1972 (8) TMI 45 - SC - Central Excise

Levy and Collection - Distinction between - Natural justice - Principles not followed - Levy and assessment - Difference between - Rule 10 vis-a-vis Rule 10-A.

Issues Involved:
1. Change in the basis of assessment for excise duty.
2. Validity of notices demanding additional excise duty.
3. Whether the notices were barred by time.
4. Jurisdiction of the Collector to issue the impugned notices.
5. Interpretation and applicability of Rules 10 and 10-A of the Central Excise Rules, 1944.
6. Whether there was a provisional assessment under Rule 10-B.
7. Whether the impugned notice fell under Rule 10-A.

Issue-wise Detailed Analysis:

1. Change in the Basis of Assessment for Excise Duty:
The Company used to furnish quarterly price lists including the "distributors' selling price" until July 1957. After this column was dropped, the excise authorities faced difficulties in valuing the cigarettes and changed the basis of assessment from "distributors' selling price" to "the wholesale cash selling price at which stockists or agents are selling the same to an independent buyer in the open market." This change was communicated to the Company on 5-11-1958.

2. Validity of Notices Demanding Additional Excise Duty:
Three notices were issued by the Deputy Superintendent demanding additional excise duty for short levy on various brands of cigarettes for different periods. The Company challenged these notices under Article 226 of the Constitution, and the Calcutta High Court quashed them on the ground that the Company had not been given an opportunity to be heard. The High Court did not decide whether the notices were time-barred but allowed the Collector to take necessary steps for assessment and realization of revenue in accordance with the law.

3. Whether the Notices Were Barred by Time:
The notices were challenged on the ground that they were barred by the provisions of Rule 10 of the Central Excise Rules. The learned Single Judge and the Division Bench of the Calcutta High Court held that the notices were indeed barred by time as per Rule 10, which required a demand to be made within three months from the date on which the duty was paid or adjusted in the owner's account current.

4. Jurisdiction of the Collector to Issue the Impugned Notices:
The Company argued that the notices were issued without jurisdiction. The Collector contended that the notices were valid under Rule 10-A, which provides for residuary powers for recovery of sums due to the government. The Division Bench of the Calcutta High Court refused to consider this argument as it was not raised before the learned Single Judge or in the grounds of appeal.

5. Interpretation and Applicability of Rules 10 and 10-A of the Central Excise Rules, 1944:
Rule 10 deals with the recovery of duties or charges short-levied or erroneously refunded due to specific reasons such as inadvertence, error, collusion, or misstatement. Rule 10-A provides for the collection of any duty or deficiency in duty not specifically provided for by other rules. The Supreme Court held that Rule 10 should be confined to cases where the demand is made for a short levy caused by one of the reasons given in that rule. Rule 10-A would apply to cases not covered by Rule 10.

6. Whether There Was a Provisional Assessment Under Rule 10-B:
The Court found no evidence of an order directing provisional assessment or a bond furnished by the Company as required under Rule 10-B. The practice of provisionally approving the price lists supplied by the Company was established as a matter of fact, but it did not conform to the procedural requirements of Rule 10-B.

7. Whether the Impugned Notice Fell Under Rule 10-A:
The Supreme Court held that the Division Bench of the Calcutta High Court erred in refusing to consider the applicability of Rule 10-A. The Court found that the notice could fall under Rule 10-A, which allows for the recovery of sums due to the government in cases not specifically provided for by other rules. The Court also noted that Rule 10-A, read with Section 4 of the Act, implied a quasi-judicial procedure for completing an assessment in special circumstances.

Conclusion:
The Supreme Court allowed the appeal, set aside the orders of the Calcutta High Court, and permitted the Collector to proceed with the assessment. The Court emphasized the need to harmonize Rules 10 and 10-A and recognized an implied power to complete an assessment in cases not specifically provided for by the rules. The parties were directed to bear their own costs.

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