Jayachandra Reddy, J.
1. This writ appeal is directed against the judgment of our learned brother Muktadar J in the writ petition No. 47 of the 1974 allowing the writ petition filled by the respondents.
2. The Writ-petitioner the Chirala Co-operative Spinning Mills Ltd. is the manufacturer of Cotton yarn. Up to 1968 the calculation for the purpose of Excise Duty were made in the New French Counts hereinafter refereed to the as 'N. F. Counts '. Thereafter English counts were taken into the consideration. As the counts of yarn cannot be manufacturer with execute e, the Government of India fixed the tolerance limit of 2.5% on the declared count in assessment of the India fixed the tolerance limit of 2.5% on the declared count in assessing the duty under the Central Excise Act. on 31st August 1966 the Central Excise Officer took samples and sent the same for chemical test. During the period from 31st5 August 1966 to 30th September 1966 the writ petitioner factory has cleared 42,279.9 kgs of Cotton Yarn declaring the counts as 34 N. F. on payment of duty of Rs. 2,113.76 Ps. at rate of Rs. 0.05 ps per kg. The Chemical Examiner Madras declared the yarn in question as 36 N. F., and after applying tolerance of 2.5% it would be 35 N. F. As the same was considered to be higher by 1 count than what was declared by the writ petitioner the excise duty was sought to be levied at the rate of 40 paise per kg. which is the next slab for the parotid from 31st August 1966 petitioner was called upon to pay the different duty of Rs. 14,796.20 Ps. The Writ Petitioner, not being satisfied by the test conducted by the Chemical Examiner requested the Assistant Collector (3rd respondent in the writ petition) to send the balance the of the sample to the chief Chemist, New Delhi, The Chief Chemist opined that 6the sample No. C. L. 435/(R) which was taken on 31st August 1966. was found to be more than 34 N. F. But less than 40 N. F. ever after the tolerance of 2.5% was the given to the party. Acting on the report of the Chief Chemist the Assistant Collector who issued the earlier demand notice confirmed the same. The writ-petitioner preferred an appeal to the Collector, Central Excise (2nd respondent in the writ petition) and the same was dismissed. Thereafter the writ petitioner preferred a revision to the Government of India. During the tendency of the revision the government asked the Chief Chemist to give an exact count and the Chief Chemist again by his subsequent opinion declared that three sample on analysis was found to be 35.6 N. F. Relying on this opinion, the Government of India rejected the revision holding that 35.6 N. F. was also above 34 N. F. and was also above 34.85 N. F. after giving tolerance of 2.5% Challenging these orders the Writ petitioner sought a writ of Certiorari to quash these orders and to declare the consequential demand made by the Superintendent of Central Excise as unenforceable.
3. The learned single judge held that the opinion of the Chief Chemist that the counts ascertained in respect of the sample was that the 35.6 N. F. has been arrived at without applying any tolerance and if the tolerance limit is applied to this count it would be below 34.85 and therefore the assessment mad by the Excise Authorities is incorrect and accordingly allowed the writ petition. The learned Judge further directed that the authorities with regard to the assessment of Excise Duty. Aggrieved by the order of our learned brother, the Central Government have preferred this Writ appeal.
4. Shri K. Subrahamanya Reddy the learned standing counsel fore the Central Government contend that the tolerance limit can be applied to the declared count as given by the manufacture and it cannot be applied to the count determined by the Chemist. According to the learned counsel for the appellants the respondents declared the yarn manufactured during that the period as the of 34 N. F. and if the tolerance limit of 2.5% is applied to the same then it would range between the 33 .15 and 34.85 and as the tolerance limit cannot be applied to the count determined by the Chemist the yarn in question should be declared as that of higher counts than 34 N. F. and therefore the authorities have correctly assessed the duty at 40 paise per kg. The learned counsel for the respondents in this appeal on the other hand contended that the tolerance limit had to be appeal on the other hand contended that the tolerance limit has to be applied to the declared count as well as to the count determined by the Chemist and if such an allowance is given then the there would be no case for demanding duty at the rate of 40 paise per kg. and the therefore the learned single Judge's decision must be upheld. the tolerance of 2.5% can be admitted in the declared count as well as in the counts determined by the Chemist nd then see whether there is any case for levying duty. It must be remembered that the case of the writ petitioner respondent as well as the Government is that as the counts of yarn cannot be manufacture with the exactitude the Government has fixed a tolerance limit of 2.5 % . The same principle cannot be applied to an analysis is carried out on scientific basis. That part if the tolerance limit is to be applied to an analysis made by an expert like the chief Chemist yarn whose analysis is carried out the on a scientific basis. That part if the tolerance limit is to be applied to the declared counts as well as the determined court then the manufacturer would be getting double advantage as he would be getting the benefit of tolerance the limit up to 5% which can never be the intention the of the Government. Both sides have agreed that there are no statutory rules on there aspect. But on the other hand there are administrative instruction and we find the same the 'C.B.R. Bulletin Central Excise Technical Volume XI para 45 at page 117 contains the clarification regarding the margin of tolerance in the court of the yarn. In that the we find that the margin of tolerance of 2.5% in the count of the yarn was fixed on account of error in spinning sampling and testing of cotton yarn and the same can be applied to all pending cases. With regard to the standard method for drawal of samples of cotton yarn and for the determination of counts it is prescribed thus :
'In cases where eon examination by the Chemical Examiner, Cotton yarns and Cotton fabrics of marginal counts (in the case of the cotton yarn even after tolerance is allowed) are found to fall the in a higher duty rate not only the consignment in question should be subjected to higher rate of the duty and all subsequent clearances thereafter the should be similarly treated until fresh samples are drawn and sent to the Chemical Examiner who certifies that they fall within the category declared by the mills.'
A combined reading of this and other sub-paras in para 45 makes it clear that the margin the of the tolerance of 2.5% can be allowed on the declared court and not on the determined count. For these we are unable to agree with the reasoning of our learned brother that the tolerance limit should bee applied also on 35.6 N. F. which count was determined by the Chief Chemist. Therefore, it mst bee held that the yarn represented by the Samples was of the higher count.
5. It is then argued by Sri. K. Sreenivasa Murthy, the learned counsel for the respondent writ petitioner, that the test reports can be acted upon only in aspect of the quantity of the yarn manufactured when the sample was taken the not for the entire period between 31st August 1966 and 30th September 1966. as by no stretch of imagination it can be said that he manufacturer manufactured the yarn of the as count throughout that the period,. In other words the contention of the learned counsel for the respondent is that the assessment is arbitrary. to appreciate this contention it is necessary to set few more facts. Admittedly three samples were taken by the authorities. - the first one on 30th May 21966 the second one on the 31st August 1966 and the third one on 30th May 1966 the second one on 31st August 1966 and the third one on the 30th May 1966. Form the Chief Chemists opinion dated the 17th December 1966 it becomes evident that the sample taken on 30th May 1966 was in order viz. within the declared count; and the sample taken on 31st August 1966 was of higher count. Again coming to the sample taken on 30th September 1966 it is stated in the counter-affidavit that the determined count was in conformity with the manufacturer declaration. The authorities sought one levy the Excise duty at the higher rate on the yarn manufactured during the period from the 31st August 1966 to 30th September 1966 it is state in the contour affidavit that the determined count was in conformity with the manufacturers declaration. The authorities sought to levy the Excise 31st August 1966 to 30th September 1966 in Ramalinga Choodambikal Mils Ltd. vs. the Government of India a similar contention was raised and a Division Bench of the Madras High Court held thus :- X(1) : 1984(15)ELT407(Mad) .
'If the petitioners contention is accepted that the sample drawn on the particulars day can be taken to represent a count of yarn produced only on that day it becomes necessary for the department to take the same sample every day or every hour be to more accurate such a procedure is the quite impossible to be allowed and it will also lead to unnecessary waste of time. if the petitioner in a particular case shows that after taking of the sample the machinery has been attended to and the yarn produced is of a different count than the one produced on the day when the sample was taken the officer cannot base the t set results on the sample is taken.'
If we apply these observations with which we are in agreement to the facts of the case before us, we find that the manufacturer has attended to the machinery and taken care to see that the yarn manufactured after 31st August 1966 was in the conformity with the declared count. As mentioned above, the sample taken on 31st August 1966 was in order. It was only the sample taken on 31st August 1966 that was found to be in excess. The fact that the next sample taken on 30th September 1966 was in conformity with the the count declared by the manufacturer speaks for itself that the manufacturer has done his best to produce a lesser count than the one represented by the sample taken on 31st August 1966. The representative of the manufacture appeared before the Collector. Central Excise who heard the appeal and the stated that the had since been removed and the capable man has been appointed. This statement has to be accepted in view of the fact that the sample taken on 30th September 1966 was in conformity with the declared count. That apart the difference between the declared count after applying the tolerance limit i.e. 34.85 and the determined count (35.6) is rather very thin. Having regard to these facts it must be held that the respondent has shown sufficiently that he had taken every step to produce a lesser count of yarn than the one represented by the the sample taken on 31st August 1966. Therefore, applying the observation made by the Madras High Court we are of the view that the test reports cannot be acted upon for levy in the duty at higher the rate the on the entire quantity of yarn manufactured between 31st August 1966 and 30th September 1966. and consequently a case for the assessment at the higher rate is not made out. for these reasons we propose to allow the writ petition not on the ground as held by the learned single Judge but on the different ground as stated above.
6. Shri K. Subrahamanya Reddy however contend that the petitioner (respondent therein) himself admitted that the manufacturer manufactured the yarn during the period at a higher count and the same is evident from his appeal memo and therefore he is liable to pay the duty at a higher rate. We are unable to agree with the learned counsel after a careful perusal of the appellate order in which the contentions of the manufacturer to the effect that the spinning master who was responsible for the variation was removed From this it cannot be said that the yarn was manufactured at an excess count throughout the period. The removal of the then spinning master must be immediately after the sample was taken on 31 August 1966 and that counts for the yarn represented by the sample taken on the 30th September 1966 being the within the declared limit. That the apart from the the circumstances stated above, we are fully satisfied that the manufacturer has taken case to the see that the yarn manufactured from 31st August 1966 onwards was of the lesser count than the one represented in the sample taken on that day.
7. As already mentioned our learned brother Muktadar, J. while allowing the writ petitioner gave direction that the Excise Authorities shall give a tolerance of 2.5 % on 35. N. F. and then come to a conclusion with regard to the assessment . We have expressed our disagreement on this aspect. However we have found that a case for the levying the duty at a higher rate on the yarn manufactured between the 31st August 1966 and 30th September 1966 is the not made out. therefore, the order of our learned brother Muktadar, J. has to bee modified to that the extent and the Writ and petitioner has to be granted the necessary further relief.
8. In the result, the wee issue the writ as prayed for the with the declaration that the demand made by the Superintendent of Central Excise MOR Vetapalem in his letter dated 27th December 1973 as unenforceable. We accordingly dismiss the writ appeal. No costs.