WP/23134/2003 of K.S.N. Prasad Engineering AND Pre-stressed Vs Commissioner of Central Excise on 31 December 2004

1. Commissioner of Central Excise & Customs, Visakhapatnam.

2. Eastern Power Distribution Company of A.P. Limited, Visakhapatnam, rep., by itsChairman & Managing Director.

3. The Superintending Engineer Operation Circle, APEPDC Limited, Visakhapatnam.

.....RESPONDENTS

Petition under Article 226 of the Constitution of India praying that in thecircumstances stated in the affidavit filed herein the High Court may be pleased toissue an appropriate writ, order or direction more particularly one in the nature ofMandamus declaring the action of the respondents 2 and 3 in not paying the Centralexcise duty on the PCC poles supplied by the petitioner to it as illegal, arbitrary andunconstitutional and consequently direct the respondents to forthwith pay the saidamounts.

Counsel for the Petitioner: Mr.B.ADINARAYANA RAO

Counsel for Respondent No.1: Mr.ARAJASHEKAR REDDY, SC FOR CG.

Counsel for Respondent Nos.2 & 3: Mrs.M.Vinobha Devi, SC FOR APEPDEC Ltd.

The Court made the following :

THE HON’BLE SRI JUSTICE M.H.S.ANSARI

AND

THE HON’BLE SRI JUSTICE B. SESHASAYANA REDDY

WRIT PETITION No.23134 of 2003

ORDER:(per Hon’ble Sri Justice M.H.S.Ansari)

The reliefs prayed for in the instant writ petition are founded on the averments statedin the affidavit filed in support of the writ petition. Briefly stated, they are; pursuant toa tender notice dated 30-8-1992 for manufacture and supply of pre-stressed cementconcrete poles for 11 KVA low tension power transmission lines, the petitionersubmitted a tender. The A.P. State Electricity Board (APSEB), now having thenomenclature, A.P. Transmission Corporation Ltd., the subsidiary of which, A.P.Eastern Power Distribution Company Ltd., (A.P.E.P.D.C. Ltd.) accepted thepetitioner’s bid and pursuant thereto, an agreement was executed between theparties i.e., the petitioner and respondent No.2 herein. According to the petitioner, asper Special Condition No.F.1, it is the liability of the Board to pay the Central/SalesTax legally payable. Reliance is placed upon Special Condition No.F.1, whichreads as under.

“F.1.The rate per pole shall be inclusive of cost of all material and labour inclusive ofall taxes and duties leviable as on 04-11-1982 by Central/State Governments and localbodies on raw materials but exclusive of Central/State sales tax legally payable on thefinished poles which only will be to the Board’s account. Any variation in the taxes or duties,levied thereafter i.e., after 04-11-1982 will be to the Board’s account. The Board will not, however, be responsible for the payment of sales tax or any other taxes or duties made bythe contractor under misappropriation of law.”

It is the further case of the petitioner that the cost component of the raw material ispre-determined and the Board all-through the execution of the contract mentionedthe prices of cement per M.T. as Rs.870/- and the price of steel as Rs.8265/- perM.T. regardless of the actual variation of the prices in the market. The petitioner paidthe Central Excise on the poles taking the valuation in terms of the contract.However, the Excise authorities objected to the valuation of the poles stating that theassessable value of the goods shall be current market value. A notice of demandwas issued by the Commissioner of Central Excise and penalty was also levied. It isaverred that, upon intimation of the said liability by the petitioner to respondent No.2,it (petitioner) was advised to file appeal and the same was admitted by CEGATdirecting the petitioner to make a pre-deposit of a sum of Rs.2,00,000/-, which sumwas paid by respondents 2 and 3. Ultimately, the said appeal was dismissed byorder dated 23-1-2003 by CEGAT.

It is the contention of Mr.B.Adinarayana Rao, learned counsel for the petitioner thatthe liability being statutory, the same is payable in terms of the contract byrespondents 2 and 3. It was further contended that the contention of respondents thatthe petitioner should first pay the Excise duty and then claim reimbursement, beingthe only defence of the respondents, is untenable. It is, therefore, contended that adirection accordingly should be issued to respondents 2 and 3 to comply with theirobligations under the contract and pay the Excise duty to the respondent authorities.

The claim is resisted on the grounds stated in the counter affidavit filed on behalf ofsecond respondent. Therein, it is admitted that the supply of two raw materials areby the Board and that the petitioner has to receive the conversion charges. Theconsolidated prices were revised on the rates quoted as on 4-11-1992. These ratesare subject to variation as per Clause F.3 of the contract. The petitioner receives theinvoices of conversion charges in terms of the escalation clause with regard toescalation of labour charges. It is further stated that the petitioner also receives theinvoices of the raw materials supplied for claiming the MODVAT credits and thushas knowledge about the prices of raw materials and it was, therefore, for thepetitioner to revise the values of the raw materials. Being a manufacturer ofexcisable goods, it was for the petitioner to have followed the procedure and regulations in the matter of Central excise payments. With regard to the appeal filedby the petitioner before the CEGAT, the case of respondent No.2 is that thepetitioner did not prosecute the appeal and the same was dismissed due to non-prosecution. The appeal was not decided on merits. It is not denied by respondentNo.2 that the petitioner submitted claim through Ex.P.3 intimating the Board to paythe amount of Rs.9,32,153/- to the Central Excise Department, but its stand is that asfinal orders were passed not on merits, but due to lapses and laches of thepetitioner, it is its (petitioner’s) responsibility to pay the said amount. In reply to theaverments in paragraph 10 of the affidavit filed in support of the writ petition, it isstated that the letter from the Board dated 15-4-2003 marked as Ex.P.4 has beenreceived by the petitioner asking it to pay the differential amounts and then seek forreimbursement explaining its stand.

Insofar as respondent No.1 being Commissioner of Central Excise & Customs isconcerned, his stand appears to be that he is not concerned with the inter se disputebetween the petitioner and its customer. The liability of excise duty is on themanufacturer and respondent No.1 is, therefore, not concerned with the dispute asraised in the writ petition.

Learned Standing Counsel for the Central Government reiterated the abovecontentions. None appeared on behalf of respondents 2 and 3.

The foremost question for consideration before the Court is with regard to themaintainability of the instant writ petition.

The matter is one arising under non-statutory contract (tender). Even though therespondent contracting party is a State within the meaning of Article 12 of theConstitution of India, can the relief as prayed for be granted in exercise of its writjurisdiction by this Court?

Mr.Adinarayana Rao, learned counsel for the petitioner, relied upon the judgment ofthe Supreme Court in ABL International Ltd. v. Export Credit Guarantee Corpn.of India Ltd. wherein this aspect of the matter was considered and more particularlylearned counsel has drawn attention of this Court to those observations contained inparagraph 27 of the judgment which read as under.

“From the above discussion of ours, the following legal principles emerge as to themaintainability of a writ petition:

a. In an appropriate case, a writ petition as against a State or an instrumentalityof a State arising out of a contractual obligation is maintainable.of a State arising out of a contractual obligation is maintainable.

b. Merely because some disputed questions of fact arise for consideration,same cannot be a ground to refuse to entertain a writ petition in all casesas a matter of rule.same cannot be a ground to refuse to entertain a writ petition in all casesas a matter of rule.

c. A writ petition involving a consequential relief of monetary claim is alsomaintainable.”maintainable.”

It is not and cannot be disputed that respondents 2 and 3 are statutoryauthorities being instrumentalities of the State. It is also not in dispute that theresponsibility for payment of Central/State sales tax on finished poles is that of thesaid respondents in terms of special condition F.1 extracted supra except thosemade by the contractor under mistake of law. It is also not disputed that the petitioneris primarily responsible for payment of excise duty in respect of excisable goods, inthe case on hand, being the pre-stressed cement concrete poles.

The substantive defence of respondents 2 and 3 appears to be that, firstly, thepetitioner was furnished with the invoices of raw materials supplied to it for claimingMODVAT credits and thus has knowledge about the prices of raw materials. It was,therefore, for the petitioner to have followed the procedure according to law withregard to payment of excise duty. The particulars as disclosed by the petitioner tothe Central Excise authorities without revising the same periodically commensuratewith the hike in the prices of the raw materials resulted in the levy of penalty.Secondly, the stand appears to be that the petitioner must first pay the excise dutyand thereafter claim reimbursement from respondents 2 and 3.

As held in ABL International Ltd. (supra), in appropriate cases, a writpetition arising out of a contractual obligation is maintainable against a State or ainstrumentality of State. As a matter of rule, a Writ Court may not refuse to entertain awrit petition even where some disputed questions of fact arise for consideration. Inother words, in appropriate cases, a Writ Court may entertain a writ petition.

The question now for consideration is whether the instant case is anappropriate case where the discretion to entertain writ petition should be exercisedin favour of the petitioner.

The case on hand, more particularly with regard to the relief as prayed for, isakin to the judgment of the Supreme Court in State of U.P. v. Bridge & Roof Co.(India) Ltd.. The distinguishing feature, in the case on hand, is absence of anyarbitration clause in the contract between the parties and further, the relief is forpayment of excise duty, whereas in Bridge & Roof Co. case (supra), the reliefclaimed was against deduction of sales tax at the statutory rate.

The Supreme Court in Bridge & Roof Co. case opined that the very remedyof writ in the facts of that case is misconceived on the ground that the contractbetween the parties is a contract in the realm of private law. It is not a statutorycontract. It is governed by the provisions of the Contract Act or, may be, also bycertain provisions of the Sale of Goods Act. “Any dispute relating to interpretation ofthe terms and conditions of such a contract cannot be agitated and could not havebeen agitated in a writ petition. That is a matter either for arbitration as provided bythe contract or for the civil court, as the case may be. Whether any amount is due tothe respondent from the appellant-Government under the contract, and if so, howmuch and the further question whether retention or refusal to pay any amount by theGovernment is justified, or not, are all matters which cannot be agitated in oradjudicated upon in a writ petition.” Unlike the facts in ABL International Ltd.(supra), which were not in dispute, the facts of the cases on hand requireadjudication before any relief can be granted. The disputed questions that requireconsideration, prima facie, appear to be with regard to the particulars as disclosedby the petitioner to the Central Excise authorities, and whether the petitioner revisedthe same periodically commensurate with the hike in the prices of raw materials,whether the petitioner was furnished with the invoices of raw materials supplied to it,and on that basis claimed MODVAT credits, and thus, had knowledge about theprices of raw materials, in determining the excise duty payable, whether theprocedure prescribed was followed by the petitioner in furnishing correct particularswith regard to prices of raw materials and other inputs which have to be consideredin the light of the special conditions of the contract in paragraphs F.1, F.2 and F.3. Inthe absence of relevant material and evidence on record before us, it would not beeither proper nor prudent to adjudicate on these issues much less on the question asto the liability of the respondents to pay the penalty levied on the petitioner. Thelatter is dependent upon the answer to the questions of fact raised in the counteraffidavit to which we have alluded to. In the facts and circumstances of this case, we are not inclined to entertain the writ petition on the ground of availability ofefficacious alternative remedy to the petitioner by way of civil suit.

The writ petition is accordingly dismissed with liberty, however, to thepetitioner to avail of such remedies as may be available to it at law and as it may beadvised. It need only be clarified that if the petitioner avails of such remedy, thestatements or observations made in this judgment and order shall not prejudiciallyaffect either parties to those proceedings which shall be heard and disposed of upontheir own merits uninfluenced in any manner by any statement or observationcontained in this judgment and order.

Conclusion

In the result, with liberty as afore-stated reserved to the petitioner, the writpetition is dismissed, however, without any order as to costs.

_____________________________

(M.H.S.ANSARI, J.)

31[st] December 2004.

ARS

_____________________________

(B.SESHASAYANA REDDY, J.)

To

1. Commissioner of Central Excise & Customs, Visakhapatnam.

2. Eastern Power Distribution Company of A.P. Limited, Visakhapatnam, rep., by itsChairman & Managing Director. Chairman & Managing Director.

3. The Superintending Engineer Operation Circle, APEPDC Limited, Visakhapatnam. Visakhapatnam.

4. 2CD copies.