INDIAN CHARGE CHROME LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) Direction issued by the Assistant Collector of Central Excise and Customs, Cuttack, prohibiting transmission of electricity by Indian Charge Chrome Limited ('ICCL', shortly), petitioner No. 1, to Indian Metals and Ferro Alloys Limited ('IMFA', shortly), petitioner No. 3, and the show cause notice issued in terms of Section 124 of the Customs Act, 1962 ('the Act' hereinafter) have been challenged in this writ petition.

(2.) SEQUENCE of facts leading to filing of present writ petition is as hereunder: A letter of intent was issued by Ministry of Industry, Department of Industrial Development, permitting IMFA to set up a 100% Export Oriented Unit ('EOU' for short). Said letter of intent related to manufacture of 50,000 MTPY of High Carbon Ferro Chrome/Charge Chrome at Talcher. The first letter of intent is dated 13 -5 -1981. Subsequently, another letter of intent dated 22 -10 -1982 was issued and direction was given to surrender the first letter of intent. The second letter of intent was amended transferring the same in the name of ICCL, petitioner No. 1. Commercial production was started by IMFA in its EOU some time thereafter. The second letter of intent was again amended for transfer of location of the project to Choudwar. Again, it was amended on 26 -11 -1984 permitting import of Captive Power Plant as capital goods for 100% EOU for manufacture of Charge Chrome. There was dispute as to whether the benefit of Customs Notification No. 13/81 -Cus., dated 9 -2 -1981 for import of Captive Power Plant machineries and equipments is applicable to petitioner No. 1's case. It is relevant to note that the Industrial Development Bank of India 'lDBI' in short) while dealing with the application for financial assistance made by the ICCL vide its communication dated 27 -10 -1984 imposed a condition that approval of the Central Board of Excise and Customs for exemption from payment of customs duty on equipments and building and other materials proposed to be imported for building the power plant, was necessary. The Government of India in the Ministry of Industry vide letter dated 26 -11 -1984 indicated about the permission to import the captive power generation equipment as capital goods for the 100% EOU to be set up at Choudwar for the manufacture of charge chrome etc. covered by the letter of intent dated 22 -10 -1982. On 1 -6 -1985 the Ministry of Finance in the Department of Revenue wrote to ICCL that the captive power plant being not amenable to the discipline of bonding, could not be given the benefit of exemption under 100% EOU scheme, and that so far as exemption outside the scheme is concerned the ICCL was advised to approach the concerned Administrative Ministry. Challenging the stipulation of conditions of disbursement referred to in Clause 15 of Special terms and conditions contained in the Appendix appended to the communication dated 27 -10 -1984 to which reference has been made earlier and the views of the Ministry of Finance that the captive power plant being not amenable to the discipline of bonding could not be given the benefit of exemption under 100% EOU scheme, Writ Petition Nos. 5218 and 5219 of 1985 were filed before the Apex Court and by order dated 5 -6 -1985 the petitions were disposed of. As a major part of the dispute involved in the present writ petition revolves round the effect of said order of the Apex Court, it needs to be quoted in full, and reads as follows : - 'The Industrial Development Bank of India (IDBI) is hereby directed to make disbursement prior to 15th June, 1985 of the first down payment of 15% of the loan amount and issue the guarantee referred to in the letter of intent of October 27, 1984. It is also hereby declared that notwithstanding the non -compliance or defect in compliance of any of the conditions of disbursement referred to in Clause 15 of the said letter of intent of October 27, 1984, the validity, legality and recoverability of the IDBI's investment, loans and advances shall not in any manner be prejudiced or affected and IDBI shall be in the same position as if such consents or approvals had been obtained. The petitioners should expeditiously approach the Government and other statutory authorities for the requisite permissions/approvals as per the aforesaid letter of intent. These authorities are directed to consider the applications expeditiously. As regards the approval of the Central Board of Excise & Customs for exemption from payment of Customs Duty, the Petitioners contend that Notification No. 13/81 dated 8th February, 1981 as applicable and is adequate for compliance of condition 15(f) of the IDBI's letter of intent dated 27th October, 1984. We declare and direct that the said Notification applies to the present case. In respect of conditions 15(b), 15(i) and 15(m) all concerned parties viz., IDBI, IOB, IB and the Petitioners will discuss and amicably resolve the issues involved prior to the first down payment by IDBI and in any event prior to 12th June, 1985. In the meantime, the Petitioners will on or before 12th June 1985 also execute the necessary loan agreements, documentation and other usual undertakings required by the IDBI and/or other financial institutions in accordance with their normal practice. It is also hereby expressly declared that this order has been passed having special regard to the facts of this case and will not constitute or form a precedent for any other case or matter. This order shall be binding upon all parties concerned and also all shareholders, creditors, depositors, liquidators and all other persons concerned with the company, including authorities and bodies including the Indian Overseas Bank, Indian Bank, Reserve Bank of India, the Central Electrical Authority, Controller of Capital Issues, Central Government and its Departments, State Government of Orissa and its departments, the Orissa State Electricity Board, Company Law Board, Customs Department, Excise Department etc.' Civil Miscellaneous Petition Nos. 23090 -91 of 1985 were filed for modification of order dated 5 -6 -1985. The prayer was rejected by order dated 17 -6 -1985. The said order is also of significance. Same reads as follows : - 'After hearing both the sides we see no reason to modify the order passed by this Court on 5th June, 1985. The period fixed in that order for down payment of 15% of the loan amount and issuance of the guarantee referred to in the letter of intent dated October 27, 1984 both of which are to be carried out by the I.D.B.I. has subsequently been extended till 21st June, 1985. It is hereby directed that the down payment of 15% of the loan amount and the issuance of the guarantee should be carried out by the I.D.B.I. before the said extended date. The guarantee may state that it is being issued in accordance with the directions issued by this Court and that the consents etc. required from the statutory authorities which have been applied for and are being awaited, shall be deemed to have been granted in view of the directions of this Court. The requisite loan agreements to be executed between the I.D.B.I. and the second petitioner shall be executed within three days from today incorporating the amendments set out in the letter dated 10th June, 1985 addressed by the I.D.B.I. to the second petitioner, a copy of which is available at page 179 of the paper book. This will be the only condition precedent in the matter of disbursement of the first down payment of 15% and the issuance of the guarantee referred to in the letter of intent. Within two weeks from today, the first petitioner I.M.F.A. shall execute a guarantee in favour of the I.D.B.I. in terms of Clause 15(m) of the letter of intent as well as the counter guarantee referred to in the said clause. Within the same period, the shares of I.M.F.A. and Dr. Panda, in I.C.C.L. shall be pledged in favour of I.D.B.I. by way of security liable to be proceeded against in the event of any default being committed by them in terms of the loan transaction. Counsel appearing for the petitioners Nos. 1 to 4 undertake to Court that these will be duly done. In the event of any problem arising by reason of any of the requisite consents not being obtained from the concerned authorities, it will be open to the parties to move this Court after the re -opening of the Court and not earlier for appropriate directions. This however, shall not hold up the disbursement of the 15% down payment and the execution of the letter of guarantee by the I.D.B.I. - - - - Counsel appearing for the I.D.B.I. states before the Court that his client will make available to the petitioner, tomorrow morning at the office of Miss Bina Gupta, Advocate on record, the agreement papers to be signed by the petitioner Nos. 1 and 2 and Counsel appearing for petitioners Nos. 1 and 2 states that petitioners Nos. 1 and 2 will execute the agreement tomorrow itself.' An application was filed for modification of the orders dated 5 -6 -1985 and 17 -6 -1985. In the application for modification filed by respondents in the writ petitions before the Apex Court, it was indicated that even though the power plant may be installed within the bonded premises, the distribution system will lie outside the bonded premises as the supply of electricity will be through the Orissa State Electricity Board (in short OSEB). The working of the captive power plant and the distribution system do not lend themselves to operation within the bonded area, which is a basic requirement of Customs Notification. It was further submitted that the power generated from one 100% EOU would be fed into a distribution system which would be located outside the bonded area thereby transgressing a specific condition of the notification. It was, therefore, contended that Notification No. 13/81 -Cus., only covers the items specified in it and does not extend to all the items mentioned in Para 15(f) of the IDBI's letter dated 27 -10 -1984. Specific stand was that Notification No. 13/81 -Cus. applies, subject to the fulfilment of the conditions specified in the Notification, namely, conditions (1) to (6). Conditions specified in the notification stipulate that the importer should carry out the manufacturing operation in Customs Bond and subject to such other conditions as may be specified by the Assistant Collector of Customs in this behalf. The company has not complied with aforesaid conditions for carrying out their operations in Customs. The Apex Court observed that the application is in truth and effect for review of the Court's orders dated 5 -6 -1985 and 17 -6 -1985 in the guise of seeking a modification of orders which can not be permitted. Thereafter several correspondences were made to various departments of the Central Government and the OSEB. So far as utilization of surplus power generated at Choudwar is concerned a tripartite agreement was entered into on 14 -2 -1989 between OSEB, ICCL and IMFA regarding wheeling of power. It was stipulated that the surplus power generated at Choudwar power plant would be fed to the OSEB grid at Choudwar and that IMFA would be allowed to draw equivalent quantum of power from the OSEB grid sub -station at Therubali. The Government of Orissa in the Irrigation and Power Department intimated ICCL that it has no objection in principle to the proposal submitted by the ICCL in this regard subject to the condition that the proposal is technically feasible and mutually acceptable and also subject to the finalization of commercial terms to the satisfaction of the OSEB and the State Government. Subsequently, another tripartite agreement was executed on 24 -4 -1991. On 8 -12 -1988 the Superintendent of Central Excise and Customs, Choudwar, informed the ICCL that its power plant was going to start generating electricity and the electricity generated as also any intermediatory or finished product obtained in the course of generation should not be removed outside the bonded area without prior permission of the competent authority. ICCL wrote to the Director (Customs) of the Central Board of Excise and Customs in the Ministry of Finance of the Government of India about the directions given by the Superintendent of Central Excise and Customs, Choudwar. In response to notice dated 8 -12 -1988 the ICCL requested Assistant Collector of Central Excise and Customs, Cuttack, by letter dated 28 -1 -1989 to take note of the actual position. The Assistant Collector by his letter dated 30 -1 -1989 intimated ICCL that it was allowed to clear electricity generated in its captive power plant at Choudwar to be transferred to the 100% EOU at Therubali through OSEB grid subject to furnishing of the undertaking as was contained in the letter dated 28 -1 -1989 of the ICCL further subject to the condition that the ICCL shall furnish monthly statement of quantity, of electricity transmitted from Choudwar unit and quantity received at Therubali unit. The Government of India in the Ministry of Industry in its letter dated 3 -7 -1989 intimated the ICCL that its application for grant of an Industrial Licence under the I.D.R. Act, 1951 for manufacture of High Carbon Ferro Chrome/Charge Chrome was considered and the licence was issued subject to certain conditions. On 3 -7 -1989 the Ministry of Finance required the ICCL to indicate whether the approval for sale of electricity to units in D.T.A. has been obtained from the Board of Approvals for 100% EOUs. and, if so, a copy of the same be furnished to the Ministry. At this stage the impugned direction to stop transmission of electricity, and later the show cause notices were issued.

(3.) ACCORDING to petitioners, the show cause notice is nothing but an attempt to got over the orders passed by the Apex Court. Having failed in their attempts to get the orders dated 5 -6 -1985 and 17 -6 -1985 varied, with mala fide intent and oblique motive the show cause notice has been issued. The notice is vague and does not specifically state as to which of the conditions contained in Notification No. 13/81 -Cus. have been violated. The allegation that there has been violation thereby rendering the subject goods liable to confiscation under Section 111(o) of the Act. The I.C.C.L. and I.M.F.A. and their Chairman and Managing Director Dr. B.D. Panda were called upon to explain as to why the captive power plant shall not be confiscated under Section 111(o) of the Act. It is submitted that the notice is vague and does not contain the basic materials which would have shown application of mind and the reasons for initiating the proceedings. Merely saying that there was violation of the terms and conditions of the notification is not sufficient. Mr. S.B. Mukherjee, learned Additional Solicitor General, raised a preliminary objection as regards maintainability of the writ petition. According to him, originally the direction prohibiting transmission of electricity was challenged, and subsequently by way of amendment, the show cause notice was brought into the fold of dispute. During the pendency of the writ petition, pursuant to the direction given by this court, the petitioners were permitted to file reply to the show cause notice before the adjudicating authority, which was done. The reply was considered in detail and an elaborate reasoned order of adjudication has been passed, which is not subject -matter of challenge in the writ petition. Further, the writ petition is not maintainable as effective, efficacious and statutory alternative remedy is available. Learned Counsel for the petitioners, however, submitted that the validity of the notice itself is under challenge and as attempt is being made to get over effect of the orders passed by the Apex Court, the existence of alternative remedy should not be considered to be a bar to entertain the writ petition. So far as the plea of existence of alternative remedy is concerned, it is further submitted that this Court is a Court of equity and should apply the principles of justice, equity and good conscience. The petitioners relied and acted upon the statutory provisions, the actual terms and conditions contained in Notification No. 13/81 -Cus. the orders of the Apex Court dated 5 -6 -1985, 17 -6 -1985 and 12 -3 -1986 dismissing the Revenue's miscellaneous petition. The respondents therein accepted the orders of the Apex Court and allowed the ICCL to feed the surplus power into the OSEB grid. It was for the first time, in February, 1995, that the respondents changed their stand and issued the impugned show cause notice. The principles of promissory estoppel and equitable estoppel are clearly applicable. As early as 1986, the Customs Department was aware that ICCL would feed surplus power to the OSEB grid. By order dated 30 -1 -1989 the Assistant Collector allowed the ICCL to feed surplus power into the grid. Therefore, the Department is bound by the principles of promissory estoppel, equitable estoppel and estoppel by conduct. In that background, it cannot take any action alleging that feeding of surplus power into the OSEB grid was in violation of the terms and conditions of Notification No. 13/81 -Cus. The Department of Customs cannot be allowed to flout the orders of the Apex Court and after having failed in their earlier attempts, impugned action has been taken with ulterior motive by distorting the factual and legal aspects to over -reach and circumvent the orders of the Apex Court. It is not that a show cause notice cannot be questioned in a writ petition. Reliance has been placed on a decision of the Punjab and Haryana High Court in Oswal Agro Furane Ltd. v. Union of India - 1989 (24) ECR 533 (P&H;), wherein it was held, inter alia, that licence having been granted with full knowledge of material facts, it has to be presumed that it was done with application of mind. Validity of an order can be judged by the wordings of the order, not by importing new points. In any event, the remedy now available after passing of the order of adjudication is to go before the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT), Eastern Bench. The demand raised on adjudication is a staggering sum of more than Rupees one hundred crores, and considering the unsound financial condition of the ICCL/IMFA, it would not be in a position to comply with the requirements of Section 129E of the Act which postulates deposit of duty demanded or penalty levied pending appeal. The balance -sheets of the concerns for last few years have been submitted to show that the financial condition of the ICCL/IMFA is not very sound. By way of reply, learned Additional Solicitor General submitted that it is open to the petitioners to move the Tribunal for relaxation of the terms of deposit and that cannot be a ground to by pass the statutory remedy.