Judgment

BEG, J. :- The National Tabacco Co. of India Limited (hereinafter referred to as "the Company"), the Respondent in the appeal before us, manufactures Cigarettes, at its Factory in Agrapara, upon which Excise duty is levied 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 Excises and Salt Act of 1944 (hereinafter referred to as "the Act") were varied, from time to time, by the provisions of Finance Acts of 1951and 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 pricelists 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.I. forms required by R. 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 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 R. 9 which lays down :

9 (1)" xx xx

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 ware-house 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 of storage".

2. 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 levying excise duty. They, therefore, changed the basis of assessment itself from "the Distributors Selling Price" to "the wholesale cash selling price at which stockiest or agents are selling the same to an independent buyer in the open market". They held the view that such a change could be made having regard to the provisions of S. 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 o