Government
of India Vs. Citedal Fine Pharmaceuticals Madras &Ors. Etc [1989] INSC 205 (20 July 1989)
Singh,
K.N. (J) Singh, K.N. (J) Kania, M.H.
CITATION:
1989 AIR 1771 1989 SCR (3) 465 1989 SCC (3) 483 JT 1989 (3) 118 1989 SCALE
(2)44
ACT:
Medicinal
and Toilet Preparations (Excise Duties) Act 1955: Section--3.19/Medicinal and
Toilet Preparations (Excise Duties) Rules, 1956: Rule 12.
Residuary
Powers for recovery of sums due to Government-Validity of.
Constitution
of India, 1950: Article 14 Medicinal and
Toilet Preparations (Excise Duties) Rules 1956--Absence of period of limitation
for recovery of sums due to Government--Rule 12--Whether unconstitutional.
Limitation--Absence
of period of limitation--Action should be taken within reasonable period--Reasonableness
of period----What is.
HEAD NOTE:
The
respondents were manufacturing various medicinal preparations and in that
process were using tincture containing alcohol. On the enforcement of the
Medicinal and Toilet Preparations (Excise Duties) Act, 1955 they became liable
to pay duty and also to obtain licence but they continued their manufacture
without doing so.
The
Commercial Tax Officer issued demand notices under Rule 12 of the Medicinal and
Toilet Preparations (Excise Duties) Rules, 1956 requiring payment of the duty
which the respondents had failed to pay.
The
respondents filed writ petitions in the High Court challenging the aforesaid
notices, and the proceedings for recovery of duty. Allowing the writ petitions
the Division Bench quashed the notices as well as the proceedings for recovery
on the ground that the Act was silent on the question of levy of duty on
escaped turnover, and hence Rule 12 which provides for recovery of escaped duty
was outside the purview and scope of the Act and, therefore, ultra vires.
In
these appeals it was contended that Rule 12 was invalid and 466 unreasonable
and violative of Article 14 of the Constitution because it does not provide for
any period of limitation for the recovery of duty.
Allowing
the appeals and setting aside the judgment of the High Court, this Court,
HELD:
1. The liability to pay tax is created by the charging section 3 and Rule 12
confers, power on the authorised officer to recover duty if the same has not
been paid on account of any short-levy or deficiency or any other reason. Rule
12 is referable to section 19(2)(i) of the Act and carries out the purposes of
the Act as it seeks to provide for recovery of duty as contemplated by section
3(3) of the Act. It is designed to confer residuary power for recovery of duty
if unpaid on account of short-levy or deficiency or for any reason it remains
unpaid. If recovery of duty or any amount of sum payable to the Government
under the Act is not covered by any specific Rule, additional supplementing provision
is made for its recovery by this Rule. This Rule does not create any additional
charge or liability on the manufacturer for the payment of the duty.
The
High Court Committed error in holding that the Rule is ultra vires the Act.
[470C-D, 470A-B]
2.
Rule 12 does not prescribe any period within which recovery of any duty as
contemplated by the Rule is to be made, but that by itself does not render the
Rule unreasonable or violative of Article 14 of the Constitution. In the
absence of any period of limitation it is settled that every authority is to
exercise the power within a reasonable period. What would be reasonable period,
would depend upon the facts of each case. Whenever a question regarding the
inordinate delay in issuance of notice of demand is raised, it would be open to
the assessee to contend that it is bad on the ground of delay and it will be
for the relevant officer to consider the question whether in the facts and
circumstances of the case notice or demand for recovery was made within reasonable
period. No hard and fast rules can be laid down in this regard as the
determination of the question will depend upon the facts of each case. [470F,
G, H, 471A]
CIVIL
APPELLATE JURISDICTION: Civil Appeal Nos. 1403 to 1406 of 1974.
From
the Judgment and Order dated 23.12. 1971 of the Madras High Court in W.P. Nos. 1053-54, 4679 & 4715 of 1968.
Anil
Dev Singh, Ms. Indu Malhotra and C.V. Subba Rao for the Appellant.
467
R.P. Bhat, G.L. Sanghi, M.N. Krishnamani, Vineet Kumar, R. Mohan, K.C. Dua and
R.A. Perumal for the Respondents.
The
Judgment of the Court was delivered by SINGH, J. These appeals are directed
against the judgment and order of a Division Bench of the High Court of Madras
dated 2.8. 1974, quashing the notices issued by the Deputy Commercial Tax
Officer, Madras.
The
respondents manufacture various medicinal preparations and in that process they
use tincture containing alcohol. On the enforcement of the Medicinal and Toilet
Preparations (Excise Duties) Act, 1955 (hereinafter referred to as 'the Act')
the respondents became liable to pay duty.in accordance with Section 3 of the
Act read with Schedule to the Act. They 'further became liable to obtain licence,
but they neither paid duty nor obtained licence.
The
Commercial Tax Officer issued notices to the respondents in exercise of his
powers under Rule 12 of the Medicinal and Toilet Preparations (Excise Duties)
Rules 1956 directing them to pay duty on all medicinal preparations
manufactured by them after 1.6.1961. The notices were in the shape of notice of
demand requiring the respondents to pay the duty which they had failed to pay
in accordance with the Act and the Rules on the use of tincture in
manufacturing medicinal preparations. The respondents filed writ petitions
under Article 226 of the Constitution of India before the High Court of Madras
challenging the notices and the proceedings initiated in pursuance thereof for
the recovery of duty from them. A Division Bench of the High Court allowed the
writ petitions on the sole ground that Rule 12 under which the impugned notices
were issued was ultra vires the Act, consequently, proceedings initiated in
pursuance thereof, were without jurisdiction. On these findings the writ
petitions were allowed and the notices as well as the proceedings were quashed.
The
sole question which arises for consideration in these appeals relates to the
validity of Rule 12 of the Medicinal and Toilet Preparations (Excise Duties)
Rules 1956. The High Court has declared the Rule ultra vires on the ground that
the Act was silent on the question of levy of duty on escaped turn-over and
hence Rule 12 which provides for the recovery of escaped duty was outside the
purview and scope of the Act.
The
Act was enacted to provide for the levy and collection of 468 duty of excise on
medicinal and toilet preparations containing alcohol, opium, Indian hemp or
other narcotic drugs as the preamble states. Section 3 provides for levy and
collection of duties. It reads as under:
"3(1).
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." Excise duty is
imposed by Section 3 on the manufacture of dutiable goods at the rates
specified in the Schedule. Subsection (2) indicates the stage at which the duty
is to be levied. Section 3(3) provides for collection of duty, lays down that
it shall be collected in such manner as may be prescribed by Rules made under
the Act. Section 3, therefore, imposes duty on the manufacture of medicinal
preparations and it lays down the rates and it also indicates the stage at
which the duty is to be levied. So far as collection of duty is concerned the
Act leaves the same to the rule making authority. Section 19 confers power on
the Central Government to make rules to carry out the purposes of the Act. The
relevant provision of Section 19 is as under:
"19(1).
The Central Government may, by notification in the Official Gazette, make rules
to carry out the purposes of this Act.
(2) In
particulars, and without prejudice to the generality of the foregoing power,
such rules may (i) provide for the assessment and collection of duties levied
under this Act, the authorities by whom functions 469 under this Act are to be
discharged, the issue of notices requiring payment, the manner in which the
duties shall be payable and the recovery of duty not paid." Section 19(1)
read with Section 3(3) confer wide powers on the Central Government to make
rules which may be necessary for carrying out the purpose of the Act. Such
rules may provide for the assessment and collection of duties, and, the manner
in which the duty is to be paid as well as for the recovery of duty not paid at
all. The Central Government in exercise of its power under Section 19 of the
Act has framed the Medicinal and Toilet Preparations (Excise Duties) Rules 1956
which were enforced on 9th
March 1957. Chapter
III of the Rules provide for levy and refund of, and, exemption from duty.
Rules 6 to 17 relate to recovery, exemption and refund of duty. Rule 6 requires
every person who manufactures any dutiable goods, or who stores such goods in a
warehouse to pay the duty on such goods, at such time and place as may be
designated. Rule 9 prescribes time and manner of payment of duty. According to
this Rule no dutiable goods shall be removed from any place where they are
manufactured either for consumption or for export, outside such place until the
excise duty leviable thereon is paid at such place and in such manner as
prescribed in the Rules or as the Excise Commissioner may require. Rule 11
provides for recovery of duty or charges which may have been shortlevied
through inadvertence, error, collusion, or mis-construction on the part of an
Excise Officer and through mis-statement on the part of the owner and it also
provides for recovery of any refund erroneously made to the manufacturer, owner
of the goods on written demand made within six months from the date of payment
of duty. Rule 12 confers residuary power for the recovery of sums due to the
Government. Rule 12 reads as under:
"12.
Residuary powers for recovery of sums due to Government-Where these rules do
not make any specific provision for the duty has for any reason been
short-levied, or of any other sum of any kind payable to the collecting
Government under the Act or these rules, such duty, deficiency in duty or sum
shall, on written demand made by the proper officer, be paid to such person and
at such time and place, as the proper officer may specify." 470 As already
noted Rules contained in Chapter III of the Rules particularly Rules 6, 9, 10
and 11 provide for payment and recovery of duty and also the time and manner of
its payment. Rule 12 is designed to confer residuary power for recovery of duty
if unpaid on account of short-levy or deficiency or for any reason it remains
unpaid. If recovery of duty or any amount of sum payable to the Government
under the Act is not covered by any specific Rule, additional supplementing
provision is made for its recovery by Rule 12.
Rule
12 provides for recovery of duty, as well as any other sum payable to the
collecting Government under the Act if the same is not paid on account of
short-levy or deficiency or for any reason. In substance Rule 12 contains
additional safeguard for recovery of duty, it does not create any additional
charge or liability on the manufacturer for the payment of the duty. The
liability to pay tax is created by the charging Section 3 and Rule 12 confers,
on the authorised officer to recover duty if the same has not been paid on
account of any short-levy or deficiency or any other reason. Rule 12 is
referable to section 19(2)(i) of the Act.
The
Rule carries out the purposes of the Act as it seeks to provide for recovery of
duty as contemplated by Section 3(3) of the Act. The High Court committed error
in holding that the Rule provides for recovery of escaped duty although the Act
is silent on the question of escaped assessment and therefore Rule 12 is ultra vires
the Act.
Learned
counsel appearing for the respondents urged that Rule 12 is unreasonable and violative
of Article 14 of the Constitution, as it does not provide for any period of
limitation for the recovery of duty. He urged that in the absence of any
prescribed period for recovery of the duty as contemplated by Rule 12, the
officer may act arbitrarily in recovering the amount after lapse of long period
of time. we find no substance in the submission. While it is true that Rule 12
does not prescribe any period within which recovery of any duty as contemplated
by the Rule is to be made, but that by itself does not render the Rule
unreasonable or violative of Article 14 of the Constitution. In the absence of
any period of limitation it is settled that every authority is to exercise the
power within a reasonable period.
What
would be reasonable period, would depend upon the facts of each case. Whenever
a question regarding the inordinate delay in issuance of notice of demand is
raised, it would be open to the assessee to contend that it is bad on the
ground of delay and it will be for the relevant officer to consider the
question whether in the facts and circumstances of the case notice or demand
for recovery was made within reasonable 471 period. No hard and fast rules can
be laid down in this regard as the determination of the question will depend
upon the facts of each case.
In
view of the above discussion, we allow the appeals and set aside the judgment
and order of the High Court of Madras dated 2.8. 1974. There will be no order
as to costs.
T.N.A.
Appeals allowed.
Back