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The Ajit Mills Ltd. and anr. Vs. R.P. Laxpat, Asstt. Collector Central Excise - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtGujarat High Court
Decided On
Judge
Reported in(1971)12GLR769
AppellantThe Ajit Mills Ltd. and anr.
RespondentR.P. Laxpat, Asstt. Collector Central Excise
Cases ReferredChhotabhai Jethabhai Patel and Co. v. Union of India A.I.R.
Excerpt:
- - 1. these two petitions raise an interesting question of law which depends for its determination on the true construction of rules 10 and 10a of the central excise rules, 1944. the facts giving rise to the petitions are almost identical save and except as to dates and amounts and it would, therefore, be convenient if we state the facts of only one petition, namely, special civil application no. the case was, therefore, covered by rule 10 and no demand for differential duty could be made under rule 10a and the impugned notices were bad in so far as they were based on rule 10a. this scheme, therefore, clearly contemplates an application by the manufacturer in a. where such is the case, the removal of the goods would be clearly in contravention of rule 9 sub-rule (1) for the goods.....p.n. bhagwati, c.j.1. these two petitions raise an interesting question of law which depends for its determination on the true construction of rules 10 and 10a of the central excise rules, 1944. the facts giving rise to the petitions are almost identical save and except as to dates and amounts and it would, therefore, be convenient if we state the facts of only one petition, namely, special civil application no. 810 of 1965 there are two petitioners in this petition. the first petitioners are owners of a textile mill situate in the city of ahmedabad while the second petitioner is a partner of the managing agents of the first petitioners. the first petitioners manufacture cotton fabrics in the textile mill and since cotton fabrics are excisable goods, the first petitioners hold a licence.....
Judgment:

P.N. Bhagwati, C.J.

1. These two petitions raise an interesting question of law which depends for its determination on the true construction of Rules 10 and 10A of the Central Excise Rules, 1944. The facts giving rise to the petitions are almost identical save and except as to dates and amounts and it would, therefore, be convenient if we state the facts of only one petition, namely, Special Civil Application No. 810 of 1965 There are two petitioners in this petition. The first petitioners are owners of a textile mill situate in the City of Ahmedabad while the second petitioner is a partner of the Managing Agents of the first petitioners. The first petitioners manufacture cotton fabrics in the textile mill and since cotton fabrics are excisable goods, the first petitioners hold a licence for manufacture of cotton fabrics duly issued under the Central Excise and Salt Act 1944. During the period 1st August 1961 to 30th November 1963 which is the period with which we are concerned in this petition, the first petitioners manufactured diverse qualities of cotton fabrics which included Sorts Nos. 82352, 56008, 82352 3/4 and 56008 3/4. Out of these, Sorts Nos. 82352 and 56008 were mercerised dyed Medium A cotton fabrics while Sorts Nos. 82352 3/4 and 56008 3/4 were mercerised printed Medium A cotton fabrics Cotton fabrics were goods specified as Item No. 19 in the First Schedule of the Central Excise and Salt Act, 1944 and they were, therefore, excisable goods on which excise duty was leviable at the rates set forth against item No. 19 relating to Cotton Fabrics. But there was a notification dated 1st March 1961 issued by the Central Government under Rule 8 which exempted certain kinds of cotton fabrics from excise duty leviable on them to the extent specified in the notification. The extent of the exemption varied according as the cotton fabrics were manufactured on automatic looms or ordinary looms. We are concerned in this petition only with the exemption in regard to cotton fabrics manufactured on ordinary looms since it was common ground between the parties that the first petitioners had only ordinary looms and not automatic looms The notification dated 1st March 1961 provided that cotton fabrics of the following description shall be exempt from so much of the duty leviable thereon as is in excess of the duty specified against the respective kind of cotton fabrics:

Description Dutyn

per Sq. mtr.

III. Cotton Fabrics, Medium.

(1) Medium A:

(a)Grey ... ... ... ... ... ... 9-0

(b)Bleached and not otherwise processed... ... .. 10-0

(c)Shrink-proofed or/and organdie processed... ... 15-0

(d)Other than bleached shrink-proofed or/and organdie

processed but dyed, printed, mercerised or/and otherwise

chemically processed... ... ... ,. 12-0

The first petitioners, with a view to removing cotton fabrics of Sorts No. 82352 56008, 82352 3/4 and 56008 3/4 out of the mill premises filled in A.R. 1 Forms for assessment of excise duty leviable on the goods and submitted them to the Inspector of the Central Excise Department who was in charge of the Textile Mill. The goods according to the first petitioners were not shrink-proofed and/or organdie processed but were mercerised and dyed or printed so as to be assessable under Clause III(1)(d) and not under Clause 111(1 )(c) and the first petitioners, therefore, described these goods in A.R. 1 Forms as dyed mercerised poplin 82352 or dyed mercerised poplin 56008 or printed mercerised poplin 823523/4 or printed mercerised poplin 56008 3/4 as the case may be and also gave the tariff classification of these goods as M.A.C. which referred to Clause III(1)(d) and not M.A.D. which would refer to Clause III(1)(c). The Excise Inspector, on the basis of the description and tariff classification of these goods given in A.R. 1 Forms assessed the excise duty at 12 paise per square meter under Clause III(1)(d) and on payment of the amount of the excise duty so assessed by adjustment in the Account Current of the first petitioners, granted permission to the first petitioners to remove these goods by issuing gate passes and pursuant to the permission so granted, the first petitioners removed the goods during the period 1st August 1961 upto 23rd April 1962. With effect from 24th April 1962 the notification dated 1st March 1961 was superseded by another notification dated 24th April 1962 issued by the Central Government under Rule 8 but it is not necessary to refer to this notification since it was superseded by another notification dated 13th June 1962 which was given retrospective operation with effect from 24th April 1962. The notification dated 13th June 1962 altered the rates of exemption in respect of certain kinds of cotton fabrics with retrospective effect and provided that with effect from 24th April 1962, cotton fabrics of the following description shall be exempt from so much of the duty as is in excess of the duty specified against the respective description of cotton fabrics:

Description Duty

NP. per Sq. Meter

2. Processed fabrics in the production of which duty paid or exempted giey fabrics are used,

(i)...

(ii) Mercerised or/and water proofed (including rubberized)... ... 5-0

(a)Medium B or Coarse... ... ... ... 10-0

(b)Superfine, Fine or Medium A... .. .. ... 15-0

(iii) Processed in any other manner including shrink-proofed and/or

organdie processed... ... .. ... .. 25-0

The same procedure continued to be followed by the first petitioners in removing cotton fabrics of Sorts Nos. 82352, 56008, 82352 3/4 and 56008 3/4 from the mill premises from and after 24th April 1962. The first petitioners stated the same description of the goods in A.R. 1 Forms without mentioning that they were shrink-proofed and gave the same tariff classification, namely, M.A.C. which indicated reference to Clause 2(ii)(b) and not M.A.D. which would indicate reference to Clause 2(iii). The Excise Inspector on the basis of the description and tariff classification of the goods given in A.R. 1 Forms assessed them to excise duty at the rate of 15 paise per square meter under Clause 2(ii)(b) and on payment of the amount of excise duty so assessed by adjustment in the Account Current of the first petitioners, granted permission for removal of the goods from the mill premises by issuing gate passes and pursuant to the permission so granted, the first petitioners removed the goods during the period 24th April 1962 to 29th February 1964.

2. Some time in November 1963, the Excise Authorities drew samples of Cotton Fabrics of Sorts 56008 and 82352 from the textile mill of the first petitioners and sent them for examination and report by the Deputy Chief Chemist, Bombay. The Deputy Chief Chemist was of the view that the cotton fabrics of which the samples were sent to him were shrink-proofed cotton fabrics and were assessable to excise duty as such. The first petitioners did not agree with the view expressed by the Deputy Chief Chemist and insisted on new samples being taken but the result of examination of the new samples by the Deputy Chief Chemist was the same and the Deputy Chief Chemist adhered to his view that the cotton fabrics of Sorts Nos. 56008 and 82352 were liable to be classified as shrink-proofed fabrics. Consequent upon this report by the Deputy Chief Chemist, four notices were issued by the Excise Inspector, one dated 13th February 1964, two dated 24th February 1964 and the fourth dated 29th February 1964 demanding differential duty in respect of certain quantities of cotton fabrics of Sorts 56008 and 82352, 56008 3/4 and 82352 3/4 cleared by the first petitioners from the mill premises during the period 20th November 1963 to 29th February 1964. The demand for differential duty was based on the ground that the first petitioners had declared the goods as mercerised and cleared them as mercerised goods though in fact the goods were shrink-proofed as found by the Deputy Chief Chemist. These notices were in respect of goods which were cleared and on which excise duty was adjusted in the Account Current within three months prior to the respective dates of the notices and they were, therefore, within the time prescribed by Rule 10. The first petitioners contested the demand made in these notices and we were told by the learned advocate appearing on behalf of the petitioners that the appellate proceedings arising out of these notices are pending before the Excise authorities. We are not concerned in the present case with these notices. It is sufficient to state that these notices were purported to be issued under Rule 10 and it was not the case of the Department that they were issued under any Rule-other than Rule 10. Soon after these notices there came a group of further four notices two dated 13th October 1964, one dated 2nd January 1965 and the fourth dated 6th January 1965. These notices were purported to be issued by the Excise Inspector under Rule 10A. They demanded payment of differential duty in respect of cotton fabrics of Sorts Nos. 56008, 82352, 56008 3/4 and 82352 3/4 cleared by the first petitioners from the mill premises during the period 1st August 1961 to 30th November 1963 on the ground that-the first petitioners had cleared the goods by describing them as mercerised while in chemical test the goods were found to be shrink-proofed by the Deputy Chief Chemist as also by the Chief Chemist and there was, therefore, short levy of excise duty to the extent of 3 paise per square meter for the period 1st August 1961 to 23rd April 1962 and 10 paise per square meter for the period 24th April 1962 to 30th November 1963. The amounts of differential duty demanded by these notices were Rs. 25,985-06, Rs. 15,197-35, Rs. 1,17,394-17 and Rs. 2,41,418-42 aggregating to Rs. 3,99,995/-. The first petitioners contested the validity of these notices and pointed out to the Assistant Collector, Central Excise, that Rule 10A had no application on the facts of the case and the deficiency on account of the short levy could, if at all, be recovered only under Rule 10 but since the demand contained in the notices was made in respect of a period more than three months prior to the respective dates of the notices the notices were beyond time and consequently without jurisdiction and void. The Assistant Collector was, however, not impressed by this contention of the first petitioners and threatened to proceed to recover the amounts of differential duty demanded under these notices. The petitioners, thereupon filed Special Civil Application No. 810 of 1965 challenging the validity of these notices.

3. The main ground on which the validity of the impugned notices was challenged on behalf of the petitioners was that though the impugned notices were issued under Rule 10A, that Rule had no application since the circumstances in; which the demand for differential duty was made attracted the applicability of Rule 10 and if Rule 10 covered the case, Rule 10A could have no application. The petitioners pointed out that in A.R. 1 Forms presented by the first petitioners to the Excise Inspector for clearance of the goods, the goods were described merely as 'mercerised dyed poplin' or 'mercerised printed poplin' and the tariff classification of the goods was' given as M.A.C. which meant that they were assessable under Clause 111(1)(c) for the first period and Clause 2(ii)(b) for the second period which could only be on the basis that they were neither shrink-proofed nor organdie processed. Now if the goods were in fact shrink-proofed as contended by the Department, this was obviously a misstatement of the description of the goods in A.R.I. Forms and it was on account of this 'mis-statement that the goods were assessed at lower rates, namely, 12 paise per square meter under Clause 111(1)(c) for the first period and 15 paise per square meter under Clause 2(ii)(b) for the second period, though, being shrink-proofed, they were really assessable at 15 Paise per square meter under Clause 111(1)(d) for the first period and at 25 paise per square meter under Clause 2(iii) for the second period. The short levy, said the petitioners, was therefore on account of mis-statement of the description of the goods on the part of the first petitioners. It was also said in the alternative that in any event the short levy was through an error on the part of the Excise Inspector who assessed the excise duty leviable on the goods. The case was, therefore, covered by Rule 10 and no demand for differential duty could be made under Rule 10A and the impugned notices were bad in so far as they were based on Rule 10A. They could not also be justified under Rule 10 because they were issued more than three months after the dates of payment or adjustment of the short-levied excise duty on the goods in respect of which the demand for differential duty was made. The impugned notices were, therefore, without authority and void and could not be enforced against the first petitioners. Now the respondents could not dispute that if the case fell within Rule 10, the impugned notices would be time-barred and, therefore, the attempt of the respondents was to get out of Rule 10 and to bring the case under Rule 10A. The respondents contended that the short levy in the present case was not on account of any mis-statement of the description of the goods in A.R. 1 Forms. There was, according to the respondents, no wrong statement of the description of the goods. The description as given was correct but there was merely an omission to state in addition to the description already given, that there was one further characteristic possessed by the goods, namely, that they were shrink proofed and this did not constitute mis-statement. The respondents also urged that since the material fact, namely, that the goods were shrink-proofed was not disclosed to the Excise Inspector, it could not be said that there was any error on the part of the Excise Inspector in assessing the goods to excise duty which resulted in short-levy of excise duty on the goods. There being thus no mis-statement or error, said the respondents, Rule 10 was not attracted and the impugned notices were, therefore, rightly issued under the residuary Rule 10A.

4. To appreciate these rival contentions it is necessary to notice a few relevant provisions of the Central Excise and Salt Act, 1944, and the Central Excise Rules, 1944. Section 2(d) of the Act defines 'excisable goods' to mean goods specified in the First Schedule as being subject to a duty of excise. Cotton fabrics were at all material times specified as Item No. 19 in the First Schedule and they were, therefore, excisable goods. Section 3 is the charging section and it provides that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods which are produced or manufactured in India, as, and at the rates, set forth in the First Schedule. The excise duty is thus to be levied and collected in such manner as may be prescribed by the Rules. Section 37 confers rule-making power on the Central Government and in exercise of this power, the Central Government has made the Central Excise Rules, 1944. Chapter III of the Rules which is headed 'Levy and Refund of and Exemption from Duty' contains a fasciculus of Rules providing for the manner in which excise duty may be levied and recovered and refund may be granted. Rule 7 provides that every person who produces, cures or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such person as may be designated in or under the authority of the Rules. Rule 8 empowers the Central Government by notification in the Official Gazette to exempt, subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable on such goods. Rule 9 is an important Rule which prescribes time and manner of payment of excise duty and it says, omitting portions immaterial:

9. Time and manner of payment of duty. (I) No excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf, whether for consumption, export, or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may require, and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form:

(2) If any excisable goods are in contravention of Sub-rule (1) deposited in, or removed from, any place specified therein, the producer or manufacturer thereof shall pay the duty leviable on such goods upon written demand made by the proper officer, whether such demand is delivered personally to him, or is left at his dwelling house, and shall also be liable to a penalty which may extend to two thousand rupees, and such goods shall be liable to confiscation.

Then follow Rules 10 and 10A. Since considerable part of the argument before us turned on the true interpretation of these Rules, we may set them out in full:

10. Recovery of duties or charges short-levied or erroneously refunded: When duties or charges have been short-levied through inadvertence, error, collusion or misconstruction on the part of an officer, or through mis-statement as to the quantity, description or value of such goods on the part of the owner, or when any such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded, the person chargeable with the duty or charge, so short-levied, or to whom such refund has been erroneously made, shall pay the deficiency or pay the amount paid to him in excess, as the case may be, on written demand by the proper officer being made within three months from the date on which the duty or charge was paid or adjusted in the owners account-current, if any, or from the date of making the refund.

10-A. Residuary powers for recovery of sums due to Government Where these Rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty has for any reason been short-levied, or of any other sum of any kind payable to the Central Government under the Act or these Rules, such duty, deficiency in duty or sum shall, on a written demand made by the proper officer, be paid to such person and at such time and place, as the proper officer may specify.

Rule 11 provides for refund of duties or charges erroneously paid and Rule 12 deals with the subject of Rebate of duty on goods exported. Then we go from Chapter III to Chapter V and in that Chapter the important Rules are 49, 52 and 52A. Rule 49 provides inter alias that payment of duty shall not be required in respect of excisable goods made in a factory until they are about to be issued out of the place or premises specified under Rule 9 or are about to be removed from a store-room or other place of storage approved by the Collector under Rule 47. Rule 52 then proceeds to say:

52. Clearance on payment of duty: When the manufacturer desires to remove goods on payment of duty, either from the place or premises specified under Rule 9 or from a store-room or other place of storage approved by the Co Hector 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 officer 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.

The application in triplicate in the proper Form which is required to be made by the manufacturer desiring to remove the goods is the application in A.R. 1 Form. This form is given in the Central Excise Manual at Central Excise Series No. 57 and it contains various columns. The fifth column is headed 'Description of goods (with tariff classification)': the sixth column is headed 'Weight or Quantity': the seventh column is headed 'Value': the eighth column is headed 'Duty Rate'; and the ninth column is headed 'Duty: Amount'. The manufacturer desiring to remove the goods is required to fill in the particulars in the various columns and at the foot of the form on the right-hand side he has to subscribe to a declaration that the particulars given by him are true and correctly stated. The particulars in the various columns are obviously intended to furnish information to the Excise Inspector with a view to enabling him to assess the proper excise duty on the goods which are to be removed. There is also at the foot of the form on the left-hand side 'Assessment Memorandum' which is to be filled in by the Excise Inspector. It consists of four items: one is the total number of packages: the other is the quantity of goods on which duty is assessed: the third is rate of duty and the fourth, total duty payable. When the Excise Inspector assesses the amount of excise duty on the goods, he would fill in the Assessment Memorandum and sign it and then on production of evidence that the amount of excise duty so assessed has been paid or adjusted in the Account Current, he would permit the goods to be cleared. That permission is to be granted by issuing a gate pass. Rule 52A provides that no excisable goods shall be delivered from a factory without a gate-pass in the proper Form or in such other form as the Collector may in any particular case or class of cases prescribe signed by the owner of the factory and countersigned by the proper officer. These are the relevant provisions of the Act and the Rules which require to be considered in order to arrive at a proper determination of the question in controversy between the parties.

5. Now it is clear from these provisions that the Scheme of the Act and the Rules in regard to levy and collection of excise duty on excisable goods is simple. Excise duty is to be levied and collected in the manner prescribed by the Rules. Rule 7 provides that every person who produces, cures or manufactures any excisable goods, shall be liable to pay the excise duty leviable on such goods. When and where such excise duty is to be paid is laid down in Rule 9 read with Rule 52. It is only when the goods are to be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in that behalf, that excise duty is to be paid. Rule 9 prescribes three conditions which must be fulfilled before excisable goods can be removed from the place where they are manufactured. One is that the manufacturer must present an application in the proper form for removal of the goods: the other is that the excise duty leviable on the goods must be paid at such place and in such manner as may be prescribed by the Rules: and the third is that the permission of the proper officer must be obtained on the application. When we turn to Rule 52, the first condition prescribed by Rule 9, namely, that an application in the proper form must be presented to the proper officer is elaborated and it is provided that the application must be made by the manufacturer in triplicate in proper form which is Form A.R. 1 to the proper officer and the manufacturer must deliver it to the officer at least twelve hours before it is intended to remove the goods. The second condition requires that the excise duty leviable on the goods must be paid at such place and in such manner as may be prescribed in the Rules. Now in order to enable a manufacturer to comply with this requirement there must be some machinery for determination of the excise duty leviable on the goods. That machinery is again to be found in Rule 52 which says that the officer to whom the application in triplicate in Form A.R. 1 is presented by the manufacturer shall assess the amount of duty due on the goods. The proper officer is, therefore, required to assess the excise duty leviable on the goods when an application in triplicate in A.R. 1 Form is presented to him by the manufacturer with a view to clearing the goods. A.R. 1 Form to which we have already referred also shows that the Excise Inspector who is the proper officer has to assess the amount of excise duty and pass an order in the Form of 'Assessment Memorandum' at the foot of the Form on the left-hand side. When this process of assessment is completed and the excise duty leviable on the goods is determined as a result of the assessment, the manufacturer would know what is the amount of the excise duty to be paid by him so that on payment of such amount he can remove the excisable goods in compliance with the requirements of Rule 9. The manufacturer may either pay the amount of excise duty on assessment being made by the proper officer or it may be adjusted in an Account-Current maintained by the Collector. When the amount of excise duty assessed by the proper officer is paid or adjusted, the manufacturer has to produce evidence of that fact before the proper officer and on production of such evidence, the proper officer would permit the goods to be removed by issuing a gate-pass under Rule 52A particulars of which would be entered in A.R. 1 Form and he would also endorse such permission at the foot of A.R. 1 Form and the third condition prescribed by Rule 9 would be fulfilled. Then only would the manufacturer be entitled to remove the goods from the place where they are manufactured. This scheme, therefore, clearly contemplates an application by the manufacturer in A.R. 1 Form for removal of the goods, assessment of excise duty leviable on the goods by the proper officer, payment or adjustment of the amount of excise duty so assessed by the manufacturer and then the granting of permission by the proper officer for removal of the goods.

6. Now two possible contingencies may arise in the application of the procedure embodied in this scheme. One is that the excisable goods may be removed by the manufacturer without presenting an application in A.R. 1 Form and without having the excise duty leviable on the goods assessed by the proper officer. This may be the result either of a clandestine act on the part of the manufacturer in removing the goods with a view to evading the excise duty or it may be a bona fide act on the part of the manufacturer because he believes that no excise duty is payable on the goods and the proper officer permits the goods to be removed without assessment in the belief that no excise duty is payable on them. Where such is the case, the removal of the goods would be clearly in contravention of Rule 9 Sub-rule (1) for the goods would be removed without payment of the excise duty leviable on the goods. Rule 9 Sub-rule (2) would be attracted in such a case and the manufacturer would be liable not only to pay the excise duty leviable on the goods upon written demand made by the proper officer but also a penalty which may extend to two thousand rupees and the goods would be liable to confiscation. Another type of case which may possibly occur is where A.R. 1 Form is submitted by the manufacturer and the excise duty leviable on the goods is assessed and the amount of excise duty assessed is paid by the manufacturer before removal of the goods but it is subsequently found that the excise duty was short levied so that the proper amount of excise duty leviable on the goods has not been collected from the manufacturer. What is to happen in such a case? Rule 10 provides the answer. It says that when duties or charges have been short-levied through inadvertence, error, collusion or mis-construction on the part of an officer, or through mis-statement as to the quantity, description or value of the goods on the part of the owner, the person chargeable with the duty or charge, so short-levied, shall pay the deficiency on written demand by the proper officer being made within three months from the date on which the duty or charge was paid or ad-existed in the owners account-current, if any. To the proper officer has short-levied the excise duty while assessing the goods to excise duty on an application in A.R. 1 Form and such short levy has been occasioned either on account of inadvertence, error, collusion or mis-construction on the part of the officer or on account of mis-statement as to the quantity, description or value of the goods on the part of the manufacturer, the deficiency can be recovered by the proper officer by making a written demand within three months from the date on which the excise duty was paid or adjusted pursuant to the original assessment. A question might well arise as it did in a case before the High Court of Bombay in N.B. Sanjaria v. Elphinstone Spinning and Weaving Co. Ltd., decided by a Divison Bench consisting of Mody and Gokhale JJ. on 1/2nd July 1965 whether sort levy within the meaning of Rule 10 would include non-levy. The learned Judges of the Bombay High Court held on a consideration of the provisions of the Act and the Rules that non-levy as a result of assessment made by the proper officer on an application in A.R. 1 Form under Rule 9 read with Rule 52 would be comprehended within the expression 'short levied' as used in Rule 10. We are in respectful agreement with this view. It is the only view which can be taken consistently with the scheme of assessment of excise duty embodied in Rule 9 read with Rule 52. When an application in A.R. 1 Form is made by the manufacturer for removal of the goods, the proper officer to whom the application is presented would have to determine what is the excise duty leviable on the goods. He may find that the excise duty leviable on the goods is nil in which event he will make an endorsement to that effect in the 'Assessment Memorandum' at the foot of the application in A.R. 1 Form and grant permission for removal of the goods by issuing a gate-pass under Rule 52A. If in such a case his assessment of the excise duty is wrong and in fact some amount by way of excise duty is payable, there would be a short levy by him. The word 'levied' as distinguished from 'leviable' used in Rule 9(1) suggests determination of the amount of excise duty by going through the process of assessment.: if the excise duty assessed and levied is less than that properly leviable, the 'levy' made by the proper Officer as a result of assessment would be 'short levy'. Equally would it be 'short levy' if instead of assessing a lesser amount as excise duty leviable on the goods, he determines the excise duty leviable on the goods as nil. It is really immaterial to the expression 'short levied' whether the excise duty levied as a result of assessment is short of that leviable by reason of the assessment being low or nil. What is of importance is that there must be an assessment on an application in A.R. 1 Form, for it is only then that it can be said that the excise duty is 'levied'. If there is no assessment and the excise duty is not 'levied', the case would fall within Rule 9 sub-rule (2). But where there is assessment and 'levy' of excise duty and it is found that the 'levy' is short on account of any of the reasons specified in Rule 10, it is that rule which would apply and a written demand to pay up the deficiency would have to be made by the proper officer within three months from the date on which the excise duty was paid or adjusted or ought to have been paid or adjusted. This view receives support from an unreported decision given by a Division Bench of this Court consisting of Mehta & Sheth JJ. on 30th April 1969 in Special Civil Applications Nos. 529, 530 and 531 of 1964. Girishchandra Natverlal v. Union of India and Ors.

7. Turning to Rule 10A we find that it is a residuary rule. It was introduced in order to meet the situation arising out of the decision of the Nagpur High Court in Chhotabhai Jethabhai Patel and Co. v. Union of India A.I.R. 1952 Nagpur 139. There, excise duty was retrospectively increased by the Legislature and a notice was issued by the excise authorities demanding payment of the amount of excess duty. The question arose whether the notice could be validly issued under Rule 10. The Nagpur High Court took the view that there being no short levy of excise duty on account of any of the reasons specified in Rule 10, that Rule had no application and the notice was, therefore, without authority. To provide for cases such as these where otherwise the proper amount of excise duty might be lost to the Revenue, the Central Government introduced Rule 10A in the Rules. Rule 10A provides that where the Rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty has for any reason been short-levied, or of any other sum of any kind payable to the Central Government under the Act or the Rules, such duty, deficiency in duty or sum shall, on a written demand made by the proper officer, be paid to such person and at such time and place, as the proper officer may specify. It is clear on a plain reading of Rule 1OA that its ambit and coverage is very wide subject only to the limitation introduced by the opening words. The opening words show that if there is any specific provision in the Rules for the collection of any duty or any deficiency where the duty has for any reason been short-levied, such specific provision would apply and Rule 10A would be excluded. It is, therefore, clear and indeed it must be stated in fairness to the learned advocate appearing on behalf of the respondents, that he did not contest the validity of this, proposition, that if any case of short levy falls within Rule 10, demand for the deficiency in duty can be made only under that Rule and not under Rule 10A. Rule 10A can be invoked by the Revenue only where Rule 10 does not apply. The primary question which, therefore, requires to be considered is whether in the present case the short levy resulting in deficiency of duty demanded by the impugned notices was on account of any of the reasons specified in Rule 10. If it was, Rule 10 would apply and the impugned notices having been issued more than three months after the last date on which the excise duty short-levied was paid or adjusted, would be time-barred: if it was not, Rule 10 would have no application and in that event Rule 10A would come into play and the impugned notices issued under that Rule would be valid.

8. We must, therefore, address ourselves to the question whether the short-levy alleged in the impugned notices was on account of inadvertence, error, collusion or mis-construction on the part of the Excise Inspector or mis-statement as to the quantity, description or value of the goods on the part of the first petitioners. Now as we have already pointed out above, the only ground on which the petitioners sought to attract the applicability of Rule 10 was that there was mis-statement as to the description of the goods on the part of the first petitioners or, in any event, there was error on the part of the Excise Inspector which resulted in short levy of excise duty on the goods. We will first examine the contention based on mis-statement as to the description of the goods, for if that contention is well-founded and is sufficient to invite the applicability of Rule 10, it would not be necessary to consider the contention based on error on the part of the Excise Inspector. The argument of the petitioners on this part of the case was that there was mis-statement as to the description of the goods in A.R. 1 Forms since the first petitioners merely described the goods as 'mercerised dyed poplin Medium A' or 'mercerised printed poplin medium A' without stating that they were shrink-proofed and also gave the tariff classification of the goods as M.A.C. which indicated that they were not shrink-proofed instead of M.A.D. which would indicate that they were shrink-proofed and it was this mis-statement as to the description of the goods which was responsible for the short levy of the excise duty. The respondents on the other hand urged that there was no mis-statement as to the description of the goods in A.R. 1 Forms. The description given in A.R.I. Forms was quite correct in so far it went: the only fault from which it suffered was that an additional characteristic of the goods, namely, that they were shrink-proofed was not stated in A.R. 1 Forms. This, according to the respondents, amounted to non-disclosure of a material fact but by reason of this non-disclosure what was stated did not become incorrect: it did not introduce an element of incorrectness or inexactitude in the description as given in A.R.I. Forms. So far as the tariff classification of the goods was concerned, the respondents agreed that the tariff classification should have been M.A.D. and not M.A.C. but that, according to the respondents, was not a part of the description of the goods and a wrong statement as to tariff classification could not be regarded as mis-statement as to the description on the goods. We do not think this argument of the respondents can be sustained. It suffers from the fault of over-simplification and fails to take into account the object and purpose of filling in the particulars in A.R. 1 Forms, [t is also fallacious inasmuch as it seems to effect an artificial dichotomy between description of the goods and tariff classification as if one has nothing to do with the other.

9. It is no doubt true that the description of the goods as given in A.R. 1 Forms namely, 'mercerised dyed poplin medium A' or 'mercerised printed poplin medium A' standing by itself, taken as a bald statement, could not be said to be incorrect since the goods were medium A cotton fabrics and were mercerised and dyed or mercerised and printed. But it must be remembered that the object of filling in the particulars in A.R. 1 Forms and presenting A.R. 1 Forms containing such particulars to the Excise Inspector is to furnish full and adequate information to the Excise Inspector with a view to enabling him to arrive at a proper assessment of the excise duty leviable on the goods. The amount of excise duty would depend on the description of the goods, the tariff classification and the weight or quantity or value of the goods and these particulars are, therefore, required to be given in columns 5, 6 and 7 of A.R. 1 Forms so that proper assessment can be made by the Excise Inspector. Hence there is implicit in this requirement the obligation to give the full and correct description of the goods such as would be necessary for making a proper assessment of the excise duty. Now in the present case if the goods were merely mercerised and dyed or mercerised and printed medium A cotton fabrics, they would be assessable to excise duty at lower rates of duty under Clause 111(1)(c) for the first period and Clause 2(ii)(b) for the second period. But if they were also in addition shrink-proofed, they would be assessable to higher rates of duty under Clause III(l)(d) for the first period and Clause 2(iii)(c) for the second period. In order, therefore, to enable the Excise Inspector to determine the correct excise duty leviable on the goods, it was necessary for the first petitioners to mention by way of description of the goods in A.R. 1 Forms that they were also sprint-proofed. It was not sufficient for the first petitioners to describe the goods merely as 'mercerised dyed poplin medium A' or 'mercerised printed poplin medium A'. Such an incomplete description of the goods would convey to the Excise Inspector that the goods were not shrink-proofed. The omission to state that the goods were shrink-proofed, therefore, rendered the description of the goods incorrect having regard to the object or purpose for which the description is required to be given. This would be sufficient to reach the conclusion that there was mis-statement as to the description of the goods in A.R. 1 Forms. But the matter does not rest there. The first petitioners gave the tariff classification of the goods as M.A.C. and not M.A.D. This was clearly tantamount to a statement on the part of the first petitioners that the goods were not shrink-proofed. The tariff classification would necessarily involve a statement as to the description of the goods and implicit in the tariff classification in the present case, namely, M.A.C. as distinguished from M.A.D. was a statement that the goods were of a particular description, namely, non-shrink-proofed. There was, therefore, clearly mis-statement as to the description of the goods on the part of the first petitioners in A.R. 1 Forms and it was on account of this mis-statement that the excise duty was short-levied by the Excise Inspector. This position is in fact conceded in the affidavit-in-reply filed by Kedarnath Anand, Assistant Collector of the Excise Department in reply to the petition. It is stated in so many terms in paragraph 11 of the affidavit: 'I say that for the reason stated below the bales should have been also marked 'shrink-proof and as that mark was not put on the bales, and mentioned in form NJ. A.R. 1 less duty was recovered from the Mills during the years 1961, 1962 and 1963 whenever the four sorts were cleared from the factory premises, the procedure as mentioned above was followed viz. duty was recovered on the basis of mark put on the bales & A.R. 1 Forms' (Underlining is ours). Then again we find in paragraph 15 of the affidavit: 'As already stated above the Excise Inspector merely relied on the marks on the bales and recovered excise I also say that under the Excise Rule the Mills are required to mark about the category of cloth like 'grey', 'bleached', 'mercerised', 'dyed', 'shrink proof or processed in any other manner,' So also we find a categorical statement in paragraph 21 of the affidavit: 'The recovery of the deficiency in duty has arisen on account of want of marking 'shrink proof and wrong description in Form No. A.R. 1.' It is, therefore, apparent that there was short levy of excise duty on the goods through mis-statement as to the description of the goods in A.R. 1 Forms on the part of the first petitioners and the case must accordingly be held to be governed by Rule 10 and not Rule 10A. If that be so, the impugned notices are clearly time-barred and they must be held to be without authority and void.

9.1 Before we part with this case we may point out that one other contention was also urged on behalf of the petitioners, namely, that if there is overlapping between Rules 10 and 10A and Rule 10A deals with the same class of cases which is covered by Rule 10, Rule 10A would be violative of Article 14 since it does not provide any period of limitation for taking proceedings under it while Rule 10 provides a period of three months from the date of payment or adjustment of the excise duty within which proceedings for recovery of the deficiency must be adopted. But this contention does not arise for consideration since on the view taken by us, Rules 10 and 10A arc mutually exclusive: Rule 10A deals with the residuary class of cases not covered by Rule 10 and there is no overlapping between Rules 10 and 10A.

10. We, therefore, allow Special Civil Application No. 810 of 1965 and make the Rule absolute by issuing a writ of mandamus quashing and setting aside the impugned notices dated 13th October 1964,2nd January 1965 and 6th January 1965 issued by the Inspector of Central Excise. So far as Special Civil Application No. 758 of 1966 is concerned, facts giving rise to that petition are, as already pointed out above, identical with the facts in Special Civil Application No. 810 of 1965 save and except as to dates and amounts and the same questions of law are also raised in that petition and, therefore, for the same reasons we allow that petition also and make the rule in that petition absolute by issuing a writ of mandamus quashing and setting aside the impugned notice dated 13th June 1966 issued by the Inspector of Central Excise. The respondents in each petition will pay the costs of the petition to the petitioners.


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