# ORIENT PAPER MILLS LTD v. UNION OF INDIA

- **Citation:** [1967] 3 S.C.R. 205
- **Court:** Supreme Court of India
- **Decided:** 1967-03-16
- **Case number:** Civil Appeal No. 30 of 1966
- **Bench:** M. Hidayatullah, M. Sikri, C. A. Vaidialinoam
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/orient-paper-mills-ltd-v-union-of-india-4198
- **Pages:** 9

## Headnote

C1hlrol Excls1 Act, 1. 4 and Cintra! Exe/st Rul11 1944 r, 9 and r. 9AGood1 re1nov1d from factory afttr pll)'mlnt of dury-Chan111 In rat• of
duty-Crucial tlm1 /or chang1d ra11 to apply, wh1tla1r paytMlll of dury
nr r1moval of 1ood1.
The 1ppell1111 company curried on In the State of Orina the buslne"
of manuf1cturln1 ind ielllng piper und board1.
It held n l'c~nce In
Porm L.4 under the Olntrlll Excl11 Act H/rucrlbed by the Central llxclH
lllll11 .. 1944. The company'• !oelory 1n
Ill praml1e1 ware demucllled
under the 11111 R11l11. The F1ctor1 1riioy1.t the boneftt or 1 prlvMe r1:1w1y
11dl111 Ill th• factory uu. In 1960 1 ntw aiding w11 con111i1cted out•
1ld1 the orl1ln1I factory preml111; the comp1ny'1 req11ut to Iha 1!10111
0111horltl11 10 amend 111 lfc1ne1 ao 11 to lneludo tho new r1ilwny 1ldi11t In
the factory 1111 WH r1fu11d. On Pubnmy 27 and 28, 1961 the eomp1111y
loaded aome w1ao111 of paper after 1lflotln1 cle1nnce ol 11me aoodll by
11aymt11t of axoflt duty under r. 52 of the l!xclM Rlll11. The w1gon.1
th111 pauld Into the h1nd1 of railway Admlnl1tratlon but 11 a pllot eniln•
w11 not available they were ahunted Into the new 1ld:na. On Mllfcli I,
1961 new r1111 of 11oll1 duty came Into foroe and tho Deputy S11p11rln·
tmd111t of Ctntral !xcl11 demanded extra duty OD the wa1on1 loadild on
February 27 and 2BL 1961 on the around that thuy wrre found In the
faotory1,nm1 .. 1111 ~.45 a,m, oD March I, 1961. The comp1111y nlylna
on r. l
of the l!xol11 RulH 1ubmlt11d that the duty wu payable al Iha
r111 In fom on th• date on which tho duty wu actulllly paid, 1n tba
lll11rn1tlv1 It 1ubmlt1td that the 1ood1 havlnt bten clnnd an.cl remowd
from the factory premll11 blfor1 t11t mldnlabt of l'tbruary 28, 1951, could
not ht made llablt for tht tnh1natd duty which 011m1 Into force on Man:h
I, 1961. The oonten1lon1 w111 not aoHpttd by the Otputy S11p1rl111tn,
dtlll, H:ahar dtpll'lmtnllll 1uthorltl11 1110 reJeotod thtm. Th• company
then ftlo;r 1n 1ppl'o1tlon for revl1lon b1.ftlr1 the Oovtrnment of India
Thl1 &llO b1ln1 l'ljlCtod lh• oomp1ny IPPtAl1d by IPlllllAI luve to lhlt!
Court,
I HILD I (I I In tht OAll of m1111utao1u11d 1ood1, aooordlng 10 Ill• pro•
v !lllhlu r, II, th1 payment of tho duty and the olar111oe of aooo1 m1y bl!
1yno l'llllOll~ or !lie 111ymtnt may ht po1tpontd nlthOllAh th.e good1 m~y
lit ramovld, In tho !&lier Hilt, tintlor lho 11aond p1rt Cit r. VA lbe arltlCAI
I!.'!'' I b1oom11 th• rtmoval of tht aood1 from the laoto!')' or wat'lho\180;
""' f th1 p1ym1n1 of du!Y 11 m1d1 btlOH lht r1mov1L then 1111d1r llw
""I Pll'I of r, VA lht orllloal tlmt 11 lht p1ym1nt of d11iy, [2U CJ
·• !.!!.~dbt 11111 that lht ftrat pan of r. 9A r1l1l18 10 urunanufaetur•
... ...- an
1111 1IOOllCI p&rl to m1nllf1orurte1 loodl· [212 Pl
I (II) fn lht pmtnt 0111 lht payment of duty w11 1ynohronou1 with the
e 14r1Dot of !lit l@llll1 hto111111 Iii• pit p1111 1111d1r r. 52 llllll only bo
l11ued wfhon Ille IOOd8 b1v1 1011111lly bteti olwld for removlll. The pay·
ment o duly Mil lbt removlll Of tb1
IOOd1 had both betn efltOttd
bttore lht oh1n11 In lht, r1t1 of duty, Th• rtoovery ot enb1nolltl duty
fl'Olll lht 1pp11l1nt OOl!IPIDY Wll tlltl'lfOH. trrontou1. riu !), Ol
206
SUPREME COURT REPORTS
[1967] 3 S.C.R.
(iii) The Excise authorities had themselves
refused to recognise the
new railway siding as part of the facto·ry and it could not therefore be
said that the wagons being in the new siding must be treated as stiJI in
the factory. [213 F]
·

## Text

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ORIENT PAPER MILLS LTD.
v.
UNION OF INDIA.
March 16, 1967
[M. HIDAYATULLAH, S, M. SIKRI AND C. A. VAIDIALINOAM, JJ.]
C1hlrol Excls1 Act, 1. 4 and Cintra! Exe/st Rul11 1944 r, 9 and r. 9AGood1 re1nov1d from factory afttr pll)'mlnt of dury-Chan111 In rat• of
duty-Crucial tlm1 /or chang1d ra11 to apply, wh1tla1r paytMlll of dury
nr r1moval of 1ood1.
The 1ppell1111 company curried on In the State of Orina the buslne"
of manuf1cturln1 ind ielllng piper und board1.
It held n l'c~nce In
Porm L.4 under the Olntrlll Excl11 Act H/rucrlbed by the Central llxclH
lllll11 .. 1944. The company'• !oelory 1n
Ill praml1e1 ware demucllled
under the 11111 R11l11. The F1ctor1 1riioy1.t the boneftt or 1 prlvMe r1:1w1y
11dl111 Ill th• factory uu. In 1960 1 ntw aiding w11 con111i1cted out•
1ld1 the orl1ln1I factory preml111; the comp1ny'1 req11ut to Iha 1!10111
0111horltl11 10 amend 111 lfc1ne1 ao 11 to lneludo tho new r1ilwny 1ldi11t In
the factory 1111 WH r1fu11d. On Pubnmy 27 and 28, 1961 the eomp1111y
loaded aome w1ao111 of paper after 1lflotln1 cle1nnce ol 11me aoodll by
11aymt11t of axoflt duty under r. 52 of the l!xclM Rlll11. The w1gon.1
th111 pauld Into the h1nd1 of railway Admlnl1tratlon but 11 a pllot eniln•
w11 not available they were ahunted Into the new 1ld:na. On Mllfcli I,
1961 new r1111 of 11oll1 duty came Into foroe and tho Deputy S11p11rln·
tmd111t of Ctntral !xcl11 demanded extra duty OD the wa1on1 loadild on
February 27 and 2BL 1961 on the around that thuy wrre found In the
faotory1,nm1 .. 1111 ~.45 a,m, oD March I, 1961. The comp1111y nlylna
on r. l
of the l!xol11 RulH 1ubmlt11d that the duty wu payable al Iha
r111 In fom on th• date on which tho duty wu actulllly paid, 1n tba
lll11rn1tlv1 It 1ubmlt1td that the 1ood1 havlnt bten clnnd an.cl remowd
from the factory premll11 blfor1 t11t mldnlabt of l'tbruary 28, 1951, could
not ht made llablt for tht tnh1natd duty which 011m1 Into force on Man:h
I, 1961. The oonten1lon1 w111 not aoHpttd by the Otputy S11p1rl111tn,
dtlll, H:ahar dtpll'lmtnllll 1uthorltl11 1110 reJeotod thtm. Th• company
then ftlo;r 1n 1ppl'o1tlon for revl1lon b1.ftlr1 the Oovtrnment of India
Thl1 &llO b1ln1 l'ljlCtod lh• oomp1ny IPPtAl1d by IPlllllAI luve to lhlt!
Court,
I HILD I (I I In tht OAll of m1111utao1u11d 1ood1, aooordlng 10 Ill• pro•
v !lllhlu r, II, th1 payment of tho duty and the olar111oe of aooo1 m1y bl!
1yno l'llllOll~ or !lie 111ymtnt may ht po1tpontd nlthOllAh th.e good1 m~y
lit ramovld, In tho !&lier Hilt, tintlor lho 11aond p1rt Cit r. VA lbe arltlCAI
I!.'!'' I b1oom11 th• rtmoval of tht aood1 from the laoto!')' or wat'lho\180;
""' f th1 p1ym1n1 of du!Y 11 m1d1 btlOH lht r1mov1L then 1111d1r llw
""I Pll'I of r, VA lht orllloal tlmt 11 lht p1ym1nt of d11iy, [2U CJ
·• !.!!.~dbt 11111 that lht ftrat pan of r. 9A r1l1l18 10 urunanufaetur•
... ...- an
1111 1IOOllCI p&rl to m1nllf1orurte1 loodl· [212 Pl
I (II) fn lht pmtnt 0111 lht payment of duty w11 1ynohronou1 with the
e 14r1Dot of !lit l@llll1 hto111111 Iii• pit p1111 1111d1r r. 52 llllll only bo
l11ued wfhon Ille IOOd8 b1v1 1011111lly bteti olwld for removlll. The pay·
ment o duly Mil lbt removlll Of tb1
IOOd1 had both betn efltOttd
bttore lht oh1n11 In lht, r1t1 of duty, Th• rtoovery ot enb1nolltl duty
fl'Olll lht 1pp11l1nt OOl!IPIDY Wll tlltl'lfOH. trrontou1. riu !), Ol
206
SUPREME COURT REPORTS
[1967] 3 S.C.R.
(iii) The Excise authorities had themselves
refused to recognise the
new railway siding as part of the facto·ry and it could not therefore be
said that the wagons being in the new siding must be treated as stiJI in
the factory. [213 F]
·
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 30 of
1966.
Appeal by special leave from the order dated June 7, 8, 1963
of the Government of India, Ministry of Finance
(Department
of Revenue) in Central Excise Revision Application No. 463 of
1963.
B. Sen, Bishan Narain and B. P. Maheshwari, for the appellant.
S. V. Gupte, Solicitor-Genera/, S. G.
Patwardhan,
R. N.
Saththey, and S. P. Nayyar, for the respondent.
The Judgment of the Court was delivered by
Hidayatullah, J.
The appellant is a public limited company
which carries on the business of manufacturing and selling wholesale, paper and boards at Brajrajnagar in the State of Orissa. The
appellant company holds a licence under the Central Excise Act
in Form L-4 prescribed by the Central Excise Rules, 1944. The
appellant company's factory and its premises and precincts have
been demarcated under th~ said Rules. The Factory is traversed
qy railway lines, because the appellant company enjoys the benefit of a private siding. In 1960, the appellant Company constructed a new railway siding outside the original factory
premises
where bamboos and other raw materials were stored and constructed a . platform for loading and unloading.
This extension has
not been included in the factory or its premises or precincts for
purposes of the Excise Rules.
It is presumably so, because. to
reach the new siding, a public road has to be traversed which is
not enclosed .and from which public cannot be excluded. It is
in evidence that after this new siding was constructed, the appellant
company requested the Excise authorities to amend the licence to
include the new railway siding;· but this was refused.
On February 27, 1961, the appellant company loaded 20
wagons of paper after effecting clearance of these goods by payment of the excise duty under r. 52 of the Excise Rules.
On
February 28, 1961, the appellant company loaded 13 more wagons
and cleared them. These wagons were sealed by the railway administration and railway receipts were issued to the
appellant
company.
The company also obtained gate pass.
The wagons
then passed into the control of the railway administration., but as
a pilot engine was not available, the wagons were shunted mto the
new siding. . The exit from th~ new siding is only through the
factory premises because the railway track comes to a dead-end
nn the other side.
A
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ORIENT PAPER MILL.S v. UNION (Hidayatu/lah, /.)
207
A
The Deputy Superintendent of Central Excise wrote to the
~ppellant company on March 1, 1961 that the wagons loaded
on February 27 and 28, 1961 were found inside the factory premises till 9-45 A.M. on March 1, 1961 and the goods were therefore liable to be assessed at the higher rates of excise duty current
from Mareh 1, 1961. The appellant company contended before
B
the Deputy Superintendent that the wagons were duly sealed after
the completion of loading in his presence, were taken out of the
factory premises and were not. in the factory when the new rates
came into force. The appellant company relying upon r. 9A of
the Central Excise Rules, 1944 submitted that duty was payable
at the rate in force on the date on which the duty was actually
C
paid. In the alternative, the appellant company submitted that the
goods having been cleared or removed from the factory premises
before the midnight of February 28, 1961, could not be made
liable for the enhanced duty which came into force from March
1, 1961.
These contentions were not accepted by the Deputy
Superintendent who demanded payment of Rs. 45,475.83, from
the appellant company as differential excise duty.
The amount
D
was paid under protest and without
prejudice to the rights of
appeal and representation to the proper authorities under the
Excise Act.
The matter was then placed by the appellant company before
the Assistant Collector, C_entral Excise, Cuttack and the company
It
requested that the differential duty be refunded as it had been
illegally collected.
The Assistant Collector rejected the claim
and confirmed the collection of differential duty. The appellant
company appealed to the Collector of Central Excise, Calc\llta
and Orissa but the appeal was dismissed on March 12, 1962.
The appellant company then filed an application for
revision
against the order of the Collector of Central Excise, Calcutta and
F
Orissa before the Government of India (Central Excise Revision
Application No. 473 of 1963). The application for revision was
rejected by the Government of India on June 7 /18, 1963. No
reason was given in the order communicated to the appellant
company.
The present appeal has been filed by special leave
G
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against the last order.
The first contention in this appeal is that the order of the Deputy Superintendent confirmed by the Assistant Collector, the
Collector of Excise and the Central Government was illegal and
contrary to the provisions and intendment of the Central 'Excise
Act and the rules framed thereunder, because under r. 9A, first
part, these goods were cleared by payment of excise duty and
could not be reassessed to the enhanced duty. It is further submitted
alternatively that the goods were removed from the factory proper
before the midnight of February 28, 1961 and therefore could
208
SIJPJ.BMB COIJJ.T J.BPOll.TS
11967) 3 s.c.11..
not be assessed to the enhanced duty even if the latter part of
A
rule 9A applied. A third contention that the order of the Central
Government was bad because it gave no reason for the rejection
of the application for revision was not pressed seriously. We shall
examine the first two arguments only.
.
The duty of excise on paper and boards was increased by s.
B
13 of the Finance Act, 1961 (Act XIV of 1961) read with item
17 of the Schedule. Under the Provisional Collection of Central
Taxes Act (XVI of 1931) this duty became payable from the .1st
day of March, 1961. The question, therefore, arises whether the
11oods are to bear the old duty or the· new. This question depends
upon the tlme at which the quty was payable on tbe goods in this
C
c11111.
That In Its tum depends U!)On the true construction of r.
!IA of the Central Excise Rules, 1944. The rule consists of two
1ub·l'llles, but we are concerned with the first 1ub·rule and first
provl10 to . that sub·rule. The relevant portion of the rule mny
be read even at thl1 1ta11e:
"9A. ( 1) Alteration of duty or tarltf v11l11111lcm.-
The rate of dutY 11nd the tral! valuation (If 1111y) llP·
pllcable to 11ood8 cleared on payment of duty 1h11!1 be tlie
rate nnd valuation (If 11ny) In force on the date on
which duty ls pald, or If the 11ood1 are cleared from a
f11ctory or a warehoue, on the date of the actual removal of Ruch 11oods from such factory or warehouse:
Provided that If tho aoodl have previously been
removed from w11rehouMe under bond to be , rewnre·
hou8ed, 1111d the duty 11 pllld on 1uch SQOd8 without
their belo11 rewnrehcm1ed, the nte 11nd v11luatloo (If
11ny) oppl!c11bl11 thereto 1h11!1 be the rl\te 1111d vlllm1tlon
(If 11ny) In force on the date on which duty 18 pllld or
I! duty 11 p11ld 1hrou1h 11n 11ccount-eurren1 mlllnt11lo;i
with thll Colleetor uniler Rule 9, on tho d111e on whleh
11n 11pplle11!1on In the proper form 18 delivered to the
omcer·ltt·eliorse ot the
w11rehou81.1 from
whleh the
11ood8 wore removed:
D
"
a
To u11demnnd thl1 rule nnd lt1 lmpllcll!lon1 80met111na mu1t
be Mllid flr11 about the 1eheme of tho Ceotr11! Bxe!J11 nod lla1t Act,
1944 11nd the Centrnl B!iel1e Rule1, 1944. The Ceotrnl Excise
Act del\nu 'exclHble go0d1' 10 menn 11ood1 1peclfled In It• Finl
Schedule and 1ubjeot to 11 duty of excl111. The Act fllrther deftnH
It
'ffteto~' 10 m111111 any preml1e1 Including the preclnct1 wherein
exelH\;le sood1 11r11 m11nuf11cmred, or wlloreln or In 1111y p11rt of
whleh 11ny mnnufneturlng proe111 connected with the proiluctlon
ORIBNT PAPBR MILLS v. UNION (H/dayatu/lah, /,)
209
A of tbee goods Is being carried on Dr ls ordinarily carried on.
'Manufacture' ls defined to lncludo any procosa ldontlcal or ancll·
lary to tbo completion of a manufactured product, and certain
processes in relation to tobacco and 1alt aro included in manufucture, but with tbeso wo aro not concerned. It also defines
'curing' as including any process for rendering an unmanufac·
a turecl product fit for marketing or manufacture. Section 3 of tbe
Act lays down inter alla that there shall be lovled and collected
in such a manner as may be prescribed duties of excise· on all
excisable goods which are produced or manufactured in India at
the ratea setforth in tbe Flr1t Schedule. Section 4, wblch
is,
heuded ''Determination. of. valuo for tho purposes of duty", pro·
c vides ·that where any article Is charpable with duty at ntes do·
pendent on tbe valuo of auch article auch valuo lhal1 be .deemed
to be the whole 11le ca1h price for which an article of like: kind
and quality la aold or II capable of belna aold at the time. of tho
removal of the article charpablo with duty from tbe factory
or any other prem1111 Of manufacture or production for delivery,
etc. The emph11!1 In 1. 4 11 on the time Of removal of the article
D chnr1eable with duty from the factory, Thl1 l1 tho only 1uldance
which the Act fum11he1. We may now turn to the llulea.
Under the Rulea, duty mOIDI duty payable under 1. 3· of the
Act above-mentioned.
Rule 2 (xv) deftnea 'warehouie' u any
plliCll or preml1ea · appointed or licenaed under rule 140. We
I
now come to Chapter Ill which deal1 with levy and refund of 111d
.•~emption from duty. Rule 7 provld11 that every penon who
prod11Cea, cures or manufactures any nolaable lo0d1 or who
11or11 111ck aood• In 11
wmho1111 1hall pay the cfuty or .dutlel
levl1bl1 on 111eh good1 11 1ueh time and pl1c1 and to 111ch ~
llN m11y be dHl1n111ecl In or under the nuthorlty of the •::i:
r
wbelher the p11ym1111 of 1ueh duty or dutl111 11 11cul'ld by
Q
H
or otherwl111. Rule 9 l11y1 down the time and m1nner of pnym1nt
of duty, The r11!1 m11y be rud hart:
"9. Time Md manner of p1yment of duty.-
( I ) No exolHble aood1 1hllll be removed from Aft)'
pl1ee wher1 they are J)roclueed, eured or manutaolllreil
or •l!Y preml111 M1PUl'lln1nt. thereto, which may bl
1poolfted by the CO!leetor In thl1 behalf, whether for
eon111mplion, export, or manufacture of any other eom·
modl!Y In or out1lde 1uch pl11ee, until thi excl1e duty
levlable thereon ha1 been pllld at 1uch place and In
111eh m11nner 11 11 prHcrlbid In th111 Rul11 or u tho
Coll1etor may l'IClU11'1l, and aoept on ~ent1tlon of
an 1ppl1011tlon In Ill• p~r fonn and on obtlllnln1 lilt
penrilillon of the proper olllcer on the form:
210
SUPIUIMB GOWT 0101.TS
(1967) 3 S.C.R
Provided that such goods may l?e deposited without
payment of duty in a store-room or other place of stor·
age approved by the Collector un.der rule 27 or rule 47
or in a warehouse appointed or licensed under rule 140
or may be exported under bond as provided in rule 13 :
Provided further that such goods may be removed
on part payment of duty leviable thereon if the Central
Government, by notification in the
Official Gazette,
allow the goods to be so removed under rule 49:
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 in·
tended to be removed from the place of production,
curing manufacture or storage.
..
This rule prohibits the removal of goods from the factory or any
premises appurtenant thereto until the excise duty leviable thereon
has been paid.
The factory
and
the premises
appurtenant
thereto has to be specified by the Collector. To this rule there
are exceptions. One of them is that the goods may be deposited
without payment of duty in a store-room or other place of storage
approved by the Collector under rule 27 or under rule 4 7 any
warehouse appointed or licensed under rule 140.
Another exception is that the goods may be removed on part payment of duty
leviable if the Government notifies and allows the goods to be so
removed or the Collector if he thinks fit, approves the opening of
.an account-current of the duty payable and the account-holder
periodically makes. deposits sufficient in the opinion of the Collector to cover duty due on the goods intended to be removed from
the place of manufacture or storage.
As we are not concerned
with export under bond we may not refer to rule 13 but it is
necessary to see rules 47 and 140. Rule 47 is headed "Goods
may be stored without payment of duty"
Under this rule a
manufacturer has to' provide a
store-room or other
place of
storage at his premises for depositing goods made on the same
. premises without payment of duty.
Duty-paid goods and good!>
-other than excisable goods made in the factory must not be
B
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ORIENT PAPER MILLS \!. UNION (Hidaya1ullah, I.)
u I
deposited in such store-rooms or place. The store-room or place
must be declared by the manufacturer and approved by the Collector.
To this rule there is an exception and .it is that if the
manufacturer undertakes to pay duty on all the manufactured
goods and clears them immediately on completion of manufacture the Collector may exempt him from providing a store-room
or other place of storage. Rule 140 deals among other matters
with the appointment and licensing of warehouse.
Under this
rule the Collector shall by order in writing from time to time
approve and appoint a public warehouse and may in like manner
license private warehouses for the stora&e of excisable goods on
which duty has not been paid.
The Rules make a distinction between manufactured and
unmanufactured goods.
The relevant rules may also be seen.
Rule 25 provides for unmanufactured goods and rules 52 and 52A
for manufactured goods.
Rule 25 deals with clearance of unmanufactured products on payment of duty. This rule applies to
a curer who may apply to an officer to get the goods weighed and
duty assessed. If the duty so assessed is then paid the carer is
granted a transport permit authorising him to remove the products to any destination named by him. Rule 52 deals with manu·
factured goods. It deals with clearance on payment of duty. The
rule reads as follows :-
·
"52. Clearance on payment of duty.-
When the manufacturer desires to remove goods
on payment of duty, either from the place or premises
specified under rule 9 or from a store-room or other
place of storage approved by the Collector under rule
4 7, he. shall make application
in triplicate
(unless
otherw1~e by
rule or order required) to the proper
officer m the proper Form and shall deliver it to the
officer at least twelve hours (or such other period a.~
~ay be els~where prescribed or as the Collector may
~n any particular case require or allow) before it is
mtended to remove the goods.
The officer shall, thereupon, assess the amount of duty due on the goods and
?n production of evidence that this sum has been paid
mto. the Treasury, or paid to the account of the Collector .m the Reserve Bank of India or the State Bank of
lndta, or has been despatched to the Treasury by money.
order shall allow the goods to be cleared."
We ma? also refer to rule 52A which provides for the actual
1 emova_. of the goods from the factory.
The rule provides that
no excisable goods shall be delivered from
a factory
except
~nder a gate pass signed by the owner of the factory and countersigned by the proper officer.
Such a gate pass is made out in
212
SUPREME <;:OURT REPORTS
[1967] 3 S.C.R.
triplicate and must be ·presented to the proper officer for countersignature
at least one hour before the actual removal <>f .th:e
goods from the factory. In the pre8ent case a gate pass had
been obtained.
Rule S 1 A then provides that except as otherwise
expressly provided for in the Rules, no duty-paid goods shall be
allowed to re-enter or be retained in, any part or premises of
factory.
We may now tum to rule 9A, the interpretation of
which has given rise to the present case.
The dispute, shortly stated, is as to the application of the two
part~ of Rule 9A.
According to Mr. B. Sen for the appellant
company, the first part applies where duty is paid and the goods
cleared and in such a case the critical point of time is the payment of· duty and the point of time of the removal from the
factory is not relevant.
In the second part, according to him,
the critical time is the removal of the goods from a factory or
warehouse without payment of duty such as happens when they
are removed under the provisos to Rule .9A.
In this view of the
matter he contends that this case falls within the first part of
Rule 9A.
On the other hand, the learned Solicitor General on
behalf of the Union of India submits that the main rule is in
the first part and the second part of the rule is an exception. He
suggests that one part speaks of payment of duty and the other
of removal and the difference in point of time is between clearance
· of duty in the case of unmanufactured goods and the actual removal of the goods from the factory or warehouse ia the case
of manufactured goods.
To prove his point he. emphasises the
separate provisions regarding manufactured goods in Chapter V
and unmanufactured goods in Chapter IV of the Rules.
In our opinion Rule 9A cannot be read on the basis of the
classification suggested by the Solicitor General. No doubt rules
9 and 9A apply to manufactured as well as unmanufactured goods
because rule 9 speaks in terms of both and rule 9A mentions
in one place goods without adverting to the source and in the
other the factory or warehouse.
But the distinction in the two
parts of rule 9A cannot be founded on the basis. of a difference
to be found in Chapters IV and V of the Rules.
Rule 25 allows
the clearance of unmanufactured products on payment of duty
but rules 26 and 27 allow such products to be despatched to a
bonded warehouse or to be deposited in a curer's bonded storeroom.
A special rule applies to the latter goods deposited in
the store-room.
They must be cleared on payment of duty
ordinarily before the 30th day of June (extend~ to 31st. Dece.mber under certain conditions) of the year followm_g that m which
they are harvested or deposited. On the other hand, under ru~e
49 payment of duty is not required in. respect of goods made m
a factory until they are about to be issued out of the .place or
A
B
c
D
F
H
A
B
c
D
E
F
G
ORIENT PAPER MILLS v. UNION (Hidayatu/lah, J.)
21S
premises specified under rule 9 or are about to be removed from
a store-room or other place of storage approved by the Collector.
The only exception to this is their removal to a licensed warehouse. Rule 52 then says that when the manufacturer desires to
remove goods on payment of duty from .the factory or store-roo~
or other place of storage, he can get the duty assessed, pay 11
and get a clearance and a gate pass. He must then remove the
goods and such goods must not lie in che factory etc. or after
removal re-enter the premises (vide r. 51A).
It will thus be seen that in the case of manufactured goods
the payment of duty and. the clearance of goods may be synchronous or the payment may be postponed although the goods may
be removed (provisos to r. 9). This immediately sets up two
kinds of cases in respect of manufactured goods. The critical
time thus becomes the removal from the factory or ware.house
but if the payment of duty ·is made before the removal then the
critical time is the payment of duty.
In the present case the
payment of duty was synchronous with the clearance of the goodS
because the gate pass can only be issued when the goods have
actually been cleared for removal.
The above construction of
the Rules agrees with the construction placed by the Board of
Revenue in its ruling of 1957 when the effect of the sealing of
the wagons by the Railway after loading and the issuance of
railway receipts was considered. The Board ruled that such
goods would not be considered as lying in the stock in the factory
pcem.ises.
When we add to it the fact in this cast: that duty was
paid on the goods and gate pass was also issued, there remains
little to argue except to say that the wagons being in the new
siding must be treated as still in the factory.
Here the difficulty
in the way of -the Union of India is that the Excise authorities
themselves refused to recognise this portion as part of the factory.
1f !he goods were put in the wagons after payment of duty, and
the wagons were sealed and shunted out of the factory proper
on a gate pass, not only under the ruling of the Board but also
on the application of the Rules as explained here these goods
became free of the enhanced duty. The recovery was accordingly
erroneous.
The duty collected must, therefore, be refunded and
we order accordingly. The appellant's costs must be paid by the
respondent.
G.C.
Appeal a//oowetf_