1. In this case, the petitioner seeks a writ of certiorari to quash certain additional levies made on him by the respondents under the Central Excises and Salt Act, 1944. The petitioner is a company registered under the Companies Act, carrying on business of manufacture of cotton textiles yarn of various counts. In respect of the yarn manufactured by the petitioner, excise duty is levied under the Central Excises and Salt Act, 1944. The petitioner was manufacturing yarn of various counts including yarn of 40 counts (English counts) equivalent to 33.9 NF (French count) during the year 1966.
2. On 14-9-1966 the Supervising officer of the Central Excise department drew samples of yarn said to be 40 counts for the purpose of testing. On the day of drawal of sample, the petitioner had already packed into bales ready for clearance 69 bales of cotton yarn out of the yarn manufactured previous to 14-9-1966. The sample so drawn was 840 yards in length. The Supervising officer who took the sample divided the sample into three parts and handed over one to the petitioner, forwarded another to the Chemical examiner, Custom House, Madras and retained the third. The Chemical Examiner reported that the sample sent to him was found to be on analysis of 38.5 NF. after allowing for a tolerance of 2.5 per cent. In pursuance of this report the Supervising Officer raised additional demand on 24-11-1966 for a sum of Rs. 13523-37 purporting to be one under Rules 10 and 10-A in respect of 213 bales (including 69 bales previously packed), being the quantity manufactured between 14-9-1966and 20-10-1966 on which latter date the next sample was drawn. At that stage the petitioner requested the supervising officer for retesting the second sample by the Chief Chemical examiner, Delhi. The supervising officer complied with the petitioner's request and sent !he second sample for analysis by the chief chemical examiner. He found the sample to be more than 34 NF but less than 40 NF even after giving a tolerance of 2.5 per cent. Based on the two test reports the differential duty of Rs. 13523-37 was levied by the Assistant Collector on the petitioner on the quantity of cotton yarn cleared between 14-9-1966 and 20-10-1966 on the basis that the count was more than 34 NF. Before the Assistant Collector, the petitioner required the third sample in his possession to be tested. The Assistant Collector, however, refused to have the third sample tested as requested by the petitioner, and confirmed the demand referred to above.
3. Aggrieved against the order of the Assistant Collector, the petitioner filed an appeal to the Collector of Cenral Excise, the second respondent herein. One of the contentions raised by the petitioner was that 69 bales out of 213 bales cleared during the period between 14-9-1966 and 20-10-1966 had been produced before 14-9-1966 when the sample was drawn and therefore the said 69 bales cannot be subjected to additional duty. The Collector, however, rejected the said contention as well as others and confirmed the demand.
4. There was a further revision by the petitioner to the first respondent under Section 36 of the Act. The first respondent held that no additional levy could be made in respect of 69 bales which were already manufactured packed -and kept ready for delivery prior to the taking of the samples on 14-9-1966, but confirmed the levy in respect of the balance of 144 bales of cotton yarn produced and cleared between 14-9-1966 and 20-10-1966.
5. The petitioner seeks to quash the order of the first respondent so far as it is against it raising the following grounds of attack.
6. The first ground of attack is that as the petitioner's request to retest of the third sample in its possession, was not complied with, there has been a violation of the principles of natural justice and that if the third sample had been tested as per the petitioner's request it would have shown the actual and correct count of yarn. If is true that the petitioner requested, the third sample to be tested and that such a request was rejected. But it has to be borne in mind that the first and second samples earlier tested practically showed that the count of yarn manufactured by the petitioner on the date when the sample was taken was more than 33.9 NF that is over and above 40 counts. If the rest of the two samples showed varying results, then it will be necessary to test the third sample. When the testing of the two samples led to identically the same result the third respondent very rightly thought that the retest of the third sample was quite unnecessary. Neither before us nor before the authorities, the petitioner was able to question the test reports of the two samples tested already. Under these circumstances, it is not possible to accept the petitioner's contention that all the samples should be tested before action is taken for levying additional duty in this case. We do not think that the refusal to have third sample tested has resulted in the violation of any principles of natural justice in this case. The samples were taken in the presence of the petitioner. The petitioner has not challenged the manner of taking samples in this case and the samples had been certified as the one manufactured by the petitioner. Unless the two test reports are attacked on any sustainable grounds, the authorities are justified in proceeding to act on the basis of the said reports and to levy the additional duty on the basis that the yam produced by him is more than 33,9 NF.
7.The second ground of attack is that the result of the (est reports can be applied only lo the quantity of yarn manufactured on the date when the sample was taken and not for the entire period between 14-9-1966 and 20-10-1966. The contention of the petitioner is that it cannot be assumed that the count of yarn manufactured by the petitioner on subsequent days was the same as one found on 14-9-1966 and that the test report based on a sample of 840 yards cannot be taken to represent the entire 38638-2 Kgs. produced during the period. It must be remembered that the department cannot be expected to take samples every day and for every bale. It is -seen that a sample is taken periodically at regular intervals and the test result of such a sample is taken to govern production of yam made by the petitioner till the next drawal of the sample. If the petitioner's contention is accepted that the sample drawn on particular day can be taken to represent a count of yarn produced only on that day, it becomes necessary for the department to take the same sample every day or even every hour to be more accurate. Such a procedure is quite impossible to be followed and it will also lead to unnecessary waste of time. If the petitioner in a particular case shows that after the taking of the sample the machinery has been attended to and the yarn produced is of a different count than the one produced OR the day when the sample was taken the officers cannot base the test results on the sample for the entire goods manufactured during the period till the next sample is taken. But in this case the petitioner has not shown that anything has been done between 14-9-1966 and 20-10-1966 to produce a lesser count of yarn than the one represented by the sample taken on 14-9-1966. We are not therefore inclined to accept the petitioner's contention that the test reports cannot be taken to represent the count of yam for the entire quantity manufactured between 14-9-1966 and 20-10-1966.
8. A similar contention was advanced in W. P. 1421 of 1971 (Mad), Sri Sakthi Textiles (P) Ltd. v. Govt. of India and it was rejected with the following observations:
'The quantity of yarn taken for tests are of substantial lengths drawn at random and it is impossible to carry out the tests of the entire quantity. The petitioner's contention that unless the excise authorities have conducted the test every day and factually found that the petitioner on each day manufactures counts in excess of 50 NF, the department has no jurisdiction to make additional levy is not tenable. The department rightly withdrew the levy prior to the period of taking samples by them and the levy of differential duly on yarn produced after and from the period of the drawal of the sample, is, therefore, legal and within the competence of the taxing power of the Government. We are of opinion that Rule 56 itself contemplates the taking of samples of yarn manufactured and tested.'
With respect we are in entire agreement with the said observations.
9. The third ground of attack is that Section 37(2)(xiv) provides for a rule being framed for taking of samples and for testing the samples taker, and therefore the test reports which were not in pursuance of any statutory rule cannot be acted upon. We are not, however, inclined to accept this contention. It is true there is no rule relating to the testing of sample. Rule 56 provides for the manner in which the samples have to be taken and it is true that it is silent on the manner of testing samples but on that ground alone it cannot be said that the test reports in this case cannot be acted upon. It has been held in W. P. 1421 of 1971 (Mad) that under Rule 56 which deals with the taking of samples is embedded the power to have them tested and that it is not necessary to have a separate role dealing with the testing of samples. Besides agreeing with the above reasoning we would like to give one other reason for holding that no rule is needed for dealing with the testing of samples. Rule 56 provides for the drawing of samples and that is the only power needed having regard to the fact that the products manufactured are in the custody of the petitioner and unless the power to draw samples is given to the authorities the authorities may be powerless to enter the premises and take samples. Once the power to draw samples is given how the sample so taken is to be utilised need not specifically be provided, as it relates to the mode and manner of proof. It is not in dispute that the petitioner has also been given a sample. He can also have the sample tested and utilise the results of such a test as evidence, in his favour. Under these circum-stances, we are not in a position to accept the petitioner's contention that the test reports made not on the basis of any statutory rule cannot be used against him.
10. The learned counsel then contends that the tolerance of 2.5 per cent adopted by the department is arbitrary having regard to the fact that the Ministry of Commerce and Industry (Trade and Merchandise Marks) by notification dated 20-9-1962 had prescribed a tolerance limit of 5 per cent. The said point has been considered by the earlier Bench in W. P. 1421 of 1971 (Mad) and has been rejected on the ground that the tolerance limit was arrived at after a great deal of experience and tests. We have to therefore reject this contention as well.
11. Then it is contended by the learned counsel that the additional demands have been made under Rule 10 and Rule 10-A that Rule 10 cannot apply to the facts of the case and that Rule 10-A has been held to be ultra vires by this court in Agarwal Bros. v. Union of India, 1973 Tax LR 2213. But as regards this contention, the counter affidavit filed on behalf of the respondents states that the demand could be sustained under Sub-rule (b) of Rule 9-B (i) read with Sub-rule (3). Thus, the department seeks to sustain the demand under Rule 9-B and not under Rule 10 and Rule 10-A. If the demand could be sustained under Rule 9-B the fact that Rule 10 and Rule 10-A had wrongly been mentioned in the demand is of no consequence. It is well established that the quoting of wrong provision of law will not vitiate an order if the order could be sustained on arty other provisions of the statute. The question therefore is whether the demand in this case could be sustained under Rule 9-B? It is not in dispute that there has been an earlier levy of excise duty on the petitioner on the basis that the count of yarn manufactured by it was 33.9 NF. As a result of the test reports, additional levy has been made and the differential duty is sought to be levied in addition to the duty already collected. That will squarely come under Sub-rule (5) of Rule 9-B. Rule 9-B contemplates a provisional levy being made pending testing of a sample and a final levy being made after the test reports are received by the concerned authodity. We have to, therefore, hold that the demand made in this case will have lo be taken as one made under Rule 9-B.
12. The result is that all the contentions raised by the petitioner fail and the writ petition is, therefore, dismissed with costs. Counsel's fee Rs. 150.