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PETITIONER:

SHIVA GLASS WORKS CO. LTD.

Vs.

RESPONDENT:

ASSITANT COLLECTOR OF CENTRAL EXCISE AND OTHERS.

DATE OF JUDGMENT11/01/1991

BENCH:

OJHA, N.D. (J)

BENCH:

OJHA, N.D. (J)

SAIKIA, K.N. (J)

CITATION:

1991 AIR 456 1991 SCR (1) 43

1991 SCC (2) 329 JT 1991 (1) 73

1991 SCALE (1)12

ACT:

Central Excises and Salt Act, 1944/Central Excise

Rules, 1944: Section 3/Rules 10 and 10A--Assessee--Price

list of goods furnished--Accepted provisionally--Excise duty

paid--Goods cleared--Discrepancy--Detected later--Recovery

of excise duty--Whether permissible.

HEADNOTE:

The appellant company a licensee under the central

Excises and Salt Act, 1944 and during the relevant period

namely 1st September, 1961 to 26th September, 1963 carried

on the business of manufacturing different types of glass

wares which were excisable goods under the Act.

The appellant used to present A.R.I. forms accompanied

with price lists of the goods and after paying excise duties

calculated on the basis of the price lists used to remove

the goods. The office of the appellant was searched by the

Excise Authorities on 26th September, 1963 and several

documents, books and papers were seized, and as a

consequence thereof it transpired that the appellants were

maintaining two sets of bills. The bills of one set were

those on the basis of which the appellant used to pay excise

duty before clearance of the goods and those of the other

were such which were never issued to the dealers. In these

two sets of bills, the rate of discount was differently

shown.

A notice dated 26th March, 1968 was served on the

appellant by the Assistant Collector stating that it

appeared that during the relevant period the appellant had

not paid excise duty on the goods at the prices at which

they were sold, but duty was paid at lower rates and

requiring it to show cause as to why duty on the prices at

which the good were actually sold, as found on scrutiny of

sale vouchers/sale documents should not be recovered under

Rule 10A of the Central Excise Rules, 1944. In reply the

appellant asserted that it was the provision of Rule 10 and

not Rule 10A which was attracted to the facts and

consequently the initiation of proceedings was barred by

time. This plea did not find favour with the Excise

Authorities, and the appellant was required to pay the

additional duty of Rs. 1.41 lakhs.

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The aforesaid order was challenged by the appellant

before the

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High Court under Article 226 of the Constitution and a

Single Judge accepted the contention of the appellant the

Rule 10 and not Rule 10A of the Rules was applicable and on

this view quashed the order dated 26th August, 1968

The respondents preferred and appeal to the Division

Bench which has reversed the order of the Single Judge, on

the finding that it was a case falling Rule 10A and

dismissed the writ petition.

In the appeal to this Court it was contended that the

single Judge was right in taking the view that the case fell

within the purview of Rule 10 of the Rules and that the

Division Bench committed an error in reversing the Judgment,

while the Revenue contested the appeal urging that on the

facts found by the division Bench, and indeed on the case

set up by the appellant itself no exception could be taken

to the finding of the Division Bench that it was Rule 10A

and not Rule 10 which was attracted to the facts of the case.

Dismissing the Appeal, this Court,

HELD: 1. The question as to whether Rule 10 or Rule 10A

was applicable has to be determined in the background of the

procedure which was followed. The legal position is that

Rule 10A does not apply where the case is covered by Rule 10

of the Rules. [48E]

N.B. Sanjana v. Elphinstone Mills, [1971] 3 S.C.R. 506

relied on.

2. Simply because Rule 9B of the Rules, was conceded

not to have been taken recourse to by the respondents so

that provisional assessment could be said to have come into

existence in its statutory sense as contemplated by the said

rule when duty was paid at the time of clearance of the

goods, the conclusion was not inescapable, that a final

assessment had came into being at that time. [49A-B]

3. In view of the procedure adopted by the appellant it

was apparently a case where duty was calculated on the basis

of price lists supplied by the appellant to facilitate the

clearance of the goods and the correct amount of duty

payable was yet to be determined after subsequent

verification, and appellant was under an obligation to pay,

on the basis of the bond executed by them, the difference of

the amount of the duty paid at the time of clearance of the

goods and the amount found payable after subsequent

varification. [49B-C]

4. The Division Bench of the High Court has found that

there was no assessment as is understood in the eye of law,

but only a mechanical settlement or adjustment of duties on

the basis of the sale prices filed by the appellant had been

made and at best, it was a case of incomplete assessment

which the Excise Authorities were entitle to complete under

Rule 10A.[49D]

Assistant Collector of Central Excise, Calcutta

Division v. National Tobacco Co. of India Ltd., [1973] 1

S.C.R. 822, referred to.

5. The instant case therefore falls within the purview

of Rule 10A and not Rule 10 of the Rules. [50B]

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 763 of

1977.

From the Judgment and Order dated 30.7.1976 of the

Calcutta High Court in Appeal No. 167 of 1972.

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Raja Ram Agrawal, K.B. Rana and Praveen Kumar for

Khaitan & Co. for the Appellant.

A. Subba Rao, P. Parmeshwaran and A.D.N. Rao for the

Respondents.

The Judgment of the Court was delivered by

OJHA, J. This appeal by special leave has been

preferred against the judgment dated 30th July, 1976 of the

Calcutta High Court in Appeal from Original Order No.

167/1972. The facts in nutshell necessary for the decision

of this appeal are that the Appellant-Company, a licensee

under the Central Excise and Salt Act, 1944 (hereinafter

referred to as the Act) carried on during the relevant time,

namely, 1st September, 1961 to 26th September, 1963,

business of manufacturing different types of glasswared

which were excisable goods under the Act. The appellant

used to present A.R.I. forms accompanied with price list of

the goods and after paying excise duties calculated on the

basis of the price lists used to remove the goods. The

appellant's office was searched by the Excise Authorities on

26 September, 1963 and several documents, books and papers

were seized. As a consequence of this search and seizure it

transpired that the appellant was maintaining two sets of

bills. The bills of one set were those on the basis of

which the appellant used to pay excise duty

46

before clearance of the goods and those of the other were

such which were never issued to the dealers. In these two

sets of bills inter alia the rate of discount was

differently shown. A notice dated 26th March, 1968 was

served on the appellant by the Assistant collector of

Central Excise, Calcutta-II Division, Calcutta stating that

it appeared that the appellant had, during the relevant

period, not paid excise duty on the goods at the prices at

which they were sold but duty was paid at lower rates

declared by it. The appellant was required to show cause as

to why duty amounting to Rs. 1,43,633.84 p. on the prices at

which the goods were actually sold, as found on scrutiny of

sale vouchers/sale documents should not be recovered under

rule 10A of the Central Excise Rule, 1944 (hereinafter

referred to as the Rules.) The appellant, in reply to the

show cause notice, inter alia asserted that it was the

provisions of Rule 10 and not Rule 10A of the Rules which

were attracted to the facts of the instant case and that

consequently the initiation of proceedings against the

appellant was barred by time. This plea did not find favour

with the Excise Authorities and the appellant was required,

by order dated 26th August, 1968, to pay to the Central

Government, an additional duty of Rs. 1,41,829.11 p. This

order was challenged by the appellant before the High Court

under Article 226 of the Constitution of India. A learned

Single Judge of the High Court accepted the contention of

the Rule 10 and not Rule 10A of the Rules was applicable and

on this view the order dated 26th August, 1968 was quashed.

Aggrieved by that order, the respondents preferred an appeal

before a Division Bench of the High Court. The judgment of

the learned Single Judge was reversed and on the finding

that it was a case falling under Rule 10A, the writ petition

was dismissed by the judgment under appeal.

The only point which has been urged by learned counsel

for the appellant in support of this appeal is that the

learned Single Judge was right in taking the view that the

case fell within the purview of Rule 10 of the Rules and the

Division Bench committed an error in reversing his judgment.

For the respondents on the other hand, it has been urged

that on the fact found by the division Bench and indeed on

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the case set up by the appellant itself no exception could

be taken to the finding of the Division Bench that it was

Rule 10A of the Rules and not Rule 10 which was attracted to

the facts of the instant case. In order to appreciate the

respective submissions made by learned counsel for the

parties it would be useful to extract Rules 10 and 10A.

They read as hereunder:

"10. Recovery of duties or charges short-levied or

errones-

47

ously 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 owning to such cause,

erroneously refunded, the person chargeable with

the duty or charge so short-levies, or to whom such

refund has been erroneously made, shall pay the

deficiency or 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."

"10A. Residuary powers for recovery of sums due to

Government--Where these Rules do not make any

specific provision for the collection any duty, or

of any deficiency in 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.

In elaboration of his submission that it was a case

covered by Rule 10 of the Rules learned counsel for the

appellant pointed out that since the case of the respondents

was that on the basis of the documents seized during the

search of the appellant's office on 26th September, 1963 it

was found that the duty paid by the appellant on the basis

of price lists furnished by the appellant at the time of

clearance of the goods was deficient, it was a case where

duty had been short-levied "through mis-statement as to the

quantity, description or value of such goods on the part of

the owner" as contemplated by Rule 10. We find it difficult

to agree with the submission. The procedure adopted by the

appellant/was indicated by the appellant under its letter

dated 23rd March, 1961, a portion whereof as extracted by

the learned Single Judge reads as hereunder:

"We enclose herewith our three price lists for 1)

Bottles and phials 2) Glass-Wares and 3) Fancy

Wares for the purposes of provisional assessment.

These price are inclusive of Central Excise duty.

As regards Trade discounts to

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be deducted from the said prices as per Section 4

of the Act we declare that 1) 25% should be

deducted from the price list for bottles and

phials. 2) 35% from the price list for glass-wares

and 3) 20% from the price list for fancy wares over

and above necessary deduction for Central Excise

duty included in the prices."

The learned Single Judge has also pointed out that the

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appellant used to clear the goods by executing bond and

that in the specimen copy of the bond produced in court it

was stated that whereas final assessment of excise duty of

glass and glasswares made by the appellant from time to time

could not be made for want of full particulars as regards

value, description, quality or proof thereof or for non-

completion of chemical or other tests and whereas the

appellant had requested the Excise Authorities as per Rule

9B of the Rules to make provisional assessment of excise

duty of the goods pending final assessment, the appellent

was giving a guarantee to the extent of the sum mentioned in

the bond for payment of the duties. The learned Single

Judge has also pointed out that it appeared to be the common

case of the parties that in order to facilitate the

assessment of the goods by Excise Authorities, the appellant

used to file the price list in advance and after acceptance

provisionally of the price list, the goods used to be

cleared and if subsequently and discrepancy was detected or

found, the same used to be paid by the appellant.

The question as to whether Rule 10 or Rule 10A of the

Rules was applicable has to be determined in the background

of the appellant as indicated above. The legal position

that Rule 10A does not apply where the case is covered by

Rule 10 of the Rules is well-settle in view of the decision

of this Court in N.B. Sanjana v. Elphinstone Mills, [1971] 3

S.C.R. 506, on which reliance has been placed by learned

counsel for the appellant. Consequently, Rule 10A could be

attracted only if the case does not fall within the purview

of Rule 10. It was conceded before the learned Single Judge

on behalf of the respondents that the respondents were not

proceeding under the provision of Rule 9B. On this basis and

on his own finding also that Rule 9B was not attracted, the

learned Single Judge held that it was not a case of

provisional assessment but a case of regular assessment in

pursuance whereof duty was paid by the appelant and that

since the case of the respondents was that the appellant had

manufactured documents as was revealed as a consequence of

the search and seizure referred to above it was a case of

short-levy due to mis-statement by the appellant.

Consequently, the case clearly fell

49

within the purview of Rule 10 of the Rules. The Division

Bench of the High Court in appeal did not, and in our

opinion rightly, subscribe to the aforesaid finding. Simply

because Rule 9B of the Rules was conceded not to have been

taken recourse to by the respondents so that a provisional

assessment could be said to have come into existence in its

statutory sense as contemplated by the said rule when duty

was paid at the time of clearance of the goods, the

conclusion was not inescapable, that a final assessment had

come into being at that time. In our opinion, in view of

the procedure adopted by the appellant referred to above it

was apparently a case where duty was calculated on the basis

of price lists supplied by the appellant to facilitate the

clearance of the goods and the correct amount of duty

payable was yet to be determined after subsequent

varification and appellant was under an obligation to pay,

on the basis of the bond executed by them, the difference of

the amount of the duty paid at the time of clearance of the

goods and the amount found payable after subsequent

verification. In the judgment appealed against the Division

Bench of the High Court has found that there was no

assessment as is understood in the eye of law but only a

mechanical settlement or adjustment of duties on the basis

of the sale prices filed by the appellant had been made

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and at best, it was a case of an incomplete assessment which

the Excise Authorities were entitled to complete under Rule

10A. In taking this view the Division Bench of the High

Court has relied on a decision of this Court in Assistant

Collector of Central Excise, Calcutta Division v. national

Tobacco Co. of India Ltd., [1973] 1 S.C.R.. 822. In that

case also the Company used to furnish quarterly price lists

which used to be accepted for purpose of enabling the

Company to clear its goods and according to the Excise

Authorities these used to be verified afterwards by

obtaining evidence of actual sale in the market before

issuing final certificates that the duty had been fully paid

up. The prices of the goods to be cleared were furnished by

the Company on forms known as A.R.I. forms in that case

also. It was held that only a mechanical adjustment for

settlement of accounts by making debit entries was gone

through and that it could not be said that any such

adjustment was assessment which was a quasi-judicial process

and involved due application of mind to the fact as well the

requirements of law. With regards to the debit entries it

was held that the making of such entries was only a mode of

collection of tax and even if payment or actual collection

of tax could be spoken of as a de facto "levy" it was only

provisional and not final. It could only be clothed or

invested with the validity after carrying out the obligation

to make an assessment to justify it. It was also held that

it was the process of adjustment that really determined

whether levy was short or complete. It was not a factual

or presumed levy which could in

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a disputed case prove an "assessment." This had to be done

by proof of the actual steps taken which constitute

assessment.

We are of the opinion that in view of the procedure

adopted by the appellant in the instant case referred to

above and the law laid down by this Court in the case of

national Tobacco Co. of India Ltd. (supra) it is not

possible to take any exception to the finding of the

Division Bench in the judgment appealed against that it was

a case which fell within the purview of Rule 10A and not

Rule 10 of the Rules. In the result, we find no merit in

this appeal. It is accordingly dismissed with costs.

N.V.K. Appeal dismissed.

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