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PETITIONER: ASSISTANT COLLECTOR OF CENTRAL EXCISE,CALCUTTA DIVISION

       Vs.

RESPONDENT: NATIONAL TOBACCO CO.  OF INDIA LTD.

DATE OF JUDGMENT09/08/1972

BENCH: BEG, M. HAMEEDULLAH BENCH: BEG, M. HAMEEDULLAH RAY, A.N. DUA, I.D.

CITATION:  1972 AIR 2563            1973 SCR  (1) 822  CITATOR INFO :  R          1985 SC 537  (15)  F          1986 SC1964  (8)  RF         1989 SC 516  (28)  E          1989 SC1829  (5,16)  RF         1991 SC 456  (5)  R          1992 SC1756  (14)

ACT: Central  Excise Rules-Rule 10 and 10A, Whether the  impugned notice  fell under Rule 10 to be ineffective and  barred  by limitation.

HEADNOTE: The  respondent manufactures cigarettes at its factory  upon which  Excise Duty is levied by the Assistant  Collector  of Central   Excise,  Calcutta  Division.   The  rates   varied according  to the provisions of Finance Act, 1951, and  1956 and  the  Additional  Duty  of  Excise  (Goods  of   Special Importance) Act, 1957.  The Company was required to  furnish quarterly  consolidated price lists and the  particulars  of cigarettes  to be cleared were furnished by the  Company  as required  by  Rule  9  of the  Central  Excise  Rules.   For facilitating  collection of duty, the Company  maintained  a large  sum  of money in a Current Account with  the  Central Excise  authorities, who used to debit this account for  the duty  leviable  on each stock of cigarettes  allowed  to  be removed. The  Company used, to furnish its quarterly price  lists  to the  Collector ,on forms containing nine columns  and  until July 1957, so long as this form was used by the Company,  no difficulty  was experienced in checking prices.   But  after this  column was dropped from the new form of six,  columns, the  Excise  authorities  encountered  some  difficulty   in valuing  the  cigarettes  for  levying  Excise  Duty.   They therefore,   changed  the  basis  of  assessment  from   the Distributors  selling  price to the wholesale  cash  selling price at which stockists or agents were selling the same  in the open market. The authorities informed the Company of this change of basis on  5-11-58  by  letter, which also  asked  the  Company  to furnish  its  price lists immediately  for  determining  the correct  assessable  value  of  its  cigarettes.   Two  days

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thereafter, the authorities served a notice upon the Company demanding  payment  of Rs. 1,67,072,40 P. as  Basic  Central Excise  Duty  and  Rs. 74,574,85 P.  as  Additional  Central Excise  Duty on ground of short levy for a certain brand  of cigarettes  cleared  from  Company’s  Factory  between  10th August  1958, After another five days, the authorities  sent another  notice  demanding more than Rs. 6  lakhs  as  Basic Central Excise  Duty and more than Rs. 2 lakhs as Additional Central Excise Duty.  On the following day, the  authorities sent  a third notice under Rule 10-A of the  Central  Excise Rules, demanding more than Rs. 40,000/as Central Excise Duty and more than Rs. 16,000/- as Additional Duty. The  Company challenged these notices by a writ  before  the High  Court.,  The  High Court quashed the  notices  on  the ground that the Company had not been given an opportunity of being heard.  No appeal was filed by the other side  against this decision, but when the case went back to the Collector, he issued P. fresh notice on 24-4-1960.  By this notice, for certain periods, a sum of more than Rs. 10 lakhs was  levied as  Basic Central Excise Duty and a total sum of  more  than Rs.  3  lakhs as Additional Duty, and this amount  had  been provisionally debited in the Company’s Account on the  basis of  the price list supplied by the Company and  the  Company was informed that if it desired a personal hearing, it 823 can  appear  before  the  authorities  to  make  the   final assessment in accordance with law. The Company challenged the validity of this notice dated 24- 4-60 on the ground that the notice was barred by  limitation and was ’issued without jurisdiction, so that no proceedings could  be taken.  The learned single Judge, as well  as  the Divisional  Bench of the High Court allowed the petition  on the ground that the notice was barred by time under Rule  10 of  the Central Excise Rules because the notice was held  to be fully covered by Rule 10 and by no other rule.  The  case was certified under Art. 33(a), (b) and (d) for an appeal to this  Court.  Rule 10 of the Central Excise  Rules  provides that  when duties or charges have been short levied  through inadvertence or misconstruction etc., the person  chargeable with  the duty so short levied, shall pay the deficiency  or pay  the amount paid to him in excess on written  demand  by the  proper  officer within three months from  the  date  on which the duty or charge is paid or adjusted in the  owner’s account,  if any, or from the date of making  the  refund.It was  contended  that this was  substantially  a  provisional assessment     covered by Rule 10-B.  The Division Bench  of the High Court, however, refused to agree that the  impugned notice  of 24-460 fell under Rule, 10-A.  The  reason  given for  this  refusal was that such a case  was  neither  taken before  the learned single Judge, nor could be found in  the grounds,  of the appeal despite the fact that the  appellant had ample opportunity of amending its Memorandum of  Appeal. Allowing the appeal. HELD  :  (i.)  That the High Court  erroneously  refused  to consider  whether the impugned notice fell under Rule  10-A. The  applicability  of  Rule 10-A was  very  much  in  issue because the Collector in his affidavit denied that Rule 10-A of  the said rules had any application to the facts  of  the case. (ii) It  cannot be accepted that merely because the  current account  kept under Rule 9 indicated that an accounting  had taken  place,  there  was necessarily  a  legally  valid  or complete  levy.   The making of debit entries  was  only  on ground of collection of the tax.  Even if payment or  actual collection of tax could be spoken of as a defective levy, it

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was only provisional and not fINal.  It could only be closed or invested with validity after carrying out the  obligation to  make  an assessment that really determines  whether  the levy is short or complete.  It is not a faCtual or  presumed levy  which could prove an assessment.  This has to be  done by  proof  of  the  actual  steps  taken  which   constitute assessment. [836D] A mechanical adjustment, or settlement of accounts by making debit  entries was gone through in the present case, but  it cannot be said that any such adjustment is assessment  which is a quasi-judicial process and involves due application  of mind  to the facts, as well as to the requirements  of  law. Rule  10 and 10-A seems to be so widely worded as  to  cover any inadvertence error etc.;  whereas Rule 10-A would appear to  cover  any deficiency in duty if the duty  has  for  any reason,  been short-levied, except that it would be  outside the  purview  of Rule 10-A if its  collection  is  expressly provided  or by any rule.  Both the rules as they  stood  at the  relevant  time,  deal with  collection,  and  not  with assessment.  In N. B. Sanjana’s case (A.I.R. 1971 S.C. 2039) this  Court indicated that Rule 10-A which was residual.  in character,  would  be inapplicable if a case fell  within  a specified category of cases mentioned in Rule 10. It     was pointed  out  in  Sanjana’s case that  the  reason  for  the addition 824 of the new rule 10-A was a decision of the Nagpur (Chotabhai Jethabhai’s  case; A.I.R. 1952 Nagpur 139), so that a  fresh demand  may be made on a basis altered by law.   The  excise authorities  had  made a fresh demand under Rule  10-A,  the validity  of  which was challenged, but it was upheld  by  a Full  Bench  decision  of the High Court  of  Nagpur.   This Court,  in  Chotabhai  Jethabhai’s case  also  rejected  the assessee’s  claim  that  Rule 10-A  was  inapplicable  after pointing out that the new rule was specifically designed for the  enforcement of the demand like the present one.  [836F- 837E] (iii)The present case, therefore, falls within the residuary clause  of unforeseen cases from the provisions of S.  4  of the Act, read with Rule 10-A, an implied power to carry  out or complete an assessment, not specifically provided for  by the rules, can be inferred.  Therefore, it is wrong to  hold that the case falls under Rule 10 and not under Rule 10-A.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION:  Civil Appeal  No.  1101  of 1967,. Appeal  by  certificate from the judgment  and  order  dated September 28, 1966 of the Calcutta High Court in Appeal  No. 7 of 1965. G.   L.  Sanghi,  B. D. Sharma and S. P.   Nayar,  for  ;the appellant. A.   K. Sen, B. P. Maheshwari and Shambhu Nath Chunder,  for the respondent. The Judgment of the Court was delivered by Beg,  J. The National Tobacco Co. of India Limited  (herein- after  referred to as "the Company"), the Respondent in  the appeal before us, manufactures Cigarettes, at its Factory in Agrapara, upon which Excise duty is -vied by the  appellant, the Assistant Collector of Central Excise, Calcutta Division (hereinafter referred to as "the Collector").  The rates  at which the Excise duty was imposed upon the cigarettes of the Company under the provisions of the Central Excise and  Salt

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Act  of  1944 (hereinafter referred to as  "the  Act")  were varied, from time to time, by the provisions of Finance Acts of 1951 and 1956 and the Additional Duties of Excise  (Goods of   Special  Importance)  Act  of  1957.    The   Collector maintained an office at the factory itself for the levy  and collection  of  tax.  The Company was  required  to  furnish quarterly consolidated price-lists which used to be accepted for  purposes  of enabling the Company to clear  its  goods, but,  according to the Collector, these used to be  verified afterwards  by  obtaining evidence of actual  sales  in  the market  before issuing final certificates that the duty  had been fully paid up.  The particulars of the cigarettes to be cleared  were  furnished by the Company on  forms  known  as A.R.1 forms required by Rule 9 of the Central’ Excise Rules. For facilitating collection of duty, the Company, maintained a large sum of money in a current account with the  825 Central Excise authorities who used to debit in this account the duty leviable on each stock of cigarettes allowed to  be removed.   This current account, known as  "personal  ledger account",  was maintained under the third proviso to Rule  9 which lays down:               9(1)  "          *    *       *       *      *               *               Provided  also that the Collector may,  if  he               thinks  fit, instead of requiring  payment  of               duty  in respect of each separate  consignment               of  goods removed from the place  or  premises               specified in this behalf, or from a store room               or  warehouse  duly  approved,  appointed   or               licensed  by him keep with any person  dealing               in such goods an account-current of the duties               payable  thereon  and such  account  shall  be               settled  at intervals not exceeding one  month               and the account-holder shall periodically make               deposit  therein sufficient in the opinion  of               the  Collector  to cover the duty due  on  the                             goods intended to be removed from the place  of               production, curing, manufacture or storage". It  appears that the company used to furnish  its  quarterly price-lists  to  the  Collector  on  forms  containing  nine columns  including  one to show the  "distributors’  selling price".   Until July 1957, so long as this form was used  by the Company, no difficulty seems to have been experienced in checking  the  prices.  But, after this column  was  dropped from  the  new form of six columns, the  excise  authorities seem  to  have encountered some difficulty  in  valuing  the cigarettes for vying excise duty.  They.’ therefore, changed the  basis  of  assessment itself  from  "the  Distributors" Selling Price" to "the wholesale cash selling price at which stockists  or agents are selling the same to an  independent buyer  in the open market".  They held the view that such  a charge  could  be made having regard to  the  provisions  of Section 4 of the Act.  The Deputy Superintendent of  Central Excise informed the Company,; of this change of basis on  5- 11-1958 by a letter which also asked the Company to  furnish its  price  lists immediately "for determining  the  correct assessable  value"  of its cigarettes.   On  7th  November,, 1958,  the  Deputy Superintendent served a notice  upon  the Company  demanding, payment of a sum of Rs.  1.67,072,40  as basic  Central Excise duty and Rs. 74,574,85  as  additional Central  Excise duty on account of short levy for a  certain brand of cigarettes cleared from the Company’s factory  from 10th August, 1958 to 5th November, 1958.  On 12-11-1958, the

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Deputy Superintendent sent another notice demanding  payment of a sum of Rs. 6,16,467,49 as basic Central Excise duty and Rs. 2,10,492,15 as additional central excise duty for  short levy  in respect of some brands of cigarettes  cleared  from the  factory between 1-11-1957 to 9-8-1958.  On  13-11-1959. (the Deputy Superintendent sent a 826 third  notice to the Company under Rule 10-A of the  Central Excise  Rules  1944, demanding payment of Rs.  40,726,48  as basic  Central Excise duty and Rs. 16,958.50  as  additional duty for short levy in respect of various brands. The Company applied to the Calcutta High Court under Article 226 of the Constitution against the three notices  mentioned above,  one  of which specifically under Rule 10-A  and  the other  two  under Rule 10 of the Central  Excise  Rules.   A learned  single Judge of that Court quashed the  notices  by his  order of 15-2-1960 on the ground that the  Company  had not  been given any opportunity of being heard so as  to  be able  to meet the material collected behind its  back  which formed  the basis of the demands under the  aforesaid  three notices.   On a joint request of both ides. the  High  Court did not decide the question whether notices of demand  ,were time barred.  But, the learned Judge said :               "Nothing  in  this  order  will  prevent   the               respondent  from proceeding to take  any  step               that  may be necessary for such assessment  or               for   the  realisation  of  the   revenue   in                             accordance with the law". The  learned  Judge  had also held that  neither  the  basis adopted by the company nor that put forward by the Collector was  correct.   The learned Judge pointed  out  the  correct basis  which was considered by him to be in consonance  with the  provisions  of  Section 4, sub.s(a)  of  the  Act.   He indicated  the various factors required by Section 4 of  the Act  which  had to be taken               into  account  and held:               "The  determination as to whether a  wholesale               market  exists at the site of the  factory  or               the premises of manufacture or production etc.               or  which is the nearest wholesale market,  or               the price at which the goods or goods of  like               kind  and  quality are capable of  being  sold               must necessarily be a complicated question and               must be determined carefully upon evidence and               not  arbitrarily.  Such  determination  cannot               wholly  be  made  ex-parte, that  is  to  say,               behind   the   back  of   the   assessee.    A               satisfactory determination can only be made by               giving  all  information to the  assessee  and               after  giving the assessee an  opportunity  of               establishing   his  own  point  of  view,   or               checking  and/or  challenging any material  or               evidence  upon which the  Excise   Authorities               wish to depend." As no appeal was filed by either side against this decision, it  became  final and binding between parties before  us  so that  the  question  whether the High  Court  has  correctly interpreted Section 4 of the Act in determining the basis on which  the  excise duty leviable could be  assessed  is  not under consideration here.  827 When the case went back to the Collector, he issued a  fresh notice on 24-4-1960.  As the validity of this notice is  the real  question now in issue in the appeal before us, it  may be reproduced in toto here.  It turns as follows:

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             Registered A/D               GOVERNMENT’ OF INDIA                       Collectorate of Central Excise               Office of the Assistant Collector of Central Excise,                Calcutta I Division (5, Clive Row), Calcutta                                   NOTICE               C.    No. VI(b)14/3/58/3886 Dated 21st April.,               1960               TO               M/s.   National  Tobacco  Co.  (India)   Ltd.,               Agarpara,               24 Parganas.               In  connection with the assessment of  Central               Excise duties for the periods :               1.    from 1st October, 1957 to 5th  November,               1958  in respect of 316,885,000 of "No.   Ten"               brand Cigarettes.               II.   from 1st January, 1958 to 28th January ,               1958  in respect of 6,600,000 of "D.L.T.  Mag"               Cigarettes.               III.  from 1st January, 1958 to 5th  February,               1958  in  respect of 9594,000  of  "May  Pole"               Cigarettes’.               IV.   from 1st January, 1958 to 7th  February,               1958  in  respect of 3143,500  "Carltons  Gold               Seal" Cigarettes.               V.    from  1st January 1958 to 31st  January,               1958  in  respect of 1471,250 of  "John  Peel"               Cigarettes.               VI.   from 1st January, 1958 to 16th  January,               1958 in               respect    of   8200,000  of   "Light   House"               Cigarettes.               VII.  from 1st January, 1958 to 16th  January,               1958               in   respect  of  9070,000  of   "Gold   Link"               Cigarettes. Please  note that a sum of Rs. 10,05,133.25 np.  (Rupees  10 lads five thousand one hundred thirty three and  twenty-five naya  paise only) as basic Central Excise duty and  a  total sum  of Rs. 3,43,208.25 np. (Rupees three  lacs  forty-three thousand two hundred eight and twenty-five naya paise  only) as  additional duty had been provisionally debited  in  your account on the basis of the price list supplied to us by you for the quarters 828 (i)  beginning October, 1957 dated 17th October, 1957. (ii) beginning January, 1958 dated nil. (iii)     beginning April, 1958 dated 14th April, 1958, and (iv) beginning July, 1958 dated 14-7-58, and (v)  beginning October, 1958, dated nil. 2.   We now propose to complete the assessments for the said periods  from the evidence in our possession from  which  it appears :-                (i)that there is no wholesale market for  the               goods  covered by your price lists in or  near               the  factory or the ’Place of manufacture  and               that the nearest wholesale market for the sale               is the Calcutta market.               (ii)  the wholesale cash price of the articles               in question at the time of sale and/or removal               of the ,,goods at the Calcutta market at which               goods of like kind or quality are sold or  are               capable of being sold have been ascertained by               us  and the evidence at our  disposal  reveals

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             that  the prices quoted by you in your  price-               list are-not correct. 3.  The prices at,-- as per chart annexed hereto  which  has been prepared on the basis of available evidence in terms of section  4 (a) , of the Central Excise and Sale  Act,  1955. The  vouchers mentioned in the chart are available for  your inspection at any time next week during office hours.  After obtaining  inspection of the vouchers please attend  at  our office at 5 Clive Row, Calcutta on 2nd May 1960 at 10.30  a. ’M. for the purpose of discussing the points mentioned above 4.   We  are  prepared to give you a personal  hearing  with regard  to all the points indicated above.  If you have  any evidence in support of your contention you are at liberty to produce the same at the time of bearing.  Thereafter  please note  that  we  propose  to make  the  final  assessment  in accordance with law. Sd./- (N.  D. MUKhERJEE) Assistant Collector of Central Excise, Calcutta I Division, Calcutta" The Company challenged the validity of this notice by  means of  a second petition for Writs of Prohibition and  Mandamus against  the  Collector on the ground that  the  notice  was barred by time  829 and  was issued without jurisdiction so that no  proceedings founded  on  it  could be taken.  It  was  prayed  that  the Collector may be ordered to cancel the notice.  The petition was  allowed by a learned Single Judge of the Calcutta  High Court  on  3-1-1964  on the ground that such  a  notice  was barred  by the provisions of Rule 10 of the  Central  Excise Rules  ’because the notice was held to be fully  covered  by Rule 10 and by no other rule.  A Division Bench of the  High Court  confirmed  this view on 8-9-1966  and  dismissed  the Collector’s  appeal.  The case having been certified,  under Article  133(a),  (b) and (c) for an appeal to  this  Court, this question is before us now. The  learned Single Judge as well as the Division  Bench  of the  Calcutta  High  Court said that there  was  not  enough material   on  record  to  conclude  that  there   was   any "provisional  assessment" under Rule 10-B (deleted  on  1-8- 1959 and substituted by Rule 9-B) which laid down:               "10B.  PROVISIONAL ASSESSMENT OF DUTY               (1)   Notwithstanding  anything  contained  in               these rules               (a)   There  the owner of any excisable  goods               makes and subscribed a declaration before  the               proper Officer to the effect that he is unable               for   want  of  full  information   to   state               precisely  the  real value or  description  of               such goods in the proper Form : or                (b)  Where   the  owner  of  any  goods   has               furnished  full information in regard  to  the               real  value or description of the  goods,  but               the  proper Officer requires further proof  in               respect thereof; or               (c)   Where   the  proper  Officer  deems   it               expedient  to subject any excisable  goods  to               any chemical or other test,               The  proper Officer may direct that  the  duty               leviable  on such goods may, pending the  pro-               duction  of  such  information  or  proof   or               pending  the completion of any such  test,  be               assessed provisionally. (2) When the owner of any goods in respect of which the duty has  been assessed provisionally under sub-rule(1) has  paid

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such duty, the proper Officer may make an order allowing the goods to be cleared for home consumption or for exportation, as case may be and such order shall be sufficient  authority for the removal of the goods by the owner:-               Provided that before making any such order the               proper  officer  shall require  the  owner  to               furnish a bond in the proper form binding  the               Owner to pay the differen-               830               tial  duty When the final assessment is  made.               (3)  When the duty leviable on such  goods  is               assessed   finally  in  accordance  with   the               provisions   of   these   rules,   the    duty               provisionally   assessed  shall  be   adjusted               against the duty finally assessed, and if  the               duty  provisionally assessed, falls short  of,               or is in excess of, the duty finally assessed.               the   owner  of  the  goods  shall   pay   the               deficiency or be entitled to a refund, as  the               case may be." No  order directing provisional assessment, contemplated  by Rule 10-B, (applicable at the relevant time) has been placed before  us.  Nor was the Company asked by the  Collector  to furnish a bond to pay up the difference after making a final assessment  as  was  required  under  Rule  10-B.   It  was, however, contended for the Collector that the execution of a bond,  for  the  satisfaction of  the  Collector,  could  be dispensed with in a case where the Company kept a large  sum of  money  in deposit in the "personal  ledger  account"  to guarantee its ability to meet its liabilities.  It was  also pointed  out  that the learned Single Judge as well  as  the Division Bench had found that the practice of  provisionally approving  the price-lists supplied by the Company,  pending acceptance of their correctness after due verification,  had been established as a mater of fact.  It was submitted  that this was substantially a "provisional assessment" covered by Rule  10-B,  although it may not conform  to  the  technical procedural requirements of such an assessment. Even  if the making of debit entries could, on the facts  of the  case, be held to be merely provisional think that  what took   place  could  not  be  held  to  be  a   "provisional assessment"  within  the  provisions  of  Rule  10-B   which contemplated  the  making  of an  order  directing  such  an "assessment" after applying_ the mind to the need for it. Before  proceeding  further we will deal with  the  question whether  the Division Bench correctly refused to  permit  an argument  that the impugned notice of 24-4-1960  fell  under Rule 10-A.  The ground given for this refusal was that  such a  case was neither taken before ’the learned  Single  Judge nor could be found in the grounds of appeal despite the fact that  the  appellant had ample opportunity of  amending  its Memorandum of appeal.  The appellant has, however, relied on a   previous  intimation  given  to  the  counsel  for   the respondent  that such a contention would be advanced at  the hearing of the appeal and also on an application dated 21-3- 1966  praying for permission to add the  alternative  ground that  the  impugned notice fell under Rule 10-A.   We  think that  this  refusal  was  erroneous  for  several   reasons. Firstly the Company having come to Court for a Writ of  Pro- hibition  on the ground that the impugned notice was  issued with-                             831 out jurisdiction had necessarily to establish the case which it  sets, up in paragraph 25 of its Writ Petition, that  the notice was not authorised by the rules including Rule  10-A.

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As  the  notice of 21-4-1960 was followed on 4-5-1960  by  a correction by another notice of certain statements both  the notices were assailed in paragraph 25 (ii) in the  following words               "The  respondent  has mala  fide  and  without               jurisdiction issued the said impugned  notices               pretending to falsely state that the aggregate               sum  therein mentioned has been  provisionally               debited  in  your  petitioner’s  account   and               pretending  to  intimate, to  your  petitioner               that  the respondent proposed to complete  the               assessment, And thereby, he is seeking,  under               the guise of completing an alleged  assessment               which  had already been completed and duty  in               respect  whereof had already been paid, to  do               indirectly  what  he  could  not  do  directly               inasmuch as Rule 10A of the said Rules has  no               application  to  the  facts of  the  case  and               inasmuch  as recovery of any duty which  might               have  been short levied under Rule 10  of  the               Rules is barred by limitation". This  assertion  was  met by a  categorical  denial  by  the Collector  in paragraph 26(ii) of the Collector’s  affidavit in  reply where it was stated that it was denied "that  Rule 10-A  of the said Rules had no application to the  facts  of the  case as alleged or that the recovery of any duty  which had been short levied was barred by limitation under Rule 10 of  the  said  Rules  as alleged  or  at  all".   Thus,  the applicability   of  Rule  10-A  was  very  much  in   issue. Secondly,  We find, from the Judgment of the learned  Single Judge  that, as the burden lay upon the petitioning  Company to  demonstrate, for obtaining a Writ of  Prohibition,  that the  impugned  notice was not authorised by  any  rule,  its counsel had contended’,, inter-alia, that the notice did not fall  under Rule 10-A.  The question was thus considered  by the learned Single Judge.  Thirdly, the question whether the Collector  did  or  did  not have the  power  to  issue  the impugned  notice  under or with the aid of Rule 10-A  was  a question  of law and of jurisdiction. going to the  root  of the  case,  which could be decided  without  taking  further evidence.   Indeed, as the burden was upon  the  petitioning Company to show that the impugned notice was issued  without jurisdiction,  a finding that the notice did not  fall  even within Rule 10-A was necessary before a Writ of  Prohibition could issue at all.  We think that the Division Bench  ought to  have  permitted the question to be  argued,  subject  to giving due opportunity to the petitioning Company to meet it on such, 832 terms  as the Court thought fit, even if the point  was  not taken in the grounds of appeal.  Therefore, we will consider this question also.               Rule  10  of the Central Excise Rules, ran  as               follows               "10.   Recovery  of duties or  charges  short-               levied, or erroneously refunded-               When duties or charges have been short-levied,               through inadvertence, error, collusion or mis-               construction  on  the part of an  officer,  or               through  misstatement  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  owing  to               any  such  ’cause, erroneously  refunded,  the               person chargeable with the duty or charge,  so

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             short-levied, or to whom such refund has  been               erroneously made, shall pay the deficiency  or               pay  the amount paid to him in excess, as  the               case  may be, on written demand by the  proper               officer  being made within three  months  from               the date on which the duty or charge was  paid               or adjusted in the owners account-current,  if               any, or from the date of making the refund".               Rule 10-A reads as follows:               "10-A  Residuary powers for recovery  of  sums               due to Government.-               Where  these  Rules do not make  any  specific               provision  for the collection of any duty,  or               of any deficiency in duty if the duty has  for               any reason been short levied, or of any  other               sum  of  any  kind  payable  to  the   Central               Government under the Act or "these Rules, such               duty,  deficiency in duty or sum shall,  on  a               written demand made by the proper officer,  be               paid  to  such  person and at  such  time  and               place, as the proper officer may specify." The  two  rules set out above occur in Chapter  III  of  the Central  Excise Rules 1944 headed "Levy and Refund  of,  and Exemption from Duty".  Rule 7 merely provides that the  duty leviable  on the goods will be paid at such time  and  place and to such, person as may be required by the rules.  Rule 8 deals  with power to authorise exemptions in special  cases. Rule  9(1)  provides for the time and manner of  payment  of duty.  This rule indicates that ordinarily the duty leviable must  be  paid before excisable goods are removed  from  the place where they are manufactured or stocked, and only after obtaining  the  permission of the  officer  concerned.   The third proviso  833 to  Rule  9  has  already been set  out  above.   Rule  9(2) provides for the recovery of duty and imposition of  penalty in  cases  where  Rule 9 sub. r (1) is  violated.   Rule  9A specifies the date with reference to which the duty  payable is to be determined.  We are ,not concerned here with  Rules 11 to 14 dealing with refunds, rebates, exports under  bonds and certain penalties for breaches of Rules. Rule 52 and 52-A, found in Chapter V, dealing with a  number of  matters  relating to "Manufactured Goods", may  also  be cited here :               "52.   Clearance on payment of  duty-When  the               manufacturer   desires  to  remove  goods   on               payment  of duty, either from the place  or  a               premise  specified  under  rule 9  or  from  a               store-room or other place of storage  approved               by the Collector under rule 47, he shall  make               application in triplicate (unless otherwise by               rule or order required) to the proper  officer               in the proper Form and shall deliver it to the               Officer  at least twelve hours (or such  other               period  as may be elsewhere prescribed  or  as               the  Collector  may  in  any  particular  case               require  or  allow) before it is  intended  to               remove   the  goods.   The   officer,   shall,               thereupon,  assess the amount of duty  due  on               the  goods and on production of evidence  that               this  sum has been paid into the  Treasury  or               paid  to the account of the Collector  in  the               Reserve  Bank  of India or the State  Bank  of               India, or has been despatched to the  Treasury               by  money-order  shall allow the goods  to  be

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             cleared".               "52A.   Goods to be delivered on a Gate  pass-               (1) No excisable goods shall be delivered in a               factory except under a gatepass in the  proper               form  or in such other form as  the  Collector               may  in any particular case or class of  cases               prescribe  signed by the owner of the  factory               and countersigned by the proper officer." It   will  be  noticed  that  in  Chapter  III,   the   term "assessment"  was  used  only  in  the  former  rule   10-B, corresponding  to the present rule 9-B, while  dealing  with provisional assessment of duty.  But, Rule 52 shows that  an "assessment"   is   obligatory  before  every   removal   of manufactured goods.  The rules however, neither specify  the kind of notice which should precede assessment nor lay  down the  need  to pass an assessment order.  All we can  say  in that  rules of natural justice have to be observed  for,  as was  held  by  this  Court in K. T.  M.  Nair  v.  State  of Kerala(1), "the assessment of a tax on person or property is atleast of a quasi-judicial character". (1)  [1961] 3 S.C.R. 77 @ 94. L--Sup.CI/73 834 Section  4  of the Act lays down what  would  determine  the value  of  excisable goods.  But, the Act  itself  does  not specify  a procedure for assessment presumably because  this was meant to be provided for by the rules.  Section 37(1) of the  Act  lays down that "the Central  Government  may  make rules  to  carry  into effect the  purposes  of  this  Act". Section 37, sub. s (2), particularises without prejudice  to the generality of the foregoing power" that "such rules  may provide  for  the  assessment and collection  of  duties  of excise, the authorities by whom functions under this Act are to  be discharged , the issue of notice  requiring  payment, the  manner  in  which the duty shall be  payable,  and  the recovery  of  duty not paid".  It is clear from  Section  37 that  "  assessment and collection of duties of  excise"  is part of the purposes of the Act, and Section 4, dealing with the  determination  of value for the purposes of  the  duty, also seems to us to imply the existence of a  quasi-judicial power  to  assess  "he duty payable  in  cases  of  dispute. "Collection", seems to be a term used for a stage subsequent to  "assessment".  In a case where the basis of  a  proposed assessment is disputed or where contested questions of  fact arise, a quasi-judicial procedure has to be adopted so as to correctly  assess the tax payable.  Rule 52 certainly  makes an  "assessment" obligatory before removal of  goods  unless the procedure for a "provisional assessment" under Rule 10-B (now  rule 9-B) is adopted.  But, if no quasi-judicial  pro- ceeding, which could be described as an "assessment"  either under  Rule 52 or "Provisional assessment" under  Rule  10-B (now Rule 9-B) takes place at the proper time and in accord- ance  with the rules, is the Collector  debarred  completely afterwards  from assessing or completing assessment of  duty payable  ?  That seems to us to be the real question  to  be decided here. One of the arguments on behalf of the Collector was that  no "assessment",  for the purpose of determining the  value  of excisable  goods, having taken place in the case before  us, there  could be no "levy" in the eye of law.  It  was  urged that,  even  if there was no  "provisional  assessment",  as contemplated by Rule 10-B, whatever took place could, at the most, be characterised as an "incomplete assessment",  which the  Collector  could proceed to complete,  even  after  the removal  of  the goals.  It was contended that such  a  case

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would  be  outside  the purview of Rule 10  as  it  was  not determined whether there actually was a short levy.   Hence, it  was  submitted  there was no question  of  a  proceeding barred by the limitation prescribed for making a The  demand for a short levy in certain specified circumstances.Division Bench, while repelling this contention, held :               "In  the  present case, it  appears  that  the               procedure  adopted  was that  the  respondents               issued a price list                835               quarterly.   In  that price  list,  they  gave               their  own  estimate as to the  value  of  the               goods.    For  the  time  being   the   excise               authorities  accepted the value so given,  and               gave a provisional certificate to that effect,               intending  to check the market value and  then               finally  determine  the value later  on.   The               procedure for issuing price list of  approving               the  same provisionally and accepting  payment               therefore  according  to the estimate  of  the               manufacturer,  is a procedure which is not  to               be found either in the Act or the Rules". It may be observed that this finding, that the procedure  of a  provisional  acceptance of the  Company’s  estimates  was adopted,  seems inconsistent with another finding that  what took  place  was a final adjustment of accounts  within  the purview  of  the  3rd  proviso to Rule  9,  set  out  above, constituting  a  "levy" accord to law.  The  Division  Bench appears  to  have  regarded  this  procedure  of  an  almost mechanical  levy  as  equivalent to  a  complete  assessment followed by the payment of the tax which constituted a valid "levy".   Hence,  it concluded that, there being  a  legally recognised  levy, the only procedure open to  the  Collector for questioning its correctness was one contemplated by Rule 10 so that a demand for a short levy had to be made within 3 months  of  the final "settlement of accounts"  as  provided specifically by Rule 10.  The Division Bench considered this procedure  to be an alternative to an assessment under  Rule 52 at the proper time and also :to a provisional  assessment in  accordance  with the procedure laid down in  Rule  10-B. But, to regard the procedure under Rule 10 as an alternative to an assessment would be to overlook that it presupposes an assessment which could be reopened on specified grounds only within the period given there. The term "levy" appears to us to be wider in its import than the term "assessment".  It may include both "imposition" of a tax as well as assessment.  The term "imposition" is gene- rally  used  for the, levy of a tax or duty  by  legislative provision  indicating the subject matter of the tax and  the rates  at which it has to be taxed.  The term  "assessment", on the other hand, is generally used in this country for the actual  procedure adopted in fixing the liability to  pay  a tax  on account of particular goods or property or  whatever may  be  the  object of the tax in  a  particular  case  and determining  its  amount.  The Division  Bench  appeared  to equate  "levy"  with  an "assessment" as well  as  with  the collection of a tax when it. held that "when the payment  of tax is enforced, there is a levy".  We think that,  although the connotation of the term "levy" seems wider than that  of "assessment", which it includes, yet, it does not seem to 836 us   to  extend  to  "collection".   Article  265   of   the Constitution   makes  a  distinction  between   "levy"   and "collection".  We also find that in N. B. Sanjana  Assistant Collector   of  Central  Excise,  Bombay  &  Ors.   v.   The

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Elphinstone  Spinning  & Weaving Mills Co.  Ltd.,A(1),  this Court made a distinction between "levy" and "collection"  as used in the Act and the Rules before us.  It said there with reference to Rule 1 0 :                "We are not inclined to accept the contention               of  of Dr. Syed Mohammad that  the  expression               ’levy’  in Rule 10 means actual collection  of               some  amount.  The charging provision  Section               3(1)  specifically  says.   ’There  shall   be               levied  and collected in such a manner as  may               be prescribed the duty of excise . . .’ It  is               to be noted that subsection (i) uses both  the               expressions  "levied and collected"  and  that               clearly  shows that the expression ’levy’  has               not  been  used  in the Act or  the  Rules  as               meaning actual collection". We  are, therefore, unable to accept the view  that,  merely because the "account current", kept under the third  proviso (erroneously  mentioned  as second proviso by  the  Division Bench)  to  Rule 9, indicated that an accounting  bad  taken place,  there  was necessarily a legally valid  or  complete levy.   The  making  of debit entries was  only  a  mode  of collection of the tax.  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 validity after carrying out the obligation  to make  an  assessment  to justify it.  Moreover,  it  is  the process  of  assessment that really determines  whether  the levy is short or complete.  It is not a factual or  presumed levy which could, in a disputed case, prove an "assessment". This has to be done by proof of the actual steps taken which constitute "assessment". Undoubtedly, a mechanical adjustment and ostensible  settle- ment of accounts, by making debit entries, was gone  through in  the  case before us.  But, we could not equate  such  an adjustment  with  an assessment,  a  quasi-judicial  process which involves due application of mind to the facts as  well as  to the requirements of law, unless we were bound by  law to give an unusual interpretation to the term  "assessment". Here,  we do not find any such definition of  assessment  or any  compelling reason to bold that what could at most be  a mechanical  provisional  collection, which  would  become  a "levy"  in  the eve of law only after an  "assessment",  was itself a levy or an assessment. Rules 10 and 10A, placed side by side, do raise difficulties of interpretation.  Rule 10 seems to be so widely worded  as to (1)  A.I.R. 1971 S.C. 2039  2045. 837 cover any "inadvertence, error, cullusion or misconstruction on the part of an officer", as well as any "misstatement  as to  the quantity, description or value of such goods on  the part of the owner" as causes of short levy.  Rule 10-A would appear to cover any "deficiency in duty if the duty has  for any  reason  been  short levied", except that  it  would  be outside  the  purview  of  Rule 10A  if  its  collection  is expressly provided for by any Rule.  Both the rules, as they stood  at the relevant time, dealt with collection  and  not with  assessment.   They  have to be harmonised,  In  N.  B. Sanjana’s  case  (Supra),  this  Court  harmonised  them  by indicating that Rule 10A, which was residuary in  character, would  be  inapplicable if a case fell  within  a  specified category of cases mentioned in Rule 10. It  was  pointed  out in Sanjana’s case  (Supra).  that  the reason  for the addition of the new Rule 10A was a  decision

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of  the Nagpur High Court in Chhotabhai Jethabhai  Patel  v. Union  of India(1), so that a fresh demand may be made on  a basis altered by law.  The Excise authorities had then  made a fresh demand, under the provisions of Rule 10-A, after the addition of that Rule, the validity of which challenged  but upheld  by a Full. Bench of the High Court of Nagpur.   This Court,  in  Chhotabhai Jethabhai Patel & Co.,  v.  Union  of India ( 2 ) also rejected the assessee’s claim that Rule 10- A was inapplicable after pointing out that the new rule  had been  specifically  designed"  for the  enforcement  of  the demand  like  the one arising in the  circumstances  of  the case". We think that Rule 10 should be confined to cases where  the demand  is being made for a short levy caused wholly by  one of the reasons given in that rule so that an assessment  has to  be  reopened.  The findings given by the  Calcutta  High Court  do  not show that, in the case before us,  there  was either  a short levy or that one of the grounds for a  short levy  given  in Rule 10 really and definitely  existed.   No doubt the Division Bench gave a reason for the way in  which the  claims became time barred, in the following words:                "It  is  quite  possible,   that  the  Excise               authorities,   in  an  attempt   tohelp   the,               appellants,  by facilitating the movements  of               goods, inadvertently allowed the claims to  be               barred     by  limitation.  That, however,  is               not a matter which can affect the question  of               limitation.The  bar  of  limitation  has  been               imposed by Statute.  The morality of the  case               or  the  conduct of the parties  is  therefore               irrelevant  unless the law provides  that  the               court on that ground can afford relief’ (1) A.I.R, 1952 Nag. 139, (2) [1962] Supp. 2 S.C.R. 1 838 This finding was presumably given to show that the  impugned notice fell within the purview of Rule 10 because the demand was  due  to a short-levy caused by  "inadvertence"  of  the officer  concerned.   It will be noticed that  the  Division Bench  did  not go beyond finding a  "possibility"  of  such inadvertence.  This is not a finding that it was  definitely du.-,  to  it.  No finding which could clearly  relate  the, case to any cause for short levy found in Rule 10 was given. Moreover,  we  find that there was no case taken up  by  the Company in its petition before the High Court that any short levy resulted from an inadvertence. of the officer concerned in the process of assessment.  The case set up was that of a levy  after a completed assessment, in accordance with  law, which could not, according to the Company, be reopened.  If, therefore,  as we find from the conclusions recorded by  the High  Court itself what took place was not an  "asseessment" at  all  in  the eye of law, which  could  not  be  reopened outside  the provisions of Rule 10, we think that  the  case will fall beyond Rule 10 as it stood at the relevant time. The notice set out above does not purpoe, to be issued under any particular rule probably because the Collector,. in  the circumstances  of the case, was not certain about  the  rule under which the notice could fall.  But, as was pointed  out by  this  Court in Sanjana’s case (Supra),  the  failure  to specify the provision under which a notice is sent would not invalidate it if the power to issue such a notice was there. The notice alleges that it is a case of "incomplete  assess- ment".    The   allegations  contained  in  it   have   been characterised  by the learned counsel for the Company  as  a change  of  front  intended to cover up the  neglet  of  the

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Collector in failing to comply with the correct procedure of making either an assessment before delievery contemplated by Rule 52 or a provisional assessment under Rule 10-B.  We are unable  to hold, either upon the findings given by the  High Court or upon facts transpiring from the affidavits filed by the  parties  that  the notice was a  mere  cloak  for  some omission or error or inadvertence of the Collector in making a levy or an assessment.  We  may point out that Rule 10 itself has been amended  and made  more  reasonable  in 1969 so as to  require  a  quasi- judicial procedure by serving a show cause notice "within  3 months from the date on which the duty or charge was paid or adjusted  in  the owner’s account current,  if  any".   This amendment,  made  on 11-10-1969, indicates that  the  quasi- judicial   procedure.   for   a  finding   on   an   alleged inadvertence,  error,  collusion, or misconstruction  by  an officer, or misstatement by the assessee, as the cause of an alleged short levy resulting from an assessment, can now  be embarked upon and not necessarily completed 839 within  the prescribed period.  We are,  however,  concerned with  the  procedure before this amendment took  place.   At that  time, it was certainly not clear whether a case  would fall  under Rule 10 even before the short levy or its  cause was  established.   Furthermore, in the  present  case,  the reason for an alleged short levy could be a change of  basis of  proposed  assessment  under  instructions  from   higher authorities mentioned above.  Even that change of basis  was held  by  the High Court to be erroneous.   Until  the  High Court  indicated the correct basis there was an  uncertainty about it.  Such a ground for an alleged short levy would  be analogous  to the reason for the introduction of  Rule  10-A itself  _  which,  as pointed out in N.  B.  Sanjana’s  case (Supra), was ’a change in the law.  One could go back  still further and come to the conclusion that the real reason ’,or the  alleged  short  levy was a failure of  the  Company  to supply  the fuller information it used to supply  previously and  not just a misstatement.  If the case does not  clearly come  within  the classes specified in Rule  10,  this  rule should not be invoked because, as was rightly contended  for the appellant, a too wide construction put on Rule 10  would make  Rule  10A  useless.  The two rules  have  to  be  read together. It is true that Rule 10-A seems to deal only with collection and not with the ascertainment of any deficiency in duty  or its cause by a quasi-judicial procedure.  If, however, it is read in conjunction with Section 4 of the Act, we think that a quasi-judicial proceeding, in the circumstances of such  a case,  could take place under an implied power.  It is  well established  rule  of  construction  that  a  power  to   do something essential for the proper and effectual performance of  the work which the statute has in contemplation  may  be implied [See Craies on Statute Law (Fifth Edition) P. 105] The  question whether there was or was not an implied  power to  hold an enquiry in the circumstances of the case  before us,  in view of the Provisions of Section 4 of the Act  read with  Rule  10-A  of  the, Central  Excise  Rule,   was  not examined  by the Calcutta High Court because it  erroneously shut  out consideration of the meaning and applicability  of Rule 10A.  The High Court’s view was based on an application of the rule of construction that where a mode of  performing a duty is laid down by law it must be performed in that mode or not at all.  This rule flows from the maxim :  "Expressio unius  act  exclusio alterius." But, as we  pointed  out  by Wills, J., in Colquohoun v. Brooks(1) this maxim "is often a

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valuable servant, but a dangerous master .... ". The rule is subservient   to  the  basic  principle  that  Courts   must endeavour to ascertain the legislative intent and (1)  (1888) 2 1 Q. B. D. 52,62. 840 purpose,  and  then  adopt  a  rule  of  construction  which effectuates rather than one that may defeat these.  Moreover the  rule of prohibition by necessary implication  could  be applied  only where a specified procedure is laid  down  for the  performance  of.  a duty.  Although Rule  52  makes  an assessment   obligatory  before  goods  are  removed  by   a manufacturer, yet, neither that rule nor any other rule,  as already   indicated  above,  has  specified   the   detailed procedure  for  an  assessment.  There is  no  express  pro- hibition anywhere against an assessment at any other time in the circumstances of a case like the one before us where  no "  assessment",  as it is understood in law, took  place  at all.   On the other hand, Rule 10A indicates that there  are residuary powers of making a demand in special circumstances not foreseen by the framers of the Act or the rules.  If the assessee   disputes  the  correctness  of  the   demand   an assessment becomes necessary to protect the interests of the assessee.  A case like the one before us falls more properly within  the residuary class of unforeseen cases.   We  think that, from the provisions of Section 4 of the Act read  with Rule  10A,  an  implied power to carry out  or  complete  an assessment, not specifically provided for by the rules,  can be  inferred.   No writs of prohibition or  mandamus  ",ere, therefore, called for in the circumstances of the case. Consequently, we allow this appeal and set aside the  orders of  the Calcutta High Court.  The Collector may now  proceed to  complete  the assessment.  In the circumstances  of  the case, the parties will bear their own costs throughout. Appeal allowed S.C. 841