1985 (7) TMI 92 - SC - Central Excise

Whether sub-section (2) of Section 3 and Section 4 of the Act and Rule 6 of the Cess Rules were ultra vires? Whether the notices issued by the authorities were valid on the ground that no machinery had been provided for the levy of the cess during the relevant period? Held that - the delay in appointing the Collector under the Act does not relieve the appellant of the liability to excise duty in respect of the period during which the Collector was not appointed. The only relief therefore to which the appellant can be entitled in the present appeal would be an order restraining the respondents from taking any penal action against the appellant for not furnishing monthly returns during the period in which no Collector had been appointed under the Act. It seems, however, that counsel for the respondents stated in the High Court during the hearing of the writ petition that no penal action would be taken against the appellant for not furnishing monthly returns within the period mentioned in sub-section (2) of Section 8 of the Act. We take it that the concession remains binding on the respondents, and it is not necessary for us to pass any express order in that regard. The appeal is dismissed.

Summary

Issues Involved:
1. Jurisdiction of authorities to levy and recover cess.
2. Validity of sub-section (2) of Section 3, Section 4 of the Act, and Rule 6 of the Cess Rules.
3. Liability to pay cess during the period when the Collector and appellate authority were not appointed.
4. Prosecution for non-compliance with Section 8 of the Act.

Issue-wise Detailed Analysis:

1. Jurisdiction of Authorities to Levy and Recover Cess:
The appellant questioned the jurisdiction of the authorities to levy cess on the products manufactured and dealt in by it. The Court noted that the Produce Cess Act, 1966, was enacted to continue the levy of cess on produce even after the abolition of the Commodity Committees. The Act provides for the levy and collection of cess as customs duty on produce exported beyond India and as excise duty on produce specified in the Second Schedule. The appellant failed to comply with notices issued by the Superintendent, Central Excise, and contended that the authorities had no jurisdiction to levy and recover the cess.

2. Validity of Sub-section (2) of Section 3, Section 4 of the Act, and Rule 6 of the Cess Rules:
The appellant raised the issue of whether sub-section (2) of Section 3 and Section 4 of the Act and Rule 6 of the Cess Rules were ultra vires. The High Court rejected all contentions and dismissed the writ petition. The Supreme Court did not delve into this issue in detail in the appeal, as the primary focus was on the liability to pay cess during the period when the Collector and appellate authority were not appointed.

3. Liability to Pay Cess During the Period When the Collector and Appellate Authority Were Not Appointed:
The Court addressed whether the appellant was liable to pay cess for the period during which the Collector and appellate authority had not been appointed. It was pointed out that the Collector was appointed only on July 13, 1970, and the appellate authority on August 21, 1972. The Court held that the absence of a duly appointed Collector under the Act for a certain period is a good defense against prosecution for non-compliance with Section 8 of the Act during that period. However, this does not relieve the occupier of a mill from the burden of the levy. The levy is imposed by sub-section (2) of Section 3 of the Act and comes into existence immediately on the taxable event attracting excise duty. The obligation to suffer the duty does not depend on the appointment of a Collector. Once the Collector is appointed, the occupier must file returns for the entire period from the commencement of the levy, including the period during which there was no Collector.

4. Prosecution for Non-compliance with Section 8 of the Act:
The appellant contended that no penal proceedings could be taken against it for not furnishing returns and depositing the cess during the period when the Collector and appellate authority had not been appointed. The Court held that the appellant could not be prosecuted for its omission to furnish monthly returns required under Section 8 of the Act during the period up to July 30, 1970, when no Collector was appointed under the Act. The delay in appointing the appellate authority also constituted no defense against the liability to pay duty. The Court noted that the concession made by the respondents' counsel in the High Court, stating that no penal action would be taken against the appellant for not furnishing monthly returns within the period mentioned in sub-section (2) of Section 8 of the Act, remained binding.

Conclusion:
The Supreme Court dismissed the appeal but without any order as to costs. The appellant was held liable to pay cess for the period during which the Collector and appellate authority were not appointed, but no penal action would be taken for not furnishing monthly returns during that period.