TMI Blog1976 (2) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... alorem 20% of the basic duty chargeable. (2) Laboratory Glassware 5% ad valorem 10% of the basic duty chargeable (3) Glass shells, glass globes and chimneys for lamps and lanterns. 10% ad valorem 10% of the basic duty chargeable. (4) Other glassware including tableware 15% ad valorem -do- It is common ground that glass bottles manufactured by the Company were liable to be assessed under the residuary sub-item (4) of Item 23A. 2. The procedure followed by the Company and the Excise Department for levy and collection of excise duty was as under : The year was divided into four quarters beginning with 1st January, 1st April, 1st July and 1st October. The Company used to submit to the Excise Department price lists containing the prices proposed to be charged to the customers during the ensuing quarter. Whenever the goods were required to be removed from the factory the Company used to submit returns in AR 1 form prescribed under the Central Excise Rules, 1944 (hereinafter referred to as "the Rules"). Pending the verification and determination of the price for the purpose of excise duty on the AR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to represent its case to the Assistant Collector of Central Excise in case it felt aggrieved by the decision. Thereafter by the notices of demand purported to be issued under Rule 9-B of the Rules dated September 23, September 26, October 17, October 25 and November 17, 1967 the company was called upon to pay the various amounts therein mentioned by way of differential duty payable for the five quarters beginning from April 1, 1966 and ending on June 30, 1967. On receipt of these notices three representations were made by the Company to the Assistant Collector on October 3, November 24 and November 25, 1967 for the said five periods wherein it inter alia stated that the assessable value for determination of the excise duty was approved by the Department after taking into consideration the amounts spent by the Company as transport and service charges; that such charges had no relation with the price of the goods in question and that the inclusion of such transport and service charges in the assessable value of the goods was totally unwarranted and arbitrary and beyond jurisdiction. The Company also requested for a personal hearing to be granted by the Assistant Collector. Such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the prices of the Company's articles with those of other manufacturers made by the Assistant Collector was not only apt but quite necessary as the comparison was in respect of articles of identical specifications supplied to identical customers. On these findings the appeal preferred by the Company was rejected and it is thereafter that Company filed the present petition on July 27, 1970. 5. Before the trial Court it was inter alia contended on behalf of the Company that the notices of demand could not be issued under Rule 9-B if regard be had to the provisions of that Rule. It was urged that the case was covered by the provisions of Rule 10 as the primary ground on which the said notices of demand were issued was a mis-statement as regards the value of the goods for the purposes of determination of excise duty. It was submitted that as the said notices of demand were issued beyond a period of three months the same were time-barred. It was also urged that as the provisions of Rule 10 were applicable, there was no scope for exercising the powers under Rule 10-A which was residuary Rule. Apart from these contentions, it was urged that both the Assistant Collector as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntions are urged by Mr. Joshi on behalf of the Excise Department. Firstly he submitted that the five impugned notices of demand were issued by the Department under Rule 10-A; that Rule 10 is applicable only in those cases where there is a completed assessment and the conditions of that Rule are fulfilled or satisfied, while Rule 10-A is attracted when the case is not covered by Rule 10, both in a case where there is a completed assessment and also in a case where there is an incomplete assessment. He submitted that in the present case, having regard to the procedure adopted by consent of the company there was an incomplete assessment on the basis of the price list furnished by the Company before such price list was verified for determination of the value for the purpose of levying and collecting excise duty. He submitted that Rule 10A is comprehensive enough to include within its scope a case of short levy or deficiency by reason of an incomplete assessment or even a provisional assessment (popularly so-called) which does not fall within the four corners of Rule 9-B. Secondly he submitted that the learned Judge was in error in taking the view that the Assistant Collector and the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the words "provisional assessment in AR 1 form" or of a declaration to pay the differential amount of duty when later on determined. This factor, according to his submission, may possibly raise an issue of estoppel, but it cannot affect the legal efficacy of the assessment duly made under Rule 52. He urged that the present case cannot be said to be a case of an incomplete assessment; that such was not the basis of the order passed either by the Assistant Collector or that passed by the Collector. He urged that sole basis and foundation of the Department for invoking the provisions of Rule 10-A is suppression of material facts about the recovery of service charges by issue of separate K.P.T. invoices which fact according to the Department did not fall within the meaning of the expression "mis-statement" used in Rule 10. In brief, his submission was that it was impossible for the Department to make a provisional assessment as contemplated by Rule 9-B, that there was already a final assessment made after AR 1 forms were submitted from time to time and duty was assessed thereon and entries were made in the account current maintained with the Department before the goods were cleare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any the assessable value has to be determined as contemplated by section 4. Power to make the Rules is conferred by section 37. Such Rules are to be made to carry into effect the purposes of the Act. Under section 38 all Rules made and notifications issued under the Act shall be made and issued by publications in the Official Gazette. All such rules and notifications shall thereupon have effect as if enacted in the Act. 9. In exercise of the powers conferred by section 37 of the Act the Rules have been made. Chapter III of the Rules provides for levy and refund of, and exemption from, duty. Rule 7 provides that every person who produces, cures or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such person as may be designated, in, or under the authority of these Rules, whether the payment of such duty or duties is secured by bond or otherwise. Under Rule 9 no excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf, whether for consumption, exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so short-levied, or to whom such refund has been erroneously made, shall pay the deficiency or pay 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 if the 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. * * * * 52. Clearance on payment of duty. - When the manufacturer desires to remove goods on payment of duty, either from the place or premises specified under rule 9 or from a store-room or other place of storage approved by the Collector under rule 47, he shall make application in triplicate (unless otherwise by rule or or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending final assessment. It has to be considered in the present case whether the bond loses all efficacy and becomes useless once it is conceded by the Department that a provisional assessment in conformity with the provisions of Rule 9-B was not permissible in this case in view of the decision of the Calcutta High Court in Gobinda Glass Works' case (72 C.W.N. 137). Undoubtedly the bond was executed upon a representation by the Company on the footing that the provisional assessment was permissible under Rule 9-B. However, it is not on the basis of the present bond that the action is supposed to be taken by the Department against the Company. It is one piece of material on which reliance is placed by Mr. Joshi to contend that when the goods were allowed to be cleared there was no completed assessment as there was no final determination of the prices on the basis of which excise duty is to be determined. The bond is in fact referred to in the petition itself and though it was executed on the footing that a provisional assessment under Rule 9B was permissible, still the other provisions of the bond clearly indicate in what manner the goods were permitted to be cleared by the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e argument of Mr. Sorabjee on behalf of the Company and the interveners is that there was clearance of goods permitted by the Department upon payment of duty after final assessment as contemplated by Rule 52 and if the duty paid as a result of such final assessment is to be re-assessed then the provisions of Rule 10 will be attracted. He urged that under Rule 10 reassessment proceedings can only be made within a period of three months from the date on which the duty was paid or adjusted in the owner's current account and as in the present case notices of demand were issued after the expiry of this period of three months, the same were time-barred. His argument further was that Rule 10A provides for merely residuary powers for recovery of the sums and the language thereof makes it amply clear that Rule 10A will not be attracted in a case where the provisions of Rule 10 are applicable. The steps which are to be taken before clearance of goods is permissible under Rule 52 are scrutinised by a Division Bench of this Court in Appeal No. 69 of 1963 (N.B. Sanjana, Assistant Collector of Central Excise v. Elphinstone Spinning Weaving Company Ltd. decided by Mody and Gokhale, JJ. on 1/2nd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment memorandum". The memorandum inter alia contains the number of packages, quantity or value of goods on which duty is assessed, the rate of duty and the total amount payable by way of excise duty. It is undoubtedly true that the Inspector when he signed this assessment memorandum has not indicated anything to the effect that it was merely a provisional assessment. Bearing this factor in mind it was strongly urged by Mr. Sorabjee that even though the application was for provisional assessment and it contained a declaration for payment of differential duty payable in case the prices were found to be not correct, still this was a final assessment within the meaning of Rule 52. Such a contention can only be accepted if the various parts of this form are looked at in mere isolation. To determine the question whether the assessment in a particular case is provisional or tentative or final it is necessary to look at the whole of the document and it will not be permissible to the Court or any competent authority to dissect various parts thereof into water-tight compartments. This form was submitted for the relevant quarter after the bond was executed by the Company on November 2, 1964. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not possible to accept the contention of Mr. Sorabjee that when the assessment memorandum in A.R. 1 form was signed by the Inspector the value of the goods for the purpose of excise duty was finally determined and there was a final assessment. 13. It is undoubtedly true that in some of the relevant documents with which we are concerned, namely, the bond dated November 2, 1964, the A.R. 1 Form and the five impugned notices of demand which were issued initially, reference is made to Rule 9-B but in view of the decision of the Calcutta High Court in Gobinda Glass Works' case (72 C.W.N. 137) it is quite clear that upon proper interpretation of Rule 9-B such reference was clearly unjustified. The Division Bench of the Calcutta High Court in that case has taken the view that assessment and provisional assessment of duty under the Central Excises and Salt Act and Rules read with the relative Finance Act can only be in accordance with the statutory provisions. These are not common law rights and, therefore, a provisional assessment can only be made in accordance with the provisions of Rule 9B, because no other provisions in the Act or the Rules have been brought which enable a provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment, its provisions will be attracted only if (1) the Rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty has for any reason been short-levied and (2) a written demand is made by the proper officer calling upon the owner to pay such duty or deficiency in duty. So far as Rule 10A is concerned, it is quite apparent that there is no period of limitation prescribed and if the case is capable of falling within the provisions of Rule 10A, then a written demand to pay the duty or deficiency in duty can be made at any time irrespective of any limitation. The provisions of Rule 10 and Rule 10-A have been considered by the Supreme Court in the case of Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd. - A.I.R. 1972 S.C. 2563 = 1978 E.L.T. (J 416) (S.C.). In that case the Company was required to furnish quarterly consolidated price-lists 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 fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of the demands under the aforesaid three notices. A question of limitation was also raised at that stage, but at the request of both the parties that question was not decided. The notices were quashed but it was made clear that the said order would not prevent the Excise Authority from proceeding to take any step that may be necessary for such assessment or for the recovery thereof in accordance with law. The Judgment of the single Judge of the Calcutta High Court is reported in A.I.R. 1961 Cal. 477. After that judgment a fresh notice was issued by the Assistant Collector of Central Excise on April 21, 1960 to the Company intimating to it that the Excise Authorities proposed to complete the assessment for the various periods therein mentioned and gave an opportunily to the Company for the purpose of discussing the points therein mentioned. Even a personal hearing was offered to be given with liberty to the Company to produce such evidence as it may like at the time of the hearing. The validity of that notice was challenged by the Company by filing a second petition for writs of prohibition and mandamus against the Collector on the ground that the notice was barred by time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitute "assessment". A mechanical adjustment and ostensible settlement of accounts by making debit entries could not be equated with an assessment, because, assessment being a quasi-judicial process involves due application of mind to the facts as well as the requirements of law. The Supreme Court took notice of the fact that Rule 10 seemed to be so widely worded as to cover any inadvertence, error, collusion or misconstruction on the part of an officer as well as any mis-statement as to the quantity, description or value of such goods on the part of the owner as causes of short levy. Rule 10A would appear to cover any deficiency in duty if the duty has for any reason been short levied, except that it would be outside the purview of Rule 10A if its collection is expressly provided for by any Rule. According to the Supreme Court Rule 10 should be confined to cases where the demand is being made for a short levy caused wholly by one of the reasons given in that rule so that an assessment has to be reopened. On the facts it found 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 a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to the effect that when the AR 1 forms were submitted to the Department actual assessment was made by the competent authorities, but if regard be had to the observations of the Calcutta High Court then it is implied that a provisional assessment was made on AR 1 form submitted by the Company. See A.I.R. 1967 Cal. 269 at 271. The Supreme Court has set aside the decision of the Division Bench of the Calcutta High Court on the ground that when there is no complete assessment then there is an implied power under Rule 10A\to complete such assessment so as to determine the amount of short levy. Such a case is not covered by Rule 10 and power can be exercised under the residuary Rule 10A for which no limitation is prescribed. It can, however, be said that even though both the parties were under a mistake'n impression that there was provisional assessment under Rule 9B, but on facts it was a case of incomplete assessment which permitted the authorities to complete the assessment at a later stage. 16. It was sought to be urged by Mr. Sorabjee that from the way in which orders are being passed by the Assistant Collector and the Collector it appeared that both of them have proceeded o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are consistent with the above documents to which we have referred and really go to show that rather than a case of mis-statement as regards value it was a case of incomplete assessment which was sought to be completed at a later stage upon the value being verified. 17. That takes us to the question whether the Assistant Collector and/or the Collector had violated the principles of natural justice while passing the impugned order. At the outset it may be stated that as held by the Calcutta High Court in the National Tobacco Company's case reported in A.I.R. 1961 Cal. 477, as assessment is a quasi-judicial process before determining the final assessable value as contemplated by section 4 of the Act an opportunity has to be given to the manufacturer for showing cause why the prices declared in the AR 1 form ought not to be accepted. Such an opportunity in fact was not given in the present case. On the other hand, mere intimation was given by the Superintendent by his letter dated September 2, 1967 as regards the assessable value determined by the Department and subsequently five notices of demand were issued calling upon the Company to pay the differential amount of duty in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Traders and Vitrum Glass Works not merely by way of comparison but they formed the very basis of the order. If they formed the very basis of the order, then it is not disputed by Mr. Joshi on behalf of the Department that principles of natural justice would be violated. Our attention was invited by Mr. Sorabjee to an un-reported decision of the Supreme Court in Civil Appeals Nos. 1362 and 1368 of 1967 (Collector of Central Excise and Land Customs, Shillong Anr. v. Sanawarmal Purohit Anr. decided on February 16, 1968. The Supreme Court in this case has pointed out the three principal circumstances on which the Collector of Customs founded his conclusions. The Supreme Court pointed out that these circumstances may undoubtedly be relied upon by the Collector in support of his conclusion but before his conclusion should be founded thereon it was necessary for the Collector of Customs to hold an enquiry in which due notice of those circumstances was given and the offenders were given an opportunity to meet the inferences arising therefrom and to comment thereon. Thus it is very clear that both the Assistant Collector as well as the Collector had violated the principles of natural ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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