1981 (2) TMI 84 - HC - Central Excise

Short levy due to mis-statement - Paper - Assessment - Reopening - Remand - Writ jurisdiction - Question of fact

Summary

Issues Involved:

1. Validity of notices issued under Rule 10 and Rule 10A of the Central Excise Rules, 1944.
2. Applicability of limitation period for recovery of short-levied duty.
3. Assessment of whether the wrapping paper used for packing reams was subject to excise duty.
4. Examination of the material evidence supporting the claim of short-levy of duty.
5. The correctness of the Central Government's order reversing the Appellate Collector's decision.

Issue-wise Detailed Analysis:

1. Validity of Notices Issued Under Rule 10 and Rule 10A of the Central Excise Rules, 1944:

The assessee company challenged the validity of notices dated 3rd November 1970 and 16th November 1970 issued under Rule 10 and Rule 10A of the Central Excise Rules, 1944. The controversy was whether the assessee had paid the excise duty leviable on the wrapping paper used for packing reams of writing and printing paper. The Assistant Collector initially demanded duty under Rule 10A, but the Appellate Collector allowed the appeal, stating there was no escapement of duty. The Central Government later annulled this decision, reviving the demand notices.

2. Applicability of Limitation Period for Recovery of Short-levied Duty:

The assessee argued that the demands were time-barred under Rule 10, which prescribes a three-month limitation period for recovering short-levied duty due to mis-statement. The court referred to the Supreme Court decision in Sanjana v. E.S. & W. Mills, which held that Rule 10 applies to cases of nil assessment where the entire duty later assessed is considered short-levied. The court concluded that the period of limitation for recovering short-levy would be three months for clearances up to July 1969 and one year for the period after 1st August 1969 under Rule 173J. Consequently, the demand for the period January 1963 to September 1969 was deemed illegal due to the expiration of the limitation period.

3. Assessment of Whether the Wrapping Paper Used for Packing Reams Was Subject to Excise Duty:

The core issue was whether the nominal weight declared by the assessee included the weight of the wrapping paper. The Assistant Collector argued that the nominal weight declared did not include the weight of the wrapping paper, leading to a continuous and systematic loss of revenue. The assessee contended that the weight of the wrapping paper was included in the nominal weight, supported by international trade practices and Indian Standards Institution specifications.

4. Examination of the Material Evidence Supporting the Claim of Short-levy of Duty:

The Appellate Collector found no evidence of duty escapement, citing experiments by Central Excise Officers showing the nominal weight was either in excess of or within the tolerance limit of the actual weight. The Central Government, however, reversed this decision, stating the nominal weight did not cover the weight of the wrapping paper. The court noted that the Central Government's conclusion was based on presumptions and assumptions without considering the detailed evidence provided by the assessee, including statements showing the nominal weight was generally higher than the actual weight.

5. The Correctness of the Central Government's Order Reversing the Appellate Collector's Decision:

The court found that the Central Government ignored the factual findings of the Appellate Collector and the detailed evidence presented by the assessee. The court emphasized that the onus was on the revenue to prove that the wrapping paper had not been charged to duty. The Central Government's order was deemed erroneous and based on suspicions rather than concrete evidence.

Conclusion:

The court quashed the Central Government's order dated 25th July 1975, restoring the Appellate Collector's decision dated 1st August 1972. The writ petition was allowed, and the assessee was entitled to costs. The court did not find it necessary to pass formal orders quashing the notices dated 3rd and 16th November 1970 and the Assistant Collector's order, although it concluded that one of the notices was barred by limitation.