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TMI Blog1983 (1) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... lenged the validity of the proviso 3 by preferring writ petitions contending that the notification allowed set off of excise duty on inputs like Potassium chlorate, glue and phosphorus etc., all of which go into the manufacture of safety matches, while the proviso however had denied the benefit of the notification to the manufacture of safety matches only on the ground that they pay excise duty on matches through banderols. On this basis it was urged that there was a clear discrimination. W.P. No. 1554 of 1981 batch were admitted and an interim injunction was granted on 24-3-1981. As a result of the interim injunction the respondent (Superintendent of Central Excise, Sankarankoil) was restrained from collecting excise duty referrable to the value of the imports. It may be stated at this stage that the Central Excise department did not accept the claim of the appellants. It was urged on its behalf that there was no discrimination whatever, especially in a matter granting benefits or exemption. It was further urged that the writ petitioners cannot claim exemption as of right. Those writ petitions were ultimately dismissed on 16-11-1981, by a Division Bench of this court holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be circumvented by the Superintendent by merely issuing the demand. In fact, the power under Section 11A can be exercised only by the Assistant Collector. 5. It is well settled law that where excisable goods have been released after the filing of the necessary AR 1 forms, if any short levy is sought to be recovered, it is necessary to establish an element of guilt on the part of the persons who had removed the goods. In support of this contention, reliance is placed on an unreported judgment of this Court rendered in W.P. 3103 of 1976 and also the passage occurring in J.K. Steels Ltd. v. Union of India, AIR 1970 SC 1173 at 1187 = 1978 E.L.T. (J 355). This case and N.B. Sanjana v. E.S. and W. Mills, AIR 1971 SC 2039 = 1978 E.L.T. (J 399) (S.C.) have held that where the removal of the goods was made after payment of necessary excise duty, there can be no evasion at all. The case on hand is one such. 6. Citing Prakash Cotton Mills v. B.N. Rangwani, AIR 1971 Bom. 386, it is urged that an enquiry under Section 9(2) is quasi-judicial and a hearing is contemplated which has been completely set at naught by the impugned notice. Equally in Jamnadas v. C.L. Nangiah AIR 1965 Guj. 215 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence their applicability need not be traversed. More or less under similar circumstances, this court in W.P. No 11318 of 1981 has upheld the right of the department to collect proper duty. The subsequent notifications, viz., 99 of 1980, dated 19-6-1980 and 2 of 1982 dated 1-1-1982 will also have no application, since they are for the later period. Hence it is contended that the writ appeals are devoid of merits and have to be dismissed confirming the judgment of the learned single Judge. 10. In order to appreciate the rival contentions it is necessary for us to provide the legal back-drop. The Central Excises and Salt Act of 1944 (hereinafter referred to as the Act) levies excise duty on goods manufactured or produced in certain parts of India. It is well settled law that excise is an incidence on manufacture. As to what are excisable goods is stated in Section 2(d) of the Act, as follows :- "excisable goods' means goods specified in the First Schedule as being subject to a duty of excise and includes salt." `Manufacture' has been defined under Section 2(f), so as to include any process incidental or ancillary to the completion of a manufactured product. Section 3 is the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble on such goods upon written demand made by the proper officer, whether such demand is delivered personally to him or is left at his dwelling house and shall also be liable to a penalty which may extend to two thousand rupees and (such goods) shall be liable to confiscation." By a careful reading of the above, it is clear that no goods which attract excise duty can be removed from the warehouse unless and until the proper duty is paid. It is not denied before us that the appellants are liable to pay excise duty in accordance with Notification No. 42 of 1981. dated 1-3-1981, as amended by Notification No. 88 of 1981, dated 31-3-1981. It is common case that in so far as set off was allowed to the extent of duty under Item 68 on inputs like potassium chlorate, glue and phosphorus, which set off was denied where duty was paid through banderols, it was unsuccessfully challenged in W.P. No. 1554 of 1981. During the pendency of this writ petition No. 1554 of 1981 batch, the respondent was prevented from collecting the proper duty as per the above notifications, since injunction was operative admittedly between 24-3-1981 and 19-11-1981. Therefore, after the dismissal of the batch of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. Admittedly the assessee had cleared the goods from the warehouse after paying the duty demanded and after obtaining the permission of the concerned authority. Hence there is no question of any evasion. Despite the fact that the assessee challenged the validity of the demand made on him, both the Assistant Collector as well as the Collector ignore, that contention; but when the matter was taken up to the Government it treated the demand in question as a demand under Rule 10. The Government confined the demand to clearance effected after December 21, 1962. The demand so modified is in conformity with Rule 10. But, the contention of the assessee is that the demand having been made under Rule 9(2) and there being no indication in that demand that it was made under Rule 10, the Revenue cannot now change its position and justify the demand under Rule 10; at any rate by the time the Government amended the demand, the duty claimed became barred even under Rule 10. We are unable to accept this contention as correct. There is no dispute that the officer who made the demand was competent to make demands both under Rule 9(2) as well as under Rule 10. If the exercise of a power can be tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade liable to a penalty and he also incurs the risk of the goods being confiscated. That Rule 9(2) applies only to cases where there has been an evasion from payment of duty is clear from the decision of this court in 1969-2 SCR 481 = AIR 1970 SC 1174. Though on certain other aspects there was a difference of view amongst the learned Judges, on this aspect the decision is unanimous. There is absolutely no material placed before us by the appellants which would justify the issue of the notice under Rule 9(2)." In view of what we have stated above, it is clear that there is no possibility of applying the ratio of this ruling because the department was prevented by an order of injunction from levying and recovering the full and proper excise duty. It is true the goods were removed after filing the necessary AR 1 forms. On that score alone, it cannot be contended that the department must have recourse to Rule 9(2) and establish clandestine removal, since this is not a case of clandestine removal. 14. The nature of enquiry under Rule 9(2) came to be laid down in Prakash Cotton Mills v. B.N. Rangwani, AIR 1971 Bom. 386 at 391, thus- "Having regard to these facts, it is difficult t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions to see if they suffer form any unconstitutionality. Clause (2) provides that if any excisable goods, in contravention of clause (1) are deposited in or removed from any place specified therein, the producer or manufacturer shall pay duty leviable on such goods upon a written demand made by the proper officer and shall be leviable to a penalty which may extend to two thousand rupees, and such goods shall be liable to confiscation. Clause (2) clearly is a penal provision, making a producer or a manufacturer liable to duty and confiscation of goods removed in contravention of the ban laid down in the first clause. It will be observed that the liability to pay duty leviable on the goods under this clause arises from two factors (1) an illegal removal thereof and (2) consequent thereupon the authority making a demand of duty chargeable thereon. There is no assessment on these goods provided in this part of the rule and there can be none because the goods are not there to be assessed as they are in fact surreptitiously removed without an application under Rule 52 having been made and without any assessment or payment of such assessment and without the permission to remove having be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he demand was held to be time barred in view of the limitation prescribed under Rule 10. The question there was, in the words of the Division Bench, as follows :- "There could be no difficulty in applying this decision to cases where the right of the petitioners who were questioning the validity of the order in the earlier writ petitions, has been upheld. But the more difficult question is whether the decision of the Supreme Court can be treated as one laying down a principle applicable to all cases." It was held therein - "Learned counsel for the petitioners pointed out that under Rule 10 even though the petitioners might not have been made liable to pay the differential duty in view of the judgment of the High Court, there was nothing preventing the revenue from issuing a notice to the effect that they had to issue the notice and keep the matter pending since they have preferred appeals questioning the validity of the High Court judgment. It appears to us that such a procedure could have been adopted as seen from the later portion of Rule 10, which are introduced in October 1969 and the matter kept pending. Apart from that, there is no provision in the Act or the rules to k ..... X X X X Extracts X X X X X X X X Extracts X X X X
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