The Collector has a wide discretion to determine the allowance for waste by evaporation or other natural causes under Rule 223-A of the Central Excise Rules, 1944, but the exercise of that discretion must be reasonable. The burden of proof is on the assessee to show that the allowance made by the Collector is unreasonable.

M.N. CHANDURKAR, C.J.

The writ petitioner, who is the appellant herein, is a dealer in tobacco. On a stock taking being conducted by the Central Excise department, between 17-1-1973 and 19-1-1973, it was found that there was a total shortage of 12091 kgs. in the warehouse. A notice to show cause as to why penalty should not be imposed on him for contravention of Rule 223-A and Rule 151 of the Central Excise Rules, 1944, hereinafter referred to as the Excise Rules, and why duty should not be demanded on the said quantity of 12091 kgs. tobacco was issued.

2.The explanation given by the appellant shows that there was heavy driage of the tobacco and it had undergone too many turnings for preservation which has resulted in loss of weight.

3.The Collector of Central Excise took the view that the loss in some cases was unduly large and by way of illustration he referred to a loss of 41.3% in the case of Cheroot tobacco which was stored for a period of 3 months and 21 days while in another case though the tobacco was stored for over one year, the loss was only 21%. He took the view that if the climate was hot, it should have affected all the consignments. Having rejected the explanation of the appellant, the Collector made no allowance for different percentages of deficiency in respect of different lots of tobacco. The loss varied between 5 per cent to 20 per cent. Accordingly, the appellant was called upon to pay excise duty of the quantity of 7471.36 kgs. of tobacco. No further action by way of penalty was taken because according to the Collector, the record of the appellant was quite clean. This order of the Collector was upheld in appeal by the Central Board of Excise and Customs and by the Government of India dismissing the revision petition filed by the appellant.

4.When these adverse orders were challenged in this Court by the appellant by a writ petition, the learned Single Judge dismissed the writ petition with the observation that if there was abnormal deficiency, it could not be accepted and the excise authorities had condoned the shortage to a limited extent and this Court could not interfere with such orders.

5.In this appeal, Mr. P. Shanmugham, who appears for the appellant has very vehemently contended that Rule 223-A of the Rules requires certain instructions to be issued by the Central Board of Excise and Customs to enable the excise authorities to make allowances for waste by evaporation or other natural causes and no such instructions having been given, there are no guidelines available to the excise authorities to determine the allowance which should be made on account of the loss by evaporation or other natural causes. Consequently, according to the learned counsel, the orders of the excise authorities determining the percentage of allowances to be made would amount to an arbitrary exercise of power under Rule 223-A of the Rules. Reference has been made to Sec. 5 of the Central Excise Act, which was brought into force in 1978, which enabled the Central Government by rules made under that section to provide for remission of excise duty leviable on any excisable goods which duty to any natural causes are found to be deficient in quantity. Sub-sec. (2) provides that any rules made under sub-sec, . (1) may having regard to the nature of the excisable goods or of processing or of curing thereof, the period of their storage or transit and other relevant considerations, fix the limit or limits of percentage beyond which no such remission shall be allowed. There is a proviso to Sec. 5(2) which provides that different limit or limits of percentage may be fixed for different varieties of the same excisable goods or for different areas or for different seasons.

6.Now Rule 223-A of the Rules enables the Collector to have the stock of excisable goods remaining in a factory warehouse or store-room, licensed or approved for the storage of such goods, weighed, measured, counted or otherwise ascertained in the presence of th