issue was considered as to whether the preparation, i.e. shave lotion was a medicinal preparation or toilet/cosmetic preparation. The Hon'ble Apex Court explained the distinction in both holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d issue. The Court further held that the real test to determine regarding the classification of products claimed to be Ayurvedic medicines would be to find out as to how the customers, practitioners in Ayurvedic medicines, dealers and licensing officials treat the product and where all the ingredients of the products in question are mentioned in the authoritative book of Ayurveda, the mere fact that the ingredients are purified or added with some preservatives, does not really alter their character. 66.From the aforesaid settled legal proposition, it becomes evident that while deciding the case like instant, the statutory authority must deal with the issue as to whether a product falls within Chapter 30 or 33 of the Act 1985 and definition of medicament is to be given strict adherence as provided under the Act 1944. Burden to prove that a particular product falls within a particular Chapter of Act 1985, lies upon the Revenue and not upon the assessee and for the same, evidence is to be adduced and the contents of the products have to be analysed in order to determine as to whether some of them have medicinal values and it is not relevant as to whether the said content is dominant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR 1989 SC 644, the Hon'ble Supreme Court observed that the words used in the provision should be understood in the same way in which they have been understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them. In Indian Metals Ferro Alloys Ltd., Cuttack v. CCE, [1991 (51) E.L.T. 165 (S.C.) = AIR 1991 SC 1028, the Hon'ble Supreme Court has applied the same rule of interpretation by holding that "contemporanea expositio by the administrative authority is a very useful and relevant guide to the interpretation of the expression used in a statutory instrument." Same view has been taken by the Hon'ble Supreme Court in State of M.P. v. G.S. Daal and Flour Mills, AIR 1991 SC 772; and Y.R. Chawla Others v. M.P. Tiwari Anr., AIR 1992 SC 1360. In N. Suresh Nathan v. Union of India Ors, 1992 (Suppl) 1 SCC 584; and M.B. Joshi Ors. v. Satish Kumar Pandey Ors., 1993 (Suppl.) 2 SCC 419, the Apex Court observed that construction in consonance with long-standing practice prevailing in the concerned department is to be preferred. 69.In J.K. Cotton Spinning Weaving Mills Ltd. v. Union of India Ors., [1987 (32) E.L.T. 234 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agappa Chettiar, AIR 1953 SC 235; Kishori Lal v. M/s. Chaltibai, AIR 1959 SC 504; Samant N. Balakrishan v. George Fernandez Ors., AIR 1969 SC 1201; Dalim Kumar Sain Ors. v. Smt. Nand Rani Dassi Anr., AIR 1970 Cal. 292; Rao Sahab v. Rangnath Gopalrao, AIR 1971 SC 2548; Bhoona Bi Anr. v. Gujar Bi, AIR 1973 Mad 154; DR. R.K.S. Chauhan v. State of U.P. Ors., 1995 Supp (3) SCC 688; Commissioner of Income Tax v. Park Hotel, (1996) 2 SCC 15; Syed Dastagir v. T.R. Gopalakrishna Setty, AIR 1999 SC 3029; Sankaran Pillai (Dead) by LRs v. P. Venuguduswami Ors., AIR 1999 SC 1218; J. Jermons v. Aliammal, AIR 1999 SC 3041; Life Insurance Corporation of India Ors. v. Jyotish Chandra Biswas, (2000) 6 SCC 562; Om Prakash Gupta v. Ranbir B. Goyal, (2002) 2 SCC 256; and Ashutosh Gupta v. State of Rajasthan Ors., (2002) 4 SCC 34]. 73.It is not possible for the Court to decide an issue, not raised/agitated by the authority for the reason that other party did not have opportunity to meet it and such a course would violate the principles of natural justice. (Vide New Delhi Municipal Council v. State of Punjab, AIR 1997 SC 2841). Similarly, in V.K. Majotra v. Union of India Ors., (2003) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal and to be read in context of other words, like fraud, collusion or wilful default and requires to be considered very strictly. Mere omission to disclose the correct information is not a suppression of fact unless it was deliberate to escape the payment of duty and there can be no suppression when the facts were known to the assessee as well as the Revenue. [Vide Pushpam Pharmaceuticals Co. Ltd. v. Commissioner of Central Excise, 1995 (78) E.L.T. 401 (S.C.) = (1995) Supp. 3 SCC 462.]. 78.Similarly, the wilfulness and intent refer to mental state at the time of doing or omitting to do an act by a person. Thus, it has to be gathered from assessing the overall facts and circumstances of the case as to whether the assessee intended to evade duty. Same remained the position regarding misdeclaration and in case declaration has been made by the assessee to the best of its knowledge considering the facts and circumstances of the case and the quality of the product, the charge of misdeclaration cannot be sustained. The concealment and suppression must be in order to deceit the Revenue keeping it in dark so that its acquiescence and endorses an unlawful act thinking that it is lawful w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26-8-1994 and 29-9-1994, as referred to above. The petitioners' case had always been accepted by the adjudicating authority, as is evident from the orders referred to above, particularly orders dated 29-8-1989, 29-1-1992 and 7-9-1998. Its products had always been classified under Chapter 30 vide order dated 29-9-1994. The petitioners had always been submitting the required information to the department. Thus, there can be no case of suppression of material facts or misstatement of facts. There is nothing on the record to show that there had been any kind of fraud, collusion or suppression of material fact or information in this regard, as there was no finding by the adjudicating authority on the issue of suppression of fact and, therefore, it was not warranted that the Tribunal would deal with the issue. 81.Neither the adjudicating authority nor the learned Tribunal considered it proper to send any of the products of the petitioners for chemical analysis, though the Hon'ble Apex Court while interpreting the circulars issued from time to time by the Revenue, had emphasised upon the need of such analysis, nor there is any explanation for deviating the understanding of the departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstituent thereof had medicinal value, the show cause notice was issued invoking the proviso to Section 11A(1) of the Act 1944 on 3 different grounds, including wilful misstatement and suppression of fact, claiming the products as medicines, though in some of its literatures it has been shown as cosmetics and the goods had been sold at much lower price to petitioner No. 2, a related person with a intention to evade excise duty. 83.So far as the 3rd ground was concerned, i.e., suppression of fact with respect to related person with intention to evade duty, the adjudicating authority has not recorded any finding. The Revenue in its cross-appeal has not taken this issue at all. Thus, the learned Tribunal could not have raised this issue inasmuch as without giving a show cause notice to the assessee if the Tribunal wanted to examine this issue suo motu and it was permissible in law for it, the Tribunal did not furnish any explanation giving a discriminatory treatment to the petitioner as it had been submitted before the Tribunal that the similar products had been classified as medicines by the same Tribunal in various other cases, and a large number of its own judgments had been cit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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