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of <h1>Validity of Rule 12 upheld as implementing Section 19(2)(i) and Section 3(3); no fixed limitation but reasonable delay standard</h1> SC upheld validity of Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956, rejecting the High Court's view that it was ultra ... Validity of Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 - Whether Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 is unreasonable and violative of Article 14 of the Constitution, as it does not provide for any period of limitation for the recovery of duty? Held that:- The liability to pay tax is created by the charging Section 3 and Rule 12 confers, on the authorised officer to recover duty if the same has not been paid on account of any short-levy or deficiency or any other reason. Rule 12 is referable to Section 19(2)(i) of the Act. The Rule carries out the purposes of the Act as it seeks to provide for recovery of duty as contemplated by Section 3(3) of the Act. The High Court committed error in holding that the Rule provides for recovery of escaped duty although the Act is silent on the question of escaped assessment and, therefore, Rule 12 is ultra vires the Act. Learned counsel appearing for the respondents urged that Rule 12 is unreasonable and violative of Article 14 of the Constitution, as it does not provide for any period of limitation for the recovery of duty. He urged that in the absence of any prescribed period for recovery of the duty as contemplated by Rule 12, the officer may act arbitrarily in recovering the amount after lapse of long period of time. No substance in the submission is found. While it is true that Rule 12 does not prescribe any period within which recovery of any duty as contemplated by the Rule is to be made, but that by itself does not render the Rule unreasonable or violative of Article 14 of the Constitution. In the absence of any period of limitation it is settled that every authority is to exercise the power within a reasonable period. What would be reasonable period, would depend upon the facts of each case. Whenever a question regarding the inordinate delay in issuance of notice of demand is raised, it would be open to the assessee to contend that it is bad on the ground of delay and it will be for the relevant officer to consider the question whether in the facts and circumstances of the case notice or demand for recovery was made within reasonable period. No hard and fast rules can be laid down in this regard as the determination of the question will depend upon the facts of each case. Appeal allowed. Issues: Validity of Rule 12 of Medicinal and Toilet Preparations (Excise Duties) Rules, 1956Analysis:The case involves appeals against a High Court judgment quashing notices issued by the Deputy Commercial Tax Officer to a company manufacturing medicinal preparations. The company failed to pay duty or obtain a license as required by the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. The High Court declared Rule 12, under which the notices were issued, as ultra vires the Act, leading to the quashing of the notices and proceedings. The main issue is the validity of Rule 12, which the High Court found to be outside the scope of the Act due to the Act's silence on the levy of duty on escaped turnover.The Act imposes duties on the manufacture of dutiable goods, specifying rates and the stage at which duty is levied. Section 3(3) allows for the collection of duty as prescribed by rules. Section 19 grants the Central Government the power to make rules for the Act's purposes. The Medicinal and Toilet Preparations (Excise Duties) Rules, 1956, include Rule 12, providing for the recovery of sums due to the government when no specific provision exists. Rule 12 is a residuary power for the recovery of unpaid duty or other sums, supplementing other rules in Chapter III governing duty payment and recovery.The Court held that Rule 12 is not unreasonable or violative of Article 14 of the Constitution, despite lacking a prescribed period for duty recovery. It emphasized that authorities must act within a reasonable period, determined case by case. The absence of a limitation period does not render the rule arbitrary, as reasonableness depends on individual circumstances. The Court allowed the appeals, setting aside the High Court's judgment and order.In conclusion, the Supreme Court upheld the validity of Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956, rejecting the High Court's finding of it being ultra vires the Act. The Court clarified that Rule 12 serves as a supplementary provision for the recovery of unpaid duty or sums due to the government, ensuring compliance with the Act's duty imposition and collection mechanisms.
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