tion Civil No 426 of 1989 etc
Under Article 32 of the Constitution of India
P Chidambaram KK Venugopal Dushyant Dave R Karan jawala Ms Meenakshi Arora Mrs Manik Karanjawala NP CS Vaidyanathan and SR Setia for the Petitioners
Yogeshwar Prasad RS Rana and Ashok Srivastava for the Respondents
The Judgment of the Court was delivered by SABYASACHI MUKHARJI CJ
The challenge in these writ petitions and special leave petitions is basically to the order dated 18th January 1989 passed by the District Excise Officer Gaziabad seeking to recover duties of excise on Homeodent under the Medicinal  Toilet Prepara tions Excise Duties Act 1955 hereinafter called the 1955 Act  even though the product was classifiable under the Central Excises  Salt Act 1944 hereinafter called the 1944 Act  and was in 299 fact assessed to duty under the said
Act between 1985 and 1988
Necessarily the question arises as to whether in the facts and circumstances of the case the 1944 Act would apply or the 1955 Act would apply
The factual dispute is whether in the facts as enumerated hereinafter alcohol was present in Homeodent and further whether Homeodent was Homeopathic medicine or toilet preparation and further whether the same was dutiable under the 1944 Act
We must recapitulate the basic facts in the several matters involved herein
Ms Dabur India Limited which is the petitioner in special leave petition No 161089 arising out of judgment and order dated 20th December 1988 in civil miscellaneous writ petition No Nil of 1988 connected with civil miscella neous writ petition No Nil of 1988 of the High Court of Allahabad and also the petitioner in writ petition No 42689 is a public limited company engaged in manufacture of Ayurvedic medicaments and Allopathic medicaments along with cosmetics
It had agreed to manufacture for and on behalf of Ms Sharda Boiron Laboratories Ltd hereinafter called the company  being the petitioner in special leave petition Nos 135 3689 used to manufacture andor produce a Homeopathic tooth paste called Homeodent  out of the raw materials supplied by the company on job work basis
The petitioner states that it accordingly manufactured Homeodent during 1985 to 1988 duly paying duties of excise on Homeo dent under the 1944 Act at appropriate leviable rates and recovered the same from the company
According to the peti tioner Homeodent did not contain alcohol but contained ingredients mother tinctures containing alcohol
It is stated that alcohol due to various reasons has a tendency to evaporate during the process of manufacture of Homeodent
It is further the case of the petitioner company that during the period from 1979 to 1988 it also manufactured certain other medicinal products containing alcohol which were classifiable under the 1955 Act
The petitioner company held at all material times licence as required under the 1955 Act to manufacture these products
The State Excise authorities enforcing the provisions of the Act had perma nently posted an Inspector as also a peon in the factory of the petitioner where these dutiable products were manufac tured
The bonded manufactory in which these products were manufactured was under lock and key of the said officers according to the petitioner
The activities of the petition er the petitioner asserts were clearly within the knowl edge of the State excise authorities for over a considerably long period
During the period from 1985 1988 the company supplied 300 to the petitioner amongst other ingredients mother tinc tures under BM 9 forms stating clearly that such mother tinctures were intended to be used in manufacture of Homeo dent in the factory of the petitioner
These BM 9 forms according to the petitioner were filed with the State excise authorities regularly
Therefore the petitioner asserts that the State excise authorities were aware of the manufacture of Homeodent by the petitioner and the activity of the company in getting the same manufactured in the factory of the petitioner out of mother tinctures
However the State excise authorities did not object to the same nor did they call upon either the petitioner or the company to pay duty under the 1955 Act
On 1st January 1985 the petitioner states the peti tioner filed classification list classifying Homeodent under the Act of 1944 declaring therein the ingredients of Homeo dent
On 17th January 1985 the classification list filed by the petitioner on 11
1985 was approved finally and Homeodent was held to be classifiable under the Act of 1944
On 31st August 1987 the Assistant Collector of Central Excise passed an order which was an appealable one classify ing Homeodent under the Act of 1944
The petitioner asserts that this order had subsequently been upheld by the Collec tor of Central Excise Appeals New Delhi on an appeal filed by the company
However on 18th January 1989 the Superintendent of State Excise Bulandshahr visited the factory of the petitioner and after inspecting the same enquired about Homeodent
It is the case of the petitioner that it had explained that Homeodent was classified under the Act of 1944 in view of the orders passed by the Central Excise authorities
However it is stated that the Superin tendent of State Excise Bulandshahr called upon the peti tioner to furnish details in respect of Homeodent including its ingredients and total value of clearances etc
On 20th January 1988 the petitioner addressed a detailed letter to the Superintendent of State Excise Bulandshahr explaining its stand and that duty had been paid thereon
State Excise authorities thereafter did not take any action against the petitioner nor did they take out samples of Homeodent tooth paste to get appropriate results as required under the Act of 1955 and the rules framed thereunder
However on 17th March 1988 the Superintendent of State Excise Bulandshahr passed a demand order directing the petitioner to deposit a sum of Rs681333420 being the alleged duty payable on Homeodent  manufactured and cleared between January 1985 and January 1988
This order was passed without issuing any notice to show cause and according to the petitioner without affording the petitioner any opportunity of hearing
The petitioner on the same day sent a rep 301 resentation requesting for compliance with the principles of natural justice and disputing the claim for duty
On 18th March 1988 the Superintendent of State Excise Bulandshahr modified his earlier order and confirmed the demand of duty amounting to Rs4667 lakhs on provisional basis
Once again the petitioner was neither served with a show cause notice nor was afforded an opportunity of personal hearing accord ing to the petitioner
While passing either of the orders no test result it is asserted was obtained to establish whether Homeodent contained alcohol or not
However on 18th March 1988 the petitioner deposited a sum of Rs1166 lakhs
The petitioners also executed a bank guarantee in favour of the District Magistrate Ghaziabad for a sum of Rs35 lakhs
On 6th April 1988 the petitioners filed an appeal before the Excise Commissioner UP against the illegal orders of the District Excise Officer
The petitioners also appeared for personal hearing before the Excise Commissioner through their advocate on 23rd April 1988
On 5th May 1988 the Excise Commissioner UP passed an order dismissing the appeal of the petitioners
However petitioner No 1 states that copy of the order was not served upon it
The petitioner No 1 further asserts that without serving a copy of the order on it and without intimating whether the order had been passed or not the District Excise Officer ap proached Ms Grindlays Bank for encashment of the bank guarantee of Rs35 lakhs and coerced according to the petitioners the bankers to encash the same forthwith
Thereafter the petitioner moved the High Court of Allahabad against the illegal actions of the respondents
The High Court directed the authorities to serve a copy of the order and restrained the respondents from encashing the bank guarantee
It is stated that while the High Court of Allaha bad was considering the writ petition of the petitioner and had granted stay as aforesaid the respondent District Excise officer encashed the bank guarantee of Rs35 lakhs without even calling upon the petitioner first to pay the amount
On 13th May 1988 the High Court of Allahabad di rected the petitioner to file a revision petition with the Central Government
A revision petition was filed along with stay application on 28th May 1988
Thereafter the Central Government granted stay against recovery of the balance amount of Rs2146 lakhs
On 22nd September 1988 the Addi tional Secretary to the Government of India in exercise of his revisional powers allowed the revision of the petition ers and declared the orders of the District Excise Officer dated 17th and 18th March 1988 as upheld in appeal by the Excise Commissioner as null and void having been passed in violation of principles of natural justice
Thereupon it the petitioners state 302 called upon the District Excise Officer and the District Magistrate to refund the amount of Rs4667 lakhs recovered from it by way of cash payment and encashment of bank guar antee in view of the revision order
The case of the peti tioner is that the State Excise authorities failed to grant the petitioner refund as prayed for despite the order of the revisional authorities
On 2nd November 1988 the District Excise Officer issued a show cause notice requiring the petitioner to show cause as to why an amount of Rs6813 lakhs be not recovered from it in respect of Homeodent manufactured and cleared during January 1985 to January 1988
In December 1988 the petitioner moved the High Court of Allahabad under Article 226 of the Constitution of India inter alia praying for a writ of mandamus for quashing and setting aside the show cause notice dated 2111988 and for refund of duty amounting to Rs4667 lakhs
On 20th Decem ber 1988 the High Court of Allahabad dismissed the writ petition filed by the petitioner
It is stated that on 10th January 1989 this Court upon special leave petitions Nos
135 3689 filed by the company was pleased to issue notice and directed stay of operation of the notice of demand
Thereafter on 20th January 1988 the District Excise Offi cer directed the petitioner to appear for personal hearing in response to the show cause notice
The petitioner ap peared before the District Excise Officer without prejudice and submitted a detailed reply to the show cause notice and also contended during personal hearing that the notice was required to be withdrawn
In its reply the petitioner cate gorically stated that the reply was being submitted without prejudice to petitioner s right to move this Court by way of a special leave petition
Thereafter the petitioner moved this Court on 21st January 1989
It is therefore neces sary to refer to the judgment and order dated 20th December 1988 in civil writ petition No Nil88 connected with civil miscellaneous writ petition No Nil88 in the High Court of Allahabad
It appears that Ms Dabur India Limited had filed the said writ petition in the High Court challenging the show cause notice dated 2nd November 1988 by the District Excise Officer
Ghaziabad
Another writ petition being writ peti tion No 116088 which is the subject matter of special leave petition Nos
135 3689 was filed by Ms Sharda the company for quashing the order of the Central Government dated 361988 which was annexure 1 to the writ petition
These two were disposed of by the said judgment
The ques tion that was mainly involved therein was that the conten tion of the petitioner that the Homeodent did not contain alcohol though one of the ingredients of such preparation was mother tincture containing alcohol and the same was assessable under Item 14FF of the 1944 Act
The Asstt
303 Collector of Central Excise Ghaziabad had taken the view that the Homeodent was classifiable Under sub heading No 3306 02 of the Chapter 33 of the and on that duty  15 ad valorem was leviable
This duty computed at the said rate by the Central Excise author ities was paid according to the petitioner on the goods manufactured from 111986
On 18th January 1988 the Dis trict Excise Officer made a surprise inspection of the units of the petitioner and when it was revealed that the Homeo dent tooth paste manufactured by Ms Dabur was toilet preparation containing alcohol within the meaning of Section 2k read with Item 4 of the Schedule referred to in section 3 of the 1955 Act and was therefore assessable to duty  100 ad valorem
The District Excise Officer Ghazia bad therefore had caused a common notice dated 1731988 to be served on the petitioner requiring it to pay duty aggre gating to Rs681333420 under the provisions of the 1955 Act on such goods manufactured from 1st January 1985 till the date of notice
As mentioned hereinbefore against this notice some representation was made by the petitioner to the District Excise Officer and thereupon the petitioner was directed to deposit provisionally the excise duty to the tune of Rs465545 145 under the 1955 Act and the same was deposited by the petitioner
Such demand wad
challenged by Ms Dabur in appeal before the Excise Commissioner
The Excise Commissioner affirmed the order of the District Excise Officer and dismissed the appeal
No appeal was filed by Ms Sharda against the demand notice of excise duty under the 1955 Act
However both the petitioners approached the Central Govt
in revision under Rule 128 of the 1956 Rules
The revision of Ms Dabur was disposed of by the Central Govt
and the result was communicated by the Addi tional Secretary to the Govt
of India by the order dated 2291988
The contention of Ms Dabur that the demand was raised on it without any opportunity of being heard and in violation of principles of natural justice was accepted and a direction was given that the case be adjudicated upon de nove after giving a show cause notice and proper opportunity of being heard to the party
The revision filed by Ms Sharda was also not entertained by the Central Government on the ground that a right of appeal was vested in Ms Sharda which could have been exercised upto 1761988 which was not done
However pursuant to the order of the Central Govern ment the District Excise Officer issued the impugned show cause notice dated 2111988 to the petitioners jointly validity of which was challenged by them in the writ peti tion and the other writ petition I as been filed by Ms Sharda only to challenge the order of the Central Govt
refusing 304 to entertain its revision
The learned Judges in the judg ment under appeal noted that the petitioner did not advance any argument on the merits of the question whether Homeo dent tooth paste is assessable to duty under the 1944 Act or under the 1955 Act and rightly so because that involved a factual scrutiny which could hardly be gone into by the High Court
The High Court was of the opinion that the question whether Homeodent tooth paste is sans alcohol cannot be adjudicated upon under the extra ordinary writ jurisdiction
On behalf of the petitioners before the High Court two contentions were raised
Firstly that the Central Govt
having set aside the order of District Excise Officer Ghaziabad whereunder excise duty to the tune of Rs466645145 was paid there was no justification for the respondents to retain that amount thereafter and a writ of mandamus be issued against the respondents directing them to refund this amount and secondly that under Rule 11 of the 1956 Rules when duties are short levied a written demand by the proper officer being made within six months from the date on which the duty was paid the short fall could be recovered
The submission was that no duty can be recovered for the period anterior to six months to be reckoned from the date of payment of duty
It was therefore urged that the show cause notice was invalid inasmuch as the District Excise Officer Ghaziabad had exceeded the jurisdiction in having recovered the duty beyond limitation
The High Court addressed itself to the question whether Article 226 of the Constitution of India was a proper reme dy
We are not really concerned with this question
The High Court however came to the conclusion that both the 1944  1955 Acts operate in different fields and there is no over lapping between the two
If the Homeodent tooth paste is found to be assessable to duty under the 1955 Act then it will not amount to review of the order of the Central Excise authorities
It was emphasised before the High Court that adjudication by the Central Excise authorities does not stop the State Excise authorities from considering the case under the provisions of the 1955 Act
Both the Acts are mutually exclusive and the authorities thereunder are fully empowered to consider the assessability separately according to the High Court
The High Court came to the conclusion that where the parties fully acquiesced with the matter and subjected themselves to the statutory procedure no action should be allowed to be taken under Article 226 of the Constitution unless the case is patently without jurisdiction
The orders having been made under the statutory provisions the Court should be loath to interfere under Article 226 of the Con stitution of India
It was emphasised by the High 305 Court that once the parties choose the statutory procedure they must to the logical end
The Central Govt
had directed the State Excise authorities to adjudicate the case de novo and therefore the District Excise Officer Ghaziabad had no option but to issue show cause notice
So the show cause notice dated 22nd November 1988 was jointly given to the petitioner pursuant to the direction of the Central Govern ment much after the orders had been passed initially or in appeal
Therefore the common show cause notice to the parties cannot according to the High Court be characte rised as a sparking point and from the backdrop of the case stated above it is amply clear that the Excise authorities had not assumed jurisdiction to proceed against the peti tioner for the first time by way of a show cause notice dated 2nd November 1988 rather it had been issued at much subsequent stage pursuant to the direction of the Central Government
The High Court came to the conclusion that the show cause notice having been issued in accordance with the directions of the Central Govt
in the revisional jurisdic tion which the petitioner itself subjected to cannot be assailed under Article 226 of the Constitution
So this show cause notice dated 2nd November 1988 cannot be equated with the showcause notice given at the initial stage to assume jurisdiction in the matter
The High Court also came to the conclusion that no writ can be issued in favour of the parties who remain sitting on the fence and took a chance of the proceedings taken up under the statutory provisions going in their favour
The High Court held the petitioner who had resorted to statutory remedies on its own could not be permitted to take recourse under Article 226 of the Constitution of India in the event of their having become successful under the former
Coming to writ petition No 116088 wherein the order of the Central Government refusing to entertain the revision had been challenged
The Central Government had refused to entertain the revision on the sole ground that the right of appeal that vested in Ms Sharda could not be exercised thereby
The High Court however came to the conclusion that the case of Ms Dabur was that it is manufacturing Homeodent tooth paste on job basis under the loan licence of Ms Sharda as per the specifications and control and the raw material of the latter but factually both the petition ers are different entities under the law and therefore each petitioner had to pursue its own remedy
Therefore on an analysis of the material the High Court found that there was nothing to interfere with the order of the Central Government
Therefore the questions that fall for determination are firstly 306 whether the High Court was justified in dismissing the writ petition of the petitioner on the ground of alternative remedy particularly when the writ petition challenged the actions of the respondents in seeking to levy and recover duties of excise under the 1955 Act as being without juris diction andor without authority of law
The next question that arises is whether the High Court was justified in dismissing the writ petition challenging particularly in two sets as has already been subjected to duty of excise under the 1944 Act
The next question that fails for consideration is whether the High Court was justified in dismissing the writ petition of the petitioner which had prayed for refund of duties of excise amounting to Rs4667 lakhs illegally recovered from the petitioner on Homeodent tooth paste under the 1955 Act in pursuance of the order which was declared null and void in revision by the Central Government
It is also necessary to consider whether the High Court was justi fied in dismissing the writ petition of the petitioner particularly when it challenged levy and recovery of duty under 12 of the 1956 Rules framed under the 1955 Act when the said rules have already been declared to be invalid and without jurisdiction by a Division Bench of the Madras High Court in the case of Citadel Fine Pharmaceuticals Pvt Ltd vs DRO 1973 Madras Law Journal p 99
The next main question requiring consideration is wheth er the respondents were acting within their jurisdiction while levying duty of excise on Homeodent under the 1955 Act when in the manufacture of Hemeodent alcohol had not been used as a raw material but mother tinctures containing alcohol had been used and particularly when at the final stage of manufacture Homeodent did not contain any trace of alcohol
The question that has really to be determined in this case is whether firstly Homeodent was classifiable under the 1944 Act or 1955 Act and who will determine that and secondly which Act will prevail in the facts and circum stances of the case
In this connection it may be mentioned that Ms Sharda had applied for a licence and was granted a loan licence to manufacture tooth paste as per the provisions of Drugs  Cosmetics Act 1944 and the Rules framed thereunder
The said licence was granted under rule 139B and was in Form 31A for manufacture of cosmetics
Subsequently Homeodent was envisaged by the Drug authorities as a homeopathic medica ment and licence had been granted accordingly
It is the case of the petitioner that tooth pastes were manufactured by the petitioner company for and on behalf of the loan licensee from the 307 following chemicals and ingredients Potassium Chlorate BPC 73 Sodium Benxoate IP Sodium Flou ride BP Plantago Offionle Mt HP 1 Cochloric Armorocie MT NP 1 Cochloric Officincie MT HP 1 Phytolecca Decandra NT Methyl Parehudron Benxoate IP Prophyle Paraphydroxy Benxoate IP Calcium Carbonate IP Sodium Alginete USP NF 1980 Titenium Oxide BP Precipitate Silico USP NF Liquid Sodium Socicylate 15 381 1972 Sodium Leuryle Sulphate High Purity Saccharine IP It is further to be noted that the final product ie the tooth paste is a homeopathic semi solid compound in which mother tincture was completely absent or present in fractionally negligible quantity depending upon the manu facturing conditions vacuum and the temperature
It is the case of the petitioner that at the time the tooth paste is manufactured packed and is ready for delivery the alcohol would diminish completely and would not be left at all
Nor can it be so traced upon any chemical testing
In this connection the petitioner sought to crave leave to several documents and some test examination reports
According to the Laboratory test which the petitioner produced the alcohol content was absent in the nine samples sent by the loan licensee
It was further stated that the Govt
of India had issued instructions vide letter dated 19th December 1957 requiring for determination of alcohol content of any product the samples must be sent to specified laboratories
Despite the said position it is the case of the petitioner that the Excise authorities acting under the 1955 Act had never withdrawn any sample of tooth paste manufactured by the petitioner within their knowledge between 1985 and 1988 a sufficiently long period during which their inspector in charge was physically present in the factory of Ms Sharda and had not only access but knowledge of the activities including the manufacture of the said tooth paste
The Superintendent of Excise Bulandshahr visited the factory of the petitioner company on 18th January 1988 and after inspecting the same enquired about the exciseability of Homeodent tooth paste
The petitioner s officers explained that Homeodent was classified under the 1944 Act and the duty had been paid accordingly
Subsequently the Superin tendent Excise called upon the petitioner to furnish details about the quantity and value of Homeodent manufac tured and cleared between 1985 and 1988
In pursuance there of tile petitioner replied vide his letter dated 20th January 1988 and in 308 details explained the reasons by Homeodent was not liable to duty under the 1955 Act
In pursuance of the reply of the petitioner no action was taken and the petitioner assumed that the matter had been closed
The petitioner has given detailed episodes of harassment
The main point that the petitioner seeks to emphasis in this case is that the High Court ought to have appreciated that the petitioner s product Homeodent tooth paste having been subjected to duty under the provisions of the 1944 Act the question of levying and recovering duty under the 1955 Act did not and cannot arise
Therefore the impugned ac tions of the respondents were required to be set aside by issuing appropriate writ of mandamus
The High Court was therefore in error according to the petitioner in dis missing the writ petition without appreciating this conten tion
The High Court ought to have appreciated that the petitioner was not seeking to circumvent the alternative remedy provided under the Act but in view of the conflicting claims of the Central and State Excise authorities seeking to classify Homeodent tooth paste under the respective Acts of 1944 and 1955 the petitioner was left with no other alternative but to challenge the actions by way of writ petition under Article 226 of the Constitution
It is con tended that the High Court ought to have appreciated the actions of the State authorities were ex facie and without authority in law in so far as they sought to levy and recov er duty on Homeodent tooth paste under the 1955 Act
There fore the petitioner was justified in challenging such actions by way of a writ petition before the High Court
It was further urged that the High Court had committed an error on the ground of alternative remedy before the High Court as also the demand raised against it could not be justified under Rule 12 beyond a period of six months as prescribed under Rule 11 particularly in view of the fact that Rule 12 as had been declared to be invalid and without jurisdiction as per the judgment of the Madras High Court
It is further contended that the High Court committed an error in dismiss ing the writ petition of the petitioner challenging the demand of duty made by the State Excise authorities amount ing to Rs68 lakhs particularly in view of the fact that as per S4 of the 1944 Act which is made the basis of valuation even under the Act of 1955 as per the Explanation II to the Schedule as interpreted by this Court in the cases of Union of India  Ors
vs Bombay Tyre International Ltd etc
  and Asstt
Collector of Central Excise  Ors
vs Madras Rubber Factory Ltd etc
 1 the duty liability could not exceed the sum of Rs26 lakhs
It was further emphasised that the High Court commit ted error in not directing the State Excise authorities to refund the amount of Rs4667 lakhs which was recovered from 309 the petitioner under Orders dated 17183
1988 which were declared to be null and void having been passed without giving any opportunity of hearing
The Sahibabad factory of Ms Dabur India Ltd was set up in the year 1979
From the very beginning the petitioner had undertaken the job of manufacturing various products covered under the 1955 Act
The petitioner had obtained the necessary licence and fell under the purview of the 1955 Act
Section 6 of the 1955 Act stipulates that the Central Govt
may by notification in the Official Gazette provide that from such date as may be specified in the notification no person shall engage in the production or manufacture of any dutiable goods or of any specified component parts or ingredients of such goods or of specified containers of such goods or of labels of such containers except under the authority and in accordance with the terms and conditions of a licence granted under this Act
Dutiable goods have been defined in the Act vide Clause c of section 2 ie meaning thereby the medicinal and toilet preparations specified in the Schedule as being subject to the duties of excise levied under the Act
It is stated that the State Excise authorities had posted an officer in the factory of the petitioners at Sahibabad for physical control on a part time basis
In the year 1985 an officer in the rank of an Inspector was posted at the said factory on full time basis for physical supervi sion and control
Hence all the activities of the petition er were within the knowledge of the respondent Excise au thorities
The version of the petitioner is that on an inquiry from Ms Sharda Bairon Laboratories Ltd for manu facturing of Homeodent tooth paste on job work basis out of the raw material and packing materials to be supplied by the said loan licensee Ms Sharda petitioner No 1 undertook the job
The petitioner company had filed a list classifying the said Homeodent tooth paste under Tariff item 14FF of the 1944 Act as the said tooth paste did not contain any alcohol directly
The classification list was filed in the pre scribed Form and with all the particulars
It was further checked up by the Inspector Range Inspector and it was subsequently approved by the Assistant Collector Central Excise according to the petitioner
On 31st August 1987 there is indeed an order of the Asstt Collector of Central Excise Division II Ghaziabad stating that the tooth paste in question was classifiable under the 1944 Act and not under the 1955 Act
It has to be understood that under the 1955 Act the duties go to the State Govt
while under the 1944 Act the duties go 310 to the Central Govt
 though both these Acts are central legislations
The authorities charged with the duties under the 1944 Act are Central Govt
employees and Central Govt
authorities are different and distinct from the authorities of the State Govt
under the 1955 Act
The basic question that has to be decided is whether in such a situation who or which authority will decide if the product in question would be leviable to duty under the 1944 Act and go to the coffers of the Central Government or whether it will be leviable under the 1955 Act and the realisations go to the State Govt
In the facts and circumstances of this case that will depend on the question whether alcohol was used as any of the ingredients in production of the product or manufacture thereof
That there was production andor manufacture and as such excise was leviable there is no dispute
The question is whether in the process any ingredient was used contain ing alcohol in respect of a product which is medicinal in nature and as such would be dutiable under the 1955 Act
Homeodent is a homeopathic preparation but it is also a tooth paste
Therefore it is a toilet preparation
Whether or not such Homeodent would be dutiable under the 1955 Act would depend upon whether it contained alcohol  or not
The authorities charged with the duties of enforcing a particu lar Act are enjoined with the task of determining the ques tion whether alcohol is contained therein or not
It is the case of the petitioner that they had paid duties of excise on Homeodent tooth paste manufactured by it on behalf of loan licensees under the 1944 Act
The total amount of duty claimed to have been paid for the said period amounted to Rs62657047
The petitioners rely heavily on the test certificates issued by the Homeopathic Pharmacopia Laborato ries of the Ministry of Health  Family Welfare Govt
of India which state that they had failed to detect any alco hol in the 9 batches of the tooth paste given to them for testing
The petitioner asserts that tooth paste is a homeo pathic semi solid compound in which mother tincture is completely absent or is present in negligible quantity with any alcohol that may be present in pheropest completely and that there are no traces of the same in the final product upon chemical testing
In January 1988 there was an inquiry about the exciseability of Homeodent tooth paste by the Superintendent of Central Excise under the 1955 Act
The gravamen of the charge is the order issued by the Distt
Excise Officer Ghaziabad on 17th March 1988 which was issued without notice to the petitioner and without giving it any opportunity
The Distt
Excise Officer however on demand from the petitioner had modified the earlier order of 17th March 1988 and had issued on 18th March 1988 a demand notice for 311 RS4666451 45 It is the grievance of the petitioner that as it was carrying on the manufacture under the 1955 Act it had applied for licence and the respondent authorities without assigning any reason refused to renew the licence of the petitioner company
The implication of such absence of renewal is that the petitioner was being called to pay an illegal demand It therefore was forced to close down its manufacturing operations
The petitioner avers that in the meeting which took place between the Excise Commissioner and the Managing Director of the petitioner company on 14th March 1988 the petitioner was orally informed that the licence would be renewed upon payment of dues under the orders dated 17th and 18th March 1988 as aforesaid
The petitioner further states that it was told by the Excise Commissioner to deposit 13rd of the amount forthwith and execute a bank guarantee for the remaining amount
According to the petitioner it had deposited the sum of Rs 1166000 and consequently the L I licence was renewed for a period from 2531988 to 3131988
Then on 1st April 1988 the petitioner was once again forced to close down its manufac turing activity in the absence of further renewal of licence for the period from 141988 to 741988
It is stated that the petitioner company had filed an appeal before the Commissioner under rule 127 of the 1956 Rules and upon compliance with the conditions of the State authorities the licence was renewed from 741988 on ad hoc basis for a period of 3 months upto 30th June 1988
The case of the petitioner is that the hearing of the appeal before the Excise Commissioner was over on 2341988
Howev er no order thereupon was passed
On 7th March 1988 Ms Grindlays Bank who are the bankers of the petitioner issued a bank guarantee inquiring whether any orders had been passed by the Excise Commissioner and whether the sum covered under the bank guarantee had become due
The peti tioner was informed by the bankers that the District Excise Officers and other officers present in the bank had served an order requiring the Bank to clear the bank guarantees
The petitioner states that at that time it had no informa tion as to the order of the Excise Commissioner but later on it came to learn that the Excise Commissioner had passed an order on 5th May 1988 but the same was not communicated to it and the bank guarantees were enforced without giving the petitioner any opportunity of filing any revision petition
The petitioner thereafter moved a writ petition before the Allahabad High Court which directed that the said bank guarantee should not be encashed until 13th May 1988
According to the petitioner the bankers under coercion were compelled to encash the bank guarantee on 9th May 1988 and issue a draft for an amount of Rs35 lakhs
The 312 writ petition of the petitioner came up for hearing before the Allahabad High Court and it was directed to file a revision petition within two weeks from 135
1988 and the same should be considered on merits
The High Court had stayed the recovery of an amount of Rs214613420 till the disposal of the stay application
On 22nd September 1988 the Additional Secretary to the Govt
of India allowed the revision petition of the peti tioner and set aside the orders of the District Excise Officer dated 17 18th March
Thereupon the petitioner called upon the District Excise Officer to refund the amount of Rs4647000 but the respondents failed to refund and neglected it
The respondents had issued a show cause notice calling upon the petitioner as to why an amount of Rs6813 lakhs be not recovered on Homeodent tooth paste manufactured and cleared between 1985 and 1988
The High Court had dismissed the writ petition which is the subject matter of another special leave petition
Respondent No 3 ie the District Excise Officer
Ghaziabad
vide his order dated 191
1989 had confirmed the show cause notice issued by him on 2nd November 1988 and also confirmed the demand for Rs685074520
The said order dated 19th January 1989 is the subject matter of challenge in writ petition No 42689
Therefore the basic question now is whether the au thorities under the 1955 Act were entitled and authorised to levy duties under the Act
In the orders dated 18 19th January 1989 passed by the District Excise Officer which is in vernacular and a translation of which is given in Annex ure XIV to the writ petition states that in reference to a confidential letter dated 13th January 1988 of the Deputy Excise Commissioner Meerut Division during the surprise inspection of the premises of Ms Dabur India Ltd and Ms Sharda Ghaziabad on 18th January 1988 by Sri Lal Ji Rai the then Distt
Excise Officer  Excise Superintendent Bulandshahr it was found that Ms Dabur India Ltd had been manufacturing a toilet preparation ie Homeodent tooth paste containing according to the said order alcohol for Ms Sharda Boiron
The question is did they do so
How does one find it out As stated in the order there is no dispute but if it was then calculating the duty us 3 of the 1955 Act a sum of Rs68 1333428 would be found due
The Officer found that there was a conspiracy and without knowledge of the officer in charge in a clandestine manner this production was carried on
This is an answer according to the impugned order us 7 of the 1955 Act
Section 7 deals with the offences and penalties under the Act and provides that if any person contravenes any of the provi sions of a notification issued us 6 313 or evades the payment of any duty of excise or fails to supply any information which he is required to supply he shall for every such offence be punishable to the punishment mentioned in the section
The officer has further found that as against an outstanding sum of Rs68 1333428
Rs 1167000 had been deposited
After narrating the incident and the presence of the counsel and lawyers the officer was of the opinion that nothing has been brought to his notice which required revision of the previous order
So there fore a break up was given and out of Rs685074520 the actual duty payable Rs4667000 has already been realised and therefore the balance duty is Rs218374528 and they have failed to realise the same
In view of this Court s order dated 10th January 1989 whereby this Court had directed that the proceedings might go on but the demands will not be enforced inasmuch as orders dated 18 19th January 1989 reiterate the order of 17th March 1988 it is necessary to refer to the order dated 17th February 1988 passed by the District Excise Officer Ghaziabad
Therein it stated that both the units were joint ly and severally inspected on surprise visits ie the units bonded laboratories and on the basis of the information collected it was revealed that Dabur India Ltd was manufac turing a suitable toilet preparation containing alcohol named Homeodent without obtaining necessary licence
Accord ing to the said order the product had been manufactured outside the bonded premises approved under the L I licence and the duty payable on this product had not been paid
The order further states that on the basis of the information and the stock a sum of Rs681333420 was payable and a challan to that effect was issued
In the first letter dated 13th March 1988 Dabur India Ltd wrote to the Distt
Excise Officer that the classification of Homeodent tooth paste made by the Excise Officer as toilet preparation was erroneous as this preparation according to Dabur India Ltd should be classified under Item 2 of the Schedule to the 1955 Act as a Homeodent preparation and not under Item 4
Item 3 to the Schedule of 1955 Act contains the follow ing Homeopathic preparations containing alcohol
Item No 4 is Toilet preparations containing alcohol or narcotic drugs or narcotic
So the question raised here is whether the tooth paste is primarily a toilet preparation or a homeopathic preparation
Such a question really in our opinion must be justiciable by the authorities enjoined to enforce the provisions
On the basis that the product was a homeopathic item a sum of Rs624529 was paid
The peti tioner further stated as follows Assuming and not admitting that your classification is 314 correct even then your calculation of duty of the product is erroneous on the following points a
The total wholesale value of the goods manufactured as on 18188 is Rs65939163
b A trade discount  20 has to be deducted from this wholesale price Rs 132637327
The balance amount comes to Rs526754236
The excise duty element in this amount comes to Rs 263377 118
The assessable value comes to Rs263377 118
The calculation chart showing these calculations is attached as Annexure B 
Kindly note that for central Excise purpose the excise able value declared to the CE Deptt
on the total goods manufactured upto 18188 is only Rs466645 145 and the wholesale price of these goods is Rs663186635 only
This too is evident from Annexure B 
We would therefore request you to kindly amend your demand notice accordingly
Please note that the foregoing is without any prejudice whatsoever to any arguments that may be raised by us at the time of hearing with the Commissioner UP Excise Allahabad or during any legal proceedings arising out of your afore mentioned demand notice or adjudicatory order of the Commis sioner
We also reserve the right to adduce further grounds in our defence and support at anyall future occasions in this connections
 On 18th March 1988 there was further amendment by the Distt
Excise Officer Ghaziabad he stated as follows With reference to this office s notice No 1851 2 dated 18388 both the units are jointly and severally informed that in the application letters dated 17388 received separately from both the units the total wholesale price of the total Homeodent tooth paste manufactured has been de clared as Rs65739 15631t has also been informed that 315 for the purpose of Central Excise Duty the total assessable value of the total quantity of Homeodent tooth paste manu factured until 19188 is Rs466645 145 and that the total wholesale price on this quantity has been declared as Rs663186635 to the Central Excise Deptt
Based on your declaration and clarification given in your above application and
on the basis of statistics and decla rations that exciseable value on a provisional basis for the total quantities of the cosmetics homeodent tooth paste containing alcohol which has been sold until 18188 and which in stock on 18188 has accepted as Rs466645 145 instead of Rs68133420
This does not mean that this value has been finally accepted
One to the fore mentioned the amount of Rs68 1333 120 is amended to Rs466645145 in the office s notice No 1851 2 dated 18188
On this partial amendment both the units are jointly and severally ordered to provisionally deposit Rs466645 145 instead of Rs68 1332420 as duty in the State Treasury Ghaziabad immediately on receipt of this notice under the appropriate account head and to produce a copy of the receipted Treasury Challan as proof of deposit in this office
 In view of the facts alleged and found by the District Excise Officer Ghaziabad as mentioned hereinbefore it appears to us that the Homeodent was a medicinal and toilet preparations and liable to excise duty
This Court in Ms Baidyanath Ayurved Bhawan Pvt Ltd Jhansi vs The Excise Commissioner UP  Ors has held that in order to attract duty under the 1955 Act all that is re quired is that a medicinal preparation should contain alco hol
Alcohol may be part of the preparation either because it is directly added to the solution or it came to be in cluded in it because one of the components of that prepara tion contained alcohol
It is undisputed that mother tinc ture was one of the components that was used in the prepara tion of Homeodent and it has been found that alcohol was there and mother tincture was added in the medicinal prepa ration as its component
That was not the case before any authorities in this case but being present it was found in liquid form which incidentally again was disputed because test reports were not accepted by the petitioner but accord ing to the respondent authorities indicated the presence of alcohol
Section 31 of the 1955 Act was attracted
This Court in the 316 aforesaid decision further reiterated that even if the imposition of excise duty under section 31 of the said Act on preparations in which alcohol was indirectly introduced attracts multipoint taxation that by itself would not render the duty illegal
The provisions for rebate of duty on alcohol contained in Section 4 of the said Act show that multipoint tax on medicinal preparations containing alcohol was within the contemplation of the legislature otherwise there was no purpose in incorporating section 4 into the Act
In this connection section 4 of the 1955 Act may be referred to which is as follows 4
Rebate of duty on alcohol etc supplied for manufac ture of dutiable goods Where alcohol narcotic drug or narcotic had been supplied to a manufacturer of any dutiable goods for use as an ingredient of such goods by or under the authority of the collecting Government and a duty of excise on the goods so supplied had already been recovered by such Government under any law for the time being in force the collecting Government shall on an application being made to it in this behalf grant in respect of the duty of excise leviable under this Act a rebate to such manufacturer of the excess if any of the duty so recovered over the duty leviable under this Act
 In this case however the case of the petitioner is that duty has been recovered under the 1944 Act if any refund has to be made it must be made in accordance with law
There is a question of limitation for claiming refund of this duty
The provisions are not clear
In such a situa tion it appears to us that the justice requires that provi sions should be made more clear and in the view of the facts and the circumstances that have happened we would direct that if the petitioners are entitled to any refund of the duty already paid to the Central Government in view of the duty imposition now upheld against them in favour of the State Government such refund application should be enter tained and considered in accordance with law
We are con scious in giving this direction we are not strictly follow ing the letter and the provisions of the Act
But in a case of this nature where there is some doubt as to whether duty was payable to the Central Government under the 1944 Act or whether the item was dutiable under the 1955 Act it would be just and proper and in consonance with justice in fiscal administration that the Central Government should consider in the light of the facts found if an application is made under section 11B of the 1944 Act and pass appropriate order
Such application should be made within four months from the date of the judgment
In the facts 317 and the circumstances 01  this case the limitation period under section 1 lB of the 1944 Act should not apply
This direction in our opinion must be confined in the facts and the circumstances of this case only
Our attention was drawn to the observations of this Court in Union of India  Ors
vs Bombay Tyre International Ltd etc
 supra in respect of the valuation
But the point not having been taken at any stage before the authorities it is not proper for us at this stage to go into this question
We will proceed in view of the facts and the circumstances of this case and to do justice between the parties on the basis that the duty has been correctly imposed
We have looked into the order of the District Excise Officer Ghaziabad and we find that all relevant facts have been considered and no facts were brought before us contrary to the findings nor any conten tions of substance raised which can induce us to hold to the contrary
Reference may also be made to the observations of this Court in Mohanlal Maganlal Bhavsar  Ors
vs Union of India  Ors for the test to determine whether an item of medicinal preparation falls under Item 1 of the Schedule to the 1955 Act
It has been determined by the authorities enjoined to enforce that Act and such finding has not been assailed on any cogent or reliable ground in any proper manner
If that is the position then that order must be upheld but it must be upheld that Homeodent was dutiable and as such the impugned order was correctly passed by the District Excise Officer
Our attention was drawn to the observations of this Court in NB Sanjana Assistant Collector of Central Ex cise Bombay  Ors
vs The Elphinstone Spinning and Weaving Mills Co Ltd  But in view of the facts on which the parties rested their case before the authori ties it is not necessary at this stage to go into this controversy
In the aforesaid view of the matter we are of the opinion that the impugned order dated 18th January 1989 passed by the District Excise Officer Ghaziabad must be given effect to and thereafter the petitioner s application for refund if any made before the authorities under sec tion 4 of the 1944 Act within the time indicated as before should be disposed of in the manner indicated above if made
Before we part with this case two aspects have to be adverted to one was regarding the allegation of the peti tioner that in order to compel the petitioners to pay the duties which the petitioners con 318 tended that they were not liable to pay the licence was not being renewed for a period and the petitioners were con stantly kept under threat of closing down of their business in order to coerce them to make the payment
This is unfor tunate
We would not like to hear from a litigant in this country that the Government is coercing citizens of this Country to make payment of duties which the litigant is contending not to be leviable
Government of course is entitled to enforce payment and for that purpose to take all legal steps but the Government Central or State cannot be permitted to play dirty games with the citizens of this country to coerce them in making payments which the citizens were not legally obliged to make
If any money is due to the Government the Government should take steps but not take extra legal steps or manoeuvre
Therefore we direct that the right of renewal of the petitioner of licence must be judged and attended to in accordance with law and the occa sion not utilised to coerce the petitioners to a course of action not warranted by law and procedure
Secondly in a situation of this nature we are of the opinion that the Government should consider feasibility of setting up of a machinery under a Council to be formed under Article 263 of the Constitution to adjudicate and adjust the dues of the respective Governments
In these peculiar facts it appears that the dispute is under two different central legislations and under one the State authorities will realise and impose the taxes on finding on certain basis and under the other the same transaction may be open to imposition by Central Government authorities on a particular view of the matter
In such a situation how and wherein the refund should be made of any duty paid in respect of part of a transaction to one of the authorities the State or the Centre to be adjusted should be the subject matter of a settlement by the Council to be set up under Article 263 of the Constitution
This is a matter on which we draw the attention of the concerned authorities for examination because section 3 of the 1955 Act and section 3 of the 1944 Act may overlap similar transaction in certain cases
Writ petitions are disposed of with the aforesaid direc tions
Special leave granted in SLP Civil No 1610 of 1989 Ms Dabur India vs State of UP  Ors  and SLP Civil Nos
135 36 of 1989 Sharde Bairon Laboratories vs State of UP  Ors
Appeals are disposed of in the light of the directions given hereinbefore
Save as aforesaid all interim orders are vacated
In the facts and the circumstances of the case the parties will pay and bear their own costs
RSS Petitions disposed of


Summary:
Under the Explanation added to section 2711c of the Income Tax Act 1961 by the Finance Act 1964 the assessee in a case where the total income returned was less than 80 per cent of the total income assessed was to he deemed to have concealed the particulars of his income unless he proved that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part
In his return of income for the assessment year 1966 67 the assessee respondent declared certain loss
The wealth statements called for did not disclose investment in lands
Later it was found that he had purchased a plot in his son s name
In the assessment it was stated that the total consid eration was Rs80000 out of which Rs25000 was the payment in respect of the portion purchased for his son
The exami nation of the material and the document revealed that the total consideration was Rs 140000
The on money payment made by him on behalf of his son was Rs 18750
Since the assessee could not adduce evidence to prove the nature and source of investment the ITO treated the sum as the undisclosed income and initiated penalty proceedings under section 2711c of the Act for concealment of income and referred the case to IAC
The IAC imposed a penalty equal to the income concealed holding that the assessee had not discharged the burden cast upon him by the Explanation
In appeal the Tribunal set aside the penalty on the ground that the assessee had at no time given any false or different particulars about this property in his return of income or at any time during the assessment proceedings and therefore there could not he any question of his having filed any incorrect particulars that since the assessee had not stated in the assessment proceedings that he had pur chased the pro 256 perty only for Rs80000 and during the examination and accepted that though there were two agreements but the real consideration was Rs 140000 it could not be said that he had been wilfully negligent or fraudulent in this regard that as regards concealment his explanation was that there was some cash available for purchase of the plot and that no doubt the Income Tax Officer might be justified to say that not only this explanation was not convincing but false the rejection of explanation even on the ground of falsity would not mean that the addition represented the assessee s income and more so of the concealed income
It also refused to refer to the High Court the questions of law preferred by the revenue
In the appeal by the Revenue under section 2562 of the Act the High Court found that there was no proof to show that the said sum of Rs 18750 represented the income of the relevant year and accordingly held that no question of law arose
Allowing the appeal by special leave the Court HELD 1
The High Court was in error in not correctly applying the principles of law laid down by this Court in CIT vs Mussadilal Ram Bharose to the facts of the case
The decision therefore was not sustainable
262F 21
The presumption that could be raised against the assessee under section 2711c of the Act as it stood at the relevant time that he was guilty of fraud or gross or wilful neglect resulting in concealment of income was a rebuttable presumption and if there was cogent material to rebut the evidence that was acceptable the said presumption would not stand
1261E 262B 22
In the instant case the falsity of the explanation given by the assessee had been accepted by the Tribunal in as much as it had stated that the Income Tax Officer was justified to say that not only the explanation was not convincing but false because there was no cash available to the assessee for payment of the extra money paid
Therefore no explanation was forwarded as to where from the extra money came
If that was the position and the presumption was further that the assessee was guilty of fraud then the subsequent presumption followed that he had concealed the income
262B D 23
The presumption thus raised against the assessee that he was guilty of fraud or wilful neglect as a result of which he had concealed the 257 income would be there
This presumption could have been rebutted By cogent reliable and relevant materials
No such attempt was made in the case
It could not therefore be said that the Tribunal was justified in rejecting the claim
262E F Statement of the case to be forwarded by the Tribunal within four months and the High Court to dispose of the reference as quickly as possible 262G