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Gwalior Rayon Mfg. (Wvg.) Co. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Petition No. 163 of 1980
Judge
Reported in1982(10)ELT844(MP)
ActsCompanies Act, 1956; Central Excise Act, 1944 - Sections 3, 4, 4(1), 11A and 37; Central Excise Valuation Rules, 1976 - Rule 6; Central Excise Valuation Rules, 1975 - Rule 5; Central Excise Rules, 1944 - Rules 10, 173A, 173C, 173C(1), 173C(3), 173G(1), 173G(3), 173I, 173Q, 173Q(1), 173Q(2), 233 and 233A; Constitution of India - Article 226; Indian Defence Rules - Rule 133A(2) and 133A(4); General Clauses Act - Sections 6
AppellantGwalior Rayon Mfg. (Wvg.) Co.
RespondentUnion of India (Uoi) and ors.
Cases ReferredUniversal Cables Ltd. v. Union of India and Ors.
Excerpt:
- indian penal code, 1890.sections 307 & 324: [lokeshwar singh panta & b.sudershan reddy,jj] assault proof - appellant allegedly dealt sickle blow to deceased - testimony of eye-witnesses showed that sudden altercation ensued between appellant and deceased - no evidence to indicate any previous enmity between parties - single blow of sickle had been inflicted by appellant on back of deceased - incised wound allegedly inflicted by appellant - however opinion of doctor proved that deceased had not died due to direct result of said injury held, appellant is therefore liable to be convicted under section 324 of i.p.c., sentence of 3 years imprisonment reduced to period undergone by appellant considering mental agony suffered by him - validity of the show cause notice 22. lastly, learned.....j.s. verma, j.1. the petitioner is an existing company, within the meaning of the companies act, 1956, having its registered office at birlagram, nagda, in this state. the petitioner is engaged in the manufacture of staple fibre of which sulphuric acid is an essential ingriedient. it also manufactures sulphuric acid and uses or consumes the entire quantity in the manufacture of staple fibre without selling any part of it. the dispute in this petition relates to the excise duty payable on the sulphuric acid so manufactured by the petitioner and used or consumed in its entirety in the manufacture of staple fibre at nagda during the period between 10-11-1976 and 31-10-1978.2. prior to 10-11-1976, excise duty on sulphuric acid was levied and collected on the basis of tariff value fixed by the.....
Judgment:

J.S. Verma, J.

1. The Petitioner is an existing company, within the meaning of the Companies Act, 1956, having its registered office at Birlagram, Nagda, in this State. The Petitioner is engaged in the manufacture of staple fibre of which sulphuric acid is an essential ingriedient. It also manufactures sulphuric acid and uses or consumes the entire quantity in the manufacture of staple fibre without selling any part of it. The dispute in this petition relates to the excise duty payable on the sulphuric acid so manufactured by the petitioner and used or consumed in its entirety in the manufacture of staple fibre at Nagda during the period between 10-11-1976 and 31-10-1978.

2. Prior to 10-11-1976, excise duty on sulphuric acid was levied and collected on the basis of tariff value fixed by the Central Government from time to time under Section 3 of the Central Excises and Salt Act 1944 (hereinafter referred as 'the Act'). However, with effect from 10-11-1976, excise duty on sulphuric acid became payable with reference to its value determined under Section 4 of the Act, instead of on the tariff value prior to that date. The duty of excise payable on sulphuric acid is at the rate ad valorem in accordance with Item 14-G of the First Schedule to the Act.

3. There is no dispute that for the period in question, commencing from 10-11-1976, the excise duty payable on sulphuric acid manufactured by the Petitioner is to be calculated with reference to the value thereof determined under Section 4(1)(b) of the Act read with Rule 6(b) of the Central Excise Valuation Rules, 1976, framed under Section 37 of the Act for the purpose of determining the value of excisable goods where the duty is payable in accordance with Section 4 of the Act. Section 4(1)(b) of the Act and Rule 6(b) of the Central Excise Valuation Rules, 1975 (hereinafter called the 'Valuation Rules'), in so far as they are relevant for the purpose of this petition, are as under :-

Sec. 4. Valuation of exciseable goods for purposes of charging of duty of excise.-(1) here under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section, be deemed to be-

(b) Where the normal price of such goods is not ascertainable for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed.

* * * *

Rule 6. If the value of the excisable goods under assessment cannot be determined under Rule 4 or Rule 5, and

* * * *

(b) Where the excisable goods are not sold by the assessee but are used or consumed by him or on his behalf in the production or manufacture of other articles, the value shall be based-

(i) on the value of the comparable goods produced or manufactured by the assessee or by any other assessee :

Provided that in determining the value under this sub-clause the proper officer shall make such adjustments as appear to him reasonable, taking into consideration all relevant factors and, in particular, the difference, if any, in the material characteristics of the goods to be assessed and of the comparable goods;

(ii) if the value cannot be determined under sub-clause (i), on the cost of production of manufacture, including profits, if any, which assessee would have normally earned on the sale of such goods;

The real controversy between the parties is whether it is sub-clause (i) or sub-clause (ii) of Clause (b) of Rule 6 that applies to the petitioner's case. According to the petitioner, it is sub-clause (ii) that applies, while the respondents contend that sub-clause (i) is applicable.

4. Reference may now be made to the procedure for removal of excisable goods and determination of duty, its assessment, reopening of assessment and penalty that may be imposed in certain cases. This procedure is contained in Chapter VII-A of the Central Excise Rules, 1944 (hereinafter called the 'Excise Rules'), framed under the Act. There is no dispute that the provisions of Chapter VII-A of the Excise Rules, containing Rules 173-A to Rule 173-Q, govern this case. Rule 173-C(1) requires the assessee to file price list of goods assessable ad valorem to the proper officer in such form and in such manner and at such intervals as the Collector may require. Sub-rule (3) provides for approval of the price list by the proper officer with such modification as he may consider necessary so as to bring the value shown in the price list to the correct value for the purpose of assessment as provided in Section 4 of the Act. Unless otherwise directed by the proper officer, the approved price list is to determine the duty payable on the goods intended to be removed by the assessee. Rule 173-G(1) lays down the procedure to be followed by the assessee which requires every assessee 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 of the duties payable on the excisable goods. Rule 173-G(3) requires that within 7 days after the close of each month, every assessee shall file a monthly return in the proper form with the proper officer showing the quantity of excisable goods together with other necessary particulars. Rule 173-1 then provides for assessment by the proper officer on the basis of the information contained in the return filed by the assessee under Sub-rule (3) of Rule 173-G after such further enquiry as he may consider necessary. The assessment of the duty due on the goods removed has to be made under this provision on the basis of the assessee's return. Rule 173-J relates to the time limit for the recovery of short levy or refund of excess levy and merely says that the provisions of rules 10 and 11 shall apply to the assessee. Rule 10, with which we are concerned, in substance, provides for recovery of duties not levied or not paid or short levied or not paid in full or erroneously refunded. This rule prescribes the time limit of six months from the relevant date for such an action, subject to the extended period of five years in cases covered by the proviso therein. Rule 173-Q provides for confiscation and penalty. One of the situations to which Rule 173-Q is attracted is where the assessee contravenes any of the provisions of these rules with intent to evade payment of duty. The miscellaneous provisions are contained in Chapter XIV of these rules wherein rules 233 and 233-A alone are relevant for the purpose of this petition. Rule 233 unables the Central Board of Excise and Customs and the Collectors to issue written instructions providing for any supplemental matters arising out of these rules. Rule 233-A requires a show cause notice to be issued stating the grounds for the proposed confiscation of property or imposition of any penalty and a reasonable opportunity to the assessee to show cause before any such action is taken.

5. When the Central Government stopped fixing the tariff value for payment of excise duty on sulphuric acid with effect from 10-11-1976, the Superintendent, Central Excise, Nagda (respondent No. 4), sent a letter (Annexure R-l) dated 16-11-1976 to the petitioner, drawing attention to Rule 6(b) of the Valuation Rules and requiring the petitioner to file immediately the price list in respect of sulphuric acid manufactured by it. The petitioner then filed its price list of sulphuric acid in the prescribed form under Rule 173-C(1) of the Excise Rules for approval of to the Assistant Collector, Central Excise, Ratlam (respondent No. 3), sending a copy thereof to the Superintendent, Central Excise, Nagda (respondent No. 4). This price list in the prescribed proforma, together with the petitioner's covering letter dated 17-11-1976, is Annexure C to the petition. The petitioner indicated therein that the value of sulphuric acid for the purpose of excise duty payable on it was Rs. 388/-per metric tonne on the basis of sub-clause (ii) of Clause (b) of Rule 6 of the Valuation Rules, also indicating therein that sub-clause (i) thereof was not applicable. The value of Rs. 388/- per metric was determined by the petitioner on the basis of cost of production, to which 12| per cent was added as the profit that would have normally been earned by the assessee on its sale. The Superintendent, Central Excise (respondent No. 4), verified the cost of production shown by the petitioner and made an endorsement to that effect on 17-11-1976. The Assistant Collector, Central Excise (respondent No. 3), on 18-11-1976, approved the valuation shown in the price list under Rule 173-C(3). This was the only price list filed by the petitioner during the entire period in question, i.e. between 10-11-1976 and 31-10-1978 and the excise duty paid by the petitioner for this entire period was also on the same basis. The petitioner followed the procedure laid down in Rule 173-G and also filed the monthly returns according to Sub-rule (3) thereof. The monthly returns filed by the petitioner in accordance with the approved price list for the entire relevant period are collectively marked Annexure D. At the end of these returns is the assessment made by the proper officer under Rule 173-1.

6. It appears that the respondents subsequently formed the opinion that even though the petitioner had paid excise duty on sulphuric acid on the value determined according to the approved price list under sub-clause (ii) of Clause (b) of Rule 5 of the Valuation Rules for the entire period, the correct value for the purpose of payment of excise duty in accordance with Section 4(1)(b) was required to be determined under sub-clause (i) of Clause (b) of Rule 6 of the Valuation Rules. On this view, it was treated to be a case of short levy of excise duty. Accordingly a show cause notice (Annexure A) dated 12-9-1978 was issued by the Assistant Collector, Central Excise (respondent No. 3) to the petitioner, which was amended by an addendum (Annexure B) dated 10-10-1978. This show cause notice, read with its addendum, required the petitioner to show cause why the assessable value on sulphuric acid should not be revised and consequently the short levy amounting to Rs. 28,79,138.33 should not be recovered under Rule 10 of the Excise Rules in addition to imposition of penalty under Rule 173-Q of the Excise Rules.

7. On receipt of the above show cause notice, the petitioner filed this petition under Article 226 of the Constitution on 26-11-1978 for quashing this notice (Annexures A and B) contending that the same is in excess of authority.

8. During the pendency of this petition, Rule 10 of the Excise Rules was replaced by Section 11A, introduced earlier in the Act by the amending Act No. 25 of 1978, but brought into force with effect from 17-11-1980. This amendment led to amendment of the petition for raising an additional ground that the proceedings commenced with the notice issued under Rule 10 did not survive after omission of Rule 10 from Excise Rules with effect from 17-11-1980.

9. The contentions of Shri D.P. Gupta in support of the petition are three. His first contention is that omission of Rule 10 of the Excise Rules with effect from 17-11-1980 results in automatic termination of the proceedings initiated earlier by issuing the notice. The second contention is that sub-clause (i) of Clause (b) of Rule 6 of the Valuation Rules is invalid being inconsistent with Section 4(1)(b) of the Act. The last contention is that the show cause notice is invalid wholly or at least partly even on admitted facts, in reply, the learned Advocate General argued that Rule 10 has merely been replaced by Section 11A in the Act and such replacement does not amount to repeal or omission of an enactment, that there is no inconsistency between Section 4(1)(b) of the Act and Rule 6(b)(i) of the Valuation Rules; and the show cause notice is wholly valid, Having heard both the counsels, we have formed the opinion that except the contention that a part of the show cause notice partain-ing to penalty proceeding is invalid, the remaining points urged in support of the petition must be rejected. These points are considered hereafter.

Effect of replacement of Rule 10 of the Central Excise Rules, 1944, by Section 11A of the Central Excises and Salt Act, 1944, w.e.f. 17-11-1980.

10. The Central Excise Rules, 1944, have been framed under the Central Excises and Salt Act, 1944, for the purpose of providing for assessment and collection of duties imposed by the said Act. Rule 10 therein provided for recovery of duties not levied or not paid, or short levied or not paid in full or erroneously refunded. By the Amendment Act No. 25 of 1973, Section 11A was inserted in the Act to cover the field falling within the ambit of Rule 10 framed earlier under the Act. Section 11A was brought into force w.e.f. 17-11-80 and simultaneously from the same date, Rule 10 was deleted, apparently because it became redundant after bringing into force Section 11A inserted in the Act itself. This replacement of Rule 10 framed under the Act by Section 11A inserted in the Act itself was brought about by the notification appearing at pages 122 and 123 of the paper book. The net result has been that the provision which existed till 17-11-1980 in the shape of Rule 10 framed under the Act continued in operation since that date as a section of the Act itself. In other words, on 17-11-1980, the provision was shifted from the Rules framed under the Act to the Act itself.

11. The contention of the learned counsel for the petitioner, in substance, is that all pending proceedings initiated prior to 17-11-1980 under Rule 10 of or recovery of duty short levied automatically terminated on that date and they cannot be continued under Section 11A brought into force simulta-aneously in the Central Excises and Salt Act, 1944, since the ordinary consequences of repeal or omission of an enactment must follow as there is no saving clause and also nothing to indicate such an intention of the legislature. Except for some minor variations in Section 11A, it is substantially similar to Rule 10 of the Excise Rules, which was in existence prior to 17-11-1980. For the purpose of this petition, these minor variations are not of any significance since the only question before us is whether proceedings initiated by issuance of a show cause notice prior to 17-11-1980 stand automatically terminated as contended by the learned counsel for the petitioner.

12. Reliance has been placed by Shri Gupta on a decision of the Allahabad High Court, supporting his contention, which is Ajanta Paper Products v. The Collector, Central Excise Collectorate and Anr., 1982 E.L.T. 201. The Allahabad decision noticed that Section 11A of the Act is in pari materia with Rule 10 of the Excise Rules framed under the Act. Thereafter the learned judges merely followed the decision of the Supreme Court in Rayala Corporation (P) Ltd. v. Director of Enforcement, A.I.R. 1970 S.C. 494, and held that with the omission of Rule 10 of the Central Excise Rules, the notice issued prior to its omission would lapse, since Section 6 of the General Clauses Act does not apply to repeal of a rule by another rule. Except for following the Supreme Court decision, no other reason has been given in the Allahabad decision and, therefore, it has to be seen whether the point is no, longer res integra in view of the Supreme Court decision in M/s. Rayala Corportion's case.

13. In our opinion, the Supreme Court decision in M/s. Rayala Corporation's case, does not conclude the point arising for our decision. In that case Rule 132-A(2) of the Defence of India Rules, provided for an offence which was made punishable under Sub-rule (4) thereof. It related to prohibition of dealings in foreign exchange. Rule 132-A as a whole ceased to be in existence from a specified date and the question was whether the proceedings could be validly continued for that offence after omission of Rule 132-A. The Supreme Court held that Section 6 of the General Clauses Act applies to repeals and not to omissions and also when the repeal is of a Central Act or Regulation and not of a rule. On this basis, Section 6 of the General Clauses Act was held to be inapplicable to save the prosecution under Rule 132-A, after its omission. It was also held that the amended rules by which Rule132 A had been omitted did not save a prosecution under the omitted Rule 132-A. In our opinion, there is a clear distinction in the present case as a result of which the Supreme Court decision does not apply. The omission of the rule in respect of which the Supreme Court had to decide was of the provision providing for the offence itself and not dealing with any ancillary matter. In the present case, the liability of the petitioner is based on short levy of the excise duty. The provisions for levy of the excise duty contained in the Act and the rules framed thereunder remained unaffected by the change and so also the provision for penalty. Rule 173-C of the Excise Rules together with Rule 6(b) of the Central Excise Valuation Rules, 1975, and Sections 3 and 4(1)(b) of the Act formed the basis of the allegation of short levy, while Rule 173-Q of the Excise Rules is the basis for the penalty proceedings. These provisions remain unaffected. In the Supreme Court decision as earlier pointed out, it was the omitted rule which itself laid down the offence, which is not the position in the present case. In the present case, the deletion is of Rule 10 of the Excise Rules framed under the Act simultaneously with the enforcement of Section 11A contained in the Act itself, providing merely for the manner in which the liability arising out of short levy of excise duty under the provisions continuing unaffected has to be enforced. In our opinion, this distinction on facts is alone sufficient to distinguish the Supreme Court decision in M/s. Rayala Corporation's case and to indicate that the result reached in the Allahabad decision does not automatically flow therefrom. With respect we are, therefore, unable to concur with the view taken in the Allahabad decision merely on the basis of the Supreme Court decision in M/s. Rayala Corporation's case.

14. A careful appreciation of the facts of the present case indicates that the present is not a case of repeal or omission of an enactment without a saving clause in the true sense, as contended on behalf of the petitioner, for this reason, reliance on Section 6 of the General Clauses Act is unnecessary and the absence of any saving clause at the time of bringing about this change is also of no consequence. It is settled that a rule framed under the Act is a part thereof and has to be so construed for all purposes. In State of U.P. v. Baburam, A.I.R. 1961 S.C. 751, the Supreme Court, on the basis of Maxwell on Interpretation of Statutes, 10th Edition, pp. 50-51, held as follows :-

'Rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act, and are to be judicially noticed for all purposes of construction or obligation.'

It is, therefore, clear that not only for the purpose of construction but also for the purpose of obligation thereunder, rules made under a statute must be treated 'as if they were in the Act' itself.

15. It follows that Rule 10 of the Excise Rules, which was in force till 17-11-1980 formed a part of the Central Excises and Salt Act, 1944, under which it was framed and when it ceased to exist from that date, Section 11A contained in the Act itself, which is similar, was brought into force simultaneously maintaining the continuity. The result is that the relevant provision which was in force till 17-11-1980 in the shape of a rule forming part of the Act continued without any break from 17-11-1980 in the shape of a provision in the main Act itself. This is, therefore, a case where there has neither been any repeal nor omission of an enactment but continuance of the same provision throughout as a part of the Act, the only difference being that prior to 17-11-80 it was in one part of the Act and subsequent to that date it is in another part of the same Act. Where the same provision continues in the same Act, the difference being only in the part of the Act where it is contained, it is difficult to appreciate how the principles relating to repeal or omission of an enactment can apply or a saving clause is needed to continue the proceedings initiated prior to such a change being brought about by shifting the provision from one part of the Act to another. It is merely a case of shifting the provision from one part of the Act to another without any break in its continuity. No principle or authority has been cited to show that such shifting of a provision in an enactment also amounts to repeal or omission. The only possible difference, which is not material for this case, could be that earlier in the shape of a rule it was open to challenge on the ground of inconsistency with the Act, whereas after its incorporation in the main Act itself, such challenge would arises in this petition. In this view of the matter, there can be no doubt that this contention of the learned counsel for the petitioner must be rejected.

Validity of sub-clause (?) of Clause (b) of Rule 6 of the Central Excise Valuation Rules, 1975.

16. Shri Gupta, learned counsel for the petitioner, challenges the validity of sub-clause (i) of Clause (b) of Rule 6 alone and not of sub-clause (ii) therein. The contention of the learned counsel is that sub-clause (i) is inconsistent with Section 4(1)(b) of the Act and is, therefore, invalid. This argument is based on the ground that the meaning of the expression 'nearest ascertainable equivalent thereof appearing in Section 4(1)(b) is not the same as that of 'value of the comparable goods produced or manufactured by the assessee or by any other assessee' used in sub-clause (i) or Rule 6(b). It is urged that the expression 'comparable goods' is not the same as 'identical goods' and the use of the expression 'comparable goods' in sub-clause (i) gives arbitrary powers to the authority without providing any guidelines. His further argument is that it would be more reasonable to reverse the order of the two sub-clauses so that the provision of the existing sub-clause (i) is used only as a last resort and in that case there would be no invalidity.

17. Section 4(1)(b) says that where duty of excise is chargeable on any excisable goods with reference to value, such value shall be deemed to be the nearest ascertainable equivalent of the normal price of such goods determined in the manner prescribed where the normal price of such goods, that is to say, that price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, is not ascertainable for the reason that such goods are not sold, or for any other reason. The a.ttempt to be made, where the valu: has to be determined in accordance with Section 4(1)(b) is, therefore, to find out the nearest ascertainable equivalent of the normal price of the excisable goods at which it can' be sold in the course of wholesale trade for delivery at the time and place of removal in the' manner as may be prescribed. The Central Excise Valuation Rules, 1975, have been framed to prescribe the manner for determining the value of the excisable goods. The question, therefore, is whether sub-clause (i) of clause (b) of Rule 6 is inconsistent with Section 4(1)(b), as claimed by the petitioner.

18. Sub-clause (i) of Clause (b) of Rule 6 prescribes that where the excisable goods are not sold by the assessee but are used or consumed by him or on his behalf in the production or manufacture of other articles, the value shall be based 'on the value of comparable goods produced or manufactured by the assessee or by any other assessee'. The proviso to sub-clause (i) requires that in determining the value under this sub-clause, the proper officer shall make such adjustments as appear to him reasonable, taking into consideration all relevant factors for the purpose of equating the goods to be assessed with the comparable goods. Obviously, the expression 'comparable goods' means goods which are comparable with the excisable goods. Section 4(1)(b) requires rinding out the 'nearest ascertainable equivalent thereof (of the excisable goods) determined in such manner as may be prescribed. Sub-clause (i) of Rule 6(b) provides for goods comparable with excisable goods, equated as far as possible with the excisable goods, by making suitable adjustments in order to determine the nearest ascertainable equivalent of the excisable goods as required by Section 4(1)(b). It is difficult to visualise how there is any inconsistency between Section 4(1)(b) and sub-clause (i) of Rule 6(b), as claimed by the learned counsel for the petitioner. The effect of sub-clause (i) is that in such a situation, the proper officer has to take as basis the goods comparable with the excisable goods and equate the same with the excisable goods by making necessary adjustments for this purpose in order to determine the normal price of such goods, where excise duty is payable with reference to its value. This is certainly an accepted and reasonable mode of finding the value of any goods and the meaning of the expression 'nearest ascertainable equivalent' used in Section 4(1)(b) is not different from the result achieved under sub-clause (i) of Rule 6(b). We are, therefore, unable to hold that there is any inconsistency between Section 4(1)(b) of the Act and sub-clause (i) of Rule 6,b) of the Central Excise Valuation Rules, 1975, framed thereunder.

19. We are also unable to accept the contention that sub-clause (i) of Rule 6(b) confers unbriddled powers on the proper officer and is, therefore, arbitrary. Sub-clause (i) speaks of 'comparable goods' which itself provides the guidelines to indicate that the goods taken into account should be comparable with the excisable goods. The proviso thereto further says that the differences, if any, in the material characteristics of the excisable goods and the comparable goods have to be obliterated, as far as possible, by taking into account all relevant factors and making such adjustments as may be reasonable for this purpose. This exercise has to be performed obviously to find out goods which are 'nearest ascertainable equivalent' of the excisable goods. There are sufficient guidelines in sub-clause (i) and there is no room for arbitrariness therein, even if there may be some difference of opinion on questions of fact. Remedy is available to the assessee under the Act by way of appeal to challenge the findings of the proper officer and show that the goods taken into considsration for determining the value of the excisable goods are not comparable goods as required by law. Challenge on this ground is also not tenable.

20. We are also unable to accept the contention that 'comparable goods' in sub-clause (i) of Rule 6(b) cannot ever mean 'identical goods' so that where excisable goods is, say, sulphuric acid, as in the present case, comparable goods taken into account cannot also be sulphuric acid, even though it may be the 'nearest ascertainable equivalent' as required by Section 4(1)(b) of the Act. The fallacy in this contention can be easily demonstrated. Instances may be available where the assessee himself or any other assessee manufactures identical goods in a different unit in the same locality and sells it. There appears to be no reason why identical goods manufactured in a different unit in the same locality or the nearest place available and sold by the assessee himself or any other assessee cannot be taken as 'comparable goods' and its value taken as the 'nearest ascertainable equivalent' of the value of the excisable goods in accordance with Section 4(1)(b). In fact, taking identical goods manufactured and sold at the nearest place available would be more reasonable and would reduce to the minimum the discretion available to the proper officer for equating the 'comparable goods' with the excisable goods. The petitioner's argument, if accepted, will have the opposite result and apart from making the exercise needlessly more difficult, would also confer more discretion to the proper officer than is necessary.

21. The further contention of the learned counsel for the petitioner that reversing the order of sub-clauses (i) and (ii) would be more reasonable does not also impress us. The scheme is first to take into account comparable goods as the basis, wherein the adjustments required to be made for making it the 'nearest ascertainable equivalent' of the excisable goods would be fewer and at least not hypothetical. Sub-clause (ii) then provides that if the value cannot be reasonably determined under sub-clause (i), then the cost of production or manufacture, including the profits, if any, which the assessee would have normally earned on the sale of such goods, is to be treated as the value of the excisable goods. This has to be done as a last resort, obviously because in such a situation the determination of the profits required to be added to the cost of manufacture is bound to be hypothetical. It was therefore felt that a mode involving a hypothetical element should be adopted only as a last resort. There does not appear to be anything unreasonable in it, even assuming the matter be debatable. This discretion to choose between two possible views is definitely a matter within the scope of legislative competence. We are, therefore, unable to accept even this contention of the learned counsel for the petitioner that sub-clause (i) of Clause (b) of Rule 6 of the Valuation Rules is invalid on the grounds urged.

Validity of the Show Cause Notice

22. Lastly, learned counsel for the petitioner contended that the show cause notice pertaining to short levy as well as imposition of penalty is invalid on admitted facts. For this reason, he contended that no further enquiry into the same is justified. Inasmuch as the notice pertaining to short levy is sever-able from that relating to imposition of penalty, we shall deal with these two parts separately and first take up the question of short levy.

Short Levy

23. The first defect in the notice according to the learned counsel for the petitioner, is that the allegation of short levy on the basis of value of sulphuric acid manufactured by another assessee at the nearest place i.e. Kota, cannot furnish a lawful basis. It is urged that 'comparable goods' does not mean 'identical goods' so that sulphuric acid manufactured by another assessee cannot be taken into account as 'comparable goods'. We have already rejected the petitioner's contention about the meaning of the expression 'comparable goods' and for the same reason we were unable to accept this contention that sulphuric acid manufactured by another assessee at the nearest place cannot ipso facto be the basis for the allegation of short levy.

24. It was then contended that necessary particulars to enable the petitioner to show cause have not been stated in the notice. This cannot be a ground for .quashing the notice at this stage. It is open to the petitioner to seek further particulars, if any, that may be necessary for it to show cause, assuming the same to be deficient. It may however, be mentioned that the petitioner has understood the notice to indicate that the allegation of short levy is based on the value of sulphuric acid manufactured by another assessee at Kota, the nearest place, and the proposed value has also been mentioned in the notice stating that it is sub-clause (i) and not sub-clause (ii) of Rule 6(b) that applies to the petitioner's case. According to the respondents, these are the only facts on which the notice to show cause against revision of the assessable value has been given. Whether a case of short levy on the basis stated in the show cause notice is made out is yet to be determined in the enquiry.

25. Learned counsel for the petitioner also contended that the notice is invalid at least for the period in excess of six months, which is the period of limitation prescribed in the earlier Rule 10 of the Excise Rules, as well as Section 11A replacing it with effect from 17-11-1980. On this basis, it is contended that the notice should be quashed at least for the period in excess of six months from the relevant date. In our opinion, this question also cannot be determined at this stage and it will have to await the outcome of the enquiry inasmuch as the proviso to the earlier Rule 10 as well as the now existing Section 11A provide for the larger limitation of five years in certain circumstances, which are questions of fact in. each case. Whether the larger limitation of five years would apply or not to the petitioner's case has yet to be decided after determining the disputed questions of fact between the parties and, therefore, it would be proper to leave the question open for decision, if necessary, after the ultimate decision made in the proceedings initiated with the notice. Prima facie, it is not possible to say at this stage that the contents of the notice relating to the question of short levy disclose any invalidity to shut out any further enquiry on the subject for the whole or any part of the period specified. It would, however, be open to the petitioner to challenge the ultimate order, if it is adverse to the petitioner, by contending that the facts found proved are inadequate for revising the assessable value, treating it to be a case of short levy for the whole or any part of the period specified. For this reason, if would not be proper to say anything further on this question at this stage.

Penalty

26. The question now is of the validity of the other part of the notice (Annexure A) dated 12-9-1978 read with the addendum (Annexure B) dated 10-10-1978 pertaining to penalty. It is only the addendum (Annexure B) dated 10-10-78 which pertains to imposition of penalty, there being no mention of penalty in the initial notice (Annexure A). Part of the addendum (Annexure B) pertaining to the question of short levy and giving further particulars thereof, has to be left out of any further consideration at this stage, for the reasons already given. The relevant part of the addendum (Annexure B) pertaining to imposition of penalty, states as under :-

'And whereas M/s. Grasim (Staple Fibre Division) Nagda have been aware of the prices of the comparable goods but failed to exhibit the price in the proper proforma of the price list i.e. Part VI (a) and are liable to penalty under Rule 173Q(l)(d)/173Q(2) of the Central Excise Rules, 1944.'

The ground for the proposed imposition of penalty, therefore, is that the petitioner being aware of the prices of comparable goods, failed to exhibit the same in the price list filed by it on account of which it has become liable to penalty under Rule 173-Q(l)(d) read with Rule 173Q(2) of the Central Excise Rules, 1944;

27. Rule 173-Q(l)(d) reads as follows :-

173-Q,. Confiscation and penalty.-(1) If any manufacturer, producer or licensee of a warehouse-

(d) contravenes any of the provisions of these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the manufacturer, producer, or licensee of the warehouse, as the case may be, shall be liable to a penalty not exceeding three times the value of the excisable goods in respect of which any contravention of the nature referred to in Clause (a) or Clause (b) or Clause (c) or Clause (d) has been committed, or five thousand rupees, whichever is greater.'

Rule 173-Q(l)(d) says that 'if any manufacturer, producer or licensee of a warehouse contravenes any of the provisions of these rules with intent to evade payment of duty', then all such goods shall be liable to confiscation and the manufacturer, producer or licensee of the warehouse shall also be liable to the penalty specified. Rule 173-Q(2) provides further for the extent of penalty in certain circumstances, the details of which are not material for our purpose. It is, therefore, Rule 173-Q(l)(d) which lays down the occasion for imposition of penalty, namely when the assessee 'contravenes any of the provisions of these rules with intent to evade payment of duty'. The contravention alleged in the present case by the respondents and reiterated by the learned Advocate General appearing on their behalf, is of Rule 173-C(1). Sub-rules (1) and (3) of Rule 173-C, which alone are material, as under :-

'173-C Assessee to file price list of goods assessable ad valorem.-(1) Every assessee who produces, or manufactures or warehouses goods which are chargeable with duty at a rate dependent on the value of the goods, shall file with the proper officer a price list in such manner and at such intervals as the Collector may require showing the price of each of such goods and trade discount, if any, allowed in respect thereof to the buyers along with such other particulars as the Central Board of Excise and Customs or the Collector may specify.

(3) On receipt of price list under Sub-rule (1) the proper officer may approve the price list after making such modifications as he may consider necessary so as to bring the value shown in the said price list to the correct value for the purpose of assessment as provided in Section 4 of the Act. He shall thereafter return one copy of the list approved by him to the assessee who shall, unless otherwise directed by the proper officer, determine the duty payable on the goods intended to be removed in accordance with such list.

The respondenats contend that filing the price list according to the value determined under sub-clause (ii) instead of sub-clause (i) of Rule 6(b) of the Valuation Rules is a contravention of Rule 173-C(1) of the Excise Rules and attracts penalty under Rule 173-Q thereof. The question, therefore, is whether on the admitted facts, a case for imposition of penalty under this provision is made out.

28. In a similar situation, where penalty had been imposed under Rule 173-Q of the Excise Rules, a Division Bench of this court, in Universal Cables Ltd., Satna v. Union of India and Ors., 1977 E.L.T. (J 92) ; 1977 M.P.L.J. 394, held that where a price list was filed in the form and manner prescribed under Rule 173-C, showing the price of the goods, it cannot be said that the petitioner contravened the provisions of that rule even on the assumption that the information supplied by it under that rule was false in relation to the price, so as to attract penalty under Rule 173-Q and the proceedings for levy of penalty were entirely misconceived, where the price list submitted did not show the prices correctly therein, since that by itself did not contravene Rule 173-C. The imposition of penalty was quashed. It was further pointed out in that decision on the basis of the Supreme Court decision in N.B. Sanjana v. E.S. and W. Mills., A.I.R. 1971 S.C. 2039 that in proper cases the proceedings for imposition of penalty could be quashed even at the stage of notice, when it was clearly in excess of authority, notwithstanding the remedy of appeal provided in the Act against the final decision. In a subsequent decision between the same parties, Universal Cables Ltd. v. Union of India and Ors., 1978 E.L.T. (J 632), a part of the notice, which was severable and related only to penalty proceedings, was quashed, relying on the Supreme Court decisions, including N.B. Sanjana's case, being in excess of authority. The settled position was reiterated and followed that 'if the notice issued by a Tribunal or authority, threatening to initiate proceedings prejudicial to a person is on admitted facts in excess of jurisdiction, the tribunal or authority can be prohibited from further proceeding in the matter under Article 226 of the Constitution to save unnecessary harassment of the person concerned'. Existence of the alternative remedy of appeal against the final decision was not treated as a bar to interference at the earlier stage under Article 226.

29. In our opinion, these earlier decisions of this Court, based on the settled law on the point, emerging from the decisions of the Supreme Court, conclude the point relating to penalty in the present case. In this case also the penalty proceedings have been initiated merely on the ground of contravention of Rule 173-Q 1) on the basis of filing incorrect price list, even though they were filed in the form and manner prescribed. In the price list filed by the petitioner under Rule 173-C(1), it was clearly stated that sub-clause (i) of Rule 6(b) of the Valuation Rules was not applicable and, therefore, the list was filed in accordance with sub-clause (ii) of Rule 6(b). It may also be mentioned that the proper officer took the same view at that stage and approved the price list under Rule 173-C(3) and thereafter made the assessment under Rule 173-1 on the basis of monthly returns filed by the petitioner under Rule 173-G(3) in accordance with the approved price list. It was much later that the decision to revise the assessable value has been taken on the ground that it is sub-clause (i) and not sub-clause (ii) of Rule 6 (b) which is attracted. That is, however, a debatable matter, yet to be decided after enquiry, while determining the question of short levy. All the same, these facts alone do not permit initiation of the penalty proceedings as held by this court in two cases of Universal Cables Ltd. (Supra). Leave against which was also refused by the Supreme Court.

30. The learned Advocate General tried to contend that there is some alteration made in Rule 173-C(1) as a result of which the decision in Universal Cables Ltd. does not apply. The distinction pointed out by him is addition of the words 'along with such other particulars as the Central Board of Excise and Customs or the Collector may specify' at the end of Rule 173-C(1). In our opinion, the.addition of these words at the end of Rule 173-C(1) which words did not find place earlier, makes no significant difference in the present case. It is not the respondents' case that there was breach of anything required to be done by these additional words added later at the end of Rule 173-C(1). The breach alleged is the same as in Universal Cables Ltd. which is covered by that part of Rule 173-C, which remains similar to that which was considered in the earlier decisions. The decision in Universal Cables Ltd. is, therefore, not distinguishable on this point.

31. The result, therefore, is that initiation of the penalty proceedings against the petitioner under Rule 173-Q(l)(d) read with Rule 173-Q(2) of the Central Excise Rules, 1944, is in excess of authority and to that extent alone, the show cause notice (Annexure A) dated 12-9-1978 read with the addendum (Annexure B) dated 10-10-1978, has to be quashed, this part being severable from the remaining part pertaining to short levy.

32. As a result of the aforesaid discussion, only the initiation of penalty proceedings against the petitioner must be quashed. Accordingly that part of the addendum (Annexure B) dated 10-10-1978, which pertains to initiation of the penalty proceedings (there being nothing in the initial notice, Annexure A dated 12-9-1978, relating to penalty), is quashed being in excess of authority. The respondents are restrained from enforcing the impugned notice in so far as it relates to penalty proceedings. The other reliefs claimed in the petition are rejected. In view of the partial success of both sides, parties will bear their own costs. The security amount shall be refunded to the petitioner.


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