Gujarat High Court
Sohil Raj Industries A Partnership Firm vs Shri K.R. Bhatia, Assistant Collector, ... on 1 January, 1800
Equivalent citations: 1973CENCUSVI
JUDGMENT Bhagawti, C.J.
1. These two petitions are based practically on identical facts save and except as to dates and amounts and the question of Law arising in the two petitions is also same and it will, therefore, be convenient to dispose them of by a common judgment. Since the facts giving rise to the two petitions are almost identical, it would be sufficient if we state the facts of only one petition namely, Special Civil Application No. 1214 of 1965 which was argued as the main petition
2. The petitioners carry on business as manufacturers of processed groundnut oil which is vegetable non-essential oil specified as Item No. 12 in the First Schedule of the Central Excise and Salt Act, 1944; The Central Government by a notification dated 1st March 1963 exempted inter alia all sorts of vegetable non-essential oils other than processed vegetable non-essential oils from the whole of the excise duty leviable on them. The result was that with effect from 1st March 1953 raw vegetable non-essential oil became exempt from excise duty. Now it appears that prior to 1st March 196 3 ad hoc rebate of excise duty at the rate of Rs. 108 28 paise per metric ton was being granted on export of raw or processed vegetable non-essential oil out of India. The actual notification under which this ad hoc rebate was granted has not been produced before us but obviously it had been issued by the Central Government under Rule 12 of the Central Excise Rules, 1944, When raw vegetable non-essential oils became exempt from duty with effect from 1st March 1963, a Trade Notice dated 4th March 1963 was issued by the Collector of Central Excise, Baroda, stating that the existing provisions "for, granting ad hoc rebate on the export of vegetable non essential oils shall coutinue for the present except that in cases where unprocessed oil is exported directly from a factory, rebate should be allowed only if it is from duty paid stocks". This was followed by another Trade Notice dated 26th April, 1963 issued by the Collector of Central Excise, Baroda. The Collector of Central Excise pointed out in this Trade Notice:
The Government of India have also ordered that in respect of processed V.N.E oils exported up to the 15th May, 1963, a rebate of full duty actually paid on processed oil subsequent to 1.3 63 should be allowed in addition to an hoc rebate on the assumption that the raw oil used in the manufacture of the processed oil was duty paid. However, this additional rebate of the duty on processed oil shall be allowed only if the fact of payment of duty on processed is fully established.... On and from the 16th May 1963, the system of granting ad hoc rebate shall be discontinued and the rebate shall be limited to the duty proved to have been actually paid on processed V.N.E. oils or V.P. as the case may be.
3. Similar Trade Notices dated 23rd April 1963 and 27th June 1963 were also issued by the Collector of Central Excise, Bombay. What was the net effect of these Trade Notices is a matter to which we shall presently advert but it is sufficient to state for the present that not only was full rebate of the actual excise duty paid on processed vegetable non-essential oil processed subsequent to 1st March 1963 allowed if such processed vegetable non-essential oil was exported between 1st March 1963 and 15th May 1963 but ad hoc rebate of excise duty at the rate of Rs. 108.28 per metric ton was also granted on the assumption that the excise duty must have been paid on the raw vegetable non-essential oil. So far as the excise duty levied on processed vegetable non-essential oil was concerned, full rebate of it was allowed only if it was established to the satisfaction of the excise authorities that it was actually paid but in respect of raw vegetable non-essential oil used in the manufacture of the processed vegetable non-essential oil, the manufacturer was not required to establish that excise duty was paid on it but on the assumption that excise duty must have been paid on it, ad hoc rebate of excise duty at the rate of Rs. 108.20 ps. per metric tonne was granted. This provision was obviously intended to promote export of processed vegetable non-essential oils.
4. The petitioners on the basis of these trade notices exported 743.815 metric tons of processed groundnut oil by five shipments on different dates between 6th March 1963 and 14th May 1963. The entire stock of 743.815 metric tons of processed groundnut oil was not; processed by the petitioners subsequent to 1st March 1963 but out of it, 44.340 metric tons of processed groundnut oil came from the stock which was processed groundnut oil came from the stock which was processed earlier and only the balance of 699.475 metric tons was processed subsequent to 1st March 1963. The raw groundnut oil utilised by the petitioners in manufacturering this quantity of 743.815 metric tons of procesaed groundnut oil also came from two sources : 114.442 metric tons of raw groundnut oil was manufactured by the petitioners subsequent to 1st March 1963 while the remaining quantity of raw groundnut oil was purchased by the petitioners from the market through commission agents. The petitioners, on completion of the export of each consgnment, made application to the Assistant Collector of Excise for ad hoc rebate at the rate of Rs. 108 28 per metric ton as also for full rebate of actual excise duty paid on processed groundnut oil manufactured subsequent to 1st March 1963. The claim for ad hoc rebate was for Rs. 80,541.05 ps. at the rate of Rs. 108.28 ps. per metric ton on the entire quantity of 743.815 metric tons of processed groundnut oil exported by the petitioners while the claim for full rebate of the actual exciseduty paid was for Rs. 77,117.12 ps. in respect of 699.473 metric tons of processed groundnut oil manufactured subsequent to 1st March 1963. Both the claims were granted by the Assistant Collector of Customs and the amounts claimed were paid by the excise authorities to the petitioners. The last payment in respect of the claim for ad hoc rebate was made to the petitioners on 12th July, 1963.
5. Now it appears that the Assistant Collector of Customs entertained some doubts as to whether the claim for ad hoc rebate had been righty granted by the him. He, therefore, addressed a letter dated 19th September, 1963 to the petitioners inquiring whether the raw groundnut oil used in the manufacture of processed groundnut oil exported by the petitioners after 1st March 1963 was produced before 1st March, 1963 or after 1st March 1963 and what was the source from which the processed groundnut oil was purchased by the petitioners. The petitioners by their letter in reply dated 5th October 1963 pointed out to the Assistant Collector of Customs that the petitioners had exported 743.815 metric tons of processed groundnut oil on 1st March 1963 and that raw groundnut oil used in the manufacture of this quantity of processed groundnut oil was partly, to the extent of 114.443 metric tons, manufactured in the petitioners' oil mill subsequent to 1st March 1963 and as to the remaining quantity, was purchased by the petitioners from various other oil mills through their comission agents. On receiving this information from the petitioners, the Assistant Collector of Customs came to the conclusion that the ad hoc rebate of Rs. 108-28 per metric ton was wrongly granted to the petitioners in respect of 114-448 metric tons of raw groundnut oil manufactured by the petitioners subsequent to 1st March 1963 and used in the manufacture of processed groundnut oil exported between 4th March 1963 and 14th May, 1963. The Assistant Collector of Customs, therefore, issued a notice dated 12th June, 1964 under Rule 10-A of the Central Excise, Rules, 1944, and by this notice the Assistant Collector of Customs pointed out to the petitioners that "out of the quantity of the refined groundnut oil exported during the period from 1st March 1963 to 15th May, 1963 by Sohilraj Industries, Bhavnagar, a quantity of 114 448 M. Tonnes of raw groundnut oil used in the manufacture of the refind groundnut oil exported was the non-duty paid quantity manufactured in its own oil Mills by Sohilraj Industries after 1st March 1963 and "as such duty at the rate of Rs. 108 28 per metric tonne amounting to Rs. 12,392-43 has become due to be recovered from M/s Sohilraj Industries, Bhavnagar" and accordingly demanded payment of the sum of Rs. 12,392-43 from the petitioners. The petitioners contested the validity of the demand made in the notice but the Assistant Collector was not impressed by the contentions of the petitioners and he proceeded to recover the sum of Rs. 12,392-43 ps. by adjusting it against the amount due to Messers Hindustan Lever Limited at the request of the petitioners and with the consent of Messers. Hindustan Lever Limited. The petitioners thereupon preferred Special Civil Application No. 1214 of 1965 challenging the validity of the notice of demand as also claiming refund of the sum of Rs. 12,392-43 ps. recovered by the Excise Department.
6. The main ground on which the validity of the impugned notice was challenged on behalf of the petitioners was that the Assistant Collector was not entitled to recover the sum of Rs. 12,392-43 from the petitioners by an executive fiat by issuing a notice of demand; there was no provision in the Act or in the Rules which authorised the Assistant Collector to issue the impugned notice of demand. The petitioners contended that the demand was made against them under the impugned notice was not covered either by Rule 10 or by Rule 10A and in any event it was Rule 10 which applied and not Rule 10-A. If Rule 10 applied, then obviously, said the petitioners, the impugned notice was time-barred since it was issued more than three months after the date when the ad hoc rebate was granted to the petitioners. The impugned notice of demand was, therefore, without authority and void. The respondents could not dispute that if the impugned notice was to be justified by reference to Rule 10, it would be impossible to sustain it since it was clearly time-barred and, therefore, the attempt made by the resdondent was to get out of Rule 10 and to bring the case under Rule 10-A. The argument of the respondents was that the demand made under the impugned notice was not governed by Rule 10 and it, therefore, fell within the residuary Rule 10-A.
7. The first question which arises for consideration on these rival contentions is whether the demand made in the impugned notice falls within Rule 10, for, if it falls within Rule 10, Rule 10-A which is a residuary Rule would be excluded and in that event the demand being admittedly time-barred, the impugned notice would be without authority and void. But Rule 10 has obviously no application; it permits a demand to be made only in certain specified circumstances none of which exists in the present case. Here the sum of Rs. 12,392.43 is not demanded by the Assistant Collector as deficiency in duty on account of short levy. The claim of the Department in the present case is based on the following argument. The respondents say that the ad hoc rebate at the rate of Rs. 108 28 per metric ton granted by the Central Government was ad hoc rebate of excise duty and it could, therefore, be claimed by a manufacturer only in respect of raw vegetable non-essential oil on which excise duty was leviable and paid. It is no doubt true that the trade notices to which we have referred earlier, ad hoc rebate at the rate of Rs. 108.28 per metric ton was granted on the assumption that the raw vegetable non-essential oil utilized in the manufacture of processed vegetable non-essential oil exported between 1st March 1963 and 15th May 1963 was duty paid but that assumption merely dispensed with the necessity of establishing that excise duty was paid on such raw vegetable non-essential oil. So far as full rebate of excise duty paid on processed vegetable non-essential oil exported between 1st March. 1963 and 15th May 1963 was concerned, the Central Government insisted that proof of actual payment of excise duty must be furnished and the Excise Authorities must be satisfied that the excise duty of which full rebate was claimed was actually paid by the manufacturer. But so far as the raw vegetable oil used in the manufacture of the processed vegetable non-essential oil was concerned, the Central Government did not insist on proof of actual payment of excise duty on such raw vegetable non-essential oil as a condition of granting ad hoc rebate of excise duty but was prepared to assume that excise duty must have been paid and on that assumption granted ad hoc rebate at the rate of Rs. 108.28 per metric ton. Now the case of the respondents was that so far as 114.448 metric tons of raw groundnut oil manufactured by the petitioners in their mill subsequent to 1st March 1963 and there could, therefore, be no question of granting ad hoc rebate in respect of that quantity of raw groundnut oil. ad hoc rebate at the rate of Rs. 108.28 per metric ton was rebate of excise duty and consequently if no excise duty was leviable in respect of 114.448 metric tons of raw groundnut oil, no ad hoc rebate at the rate of Rs. 108.28 per metric ton could possibly be granted in respect of the same. The ad hoc rebate in respect of 114.448 metric tons of raw groundnut oil at the rate of Rs. 108.28 per metric ton amounting to Rs. 12,392.43 ps. was, therefore, erroneously granted by the Assistant Collector of Customs to the petitioners and the petitioners were liable to refund the same to the Excise Department. This was the basis of the claim made by the respondents and obviously it could not fall within Rule 10. Rule 10 applies in two classes of cases; one, where excise duty has been short levied on account of any of the cause specified in that Rule and the other, where excise duty "after having been levied has been owing to any such cause erroneously refunded". The present case does not belong to either of these two classes of cases. Here there is no question of short levy of excise duty. As a matter of fact, raw groundnut oil was exempted from excise-duty and no excise duty was leviable on it. There is also no question of excise duty being erroneously refunded after having been levied. What is refunded here is not excise duty after having been levied but an amount by way of ad hoc rebate even though no excise duty was leviable on raw groundnut oil and was in fact not levied on it. Rule 10 has, therefore, no application.
8. The question then arises whether the demand can be justified under Rule 10-A. Rule 10-A is a residuary Rule but it applies only where what is sought to be collected is duty or deficiency in duty arising by reason of short levy or "any other sum of any kind payable to the Central Government under the Act or the Rules". Now obviously the sum of Rs. 12,392.43 which is sought to be recovered by the Assistant Collector is not duty nor is it deficiency in duty arising by reason of short levy. Is it then "any other sum of any kind payable to the Central Government under the Act or the Rules" ? When an amount by way of ad hoc rebate is erroneously granted by the Assistant Collector though it is not due to the manufacturer can such amount be regarded as a sum payable to the Central Government under the Act or the Rules? Is there any provision in the Act or the Rules ? Is there any provision in the Act or the Rules which says that in such a case the amount erroneously refunded shall be payable to the Central Government? There is admittedly no such provision in the Act or the Rules. The amount of ad hoc rebate erroneously paid to the manufacturer would certainly be recoverable by the Central Government as moneys paid and received or moneys paid without consideration, but there is nothing in the Act or the Rules which requires that such amount should be returned by the manufacturer to the Central Government. It is therefore, not possible to say that the sum of Rs. 12,392.43 being the amount of ad hoc rebate erroneously granted by the Assistant Collector of Customs in respect of 114.443 metric tons of raw groundnut oil was a sum payable to the Central Government under the Act or the Rules, if that be so, Rule 10-A can have no application and the impugned notice of demand cannot be justified under that Rule.
9. It is, therefore, apparent that neither Rule 10 or Rule 10-A applies in the present case and the impugned notice cannot be supported under either of these two Rules. No other Rule was relied upon by the respondents justifying the issue of the impugned notice and, therefore, in the absence of any statutory provision, entitling the Excise authorities to recover the amount of ad hoc rebate erroneously given to the petitioners by issuing a mere notice of demand, the impugned notice to recover the sum of Rs. 12,392 43 from the petitioners by an executive fiat without recourse to a Court of law must be held to be without authority and void. If the excise authorities have a legitimate claim for recovery of this amount either as moneys paid and received or as moneys paid without consideration, it would be open to them to take appropriate action in a Court of Law. But with that we are not concerned. The only question before us is whether the excise authorities can recover this amount by issuing a notice of demand. The question must obviously be answered against the excise authorities.
10. We, therefore, allow Special Civil Application No. 1214/ of 1965 and make the Rule absolute by issuing a writ of mandamus quashing and setting aside the impugned notice dated 12th June 1964 issued by the Assistant Collector of Customs and direct the respondents to refund to the petitioners forthwith the sum of Rs. 12,392-43 recovered by them pursuant to the impugned notice. So far as Special Civil Application No. 968 of 1965 is concerned, the facts giving rise to that petition are, as already pointed out above, identical with the facts of Special Civil Application No. 1214 of 1965 and, therefore, for the same reasons, we also allow special Civil Application No: 968 of 1965 and make the Rule absolute by issuing a writ of mandamus quashing and setting aside the impugned notice dated 12th June 1964 issued by the Assistant Collector of Customs. There is no question of refund of any amount by the respondents in this petition since the amount mentioned in the impugned notice has not been recovered by the respondents The respondents in each petition will pay the costs of the petition to the petitioners.