West Coast Ingots (P) Ltd. v. Commissioner Of C. Ex., New Delhi

1. These two writ petitions involve common questions and are taken up for hearing together. Writ Petition (Civil) No. 11808 of 2006 by West Coast Ingots (P) Ltd. and Writ Petition (C) 11812 of 2006 by M/s. Balaji Metals are directed against the Orders dated 21-6-2006 and 27-6-2006 respectively passed by the Settlement Commission, New Delhi. The petitioners are aggrieved by these orders to the extent they require the petitioners to pay simple interest at the rate of 10 per cent per annum on the total excise duty liability.

2. These two writ petitioners had filed settlement applications before the Settlement Commission for settlement of their respective cases in respect of show cause notices dated 1-10-2004 and 30-7-2004 issued to them, respectively, by the Commissioner of Central Excise, Goa. Both companies have their respective registered offices at Goa. While West Coast Ingots (P) Ltd. has its registered office at Kundaim, Goa, M/s. Balaji Metals is located at Madkaim, Goa. The Directors of the first mentioned company and the partners of the second mentioned firm are all located in Goa. The show cause notices were issued by the Commissioner of Central Excise, Goa in respect of the supplies made by the petitioners of M.S Ingots, to Goa Ispat Ltd., located in Goa, by evading the payment of excise duty. The settlement applications were initially filed before the Additional Bench of the Settlement Commission at Mumbai where initially certain sums were deposited. Later the proceedings were transferred to the Principal Bench of the Settlement Commission at Delhi. The settlement applications have been disposed of by the impugned final orders passed by the Principal Bench of the Settlement Commission at Delhi in the manner indicated. When these writ petitions were first listed before this Court, notice was directed to issue. At the subsequent hearing on 15-11-2006 counsel for the petitioner was put on notice that this Court may not consider it appropriate to exercise territorial jurisdiction in the matter.

3. Mr. N.K Kaul, the learned senior counsel appearing for the petitioners, has been heard at length on the question whether this Court should exercise territorial jurisdiction in the matter only because the impugned order has been made by the Principal Bench of the Settlement Commission in Delhi notwithstanding the fact that the petitioners themselves are located in Goa and the show cause notices were issued by the Commissioner of Central Excise in Goa. The submission, based on the judgment of the Hon'ble Supreme Court in Kusum Ingots and Alloys Ltd. v. Union of India, 2004 (168) E.L.T 3 (S.C) : (2004) 6 SCC 254 : AIR 2004 SC 2321 is that this Court should not decline to exercise jurisdiction. Reliance is also placed on Vijay Fertilizers Pvt. Ltd.… v. Union Of India & Ors.…, (2006) 130 DLT 72 [a decision rendered by one of us (Vikramajit Sen, J.)] where, the Court declined to entertain the writ petition under Article 226 but observed that in an appropriate case the Court might exercise jurisdiction for the reason that the predominant, substantial or significant part of cause of action arises within the territorial jurisdiction of the Court. Reliance has also been placed on a recent judgment of the Hon'ble Supreme Court in Musaraf Hossain Khan v. Bhagheeratha Engineering Ltd., JT 2006 (3) SC 80. Mr. Kaul has sought to distinguish the judgments of Division Bench of this Court in Suraj Woolen Mills v. Collector of Customs, Bombay, 2000 (123) E.L.T 471 (Del.) and Bombay Snuff P. Ltd… v. Uoi & Ors…, 2006 (194) E.L.T 264 (Del.) on the ground that the question in the said two decisions concerned the maintainability of statutory appeals under the Customs Act, 1962 and the Central Excises Act, 1944 respectively and did not concern the maintainability of a writ petition under Article 226.

4. Mr. Kaul further submits that the facts in the present case are not in dispute at all and the short point involved is whether the impugned order of the Settlement Commission which has granted full immunity from payment of interest to the sister concern, Goa Ispat Limited, could have validly discriminated against the two petitioners who were no differently placed but have nevertheless been asked to pay simple interest at 10 per cent per annum. He urges that the cause of action for the present writ petitions is traceable to the order of the Principal Bench of the Settlement Commission in Delhi, and has, therefore, substantially arisen within the territorial jurisdiction of this Court.

5. We are unable to be persuaded to exercise territorial jurisdiction in the matter. It may at once be noticed that the judgment in Kusum Ingots and Alloys Ltd. (supra) does not lay down that a High Court should invariably exercise jurisdiction when an order challenged before it is passed by an authority or Tribunal located within its territorial jurisdiction. The following observations in the said judgment would bear this out:

“27. When an order, however, is passed by a Court or Tribunal or an executive authority whether under provisions of a statute or otherwise, a part of cause of action arises at that place. Even in a given case, when the original authority is constituted at one place and the appellate authority is constituted at another, a writ petition would be maintainable in the High Court within whose jurisdiction it is situate having regard to the fact that the order of the appellate authority is also required to be set aside and as the order of original authority merges with that of the appellate authority.

30. We must, however, remind ourselves that even if a small part of cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a determinative factor compelling the High Court to decide the matter on merit. In appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens. (See Bhagar Singh Bagga v. Dewan Jagbir Sawhany, AIR 1941 Cal 670; Mandal Jalal v. Madanlal, (1945) 49 CWN 357; Bharat Coking Coal Limited v. Jharia Talkies and Cold Storage Pvt. Ltd., (1997) CWN 122; S.S Jain and Co. v. Union of India, (1994) CHN 445; New Horizon Ltd. v. Union of India, AIR 1994 Delhi 126).”

6. In other words even the judgment in Kusum Ingots and Alloys Ltd. leaves it to the High Court to decide, on the facts of each case, whether it is required to exercise jurisdiction if a part of the cause of action arises within its territorial jurisdiction.

7. We are also unable to agree with the submission that the judgments of the Division Benches of this Court in Suraj Woolen Mills (supra) and Bombay Snuff Pvt. Ltd. (supra) would not apply only because they concern the filing of statutory appeals. The underlying principle recognized in both judgments is that the High Court should not exercise jurisdiction only because the Tribunal whose order is in appeal before it is located within its territorial jurisdiction. In Suraj Woolen Mills (supra), a reference was made to the two earlier decisions of the Division Benches of this Court in Seth Banarsi Dass Gupta v. CIT, (1978) 113 ITR 817 and Birla Cotton and Spinning Mills Ltd. v. CIT, Rajasthan, (1980) 123 ITR 354 where appeals had been filed against the orders of the Income Tax Appellate Tribunal at Delhi although the assessees resided and carried on business outside Delhi. In both those cases this Court declined to exercise jurisdiction. In Bombay Snuff Pvt. Ltd. (supra), a Division Bench of this Court relied upon another judgment of the Division Bench in Commissioner Of Central Excise v. Technological Institute Of Textile. of Textile, 1998 (47) DRJ 667 (DB) to the same effect. We see no reason why this principle should not be applied to decline to entertain a writ petition under Article 226.

8. Turning to Vijay Fertilizers Pvt. Ltd. (supra) the following observations made after taking into account the judgment in Kusum Ingots may be usefully noticed.

“On a reading of Article 226(1) of the Constitution it will be abundantly clear that without the next following provision, a High Court may not have been empowered to issue a writ or order against a party which is not located within the ordinary territorial limits of that High Court. The power to issue writs against any person or Authority or Government even beyond the territorial jurisdiction of any High Court is no longer debatable. The rider or pre-requisite to the exercise of such power is that the cause of action must arise within the territories of that particular High Court. It does not logically follow, however, that if the cause of action, wholly or in part, arises within the territories over which that High Court holds sway, it must exercise that power rather than directing the petitioner to seek his remedy in any other High Court which is better suited to exercise jurisdiction for the reason that the predominant, substantial or significant part of the cause of action arises in that Court. In other words any High Court is justified in exercising powers under Article 226 either if the person, Authority or Government is located within its territories or if the substantial and a significant part of the cause of action has arisen within its territories. The rationale of Section 20 of the Code of Civil Procedure would, therefore, also apply to Article 226(2). A part of the cause of action would indubitably arise at the place where a person receives an adverse order, under the ordinary principles of law…. Accordingly, since I am of the opinion that the substantial or significant part of the cause of action has arisen in Uttar Pradesh, merely because the final say is that of the Central Government, Article 226(2) does not require this Court to exercise the extraordinary jurisdiction vested in it under Article 226 of the Constitution,

(emphasis supplied)

9. Mr. Kaul referred to the judgment of this Court in Agri Trade India Services Pvt. Ltd. v. Union of India, 2006 (204) E.L.T 161 (Del.) where a challenge to a notification issued by the Director General of Foreign Trade (‘DGFT’) by way of a writ petition by a company located in Mumbai was entertained. However, as has been pointed out in the said judgment itself, a substantial portion of cause of action arose in Delhi since the notification under challenge was issued by the DGFT in Delhi and all representations were made to and considered by the authorities in Delhi. Therefore, the judgment in Agri Trade India Services Pvt. Ltd. (supra), cannot come to the assistance of the petitioners herein.

10. We reiterate that the issue in these cases is not whether this High Court lacks jurisdiction to entertain the writ petition. That it certainly does not under Article 226, as already explained. The question really is whether this Court should decline to exercise its writ jurisdiction because a significant part of the cause of the action does not arise within its territorial jurisdiction. We may also add, that if the petitioner, in such event, will be without any remedy at all, the situation may be different. However, if the petitioner should properly approach the appropriate High Court within whose territorial limits a substantial portion of the cause of action arises, then this Court should decline to entertain the petition. At the cost of repetition, we may observe that a significant part of the cause of action cannot be said to arise within the territorial jurisdiction of this Court merely because the order under challenge has been passed by a Tribunal located within its territorial jurisdiction, when the events leading to the filing of the proceedings before such Tribunal, and the parties to such proceedings, are outside the territorial jurisdiction of the Court. This is the situation in the present case. Also, the petitioners here are not without remedy on account of this Court declining to entertain their petitions.

11. We may mention that we have been adopting this approach in cerlain other matters including Raj Leather Cloth Industries Pvt. Ltd. v. Union of India (Order dated 29-11-2006 passed in WP(C) No. 16672/2006) where again the challenge was to an order of the Settlement Commission by a party located in Haryana. We are not inclined to adopt a different approach here. We do not agree with the submissions of the learned senior counsel for the petitioners that the facts are any different, warranting a departure from the above approach. For all of the above reasons, we decline to entertain these writ petitions. However, the dismissal of the writ petitions is without prejudice to the rights of the petitioners to approach the appropriate Court to seek the relief sought for in these writ petitions.

12. The writ petitions and applications are accordingly dismissed with no orders as to costs.