The State of Kerala and the Excise Inspector, Southern Union Pharmaceuticals, Thrissur are the appellants in the above appeal. They challenge the judgment and decree dated 25.6.1999 of the Principal Sub Judge, Thrissur in O.S.No. 334 of 1991. The suit was filed against them by the first respondent - plaintiff for a declaration that no duty on alleged wastage of rectified sprit in the manufacture of medicinal preparations in the bonded manufactury of the plaintiff can be made or realised under the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956, the Kerala Rectified Spirit Rules or the Kerala Abkari Act and for a consequential injunction restraining them from initiating any action under the Revenue Recovery Act for the recovery of any such amounts pursuant to notices issued by them. The appellants are defendants 1 and 2 in the said suit. The suit was partly decreed by the court below finding that the demands made by the appellants - defendants were unenforceable, being out of time as prescribed by Rule 11 of the Rules. Though the relief of declaration has been disallowed by the court below, no appeal has been filed challenging the said finding. The suit was filed in the following facts and circumstances:

2. The respondent - plaintiff is a partnership firm established in the year 1955 and is engaged in the manufacture of a wide range of allopathic drugs and medicines in its pharmaceutical laboratory situate at the Museum Road, Thrissur. The suit was instituted by the Managing Partner who is authorized and competent to file the suit. Rectified spirit is a necessary raw material in the manufacturing process of the plaintiff and is used as a solvent. For the procurement, transport and use of rectified spirit, the plaintiff is possessed of all necessary licences and permissions, as required by law. Necessary licenses have been granted by the Excise Commissioner under the Medicinal and Toilet Preparations (Excise Duties), Act 1955 (hereinafter referred to as 'The Toilet Preparations Act' for short) and the Kerala Rectified Spirit Rules, 1972 (hereinafter referred to as 'the Rectified Spirit Rules' for short). The Excise Commissioner has appointed an officer of the Excise Department to control and supervise the working of the plaintiff's laboratory. No duty is leviable on alcohol used for medicinal preparations under the Rectified Spirit Rules. It is recognized that there would be wastage of rectified spirit during the manufacturing process and the rules provide for allowances of wastage. Accordingly, the Government in consultation with the Controller and Chemical Examiner fixed the maximum percentage of wastage allowable in the process of manufacture of each medicinal preparation. The Excise Inspector posted in the plaintiff's laboratory arbitrarily calculated the wastage in his manufacturing process and ordered that the plaintiffs shall remit an amount of Rs.28,984/- as duty with interest for such wastage which was not permissible. No notice was issued before fixing the same. On a previous occasion, the Excise Inspector had calculated Rs.14,341.257 as excess wastage and had ordered the plaintiff to remit Rs.2,22,289.48 as duty payable on 30.8.1982. Though an appeal was preferred before the Excise Commissioner, Thiruvananthapuram, the same was dismissed. During the pendency of the appeal, the Excise Inspector issued Revenue Recovery notice and the plaintiff challenged the same in O.S.No.109 of 1983 filed before the Sub Court, Thrissur. The suit was dismissed on 29.1.1988. It is admitted that an appeal and the second appeal filed against the said judgment and decree were dismissed.

3. While the appeal was pending, the second defendant - Excise Inspector issued

notices dated 17.1.1991 and 23.1.1991 demanding an amount of Rs.28,984/- as duty on excess wastage of rectified spirit and interest calculated thereon. He informed the plaintiff that if the amount was not paid, Revenue Recovery action would be taken again