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TMI Blog1981 (2) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... ypes of paper. The paper produced by the assessee was packed in reams or in the form of rolls. Naturally when the goods were packed in reams they had to be wrapped up in wrapping paper which was also the subject matter of excise levy. So far as the rolls were concerned they were actually weighed as and when they were removed from the factory and duty was paid on the actual weight. There is no dispute about the paper so manufactured and removed by the assessee. We are concerned in this writ petition only with the paper which was produced and packed in reams and were duly wrapped up in packing paper before they were removed from the factory. The controversy between the parties is as to whether the assessee has paid the excise duty leviable in respect of the wrapping paper. 3. Soon after excise duty on paper was introduced the Central Excise Collector at Allahabad passed a standing order in pursuance of the instructions of the Central Board of Indicet Taxes in August, 1956. This standing order provided of assessment of duty on paper and paper-board either on the basis of actual weight or on the basis of standard nominal weight. In respect of the unit packages not marked with the nom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t during this period there was a resident Inspector of the Excise Department who was posted at the factory premises and who assessed all the paper in accordance with the above procedure. In August, 1969 the Central Government issued a notification specifying the goods in question, inter alia, as excisable goods to which the provisions of Chapter VIIA of the Central Excise Rules, 1944 would apply. This meant that after 1st August, 1969 on which date the above notification came into force there was no resident Inspector on the premises of the assessee and it was expected to clear the goods on its own under what has been described as `self removal procedure.' Under this modified procedure the assessee removed its goods from October, 1969 to September, 1970 on the same basis as has been indicated above. 6. On 3rd November, 1970 the fifth respondent issued a notice purporting to be under Rule 10 read with Rule 173J of the Central Excise Rules, 1944. This notice stated that it appeared to the fifth respondent that duty on packing and wrapping paper used for packing reams inside the mill had been charged to duty at nil rates whereas a duty of Rs. 1,48,985.15 was leviable in respect ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kg. Thus, he pointed out, there was a continuous and systematic loss of revenue for the simple reason that the nominal weight declared by the assessee did not also include the weight of the wrapping paper. On the other hand, on behalf of the assessee, it had been submitted that the weight of the wrapping paper was also included in the weight of the reams as indicated on the top of the package. It was pointed out that in terms of international trade practice the nomenclature of ream was always taken as packed with wrapper. It was pointed out that specifications by the Indian Standards Institution also indicated that the weight of wrapper should be included in the ream weight of paper. The party further stated that to abide by the requirements of Indian Standards Institution, they always kept a margin in the weight of printing and writing paper so that the weight of the wrapper used could be adjusted against the margin. Statements were filed showing the difference between the nominal and actual weights and it was pointed out that the actual weight was generally lower than the nominal weight. It was, thus, claimed on behalf of the assessee that actually it had paid more duty than was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of the Appellate Collector did not appear to be correct legally for the following reasons : (1) When assessments were being made on the basis of nominal weights no evidence was required to show that the quantity of paper cleared by the assessee had been in excess of the declared nominal weight. The clearance documents showed that the nominal weights declared only contained the weights of the paper sheets and not weight of the wrapping paper; (2) The assessee admitted that in certain cases the weight found on actual weighment was more than the declared nominal weight. The plea that the difference was within the tolerance limit was not helpful when it was seen that the nominal weight did not cover the weight of the wrapping paper; (3) The Appellate Collector's interpretation of the specifications by the Indian Standards Institution was not correct. The assessee made a detailed representation and was also heard by the Central Government. But eventually by an order dated 25th July, 1975 the Central Government set aside the order of the Appellate Collector and confirmed the provisional view set out in the show cause notice as mentioned above, thus reviving the demand notices issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had been short levy of duty on account of a mis-statement made by the assessee. If that were so, the case would be governed by Rule 10 of the Central Excise Rules and the applicability of Rule 10A would be automatically excluded. Under Rule 10 recourse for recovering the short levy of duty should be taken within three months of the original order. After the introduction of self removal procedure this period of three months available under Rule 10 would be enlarged to one tear by the application of Rule 173J. It was, therefore, submitted that atleast in respect of the period January, 1963 to October, 1969 the demand raised would be time barred since the notice of the Superintendent were issued only on 3rd November, 1970 and 16th November, 1970 in respect of the two periods in question. The second point raised by Shri Daljit Singh was that there was no material before. the Central Government to come to the conclusion, reversing the cogent findings of the Appellate Collector, that there had been short-payment of excise duty by the assessee. 12. So far as the first point of limitation is concerned, it has to be decided on a construction of the provisions of Rule 10 and Rule 10A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be considered to be the duty originally short-levied. Rule 10A, it was held, would not apply to such a case. This case meets a point sought to be made on behalf of the revenue that in the present case as the wrapping paper had not been subjected to duty at all in the first instance it would not be a case covered by Rule 10. Shri C.L. Chaudhary, learned counsel for the respondents, however, sought to derive support from the later decision of the Supreme Court in Assistant Collector of Central Excise v. National Tobacco Co. of India Ltd. - AIR 1972 SC 2563 = 1978 E.L.T. (J 416). He pointed out that in that case also as in the present case there was an allegation against the assessee that the price list which had been submitted on the basis of which duty had been originally paid had been incorrect and that in view of the decision of the Supreme Court in this case it should now be held that the provisions of Rule 10 are not applicable in the present case. We are unable to agree with the learned Counsel. In the case before the Supreme Court goods had been cleared originally not on the basis of an assessment but on the basis of the procedure contained in the third proviso to Rule 9 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for recovering the short levy would only be a period of three months in respect of clearance up to July, 1969. In respect of the period after 1st August, 1969 Rule 173J would come into operation and the revenue would have the benefit of one year period. In the present case action under Rule 10 in respect of the period from January, 1963 to September, 1969 could not be taken in November 1970 because by that time even the one year period prescribed in Rule 173J had expired. It is, therefore, clear that the demand for the short-levy of duty of Rs. 9,62,476.57 was illegal. In respect of the second demand, however, we find that in so far as the demand related to the month of October, 1969 it would not be in time as it was issued on 3rd November, 1970. 15. This takes us to the second point on merits of the case. We have to examine this point because in respect of a portion of a demand the assessee's plea of limitation cannot succeed as indicated above. The short point for consideration here is as to whether there is material to hold that the wrapping paper had escaped duty in the first instance. The learned Counsel for the revenue submits that this is a question of fact and that as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nominal weight. According to the statement during the period April, 1963 to March, 1971 there was a net underweight of paper to the extent of 547653 Kgs. out of the total production of 219421 tonnes. It will be appreciated that several years after goods had been cleared it is not possible for either the assessee or the Department to establish what exactly the weight of the goods that were cleared was. But the above statement based on the production records of the assessee clearly showed that by paying excise duty on the nominal weight there had been no under-payment of the excise duty as apprehended by the department. The contents of these statements are not challenged in the order of the Government nor is any positive statement made in the counter-affidavit that these statements do not reflect the correct position though of course the learned counsel for the revenue states that it does not admit their correctness. Apart from the fact that the overall picture is clearly indicative of the fact that the nominal weight must have included the weight of wrapping paper also, there are several other circumstances which support the assessee's case. We have earlier referred to the spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghed and so far as the paper which was packed in reams was concerned the Central Excise Officers conducted experiments from time to time to determine their actual weight. Having regard to the standing order to which we have already referred it is quite clear that these test checks could not have revealed anything abnormal. There is nothing even to indicate that the nominal weight of the paper fell short of the actual weight by the initial margin of 1%. If that had been so a larger test check would have been conducted and even if that had failed there would have been a complete weighment of a day's production. The absence of an allegation that any of these things happened coupled with the fact that till August, 1959 there was a revenue officer posted on the spot indicates that the actual weight of the paper did not fall short of the nominal weight. Having regard to all these factors the conclusion of the Central Government that the weight of the wrapping paper had not been charged to duty is only based on suspicions and assumptions. 17. Shri Chaudhary contended that if we found that the Central Government had not considered certain arguments addressed on behalf of the assessee, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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