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Andhra Pradesh High Court
Judges : SRINIVASA CHARI
Union of India - Appellant
Versus
Balabhadra Ramaiah - Respondent
Decided On : 06-24-60
CENTRAL EXCISE - LEVY OF DUTY - ALLOWANCE FOR DRYAGE - DISCRETION OF OFFICER - SCOPE OF SECTION 40 OF THE CENTRAL EXCISES AND SALT ACT, 1944 - MAINTAINABILITY OF SUIT FOR REFUND OF ILLEGALLY LEVIED DUTY.
Fact of the Case:
The plaintiff, a registered firm dealing in unmanufactured country tobacco, stored tobacco in a warehouse under a license issued by the Central Excise authorities. The tobacco was processed by sprinkling water, resulting in an increase in weight due to water absorption. After processing, the tobacco was allowed to dry, and the weight was recorded again, showing a loss in weight due to evaporation. The Central Excise authorities assessed duty on the difference in weight, allowing only 5% for dryage, resulting in an additional duty of Rs. 1,388-13-0. The plaintiff filed a suit for refund of the duty, contending that the alleged loss in weight due to evaporation was not assessable to duty.
Finding of the Court:
The court held that the suit was maintainable and that the levy of duty on the loss in weight due to evaporation was illegal. The court interpreted Rule 223-A of the Central Excise Rules, 1944, to mean that the allowance for dryage or evaporation is only applicable in cases where there is a deficiency in the weight of the commodity at the warehouse that is not attributable to evaporation or dryage. In this case, the loss in weight was entirely due to evaporation and dryage, and therefore, the plaintiff was entitled to an allowance for the actual loss of weight.
Issues: 1. Whether a suit is maintainable to challenge an act of an officer under the Central Excises and Salt Act, 1944, done in good faith in the discharge of his duties? 2. Whether the officer has the discretion to allow a certain percentage for dryage or evaporation, and if so, whether the assessee can claim a higher allowance as a matter of right?
Ratio Decidendi: 1. Section 40 of the Central Excises and Salt Act, 1944, does not bar a suit for refund of an illegal levy of assessment. The assessee can question the correctness, legality, and propriety of the imposition of duty that is not in accordance with the law. 2. Rule 223-A of the Central Excise Rules, 1944, does not confer an absolute discretion on the officer to allow a certain percentage for dryage or evaporation. The allowance is only applicable in cases where there is a deficiency in the weight of the commodity at the warehouse that is not attributable to evaporation or dryage. In this case, the loss in weight was entirely due to evaporation and dryage, and therefore, the plaintiff was entitled to an allowance for the actual loss of weight.
Final Decision: The court dismissed the appeal filed by the Union of India and confirmed the judgment of the lower appellate court, directing the refund of the duty paid by the plaintiff on the loss of weight due to evaporation and dryage.
( 1 ) THIS appeal on behalf of the Union of India, represented by the Secretary to the Government of India, Ministry of Finance, is against the judgment of the Subordinate Judge, Eluru, decreeing the plaintiffs suit, who in turn confirmed the decree passed by the District Munsif of Eluru. The respondent herein is a registered firm carrying on business in unmanufactured country tobacco and holding a licence under the provisions of the Central Excise Rules, 1944, for premises at Eluru and also for a warehouse at Mustabada in Krishna District,under the licence held by the firm in Mustabada warehouse, the plaintiff stores unmanufactured country tobacco on which duty has not been paid. The procedure adopted in the matter of the storage of the tobacco, the taking of the weight and the final assessment of duty has been according to the rules framed under the Central Excises and Salt Act. The plaintiff used to receive country tobacco from the growers into his arehouse. The procedure that is generally followed is that each consignment of tobacco is weighed in the presence of the Excise Officer immediately they are received, and the weights were noted in the Officers presence in Part I of the register. As the said tobacco does not contain the required moisture and the mellowish colour, it is processed by sprinkling water for a period ranging from seven to fifteen days depending upon the quality of the tobacco. After processing the tobacco is bundled up in bundles of 200 lbs. , each. It has to be observed that in the course of the Processing, tobacco absorbs a portion of water as such the weight of the tobacco increases. The net weight of the tobacco taken for processing is entered in the register maintained and the gross weight after processing is also noted. After the processing, the tobacco is allowed to dry and the weight recorded after the evaporation of the water and the actual dryage is noted. This is the process that is adopted and so far as this case is concerned the net weight of the tobacco actually received by the plaintiff into his warehouse for the relevant year i. e. , 1945 was 1,40,297 lbs. and soon after processing if weighed 1,68,783 lbs. Therefore, the increase in the weight was to the extent of 28,486 lbs. After this the tobacco delivered out of the plaintiffs warehouse is also noted in the warehouse register and in this case the weight of the tobacco delivered out of the plaintiffs warehouse by 11/12/1945, which was the date of the stock-taking by the officer, was 1,54,834 lbs. as against 1,68,783 lbs. , which was the weight immediately after processing. The loss in the increase in weight was therefore 13,969 lbs. , this being the difference between 1,68,783 lbs. which the tobacco weighed after processing and its weight after dryage viz. 1,54,814 lbs. The Assistant Collector Central Excise, Vijayavada, while allowing only 5 per cent for dryage, assessed the duty on the difference in weight. Thereby the Collector did not allow any dryage to the extent of 2,469 lbs. and he assessed a duty of Rs. 1,388-13-0. The plaintiff preferred an appeal to the Collector, Central Excise, Madras, who rejected the appeal. The plaintiff preferred a revision to the Government of India, Ministry of Finance, and the same was dismissed. The plaintiff thereupon called upon the defendant to cancel the duty by a notice issued on 20/08/1951, but no reply was received and the defendant collected the amount from the plaintiff. Thereafter the plaintiff issued a notice under Section 80, Civil Procedural Code, demanding refund of the amount with interest at six per cent; per annum. The contention of the plaintiff in the suit was that the alleged loss in weight which was due to evaporation of water-contents was not assessable to any duty and no duty could be levied under the provisions of the Central Excise Act and Rules framed thereunder. The Union Government filed a written statement contending inter alia that the Civil Cour
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