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HIGH COURT OF CALCUTTA
D. N. SINHA, A. K. MUKHERJI
ASSISTANT COLLECTOR OF CENTRAL EXCISE - Appellant
Versus
NATIONAL TOBACCO CO. OF INDIA LTD. - Respondent
A. F. O. O. 7 Of 1965
Decided On : SEPTEMBER 28, 1966
CENTRAL EXCISE AND SALT ACT - LEVY OF EXCISE DUTY - PROCEDURE FOR CLEARANCE OF GOODS ON PAYMENT OF DUTY - PROVISIONAL ASSESSMENT - RECOVERY OF DUTIES SHORT-LEVIED OR ERRONEOUSLY REFUNDED - LIMITATION.
Fact of the Case:
The respondent company, a manufacturer of cigarettes, was required to pay excise duty on the value of the cigarettes manufactured by it. During the relevant period, excise duty was levied on a slab system upon the value of the goods manufactured. The company and the Central Excise Authorities had a dispute over the calculation of the duty payable, with the company trying to keep within the lower slabs and the authorities trying to calculate the duty under the higher slabs. The company had an account-current with the appellant, which account was settled each month.
Finding of the Court:
The court held that the excise authorities were entitled to make a provisional assessment of duty under Rule 10-B of the Central Excise Rules, but that they had not done so in this case. The court also held that the second proviso to Rule 9 of the Central Excise Rules, which allowed for the opening of an account-current and the settlement of the account at intervals not exceeding one month, did not apply to the facts of the case. The court further held that the notices issued by the excise authorities demanding payment of short-levied duty were barred by limitation under Rule 10 of the Central Excise Rules.
Issues: 1. Whether the excise authorities were entitled to make a provisional assessment of duty under Rule 10-B of the Central Excise Rules? 2. Whether the second proviso to Rule 9 of the Central Excise Rules, which allowed for the opening of an account-current and the settlement of the account at intervals not exceeding one month, applied to the facts of the case? 3. Whether the notices issued by the excise authorities demanding payment of short-levied duty were barred by limitation under Rule 10 of the Central Excise Rules?
Ratio Decidendi: 1. The court held that the excise authorities were not entitled to make a provisional assessment of duty under Rule 10-B of the Central Excise Rules because they had not complied with the requirements of the rule. The rule required the excise authorities to give the owner of the goods a notice requiring them to furnish a bond binding them to pay the differential duty when the final assessment was made. The excise authorities had not done this. 2. The court held that the second proviso to Rule 9 of the Central Excise Rules, which allowed for the opening of an account-current and the settlement of the account at intervals not exceeding one month, did not apply to the facts of the case because the excise authorities had not made a provisional assessment of duty under Rule 10-B. The court held that the second proviso to Rule 9 only applied to cases where a provisional assessment had been made. 3. The court held that the notices issued by the excise authorities demanding payment of short-levied duty were barred by limitation under Rule 10 of the Central Excise Rules. The rule required the excise authorities to make a written demand for payment of short-levied duty within three months from the date on which the duty was paid or adjusted in the owner's account-current. The excise authorities had not done this.
Final Decision: The court dismissed the appeal and held that the decision of the court below was correct.
( 1 ) THE facts in this case are briefly as follows. The respondent company carries on the business of manufacturing cigarettes and tobacco at Agarpara in 24 Parganas and as such, they have to pay excise duty on the value of the cigarettes manufactured by it. In this case, we are not concerned with anything else. The levy of excise duty is controlled by me Central Excises and Salt Act (Act I of 1944) (hereinafter referred to as the "said Act") and the Central Excise Rules (hereinafter referred to as the "said Rules" ). Section 3 of the said Act provides that there shall be levied and collected in such manner as may be prescribed, duties of excise on all excisable goods other than salt, which are produced and manufactured in (India), and a duty on salt manufactured in, and imported by land into any part of India as, and at the rates, set forth in the First Schedule. It is not necessary to go into further details at present. It is sufficient to state that cigarettes manufactured in India have to pay excise duty. During the relevant period, namely the years 1955 to 1957, excise duty was to be levied on a slab system upon value of the goods manufactured. It was, therefore, a battle of wits between the manufacturer and the Central Excise Authorities. The former wanted to keep within the lower slabs whereas it was to the interest of the latter to calculate the excise duty under the higher ilabs. For the calculation of the duty payable, the value of the goods was all-important, as the calculation of the excise duty depended upon the price, that is to say the value of the cigarettes manufactured. Section 4 of the said Act provides how the value was to be determined for purposes of duty. Section 37 of the said Act confers power upon the Central Government to make rules, inter alia providing for the assessment and collection of excise duty, particularly the authorities by whom functions under the said Act were to be discharged, the issue of notices requiring payment, the manner in which the duty shall be payable and the recovery of duty not paid. Such Rules have been promulgated, and the said Rules will govern the determination of this case, as we are concerned with the realization of duty on excisable goods. Under the said Rules, [2 (v)] "duty" means the duty payable under Section 3 of the said Act. Rule 7 provides that every person who produces or manufactures any excisable goods shall pay the duty leviable on such goods, at such time and place and to such person as may be designated in, or under the authority of, the said Rules. Rule 9 is important and the relevant part thereof is set out below:"9. Time and manner of payment of duty.-- (1) No excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf, whether for consumption, export, or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may require, and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form:. . . . . . . . . . . . . . . . . . Provided further 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 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. "the proviso set out abo
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