Case: M/S. Colfax Laboratories (India) Limited &amp; Another Vs. The State of Goa &amp; Others

Nos.109 of 1991 and 84 of 1992 the liability of payment of excise duty at 100% ad valorem could be cast if it was ultimately held that the classification of the subject products was made as toilet preparations. However, the Company did not despatch the products in compliance with the Rules and by filling in Form AR-2. Rule 9, 40 and 81 of the Rules read as under:- "9. Time and manner of payment of duty. - (1) No dutiable goods shall be removed from any place where they are manufactured or any premises appurtenant thereto, which may be specified by the Excise Commissioner in this behalf, whether for consumption, export or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these rules or as the Excise Commissioner may require." "40. Issue from a bonded manufactory.- (1) Issues of alcoholic preparations and preparations containing opium, Indian hemp or other narcotic drugs and narcotics shall be made from a bonded manufactory on payment of duty. The licensee shall present before the officer-incharge an application in Form AR- 2 signed by him or by his authorized representative. The officer-in-charge shall, after checking the entries and realizing the duty payable, allow the required quantities to be removed after issuing a permit". "81. Clearance on payment of duty. - When the licensee desires to remove goods on payment of duty, he shall make an application in Form AR-2 in triplicate, to the officer-in-charge or the proper officer, as the case may be, at least twelve hours before he is intended to remove the goods. The officer shall, thereupon, assess the amount of duty leviable on the goods and on production of evidence that the sum has been paid into a treasury or the sum has been debited to the accountcurrent, as the case may be, shall allow the goods to be cleared".17. Form AR-2 has been appended to the Rules and contains the columns inter alia of "Value" and "Duty". Under the column "Duty" there are two sub-columns, namely, "Rate" and "Amount". From the value shown in the AR-2 Form , if duty is reduced, the wholesale price is arrived at and on this wholesale price 100% ad valorem will be the duty payable. In the Affidavit-in-reply filed on behalf of the Respondents it has been stated in para 20 as under:- "In order to calculate the duties, it was necessary to get particulars from the assessee/Petitioner. The Department requested the assessee by letter dated 15-9-1999 to furnish copies of invoices from 16-8-1991 to 17-8-1998 in respect of two products sold by them. The assessee by their letter dated 30-9-1998 suggested that Department verifies the invoices at the factory premises itself. Accordingly, the officer of the Department undertook the process of verification of the invoices at the factory premises of the assessee."It is also obvious from the record that the Petitioners went on paying the duty at Rs.10/- per proof litre and they have not indicated exactly the wholesale price and merely by paying the excise duty on proof per litre basis it cannot be accepted that it was a commodity price as shown in the invoices. It is thus clear that the onus of proving the issue of cum-duty price squarely falls on the Petitioners and the learned Senior Counsel appearing for the Respondents fairly conceded that if this issue was proved, the formula as set out in the decision of this Court in Writ Petition No.337 of 1998 would be applicable. The Petitioners will have to submit the invoices/AR-2 forms or any other documentary proof to arrive at the conclusion that the price shown by them was a cum-duty price and unless it is established that the price was a cum-duty price, the quantification in the manner advanced by the Petitioners cannot be undertaken. 18. However, it is pertinent to note that the impugned Order is eloquently silent on the issue of cum-duty price and the applicability of the formula set out in our Judgment in Writ Petition No. 337 of 1998. No reasons have been given as to why the same formula could not be adopted though it has been stated that as per the Orders passed by this Court in Writ Petition Nos. 109 of 1991 and 84 of 1992, the Petitioners were aware of their ultimate liability in the products to be classified as toilet preparations. This reasoning does not suffice the legal requirements moreso when this Court has made applicable the cum-duty formula devised in the case of Government of India v. Madras Rubber Factory Ltd.(supra) for the earlier period whilst deciding Writ Petition No.337 of 1998. The learned Senior Counsel appearing for the Petitioners was right in his contentions that the subsequent Affidavits filed cannot fill in this lacuna and the impugned Order, therefore, is unsustainable on this ground. The dispute of quantification of the excise duty after the decision of the Supreme Court partly confirming our Judgment in Writ Petition No.337 of 1998 is required to be adjudicated afresh for the relevant periods and it shall be the responsibility of the Petitioners to place before the appropriate authority all the relevant records so as to ascertain the issue of commodity price to adopt the formula set out in our Judgment in Writ Petition No.337 of 1998 for quantification of the excise duty for the subsequent periods covered by the impugned Order. We are not impressed with the contentions of the Petitioners that the quantification in this case is also required to be undertaken by following the same formula suo motu. The Petitioners will have to appear before the appropriate authority and on the basis of the record that may be available with them the issue of cum-duty price will have to be settled. No other issues raised in this Petition remain to be decided in view of our earlier decision in Writ Petition No.337of 1998.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]16. The Petitioners were fully aware that as per the Orders passed by this Court in Writ Petition Nos.109 of 1991 and 84 of 1992 the liability of payment of excise duty at 100% ad valorem could be cast if it was ultimately held that the classification of the subject products was made as toilet preparations. However, the Company did not despatch the products in compliance with the Rules and by filling in FormRule 9, 40 and 81 of the Rules read asTime and manner of payment of duty.(1) No dutiable goods shall be removed from any place where they are manufactured or any premises appurtenant thereto, which may be specified by the Excise Commissioner in this behalf, whether for consumption, export or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these rules or as the Excise Commissioner may require.Issue from a bonded manufactory.(1) Issues of alcoholic preparations and preparations containing opium, Indian hemp or other narcotic drugs and narcotics shall be made from a bonded manufactory on payment of duty. The licensee shall present before thean application in Form AR2 signed by him or by his authorized representative. Theshall, after checking the entries and realizing the duty payable, allow the required quantities to be removed after issuing a permit".Clearance on payment of duty.When the licensee desires to remove goods on payment of duty, he shall makean application in Formin triplicate, to theor the proper officer, as the case may be, at least twelve hours before he is intended to remove the goods. The officer shall, thereupon, assess the amount of duty leviable on the goods and on production of evidence that the sum has been paid into a treasury or the sum has been debited to the accountcurrent, as the case may be, shall allow the goods to be cleared".17. Formhas been appended to the Rules and contains the columns inter alia of "Value" and "Duty". Under the column "Duty" there are twonamely, "Rate" and "Amount". From the value shown in theForm , if duty is reduced, the wholesale price is arrived at and on this wholesale price 100% ad valorem will be the duty payable. In thefiled on behalf of the Respondents it has been stated in para 20 asorder to calculate the duties, it was necessary to get particulars from the assessee/Petitioner. The Department requested the assessee by letter datedto furnish copies of invoices from98 in respect of two products sold by them. The assessee by their letter datedsuggested that Department verifies the invoices at the factory premises itself. Accordingly, the officer of the Department undertook the process of verification of the invoices at the factory premises of the assessee."It is also obvious from the record that the Petitioners went on paying the duty at Rs.10/per proof litre and they have not indicated exactly the wholesale price and merely by paying the excise duty on proof per litre basis it cannot be accepted that it was a commodity price as shown in the invoices. It is thus clear that the onus of proving the issue ofprice squarely falls on the Petitioners and the learned Senior Counsel appearing for the Respondents fairly conceded that if this issue was proved, the formula as set out in the decision of this Court in Writ Petition No.337 of 1998 would be applicable. The Petitioners will have to submit theforms or any other documentary proof to arrive at the conclusion that the price shown by them was aprice and unless it is established that the price was aprice, the quantification in the manner advanced by the Petitioners cannot be undertaken.However, it is pertinent to note that the impugned Order is eloquently silent on the issue ofprice and the applicability of the formula set out in our Judgment in Writ Petition No. 337 of 1998. No reasons have been given as to why the same formula could not be adopted though it has been stated that as per the Orders passed by this Court in Writ Petition Nos. 109 of 1991 and 84 of 1992, the Petitioners were aware of their ultimate liability in the products to be classified as toilet preparations. This reasoning does not suffice the legal requirements moreso when this Court has made applicable theformula devised in the case of Government of India v. Madras Rubber Factory Ltd.(supra) for the earlier period whilst deciding Writ Petition No.337 of 1998. The learned Senior Counsel appearing for the Petitioners was right in his contentions that the subsequent Affidavits filed cannot fill in this lacuna and the impugned Order, therefore, is unsustainable on this ground. The dispute of quantification of the excise duty after the decision of the Supreme Court partly confirming our Judgment in Writ Petition No.337 of 1998 is required to be adjudicated afresh for the relevant periods and it shall be the responsibility of the Petitioners to place before the appropriate authority all the relevant records so as to ascertain the issue of commodity price to adopt the formula set out in our Judgment in Writ Petition No.337 of 1998 for quantification of the excise duty for the subsequent periods covered by the impugned Order. We are not impressed with the contentions of the Petitioners that the quantification in this case is also required to be undertaken by following the same formula suo motu. The Petitioners will have to appear before the appropriate authority and on the basis of the record that may be available with them the issue ofprice will have to be settled. No other issues raised in this Petition remain to be decided in view of our earlier decision in Writ Petition No.337of 1998.