1986 (2) TMI 61 - HC - Central Excise

Summary

Issues Involved:
1. Liability of curers of tobacco for payment of excise duty.
2. Interpretation of relevant rules under the Central Excises and Salt Act, 1944.
3. Validity of the demands made by the Superintendents of Central Excise.
4. Legal principles governing the interpretation of fiscal statutes.

Detailed Analysis:

1. Liability of Curers of Tobacco for Payment of Excise Duty:
The respondents, who are growers and curers of tobacco, sold tobacco without paying the excise duty chargeable under the Central Excises and Salt Act, 1944. The main contention was whether the curers' liability for excise duty extinguished upon the sale and delivery of tobacco to a licensed warehouseman and dealer, and upon reporting the transfer to the proper officer.

2. Interpretation of Relevant Rules under the Central Excises and Salt Act, 1944:
The court examined Rules 9, 19, 24, 29, and 49 of the Central Excise Rules, 1944, to determine the liability for excise duty. Rule 9(1) prohibits the removal of excisable goods until the excise duty has been paid. Rule 19 states that duty becomes chargeable as soon as the products are cured and fit for sale, and the curer remains liable for the payment of duty until the liability is transferred to another licensed person. Rule 24 outlines the methods of disposal of the products by the curer, but does not absolve the curer's liability. Rule 29 allows authorities to collect duty from the purchaser but does not absolve the curer from liability until the transfer of ownership is reported and acknowledged by the proper officer. Rule 49 supports the appellants' case that duty is chargeable only on removal of goods from the factory premises or an approved place of storage.

3. Validity of the Demands Made by the Superintendents of Central Excise:
The demands made by the Superintendents of Central Excise for payment of excise duty from the curers were challenged by the respondents. The court held that the demands were legal and valid, as the curers' liability for duty did not extinguish merely by reporting the transfer of ownership to the proper officer. The court emphasized that the curers are primarily liable for the duty under the Act and Rules, and the liability can only be transferred to the purchaser if the purchaser pays the duty.

4. Legal Principles Governing the Interpretation of Fiscal Statutes:
The court referred to established principles of statutory interpretation, emphasizing that the interpretation should make the charging provision effective and not provide a means of tax evasion. The court cited various judgments, including K.P. Varghese v. I.T.O. Ernakulam and Another, and Union of India v. Bombay Tyre International Limited, to support the principle that the taxable event is the manufacture of goods and the manufacturer is primarily liable for the duty. The court rejected the respondents' interpretation that their liability extinguished upon reporting the transfer of ownership, stating that such an interpretation would defeat the purpose of the excise duty provisions.

Conclusion:
The court allowed the appeals, set aside the common order dated 21-11-1980 of Srinivasa Iyengar, J., and dismissed the writ petitions filed by the respondents. The court held that the demands made against the respondents who had not paid the duty were legal and valid. The court also granted certificates of fitness to appeal to the Supreme Court, recognizing that the cases involved substantial questions of law of general importance.

Orders on Oral Application for Certificate of Fitness to Appeal to the Supreme Court:
The court acknowledged the conflict of judicial opinion on the issue and granted the respondents' oral application for certificates of fitness to appeal to the Supreme Court. The court also stayed the operation of its judgment for two months for those respondents who had not made payments, recognizing the stay orders previously granted by the learned Single Judge.