Case: Shiva Glass Works Co. Ltd Vs. Assitant Collector Of Central Excise And Others

OJHA, J. 1. This appeal by special leave has been preferred against the judgment dated July 30, 1976 of the Calcutta High Court in Appeal from Original Order No. 167 of 1972. The facts in nutshell necessary for the decision of this appeal are the appellant-Company, a licensee under the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) carried on during the relevant time, namely, September 1, 1961 to September 26, 1963, business of manufacturing different types of glasswares which were excisable goods under the Act. The appellant used to present ARI 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 appellants office was searched by the excise authorities on September 26, 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 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 March 26, 1968 was served on the appellant by the Assistant Collector of Central Excises, 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 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 10-A of the Central Excise Rules, 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 10-A 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 August 26, 1968, to pay to the Central Government, an additional duty of Rs. 1, 41, 829.11. 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 to the appellant that Rule 10 and not Rule 10-A of the Rules was applicable and on this view the order dated August 26, 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 10-A, the writ petition was dismissed by the judgment under appeal 2. 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 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 10-A 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 by useful to extract Rule 10 and 10-A They read as hereunder "10. Recovery of duties or charges shore-levied or erroneously refunded. - When duties or charges have been short-levied through inadvertence, error, collusion or misconstruction on the part of an officer, or through misstatement as to the quantity, description or value of such goods on the part of the owner, or when any such cause, or charge, after having been levied, has been owing to such cause, erroneously refunded, the person chargeable with the duty or charge so short-levied, or to whom such refund has been erroneously made, shall pay the deficiency or the amount paid to him in excess as the case may be, on written demand by the proper officer being made within three months from the date on which the duty or charge was paid or adjusted in the owners account, current, if any, or from the date of making the refund." "10-A. Residuary powers for recovery of sums due to government. - Where these Rules do not make any specific provision for the collection of any duty, or of any deficiency in duty 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." * 3. 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 appellants office on September 26, 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 misstatement 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 March 23, 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) Glasswares and (3) Fancy wares for the purposes of provisional assessment. These prices are inclusive of central excise duty. As regards trade discounts to be deducted from the said prices as per Section 4 of the Act we declared that (1) 25 per cent should be deducted from the price list for bottles and phials (2) 35 per cent from the price list for glasswares and (3) 20 per cent from the price list for fancy wares over and above necessary deduction for central excise duty included in the prices." * 4. 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 others tests and whereas the appellant had requested the excise authorities as per Rule 9-B of the Rules to make provisional assessment of excise duty of the goods pending final assessment, the appellant 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 any discrepancy was detected or found, the same used to be paid by the appellant 5. The question as to whether Rule 10 or Rule 10-A of the Rules was applicable has to be determined in the background of the procedure which was followed even according to the appellant as indicated above. The legal position that Rule 10-A does not apply where the case is covered by Rule 10 of the Rules is well settled in view of the decision of this Court in N. B. Sanjana, Asstt. C.C.E. v. Elphinstone Spg. & Wvg. Mills Co. Ltd. ( 1971 (1) SCC 337 : 1971 (3) SCR 506 ), on which reliance has been placed by learned counsel for the appellant. Consequently, Rule 10-A 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 provisions of Rule 9-B. On this basis and on his own finding also that Rule 9-B 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 appellant 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 misstatement by the appellant. Consequently, the case clearly fell 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 9-B 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 a 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 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 verification. In the judgment appealed against the Division Bench of the High Court has found that there was no assessment as is understood in 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 10-A. 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. ( 1972 (2) SCC 560 : 1973 (1) SCR 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 know 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 facts as well as the requirements of law. With regard 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 a disputed case prove an "assessment". This had to be done by proof of the actual steps taken which constitute assessment 6. 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. ( 1972 (2) SCC 560 : 1973 (1) SCR 822 ) 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 10-A and not Rule 10 of the Rules.

Decision:
0[ds]3. 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 appellants office on September 26, 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 misstatement 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 March 23,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 others tests and whereas the appellant had requested the excise authorities as per Rule 9-B of the Rules to make provisional assessment of excise duty of the goods pending final assessment, the appellant 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 any discrepancy was detected or found, the same used to be paid by thethe case clearly fell 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 9-B 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 a 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 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 verification. In the judgment appealed against the Division Bench of the High Court has found that there was no assessment as is understood in 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 10-A.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. ( 1972 (2) SCC 560  : 1973 (1) SCR 822 ) 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 10-A and not Rule 10 of the Rules.