1. The petitioner is a resident of Jamkhandi town who engages himself in the purchase and sale of groundnuts and groundnut oil. By a notice issued to him on August 4, 1957, the Collectorate of Central Excise called upon him to pay excise duty in the sum of Rs. 10,356.02 nP. which according to the Excise authorities represented the excise duty payable by the petitioner for the years 1956-57 and 1957-58. On August 6, 1957, evidently after the demand was made of the petitioner for the payment of the excise duty, he applied for permission to pay the excise duty in six monthly instalments. He addressed a letter to the Range Officer of the Central Excise, Jamkhandi, in which he prayed for permission to do so. In that letter, he informed the Range Officer that he had applied on that date for the grant of a licence to him which obviously was a licence which he had to obtain for the manufacture of goods liable to Central Duty of Excise. He also stated in that letter that he was having transactions with two mills in Jamkhandi known as the Mirza Oil Mills and Rameswara Oil Mills. He proceeded to state that he would honour the demand notice served on him for the payment of the excise duty payable by him for the years 1956-57 and 1957-58, but that since the amount demanded of him was very heavy he was not in a position to pay that amount in a lump sum. That was the reason why he prayed for permission to pay the amount by instalments.
2. It is not disputed that on the very same date he made two applications for the grant of licences to him to manufacture goods liable to Central Duty of Excise. The original applications made by him for that purpose have been produced before us. Both these applications were made by him on August 6, 1957, and were addressed to the Collector of Central Excise, Bangalore. The first of those applications related to the year ending on the 31st of December, 1956 and the second related to the year ending on the 31st of December, 1957. In those applications the petitioner applied for licences to manufacture vegetable non-essential oils, and the places where he proposed to manufacture those oils were described by him as Rameshwara Oil Mills and Mirza Oil Mills, Jamkhandi.
3. Thereafter, and, in spite of the fact, that the petitioner consented to pay the excise duty demanded of him, he made a complaint to the Assistant Collector of Central Excise, Bellary, that the duty demanded of him was not payable by him. The Assistant Collector negatived that contention and directed the petitioner to pay the duty within ten days from the date of the receipt of his order. From that order the petitioner appealed to the Collector of Central Excise, Bangalore. That appeal was dismissed for non-compliance with the provisions of Section 189 of the Sea Customs Act read with Rule 215 of the Central Excise Rules 1944, in accordance with the provisions of which the appellant had to deposit the excise duty demanded of him in the first instance. After the dismissal of the petitioner's appeal in that way, the petitioner presented this writ petition to this court in which he asks that the demand for the payment of the excise duty by him should be quashed.
4. The contention urged on behalf of the petitioner is that no excise duty is payable by him under the provisions of the Central Excises and Salt Act, 1944, under which the demand was made for the payment of the excise duty in this case. The contention is that the petitioner is neither a manufacturer nor a producer of excisable goods in respect of which the excise duty can be levied under the provisions of that Act. According to him, the petitioner who is merely a dealer in the sale and purchase of groundnuts and groundnut oil, got his groundnuts crushed in the Mirza Oil Mills and the Rameswara Oil Mills, Jamkhandi, and thereafter sold the oil so extracted, as a dealer in such groundnut oil. The manufacturers of the oil so sold by him, according to the petitioner's contention, if at all, are the two mills who extracted the oil from the groundnuts belonging to him at his request.
5. The charging section of the Central Excises and Salt Act (which will hereinafter be referred to as 'the Act') is Section 3 which provides that duties on all excisable goods other than salt which are produced or manufactured in India, and a duty on salt manufactured in, or imported by land into, any part of India shall be levied and collected in such manner as may be prescribed. Rule 7 of the Rules made under the Act provides for the recovery of such excise duty. That rule makes every person who produces, cures or manufactures any excisable goods or who stores such goods, at warehouse, liable to pay the duty or duties leviable on such goods. Rule 9 prescribes the time and manner of payment of duty. While Sub-rule 1 of that rule provides for the payment by the manufacturer liable to pay excise duty before the removal of the excisable goods from the place where they are produced or manufactured, Sub-rule 2 provides for the collection of such duty even after the removal of those goods in contravention of the provisions of Sub-rule 1. Section 2(f) of the Act contains the definition of 'manufacture' and 'manufacturer'.
6. It is not disputed that the vegetable oil which was extracted in the case before us from out of the groundnuts belonging to the petitioner were excisable goods within the meaning of that expression occurring in Section 3 of the Act. It is also not less disputed that the oil was oil which was manufactured within the meaning of the Act, although the controversy centres round the question as to who was the manufacturer. It is also not denied that vegetable non-essential oils like the groundnut oil in this case are excisable goods. Indeed they form the subject matter of the 23rd entry in Schedule 1 to the Act.
7. Appendix V to the Act, however, provides for exemptions from the payment of the excise duty otherwise payable under the Act, and Serial Number 50 in that Appendix entitles the manufacturer of vegetable non-essential oil, subject to the limitations and conditions contained in Column 3 of that serial number, to an exemption from the payment of excise duty in respect of such quantities as may from time to time be specified in the 4th column of that serial number. During the year 1956-57 which commenced from April 1, 1956, and ended on March 31, 1957, the quantity of oil extracted from groundnuts owned by the petitioner was 175 tons and 1,657 pounds. The exemption to which the manufacturer was entitled during that year was in respect of the first 125 tons. The case for the Excise Department is that after deducting the quantity of oil in respect of which the petitioner was entitled to exemption he had to pay excise duty on 50 tons and 1,657 pounds, which he failed to pay. In respect of the year 1957-58, the case for the department is that he similarly failed to pay excise duty on 60 tons and 1,035 pounds of oil. It is in respect of this aggregate manufacture that the demand was made on the petitioner on August 4, 1957, for the payment of the duty amounting to Rs. 10,356.2 nP.
8. The argument which was first addressed before us on behalf of the petitioner by his learned Advocate Mr. Javali, is that the petitioner is not the manufacturer of the oil extracted in the two mills and, therefore, not liable to pay the excise duty demanded of him. He has drawn our attention to the definition of the words 'manufacture' and 'manufacturer' occurring in Section 2(f) of the Act and has urged before us that he does not come anywhere within the four corners of that definition. It was alternatively urged that even if the petitioner could be regarded as a manufacturer of oil within the meaning of the Act, the demand made by the Department for the payment of the excise duty was without the authority of law and, therefore, illegal.
9. The question as to whether the petitioner was the manufacturer of the oil in respect of which duty is demanded, is a question of fact. Although the argument now addressed before us is that the petitioner cannot in law be regarded as a manufacturer of the oil, since the mills who crushed the petitioner's groundnuts in their mills have to be regarded as such manufacturers, the petitioner when he made his application for the grant of time for the payment of the excise duty demanded of him categorically admitted that he was the manufacturer of the oil, and indeed in his application which was presented on August 6, 1957, which is the very day on which he applied for instalments to pay the duty, he described himself as such manufacturer. The premises in which he was so manufacturing oil was referred to as the two mills in which, admittedly, his groundnuts were crushed.
10. The case for the excise department as set out in the counter-affidavit is that those mills in which the petitioner's groundnuts were crushed were not the manufacturers of the oil but that the real manufacturer was the petitioner himself. It is urged that the only groundnuts which were crushed in those two mills were those belonging to the petitioner and that the petitioner was himself the person who had de facto control over the business and operation of those mills. In the affidavit produced before us of which the deponent is the Assistant Collector of Central Excise, the truth of the allegation of the petitioner that he paid any charges for the extraction of the oil from his groundnuts to any of those two mills is disputed. It is also stated in the course of this affidavit that the persons in charge of those two mills made an admission during the course of the investigation which resulted in the demand made on the petitioner that the only oil that was extracted in those mills was the oil which was extracted from the groundnuts of the petitioner.
11. The petitioner has produced no evidence whatsoever before us in support of his allegation that he paid any charges to the two mills for the extraction of the oil which was done by them. He has not even produced his own accounts in support of that allegation. He has not produced any document evidencing payment of the charges for such extraction. On the contrary, from the two applications made by the petitioner to the Department for the grant of licenses to him on August 6, 1957, it becomes in our opinion, abundantly clear that the contention of the Department that the petitioner is the real manufacturer of the oil in those two mills is only too well-founded.
12. Having regard to these circumstances and also the fact that the petitioner, after the demand was made of him for the payment of the excise duty, admitted his liability to pay the duty, not on any mistaken supposition as it is now sought to be made out on his behalf by his learned Advocate Mr. Javali, but on the basis that he was the manufacturer of the oil, it is, we think, not open to the petitioner to resile from the position taken by him at that stage and to contend before us that someone else was the manufacturer of the oil and not he.
13. Mr. Javeli, however, made an attempt to persuade us to take a contrary view and in support of that argument he drew our attention to a portion of the letter addressed by the petitioner to the Range Officer of the Central Excise on August 6, 1957, in which the petitioner stated that he had decided to comply with the demand made by the Department for the payment of the duty, subject to his right of appeal. As rightly contended by the learned Advocate-General, the fact that he intimated the Range Officer that he had decided to comply with the demand subject to his right of appeal does not entitle the petitioner to resile from the admissions made by him in the letter in which he admitted in so many words that he was the manufacturer of the oil and that he was liable to pay the duty demanded of him. The only right which was reserved in that part of the letter was the right to challenge the validity of the demand made by the Department on the facts admitted by him in that communication, and not the right to repudiate the truth of the admissions made by him or to question them. That letter which the petitioner wrote to the Range Officer lends strong support to the argument addressed before us by the learned Advocate-General on behalf of the Department that the crushing of the groundnuts in the two mills was really done by the petitioner himself. Now, as we have mentioned, the 50th entry in Appendix V entitles a manufacturer to some exemption in regard to the payment of excise duty. If the mills had been the manufacturers and not the petitioner, that exemption would have been available to the mills. But in paragraph 3 of the petitioner's letter this is what he stated :-
'The exemption quantity that is going to be allowed to me for the year 1957-58 will be enjoyed by the Rameswar Oil Mills. I am willing to pay the excise duty for all the quantity of groundnut oil (V.N.E. Oil) manufactured by Mirza Oil Mills during the year 1957-58 up to the closure of my transaction at the rate of Rs. 112 per ton.'
14. If the mills had been the manufacturers, each of those two mills would have been entitled to the exemption provided for by Appendix V. The petitioner in the aforesaid paragraph of the letter referred to the exemption relating to the year 1957-58 as an exemption to which he was himself entitled and he proceeded to state that that exemption for that year 'will be enjoyed by the Rameswar Oil Mills' as if what was manufactured in the Rameswar Oil Mills was really his own manufacture. The exemption to which he was entitled would not be the exemption to which the mills would be entitled, on any other hypothesis than that he was the manufacturer of the oil in the Rameswar Oil Mills.
15. We cannot, therefore, accede to the contention that the petitioner was not the manufacturer in this case.
16. Even so it was urged that each of the two mills was entitled to the exemption referred to in Appendix V and that if they were so exempted the excise duty claimed by the Department would be excessive. It is plain that this argument has no substance since if, as we have found, the petitioner admitted that he was the manufacturer of the oil - it is a fact that the extraction of the oil was partly done in one mill and partly in the other - it was not permissible to the petitioner to claim the exemption to which he was entitled on each of the occasions on which his oil was crushed in the aforesaid mills. Such exemption being available to him only in respect of the first 125 tons of oil manufactured by him during any given year, the claim now made on his behalf would be plainly illegitimate.
17. What remains to be considered is the argument urged before us that the demand made by the petitioner was without lawful authority. Mr. Javali rested this argument on the provisions of Rule 9 of the Rules made under the Act, according to which no manufacturer can remove the goods manufactured by him from the premises referred to in Sub-rule 1 of that Rule, without the payment of the duty payable by him. Mr. Javali contended before us that the oil in this case which was manufactured in the two mills had been removed long before the demand was made on the petitioner and that it had all been sold by the petitioner to his customers when he was called upon to pay the excise duty. At one stage of the argument, Mr. Javali contended that the excise duty which can be demanded under the Act was duty which related to the goods themselves and not one which was relatable to its manufacture or production. That being so, it was suggested that if the goods themselves were not in existence at the time the duty was demanded, such demand would be without the authority of the law. The provisions of Section 3 and Rules 7 and 9 form a complete answer to this argument. Those statutory provisions make it clear that it is the manufacturer of the excisable goods that is liable to pay the excise duty and Sub-rule 2 of Rule 9 makes it perfectly clear that it is not necessary that the excisable goods should be in the possession of the manufacturer at the time when the excise duty is demanded. On the contrary Sub-rule 2 of Rule 9 entitles the Department to demand the payment of the excise duty payable by the manufacturer even after the removal of the goods from the premises referred to in Sub-rule 1 and in contravention of the provisions thereof. As pointed out by Their Lordships of the Federal Court of India in the Province of Madras v. Boddu Paidanna and Sons, A.I.R. 1942, Federal Court, page 33, the excise duty which is imposed upon the manufacturer of the producer of excisable articles in connection with the manufacturer or production does not cease to be excisable if the goods are disposed of by the manufacturer, as the petitioner claims to have done in this case. What Their Lordships held in that case was that there was nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed or given away. The contention that the demand made in this case was without lawful authority must therefore fail.