TMI Blog1990 (7) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... . The factual dispute is whether in the facts that have happened, as enumerated hereinafter, alcohol was present in Homeodent and further whether Homeodent was Homoeopathic medicine or toilet preparation and further whether the same was dutiable under the 1944 Act. We must recapitulate the basic facts in the several matters involved herein. 2. M/s. Dabur India Limited which is the petitioner in special leave petition No. 1610/89 arising out of judgment and order dated 20th December, 1988 in civil miscellaneous writ petition No. Nil of 1988 connected with civil miscellaneous writ petition No. Nil of 1988 of the High Court of Allahabad, and also the petitioner in writ petition No. 426/89, is a public limited company engaged in manufacture of Ayurvedic medicaments and Alopathic medicaments along with cosmetics. It had agreed to manufacture for and on behalf of M/s. Sharda Boiron Laboratories Ltd. (hereinafter called `the company') - being the petitioner in special leave petition Nos. 135-36/89, used to manufacture and/or produce a Homoeopathic tooth-paste called `Homeodent' out of the raw materials supplied by the company on job work basis. The petitioner states that it accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugust, 1987 the Assistant Collector of Central Excise passed an order which was an appealable one classifying Homeodent under the Act of 1944. The petitioner asserts that this order had subsequently been upheld by the Collector of Central Excise (Appeals), New Delhi, on an appeal filed by the company. However, on 18th January, 1989 the Superintendent of State Excise, Bulandshahr visited the factory of the petitioner and after inspecting the same, enquired about Homeodent. It is the case of the petitioner that it had explained that Homeodent was classified under the Act of 1944 in view of the orders passed by the Central Excise Authorities. However, it is stated that the Superintendent of State Excise, Bulandshahr called upon the petitioner to furnish details in respect of Homeodent including its ingredients and total value of clearances etc. On 20th January, 1988 the petitioner addressed a detailed letter to the Superintendent of State Excise, Bulandshahr, explaining its stand, and that duty had been paid thereon. State Excise authorities, thereafter, did not take any action against the petitioner nor did they take out samples of Homeodent tooth-paste to get appropriate results as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court of Allahabad was considering the writ petition of the petitioner and had granted stay as aforesaid, the respondent District Excise Officer encashed the bank guarantee of Rs. 35 lakhs without even calling upon the petitioner first to pay the amount. On 13th May, 1988 the High Court of Allahabad directed the petitioner to file a revision petition with the Central Government. A revision petition was filed along with stay application on 28th May, 1988. Thereafter, the Central Government granted stay against recovery of the balance amount of Rs. 21.46 lakhs. On 22nd September, 1988 the Additional Secretary to the Government of India in exercise of his revisional powers allowed the revision of the petitioners and declared the orders of the District Excise Officer dated 17th and 18th March, 1988 as upheld in appeal by the Excise Commissioner as null and void having been passed in violation of principles of natural justice. Thereupon it, the petitioners state, called upon the District Excise Officer and the District Magistrate to refund the amount of Rs. 46.67 lakhs recovered from it by way of cash payment and encashment of bank guarantee in view of the revision order. The cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therein was that the contention of the petitioner that the Homeodent did not contain alcohol, though one of the ingredients of such preparation was mother tincture containing alcohol and the same was assessable under Item 14FF of the 1944 Act. The Asstt. Collector of Central Excise, Ghaziabad had taken the view that the Homeodent was classifiable under sub-heading No. 3306.02 of Chapter 33 of the Central Excise Tariff Act, 1985 and on that duty @ 15% ad valorem was leviable. This duty computed at the said rate by the Central Excise authorities was paid, according to the petitioner, on the goods manufactured from 1-1-1986. On 18th January, 1988 the District Excise Officer made a surprise inspection of the units of the petitioner and when it was revealed that the Homeodent tooth-paste manufactured by M/s. Dabur was toilet preparation containing alcohol within the meaning of Section 2(K), read with Item 4 of the Schedule, referred to in Section 3 of the 1955 Act, and was therefore assessable to duty @ 100% ad valorem. The District Excise Officer, Ghaziabad, therefore had caused a common notice dated 17-3-1988 to be served on the petitioner requiring it to pay duty aggregating to Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction. On behalf of the petitioners before the High Court two contentions were raised. Firstly that the Central Govt. having set aside the order of District Excise Officer, Ghaziabad, whereunder excise duty to the tune of Rs. 46,66,451.45 was paid, there was no justification for the respondents to retain that amount thereafter and a writ of mandamus be issued against the respondents directing them to refund this amount; and secondly, that under Rule 11 of the 1956 Rules when duties are short levied, a written demand by the proper officer being made within six months from the date on which the duty was paid, the shortfall could be recovered. The submission was that no duty can be recovered for the period anterior to six months to be reckoned from the date of payment of duty. It was, therefore, urged that the show-cause notice was invalid, inasmuch as the District Excise Officer, Ghaziabad had exceeded the jurisdiction in having recovered the duty beyond limitaion. 8. The High Court addressed itself to the question whether Article 226 of the Constitution of India was a proper remedy. We are not really concerned with this question. The High Court, however, came to the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the initial stage to assume jurisdiction in the matter. The High Court also came to the conclusion that no writ can be issued in favour of the parties who remain sitting on the fence and took a chance of the proceedings taken up under the statutory provisions going in their favour. The High Court held the petitioner who had resorted to statutory remedies on its own could not be permitted to take recourse under Article 226 of the Constitution of India, in the event of their having become successful under the former. 9. Coming to writ petition No. 1160/88 wherein the order of the Central Government refusing to entertain the revision had been challenged. The Central Government had refused to entertain the revision on the sole ground that the right of appeal that vested in M/s. Sharda could not be exercised thereby. The High Court, however, came to the conclusion that the case of M/s. Dabur was that it is manufacturing Homeodent tooth-paste on job basis under the loan licence of M/s. Sharda as per the specifications and control and the raw material of the latter but factually both the petitioners are different entities under the law and therefore each petitioner had to pursue its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a loan licence to manufacture toothpaste as per the provisions of Drugs Cosmetics Act, 1944 and the Rules framed thereunder. The said licence was granted under Rule 139B and was in Form 31A for manufacture of cosmetics. Subsequently, Homeodent was envisaged by the Drug authorities as a homeopathic medicament and licence had been granted accordingly. It is the case of the petitioner that tooth-pastes were manufactured by the petitioner company for and on behalf of the loan licensee from the following chemicals and ingredients : "Potassium Chlorate BPC 73 Sodium Benxoate IP Sodium Fluoride BP Plantago Offionle MT HP 1 Cochloric Armorocie MT NP 1 Cochloric Officincie MT HP 1 Phytolecca Decandra NT Methyl Parehudron Benxoate IP Prophyle Paraphydroxy Benxoate IP Calcium Carbonate IP Sodium Alginete USP NF 1980 Titanium Oxide BP Precipitate Silico USP NF Liquid Sodium Socicylate IS 381: 1972 Sodium Leuryle Sulphate (High Purity) Saccharine IP" It is further to be noted that the final product i.e. the toothpaste is a homeopathic semi-solid compound in which mother tincture was completely absent or present in fractionally negligible quantity, depending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 955 Act did not and cannot arise. Therefore, the impugned actions of the respondents were required to be set aside by issuing appropriate writ of mandamus. The High Court was, therefore, in error, according to the petitioner, in dismissing the writ petition without appreciating this contention. The High Court ought to have appreciated that the petitioner was not seeking to circumvent the alternative remedy provided under the Act but in view of the conflicting claims of the Central and State Excise authorities seeking to classify Homeodent toothpaste under the respective Acts of 1944 and 1955, the petitioner was left with no other alternative but to challenge the actions by way of a writ petition under Article 226 of the Constitution. It is contended that the High Court ought to have appreciated the actions of the State authorities were ex facie and without authority in law in so far as they sought to levy and recover duty on Homeodent toothpaste under the 1955 Act. Therefore, the petitioner was justified in challenging such actions by way of a writ petition before the High Court. It was further urged that the High Court had committed an error on the ground of alternative remedy bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Excise authorities had posted an officer in the factory of the petitioners at Sahibabad for physical control on a part-time basis. In the year 1985, an officer in the rank of an Inspector was posted at the said factory on full time basis for physical supervision and control. Hence, all the activities of the petitioner were within the knowledge of the respondent Excise authorities. The version of the petitioner is that on an inquiry from M/s. Sharda Boiron Laboratories Ltd. for manufacturing of Homeodent toothpaste on job work basis out of the raw material and packing materials to be supplied by the said loan licensee, M/s. Sharda, petitioner No.1 undertook the job. The petitioner-company had filed a list classifying the said Homeodent toothpaste under Tariff Item 14FF of the 1944 Act as the said tooth paste did not contain any alcohol directly. The classification list was filed in the prescribed Form and with all the particulars. It was further checked up by the Range Inspector and it was subsequently approved by the Assistant Collector, Central Excise, according to the petitioner. 17. On 31st August, 1987 there is indeed an order of the Asstt. Collector of Central Excise, Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egligible quantity with any alcohol that may be present in pheropest completely and that there are no traces of the same in the final product upon chemical testing. In January, 1988 there was an inquiry about the excisability of Homeodent toothpaste by the Superintendent of Central Excise, under the 1955 Act. The gravamen of the charge is the order issued by the Distt. Excise Officer, Ghaziabad, on 17th March, 1988 which was issued without notice to the petitioner and without giving it any opportunity. The Distt. Excise Officer, however, on demand from the petitioner had modified the earlier order of 17th March, 1988 and had issued on 18th March, 1988 a demand notice for Rs. 46,66,451.45. It is the grievance of the petitioner that as it was carrying on the manufacture under the 1955 Act, it had applied for licence and the respondent authorities without assigning any reason, refused to renew the licence of the petitioner company. The implication of such absence of renewal is that the petitioner was being called to pay an illegal demand. It, therefore, was forced to close down its manufacturing operations. The petitioner avers that in the meeting which took place between the Excise C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad High Court and it was directed to file a revision petition within two weeks from 13-5-1988 and the same should be considered on merits. The High Court had stayed the recovery of an amount of Rs. 21,46,134.20 till the disposal of the stay application. 20. On 22nd September, 1988 the Additional Secretary to the Government of India allowed the revision petition of the petitioner and set aside the orders of the District Excise Officer, dated 17-18th March, 1988. Thereupon, the petitioner called upon the District Excise Officer, to refund the amount of Rs. .46,47,000 but the respondents failed to refund and neglected it. The respondents had issued a show-cause notice calling upon the petitioner as to why an amount of Rs. 68.13 lakhs be not recovered on Homeodent toothpaste manufactured and cleared between 1985 and 1988. The High Court had dismissed the writ petition which is the subject-matter of another special leave petition. Respondent No. 3 i.e. the District Excise Officer, Ghaziabad, vide his order dated 19-1-1989 had confirmed the show-cause notice issued by him on 2nd November, 1988 and also confirmed the demand for Rs. 68,50,745.20. The said order dated 19th January, 1989 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the demands will not be enforced, inasmuch as orders dated 18-19th January, 1989 reiterate the order of 17th March, 1988, it is necessary to refer to the order dated 17th February, 1988 passed by the District Excise Officer, Ghaziabad. Therein it stated that both the units were jointly and severally inspected on surprise visits i.e. the units bonded laboratories, and on the basis of the information collected it was revealed that Dabur India Ltd. was manufacturing a suitable toilet preparation containing alcohol named Homeodent without obtaining necessary licence. According to the said order the product had been manufactured outside the bonded premises approved under the L-1 licence and the duty payable on this product had not been paid. The order further states that on the basis of the information and the stock a sum of Rs. 68,13,334.20 was payable and a challan to that effect was issued. In the first letter dated 18th March, 1988, Dabur India Ltd. wrote to the Distt. Excise Officer, that the classification of Homeodent toothpaste made by the Excise Officer as toilet preparation was erroneous, as this preparation, according to Dabur India Ltd., should be classified under Item 2 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toothpaste manufactured has been declared as Rs. 65,73,915.63. It has also been informed that for the purpose of Central Excise Duty, the total assessable value of the total quantity of Homeodent toothpaste manufactured uptil 19-1-1988 is Rs. 46,66,451.45 and that the total wholesale price on this quantity has been declared as Rs. 66,31,866.35 to the Central Excise Department. Based on your declaration and clarification given in your above application and on the basis of statistics and declarations the excisable value on a provisional basis for the total quantities of the cosmetics homeodent tooth paste containing alcohol, which has been sold uptil 18-1-1988 and which in stock on 18-1-1988 has been accepted as Rs. 46,66,451.45 instead of Rs. 68,13,324.20. This does not mean that this value has been finally accepted. One to the fore mentioned, the amount of Rs. 68,13,331.20 is amended to Rs. 46,66,451.45 in the office's notice No. 185/1-2 dated 18-1-1988. On this partial amendment, both the units are jointly and severally ordered to provisionally deposit Rs. 46,66,451.45 instead of Rs. 68,13,324.20 as duty in the State Treasury, Ghaziabad immediately on receipt of this notice, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e collecting Government shall, on an application being made to it in this behalf, grant in respect of the duty of excise, leviable under this Act, a rebate to such manufacturer of the excess, if any, of the duty so recovered over the duty leviable under this Act." 25. In this case, however, the case of the petitioner is that duty has been recovered under the 1944 Act; if any refund has to be made, it must be made in accordance with law. There is a question of limitation for claiming refund of this duty. The provisions are not clear. In such a situation, it appears to us that the justice requires that provisions should be made more clear and in the view of the facts and the circumstances that have happened, we would direct that if the petitioners are entitled to any refund of the duty already paid to the Central Government in view of the duty imposition now upheld against them in favour of the State Government such refund application should be entertained and considered in accordance with law. We are conscious in giving this direction, we are not strictly following the letter and the provisions of the Act. But in a case of this nature, where there is some doubt as to whether duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into this controversy. 29. In the aforesaid view of the matter, we are of the opinion that the impugned order dated 18th January, 1989 passed by the District Excise Officer, Ghaziabad, must be given effect to and thereafter the petitioner's application for refund, if any, made before the authorities under Section 4 of the 1944 Act within the time indicated as before should be disposed of in the manner indicated above, if made. 30. Before we part with this case, two aspects have to be adverted to - one was regarding the allegation of the petitioner that in order to compel the petitioners to pay which the petitioners contended that they were not liable, the licence was not being renewed for a period and the petitioners were constantly kept under threat of closing down business in order to coerce them to make the payment. This is unfortunate. We would not like to hear from a litigant in this country that the Government is coercing citizens of this country to make payment which the litigant is contending not to be leviable. Government, of course, is entitled to enforce payment and for that purpose to take all legal steps but the Government, Central or State, cannot be permitted to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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