Case: Assistant Collector Of Central Excise,Calcutta Division Vs. National Tobacco Co. Of India Ltd

1. The National Tabacco Co. of India Limited (hereinafter referred to as "the Company"), the Respondent in the appeal before us, manufactures Cigarettes, at its Factory in Agrapara, upon which Excise duty is levied by the appellant, the Assistant Collector of Central Excise, Calcutta Division (hereinafter referred to as "the Collector"). The rates at which the Excise duty was imposed upon the cigarettes of the Company under the provisions of the Central Excises and Salt Act of 1944 (hereinafter referred to as "the Act") were varied, from time to time, by the provisions of Finance Acts of 1951and 1956 and the Additional Duties of Excise (Goods of Special Importance) Act of 1957. The Collector maintained an office at the factory itself for the levy and collection of tax. The Company was required to furnish quarterly consolidated pricelists which used to be accepted for purposes of enabling the Company to clear its goods, but, according to the Collector, these used to be verified afterwards by obtaining evidence of actual sales in the market before issuing final certificates that the duty had been fully paid up. The particulars of the cigarettes to be cleared were furnished by the Company on forms known as A.R.I. forms required by R. 9 of the Central Excise Rules. For facilitating collection of duty, the Company maintained a large sum of money in a current account with the Central Excise authorities who used to debit in this account the duty leviable on each stock of cigarettes allowed to be removed. This current account, known as "personal ledger account", was maintained under the third proviso to R. 9 which lays down(1)" xx xxProvided also that the Collector may, if he thinks fit, instead of requiring payment of duty in respect of each separate consignment of goods removed from the place or premises specified in this behalf, or from ase duly approved, appointed or licensed by him keep with any person dealing in such goods anof the duties payable thereon and such account shall be settled at intervals not exceeding one month and theshall periodically make deposit therein sufficient in the opinion of the Collector to cover the duty due on the goods intended to be removed from the place of production, curing, manufacture of storage".It appears that the company used to furnish its quarterlyto the Collector on forms containing nine columns including one to show the "distributors selling price". Until July 1957, so long as this form was used by the Company, no difficulty seems to have been experienced in checking the prices. But, after this column was dropped from the new form of six columns, the excise authorities seem to have encountered some difficulty in valuing the cigarettes for levying excise duty. They, therefore, changed the basis of assessment itself from "the Distributors Selling Price" to "the wholesale cash selling price at which stockiest or agents are selling the same to an independent buyer in the open market". They held the view that such a change could be made having regard to the provisions of S. 4 of the Act. The Deputy Superintendent of Central Excise informed the Company of this change of basis onby a letter which also asked the Company to furnish its price lists immediately "for determining the correct assessable value" of its cigarettes. On 7th November, 1958, the Deputy Superintendent served a notice upon the Company demanding payment of a sum of Rs. 1,67,072.40 as basic Central Excise duty and Rs. 74,574.85 as additional Central Excise duty on account of short levy for a certain brand of cigarettes cleared from the Companys factory from 10th August 1958, to 5th November, 1958. Onthe Deputy Superintendent sent another notice demanding payment of a sum of Rs. 6,16,467.49 as basic Central Excise duty and Rs. 2,10,492.15 as additional Central Excise duty for short levy in respect of some brands of cigarettes cleared from the factory between8. Onthe Deputy Superintendent sent a third notice to the Company under R.10A of theCentral Excise Rules 1944, demanding payment of Rs. 40,726.48 as basic Central Excise duty and Rupees 16,958.50 as additional duty for short levy in respect of various brands.3. The Company applied to the Calcutta High Court under Article 226 of the Constitution against the three notices mentioned above, one of which specifically under Ruleand the other two under Rule 10 of the Central Excise Rules. A learned Single Judge of that Court quashed the notices by his order ofon the ground that the Company had not been given any opportunity of being heard so as to be able to meet the material collected behind its back which formed the basis of the demands under the aforesaid three notices. On a joint request of both sides, the High Court did not decide the question whether notices of demand were time barred. But, the learned Judge saidin this order will prevent the respondent from proceeding to take any step that may be necessary for such assessment or for the realisation of the revenue in accordance with the law".The learned Judge had also held that neither the basis adopted by the company nor that put forward by the Collector was correct. The learned Judge pointed out the correct basis which was considered by him to be in consonance with the provisions of Section 4,(a) of the Act. He indicated the various factors required by Section 4 of the Act which had to be taken into account and helddetermination as to whether a wholesale market exists at the site of the factory or the premises of manufacture or production etc. or which is the nearest wholesale market, or the price at which the goods or goods of like kind and quality are capable of being sold must necessarily be a complicated question and must be determined carefully upon evidence and not arbitrarily. Such determination cannot wholly be made ex parte, that is to say, behind the back of the assessee. A satisfactory determination can only be made by giving all information to the assessee and after giving the assessee an opportunity of establishing his own point of view, or checking and/or challenging any material or evidence upon which the Excise Authorities wish to depend".As no appeal was filed by either side against this decision, it became final and binding between parties before us so that the question whether the High Court has correctly interpreted Section 4 of the Act in determining the basis on which the excise duty leviable could be assessed is not under consideration here.6. When the case went back to the Collector, he issued a fresh notice onAs the validity of this notice is the real question now in issue in the appeal before us, it may be reproduced in toto here. It runs as follows :RegisteredOF INDIACollectorate of Central Excise Office of the Assistant Collector of Central Excise,Calcutta I Division (5, Clive Row), Calcutta.NOTICEC. No. VI (b) 14/3/58/3886Dated 21st April, 1960.ToM/s. National Tabacco Co. (India) Ltd.,Agarpara,24 Parganas.In connection with the assessment of Central Excise duties for the periods :I. from 1st October, 1957 to 5th November, 1958 in respect of 316,885,000 of "No. Ten" brand Cigarettes.II. from 1st January, 1958 to 28th January, 1958 in respect of 6,600,000 of "D.L.T. Mag" Cigarettes.III. from 1st January, 1958 to 5th February, 1958 in respect of 9594,000 of "May Pole" cigarettes.IV. from 1st January, 1958 to 7th February, 1958 in respect of 3143,500 "Carltons Gold Seal" Cigarettes.V. from 1st January 1958 to 31st January, 1958 in respect of 1471,250 of "John Peel" cigarttes.VI. from 1st January, 1958 to 16th January, 1958 in respect of 8200,000 of "Light House" Cigarettes.VII. from 1st January, 1958 to 16th January, 1958, in respect of 9070,000 of "Gold Link" Cigarettes.Please note that a sum of Rs. 10,05,133. 25 np. (Rupees 10 lacs five thousand one hundred thirty three andnaya paise only) as basic Central Excise duty and a total sum of Rupees 3,43,208.25 np. (Rupees three lackthousand two hundred eight andnaya paise only) as additional duty had been provisionally debited in your account on the basis of the price lists supplied to us by you for the quarters.(i) beginning October, 1957 dated 17th October, 1957.(ii) beginning January, 1958 dated nil.(iii) beginning April, 1958 dated 14th April, 1958,(iv) beginning July, 1958 datedand(v) beginning October, 1958, dated nil.2. We now propose to complete the assessments for the said periods from the evidence in our possession from which it appears :(i) that there is no wholesale market for the goods covered by your price lists in or near the factory or the place of manufacture and that the nearest wholesale market for the sale is the Calcutta market.(ii) the wholesale cash price of the articles in question at the time of sale and/or removal of the goods at the Calcutta market at which goods of like kind or quality are sold or are capable of being sold have been ascertained by us and the evidence at our disposal reveals that the prices quoted by you in yourare not correct.3. The prices are as per chart annexed hereto which has been prepared on the basis of available evidence in terms of Section 4 (a) of the Central Excises and Salt Act, 1944. The vouchers mentioned in the chart are available for your inspection at any time next week during office hours. After obtaining inspection of the vouchers please attend at our office at 5 Clive Row, Calcutta on 2nd May 1960 at 10.30 a.m. for the purpose of discussing the points mentioned above.4. We are prepared to give you a personal hearing with regard to all the points indicated above. If you have any evidence in support of your contention you are at liberty to produce the same at the time of hearing. There after please note that we propose to make the final assessment in accordance with law.Sd/(M. D. Mukherjee)Assistant Collector of Central Excise,Calcutta I Division, Calcutta".The Company challenged the validity of this notice by means of a second petitioner for Writs of Prohibition and Mandamus against the Collector on the ground that the notice was barred by time and was issued without jurisdiction so that no proceedings founded on it could be taken. It was prayed that the Collector may be ordered to cancel the notice. The petition was allowed by a learned Single Judge of the Calcutta High Court onon the ground that such a notice was barred by the provisions of Rule 10 of the Central Excise Rules because the notice was held to be fully covered by Rule 10 and by no other rule. A Division Bench of the High Court confirmed this view onand dismissed the Collectors appeal. The case having been certified, under Article 133 (a), (b) and (c), for an appeal to this Court, this question is before us now.8. The learned Single Judge as well as the Division Bench of the Calcutta High Court said that there was not enough material on record to conclude that there was any "provisional assessment" under Rule959 and substituted by Rule

Court's reasoning:
9. We order directing provisional assessment, contemplated by Rule(applicable at the relevant time) has been placed before us. Nor was the Company asked by the Collector to furnish a bond to pay up the difference after making a final assessment as was required under Rulet was, however, contended for the Collector that the execution of a bond, for the satisfaction of the Collector, could be dispensed with in a case where the Company kept a large sum of money in deposit in the "personal ledger account" to guarantee its ability to meet its liabilities. It was also pointed out that the learned Single Judge as well as the Division Bench had found that the practice of provisionally approving thed by the Company, pending acceptance of their correctness after due verification, had been established as a matter of fact. It was submitted that this was substantially a "provisional assessment" covered by Ruleh it may not conform to the technical procedural requirements of such an assessment.Even if the making of debit entries could, on the facts of the case, be held to be merely provisional we think that what took place could not be held to be a "provisional assessment" within the provisions of Rule 10B which contemplated the making of an order directing such an "assessment" after applying the mind to the need for it.11. Before proceeding further we will deal with the question whetherthe Division Bench correctly refused to permit an argument that the impugned notice ofl under Rule10A. The ground given for this refusal was that such a case was neither taken before the learned single Judge nor could be found in the grounds of appeal despite the fact that the appellant had ample opportunity of amending its. memorandum of appeal. The appellant has, however, relied on a previous intimation given to the counsel for the respondent that such a contention would be advanced at the hearing of the appeal and also on an application datedpraying for permission to add the alternative ground that the impugned notice. We think that this refusal was erroneous for several reasons. Firstly, the Company having come to Court for a Writ of Prohibition on the ground that the impugned notice was issued without jurisdiction had necessarily to establish the case, which is set up in paragraph 25 of its Writ Petition, that the notice was not authorised by the rules including Rulethe notice ofwas followed onby a correction by another notice of certain statements both the notices were assailed in paragraph 25the applicability of Rulewas very much in issue. Secondly, we find, from the Judgment of the learned Single Judge that, as the burden lay upon the petitioning Company to demonstrate, for obtaining a Writ of Prohibition, that the impugned notice was not authorised by any rule, its counsel had contended, inter alia, that the notice did notle 10A. Thequestion was thus considered by the learned Single Judge. Thirdly, the question whether the Collector did or did not have the power to issue the impugned notice under or with the aid of Rule10A was aquestion of law and of jurisdiction, going to the root of the case, which could be decided without taking further evidence. Indeed, as the burden was upon the petitioning Company to show that the impugned notice was issued without jurisdiction, a finding that the notice did not fall even within R.was necessary before a Writ of Prohibition could issue at all. We think that the Division Bench ought to have permitted the question to be argued subject to giving due opportunity to the petitioning Company to meet it on such terms as the Court thought fit, even if the point was not taken in the grounds of appeal.It will be noticed that in Chapter III, the term "assessment" was used only in the former rulecorresponding to the present Rulewhile dealing with provisional assessment of duty. But, Rule 52 shows that an "assessment" is obligatory before every removal of manufactured goods. The rules, however, neither specify the kind of notice which should precede assessment nor lay down the need to pass an assessment order. All we can say is that rules of natural justice have to be observed for, as was held by this Court in K. T. M. Nair v. State of Kerala, 1961(3) SCR 77 at p. 94 = (AIR 1961 SC 552  ) "the assessment of a tax on person or property is at least of ae Division Bench, while repelling this contention, heldthe present case, it appears that the procedure adopted was that the respondents issued a price list quarterly. In that price list, they gave their owner and gave estimate as to the value of the goods. For the time being, the excise authorities accepted the value so gave a provisional certificate to that effect, intending to check the market value and then finally determine the value and then finally determine the value later on. The procedure for issuing price list of approving the same provisionally and accepting payment therefore according to the estimate of the manufacturer, is a procedure which is not to be found either in the Act or the Rules".It may be observed that this finding, that the procedure of a provisional acceptance of the Companys estimates was adopted, seems inconsistent with another finding that what took place was a final adjustment of accounts within the purview of the 3rd proviso to Rule 9, set out above, constituting a "levy" according to law. The Division Bench appears to have regarded this procedure of an almost mechanical levy as equivalent to a complete assessment followed by the payment of the tax which constituted a valid "levy". Hence, it concluded that, there being a legally recognised levy, the only procedure open to the Collector for questioning its correctness was one contemplated by R. 10 so that a demand for a short levy had to be made within 3 months of the final "settlement of accounts" as provided specifically by Rule 10. The Division Bench considered this procedure to be an alternative to an assessment under Rule 52 at the proper time and also to a provisional assessment in accordance with the procedure laid down in RuleBut to regard the procedure under Rule 10 as an alternative to an assessment would be to overlook that it presupposes an assessment which could be reopened on specified grounds only within the period given there.20. The term "levy" appears to us to be wider in its import than the term "assessment". It may include both the "imposition" of a tax as well as assessment. the term "imposition" is generally used for the levy of a tax or duty by legislative provisions indicating the subject matter of the tax and the rates at which it has to be taxed. The term "assessment", on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate "levy" with an "assessment" as well as with the collection of a tax when it held that "when the payment of tax is enforced, there is a levy". We think that, although the connotation of the term "levy" seems wider than that of "assessment", which it includes, yet, it does not seem to us to extend to "collection". Article 265 of the Constitution makes a distinction between "levy" and "collection". We also find that in N. R. Sanjana v. The Elphinstone Spg. and Wvg. Mills Co. Ltd., AIR 1971 SC 2039   at p. 2045 this Court made a distinction between "levy" and collection" as used in the Act and the Rules before us.We are, therefore, unable to accept the view that merely because the "account current", kept under the third proviso (erroneously mentioned as second proviso by the Division Bench) to Rule 9, indicated that the accounting had taken place, there was necessarily a legally valid or complete levy. The making of debit entries was only a mode of collection of the tax. 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 validity after carrying out the obligation to make an assessment to justify it. Moreover, it is the process of assessment that really determines whether the levy is short or complete. It is not a factual or presumed levy which could, in a disputed case, prove an "assessment". This has to be done by proof of the actual steps taken which constitute "assessment".22. Undoubtedly, a mechanical adjustment and ostensible settlement of accounts, by making debit entries, was gone through in the case before us. But, we could not equate such an adjustment with an assessment, aprocess which involves due application of mind to the facts as well as to the requirements of law, unless we were bound by law to give such an unusual interpretation to the term "assessment". Here, we do not find any such definition of assessment or any compelling reason to hold that what could at most be a mechanical provisional collection, which would become a "levy" in the eye of the law only after an "assessment", was itself a levy or an assessment.This finding was presumably given to show that the impugned notice fell within the purview of R. 10 because the demand was due to a short levy caused by "inadvertence" of the officer concerned. It will be noticed that the Division Bench did not go beyond finding a "possibility" of such in advertence. This is not finding that it was definitely due to it. No finding which could clearly relate the case to any cause for short levy found in Rule 10 was given. Moreover, we find that there was no case taken up by the Company in its petition before the High Court that any short levy resulted for an inadvertence of the officer concerned in the process of assessment. The case set up was that of a levy after a completed assessment. in accordance with law, which could not, according to the Company, be reopened. If, therefore, as we find from the conclusions recorded by the High Court itself, what took place was not an "assessment" at all in the eye of law, which could not be reopened outside the provisions of Rule 10, we think that the case will fall beyond Rule 10 as it stood at the relevantThe notice set out above does not purport to be issued under any particular rule probably because the Collector, in the circumstances of the case, was not certain about the rule under which the notice could fall. But, as was pointed out by this Court in Sanjanas case (supra), the failure to specify the provision under which a notice is sent would not invalidate it if the power to issue such a notice was there.28. The notice alleges that it is a case of "incomplete assessment". The allegations contained in it have been characterised by the learned counsel for the Company as a change of front intended to cover up the neglect of the Collector in failing to comply with he correct procedure of making either an assessment before delivery contemplated by R. 52 or a provisional assessment under Rule 10 B. We are unable to hold, either upon the findings given by the High Court upon facts transpiring from the affidavits filed by the parties that the notice was a mere cloak for some omission or error inadvertence of the Collector in making a levy or an assessment.29. We may point out that R. 10 itself has been amended and made more reasonable in 1969 so as to require aprocedure by serving a show cause notice "within 3 months from the date on which the duty or charge was paid or adjusted in the owners account current, if any". This amendment, made onindicates that theprocedure, for a finding on an alleged inadvertence, error, collusion, orby an officer, orby the assessee, as the cause of an alleged short levy resulting from an assessment can now be embarked upon and not necessarily completed within the prescribed period. We are, however, concerned with the procedure before this amendment took place. At that time, it was certainly not clear whether a case wouldunder Rule 10even before the short levy or its cause was established. Furthermore, in the present case, the reason for an allegedcould be a change of basis of proposed assessment under instructions from higher authorities mentioned above. Even that change of basis was held by the High Court to be erroneous. Until the High Court indicated the correct basis there was an uncertainty about it. Such a ground for an alleged short levy would be analogous to the reason for the introduction of Ruleitself which, as pointed out in N. R. Sanjanas case, AIR 1971 SC 2039   (supra), was a change in the law. One could go back still further and come to the conclusion that the real reason for the alleged short levy was a failure of the Company to supply the fuller information it used to supply previously and not just aIf the case does not clearly come within the classes specified in Rule 10, this rule should not be invoked because, as was rightly contended for the appellant, a too wide construction put on Rule 10 would make Rule 10A useless. The two rules have to be read together.30. It is true that Ruleseems to deal only with collection and not with the ascertainment of any deficiency in duty or its cause by aprocedure. If, however, it is read in conjunction with Section 4 of the Act, we think that aproceeding, in the circumstances of such a case, could take place under an implied power. It is well established rule of construction that a power to do something essential for the proper and effectual performance of the work which the statute has in contemplation may be implied. See Craies on Statute Law (Fifth Edition) p. 105.31. The question whether there was or was not an implied power to hold an enquiry in the circumstances of the case before us, in view of the provisions of Section 4 of the Act read with Rule10A of theCentral Excise Rules, was not examined by the Calcutta High Court because it erroneously shut out consideration of the meaning an applicability ofHigh Courts view was based on an application of the rule of construction that where a mode of performing a duty is laid down by law it must be performed in that mode or not at all. This rule flows from the maxim: " Expressio unius est exclusio alterius ." But, as was pointed out by Wills, J., in Colquhoun v. Brooks,(1888) 21 QBD 52 at p. 62, this maxim "is often a valuable servant, but a dangerous master...". The rule is subservient to the basic principle that Courts must endeavour to ascertain the legislative intent and purpose, and then adopt a rule of construction which effectuates rather than one that may defeat these. Moreover, the rule of prohibition by necessary implication could be applied only where a specified procedure is laid down for the performance of a duty. Although Rule 52 makes as assessment obligatory before good are removed by a manufacturer, yet, neither that rule nor any other rule, as already indicated above, has specified the detailed procedure for an assessment. There is no express prohibition anywhere against an assessment at any other time in the circumstances of a case like the one before us where no "assessment", as it is understood in law, took place at all. On the other hand,. Rule 10Are are residuary powers of making a demand in special circumstances not foreseen by the framers of the Act or the rules. If the assessee disputes the correctness of the demand an assessment becomes necessary to protect the interests of the assessee. A case like the one before us falls more properly within the residuary class of unforeseen cases. We think that, from the provisions of Section 4 of the Act read with Rule 10A, an implied power to carry out or complete an assessment, not specifically provided for by the rules, can be inferred. No Writs of Prohibition or Mandamus were, therefore, called for in the circumstances of the case.