TaxTMI 
TaxTMI 
1985 (2) TMI 251
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....s used in any dyeing process' were added as Item 14D in the First Schedule to the Central Excise and Salt Act, 1944 (hereinafter referred to as `the Act' with effect from March 1, 1961 and consequently the respondent became liable to pay excise duty imposed by the Act on two of its products known as cibagenes and cibanogenes which were being manufactured by it by virtue of section 3 of the Act which provided that excise duty prescribed by the Act was leviable on all excisable goods specified in the First Schedule to the Act. Item 14D in the First Schedule during the relevant period read thus: "14D, Synthetic organic dyestuffs (including pigment dye stuffs) and synthetic organic derivatives used in any dyeing Thirty per cent process. ad valorem. But on November 23, 1961, the Central Government issued a notification under Rule 8(1) of the Central Excise Rules, 1944 (hereinafter referred to as 'the Rules') exempting the dyes specified in the Schedule annexed thereto from the whole of the excise duty leviable thereon if and only if such dyes had been manufactured from any other dye on which excise dut....
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....larly we propose to purchase some quantity of imported fast colour bases from the open market. We will present the materials thus purchased to you for the recovery of excise duty @15%. We have now to request you to advise your Inspector at ATUL to accept the excise duty on the fast colour Bases, which we will purchase either from the local manufacturer or from the open market. Thanking you in meanwhile, we remain. Yours faithfully, for the ATUL PRODUCTS LTD. (S. K Soman)" The Superintendent of Central Excise, Bulsar Division, Bulsar sent a reply dated January 4/6, 1962 to the above letter stating that there was no objection to the payment of excise duty on fast colour bases purchased by the respondent and that if evidence of payment of excise duty on fast colour bases was produced the dyes manufactured by using those fast colour bases would not be liable to duty under the notification referred to above. He also instructed the Deputy Superintendent of Central Excise to receive duty on such fast colour bases which went into the production of cibagenes or cibanogenes (processed dyes) by the respondent. The respondent accordingly paid the duty and was exempted ....
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....22 for the recovery of duty as a result of the assessment of the final processed dyes; because the processed dyes were not eligible for exemption from duty only on the ground that the duty was voluntarily paid on the basic dyes which were in stock/purchased from the market as on 28-2-61 when such payment of duty on the stock of basic dyes as on 28-2- 61 was not warranted. 3. M/s. Atul Products Ltd. Atul have represented this dispute vide their letter No. SL/437/9581 dated 25-3-64 against Demand No. 10175 dated 6-1-64. 4.M /s.Atul Products Ltd. Atul should show cause to the undersigned as to way the demand referred to above issued by the Deputy Superintendent,Central Excise,Atul should not be confirmed. 5. Atul Products Ltd. Atul are further directed to produce at the time of showing cause all the evidence upon which they intend to rely in support of their defence. 6 M/s. Atul Products Ltd. Atul should also indicate in the written explanation whether they wish to be heard in person before the assessment dispute is finalised. 7. If no cause is shown against the action proposed to be taken within ten days of the receipt of this notice or they do not appear before the un....
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....dent was entitled to the exemption under the notification in respect of the goods manufactured by it as excise duty had been paid on the dyes used in the manufacture of the said goods. The High Court, therefore, allowed the writ petition quashing the orders of the Assistant Collector and the notices of demand impugned in the writ petition and directing the excise authorities not to recover the sums mentioned therein by its judgment dated July 9/10, 1969. This appeal is filed by the Union of India against the Judgment of the High Court. The two principal questions which arise for consideration before us in this appeal are: (i) whether the respondent was entitled to the benefit of the exemption notification dated November 23, 1961 when the dyes said to have been used by the respondent in the manufacture of other dyes were not liable for payment of excise duty when they were manufactured, that is, before the introduction of Item 14D into the First Schedule to the Act even though duty may have been paid on them after the introduction of item 14D and (ii) whether the demands made in this case fall within the scope of Rule 10-A of the Rules or under Rule 10 thereof. It is not dispu....
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....957). But it, however, contained a proviso that in the case of any class of such goods in respect of which additional duties are leviable by the Central Government under clause 3 of the Additional Duties of Excise (Levy and Distribution) Bill, 1957 read with Section 4 of the Provisional Collection of Taxes Act, 1931 (Central Act XVI of 1931) the exemption would be subject to the dealer proving to the satisfaction of the assessing authority that additional duties of excise had been so levied and collected on such goods by the Central Government. In the above said case certain dealers who had sold textile goods which were not subject to additional duties of excise claimed that they were entitled to the exemption even though they had not paid such additional excise duty. The State Government pleaded that the dealers would be entitled to claim exemption if and only if such additional excise duty had been levied and collected and since the goods in question were not liable to such additional excise duty, they were not entitled to claim the exemption. This Court rejected the contention of the State Government and held that on a plain reading of the notification relied on in that case all....
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....se of the respondent that it would not have manufactured the dyes but for the advice given by the Department. On the other hand it is obvious that the respondent had before it the exemption notification which alone could be the basis for its actions. The Department was not also expected to tender legal advice to the respondent on a matter of this nature. After giving our earnest consideration to the case before us we are of the view that under the notification exemption could be claimed only where the dyes used in the manufacture of other dyes were liable to, payment of excise duty when they were manufactured and such duty had been paid. A voluntary payment of excise duty on dyes which were not liable for such payment would not earn any exemption under the notification. The finding re p73 corded by the High Court on the above question is, therefore, liable to be set aside. The next question relates to the appropriate provision of law under which action could have been taken in this case by the Central Excise authorities. This question was not decided by the High Court in view of its finding on the liability of the respondent to pay excise duty on the products manufactured by it.....
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.... which the duty or charge was paid or adjusted in the owners account-current or from the date of making the refund, Rule 10-A did not contain any such period of limitation. The scope of these two Rules has been considered by this Court in two decisions i.e. N. B. Sanjana. Assistant Collector Of Central Excise, Bombay & Ors. v. Elphinstone Spinning & Weaving Mills Co. Ltd. ([1971] 3 S.C.R. 506) and Assistant Collector of Central Excise, CALCUTTA Division v. National Tobacco Co. Of India Ltd.([1973] I S.C.R. 822) In addition to the above two points of distinction between Rule 10 and 10-A of the Rules, this Court further held in Sanjana's case (supra) following the decision in Gursahai Saigal v. Commissioner of Income-tax, Punjab([1963] 3 S.C.R. 893) that in calculating the period of limitation, the expression 'paid' in Rule 10 should not be literally construed as 'actually paid' but as 'ought to have been paid' in order to prevent a person, who had not paid any excise duty at all which he should have paid from escaping, from the net of Rule 10 of the Rules. In National Tobacco Co' s. case (supra) this Court observed at pages 836-837 thus: Rules 10 and ....
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....nderstood in law; took place at all. On the other hand, Rule 10A indicates that there are residuary powers of making a demand in special circumstances not foreseen by the framers of the Act or the rules. If the assessee disputes the correctness of the demand an assessment becomes necessary to protect the interests of the assessee. A case like the one before us falls more properly within the residuary class of unforeseen cases. We think that, from the provisions of section 4 of the Act read with Rule 10A, an implied power to carry out or complete an assessment, not specifically provided for by the rules, can be inferred." In the instant case there has been no assessment of the manufactured goods at all as contemplated by Rule 52 of the Rules and the delivery of the goods has taken place contrary to Rule 52-A of the Rules. Rule 52 and Rule 52-A as they stood at the relevant period are set out below:- "52. Clearance on payment duty- When the manufacturer desires to remove goods on A payment of duty, either from the place or a premises specified under rule 9 or from a store-room or other place of storage approved by the Collector under rule 47, he shall make application in triplicat....