1953 (1) TMI 1 - HC - Central Excise

Appeal dismissed, pledgees liable for excise duty under Rule 160. Article 226 applies. No costs awarded.

The court dismissed the appeal and upheld the liability of the pledgees to pay excise duty under Rule 160 of the Central Excise Rules, 1944. It also ... Warehoused goods - Duty liability Issues Involved:1. Liability of a pledgee under Rule 160 of the Central Excise Rules, 1944.2. Applicability of Article 226 of the Constitution of India to the case.Issue-wise Detailed Analysis:1. Liability of a Pledgee under Rule 160 of the Central Excise Rules, 1944:The primary issue revolves around whether the appellants, who are pledgees and not absolute owners of the tobacco, are liable to pay excise duty under Rule 160 of the Central Excise Rules, 1944. The appellants argued that the liability under Rule 160 should be discharged only by the absolute owner of the goods. However, the court noted that Rule 160 states, 'If any goods are not removed from the warehouse within three years from the date on which they were first warehoused, the owner of the goods shall forthwith pay the full amount of the duty chargeable thereon.'The court examined whether the appellants could be considered owners within the meaning of Rule 160. It was noted that under the Indian Contract Act, a pledgee does not become an owner under a contract of pledge, as the right of the pledgee is always subject to the right of redemption by the pledgor. However, Rule 3 of the Central Excise Rules extends the definition of 'owner' to include a person expressly or impliedly authorized by the owner to act as an agent, provided such authorization is approved by the Collector. Although this was not applicable in the present case, the court considered the broader scheme of the Act and the Rules.The court highlighted that various rules, such as Rule 7, Rule 19, Rule 145, and Rule 160, collectively indicate that the liability to pay excise duty attaches not only to the absolute owner but also to any person who stores the goods in the warehouse. The court reasoned that if the appellants' interpretation were accepted, it would render Rule 145 unworkable, as the liability to remove the goods would fall on M/s. M. James Canterbury & Co., who were neither in possession of the goods nor the owners of the godown.Further, the court noted that the appellants had obtained permission under Rule 152 and a permit under Rule 153 to move the goods, which is permissible only for 'owners' of the goods. This reinforced the conclusion that the term 'owner' in these rules includes persons with partial interest, such as pledgees.The court also examined Rules 140, 142, and 143, which involve the licensee's obligations and rights concerning the goods in the warehouse. The court concluded that the word 'owner' in these rules refers to any person in possession of the goods with a partial interest, thus including the appellants.In summary, the court determined that the term 'owner' as used in the Central Excise Rules includes persons having either whole or partial interest in the goods, thereby making the appellants liable to pay the excise duty under Rule 160.2. Applicability of Article 226 of the Constitution of India:The second issue concerned whether Article 226 of the Constitution of India could be invoked by the appellants, given that the liability arose before the Constitution came into force. The learned Advocate General argued that the liability arose between December 27, 1949, and December 30, 1949, and thus, Article 226 could not be applied retrospectively. Additionally, it was argued that the original jurisdiction of the court in revenue matters was excluded by Section 226 of the Government of India Act, 1935.The court examined the facts and noted that while the original demand notices were served in December 1949, the appellants continued to pursue remedies under the Central Excise Act and Rules. The final notice of demand was served on August 29, 1950, after the Constitution had come into force. This notice indicated that the Central Board of Revenue had ordered the realization of dues through certificate action under Section 11 of the Central Excises and Salt Act, 1944.Given that the final demand notice was served after the Constitution came into force, the court concluded that Article 226 was applicable to the case. Therefore, the second point raised by the learned Advocate General was not accepted.Conclusion:The appeal was dismissed, and the court upheld the liability of the appellants to pay the excise duty under Rule 160 of the Central Excise Rules, 1944. The court also affirmed the applicability of Article 226 of the Constitution to the case, given the timeline of events. However, no order as to costs was made, considering the special circumstances of the case.