9911796707
TMI Blog1976 (2) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... shells, glass globes and chimneys for lamps and lanterns. 10% ad valorem Do. (4) Other glassware including tableware. 15% ad valorem Do. It is common ground that glass bottles manufactured by the Company were liable to be assessed under the residuary sub-item (4) of Item 23A. 2.The procedure followed by the Company and the Excise Department for levy and collection of excise duty was as under : The year was divided into four quarters beginning with 1st January, 1st April, 1st July and 1st October. The Company used to submit to the Excise Department price lists containing the prices proposed to be charged to the customers during the ensuing quarter. Whenever the goods were required to be removed from the factory the Company used to submit returns in AR 1 form prescribed under the Central Excise Rules, 1944 (hereinafter referred to as ''the Rules"). Pending the verification and determination of the price for the purpose of excise duty on the AR 1 form an assessment was made which was described as "Provisional Assessment" and after making a debit entry in the account current maintained as required by the second proviso to Rule 9 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B of the Rules dated September 23, September 26, October 17, October 25, and November 17, 1967 the company was called upon to pay the various amounts therein mentioned by way of differential duty payable for the five quarters beginning from April 1, 1966 and ending on June 30, 1967. On receipt of these notices three representations were made by the Company to the Assistant Collector on October 3, November 24 and November 25, 1967 for the said five periods wherein it inter alia stated that the assessable value for determination of the excise duty was approved by the Department after taking into consideration the amounts spent by the Company as transport and service charges; that such charges had no relation with the price of the goods in question and that the inclusion of such transport and service charges in the assessable value of the goods was totally unwarranted and arbitrary and beyond jurisdiction. The Company also requested for a personal hearing to be granted by the Assistant Collector. Such hearing was granted on May 27, 1968 and the representations were ultimately disposed of by the Assistant Collector by his order date July 20, 1968. The Assistant Collector rejected the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of identical specifications supplied to identical customers. On these findings the appeal preferred by the Company was rejected and it is thereafter that the Company filed the present petition on July 27 1970. 5.Before the trial Court it was inter alia contended on behalf of the Company that the notices of demand could not be issued under Rule 9B if regard be had to the provisions of that Rule. It was urged that the case was covered by the provisions of Rule 10 as the primary ground on which the said notices of demand were issued was a mis-statement as regards the value of the goods for the purposes of determination of excise duty. It was submitted that as the said notices of demand were issued beyond a period of three months the same were time barred. It was also urged that as the provisions of Rule 10 were applicable, there was no scope for exercising the powers under Rule 10A which was residuary Rule. Apart from these contentions, it was urged that both the Assistant Collector as well as the Collector violated the principles of natural justice, because the evidence and material which had been considered and made the basis of the impugned orders was not disclosed nor was any re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s applicable only in those cases where there is a completed assessment and the conditions of that Rule are fulfilled or satisfied, while Rule 10A is attracted when the case is not covered by Rule 10, both in a case where there is a completed assessment and also in a case where there is an incomplete assessment. He submitted that in the present case, having regard to the procedure adopted by consent of the company there was an incomplete assessment on the basis of the price list fumished by the Company before such price list was verified for determination of the value for the purpose of levying and collecting excise duty. He submitted that Rule 10A is comprehensive enough to include within its scope a case of short levy or deficiency by reason of an incomplete assessment or even a provisional assessment (popularly so-called) which does not fall within the four corners of Rule 9B. Secondly he submitted that the learned Judge was in error in taking the view that the Assistant Collector and the Collector violated the principles of natural justice. He submitted that the bills furnished by the New Era Traders and Vitrum Glass Works were relied upon merely by way of comparison but they we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an issue of estoppel, but it cannot affect the legal efficacy of the assessment duty made under Rule 52. He urged that the present case cannot be said to be a case of an incomplete assessment; that such was not the basis of the order passed either by the Assistant Collector or that passed by the Collector. He urged that sole basis and foundation of the Department for invoking the provisions of Rule 10A is suppression of material facts about the recovery of service charges by issue of separate K.P.T. invoices which fact according to the Department did not fall within the meaning of the expression "mis-statement" used in Rule 10. In brief, his submission was that it was impossible for the Department to make a provisional assessment as contemplated by Rule 9B, that there was already a final assessment made after AR 1 forms were submitted from time to time and duty was assessed thereon and entries were made in the account current maintained with the Department before the goods were cleared. Such a case was directly covered by Rule 10 and as the notices of demand were issued after the expiry of the prescribed period of three months under Rule 10, they were rightly held to be time-barred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 38 all Rules made and notification issued under the Act shall be made and issued by publications in the official Gazette. All such rules and notifications shall thereupon have effect as if enacted in the Act. 9.In exercise of the powers conferred by section 37 of the Act the Rules have been made. Chapter III of the Rules provides for levy and refund of, and exemption from, duty. Rule 7 provides that every person who produces, cures or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such person as may be designated, in, or under the authority of these Rules, whether the payment of such duty or duties is secured by bond or otherwise. Under Rule 9 no excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf, whether for consumption, export, or manufacture of any other commodity in or outside such place, until the excise leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three months from the date on which the duty or charge was paid or adjusted in the owners account-current, if any, or from the date of making the refund. 10A. Residuary powers for recovery of sums due to Government. - Where these Rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty has for any reason been short levied, or of any other sum of any kind payable to the Central Government under the Act or these Rules, such duty, deficiency in duty or sum shall, on a written demand made by the proper officer, be paid to such person and at such time and place, as the proper officer may specify. 52. Clearance on payment of duty. - When the manufacturer desires to remove goods on payment of duty, either from the place or premises specified under Rule 9 or from a store-room or other place of storage approved by the Collector under Rule 47, he shall make application in triplicate (unless otherwise by rule or order required) to the proper officer in the proper Form and shall deliver it to the officer at least twelve hours (or such other period as may be elsewhere prescribed or as the Collector may in any particular case require o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Rule 9B was not permissible in this case in view of the decision of the Calcutta High Court in Gobinda Glass Works' case (72 C.W.N. 137). Undoubtedly the bond was executed upon a representation by the Company on the footing that the provisional assessment was permissible under Rule 9B. However, it is not on the basis of the present bond that the action is supposed to be taken by the Department against the Company. It is one piece of material on which reliance is placed by Mr. Joshi to contend that when the goods were allowed to be cleared there was no completed assessment as there was no final determination of the prices on the basis of which excise duty is to be determined. The bond is in fact referred to in the petition itself and though it was executed on the footing that a provisional assessment under Rule 9B was permissible, still the other provisions of the bond clearly indicate in what manner the goods were permitted to be cleared by the Company. The very first recital in this bond makes it amply clear that final assessment of excise duty on the bottles manufactured by the Company was not possible inter alia for want of full information as regards the value thereof or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a result of such final assessment to be re-assessed then the provisions of Rule 10 will be attracted. He urged that under Rule 10 re-assessment proceedings can only be made within a period of three months from the date on which the duty was paid or adjusted in the owner's current account and as in the present case notices of demand were issued after the expiry of this period of three months, the same were time-barred. His argument further was that Rule 10A provides for merely residuary powers for recovery of the sums and the language thereof makes it amply clear that Rule 10A will not be attracted in a case where the provisions of Rule 10 are applicable. The steps which are to be taken before clearance of goods is permissible under Rule 52 are scrutinised by a Division Bench of this Court in Appeal No. 69 of 1963 (N.B. Sanjana, Assistant Collector of Central Excise v. Elphinstone Spinning Weaving Company Ltd. - 1978 (2) E.L.T. (J 399) (S.C.) decided by Mody and Kokhale JJ. on 1/2nd July 1965. In this judgment the provisions of Rule 52 and Rule 52A which provides for issuance of a gate-pass so as to enable delivery of goods were considered. These Rules according to the learned Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undoubtedly true that the Inspector when he signed this assessment memorandum has not indicated anything to the effect that it was merely a provisional assessment. Bearing this factor in mind it was strongly urged by Mr. Sorabjee that even though the application was for provisional assessment and it contained a declaration for payment of differential duty payable in case the prices were found to be not correct, still this was a final assessment within the meaning of Rule 52. Such a contention can only be accepted if the various parts of this form are looked at in mere isolation. To determine the question whether the assessment in a particular case is provisional or tentative or final it is necessary to look at the whole of the document and it will not be permissible to the Court or any competent authority to dissect various parts thereof into water-tight compartments. This form was submitted for the relevant quarter after the bond was executed by the Company on November 2, 1964. That bond clearly contained a recital to the effect that it was not possible to make final assessment of excise duty immediately for want of full information as regards the value or proof thereof. Actually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd there was a final assessment. 13.It is undoubtedly true that in some of the relevant documents with which we are concerned, namely, the bond dated November 2, 1964, the AR 1 form and the five impugned notices of demand which were issued initially, reference is made to Rule 9B but in view of the decision of the Calcutta High Court in Gobinda Glass Work's case (72 C.W.N. 137) it is quite clear that upon proper interpretation of Rule 9-B such reference was clearly unjustified. The Division Bench of the Calcutta High Court in that case has taken the view that assessment and Provisional assessment of duty under the Central Excise and Salt Act and Rules read with the relative Finance Act can only be in accordance with the statutory provisions. These are not common law rights and, therefore, a provisional assessment can only be made in accordance with the provisions of Rule 9B, because no other provisions in the Act or the Rules have been brought which enable a provisional assessment to be made. Rule 9B makes it clear that a manufacturer, curer or owner of goods warehoused may ask for provisional assessment only in a case where the assessment of the goods involves two or more alterna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand is made by the proper officer calling upon the owner to pay such duty or deficiency in duty. So far as Rule 10A is concerned, it is quite apparent that there is no period of limitation prescribed and if the case is capable of falling within the provisions of Rule 10A, then a written demand to pay the duty or deficiency in duty can be made at any time irrespective of any limitation. The provisions of Rule 10 and Rule 10A have been considered by the Supreme Court in the case of Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd. - 1978 (2) E.L.T. (J416) (S.C.) = AIR 1972 S.C. 2563. In that case the Company was required to furnish quarterly consolidated price-lists which used to be accepted for purposes of enabling the Company to clear its goods, but according to the Collector these used to be verified afterwards by obtaining evidence of actual sales in the market before issuing final certificates that the duty had been fully paid up. The particulars of the cigarettes to be cleared were furnished by the Company on forms known as AR 1 forms required by Rule 9 of the Rules. For facilitating collection of duty, the Company maintained a large sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear that the said order would not prevent the Excise Authority from proceeding to take any step that may be necessary for such assessment or for the recovery thereof in accordance with law. The judgment of the single Judge of the Calcutta High Court is reported in AIR 1961 Cal. 477. After that judgment a fresh notice was issued by the Assistant Collector of Central Excise on April 21, 1960 to the Company intimating to it that the Excise Authorities proposed to complete the assessment for the various periods therein mentioned and gave an opportunity to the Company for the purpose of discussing the points therein mentioned. Even a personal hearing was offered to be given with liberty to the Company to produce such evidence as it may like at the time of the hearing. The validity of that notice was challenged by the Company by filing a second petition for writs of prohibition and mandamus against the Collector on the ground that the notice was barred by time and was issued without jurisdiction so that no proceedings founded on it could be taken. A prayer for quashing the notice was allowed by the learned single Judge of the Calcutta High Court on January 3, 1964 on the ground that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mind to the facts as well as the requirements of law. The Supreme Court took notice of the fact that Rule 10 seemed to be so widely worded as to cover any inadvertence, error, collusion or misconstruction on the part of an officer as well as any mis-statement as to the quantity, description or value of such goods on the part of the owner as causes of short levy. Rule 10A would appear to cover any deficiency in duty if the duty has for any reason been short levied, except that it would be outside the purview of Rule 10A if its collection is expressly provided for by any Rule. According to the Supreme Court Rule 10 should be confined to cases where the demand is being made for a short levy caused wholly by one of the reasons given in that rule so that an assessment has to be reopened. On the facts it found that the real reason for the alleged short levy was a failure of the Company to supply the fuller information it used to supply previously and not just a mis-statement. If the base does not clearly come with-in the classes specified in Rule 10, this Rule should not be invoked because a too wide construction put on Rule 10 would make Rule 10A useless. The two Rules have to be read t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visional assessment was made on AR 1 form submitted by the Company. See AIR 1967 Cal. 269 at 271. The Supreme Court has set aside the decision of the Division Bench of the Calcutta High Court, on the ground that when there is no complete assessment then there is an implied power under Rule 10A to complete such assessment so as to determine the amount of short levy. Such a case is not covered by Rule 10 and power can be exercised under the residuary Rule 10A for which no limitation is prescribed. It can, however, be said that even though both the parties were under a mistaken impression that there was provisional assessment under Rule 9B, but on facts it was a case of incomplete assessment which permitted the authorities to complete assessment at a later stage. 16.It was sought to be urged by Mr. Sorabjee that from the way in which orders are being passed by the Assistant Collector and the Collector it appeared that both of them have proceeded on the footing that there is a mis-statement as regards the value of the goods and therefore the case was covered by Rule 10. It is not possible for us to accept this contention for more than one reason. In the first place, as there was no c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the value being verified. 17.That takes us to the question whether the Assistant Collector and/or the Collector had violated the principles of natural justice while passing the impugned order. At the outset it may be stated that as held by the Calcutta High Court in the National Tobacco Company's case reported in 1978 (2) E.L.T. (J416) S.C. = AIR 1961 Cal. 477, as assessment is a quasi-judicial process before determining the final assessable value as contemplated by section 4 of the Act an opportunity has to be given to the manufacturer for showing cause why the prices declared in the AR 1 form ought not to be accepted. Such an opportunity in fact was not given in the present case. On the other hand, mere intimation was given by the Superintendent by his letter dated September 2, 1967 as regards the assessable value determined by the Department and subsequently five notices of demand were issued calling upon the Company to pay the differential amount of duty in respect of the goods cleared during the relevant quarters. When representations were made by the Company against such notices of demand they were treated as an appeal and heard by the Assistant Collector. It is clear f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment that principles of natural justice would be violated. Our attention was invited by Mr. Sorabjee to an unreported decision of the Supreme Court in Civil Appeals Nos. 1362 and 1368 of 1967 [Collector of Central Excise and Land Customs, Shillong Anr. v. Sanawarmal Purohit Anr. since reported in 1979 (4) E.L.T. (J613) (S.C.)] decided on February 16, 1968. The Supreme Court in this case has pointed out the three principal circumstances on which the Collector of Customs founded his conclusions. The Supreme Court pointed out that these circumstances may undoubtedly be relied upon by the Collector in support of his conclusion but before his conclusion should be founded thereon it was necessary for the Collector of Customs to hold an enquiry in which due notice of those circumstances was given and the offenders were given an opportunity to meet the inferences arising therefrom and to comment thereon. Thus it is very clear that both the Assistant Collector as well as the Collector had violated the principles of natural justice inasmuch as evidence and material which was considered and made the basis of the impugned orders was not disclosed to the Company, not was a reasonable opport ..... X X X X Extracts X X X X X X X X Extracts X X X X
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