1983 (1) TMI 90 - HC - Central Excise

Duty not levied due to injunction of Court Short levy Writ Petition if dismissed Liability to pay duty is revived

Issues Involved:
1. Validity of Proviso 3 of Notification No. 201/79-C.E.
2. Applicability of Section 11A of the Central Excises and Salt Act for recovery of excise duty.
3. Whether Rule 9(2) or Rule 10 applies to the recovery of excise duty.
4. Impact of court injunctions on the recovery of excise duty.
5. Relevance of subsequent notifications and judicial precedents.

Detailed Analysis:

1. Validity of Proviso 3 of Notification No. 201/79-C.E.
The appellants, manufacturers of safety matches, challenged the validity of Proviso 3 of Notification No. 201/79-C.E., which denied the benefit of set-off of excise duty for goods on which duty was paid through banderols. They argued this was discriminatory since it allowed set-off for inputs like Potassium chlorate, glue, and phosphorus used in manufacturing safety matches. The court dismissed the writ petitions, upholding the validity of Proviso 3, stating that there was no discrimination in granting exemptions or benefits.

2. Applicability of Section 11A of the Central Excises and Salt Act for Recovery of Excise Duty
The appellants contended that the recovery of excise duty should have been initiated under Section 11A of the Central Excises and Salt Act, which provides an elaborate procedure involving a show cause notice, representation, and determination. The court rejected this argument, stating that Section 11A did not apply because the excise department was prevented by an injunction from collecting the proper duty. The court held that since the charge of excise duty was already attached to the goods upon removal, the right of recovery was merely postponed due to the court's injunction.

3. Whether Rule 9(2) or Rule 10 Applies to the Recovery of Excise Duty
The appellants argued that Rule 9(2) or Rule 10 should apply, which involves establishing clandestine removal and following a quasi-judicial procedure. The court clarified that Rule 9(2) applies to clandestine removal without assessment, which was not the case here. The goods were removed under a court order without full duty payment due to the injunction. The court also noted that Rule 10 did not apply as there was no evasion or clandestine removal.

4. Impact of Court Injunctions on the Recovery of Excise Duty
The court emphasized that the injunction prevented the excise department from collecting the proper duty. Once the injunction was dissolved, the department was entitled to recover the full excise duty. The court cited the principle that no person shall be prejudiced by an act of court, reinforcing that the delay in duty collection due to the injunction should not benefit the appellants.

5. Relevance of Subsequent Notifications and Judicial Precedents
The appellants cited various judicial precedents and notifications to support their case. The court found these references inapplicable, as the circumstances in those cases differed significantly from the present case. The court specifically mentioned that subsequent notifications (No. 99 of 1980 and No. 2 of 1982) were irrelevant as they pertained to later periods. The court also referenced a similar case (W.P. No. 11318 of 1981), which supported the department's right to collect the proper duty post-injunction.

Conclusion:
The court dismissed the writ appeals, upholding the validity of Proviso 3 of Notification No. 201/79-C.E. and confirming that Section 11A of the Central Excises and Salt Act did not apply. The court ruled that Rule 9(2) or Rule 10 was not applicable, and the department was justified in recovering the excise duty post-injunction. The appellants were ordered to pay the differential duty, and the writ appeals were dismissed with costs.

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