KERALA HIGH COURT

                                          Kerala Polythene Industries

                                                         Vs

                               Superintendent of Central Excise Trivandrum

                                            (P.Subramonian Poti,J. )

                                                   07.01.1976

                                                 JUDGEMENT

P.Subramonian Poti,J.

( 1. ) THE petitioner before us is a firm engaged in the business of manufacture of Polythene Lay
Flat Tubings. By Notification No. 59/64 issued by the Central Government Polythene Lay Flat
Tubings were exempted from levy of excise duty with effect from Ist March 1964. THE said
exemption was subsequently withdrawn by a Notification No. 101/70, dated 1st May 1970 issued
by the Government of India is the Ministry of Finance. Shortly thereafter, the product
aforementioned was again exempted from payment of excise duty by another Notification dated
17th July 1970. THE resultant position was that during the intervening period between 1st May
1970 and 17th july 1970 Polythene Lay Flat Tubings were assessable to duty under tariff item i5a
(2 ). apparently because of ignorance regarding the withdrawal of the exemption as per the
Notification dated 1st May 1970 the petitioner-firm which was enjoying the facility of self
removal procedure had not credited to the department the excise duty payable in respect of the
Polythene Lay Flat Tubings removed from their factory during the period from 1st May 1970 to
16th July 1970. When this fact came to the notice of the Superintendent of Central excise,
Trivandrum (first respondent), he issued a notice to the petitioner as per Ext. P-1 dated 26th
March 1971 stating that the quantity of polythene sheets to the value of Rs. 38. 044. 75 cleared
from the petitioner's factory without payment of duty during the period from 1st May 1970 to
16th July 1970 was liable to be charged Basic Duty at the rate of 25 percent ad valorem and also
special Excise Duty at the rate of 20 per cent of the Basic Duty and calling upon the petitioner to
show cause why action should not be taken under R. 10a of the Central Excise Rules for the levy
and collection of the said duty from the petitioner. In reply to Ext. P-1 the petitioner submitted a
detailed representation dated 30th April 1971. Ext. P-2 is a copy of the said representation. After
considering the points raised in Ext. P-2 the Assistant collector of Central Excise, Trivandrum
(second respondent) passed the order ext. P-3 dated 20th August 1971 ordering that the petitioner
should pay the duty of Rs. 11,413 45 in respect of the quantity of Polythene Lay Flat Tubings
cleared from the petitioner's factory from 1st May 1970 to 16th July 1970 as mentioned in the
show cause notice.

( 2. ) AGAINST the Order Ext. P-3 an appeal was preferred by the petitioner before the
Collector of Customs and Central Excise, Cochin. Ext. P-4 is a copy of that appeal petition. That
appeal was disposed of by the appellate Collector of Central Excise, Madras (third respondent)
by the order ext P-5 dated 7th August 1972 whereby he confirmed the action taken by the
assistant Collector under R. 10a for the levy and collection of the duty legally payable on the
Polythene Lay Flat Tubings cleared from the petitioner's factory during the period when the
commodity was not exempt from payment of duty. Though the petitioner preferred a revision
petition to the Government of India that was dismissed by the Central Government as per order
Ext. P-7 dated 31st march 1973 After the rejection of the petitioner's revision petition by the
government of India, the first respondent issued to the petitioner the communication Ext. P-8
dated 5th July 1973 demanding payment of the duty in question within 10 days of the receipt of
the said order. This writ petition has been brought by the petitioner seeking to quash Exts. P-1, P-
3, P-5, P-7 and P-8. The main contention urged before us by the learned advocate for the
petitioner is that R. 10a of the Central Excise Rules is ultra vires and void. R. 10a is in the
following terms: 10a. Residuary powers for recovery of sums due to government. Where these
Rules do not make any specific provisions for the collection of any duty, or of any deficiency in
duty if the duty has for any reason been short levied, or of any other sum of any kind payable to
the central Government under the Act or these Rules, such duty, deficiency in duty or sum shall,
on a written demand made by the proper officer, be paid to such person and at such lime and
place, as the proper officer may specify. "It is argued on behalf of the petitioner that there is no
provision in the Central Excise and Salt Act (1 of 1944) conferring power on the Central
Government to frame such a rule. In support of this contention strong reliance was placed by the
petitioner's counsel on two rulings of the madras High Court reported in Agarwal Brothers versus
Union of India (1972) II mlj 476 and Citadel Fine Pharmaceuticals Pvt. Ltd versus District
Revenue officer (1973) I MLJ. 99. The latter case though reported only later was the one decided
earlier. The point which arose for decision in Citadel Fine pharmaceuticals Pvt Ltd. v. District
Revenue Officer1 concerned the validity of R. 12 of the Rules framed under the Medicinal and
Toilet preparations (Excise Duties) Act (XVI of 1955) which is a provision substantially
corresponding to R. 10a of the Central Excise Rules. The learned judges held that since the
parent enactment, namely the Medicinal and Toilet preparations (Excise Duties) Act was silent
on the question of levy of duty on escaped turnover, R. 12 in so far as it made a provision for
assessing the escaped turnover was invalid since the charging power under S. 3 of the Act could
not be extended by a rule. Even though R. 12 of the Medicinal and Toilet preparations (Excise
Duties) Rules, 956 is a provision in pari materia with r. 10a of the Central Excise Rules there is
marked difference in language, scope and content between S. 3 of the Medicinal and Toilet
Preparations (Excise duties) Act (Act XVI of 1955) and S. 3 of the Central Excise and Salt Act.
To appreciate this it is necessary to read the two sections S. 3 of the Medicinal and Toilet
Preparations (Excise Duties) Act is in the following terms: 3. "duties of Excise to be levied and
collected on certain goods.- (I) There shall be levied duties of excise, at the rates specified in the
Schedule, on all dutiable goods manufactured in India. (2) The duties aforesaid shall be leviable:
(a) Where the dutiable goods are manufactured in bond, in the state in which such goods are
released from a bonded-warehouse for home consumption, whether such state is the state of
manufacture or not; (b) Where the dutiable goods are not manufactured in bond, in the state in
which such goods are manufactured. (3) Subject to the other provisions contained in this act, the
duties aforesaid shall be collected in such manner as may be prescribed. Explanation Dutiable
goods are said to be manufactured in bond within the meaning of this section if they are allowed
to be manufactured without payment of any duty of excise leviable under any law for the time
being in force in respect of alcohol, opium, Indian hemp or other narcotic drug or narcotic which
is to be used as an ingredient in the manufacture of such goods. " S. 3 of the Central Excise and
Salt Act reads: "3. (1) There shall be levied and collected in such manner as may be prescribed
duties of excise on all excisable goods other than salt which are produced or manufactured in
India and a duly on salt manufactured in, or imported by land into, any part of India as, and at the
rate, set forth in the First Schedule. (1a) The provisions of sub-section (1) shall apply in respect
of all excisable goods other than salt which are produced or manufactured in India by, or on
behalf of Government, as they apply in respect of goods which are not produced or manufactured
by Government. (2) The Central Government may, by notification in the official Gazette, fix, for
the purpose of levying the said duties, tariff values of any article enumerated either specifically
or under general headings, in the First Schedule as chargeable with duty advalorem and may alter
any tariff values for the time being in force. (3) Different tariff values may be fixed for different
classes or descriptions of the same article " A comparative study of the two provisions reveals
that there is a fundamental difference in their policy and scheme Under S. 3 of the medicinal and
Toilet Preparations (Excise Duties) Act only the manner of collection of the duties is left to be
prescribed by the rules and the levy of duty is to be made at the rates specified in the Schedule to
the Act. In enacting S. 3 of the Central Excise and Salt Act the Parliament has empowered the
rule-making authority to prescribe by rules the manner of levy of the duties and also the manner
of collection of duties of excise on all excisable goods other than salt. Manifestly the rule-making
power conferred by this section is very much wider in its ambit than the power conferred on the
rule-making authority under S. 3 of the Medicinal and Toilet Preparations (Excise Duties) Act
whereunder only the manner of collection of duties can be laid down by rules. Such being the
position, the reasons stated by the Madras high Court in Citadel Fine Pharmaceuticals Pvt. Ltd
versus District Revenue officer (1973) I M. L. J. 99 for declaring R. 12 of the Medicinal and
Toilet preparations (Excise Duties) Rules to be ultra vires on the ground that the framing of such
a rule was beyond the scope of the rule-making power conferred on the Central Government by
S. 3 (1) of the Medicinal and Toilet Preparations (Excise Duties) Act are not applicable to this
case. The scope of the rule-making power conferred by S. 3 (1) of the Central Excise and Salt
Act is wide enough to embrace all matters relating to the manner in which both the levy and the
collection of duties of excise on all excisable goods other than salt are to be made. The provision
contained in R. 10a is fully within the scope of the said power. Hence we are unable to accept the
contention advanced on behalf of the petitioner that R. 10a is ultra vires the rule-making power
conferred by the Act on the Central Government.
( 3. ) IT is true that in Agarwal Brothers v. Union of India2 one of the questions raised before the
Madras High court concerned the validity of R. 10a of the Central Excise Rules. But it is seen
from the judgment that the learned judges did not have to consider the said question on the merits
in view of the submission made by the Standing council for the Central Government that he did
not seek to sustain the demand on the basis of R. 10a in the light of the earlier ruling of the same
High Court striking down R. 12 of the Medicinal and Toilet Preparations (Excise Duties)Rules.
Inasmuch as the question relating to the validity. of R. 10a was not gone into by the court this
decision cannot obviously be regarded as an authority supporting the petitioner's contention that
the said Rule is ultravires. As already observed by us the earlier decision of the Madras High
Court reported in Citadel Fine Pharmaceuticals Pvt. Ltd. v. District Revenue Officer3 concerning
the validity of R. 12 of the Medicinal and Toilet preparations (Excise Duties) Rules is clearly
distinguishable. There cannot be any doubt that on the facts and circumstances of the present
case respondents 1 and 2 were perfectly justified in invoking the power conferred by R. 10a.
Admittedly the petitioner had not credited to the Department the duty payable in respect of fie
Polythene Lay flat Tubings cleared from the petitioner's factory during the period between 1st
May 1970 and 16th July 1970 even though the said article was not exempt from duty during that
time The orders Exts. P-3, P-5, P-7 and P-8 do not, therefore, call for any interference. ;

Cases Referred.

1(1973) I MLJ. 99
2(1972) II M. L. J. 476
3(1973) T m. L. J. 99