In CIVIL APPEAL NOS. 8583-8584 OF 2010-SC- Top Court confirms Delhi HC’s judgment upholding constitutional validity of section 9-D of Central Excise and Salt Act, 1944, imposes cost of Rs 5 lakh on appellants
Justices Dipankar Datta & S. Ravindra Bhat [09-02-2023]

Read Jjudgment: G.T.C. INDUSTRIES LTD (NOW KNOWN AS GOLDEN TOBACCO LIMITED) THR. MANAGER LEGAL AND ANR v. COLLECTOR OF CENTRAL EXCISE AND ORS 

Mansimran  Kaur

New Delhi, February 14, 2023:  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 Supreme Court has observed while dealing with the appeals assailing the order passed by the Delhi High Court , wherein it declared section 9-D of the Central Excise and Salt Act, 1944 as intra vires

The Division Bench of Justice Dipankar Datta and S. Ravindra Bhat dismissed the instant appeals by observing that the endeavour of the appellants to have these appeals argued before this Court was of purely academic interest and would not serve any real purpose. 

These appeals, by special leave, challenged the judgment and order rendered by the Delhi High Court while disposing of the five writ petitions. The High Court, for the reasons assigned in the impugned judgment, declared section 9-D of the Central Excise and Salt Act, 1944 as intra vires while dismissing the writ petitions.

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.

Two show-cause notices 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.

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.

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 October 28, 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.

The Tribunal had disposed of the appeals in favour of the department, whereafter appeals were carried to this Court.

Subsequently, five writ petitions came up for hearing before the High Court . The common grievance of the petitioners was noted by the High Court 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. 

It was in terms of the order dated  April 25, 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 counsel appearing for the parties, the High Court passed the impugned judgment and order. 

After considering the submissions, the Court noted that 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 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.

The contentions raised 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, the Court noted. 

 “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 July 31,  2008 when the judgment and order dated  August 28,  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”, the Bench said.

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 this Court was, therefore, of purely academic interest and would not serve any real purpose, the Court observed.