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PETITIONER: DABUR INDIA LTD AND ANR.

       Vs.

RESPONDENT: STATE OF UTTAR PRADESH AND ORS.

DATE OF JUDGMENT12/07/1990

BENCH: MUKHARJI, SABYASACHI (CJ) BENCH: MUKHARJI, SABYASACHI (CJ) SAIKIA, K.N. (J) RAMASWAMY, K.

CITATION:  1990 AIR 1814            1990 SCR  (3) 294  1990 SCC  (4) 113        JT 1990 (3)   109  1990 SCALE  (2)29

ACT:     Central   Excises  and  Salt  Act,  1944:  Sections   3, 11B--Homeodent tooth paste--Whether homeopathic medicine  or toilet preparation-Whether liable to excise duty.     Constitution of India,  1950: Article 263--Dispute under two  different central legislations---Under  one--State  au- thorities  to  realise  and impose  taxes--Under  the  other Central  Government--Refund to be paid or  adjusted---Should be subject matter of  settlement by the proposed Council.     Medicinal  &  Toilet Preparations (Excise  Duties)  Act, 1955: Sections 3(1) and 4  ’Homeodent’ tooth paste--Liabili- ty to excise duty.

HEADNOTE:     M/s Dabur India Limited, petitioner in one set of  peti- tions,  is a public limited company engaged in the  manufac- ture  of Ayurvedic as well as Allopathic medicaments,  along with cosmetics. It used to manufacture for and on behalf  of M/s Sharda Boiren Laboratories--The petitioner in the second set  of petitions--a Homeopathic tooth paste called  ’Homeo- dent’  out of the raw-materials supplied by M/s  Sharda,  on job basis. It accordingly manufactured Homeodent during 1985 to 1988, duly paying duties of excise on Homeodent under the Central Excises & Salt Act, 1944.     The  Superintendent of State Excise visited the  factory of  M/s Dabur on 18th January, 1988 and enquired  about  the excisability  of  Homeodent  under the  Medicinal  &  Toilet Preparations  (Excise  Duties) Act, 1955. He was  told  that Homeodent had been classified under the 1944 Act in view  of the orders passed by the Central Excise authorities.  Howev- er, when it was revealed that the Homeodent tooth paste  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, the District  Excise  Officer caused  a common notice dated 17.3.1988 to be served on  M/s Dabur   requiring   it   to   pay   duty   aggregating    to Rs.68,13,334.20 under the provisions of the 1955 Act on such 295 goods  manufactured  and cleared between  January  1985  and January  1988.  This order was passed  without  issuing  any

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notice to show cause, and without affording any  opportunity of hearing, to the petitioner.     The  Petitioner  sent a  representation  requesting  for compliance  with the principles of natural justice and  also disputing  the amount claimed as duty. On 18th  March,  1988 the  Superintendent  of State Excise  modified  the  earlier order and confirmed the demand of duty amounting to Rs.46.67 lakhs,  on  provisional basis. On that  day  the  petitioner deposited  a sum of Rs. 11.66 lakhs and further  executed  a bank  guarantee for the balance. Simultaneously,  the  peti- tioner  appealed against the order dated 18th  March,  1988. The Excise Commissioner dismissed the appeal. No appeal  was filed by M/s Sharda against the demand notice of excise duty under the 1955 Act.     The  petitioner moved the High Court. On 13th May,  1988 the  High Court directed the petitioner to file  a  revision petition  with the Central Government. Both the  petitioners then approached the Central Government in revision. On  22nd September,  1988 the Additional Secretary to the  Government of  India in exercise of his revisional powers  allowed  the revision  filed by M/s Dabur and declared the orders of  the District Excise Officer and the Excise Commissioner as  null and  void having been passed in violation of the  principles of natural justice. The revision filed by M/s Sharda was not entertained  by the Central Government on the ground that  a right of appeal was vested in Sharda, which was not  availed of.  The High Court dismissed Sharda’s petition  challenging the  order of the Central Government declining to  entertain its  review. Against the order of the High Court M/s  Sharda have filed the special leave petition in this Court.      On  the  basis of the revision order,  the  petitioners called upon the District Excise Officer to refund the amount of  Rs.46.67 lakhs recovered from it by way of cash  payment and encashment of bank guarantee. The State Excise  authori- ties however failed to grant the refund, and instead  issued a fresh show-cause notice to the petitioners jointly on  2nd November, 1988.      In December 1988, M/s Dabur moved the High Court  under Article  226  of the Constitution for quashing  and  setting aside the showcase notice dated 2.11.1988 and for refund  of duty amounting to Rs.46.67. The  High Court dismissed the writ petition. The High  Court was 296 of  the  opinion that the question whether  Homeodent  tooth paste  was sans alcohol could not be adjudicated upon  under the extraordinary writ jurisdiction. The High Court  however came  to  the conclusion that both the 1944  and  1955  Acts operated  in different fields and there was  no  overlapping between the two. The High Court further observed that  where the  parties fully acquiesced with the matter and  subjected themselves  to the statutory procedure, no action should  be allowed  to be taken under Article 226 of  the  Constitution unless  the case was patently without jurisdiction. In  this connection,  it was emphasised by the High Court  that  once the  parties chose the statutory procedure they must  go  to the logical end.     It  was inter alia urged before this Court on behalf  of the  petitioner  that it 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  authori- ties  seeking  to classify Homeodent tooth paste  under  the respective  Acts of 1944 and 1955, the petitioner  was  left with  no other alternative but to challenge the  actions  by way of writ petition under Article 226 of the  Constitution.

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It  was  further contended that Homeodent  did  not  contain alcohol but contained ingredient "mother tincture"  contain- ing  alcohol, which had a tendency to evaporate  during  the process of manufacture of Homeodent; that no test result  as required under the 1955 Act was obtained to establish wheth- er  Homeodent  contained alcohol or not; and  that  on  31st August,  1987 the Assistant Collector of Central Excise  had already passed an order classifying Homeodent under the  Act of  1944  which order had been upheld by  the  Collector  of Central Excise (Appeals). The main point that the petitioner sought  to  emphasis was that the High Court ought  to  have appreciated that Homeodent tooth paste having been subjected to  duty under the provisions of the 1944 Act, the  question of  levying and recovering duty under the 1955 Act  did  not and could not arise. Dismissing the petitions, this Court,     HELD: (1) Homeodent is a homeopathic preparation but  it is  also a tooth paste. Therefore, it is a  toilet  prepara- tion.  Whether or not such Homeodent would not  be  dutiable under  the Medicinal & Toilet Preparations  (Excise  Duties) Act, 1955 would depend upon whether it contained alcohol  or not. [315E]     (2) It is undisputed that mother-tincture was one of the components that was used in the preparation of Homeodent and it has been found that alcohol was there and mother tincture was added in the 297 medicinal preparation as its component. [315G]     M/s Baidyanath Aryurved Bhawan (Pvt.) Ltd. Jhansi v. The Excise Commissioner U.P., [1971] 1 SCR 590, referred to.     (3) The authorities charged with the duties of enforcing a  particular Act are enjoined with the task of  determining the  question whether alcohol is contained therein  or  not. [310D]     (4)  It has been determined by the authorities  enjoined to  enforce the 1955 Act that Homeodent was a medicinal  and toilet  preparation  and  liable to excise  duty,  and  such finding  has not been assailed on any cogent ground  in  any proper  manner.  If that is the position, then  it  must  be upheld that Homeodent was dutiable. [317D]     Union of India v. Bombay Tyre International Ltd., [1984] 1  SCR  347; Mohanlal Magan Lal Bhavsar v. Union  of  India, [1956]  1 SCC 122 and N.B. Sanjana, Assistant  Collector  of Central Excise, Bombay v. The Elphinston Spinning and  Weav- ing Mills Co. Ltd., [1971] 3 SCR 506, referred to.     (5)  Provisions for rebate of duty on alcohol  contained in  section  4 of the 1955 Act show that multipoint  tax  on medicinal  preparations  containing alcohol was  within  the contemplation, otherwise there was no purpose in incorporat- ing section 4 into the Act. [316B]     (6) Justice requires that provisions for claiming refund of this duty should be made more clear. However, in the view of the facts and the circumstances that have happened, it is directed 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. [316E-F]     (7) In a case of this nature, where there is some  doubt as  to  whether duty was payable to the  Central  Government under  the 1944 Act or whether the item was  dutiable  under the 1955 Act, it would be just and proper and in  consonance with  justice infiscal administration that the Central  Gov- ernment should consider in the light of the facts found,  if an  application is made under section 11B of the  1944  Act,

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and circumstances of this case, the limitation period  under section 11B of the 1944 Act should not apply. This direction must be confined in the facts and the circumstances of  this case only. [316G-H; 317A] 298     Citadel Fine Pharmaceuticals Pvt. Ltd. v. D.R.O., [1973] Mad. Law Journal 99; Union of India v. Bombay Tyre  Interna- tional  Ltd.,  [1984] 1 SCR 347 and Assistant  Collector  of Central  Excise v. Madras Rubber Factory Ltd., [1986]  supp. SCC 751, referred to.     (8) Government should consider feasibility of a  machin- ery  under a Council to be formed under Article 263  of  the Constitution  to adjudicate and adjust the dues of  the  re- spective Governments. [318D]     (9) This Court 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  contend- ing  not  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 play dirty games with the citizens to coerce them in  making payments  which-the  citizens were not  legally  obliged  to make. If any money is due to the Government, the  Government should take steps but not take extra legal steps or  manoeu- vre.  Therefore, the right of renewal of the  petitioner  of licence  must be judged and attended to in  accordance  with law and the occasion not utilised to coerce the  petitioners to  a course of action not warranted by law  and  procedure. [318A-C]

JUDGMENT:     ORIGINAL JURISDICTION: Writ Petition (Civil) No. 426  of 1989 etc. etc. (Under Article 32 of the Constitution of India).     P. Chidambaram, K.K. Venugopal, Dushyant Dave, R. Karan- jawala, Ms. Meenakshi Arora, Mrs. Manik Karanjawala  (N.P.), C.S. Vaidyanathan and S.R. Setia for the Petitioners.     Yogeshwar Prasad, R.S. Rana and Ashok Srivastava for the Respondents. The Judgment of the Court was delivered by     SABYASACHI  MUKHARJI,  CJ. The challenge in  these  writ petitions  and special leave petitions is basically  to  the order  dated  18th  January, 1989, passed  by  the  District Excise  Officer,  Gaziabad,  seeking to  recover  duties  of excise  on Homeodent under the Medicinal &  Toilet  Prepara- tions  (Excise  Duties) Act, 1955 (hereinafter  called  ’the 1955  Act’), even though the product was classifiable  under the  Central  Excises & Salt Act, 1944  (hereinafter  called ’the 1944 Act’) and was, in 299 fact, assessed to duty under the said. Act between 1985  and 1988. Necessarily, the question arises as to whether, in the facts  and  circumstances of the case, the  1944  Act  would apply  or the 1955 Act would apply. The factual  dispute  is whether in the facts, as enumerated hereinafter, alcohol was present  in  Homeodent  and further  whether  Homeodent  was Homeopathic  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.     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

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writ petition No. Nil of 1988 connected with civil miscella- neous  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 Allopathic  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  Homeopathic  tooth paste called ’Homeodent’  out  of  the raw-materials supplied by the company on job work basis. The petitioner states that it accordingly manufactured Homeodent during 1985 to 1988, duly paying duties of excise on  Homeo- dent  under the 1944 Act at appropriate leviable  rates  and recovered the same from the company. According to the  peti- tioner,  Homeodent  did not contain  alcohol  but  contained ingredients  "mother  tinctures" containing alcohol.  It  is stated that alcohol, due to various reasons, has a  tendency to evaporate during the process of manufacture of Homeodent.     It  is further the case of the petitioner  company  that during  the  period from 1979 to 1988 it  also  manufactured certain  other medicinal products containing  alcohol  which were classifiable under the 1955 Act. The petitioner company held  at  all material times licence as required  under  the 1955  Act  to manufacture these products. The  State  Excise authorities  enforcing the provisions of the Act had  perma- nently posted an Inspector as also a peon in the factory  of the  petitioner where these dutiable products were  manufac- tured.  The bonded manufactory in which these products  were manufactured  was under lock and key of the  said  officers, according to the petitioner. The activities of the petition- er,  the petitioner asserts, were clearly within the  knowl- edge of the State excise authorities for over a considerably long  period. During the period from 1985-1988, the  company supplied 300 to  the petitioner amongst other ingredients, "mother  tinc- tures"  under BM-9 forms, stating clearly that  such  mother tinctures were intended to be used in manufacture of  Homeo- dent  in  the factory of the petitioner. These  BM-9  forms, according  to  the  petitioner, were filed  with  the  State excise  authorities  regularly.  Therefore,  the  petitioner asserts that the State excise authorities were aware of  the manufacture of Homeodent by the petitioner and the  activity of  the  company  in getting the same  manufactured  in  the factory of the petitioner out of mother tinctures.  However, the State excise authorities did not object to the same  nor did  they call upon either the petitioner or the company  to pay duty under the 1955 Act.     On  1st January, 1985, the petitioner states, the  peti- tioner filed classification list classifying Homeodent under the Act of 1944, declaring therein the ingredients of Homeo- dent.  On 17th January, 1985, the classification list  filed by  the  petitioner on 1.1. 1985 was  approved  finally  and Homeodent was held to be classifiable under the Act of 1944. On  31st  August, 1987 the Assistant  Collector  of  Central Excise passed an order which was an appealable one classify- ing Homeodent under the Act of 1944. The petitioner  asserts that this order had subsequently been upheld by the  Collec- tor  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

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the Act of 1944 in view of the orders passed by the  Central Excise authorities. However, it is stated that the  Superin- tendent  of State Excise, Bulandshahr called upon the  peti- tioner 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 required under the  Act of  1955 and the rules framed thereunder. However,  on  17th March, 1988 the Superintendent of State Excise,  Bulandshahr passed a demand order directing the petitioner to deposit  a sum  of  Rs.68,13,334.20 being the alleged duty  payable  on ’Homeodent’  manufactured and cleared between January,  1985 and January, 1988. This order was passed without issuing any notice  to  show  cause and, according  to  the  petitioner, without affording the petitioner any opportunity of hearing. The petitioner on the same day sent a rep- 301 resentation requesting for compliance with the principles of natural  justice and disputing the claim for duty.  On  18th March, 1988 the Superintendent of State Excise, Bulandshahr, modified his earlier order and confirmed the demand of  duty amounting to Rs.46.67 lakhs on provisional basis. Once again the  petitioner was neither served with a show cause  notice nor was afforded an opportunity of personal hearing, accord- ing  to the petitioner. While passing either of the  orders, no  test result, it is asserted, was obtained  to  establish whether Homeodent contained alcohol or not. However, on 18th March,  1988  the  petitioner deposited a  sum  of  Rs.11.66 lakhs.  The  petitioners also executed a bank  guarantee  in favour  of the District Magistrate, Ghaziabad, for a sum  of Rs.35 lakhs.     On  6th  April,  1988 the petitioners  filed  an  appeal before  the  Excise Commissioner, U.P. against  the  illegal orders of the District Excise Officer. The petitioners  also appeared for personal hearing before the Excise Commissioner through their advocate on 23rd April, 1988. On 5th May, 1988 the  Excise Commissioner, U.P., passed an  order  dismissing the  appeal  of the petitioners. However, petitioner  No.  1 states  that copy of the order was not served upon  it.  The petitioner No. 1 further asserts that without serving a copy of the order on it and without intimating whether the  order had  been  passed or not, the District  Excise  Officer  ap- proached  M/s.  Grindlays Bank for encashment  of  the  bank guarantee  of  Rs.35  lakhs and coerced,  according  to  the petitioners,  the  bankers  to encash  the  same  forthwith. Thereafter, the petitioner moved the High Court of Allahabad against  the  illegal actions of the respondents.  The  High Court directed the authorities to serve a copy of the  order and  restrained  the  respondents from  encashing  the  bank guarantee. It is stated that while the High Court of Allaha- bad 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  di- rected  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  Addi- tional  Secretary to the Government of India in exercise  of

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his revisional powers allowed the revision of the  petition- ers  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, 302 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  guar- antee  in view of the revision order. The case of the  peti- tioner is that the State Excise authorities failed to  grant the petitioner refund as prayed for despite the order of the revisional  authorities. On 2nd November, 1988 the  District Excise  Officer  issued a show-cause  notice  requiring  the petitioner  to  show cause as to why an amount  of  Rs.68.13 lakhs  be  not  recovered from it in  respect  of  Homeodent manufactured  and cleared during January, 1985  to  January, 1988. In December, 1988 the petitioner moved the High  Court of Allahabad under Article 226 of the Constitution of India, inter alia, praying for a writ of mandamus for quashing  and setting aside the show-cause notice dated 2.11.1988 and  for refund  of duty amounting to Rs.46.67 lakhs. On 20th  Decem- ber,  1988  the High Court of Allahabad dismissed  the  writ petition filed by the petitioner. It is stated that on  10th January,  1989 this Court upon special leave petitions  Nos. 135-36/89  filed by the company was pleased to issue  notice and  directed  stay of operation of the  notice  of  demand. Thereafter, on 20th January, 1988 the District Excise  Offi- cer  directed the petitioner to appear for personal  hearing in  response  to the show cause notice. The  petitioner  ap- peared before the District Excise Officer without  prejudice and submitted a detailed reply to the show cause notice  and also  contended during personal hearing that the notice  was required to be withdrawn. In its reply the petitioner  cate- gorically stated that the reply was being submitted  without prejudice to petitioner’s right to move this Court by way of a  special leave petition. Thereafter, the petitioner  moved this  Court on 21st January, 1989. It is, therefore,  neces- sary to refer to the judgment and order dated 20th December, 1988 in civil writ petition No. Nil/88 connected with  civil miscellaneous writ petition No. Nil/88 in the High Court  of Allahabad.     It  appears that M/s. Dabur India Limited had filed  the said  writ petition in the High Court challenging the  show- cause notice dated 2nd November, 1988 by the District Excise Officer.  Ghaziabad. Another writ petition being writ  peti- tion  No.  1160/88 which is the subject  matter  of  special leave petition Nos. 135-36/89 was filed by M/s. Sharda  (the company)  for quashing the order of the  Central  Government dated  3.6.1988 which was annexure-1 to the  writ  petition. These  two were disposed of by the said judgment. The  ques- tion  that was mainly involved therein was that the  conten- tion  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. 303 Collector  of Central Excise, Ghaziabad, had taken the  view that  the Homeodent was classifiable Under  sub-heading  No. 3306-02 of the 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 author- ities  was paid, according to the petitioner, on  the  goods manufactured  from 1.1.1986. On 18th January, 1988 the  Dis-

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trict Excise Officer made a surprise inspection of the units of  the petitioner and when it was revealed that the  Homeo- dent  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, Ghazia- bad, therefore had caused a common notice dated 17.3.1988 to be served on the petitioner requiring it to pay duty  aggre- gating  to Rs.68,13,334.20 under the provisions of the  1955 Act  on such goods manufactured from 1st January, 1985  till the date of notice. As mentioned hereinbefore, against  this notice some representation was made by the petitioner to the District  Excise  Officer and thereupon the  petitioner  was directed  to  deposit provisionally the excise duty  to  the tune of Rs.46,55,45 1.45 under the 1955 Act and the same was deposited by the petitioner. Such demand wad. challenged  by M/s.  Dabur  in appeal before the Excise  Commissioner.  The Excise  Commissioner  affirmed  the order  of  the  District Excise Officer and dismissed the appeal. No appeal was filed by  M/s.  Sharda against the demand notice  of  excise  duty under the 1955 Act. However, both the petitioners approached the  Central  Govt. in revision under Rule 128 of  the  1956 Rules.  The  revision of M/s. Dabur was disposed of  by  the Central  Govt. and the result was communicated by the  Addi- tional  Secretary to the Govt. of India by the  order  dated 22.9.1988. The contention of M/s. Dabur that the demand  was raised  on it without any opportunity of being heard and  in violation of principles of natural justice, was accepted and a  direction was given that the case be adjudicated upon  de nove after giving a show cause notice and proper opportunity of  being  heard to the party. The revision  filed  by  M/s. Sharda was also not entertained by the Central Government on the ground that a right of appeal was vested in M/s.  Sharda which  could have been exercised upto 17.6.1988,  which  was not done.     However,  pursuant to the order of the  Central  Govern- ment, the District Excise Officer issued the impugned  show- cause  notice  dated 2.11.1988 to the  petitioners  jointly, validity  of which was challenged by them in the writ  peti- tion  and the other writ petition I. as been filed  by  M/s. Sharda  only  to challenge the order of  the  Central  Govt. refusing 304 to  entertain its revision. The learned Judges in the  judg- ment under appeal noted that the petitioner did not  advance any  argument on the merits of the question; whether  Homeo- dent tooth paste is assessable to duty under the 1944 Act or under  the 1955 Act and rightly so because that  involved  a factual scrutiny which could hardly be gone into by the High Court. The High Court was of the opinion that the  question, whether  Homeodent  tooth paste is sans alcohol,  cannot  be adjudicated upon under the extra-ordinary writ jurisdiction. 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 short fall  could  be recovered. The submission was that no duty can be  recovered

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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 limitation.     The High Court addressed itself to the question  whether Article 226 of the Constitution of India was a proper  reme- dy. We are not really concerned with this question. The High Court, however, came to the conclusion that both the 1944  & 1955 Acts operate in different fields and there is no  over- lapping  between  the two. If the Homeodent tooth  paste  is found  to be assessable to duty under the 1955 Act  then  it will not amount to review of the order of the Central Excise authorities.  It was emphasised before the High  Court  that adjudication by the Central Excise authorities does not stop the State Excise authorities from considering the case under the  provisions of the 1955 Act. Both the Acts are  mutually exclusive and the authorities thereunder are fully empowered to  consider the assessability separately, according to  the High Court. The High Court came to the conclusion that where the  parties fully acquiesced with the matter and  subjected themselves  to the statutory procedure, no action should  be allowed  to be taken under Article 226 of  the  Constitution unless the case is patently without jurisdiction. The orders having  been made under the statutory provisions, the  Court should  be loath to interfere under Article 226 of the  Con- stitution of India. It was emphasised by the High 305 Court  that once the parties choose the statutory  procedure they must     to  the logical end. The Central Govt. had directed  the State Excise authorities to adjudicate the case de novo and, therefore,  the District Excise Officer, Ghaziabad,  had  no option  but  to issue show-cause notice. So  the  show-cause notice  dated 22nd November, 1988 was jointly given  to  the petitioner pursuant to the direction of the Central  Govern- ment  much after the orders had been passed initially or  in appeal.  Therefore,  the  common show-cause  notice  to  the parties  cannot, according to the High Court,  be  characte- rised as a sparking point and from the backdrop of the  case stated above, it is amply clear that the Excise  authorities had  not assumed jurisdiction to proceed against  the  peti- tioner  for  the first time by way of  a  show-cause  notice dated  2nd November, 1988 rather it had been issued at  much subsequent  stage pursuant to the direction of  the  Central Government.  The High Court came to the conclusion that  the show-cause notice having been issued in accordance with  the directions of the Central Govt. in the revisional  jurisdic- tion  which  the petitioner itself subjected to,  cannot  be assailed  under  Article 226 of the  Constitution.  So  this show-cause notice dated 2nd November, 1988 cannot be equated with  the  showcause notice given 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.     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

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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  petition- ers are different entities under the law and therefore  each petitioner  had to pursue its own remedy. Therefore,  on  an analysis  of the material, the High Court found  that  there was  nothing  to  interfere with the order  of  the  Central Government. Therefore,  the  questions that fall for  determination  are firstly, 306 whether the High Court was justified in dismissing the  writ petition  of  the petitioner on the  ground  of  alternative remedy  particularly when the writ petition  challenged  the actions  of the respondents in seeking to levy  and  recover duties of excise under the 1955 Act as being without  juris- diction  and/or without authority of law. The next  question that  arises  is  whether the High Court  was  justified  in dismissing the writ petition challenging particularly in two sets  as has already been subjected to duty of excise  under the 1944 Act. The next question that fails for consideration is  whether the High Court was justified in  dismissing  the writ petition of the petitioner which had prayed for  refund of  duties of excise amounting to Rs.46.67  lakhs  illegally recovered from the petitioner on Homeodent tooth paste under the  1955 Act in pursuance of the order which  was  declared null  and void in revision by the Central Government. It  is also necessary to consider whether the High Court was justi- fied  in  dismissing  the writ petition  of  the  petitioner particularly  when it challenged levy and recovery  of  duty under  12 of the 1956 Rules framed under the 1955  Act  when the said rules have already been declared to be invalid  and without jurisdiction by a Division Bench of the Madras  High Court in the case of Citadel Fine Pharmaceuticals Pvt.  Ltd. v. D.R.O., [1973] Madras Law Journal p. 99.     The next main question requiring consideration is wheth- er  the  respondents were acting within  their  jurisdiction while levying duty of excise on Homeodent under the 1955 Act when  in the manufacture of Hemeodent alcohol had  not  been used  as  a  raw material but  mother  tinctures  containing alcohol  had  been used and particularly when at  the  final stage of manufacture Homeodent did not contain any trace  of alcohol.     The  question that has really to be determined  in  this case  is, whether firstly Homeodent was  classifiable  under the  1944 Act or 1955 Act and who will determine  that;  and secondly,  which Act will prevail in the facts  and  circum- stances of the case.     In this connection, it may be mentioned that M/s. Sharda had applied for a licence and was granted a loan licence  to manufacture  tooth  paste 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  medica- ment  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 307 following chemicals and ingredients: "Potassium  Chlorate BPC 73 Sodium Benxoate IP Sodium  Flou-

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ride 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  Titenium Oxide BP Precipitate Silico USP NF Liquid Sodium  Socicylate 15 381: 1972 Sodium Leuryle Sulphate (High Purity) Saccharine IP"     It  is further to be noted that the final  product  i.e. the  tooth  paste is a homeopathic  semi-solid  compound  in which  mother tincture was completely absent or  present  in fractionally  negligible quantity, depending upon the  manu- facturing conditions, vacuum and the temperature. It is  the case  of the petitioner that at the time the tooth paste  is manufactured, packed and is ready for delivery, the  alcohol would diminish completely and would not be left at all.  Nor can  it  be  so traced upon any chemical  testing.  In  this connection, the petitioner sought to crave leave to  several documents  and some test examination reports.  According  to the  Laboratory  test  which the  petitioner  produced,  the alcohol  content was absent in the nine samples sent by  the loan licensee. It was further stated that the Govt. of India had  issued  instructions vide letter dated  19th  December, 1957  requiring for determination of alcohol content of  any product the samples must be sent to specified  laboratories. Despite the said position, it is the case of the  petitioner that  the Excise authorities acting under the 1955 Act,  had never  withdrawn any sample of tooth paste  manufactured  by the petitioner within their knowledge between 1985 and  1988 a sufficiently long period during which their  inspector-in- charge was physically present in the factory of M/s.  Sharda and  had  not only access but knowledge  of  the  activities including  the  manufacture  of the said  tooth  paste.  The Superintendent  of Excise, Bulandshahr, visited the  factory of  the petitioner-company on 18th January, 1988  and  after inspecting  the  same enquired about  the  exciseability  of Homeodent  tooth paste. The petitioner’s officers  explained that  Homeodent  was classified under the 1944 Act  and  the duty  had been paid accordingly. Subsequently, the  Superin- tendent  (Excise)  called  upon the  petitioner  to  furnish details  about the quantity and value of Homeodent  manufac- tured and cleared between 1985 and 1988. In pursuance there- of,  tile  petitioner  replied vide his  letter  dated  20th January, 1988 and in 308 details explained the reasons by Homeodent was not liable to duty  under the 1955 Act. In pursuance of the reply  of  the petitioner  no action was taken and the  petitioner  assumed that  the matter had been closed. The petitioner  has  given detailed episodes of harassment.     The main point that the petitioner seeks to emphasis  in this  case is that the High Court ought to have  appreciated that  the petitioner’s product Homeodent tooth paste  having been subjected to duty under the provisions of the 1944 Act, the  question of levying and recovering duty under the  1955 Act  did not and cannot arise. Therefore, the  impugned  ac- tions  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  dis- missing the writ petition without appreciating this  conten- tion.  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 tooth paste under the respective  Acts of  1944  and 1955, the petitioner was left  with  no  other

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alternative  but  to challenge the actions by  way  of  writ petition  under Article 226 of the Constitution. It is  con- tended  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 recov- er duty on Homeodent tooth paste under the 1955 Act.  There- fore,  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 before the High Court as also  the  demand raised against it could not  be  justified under  Rule 12 beyond a period of six months  as  prescribed under Rule 11 particularly in view of the fact that Rule  12 as had been declared to be invalid and without  jurisdiction as per the judgment of the Madras High Court. It is  further contended that the High Court committed an error in dismiss- ing  the  writ petition of the  petitioner  challenging  the demand of duty made by the State Excise authorities  amount- ing to Rs.68 lakhs particularly in view of the fact that  as per S.4 of the 1944 Act which is made the basis of valuation even under the Act of 1955 as per the Explanation II to  the Schedule as interpreted by this Court in the cases of  Union of  India  & Ors. v. Bombay Tyre  International  Ltd.  etc., [1984]  1 SCR 347 and Asstt. Collector of Central  Excise  & Ors. v. Madras Rubber Factory Ltd etc., [1986] Suppl. SCC 75 1  the  duty  liability could not exceed the  sum  of  Rs.26 lakhs. It was further emphasised that the High Court commit- ted  error in not directing the State Excise authorities  to refund the amount of Rs.46.67 lakhs which was recovered from 309 the  petitioner under Orders dated 17/18.3. 1988 which  were declared  to  be null and void having  been  passed  without giving any opportunity of hearing.     The  Sahibabad factory of M/s. Dabur India Ltd. was  set up in the year 1979. From the very beginning the  petitioner had  undertaken  the job of manufacturing  various  products covered under the 1955 Act. The petitioner had obtained  the necessary  licence  and fell under the purview of  the  1955 Act.  Section 6 of the 1955 Act stipulates that the  Central Govt. may, by notification in the Official Gazette,  provide that from such date as may be specified in the notification, no  person shall engage in the production or manufacture  of any  dutiable goods or of any specified component  parts  or ingredients of such goods or of specified containers of such goods  or  of  labels of such containers  except  under  the authority and in accordance with the terms and conditions of a  licence granted under this Act. Dutiable goods have  been defined  in  the Act vide Clause (c) of s.  2  i.e.  meaning thereby  the medicinal and toilet preparations specified  in the Schedule as being subject to the duties of excise levied under the Act.     It  is  stated  that the State  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 supervi- sion and control. Hence, all the activities of the petition- er  were within the knowledge of the respondent  Excise  au- thorities.  The  version  of the petitioner is  that  on  an inquiry from M/s. Sharda Bairon Laboratories Ltd. for  manu- facturing of Homeodent tooth paste 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 tooth paste under Tariff item 14FF of the

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1944 Act as the said tooth paste did not contain any alcohol directly.  The  classification list was filed  in  the  pre- scribed  Form and with all the particulars. It  was  further checked  up  by  the Inspector Range Inspector  and  it  was subsequently  approved by the Assistant  Collector,  Central Excise, according to the petitioner.      On  31st August, 1987 there is indeed an order  of  the Asstt  Collector of Central Excise, Division II,  Ghaziabad, stating  that the tooth paste in question  was  classifiable under the 1944 Act and not under the 1955 Act. It has to  be understood  that  under the 1955 Act the duties  go  to  the State Govt. while under the 1944 Act the duties go 310 to  the  Central Govt., though both these Acts  are  central legislations. The authorities charged with the duties  under the  1944 Act are Central Govt. employees and Central  Govt. authorities are different and distinct from the  authorities of  the State Govt. under the 1955 Act. The  basic  question that has to be decided is whether in such a situation who or which authority will decide if the product in question would be leviable to duty under the 1944 Act and go to the coffers of  the  Central Government or whether it will  be  leviable under  the  1955 Act and the realisations go  to  the  State Govt.     In  the facts and circumstances of this case, that  will depend  on the question whether alcohol was used as  any  of the ingredients in production of the product or  manufacture thereof. That there was production and/or manufacture and as such excise was leviable, there is no dispute. The  question is, whether in the process any ingredient was used  contain- ing  alcohol in respect of a product which is  medicinal  in nature  and  as such would be dutiable under the  1955  Act. (Homeodent  is  a homeopathic preparation but it is  also  a tooth paste. Therefore, it is a toilet preparation.  Whether or not such Homeodent would be dutiable under the 1955  Act, would depend upon whether it contained ’alcohol’ or not. The authorities charged with the duties of enforcing a  particu- lar Act are enjoined with the task of determining the  ques- tion whether alcohol is contained therein or not. It is  the case  of the petitioner that they had paid duties of  excise on  Homeodent  tooth paste manufactured by it on  behalf  of loan licensees under the 1944 Act. The total amount of  duty claimed  to have been paid for the said period  amounted  to Rs.6,26,570.47.  The  petitioners rely heavily on  the  test certificates issued by the Homeopathic Pharmacopia Laborato- ries  of the Ministry of Health & Family Welfare,  Govt.  of India, which state that they had failed to detect any  alco- hol  in the 9 batches of the tooth paste given to  them  for testing. The petitioner asserts that tooth paste is a homeo- pathic  semi-solid  compound  in which  mother  tincture  is completely absent or is present in negligible 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  exciseability of Homeodent tooth  paste  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 311 RS.46,66,451-45- It is the grievance of the petitioner  that

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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 Commissioner and the  Managing  Director of the  petitioner-company  on  14th March,  1988  the petitioner was orally  informed  that  the licence  would  be renewed upon payment of  dues  under  the orders  dated 17th and 18th March, 1988, as  aforesaid.  The petitioner  further  states that it was told by  the  Excise Commissioner  to deposit 1/3rd of the amount  forthwith  and execute a bank guarantee for the remaining amount. According to the petitioner, it had deposited the sum of Rs. 11,66,000 and  consequently the L-I licence was renewed for  a  period from  25.3.1988  to 31.3.1988. Then on 1st April,  1988  the petitioner was once again forced to close down its  manufac- turing activity in the absence of further renewal of licence for the period from 1.4.1988 to 7.4.1988.     It  is stated that the petitioner-company had  filed  an appeal  before the Commissioner under rule 127 of  the  1956 Rules  and upon compliance with the conditions of the  State authorities, the licence was renewed from 7.4.1988 on ad hoc basis  for  a period of 3 months upto 30th June,  1988.  The case  of  the petitioner is that the hearing of  the  appeal before the Excise Commissioner was over on 23.4.1988. Howev- er,  no order thereupon was passed. On 7th March, 1988  M/s. Grindlays  Bank,  who  are the bankers  of  the  petitioner, issued  a  bank guarantee inquiring whether any  orders  had been  passed by the Excise Commissioner and whether the  sum covered  under the bank guarantee had become due. The  peti- tioner was informed by the bankers that the District  Excise Officers  and other officers present in the bank had  served an  order requiring the Bank to clear the  bank  guarantees. The  petitioner states that at that time it had no  informa- tion as to the order of the Excise Commissioner but later on it came to learn that the Excise Commissioner had passed  an order on 5th May, 1988 but the same was not communicated  to it; and the bank guarantees were enforced without giving the petitioner any opportunity of filing any revision  petition. The  petitioner thereafter moved a writ petition before  the Allahabad  High  Court  which directed that  the  said  bank guarantee  should  not  be encashed until  13th  May,  1988. According to the petitioner, the bankers under-coercion were compelled to encash the bank guarantee on 9th May, 1988  and issue a draft for an amount of Rs.35 lakhs. The 312 writ  petition of the petitioner came up for hearing  before the  Allahabad  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.     On 22nd September, 1988 the Additional Secretary to  the Govt.  of India allowed the revision petition of  the  peti- tioner  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  tooth  paste manufactured  and  cleared between 1985 and 1988.  The  High

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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 is  the  subject-matter of challenge in  writ  petition  No. 426/89.     Therefore,  the basic question now is, whether  the  au- thorities under the 1955 Act were entitled and authorised to levy  duties  under  the Act. In the  orders  dated  18-19th January, 1989 passed by the District Excise Officer which is in vernacular and a translation of which is given in  Annex- ure XIV to the writ petition, states that in reference to  a confidential  letter dated 13th January, 1988 of the  Deputy Excise  Commissioner, Meerut Division, during  the  surprise inspection of the premises of M/s. Dabur India Ltd. and M/s. Sharda,  Ghaziabad on 18th January, 1988 by Sri Lal Ji  Rai, the  then  Distt. Excise Officer  &  Excise  Superintendent, Bulandshahr,  it  was found that M/s. Dabur India  Ltd.  had been manufacturing a toilet preparation i.e. Homeodent tooth paste  containing, according to the said order, alcohol  for M/s.  Sharda  Boiron. The question is, did they do  so.  How does  one find it out? As stated in the order, there  is  no dispute  but if it was, then calculating the duty u/s  3  of the  1955 Act a sum of Rs.68, 13,334.28 would be found  due. The  Officer found that there was a conspiracy  and  without knowledge  of the officer-in-charge in a clandestine  manner this production was carried on. This is an answer, according to  the  impugned order, u/s 7 of the 1955  Act.  Section  7 deals  with  the offences and penalties under  the  Act  and provides  that if any person contravenes any of  the  provi- sions of a notification issued u/s 6 313 or  evades  the payment of any duty of excise  or  fails  to supply  any information which he is required to  supply,  he shall for every such offence be punishable to the punishment mentioned in the section. The officer has further found that as  against  an  outstanding sum of  Rs.68,  13,334.28.  Rs. 11,67,000  had been deposited. After narrating the  incident and the presence of the counsel and lawyers the officer  was of  the opinion that nothing has been brought to his  notice which  required revision of the previous order.  So,  there- fore,  a break up was given  and  out  of   Rs.68,50,745.20, the   actual   duty  payable Rs.46,67,000 has  already  been realised and, therefore, the balance duty is Rs.21,83,745.28 and they have failed to realise the same.     In view of this Court’s order dated 10th January,  1989, whereby  this Court had directed that the proceedings  might go  on  but 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 joint- ly 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 manufac- turing  a  suitable toilet  preparation  containing  alcohol named Homeodent without obtaining necessary licence. Accord- ing  to  the said order the product  had  been  manufactured outside  the bonded premises approved under the L-I  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

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13th  March,  1988,  Dabur India Ltd. wrote  to  the  Distt. Excise  Officer, that the classification of Homeodent  tooth paste  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 the Schedule  to the  1955 Act as a Homeodent preparation and not under  Item 4.  Item 3 to the Schedule of 1955 Act contains the  follow- ing: "Homeopathic preparations containing alcohol". Item No. 4  is  "Toilet preparations containing alcohol  or  narcotic drugs  or narcotic". So the question raised here is  whether the  tooth  paste  is primarily a toilet  preparation  or  a homeopathic  preparation.  Such a question  really,  in  our opinion, must be justiciable by the authorities enjoined  to enforce the provisions. On the basis that the product was  a homeopathic  item, a sum of Rs.6245.29 was paid.  The  peti- tioner further stated as follows: "Assuming and not admitting that your classification is 314 correct,  even then your calculation of duty of the  product is erroneous on the following points: a. The total wholesale value of the goods manufactured as on 18.1.88 is Rs.65,93,91.63. b.  A  trade  discount @ 20% has to be  deducted  from  this wholesale price Rs. 13,26,373.27. The balance amount comes to Rs.52,67,542.36. The excise duty element in this amount comes to Rs .26,33,77 1.18.      The  assessable  value comes to Rs.26.33.77  1.18.  The calculation chart showing these calculations is attached  as Annexure ’B’. 3.  Kindly note that for central Excise purpose the  excise- able  value  declared to the CE Deptt. on  the  total  goods manufactured  upto 18.1.88 is only Rs.46,66,45 1.45 and  the wholesale price of these goods is Rs.66,31,866.35 only. This too is evident from Annexure ’B’. We would, therefore, request you to kindly amend your demand notice accordingly. Please  note  that the foregoing is  without  any  prejudice whatsoever to any arguments that may be raised by us at  the time of hearing with the Commissioner UP, Excise,  Allahabad or  during any legal proceedings arising out of your  afore- mentioned demand notice or adjudicatory order of the Commis- sioner. We also reserve the right to adduce further  grounds in  our defence and support at any/all future  occasions  in this connections."     On  18th March, 1988 there was further amendment by  the Distt. Excise Officer, Ghaziabad, he stated as follows: "With  reference to this office’s notice No.  185/1-2  dated 18.3.88  both the units are jointly and  severally  informed that  in  the  application letters  dated  17.3.88  received separately from both the units, the total wholesale price of the  total Homeodent tooth paste manufactured has  been  de- clared as Rs.65,739, 15.63.1t has also been informed that 315 for the purpose of Central Excise Duty, the total assessable value  of the total quantity of Homeodent tooth paste  manu- factured  until  19.1.88 is Rs.46,66,45 1.45  and  that  the total wholesale price on this quantity has been declared  as Rs.66,31,866.35 to the Central Excise Deptt. Based  on your declaration and clarification given  in  your above application and. on the basis of statistics and decla- rations that exciseable value on a provisional basis for the total  quantities  of the cosmetics  homeodent  tooth  paste containing  alcohol, which has been sold until  18.1.88  and which  in stock on 18.1.88 has accepted as Rs.46,66,45  1.45 instead  of  Rs.6,81,334.20. This does not  mean  that  this

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value has been finally accepted. One  to the fore mentioned, the amount of Rs.68, 13,33  1.20 is  amended  to Rs.46,66,451.45 in the office’s  notice  No. 185/1-2  dated 18.1.88. On this partial amendment, both  the units  are  jointly and severally ordered  to  provisionally deposit Rs.46,66,45 1.45 instead of Rs.68, 13,324.20 as duty in  the State Treasury, Ghaziabad immediately on receipt  of this  notice,  under  the appropriate account  head  and  to produce a copy of the receipted Treasury Challan as proof of deposit in this office."     In  view of the facts alleged and found by the  District Excise  Officer,  Ghaziabad, as mentioned  hereinbefore,  it appears to us that the Homeodent was a medicinal and  toilet preparations  and liable to excise duty. This Court  in  M/s ‘Baidyanath Ayurved Bhawan (Pvt.) Ltd., Jhansi v. The Excise Commissioner, U.P. & Ors., [1971] 1 SCR 590 has held that in order  to attract duty under the 1955 Act, all that  is  re- quired is that a medicinal preparation should contain  alco- hol.  Alcohol may be part of the preparation either  because it  is directly added to the solution or it came to  be  in- cluded in it because one of the components of that  prepara- tion  contained alcohol. It is undisputed that  mother-tinc- ture was one of the components that was used in the prepara- tion  of  Homeodent and it has been found that  alcohol  was there and mother tincture was added in the medicinal  prepa- ration  as its component. That was not the case  before  any authorities  in this case but being present it was found  in liquid  form which incidentally again was  disputed  because test reports were not accepted by the petitioner but accord- ing to the respondent authorities, indicated the presence of alcohol.  Section 3(1) of the 1955 Act was  attracted.  This Court in the 316 aforesaid  decision  further  reiterated that  even  if  the imposition of excise duty under section 3(1) of the said Act on  preparations in which alcohol was indirectly  introduced attracts multipoint taxation that by itself would not render the  duty  illegal.  The provisions for rebate  of  duty  on alcohol  contained  in Section 4 of the said Act  show  that multipoint tax on medicinal preparations containing  alcohol was  within the contemplation of the  legislature  otherwise there  was  no purpose in incorporating section 4  into  the Act.  In this connection, section 4 of the 1955 Act  may  be referred to which is as follows: "4.  Rebate of duty on alcohol, etc., supplied for  manufac- ture  of  dutiable goods--Where alcohol,  narcotic  drug  or narcotic had been supplied to a manufacturer of any dutiable goods  for use as an ingredient of such goods by,  or  under the  authority of, the collecting Government and a  duty  of excise  on the goods so supplied had already been  recovered by  such  Government  under any law for the  time  being  in force,  the 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."     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 situa- tion, it appears to us that the justice requires that provi- sions  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

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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  enter- tained  and considered in accordance with law. We  are  con- scious in giving this direction, we are not strictly follow- ing the letter and the provisions of the Act. But in a  case of this nature, where there is some doubt as to whether duty was payable to the Central Government under the 1944 Act  or whether  the item was dutiable under the 1955 Act, it  would be just and proper and in consonance with justice in  fiscal administration  that the Central Government should  consider in  the light of the facts found, if an application is  made under  section  11B  of the 1944 Act  and  pass  appropriate order.  Such application should be made within  four  months from the date of the judgment. In the facts 317 and  the circumstances 01’ this case, the limitation  period under  section 1 lB of the 1944 Act should not  apply.  This direction, in our opinion, must be confined in the facts and the circumstances of this case only.     Our  attention  was drawn to the  observations  of  this Court  in  Union of India & Ors. etc. etc.  v.  Bombay  Tyre International  Ltd.  etc. etc., (supra) in  respect  of  the valuation. But the point not having been taken at any  stage before  the  authorities, it is not proper for  us  at  this stage  to go into this question. We will proceed in view  of the  facts  and  the circumstances of this case  and  to  do justice  between the parties on the basis that the duty  has been correctly imposed. We have looked into the order of the District  Excise  Officer, Ghaziabad and we  find  that  all relevant  facts  have  been considered  and  no  facts  were brought  before us contrary to the findings nor any  conten- tions of substance raised which can induce us to hold to the contrary.     Reference  may also be made to the observations of  this Court in Mohanlal Maganlal Bhavsar & Ors. v. Union of  India &  Ors., [1986] 1 SCC 122 for the test to determine  whether an  item of medicinal preparation falls under Item 1 of  the Schedule  to  the 1955 Act. It has been  determined  by  the authorities  enjoined to enforce that Act and  such  finding has  not been assailed on any cogent or reliable  ground  in any proper manner. If that is the position, then that  order must  be  upheld but it must be upheld  that  Homeodent  was dutiable and as such the impugned order was correctly passed by the District Excise Officer.     Our  attention  was drawn to the  observations  of  this Court  in N.B. Sanjana, Assistant Collector of  Central  Ex- cise, Bombay & Ors. v. The Elphinstone Spinning and  Weaving Mills  Co. Ltd., [1971] 3 SCR 506. But in view of the  facts on  which the parties rested their case before the  authori- ties,  it  is not necessary at this stage to  go  into  this controversy.     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  sec- tion  4 of the 1944 Act within the time indicated as  before should  be  disposed of in the manner  indicated  above,  if made.      Before  we part with this case, two aspects have to  be adverted  to--one was regarding the allegation of the  peti- tioner  that in order to compel the petitioners to  pay  the duties which the petitioners con- 318

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tended that they were not liable to pay, the licence was not being  renewed  for a period and the petitioners  were  con- stantly kept under threat of closing down of their  business in order to coerce them to make the payment. This is  unfor- tunate.  We would not like to hear from a litigant  in  this country  that  the Government is coercing citizens  of  this Country  to  make payment of duties 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  play dirty games with the  citizens  of  this country to coerce them in making payments which the citizens were not legally obliged to make. If any money is due to the Government,  the Government should take steps but  not  take extra  legal steps or manoeuvre. Therefore, we  direct  that the  right of renewal of the petitioner of licence  must  be judged and attended to in accordance with law and the  occa- sion  not utilised to coerce the petitioners to a course  of action  not warranted by law and procedure. Secondly,  in  a situation  of  this nature, we are of the opinion  that  the Government  should consider feasibility of setting up  of  a machinery under a Council to be formed under Article 263  of the  Constitution to adjudicate and adjust the dues  of  the respective Governments. In these peculiar facts, it  appears that the dispute is under two different central legislations and under one the State authorities will realise and  impose the  taxes on finding on certain basis and under  the  other the  same transaction may be open to imposition  by  Central Government  authorities on a particular view of the  matter. In  such a situation, how and wherein the refund  should  be made of any duty paid in respect of part of a transaction to one  of  the  authorities, the State or the  Centre,  to  be adjusted should be the subject matter of a settlement by the Council to be set up under Article 263 of the  Constitution. This  is  a  matter on which we draw the  attention  of  the concerned  authorities for examination because section 3  of the  1955  Act  and section 3 of the 1944  Act  may  overlap similar transaction in certain cases.     Writ petitions are disposed of with the aforesaid direc- tions. Special leave granted in SLP (Civil) No. 1610 of 1989 (M/s. Dabur India v. State of U.P. & Ors., ) and SLP (Civil) Nos. 135-36 of 1989 (Sharde Bairon Laboratories v. State  of U.P.  & Ors.). Appeals are disposed of in the light  of  the directions given hereinbefore. Save as aforesaid all interim orders are vacated.     In  the  facts and the circumstances of  the  case,  the parties will pay and bear their own costs. R.S.S.                              Petitions disposed of. 319