Full Judgment Text
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PETITIONER:
SHIVA GLASS WORKS CO. LTD.
Vs.
RESPONDENT:
ASSITANT COLLECTOR OF CENTRAL EXCISE AND OTHERS.
DATE OF JUDGMENT11/01/1991
BENCH:
OJHA, N.D. (J)
BENCH:
OJHA, N.D. (J)
SAIKIA, K.N. (J)
CITATION:
1991 AIR 456 1991 SCR (1) 43
1991 SCC (2) 329 JT 1991 (1) 73
1991 SCALE (1)12
ACT:
Central Excises and Salt Act, 1944/Central Excise
Rules, 1944: Section 3/Rules 10 and 10A--Assessee--Price
list of goods furnished--Accepted provisionally--Excise duty
paid--Goods cleared--Discrepancy--Detected later--Recovery
of excise duty--Whether permissible.
HEADNOTE:
The appellant company a licensee under the central
Excises and Salt Act, 1944 and during the relevant period
namely 1st September, 1961 to 26th September, 1963 carried
on the business of manufacturing different types of glass
wares which were excisable goods under the Act.
The appellant used to present A.R.I. forms accompanied
with price lists of the goods and after paying excise duties
calculated on the basis of the price lists used to remove
the goods. The office of the appellant was searched by the
Excise Authorities on 26th September, 1963 and several
documents, books and papers were seized, and as a
consequence thereof it transpired that the appellants were
maintaining two sets of bills. The bills of one set were
those on the basis of which the appellant used to pay excise
duty before clearance of the goods and those of the other
were such which were never issued to the dealers. In these
two sets of bills, the rate of discount was differently
shown.
A notice dated 26th March, 1968 was served on the
appellant by the Assistant Collector stating that it
appeared that during the relevant period the appellant had
not paid excise duty on the goods at the prices at which
they were sold, but duty was paid at lower rates and
requiring it to show cause as to why duty on the prices at
which the good were actually sold, as found on scrutiny of
sale vouchers/sale documents should not be recovered under
Rule 10A of the Central Excise Rules, 1944. In reply the
appellant asserted that it was the provision of Rule 10 and
not Rule 10A which was attracted to the facts and
consequently the initiation of proceedings was barred by
time. This plea did not find favour with the Excise
Authorities, and the appellant was required to pay the
additional duty of Rs. 1.41 lakhs.
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The aforesaid order was challenged by the appellant
before the
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High Court under Article 226 of the Constitution and a
Single Judge accepted the contention of the appellant the
Rule 10 and not Rule 10A of the Rules was applicable and on
this view quashed the order dated 26th August, 1968
The respondents preferred and appeal to the Division
Bench which has reversed the order of the Single Judge, on
the finding that it was a case falling Rule 10A and
dismissed the writ petition.
In the appeal to this Court it was contended that the
single Judge was right in taking the view that the case fell
within the purview of Rule 10 of the Rules and that the
Division Bench committed an error in reversing the Judgment,
while the Revenue contested the appeal urging that on the
facts found by the division Bench, and indeed on the case
set up by the appellant itself no exception could be taken
to the finding of the Division Bench that it was Rule 10A
and not Rule 10 which was attracted to the facts of the case.
Dismissing the Appeal, this Court,
HELD: 1. The question as to whether Rule 10 or Rule 10A
was applicable has to be determined in the background of the
procedure which was followed. The legal position is that
Rule 10A does not apply where the case is covered by Rule 10
of the Rules. [48E]
N.B. Sanjana v. Elphinstone Mills, [1971] 3 S.C.R. 506
relied on.
2. Simply because Rule 9B of the Rules, was conceded
not to have been taken recourse to by the respondents so
that provisional assessment could be said to have come into
existence in its statutory sense as contemplated by the said
rule when duty was paid at the time of clearance of the
goods, the conclusion was not inescapable, that a final
assessment had came into being at that time. [49A-B]
3. In view of the procedure adopted by the appellant it
was apparently a case where duty was calculated on the basis
of price lists supplied by the appellant to facilitate the
clearance of the goods and the correct amount of duty
payable was yet to be determined after subsequent
verification, and appellant was under an obligation to pay,
on the basis of the bond executed by them, the difference of
the amount of the duty paid at the time of clearance of the
goods and the amount found payable after subsequent
varification. [49B-C]
4. The Division Bench of the High Court has found that
there was no assessment as is understood in the eye of law,
but only a mechanical settlement or adjustment of duties on
the basis of the sale prices filed by the appellant had been
made and at best, it was a case of incomplete assessment
which the Excise Authorities were entitle to complete under
Rule 10A.[49D]
Assistant Collector of Central Excise, Calcutta
Division v. National Tobacco Co. of India Ltd., [1973] 1
S.C.R. 822, referred to.
5. The instant case therefore falls within the purview
of Rule 10A and not Rule 10 of the Rules. [50B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 763 of
1977.
From the Judgment and Order dated 30.7.1976 of the
Calcutta High Court in Appeal No. 167 of 1972.
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Raja Ram Agrawal, K.B. Rana and Praveen Kumar for
Khaitan & Co. for the Appellant.
A. Subba Rao, P. Parmeshwaran and A.D.N. Rao for the
Respondents.
The Judgment of the Court was delivered by
OJHA, J. This appeal by special leave has been
preferred against the judgment dated 30th July, 1976 of the
Calcutta High Court in Appeal from Original Order No.
167/1972. The facts in nutshell necessary for the decision
of this appeal are that the Appellant-Company, a licensee
under the Central Excise and Salt Act, 1944 (hereinafter
referred to as the Act) carried on during the relevant time,
namely, 1st September, 1961 to 26th September, 1963,
business of manufacturing different types of glasswared
which were excisable goods under the Act. The appellant
used to present A.R.I. forms accompanied with price list of
the goods and after paying excise duties calculated on the
basis of the price lists used to remove the goods. The
appellant’s office was searched by the Excise Authorities on
26 September, 1963 and several documents, books and papers
were seized. As a consequence of this search and seizure it
transpired that the appellant was maintaining two sets of
bills. The bills of one set were those on the basis of
which the appellant used to pay excise duty
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before clearance of the goods and those of the other were
such which were never issued to the dealers. In these two
sets of bills inter alia the rate of discount was
differently shown. A notice dated 26th March, 1968 was
served on the appellant by the Assistant collector of
Central Excise, Calcutta-II Division, Calcutta stating that
it appeared that the appellant had, during the relevant
period, not paid excise duty on the goods at the prices at
which they were sold but duty was paid at lower rates
declared by it. The appellant was required to show cause as
to why duty amounting to Rs. 1,43,633.84 p. on the prices at
which the goods were actually sold, as found on scrutiny of
sale vouchers/sale documents should not be recovered under
rule 10A of the Central Excise Rule, 1944 (hereinafter
referred to as the Rules.) The appellant, in reply to the
show cause notice, inter alia asserted that it was the
provisions of Rule 10 and not Rule 10A of the Rules which
were attracted to the facts of the instant case and that
consequently the initiation of proceedings against the
appellant was barred by time. This plea did not find favour
with the Excise Authorities and the appellant was required,
by order dated 26th August, 1968, to pay to the Central
Government, an additional duty of Rs. 1,41,829.11 p. This
order was challenged by the appellant before the High Court
under Article 226 of the Constitution of India. A learned
Single Judge of the High Court accepted the contention of
the Rule 10 and not Rule 10A of the Rules was applicable and
on this view the order dated 26th August, 1968 was quashed.
Aggrieved by that order, the respondents preferred an appeal
before a Division Bench of the High Court. The judgment of
the learned Single Judge was reversed and on the finding
that it was a case falling under Rule 10A, the writ petition
was dismissed by the judgment under appeal.
The only point which has been urged by learned counsel
for the appellant in support of this appeal is that the
learned Single Judge was right in taking the view that the
case fell within the purview of Rule 10 of the Rules and the
Division Bench committed an error in reversing his judgment.
For the respondents on the other hand, it has been urged
that on the fact found by the division Bench and indeed on
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the case set up by the appellant itself no exception could
be taken to the finding of the Division Bench that it was
Rule 10A of the Rules and not Rule 10 which was attracted to
the facts of the instant case. In order to appreciate the
respective submissions made by learned counsel for the
parties it would be useful to extract Rules 10 and 10A.
They read as hereunder:
"10. Recovery of duties or charges short-levied or
errones-
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ously refunded--When duties or charges have been
short-levied through inadvertence, error, collusion
or misconstruction on the part of an officer, or
through mis-statement as to the quantity,
description or value of such goods on the part of
the owner, or when any such duty or charge, after
having been levied, has been owning to such cause,
erroneously refunded, the person chargeable with
the duty or charge so short-levies, or to whom such
refund has been erroneously made, shall pay the
deficiency or the amount paid to him in excess as
the case may be, on written demand by the proper
officer being made within three months from the
date on which the duty or charge was paid or
adjusted in the owners’ account, current, if any,
or from the date of making the refund."
"10A. Residuary powers for recovery of sums due to
Government--Where these Rules do not make any
specific provision for the collection any duty, or
of any deficiency in duty has for any reason been
short-levied, or of any other sum of any kind
payable to the Central Government under the Act or
these Rules, such duty, deficiency in duty or sum
shall on a written demand made by the proper
officer, be paid to such person and at such time
and place as the proper officer may specify.
In elaboration of his submission that it was a case
covered by Rule 10 of the Rules learned counsel for the
appellant pointed out that since the case of the respondents
was that on the basis of the documents seized during the
search of the appellant’s office on 26th September, 1963 it
was found that the duty paid by the appellant on the basis
of price lists furnished by the appellant at the time of
clearance of the goods was deficient, it was a case where
duty had been short-levied "through mis-statement as to the
quantity, description or value of such goods on the part of
the owner" as contemplated by Rule 10. We find it difficult
to agree with the submission. The procedure adopted by the
appellant/was indicated by the appellant under its letter
dated 23rd March, 1961, a portion whereof as extracted by
the learned Single Judge reads as hereunder:
"We enclose herewith our three price lists for 1)
Bottles and phials 2) Glass-Wares and 3) Fancy
Wares for the purposes of provisional assessment.
These price are inclusive of Central Excise duty.
As regards Trade discounts to
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be deducted from the said prices as per Section 4
of the Act we declare that 1) 25% should be
deducted from the price list for bottles and
phials. 2) 35% from the price list for glass-wares
and 3) 20% from the price list for fancy wares over
and above necessary deduction for Central Excise
duty included in the prices."
The learned Single Judge has also pointed out that the
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appellant used to clear the goods by executing bond and
that in the specimen copy of the bond produced in court it
was stated that whereas final assessment of excise duty of
glass and glasswares made by the appellant from time to time
could not be made for want of full particulars as regards
value, description, quality or proof thereof or for non-
completion of chemical or other tests and whereas the
appellant had requested the Excise Authorities as per Rule
9B of the Rules to make provisional assessment of excise
duty of the goods pending final assessment, the appellent
was giving a guarantee to the extent of the sum mentioned in
the bond for payment of the duties. The learned Single
Judge has also pointed out that it appeared to be the common
case of the parties that in order to facilitate the
assessment of the goods by Excise Authorities, the appellant
used to file the price list in advance and after acceptance
provisionally of the price list, the goods used to be
cleared and if subsequently and discrepancy was detected or
found, the same used to be paid by the appellant.
The question as to whether Rule 10 or Rule 10A of the
Rules was applicable has to be determined in the background
of the appellant as indicated above. The legal position
that Rule 10A does not apply where the case is covered by
Rule 10 of the Rules is well-settle in view of the decision
of this Court in N.B. Sanjana v. Elphinstone Mills, [1971] 3
S.C.R. 506, on which reliance has been placed by learned
counsel for the appellant. Consequently, Rule 10A could be
attracted only if the case does not fall within the purview
of Rule 10. It was conceded before the learned Single Judge
on behalf of the respondents that the respondents were not
proceeding under the provision of Rule 9B. On this basis and
on his own finding also that Rule 9B was not attracted, the
learned Single Judge held that it was not a case of
provisional assessment but a case of regular assessment in
pursuance whereof duty was paid by the appelant and that
since the case of the respondents was that the appellant had
manufactured documents as was revealed as a consequence of
the search and seizure referred to above it was a case of
short-levy due to mis-statement by the appellant.
Consequently, the case clearly fell
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within the purview of Rule 10 of the Rules. The Division
Bench of the High Court in appeal did not, and in our
opinion rightly, subscribe to the aforesaid finding. Simply
because Rule 9B of the Rules was conceded not to have been
taken recourse to by the respondents so that a provisional
assessment could be said to have come into existence in its
statutory sense as contemplated by the said rule when duty
was paid at the time of clearance of the goods, the
conclusion was not inescapable, that a final assessment had
come into being at that time. In our opinion, in view of
the procedure adopted by the appellant referred to above it
was apparently a case where duty was calculated on the basis
of price lists supplied by the appellant to facilitate the
clearance of the goods and the correct amount of duty
payable was yet to be determined after subsequent
varification and appellant was under an obligation to pay,
on the basis of the bond executed by them, the difference of
the amount of the duty paid at the time of clearance of the
goods and the amount found payable after subsequent
verification. In the judgment appealed against the Division
Bench of the High Court has found that there was no
assessment as is understood in the eye of law but only a
mechanical settlement or adjustment of duties on the basis
of the sale prices filed by the appellant had been made
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and at best, it was a case of an incomplete assessment which
the Excise Authorities were entitled to complete under Rule
10A. In taking this view the Division Bench of the High
Court has relied on a decision of this Court in Assistant
Collector of Central Excise, Calcutta Division v. national
Tobacco Co. of India Ltd., [1973] 1 S.C.R.. 822. In that
case also the Company used to furnish quarterly price lists
which used to be accepted for purpose of enabling the
Company to clear its goods and according to the Excise
Authorities these used to be verified afterwards by
obtaining evidence of actual sale in the market before
issuing final certificates that the duty had been fully paid
up. The prices of the goods to be cleared were furnished by
the Company on forms known as A.R.I. forms in that case
also. It was held that only a mechanical adjustment for
settlement of accounts by making debit entries was gone
through and that it could not be said that any such
adjustment was assessment which was a quasi-judicial process
and involved due application of mind to the fact as well the
requirements of law. With regards to the debit entries it
was held that the making of such entries was only a mode of
collection of tax and even if payment or actual collection
of tax could be spoken of as a de facto "levy" it was only
provisional and not final. It could only be clothed or
invested with the validity after carrying out the obligation
to make an assessment to justify it. It was also held that
it was the process of adjustment that really determined
whether levy was short or complete. It was not a factual
or presumed levy which could in
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a disputed case prove an "assessment." This had to be done
by proof of the actual steps taken which constitute
assessment.
We are of the opinion that in view of the procedure
adopted by the appellant in the instant case referred to
above and the law laid down by this Court in the case of
national Tobacco Co. of India Ltd. (supra) it is not
possible to take any exception to the finding of the
Division Bench in the judgment appealed against that it was
a case which fell within the purview of Rule 10A and not
Rule 10 of the Rules. In the result, we find no merit in
this appeal. It is accordingly dismissed with costs.
N.V.K. Appeal dismissed.
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