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CASE NO.: Appeal (civil)  7531 of 1995 Appeal (civil)  7815 of 1995

PETITIONER: Union of India & Others

RESPONDENT: M/s. G.T.C. Industries Limited

DATE OF JUDGMENT: 27/03/2003

BENCH: SYED  SHAH MOHAMMED QUADRI & ASHOK BHAN.

JUDGMENT:

J U D G M E N T

BHAN, J.

       Civil Appeal No. 7531 of 1995

Union of  India has filed this appeal against the  order of the Gauhati High  Court in Civil Rule No. 1940 of 1989  wherein the  High Court at the instance of  respondent No.1 has quashed the order passed by the Collector  of Customs and Central  Excise, Shillong.  (for short ’the Collector’)  dated  15th  May 1990 and remanded the case to the Collector for a fresh decision with the following directions :

       "In view of the above, the adjudication order dated 15.5.90 is set aside.  The collector shall resume the proceedings and summon the aforesaid three persons viz. Sri R. Salio, Sri Liangtilinga and Sri Lalchungunga for necessary examination in accordance with the observation made above and thereafter proceed to decide the matter afresh.  The other materials obtained and already  on record shall be available for the purpose .  We also direct  that further  proceedings shall be taken by an officer other than the one who has made the adjudication order dated 15/ 16 May, 1990 and the  competent authority in that regard shall take appropriate action and make necessary orders."

Facts relevant to the points raised in this appeal are:

GTC Industries Ltd.(respondent in this appeal) is a well known manufacturer of cigarettes  having its  own brand names one of which is Panama Virgin.  GTC Ltd. was having its cigarettes   manufactured inter alia, through M/s.  North Eastern Tobacco  having its own place of work in Mizoram.  These cigarettes  were being  removed from the premises of  North Eastern Tobacco (hereinafter referred to ’NET’) without payment of Excise Duty and the same was detected  when certain vehicles carrying the cigarettes  were  apprehended by the Excise Authorities.

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 The Collector issued Show Cause Notices to GTC and NET. Show Cause Notices were also issued   to the partners of NET M/s Sailo, Lalchunganga and Liangtilinga, to one  Ajay Sukhani  who was  the power of attorney holder on behalf of NET  and also the officers of GTC and its sister concerns with the allegation that NET was set up as a front company  by GTC  to evade payment of excise duty.  Contravention of various provisions of the act was alleged  against GTC as well as its officers.

In the course of hearing before the Collector of  Central Excise GTC  applied to the Collector requesting that summons be issued under Section 14 of the Central Excise Act, 1944 (hereinafter referred to as the ’Act’) to the partners of NET including Shri Sailo so that GTC could cross examine him.  The Collector after hearing arguments ruled that he could not issue summons  to the said persons inasmuch as   they were also co-noticees to the proceedings.  They had also been issued show cause notices for contravening the provisions of the Act and therefore could not be compelled to appear for the purpose of cross- examination by another co-noticee. The Collector held:

"Of the persons who were asked to cross- examination three of them viz. Richard Sailo, Liangtilinga, Lalchungnunga are co-noticees to these  proceedings.  By issuing them summons as requested by GTC, prejudice is likely to be caused to their defence  by compelling their attendance before me.  It isan established principle of law that no noticee can be forced to appear before the adjudicator .  In fact, I had given the opportunity by letters dated 23rd Oct., 1989 and 17th November, 1989 to   M/s  GTC to bring  these persons as their own witnesses, if they wished to rely on their testimony.  But they have not done so.  Being unable to issue summons to these persons, I cannot but reject the request of GTC."

The ruling of the Collector declining to issue summons was challenged in the High Court  by filing the present  Writ Petition before the  completion  of the adjudication proceedings on the ground of violation of Principles of Natural Justice.

The High Court initially on 4th of December, 1989, as an interim measure, stayed all the proceedings in pursuance to  the Show cause notice.  Later on , on 24th January, 1990 , the stay granted on  4th of December 1989 was  vacated  by the Division Bench.  The matter  was further carried to this court by filing  SLP 6288/90 which  was heard and disposed of on 4th May, 1990  with the following observations:

"After  some arguments, both sides are agreed  that  the respondent may pass the final order of adjudication.  However, the order may not be communicated to the petitioner.   It may be put in a sealed cover and placed before the High Court for such directions as the High Court  may give at the time of hearing of the writ petition.

We are told that the writ petition is likely to come  up before the High Court for hearing on 17th May, 1990.  We hope that the Writ Petition will be disposed of  expeditiously.

The SLP is disposed of in these terms."

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On 15th  of May, 1990, the collector passed the final order in the adjudication of the show cause notice and forwarded the same in a sealed cover to the High Court in terms of the order passed by this Court in SLP 6288/90.  On 10th of July, 1990  High Court opened the sealed cover and delivered a copy of the order of the  Collector  to the counsel for GTC and directed that it may be served on the other affected parties as well. .   The High Court concluded the hearing  on 10th August 1990 and the impugned judgment was pronounced on 20th October, 1990.

Plea raised by the appellant that since the final order passed by the Collector had been communicated  to the affected  persons as required under the law, the  parties should be directed to seek  their remedy by  way  of appeal provided under the Act was rejected by the High  Court on  the  ground  that alternate remedy  was not an absolute bar to the exercise of extraordinary jurisdiction under Article 226 of the Constitution.  In  the  given facts and circumstances of  the case the Court could proceed to examine the correctness or otherwise of an order without asking the aggrieved party to exhaust the alternate remedy of filing of appeal/revision provided under the Act.  It was held that GTC had come to the Court before the finalisation of the adjudication by the Collector with the grievance  that the proceedings were being conducted in violation of Principles of Natural Justice. Finalisation of the proceedings by the Collector  were made subject to the decision of the Writ Petition.  As the order of the Collector came into being during the pendency of  the  writ petition, the same could be examined by the Court and if necessary relief moulded  to the requirements of the subsequent developments which  had taken   place during the pendency of the writ petition.

On merits, the counsel appearing for the GTC before the High Court confined his arguments to the issue of infringement of the violation of Principles of Natural Justice only.  The High Court held that denial of opportunity to the GTC to cross-examine Shri Sailo, Lalchunganga and Liangtilinga was nothing  short  of  denial of reasonable  opportunity to the Writ Petitioner to defend and establish its version.  That the same amounted to the breach of  Principles of Natural Justice.  On this basis the final adjudication order of Collector was set aside and the matter was remitted back with the direction to resume the proceedings and issue summons to the partners  of NET for necessary cross-examination by GTC and thereafter to decide the matter afresh.

Learned Senior Counsel appearing for the Union of India  Mr. Jaideep Gupta submitted that no statement was taken from Shri Sailo by the authorities nor did the authorities rely upon any statement of Shri Sailo against GTC. That it was not a case where the evidence had been produced by the appellant in support of its case and no opportunity of cross-examination was given to the other side.  Notice could not be issued to Shri Sailo under Section 14 of the Act to compel his attendance and to make a statement   coupled with the opportunity to the GTC to cross-examine him.  That  Shri Sailo being  a co-noticee, could not be compelled to appear as witness against himself.  Non-summoning of  a co-noticee for the purpose  of cross-examination by another co- noticee did not amount to breach of Principles of Natural Justice. In the alternative, it was submitted that in a case based on violation of Principles of Natural  Justice, it is to be shown that     some prejudice was  caused to the aggrieved person because of the alleged breach of violation of Principles of Natural Justice. It was vehemently contended that the Collector in coming to the finding that the GTC was the real manufacturer and the NET its  front  company did not rely  upon the statement of Shri Sailo.  In coming to this finding  the Collector had primarily placed reliance on the statements of other persons.

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Per contra, Shri Ganesh who appeared for the respondent  fairly conceded that he could not support the direction issued by the High Court to summon  Shri Sailo under Section 14 of the Act and produce him for cross-examination  by the GTC.  But he entered a caveat to the submission of the counsel for the appellant that the Collector had not placed reliance on the statement of Shri Sailo.  Relying upon the findings recorded by the High Court, it was contended that the Order of the Collector was based on the statement/submissions made by Shri Sailo before the authorities.  That the statement/submissions of Shri Sailo could not be relied upon for recording an adverse order against the GTC.

Submissions put forth by the counsel appearing for the Union of India cannot be accepted.  It is an admitted case before us that Shri Sailo,  Lalchunganga or   Liangtilinga  did not  file any response by way of a written reply.  Their statements were also not recorded.  Shri Sailo appeared before the Collector on 25th  November, 1989 in the absence of the representatives of GTC, on which date the collector recorded the submissions of Shri Sailo. At the subsequent hearing which took place on 1st May, 1990, representatives of GTC attended the proceedings  but were  not given  any notice or information about the submissions/statement made by  Shri Sailo on 25th November, 1989. Thereafter, on 15th May, 1990, Collector passed his order  in original quoting extensively from the submissions/statement made before him by Shri Sailo which ran into three pages which itself makes it clear that the Collector had placed strong reliance on the submissions/statement of Shri Sailo.  It is specifically recorded in the order that the departmental representatives  who appeared  before the Collector had also placed strong reliance on the submissions/statement of Shri Sailo. The Collector’s order is based largely and  substantially  if not entirely on the submissions of Shri Sailo.  The High Court in paragraphs  27 and 28 of its judgment has also recorded  a finding  that the Collector in its order had substantially relied upon the submissions made by Shri Sailo.  In paragraph  27 it is recorded:

"It may also here be noted that the Collector in his adjudication order, made on 15th May, 1990, has substantially relied upon the statement of Shri Sailo which was made to the Collector at a personal hearing."

In paragraph 28, it is observed:

"The utilisation of Shri Sailo’s statement in itself shows that the statement of Mr. Sailo was indeed not only necessary but  of substantial importance in the consideration and proper adjudication on the version of the petitioner."

Counsel  for the appellants failed to displace the finding recorded by the High Court  on this  point.  Contention  of  the  counsel for the Union of India   that the order of the Collector should be sustained by ignoring the submissions/statement of Shri  Sailo as there was other sufficient material on record  to sustain and justify the said order cannot be accepted.  It may not be possible for us to separate or disentangle the submissions of Shri Sailo from other material   evidence on record. It is well settled that a quasi-judicial order has to be judged  on the basis of reasoning contained therein and not on the basis of pleas put forward by the person seeking to sustain the order in its counter affidavit or oral arguments before the court.

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It is apt to note here that no statement was made by Shri Salio before the adjudicating authority.  What is referred to as statement of Shri Salio is nothing but his oral submissions made at the hearing.

An adverse finding could not have been recorded against the GTC by relying upon the oral submissions made by a co-noticee at the hearing without any supporting material on record, providing due opportunity to GTC to meet the same.

For the reasons stated above,  the appeal is  accepted in part and directions issued by the  High Court to the Collector to summon Shri Sailo, Liantilinga and Lalchungunga   for necessary examination and to afford an opportunity to the GTC to cross-examine them are set aside.  But the order of the High Court setting aside the order of the Collector is sustained on the ground that the Collector had erred in placing reliance on the submissions of Shri Sailo.  The direction issued by the High Court   that the proceedings shall be taken by the officer other than the one who had made the adjudication order shall also stand set aside.  Otherwise also this direction has become infructuous with the passage of time.  The incumbent Collector is  directed to decide the matter afresh on the basis of any other material obtained and also placed on record for the purpose duly granting reasonable opportunity to GTC to produce evidence in rebuttal.

The  Collector is directed to dispose of the matter within four months from the date of appearance of the parties before it.  The parties through their counsel are directed to appear before the Collector of Customs, Shillong on 5th May, 2003.  No costs.

Civil Appeal No. 7815 of 1995

       This appeal is directed against the interim order arising in the same proceedings.  Since the final matter has been disposed of, this appeal has become infructuous and is disposed of accordingly.  No costs.