1. This appeal on behalf of the Union of India, represented by the Secretary to the Government of India, Ministry of Finance, is against the judgment of the Subordinate Judge, Eluru, decreeing the plaintiff's suit, who in turn confirmed the decree passed by the District Munsif of Eluru. The respondent herein is a registered firm carrying on business in unmanufactured country tobacco and holding a licence under the provisions of the Central Excise Rules, 1944, for premises at Eluru and also for a warehouse at Mustabada in Krishna District,
Under the licence held by the firm in Mustabada warehouse, the plaintiff stores unmanufactured country tobacco on which duty has not been paid. The procedure adopted in the matter of the storage of the tobacco, the taking of the weight and the final assessment of duty has been according to the rules framed under the Central Excises and Salt Act. The plaintiff used to receive country tobacco from the growers into his arehouse.
The procedure that is generally followed is that each consignment of tobacco is weighed in the presence of the Excise Officer immediately they are received, and the weights were noted in the Officer's presence in Part I of the register. As the said tobacco does not contain the required moisture and the mellowish colour, it is processed by sprinkling water for a period ranging from seven to fifteen days depending upon the quality of the tobacco.
After processing the tobacco is bundled up in bundles of 200 lbs., each. It has to be observed that in the course of the Processing, tobacco absorbs a portion of water as such the weight of the tobacco increases. The net weight of the tobacco taken for processing is entered in the register maintained and the gross weight after processing is also noted. After the processing, the tobacco is allowed to dry and the weight recorded after the evaporation of the water and the actual dryage is noted.
This is the process that is adopted and so far as this case is concerned the net weight of the tobacco actually received by the plaintiff into his warehouse for the relevant year i.e., 1945 was 1,40,297 lbs. and soon after processing if weighed 1,68,783 lbs. Therefore, the increase in the weight was to the extent of 28,486 lbs. After this the tobacco delivered out of the plaintiff's warehouse is also noted in the warehouse register and in this case the weight of the tobacco delivered out of the plaintiff's warehouse by 11th December 1945, which was the date of the stock-taking by the officer, was 1,54,834 lbs. as against 1,68,783 lbs., which was the weight immediately after processing.
The loss in the increase in weight was therefore 13,969 lbs., this being the difference between 1,68,783 lbs. which the tobacco weighed after processing and its weight after dryage viz. 1,54,814 lbs. The Assistant Collector Central Excise, Vijayavada, while allowing only 5 per cent for dryage, assessed the duty on the difference in weight. Thereby the Collector did not allow any dryage to the extent of 2,469 lbs. and he assessed a duty of Rs. 1,388-13-0.
The plaintiff preferred an appeal to the Collector, Central Excise, Madras, who rejected the appeal. The plaintiff preferred a revision to the Government of India, Ministry of Finance, and the same was dismissed. The plaintiff thereupon called upon the defendant to cancel the duty by a notice issued on 20th August, 1951, but no reply was received and the defendant collected the amount from the plaintiff. Thereafter the plaintiff issued a notice under Section 80, Civil Procedural Code, demanding refund of the amount with interest at six per cent; per annum.
The contention of the plaintiff in the suit was that the alleged loss in weight which was due to evaporation of water-contents was not assessable to any duty and no duty could be levied under the provisions of the Central Excise Act and Rules framed thereunder. The Union Government filed a written statement contending inter alia that the Civil Court had no jurisdiction to try the suit in view of the provisions of Section 40 of the Central Excises and Salt Act.
Another plea that was raised was that as the suit was filed after six months from the act complained of, the suit was barred under the aforesaid Act, the Limitation Act and the Madras Revenue Recovery Act, that this case, therefore, turned upon the pure questions of law relating to the right of the Central Excise Authorities to levy the duty and the suit was maintainable. The trial Court as well as the lower appellate court negatived the pleas raised by the Government and decreed the plaintiff's suit holding that the civil court had jurisdiction and the levy was not warranted under the Rules. The Government has now preferred this appeal.
2. The two arguments that have been advanced before me on behalf of the Government are that no suit would lie to challenge any act of an Officer under the Central Excises and Salt Act which has been done bona fide in the discharge of his duties and the second argument is that there is a discretion vested in the Officer to allow a certain percentage for dryage or evaporation and if in the exercise of that discretion he allowed certain percentage, the assesses could not as a matter of right claim that the allowance should be more. The section of the Act on which reliance is placed on behalf of the Government, is Section 40 which reads as follows :
'(1) No suit shall lie against the Central Government or against any officer of the Crown in respect of any order passed in good faith or any act in good faith done or ordered to be done under this Act.
(2) No suit, prosecution, or other local proceeding shall be instituted for anything done or ordered to be done under this Act, after the expiration of six months from the accrual of the cause of action or from the date of the act or order complained of.'
The matter came to be considered in connection with Section 18 of the Madras General Sales Tax Act which in terms is almost identical with Section 40 of the aforesaid Act. Section 18 of the Madras General Sales Tax Act is as follows :
'No suit shall be instituted against the Crown and no suit prosecution or other proceeding shall be instituted against any Officer or servant of the Provincial Government in respect of any act done or purporting to be done under this Act, unless the suit, prosecution or other proceeding is instituted within six months from the date of the act complained of.'
Sub-section (2) of Section 40 is in identical terms. In considering the scope and effect of Section 18 of the Madras General Sales Tax Act, Govinda Menon and Basheer Ahmed Sayeed, JJ. in Province of Madras v. Satyanarayanamurthy, : AIR1952Mad273 observed that it is only in cases where the statute specifically excludes the jurisdiction of a Civil Court or by necessary intendment that such jurisdiction is ousted.
But where a suit is allowed but a restriction is placed upon the filing of such suits, the Civil Court's jurisdiction cannot be regarded as having been excluded and in so holding the learned Judges stated that under Section 18 of the Madras General Sales Tax Act there was no prohibition against the filing of a suit, and they said that the suits filed by the persons alleging that the sales-tax was levied illegally against them and excessive amounts were collected, were maintainable and they followed the decision in Kamaraja Pandiya Naicker v. Secy. of State, 69 Mad LJ 695 : (AIR 1936 Mad 269). Subsequently, the matter came to be considered in State of Madras v. Abdul Khadar Tharaganar Firm, : AIR1953Mad905 .
That was a suit for recovery of an amount said to have been collected illegally from the plaintiff as sales-tax and the learned Judge, Panchapakesa Aiyyar J., held that Section 18 covered only cases for compensation or damages against tortious acts committed by Government Officers and would not cover suit for refund of tax alleged to have been illegally collected or where the tax had been collected in excess, by error.
Holding so, the learned Judge observed that the jurisdiction of civil courts in such cases was not ousted. This case in my opinion, on the allegations in the plaint is clearly a case where the plaintiff seeks to claim a refund of the amount paid by him as duty on the ground that such levy was not warranted and that it was an illegal assessment. A Bench of this Court consisting of Subba Rao C. J. (as he was) and Jaganmohan Reddy, . in Santhanna v. State of Madras, 1957-2 Andh R 260 : (AIR:1958 Andh Pra 670) considered he scope of Section 18 of the Madras General Sales Tax Act and after adverting to the case of : AIR1952Mad273 , already referred to, observed that an assessee was entitled toseek his remedy in a court of law by challengingthe legality of the order of the assessing authority,unless that right had been barred or had beentaken away statutorily.
They further held that the fact that under the taxing statute there was a right of appeal or revision provided against the assessment could not by itself deprive the party of seeking his remedy in a civil court. They also held that section 18 of the Madras General Sales Tax Act did not apply to such suits and the only Article which was applicable to a case where the plaintiff filed a suit for the recovery of duty which has been illegally levied, was Article 62 of the Limitation Act which Prescribes three years.
This view has been re-affirmed by another decision of this Court in the case of Basappa v. Provincial Govt. of Madras, : AIR1959AP192 . That was also a case relating to the Madras General Sales Tax Act and on examining the scope of Section 18, the learned Judges, Chandra Reddy, J. (as he then was) and Krishna Rao, J. opined that Section 18 only applied to suits for damages and compensation and cannot be extended to cases for refund of tax paid to the Government.
It may, therefore, be taken to he well-settled that where an assessee claims a refund of a tax illegally collected by the assessing authority under the Madras General Sales Tax Act, there is no bar to a suit being filed for the recovery of the same and Section 18 would not come in the way. These cases are sought to be distinguished by the counsel On behalf of the Government on the ground that they related to cases under the Madras General Sales Tax Act.
The provisions being identical and the language being the same, I do not see any distinguishing feature as is Contended for on behalf of the Government. I might refer to a decision of the Patna High Court reported in Union of India v. Ayed Ram, : AIR1958Pat439 , of the Chief Justice and Choudhary, J. The facts of this case were that certain quantities of non-duty paid tobacco were seized from the plaintiff's shop and the Collector of the Central Excise, Calcutta, confiscated the seized tobacco and ordered the same to be released on payment of the duty imposed and a redemption fine of Rs. 200/- in lieu of confiscation.
A further penalty of Rs. 100/- also was imposed. The plaintiff deposited the amounts. The seized tobacco was sold by the Government. Thereafter, the plaintiff demanded delivery of the seized tobacco to him but the tobacco was not returned. whereupon he brought the Present suit for return of the seized tobacco or in the alternative for a sum of Rs. 2,500/- being the market price of the tobacco at the material time.
The learned Judges had to consider as to whether the act of the Central Excise Department was ultra vires and whether this act could be regarded as anything done or ordered to be done-under the Act within the meaning of Section 40 and whether Section 40 (2) of the Act applied. They held that the act of the officers in selling the confiscated property was ultra vires and therefore where the act was ultra vires it could not be regarded as something done or ordered to be done under the Act coming within Section 40, and therefore, Section 40(2) did not apply.
They also held that the suit was governed by Article 62 of the Limitation Act. This decision would also make it abundantly clear that where the act of the department is in contravention of the Rules and so ultra vires of the Act, it would not be regarded as an act done or ordered to be done under the Act to attract the provisions of Section 40(2) of the Act. It is just as well that another decision of the Madras High Court dealing with Section 40 of the Central Excises and Salt Act is also noted in this connection.
These learned Judges, Govinda Menon and Ramaswami JJ. laid down that a suit alleging that the Excise-tax levied illegally against the assessee was maintainable and Section 40 (2) only contemplates the filing of suits within six months specified in that sub-section. They further go to hold that the civil court's jurisdiction is not restricted to cases where there is lack of jurisdiction of the Excise authorities but also extends to the correction of errors apparent on the face of the record.
In the effect the learned Judges held that subsection (2) of Section 40 was very wide in its language and import and a right of suit which was implicit under the common law is not taken away under the Provisions of Section 40 (2) of the Act. So, it is conclusively established and uniformly held that a suit for the refund of an illegal levy of the assessment is maintainable and Section 40 (2) is no bar. The plaintiff can question the correctness, legality and propriety of the imposition of duty which is not in accordance with law. This plea, therefore, of the Government, must fail.
3. The next argument advanced was that in making the allowance by the Officer for the dryage and evaporation he exercised a discretion vested in him under the Rules and such exercise of discretion could not be interfered with by this Court. The learned counsel invited my attention to a judgment of Satyanarayana Raju, J. in Mohammad Murtuza Hussain Saheb v. Collector of Central Excise, Hyderabad, W. P. No. 823 of 1957(AP). In order to understand what the facts of the case in the writ petition were, I sent for the records in the writ petition and in my opinion the facts of that case are entirely different and the observations of the learned Judge in that writ petition could be distinguished on the ground that the facts in the writ petition were entirely different.
That petition was for the issue of a writ of certiorari to quash the notice of demand issued by the Superintendent of Central Excise, Nellore, calling upon the petitioner to pay a sum of Rs. 3,000/- and odd. The grounds on which the notice of demand was sought to be attacked as set out by the learned Judge in his order, were that there was a contravention of Rule 10 as the revised demand was not made within three months required by the rule, and that the authorities mid have allowed for the entire dryage or evaporation.
The further contention raised was that the basis on which the allowance was made on account of dryage and wastage was purely arbitrary and not on any accepted principle. In dealing with the objection raised by the petitioner the learned Judge adverting to Rules 143, 148 read with Rule 223-A came to the conclusion that having regard to the terms of the Act and the Rules, the licensee could not demand as of right the percentage of wastage to be allowed and that if be was dissatisfied with the allowance allowed by the authority tie had a remedy by way of appeal or revision to the higher authorities.
In the view that the learned Judge took and on the facts of that case, he dismissed the, writ petition. This case, in my opinion, cannot be called in aid of the contention on behalf of the appellant. It cannot be denied that Excise duties are leviable on the goods and the commodities mentioned in the Schedule in this case is tobacco; Rule 223-A which by reason of an amendment has taken the place of the former Rule 142, reads as follows:-
'If the quantity so ascertained is less than the quantity which ought to be found in such premises, (after taking into account receipts and deliveries, and making such allowance for waste by evaporation or other natural causes as the proper officer may consider reasonable and as may be in accordance with my instruction issued by the Central Board of Revenue) the owner of such goods shall unless the deficiency, is accounted for to the satisfaction of the proper officer be liable to a penalty which may extend to five times the duty chargeable on such goods as are found deficient.'
A reading of this rule would make it abundantly clear that what this rule envisages is the levy of a penalty where it is found that there is a deficiency in the weight of the commodity which is not accounted for to the satisfaction of the officer, for, it only speaks of the imposition of a penalty; that is to say, if the weights of the good as recorded in the warehouse at the time of receipts and deliveries do not tally, it is liable to Penalty unless accounted for to the satisfaction of the proper officer. In the case in question, as has already been stated, the entry in Ex. B-l showing the weight of the tobacco before the processing is shown as 1,40,297 lbs. After Processing it weighed 1,68,783 lbs., as would be evident from Ex. B-2, and the tobacco delivered out of the warehouse weighed 1,54,814 lbs. It is, therefore, obvious that in this case the tobacco weighed more than what it weighed before the processing commenced. It weighed 14,517 lbs., more.
The difference between the original weight and the weight after processing was 28,486 lbs. which represented the water absorbed by the tobacco and after the drying if it weighed 1,54,814 lbs., it meant that the dryage was 28,486 lbs. minus' 14,517 lbs. which represented the dryage, the extent of loss of weight by evaporation. On no portion of this difference in weight could there be any levy and the department, therefore, was bound to allow all the loss of weight viz., 13,969 lbs, and not 5 per cent as It did.
A proper interpretation of the Rule 223-A would be that it is only in cases where the assessing authority finds that there has been a deficiency in the weight of the commodity at the warehouse which is not attributable to the evaporation or dryage that the procedure mentioned in that rule should be adopted. It is, therefore, clear that in the case the authorities have purported to collect duty on something which could not be assessed for the reason that the assesses was entitled to an allowance of the actual loss of weight, viz., 13,969 lbs. and if duty has been collected from the assessee without making an allowance for the actual loss of weight it cannot be regarded as one allowed by the Act or the Rules. If, therefore, the levy was one not warranted by the Act or the Rules, it must be regarded as an illegal levy which the plaintiff is entitled to get a refund of.
4. In this case, on the evidence, the trial Court as well as the lower appellate Court have come to the conclusion that the officer concerned could not give any cogent reason or any satisfactory explanation as to why the allowance for dryage was fixed at 5 per cent. That there was no pilferage or surreptitious removal of any portion of the tobacco was established. D. W. 1 has stated, as would be clear from his evidence, that the loss represented the dryage. It stands to reason that the licensee would be liable to account only for the deficiency in the weight of the stock where it is found that the weight is less than the weight noted in the receipt account.
I am, therefore, in agreement with the conclusion arrived at by the trial Court as well as the appellate Court, that the loss in weight is attributable only to the evaporation and dryage and such other natural causes. Under the circumstances, the plaintiff is not liable to pay duty on such loss. He would, therefore, be entitled to refund of the duty paid on such loss of weight due to evaporation and dryage. There is no other matter to be considered. The result will be that the judgment of the lower appellate Court will be confirmed and this appeal dismissed with costs.