Sudhir Deoras & Anr vs Commissioner, Central Excise &

For the Appellant/Petitioner M/s.M.S. Mittal, Snr. Adv., N. Pasari For the Respondent M/s R.Kumar, S.S.C.C.E., A. Kumar ------ Reportable Dated 27th April, 2012

Heard learned counsel for the parties.

The petitioner has challenged the summons issued to him

under Section 14 of the Central Excise Act, 1944. According to the learned

counsel for the petitioner's company, which is a registered company under

the provisions of the Companies Act, received a notice dated 12.1.2010 in

the name of the company asking it to furnish information given in the said

notice. The petitioner-company fully co-operated and furnished all

relevant documents and also produced the authorized person of the

company to give his statements in inquiry/investigation under section 14

of the Central Excise Act, 1944. The company's authorized person holding

the post of General Manager (F &A) appeared before the authority and

gave his statements. Thereafter the Commissioner, Central Excise &

Service Tax, Jamshedpur, issued summon under Section 14 of the Central

Excise Act, 1944 on 11.11.2011 through the Superintendent (Prev.),Central

Excise, Jamshedpur, directing the petitioner, Sri Sudhir Deoras, Managing

Director of the petitioner-company, to appear personally before the said

authority. In the said summon, though it is stated that he should bring

with him information, documents and records specified in the schedule, 2

which may in his knowledge or in his control or in his possession,

however, in the schedule, it is specifically mentioned "NIL".Therefore, the

present petitioner has been summoned to appear before the said authority

in the proceedings of inquiry, which may be, to give evidence and, as per

the notice, not for production of documents. The petitioner has challenged

the summon on the ground that summon has been issued without there

being any reason and in spite of the fact that the authorized officer of the

company and who is General Manager (F & A), who has full knowledge of

the facts of the case and who is dealing with the subject of taxation

matters, appeared before the authority and gave his statements. Today

one affidavit has been filed on behalf of the company through its officer,

Sri Prabhakar Kumar Singh, stating therein that Mr. Ashim Roy, who

appeared on behalf of the petitioner-company before the authority, is one

of the senior most officials and is entirely acquainted with all the taxation

matters of the company and is a person having best knowledge and the

petitioner does not intend to state further or amend any of his statement.

In paragraph 25, the petitioner stated that the replies given by Mr. Ashim

Roy to the queries raised by the respondent no. 2 is as per best of his

knowledge and the petitioner no. 1 does not have to state anything

further or amend any of the statements given by Mr. Roy. It is also stated

in the rejoinder that whether the plant and equipments supplied under an

independent supply contract is leviable to service tax or not is a matter of

legal interpretation based on contracts entered by the company with the

customers and the contracts are all ready produced by the company and

available on record with the respondents. It is further stated that issuance

of summon only for legal interpretation whether plant and equipments

supplied under an independent supply contract is leviable to service tax or 3

not is not permissible and such calling of the petitioner would be an

exercise in futility and would only cause undue harassment to the

petitioner. However, petitioner and the company are fully co-operating in

the inquiry under section 14.

3. Learned counsel for the respondents vehemently submitted

that Orissa High Court held that High Court should not interfere at the

stage when the Department issues summons and the order of the Orissa

High Court rendered in the case of Tata Iron & Steel Co. Ltd. Vs. Union

of India reported in 1995 (75) E.L.T 501 (Ori) has been approved by

the order of the Hon'ble Supreme Court as S.L.P preferred by Tata

Iron & Steel Co. Ltd has been dismissed. Orissa High Court held that

power given to the Excise Officer to call upon the person either to give

evidence or produce documents in his custody which the Excise Officer

believes would have a vital bearing in the inquiry and the status of the

persons summoned is of no relevance.

4. Be that as it may, legal issue has been raised by the writ

petitioner that in a matter of inquiry under section 14 of the Act of 1944,

what is the scope and jurisdiction of the Enquiry Officer in the matter of

summoning a person when the assessee is a company and in the opinion

of the company, the authorized person has already appeared in inquiry and

gave statements which the company is accepting to be the statements given

correctly and fully to the Enquiry Officer, whether, in that situation,

merely for the purpose of obtaining information with respect to

interpretation of a document, company's Managing Director can be

summoned even if the power under section 14 (1) and (2) of the Act of

1944 are wide enough to summon any person whose attendance is

considered necessary by the Enquiry Officer? 4

5. It is submitted by the learned counsel for the Revenue that

the representative of the writ petitioner, Mr. Ashim Roy, was summoned

twice and he gave his statements but he gave evasive reply or shown his

inability to explain the facts and, therefore, the Officer found it just and

proper to summon the Managing Director of the petitioner-company to

give statement in the inquiry.

6. We considered the submissions of the learned counsel for the

parties and perused the detailed pleadings of the parties. We have noticed

that it is a matter of proceeding against a company which is run by its

Board of Directors and with the help of its officers. The company's affairs

are assigned to various persons, who discharge their duties as

assigned. In conducting the affairs and business of any company, there

may be departmentalization and several persons may be holding different

positions as well as high positions in the company but may be dealing

with some of the matters of the company only and the person holding

very high positions may not have sufficient knowledge of all the activities

of that company to the requisite extent so as to make every person by

virtue of his holding post to be a competent person for giving statements

on behalf of the company. Primarily it is for the company to decide who

should be responsible for the affairs of the company for a particular

subject-matter and disclose in proceedings undertaken under various Acts.

Such person is the person authorized and may be accepted as

representative of the company for that purpose and he may have full

knowledge of the facts relating to the issue under inquiry/investigation.

There may be possibility of delaying tactics, hide and seek as well as

deliberate avoidance of responsible person of that company who if faces

inquiry may have to face the consequence which may be penal and to 5

avoid natural legal consequences, which may even be of prosecution. But a

competent Officer can certainly take care of all issues by taking adequate

measures. The power under section 14 of the Act of 1944 , as has been

given, are, no doubt, wide enough and thus, the officer exercising such

power has power to summon any person whose attendance such Officer

considers necessary either to take evidence or produce documents. It has

been made further wide by sub-section (2), which makes it obligatory and

mandatory upon the summoned person to attend and appear before such

officer and sub-section (2) made him bound to state the truth upon the

subject of the inquiry. The inquiry has been declared to be a "judicial

proceeding" under section 193 and 228 of the Indian Penal Code.

Therefore, it is clear that giving false evidence in proceedings under

section 14 of the Act of 1944 is punishable under the provisions of the

Indian Penal Code. It cannot be disputed that the officer authorized under

section 14 of the Act of 1944 has a very wide and very pervasive power

and can summon any person to give evidence or to produce documents.

Such power is very necessary power and was required to be given to such

officer so that complete inquiry may be conducted by him.

7. Now the question arises as to how this power is to be

exercised - whether exercise of such vast and important power, if is

regulated by reasonableness, will amount to any unreasonableness

restriction upon the power of such officer?

We are of the considered opinion that this power is given to

such officer so that he may discharge his legal obligation effectively but

does not authorize him to act as per his whims or act but in reasonable

manner. Reasonableness is inherent in any exercise of power. In section 14

itself it is provided that one can be summoned in the inquiry if in the 6

opinion of such officer, presence of any person is "consider necessary",

which is the only requirement for exercise of power to summon any

person and if that is kept in mind and thereafter such officer summons any

person whose appearance in inquiry is necessary, it will be reasonable

exercise of the power by such officer. Reasonableness depends upon the

facts of each case and no fixed guidelines can be framed, nor there should

be hypertechnical view and reasonableness may be inferred from the facts

of each case. Normally it is to be presumed that the authority has acted

absolutely reasonably and it cannot be presumed that there may be any

element of unreasonableness or mala fide in action in exercise of the

power for which he has been authorized by the statutory provision.

8. Keeping in mind all these principles, we have to examine

whether it is a fit case for interference by this Court in the matter of

summoning of the petitioner, who is the Managing Director of a limited

company, who has been summoned under section 14 of the Act of 1944

only for the purpose of giving his statements and has not been summoned

for producing documents. Therefore, the Officer has all the documents with

him as may be needed by him at this stage. The contention of the company

is that its all affairs relating to tax in question is handled by Ashim Roy,

who is the General Manager (F&A) and whatever he has stated company is

accepting to be the statements on behalf of the company. The company also

stated that the company does not want to state more than what Ashim Roy,

General Manager (F&A), has stated before the authority under section 14

of the Act of 1944. The company's stand also is to the effect that the said

authorized officer has issued summon to the Managing Director of the

company on the ground that Ashim Roy did not give proper reply to the

queries raised by the investigating team, Ashim Roy is one of the 7

seniormost officials of the petitioner-company and is entirely acquainted

with all taxation matters of the petitioner-company.

9. In view of the above stand of the petitioner and petitioner-

company, the Managing Director to whom all facts may not be in full

knowledge and in better knowledge than the knowledge of the General

Manager (F&A) of the company is also a relevant issue. Not only this issue

alone can be a factor for us but other factors, which are relevant, are

coming from the reply filed by the respondents, wherein the respondents

have quoted relevant statements of Ashim Roy to indicate that General

Manager (F&A), Ashim Roy, gives some evasive reply and even did not

disclose what the gross value of the project by stating that there is no gross

value of the project. Ashim Roy also stated that "I cannot express my

opinion whether this means a Turnkey/Composite contract to the best of his

knowledge". It is also stated that "ownership of the plant and equipments

(including spare parts) procured in the country where the site is located

shall be transferred to the employer when the plant and equipments are

loaded on to the mode of transport to be used to convey the plant and

equipments". In the reply, it has been stated that "It is clear from the above

(i) that the employer has not yet taken the care, custody and the risk of the

equipment delivered by TRF to them till now. The employer will take over

the goods together with the care, custody and the risks only after issuance

of the completion certificate. Thus, ownership of the goods has not yet been

passed. (ii) It falsifies, the statement of Sri Roy who told that the ownership

of the goods gets transferred as per Sale of Goods Act, as the risk is still

with TRF. (iii) It also makes suspicious and requires to be ascertained

whether the statement dated 16.6.2010 of Sri Roy who in answer to

Q.No.11 stated that the goods were not in a ready state for operation when 8

the transfer of title took place".

10. In totality, it has been stated in the reply that the Assessing

Officer was of the view that Ashim Roy, General Manager (F&A), either

did not give complete reply or gave evasive reply and therefore, an opinion

was formed by the Assessing Officer to summon the Managing Director of

the company.

11. At this place, it will be relevant to mention here that it is an

inquiry with respect to levy of service tax and the subject-matter is of two

contracts, whereunder issue for determination is that, whether the

petitioner's company is liable to pay service tax under one contract and not

liable to pay service tax under another contract. The Revenue is proceeding

to find out whether service tax is leviable upon both the contracts and if so,

then what is the value of the services to find out the correct tax liability of

the writ petitioners. Therefore, according to the respondents also, who are

examining service contract and examining the nature of the contract and

finding out the meaning of "Turnkey Project" and its value and finding out

whether, though there are two separate deeds of contract, it is a composite

contract with "single responsibility" basis in terms of clause 10 of the

contract, copy of which has been placed on record as Annexure - C. In

view of the above reasons, basically it is a matter of interpretation of a

document first so as to find out the real nature of the contract. It is a settled

law that when the deed under consideration is having unambiguous and

clear terms incorporated in it, the parties either by pleadings or by evidence

cannot add or subtract from the said deed. In view of the above, the oral

evidence for the purpose of finding the true meaning of the contract

between the parties, i.e. the petitioner and its contracting party, is

concerned, it depends upon first examining the contract itself and if there is 9

ambiguity and some vagueness which can be cleared by evidence then only

evidence can be considered. In section 91 of the Indian Evidence Act, it is

clearly provided that when the terms of a contract have been reduced to the

form of a document, no evidence shall be given in proof of the terms of

such contract except the document itself and section 92 excludes the oral

evidence for such written contract and it is specifically provided that no

evidence of oral agreement shall be admitted as between the parties to any

such instrument or their representatives in interest for the purpose of

contradicting, varying, adding to or subtracting from its terms. The

principles of section 91 of the Indian Evidence Act and 92 of the Indian

Evidence Act spell out what can be proof of written contract and section 91

of the Indian Evidence Act requires production of the contract itself and

section 92 of the Indian Evidence Act excludes oral evidence and excludes

oral agreement. This principle can be applied in the light of the legal

position that when the deed and document are unambiguous and clear,

neither by pleadings, nor by evidence its contents can be varied or altered

by the parties.

12. In the light of this legal position as well as in the light of the

nature of the affairs of any public limited company, the Officer under

section 14 of the Act of 1944 should examine the relevant issue before

summoning any person to give evidence because of the reason that every

person of the company may not be a relevant person at all for the purpose

of inquiry may he be holding highest position in the company because of

the reason mentioned above. In that situation and to avoid unnecessary

delay, it is always appropriate to first ask the company to send a duly

authorized person well acquainted with the facts and issues involved in the

inquiry so that thereafter the company may not take evasive stand and may 10

not take false stand that the person who deposed was either not authorized

or had no knowledge or had given statements without the knowledge of the

company etc. This will advance the cause of justice and certainly rules out

the delay that may be in the conduct of any inquiry. At the same time, it is

not binding upon the Assessing Officer to accept that the person nominated

by the company to be and as only witness who can be examined in the

inquiry. The Enquiry Officer in the facts and circumstances of a particular

case if is not satisfied with the statements on the ground of its being

unreliable (prima facie) or any further explanation is required from the

person who may be found to be relevant by the Assessing Officer from the

statements of such witness, in that situation the Enquiry Officer may

summon any of the persons irrespective of his status in the company. It

appears that sometimes when the highest executive or higher person in the

affairs of the company refuses or do not want to appear in response to the

summon for giving evidence or for producing documentary evidence, then

it may be misunderstood because of the sole reason of his status. That

impression may not be true in all cases. The efforts of not making

appearance before the Assessing Officer by the highest officer or person

who is at the helm of the affairs of the company may be due to the reason

that he himself may not have knowledge and there is more probability of

drawing impression that person in high position must have knowledge of

each and every activity and he can be in better position to explain contracts,

and such impression may not be correct because of the reason that for better

task, planning services of expert are taken whose opinions are accepted by

the persons in high position in company and therefore, persons who

prepared the contract may better explain the contract, if needed. Therefore,

the Assessing Officer or Enquiry Officer should keep in mind that he being 11

an Officer authorized by law to summon any body does not make him an

Officer having no control of reasonableness and though he has right to

summon any person either the Managing Director or the General Manager

of the company or even a clerk of the company but he should not summon

unless it is required for the purpose of an inquiry. Sometimes such summon

to the company's officer may also be misunderstood that the same has been

issued by the Officer to show his authority. It is also not correct. In dealing

with the public by all Officers having power to summon, such caution is

required to be taken that no other impression be gathered by anybody;

either by the high officers in the company or any of the persons who has

been summoned by the authority, nor by the authority himself that either is

only trying to show his authority or superiority. If this impression is

removed by both the parties, then only enquiry may proceed smoothly

without there being delay and thus, this will avoid unnecessary challenge to

the orders of summoning the persons in inquiry.

13. At this stage, it will be very relevant to mention here that we

have already noticed the provision of sub-section (3) of section 14 of the

Act of 1944, wherein and whereby proceedings under section 14 of the Act

of 1944 have been declared to be judicial proceedings and having

consequence under section 193 and 228 of the Indian Penal Code. There

may be possibility of avoidance of the witnesses to appear in the inquiry to

avoid such consequence of punishment and imprisonment. Therefore, the

task of the Enquiry Officer is onerous as well as he is required to act

cautiously so as to see that no guilty person may escape from the liability

and consequence of his giving false evidence and statements.

14. Coming to the judgment of the Orissa High Court, we may

observe that the Division Bench of Orissa High Court also observed in that 12

case on facts, which was under the Excise Act, 1962, that only limitation

contemplated under section 108 of the Act of 1962 is that the person to be

summoned must be such as the authority issuing summon considers

necessary. We are in full agreement with the view expressed by the Orissa

High Court. We reiterate that the authority issuing the summon must issue

summons to a witness only when the authority considers it necessary for

summoning. This necessarily implies application of mind and is guided by

the principles of reasonableness in the matter of summoning of witness and,

therefore, as we have already observed that in the matter of summoning

witnesses, there must be reasonableness and the guiding condition is that

the witness is necessary for the purpose of inquiry.

15. Therefore, we are of the considered opinion that in the present

facts and circumstances, at this stage, when one of the witness has already

appeared before the concerned authority, produced all the relevant

documents, which were called and summoned by the Enquiry Officer and

he has deposed and the company is of the view that it has nothing more to

submit, state, explain and admits the statements of the witness, then the

Assessing Officer may proceed further with the inquiry at this stage without

summoning petitioner himself in person and after forming any opinion

about necessity of summoning the petitioner, (prima facie satisfaction), he

may be free to summon any of the petitioners and other persons irrespective

of the person's status to give evidence. We are passing this order in this

case because of the facts of this case only and these facts are that the

statements of the witness has already been recorded by the Enquiry Officer

and he is also the person who is the General Manager (F&A) of the

company and the reason has been disclosed in the counter-affidavit by the

respondents for summoning the petitioner and therefore, for the purpose of 13

deciding of a larger issue to examine the scope and power of the Assessing

Officer under section 14 of the Act of 1944, we are passing this order and

we also are of the view that it is not necessary for the Assessing Officer to

record reasons for summoning of witnesses in each and every case.

However, whenever action of the Assessing Officer is questioned in the

matter of summoning witness, as is the case made out prima facie by the

petitioner, then respondents may show reasons for summoning of the

witnesses from record.

16. Here in this case, we are of the considered opinion that at this

stage of inquiry, the evidence of the Managing Director may be dispensed

with, with permission to the Assessing Officer to take a decision

subsequently and if necessary, then to summon the Managing Director

himself. It is also made clear that in case, the Assessing Officer proceeds to

summon any of the witnesses of the company, he need not to record any

reason and may summon any witness.

17. In view of the above observation, the summon dated

11.11.2011

contained in Annexure - 1 is quashed with liberty to the

Assessing Officer to proceed in the light of the observations made above.

(Prakash Tatia, C.J.)

(Aparesh Kumar Singh, J) dey