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TMI Blog1971 (1) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... ious other goods like leather cloth, book binding cloth and other coated fabrics. Under Section 3 of the Central Excises and Salt Act, 1944 (hereinafter to be referred as the Act), duty is imposed on all excisable goods produced or manufactured in India at the rates set forth in the First Schedule to the Act. Item 19 of the First Schedule includes cotton fabrics. Section 3 of the Act provides that excise duty is to be collected in such manner as may be prescribed by rules made under the Act. On cotton fabrics additional excise duty called handloom cess is also imposed under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Khadi and Other Handloom Industries Development (Additional Excise Duty on Cloth) Act, 1953, respectively. Under Section 37 of the Act, the Central Government had made rules called the Central Excise Rules, 1944 (hereinafter to be referred as the Rules). Rule 8 gives power to the Central Government to exempt by notification subject to such conditions as may be specified therein any excisable goods from whole or any part of duty leviable on such goods. Accordingly the Central Government issued a notification Ex. A, dated January 5, 1957 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the forms was 'nil'. Under the heading 'Assessment Memorandum' in the Said form the particulars regarding rate of duty and amount of total duty payable on the goods referred to in the form had to be filled up and signed by the Excise Inspector. There is no controversy that in each of the A.R.I. forms filed by the respondents during the period July 4, 1958 and July 30, 1960, the Excise Inspector Incharge, Leather Cloth Division has made an assessment in the appropriate portion of those forms showing the rate of duty and the amount of total duty payable as 'nil'and has affixed his signature under such 'Assessment Memorandum'. Therefore, it will be seen that all the goods removed by the respondents during the said period were shown by them as not liable to pay any excise duty and were also assessed by the Excise Inspector as not liable to pay any duty. 4. Lateron the excise authorities appear to have entertained some doubt whether the goods covered by these A.R.I forms were of the description exempted under Item No. 2 of the notification Ex. A. Some correspondence took place between the department and the respondents. On November 3, 1961, the second appellant issued two notices ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents and held that Rule 10 applied and as the demand notices had been issued long; after the expiry of three months, Exs. G and H, the notices were illegal and void. In this view the learned single Judge quashed the said notices. On appeal the Division Bench confirmed the order of the learned single Judge. 11. This is a convenient stage to refer to the relevant rules. They are Rules 7, 9, 10, 10-A, 52 and 52-A (1). We have already referred to the fact that the rules have been made by the Central Government under Section 37 of the Act. Those rules referred to above are as follows :- **** 12. Dr. Syed Mohammed, learned Counsel for the appellants urged that going by a plain reading of R. 10, it is clear that the said rule will apply only to cases : (1) when an assessment has been made and that some amount is due as duty and (2) when the said amount so assessed has been paid by the party concerned. In this case, he pointed out, there has been, no doubt, an order of assessment was passed when the goods were cleared by the party but that order of assessment was not one making the party liable to pay any duty, on the other hand, it was an order 'of nil assessment' under which the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have been paid. The word "paid" has only been used to provide a starting point of limitation of three months. Though the ordinary meaning of the expression "paid'' is that some amount should have been actually paid as such both the Counsels pointed out, that the said word should be construed in the context in which it appears. So read, it is pointed out that the proper interpretation to be placed on the word "paid" is that it has been used to denote the stage or time when the duly or charge ought 11 been paid. Such a reading will not do any violence to the language of It is further pointed out that the expression "short levied and the correct amount, due and in the other case the short levy" will be the entire amount of duty that is found to be actually due by a party. The Counsel further pointed out that Rule 10-A will apply only to those cases where no specific provision for collection of duty or any deficiency in duty has been made by the rules and that will apply also to any other sum of any other kind payable to the Central Government under the Act or the rules. In this case, as the party admittedly has been assessed to 'nil' duty by the officers concerned and allowed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is holding licence under the Central Excise Rules. On the introduction in Parliament of Bill No. 13 of 1951 on February 28, 1951 the assessees paid the requisite duty on tobacco stored by them under the declared provision read with Sections 3 and 4 of the Provisional Collection of Taxes Act, 1931. The assessees cleared tobacco from the warehouse between March 1, 1951 and April 28, 1951, after obtaining clearance certificates from the Range Officer, Central Excise. The rate of duty payable on unmanufactured tobacco was increased by the Finance Act of 1951. On June 4, 1931 a demand was made by the Range Officer, Central Excise at the increased rate and the assessees therein were asked to pay the said increase. The assessees challenged the demand before the High Court under Art. 226 of the Constitution on various grounds. The Nagpur High Court held that Rule 10 did not apply and that the demand was invalid. 17. After the decision of the Nagpur High Court, the Central Government by a notification dated December 8, 1951 amended the Central Excise Rules, 1944 by the addition of a new Rule 10-A. On the basis of this rule in respect of the same assessees a further and fresh demand was mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r erroneously refunded. The expression "paid" has been used to denote the starting point of limitation of three months for the issue of a written demand. The Act and the Rules provide in great detail the stage at which and the time when the excise duty is to be paid by a party. If the literal construction that the amount should have been actually paid is accepted then in case like the present one on hand, when no duty has been levied, the Department will not be able to take any action under Rule 10. Rule 10-A cannot apply when a short-levy is made through error or mis-construction on the part of an officer, as such a case is specifically provided by Rule 10. Therefore, in our opinion, the proper interpretation to be placed on the expression "paid" is "ought" to have been "paid". Such an interpretation has been placed on the expression "paid" occurring in certain other enactments as in Gursahai Saigal v. Commissioner of Income-tax, Punjab (1963) 3 SCR 893 = (AIR 1963 SC 1062) and in Allen v. Thron Electrical Industries Ltd. (1968) 1 QB 487. In (1963) 3 SCR 893=(AIR 1963 SC 1062), the question arose as follows : In certain assessment proceedings; under the Indian Income-tax Act, 1922 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he manner laid down in sub-section (6). According to the assessee there was no 1st day of January of a financial year in which the tax paid and there was no question of a short fall between eighty per cent of the tax payable on regular assessment and the amount paid because he has paid nothing. While rejecting the said contention this Court held : "The proper way to deal with such a provision is to give it an interpretation which to use the words of the Privy Council in Mahaliram Ramji-das's (case), 67 Ind. App. 239 = (AIR 1940 PC 124), "makes the machinery workable utres valeat potias quam pereat." We, therefore, think that we should read sub-section (6) according to the provisions of which interest has to be calculated as provided in sub-section (8) in a manner which makes it workable and thereby prevent the clear intention of sub-section (8) being defeated. Now how is that best done ? As we have earlier said sub-section (6) deals with a case in which tax had been paid and therefore it says that interest would be calculated "from the 1st day of January in the financial year in which the tax was paid". This obviously cannot literally be applied to a case where no tax has been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention of Mr. Daphtary that the expression "paid" should be construed as "ought to have been paid and even when no duty has been assessed, the entire duty when subsequently assessed will be a short-levy, which is also supported by the decision of this Court in (1963) 3 SCR 893 = (AIR 1963 SC 1062), has to be accepted. It follows that in order to attract Rule 10 it is not necessary that some amount of duty should have been assessed and that the said amount should have also been actually paid. That provision will apply even to cases where there has been a nil assessment in which case the entire duty lateron assessed must be considered to be the duty originally short-levied. There is also no difficulty in calculating the period of three months. As pointed out above, the Act and the Rules provide very elaborately the stage and the time when the duty is to be paid and if that is so, that must be considered to be the stage or time when the duty ought to have been paid and if so the period of three months will run from the time when the duty ought to have been paid. 24. Dr. Syed Mohammad referred us to certain decisions of the High Courts where a demand has been sustained under Rule 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sub-rule (1) of Rule 9 provides for the time and the manner of payment of duty. In this case there is no controversy that whenever goods were cleared by the respondents, necessary applications had been made to the officer concerned and the latter had passed orders of assessment to nil duty. To attract sub-rule (2) to Rule 9, the goods should have been removed in contravention of sub-rule (1). It is not the case of the appellants that the respondents have not complied with the provisions of sub-rule (1). We are of the opinion that in order to attract sub-rule (2), the goods should have been removed clandestinely and without assessment. In this case there is such clandestine removal without assessment. On the other hand, goods had been removed with the express permission of the Excise authorities and after order of assessment order was nil. That in our opinion, will not bring the case under sub-rule (2). That sub-rule (2) is a penal provision is shown from the fact that apart from the duty payable the party is also made liable to a penalty and he also incurs the risk of the goods being confiscated. That Rule 9 (2) applies only to a case where there has been an evasion from payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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