http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8  

PETITIONER: M/S. DHANPAT OIL & GENERAL MILLS

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT08/07/1985

BENCH: PATHAK, R.S. BENCH: PATHAK, R.S. VENKATARAMIAH, E.S. (J)

CITATION:  1985 AIR 1255            1985 SCR  Supl. (2)   4  1985 SCC  (3) 599        1985 SCALE  (2)46

ACT:      Produce Cess  Act, 1966,  Sections 2(a),7,8,9(2),10 and 15(2), scope  of -  Whether proceedings under the Act can be taken without  appointing a  "Collector" and  an " Appellate Authority" by  resort to the provisions of section 15 (2) of the Act   Monthly filing of obligatory returns under section 8,  whether   can  be  discontinued  on  the  plea  of  non- appointment of  a "Collector"  Liability to  the payment  of cess for  the  products  manufactured  and  a  liability  to prosecution for  not filing  returns  and  paying  the  cess during the period when the Collector and Appellate Authority had not been appointed.

HEADNOTE:      The Produce  Cess Act,  1966 is  a dual  enactment.  It provides for  the levy and collection, as a cess, of customs duty on  produce specified  in the first schedule to the Act and exported  beyond the limits of India; and (ii) of excise duty of  the  produce  specified  in  the  second  schedule. Section 8  of the  Act requires  the occupier  of a  mill to furnish to  the "Collector" every month a return stating the total amount  of produce,  specified in  the Second Schedule consumed or  brought under  processing or  extracted in  the mill during  the preceding  month.  The  return  has  to  be furnished before  the seventh   day  of each  month together with such  other information as may be prescribed, and every such return is to be made in such form and to be verified in such  manner   as  may   be  prescribed.  There  must  be  a "Collector" within  the meaning  of  the  Act,  that  is  as defined in  section 2(a)  of the  Act to  whom such  monthly returns are  to be  furnished.  On  noncompliance  with  the provisions of section 8, the "Collector" so appointed by the Central Government  under the  Act, is  empowered under sub- section 2  of section  9 to  proceed at  once  and  make  an assessment in  the manner  prescribed by  the  Produce  Cess Rules 1969.  Such a  "Collector" was appointed under the Act on July  13, 1970. The Appellate Authority, entitled to hear appeals from  the orders  of the  collector was appointed on August 21,  1972. The  appellant carries on the business  of oil extraction  from ground  nut, cotton-seeds,  sarson  and other oil  seed   and also  deals  in  vegetable  and  other essential oils.  On September  29, 1972  the Superintendent,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8  

Central Excise, issued a notice requiring the 5 appellant to  produce certain documents and to appear before the authority  for the  purpose of  an enquiry pertaining to the cess  leviable under  the Act.  The  appellant  did  not comply  with   the  notice.   On  December   22,  1972,  the Superintendent, Central  Excise,  issued  a  further  notice requiring the appellant to show cause against the imposition of a  penalty for  its failure  to file a return and deposit the cess.  The appellant  questioned the jurisdiction of the authority to  levy cess. A further notice dated September 3, 1973 was  issued by  the Assistant Collector, Central Excise requiring the  appellant to  appear before him in connection with the  aforesaid proceedings.  The appellant, admittedly, did not  deposit any  cess nor  file any  return, contending that there  was no  jurisdiction in  the authorities to levy and recover  the cess on the products manufactured and dealt in by  it. The  appellant then  filed a writ petition in the High Court  of Punjab  &  Haryana  raising  various  points, including the  question whether sub-section (2) of section 3 and section  4 of  the Act and rule 6 of the Cess Rules were ultra  vires   and  whether   the  notices   issued  by  the authorities were  valid on  the ground that no machinery had been provided  for the  levy of the cess during the relevant period and  prayed for  relief against  the proceedings. The Writ Petition  was dismissed and hence the appeal by special leave.      Dismissing the appeal, the Court, ^      HELD: 1.1.  The entire machinery under the Produce Cess Act,  1966  through  which  the  occupier  of  a  mill  must discharge his  statutory  obligations  remains  non-existent unless a "Collector" within the meaning of the definition in section 2(a)  is appointed. So long as there is no Collector there is  no obligation on the occupier of a mill to furnish monthly returns and there is no existing statutory authority for taking  proceedings for the assessment and collection of the cess.  Clearly there can be no Collector for the purpose of the  Act unless he is an officer appointed by the Central Government to  perform the  duties of  a Collector  provided under the  Act and  Rules. A  subordinate  officer  is  also envisaged within  the definition of section 2(a) but he must be  an  officer  authorised  in  writing  by  the  Collector appointed under  the Act  to perform  such duties.  Even the earliest step  required of  an occupier, that is to say, the furnishing  of   a  statement   containing  the  particulars specified under  section 7  must be made to a Collector, and that is also not possible in the absence of a duly appointed Collector under the Act. [10 B-D] 6      1.2 The  appellant in  this case,  cannot be prosecuted for its  omission to  furnish monthly returns required under section 8  of the  Act during  the period upto July 30, 1970 for which  there was  no Collector  appointed under the Act. The Appellate  Authority was  appointed on  August 21, 1972, but the  delay in  appointing the Appellate Authority can be no ground  for not  furnishing the  returns after  July  30, 1970, when  the Collector  was appointed. [11 G-H, 12 A & 13 B]      1.3 The  absence of  duly appointed Collector under the Act for  a certain  period  is  a  good  defence  against  a prosecution for  non-compliance with  section 8  of the  Act during that  period only.  However, the  delay in appointing the Collector  under the  Act does not relieve the appellant of the  liability to  excise duty  in respect  of the period

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8  

during which the Collector was not appointed. [13 B-D]      The levy  is imposed  by sub-section  2 of section 3 of the Act  and comes into existence immediately on the taxable event attracting  excise duty. The accrual of the obligation to suffer  the duty  does not depend on the appointment of a Collector, which  is only  part of the machinery designed by the Act  for the  Assessment and  recovery of  the duty. The imposition and accrual of the duty is a thing apart from its assessment and  collection. There is an obligation to file a return under  section 8  of the produce and a return must be filed every month before the 7th day. Noncompliance with the latter obligation is sufficient to bring the occupier within the mischief  of sub-section  2 of section 9 of the Act. But where such  non-compliance is  due to  the circumstance that Collector was  appointed  to  whom  such  returns  could  be furnished, sub-section 2 of section 9 cannot come into play. However, the  obligation to  file a  return remains  and  it remains in  respect of  the entire  period during  which the Collector had  not been appointed, and once the Collector is appointed the  occupier is  obliged to file a return for the entire period  from the  commencement of  the levy including the period  during which  there was  no Collector.  That  is because the  liability to  excise duty  had already  accrued with the  earliest excisable  event and  it subsisted during the entire  period including  the period  during which there was no Collector. The position is that when the Collector is appointed  the   occupier  must  within  a  reasonable  time thereafter, file  monthly returns of the produce consumed or brought under  processing or  extracted in  the mill  during each preceding  month, such monthly returns being in respect of all  the months  included in  the period uptodate. Or the occupier may 7 make a  composite  return  specifying  the  amount  of  such produce monthwise  or the  entire period. The Collector will then take the return into consideration and take proceedings under section 9 of the Act.[12 C-H 13 A]      2. Recourse  to sub-section  2 of section 15 of the Act on the ground that no steps are instituted by the Government to bring  Sections 2(a),6,7,8,9  and 20 into working life by taking action  under them cannot be resorted to. Sub-section 2 of  section 15  is not  intended as  a substitute  for the other provisions  of the Act. It is not an interim provision intending that  recourse may  be had  to it  until action is taken  by   the  Government  to  instal  the  machinery  and institute the  steps required  by the  Act  for  making  its provisions workable. Sub-section 2 of section 15 is intended to cover  that area  only which  is not  included within the area covered by the remaining provisions of the Act. It is a residual  provision   and  nothing   more.  For  example,  a Collector appointed  under the  Cess Act  can alone  be  the assessing authority  authorised to  receive returns and make assessments. No  officer or  authority constituted under the Central Excises  and  Salt  Act  can  do  so.  Nor  can  the appellate authority  appointed under  the  latter  enactment entertain and  hear appeals  against assessments  made under the Cess  Act. The  jurisdiction to  do so belongs solely to the appellate  authority appointed  under  subsection  1  of section 10 of the Act. [11 C-G]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeal No. 138 of 1979.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8  

    From the  Judgment and  Order dated  29.11.1978 of  the Punjab & Haryana High Court in C.W. No. 35 of 1974.      A.K. Sen,  R.L. Batta,  V.K. Bahl and H.K. Puri for the Appellant.      Hardyal Hardy, K. S. Gurumoorthy and Miss A. Subhashini for the Respondents.      The Judgment of the Court was delivered by      PATHAK, J.  This civil  appeal arises  out  of  a  writ petition filed  in the  High Court of Punjab and Haryana for the quashing  of proceedings  taken under  the Produce  Cess Act, 1966 for the assessment and recovery of the cess. 8      The Indian  Cotton Cess  Act, 1923, the Indian Lac Cess Act, 1930,  the Indian  Coconut Committee  Act, 1944 and the Indian Oil-seeds  Committee Act,  1946 ceased to have effect from April  1, 1966  in consequence  of which  the  relative Committees constituted  under those Acts stood dissolved and there was no legislative sanction for the continuance of the levy of  cess on the produce after March 31, 1966. While the Research Institutes and Stations and other research projects of those  Committees  now  fell  within  the  administrative control of  the Indian Council of Agricultural Research, and the  work  relating  to  development,  marketing  and  other functions was to be looked after directly by the Ministry of Food and Agriculture, Department of Agriculture, assisted by Development Councils  constituted  by  the  Government,  and suitable grants  were envisaged  to the  Indian  Council  of Agricultural  Research   for  the  maintenance  of  Research Institutes and  for carrying on the research activities, the Government felt need for larger investments on such projects in order to undertake an effective programme of research and development. Accordingly, it decided to continue the cess on the produce  even  after  the  abolition  of  the  Commodity Committees. For the achievement of that objective Parliament enacted the  Produce Cess  Act, 1966 (shortly referred to as "the Act").  The Produce  Cess Rules, 1969 were published on March 28, 1969.      The Act  is a  dual enactment. It provides for the levy and collection,  as a  cess,  of  customs  duty  on  produce specified in  the First  Schedule to the Act exported beyond the limits  of India.  And it  provides  for  the  levy  and collection, as cess, of excise duty on the produce specified in the  Second Schedule.  We are concerned in this case with the levy and collection of excise duty.      The appellant carries on the business of oil extraction from groundnut, cotton-seeds, sarson and other oil seeds and also  deals  in  vegetable  and  other  essential  oils.  On September 29,  1972,  the  Superintendent,  Central  Excise, issued a  notice requiring  the appellant to produce certain documents and to appear before the authority for the purpose of an enquiry pertaining to the cess leviable under the Act. The appellant  did not  comply with  the notice. On December 22, 1972,  the  Superintendent,  Central  Excise,  issued  a further notice requiring the appellant to show cause against the imposition of a penalty for its failure to file a return and to  deposit  the  cess.  The  appellant  questioned  the jurisdiction of the authority to levy cess. 9 A further  notice dated  September 3, 1973 was issued by the Assistant Collector,  Central Excise requiring the appellant to appear  before  him  in  connection  with  the  aforesaid proceedings. Admittedly,  the appellant  did not deposit any cess nor  filed any  return, contending  that there  was  no jurisdiction in the authorities to levy and recover the cess on the products manufactured and dealt in by it.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8  

    The appellant  filed a  writ petition in the High Court of Punjab and Haryana. Various points were raised before the High Court,  including the question whether sub-s.(2) of s.3 and s.4  of the  Act and rule 6 of the Cess Rules were ultra vires and whether the notices issued by the authorities were valid on  the ground that no machinery had been provided for the levy  of the  cess during  the relevant  period. All the contentions were  rejected by  the High  Court, and the writ petition was dismissed.      In the  appeal before  us the  limited point  raised is that the  appellant is not liable to payment of cess for the period during  which the  Collector and  appellate authority had not been appointed, and no penal proceeding can be taken against  the   appellant  for  not  furnishing  returns  and depositing the cess pertaining to such period. It is pointed out that while s.9 of the Act confers power on the Collector to make  assessment and  recovery of  the excise  duty  such Collector was  appointed only  on July  13, 1970. It is also pointed out  that while  s10. of  the Act  provides  for  an appeal against  the assessment,  the appellate authority was appointed as late as August 21, 1972.      The case  before  us  falls  into  two  parts.  Is  the appellant liable  to prosecution  for not filing returns and paying the  cess during  the period  when the  Collector and appellate authority  had not  been  appointed?  And  is  the appellant not  liable  to  cess  at  all  for  the  products manufactured during such period ?      It seems  to us  that the  appellant is  right  in  the contention that  so long  as the  Collector is not appointed for the  purposes of  the Act no fault can be found with the appellant in  not furnishing returns during such period. s.8 of the Act requires the occupier of a mill to furnish to the "Collector" every month a return stating the total amount of produce, specified  in  the  Second  Schedule,  consumed  or brought under processing or extracted in the mill during the preceding month.  The return  has to be furnished before the seventh  day   of  each   month  together  with  such  other information as may be prescribed, and every such return is 10 to be made in such form and to be verified in such manner as may be  prescribed. There  must be  a Collector  within  the meaning of  the Act  to whom  such monthly returns are to be furnished. The  expression "Collector"  has been  defined by clause (a)  of s.2 of the Act to mean "the officer appointed by the  Central Government  to perform in any specified area the duties  of a  Collector under the provisions of this Act and the  rules made  thereunder, and  includes  any  officer subordinate to  that  officer  when  he  may,  by  order  in writing,  authorise   to  perform  his  duties  under  those provisions." Clearly  there can  be  no  Collector  for  the purpose of  the Act unless he is an officer appointed by the Central Government  to perform  the duties  of  a  Collector provided under  the Act  and Rules. A subordinate officer is also envisaged  within the  definition, but  he must  be  an officer authorised  in writing  by the  Collector  appointed under the  Act to  perform such  duties. It would be true to say  that   unless  there   is  a   Collector"  within   the contemplation of  the Act, there can be no obligation on any occupier of  a mill  to furnish  monthly returns.  Even  the earliest step  required of  an occupier, that is to say, the furnishing  of   a  statement   containing  the  particulars specified under  s. 7  must be made to a Collector, and that is also  not possible  in the  absence of  a duly  appointed Collector under  the Act. The entire machinery under the Act through which  the occupier  of a  mill must  discharge  his

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8  

statutory  obligations   remains  non-existent  unless  such "Collectors is  appointed. So  long as there is no Collector there is  no obligation on the occupier of a mill to furnish monthly returns and there is no existing statutory authority for taking  proceedings for the assessment and collection of the cess.      Reliance was  placed  before  the  High  Court  by  the respondent on  sub-s.(2) of s.15 of the Act. Sub-s.(2) of s. 15 declares  that the  provisions of the Central Excises and Salt Act,  1944 and  the rules  made  thereunder,  including those relating  to refunds  and exemptions from duty, shall, so far  as may  be,  apply  in  relation  to  the  levy  and collection of  duties of  excise on any produce specified in the Second  Schedule as  they apply  in relation to the levy and collection  of duty  payable to  the Central  Government under that  Act. The  High Court  took  the  view  that  the absence of  a Collector  appointed under  the Act  was of no significance  and  proceedings  could  be  taken  under  the provisions of  sub-s.(2) of  s. 15 of the Act. We are unable to agree. In our opinion, in order to ascertain the scope of sub-s.(2) of s. 15 is  necessary to read the Act as a whole. We have  pointed out earlier that the expression "Collector" has been  specifically defined  by the  Act itself,  and the definition requires that the officer must 11 be one  specifically appointed  by the Central Government to perform the duties of a Collector detailed under the Act and Rules.  There   are  other   provisions  which   have   been particularly enacted  in the  Act. They  specify the persons who are  liable to  pay duty,  their obligations, the powers and procedures  in relation  to assessment  of the duty, the constitution of  an appellate  authority and its powers, and the powers of the Central Government to revise the appellate orders. Included  also are specific provisions in respect of the recovery  of sums  due under  the Act to the Government, and there  are other incidental provisions. There is also an express provision  by s.20 empowering the Central Government to make  rules to  carry out  the purposes  of the  Act, and particularly sub-s.(2)  of s.20  envisages that  such  rules should provide  for the  form of  the monthly return and the manner  in   which  such  return  should  be  verified,  the information which  every occupier  is required to furnish in the monthly  returns and  the manner  in which assessment of excise duty  shall be  made where  no return is furnished or the return  furnished is  believed by  the Collector  to  be incorrect or defective. It is inconceivable to our mind that recourse should  be permissible  to sub-s.(2) of s.15 of the Act on  the ground  that no  steps were  instituted  by  the Government to  bring the  aforesaid provisions  into working life by  taking action  under them.  Sub-s.(2) of  s.15,  we think, is  not  intended  as  a  substitute  for  the  other provisions of  the Act.  It  is  not  an  interim  provision intending that  recourse may  be had  to it  until action is taken  by   the  Government  to  instal  the  machinery  and institute the  steps required  by the  Act  for  making  its provisions workable.  In our  opinion, sub-s.(2)  of s.15 is intended to  cover that  area only  which  is  not  included within the  area covered  by the remaining provisions of the Act. It  is a  residual  provision  and  nothing  more.  For example, a  Collector appointed under the Cess Act can alone be the assessing authority authorised to receive returns and make assessments.  No officer or authority constituted under the Central  Excise and  Salt Act  can do  so. Nor  can  the appellate authority  appointed  under  the  later  enactment entertain and  hear appeals  against assessments  made under

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8  

the Cess  Act. The  jurisdiction to  do so belongs solely to the appellate authority appointed under sub-s.(1) of s.10 of the Cess Act.      We hold that the appellant cannot be prosecuted for its omission to  furnish monthly  returns required  under s.8 of the Act during the period upto July 30, 1970 for which there was no  Collector appointed  under the  Act.  The  appellate authority was  appointed on August 21, 1972 but the delay in appointing the 12 appellate authority  can be no ground for not furnishing the returns  after   July  30,  1970,  when  the  Collector  was appointed. We  find it  unnecessary to  go into  the further question  whether   the  appellant   can  be   excused  from furnishing monthly  returns upto  March 28, 1969, that is to say, until the Produce Cess Rules, which prescribed the form of the  return  and  the  mode  of  the  verification,  were published. That  is unnecessary  because in  any  event  the Collector was not appointed until July 30, 1970 and for that reason no returns could be filed upto that date.      The absence of a duly appointed Collector under the Act for a certain period is a good defence against a prosecution for non-compliance  with s.8  of the Act during that period. It does not however, relieve the occupier of a mill from the burden of  the levy. The levy is imposed by sub-s.(2) of s.3 of the  Act and  comes into  existence  immediately  on  the taxable event  attracting excise  duty. The  accrual of  the obligation to  suffer  the  duty  does  not  depend  on  the appointment of  a Collector.  The appointment of a Collector is only  a part of the machinery designed by the Act for the assessment and  recovery of  the duty.  The  imposition  and accrual of the duty is a thing apart from its assessment and collection. Now  s.8 requires  the  occupier  to  furnish  a return every  month stating  the  total  amount  of  produce consumed or  brought under  processing or  extracted in  the mill during  the preceding  month. There is an obligation to file the  return every month. Non-compliance with the latter obligation is  sufficient to  bring the  occupier within the mischief of  sub-s.(2) of  s.9 of  the Act.  It empowers the Collector to  proceed at  once and make an assessment in the manner  prescribed   by  the  Rules.  But  where  such  non- compliance is due to the circumstances that no Collector was appointed to whom such returns could be furnished, sub-s.(2) of s.9  cannot come  into play.  However, the  obligation to file a  return remains  and it  remains in  respect  of  the entire period  during  which  the  Collector  had  not  been appointed, and  once the Collector is appointed the occupier is obliged  to file  a return for the entire period from the commencement of  the levy  including the period during which there was  no Collector.  That is  because the  liability to excise duty  had already accrued with the earliest excisable event and  it subsisted  during the  entire period including the period during which there was no Collector. The position is that  when the  Collector is  appointed the occupier must within a reasonable time thereafter, file monthly returns of the produce consumed or brought under processing or extracts in the  mill  during  each  preceding  month,  such  monthly returns being  in respect  of all the months included in the period uptodate. Or 13 the occupier  may make  a composite  return  specifying  the amount of  such produce monthwise for the entire period. The Collector will  then take  the return into consideration and take proceedings under s.9 of the Act.      We hold  that the  delay in  appointing  the  Collector

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8  

under  the  Act  does  not  relieve  the  appellant  of  the liability to  excise duty  in respect  of the  period during which the Collector was not appointed.      This disposes  of the further argument of the appellant that as  the appellate authority was appointed on August 21, 1972 only  there was no liability to pay the duty in respect of the  period until  such  appointment.  If  the  delay  in appointing the  Collector does  not furnish  good ground for excusing the  occupier  from  such  liability,  the  delayed appointment of  the appellate  authority also constitutes no defence.      The only relief therefore to which the appellant can be entitled in the present appeal would be an order restraining the respondents  from asking  any penal  action against  the appellant for  not furnishing  monthly  returns  during  the period in  which no  Collector had  been appointed under the Act. It  seems, however,  that counsel  for the  respondents stated in  the High  Court during  the hearing  of the  writ petition that  no penal  action would  be taken  against the appellant for  not furnishing  monthly  returns  within  the period mentioned  in sub-s.(2) of s.8 of the Act. We take it that the  concession remains binding on the respondents, and it is not necessary for us to pass any express order in that regard.      In the result, the appeal is dismissed, but without any order as to costs. S.R.                                       Appeal dismissed. 14