Esskay Minerals vs The Coal India Limited

Dhirubhai Naranbhai Patel, Actg. C.J.

Counsel appearing for the petitioner submitted that they are seeking stay against Annexures-2 and 3 mainly for the reasons that the royalty amount as well as stowing excise duty has been added in the assessable value for the payment of the excise duty on coal. It is submitted by the counsel for the petitioner that the issue involved is whether the amount of royalty and the amount of stowing excise duty can be treated as tax or not and if it is treated as tax, it is excluded from the valuation of the goods in question under Section 4(3)(d) of the Central Excise Act, 1944. Stowing excise duty is leviable under the Coal Mines (Conservation and Development) Act, 1974 and it is defined under Section 3(j) of this Act and charging Section is Section 6 of the Act, 1974.

Counsel appearing for the respondents vehemently submitted that it is true that the matter is pending before the Nine Judges'' Bench of Hon''ble the Supreme Court. As per the order passed by the Hon''ble Supreme Court in the case of Mineral Area Development Authority etc. Vs. Steel Authority of India and Others, , paragraph 2 of the said order reads as under:

"2. Before concluding, we may clarify that normally the Bench of five learned Judges in case of doubt has to invite the attention of the Chief Justice and request for the matter being placed for hearing before a Bench of larger coram than the Bench whose decision has come up for consideration (see Central Board of Dawoodi Bohra Community v. State of Maharashtra). However, in the present case, since prima facie there appears to be some conflict between the decision of this Court in State of W.B. v. Kesoram Industries Ltd. which decision has been delivered by a Bench of five Judges of this Court and the decision delivered by a seven-Judge Bench of this Court in India Cement Ltd. v. State of T.N., reference to the Bench of nine Judges is requested. The office is directed to place the matter on the administrative side before the Chief Justice for appropriate orders."

Thus, there are two decisions rendered by Hon''ble the Supreme Court-one is by seven Judges'' Bench in the case of India Cement Ltd. and Others Vs. State Of Tamil Nadu and Others, and another decision rendered by Hon''ble the Supreme Court in the case of The State of West Bengal Vs. Kesoram Industries Ltd. and Others, . The earlier judgment reported in the year 1990 was delivered by the seven Judges'' Bench, whereas the decision reported in the year 2004 was delivered by Five Judges'' Bench. There is also another decision referred in the case of Mineral Area Development Authority (Supra) by the Hon''ble Supreme Court.

Looking to the contentions raised in this writ petition, Rule.

Counsel for the respondents waives notice of Rule.

So far interim relief is concerned, looking to the provisions of Central Excise Act, 1944, especially for valuation of the goods, as per Section 4 thereof, there is no prima facie case in favour of the petitioner. Balance of convenience is also not in favour of the petitioner and no irreparable loss will be caused to the petitioner if the stay, as prayed for, is not granted. If the petitioner succeeds, whatever amount is paid to the Union of India, shall be returned by the respondents, whereas, if the petition is dismissed, there are all chances that the respondents may not be in a position to recover the tax. There is no, prima facie, case in favour of the petitioner. Hon''ble the Apex Court in the case of Assistant Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. and Others, , especially at paragraph nos. 5, 6 & 7, has held as under:

"5. We repeat and deprecate the practice of granting interim order which practically give the principal relief sought in the petition for no better reason than that a prima facie case has been made out, without being concerned about the balance of convenience, the public interest and a host of other relevant considerations. Regarding the practice of some clever litigants of resorting to filing writ petitions in far-away courts having doubtful jurisdiction, we had this to observe: [SCC para 2, p. 648: SCC (Cri.) pp. 350-51]

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We have come across cases where the collection of public revenue has been seriously jeopardised and budgets of Governments and Local Authorities affirmatively prejudiced to the point of precariousness consequent upon interim orders made by courts................................. We have come across cases where an entire Service is left in a stay of flutter and unrest because of interim orders passed by courts, leaving the work they are supposed to do in a state of suspended animation.................... But since the law presumes that public authorities function properly and bona fide with due regard to the public interest, a court must be circumspect in granting interim orders of far-reaching dimensions or orders causing administrative, burdensome inconvenience or orders preventing collection of public revenue for no better reason than that the parties have come to the court alleging prejudice, inconvenience or harm and that a prima facie case has been shown.............................................. We often wonder why in the case indirect taxation where the burden has already been passed on to the consumer, any interim relief should at all be given to the manufacturer, dealer and the like !

There is just one more thing that we wish to say. In Siliguri Municipality v. Amalendu Das, the Court was put to the necessity of pointing out the following: [SCC para 4, pp. 438-39 : SCC (Tax) pp. 135-36]

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We desire to add and as was said in Cassell & Co. Ltd. v. Broome we hope it will never be necessary for us to say so again that "in the hierarchical system of courts" which exists in our country, "it is necessary for each lower tier", including the High Court, "to accept loyally the decisions of the higher tiers". "It is inevitable in hierarchical system of courts that there are decisions of the Supreme Appellate Tribunal which do not attract the unanimous approval of all members of the judiciary.... But the judicial system only works if someone is allowed to have the last word and that last word, once spoken, is loyally accepted." The better wisdom of the court below must yield to the higher wisdom of the court above. That is the strength of the hierarchical judicial system. In Cassell & Co. Ltd. v. Broome commenting on the Court of Appeal''s comment that Rookes v. Barnard was rendered per incuriam. Lord Diplock observed:

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It is needless to add that in India under Article 141 of the Constitution the law declared by the Supreme Court shall be binding on all courts within the territory of India and under Article 144 all authorities, civil and judicial in the territory of India shall act in aid of the Supreme Court.

7......................................................................... We do not have the slightest doubt that the orders of the learned Single Judge as well as Division Bench are wholly unsustainable and should never have been made. Even assuming that the Company had established a prima facie case, about which we do not express any opinion, we do not think that it was sufficient justification for granting the interim orders as was done by the High Court. There was no question of any balance of convenience being in favour of the respondent Company. The balance of convenience was certainly in favour of the Government of India. Governments are not run on mere bank guarantees. We notice that very often some courts act as if furnishing a bank guarantee would meet the ends of justice. No governmental business or for that matter no business of any kind can be run on mere bank guarantees. Liquid cash is necessary for the running of a Government as indeed any other enterprise. We consider that where matters of public revenue are concerned, it is of utmost importance to realise that interim orders ought not to be granted merely because a prima facie case has been shown. More is required. The balance of convenience must be clearly in favour of the making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the public interest................................................................. "

(Emphasis supplied)

In view of this decision also, we see no reason to stay the operation, implementation and execution of Annexures-2 and 3, annexed to the instant writ petition. Nonetheless, if the petitioner succeeds in the writ petition, the amount shall be paid to the petitioner by the respondents forthwith with interest, as decided at the time of final hearing.

Counsel for both the sides submitted that the matter which is referred before the Nine Judges'' Bench by the Hon''ble Supreme Court will decide the issue involved in this writ petition also, which is mainly pertaining to whether royalty tantamount to tax or not? And whatever will be the logic on that royalty will also be a logic of stowing excise duty because, there is no issue pending before Hon''ble the Supreme Court about the stowing excise duty, whether it is tax or not?

This matter will be taken up for its hearing as and when, the counsel for the petitioner is ready and upon his mentioning.