KIRLOSKAR CUMMINS LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) THE main question that arises for consideration in this writ petition relates to the interpretation of section 36 (2) read with section 36 (1) of the Central Excises and Salt Act, 1944.

(2.) THE facts out of which the petition arise are as follows:--- (A) In December 1973 the petitioner, Kirloskar Cummins Ltd. , had negotiations regarding export of 29 Engines to Tanzania. In March and April 1974, 5 Engines were cleared from the Factory for the purpose of export to Tanzania. In view of the export promotion policy the duty leviable on the export goods intended to be exported was much lower than the excise duty payable for the goods to be sold In India. Hence, the goods were allowed to be cleared by the Government on the payment of such lesser duty only. However, it is turned out that for reasons beyond the control of the petitioner/company the goods could not be exported. The petitioner/company had no doubt sold the goods to Kirloskar Electric Company Ltd. , for export. But since Kirloskar Electric Company Ltd. , could not export the goods, application was made by the petitioner/company to the Assistant Collector under the Excise Act for permission to sell the goods within the territory of India. By an order dt. 10th July, 1974 the Assistant Collector of Central Excise gave permission to divert the goods for internal market as requested by the petitioner. The petitioner was further directed by the said order to approach the Superintendent of Central Excise for consequential endorsement in the books of the said authority so as to enable the petitioner/company to make necessary amendment in their own books. However, on 22nd July, 1975 a Show-Cause notice was issued by the Superintendent of Central Excise, Pune, to the petitioner to show cause as to why the differential duty amounting to Rs. 24,987. 85 together with the penalty for non-payment thereof should not levied upon the petitioner-company in view of the fact that the duty payable for sale of goods in the territory of India was not duly paid. In a sense, the showcause notice was for short payment of duty and for levy of penalty. A reply was given by the Company to the said Notice. They also asked for an opportunity to be heard. Their contention was that the goods had been lawfully cleared from the Factory and that the duty which was payable for lawful clearance was already paid and that there was no jurisdiction vesting in the Excise Authority to call upon the petitioner to pay the differential duty. As a corollary to this contention, it was further contended that if no such differential duty was payable, no question of payment of penalty arose. This contention was negatived by the Assistant Collector, who by his order dated 8th October, 1975 ordered that the differential duty of Rs. 24,987. 85 should be paid by the Company. He also levied a penalty of Rs. 250/- for the short payment. The petitioner/company filed an appeal to the Collector of Central Excise. The quantum of penalty was challenged; as also was challenged the decision of the Assistant Collector to the effect that the differential duty was payable by the Company. The Collector in exercise of his appellate jurisdiction under section 35 of the Central Excises and Salt Act, 1944, as it then stood, dismissed the appeal so far as the liability for payment of the differential duty was concerned. But the amount of penalty for payment of the differential duty was concerned. But the amount of penalty was reduced by him from Rs. 250/- to Rs. 100/ -. Against this order the petitioner/company filed a Revision application on 13-09-1976 to the Central Government, evidently under section 36 of the Central Excises and Salt Act. During the pendency of this Revision Application, the Central Government issued a show cause notice to the company on 15-03-1977 calling upon them to show cause as to why the amount of penalty should not be enhanced. After giving the necessary hearing to the petitioner/company, the Central Government Passed an Order, evidently under section 35 (2) of the Act, on 25-09-1979, dismissing the Revision application, but enhancing the penalty from the amount of Rs. 100/- as fixed by the Collector in the appeal, to the amount of Rs. 50,000/-The present petition is filed against the said Order of the Central Government.

(3.) MR. Setalvad has formulated three propositions before the Court for this Courts consideration, viz. :---i) that the Central Government has no power in the facts and circumstances of the present case to enhance the penalty to anything beyond what was done by the Assistant Collector: (ii) that the purported exercise of the power of penalty is perverse in the circumstances of the case: (iii) that there can be no recovery of short levy of duty after the goods have been lawfully cleared from the Factory. However, I may state here that so far as the 3rd proposition is concerned, Mr. Setalvad has specifically given up the same. He no longer presses his claim of immunity from the liability to pay the differential duty. He made it clear that he wished to keep the point open. Only points Nos. (i) and (ii) were something upon which submissions were made by the learned Counsel.