Gautam Coal Works Pvt. Limited V. The Union of India through the Principal Chief Commissioner of Income Tax and The Principal Commissioner of Income Tax and Central Coalfields Limited

WPC/2886/2018

AI Insights

The case involves M/s. Gautam Coal Works Pvt. Limited, the petitioner, who contested the suspension of coal supply by Central Coalfields Limited (CCL) based on directives from the Income Tax Department and observations from the Regional Economic Intelligence Committee (REIC). The petitioner argued that the suspension was arbitrary and lacked jurisdiction, as the Income Tax Department had previously acknowledged it had no authority over the matter. The court examined the procedural and substantive aspects of the suspension, including the validity of the directives under the Fuel Supply Agreement (FSA) and the role of the Income Tax Department in influencing CCL's decision to suspend coal supply.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 685449 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 05-11-2018
• Assessment Year: misc
• Other Referred Cases: Ashoka Smokeless Coal India (P) Ltd. Vs. Union of India, Sushila Chemicals (P) Ltd. & Anr. v. Bharat Coking Coal Ltd. & Ors., Coal India Limited and Others Vs. Alok Fuels Private Limited through Director and Ors., M/s Swastika Smokeless Coke Company Pvt. Ltd. Vs. Central Coalfields Limited & Anr., Noble Resources Ltd. v. State of Orissa & Anr., ABL International Ltd. & Anr. v. Export Credit Guarantee Corpn. of India Ltd. & Ors., Bharat Coking Coal Limited & Ors. Vs. M/s Jha Briquette Unit & Ors.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: RAJIV SINHA; DEEPAK ROSHAN; ANOOP MEHTA
• Assessee Lawyers: SUMEET GADODIA
• Keywords: Coal supply; Form 27C; Fuel Supply Agreement; Income Tax; Tax collected at source
• Section: 133A(2A); 206C; 206C(1A)

Judgement Text

"1 IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P. (C) No.2886 of 2018 With I.A. Nos.7768 & 9439 of 2018 ----- M/s. Gautam Coal works Pvt. Limited. .......... Petitioner. -Versus- 1. The Union of India through the Principal Chief commissioner of Income Tax, Central Revenue Building, 1st Floor, Birchand Patel Marg, Patna-800001. 2. The Principal Commissioner of Income Tax, Central Revenue Building, 5A-Main Road, Ranchi-834001. 3. Central Coalfields Limited (A Government of India Undertaking), through its Managing Director, Darbhanga House, Kutchery Road, Near Ranchi University, Ranchi-834029. .......... Respondents. ----- CORAM : HON’BLE MR. JUSTICE RAJESH SHANKAR ----- For the Petitioner : Mr. Sumeet Gadodia, Advocate For the UOI : Mr. Rajiv Sinha, ASGI For the Income Tax : Mr. Deepak Roshan, Advocate For the CCL : Mr. Anoop Kr. Mehta, Advocate ----- Order No.13 Date: 05.11.2018 1. The present writ petition originally was filed under the nomenclature- W.P.(T) making prayer against the Income Tax authorities only i.e. for declaration that they did not have any jurisdiction to direct the Central Coalfields Limited (in short ‘CCL’) to withdraw and/or suspend the supply of coal to the petitioner pursuant to the existing Fuel Supply Agreement (in short ‘FSA’) entered by and between the petitioner and the CCL. 2. The matter was listed before the Division Bench of this court and vide order dated 16.08.2018, the petitioner was directed to add the CCL as party-respondent. Accordingly, the CCL was added as respondent no.3 in the present case. Subsequently, the learned Division Bench vide order dated 01.10.2018 observing inter alia that the present matter does not come within the ambit of tax matter, directed to place this writ petition before appropriate Bench as per the present roster. Consequently, the writ petition has been placed before this Bench. 3. I.A No.9439 of 2018 has been filed by the petitioner seeking deletion of respondent nos.1 and 2 from the array of the respondents and thus the grievance of the petitioner rests only against the respondent- CCL in relation to suspension of its coal supply. 2 4. The factual background of the case as stated in the writ petition is that the petitioner is engaged in the business of manufacture of Special Smokeless Fuel having its industrial unit at Ormanjhi, District - Ranchi. The petitioner entered into a FSA with the respondent-CCL for supply of raw material to its unit. Section 206C of the Income Tax Act, 1961 provides for deduction of Tax Collected at Source (TCS) by the seller from the buyer of the coal @ 1%. However, in view of Section 206C (1A), no deduction of TCS is to be made if the buyer is purchasing coal for use in manufacturing activities and/or for generation of power and furnishes statutory declaration in Form-27 to the seller. Since the petitioner was also engaged in manufacturing activities, no TCS was deducted by the respondent-CCL on the furnishing of Form-27C by the petitioner. A survey under section 133A (2A) of the Act, 1961 was conducted in the office premises of the petitioner-Company and during the said survey proceeding it was alleged by the officers of the Income Tax Department that the petitioner-company had the capacity to process only about 0.05% of the total quantity of coal purchased from the CCL for its manufacturing unit. Thereafter, the office of the Principal Commissioner of Income Tax- the respondent no.2 vide letter dated 31.10.2017 communicated the said fact to the CCL and relying upon the said observation, the CCL issued an order dated 02.11.2017 suspending coal supply to the petitioner-unit with immediate effect. The petitioner vide letter dated 13.11.2017 requested the CCL for withdrawal of suspension of coal supply of the petitioner by stating that the facts communicated by the Income Tax Department is not correct, rather the erroneous facts have been recorded in the said letter. The petitioner also represented before the Principal Commissioner of Income Tax, Ranchi- respondent no. 2 for issuing necessary direction to CCL for resumption of coal supply to the petitioner whereupon the respondent no.2 clarified vide letter dated 14.11.2017 that it had not directed the CCL for suspension of coal supply of the petitioner and the Income Tax Department would have no objection in the matter of resumption of coal supply in favour of the petitioner. Thereafter, the petitioner vide letter dated 17.11.2017 requested the CCL to resume the coal supply pursuant to FSA and finally the coal supply was resumed by the CCL. However, the CCL issued show cause notice dated 17/18.11.2017 to explain the position 3 with regard to the allegation levelled against it which was replied by the petitioner denying all the allegations. Thereafter, the CCL vide letter dated 17.1.2018 requested the General manager, Directorate of Industries, government of Jharkhand to conduct an inquiry to ascertain the fact as to whether the petitioner was utilizing coal for its manufacturing unit or not. The General Manager, District Industries Centre, Ranchi submitted report to the CCL vide letter dated 07.02.2018 categorically stating that the machineries in the manufacturing unit of the petitioner are in running condition but the unit was found closed due to non-supply of coal with effect from November, 2017. Pursuant to receipt of the inquiry report and also after taking into consideration the reply of the petitioner, a decision was taken by the CCL for resumption of coal supply to the petitioner and accordingly supply of coal was resumed in its favour with effect from 23.02.2018. Again vide letter dated 19.05.2018, the CCL sought clarification from the Principal Commissioner of Income Tax, Ranchi- respondent no. 2 relating to supply of coal to the petitioner. During the pendency of the writ petition, the respondent-CCL vide letter dated 04.08.2018 again suspended coal supply of the petitioner and thus the petitioner vide letter dated 14.08.2018 again requested the respondent CCL to resume the coal supply, however, no action has been taken in this regard. Hence, the present writ petition. 5. The learned counsel appearing for the petitioner submits that the finding recorded in course of survey proceeding was absolutely erroneous, perverse and contrary to the actual facts of the case. The production capacity of the petitioner-unit is 100 Tons per day and even the total quantity of coal supply made by the CCL is much less than its total production capacity. Monthly inspection of the petitioner-unit is being done by the Industries Department, Government of Jharkhand and necessary report about the status of the petitioner’s unit is being submitted by it to the CCL. Even the CCL undertakes inspection of the petitioner’s unit at periodic intervals and at no point of time any question whatsoever has been raised either by the Industry Department of the State of Jharkhand or by the CCL with respect to the manufacturing process of the petitioner unit and/or any allegation has been levelled regarding diversion of coal by the petitioner’s unit. Pursuant to the show cause reply submitted by the petitioner and after 4 due examination of the relevant documents and/or necessary facts including the fact that the petitioner is running the unit properly and is not engaged in diversion of coal as well as it has the capacity to utilize the coal being supplied by CCL, the respondent-CCL vide its letter dated 23.02.2018 resumed the supply of coal in its favour. However, on 04.08.2018 the coal supply to the petitioner has again been suspended merely on the basis of the observation made by the Regional Economic Intelligence Committee (in short ‘REIC’) without issuance of any notice to the petitioner. It is further submitted that the Income Tax Department without any jurisdiction and authority of law, in most arbitrary manner actuated with malice in law against the petitioner, has been issuing repeated directions to the respondent-CCL for suspension of supply of coal to the petitioner and ultimately, due to the direction issued by Income Tax Department, the respondent- CCL has again suspended the petitioner’s coal supply with effect from 04.08.2018. The action of the respondent CCL in suspending the supply of coal to the petitioner only pursuant to the direction of Income Tax department is wholly illegal, arbitrary and contrary to the terms and conditions of the FSA itself. Despite the fact that Principal Commissioner of Income Tax, Ranchi vide its letter dated 12.12.2017 informed that the Income Tax Department has no jurisdiction and/or locus standi to direct stoppage of supply of coal to the petitioner, subsequently during the REIC meeting held on 24.04.2018, the respondent no.1- Principal Chief Commissioner of Income Tax, Patna deliberately with an oblique and malafide motive directed the respondent-CCL not to take cognizance of the earlier letter dated 12.12.2017 and further directed the respondent-CCL to stop supply of coal to the petitioner. It is further submitted that the periodical inspections are being made by the District Industries Centre, Ranchi for verifying the status of the petitioner’s unit and the reports are being submitted to the respondent-CCL. The most recent report submitted by District Industries Centre to the respondent-CCL is of 04.08.2018 which would show that the petitioner-unit was functional. Despite the said fact, the respondent-CCL only on the dictates of the Income Tax Department has suspended the supply of coal to the petitioner. 6. Per contra, the learned counsel for the respondent nos.1 and 2 submits that whatever directions have been issued by them to the CCL are in 5 accordance with law and as such the petitioner is not entitled to the relief as prayed for. It is further submitted that Section 206C(1A) of the Income Tax Act, 1961 itself specifies that no collection of tax shall be made if the buyer furnishes a declaration in the prescribed form to the person responsible for collecting tax and verified in the prescribed manner to the effect that the goods are being utilized for the purpose of manufacturing, processing or producing articles etc. and not for trading purposes. Thus any such direction issued to the CCL is not erroneous and contrary to any provision of law. The said section/sub- section does not bar the Income Tax Department to verify the actual position of the petitioner’s unit to ensure that the goods (coal) being purchased by the petitioner on furnishing Form-27C are actually utilized for the purpose of manufacturing, processing or producing articles or things and not for trading purpose. By virtue of the direction contained in letter dated 31.10.2017, the respondent no.2 reminded the respondent-CCL only on the legal provisions of section 206C of the Act, 1961 and the necessary action was to be taken by the seller of coal i.e. CCL in the present case. It is also submitted that the petitioner was not utilizing the coal purchased on the strength of statutory declaration Form-27C for self-consumption as an end user as provided u/s 206C of the Act, 1961 as the petitioner had the capacity to process only about 0.05% of the total quantity of coal sold by CCL to it and under such situation, the CCL authorities were advised vide letter dated 31.10.2017 as a matter of abundant precaution and in order to mitigate loss of revenue to satisfy themselves as to whether the Form- 27C submitted by the petitioner is correct in its letter and spirit or not. Moreover, the letter dated 31.10.2017 is merely informative in nature wherein CCL has been advised to verify Form-27C as per the provision of section 206C of the Act, 1961. The respondent nos.1 & 2 are only concerned with the maximization of tax revenue and to see that the Form-27C may not be misused by giving wrong declaration. It is the seller who has to verify the genuineness of Form-27C and to sign the same. The buyer of the goods will always say that the goods purchased by them are utilized for the purpose of manufacturing process and production of goods. The buyer is the declarant and the seller is the verifying authority who after verification, puts his signature and 6 forward one copy of it to the concerned authority of the Income Tax department. 7. The learned counsel appearing for the respondent no.3 submits that a meeting of the 40th REIC was held on 24.04.2018 at the Office of the Income Tax Department, Ranchi, which was attended by Shri Rajendra Singh, G.M (Fin./FPC), CCL Ranchi and the convener urged before Shri Rajendra Singh to stop the supply of coal to such companies which were misusing Form-27C and advised the representatives of CBI and ED to investigate these matters with respect to the involvement of public servants in misuse of public money etc. In 41st meeting also, the matter relating to supply of coal to the petitioner was discussed and it was informed by the Income Tax Department that they were investigating the matter wherein certain irregularities were found in consumption of coal by the petitioner’s unit. It is further submitted that since the CCL does not carry out inspection of such units on regular basis for ascertaining end use of coal and it relies on the documents submitted by the consumers certified by various functionaries such as charted Accountant, GM, DIC etc., on getting the communication from the Income Tax department regarding misuse of coal by the petitioner, the supply of coal to the petitioner was suspended so as to prevent any further misuse. Though the FSA between CCL and the petitioner had expired on 30.04.2018, yet coal supply was being continued under the expired FSA in accordance with the Coal India Ltd. guidelines issued for continuing supply of coal to all such units whose valid FSAs as per NCDP had expired, as the part of implementing Linkage Auction Policy for non-regulated sector consumers. It is further submitted that the last inspection of the petitioner’s unit was done on 26.11.2016 wherein it was observed by the inspection team that the plant is not being utilized at its rated/desired capacity and it runs only in one shift. Learned counsel for the respondent no.3 also submits that the action for suspending supply of coal was taken as per the terms and conditions of FSA and in the light of the ‘Factory Running Affidavit’ submitted by the petitioner on monthly basis declaring that any diversion or misuse, if found prima facie by any authority, the coal supply would be suspended by the CCL with immediate effect and further action for termination of FSA would be taken. It is also submitted that the supply of coal could be resumed only after negation 7 of the alleged misuse of coal by the petitioner’s unit from the end of the Income Tax Department, however, no such communication has been received from the Income Tax Department indicating that the petitioner has not misused/diverted the coal purchased from respondent-CCL as per the FSA meant for consumption in its SSF plant. One of the basis for release of coal to such unit is the inspection report of the GM, DIC, however, in the said report, it was only reported that the unit was found in running condition. No observation has been made by the said authority regarding misuse and diversion of coal by the petitioner. The supply of coal was resumed to the petitioners’ units on conditional basis and even after the resumption of coal, the GM, DIC and the Income Tax authorities were requested vide letters dated 22.02.2018 for inspecting the unit to negate the alleged diversion of coal and to communicate the respective survey reports. 8. Heard the learned counsel for the parties and perused the materials available on record. Due to the subsequent development in the matter as detailed herein above, the only issue requires consideration of this court is as to whether in the present circumstance, the respondent- CCL is justified in suspending the supply of coal to the petitioner. 9. The thrust of the argument of the learned counsel for the petitioner is that the show cause notice dated 17.11.2017 was duly replied by the petitioner and the respondent-CCL after getting satisfied with the said reply as well as the letter of the IT department informing that it has no locus standi in the matter of resumption of supply, the respondent- CCL resumed the coal supply and thus the said matter had come to an end. However, the respondent-CCL arbitrarily reopened the mater without issuing any fresh show cause notice or giving any opportunity of hearing to the petitioner and again stopped the coal supply in violation of the FSA. 10. To appreciate the contention of the learned counsel for the petitioner it is relevant to go through the survey report of the Income Tax Officer, Ward No.1(3), Ranchi prepared in the case of M/s Gautam Coal Works (P) Ltd., Ranchi (the petitioner herein) submitted before the Principal Commissioner of Income Tax, Ranchi. The conclusion of the said report is reproduced hereinbelow:- “Conclusions: In view of all the above facts, it is of the view that the assessee used to purchase the raw coal from M/s CCL, Ranchi up to a maximum of 2306 ton per month but not used for 8 making of SSF on regular basis and many times sold into the open market in toto including undersize coal. This interference is drawn on the following reasons:- 1. In the statement recorded during the course of survey in factory premises of the assessee company, an employee of the factory namely Shir Laxman Yadav who stated to have been working there since last 20 years approx.. in reply to q.n.9 he had clearly stated that last truck loaded with coal had come into the factory premises in April, 2017. That means, the coal purchased from M/s CCL by the assessee company during the F.Y.2017-18 might have been sold into the open market without bringing them even in the factory premises. 2. As per statement of Shri Laxman Yadav, Operator, recorded in course of survey in factory premises, (Refer Annexure-B) the capacity of plant for making SSF is 24 qtls. per day. If 300 days has been taken on an average, then capacity of the plant of the assessee for making SSF comes to 720 qtls. or 7.2 MT per year only. That means the assessee company is not in a position to consume the raw coal purchased from M/s CCL, Ranchi beyond this capacity of its plant for making SSF per year. 3. In the statement recorded on 18.10.2017 Shri Mahendra Kr. Singh, Director of the assessee company has undertaken to submit Manufacturing A/c, Trading A/c & P.L.A/c as on 26.09.2017 in the office on 20.10.2017 positively without fail. But, no such account have been furnished either before the A.O or in the office on 20.10.2017. (Refer Annexure-C). 4. No regular books of a/cs. have been found in the office as well as factory premises of the assessee during the course of survey. On being confronted in statement recorded on 18.10.2017, Shri Mahendra Kr. Singh, Director of the assessee has admitted in his reply to q.n.1&3 that no regular books of a/cs. have been maintained either for current year or earlier years viz. F.Y.16-17, 15-16, 14-15 etc. He further stated that only Sale Register, Purchase Register and Production Register/Stock Register are being maintained. (Refer Annexure-C).” 11. On the basis of the said survey report, the CCL issued a show cause notice dated 17.11.2017 with a prima facie notion that the petitioner is engaged in resale, trade or diversion of coal other than the purposes specified in Clause 4.4 of the FSA. The said show cause notice was for the proposed action of termination of the FSA and forfeiture of the bank guarantee. The Coal Supply to the petitioner was then stopped for preventing further misuse of supplied coal. Subsequently, vide letter dated 23.02.2018, the coal supply was resumed with a condition that the same would be subject to the report as may be received from the IT department and DIC Ranchi. It was also informed that the action pursuant to receipt of the report would be taken accordingly. From the aforesaid factual position it would appear that even after the resumption of supply of coal, the said issue had not come to an end. The coal supply of petitioner’s unit was resumed only on the basis of 9 the information given by the IT Department that it has no concern with resumption of supply. However, the REIC which is the apex forum comprising of various government agencies responsible for economic intelligence and combating economic offenses in different states, having found that the present matter relates to the public revenue advised the CCL to suspend the supply of coal to the petitioner. 12. Subsequent to the judgment of the Hon’ble Supreme Court rendered in the case of Ashoka Smokeless Coal India (P) Ltd. Vs. Union of India, reported in (2007)2 SCC 640, the Ministry of Coal, Government of India, adopted new coal distribution policy under which the coal was to be supplied to different consumers through fuel supply agreements (FSA) by stipulating specific terms and conditions that the coal supplied to them shall be used only for the purpose mentioned in the agreement failing which the CCL shall have the liberty to terminate the agreement forthwith. 13. Clause 4.4 of the FSA of the petitioner is quoted hereinbelow:- “4.4 The total quantity of coal supplied pursuant to this Agreement is meant for use at the SSF plant at Vill- Tape, Ormanjhi, Pattu, Ranchi as lited in Scheule-1. The purchaser shall not sell/divert and/or transfer the coal for any purpose whatsoever and the same shall be treated as material breach of Agreement. In the event that the Purchaser engages or plans to engage into any such resale or trade, the Seller shall terminate this Agreement forthwith without any liabilities or damages whatsoever payable to the Purchaser. It is expressly clarified that the Seller shall reserve the right to verify including the right to inspect/call for any document from the Purchaser and physically verify the end use of Coal and satisfy itself of its authenticity. The purchaser shall have the obligation to comply with the Seller’s direction/extend full co- operation in carrying out such verification/inspection.” 14. Thus, the specific condition in the FSA is that the petitioner shall not sell/divert and/or transfer the Coal for any purpose failing which the Seller (the CCL) shall terminate the agreement forthwith. In order to ensure as to whether the petitioner has committed any breach of the agreement by selling/diverting the Coal, the respondent-CCL has the right to inspect or call for any document from the purchaser (the petitioner) and physically verify the end use of coal. 15. Learned counsel for the respondent no.3 has put reliance on the judgments of the Hon’ble Supreme Court rendered in the cases of Sushila Chemicals (P) Ltd. & Anr. v. Bharat Coking Coal Ltd. & Ors., reported in (2010)10 SCC 388, and Coal India Limited and Others Vs. Alok Fuels Private Limited through Director and Ors., reported in (2010) 10 SCC 157. The issue raised in the 10 said cases was as to whether the supply of coal can be suspended by the BCCL (one of the coal companies) on the basis of the FIR lodged by the CBI. The Hon’ble Supreme Court in the case of Sushila Chemicals (P) Ltd. (Supra.) has observed as under: “19. Coal India Ltd. and BCCL are government companies of the Government of India and are bound by the policy decisions of the Government of India, Ministry of Coal, and since under the new coal distribution policy formulated pursuant to the observations of this Court in Ashoka Smokeless Coal India (P) Ltd. v. Union of India misutilisation of allotted coal and black marketing of such coal by the appellants was to be checked, Coal India Ltd. and BCCL did not act arbitrarily or unreasonably to suspend the supplies of coal under FSA to the appellants, if they entertained a serious doubt on the basis of the FIR lodged by CBI that the supplies of coal, if made, to the appellants may be misutilised by the appellants and may be sold in the open market. 23. In our considered opinion, BCCL will also have the right to suspend supplies of coal to the appellants where it has doubts that the appellants may misutilise the allotted coal and divert or sell the same in open market because, as would be clear from Clause 4.4 of the FSA and the new coal distribution policy dated 18-10-2007, the very object of FSA as well as policy decision of the Government is to allot coal to the appellants for utilisation in their plants and not for any other purpose. Therefore, if the FIR lodged by CBI, which is a premier investigation agency of the Central Government, created serious doubts that the allotted coal may be diverted or sold in the open market instead of being utilised in the plants of the appellants, BCCL would be within its rights to suspend the supplies of coal to the appellants till the doubts are cleared in appropriate proceedings.” 16. It has been held in the aforesaid judgment that if on lodging of FIR by the CBI which is a premier investigation agency, the BCCL has any serious doubt regarding the breach of contract by way of re-sale or diversion of coal instead of utilizing it for the purpose it was supplied, it may immediately suspend the supply of coal till any final decision is taken by the coal company in an appropriate proceeding. 17. The learned counsel for the petitioner has vehemently argued that any authority empowered to take a decision, cannot act on the behest or suggestion of another person or authority. In support of the said argument, the learned counsel has put reliance on a judgment rendered by the Hon’ble Supreme Court in the case of Commissioner of Police, Bombay Vs. Gordhandas Bhanji, reported in AIR 1952 SC 16. The fact of the said case was that the Commissioner of Police who had the jurisdiction to grant or refuse a license for cinema hall, cancelled the earlier granted license of the respondent of that case on the behest of the government. When the matter travelled to the Hon’ble Supreme Court, while adjudicating the same, it has been held as under:- 11 “26. We have held that the Commissioner did not in fact exercise his discretion in this case and did not cancel the license he granted. He merely forwarded to the respondent an order of cancellation which another authority had purported to pass. It is evident from these facts that the Commissioner had before him objections which called for the exercise of the discretion regarding cancellation specifically vested in him by R. 250. He was therefore bound to exercise it and bring to bear on the matter his own independent and unfettered judgement and decide for himself whether to cancel the license or reject the objections. That duty he can now be ordered to perform under S. 45.” 18. Further reliance has been put by the learned counsel for the petitioner on the judgment of the Hon’ble Supreme Court rendered in the case of Pancham Chand and Others Vs. State of Himachal Pradesh and Others, reported in (2008) 7 SCC 117, wherein the fact was that a political person had filed an application before the Chief Minister directly for grant of permit and thereafter the office of the Chief Minister communicated the order of the Chief Minister to the Director, Transport who while acting as per the direction of the Chief Minister, granted permission to that political person. The Hon’ble Apex Court after appreciating the said fact, held that the Chief Minister cannot usurp the power and function of the Regional Transport Authority and such an interference on the part of any functionary upon whom the statute does not confer any jurisdiction, is wholly unwarranted in law. 19. The facts and circumstance of the present case stands on different footing from the facts of the aforesaid cases. In the present case the subject matter is coal. Coal is regarded as an essential commodity. Thus, different from any general contract, the purchaser is restricted by the specific agreement from diverting the coal and causing loss to the government revenue. In the agreement itself, the CCL has been empowered to periodically inquire as to whether the consumer/ buyer is misusing the terms of the FSA so as to take suitable measures including termination of coal supply agreement. Since the diversion of coal in the open market by the purchaser also attracts criminal liability, the government agencies like CBI or other bodies empowered for economic intelligence and to check economic offences also make investigation to find out if the purchasers of coal are diverting the same in the open market. Therefore, even if on the information of any other government agency, it prima facie appears to the coal company that its consumer is violating the conditions laid down in Clause 4.4 of FSA, it may immediately stop/suspend the supply of coal for preventing further misuse till any concrete conclusion is drawn. However, the final 12 decision in this regard has to be taken by the coal Company and for that purpose it may make necessary inquiry at its own level to find out the veracity of the allegations levelled against the consumer by different functionaires. 20. Learned counsel for the petitioner has also put reliance on the judgment rendered by the Division Bench of this Court in the case of Bharat Coking Coal Limited & Ors. Vs. M/s Jha Briquette Unit & Ors. reported in (2005)2 JLJR 67 (HC), wherein the fact was that the coal supply to the writ petitioner was stopped on the basis of the order of the Superintendent of Police, Dhanbad. Under the factual context of the said case, the learned Division Bench has held as under: “4. Having heard the learned counsel for the appellants at length, we are also at a total loss to understand the reasons which prompted the appellants to file the present appeal. Is it the case of the appellants that the learned Single Judge was wrong in holding that the appellants being one of the contracting parties should not have acted merely on the dictates of a Police Officer, that too based on an unfounded, unconfirmed and totally uncorroborated report of the Police? Is it also the case of the appellants that despite being a contracting party, the appellants were not required to act in accordance with the contractual terms and if ever the appellants wanted to stop the supply of coal to the respondent- writ petitioner, they were under no obligation at all to act in accordance with such terms and conditions of the contract and to satisfy themselves whether the writ petitioner was a genuine person or not? To say the least, the appellants acted illegally and in violation of the terms of contract merely on the basis of an unfounded report of the Police. They also appear to have acted mechanically and without any application of mind. There is no merit in this appeal. The appeal is wholly misconceived.” 21. In the aforesaid case, the learned Division Bench observed that the suspension of supply of coal was made only on the unfounded allegation against the petitioner of that case made by the Superintendent of police, Dhanbad and thus affirmed the order of the Single Judge whereby the BCCL was directed to take decision after getting information from other sources or agencies, if necessary. 22. This court is also of the view that the final decision in the matter is to be taken by the respondent-CCL. However, so far as the suspension of coal by ways of immediate measure is concerned, it has been specifically held by the Hon’ble Supreme Court in the cases of Sushila Chemicals (P) Ltd. (Supra.) and Alok Fuels Private Limited (Supra.) that the coal company has the right to suspend the supply of coal to the consumer where it has any doubt that the consumer is misutilizing the coal by diverting or selling the same in the open market. 13 23. In the present case, the respondent-CCL had taken action against the petitioner on the basis of the inspection report of the Income Tax Department which was prepared taking note of the evidence of an employee of the petitioner and also having taken into consideration of the statement of the Director of the petitioner that no regular book of account was maintained, rather only sale register, purchase register and production register/stock register were being maintained. The aforesaid fact can be said to be prima facie material to create doubt with the CCL that the petitioner has violated the terms and conditions of Clause 4.4 of FSA. Thus I find no infirmity in the decision of the CCL to suspend the supply of coal of the petitioner till final decision is taken in the matter after initiating appropriate proceeding. 24. In the case of M/s Swastika Smokeless Coke Company Pvt. Ltd. Vs. Central Coalfields Limited & Anr. [W.P.(C) No.2589 of 2016], the fact was that on the basis of an FIR lodged by the district administration alleging diversion of coal by the consumer, the respondent-CCL suspended its supply of coal and finally terminated the FSA. In the said case, this court after taking note of the observation made by the Hon’ble Supreme Court in the case of Sushila Chemical Private Ltd. (Supra.) held that before passing the order of termination of agreement, no independent inspection was carried out at the level of the coal company in an appropriate proceeding to find out the truthfulness of the allegation as well as before passing the order of termination of agreement, the principles of natural justice was not followed. 25. In the present case the subject matter is the order of suspension of coal supply on the observation of the Income Tax Department and the REIC. Moreover, the final decision in this regard has not yet been taken and as such the judgment rendered in the case of M/s Swastika Smokeless Coke Company Pvt. Ltd. (Supra.) would not apply in the fact situation of the present case. On the contrary, the ratio laid down in the cases of Sushila Chemical Private Ltd. (Supra.) and Alok Fuels (P) Ltd. (Supra.) would be applicable to the case of the petitioner. 26. The learned counsel for the petitioner has also put reliance on the judgments of the Hon’ble Supreme Court rendered in the cases of Noble Resources Ltd. v. State of Orissa & Anr., reported in 14 (2006)10 SCC 236, and ABL International Ltd. & Anr. v. Export Credit Guarantee Corpn. of India Ltd. & Ors., reported in (2004) 3 SCC 553, and has contended that the writ petition under Article 226 of the Constitution of India is maintainable in contractual matter. I have no doubt with the proposition laid down in the aforesaid judgments. Nevertheless, as in the present writ petition, I do not find any infirmity, arbitrariness and unreasonableness in the action of the respondent-CCL, any interference under Article 226 of the Constitution of India is not warranted. Moreover, the power to suspend the coal supply is an ancillary power of the CCL in addition to cancel the contract itself. In such circumstance, the order passed by the respondent-CCL suspending the supply of coal to the petitioner needs no interference by this Court in its extraordinary writ jurisdiction. 27. The learned counsel for the petitioner has put much reliance on the report of the G.M., District Industries Centre (DIC) which indicates that the petitioner’s unit is a running one. However, the stand of the respondent-CCL is that the report of the G.M., DIC does not speak about the capacity of the petitioner’s unit and since allegation against it is regarding its capacity to consume the coal supplied to it, the report of the G.M., DIC will not help the case of the petitioner. 28. Under the aforesaid facts and circumstances of the case, the present writ petition is disposed of, directing the respondent-CCL to make an independent inquiry on the allegation levelled against the petitioner in view of specific power conferred under Clause 4.4 of the FSA and to take a final decision after providing reasonable opportunity of hearing to the petitioner’s representative expeditiously. It is, however, made clear that while taking the said decision, the respondent-CCL will not be influenced by the observations of the REIC and the Income Tax Department. 29. I.A. Nos.7768 & 9439 of 2018 are also disposed of accordingly. (Rajesh Shankar, J.) Sanjay/AFR "