K.M. Dayal, J.
1. The present writ petition has been filed by M/s. Synthetics and Chemicals Ltd., Fatehganj (West), Bareilly, U.P. challenging the order of the respondents calling upon the petitioners to pay Excise duty on the alleged losses of Benzene purchased by them.
2. The petitioners are running a Rubber Factory for which they require Benzene to be used as one of the ingredients in the manufacture of Rubber. The Benzene is obtained as a by-product in the iron steel plants and it is also available from the Indian Oil Corporation. The Excise duty under the Central Excise Act is levied on the Benzene produced by the manufacturers. The Benzene is a highly volatile and inflammable substance. It has, therefore, to be transported in strong vats or wagons and the handling has to be done very carefully so as to avoid losses by evaporation spillage or otherwise. The Benzene being a light liquid has to be pumped from the manufacturer's factory into the railway wagons under pressure. Again on reaching the petitioners' and it has to be pumped out to the petitioners'. Storage vats and receptacles from the railway wagons. Under the practice prevalent, so far, the meters were fitted in the flow line of the liquid at the purchasers' end as well as at the time when the same was delivered at the petitioners' end. According to the petitioners, there has always been some loss in the handling due to evaporation or spillage at both ends and consequently the reading of the meter at the petitioners' end was always somewhat less than that which was measured at the purchasers' end.
3. Under the Excise Act an Inspector of the department is present at the time of filling the railway wagons at the purchasers' end and also while the wagons are emptied at the petitioners' end. The record is always with the Excise Department and, therefore, the difference, if any, was due to losses beyond the control of the petitioners.
4. It was also contended that the reading of the meter at the purchasers' end was lower than that delivered at the petitioners' end. However, the petitioners paid Excise duty on the amount delivered to them. The respondents have demanded duty on the alleged losses at usual rates.
5. Under Section 3 of the Central Excises and Salt Act, 1944 the duty is being levied on all excisable goods which are produced or manufactured' in India. Benzene is one of the Excisable articles under the aforesaid Act. Consequently the duty is leviable on the quantity produced. As it is a duty on production or manufacture, it has been rightly argued by the counsel for the petitioner that the Excise duty is chargeable on the manufacture and not on sale. It follows that the duty, that is payable is, on the quantity manufactured and not the quantity actually received.
6. The duty is payable at the rates set forth and in the First Schedule of the aforesaid Act, known as tariff duty. However, under Rule 8 of Chapter III of the Central Excise Rules the Central Governments is authorised to grant exemption in respect of the whole or part of the duty leviable, in respect of such goods, as it may notify in the official gazette from time to time. The concessional duty is termed as remitted duty. We are informed that the Excise duty leviable on the Benzene manufactured is Rupees one thousand per kilo litre. The concession in the Excise duty is granted under Rule 192 of Chapter X of the Central Excise Rules, 1944. When the excisable articles are utilised in specified industrial process, a concession is granted. The concession in the instant case is considerable and instead of rupees one thousand per kilo litre the concessional rate available to the petitioner is only, Rs. 32/- per kilo litre. In order to avoid misuse of the concession Rule 196 has been framed. Under that rule, if any goods obtained under Rule 192 are not duly accounted for, or are not shown to the satisfaction of the proper officer to have been lost or destroyed by industrial causes or by unavoidable accident during transport from the place of procurement to the applicant's premises or during handing or storage in the premises approved under Rule 192, the duty on such losses is being levied as such, i.e. without any concession.
7. In the instant case, originally the handling and evaporation losses were one percent and they were allowed by the department as losses exempted under Section 196. However, during the relevant year the losses shown, as measured at the petitioners' end, increased considerably-so much so that they were upto 36.5 per cent.
8. Due to abnormal losses the Assistant Collector, Central Excise issued 14 notices 'for different consignments' to the petitioners to show cause why the difference between the tariff duty and the remitted duty may not be realised from the petitioners in respect of the quantity of Benzene lost. These notices had been filed by the petitioner as Annexures 2A to 2N to the petition. Thereafter orders were passed by the Deputy Collector condoning five per cent loss during transit and ordered the duty to be paid on the remaining quantity at usual rates. The orders of the Deputy Collector, Central Excise, Allahabad are filed as Annexures 3A to 3K to the writ petition. The petitioners filed appeal against the aforesaid order and the Collector, Central Excise partly allowed the appeal by allowing exemption at the flat rate of 7 1/2. per cent. The copies of the orders of the Collector Central Excise, Allahabad are filed with the writ petition as Annexures 4A to 9N. There after the petitioners filed revisions before the Central Government Ministry of Finance, New Delhi. The revisions were decided by the respondent No. 3, who by his order dated 6th August, 1973 dismissed the revisions. The questions involved in the instant case are two: Firstly whether the petitioners are liable to pay the Excise duty at the quantity received by them as measured at their end or on the quantity despatched by the manufacturers. Secondly whether the petitioners could be made liable to pay the Excise duty at usual rates on the goods not received by them.
9. As far as the first questions concerned, there is no dispute that the duty is payable on the goods manufactured. Under Rule 8 goods manufactured and thus if the duty is chargeable on the goods manufactured, it would be on the quantity delivered at the manufacturers' end. However, the goods that are obtained on concession are to be transported under Rule 193 after due measurement. Consequently, the duty has to be paid on the amount procured. The payment of duty is deferred and concession granted, under Rule 8/192 read with Section 3 of the Act, has to be in respect of the goods delivered by the manufacturer and not the goods actually transported by the petitioners or their agents.
10. The counsel for the respondent has relied upon a case reported in : AIR1962SC1281 R.C. Jall Parsi v. Union of India and Anr.. The case related to levy of cess on all coal produced by collieries. Under ordinance No. 39 of 44 the cess was leviable but it could be collected from the consignee. The nature of Excise duty was considered in connection with the same in paragraph 7 their Lordships of the Supreme Court relied upon a case reported in . In Re-central Provinces and Berar Sale of Motor Spirit and Lubricants Taxation Act, 1938. They also relied upon another case of Federal Court reported in A.I.R. 1942 Federal Court 33 - 1978 ELT (3 272), Province of Madras v. Boddu Paidanna and Sons which considered the scope of Excise duty. Another case related for Excise duty relied upon by their Lordship of the Supreme Court was Governor General in Council v. Province of Madras reported in . Summing up the three decisions, their Lordships of the Supreme Court held :
'With great respect, we accept the principles laid down by the said three decisions in the matter of levy of an Excise duty and the machinery for collection thereof. Excise duty is primarily a duty on. the production or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producers passes on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the import that is, it is a duty on the manufacture or production, is not lost. The method of collection does not affect the essence of the duty, but only relates to the machinery of collection for administrative convenience.'
Under the circumstances there is no room for doubt that the Excise duty could have been levied on the amount despatched by the producers and it could be realised from the petitioners under the provisions of the Act.
11. It was further argued on behalf of the petitioners that the fixation of evaporation losses at 7 1/2 per cent was arbitrary. It may be remembered that under Rule 196 it is the satisfaction of the authority whether the losses were genuine or not and what should be the losses in a particular case. While sitting in the writ jurisdiction we cannot enter into that, question, unless the decision is capricious or no reasonable man could have reached that decision. From the orders of the Deputy Collector it is clear that he applied his mind to the question of losses and then come to a finding, and not arbitrarily. He also granted personal hearing to the petitioners and considered even the cases relied upon by the petitioners. He gave following finding regarding the actual loss :
'(d). the loss was not real but virtually due to the defective flow meter which was giving wrong readings. At his suggestion, the factory installed a meter tank authentically caliberated by the weights and measures department in place of the flow meter and the losses have come down sharply after the switch over to the measuring tank.'
12. The same finding was arrived at by the Collector in paras (ii) and (iii) of his conclusions, reproduced below :
'(ii) that these losses were 'occurring' at the time when the factory was measuring their 'receipts' with the help of a flow meter, which was erratic and that this was so is established by the fact that, after the introduction of caliberated tanks by the factory, the number of cases where the losses were registered have come down considerably, the losses are almost always within the permissible limit and there also cases of gains too, indeed these cases of loss are essentially matters of the past.'
13. The matter was also considered by the respondent No. 3 in revision. It held that the losses due to natural causes could not be so high as to go beyond 7.5 per cent. Under the circumstances it cannot be said that the finding about the claim of losses was either arbitrary or without any reasonable basis. As regards the second question of rate of duty it may be mentioned that the duty known as Tariff Duty is payable on the amount manufactured at the usual rates under Section 3 of the Act. However, under Rule 8 the Central Government is empowered to grant exemption from whole or part of the duty. Under Rule 192 the concessions in the duty, i.e. remitted duty is granted in respect of the goods used in a specified industrial process. As according to the petitioners own case he did not use the goods i.e. the Benzene for which losses are claimed in manufacture of rubber goods for which the concessions was granted the duty payable on such goods would automatically be the tariff duty and not the remitted duty. The petitioner was entitled to claim remitted duty only on the quantity actually consumed by him in the industrial process. As it is not the petitioner's case that he consumed the disputed quantity (losses) in the specified industrial process i.e. the manufacture of rubber goods, the question of paying remitted duty on that quantity does not arise.
14. Under the circumstances we are satisfied that the orders passed by the respondent Nos. 1 to 3 are quite correct and the writ petition is liable to be dismissed with costs.