Holding

A writ petition is maintainable when a show‑cause notice is issued with pre‑meditation and the authority has already determined liability, rendering the High Court's refusal to exercise jurisdiction erroneous.

Summary

Siemens Ltd., a multi‑location company, owned a factory within the Bombay Municipal Corporation (BMC) limits and another outside those limits. The BMC issued a show‑cause notice demanding payment of municipal cess on goods supplied from the factory outside its jurisdiction. Siemens filed a writ petition under Article 226 challenging the jurisdiction of the notice. The High Court refused to entertain the petition, holding that writ courts ordinarily cannot interfere with a show‑cause notice. The Supreme Court allowed the appeal, holding that when a statutory authority issues a notice with pre‑meditation and has already determined liability, the writ petition is maintainable. Consequently, the High Court's order was set aside and the matter remitted for fresh consideration. The Court emphasized that a show‑cause notice that merely quantifies liability, after the authority has decided the liability, is not amenable to a writ petition unless pre‑meditation is shown.

Issues considered

Whether a writ court can entertain a petition challenging a show‑cause notice issued by a municipal authority when the authority has already determined liability.
Whether the Bombay Municipal Corporation had jurisdiction to levy cess on goods supplied from a factory outside its territorial limits.
Whether the High Court erred in refusing to exercise its jurisdiction under Article 226 of the Constitution.

Legislation cited

Bombay Provincial Municipal Corporation Act, 1949

Subjects

Writ jurisdictionArticle 226Show cause noticeMunicipal cessJurisdictional factPremeditationStatutory authorityLiability determination

Judgment

M/S. SIEMENS LTD. A
v.
ST ATE OF MAHARASHTRA AND ORS.

DECEMBER 1, 2006

[S.B. SINHA AND MARKANDEY KA TJU, JJ.] B

Constitution of India, 1950-Article 226-Discretionary jurisdiction
under-To interfere with show cause notice directing payment of cess-
Permissibility-Writ Petition challenging jurisdiction of the Authority levying C
cess-Authorities already determined the liability-Held: Ordinarily a Writ
Court may not exercise its discretionary jurisdiction in entertaining a writ
petition questioning show cause notice-But when notice is issued with
premeditation, writ petition is mainrainable-As the Authority had
predetermined the liability, the writ petition is maintainable.
D
Appellant, a multi location company was owing two factories one falling
within the local limits of Bombay Municipal Corporation and the other factory
fell outside the jurisdiction of the Corporation. Respondent-Corporation
directed the establishment of appellant which fell outside the jurisdiction of
the Corporation, to pay the cess. Show cause notice making the demand was
issued. Appellant's stand was that they were not liable to pay cess for goods E
supplied from that factory as it did not fall within local jurisdiction of the
Corporation.

Appellant filed Writ Petition questioning the jurisdiction of issuance
of the notice by the Corporation. High Court refused to exercise
jurisdiction under Article 226 of the Constitution interfering with demand F
directing payment of cess.

Allowing the appeal, the Court

HELD: 1. Although ordinarily a writ court may not exercise its
discretionary jurisdiction in entertaining a writ petition questioning a G
notice to show cause unless the same inter alia appears to have been
without jurisdiction. (929-B-CJ

State of Uttar Pradesh v. Brahm Datt Sharma and Anr. AIR (1987) SC
925 H
926 SUPREME COURT REPORTS [2006] SUPP. 9 s.c:R. _,
....
A 943; Special Director and Anr. v. Mohd. Ghulam Ghouse and Anr. (2004] 3
SCC 440; Union of India and Anr. v. Kunisetty Satyanarayana (2006] 12
SCALE 262 - referred to.

2. But when a notice is issued with pre-meditation, a writ petition
would be maintainable. In such ·an event, even if the court directs the
B statutory authority to hear the matter afresh, ordinarily such hearing
would not yield any fruitful purpose. It is evident in the instant case that
the respondent has clearly made up its mind. It explicitly said so both in
the counter affidavit as also in its purported show cause. [929-C-E)

c V.C. Banaras
K.I. Shephard and Ors. v. Union of India and Ors. [1987) 4 SCC 431;
Hindu University and Ors. v. Shrikant (2006] 6 SCALE 66;
Shri Shekhar Ghosh v. Union ofIndia and Anr. (2006) 1 l SCALE 363; Rajesh
Kumar and Ors. v. D.C.l.T. and Ors. (2006) 11 SCALE 409 - relied on.

3. A bare perusal of the order impugned before the High Court as
D also the statements made before this Court in the counter affidavit filed
by the respondents, the Court is satisfied that the statutory authority has
already applied its mind and has formed an opinion as regards the liability
or otherwise of the appellant. If in passing the order the respondent has
already determined the liability of the appellant and the only question
which remains for its consideration is quantification thereof, the same does
E
not remain in the realm of a show cause notice. ,The writ petition was
maintainable. [930-A-BJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5295 of2006.

From the final Order dated 8-7-2005 of the High Court of Judicature
F at Bombay in Writ Petition No. 4338 of 2005.

Harish N. Salve, Prakash Shah, Jay Savla and Ms. Reena Bagga for the ~

Appellant.

Vinay Navare, Naresh Kumar, A.P. Mayee and V.N. Raghupathy for
G the Respondents.

The Judgment of the Court was delivered by.

S.B. SINHA, J. Leave granted.

H Whether the High Court in exercise of its jurisdiction under Article 226

'f
SIEMENS LTD. v. STATE OF MAHARASHTRA [S.B. SINHA, J.) 927
of the Constitution of India would interfere with a demand directing payment A
of cess is in question in this appeal which arises out of a judgment and order
dated 8.07.2005 passed by a Division Bench of the High Court of Judicature
at Bombay in Writ Petition No. 4338 of 2005.

The appellant is a multi location company. It has a factory and godown
at Kalwe. It pays cess for the goods supplied from the said factory in terms B
of the provisions of the Bombay Provincial Municipal Corporation Act, 1949.
It also owns a factory at Aurangabad. Its office is at Kharghar~ The said
factory at Aurangabad and the office at Kharghar are outside the jurisdiction
of the city limits ofNavi Mumbai and, thus, outside the territorial jurisdiction
of the Bombay Municipal Corporation. Supplies are made to dealers directly C
from the appellant's factory situated at Aurangabad and office at Kharghar.
However, the establishment of the appellant at Kalwe was directed to pay
taxes, although according to it, no jurisdictional fact exists therefor.

The demand was made terming the same as a show cause notice. It
appears that in course of routine investigation, some vendors had made certain D
complaints as regards the transactions of goods from the appellant's factory
at Kalwa. The appellant made its representation on receipt of the said purported
demand. Oral and written submissions were also made on 2.05.2005 and
10.06.2005 stating that the appellant had neither been receiving any goods
. within the local limits of Respondent No. 2 nor was it an importer in respect
of the goods directly sold from its Aurangabad factory or from its sub- E
vendors' manufacturing premises and, therefore, they were not liable to pay
any cess thereupon.

By reason of a purported show cause notice, the appellant was directed
to make payment of cess with interest immediately in respect of the purported F
supplies made to Navi Mumbai parties right from 1.06.1996. It was, however,
stated:

"You are also requested to attend at above address at 11.00 a.m.
on 4.7.05 hearing. I am enclosing herewith the photocopies of the
bills raised by Aurangabad Daman divisions to the Navi Mumbai G
Vendees."

A writ petition was filed by the appellant herein questioning the said
purported notice. By reason of the impugned order, the High Court refused
to exercise its jurisdiction under Article 226 of the Constitution of India
stating: H
928 SUPREME COURT REPORTS (2006] SUPP. 9 S.C.R.

A "Challenge is to a show cause notice issued by the Corporation
demanding certain payment of cess on the value of goods imported
from Aurangabad and Daman. Petitioners may file their reply to the
show cause notice and produce the relevant documents within two
weeks. In case the order is adverse to the petitioner no recovery shall
be made for a period of four weeks from the date of service of the
B order on the petitioner."

Before this Court a counter affidavit has been filed wherein although
inter alia it was contended that the said show cause notice cannot be termed
as an order determining the rights and obligations of the parties, it has clearly
C been stated:

"I say that the show cause notice dated 22.6.2005 at Annexure P-
2 to the Special Leave Petition indicates that the Respondent No. 2
Corporation has been deprived of lawful recovery of Cess on the said
goods imported within the jurisdiction of the Respondent Corporation.
l say that such evasion of Cess is in huge amounts and it is perfectly
D
within the rights of the respondent Corporation to call upon all the
parties involved in the transactions to arrive at the exact finding of
fact. I say that for arriving at the finding of fact with regard to the
said imports there are many facts which need to be taken into account.
I say that such factual aspects include : which is the party which has
E imported the goods within the jurisdictional limits of the respondent
Corporation what is the nature of contract between the seller and the
said importer of goods, is there any mechanism used by the parties
to avoid payment of Cess on the said import of goods, what is the
extent of Cess that is evaded as a result of such mechanism and who
ultimately can be held responsible both for the purposes of recovery
F
as also for the purpose of penalty ..... "

It was further asserted:

" .. .I say that it is well known that under the Bombay Provincial
Municipal Corporation (Cess on Entry of Goods) Rules 1996 goods
G purchased from registered dealers are not subject to Cess. I say that
in this view of the fact the entire nature of the transactions, to which
the petitioner also was party, need to be examined and scrutinized
from the perspective ofrecovery ofcess and identification of liability.
I say that if the petitioner has directly or indirectly supplied the goods
H the petitioner itself must come forward to cooperate with the respon-
SIEMENS LTD. v. STATE OF MAHARASHTRA [S.B. SINHA, J.] 929

dent Corporation to enable it to discharge its duties prescribed under A
the B.P.M.C. (Cess on Entry of Goods) Rules, 1996 read with B.P.M.C.
Act 1949 .... "

The question as to whether jurisdictional fact existed for issuance of the
said notice order passed by the respondent was in question in the said writ
~~ B
Although ordinarily a writ court may not exercise its discretionary
jurisdiction in entertaining a writ petition questioning a notice to show cause
unless the same inter a/ia appears to have been without jurisdiction as has
been held by this Court in some decisions including State of Uttar Pradesh C
v. Brahm Datt Sharma and Anr., AIR (l 987) SC 943, Special Director and
Anr. v. Mohd. Ghulam Ghouse and Anr., [2004] 3 SCC 440 and Union of
India and Anr. v. Kunisetty Satyanarayana, (2006) 12 SCALE 262, but the
question herein has to be considered from a different angle, viz, when a
notice is issued with pre-meditation, a writ petition would be maintainable.
In such an event, even if the courts directs the statutory authority to hear the D
matter afresh, ordinarily such hearing would not yield any fruitful purpose
[See K.I. Shephard and Ors. v. Union of India and Ors., [1987] 4 SCC 43 l
: AIR (1988) SC 686]. It is evident in the instant case that the respondent has
clearly made up its mind. It explicitly said so both in the counter affidavit as
also in its purported show cause. E
The said principle has been followed by this Court in V.C. Banaras
Hindu University and Ors. v. Shrikant (2006) 6 SCALE 66, stating:

"The Vice Chancellor appears to have made up his mind to impose
the punishment of dismissal on the Respondent herein. A post F
decisional hearing given by the High Court was illusory in this case.

In K./. Shephard & Ors. etc. etc. v. Union of India & Ors., AIR
(l 988) SC 686, this Court held :

" .. .It is common experience that once a decision has been taken, G
there is tendency to uphold it and a representation may not really
yield any fruitful purpose."

[See also Shri Shekhar Ghosh v. Union of India & Anr., (2006) l l
SCALE 363 and Rajesh Kumar & Ors. v. D. C.I. T. & Ors., (2006) 11 SCALE
409] ff
930 SUPREME COURT REPORTS {2006] SUPP. 9 S.C.R.

A A bare perusal of the order impugned before ~he High Court as also the
statements made before us in the counter affidavit fj~ed by' the respondents,
we are satisfied that the statutory authority has already· ci~plied its mind and
has formed an opinion as regards the liability or otherwise of the appellant.
If in passing the order the respondent has already determined the liability of
B the appellant and the only question which remains for its consideration is
quantification thereof, the same does not remain in the realm of a show cause
notice. The writ petition, in our opinion, was maintainable.

For the reasons aforementioned, the impugned judgment cannot be
sustained which is set aside accordingly. The appeal is allowed and the matter
C is remitted to the High Court for its consideration afresh on its own merits.
No costs.

K.K.T. Appeal allowed.