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Triveni Sheet Glass Works Ltd. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Writ No. 477 of 1978
Judge
Reported in1983(12)ELT711(All)
ActsCentral Excise Act - Sections 4, 11, 11A, 11A(1), 11B, 11C, 24, 35, 35A, 36, 36(2) and 173I; Customs, Excise and Board of Revenue (Amendment) Act, 1978; Central Excise Rules - Rules 2, 9, 10, 10A, 11, 11(3), 12, 12A, 47, 50, 52, 54, 98 and 173A to 183RM;
AppellantTriveni Sheet Glass Works Ltd.
RespondentUnion of India (Uoi) and ors.
Excerpt:
- - 1 and 2 mentioned above yet, while moulding its relief it has claimed that the respondents be directed to refund the amount covered by those items as well. (2) if on receipt of any such application the assistant collector of central excise is satisfied that the whole or any part of the duty paid by appellant should be refunded to him, he may made an order accordingly. of course if there are some compelling reasons like a stay order passed by the appellate or revisional authority staying refund of the money or that in order to effectuate the appellate or revisional order certain exercise has to be undertaken, no amount that has become due to the person under the appellate or revisional order may be refunded by the proper officer so long as the stay order continues or, as the case.....h.n. seth, j.1. petitioner triveni sheet glass works limited, manufactures glass sheets which are chargeable to excise duty under the central excises and salt act at a rate depending on their value and is in this regard governed by the procedure laid down in chapter vii (rule 173-a to rule 173 rm) of the central excise rules. it went into production of glass sheets on 3rd january, 1976 and on the same day it as required by rule 173c, submitted its price list which was to remain operative till 16th january, 1976 before the proper officer for his approval. during this period the petitioner claims to have cleared five consignments of glass sheets in unwrapped condition. a dispute regarding inclusion of packing charges in the assessable value of the goods of such consignment is still pending.....
Judgment:

H.N. Seth, J.

1. Petitioner Triveni Sheet Glass Works Limited, manufactures glass sheets which are chargeable to excise duty under the Central Excises and Salt Act at a rate depending on their value and is in this regard governed by the procedure laid down in Chapter VII (Rule 173-A to Rule 173 RM) of the Central Excise Rules. It went into production of glass sheets on 3rd January, 1976 and on the same day it as required by Rule 173C, submitted its price list which was to remain operative till 16th January, 1976 before the proper officer for his approval. During this period the petitioner claims to have cleared five consignments of glass sheets in unwrapped condition. A dispute regarding inclusion of packing charges in the assessable value of the goods of such consignment is still pending before the Assistant Collector, Central Excise.

2. Thereafter the petitioner submitted, from time to time, a number of price lists up to 19th April, 1977 for approval of the proper officer. A perusal of the allegations made in paragraph 20 read alongwith copies of the orders Annexures 1 and 2 to the writ petition as also Annexure 7 to the writ petition shows that three of the price lists, namely, those Nos. 2/76, 7/76 and 9/76 submitted by the petitioner for approval on 17th January, 1976, 9th June, 1976 and 20th December, 1976 were not approved as such by the proper officer who directed that the value of certain packing be also included in the assessable value of glass sheets and he amended those price lists accordingly. Being aggrieved the petitioner went up in appeal before the Appellate Collector who accepted the petitioner's case in this regard and disposed of the appeals regarding price lists 2/76 and 7/76 vide his order dated 20th May, 1978 (Annexure 11) and that in respect of price list No. 9/76 vide his order dated 1st August, 1978 (Annexure 2). Operative portions of the orders dated 20th May, 1978 and 1st August, 1978 respectively ran thus : -

'In view of the above discussions, I order that extra packing charges for frame/case/crate packing of glass sheets and introductory discount uniformly given to all buyers in certain markets or regions would not form part of the assessable value while the charges incurred towards handling and loading within the factory would constitute part of assessable value. Consequential relief is allowed.'

AND

'I, therefore, set aside the order of the Assistant Collector relating to Item Nos. (ii) and (iii) and (iv) mentioned in the appeal involving a total amount of Rs. 5,55,925.47. I also direct that the refund claimed made on this account be accepted and the amount refunded to the appellant.'

3. In paragraph 20 of the petition the petitioner claims that under the two appellate orders mentioned above it became entitled to receive a refund of Rs. 3,28,209.27 and Rs. 4,53,194.41 P. total Rs. 7,81,403.68 P. Despite repeated requests the respondents have not yet refunded the said amount to it. The petitioner has been advised to seek separate remedy in respect of this amount and that he would separately be seeking such remedy.

4. The petitioner further claimed that it in due course again submitted price lists No. 1/77 on 2nd June, 1977. The proper officer, vide his order dated 16th June, 1977 again did not approve it and modified the same by including the packing charges objected to by it i'n the assessable value of glass sheets manufactured by it. The petitioner accordingly cleared the glass sheets by paying excise duty in accordance with the modified price list under protest and went up in appeal before the Appellate Collector. The Appellate Collector vide his order dated 14th October, 1977 (Annexure IV) allowed the appeal and set aside the order of the proper officer modifying the price list No. 1/77. According to it, as a result of the appellate order it became entitled to a refund of Rs. 3,68,595.86 P. However, despite requests the respondents have not refunded this amount to the petitioner so far.

5. Once again the petitioner submitted price list No. 1/78 on 13th June, 1978 and the proper officer vide his order dated 30th June, 1978 modified the same by including the packing charges objected to by the petitioner in the assessable value of the glass sheets manufactured by it. The Petitioner again paid excise duty in accordance with the modified price list under protest and went up in appeal before the Appellate Collector. The Appellate Collector again allowed the appeal vide his order dated 1st August, 1978 and set aside the order of the proper officer modifying the price list and directed that consequential relief, if any, also stood allowed. The petitioner claims that it, in pursuance of the aforesaid appellate order, became entitled to a refund of a sum of Rs. 1,20,367.80 P. However, the defendant has not taken any steps to refund the said amount to it so far.

5-A. As mentioned in paragraph 27 of the petition petitioner claims to have become entitled to the refund of following amounts in pursuance of various 'appellate orders passed by the Appellate Collector :-

(1) Vide order dated 1st August, 1978 in respect of price list 9/76, Rs. 3,28,209.21 P.

(2) Vide order dated 20th May, 1978 in respect of price lists Nos. 2/76 and 7/76, Rs. 4,53,194.41 P.

(3) Vide order dated 14th October, 1977 in respect of price list No. 1/77, Rs. 3,68,593.86 P.

(4) Vide order dated 1st August, 1978 in respect of price list No. 1/78, Rs. 1,20,367.81 P.

Total comes to Rs. 12,70,367.35 P. The petitioner claims that the respondents are wrongly withholding the said amount and they are bound to refund the same to it. It, therefore, prays for a writ under Article 226 of the Constitution commanding the respondents to refund the said amount to it forthwith.

6. It may be mentioned here that although the petitioner had in paragraph 20(vi), stated that he would seek separate remedy to enforce the refund in respect of Item Nos. 1 and 2 mentioned above yet, while moulding its relief it has claimed that the respondents be directed to refund the amount covered by those items as well.

7. The petitioner further contends that the Central Government, purporting to exercise its powers under Section 36(2) of the Act, issued a notice on 26th September, 1978 requiring it to show cause why Collector's appellate order dated 14th October, 1977 in respect of price list No. 1/77 be not revised. By means of this petition the petitioner also challenges the validity of the aforesaid notice interalia on the ground that the same had been issued beyond the period of limitation prescribed by the 3rd proviso added to Section 36(2) by the Customs, Excise and Salt and Board of Revenue Amendment Act, 1978 (No. 25 of 1978), which became effective with effect from 1st July, 1978 was without jurisdiction and is liable to be quashed.

8. So far as petitioner's claim for refund of Rs. 1270,367.35 P. due to it under various appellate orders passed by the Appellate Collector is concerned, the respondents do not deny that so long those appellate orders stand, the petitioner is entitled to the amount claimed by it. Their case is that various orders passed by the Appellate Collector are wrong on merits and the matter is currently engaging the attention of the Central Government. Learned counsel for the respondents seeks to justify non-refund of the amount claimed by the petitioner on the ground that the controversy with regard to it has not been finally settled so far.

9. Rule 11 of the Central Excise Rules as substituted by GSR 554(E), dated the 6th August, 1977 reads thus : -

'Claim for refunds of duty.-Any person claiming refund of any duty paid by him may make an application, for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the date of payment of duty :

Provided that the limitation of six months shall not apply when any duty has been paid under protest.

Explanation. -(I) Where any duty is paid provisionally under these rules on the basis of the value or the rate of duty, the period of six months shall be computed from the date on which the duty is adjusted after final determination of the value or the rate of duty, as the case may be.

(2) If on receipt of any such application the Assistant Collector of Central Excise is satisfied that the whole or any part of the duty paid by appellant should be refunded to him, he may made an order accordingly.

(3) Where, as a result of any order, passed in appeal or revision under the Act, refund of any duty becomes due to any person, the proper officer may refund the amount to such person without his having to make any claim in that behalf.

(4) Save as otherwise provided by or under these rules, no claim for refund of any duty shall be entertained.

Explanation.-For the purposes of this rule, 'refund' includes rebate referred to in Rules 12 and 12-A.'

Aforementioned provision contained in Rule 11 has since been incorporated by the Customs, Excise & Salt and Board of Revenue Amendment Act, 1978 (No. 25 of 1978) in the Central Excises and Salt Act itself as Section 11A. As laid down in Sub-rule (3) where as a result of any order passed in appeal or revision under the Act, refund of any duty becomes due to any person, the proper officer may refund the amount to such person without his having to make any claim in that behalf. The requirement in the rule that the proper officer is to make the refund of the amount that becomes due to a person as a result of appellate or revisional order even though such person does not apply for it, indicates that the rule imposes a public duty upon the proper officer to refund the amount on his own. In the circumstances, the word 'may' used in the rule has to be read as 'shall', and the proper officer is under a statutory obligation to give effect to the appellate or revisional order, as the case may be and to refund the amount to the person entitled to it in consequence of such order. Of course if there are some compelling reasons like a stay order passed by the appellate or revisional authority staying refund of the money or that in order to effectuate the appellate or revisional order certain exercise has to be undertaken, no amount that has become due to the person under the appellate or revisional order may be refunded by the proper officer so long as the stay order continues or, as the case may be, the exercise contemplated by the appellate or revisional order has not been completed. But, as soon as the stay order is discharged or the exercise is completed, the obligation on the part of the proper officer to refund the amount would be there and he has to make the refund in a reasonable time. We have given aforementioned illustrations merely with a view to elucidate the scope of Sub-rule (3) of Rule 11 and should not be understood as laying down exhaustively the circumstances in which the actual refund by the proper officer in pursuance of an appellate or revisional order can be deferred,

10. As stated earlier, it is not disputed that as a result of various appellate orders passed by the Collector, Central Excise, the refund claimed by the petitioner has become due to it and that those orders have not yet been set aside by any superior authority. Although the Central Government has issued a show cause notice to the petitioner under Section 36(2) of the Act, in respect of the appellate order dated 14th of October, 1977 it has not passed any order staying the refund which has become due under that order. No such circumstance has been brought to our notice which has the effect of inhibiting the proper officer from performing his obligation under Rule 11(3) to refund the amount due in accordance with various appellate orders within reasonable time. The fact that the Central Government is examining the propriety of the appellate order dated 14th of October, 1977 by itself cannot provide a reason which is good enough to justify the proper officer in not performing his public duty under Rule 11(3). Accordingly the petitioner is entitled to a writ commanding the respondents to refund the amounts due to it in consequence of various appellate orders mentioned in paragraph 27 of the petition. Of course, if and when the appellate orders are modified or corrected, it will be open to the respondents to initiate proper proceedings in accordance with law for recovering the amount to the extent it has been wrongly refunded by it.

11. As has already been mentioned, the petitioner in paragraph 20(vi) of the petition stated that it would pursue separate remedy for seeking relief in respect of the amount of Rs. 3,23,209.27 and Rs. 4,53,194.41 due to it under appellate orders dated 1-8-1978 and 20-5-1978, he has while formulating the prayer made in the petition claimed relief in respect of these two amounts as well. However, as all the necessary material for claiming relief in respect of these two amounts has been mentioned in the petition and the petitioner has claimed relief in respect of these two amounts on grounds similar to those in respect of other appellate orders, which are dated 14th of October, 1977 and 1st of August, 1978, and in view of the fact that the respondents have fully availed of the opportunity to put up their case in respect of these two amounts as well, we do not think that any prejudice will be caused to the respondents if, while disposing of this petition, appropriate order regarding the amounts due to the petitioner in pursuance of the appellate orders dated 1st of August, 1978 and 20th of May, 1978 is also made.

12. We now proceed to consider petitioner's objection regarding validity of the notice dated 26th of September, 1978, whereby the Central Government has, in exercise of its powers under Section 36(2) of the Act, required the petitioner to show cause why Collector's appellate order dated 14th of October, 1977 in respect of price list No. 1 of 1977 be not revised.

13. Prior to the amendment in Section 36(2) of the Central Excises and Salt Act, made by Central Act No. 25 of 1978, which became operative with effect from 6-6-1978 the section ran thus :-

'(2) The Central Government may, of its own motion or otherwise, call for and examine the record of any proceeding in which any decision or order has been passed under Section 35 or Section 35A of this Act for the purpose of satisfying itself as to the correctness, legality or propriety of such decision or order and may pass such order thereon as it thinks fit:

Provided that no decision or order shall be varied so as to prejudicially affect any person unless such person is given a reasonable opportunity of making a representation and, if he so desires, of being heard in his defence :

Provided further that no proceedings shall be commenced under this Sub-section in respect of any decision or order (whether such decision or order has been passed before or after the coming into force of this Sub- section) after the expiration of period of one year from the date of such decision or order.'

14., Certain amendments and changes were made in the Central Excises and Salt Act by Customs, Central Excise and Salt and Central Board of Revenue (Amendment) Act (Act No. 25 of 1978) published in the official gazette on 6-6-1978. The amending Act inserted new Sections 11A, 11B, 11C in the Central Excises and Salt Act and by Section 24 thereof it inter alia added a third proviso to Section 36(2) of the Act which runs thus : -

'Provided also that where the Central Government is of opinion that any duty of excise has not been levied or has been short levied or erroneously refunded, no order levying or enhancing the duty or no order requiring payment of duty so refunded shall be made under this section unless the person affected by the proposed order is given notice to show cause against it within time limit specified in Section 11A.'

The time limit in Section 11-A(1) of the Act is inserted by Act No. 25 of 1978 has been specified in the following manners :-

'When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may within six months from the relevant date serve notice on the person chargeable with duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice :

Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion, or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act or the Rules made thereunder with intent to evade payment of duty, by such person or his agent, the provision of this Sub-section shall have effect as if for the words 'six months' words 'five years' were substituted.

Explanation.-Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of six months or five years, as the case may be.'

15. Learned counsel for the petitioners contended that the order in respect of which the Central Government has, in exercise of its powers under Section 36(2), issued notice on 21st of September, 1978, was made as far back as on 14th of Octorber, 1977. This order, according to him, entailed shortlevy of excise duty. It not being the case of the respondents that such short-levy was because of any fraud or collusion on the part of the petitioner, or misstatement or suppression of facts by him, or contravention of any provisions of the Act or the Rules made thereunder, the Central Government, in view of the amendments made in Section 36(2) of the Act by Act No. 25 of 1978 lost jurisdiction to issue notice and initiate proceedings after a lapse of six months from 14th of October, 1977 (that is, after 14th of April, 1978) and in any case 6th of June, 1978 when Act No. 25 of 1978 came into force. The notice dated 20th of September, 1978 issued to the petitioner was. accordingly without jurisdiction and is liable to be quashed,

16. The case of the respondents, on the other hand, is that the amendment made in the Central Excises and Salt Act by Act No. 25 of 1978 is not to have any retrospective effect. Accordingly, the power of the Central Government to revise the order dated 14th of October, 1977 which was made long before 6th of June, 1978, when Act No. 25 of 1978 was in. force, will continue to be governed by Section 36(2) as it stood prior to its amendment in the year 1978. The limitation for issuing notice under Section 36(2) in all cases was one year. The impugned notice having been issued within one year of 14th October, 1977 is well within time. Even assuming that the right of the Central Government to initiate proceedings under Section 36(2) could be affected by the amendment made by Act No. 25 of 1978, the proviso added to Section 36(2) merely laid it down that in cases of the nature mentioned therein no proceedings could be initiated unless a notice to show cause had been issued within the period of limitation specified in Section 11A. The section was enforced vide Notification No. 176/80-C.E., dated 12th of November, 1980 with effect from 17th of November, 1980. Accordingly, the period of limitation specified in Section 11A and the proviso added to Section 36(2) by Act No. 25 of 1978 had not become operative by the time the impugned notice was issued by the Central Government. Learned counsel for the respondents further urged that the instant case does not fall within the ambit of the proviso added by Act No. 25 of 1978 and it continues to be governed by the second proviso to Section 36(2) of the Act which enabled the Central Government to commence proceedings for revision of a decision or an order within one year.

17. We are not impressed by the argument of the learned counsel for the respondents that as the amendments made by Act 25 of 1978 are not retrospective in nature they do not affect the right of the Central Government to initiate proceedings under Section 36(2) of the Act in respect of orders made prior to that date. We are also not impressed by the submission that as the provisions of Section 11A were enforced only with effect from 17th of November, 1980 the third proviso to Section 36(2) added by Act No. 25 of 1978 did not become operative till 17th of November, 1980. However, we find considerable force in the submission of the learned counsel for the respondents that the instant case is not governed by the proviso to Section 36(2) as added by Act No. 25 of 1978. It in our opinion is governed by the second proviso to Section 36(2) whereunder the requisite notice could be issued within one year of the date of the order or decision and as such it cannot be said that the impugned notice issued by the Central Government is without jurisdiction on the ground that it has been issued beyond the period of limitation specified for that purpose. However, in the view which we are taking, it is not necessary for us to express any concluded opinion on the question as to whether orders made prior to 17th of November, 1980 or 6th of June, 1980 of the nature specified in the proviso added to Section 36(2) by Act No. 25 of 1978 could be governed by that proviso or not. We would for the purposes of our discussion take it that the proviso to Section 36(2) added by the Act No. 25 of 1978 will apply also to orders made prior to 17th November, 1978 and 6th of June, 1980 provided they are orders of the nature specified therein.

18. We now proceed to state the reasons why in our opinion the instant case is not governed by the proviso to Section 36(2) of the Act as added to it by Act 25 of 1978.

19. A perusal of the second proviso to Section 36(2) shows that the general rule is that the Central Government is precluded from initiating proceedings for revision of an order or a decision made under the Excise Act unless the proceedings have been initiated within one year of the order or the decision sought to be revised. The further proviso added to the Sub-section by Act 25 of 1978, however, places special restriction on such power of the Central Government and prevents it from passing orders of the nature specified therein unless it comes to the conclusion that any duty of excise has:-

(i).not been levied, or

(ii) been short levied, or

(iii) been erroneously refunded,

and it has given a notice requiring the person affected to show cause against the proposed order within the time limit specified in Section 11A of the Act. A plain reading of this proviso shows that it has no application to case where the Central Government is not required to form an opinion on the question as to whether or not there has been non-levy, short-levy or erroneous refund of duty as a consequence whereof an order levying or enhancing the duty or requiring payment of duty erroneously refunded has to be made.

20. In the case before us, the Central Government has issued the impugned notice with a view to examine the correctness, legality and propriety of the order dated 14th October, 1977 passed by the Appellate Collector whereby he had set aside an order made under Rule 173-C(2) by Assistant Collector, Central Excise modifying price list No. 1/77 submitted by the petitioner for his approval on 2nd June, 1977. The notice issued by the Central Government is not directed against any order of assessment made under Rule 173-1, on the basis of the price list No. 1/77, as modified by the Assistant Collector. The question that, therefore, arises for consideration is whether while considering the legality, propriety or correctness of the order dated 14th October, 1977 passed by the Appellate Collector the Central Government is required to go into the question as to whether there has been any non-levy, short-levy or erroneous refund of duty and whether it would be required to make an order levying, enhancing or requiring payment of an amount erroneously refunded to the petitioner.

21. We find that the words levy and short-levy also occurred in Rules 10 and 10A of the Central Excise Rules as they stood earlier and we have no reason to think that those words have been used in the proviso added to Section 36(2) of the Central Excise Act by Act 25 of 1978 in a sense different from that in which they were used to those rules. The question as to the meaning of the word 'levy' and 'short-levy' occurring in various provisions under the Central Excise Act came up for consideration before the Supreme Court in the case of Assistant Collector, Central Excise v. National Tobacco Co., AIR 1972 SC 2563 Justice M.H. Beg, speaking for the Court made the following observations in paragraph 20 of the judgment : -

'The term 'levy' appears to us to be wider in its import than the term 'assessment'. It may include both 'Imposition' of a tax as well as assessment. The term 'imposition' is generally used for the levy of a tax or duty by legislative provisions indicating the subject matter of the tax and the rates at which it has to be taxed. The term 'assessment', on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate 'levy' with an 'assessment' as well as with the collection of tax when it held that 'when the payment of tax is enforced, there is a levy'. We think that although the connotation of the term 'levy' seems wider than that of 'assessment' which it includes, yet, it does not seem to us to extend to 'collection'. Article 256 of the Constitution makes a distinction between 'levy' and collection....'

After making these observations the learned Judge in paragraph 21 of the judgment went on to say :-

'We are, therefore, unable to accept the view that merely because the 'account current' kept under the third proviso (erroneously mentioned as second proviso by the Division Bench) to Rule 9 indicated that an accounting had taken place, there was necessarily a legally valid or complete levy. The making of debit entries was only a mode of collection of tax. Even if payment of actual collection of tax could be spoken of as a de facto 'levy' it was only provisional and not final. It could only be clothed or invested with validity after carrying out the obligation to make an assessment to justify it. Moreover, it is the process of assessment that really determines whether levy is short or complete. It is not a factual of presumed levy which could, in a disputed case, prove an assessment. This has to be done by proof of the actual steps taken which constitute 'assessment'.' (emphasis supplied)

Again in the case of N.B. Sanjana v. E.S. and W. Mills, AIR 1971 SC 2039 the Supreme Court ruled that where as a result of assessment it is held that no duty is payable it results in short levy of duty within the meaning of the expression as used in Rule 10 of Central Excise Rules.

22. Import of the observations made by the Supreme Court in the two cases mentioned above, therefore, is that under the provisions of the Central Excise Act and the Rules framed thereunder, excise duty can be said to have been levied only when an assessment of duty in accordance with the provisions of the Act takes place. Viewed in this light, the expression 'any excise duty has not been levied' used in Sections 36 and 11 would cover within its scope such cases where for some reason the authorities under the Act failed to assess the duty payable under the Act. Cases where the assessment made by the authorities results either in nil assessment or in such assessment which in consequence of subsequent proceedings taken under the Act is found to be less than the duty payable under the law are cases where duty can be said to have been short-levied. The cases of erroneous refund of duty are such cases wherein the amount of excise duty or portion thereof paid by the assessee is on assessment or otherwise found by the proper officer to have been paid in excess of what was properly payable by the assessee and refunds such duty or excess thereof to him, but in subsequent proceedings it is found that there was an error in directing such refund.

23. As pointed out by the Supreme Court in Assistant Collector, Central Excise v. National Tobacco Co., AIR 1972 SC 2563 the term 'assessment' is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. For the purposes of the rules framed under the Central Excise Act the word 'assessment' has been defined in Rule 2 (ia) as assessment of duty made by the proper officer and includes, reassessment, provisional assessment under Rule 98, summary assessment under Rule 173-Q and any order or assessment in which the duty assessed is nil, It is thus obvious that for the purposes of Rules framed under the Central Excise Act 'assessment' comes into existence when the proper officer determines the amount of duty payable by the person liable to pay duty under the provisions of the Act. It may be that while determining the amount of duty payable by the assessee it becomes necessary for the proper officer to find out the goods in respect of which duty is payable as also to resolve and decide a controversy with regard to the rate at which the duty is to be calculated and in this sense such determination forms part of the procedure for fixing the liability of the assessee for payment of duty, but then mere determination of the goods in respect to which and the rate at which the duty on those goods is payable by itself does not result in assessment of duty.

24. Rule 52 appearing in Chapter V of the Central Excise Rules lays down the normal rule for clearance of goods by a manufacturer on payment of duty. It runs thus :-

'When the manufacturer desires to remove goods on payment of duty either from the place or a 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 office at least twelve hours (or such other period as may be elsewhere prescribed or as the Collector may in any particular case require or allow) before it is intended to remove the goods. The officer, shall, thereupon assess the amount of duty due on the goods and on production of evidence that this sum has been paid into the Treasury or paid to the account of the Collector in the Reserve Bank of India or the State Bank of India, or has been despatched to the Treasury by money order shall allow the goods to be cleared.'

It shows that normally assessment of duty is obligatory before every removal of manufactured goods. However, the Central Government evolved a special procedure enabling the manufacturers or producers to, even before proper officer assessed the duty payable by them under Rule 52, remove excisable goods after themselves determining and paying the amount of duty payable in respect thereof. For this purpose it introduced a new Chapter VII-A in Central Excise Rules incorporating therein Rules 173A to 183RM.

25. The scheme underlying Chapter VII-A is that an assessee who manufactures excisable goods to which the Chapter applies, has to under Rule 173B filed with the proper officer for approval a list in such Forms as the Collector may direct showing (a) the full description of the goods manufactured or produced by him (b) the item number and sub-items, if any, of the First Schedule to the Act under which such goods fall (c) the rate of duty leviable on each such goods and (d) such other particulars as the Collector may direct. Sub-rule (2) of Rule 173B then enables the proper officer to, after holding such inquiry as he deems fit, approve the list with such modifications as are considered necessary. He is then required to return one copy of the approved list to the assessee who is unless otherwise directed by the proper officer to determine the goods intended to be removed in accordance with such list. In short the order made by the proper officer under this rule enables the assessee to know this view about the rate at which the duty that is leviable on the goods manufactured and intended to be removed by him, is intended to be calculated. In cases where the assessee produces or manufactures goods which are chargeable with duty at a rate dependent on the value of the goods he is also required to file with the proper officer for his approval a price list in such Form and in such manner and at such intervals as the Collector may require showing the price of each of such goods and the trade discount, if any, allowed in respect thereof to the buyers. Sub-rule (2) of the rule thereupon requires the proper officer to approve the price list after such modification as he may consider necessary so as to bring the value shown in the assessment list to be the correct value, for the purposes of assessment as provided in Section 4 of the Act. The object of the rule is to enable the assessee to know, in the case of goods in respect of which duty is payable ad valorem, the value of the goods on. the basis of which the duty is to be assessed at the rates mentioned in the list approved in respect of such goods under Rule 173B. Rule 173F then enables the assessee who has complied with the provisions of Rule 173C to himself determine the liability for the duty due on the excisable goods intended to be removed and to remove the goods on payment of duty so determined by him. Rule 173G lays down the procedure for paying the amount of duty determined by the assessees themselves under Rule 173F by requiring them to keep an account-current with the Collector separately for each excisable goods falling under different items of the First Schedule to the Act, in such Form and manner as the Collector may require (Form RG 23) and to pay the duty determined by them for each consignment by debit to such account-current before removal of goods. Sub-rule (3) of Rule 173G of the Rules enjoins upon the assessee to file in lieu of the returns prescribed under Rule 54 within seven days after the close of each month, with the proper officer in quadruplicate a monthly return in the proper Form giving out amongst other certain information about the goods manufactured and cleared by him as also the amount of duty paid by him in respect thereof. It may be emphasised here that Rule 173G(3) requires an assessee to file his return for a particular month after he has cleared the goods manufactured by him on payment of duty determined by himself. Rule 173-I then provides thus :-

'173-I.(1) The proper officer shall on the basis of the information contained in the return filed by the assessee under Sub-rule (3) of Rule 173G and after such further inquiry as he may consider necessary, assess the duty due on the goods removed and complete the assessment memorandum on the return-A copy of the returns so completed shall be sent to the assessee.

(2) The duty determined and paid by the assessee under Rule 173F shall be adjusted against the duty assessed by the proper officer under Sub-rule (1) and where the duty so assessed is more than the duty determined and paid by the assessee, the assessee shall pay deficiency by making a debit in the account-current within ten days of receipt of copy of the return from the proper officer and where such duty is less, the assessee shall take credit in the account-current for the excess on receipt of the assessment order in the copy of the return duly countersigned by a Superintendent of Central Excise.'

26. Aforementioned scheme shows that whereas under Rules 173G and 173C the proper officer determines the nature of the goods manufactured by the assessee the rate of duty leviable in respect thereof as also the value to which such rate is to be applied, he does not determine the amount which is actually payable by the assessee as excise duty. As a matter of fact, the determination under Rules 173G and 173C may take place even before the assessee manufactures the goods on removal of which he eventually becomes liable to pay duty. So long as the goods have not been manufactured or produced, no question of making an assessment of duty payable in respect of such goods can possibly arise. In such cases the rules contemplated removal of goods by the manufacturers on determining the duty payable in respect of such goods by the manufacturer or producer themselves and for making monthly assessments for payment of duty by the proper officer in respect of the goods which have been removed by the assessee during a particular month on the basis of the returns filed by the assessee under Rule 173G(3). The duty payable is thus determined by the proper officer under Rule 173-I and at no stage prior to it.

27. In this view of the matter we are of opinion that a simpliciter order passed under Rule 173C even though it provides a basis for eventually calculating and determining the amount of duty payable by a manufacturer during a particular month neither results in assessment of duty nor to its being levied. Such an order by itself, therefore, cannot entail any question of short levy or erroneous refund of duty.

28. Learned counsel for the petitioner invited our attention to a decision of a Full Bench of the Calcutta High Court in the case of Inspector, Central Excise Taxmaco Bolgharia v. Textile Machinery Corporation Ltd., 1980 Tax LR 2308 (Excise) wherein the proper officer had permitted removal of certain goods under the provisions of Rule 50 after holding that they were not excisable. A question had arisen whether the action of the proper officer had resulted into short-levy or excise duty within the meaning of Rule 10 of the Central Excise Rules. The Calcutta High Court held that in the context the action of the proper officer in determining that the goods permitted to be removed by the petitioner were not excisable resulted in nil assessment of excise duty payable on such goods and as such it resulted into short-levy attracting the provisions of Rule 10 of the Central Excise Rules. Learned counsel for the petitioner urged that in the instant case also if the Central Government determines that the value of the goods for purposes of assessment should be more than what has been determined under the appellate order sought to be revised by it, it should result in less assessment and short-levy of duty. In our opinion, the ratio of the Calcutta case cannot be extended to an order passed under Rule 173C. We have already stated the reason why we consider that order under Rule 173C does not result in any assessment or short-levy or erroneous refund of duty.

29. Learned counsel for the petitioner also invited our attention to a decision of the Delhi High Court in the case of the Associated Cement Co. Ltd. v. Union of India, 1981 E.L.T. 421. In that case the Superintendent Central Excise had required the Associated Cement Company to pay duty at the rate of Rs. 91 per metric ton of 'Pozzalena Cement' manufactured by it. In an appeal perferred by the Company before the Appellate Collector, Central Excise the said demand was ordered to be withdrawn and the Superintendent Central Excise was directed to assess duty payable by the petitioner at the rate of Rs. 82 per metric ton only. Thereafter a notice was issued by the Central Government under Section 36 of the Central Excise Act calling upon the Company to show cause why the order of the Appellate Collector be not reviewed and set aside and the demand made by the Superintendent be restored. The question that arose before the Delhi High Court was as to whether the notice under Section 36 issued by the Central Government requiring the petitioner to show cause why the order passed by the Appellate Collector be not revised was within the period of limitation prescribed under the proviso to Section 36(2) as added by Act 25 of 1978. The Delhi High Court treating the order of the Appellate Collector as resulting in short-levy of duty held that the case was covered by the third proviso added to Section 36(2) by Act 25 of 1978 and that the period of limitation mentioned therein had to be computed with reference to the date of the order sought to be revised. In the result it held that the notice issued by the Central Government was beyond the period of limitation and directed it to be quashed. The question as to when an order passed by the authorities under the Central Excise Act can be said to result in levy or short-levy of duty was neither raised nor considered by the Delhi High Court in this case. We are, accordingly of opinion that the petitioner cannot derive any assistance from the ratio of this case either.

30. Learned counsel for the petitioner argued that when in an appeal against an order made under Rule 173C the Appellate Collector modifies the price list and as a consequence thereof directs the refund of excise duty paid by the assessee it results into levy of excise duty and if the Central Government in proceedings under Section 36 of the Act comes to the conclusion that the order passed by the Appellate Collector is erroneous it necessarily implies, that the Appellate collector has determined duty payable by the assessee which is less than what is actually payable by him and in this sense it results into a short-levy and as such the further proviso added to Section 36 of the Act by Act 25 of 1978 comes into full play. We find ourselves unable to accept this submission. In the first place we do not find that the order dated 14th of October, 1977 in respect of which the impugned notice under Section 36 has been issued by the Central. Government contains any direction for refunding any amount to the petitioner. The operative portion of the order passed by the Appellate Collector reads thus : -

'In view of the above considerations the order of the Assistant Collector is set aside and the appeal is allowed.'

31. The effect of aforementioned order of the Appellate Collector is that it merely sets aside the order of the Assistant Collector purporting to modify petitioner's price list No. 1/77. The order on the face of it merely declares that for the. purpose of calculation of excise duty payable in respect of the goods manufactured and cleared by the petitioner, the value shown in the price list as submitted by the petitioner should be taken to be correct. It does not purport to determine the excise duty payable by the petitioner in respect of any goods cleared by it in any particular month as contemplated by Rule 173-I. It may be that in consequence of the order made by the Appellate Collector it became necessary for the proper officer to reconsider various assessments made by him under Rule 173-I on the basis of the price list as modified by him, and the petitioner became, so long as the appellate order stood, entitled to refund of the duty assessed and paid by it in excess of what ought to have been paid in accordance with the value shown in the price list as accepted by the Appellate Collector, under Rule 11 of the Rules framed under the Central Excise Act, and as such entitlement accrued as a result of an order passed in appeal the proper officer becomes bound to refund the same to the petitioner on his own as laid down in Rule 11(3) of the Central Excise Rules ; but then the appellate order by itself did not result in any determination of the amount of excise duty payable by the petitioner in any particular month and it by itself does not result in refund of any portion of duty to the assessee. Accordingly the order, if found to be wrong, can also not be said to have resulted either in erroneous refund or short-levy of duty and no question of the Central Government passing any order for paying a duty short-levied or erroneously refunded in a revision against that order under Section 36 would arise.

32. Learned counsel for the petitioner then invited out attention to the fact that price list No. 1/77 continued to be effective till the month of June, 1978 when the petitioner submitted a fresh price list No. 1/78 for approval of the proper officer. For the period subsequent to 14th of October, 1976 and before June, 1978 the petitioner was assessed to excise duty on the basis of the value as originally given in price list No. 1/77. In case the Central Government holds that the appellate order dated 14th of October, 1977 passed by the Appellate Collector was wrong and the value of the goods created during this period has to be taken as that modified by the proper officer, the assessment made under Rule 173-I would result in short-levy of excise duty and as such the Central Government would require the petitioner to pay the duty so short-levied. In any case the order which the Central Government will pass would result in enhancement of duty for that period. We are unable to accept this submission. As in the instant case the Central Government has merely given notice to the petitioner in respect of the appellate order dated 14th of October, 1977 and not in respect of any order of assessment made under Section 173-I and it has called for the record to examine the validity of the appellate order made in respect of a price list, it will be able to pass orders only regarding what should, for purposes of assessment of excise duty be considered to be the correct value of the articles manufactured by the petitioner during the period in which price list No. 1/77 remained in force. It would neither make any order regarding, nor deal with the question as to whether any assessment has been wrongly made resulting in short-levy or duty. If the order passed by the Central Government results in restoring the order made by the proper officer, appropriate proceedings in respect of excise duty that may, in the opinion of the relevant (Sic) have been short-levied will have to be initiated under Section 11A as inserted in the Central Excise Act by Act 25 of 1978 and it will be at that stage that the question whether or not there had been a short-levy and whether the petitioner can be made to pay the same will arise for consideration.

33. Learned counsel appearing for the petitioner contended that the proceedings that may be taken subsequently for claiming back the amount refunded to the petitioner under the orders passed by the Court and for recovering the duty which may be found to be short-levied in proceedings that may be initiated in consequence of the orders that may bepassed by Central Government would be barred by limitation and as such the impugned proceedings pending before the Central Government are absolutely futile. As no proceedings for claiming back the amount refunded to the petitioner or for recovering the duty which has been found to be short-levied have been initiated so far and as those proceedings are not the subject-matter of the present writ petition, it is not necessary for us to express any opinion on the question as to whether initiation of those proceedings has become barred by time. If and when such proceedings are taken, it will be open to the petitioner to raise all such legal objections that may be open to it. Suffice is to say we do not find any error in the notice issued by the Central Government for the reason that it is barred by the period of limitation provided in the third proviso to Section 36(2) of the Act.

34. In the end, learned counsel for the petitioner urged that on the facts of this case it would be apparent to anybody that the order sought to be revised by the Central Government was in accordance with the decision of various High Court as well as the circulars issued by the Central Board of Excise and Customs and that there was no error in the order of the Appellate Collector. In the circumstances, the notice issued by the Central Government was vitiated by legal mala fides. We are at this stage not going into the merits of the question dealt with by the order in respect of which the notice has been issued by the Central Government. It will be for the petitioner to approach the Central Government and to satisfy it that the order passed by the Appellate Collector requires no interference. Merely because the petitioner thinks that the order passed by the Appellate Collector is fully justified, it cannot be said that the notice which had been issued by the Central Government is vitiated or is without jurisdiction.

35. In the result the petition succeeds and is allowed in part. The respondents are directed to refund the amount that has admittedly become due to the petitioner in consequence of various appellate orders mentioned in paragraph 27 of the writ petition forthwith. Petitioner's request for quashing the notice under Section 36 of the Central Excise Act, issued by the Central Government for examining the validity of the appellate order dated 14th of October, 1977 is rejected. In view of the divided success, the parties are directed to bear their own costs.

Petition partly allowed.


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