- (1.) The petitioners carry on business in co-partnership under the firm name Messrs. Howrah Proofing Co., at No. 113/1, Shri Arbindo Road, in the town of Howrah. The petitioners allege that in the business of the said firm they carry on the work of processing canvas with the help of a plant run by manual labour and as such the canvas processed by them is exempt from payment of Central Excise duty. They further allege that when they discontinued the use of electric power in their factory, they informed the Deputy Superintendent, Central Excise, about the fact by a letter, dated May 1, 1962, which is set out below : "This is to inform you that due to increase in taxation of processed Cotton Fabrics in the Finance Bill, 1962, I have intended to switch over my factory from Power driven to hand driven, as present I am not in a position to continue the present system which requires a good finance in my business. The Calcutta Electric Supply Co. has disconnected and sealed my meter on 30-4-1962 (a.m.) on our request. So, we request you kindly to visit our factory and after necessary inspection please permit us to start our factory on hand driven in our licence premises. In this connection we are to state that if we like to switch over the factory to power driven again during this year, we will inform you at least 15 days before the commencement of the same." On July 21, 1962, the petitioners say, the factory premises of the petitioners was searched by a raiding party from the Central Excise Department and the books of account of the petitioners were seized. Thereafter, the respondent No. 2 - Assistant Collector, issued a notice, dated September 25, 1962 by registered post, addressed to the firm name of the petitioners. The material portion of the said notice reads as follows : "Whereas it appears that M/s. Howrah Proofing Co. of 113/1, Shri Arabindo Road, Salkia, Howrah, holding L4 licence No. 1 (CF)/59, have contravened the provisions of Rules 9, 52A & 53 of the Central Excise Rules, 1944, inasmuch as they manufactured in their processing factory a quantity of 9,00,948.60 sq. metre of processed cotton canvas valued about Rs. 19,60,166.22 nP. between the period from 17-4-1961 to 12-7-1962 and cleared the same from the factory without account in the Central Excise records and without payment of Central Excise duty and in a manner otherwise then as provided in the Central Excise Rules, 1944, the said M/s. Howrah Proofing Co. are hereby requested to show cause to the Collector of Central Excise, Calcutta & Orissa, Calcutta, 15/1, Strand Road, Custom House, Calcutta (i) Why penalties should not be imposed on them under Rules 9(2), 52A & 226 of the Central Excise Rules, 1944 and (ii) Why the Central Excise duty of a sum of Rs. 49,760.78 nP. due on 9,00,948.60 sq. metre of cotton canvas at appropriate rate should not be recovered from them under Rule 9(2) of the Central Excise Rules, 1944. * * * * * * * 4. M/s. Howrah Proofing Co. shall also indicate in the written explanation, whether they wish to be heard in person before the case as adjudicated. 5. If no cause is shown against the action proposed to be taken within 10 (ten) days of the date of receipt of this notice, or they do not appear before the Adjudicating Officer (Collector of Central Excise, Calcutta & Orissa, Calcutta) when the case is posted for hearing, the case will be decided ex parte ." Along with the show cause notice was attached a long statement of the case against the petitioners, on which the proposed action was intended to be taken. That notice, the petitioners say, was received by them on September 30, 1962. Before the date fixed for showing cause expired, the petitioners say further, the respondent No. 3, Deputy Superintendent, Central Excise, sent a notice of demand to the petitioners under Rule 9(2) of the Central Excise Rules, calling upon them to pay Rs. 49,760.78 nP. being the amount of excise duty on goods manufactured by the petitioners at their factory above named between April 17, 1961 and July 12, 1962. The petitioners made a representation, dated October 22, 1962, before the respondent No. 1 Collector, both against the notice to show cause and the notice of demand, praying for withdrawal and cancellation of the demand. The respondent-Collector heard the Counsel engaged by the petitioners, over-ruled the contentions put forward and on January 28, 1963, passed the following order : "I imposed penalty of Rs. 500/- under each of the Rules 9(2), 52A & 226 of the Central Excise Rules, 1944 (Rs. 1,500/- in all) on M/s. Howrah Proofing Co. of 113/1, Shri Arabindo Road, Salkia, Howrah. M/s. Howrah Proofing Co. should also pay excise duty on the entire quantity of 9,00,948.60 sq. metres of processed cotton canvas, produced and clandestinely removed by them." Aggrieved by the order, the petitioners moved this Court, under Art. 226 of the Constitution, praying for a Writ of Certiorari for the quashing of the notice, dated September 29, 1962, and the order, dated January 28, 1963, and for a mandate upon the respondents restraining them from taking steps under the order dated January 28, 1963 and obtained this Rule, limited to the following ground : "The petitioners did not get an opportunity to formulate their objections against the said purported notice due to denial of access to the relevant books of account and papers seized and also the premature decision and assessment made by the Respondent No. 3 issuing notice of demand before the expiry of the period granted in the notice for showing cause, and the said purported order, dated 28th January, 1963, was made in violation of the principles of natural justice and/or without jurisdiction." Now, section 3 of the Central Excises & Salt Act, 1944, authorises imposition of excise duties specified in the first schedule of the Act. Rule 9 of the Central Excise Rules, 1944 prescribes rules regarding time and manner of payment of duty and the penalty to be imposed for evasion of payment of duty. Rules 52-A provides for delivery of excisable goods from factories only under gate passes and makes breach of the provision liable to penalty. Rule 226 provides as to how entry-books, stock accounts and warehouse registers are to be maintained and makes breach of the provision liable to penalty. Therefore, if the petitioners did really contravene the provisions of Rules 9, 52A and 226, or any of them, it is within the power of the Central Excise authorities to realise the duty that escaped payment and to penalise the petitioners for evasion of payment of duty. In this case, regard being had to the limited nature of the rule issued. I am not concerned with the propriety or the correctness of the order.
(2.) Mr. R. Chaudhury, learned Advocate for the petitioners, argued that the notice to show cause was received by the firm of the petitioners on September 30, 1963, and the firm had 10 days' time to show cause, that is to say, upto October 11, 1963. Before, however, the petitioners could show cause, the decision was taken exparte by respondent No. 3 Deputy Superintendent and a demand notice was issued. Thus, Mr. Chaudhury contended the petitioners were denied all opportunities to show cause and, as such, the order of assessment made and the penalty imposed were done in violation of the principles of natural justice.
(3.) The argument made by Mr. Chaudhury is attractive but fizzles out on ultimate analysis. When a person is charged with evasion of duty should not be realised from him and why further he should not be realised from him and why further he should not be penalised for breach of statutory provision as to payment of duty, no action should be taken against him until the cause shown by him, if any, is considered and decided or, where no cause is shown until the time fixed for showing cause expires. In issuing the demand notice for payment of duty, alleged to have been evaded, the respondent Deputy Superintendent showed under haste and a state of mind wholly made up against the petitioners beforehand. If the Deputy Superintendent had been the adjudicating authority, I might have upheld the argument of Mr. Chaudhury on the ground that the Deputy Superintendent had a fore-sworn mind and that the opportunity given to the petitioners to show cause was only a matter of form. But in this case, the Deputy Superintendent was not the adjudicating authority. The Notice to show cause was issued by an Assistant Collector of Central Excise, calling upon the petitioners to show cause before the Collector of Central Excise, Calcutta and Orissa, who was the adjudicating authority. It appears from the adjudication order, (1) that the petitioners asked for extension of time before the collector to show cause, which prayer was allowed, (2) that they submitted their written explanation to the notice on October 21, 1962, (3) that their request for personal hearing was granted by the Collector, (4) that a Counsel for the petitioners appeared before the Collector and made his submissions, and (5) that the Collector considered the objections of the petitioners and delivered a reasoned order of adjudication. Therefore, the charge of violation of principles of natural justice can hardly be levelled against the respondent Collector.;