# ASSISTANT COLLECTOR OF CENTRAL EXCISE, CALCUTTA DIVISION v. NATIONAL TOBACCO CO. OF INDIA LTD

- **Citation:** [1973] 1 S.C.R. 822
- **Court:** Supreme Court of India
- **Decided:** 1972-08-09
- **Case number:** Civil Appeal No. 1101 Of 1967
- **Bench:** A. N. Ray, I. D. Dua, M. H. Beg
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/assistant-collector-of-central-excise-calcutta-division-v-national-tobacco-co-5726
- **Pages:** 19

## Headnote

Central Excise Rules-Rule 10. and lOA, Whetlwr tlw impUlned notice
fell under Rule 10 to be ineffective and barred by limitation.
The respondent malllli'acturea ciprettea II( its factory 11p0o
wbleh
Excise Duty is levied by the Assistant Collector of Central Excise, Calcutta
Division.
The rates varied accordina; to the provision& ot Finance A.ct,
1951, and 1956 and the Additional Duty of Excise (Goods of Special
Importe~ce) Act, 1957. The Company was required to furnish quarterly
consolidated price lists and the. particulars Of cigarettes to be cleared were
furnished by llhe Company as. required by Rule 9 of ~ Central Excise
Rull'". Fot faciUtating collection of duty, the Company maintained a large
sum of money in a Current Account with the Central &cise authoritil'",
who used to debit this account for the duty leviable on each stock of
cigarettes allowed to be removed.
The Company used to furnish its quarterly price lists to the Collector
on forms containing nine columns R!ld until July 1957, so long as this
form was used by the Company, no difficulty was experienced in checking
prices.
Bu~ after this column .was dropped from the new fom1 of si"
columns, the Excise authorities encountered some difficulty in valuing the
cigarettes for levying Excise Duty. They tllerefore, changed the basis of
assessment from the Distributors selling priee to the wholesale oash selling
price at which stockists or agents were selling the same in the open
market.
The authorities informed the Company of this change of basis on
5-11-58 bv letter, which also asked the Company to furniSh its price lists
immediately for determining the correct assessable value of its cigarettes.
Two days thereafter, the authorities served a notice upon the Company
demanding payment of Rs. 1,67,072,40 P. as Basic Central Excise Duty
and R•. 74,574,85 P. as Additional Central Excise Duty on ground of
short levy for a certain brand of cigarettes cleared from Company's
Factory between 10th August 1958. After another five cklys, the authorities sent another notice demanding more than Rs. 6 lakhs as Basic Central
Excise Duty and more !ban Rs. 2 lakhs as Additional Central Excise
Duty.
On too following day, the authorities ~t a tlilid notice under
Rule 10-A of the Central Excise Rules, demanding more than Rs. 40,000/-
as Central Excise Duty and more than Rs. 16,000/· as AdditionaI Duty.
The Company challenged these notices by e. writ before the High Court.
The High Court quashed the notices on the ground that the Coolpany
had not been given an opportunity of being heard.
No appeal was filed
by the other side against this decision, but when the case went back to
the Colleclior, he issued a fresh notice on 24-4-1960. By th~ notice, f~r
certain periods. a sum of more than Rs. 10 Iakhs was levied as B~c
Central Excise Duty and a total sum of more than Rs. 3 lakhs as Additional Duty, and Ibis amount had been provisionally debited in the Company's Accouiit on the basis of the price list ~upplied by the Co:npan_y
and the Company was informed that if it desired a personal hearing, ti
B
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ASST. COLI.ECTOR v. NATIONAL TOBACCO CO. LTD.
823
(Beg, J,)
A
can apl'ear before the authorities to nrnke the final assessment in accord·
ance with law.
B
c
B
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II
The Company challenged the validity of this notice dated 24-4-60 O!l
the ground !hat the notice was barred by. limitation and was issued without
jurisdicltion, so that no proceedings could be taken. ·The learned single
Judge, as well as the Divisional Bench of the High Court allowed the
petition on the ground that the notice was barre& by time under Rule 10
of the Central Excise Rules because the notice was held to be fully
covered by Rule 10 and by no other rule. The case was certified under
Art. 33 (a). (b) and ( d) for an appeal· to this Court.
Rule 10 of tho
Central Excise Rules provides that when duties or charges have been
short levied through inadvertence or misconstruction etc.,
the
person
chargeable with'

## Text

_Characters 0–39,555 of 50,364. This is a partial read: ask again with offset=39555 for what follows._

822
ASSISTANT COLLECTOR OF CENTRAL EXCISE,
CALCUTTA DIVISION
v.
NATIONAL TOBACCO CO. OF INDIA LTD.
August 9, 1972
[A. N. RAY, I. D. DUA AND M. H. BEG, JJ.]
Central Excise Rules-Rule 10. and lOA, Whetlwr tlw impUlned notice
fell under Rule 10 to be ineffective and barred by limitation.
The respondent malllli'acturea ciprettea II( its factory 11p0o
wbleh
Excise Duty is levied by the Assistant Collector of Central Excise, Calcutta
Division.
The rates varied accordina; to the provision& ot Finance A.ct,
1951, and 1956 and the Additional Duty of Excise (Goods of Special
Importe~ce) Act, 1957. The Company was required to furnish quarterly
consolidated price lists and the. particulars Of cigarettes to be cleared were
furnished by llhe Company as. required by Rule 9 of ~ Central Excise
Rull'". Fot faciUtating collection of duty, the Company maintained a large
sum of money in a Current Account with the Central &cise authoritil'",
who used to debit this account for the duty leviable on each stock of
cigarettes allowed to be removed.
The Company used to furnish its quarterly price lists to the Collector
on forms containing nine columns R!ld until July 1957, so long as this
form was used by the Company, no difficulty was experienced in checking
prices.
Bu~ after this column .was dropped from the new fom1 of si"
columns, the Excise authorities encountered some difficulty in valuing the
cigarettes for levying Excise Duty. They tllerefore, changed the basis of
assessment from the Distributors selling priee to the wholesale oash selling
price at which stockists or agents were selling the same in the open
market.
The authorities informed the Company of this change of basis on
5-11-58 bv letter, which also asked the Company to furniSh its price lists
immediately for determining the correct assessable value of its cigarettes.
Two days thereafter, the authorities served a notice upon the Company
demanding payment of Rs. 1,67,072,40 P. as Basic Central Excise Duty
and R•. 74,574,85 P. as Additional Central Excise Duty on ground of
short levy for a certain brand of cigarettes cleared from Company's
Factory between 10th August 1958. After another five cklys, the authorities sent another notice demanding more than Rs. 6 lakhs as Basic Central
Excise Duty and more !ban Rs. 2 lakhs as Additional Central Excise
Duty.
On too following day, the authorities ~t a tlilid notice under
Rule 10-A of the Central Excise Rules, demanding more than Rs. 40,000/-
as Central Excise Duty and more than Rs. 16,000/· as AdditionaI Duty.
The Company challenged these notices by e. writ before the High Court.
The High Court quashed the notices on the ground that the Coolpany
had not been given an opportunity of being heard.
No appeal was filed
by the other side against this decision, but when the case went back to
the Colleclior, he issued a fresh notice on 24-4-1960. By th~ notice, f~r
certain periods. a sum of more than Rs. 10 Iakhs was levied as B~c
Central Excise Duty and a total sum of more than Rs. 3 lakhs as Additional Duty, and Ibis amount had been provisionally debited in the Company's Accouiit on the basis of the price list ~upplied by the Co:npan_y
and the Company was informed that if it desired a personal hearing, ti
B
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'
G
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•
,\
J
'
ASST. COLI.ECTOR v. NATIONAL TOBACCO CO. LTD.
823
(Beg, J,)
A
can apl'ear before the authorities to nrnke the final assessment in accord·
ance with law.
B
c
B
I
,
G
II
The Company challenged the validity of this notice dated 24-4-60 O!l
the ground !hat the notice was barred by. limitation and was issued without
jurisdicltion, so that no proceedings could be taken. ·The learned single
Judge, as well as the Divisional Bench of the High Court allowed the
petition on the ground that the notice was barre& by time under Rule 10
of the Central Excise Rules because the notice was held to be fully
covered by Rule 10 and by no other rule. The case was certified under
Art. 33 (a). (b) and ( d) for an appeal· to this Court.
Rule 10 of tho
Central Excise Rules provides that when duties or charges have been
short levied through inadvertence or misconstruction etc.,
the
person
chargeable with' the duty so short levied, shall pay the deficiency or pay
the amount paid to him in excess on written demand by the proper officer
within three months from the date on which the duty or charge is paid
or adjusted in the owner's account, if any, or from the date of making
the refund.
It was ·contended that this was substantially a provisional.
assessment covered bv. Rule 10-B.
The Division Bench of the Higb
Court, however, refused to agree that the impugned notice of 24-4-60 fell
under Ru!., 10-A.
The reason given for this refusal was that such a
Clase was neither taken before the learned single Judge, nor could be
found in the grounds of the appeal despite the fact that the appellant
bad ample opportunity of amending its Memorandum of Appeal. Allowing
the appeal.
HELD : ( i) That the High Court erroneously refused to consider
whether the impugned notice fell under Rule 1 ().A. The applicability of
Rule 10-A was very much in issue because the Collector in bis affidavit
denied that Rule !O·A of.the ss;d rules had any applicatioit to the facts
of the case.
(ii) It cannot be accepted that merely because lhe current account kePt
under Rule 9 indicl>ted that an accounting had taken place, there was
necessarily a legally valid or complete levy. The making of de~it entries
was only on ground of coller.tion of the tax. Even if payment or actual
cpllection of tax could be spoken of as a defective levy, it was only
provisional and not final. It could only be closed or invested With validity
after carrying out the obligation to make an assessment that really determines whether the levv is short or complete. It is not a faatual or presumed levv which could prove an assessment. This has to be done by proof
of the actual steps taken which constitute as•essment.. f1836D)
A mechanical adjustment, or settlement of accounts by making debit
entries was gone through in the present case, but it cannot be said that
any such adjustment is assessment which is a quasi-judicial process and
involves due application of mind to the fact's, as well as to the requirements of law.
Rule 10 and JO-A seems to be so widely worded as to
cover any i11advertance error et.c.; whereas Rule 10-A would appear
to 'cover any deficiency in duty if the duty has, for any reason, been
sbort-levied, except that it would be outside tlbe purview of Rule 10-A
if its collection is expre8sly provided or by any rule.
Both the rules
as they stood at the relevant time, deal with collection, and not with assessment. In N. B. Sanjana!s case (A.LR. 1971 S.C. 4039) this Court indi.
cated that Rule JO-A which was residual, in character, would be inappli.
cable if a case fell within a sj)ecmed category of cases mentioned in Rule
10. It was pointed out in Sanjana's case that the reason for the addition
824
SUPRilME COURT REPORTS
(1973] l S.C.R.
ot the new rule 10-A was a decision of the Nagpur (Chotabhai Jeti:ahhai'• case; A.LR. 1952 Nagpur 139), so that a fresh demand may be
made on a basis altered by law.
The excise authorities had made a
fresh demand under Rule 10-A, the validity of which· was challenged, but
it was upheld by a Full Bench decision of the High Court of. Nagpur.
This Court, in Chotahhai Jetliabhai's case also rejected the assessee's claim
that Rule JO-A was inapplicable alter pointing our that the new rule was
specifically designed for the enforcement of the demand like the present
one. r836F-837E]
(iii) The present case, therefore, falls within the residuary clause o(
unforeseen cases from the provisions of S. 4 of the Act, read wih Rule
10--/\, an implied power to carry ·out or complete an assessment, not
specifically provided for by the rules, can .be inferred.
Therefore, it is
wrong to hold that the case falls under Rule 10 and not under Rule IO-A.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1101
Of 1967.
Appeal by certificate from the judgment and order
dated
September 28, 1966 of the Calcutta High Court in Appeal No. 7
of 1965.
B
c
G. L. Sanghi, B. D. Sharma and S. P.
Nayar,
for 'the
9
appellant.
A. K. Sen, B. P. Maheshwari and Shambhu Nath Chunder,
for 'the respondent.
The Judgment of ithe Court was delivered by
Beg, J. The National Tobacco Co. of India Limited (herein-.
after referred to as "the Company"), the Respondent in the appeal
before us, manufactures Cigarettes, at i'ts Factory in Agrapara,
upon which Excise duty is levied by the appellant, the Assistant
Collector of Central Excise, Calcutta Division (hereinafter referred to as "the Collector"). The rates at which ~he Excise duty
was imposed upon the cigarettes of the Company under the provisions of the Central Excise ancJ Salt Act of 1944 (hereinafter
referred to as "the Act") were varied, from time to time, by the
provisions of Finance Acts of 1951 and 1956 and the Additional
Duties of Excise (Goods of Special Importance) Ac: of 1957.
The Collector maintained an office at the factory itself for the
levy and collection of tax. The Company was required to furnish
quarterly consolidated price-lists which used to be accepted for
purposes of enabling the Company to clear its goods, but. according to the Collector, these used to be verified afterwards bv
obtaining evidence of actual sales in the market before issuing final
certificates that the duty had been fully paid up. The particulars
of ~he cigarettes to be cleared were furnished by tho~ Company
on forms known as A.RI forms required by Rule 9 of the Central
Excise Rules. For facilitating collection of duty, the Company
maintained a large sum of money in a current account with the
E
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.\SST. COLLECTOR V. NATIONAL TOBACCO CO. LTD.
8 2 5
(Beg, J.)
A
Central Excise authorities who used to debit in this account the
duty leviable on each stock of cigarettes allowed to be removed.
This current account, known as "personal ledger account", was.
maintained under the third proviso 'to Rule 9 which lays down
8
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0
9(1) .. •
•
•
•
•
•
Provided also 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 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 remo~d from the place of production, curing, manufacture or storage'.',
It appea{s that the company
used to furnish its quarterly
price-lists to the Collector on forms containing nine columns including one to show the "distributors' selling price". Until July
1957, so long as this form was used by the Company, no difficulty seems to have been experienced in checking the price:;, But,
after this column was dropped from the new form of six columns,
E
the excise authorities seem to have encountered some difficulty
in valuing the Cigarettes for levying excise duty. They, therefore,
changed the basis of assessment itself from
"the Distributors•
Selling Price" to "the wholesale cash selling price at. which stockists
or a.gents are selling the same to an independent buyer in the
open market". They held the vi·~w that such a charge could be
made having regard to the provisions of Section 4 of the Act.
F
The Deputy Superintendent of Central Excise informed the Company of this change of basis on 5-11-1958 by a Jetter which also
asked th.~ Company to furnish its price lists immediately "for
determining the correct assessable value" of its cigarettes. On
7th November, 1958, the Deputy Superintendent served a notice·
upon
the
Company
demanding payment
of a
sum
of
G
Rs. 1.67,072,40 as basic Central Excise duty and. Rs. 74,574,85
as additional Central Excise duty on account of
short
levy
for a certain brand of cigarettes cleared from the Company's
factory from 10th August, 1958 to 5th November, 1958.
On
12-11-1958, the Deputy Superintendent sent another notice
demanding payment of a sum of Rs. 6,16,467,49 as basic
H
Central Excise duty and Rs. 2, I 0,492, l 5
as
additional
central excise duty for short levy in respect of · some brands·
• of cigarettes cleared from the factory between
1-11-1957
to
9-8-1958~ On 13-11-1959. 'the Deputy Superintendent sent a··
826
SUPREME COURT REPORTS
[1973] I S.C.'ll
third notice to the Company under Rule l 0-A of the Central
A
Ex~ise Rules 194~. demanding payment of Rs.
40,726,48 as
basic Central Excise duty and Rs. 16,958.50 as addHionc1l duty
•
for shor't levy in respect of various brands.
ll
The Company applied to the Calcutta High Court under Arti·
cle 226 of the Constitution against the three notices mentioned
B
above, one of which specifically under Rule 10-A and the other
two under Rule 10 of the Central Excise Rules. A learned single
Judge of that Court quashed •the notices by his order of 15-2-1960
on the ground that the Company had not been given any opportunity of being heard so as to be able to 'meeit the material collected behind its back which formed the basis of the demanJs under
the aforesaid three notices. On a joint request of both >ides, the C
High Court did not decide the questiOfl whether notices of demand
were time barred. But, 1he learned Judge said :
"Notl:tjng in this order will prevent the respondent
from proceeding to take any step that may be necessary
for such assessment or for the realisation of the revenue
in accordance with the law".
The learned Judge had also held that neither the basis adopted
by the company nor tha!t put forward by the
Col~~ctor was
correct. The' learned Judge pointed out the correct basis which
was considered by him to be in consonance with the provisions
D
of Section 4, sub.s(a) of the Act. He indicated the various factors
E
required bv Section 4 of the Act which had to be taken into
account and held :
"The determination as to whether a wholesale market
exists at the site of the factory or the premises of manufacture or production etc. or which is the nearest wholesale market, 1or the price at which the goods or goods of
r
like kind and quality are capable of being sold must 11e"..
cessarily be a complicated question and must be determined carefully upon evidence and not arbitrarily. Such
determination cannot wholly be made ex-parte, that is· to
say, behind the oack of the assessee. A satisfactory deter.
mination can only be made by giving; all information to
G
the assessee and after giving the assessee an opportunity
of establishing his own point of view, or checking and/or
challengin_g any material or evidence upon which the
Excise Authorities wish to depend".
As no appeal was filed by either side against this decision,
it became final a:nd binding l:,letween parties before us so that the
H
question wether the High Court has correctly interpreted Section
4 of the Act in determining the basis on which the excise duty
leviable could be assessed is not under consideration here.
\.
ASST. COLLECTOR v. NATIONAL TOBACCO CO. LTD.
827
(Beg, /,)
A
When the case went back to the Collector, he issued a· fresh
B
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notice on 24-4-1960.
As the validity of 'this notice is the real
question. now in issue in the appeal before us, it may be reproduced in toto here. It turns as follows :
To
GOVERNMENT OF INDIA
Collectorate of Central Excise
Regi&l.ered A/D
Office of the Assistant Collector of Central Excise,
Calcutta I Division (5, Clive Row), Calcutta
NOTICE
C. No. Vl(b) 1413/58/3886·
Dated 21st April, 1960
M/s. National Tobacco Co. (India) Ltd.,
Agarpara,
24 Par.e;anas.
In connection with the assessment of Central Excis.e duties for
the periods :
I. from 1st October, 1957 to 5th November, 1958
in respect of 316,885,000 of "No. Ten" brand Cigarettes.
rr. from 1st January, 1958 to 28th January , 1958
in respect of 6,600,000 of "D.L.T. Mag" Cigarettes.
III. from 1st January, 1958 to 5th February, 1958
in respect of 9594,000 of "May Pole" Cigarettes.
IV. from 1st January, 1958 to 7th February, 1958
ill respect of 3143,500 "Carltons Gold Seal" Cigarettes.
V. froJll 1st January 1958 to'31st January, 1958 in
respect of 1471,250 of "John Peel" Cigarettes.
VI. from bt January, 1958 to 16th Jannary,J958 in
respect of 8200,000 of "Light Honse" Cigarettes.
VII. from lst January, 1958 to 16th January, 195S
in respect of 9070,000 of "Gold Link" Cigarettes.
Please note that a sum of Rs. 10;)5,133.25 np. (Rupees 10 lacs
five thousand one hundred thirty three and twenty-five naya paise
only) as basic Central Excise duty and a total sum of Rs.
ff 3,43,208.25 np. (Rupees three lacs forty-three lhonsand two
hundred eight and twenty-five naya paise only) as additional duty
had been provisionally debited in your account on the basis of
the price list supplied to us by you for the quarters :
828
SUPREME COURT REPORTS
[1973] ! S.C.R.
(i) beginning October, 1957 dated 17th October,
1957.
(ii) pc~inning January, 1958 dated nil.
(iii) beginning April, 1958 dated 14th April, 1958,
and
liv) be_ginning July, 1958 dated 14-7-58, and
B
(v) beginning October, 1958, dated nil.
2. We now prupose to comolete the assessments for the said
periods from the evidence in oLir
possession from
which it appears:-
(i) that there is no wholesale ma<ket for the goods
covered by your price lists in or near the factory
or the place of manufacture and that the nearest
wholesale mar~et for the sale is the Calcutta
market.
(ii) the wholesale cash price of the artic;les in question at •the time of sal·~ and/ or removal of the
g.oods at the Calcutta market at which goods of
like kind or quality are sold or are capable of
being sold have been ascertainoo by us and the.
evidence at our disposal reveals that the prices
quoted by you in your price-liSlt are not correct.
3. The prices are as per chart annexed hereto which has been
prepared on the basis of available evidence in tem1s of section
4(a) of the Central Excise and Sale Aot, 1955.
The vouchers
mentioned in the chart are available for your inspection at any
time next w~k during office hours.
After obtaining inspection
of the voucllers please attend at our office at 5 Clive Row, Calcutta 0n 2nd May 1960 at 10.30 a.m. for the pmrme of discussin.g the points mentioned above.
4. We are prepared to give you a personal hearing,with regard
to all the points indicated above.
If you have any evidence in
support of yo1!J contention you are at liberty to produce the same
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at the time of hearing.
Thereafter please note that we propose
G
to make 'the final assessment in accordance with law.
Sd./- (N. D. MUKHERJEE)
Assistant Collector of Central Excise,
Calcutta I Division, CalcuttaH
The Company challenged the validity of this notice by means
of a second petition for Writs of Prohibition and Mandamus against
the Collector on the ground that the notio~ was barred by time
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ASST. COLLECTOR v. NATIONAL TOBACCO CO. LTD.
829
(Beg, J.)
and was issued without jurisdiction so that no proceedings founded on it could be taken.
It was prayed tha·t the Collector'may
be ordered to cancel the notice.
The petition wa> allowed by a
learned Single Judge of the Calcucta High Court on 3-1-1964 on
the ground that such a notice was barred !Jy ihe provisions of
Rule 10 of the Central Excise Rules because the notice was held
to be fully covered by Rule 10 and by no other rule. A Division
Bench of the High Court confirmed this view on 8-9-1966 and
dismissed the Collector's appeal.
The case having been certified,
under Article 133(a), (b) and (c) for an appeal to this Court,
_this questic~n is before us now.
The Jearned Single Judge as well as the Division Bench of
the Calcu'tla -High Court said that th.ere was not enough material
on record to conclude that there was any "provisional vssessment"
under Rule 10-B (deleted on 1-8-1959 and substituted by Rule
9-B) which laid down :
"lOB. PROVISIONAL ASSESSMENT OF DUTY ,_
( 1 ) Notwithstanding anything contained in 'these rules
(a) There the owner of any excisable goods makes
and suoscribed a declaration before the proper
Officer to the effect that he is unable for want
of full information to state precisely the real
value or description of such goods in the proper Form·: or
(b) Wht;re the owner of any goods has furnished
full information in regard to the real value or
description of the goods, but the proper Officer
requires further
proof in respect thereof; or
( c) Where the proper Officer deems
it expedient
to subject any eKcisable goods to any chemical
or other test,
The proper Officer may direct that the duty
leviable on such .goods may, pending the production of such information or proof or pending
the completion of any such test, be assessed
provisionally.
(2) When the owner of any goods in respect of which the
duty has been assessed
provisionally under
sub-rule(l) has
paid such duty, the proper Officer may m~ke an order allowing
the goods to be cleared for home consumption or for exportation, as case m?,y be and such order shall be sufficient aut:lority
for the removal of the goods ~ the owner :-
Provided that before making any such order the proper officer shall require the owner to furnish a bond ia
the proper form binding the owner to pay the differen-
830
SUPREME COURT REPORTS
[1973] l S.C.R.
tial duty when the final assessment is made. ( 3) When
A
the du(y !•~viable on such goods is assessed finally in
accordance with the provisions of these rules, the duty
provisionally assessed shall be adjusted against the duty
finally assessed, and if the duty provisionally assessed,
falls short of, or is in excess of, the duty finally assessed.
the owner of 'the goods shall pa} the deficiency or .be
B
entitled to a refund. as the case may be."
No order directing provisional assessment, contemplated by
Rule 10-B, (applicable at the relevant time) has been placed before us. Nor was the Company asked by the Collector to furnish
a · bon'd to pay up the difference after making a final assessment
as was required under Rule 10-B. It was, however, contended
C
for· the Collector tha1 the execution of a bond, for the satisfac1tion of the Collector. could be dispensed with in a case where the
Company kept a large sum of money in deposit in the "personal
ledger account" to guarantee its ability to meet its liabilities. It
was also pointed out that the learned Single Judge as well as the
Division Bench had found that ~the practice of provisionally apD
proving tbe price-lists supplied by the Company, pending acceptance of thdr coirectness af1er due verification, had been established as a mater of fact. It was submitted tha1 this was sub·
stantially a "provisional assessment" cover<!d by Rule 10-B, ~!
though i't may not conform !:J the technical procedural requi«ements of such an asessment.
E
Even if the making of debit entries could, on the facts of the
case, be held to be merely provisional w~ think that wha1 took
place could nat be held to be a "provisional assessment" within
the provisions of Rule 10-B which contemplated the making
of an order directing such an "assessment" after
applying the
mind to the nt;ed for it.
F
Before
proceeding further we will deal with the question
:whether the Division Bench
correctly refused to permit an
ar.curnent tha'. the impugned notice of 24-4-1960 fell under Rule
I 0-A. The ground given for this refusal was that such a case
was neither take11 before the l·~arned Single Judge nor could be
found in the grounds of appeal despite the fact that the appellant
G
had ample opportunity of amending its Memorandum of appeal.
The appellant has, however. relied on a previous intimation given
to the coun~el for the respondent that such a contention would
be advanced at the hearing of the appeal and also on an application dated 21-3-1966 praying for permission to add the alternative ground that the impugned notice fell under Rule 10-A.
We think that this refusal was erroneous for several reasons.
H
Firstly the <:ompany having come 'to Court for a Writ of Prohibition on the ground that the impugned notice was issued with-
A
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ASST. COLLECTOR V. NATIONAL TOBACCO CO. LTD.
831
(Beg, !.)
out. iurisdiction had necessarily to establish the case which it sets
up m paragrap.h 25 of its Wriit Petition, that the notice was not
authorised by ithe rules including Rule 10-A. As the notice of
21-4-1960 was followed on 4-5-1960 by a correction by another
notice of certain statements both the notices were assailed in paragraph 25(ii) in the following words :
·'The respondent has mala· fide and without jurisdiction issued the said impugned notices pretending to
fal~ely state that the aggregate sum therein mentioned
has been provisionally
debited in your
petitioner's
account and pretending to intim;ite to your petitioner
that the respondent proposed to complete the assessment, .and thereby, he is seeking, under the guise of
complel!ng an alleged assessment which had already
been compl~ted and duty in respect whereof had already been paid, to do indirectly what he could not do
directly inasmuch as Rule !OA of the said Rules has
no application to the facts of the case and inasmuch
as recovery of any duty which might have been short
levied under Rule 10 of the Rules is barred by limitation'".
This
as9~f'tion was met by a categorical denial by the Collector
in para.graph 26(ii) of the Collector's affidavit in reply where
it was stated tirnt it was denied "that Rule 10-A of the said Rules
had no application 'to the facts of fu.e case as alleged or that
the recovery of any duty which had been short levied was barred
by limitation under Rule 10 of the said Rules as alleged or at
all". Thus, the applicability of Rule 10-A was very muc1' in issue.
Secondly, we find, from the
Judgment of tho~ learned
Single
Judge that, ;1s the burden lay upon the petitioning Company to
demonstrate, for obtaining a Writ of Prohibiticn, that the impugned notice was not authorised by any rule, its counsel had
contended, inter-alia, that the notice did not fall under Rule
10-A.
The question was thus considered by the learned Si:1gle
Judge.
Thirdly, the qw~stion whetlier the Collector did or did
not have the power to issue 'the impugned notice under or with
the aid of Rule 1 O·A was a question of law and of jurisdicti0n.
going to the root of the case, which could be decided without
takine fu~ther evidence.
Indeed, as the burden was upon the
petitionin.g Company to show that the
irr.pugned notice
w:is
issued without jurisdiction, a finding that 'th>~ notice did not fall
even wihtin Rule 10-A was necessary before a Writ of Prohibition could issue at all.
We think that the Division. Bench ou~ht
to have permitted the question to be argued, sub1ect. to giving
due opportunity to the petitioning Company to meet it on such
832
SUPREME COURT REPORTS
[l 973] I S.C.R.
~erms as the Court thought fit, even if the point was not taken
A
m the grounds of appeal. Therefore, we will consider this question also.
Rule
10 of the Cen1ral Excise Rules, ran as follows :
"10. Recovery of duties or charges short-levied. or
erroneously refundedWhen duties or charges
have been
short-levied,
through inadvertence, error, ·collusion or mis-construction on the part of an officer, or through mis-statement
.as to the quantity, d~cription or value of such goods
on the part of the owner, or when any such duty or
charge, after having ~en levied, has been owing to any
such ·cause, erroneously refunded, the person chargeable with the duty or charg>J, so short-levied, or to
whom such refund,.P~ been erroneously made, shall
pay the deficiency.·or pay the amount paid to him in
excess, as the case may be, 'On written demand by 1he
proper officer being made within three months from
the date on which the duty or charge was paid or adjusted in the owners account-current, if any, .1r from
the date of making the refund".
Rule 10-A reads as follows :
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"10-A Residuary powers for recovery of sums due to
E
Government.-
Where these Rules do not make any specific provision .for the collection of any duty, or of any deficier.;;y in du1y if the duty has for any reason been short
levied, or of any other sum of any kind payable to the
Central Government under the Act or these
Rules,
such duty, deficiency in duty or sum shall, on a written
demand made by the proper officer, be paid to such
person and at such time and place,
as the proper
officer may specify."
F
The two rules set out above occur in Chapter III of the
Central Excise Rules 1944 headed "Levy and Refund of, and
G
Exemption from Duty". Rule 7 merely provides tha1 the duty
leviable on the goods will be paid a1
such time and place
and to such person as
may be required by the rules.
Rule
8 deals with power to authorise exemptions in special cases.
Rule 9 ( 1) provides for the 1ime and manner of payment of
duty.
This rule indicates that ordinarily the duty leviable must H
be paid before
excisable
goods are removed from the place
where they are manufactured or stocked, and only after obtaining the permission of the officer concerned.
The third proviso
t
ASST. COLLECTOR v. NATIONAL TOBACCO CO. LTD.
833
(Beg, J.)
A
to Rule 9 has already been sef out above.
Rule 9 (2) provides
for the recovery of duty and imposition of penalty in cases where
Rule 9 sub. r ( 1) is violated.
Rule 9A specifies the date with
reference to which the duty payable is to be determined. We are
not concerned here with Rules 11 to 14 dealing with refunds,
'rebates, exports under bonds and certain penalties for breaches
B ·of Rules.
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Rule 52 and 52-A, found in Chapter V,
dealing with a
number of marters rdating to "Manufactured Goods", may also
be cited here :
•
"52. Clearance on payment of duty-When the
manufacturer desires to remove goods on payment of
duty, either from the place or a premise specified under ·
rule 9 or from a store-room or o:her place of storage
approved by the Collector urider rule 47, he
shall
make application in triplicate
(unless otherwise · by
rule or order required) to the proper officer in the proper J'orm and shall deliver it to the Officer at least
twelve hours (or such other period as may be elsewhere prescribed or as the Collector may in any particular case require or allow) before it is
intended to
remove the
goods.
The officer,
shall,
thereupon,
assess the amount of duty .due on the goods and on
production of evidence that this sum has been paid
into the Treasury or paid to the account of the Collcc-
. tor in the Reserve Bank of India or the State Bank of
India, or has been
despatched to the
Treasury by
money-order shall allow the goods to. be cleared".
"52A. Goods to be delivered on a Ga:tepass-(1)
No excisable goods shall be delivered from a factory
except under a gatepass in the proper form or in such
other form as the Collector
may in any
particular
case or class of cases prescribe signed by the owner of
the factory and countersigned by the proper officer."
\
It will be nO'!iced that in Chapter III, the term "assessment"
was used o!J]y in the former rule 10-B, corresponding to
the
G
present rule 9-B, while dealing with provisional. assessment of
•.
duty. But, Rule 52 shows that an "assessment" is obligatory
before every removal of manufactured goods.. The rules, however, neither specify the kind of notice which should precede
· asses,ment nor !av down the need to pass an as5"'ssment order.
All we can say in that rules of natural justice have to be observed
for, as . was held by this Court in K. T. M. Nair v. State of
H
Kera/a('), "the asse«ment of a tax on person or property is
atleast of a quasi-judicial character".
(I) [1~~1] 3 S.C.R. 77@ 94.
~L-172 S,p.CJ/73
834
SUPREME COURT REPORTS
[1973] 1 S.C.R.
Section 4 of the Act Jays down what would determine the
A
value of excisable goods.
But, the Act itself does not. r't!cify
a procedure for assessment presumably because this was meant
to be provided for by 1the rules.
Section 37 ( 1) of the Act lays
down that "the Central Government may make rules to carry
into effect the purposes of this Act".
Section 37, sub. • (2),
particularises "wit!Jout prejudice to the generality of the foreB
going power" that "such rules may provide for the assessment and
collection of dutie> of exci;e, the authorities by whom functions
under this ~ct are to be di~charged, lth.e issue of' notice re<juiring
payment, the manner in which the duty shall be payable, and
the recovery of duty not paid". It is dear from Section 37 that
"assessment and collection of duties of excise" is part of the
C
purposes of the Act, and Se~tion 4, dealing with the determination of value for the purposes of the duty, also seems to us to
imply the e~istence of a quasi-judicial power to assess the duty
payable in cases of dispute.
"Collection", seems to be a term
11sed for a sta_ge subsequ.!nt to "assessment". In a case where
the basis of a proposed assessment is disputed or where contested questions of fact arise, a quasi-judicial procedure ha; to ):ie D
adopted so as to correctly ass~ss the tax payable.
Rule 52 certainly makes an "assessment" obliJwtory before removal of goods
unless the procedure for a "provisional assessment" under Rule
10-B (now rule 9-B) is adopted.
But, if no quasi-judicial pmceeding, which could be described as an
"assessment"
. lther
under R::le 52 or "provisional as5essment" under
Rule l 0-B
E
(now Rule 9-B) takes place at the proper time and in accordance with the rules, is the Collector debarred completely af•~r
wards from assessing or completing assessment of duty payable ?
That seems tu us to be the real question to be decided here.
One of the arguments on behalf of the Collector was tliat
F
no "assessment", for the purpose of determining the value
of
excisable good_s, having taken place in the case before u>, there
could be no "levy" in the eve of law. It was urged that. even
if there was no "provisional assessment", as contemplated ·by
Rule I 0-B. whatever took place could, at the most, be characterised ~" an ";ncomplete assessment", which the Collector-could
proceed to complete even after the ,emoval o~ the goals .. It G
was contendec' that
0 uch a case would be outside the purvt-:!W
of 'Rule 10 as it was not determined whether there actually was
a short levy.
Hence, i't was submitt~d there was no question of
a proceeding barred by the limitation prescribed for makin<r a
demand for a short levy in certain specified circumstances. The
Division Bench, while repelling this contention, held :
H
"In the present case, it aPPCars that the procedure
adopted was that the respondents issued a price list
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ASST. COLLECTOR V. NATIONAL TOBACCO CO. LTD.
83 5
(Beg, J.)
quarterly.
In that price list, they gave their own estimate as to the value of the goods. For the time being
the exci~e authorities accepted the value so given, and
gave a provisional certificate to that effect,, intending
to check the market value and then finally gitermine
the value later on. The procedure for issuing price list of
approvjng tlie same provisionally and accepting payment therefore according to the estimate of the manufacturer, is , a procedure which is not to be found either
in the Act or the Rules".
It may be observed that this finding, that the procedure of
a provisional acceptance of the Company's estimates was ad()flted, seems inconsistent with another finding that what took place
was a final adjustment of accounts within ~he purview of the
3rd proviso to Rule 9, set out above, constituting a "levy" ac-'
cord to Jaw.
The Division Bench appears to
have
regarded
this procedure of an almost mechanical levy as equivalent to a
complete assessment followed by the payment of the tax which
constituted a valid "levy".
Hence, it concluded that, there be·
ing a legally recognised levy, the only procedure open to the Collector for questioning its correctness was one contemplated by
Rule I 0 so that a demand for a short levy had to be made within
3 months of .the final "sett1ement of accounts" as provided specifically by Rule · 10.
The Division Bench considered this
procedure to be an alternative to an assessment under Rule 52 at
the proper _!ime and also to a provisional assessment in accordance with the procedure laid down in Rule 10-B.
But, to regard the procedure under Rule 10 as an alternative to an assessment would be to overlook that it presupposes an
as;essment
which could be reopened on specified grounds only within the
period given there.
The term "levy" appears to us to be wider in its import than
the te1m "assessment". It may include both "imposition'' of
a tax as well as assessment.
Th term "imposition"
is · generally um! for the levy of a tax or duty by legislative provision indicating the subject ma'tter of the tax and the rates at
which it I.as to be taxed.
The term "assessment", -0n the other
hand, is generally used in this country for the actual procedure adopted in fixing
the liability to pay a tax on account
of particular goods or property or whatever may be the object
of the tax in a particular case and determin:ng its amou11t. The
Division Bench appeared to equate "levy" with an "assessment"
as well as with the collection of a tax when it held that "when
the payment of tax is enforced, there is a levy". We ihink that,
although the connotation of the term "levy" seems wider than
that of "assessment", which it includes, yet, it does 11ot seem t(}
836
SUPREME COURT REPORTS
[1973] I S.C.I..
•s to extend to "collection".
Article 265 of the Constitutio• A
makes a distinction between "levy" and "collection".
'We also
.find that in
N. B. Sanjana Assistant Collector of Central
Excise, Bombay & Ors. v. The Elphinstone Spinning & WeMint
Mills Co. Ltd.,A(1 ), this Court made a distinction betwe~11 "levy"
and "collection" as used in the Act and the Rules before us.
It
~aid ther·~ with reference to Rule 10 :
.a
"We are not inclined to accevt the contention of
of Dr. Syed Moha'mmad that the expression 'levy' in
Rule 10 means actual collection of some amount. The
charging provision
Section 3 ( 1)
specifically
says.
'There shall be levied and collected in such a manner
as may be prescribed the duty of excise .... ' It is to
C
be noted that sub-section (i) uses both the expressions "levied and collected" and that
clearly shows
that the expression 'levy' has not been used in the Act
or the Rules as meaning actual collection".
We are, therefore, unable ito accept the view that, merely
because the "account current", kept under the
third
proviso
I)
(erroneously
mentioned as second
proviso by the
Divisioa
Bench) to Rule 9, indicated that an accounting had taken place,
lhere was necessarily a legally valid or complete :evy.
The
making of debit entries was only a mode of coll'!Ction of the tax.
Even if payment or actual collection of tax coμld be spoken of
as a de facto "levy" it was only provisional and not final.
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could only be clothed or invested with validity after carrying out
the obligation to make an assessment to justify it.
Moreover,
it is the proces, of assessment that really determines whether the
fovy is short or complete.
H is not a factual or presumed levy
which could, in a disputed case, prove an "assessment".
Thia·
bas to be done by proof of the actual steps taken which comltitute "assessment".
F
Undoubtedly, a mechanical adjustment and ostensible settloment of accounts, by making debit entries, was ~one through ia
tlie case before us.