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PETITIONER: SHIVA GLASS WORKS CO. LTD.

       Vs.

RESPONDENT: ASSITANT COLLECTOR OF CENTRAL EXCISE AND OTHERS.

DATE OF JUDGMENT11/01/1991

BENCH: OJHA, N.D. (J) BENCH: OJHA, N.D. (J) SAIKIA, K.N. (J)

CITATION:  1991 AIR  456            1991 SCR  (1)  43  1991 SCC  (2) 329        JT 1991 (1)    73  1991 SCALE  (1)12

ACT:      Central  Excises  and  Salt  Act,  1944/Central  Excise Rules,  1944:  Section 3/Rules 10  and  10A--Assessee--Price list of goods furnished--Accepted provisionally--Excise duty paid--Goods  cleared--Discrepancy--Detected  later--Recovery of excise duty--Whether permissible.

HEADNOTE:      The  appellant  company a licensee  under  the  central Excises  and Salt Act, 1944 and during the  relevant  period namely  1st September, 1961 to 26th September, 1963  carried on  the business of manufacturing different types  of  glass wares which were excisable goods under the Act.      The appellant used to present A.R.I. forms  accompanied with price lists of the goods and after paying excise duties calculated  on the basis of the price lists used  to  remove the goods.  The office of the appellant was searched by  the Excise  Authorities  on  26th September,  1963  and  several documents,   books  and  papers  were  seized,  and   as   a consequence  thereof it transpired that the appellants  were maintaining  two sets of bills.  The bills of one  set  were those on the basis of which the appellant used to pay excise duty  before clearance of the goods and those of  the  other were such which were never issued to the dealers.  In  these two  sets  of bills, the rate of  discount  was  differently shown.      A  notice  dated  26th March, 1968 was  served  on  the appellant  by  the  Assistant  Collector  stating  that   it appeared  that during the relevant period the appellant  had not  paid  excise duty on the goods at the prices  at  which they  were  sold,  but  duty was paid  at  lower  rates  and requiring  it to show cause as to why duty on the prices  at which  the good were actually sold, as found on scrutiny  of sale  vouchers/sale documents should not be recovered  under Rule  10A of the Central Excise Rules, 1944.  In  reply  the appellant asserted that it was the provision of Rule 10  and not   Rule  10A  which  was  attracted  to  the  facts   and consequently  the  initiation of proceedings was  barred  by time.   This  plea  did  not find  favour  with  the  Excise Authorities,  and  the  appellant was required  to  pay  the additional duty of Rs. 1.41 lakhs.

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    The  aforesaid  order was challenged by  the  appellant before the                                                        44 High  Court  under  Article 226 of the  Constitution  and  a Single  Judge accepted the contention of the  appellant  the Rule 10 and not Rule 10A of the Rules was applicable and  on this view quashed the order dated 26th August, 1968      The  respondents preferred and appeal to  the  Division Bench  which has reversed the order of the Single Judge,  on the  finding  that  it  was a  case  falling  Rule  10A  and dismissed the writ petition.      In  the appeal to this Court it was contended that  the single Judge was right in taking the view that the case fell within  the  purview of Rule 10 of the Rules  and  that  the Division Bench committed an error in reversing the Judgment, while  the Revenue contested the appeal urging that  on  the facts  found by the division Bench, and indeed on  the  case set  up by the appellant itself no exception could be  taken to  the finding of the Division Bench that it was  Rule  10A and not Rule 10 which was attracted to the facts of the case.      Dismissing the Appeal, this Court,      HELD: 1. The question as to whether Rule 10 or Rule 10A was applicable has to be determined in the background of the procedure  which was followed.  The legal position  is  that Rule 10A does not apply where the case is covered by Rule 10 of the Rules. [48E]      N.B. Sanjana v. Elphinstone Mills, [1971] 3 S.C.R.  506 relied on.      2.  Simply because Rule 9B of the Rules,  was  conceded not  to  have been taken recourse to by the  respondents  so that provisional assessment could be said to have come  into existence in its statutory sense as contemplated by the said rule  when  duty was paid at the time of  clearance  of  the goods,  the  conclusion was not inescapable, that   a  final assessment had came into being at that time. [49A-B]      3. In view of the procedure adopted by the appellant it was apparently a case where duty was calculated on the basis of  price lists supplied by the appellant to facilitate  the clearance  of  the   goods and the correct  amount  of  duty payable   was   yet  to  be  determined   after   subsequent verification, and appellant was under an obligation to  pay, on the basis of the bond executed by them, the difference of the amount of the duty paid at the time of clearance of  the goods   and  the  amount  found  payable  after   subsequent varification. [49B-C]      4. The Division Bench of the High Court has found  that there was no assessment as is understood in the eye of  law, but only a mechanical settlement or adjustment of duties  on the basis of the sale prices filed by the appellant had been made  and  at best, it was a case of  incomplete  assessment which the Excise Authorities were entitle to complete  under Rule 10A.[49D]      Assistant   Collector  of  Central   Excise,   Calcutta Division  v.  National Tobacco Co. of India Ltd.,  [1973]  1 S.C.R. 822, referred to.      5. The instant case therefore falls within the  purview of Rule 10A and not Rule 10 of the Rules. [50B]

JUDGMENT:      CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 763  of 1977.      From  the  Judgment and Order dated  30.7.1976  of  the Calcutta High Court in Appeal No. 167 of 1972.

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    Raja  Ram  Agrawal,  K.B. Rana and  Praveen  Kumar  for Khaitan & Co. for the Appellant.      A.  Subba Rao, P. Parmeshwaran and A.D.N. Rao  for  the Respondents.      The Judgment of the Court was delivered by      OJHA,  J.  This  appeal  by  special  leave  has   been preferred against the judgment dated 30th July, 1976 of  the Calcutta  High  Court  in Appeal  from  Original  Order  No. 167/1972.  The facts in nutshell necessary for the  decision of  this appeal are that the Appellant-Company,  a  licensee under  the  Central Excise and Salt Act,  1944  (hereinafter referred to as the Act) carried on during the relevant time, namely,  1st  September,  1961  to  26th  September,   1963, business  of  manufacturing different  types  of  glasswared which  were  excisable goods under the Act.   The  appellant used to present A.R.I. forms accompanied with price list  of the  goods and after paying excise duties calculated on  the basis  of  the price lists used to remove  the  goods.   The appellant’s office was searched by the Excise Authorities on 26  September, 1963 and several documents, books and  papers were seized.  As a consequence of this search and seizure it transpired  that the appellant was maintaining two  sets  of bills.   The  bills of one set were those on  the  basis  of which the appellant used to pay excise duty                                                        46 before  clearance of the goods and those of the  other  were such  which were never issued to the dealers.  In these  two sets   of  bills  inter  alia  the  rate  of  discount   was differently  shown.   A notice dated 26th  March,  1968  was served  on  the  appellant by  the  Assistant  collector  of Central Excise, Calcutta-II Division, Calcutta stating  that it  appeared  that the appellant had,  during  the  relevant period,  not paid excise duty on the goods at the prices  at which  they  were  sold but duty was  paid  at  lower  rates declared by it.  The appellant was required to show cause as to why duty amounting to Rs. 1,43,633.84 p. on the prices at which the goods were actually sold, as found on scrutiny  of sale  vouchers/sale documents should not be recovered  under rule  10A  of  the Central Excise  Rule,  1944  (hereinafter referred  to as the Rules.)  The appellant, in reply to  the show  cause  notice,  inter alia asserted that  it  was  the provisions  of Rule 10 and not Rule 10A of the  Rules  which were  attracted  to the facts of the instant case  and  that consequently  the  initiation  of  proceedings  against  the appellant was barred by time.  This plea did not find favour with the Excise Authorities and the appellant was  required, by  order  dated 26th August, 1968, to pay  to  the  Central Government,  an additional duty of Rs. 1,41,829.11  p.  This order was challenged by the appellant before the High  Court under  Article 226 of the Constitution of India.  A  learned Single  Judge of the High Court accepted the  contention  of the Rule 10 and not Rule 10A of the Rules was applicable and on this view the order dated 26th August, 1968 was  quashed. Aggrieved by that order, the respondents preferred an appeal before a Division Bench of the High Court.  The judgment  of the  learned  Single Judge was reversed and on  the  finding that it was a case falling under Rule 10A, the writ petition was dismissed by the judgment under appeal.      The only point which has been urged by learned  counsel for  the  appellant in support of this appeal  is  that  the learned  Single Judge was right in taking the view that  the case fell within the purview of Rule 10 of the Rules and the Division Bench committed an error in reversing his judgment. For  the  respondents on the other hand, it has  been  urged that  on the fact found by the division Bench and indeed  on

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the  case set up by the appellant itself no exception  could be  taken to the finding of the Division Bench that  it  was Rule 10A of the Rules and not Rule 10 which was attracted to the  facts of the instant case.  In order to appreciate  the respective  submissions  made  by learned  counsel  for  the parties  it  would be useful to extract Rules  10  and  10A. They read as hereunder:           "10. Recovery of duties or charges short-levied or          errones-                                                        47           ously  refunded--When duties or charges have  been          short-levied through inadvertence, error, collusion          or  misconstruction on the part of an  officer,  or          through   mis-statement   as   to   the   quantity,          description or value of such goods on the  part  of          the  owner, or when any such duty or charge,  after          having been levied, has been owning to such  cause,          erroneously  refunded, the person  chargeable  with          the duty or charge so short-levies, or to whom such          refund  has  been erroneously made, shall  pay  the          deficiency  or 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."           "10A. Residuary powers for recovery of sums due to          Government--Where  these  Rules  do  not  make  any          specific provision for the collection any duty,  or          of  any deficiency in 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.      In  elaboration  of his submission that it was  a  case covered  by  Rule 10 of the Rules learned  counsel  for  the appellant pointed out that since the case of the respondents was  that  on the basis of the documents seized  during  the search of the appellant’s office on 26th September, 1963  it was  found that the duty paid by the appellant on the  basis of  price  lists furnished by the appellant at the  time  of clearance  of the goods was deficient, it was a  case  where duty had been short-levied "through mis-statement as to the quantity, description or value of such goods on the part  of the owner" as contemplated by Rule 10.  We find it difficult to agree with the submission.  The procedure adopted by  the appellant/was  indicated by the appellant under  its  letter dated  23rd March, 1961, a portion whereof as  extracted  by the learned Single Judge reads as hereunder:           "We enclose herewith our three price lists for  1)          Bottles  and  phials 2) Glass-Wares  and  3)  Fancy          Wares  for the purposes of provisional  assessment.          These  price are inclusive of Central Excise  duty.          As regards Trade discounts to                                                        48           be deducted from the said prices as per Section  4          of  the  Act  we  declare that  1)  25%  should  be          deducted  from  the  price  list  for  bottles  and          phials. 2) 35% from the price list for  glass-wares          and 3) 20% from the price list for fancy wares over          and  above necessary deduction for  Central  Excise          duty included in the prices."      The learned Single Judge has also pointed out that  the

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appellant   used  to clear the goods by executing  bond  and that  in the specimen copy of the bond produced in court  it was  stated that whereas final assessment of excise duty  of glass and glasswares made by the appellant from time to time could  not be made for want of full particulars  as  regards value,  description,  quality or proof thereof or  for  non- completion  of  chemical  or other  tests  and  whereas  the appellant  had requested the Excise Authorities as per  Rule 9B  of  the Rules to make provisional assessment  of  excise duty  of the goods pending final assessment,  the  appellent was giving a guarantee to the extent of the sum mentioned in the  bond  for payment of the duties.   The  learned  Single Judge has also pointed out that it appeared to be the common case  of  the  parties  that  in  order  to  facilitate  the assessment of the goods by Excise Authorities, the appellant used to file the price list in advance and after  acceptance provisionally  of  the  price list, the  goods  used  to  be cleared and if subsequently and discrepancy was detected  or found, the same used to be paid by the appellant.      The  question as to whether Rule 10 or Rule 10A of  the Rules was applicable has to be determined in the  background of  the  appellant as indicated above.  The  legal  position that  Rule 10A does not apply where the case is  covered  by Rule 10 of the Rules is well-settle in view of the  decision of this Court in N.B. Sanjana v. Elphinstone Mills, [1971] 3 S.C.R.  506,  on which reliance has been placed  by  learned counsel for the appellant.  Consequently, Rule 10A could  be attracted only if the case does not fall within the purview of Rule 10.  It was conceded before the learned Single Judge on  behalf of the respondents that the respondents were  not proceeding under the provision of Rule 9B. On this basis and on his own finding also that Rule 9B was not attracted,  the learned  Single  Judge  held  that it  was  not  a  case  of provisional  assessment but a case of regular assessment  in pursuance  whereof  duty was paid by the appelant  and  that since the case of the respondents was that the appellant had manufactured  documents as was revealed as a consequence  of the  search and seizure referred to above it was a  case  of short-levy   due   to  mis-statement   by   the   appellant. Consequently, the case clearly fell                                                        49 within  the purview of Rule 10 of the Rules.   The  Division Bench  of  the  High Court in appeal did  not,  and  in  our opinion rightly, subscribe to the aforesaid finding.  Simply because  Rule 9B of the Rules was conceded not to have  been taken  recourse to by the respondents so that a  provisional assessment could be said to have come into existence in  its statutory  sense as contemplated by the said rule when  duty was  paid  at  the  time of  clearance  of  the  goods,  the conclusion was not inescapable, that a final assessment  had come  into being at that time.  In our opinion, in  view  of the procedure adopted by the appellant referred to above  it was apparently a case where duty was calculated on the basis of  price lists supplied by the appellant to facilitate  the clearance  of  the  goods and the  correct  amount  of  duty payable   was   yet  to  be  determined   after   subsequent varification  and appellant was under an obligation to  pay, on the basis of the bond executed by them, the difference of the amount of the duty paid at the time of clearance of  the goods   and  the  amount  found  payable  after   subsequent verification.  In the judgment appealed against the Division Bench  of  the  High  Court has  found  that  there  was  no assessment  as  is understood in the eye of law but  only  a mechanical  settlement or adjustment of duties on the  basis of  the  sale prices filed by the appellant  had  been  made

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and at best, it was a case of an incomplete assessment which the Excise Authorities were entitled to complete under  Rule 10A.   In  taking this view the Division Bench of  the  High Court  has relied on a decision of this Court  in  Assistant Collector  of Central Excise, Calcutta Division v.  national Tobacco  Co. of India Ltd., [1973] 1 S.C.R.. 822.   In  that case also the Company used to furnish quarterly price  lists which  used  to  be accepted for  purpose  of  enabling  the Company  to  clear  its goods and according  to  the  Excise Authorities   these  used  to  be  verified  afterwards   by obtaining  evidence  of  actual sale in  the  market  before issuing final certificates that the duty had been fully paid up.  The prices of the goods to be cleared were furnished by the  Company  on forms known as A.R.I. forms  in  that  case also.   It  was held that only a mechanical  adjustment  for settlement  of  accounts by making debit  entries  was  gone through  and  that  it  could not  be  said  that  any  such adjustment was assessment which was a quasi-judicial process and involved due application of mind to the fact as well the requirements  of law.  With regards to the debit entries  it was held that the making of such entries was only a mode  of collection  of tax and even if payment or actual  collection of  tax could be spoken of as a de facto "levy" it was  only provisional  and  not final.  It could only  be  clothed  or invested with the validity after carrying out the obligation to make an assessment to justify it.  It was also held  that it  was  the process of adjustment  that  really  determined whether  levy was short or complete.  It was not  a  factual or presumed levy which could in                                                        50 a  disputed case prove an "assessment." This had to be  done by  proof  of  the  actual  steps  taken  which   constitute assessment.      We  are  of the opinion that in view of  the  procedure adopted  by  the appellant in the instant case  referred  to above  and  the law laid down by this Court in the  case  of national  Tobacco  Co.  of  India Ltd.  (supra)  it  is  not possible  to  take  any  exception to  the  finding  of  the Division Bench in the judgment appealed against that it  was a  case  which fell within the purview of Rule 10A  and  not Rule  10 of the Rules.  In the result, we find no  merit  in this appeal.  It is accordingly dismissed with costs. N.V.K.                                       Appeal dismissed.                                                        51