1960 (6) TMI 26 - HC - Central Excise

Summary

Issues Involved:
1. Jurisdiction of the Civil Court.
2. Legality of the levy of excise duty on the loss of weight due to evaporation and dryage.
3. Discretion of the Excise Officer in allowing percentage for dryage or evaporation.
4. Applicability of Section 40 of the Central Excises and Salt Act.
5. Limitation for filing the suit.

Detailed Analysis:

1. Jurisdiction of the Civil Court:
The primary issue was whether the Civil Court had the jurisdiction to entertain the suit challenging the levy of excise duty. The Government contended that the Civil Court had no jurisdiction based on Section 40 of the Central Excises and Salt Act, which states that no suit shall lie against the Central Government or its officers for any act done in good faith under the Act. However, the court referred to precedents, including the Madras General Sales Tax Act, which has similar provisions. It was held that unless the jurisdiction of the Civil Court is specifically excluded by the statute, it cannot be regarded as ousted. The court concluded that the Civil Court's jurisdiction was not excluded and the suit was maintainable.

2. Legality of the Levy of Excise Duty on the Loss of Weight Due to Evaporation and Dryage:
The plaintiff argued that the loss in weight due to evaporation of water content should not be subject to excise duty. The court examined the process of storing and processing tobacco, which involved an increase in weight due to water absorption and subsequent loss of weight due to evaporation. The court noted that the Assistant Collector of Central Excise allowed only 5% for dryage and assessed duty on the remaining difference, which was challenged by the plaintiff. The court found that the actual loss in weight due to evaporation was 13,969 lbs and that the excise duty should not have been levied on this loss. The court held that the levy was not warranted under the Rules and the plaintiff was entitled to a refund.

3. Discretion of the Excise Officer in Allowing Percentage for Dryage or Evaporation:
The Government argued that the Excise Officer had the discretion to allow a certain percentage for dryage and evaporation and that this discretion could not be interfered with by the court. However, the court found that the officer did not provide a satisfactory explanation for fixing the allowance at 5%. The court held that the officer's discretion must be exercised reasonably and in accordance with the rules. Since the actual loss due to evaporation was established, the court concluded that the officer's discretion was not exercised properly and the plaintiff was entitled to an allowance for the actual loss.

4. Applicability of Section 40 of the Central Excises and Salt Act:
Section 40 of the Act was examined to determine if it barred the suit. The court referred to various precedents where it was held that Section 40 did not bar suits for refund of illegally collected taxes. The court concluded that Section 40 did not apply to cases where the levy was not warranted by the Act or Rules, and thus, the plaintiff's suit for refund was maintainable.

5. Limitation for Filing the Suit:
The Government contended that the suit was barred by limitation as it was filed after six months from the act complained of, as per Section 40(2) of the Act. However, the court referred to precedents which held that the limitation period for suits for recovery of illegally collected taxes is governed by Article 62 of the Limitation Act, which prescribes a period of three years. The court held that the suit was filed within the prescribed period and was not barred by limitation.

Conclusion:
The court confirmed the judgment of the lower appellate court, holding that the Civil Court had jurisdiction, the levy of excise duty on the loss of weight due to evaporation was not warranted, the discretion of the Excise Officer was not properly exercised, Section 40 of the Act did not bar the suit, and the suit was not barred by limitation. The appeal was dismissed with costs.