Excise recovery by unilateral debit entries is impermissible, but inter-factory adjustment of company balances was upheld.

Section 11 of the Central Excise and Salt Act, 1944 did not authorise the Superintendent to make unilateral debit entries in the assessee's account-current; the statutory scheme required assessment under the rules and recovery only through the prescribed machinery, so the debit entries were quashed. The manufacturer-company's different factories were not separate legal persons for excise liability, so balances maintained across its units could be adjusted against the demand relating to the Chemical Factory; that adjustment was upheld. The writ therefore succeeded only on the issue of unauthorised debit entries, while recovery in accordance with law remained open.

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Issues: (i) Whether the Superintendent of Central Excise could himself make debit entries in the assessee's accounts in exercise of power under Section 11 of the Central Excise and Salt Act, 1944; (ii) Whether the demand relating to the Chemical Factory could be realised by adjustment against the balances in the accounts of the other factories.

Issue (i): Whether the Superintendent of Central Excise could himself make debit entries in the assessee's accounts in exercise of power under Section 11 of the Central Excise and Salt Act, 1944.

Analysis: The statutory scheme under Chapter VII-A required the assessee to determine duty provisionally, maintain an account-current, and then make the debit or credit entry after the proper officer completed assessment under Rule 173-I. Section 11 authorised recovery by deduction from money owing to the assessee or by attachment and sale, but it did not authorise the officer to enter debits unilaterally in the assessee's account-current. The lawful course was to inform the assessee of the amount recoverable and proceed under the recovery machinery provided by law if the assessee failed to comply.

Conclusion: The power to make the debit entries was not vested in the Superintendent; this issue was decided in favour of the assessee.

Issue (ii): Whether the demand relating to the Chemical Factory could be realised by adjustment against the balances in the accounts of the other factories.

Analysis: The manufacturer-company was the real assessee and its various factories were not separate legal entities for excise liability. The liability for duty was that of the company as a whole, and the existence of separate licences for different factories did not create separate assessees. Accordingly, the department could treat the balances maintained by the company across its units as available for recovery of the dues.

Conclusion: Adjustment against the balances of the other factories was permissible; this issue was decided against the assessee.

Final Conclusion: The writ application succeeded to the extent that the unilateral debit entries were quashed, while the department was left free to proceed according to law for recovery of the duty in the light of the final position in the pending appeals.

Ratio Decidendi: Where the excise rules require the assessee to make the debit entry after final assessment, the recovery officer cannot substitute that statutory mechanism by unilaterally debiting the assessee's account-current; recovery must follow the mode expressly authorised by the governing statute and rules.

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