UNION OF INDIA AND ANR.versusM/S. G.T.C. INDUSTRIES LTD., BOMBAY

A                        UNION OF INDIA AND ANR.
                                         v.
                 MIS. G.T.C. INDUSTRIES LTD., BOMBAY

                                MARCH 27, 2003

B    (SYED SHAH MOHAMMED QUADRI AND ASHOK BHAN, JJ.)


          Central Excise Act, 1944-So?Ction 14-Evasion ofexcise duty-Notice-
    Oral submission by co-noticee before authority-Opportunity to rebut the         •
C   same not given to noticee-company-Adverse order against the noticee-
    Company re(ving on the oral submission of co-noticee-Order of the authority
    quashed by High Court holding the reliance on the submission as wrong-On
    appeal plea that reliance on submission was not placed by authority and even
    if placed same may be ignored as other material sufficient to come to the
    conclusion-Held, reliance on the submission factually proved-Order of
D   authority cannot be sustained ignoring the submission-Adverse finding could
    not have been recorded against noticee-Company relying on the oral submission
    without any supporting material and without opportunity to the Company to
    meet the same.

         Practice and Procedure:
E
          Quasi Judicial Order-· Review of-Held, has to be judged on the basis
    of judgment contained therein and not on the basis of pleas in the counter
    affidavit or oral arguments.

           Show cause notices were issued to the respondent-company, its front
F   company and its partners among others for having evaded payment of
    excise duty. One of the partners appeared before the Collector of Central
    Excise in absence of the representatives of the respondent-company and
    made oral submissions. Respondent-company requested to issue summons
    under Section 14 of Central Exdse Act, 1944 to partners in order to cross
G   examine them. The Collector refused to issue summons. The ruling of the
    Collector declining to issue summons was challenged by a writ petition
    on the ground of violation of principles of Natural Justice. High Court
    initially stayed all the proceedings in pursuance to the show cause notice
    by its interim order, but later vacated the same. Hence the matter was
    taken to this Court by way of Special Leave Petition wherein the Court
H                                        48
                    U.0.1. v. G.T.C. INDUSTRIES LTD.,                      49
had directed the Collector to pass the final order and place the same before     A
High Court. The Collector as per the direction of this Court passed the
final order relying on the statement of the partner and forwarded the order
to the High Court. High Court quashed the order of the Collector on the
grounds that denial of opportunity to cross examine the partners amounted
to breach of principles of Natural Justice; and that Collector had erred         B
in placing reliance on the submissions of the partners. The matter was
remanded to the Collector with a direction to summon the partners.

      In appeal to this Court appellant-State contended that the Collector
in coming to the finding did not rely on the statement of the partner; and
that order of the Coll~ctor should be ~ustained by ignoring the statement        C
of the partner as there was other sufficient material on record to sustain
and justify the said order.

      Respondent-company contended that the order of the Collector was
based on the statement ·made by the partner before the authorities; and
that the partner could not be relied on for recording an adverse order           D
against the respondent-company.

      Disposing of the appeals, the Court

      HELD: 1. Collector passed his order in original quoting extensively
from the statement made before him by the partner makes it clear that
the Collector had placed strong reliance on his statement. It is specifically    E
recorded in the order that the departmental representatives who appeared
before the Collector had also plactd strong reliance on his statement. The
Collector's order is based largely and substantially if not entirely on his
statement. High Court in its judgment has also recorded a finding that
the Collector in its order had substantially relied upon his statement.          p
                                                          (54-G, H; 55-A]

      2. It cannot be said that the order of the Collector should be sustained
by ignoring the statement of the partner as there was other sufficient
material on record to sustain and justify the said order. It may not be
possible to separate or disentangle his statement from other material            G
evidence on record. A quasi-judicial order has to be judged on the basis
of reasoning contained therein and not on the basis of pleas put forward
by the person seeking to sustain the order in its counter affidavit or oral
arguments before the court. [55-D, E]

     3. No statement was made by the partner before the adjudicating             H
                                                                                   J
    50                    SUPREME COURT REPORTS                 [2003] 3 S.C.R.
A   authority. What is referred to as his statement is nothing but his oral
    submissions made at the hearing. An adverse finding could not have been
    recorded against the respondent-Company by relying upon the oral
    submissions made by a co-noticee at the hearing without any supporting
    material on record, providing due opportunity to respondent-Company
B   to meet the same. 155-F, GI

          4. Directions issued by the High Court to the Collector to summon
    the partnersfor necessary examination and to afford an opportunity to the
    respondent-Company to cross-examine them are set aside. But the order
    of High Court setting aside the order of the Collector is sustained on the
C   ground that the Coilector had erred in placing reliance on the statement
    of the partner. The direction issued by High Court that the proceedings
    shall be taken by the officer other than the one who had made the
    adjudication order shall also stand set aside. Otherwise also this direction
    has become infructuous with the passagf' of time. The incumbent Collector
    is directed to decide the matter afresh on the basis of any other material
D   obtained and also placed on record for the purpose duly granting
    reasonable opportunity to respondent-Company to produce evidence in
    rebuttal. 155-H; 56-A, B)

         CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7531 of 1995.

E        From the Judgment and Order dated 20. l 0.1990 of the Gauhati High
    Court at Assam in C.R. No. 1940 of 1989.
                                    WITH
         C.A. No. 78 I 5 of 1995.

         Jaideep Gupta, N.K. Bajpai, K.K. Dhawan and B.K. Prasad for the
F   Appellant.

         S. Ganesh, Mrs. Robina Nath, Mrs. Nisha Bagchi, U.K. Khaitan for
    Khaitan & Co., J.D. Jain (NP) and Mrs. Hemantika Wahi for the Respondent.

          The Judgment of the Court was delivered by
G
          BHAN, J. Civil Appeal No. 7531 of 1995

          Union of India has filed this appeal against the order of the Gauhati
    High Court in Civil Rule No. 1940 of 1989 wherein the High Court at the
    instance of respondent No. I has quashed the order passed by the Collector
H   of Customs and Central Excise, Shillong. (for short 'the Collector') dated
               U.0.1. v. G.T.C. INDUSTRIES LTD., [ASHOK BHAN, J.]                 51

     I 5th May I 990 and remanded the case to the Collector for a fresh decision        A
     with the following directions :

                  "In view of the above, the adjudication order dated 15.5.90 is set
             aside. The collector shall resume the proceedings and summon the
             aforesaid three persons viz. Sri R. Salio, Sri Liangtilinga and Sri
             Lalchungunga for necessary examination in accordance with the              B
             observation made above and thereafter proceed to decide the matter
             afresh. The other materials obtained and already on record shall be
             available for the purpose . We also direct that further proceedings
             shall be taken by an officer other than the one who has made the
             adjudication order dated 15/ 16 May, 1990 and the competent authority
             in that regard shall take appropriate action and make necessary orders."   C
           Facts relevant to the points raised in this appeal are:

           GTC Industries Ltd. (respondent in this appeal) is a well known
     manufacturer of cigarettes having itsown brand names one of which is Panama
     Virgin. GTC Ltd. was having its cigarettesmanufactured inter alia, through         D
     Mis. North Eastern Tobacco having its own place of work in Mizoram. These
     cigarettes were beingremoved from the premises of North Eastern Tobacco
     (hereinafter referred to 'NET') without payment of Excise Duty and the same
     was detected when certain vehicles carrying the cigarettes wereapprehended
     by the Excise Authorities.
                                                                                        E
            The Collector issued Show Cause Notices to GTC and NET. Show
     Cause Notices were also issued to the partners of NET Mis Sailo, Lalchunganga
     and Liangtilinga, to one Ajay Sukhani who was the power of attorney holder
     on behalf of NET and also the officers of GTC and its sister concerns with
     the allegation that NET was set up as a front company by GTC to evade              F
     payment of excise duty. Contravention of various provisions of the Act was
     alleged against GTC as well as its officers.

            In the course of hearing before the Collector of Central Excise GTC
     applied to the Collector requesting that summons be issued under Section 14
     of the Central Excise Act, I 944 (hereinafter referred to as the 'Act') to the     G
     partners of NET including Shri Sailo so that GTC could cross examine him.
     The Collector after hearing arguments ruled that he could not issue summons
     to the said persons inasmuch as they were also co-noticees to the proceedings.
·~   Tjley had also been issued show cause notices for contravening the provisions
     of the Act and therefore could not be compelled to appear for the purpose of
     cross-examination by another co-noticee. The Collector held:                       H
    52                    SUPREME COURT REl'ORTS                 [2003] 3 S.C.R.

A           "Of the persons who were asked to cross-examination three of them
    viz. Richard Sailo, Liangtilinga. Lalchungnunga are co-noticees to these
    proceedings. By issuing them summons. as requested by GTC, prejudice is
    likely to be caused to their defence by compelling their attendance before me.
    It isan established principle of law that no noticee can be forced to appear
B   before the adjudicator . In fact, I had given the opportunity by letters dated
    23rd Oct., 1989 and 17th November, 1989 to Mis GTC to bring these persons
    as their own witnesses, if they wished to rely on their testimony. But they
    have not done so. Being unable to issue summons to these persons, 1 cannot
    but reject the request of GTC."

C         The ruling of the Collector declining to issue summons was challenged
    in the High Court by filing the present Writ Petition before the completion
    of the adjudication proceedings on the ground of violation of Principles of
    Natural Justice.

          The High Court initially on 4th of December, 1989, as an interim
D measure, stayed all the proceedings in pursuance to the Show cause notice.
    Later on , on 24th January, 1990 , the stay granted on 4th of December 1989
    was vacated by the Division Bench. The matterwas further carried to this
    court by filing SLP 6288/90 which was heard and disposed of on 4th May,
    1990 with the following observations:

E              "After some arguments, both sides are agreedthat the respondent
            may pass the final order of adjudication.However, the order may not
            be communicated to the petitioner. It may be put in a sealed cover
            and placed before the High Court for such directions as the High
            Court may give at the time of hearing of the writ petition.

F               We are told that the writ petition is likely to come up before the
            High Court for hearing on 17th May, 1990. We hope that the Writ
            Petition will be disposed of expeditiously.

          The SLP is disposed of in these terms."

G       On 15th of May, 1990, the collector passed the final order in the
  adjudication of the show cause notice and forwarded the same in a sealed
  cover to the High Court in terms of the order passed by this Court in SLP
  6288/90. On I0th of July, 1990 High Court opened the sealed cover and
  delivered a copy of the order of the Collector to the counsel for GTC and'
  directed that it may be served on the other affected parties as well. The High     '
H Court concluded the hearing on I0th August 1990 and the impugned judgment
             U.0.1. v. G.T.C. INDUSTRIES LTb .• [ASHOK BHAN, J.)              53
    was pronounced on 20th October, 1990.                                          A
           Plea raised by the appellant that since the final order passed by the
    Collector had been communicated to the affected persons as required under
    the law, the parties should be directed to seek their remedy by wayof appeal
    provided under the Act was rejected by the High Court onthe ground that
    alternate remedy was not an absolute bar to the exercise of extraordinary B
    jurisdiction under Article 226 of the Constitution. In thegiven facts and
    circumstances of the case the Coutt could proceed to examine the correctness
    or otherwise of an order without asking the aggrieved party to exhaust the
    alternate remedy of filing of appeal/revision provided under the Act. It was
    held that GTC had come to the Court before the finalisation of the adjudication C
    by the Collector with the grievance that the proceedings were being conducted
    in violation of Principles of Natural Justice. Finalisation of the proceedings
    by the Collector were made subject to the decision of the Writ Petition. As
    the order of the Collector came into being during the pendency of thewrit
    petition, the same could be examined by the Court and if necessary relief
    moulded to the requirements of the subsequent developments which had D


-   taken place during the pendency of the writ petition.

          On merits, the counsel appearing for the GTC before the High Court
    confined his arguments to the issue of infringement of the violation of
    Principles of Natural Justice only. The High Court held that denial of         E
    opportunity to the GTC to cross-examine Shri Sailo, Lalchunganga and
    Liangtilinga was nothing shm1 of denial of reasonable opportunity to the
    Writ Petitioner to defend and establish its version. That the same amounted
    to the breach of Principles of Natural Justice. On this basis the final
    adjudication order of Collector was set aside and the matter was i\emitted
    back with the direction to resume ~he proceedings and issue summons to the     F
    partners of NET for necessary cross-examination by GTC and thereafter to
    decide the matter afresh.

          Learned Senior Counsel appearing for the Union of India Mr. Jaideep
    Gupta submitted that no statement was taken from Shri Sailo by the authorities G
    nor did the authorities rely upon any statement of Shri Sailo against GTC.
    That it was not a case where the evidence had been produced by the appellant
    in support of its case and no opportunity of cross-examination was given to
    the other side.Notice could not be issued to Shri Saito under Section 14 of
    the Act to compel his attendance and to make a statement coupled with the
}
    opportunity to the GTC to cross-examine him. That Shri Sailo being a co- H
    54                    SUPREME COURT REPORTS                    (2003] 3 S.C.R.

A noticee, could not be compelled to appear as witness against himself.Non-
    summoning of a co-noticee for the purpose of cross-examination by another
    co-noticee did not amount to breach of Principles of Natural Justice. In the
    alternative, it was submitted that in a case based on violation of Principles of
    Natural Justice, it is to be shown that some prejudice was caused to the
B   aggrieved person because of the alleged breach of violation of Principles of
    Natural Justice. It was vehemently contended that the Collector in coming to
    the finding that the GTC was the real manufacturer and the NET its front
    company did not rely upon the statement of Shri Sailo. In coming to this
    finding the Collector had primarily placed reliance on the statements of other
    persons.
c
           Per contra, Shri Ganesh who appeared for the respondent fairly conceded
    that he could not support the direction issued by the High Court to summon
    Shri Sailo under Section 14 of the Act and produce him for cross-examination
    by the OTC.But he entered a caveat to the submission of the counsel for the
    appellant that the Collector had n01 placed reliance on the statement of Shri
D   Sailo. Relying upon the findings recorded by the High Court. it was contended
    that the Order of the Collector was based on the statement/submissions made
    by Shri Saito before the authorities. That the statement/submissions of Shri
    Saito could not be relied upon for recording an adverse order against the
                                                                                       -
    GTC.
E
         Submissions put forth by the counsel appearing for the Union of India
  cannot be accepted. It is an admitted case before us that Shri
  Sailo,Lalchunganga or Liangtilingadid not file any response by way of a
  written reply. Their statements were also not recorded. Shri Saito appeared
  before the Collector on 25th November, 1989 in the absence of the
F representatives of GTC, on which date the collector recorded the submissions
  of Shri Saito. At the subsequent hearing which took place on Ist May, ·1990,
  representatives of GTC attended the proceedings but were not given any
  notice or information about the submissions/statement made by Shri Sailo on
  25th November, 1989. Thereafter. on 15th May. 1990, Collector passed his
G order in original quoting extensively from the submissions.istatement made
  before him by Shri Saito which ran into three pages which itself makes it
  clear that the Collector had placed strong relian.:e on the submissions/statement
  of Shri Saito.It is specifically recorded in the order that the departmental
  representatives who appeared before the Collector had also placed strong
  reliance on the submis~ions/statement of Shri Saito. The Collector's order is
H based largely and substantially if not entirdy on the submissions of Sliri
              U.0.1. v. G.T.C. INDUSTRIES LTD., [ASHOK BHAN, .1.)                55

    Sailo. The High Court in paragraphs 27 and 28 of its judgment has also             A
    recorded a finding that the Collector in its order had substantially relied upon
    the submissions made by Shri Sailo.ln paragraph 27 it is recorded:

                 "It may also here be noted that the Collector in his adjudication
            order, made on 15th May, 1990, has substantially relied Upon the
            statement of Shri Sailo which was made to the Collector at a personal      B
            hearing."

          In paragraph 28, it is observed:

                 "The utilisation of Shri Sailo's statement in itself shows that the
            statement of Mr. Sailo was indeed not only necessary but of substantial    C
            importance in the consideration and proper adjudication on the version
            of the petitioner."

           Counsel for the appellants failed to displace the finding recorded by the
    High Court on this point. Contentionof the counsel for the Union of India
    that the or~er of the Collector should be sustained by ignoring the submissions/   D

-   statement of Shri Sailo as there was other sufficient material on record to
    sustain and justify the said order cannot be accepted. It may not be possible
    for us to separate or disentangle the submissions of Shri Sailo from other
    materialevidence on record. It is well settled that a quasi-judicial order has
    to be judged on the basis of reasoning contained therein and not on the basis      E
    of pleas put forward by the person seeking to sustain the order in its counter
    affidavit or oral arguments before the court.

          It is apt to note here that no statement was made by Shri Salio before
    the adjudicating authority. What is referred to as statement of Shri Salio is
    nothing but his oral submissions made at the hearing.                              F
          An adverse finding could not have been recorded against the GTC by
    relying upon the oral submissions made by a co-noticee at the hearing without
    any supporting material on record, providing due opportunity to GTC to meet
    the same.
                                                                                       G
           For the reasons stated above, the appeal is accepted in part and directions
    issued by the High Court to the Collector to summon Shri Sailo, Liantilinga
    and Lalchungunga for necessary examination and to afford an opportunity to
    the GTC to cross-examine them are set aside. But the order of the High Court
    setting aside the order of the Collector is sustained on the ground that the
    Collector had erred in placing reliance on the submissions of Shri Sailo.The H
    56                    SUPREME COURT REPORTS                   [2003] 3 S.C.R.

A direction issued by the High Court that the proceedings shall be taken by the
    officer other than the one who had made the adjudication order shall also
    stand set aside.Otherwise also this dirt:ction has become infructuous with the
    passage of time. The incumbent Collector is directed to decide the matter
    afresh on the basis of any other material obtained and also placed on record
B   for the purpose duly granting reasonable opportunity to GTC to produce
    evidence in rebuttal.

          The Collector is directed to dispose of the matter within four months
    from the date of appearance of the parties before it. The parties through their
    counsel are directed to appear before the Collector of Customs, Shillong on
C   5th May, 2003. No costs.

          Civil Appeal No. 7815 of 1995

         This appeal is directed against the interim order arising in the same
    proceedings. Since the final matter has been disposed of. this appeal has
D   become infructuous and is disposed of accordingly. No costs.

    K.K.T.                                                   Appeals disposed of.
                                                                                      -