Civil Appeal No 763 of 1977
From the Judgment and Order dated 3071976 of the Calcutta High Court in Appeal No 167 of 1972
Raja Ram Agrawal KB Rana and Praveen Kumar for Khaitan  Co for the Appellant
A Subba Rao P Parmeshwaran and ADN 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 1671972
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 ARI 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 14363384 p on the prices at which the goods were actually sold as found on scrutiny of sale voucherssale 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 14182911 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 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 appellantwas 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 48 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 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 NB Sanjana vs Elphinstone Mills   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 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 vs national Tobacco Co of India Ltd  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 ARI 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 50 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
NVK Appeal dismissed


Summary:
Respondent No 1 is a firm dealing in medicines and respondents 2 and 3 are its managing parnter and pharmacist
In contravention of the provisions of Drugs Price Control Order 1979 para 21 read with para 18 they charged from a Nursing Assitant of the Medical College Hospital Kottayam Rs 90 in excess of the maximum retail price fixed for the sale of 15 tablets of Largactil of 100 mg each and 60p in excess for 100 tablets of Hipnotex of 5mg each
According to the prosecution this act of their s being in contravention of the provisions of the Order was punishable under Section 7 of the and accordingly prosecution was initiated against the respondents
The trial court found the respondents guilty and convicted them and sentenced respondent No 1 firm to a fine of Rs 2000 and respondents 2 and 3 to three months simple imprisonment
On appeal the High Court of Kerala acquitted them taking the view that none of the aforesaid two medicines namely Largactil and Hipnotex were formulations  as defined in Section 2f of the Drugs Price Control Order 1979 and as such the sale of these drugs at higher rates than the prescribed was not punishable under paras 21 read with para 18 of the order
The appellants have thus filed this appeal after obtaining special leave
The question for decision in the present case relates to the correctness of the construction made by the High Court of the provisions of the Order 
Partly allowing the appeal this Court HELD A bulk drug is one which may be capable of use by itself or as an ingredient in any formulation
69G Formulation is a medicine which may comprise even of one bulk 66 drug by itself or more than one bulk drug
The definition of Formulation  is very wide and includes even one bulk drug where that one bulk drug by itself is treated as a medicine
70B The provisions of para 21 which in terms are meant to control sale prices of formulations specified in the Third Schedule as also the other provisions of the Order which in terms may be of limited application are specifically made applicable to all formulations as defined in the Order except only paragraphs 10 to 14 which have been expressly excluded
It is by virtue of para 18 that the prohibition contained in para 21 has been made applicable to formulations not specified in the Third Schedule
70G H The High Court misconstrued the provisions of the Drugs Price Control Order 1979
The Court rejected that construction and held that the allegations in the present case if proved would amount to a contravention of para 21 read with para 18 of the Order  which is punishable under Section 7 of the 
The Court however did not interfere with the acquittal of the respondents
72B C