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TMI Blog1972 (3) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... Alcohol and varnish (French Polish) Rules, 1959. In December, 1964 the Superintendent of Central Excise Department asked the petitioner to take a licence under the Central Excise and Salt Act, 1944, hereinafter referred to as the Act, on the ground that the French Polish manufactured is excisable falling under Tariff Item No. 14 of Schedule I of the Act. Even though the petitioner felt that the French Polish it manufactures is not an excisable product, nevertheless, in order to avoid legal complications that may arise applied for and got a licence under the Act on December 10, 1964 for the manufacture of French Polish, of a quantity not exceeding 8,200 litres per annum and the said licence was renewed from year to year on payment of the appropriate renewal fee. On July 13, 1965, the Range Officer, Pudukottai issued a memo to the petitioner directing it not to clear the manufactured goods without payment of duty under the Act, presumably on the ground that the French Polish manufactured by the petitioner will come under the term Varnish falling under Item 14 of Schedule I. Immediately, on July 17, 1965 the petitioner represented to the Collector of Central Excise the second respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents. 4. In W.P. No. 266 of 1967, Thiruvade and Company, which also manufactures French Polish under a licence issued by the Central Excise Department, is the petitioner. The said firm was also denied the benefit of exemption under Notification 137/60 dated October 1, 1960 as amended by Notification 109/63 dated July 6, 1963 on the ground that one of its partners, Mr Thiruvadi is also a partner in Murugan Company, which is also manufacturing French Polish at the same time, and on that basis demands for payment of duty under Rule 10A of the Rules calling upon the petitioner to pay ₹ 5,034.54 for the period July 6, 1963 to December 24, 1964 and further a sum of ₹ 2,806.20 for the period December 24, 1964 to June 26, 1964 had been issued by the Department. This writ petition has been filed to quash these demands. Therefore, both the writ petitions raise the question of validity of the demands issued against the respective petitioners. 5. The petitioners firstly contend that Rule 10A is ultra vires the Act, as there is no specific rule making power conferred under Section 37 of the Act for recovery of excise duty which has escaped levy at the time of clearance and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court observed : If the exercise of a power can be treated to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of power in question. This is a well settled proposition of law . 7. These observations were cited with approval in a recent decision of the Supreme Court in N.B. Sanjana v. E. S. and W. Mills (AIR 1971 SC 2039). Mr. Parasaran is, therefore, well founded in his contention that if the respondents have power to issue demands either under Rule 10A or Rule 9(2) the fact that the demand refers specifically to a particular rule, which may not be applicable will not make the demand invalid. 8. Mr. K. K. Venugopal, learned counsel for the petitioners does not dispute the legal position that if the demands could be sustained under some valid source of power either in the statute or in the Rules a reference to wrong provision will not make the demands invalid. He however, contends that Rule 9(2) also suffers from the same legal infirmities as Rule 10(A) which has to be held to be ultra vires in view of the Bench decision referred to above, and that, in any event the goods in the case not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tertained a doubt as to whether the goods are excisable or not, and did not object to the clearance of the goods without payment of duty, and that, the mere non-levy at the time of the clearance will not attract Rule 9(2). In our view there is considerable force in this contention of the petitioners. 12. To attract Rule 9(2) the goods should have been removed in contravention of sub-rule (1). Rule 9(1) read with Rules 47, 52 and 52(A) set down an elaborate procedure as to how the duty has to be paid at the time of clearance of the goods from the premises of the factory. In the petitioners case the authorities have not fixed the time, place and the manner of payment of Excise duty as contemplated by Rule 9(1) and as such, there cannot be any contravention of that Rule. Thus Rule 9(2) can be applied only when the manufacturer clandestinely removes the goods from the place or premises specified in Rule 9(1) or from the store room or other place of storage approved by the Collector under Rule 47 without the use of a gate pass in the proper form countersigned by the officer under Rule 52(A). In the case of the petitioners, the authorities have not taken any steps under Rules 9(1) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the goods have been cleared without payment of excise duty merely because they have taken a view that the goods are excisable long after the goods had been cleared from the factory. Rule 9(2) could, in our opinion, be invoked only in a case where the goods manufactured had been brought in for the Central Excise levy and the time, the place and the manner for payment of the excise duty and for clearance of the goods had already been fixed by the Collector and the petitioner cleared the goods contrary to the said procedure prescribed by the excise authorities. We are, therefore, of the view that in these acts, where the goods are sought to be brought to excise levy for the first time by the issue of the demands after the goods had been cleared from the factory, the petitioners cannot be held to have contravened Rule 9(1) so as to enable the Excise authorities to invoke Rule 9(2). 13. In view of the finding that Rule 9(2) cannot be invoked to sustain the demands made in these cases, the further contention raised by the petitioners that Rule 9(2) suffers from the same infirmities as Rule 10A and had, therefore, to be held ultra vires, need not be gone into. We are not, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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