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 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 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
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
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:
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
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
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.
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
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
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
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
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
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
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
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