TMI Blog1982 (4) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of tariff value fixed by the Central Government from time to time under Section 3 of the Central Excises and Salt Act 1944 (hereinafter referred as 'the Act'). However, with effect from 10-11-1976, excise duty on sulphuric acid became payable with reference to its value determined under section 4 of the Act, instead of on the tariff value prior to that date. The duty of excise payable on sulphuric acid is at the rate ad valorem in accordance with Item 14-G of the First Schedule to the Act. 3. There is no dispute that for the period in question, commencing from 10-11-1976, the excise duty payable on sulphuric acid manufactured by the Petitioner is to be calculated with reference to the value thereof determined under Section 4(1)(b) of the Act read with rule 6(b) of the Central Excise Valuation Rules, 1976, framed under section 37 of the Act for the purpose of determining the value of excisable goods where the duty is payable in accordance with section 4 of the Act. Section 4(1)(b) of the Act and Rule 6(b) of the Central Excise Valuation Rules, 1975 (hereinafter called the 'Valuation Rules'), in so far as they are relevant for the purpose of this petition, are as under :- S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector may require. Sub-rule (3) provides for approval of the price list by the proper officer with such modification as he may consider necessary so as to bring the value shown in the price list to the correct value for the purpose of assessment as provided in section 4 of the Act. Unless otherwise directed by the proper officer, the approved price list is to determine the duty payable on the goods intended to be removed by the assessee. Rule 173-G(1) lays down the procedure to be followed by the assessee which requires every assessee to keep an account current with the Collector separately for each excisable goods falling under different items of the First Schedule to the Act, in such form and manner as the Collector may require of the duties payable on the excisable goods. Rule 173-G(3) requires that within 7 days after the close of each month, every assessee shall file a monthly return in the proper form with the proper officer showing the quantity of excisable goods together with other necessary particulars. Rule 173-I then provides for assessment by the proper officer on the basis of the information contained in the return filed by the assessee under sub-rule (3) of rule 173-G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of sulphuric acid for the purpose of excise duty payable on it was Rs. 388/- per metric tonne on the basis of sub-clause (ii) of clause (b) of rule 6 of the Valuation Rules, also indicating therein that sub-clause (i) thereof was not applicable. The value of Rs. 388/- per metric was determined by the petitioner on the basis of cost of production, to which 12˝ per cent was added as the profit that would have normally been earned by the assessee on its sale. The Superintendent, Central Excise (respondent No. 4), verified the cost of production shown by the petitioner and made an endorsement to that effect on 17-11-1976. The Assistant Collector, Central Excise (respondent No. 3), on 18-11-1976, approved the valuation shown in the price list under rule 173-C(3). This was the only price list filed by the petitioner during the entire period in question, i.e. between 10-11-1976 and 31-10-1978 and the excise duty paid by the petitioner for this entire period was also on the same basis. The petitioner followed the procedure laid down in rule 173-G and also filed the monthly returns according to sub-rule (3) thereof. The monthly returns filed by the petitioner in accordance with the appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The last contention is that the show cause notice is invalid wholly or at least partly even on admitted facts, in reply, the learned Advocate General argued that Rule 10 has merely been replaced by Section 11-A in the Act and such replacement does not amount to repeal or omission of an enactment, that there is no inconsistency between Section 4(1) (b) of the Act and Rule 6(b)(i) of the Valuation Rules; and the show cause notice is wholly valid, Having heard both the counsels, we have formed the opinion that except the contention that a part of the show cause notice pertaining to penalty proceeding is invalid, the remaining points urged in support of the petition must be rejected. These points are considered hereafter. Effect of replacement of Rule 10 of the Central Excise Rules, 1944, by Section 11A of the Central Excises and Salt Act, 1944, w.e.f. 17-11-1980. 10. The Central Excise Rules, 1944, have been framed under the Central Excises and Salt Act, 1944, for the purpose of providing for assessment and collection of duties imposed by the said Act. Rule 10 therein provided for recovery of duties not levied or not paid, or short levied or not paid in full or erroneousl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and held that with the omission of Rule 10 of the Central Excise Rules, the notice issued prior to its omission would lapse, since Section 6 of the General Clauses Act does not apply to repeal of a rule by another rule. Except for following the Supreme Court decision, no other reason has been given in the Allahabad decision and, therefore, it has to be seen whether the point is no longer res integra in view of the Supreme Court decision in M/s. Rayala Corporation's case. 13. In our opinion, the Supreme Court decision in M/s. Rayala Corporation's case, does not conclude the point arising for our decision. In that case rule 132-A(2) of the Defence of India Rules, provided for an offence which was made punishable under sub-rule (4) thereof. It related to prohibition of dealings in foreign exchange. Rule 132-A as a whole ceased to be in existence from a specified date and the question was whether the proceedings could be validly continued for that offence after omission of rule 132-A. The Supreme Court held that section 6 of the General Clauses Act applies to repeals and not to omissions and also when the repeal is of a Central Act or Regulation and not of a rule. On this basis, se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of bringing about this change is also of no consequence. It is settled that a rule framed under the Act is a part thereof and has to be so construed for all purposes. In State of U.P. v. Baburam, A.I.R. 1961 S.C. 751, the Supreme Court, on the basis of Maxwell on Interpretation of Statutes, 10th Edition, pp. 50-51, held as follows :- "Rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act, and are to be judicially noticed for all purposes of construction or obligation." It is, therefore, clear that not only for the purpose of construction but also for the purpose of obligation thereunder, rules made under a statute must be treated 'as if they were in the Act' itself. 15. It follows that rule 10 of the Excise Rules, which was in force till 17-11-1980 formed a part of the Central Excises and Salt Act, 1944, under which it was framed and when it ceased to exist from that date, Section 11-A contained in the Act itself, which is similar, was brought into force simultaneously maintaining the continuity. The result is that the relevant provision which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-clause (i) gives arbitrary powers to the authority without providing any guidelines. His further argument is that it would be more reasonable to reverse the order of the two sub-clauses so that the provision of the existing sub-clause (i) is used only as a last resort and in that case there would be no invalidity. 17. Section 4(1)(b) says that where duty of excise is chargeable on any excisable goods with reference to value, such value shall be deemed to be the nearest ascertainable equivalent of the normal price of such goods determined in the manner prescribed where the normal price of such goods, that is to say, that price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, is not ascertainable for the reason that such goods are not sold, or for any other reason. The attempt to be made, where the value has to be determined in accordance with Section 4(1)(b) is, therefore, to find out the nearest ascertainable equivalent of the normal price of the excisable goods at which it can be sold in the course of wholesale trade for delivery at the time and place of removal in the manner as m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise Valuation Rules, 1975, framed thereunder. 19. We are also unable to accept the contention that sub-clause (i) of rule 6(b) confers unbriddled powers on the proper officer and is, therefore, arbitrary. Sub-clause (i) speaks of 'comparable goods' which itself provides the guidelines to indicate that the goods taken into account should be comparable with the excisable goods. The proviso thereto further says that the differences, if any, in the material characteristics of the excisable goods and the comparable goods have to be obliterated, as far as possible, by taking into account all relevant factors and making such adjustments as may be reasonable for this purpose. This exercise has to be performed obviously to find out goods which are 'nearest ascertainable equivalent' of the excisable goods. There are sufficient guidelines in sub-clause (i) and there is no room for arbitrariness therein, even if there may be some difference of opinion on questions of fact. Remedy is available to the assessee under the Act by way of appeal to challenge the findings of the proper officer and show that the goods taken into consideration for determining the value of the excisable goods are not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hypothetical. It was therefore felt that a mode involving a hypothetical element should be adopted only as a last resort. There does not appear to be anything unreasonable in it, even assuming the matter be debatable. This discretion to choose between two possible views is definitely a matter within the scope of legislative competence. We are, therefore, unable to accept even this contention of the learned counsel for the petitioner that sub-clause (i) of clause (b) of rule 6 of the Valuation Rules is invalid on the grounds urged. Validity of the Show Cause Notice 22. Lastly, learned counsel for the petitioner contended that the show cause notice pertaining to short levy as well as imposition of penalty is invalid on admitted facts. For this reason, he contended that no further enquiry into the same is justified. Inasmuch as the notice pertaining to short levy is severable from that relating to imposition of penalty, we shall deal with these two parts separately and first take up the question of short levy. Short Levy 23. The first defect in the notice according to the learned counsel for the petitioner, is that the allegation of short levy on the basis of value of sulphuri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not to the petitioner's case has yet to be decided after determining the disputed questions of fact between the parties and, therefore, it would be proper to leave the question open for decision, if necessary, after the ultimate decision made in the proceedings initiated with the notice. Prima facie, it is not possible to say at this stage that the contents of the notice relating to the question of short levy disclose any invalidity to shut out any further enquiry on the subject for the whole or any part of the period specified. It would, however, be open to the petitioner to challenge the ultimate order, if it is adverse to the petitioner, by contending that the facts found proved are inadequate for revising the assessable value, treating it to be a case of short levy for the whole or any part of the period specified. For this reason, if would not be proper to say anything further on this question at this stage. Penalty 26. The question now is of the validity of the other part of the notice (Annexure A) dated 12-9-1978 read with the addendum (Annexure B) dated 10-10-1978 pertaining to penalty. It is only the addendum (Annexure B) dated 10-10-1978 which pertains to impositi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents and reiterated by the learned Advocate General appearing on their behalf, is of rule 173-C(1). Sub-rules (1) and (3) of Rule 173-C, which alone are material, as under :- "173-C Assessee to file price list of goods assessable ad valorem. - (1) Every assessee who produces, or manufactures or warehouses goods which are chargeable with duty at a rate dependent on the value of the goods, shall file with the proper officer a price list in such manner and at such intervals as the Collector may require showing the price of each of such goods and trade discount' if any, allowed in respect thereof to the buyers along with such other particulars as the Central Board of Excise and Customs or the Collector may specify. ***** (3) On receipt of price list under sub-rule (1) the proper officer may approve the price list after making such modifications as he may consider necessary so as to bring the value shown in the said price list to the correct value for the purpose of assessment as provided in section 4 of the Act. He shall thereafter return one copy of the list approved by him to the assessee who shall, unless otherwise directed by the proper officer, determine the duty payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on concerned'. Existence of the alternative remedy of appeal against the final decision was not treated as a bar to interference at the earlier stage under Article 226. 29. In our opinion, these earlier decisions of this Court, based on the settled law on the point, emerging from the decisions of the Supreme Court, conclude the point relating to penalty in the present case. In this case also the penalty proceedings have been initiated merely on the ground of contravention of rule 173-C(1) on the basis of filing incorrect price list, even though they were filed in the form and manner prescribed. In the price list filed by the petitioner under rule 173 C(1), it was clearly stated that sub-clause (i) of rule 6(b) of the Valuation Rules was not applicable and, therefore, the list was filed in accordance with sub-clause (ii) of rule 6(b). It may also be mentioned that the proper officer took the same view at that stage and approved the price list under Rule 173-C(3) and thereafter made the assessment under Rule 173-I on the basis of monthly returns filed by the petitioner under Rule 173-G(3) in accordance with the approved price list. It was much later that the decision to revise the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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