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SUPREME COURT OF INDIA
O. CHINNAPPA REDDY, E.S. VENKATARAMIAH AND SABYASACHI MUKHARJI, .JJ.
D.R. Kohli and others, Appellants
Versus
Atul Products Ltd., Respondent.
Civil Appeal No. 2277 of 1970, D/- 12-2-1985.
Constitution of India, 1950 - Article 133(1)(a), 226 - Finance Act of 1961 - Central Excises and Salt Act, 1944 - Provisional Collection of Taxes Act. 1931 - section 4 - Central Excise Rules, 1944 - Rule 8(1), 10-A, 10, 52, 52-A, 47 - Business - Goods - Liable to Pay Excise Duty - Respondent is owner of a factory at Atul in State in which it has been carrying on business of manufacturing dyes, chemicals and pharmaceuticals for a number of years - Synthetic organic dyestuffs and synthetic organic derivatives used in any dyeing process were added as Item 14D in First Schedule and consequently respondent became liable to pay excise duty imposed by Act on two of its products known as cibagenes and cibanogenes which were being manufactured by it by virtue which provided that excise duty prescribed by Act was leviable on all excisable goods specified in First Schedule to Act - Item 14D in First Schedule during relevant period - Whether respondent was entitled to benefit of exemption notification when dyes said to have been used by respondent in manufacture of other dyes were not liable for payment of excise duty when they were manufactured, that is, before introduction of Item 14D into First Schedule to Act even though duty may have been paid on them after introduction of Item 14D - Whether demands made in this case fall within scope of Rule 10-A of Rules or under Rule 10 thereof - Whether case falls within scope of law granting exemption or not and there can be no dispute about that principle – Held, Facts of this case indicate that Department was virtually inveigled into a trap by respondent suggesting that it was too eager to pay excise duty on certain goods which to knowledge of respondent were not liable for excise duty with object of getting benefit of right to clear its products which were liable for higher excise duty because of their increased value without paying any duty at all - Rule 10 of Rules deals with four kinds of mistakes on part of an officer which bring a case within its sweep - Of them inadvertence, error and misconstruction are mistakes which can be committed unilaterally by officer himself - Collusion involves a pact between two or more persons to defraud Government - This case does not involve any such unilateral mistake on part of an officer or collusion as explained above - Nor is this a case where through mis-statement as to quantity, description or value of such goods on part of the owner short levy has occasioned - Further error in this case has not taken place at time of assessment or at time when assessment ought to have been made under Rule 52 - Discussion and correspondence between assessee and officers concerned had taken place without reference to actual goods - Goods were actually manufactured and cleared afterwards - Reply of Superintendent of Central Excise was in nature of an advice and not an assessment as contemplated under Rule 52 - Hence this case is not covered by Rule 10 of Rules at all - Rule 10-A of Rules which is a residuary provision is, therefore, necessarily attracted - Hence plea of limitation raised on basis of Rule 10 of Rules does not survive - Appeal allowed.
Judgment
VENKATARAMIAH, J. :- This appeal by certificate under Article 133(1)(a) of the Constitution is filed against the judgment and order dated July 9/10, 1969 in Special Civil Application No. 624 of 1964 on the file of the High Court of Gujarat filed under Art. 226 of the Constitution by M/s. The Atul Products Ltd., the respondent in this appeal.
2. The respondent is the owner of a factory at Atul in the State of Gujarat in which it has been carrying on the business of manufacturing dyes, chemicals and pharmaceuticals for a number of years. By the Finance Act of 1961 synthetic organic dyestuffs (including pigment dyestuffs) and synthetic organic derivatives used in any dyeing process were added as Item 14D in the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) with effect from March 1, 1961 and consequently the respondent became liable to pay excise duty imposed by the Act on two of its products known as cibagenes and cibanogenes which were being manufactured by it by virtue of S. 3 of the Act which provided that excise duty prescribed by the Act was leviable on all excisable goods specified in the First Schedule to the Act. Item 14D in the First Schedule during the relevant period read thus :
"14D. Synthetic organic dypstuffs including pigment dyestuffs) Thirty per cent ad valorem." ,and synthetic organic derivatives used in any dyeing process.
3. But on November 23, 1961, the Central Government issued a notification under Rule 8(1) of the Central Excise Rules, 1944 (hereinafter referred to as the Rules) exempting the dyes specified in the Schedule annexed thereto from the whole of the excise duty leviable thereon if and only if such dyes had been manufactured from any other dye on: which excise duty or countervailing. customs duty had already been paid. The notification read thus :
Government of India
Ministry of Finance
(Department of Revenue)
New Delhi,
dated the 23rd November, 1961
the 2nd Agrahayana, 1883 S. E
NOTIFICATION
Central Excise
G.S.R In exercise of the powers conferred by sub-rule (i) of Rule 8 of the Central Excise Rules, 1944, as in force I in India, and as applied to the State of Pondicherry, the Central Government hereby exempts the dyes specified in the schedule annexed hereto; falling under Item No. 14D of, the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) from the whole of the excise duty leviable thereon if and only if, such dyes are manufactured from any other dye on which excise duty or countervailing customs duty has already been paid.
Schedule
1. Solubilised Vats.
2. Rapid fast colours,
3. Rapidogenes,
4. Fast Colour Salts.
(180/61)
Sd/-
(B. N. Banerji)"
4. It may be stated here that cibagenes and cibanogenes which were , being manufactured by the respondent belong to the class of dyes referred to in the Schedule annexed to the above said notification. After the above notification was issued, the respondent wrote a letter dated December 22, 1961, to the Superintendent of Excise, Bulsar Division, Bulsar which read as follows :
"Dear Sir,
You are aware that under the Notification No. 180/61 of the 23rd November, 61 issued by the Government of India, Min. of Finance (Dept. of Revenue), Rapidogenes/ Rapid fasts and fast colour bases are exempted from the excise duty provided such dyes are manufactured from other dyes on which excise duty or countervailing customs duty has already been paid.
During the course of discussions we had on the 20th December, 61 with the Collector of Central Excise and yourself, we pointed that we purchase Fast Colour Bases, required in the production of Rapidogenes/Rapid fasts either from the manufacturer in Bombay of from the open market. The material which the local Manufacturer has offered us was produced before the imposition of excise duty on dyes. He is, therefore, willing to sell us the material without the recovery of excise duty. We now propose to pay the excise duty on the fast colour bases which we will purchase from t
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