PRAKASH COTTON MILLS PVT LTD Vs. S M BHARDWAJ ASSISTANT COLLECTOR OF CENTRAL EXCISE BOMBAY DIVISION

JUDGEMENT

(1.) This is an appeal preferred by Prakash Cotton Mills Private Limited and its Director against the judgment dated July 16, 1980 delivered by Mr. Justice Aggarwal dismissing the Writ Petition filed by the appellants for quashing show cause notice dated August 30, 1975 and March 17, 1976 issued by the Assistant Collector of Central Excise, Bombay. Few facts giving rise to the filing of the petition are as follows :

(2.) Prakash Cotton Mills have a registered Office in Bombay and are owners of Textile Mills situate at Lower Parel, Bombay. The Textile Mill is duly licensed and employee large number of workers, who work on spindles and handlooms. The Mills have obtained an Excise Licence under Rule 174 of the Central Excise Rules, 1944 and the Licence specifies the place of manufacture of cotton fabrics, the place being the factory premises. On March 11, 1963. Officers of the Central Excise Department seized certain goods of the mills which were lying in the premises of M/s. Jalan Dyeing & Bleaching Mills, Bombay, which is the sister concern of the appellants. The Excise Officers attached several documents, books of accounts, vouchers and papers and mills filed Writ Petition No. 127 of 1963 in the Court to challenge the seizure of the goods. The Writ Petition was dismissed and so also the appeal preferred to the Supreme Court.

(3.) The Assistant Collector of Central Excise raided the premises of M/s. Jalan Dyeing & Bleaching Mills and M/s. Lokenath Tolaram , a partnership concern which is respondent No. 6 in this appeal and several other parties and recovered large number of documents and there upon issued a detention order. It is required at this juncture to state that respondent No. 5 to the original petition, i.e. Adarsh Vidyut Kargha Sahakari Samiti Limited, is a registered Co-operative Society constituted under the provisions of the Maharashtra Co- operative Societies Act. In the documents seized by the Excise authorities, it was noticed that Prakash Cotton Mills and M/s. Lokenath Tolaram, a partnership firm, had set a bogus Co-operative Society, i.e. respondent No. 5 to the petition for Securing benefits available under Exemption Notification dated January 5, 1957 as amended up to April 24, 1962. The modus operandi was that the employees of Prakash Cotton Mills were enrolled as members of the Co- operative Society and each member was shown to own 4 powerlooms. This modus was employed because the Government of India, Ministry of Finance (Department of Revenue) had issued Exemption Notification prescribing that unprocessed cotton fabrics manufactured by or no behalf of the same person is one or more factories commonly known as powerlooms (without spinning plants) in which less than 5 powerlooms in all but no roller lopcker machine are installed would be exempted from payment of the excise duty leviable thereon under the Central Excises and Salt Act, 1944. This exemption was not available to a manufacturer who commences production for the first time on or after April 1, 1961 by acquiring powerlooms from any other person who is or has been a licensee of a powerloom factory. According to the Excise authorities, Prakash Cotton Mills in collusion with M/s. Lokenath Tolaram, a partnership firm, set up a bogus Co-operative Society and enrolled members who are in the employment of the mills only to prepare evidence that each of the members owns less than 4 powerlooms from which unprocessed cotton fabrics is manufactured. The members of the Co-operative Society are alleged to have manufactured excisable fabrics for Prakash Cotton Mills and M/s. Lokenath Tolaram at several places in Bombay. The Excise authorities realised that excisable cotton fabric was not only manufactured by Prakash Cotton Mills and M/s. Lokenath Tolaram, a firm. but was removed and sold in the market without payment of duty. Thereupon the Excise authorities issued 35 show cause notices followed by demand notices in the month of June and August, 1964. Prakash Cotton Mills Challenged the demand notices by filing Miscellaneous Petition No. 324 of 1964 in this Court under Article 226 of the Constitution of India complaining that the demand notices were issued and the amounts are tried to be recovered by the Excise authorities without complying with the principles of natural justice in as much as proper opportunity was not given to the petitioners to show cause. The petition was decided in favour of the Mills and Civil Appeal No. 917(N) of 1971 preferred by the Excise authorities before the Supreme Court was withdrawn in the year 1975. The Excise authorities stated before the Supreme Court that in view of the judgment of the High Court that principles of natural justice was not observed, the Excise authorities would serve fresh show cause notices on the petitioners and would hold fresh proceedings.