GTC Industries Ltd. (Now Known As Golden Tobacco Limited) Through Manager Legal vs Collector of Central Excise New Delhi

NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.8583-8584 OF 2010

G.T.C. INDUSTRIES LTD (NOW KNOWN AS GOLDEN TOBACCO LIMITED) THR. MANAGER LEGAL AND ANR. ……APPELLANTS

VS.

COLLECTOR OF CENTRAL EXCISE AND ORS ….RESPONDENTS

WITH

CIVIL APPEAL NOS.8581-8582/2010 CIVIL APPEAL No.8585/2010

JUDGMENT

DIPANKAR DATTA, J.

These appeals, by special leave, challenge the

judgment and order dated 28th August, 2009 rendered by the

Delhi High Court (hereafter ‘the High Court’, for short) while

disposing of 5 (five) writ petitions, viz. WP(C) Nos. 1854 and

1895 to 1898 of 1992.

2. The High Court, for the reasons assigned in the

impugned judgment, declared section 9-D of the Central Signature Not Verified Digitally signed by Harshita Uppal Date: 2023.02.09 15:49:53 IST Reason: Excise and Salt Act, 1944 (hereafter ‘Excise Act’, for short) as

intra vires while dismissing the writ petitions. 2

3. In course of hearing before us, Mr. S.K. Bagaria, learned

senior counsel appearing for the appellants, did not even

attempt to assail the reasons assigned by the High Court for

up-holding the constitutional validity of section 9-D of the

Excise Act. However, Mr. Bagaria argued that by a judgment

and order dated 25th April, 2008, this Court had remitted the

matters back to the High Court for consideration thereof

afresh. In view of the judicial mandate, while deciding the writ

petitions afresh on remand, the High Court could not have

limited its decision only to the issue relating to vires of section

9-D. The writ petitions, as amended, also raised the issue as

to how the essential pre-requisites of section 9-D were

breached by the department in the adjudication orders. The

effect of the principles and pre-requisites laid down by the

High Court for invocation of section 9-D vis-à-vis the

appellants’ case could not have been left undecided.

4. According to Mr. Bagaria, the principles laid down by the

High Court in the impugned judgment ought to have been

applied to test the legality and correctness of the impugned

action of the department and there being apparent breach of

such principles at the end of the department, the High Court

committed an error of law in not deciding the other issues

raised in the writ petitions. In other words, according to Mr. 3

Bagaria, the High Court could not have stopped at deciding

the issue of vires of section 9-D by reading it down and

summarizing the conditions precedent in-built into it and it

was obligatory for the High Court to decide the writ petitions

in its totality; and while so deciding, to declare whether on the

parameters of the conditions precedent in section 9-D, as laid

down in the impugned judgment, the petitioners were entitled

to any relief or not.

5. Mr. Bagaria continued by submitting that the details of the

earlier proceedings as well as all earlier orders including the

orders passed by the Customs, Excise and Gold Control

Appellate Tribunal (hereafter ‘Tribunal’, for short) and this

Court were placed on record before this Court by way of a

‘status chart’. Such status chart was reproduced in the

judgment and order dated 25th April, 2008; and after noting all

these facts, the matters were remitted to the High Court for

deciding the writ petitions afresh. It is not as if the remand

was only for deciding the issue of section 9-D alone without

deciding the remaining issues raised in the writ petitions.

6. The argument of Mr. Bagaria was that if the effect of the

principles and pre-requisites laid down by the High Court vis-

à-vis the appellants’ case were to be left undecided, the entire

proceedings continuing since the last several years would 4

simply be rendered academic. He has, therefore, endeavoured

to persuade us hold that the High Court committed an error of

law requiring correction by us.

7. Mr. Bagaria referred to the decisions of this Court in

State of UP vs. Mohammad Nooh 1, Calcutta Discount

Company vs. ITO2, Institute of Chartered Accountants

of India vs. L.K. Ratna3 and Andaman Timber Industries

vs. CCE4 in support of his arguments.

8. To appreciate the contentions of Mr. Bagaria, we need to

take a quick look at the events preceding the impugned

judgment and order.

9. The facts giving rise to the writ petitions reveal that

huge demands of about Rs. 94,00,00,000/- were raised by the

department on the ground that the appellants and its job

workers had manufactured deceptively similar versions of

certain regular brands of cigarettes showing sale price

whereas the same were sold through marketing chain at the

higher price of normal brands and that the difference

between the two prices was received by the appellants as

flow-back through various super wholesale buyers. On 23 rd

March, 1988 and 29th March, 1988, two show-cause notices

1 AIR 1958 SC 86 2 AIR 1961 SC 372 3 (1986) 4 SCC 537 4 (2016) 15 SCC 785 5

were issued by the department to the petitioners raising

demands for alleged short payment of excise duty. Such

notices primarily relied on the statements of 75 (seventy-five)

witnesses to establish the recovery of prices higher than the

declared prices and flow back of additional amounts to the

appellants. Pursuant to directions of the Bombay High Court,

facility of cross-examination was extended in respect of only

29 (twenty-nine) witnesses and most of them, during cross-

examination, denied any flow back to the appellants. The

remaining statements remained untested but were relied

upon by invoking section 9-D of the Excise Act. Grievance of

the appellants in the writ petitions was that the parameters

of section 9-D had been completely ignored by the

authorities.

10. Since the show-cause notices were spread over a

thousand pages and 600 (six hundred) of which were related

to 63 (sixty-three) statements on which the department had

placed reliance, the appellants on 6th March, 1991 made a

request for cross-examination of 31 (thirty-one) witnesses.

However, without attempting to follow the principles of

natural justice, adjudication orders in respect of the show-

cause notices had been passed by the adjudicating authority

confirming the demands.

6

11. Despite persistent requests, the facility of cross-

examination was denied. Even before the Collector of Central

Excise had passed any order confirming the demand of duty

against them, the appellants had rushed to the High Court to

complain about the fairness of the procedure followed by the

Collector, more particularly, the denial of the opportunity to

cross-examine. During the pendency of the proceedings, the

Collector had passed the final orders. By applying for

amendment in each one of the writ petitions, permission was

sought to assail the validity of the orders passed by the

Collector. Such applications were disposed of by an order

dated 28th October, 1992 with the observation that the order

of the Collector being appealable, the petitioners could

pursue their remedy in appeal before the prescribed

appellate authority. However, since there was also a

challenge to the constitutional validity of section 9-D of the

Excise Act, the High Court did not dispose of the writ petitions

finally but intended to examine that limited question later.

The petitioners had preferred appeals before the Tribunal for

the period relevant to WP(C) 1854/1992 and 1895/1992. The

Tribunal had disposed of the appeals in favour of the

department, whereafter appeals were carried to this Court.

The appeals arising out of orders passed by the Tribunal 7

relevant to WP(C) Nos. 1896/1992 and 1898/1992 were

dismissed by an order dated 12 th September, 1997 of this

Court for failure to make the requisite pre-deposit.

12. The Tribunal on 21st March, 2001 had allowed appeals

filed by M/s J&K Cigarettes and M/s. Kanpur Cigarettes Pvt.

Ltd. These orders were carried in appeal by the department

by filing appeals before this Court under section 35L of the

Excise Act, being Civil Appeal Nos. 6398-6403 of 2002.

13. During the pendency of these 2 (two) appeals, the 5

(five) writ petitions came up for hearing before the High Court

on December 6, 2006. The common grievance of the

petitioners was noted by the High Court in paragraph 3, that

they had invoked the writ jurisdiction feeling aggrieved by

denial of adequate opportunity to cross-examine certain

witnesses whose statements were recorded by the excise

authorities in the course of investigation. The appellants had

argued that the statements of such witnesses, obtained by

the excise authorities in the course of their investigation,

could only be used if they were given an opportunity to cross-

examine the witnesses.

14. The High Court in its order dated 6 th December, 2006

recorded that 2 (two) issues emerged for decision, viz.,

“1. Whether this Court would be justified in reading down or interpreting Section 9-D of the Act as 8

suggested by counsel for the petitioner company when three appeals involving the validity of the orders passed by the Collector and the CEGAT placing reliance upon Section 9-D of the Act are pending before the Supreme Court?

2. If answer to question No. 1 is in the affirmative, whether Section 9-D suffers from any vice of unconstitutionality?”

15. Insofar as the first question is concerned, the High

Court, inter alia, held as follows:

“Two of the orders when challenged before the Supreme Court, were upheld by Their Lordships also while the remaining three appeals are pending adjudication. It is obvious that stand (sic) disposed of or those pending before the Apex Court, the question of fairness of the procedure and in particular, the denial of any opportunity to cross-examine the witnesses was and continues be available to the petitioner. If the discretion vested in the authority in terms of Section 9D(1)(a) has been improperly exercised, Their Lordships could have granted relief in the disposed of appeals and can even now grant relief to the petitioner in the appeals that are pending for disposal. It is also evident that while examining the question of fairness of the procedure adopted by the adjudicating authority, the interpretation of provisions of Section 9D(1)(a) would fall for consideration of Their Lordships. What is the true scope of Section 9D(1)(a) and what is the true interpretation to be placed upon the same having regard to the possible 'constitutional infirmity suggested by the petitioner's is a matter which would legitimately arise for consideration of the Supreme Court. Even assuming that the dismissal of two appeals filed by the petitioner involving the same question is not indicative of the Court finding infirmity either (sic, in) the procedure adopted by the adjudicating authority or in the interpretation placed upon Section 9D(1)(a) by the saidauthority or the Tribunal, the contrary interpretation which petitioner wishes this Court to place upon Section 9D is a matter still open to the petitioners before the Supreme Court. That being so, there is no compelling reason why this court should take upon itself the exercise of interpreting Section 9

9D and in the process reading the same down as suggested by the petitioner. If the interpretation suggested does eventually appeal to the Supreme Court during the course the hearing pending before Their Lordships, the opinion of this court on that aspect would be wholly inconsequential and academic. Such an academic exercise need not be undertaken by this court nor is any duplication of the process of interpretation (sic) Question number 1 is, therefore, answered in the negative.”

In the light of the answer to question no. 1, the Court felt that

the answer to the second question becomes unnecessary.

Consequently, the writ petitions were dismissed with costs.

16. The judgment and order dated 6th December, 2006

was carried in appeal before this Court in Civil Appeal

Nos.3187-3189/2008. By an order dated 25 th April, 2008, this

Court disposed of the appeals by the following order:-

“7. The High Court, as noticed hereinbefore, did not decide the question of constitutionality of the said provision, nor did it determine the objection of the respondents that no cause of action had arisen therefor.

8. We are, therefore, of the opinion that interest of justice would be subserved if the impugned judgments are set aside and the matters are remitted back to the High Court for consideration thereof afresh. We direct accordingly.

9. The appeals are disposed of with the aforementioned observations and directions.

10. However, as these matters are pending for a long time, we would request the High Court to consider the desirability of disposing of thewrit petitions, filed by the appellants, as expeditiously as possible, preferably without a period of three months from the date of communication of this order. All contentions of the parties shall remain open.” 10

17. It was in terms of the order dated 25 th April, 2008 that

the High Court once again considered the challenge of the

appellants to the vires of section 9-D of the Excise Act. Upon

hearing learned counsel appearing for the parties, the High

Court in the impugned judgment and order dated 28 th August,

2009 recorded the following conclusions:-

“32. Thus, we summarize our conclusions as under:-

(i) We are of the opinion that the provisions of Section 9-D(2) of the Act are not unconstitutional or ultra vires;

(ii) While invoking Section 9-D of the Act, the concernedauthority is to form an opinion on the basis of material on record that a particular ground, as stipulated in the said Section, exists and is established;

(iii) Such an opinion has to be supported with reasons;

(iv) Before arriving at this opinion, the authority would give opportunity to the affected party to make submissions on the available material on the basis of which the authority intends to arrive at the said opinion; and

(v) it is always open to the affected party to challenge the invocation of provisions of Section 9-D of the Act in a particular case by filing statutory appeal, which provides for judicial review”.

and dismissed the writ petitions holding that the same had no

merit.

18. Bearing in mind these preceding facts and

circumstances, we need to consider the contentions raised by 11

Mr. Bagaria. For the reasons that follow, the contentions do

not commend acceptance.

19. This Court while remitting the writ petitions to the High

Court for hearing the same afresh had taken note of the fact

that, inter alia, the appellants’ appeals bearing Civil Appeal

Nos. 5134-34/1997 questioning the order of the Tribunal

confirming the demands against the appellants stood

dismissed by an order of this Court dated 12th September,

1997.

20. As noted above, the orders of the Tribunal dated 21 st

March, 2001 deciding the appeals in favour of the appellants,

were the subject matter of challenge in this Court at the

instance of the department in Civil Appeal Nos.6398-

6403/2002. Such appeals were ultimately allowed by order

dated 31st July, 2008; while directing a remand, it was

observed by this Court that the Tribunal had not recorded any

findings regarding the flow back.

21. At this juncture, from paragraph 1(xxiv) of the Statement

of Case filed on 10th December, 2012, we also note that

pursuant to the remand ordered by this Court as above, the

Tribunal disposed of the statutory appeals confirming the

demands against Kanpur Cigarettes Pvt. Ltd. and J&K 12

Cigarettes. Civil Appeal Nos. 1533-1534 of 2011, carried

before this Court from the orders of the Tribunal, were

thereafter dismissed in view of inability to comply with the

conditional order passed by this Court directing issue of notice

subject to deposit of the entire demand amount as confirmed.

22. There was one other appeal filed before this Court but

the same too had not been not pursued by the appellants and

the job workers.

23. Therefore, as on date of hearing of these civil appeals,

there is no lis pending in respect of the concerned demands

between the parties.

24. It would be appropriate to note the issues involved in the

writ petitions. First, the vires of section 9-D of the Excise Act

was under challenge. Secondly, even if section 9-D were intra

vires, whether the parameters thereof were completely

ignored by the excise authorities.

25. The writ petitions were instituted before the High Court

way back in 1992 before any adjudication order was passed

praying, inter-alia, for cross-examination of the remaining

witnesses whose cross-examination had already been

permitted but who were not produced. Pursuant to the liberty

given by the High Court, the appellants filed an application for 13

amendment mentioning in detail as to how and for what

reasons invocation of section 9-D by the Commissioner was

illegal and also challenging the vires of section 9-D of the

Excise Act.

26. Though vehemently argued by Mr. Bagaria, there is no

pending proceeding where the principles and prerequisites

laid down by the High Court for invocation of section 9-D of

the Excise Act vis-à-vis the appellants’ case could be

attracted for a decision. When this Court by its order dated

25th April, 2008 remitted the matter to the High Court for

deciding the question of vires of section 9-D, only the civil

appeals carried from the orders of the Tribunal by the

department were pending. These appeals were ultimately

allowed by this Court vide its order dated 31 st July, 2008 and

the matters remitted to the Tribunal. These two appeals, on

remand to the Tribunal, have since been decided in favour of

the department and against the appellants. As noticed above,

the appeals carried to this Court by the appellants from the

orders of the Tribunal confirming the demands against the

appellants also stand dismissed. We are, therefore, left to

wonder in which proceedings would the principles and

prerequisites and/or the parameters of the conditions 14

precedent in section 9-D, laid down by the High Court, could

at all be applied.

27. The contentions raised by Mr. Bagaria that the

parameters of section 9-D were completely ignored while the

adjudication orders were made could have been regarded to

be of some worth and engaged our attention if only any

remedy by way of an appeal before the departmental

authority or by a petition before any court were open to be

pursued by the appellants as on date these civil appeals came

up for consideration before us. What we find from the factual

narrative is that although two proceedings were pending

before the Tribunal in view of the order of remand dated 31 st

July, 2008 when the judgment and order dated 28 th August,

2009 under challenge came to be made, even those

proceedings stand closed today after the appellants had

approached this Court and their civil appeals stood dismissed

for non-deposit of the amount demanded. With the final

decision on all the appeals arising from the orders of the

Tribunal being rendered against the appellants, there is no

pending lis where the principles and conditions precedent

could be applied. The endeavour of the appellants to have

these appeals argued before us is, therefore, of purely

academic interest and would not serve any real purpose. 15

28. While dismissing the civil appeals, we endorse the views

of the High Court insofar as it spurned the challenge of the

appellants to the constitutional validity of section 9-D of the

Excise Act.

29. For unnecessarily protracting the proceedings before this

Court, although no lis survived for resolution, we impose costs

of Rs.5,00,000/- on the appellants. This amount is to be paid

to any charitable organization involved in providing help,

assistance and relief to children suffering from cancer. Such

costs shall be paid within a month from date. Within two

weeks thereof, proof of payment shall be produced before the

Registrar who shall satisfy himself that the recipient

organization is, in fact, providing care to children suffering

from cancer. In default thereof, the amount of costs shall be

recovered as arrears of land revenue.

………………………………J (S. RAVINDRA BHAT)

………………………………J (DIPANKAR DATTA)

NEW DELHI;

9TH FEBRUARY, 2023.