Assistant
Collector of Central Excise, Guntur Vs. Ramdev
Tobacco Company [1991] INSC 15 (25 January 1991)
Ahmadi,
A.M. (J) Ahmadi, A.M. (J) Venkatachalliah, M.N. (J)
CITATION:
1991 AIR 506 1991 SCR (1) 126 1991 SCC (2) 119 JT 1991 (1) 199 1991 SCALE (1)70
ACT:
Central
Excises and Salt Act, 1944/Central Excises and Salt Rules 1944: Section
40(2)/Rules 32, 151, 160-`Other legal proceedings'- Whether includes-Issuance
of show cause notice and initiation of consequential adjudication proceedings.
HEAD NOTE:
The
appellant issued a notice calling upon the respondent who was a dealer in
tobacco to show cause why duty should not be demanded under Rule 160 of the
Central Excise Rules, 1944 on the tobacco removed from his warehouse and not
accounted for, and further to show cause why penalty should not be imposed for
infraction of the Rules.
The
respondent sent a detailed reply, and after hearing him the appellant came to
the conclusion that the respondent had evaded payment of duty. Thereupon the
appellant issued a demand notice for the duty payable and further imposed a
penalty.
The
respondent filed a writ petition in the High Court challenging the order of the
appellant. The learned Single Judge allowed the petition taking the view that
the appellant's action was time barred because under section 40(2) of the
Central Excises and Salt Act, 1944 no suit, prosecution or other legal
proceedings could be instituted for anything done or ordered to be done under
the law after the expiration of six months from the accrual of the cause of
action. The Division Bench dismissed the appellant's appeal.
Before
this Court it was inter alia contended on behalf of the appellant that the
expression `other legal proceeding' is preceded by particular words of a
certain genus, i.e., `suit' and `prosecution', indicating reference to
proceedings taken in courts only, and, therefore, the wide words must be
limited to things ejusdem generis and must take colour from the preceding words
and receive a limited meaning to exclude proceedings of the type in question.
Allowing
the appeal of the Revenue, this Court,
HELD:
(1)
The rule of ejusdem generis is generally invoked where 127 the scope and ambit
of the general words which follow certain specific words (which have some
common characteristic and constitute a genus) is required to be determined.[131G]
(2)
The cardinal rule of interpretation is to allow the general words to take their
natural wide meaning unless the language of the statute gives a different
indication or such meaning is likely to lead to absurd results in which case
their meaning can be restricted by the application of the rule of ejusdem generis
and they may be required to fall in line with the specific things designated by
the proceding words. But unless there is a genus which can be comprehended from
the preceding words, there can be question of invoking this rule. Nor can this
rule have any application where the general words precede specific words
[132B-C]
(3)
The wide expression `other legal proceeding' must be read ejusdem generis with
the preceding words `suit' and `prosecution' as they constitute a genus. [133H]
(4)`Suit'
or `prosecution' are those judicial or legal proceedings which are lodged in a
court of law and not before any executive authority, even if a statutory one.
[132E-F]
(5)
The penalty and adjudication proceedings in the instant case did not fall
within the expression `other legal proceeding' employed in section 40(2) of the
Act, as it stood prior to its amendment by Art.22 of the 1973, and therefore,
the said proceedings were not subject to the limitation prescribed by the said
sub-section. [ 133H; 134A] Public Prosecutor, Madras v. R. Raju & Anr. etc., [1973] S.C.R. 812; Universal
Cables Ltd. v. union of India, [1977] E.L.T. (J92); Amar Chandra v.
Excise Collector, Tripura, A.I.R. 1972 S.C. 1863; C.C. Industries & Ors. v.
H.N. Ray & Anr., [1980] E.L.T. 442, referred to.
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 2341 of 1978.
From
the Judgement and Decree dated 16.11.1977 of the Andhra Pradesh High Court in
Writ Appeal No. 358 of 1976.
Altaf
Ahmed, Additional Solicitor General, P. Parmeshwaran and Dilip tandon for the
Appellant.
128
A.S. Nambiar and B. Parthasarthy for the Respondent.
The Judgement
of the Court was delivered by AHMADI, J. This appeal, on certificate, is
directed against the decision of the High Court of Andhra Pradesh which was
quashed the imposition of duty and levy of penalty on the ground that the show
cause notice was issued after the expiry of the period of six months from the
accrual of the cause of action. The facts leading to this appeal are as
follows:
The
respondent M/s. Ramdev Tobacco Company, a sole proprietory concern, was at all
material times a dealer in tobacco having a licenced warehouse at Guntur. The dealer was liable to pay duty
on the tobacco received at his warehouse and transported to another dealer. On
August 30, 1972 the appellant issued a notice calling upon the respondent to
show cause why duty should not be demanded under Rule 160 of Central Excise
Rules, 1944 (`the Rules' hereafter) on 64,444 kgs. of VFC Farmash Tobacco
removed from his warehouse and not accounted for in the warehouse register
maintained under the Rules. The respondent was also asked to show cause why
penalty should not be imposed for infraction of Rules 151 and 32(1) of the
Rules for illicit removal of the aforementioned quantity of tobacco. This show
cause notice was founded on the allegation that in 1970 the respondent obtained
six transport permits (T.P. 2) dated January 13, 1970, February 10, 1970, March
26, 1970, May 16, 1970, July 24, 1970 and August 5, 1970 and transported under
each permit more than the quantity of tobacco allowed thereunder in
contravention of the aforementioned rules.
The
respondent sent a detailed reply to the said show cause notice on November 4, 1972. After giving a personal hearing to
the respondent on September
18, 1973 the appellant
came to the conclusion that the respondent had evaded payment of duty on 1272
bags weighing 48,304 Kgs, of VFC Farmash tobacco and issued a demand under Rule
160 in the sum of Rs.1,66,165.76 under adjudication order No. 173/74 dated April 9, 1974. In addition thereto the appellant
imposed a penalty of Rs. 100 for contravention of Rules 151 and 32(1) of the
Rules. Thereupon the respondent filed a writ petition No.2600 of 1974 under
Article 226 of the Constitution challenging the aforesaid order of the
appellant. This writ petition was heard and disposed of by a learned Single
Judge of the High Court who took the view that the appellant's action was time
barred inasmuch as it was initiated after the expiry of the period of six
months from the accrual of the cause of action. According to the learned Judge
under section 129 40(2) of the Central Excises and Salt Act, 1944 (`the Act'
hereinafter) no suit, prosecution or other legal proceeding could be instituted
for anything done or ordered to be done under the law after the expiration of
six months from the accrual of the cause of action. Since a period of more than
six months had indisputably expired from the dates on which the excess tobacco
was transported under the six transport permits in question, the action was
clearly time barred. In this view of the matter the writ petition was allowed
and the demand made under the impugned adjudication order both in respect of
duty and penalty was quashed. The present appellant questioned the correctness
of this view in appeal, Writ Appeal No. 358 of 1976, but in vain. The Division
Bench found the view taken by the learned Single Judge in accord with its view
in Writ Petition No. 2516 of 1974 decided on April 1, 1976. It, therefore, dismissed the appeal but since it had
granted a certificate to appeal in the case relied on, it also granted a
similar certificate which has given rise to this appeal.
Sub-section
(2) of section 40 of the Act as it stood at the relevant point of time before
its amendment by Amendment Act 22 of 1973 read as under:
"No
suit, prosecution or other legal proceeding shall be instituted for anything
done or ordered to be done under the Act after the expiration of six months
from the accrual of the cause of action or from the date of the act or order
complained of".
Before
we proceed to analyse this sub-section it would be advantageous to bear in mind
that sub-section (1) of this section bars the institution of any suit,
prosecution or other legal proceeding against the Central Government or its
officer in respect of any order passed in good faith or any act in good faith
done or ordered to be done under the Act.
The
second sub-section prescribes a period of limitation for suits, prosecutions
and other legal proceedings instituted, lodged or taken for anything done or
ordered to be done under the Act. That is why in Public Prosecutor, Madras v. R.Raju & Anr., etc., [1973]
SCR 812 it was urged on a conjoint reading of the two sub-sections that
sub-section (2) applied only to Government and could not come to the rescue of
a tax payer. Rejecting this contention this Court held:
"The
two sub-sections operate in different fields.
The
first sub-section contemplates bar of suits against the Central Government or
against the officers by protecting them in 130 respect of orders passed in good
faith or acts done in good faith. It is manifest that the second sub- section
does not have any words of restriction or limitation of class of persons unlike
sub-section (1). Sub-section (2) does not have any words of qualification as to
persons. Therefore, sub- section (2) is applicable to any individual or
person." This the appellant's contention that sub-section (2) was confined
only to the Government officers was found to be unwarranted on the plain words
of the provision and was also repelled by reference to other comparable
statutes which went to show that whenever the legislature intended to limit the
application against the Government officers, the Legislature had chosen
appropriate words of limitation to restrict the operation of the provision. It
follows, therefore, that the application of the sub-section extended to any
person, not being a Government Officer, against whom any suit, prosecution or
other legal proceeding was commenced for anything done or ordered to be done
under the Act.
The
next contention convassed in that case by the learned counsel for the appellant
was that the words "anything done or ordered to be done" employed in
the sub- section would not include anything done in violation of the Act. This
Court after referring to the definition of the word `act' in the General
Clauses Act, 1897, which extended to illegal omissions also, and the case law
on the subject observed at page 820 as under:
"These
decisions in the light of the definition of the word `act' in the General
Clauses Act establish that non-compliance with the provisions of the statute by
omitting to do what the act enjoins will be anything done or ordered to be done
under the Act. The complaint against the respondents was that they wanted to
evade payment of duty. Evasion was by using and affixing cut and torn
banderols.
Books
of account were not correctly maintained.
There
was shortage of banderols in stock.
Unbanderolled
matches were found. These are all infraction of the provisions in respect of
things done or ordered to be done under the Act." It is, therefore, clear
from the above observation that any omission or infraction of the statutory
provision would also fall within the ambit of the provision. Non-payment of
duty or dues which a dealer is under an obligation to pay under the statute
was, therefore, held to fall within 131 the scope of the provision. In that
case the complaint against the respondents was that to evade the payment of
duty they had used and affixed cut and torn banderols and had failed to
maintain the accounts correctly resulting in shortage in stocks. The
respondents were prosecuted for contravention of the Rules punishable under
sections 9(b) and 9(d) of the Act as also under section 420 read with section
511 and 109, I.P.C. The respondents pleaded the bar of section 40 of the Act as
it then stood. The High Court upheld the contention that the prosecution was
barred by the rule of limitation incorporated in section 40 as the same was
instituted after the expiry of six months from the date of the commission of
the alleged offences. This Court on the aforesaid line of reasoning affirmed
the High Court's decision.
But
the question is whether the issuance of a show cause notice and the initiation
of the consequential adjudication proceedings can be described as `other legal
proceedings' within the meaning of sub-section (2) of section 40 of the Act? If
the said departmental action falls within the expression `other legal
proceeding' there can be no doubt that the action would be barred as the same
indisputably was initiated six months after the accrual of the cause action. So
the crucial question is whether the issuance of the show cause notice dated
August 30, 1972 and the passing of the impugned order in adjudication
proceedings emanating there from constitutes `other legal proceeding' within
the meaning of section 40(2) of the Act to fall within the mischief of that
sub-section which bars such proceedings if commenced after a period of six
months from the accrual of the cause of action. The learned Additional Solictor
General submitted that the expression `other legal proceeding' must be read ejusdem
generis with the proceeding expressions `suit' and `prosecution' and if so read
it becomes crystal clear that the department's action cannot come within the
purview of `other legal proceeding'. How valid is this contention is the
question which we are called upon to answer in the present appeal.
The
rule of ejusdem generis is generally invoked where the scope and ambit of the
general words which follow certain specific words (which have some common
characteristic and constitute a genus) is required to be determined. By the
application of this rule the scope and ambit of the general words which follow
certain specific words constituting a genus is restricted to things ejusdem generis
with those preceding them, unless the context otherwise requires. General words
must ordinarily bear their natural and larger meaning and need not be confined ejusdem
generis to things previously enumerated unless the language of the statute
spells out an intention to that effect. Courts 132 have also limited the scope
of the general words in cases where a larger meaning is likely to lead to
absurd and unforeseen results. To put it differently, the general expression
has to be read to comprehend things of the same kind as those referred to by
the preceding specific things constituting a genus, unless of course from the
language of the statute it can be inferred that the general words were not
intended to be so limited and no absurdity or unintended and unforeseen
complication is likely to result if they are allowed to take their natural
meaning. The cardinal rule of interpretation is to allow the general words to
take their natural wide meaning unless the language of the statute gives a
different indication or such meaning is likely to lead to absurd results in which
case their meaning can be restricted by the application of this rule and they
may be required to fall in line with the specific things designated by the
preceding words. But unless there is genus which can be comprehended from the
preceding words, there can be no question of invoking this rule. Nor can this
rule have any application where the general words precede specific words.
There
can be little doubt that the words `other legal proceeding' are wide enough to
include adjudication and penalty proceedings under the Act. Even the learned
Additional Solicitor General did not contend to the contrary but what he said
was that since this wide expression is preceded by particular words of a
certain genus, namely, words indicating reference to proceedings taken in
courts only, the wide words must be limited to things ejusdem generis and must
take colour from the preceding words and should, therefore, receive a limited
meaning to exclude proceedings of the type in question. There can be no doubt
that `suit' or `prosecution' are those judicial or legal proceedings which are
lodged in a court of law and not before any executive authority, even if a
statutory one. The use of the expression `instituted' in section 40(2)
strengthens this belief. Since this sub-section has been construed by this
Court in Raju's case (supra) not to be confined in its application to only
Government servants but to extend to others including the assessees and since
the words `for anything done or ordered to be done under this Act' are found to
be comprehensive enough to include acts of non-compliance or omissions to do
what the Act and the Rule enjoin, the limitation prescribed by section 40(2)
would undoubtedly hit the adjudication and penalty proceedings unless the
expression `other legal proceeding' is read ejusdem generis to limit its ambit
to legal proceedings initiated in a court of law.
The
scope of section 40(2) as it stood before its amendment pursuant to Raju's case
came up for consideration before a Division 133 Bench of the Madhya Pradesh
High Court in Universal Cables Ltd. v. Union of India, [1977] ELT (J92) wherein
the question raised for determination was whether penalty procedings taken
under Rule 173Q for the infraction of Rule 173C with a view to evading payment
of duty fell within the expression `other legal proceeding' used in the said
sub- section. The High Court conceded that the expression when read in
isolation is wide enough to include any proceeding taken in accordance with
law, whether so taken in a court of law or before any authority or tribunal but
when read with the preceding words `suit' or `prosecution' it must be given a
restricted meaning. This is how the High Court expressed itself at page J 106:
"Now
the language of section 40 (2) is: `no suit, prosecution or other legal
proceeding shall be instituted'. `Suit' and `prosecution' which precede the
expression `other legal proceeding' can be taken only in a Court of Law".
After
stating the expanse of the ejusdem generis rule, as explained in Amar Chandra
v. Excise Collector, Tripura, AIR. 1972 SC 1863 at 1868 (Sutherland, Volume 2
pages 399-400) the High Court observed that there was no indication in the said
sub-section or elsewhere in the Act that the said general words were intended
to receive their wide meaning and were not to be construed in a limited sense
with the aid of the ejusdem generis rule. A departmental proceeding like
penalty proceedings were, therefore, placed outside the scope of the said
sub-section. This view was quoted with approval by a learned Single Judge of
the Bombay High Court in C.C. Industries & Others v. H.N. Ray and Another,
[1980] ELT 442 at 453. These two cases, therefore, clearly support the view
canvassed before us by the learned Additional Solicitor General.
We
have given our careful consideration to the submission made on behalf of the
appellant, reinforced by the view expressed in the aforesaid two decisions. In
considering the scope of the expression `other legal proceeding' we have
confined ourselves to the language of sub-section (2) of section 40 of the Act
before its amendment by Act 22 of 1973 and should not be understood to express
any view on the amended provision. On careful consideration we are in
respectful agreement with the view expressed in the aforesaid decisions that
the wide expression `other legal proceeding' must be read ejusdem generis with
the preceding words `suit' and `prosecution' as they constitute a genus. In
this view of the matter we must uphold the contention of the learned Additional
Solicitor General that the penalty and adjudication 134 proceedings in question
did not fall within the expression `other legal proceeding' employed in section
40 (2) of the Act as it stood prior to its amendment by Act 22 of 1973 and
therefore, the said procedings were not subject to the limitation prescribed by
the said sub-section.
Mr. Nambiar,
the learned counsel for the respondents strongly argued that we should not
entertain the submission based on the ejusdem generis rule since it was not
raised before the High Court. That indeed is true but being a pure question of
law we have though it fit to entertain the same. We therefore, do not entertain
this objection.
In the
result we allow this appeal and set aside the order passed by the learned
Single Judge as well as the Division Bench which affirmed it and dismiss the
respondent's writ petition itself. We also set aside the order by which the
appellant was directed to pay costs. We restore the adjudication order dated April 4, 1974 and all consequential orders, if any,
passed there under. Interim stay granted on August 16, 1979 is vacated and the appellant will be entitled to recover
the dues from the security furnished pursuant to that order. The appeal is
allowed accordingly with no order as to costs.
R.S.S.
Appeal allowed.
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