ORKAY SILK MILLS LIMITED Vs. M S BINDRA

JUDGEMENT

(1.) By this petition filed under Article 226 of the Constitution of India, the petitioners are challenging the legality of the order dated June 1, 1985 passed by respondent No. 1. The petitioner No. 1 is a company carrying on business of manufacturing polyester filament yarn of the type known as Partially Oriented Yarn ("POY") as also of draw-texturing such "POY" into textured yarn. The petitioner-company has factories at Saki Naka in Greater Bombay and at Patalganga in Raigad District. The company started manufacturing "POY" from March, 1982 at Patalganga. The petitioner-company itself draw texturises some of its POY and there are also five companies and/or partnership firms which were connected with the petitioner-company and which also carry on the business of draw-texturising the POY manufactured by the petitioner-company. These concerns are : (1) Orlando Synthetic Industries Pvt. Ltd., (2) Paramount Synthetics (P) Limited, (3) KDB Crimping Proprietors Kapal Dyeing and Bleaching Works (P) Ltd., (4) Orkay International, and (5) Orkay Textiles Corporation. The petitioner No. 2 is a director and the chairman of the board of directors of petitioner No. 1 company.

(2.) The respondent No. 1 was the Director in charge of the Directorate of Anti Evasion, Central Excise, and his office was situated at New Delhi. Shri R. Bhattacharji was the Deputy Director at New Delhi, while Shri V.R. Gangurde was working as Deputy Director in Bombay. On Bombay 26, 1984, the respondent No. 1 along with Shri Bhattacharji and other members of the team came down to Bombay and raided the premises of the petitioner No. 1 company and simultaneously its associates, various texturisers, consumers, customers and dealers. The raids were carried out under the overall control and guidance of respondent No. 1 and of the two Deputy Directors : Bhattacharji and Gangurde. The raiding party obtained instructions from respondent No. 1 on telephone from time to time and thereafter reported the result of the raids and letters were also addressed to respondent No. 1 communicating the result. The factory premises of the company at Patalganga were also raided and the raiding party noticed a large quantity of waste which was stored by the company and which was the result of manufacture of POY and texturised yarn. On April 19, 1984, the Officers of the Directorate started weighting the said waste, but subsequently by May 8, 1984, the weighting work was abandoned and the panchnamas were prepared evidencing that fact. On August 6, 1984, the respondent No. 2 - the Central Board of Excise and Customs - published Notification No. 191/84-C.E. in exercise of powers conferred by Clause (b) of Section 2 of the Central Excises and Salt Act, 1944 (hereinafter referred to as the "Act") investing the Director, Anti Evasion (Customs and Central Excise in the Directorate of Revenue intelligence, New Delhi) with the powers of the Collector of Central Excise to be exercised by him throughout the territory of India. In view of this notification, the respondent No. 1 who was holding the post of Director, Anti Evasion, was invested with the powers of the Collector of Central Excise. On the same date, the Central Board enquired from respondent No. 1 as to which cases he would like to decide and respondent No. 1 selected the cases against the petitioners and its five associates. The cases were accordingly allotted to respondent No. 1 and respondent No. 1 on August 7, 1984 issued show cause notice to petitioner No. 1 and the other five concerns. The show cause notice runs into 39 pages with annexures running into 6 pages. The show cause notice was subsequently amended by corrigendum dated August 31, 1984 which was issued by Shri Bhattacharji who was one of the officers connected with the raid on the factory premises of the company. The allegations of the department broadly were that the company had not accounted for its entire production; the company has clandestinely removed the finished product and the company has made false declaration of deniers of yarn cleared from the factory. The show cause notice alleged that the company is guilty of evading payment of Excise duty on large scale.

(3.) After service of notice on petitioner No. 1 company on September 10, 1984, a request was made to respondent No. 1 to supply a copy of panchnama in respect of raid on the premises of Ramgopal Industries. On April 8, 1985, respondent No. 1 was requested to supply production report prepared by the company. On April 18, 1985, the request was reiterated and the company also claimed that one Shri Gokeni should be submitted for cross-examination. On April 19, 1985, the company informed respondent No. 1 offering demonstration of drawing 160 denier textured yarn made from POY of 755 denier. The offer was reiterated on May 15, 1985. On May 17, 1985, the respondent No. 1 was requested to permit cross-examination of Majumdar of Himsons and to supply copies of proceedings and depositions recorded. These applications made by the company were never answered. The respondent No. 1 gave hearing to the company on April 20, May 2, May 14, May 15, May 25, May 30, and May 31, 1985. The hearing concluded on May 31, 1985 at about 1.30 in the afternoon. The respondent No. 1 flew back to Delhi the same evening and declared the impugned order at New Delhi on June 1, 1985 which was a Saturday. The impugned order was given wide publicity in newspapers and corrigendum was issued on June 6, 1985. The petitioner No. 1 company received a cyclostyled copy of the order on June 12, 1985 and the order runs into 130 pages. By the impugned order, the respondent No. 1 directed the company to make payment of Rs. 4,48,48,562.67 P. towards the duty unpaid in respect of POY/PFY. The company was also directed to pay duty of Rs. 1,62,919.06 P. in respect of certain quantity of POY which could not be accounted during stock taking. A further duty of Rs. 2,06,78,648.80 P., Rs. 20,67,864.88 P. and Rs. 31,01,778.32 P., the total being Rs. 2,58,48,292.00 P. was imposed in respect of denier which was found to be mis-declared. The respondent No. 1 also ordered confiscation of a total quantity of 4,374.73 Kgs. of different deniers, and as the yarn was already removed provisionally, the security amount given by the company was ordered to be confiscated. The respondent No. 1 further imposed a penalty of Rs. 2,00,00,000 on the company. The respondent No. 1 further directed that the land, buildings, plant, machinery, materials, conveyance, etc., used by the company in connection with the manufacture, production, storage, removal, etc., of the goods should be confiscated, but the same can be redeemed on payment of fine of Rs. 1,00,00,000. The department was directed to take constructive possession of the building, plant, etc., pending redemption. The respondent No. 1 curiously imposed a personal penalty of Rs. 50,00,000 on petitioner No. 2 without even service of the show cause notice. The respondent No. 1 directed that orders pertaining to the remaining five concerns would be passed separately.