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TMI Blog1983 (1) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 manufacturer of safety matches only on the ground that they pay excise duty on matches through banderolls. On this basis it was urged that there was a clear discrimination. W.P. 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 referable 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 proviso 3 to the Notification No. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 person 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. Steel Ltd. v. Union of India, A.I.R. 1970 S.C. 1175 at 1187 = 1978 E.L.T. (J 355). This case and N.B. Sanjana v. F.S. and W. Mills, A.I.R. 1971 S.C. 2039 = 1978 E.L.T. (J 399) 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, A.I.R. 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 Jannadan v. C.L. Nangiah, A.I.R. 1965 Guj. 215, 232, it has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licability need not be traversed. More or less under similar circumstances, this court in W.P. 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 good 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 charging section, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 chloride, glue and phosphorous, which set-off was denied where duty was paid through banderolls, it was unsuccessfully challenged in W.P. 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 notification, since injunction was operative admittedly between 24-3-1981 and 19-11-1981. Thereafter, after the dismissal of the batch of the writ petitions all that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehouse after paying the duty demanded and after obtaining the permission of the concerned authority. Hence, there is no question of 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, ignored 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 traced to a legitimate source, the fact that the same was purported to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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-S.C.R. 491 = A.I.R. 1970 S.C. 1173. 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 materia 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 ARI 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. 13. The nature of enquiry under Rule 9(2) came to be laid down in Prakash Cotton Mills v. B.N. Rangwani, A.I.R. 1971, Bom. 386 at 391 thus - "Having regard to these facts, it is difficult to hold that investigations which must be made bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitutionality. 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 manufacturers shall pay duty leviable on such goods upon a written demand made by the proper officer and shall be liable 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 been obtained. Therefore, the case contem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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, if there is no provision in the Act or the Rules to keep a liability for excise duty alive either by a protective assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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