1965 (11) TMI 151 - HC - Service Tax

Summary

Issues Involved:
1. Legality of the orders directing the petitioner to pay full excise duty.
2. Constitutionality of the Central Excise Rules.
3. Denial of personal hearing by the Central Government.
4. Assessment and collection of excise duty.
5. Opportunity of being heard in quasi-judicial proceedings.

Detailed Analysis:

1. Legality of the Orders Directing the Petitioner to Pay Full Excise Duty:
The petitioner challenged the orders dated 13th March 1961 and 17th March 1961 by the Superintendent of Central Excise, Ranchi, which directed the payment of full excise duty on 1186 radio sets before their removal from the factory. The petitioner contended that these sets were fully manufactured before 1st March 1961, and thus, no duty was payable. However, an inspection on 9th March 1961 revealed that the sets were in a dismantled condition. Consequently, the Superintendent of Excise determined that the manufacture was not completed before the said date, making excise duty payable. This decision was upheld by higher authorities, including the Central Government.

2. Constitutionality of the Central Excise Rules:
The petitioner raised several constitutional questions, including the vires of the Central Excise Rules. The Act consolidates and amends the law relating to central duties of excise on goods manufactured in India. Section 3 is the charging section, and Section 2(f) defines "manufacture" to include any process incidental or ancillary to the completion of a manufactured product. The rules provide for the assessment and collection of duties, and the Central Government's rule-making power is under Section 37(2)(i). The court found that the rule-making power was not excessive and that the Act provided sufficient guidance, including the definition of "manufacture" and principles for determining the value of goods. The rules were required to be laid before Parliament, ensuring legislative control.

3. Denial of Personal Hearing by the Central Government:
The Central Government's refusal to grant a personal hearing at the revision stage was challenged as a violation of natural justice. The court held that the power of review under Section 36 of the Act is quasi-judicial, requiring the Central Government to give the petitioner a reasonable opportunity of being heard. The necessity of a hearing arises because the question of when the manufacture of a wireless set is complete is a mixed question of law and fact.

4. Assessment and Collection of Excise Duty:
The petitioner argued that the machinery for assessment and collection of excise duty was a legislative function that could not be delegated to the rule-making authority. The court rejected this contention, stating that Article 265 of the Constitution allows for the levy and collection of tax by "law," which includes rules made under an Act. The Act and rules provided sufficient guidance and safeguards, including the right of appeal and revision, and the requirement for the assessing officer to act quasi-judicially.

5. Opportunity of Being Heard in Quasi-Judicial Proceedings:
The petitioner contended that the rules denied a reasonable opportunity of being heard, imposing unreasonable restrictions on trade. The court found that the rules implied a quasi-judicial inquiry before final assessment, with provisions for provisional assessment, part-payment of duty, and removal of goods with a current account. The discretionary powers conferred on Central Excise Officers were not arbitrary, as they were subject to appeal and revision.

Conclusion:
The court quashed the orders of the Superintendent of Central Excise dated 13th March 1961 and 17th March 1961, the appellate order of the Collector of Central Excise dated 30th June 1961, and the order of the Central Government dated 21st December 1961. The Collector of Central Excise, Patna, was directed to rehear the appeal after giving the petitioner a reasonable opportunity to represent his case and dispose of it according to law. No order for costs was made.