Madras High Court
Parker And Co. vs Union Of Indias (Uoi) And Ors. on 1 January, 1800
Equivalent citations: 1977(1)ELT22(MAD)
JUDGMENT Ramanujam, J.
1. The petitioners in both these cases are two firms manufacturing French Polish under a licence issued under the Madras Denatured spirit (Methyl) Alcohol and Varnish (French Polish) Rules, 1959. They have been served with demands for payment of basic excise duty as well as special excise duty amounting to Rs. 3,736.44 and Rs. 4,773.12 for the period 6-7-1963 to 26-6-1966 respectively by the Range Officer, Kanchipurm. The petitioners approached the Assistant Collector of Central Excise questioning those demands and the Assistant Collector confirmed the assessments by his orders dated 4-7-1970 and 18-8-1970 respectively, on the ground that the concession of payment of duty at nil rate for the first 50 kilo litres will not be available to the petitioners because they did not satisfy the condition prescribed by the Central Excise Notification No. 137/60-CE, dated 1-10-1960 as amended by Notification No. 109/63, dated 6-7-1963 in that one of the partners in both the firms had a proprietory interest in another concern producing French Polish, and that French Polish is an item coming under the entry 'Varnish' in Item 14 (ii) of Schedule I to the Central Excises and Salt Act, 1944.
2. It is not in dispute that the petitioners were manufacturing French Polish for a long time and till the year 1965 they neither took out a licence to manufacture French Polish under the Central Excise and Salt Act, 1944 nor did they pay any duty of excise on their manufacture. Only in the year 1965 the Excise authorities informed the petitioners that they are to take out licences under the Central Excises and Salt Act for the manufacture of French Polish which comes under the entry 'Varnish' in Schedule I, and it is only thereafter the petitioners applied for a licence on 22-2-1965 and a licences had been issued to them on 23-4-1965. The departmental authorities were of the view that French Polish could not be manufactured without a licence after 1-1-1963 and therefore the manufacture and clearance of French Polish without a licence from 1-1-1963 was compounded on payment of Rs. 10/- by the Superintendent of Central Excise by his order dated 7-2-1969. After the petitioners took out licences as desired by the authorities, demands referred to above had been issued against the petitioners on 20-12-1966 and 31-3-1967 respectively for the period 6-7-1963 to 26-6-1966.
3. These demands are attacked on various grounds. Firstly it is contended that the demands had been issued under Rule 10A of the Central Excise Rules which is ultra vires. Secondly it is contended that the demands cannot also be brought under Rule 9 (2) as suggested by the respondents. Thirdly it is contended that the Notification Nos. 137/60-CE, dated 1-10-1960 and 109 of 1963, dated 6-7-1963 have not been properly construed by the Excise Authorities and that on a proper interpretation of the two notifications, the benefit of exemption conferred by the first notification before its amendment could not be legally taken away by invoking the amended notification.
4. As regards the first contention that Rule 10A has no statutory backing and as such is ultra vires and that, therefore, the demand issued under Rule 10A should be beld to be invalid, it is pointed out that a similar provision under Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 have been held to be ultra vires by a Bench of this Court in W. P. Nos. 1053 of 1968 etc. W.P. No. 1053/68 Citadel Pharmaceuticals, Madras v. D.R.O. Chingleput and 2 others, and that the principle of that decisions will apply with equal force to Rule 10A as well. The learned Central Government Standing Counsel does not dispute the position that the principle of the above decision will equally apply to Rule 10A. He, therefore, states that he will not be able to sustain the demands impugned in these writ petitions under Rule 10A in view of the decision in W.P. No. 1053 of 1968 etc. W.P. No. 1053/68-Citadel Pharmaceuticals, Madras v. D.R.O. Chingleput and 2 others, but that he would sustain the same under Rule 9(2).
5. Therefore, we have to see whether the demands could be sustained under Rule 9(2). While considering this aspect. we have held in Writ Petition Nos. 265 and 266 of 1967. W.P. Nos. 265 and 266/1967--Murugan and Co. v. Deputy Collector of Central Excise, Tiruchi and S.P. Thiruvadi and Co. v. Inspector of Central Excise, Cuddalore, that Rule 9(2) can be invoked only in a case where there has been an anterior levy of the goods manufactured by the Central Excise authorities, prescribing the mode and manner, the place for payment of the excise duty as contemplated in Rule 9(1) for clearance of the goods, and that will not apply to a case where the levy is sought to be made for the first time and that Rule 9(2) can be applied only for a clandestine removal of the excisable goods in contravention of Rule 9(1). In view of that decision we have to hold that the demands in these cases purport to have been issued under Rule 10A cannot also be sustained under Rule 9(2). It is not the case of the department that the demands could be sustained under any other statutory provision. Obviously Rule 9(2) cannot be applied as there is no levy before. Therefore, the demands in question have to be quashed on that short ground. In that view it is not necessary to go into the other contentions raised by the petitioners relating to the scope of the two notifications referred to above. The Writ Petitions are, therefore, allowed and the demands in question quashed. There will however be no order as to costs.