R.C. Mankad, J.
1. What is at stake in this petition by a Co-operative Society formed by workers who themselves operate powerlooms is the credibility of high officials of a Government Department (Central Excise Department). To act or not to act in accordance with their directions is no more the question. The question is whether to act according to their directions is a good ground for penalizing them. And this is how the dilemma has arisen.
2. Petitioner society was required to pay duty at the rate of Rs. 50 per loom per annum by way of compounded levy permissible under rule 96J read with the relevant notifications. The Society sought guidance from the competent authority on the question as to whether or not there was any ceiling on the number of looms that can be operated under the scheme of compounded levy. The Assistant Collector of Central Excise, Ahmedabad, by his letter dated March 20, 1969 had informed them that excise duty was payable at the rate of Rs. 50 per powerloom per annum, provided that not more than four powerlooms were operated by each member. No other rider was added. It is not in dispute that number of powerlooms does not exceed the ratio of four powerlooms per member specified in the aforesaid communication. The Assistant Collector of Central Excise, having informed them in writing that they were entitled to claim benefit of a compounded levy, the petitioner society continued to work 65 powerlooms owned by them and went on paying excise duty at the aforesaid rate in accordance with the communication received from the Assistant Collector of Central Excise, Ahmedabad. In fact, some time later, another communication was addressed by the petitioner-Society to the Assistant Collector of Central Excise seeking further clarifications. This letter was replied to by the Assistant Collector on April 17, 1969 whereby the made it abundantly clear that the society was entitled to the benefit of the concenssional rate of excise duty by way of compounded levy irrespective of the number of looms owned and worked by the society. That, the Assistant Collector had informed the petitioner society explicitly in the aforesaid terms is not disputed in the sense that the averments made in this behalf in paragraph 8 of the petition have not been specifically controverted by the respondents in the affidavit-in-reply sworn by Mr. K. R. Bhargava Assistant Collector, Customs, Ahmedabad on September 29, 1980. Notwithstanding the aforesaid position, the respondents called upon the petitioner-society to show cause why a sum of Rs. 2,35,659.88 P. should not be recovered from it as the petitioner society was not entitled to the benefit of concenssional notification under which duty at the compounded rate was payable. In the wake of the aforesaid show cause notice dated September 26, 1972 as per Annexure 'F' of the Superintendent Central Excise, Patna, the Assistant Collector of Central Excise, by his impugned order Annexure 'A' confirmed the demand to the tune of Rs. 34,896.41 P. by his order dated Nil August 1975. It appears that the Assistant Collector waived its demand for a sum of Rs. 2,00,762.47 P. but did not accept the contention of the petitioner society in respect of the demand for the sum of Rs. 34,896.41 P. which amount the petitioner society was called upon to pay.
3. The petitioner society approached the Appellate Collector of Central Excise by way of an appeal. The Appellate Collector was fair enough to realise that the petitioner society was placed in this embarrassing situation on account of the view taken by the Department itself in the past, which was communicated to the petitioner society in writing by the Assistant Collector, and that is why he was constrained to observe in para 7 of his impugned order to the effect that it was a case of hardship caused to the petitioner society on account of failure on the part of the Department to give appropriate guidance. He however, felt that no relief could be granted to the petitioner society in view of the relevant provisions. Relevant passage from his order may be quoted for the sake of preciseness.
'I have gone through the records of the case and considered all arguments raised by the appellants. Keeping in view the correspondence between the department and the Licensee and the A.S.P. sanctioned for 65 looms, this is a hard case where timely guidance was not given to the co-operative society and the Licensee got to suffer in a big way. However, with the Central Excise law, as it stands, I do not see any reason to interfere with the order passed by the Assistant Collector excepting the contentions of the appellants that from 12-7-72 onwards, they have worked only 48 looms, and not 65 looms, but the Department included the charge of duty on 65 looms...... included from 12-7-72 to 31-8-72......... for the period satisfied........ if Assistant Collector is.......................... This then the demand should in accord to this extent. Consequential relief shall be granted to the appellants.'
It will be seem that the order passed by the Assistant Collector was modified by the Appellate Collector in sofar as the period from July 12, 1972 to August 31, 1972 was concerned in view of the statement made on behalf of the petitioner society that as soon as the department apprised the petitioner society of the changed stand it had dismantled 17 out of 65 looms. The Appellate Collector directed the Assistant Collector to verify the correctness of the statement and to reduce the demand to the appropriate extent in respect of this period.
4. The petitioner society approached the Government of India by way of revisional application. The revisional authority by its impugned order annexure 'H' dated October 27, 1978 confirmed the order passed by the Appellate authority and rejected the revisional application. While rejecting the revisional application preferred by the petitioner the revisional authority has set aside the direction issued by the Appellate Collector insofar as the period subsequent to July 12, 1972 was concerned on the ground that permission of the Textile Commissioner was not obtained. Thereupon the petitioner society has approached this court by way of the present petition under Article 226 of the Constitution of India.
5. A few facts are not in dispute : (1), the petitioner society sought clarification from the Assistant Collector as early as in 1969 on the question as to whether or not the benefit of compounded levy would be available to the petitioner society in view of the fact that it was operating 65 looms. It appears that there was some doubt whether the benefit of compounded levy could be availed of, if a manufacturer was operating more than 49 powerlooms. The Assistant Collector informed the petitioner society in writing first by his communication dated March 20, 1969 and later on in explicit terms by a communication dated April 13, 1969 that the petitioner society would be entitled to the benefit of the concession on payment of compounded levy irrespective of the number of the looms operated by it if operated under one roof; (2) No objection was raised by the Department in this behalf till 1973; (3) it was only for the first time on May 15, 1972 that the Department issued a communication as per Annexure 'N' assuming the posture that benefit of concession of compounded levy would be available provided and only provided the number of looms operated by the manufacturer did not exceed 49. The preamble of this communication firmly establishes that it was assumed by all concerned that was not a relevant consideration and it was only later on the doubts were raised in regard to the limitation of number of powerlooms only at about the time of the issuance of the said clarificatory letter. The preamble may be quoted :-
'Doubts have been raised about the limitation of number of possession in case of the co-operative societies for enjoying concenssional rate of duty under notifications No. 41/65 and 176/66 as amended.'
The aforesaid clarification made by Annexure 'N' was by way of a circular letter issued by the Department; (4) It is not shown that the foresaid clarification letter was sent to the petitioner society or that it was published in the Government Gazette; (5) The record shows that the petitioner society was apprised of this communication for the first time on July 12, 1972.
6. It is in the backdrop of the aforesaid facts that the question as regards the demand made for the period between May 15, 1972 till July 12, 1972 has arisen. It will be called that so far as the period subsequent to July 12, 1972 is concerned, the appellate authority has already granted relief to the petitioner society subject to the verification by the competent officer though that part of the order has not been confirmed by the revisional authority. The dispute that now survives relates to the intervening period namely, the period between May 15, 1972, the date on which clarification was made by the circular letter Annexure 'N' and July 12, 1972 on which date the petitioner was apprised of the clarification. In regard to this period, the Department has taken the stand that once the Department has clarified the situation, the petitioner society was not entitled to any relief subsequent to the date of issuance of the clarification notwithstanding the fact that previously the petitioner society was acting in conformity with the view of the Department and was operating more than 49 looms in view of the written authority given by the Assistant Collector way back in 1969 in no unambiguous terms. The Department itself realised that the situation was of its own creation and dropped the demand for the period anterior to May 15, 1972 on which date the clarification was made in regard to the change in policy. It was for the first time that the manufacturers including the petitioner society were informed by the clarificatory notification that the concession would not be available in case the number of powerlooms being operated exceeded 49. In the present case, it is neither shown that it was published in the Government Gazette nor was it shown that the petitioner was apprised of it earlier. The communication appears to have remained on the file of the Department till July 1972. In any case for this lapse on the part of the Department, petitioner society cannot be penalised. This vita aspect has been completely missed by the Department. The learned Standing Counsel is not doubt right in submission that the Department itself had committed an error presumably because rule 96 as it stood at the material time was overlooked by the Department. All the same, the very principle which was invoked for revoking the demand in respect of the period anterior to May 15, 1972, would be attracted in respect of the disputed period as well as having regard to the fact that clarificatory letter appears to have remained on the file of the Department till July 12, 1972. If it had been published in a Government Gazette, or if it has been shown that it has in fact been issued on May 15, 1972, it would have stood on a different footing. So far as the record goes, it would appear that it remained on the file of the Department. The petitioner society came to be apprised or informed of the change in policy only on July 12, 1972. And immediately it dismantled looms which were in excess of prescribed limit of 49. On these facts the petitioner society was justified in making the grievance that there was no rational ground for limiting the concession to the period upto May 15, 1972 and in dropping the demand upto that date only. The same considerations which obtained in regard to the period upto May 15, 1972 applied to the period upto July 12, 1972. The competent authority has committed an error on the face of the record in disregarding the fact that it was necessary to show when exactly that notification was issue and not merely to show that it bore a particular date line. In the light of the aforesaid discussion, the competent authority must be directed to drop the demand till July 12, 1972.
7. The learned counsel for the petitioner is also right in his submission that the Appellate Collector having upheld the contention in regard to the period subsequent to July 12, 1972, in the revisional application preferred by the petitioner, the revisional authority had no competence to set aside the direction of the Appellate Collector on the ground that the permission of the Textile Commissioner had not been obtained and the central excise licence had not been got amended. Whether or not the petitioner society was entitled to the benefit of compounded levy did not depend on whether or not the Textile Commissioner's approval was obtained for dismentling the excess number of looms. If in fact the petitioner society was operating not more than 49 looms and excess number of looms had been dismantled, the petitioner society society should not have been denied the benefit of the compounded levy. The Appellate Collector was therefore, right in the view that he took and the revisional authority was in error in setting aside that part of the direction. The learned counsel is also right in his submission that in the revisional application preferred by the petitioner society, it was not open to the revisional authority to pass any order adverse to it. Insofar as this aspect is concerned, the order passed by the Appellate Collector must be restored.
8. In the result, the petition is allowed. The respondents are directed to modify the demand in the following manner :-
(1) With regard to the demand in respect of the period between May 15, 1972 and July 12, 1972, it may withdrawn;
(2) With regard to the demand in respect of the period from July 13, 1972 to August 31, 1972, the direction given by the Appellate Collector in his order dated March 17, 1976 as per Annexure 'C' which is restored may be followed.
9. Rule made absolute to the aforesaid extent. There would be no order as to costs.