Dabur
India Ltd & Anr Vs. State of Uttar Pradesh & Ors [1990] INSC 199 (12 July 1990)
Mukharji,
Sabyasachi (Cj) Mukharji, Sabyasachi (Cj) Saikia, K.N. (J) Ramaswamy, K.
CITATION:
1990 AIR 1814 1990 SCR (3) 294 1990 SCC (4) 113 JT 1990 (3) 109 1990 SCALE (2)29
ACT:
Central
Excises and Salt Act, 1944: Sections 3, 11B--Homeodent tooth paste--Whether
homeopathic medicine or toilet preparation-Whether liable to excise duty.
Constitution
of India, 1950: Article 263--Dispute under
two different central legislations---Under one--State au- thorities to realise
and impose taxes--Under the other Central Government--Refund to be paid or
adjusted---Should be subject matter of settlement by the proposed Council.
Medicinal
& Toilet Preparations (Excise Duties) Act, 1955: Sections 3(1) and 4 'Homeodent'
tooth paste--Liabili- ty to excise duty.
HEAD NOTE:
M/s Dabur
India Limited, petitioner in one set of peti- tions, is a public limited
company engaged in the manufac- ture of Ayurvedic as well as Allopathic
medicaments, along with cosmetics. It used to manufacture for and on behalf of
M/s Sharda Boiren Laboratories--The petitioner in the second set of
petitions--a Homeopathic tooth paste called 'Homeo- dent' out of the
raw-materials supplied by M/s Sharda, on job basis. It accordingly manufactured
Homeodent during 1985 to 1988, duly paying duties of excise on Homeodent under
the Central Excises & Salt Act, 1944.
The
Superintendent of State Excise visited the factory of M/s Dabur on 18th January, 1988 and enquired about the excisability
of Homeodent under the Medicinal & Toilet Preparations (Excise Duties) Act,
1955. He was told that Homeodent had been classified under the 1944 Act in view
of the orders passed by the Central Excise authorities. Howev- er, when it was
revealed that the Homeodent tooth paste was toilet preparation containing
alcohol, within the meaning of section 2(k), read with Item 4 of the Schedule,
referred to in section 3 of the 1955 Act, the District Excise Officer caused a
common notice dated 17.3.1988 to be served on M/s Dabur requiring it to pay
duty aggregating to Rs.68,13,334.20 under the provisions of the 1955 Act on
such 295 goods manufactured and cleared between January 1985 and January 1988.
This order was passed without issuing any notice to show cause, and without
affording any opportunity of hearing, to the petitioner.
The
Petitioner sent a representation requesting for compliance with the principles
of natural justice and also disputing the amount claimed as duty. On 18th March, 1988 the Superintendent of State Excise
modified the earlier order and confirmed the demand of duty amounting to
Rs.46.67 lakhs, on provisional basis. On that day the petitioner deposited a
sum of Rs. 11.66 lakhs and further executed a bank guarantee for the balance.
Simultaneously, the peti- tioner appealed against the order dated 18th March, 1988.
The
Excise Commissioner dismissed the appeal. No appeal was filed by M/s Sharda
against the demand notice of excise duty under the 1955 Act.
The
petitioner moved the High Court. On 13th May, 1988 the High Court directed the
petitioner to file a revision petition with the Central Government. Both the
petitioners then approached the Central Government in revision. On 22nd September, 1988 the Additional Secretary to the Government
of India in exercise of his revisional powers allowed the revision filed by M/s
Dabur and declared the orders of the District Excise Officer and the Excise
Commissioner as null and void having been passed in violation of the principles
of natural justice. The revision filed by M/s Sharda was not entertained by the
Central Government on the ground that a right of appeal was vested in Sharda,
which was not availed of. The High Court dismissed Sharda's petition
challenging the order of the Central Government declining to entertain its
review. Against the order of the High Court M/s Sharda have filed the special
leave petition in this Court.
On the
basis of the revision order, the petitioners called upon the District Excise
Officer to refund the amount of Rs.46.67 lakhs recovered from it by way of cash
payment and encashment of bank guarantee. The State Excise authori- ties
however failed to grant the refund, and instead issued a fresh show-cause
notice to the petitioners jointly on 2nd November, 1988.
In
December 1988, M/s Dabur moved the High Court under Article 226 of the
Constitution for quashing and setting aside the showcase notice dated 2.11.1988
and for refund of duty amounting to Rs.46.67.
The
High Court dismissed the writ petition. The High Court was 296 of the opinion
that the question whether Homeodent tooth paste was sans alcohol could not be
adjudicated upon under the extraordinary writ jurisdiction. The High Court
however came to the conclusion that both the 1944 and 1955 Acts operated in different
fields and there was no overlapping between the two. The High Court further
observed that where the parties fully acquiesced with the matter and subjected
themselves to the statutory procedure, no action should be allowed to be taken
under Article 226 of the Constitution unless the case was patently without
jurisdiction. In this connection, it was emphasised by the High Court that once
the parties chose the statutory procedure they must go to the logical end.
It was
inter alia urged before this Court on behalf of the petitioner that it was not
seeking to circumvent the alternative remedy provided under the Act but in view
of the conflicting claims of the Central and State Excise authori- ties seeking
to classify Homeodent tooth paste under the respective Acts of 1944 and 1955,
the petitioner was left with no other alternative but to challenge the actions
by way of writ petition under Article 226 of the Constitution.
It was
further contended that Homeodent did not contain alcohol but contained ingredient
"mother tincture" contain- ing alcohol, which had a tendency to
evaporate during the process of manufacture of Homeodent; that no test result
as required under the 1955 Act was obtained to establish wheth- er Homeodent
contained alcohol or not; and that on 31st August, 1987 the Assistant Collector
of Central Excise had already passed an order classifying Homeodent under the
Act of 1944 which order had been upheld by the Collector of Central Excise
(Appeals). The main point that the petitioner sought to emphasis was that the
High Court ought to have appreciated that Homeodent tooth paste having been
subjected to duty under the provisions of the 1944 Act, the question of levying
and recovering duty under the 1955 Act did not and could not arise.
Dismissing
the petitions, this Court,
HELD:
(1) Homeodent is a homeopathic preparation but it is also a tooth paste.
Therefore, it is a toilet prepara- tion. Whether or not such Homeodent would
not be dutiable under the Medicinal & Toilet Preparations (Excise Duties)
Act, 1955 would depend upon whether it contained alcohol or not. [315E]
(2) It
is undisputed that mother-tincture was one of the components that was used in
the preparation of Homeodent and it has been found that alcohol was there and
mother tincture was added in the 297 medicinal preparation as its component. [315G]
M/s Baidyanath Aryurved Bhawan (Pvt.) Ltd. Jhansi v. The Excise Commissioner U.P., [1971] 1 SCR 590, referred to.
(3)
The authorities charged with the duties of enforcing a particular Act are
enjoined with the task of determining the question whether alcohol is contained
therein or not. [310D]
(4) It
has been determined by the authorities enjoined to enforce the 1955 Act that Homeodent
was a medicinal and toilet preparation and liable to excise duty, and such
finding has not been assailed on any cogent ground in any proper manner. If
that is the position, then it must be upheld that Homeodent was dutiable. [317D]
Union of India v. Bombay Tyre International Ltd., [1984] 1 SCR 347; Mohanlal
Magan Lal Bhavsar v. Union of India, [1956] 1 SCC 122 and N.B. Sanjana, Assistant Collector of
Central Excise, Bombay v. The Elphinston Spinning and Weav-
ing Mills Co. Ltd., [1971] 3 SCR 506, referred to.
(5)
Provisions for rebate of duty on alcohol contained in section 4 of the 1955 Act
show that multipoint tax on medicinal preparations containing alcohol was
within the contemplation, otherwise there was no purpose in incorporat- ing
section 4 into the Act. [316B]
(6)
Justice requires that provisions for claiming refund of this duty should be
made more clear. However, in the view of the facts and the circumstances that
have happened, it is directed that if the petitioners are entitled to any
refund of the duty already paid to the Central Government in view of the duty
imposition now upheld against them in favour of the State Government such
refund application should be entertained and considered in accordance with law.
[316E-F]
(7) In
a case of this nature, where there is some doubt as to whether duty was payable
to the Central Government under the 1944 Act or whether the item was dutiable
under the 1955 Act, it would be just and proper and in consonance with justice infiscal
administration that the Central Gov- ernment should consider in the light of the
facts found, if an application is made under section 11B of the 1944 Act, and
circumstances of this case, the limitation period under section 11B of the 1944
Act should not apply. This direction must be confined in the facts and the
circumstances of this case only. [316G-H; 317A] 298 Citadel Fine
Pharmaceuticals Pvt. Ltd. v. D.R.O., [1973] Mad. Law Journal 99; Union of India
v. Bombay Tyre Interna- tional Ltd., [1984] 1 SCR 347 and Assistant Collector
of Central Excise v. Madras Rubber Factory Ltd., [1986] supp. SCC 751, referred
to.
(8)
Government should consider feasibility of a machin- ery under a Council to be
formed under Article 263 of the Constitution to adjudicate and adjust the dues
of the re- spective Governments. [318D]
(9)
This Court would not like to hear from a litigant in this country that the
Government is coercing citizens of this country to make payment which the
litigant is contend- ing not leviable. Government, of course, is entitled to
enforce payment and for that purpose to take all legal steps but the
Government, Central or State, cannot be permitted to play dirty games with the
citizens to coerce them in making payments which-the citizens were not legally
obliged to make. If any money is due to the Government, the Government should
take steps but not take extra legal steps or manoeu- vre. Therefore, the right
of renewal of the petitioner of licence must be judged and attended to in
accordance with law and the occasion not utilised to coerce the petitioners to
a course of action not warranted by law and procedure. [318A-C]
ORIGINAL
JURISDICTION: Writ Petition (Civil) No. 426 of 1989 etc. etc.
(Under
Article 32 of the Constitution of India).
P.
Chidambaram, K.K. Venugopal, Dushyant Dave, R. Karan- jawala, Ms. Meenakshi Arora,
Mrs. Manik Karanjawala (N.P.), C.S. Vaidyanathan and S.R. Setia for the
Petitioners.
Yogeshwar
Prasad, R.S. Rana and Ashok Srivastava for the Respondents.
The
Judgment of the Court was delivered by SABYASACHI MUKHARJI, CJ. The challenge
in these writ petitions and special leave petitions is basically to the order
dated 18th January, 1989, passed by the District Excise Officer, Gaziabad,
seeking to recover duties of excise on Homeodent under the Medicinal &
Toilet Prepara- tions (Excise Duties) Act, 1955 (hereinafter called 'the 1955
Act'), even though the product was classifiable under the Central Excises &
Salt Act, 1944 (hereinafter called 'the 1944 Act') and was, in 299 fact,
assessed to duty under the said. Act between 1985 and 1988. Necessarily, the question
arises as to whether, in the facts and circumstances of the case, the 1944 Act
would apply or the 1955 Act would apply. The factual dispute is whether in the
facts, as enumerated hereinafter, alcohol was present in Homeodent and further
whether Homeodent was Homeopathic medicine or toilet preparation and further
whether the same was dutiable under the 1944 Act. We must recapitulate the
basic facts in the several matters involved herein.
M/s. Dabur
India Limited which is the petitioner in special leave petition No. 1610/89
arising out of judgment and order dated 20th December, 1988 in civil
miscellaneous writ petition No. Nil of 1988 connected with civil miscella- neous
writ petition No. Nil of 1988 of the High Court of Allahabad, and also the
petitioner in writ petition No. 426/89, is a public limited company engaged in
manufacture of Ayurvedic medicaments and Allopathic medicaments along with
cosmetics. It had agreed to manufacture for and on behalf of M/s. Sharda Boiron
Laboratories Ltd. (hereinafter called 'the company')--being the petitioner in
special leave petition Nos. 135-36/89, used to manufacture and/or produce a
Homeopathic tooth paste called 'Homeodent' out of the raw-materials supplied by
the company on job work basis. The petitioner states that it accordingly
manufactured Homeodent during 1985 to 1988, duly paying duties of excise on Homeo-
dent under the 1944 Act at appropriate leviable rates and recovered the same
from the company. According to the peti- tioner, Homeodent did not contain alcohol
but contained ingredients "mother tinctures" containing alcohol. It
is stated that alcohol, due to various reasons, has a tendency to evaporate
during the process of manufacture of Homeodent.
It is
further the case of the petitioner company that during the period from 1979 to
1988 it also manufactured certain other medicinal products containing alcohol
which were classifiable under the 1955 Act. The petitioner company held at all
material times licence as required under the 1955 Act to manufacture these
products. The State Excise authorities enforcing the provisions of the Act had perma-
nently posted an Inspector as also a peon in the factory of the petitioner
where these dutiable products were manufac- tured. The bonded manufactory in
which these products were manufactured was under lock and key of the said
officers, according to the petitioner. The activities of the petition- er, the
petitioner asserts, were clearly within the knowl- edge of the State excise
authorities for over a considerably long period. During the period from
1985-1988, the company supplied 300 to the petitioner amongst other
ingredients, "mother tinc- tures" under BM-9 forms, stating clearly
that such mother tinctures were intended to be used in manufacture of Homeo-
dent in the factory of the petitioner. These BM-9 forms, according to the
petitioner, were filed with the State excise authorities regularly. Therefore,
the petitioner asserts that the State excise authorities were aware of the
manufacture of Homeodent by the petitioner and the activity of the company in
getting the same manufactured in the factory of the petitioner out of mother
tinctures. However, the State excise authorities did not object to the same nor
did they call upon either the petitioner or the company to pay duty under the
1955 Act.
On 1st
January, 1985, the petitioner states, the peti- tioner filed classification
list classifying Homeodent under the Act of 1944, declaring therein the
ingredients of Homeo- dent. On 17th January, 1985, the classification list
filed by the petitioner on 1.1. 1985 was approved finally and Homeodent was
held to be classifiable under the Act of 1944.
On
31st August, 1987 the Assistant Collector of Central Excise passed an order
which was an appealable one classify- ing Homeodent under the Act of 1944. The
petitioner asserts that this order had subsequently been upheld by the Collec- tor
of Central Excise (Appeals), New Delhi, on an appeal filed by the company.
However, on 18th January, 1989 the Superintendent of State Excise, Bulandshahr
visited the factory of the petitioner and after inspecting the same, enquired
about Homeodent. It is the case of the petitioner that it had explained that Homeodent
was classified under the Act of 1944 in view of the orders passed by the
Central Excise authorities. However, it is stated that the Superin- tendent of
State Excise, Bulandshahr called upon the peti- tioner to furnish details in
respect of Homeodent including its ingredients and total value of clearances
etc. On 20th January, 1988 the petitioner addressed a detailed letter to the
Superintendent of State Excise, Bulandshahr, explaining its stand, and that
duty had been paid thereon. State Excise authorities, thereafter, did not take
any action against the petitioner nor did they take out samples of Homeodent
tooth paste to get appropriate results as required under the Act of 1955 and
the rules framed thereunder. However, on 17th March, 1988 the Superintendent of
State Excise, Bulandshahr passed a demand order directing the petitioner to deposit
a sum of Rs.68,13,334.20 being the alleged duty payable on 'Homeodent'
manufactured and cleared between January, 1985 and January, 1988. This order
was passed without issuing any notice to show cause and, according to the
petitioner, without affording the petitioner any opportunity of hearing.
The
petitioner on the same day sent a rep- 301 resentation requesting for
compliance with the principles of natural justice and disputing the claim for
duty. On 18th March,
1988 the
Superintendent of State Excise, Bulandshahr, modified his earlier order and
confirmed the demand of duty amounting to Rs.46.67 lakhs on provisional basis.
Once again the petitioner was neither served with a show cause notice nor was
afforded an opportunity of personal hearing, accord- ing to the petitioner.
While passing either of the orders, no test result, it is asserted, was
obtained to establish whether Homeodent contained alcohol or not. However, on 18th March, 1988 the petitioner deposited a sum of
Rs.11.66 lakhs. The petitioners also executed a bank guarantee in favour of the
District Magistrate, Ghaziabad, for a sum of Rs.35 lakhs.
On 6th April, 1988 the petitioners filed an appeal
before the Excise Commissioner, U.P. against the illegal orders of the District
Excise Officer. The petitioners also appeared for personal hearing before the
Excise Commissioner through their advocate on 23rd April, 1988. On 5th
May, 1988 the Excise
Commissioner, U.P., passed an order dismissing the appeal of the petitioners.
However, petitioner No. 1 states that copy of the order was not served upon it.
The petitioner No. 1 further asserts that without serving a copy of the order
on it and without intimating whether the order had been passed or not, the
District Excise Officer ap- proached M/s. Grindlays Bank for encashment of the
bank guarantee of Rs.35 lakhs and coerced, according to the petitioners, the
bankers to encash the same forthwith.
Thereafter,
the petitioner moved the High Court of Allahabad against the illegal actions of
the respondents. The High Court directed the authorities to serve a copy of the
order and restrained the respondents from encashing the bank guarantee. It is
stated that while the High Court of Allaha- bad was considering the writ
petition of the petitioner and had granted stay as aforesaid, the respondent
District Excise officer encashed the bank guarantee of Rs.35 lakhs without even
calling upon the petitioner first to pay the amount. On 13th May, 1988 the High
Court of Allahabad di- rected the petitioner to file a revision petition with
the Central Government. A revision petition was filed along with stay
application on 28th May, 1988. Thereafter, the Central Government granted stay
against recovery of the balance amount of Rs.21.46 lakhs. On 22nd September,
1988 the Addi- tional Secretary to the Government of India in exercise of his revisional
powers allowed the revision of the petition- ers and declared the orders of the
District Excise Officer dated 17th and 18th March, 1988 as upheld in appeal by
the Excise Commissioner as null and void having been passed in violation of
principles of natural justice. Thereupon it, the petitioners state, 302 called
upon the District Excise Officer and the District Magistrate to refund the
amount of Rs.46.67 lakhs recovered from it by way of cash payment and
encashment of bank guar- antee in view of the revision order. The case of the peti-
tioner is that the State Excise authorities failed to grant the petitioner
refund as prayed for despite the order of the revisional authorities. On 2nd
November, 1988 the District Excise Officer issued a show-cause notice requiring
the petitioner to show cause as to why an amount of Rs.68.13 lakhs be not
recovered from it in respect of Homeodent manufactured and cleared during
January, 1985 to January, 1988. In December, 1988 the petitioner moved the High
Court of Allahabad under Article 226 of the Constitution of India, inter alia,
praying for a writ of mandamus for quashing and setting aside the show-cause
notice dated 2.11.1988 and for refund of duty amounting to Rs.46.67 lakhs. On
20th Decem- ber, 1988 the High Court of Allahabad dismissed the writ petition filed by the petitioner. It is stated that
on 10th January, 1989 this Court upon special leave
petitions Nos. 135-36/89 filed by the company was pleased to issue notice and
directed stay of operation of the notice of demand.
Thereafter,
on 20th January, 1988 the District Excise Offi- cer
directed the petitioner to appear for personal hearing in response to the show
cause notice. The petitioner ap- peared before the District Excise Officer
without prejudice and submitted a detailed reply to the show cause notice and
also contended during personal hearing that the notice was required to be
withdrawn. In its reply the petitioner cate- gorically stated that the reply
was being submitted without prejudice to petitioner's right to move this Court
by way of a special leave petition. Thereafter, the petitioner moved this Court
on 21st January, 1989. It is, therefore, neces- sary to
refer to the judgment and order dated 20th December, 1988 in civil writ petition No. Nil/88
connected with civil miscellaneous writ petition No. Nil/88 in the High Court
of Allahabad.
It
appears that M/s. Dabur India Limited had filed the said writ petition in the
High Court challenging the show- cause notice dated 2nd November, 1988 by the District Excise Officer. Ghaziabad. Another writ petition being writ peti-
tion No. 1160/88 which is the subject matter of special leave petition Nos.
135-36/89 was filed by M/s. Sharda (the company) for quashing the order of the
Central Government dated 3.6.1988 which was annexure-1 to the writ petition.
These
two were disposed of by the said judgment. The ques- tion that was mainly
involved therein was that the conten- tion of the petitioner that the Homeodent
did not contain alcohol, though one of the ingredients of such preparation was
mother tincture containing alcohol and the same was assessable under Item 14FF
of the 1944 Act. The Asstt. 303 Collector of Central Excise, Ghaziabad, had taken
the view that the Homeodent was classifiable Under sub-heading No. 3306-02 of
the Chapter 33 of the Central Excise Tariff Act, 1985 and on that duty @ 15% ad
valorem was leviable. This duty computed at the said rate by the Central Excise
author- ities was paid, according to the petitioner, on the goods manufactured
from 1.1.1986. On 18th January, 1988 the Dis- trict Excise Officer made a
surprise inspection of the units of the petitioner and when it was revealed
that the Homeo- dent tooth paste manufactured by M/s. Dabur was toilet
preparation containing alcohol within the meaning of Section 2(k), read with
Item 4 of the Schedule, referred to in section 3 of the 1955 Act, and was
therefore assessable to duty @ 100% ad valorem. The District Excise Officer, Ghazia-
bad, therefore had caused a common notice dated 17.3.1988 to be served on the
petitioner requiring it to pay duty aggre- gating to Rs.68,13,334.20 under the
provisions of the 1955 Act on such goods manufactured from 1st January, 1985
till the date of notice. As mentioned hereinbefore, against this notice some
representation was made by the petitioner to the District Excise Officer and
thereupon the petitioner was directed to deposit provisionally the excise duty
to the tune of Rs.46,55,45 1.45 under the 1955 Act and the same was deposited
by the petitioner. Such demand wad. challenged by M/s. Dabur in appeal before
the Excise Commissioner. The Excise Commissioner affirmed the order of the
District Excise Officer and dismissed the appeal. No appeal was filed by M/s. Sharda
against the demand notice of excise duty under the 1955 Act. However, both the
petitioners approached the Central Govt. in revision under Rule 128 of the 1956
Rules. The revision of M/s. Dabur was disposed of by the Central Govt. and the
result was communicated by the Addi- tional Secretary to the Govt. of India by
the order dated 22.9.1988. The contention of M/s. Dabur that the demand was
raised on it without any opportunity of being heard and in violation of
principles of natural justice, was accepted and a direction was given that the
case be adjudicated upon de nove after giving a show cause notice and proper
opportunity of being heard to the party. The revision filed by M/s. Sharda was
also not entertained by the Central Government on the ground that a right of
appeal was vested in M/s. Sharda which could have been exercised upto
17.6.1988, which was not done.
However,
pursuant to the order of the Central Govern- ment, the District Excise Officer
issued the impugned show- cause notice dated 2.11.1988 to the petitioners
jointly, validity of which was challenged by them in the writ peti- tion and
the other writ petition I. as been filed by M/s. Sharda only to challenge the
order of the Central Govt. refusing 304 to entertain its revision. The learned
Judges in the judg- ment under appeal noted that the petitioner did not advance
any argument on the merits of the question; whether Homeo- dent tooth paste is
assessable to duty under the 1944 Act or under the 1955 Act and rightly so because
that involved a factual scrutiny which could hardly be gone into by the High
Court. The High Court was of the opinion that the question, whether Homeodent
tooth paste is sans alcohol, cannot be adjudicated upon under the
extra-ordinary writ jurisdiction.
On
behalf of the petitioners before the High Court two contentions were raised.
Firstly that the Central Govt. having set aside the order of District Excise
Officer, Ghaziabad, whereunder excise duty to the tune of Rs.46,66,451.45 was
paid, there was no justification for the respondents to retain that amount
thereafter and a writ of mandamus be issued against the respondents directing
them to refund this amount; and secondly, that under Rule 11 of the 1956 Rules
when duties are short levied, a written demand by the proper officer being made
within six months from the date on which the duty was paid, the short fall
could be recovered. The submission was that no duty can be recovered for the
period anterior to six months to be reckoned from the date of payment of duty.
It was, therefore, urged that the show cause notice was invalid, inasmuch as
the District Excise Officer, Ghaziabad, had exceeded the jurisdiction in having
recovered the duty beyond limitation.
The
High Court addressed itself to the question whether Article 226 of the
Constitution of India was a proper reme- dy. We are not really concerned with
this question. The High Court, however, came to the conclusion that both the
1944 & 1955 Acts operate in different fields and there is no over- lapping
between the two. If the Homeodent tooth paste is found to be assessable to duty
under the 1955 Act then it will not amount to review of the order of the
Central Excise authorities. It was emphasised before the High Court that
adjudication by the Central Excise authorities does not stop the State Excise
authorities from considering the case under the provisions of the 1955 Act.
Both the Acts are mutually exclusive and the authorities there under are fully
empowered to consider the assessability separately, according to the High
Court. The High Court came to the conclusion that where the parties fully
acquiesced with the matter and subjected themselves to the statutory procedure,
no action should be allowed to be taken under Article 226 of the Constitution
unless the case is patently without jurisdiction. The orders having been made
under the statutory provisions, the Court should be loath to interfere under
Article 226 of the Con- stitution of India. It was emphasised by the High 305
Court that once the parties choose the statutory procedure they must to the
logical end. The Central Govt. had directed the State Excise authorities to
adjudicate the case de novo and, therefore, the District Excise Officer,
Ghaziabad, had no option but to issue show-cause notice. So the show-cause
notice dated 22nd November, 1988 was jointly given to the petitioner pursuant
to the direction of the Central Govern- ment much after the orders had been
passed initially or in appeal. Therefore, the common show-cause notice to the
parties cannot, according to the High Court, be characte- rised as a sparking
point and from the backdrop of the case stated above, it is amply clear that
the Excise authorities had not assumed jurisdiction to proceed against the peti-
tioner for the first time by way of a show-cause notice dated 2nd November,
1988 rather it had been issued at much subsequent stage pursuant to the
direction of the Central Government. The High Court came to the conclusion that
the show-cause notice having been issued in accordance with the directions of
the Central Govt. in the revisional jurisdic- tion which the petitioner itself
subjected to, cannot be assailed under Article 226 of the Constitution. So this
show-cause notice dated 2nd
November, 1988 cannot
be equated with the show cause notice given at the initial stage to assume
jurisdiction in the matter. The High Court also came to the conclusion that no
writ can be issued in favour of the parties who remain sitting on the fence and
took a chance of the proceedings taken up under the statutory provisions going
in their favour. The High Court held the petitioner who had resorted to
statutory remedies on its own could not be permitted to take recourse under
Article 226 of the Constitution of India, in the event of their having become
successful under the former.
Coming
to writ petition No. 1160/88 wherein the order of the Central Government
refusing to entertain the revision had been challenged. The Central Government
had refused to entertain the revision on the sole ground that the right of
appeal that vested in M/s. Sharda could not be exercised thereby. The High
Court, however, came to the conclusion that the case of M/s. Dabur was that it
is manufacturing Homeodent tooth paste on job basis under the loan licence of
M/s. Sharda as per the specifications and control and the raw-material of the
latter but factually both the petition- ers are different entities under the
law and therefore each petitioner had to pursue its own remedy. Therefore, on
an analysis of the material, the High Court found that there was nothing to
interfere with the order of the Central Government.
Therefore,
the questions that fall for determination are firstly, 306 whether the High
Court was justified in dismissing the writ petition of the petitioner on the
ground of alternative remedy particularly when the writ petition challenged the
actions of the respondents in seeking to levy and recover duties of excise
under the 1955 Act as being without juris- diction and/or without authority of
law. The next question that arises is whether the High Court was justified in
dismissing the writ petition challenging particularly in two sets as has
already been subjected to duty of excise under the 1944 Act. The next question
that fails for consideration is whether the High Court was justified in
dismissing the writ petition of the petitioner which had prayed for refund of
duties of excise amounting to Rs.46.67 lakhs illegally recovered from the
petitioner on Homeodent tooth paste under the 1955 Act in pursuance of the
order which was declared null and void in revision by the Central Government.
It is also necessary to consider whether the High Court was justi- fied in
dismissing the writ petition of the petitioner particularly when it challenged
levy and recovery of duty under 12 of the 1956 Rules framed under the 1955 Act
when the said rules have already been declared to be invalid and without
jurisdiction by a Division Bench of the Madras High Court in the case of
Citadel Fine Pharmaceuticals Pvt. Ltd. v. D.R.O., [1973] Madras Law Journal p.
99.
The
next main question requiring consideration is wheth- er the respondents were
acting within their jurisdiction while levying duty of excise on Homeodent
under the 1955 Act when in the manufacture of Hemeodent alcohol had not been
used as a raw material but mother tinctures containing alcohol had been used
and particularly when at the final stage of manufacture Homeodent did not
contain any trace of alcohol.
The
question that has really to be determined in this case is, whether firstly Homeodent
was classifiable under the 1944 Act or 1955 Act and who will determine that;
and secondly, which Act will prevail in the facts and circum- stances of the
case.
In
this connection, it may be mentioned that M/s. Sharda had applied for a licence
and was granted a loan licence to manufacture tooth paste as per the provisions
of Drugs & Cosmetics Act, 1944 and the Rules framed thereunder. The said licence
was granted under rule 139B and was in Form 31A for manufacture of cosmetics.
Subsequently, Homeodent was envisaged by the Drug authorities as a homeopathic medica-
ment and licence had been granted accordingly. It is the case of the petitioner
that tooth pastes were manufactured by the petitioner company for and on behalf
of the loan licensee from the 307 following chemicals and ingredients:
"Potassium
Chlorate BPC 73 Sodium Benxoate IP Sodium Flou- ride BP Plantago Offionle Mt HP
1 Cochloric Armorocie MT NP 1 Cochloric Officincie MT HP 1 Phytolecca Decandra
NT Methyl Parehudron Benxoate IP Prophyle Paraphydroxy Benxoate IP Calcium
Carbonate IP Sodium Alginete USP NF 1980 Titenium Oxide BP Precipitate Silico
USP NF Liquid Sodium Socicylate 15 381: 1972 Sodium Leuryle Sulphate (High
Purity) Saccharine IP" It is further to be noted that the final product
i.e. the tooth paste is a homeopathic semi-solid compound in which mother
tincture was completely absent or present in fractionally negligible quantity,
depending upon the manu- facturing conditions, vacuum and the temperature. It
is the case of the petitioner that at the time the tooth paste is manufactured,
packed and is ready for delivery, the alcohol would diminish completely and
would not be left at all. Nor can it be so traced upon any chemical testing. In
this connection, the petitioner sought to crave leave to several documents and
some test examination reports. According to the Laboratory test which the
petitioner produced, the alcohol content was absent in the nine samples sent by
the loan licensee. It was further stated that the Govt. of India had issued
instructions vide letter dated 19th December, 1957 requiring for determination
of alcohol content of any product the samples must be sent to specified
laboratories.
Despite
the said position, it is the case of the petitioner that the Excise authorities
acting under the 1955 Act, had never withdrawn any sample of tooth paste
manufactured by the petitioner within their knowledge between 1985 and 1988 a
sufficiently long period during which their inspector-in- charge was physically
present in the factory of M/s. Sharda and had not only access but knowledge of
the activities including the manufacture of the said tooth paste. The
Superintendent of Excise, Bulandshahr, visited the factory of the
petitioner-company on 18th
January, 1988 and after
inspecting the same enquired about the exciseability of Homeodent tooth paste.
The petitioner's officers explained that Homeodent was classified under the
1944 Act and the duty had been paid accordingly. Subsequently, the Superin- tendent
(Excise) called upon the petitioner to furnish details about the quantity and
value of Homeodent manufac- tured and cleared between 1985 and 1988. In
pursuance there- of, tile petitioner replied vide his letter dated 20th January, 1988 and in 308 details explained the
reasons by Homeodent was not liable to duty under the 1955 Act. In pursuance of
the reply of the petitioner no action was taken and the petitioner assumed that
the matter had been closed. The petitioner has given detailed episodes of
harassment.
The
main point that the petitioner seeks to emphasis in this case is that the High
Court ought to have appreciated that the petitioner's product Homeodent tooth
paste having been subjected to duty under the provisions of the 1944 Act, the
question of levying and recovering duty under the 1955 Act did not and cannot
arise. Therefore, the impugned ac- tions of the respondents were required to be
set aside by issuing appropriate writ of mandamus. The High Court was,
therefore, in error, according to the petitioner, in dis- missing the writ
petition without appreciating this conten- tion. The High Court ought to have
appreciated that the petitioner was not seeking to circumvent the alternative
remedy provided under the Act but in view of the conflicting claims of the Central
and State Excise authorities seeking to classify Homeodent tooth paste under
the respective Acts of 1944 and 1955, the petitioner was left with no other
alternative but to challenge the actions by way of writ petition under Article
226 of the Constitution. It is con- tended that the High Court ought to have
appreciated the actions of the State authorities were ex facie and without
authority in law in so far as they sought to levy and recov- er duty on Homeodent
tooth paste under the 1955 Act. There- fore, the petitioner was justified in
challenging such actions by way of a writ petition before the High Court. It
was further urged that the High Court had committed an error on the ground of
alternative remedy before the High Court as also the demand raised against it
could not be justified under Rule 12 beyond a period of six months as
prescribed under Rule 11 particularly in view of the fact that Rule 12 as had
been declared to be invalid and without jurisdiction as per the judgment of the
Madras High Court. It is further contended that the High Court committed an
error in dismiss- ing the writ petition of the petitioner challenging the
demand of duty made by the State Excise authorities amount- ing to Rs.68 lakhs
particularly in view of the fact that as per S.4 of the 1944 Act which is made
the basis of valuation even under the Act of 1955 as per the Explanation II to
the Schedule as interpreted by this Court in the cases of Union of India &
Ors. v. Bombay Tyre International Ltd. etc., [1984] 1 SCR 347 and Asstt. Collector
of Central Excise & Ors. v. Madras Rubber Factory Ltd etc., [1986] Suppl.
SCC 75 1 the duty liability could not exceed the sum of Rs.26 lakhs. It was
further emphasised that the High Court commit- ted error in not directing the
State Excise authorities to refund the amount of Rs.46.67 lakhs which was
recovered from 309 the petitioner under Orders dated 17/18.3. 1988 which were
declared to be null and void having been passed without giving any opportunity
of hearing.
The
Sahibabad factory of M/s. Dabur India Ltd. was set up in the year 1979. From
the very beginning the petitioner had undertaken the job of manufacturing
various products covered under the 1955 Act. The petitioner had obtained the
necessary licence and fell under the purview of the 1955 Act. Section 6 of the
1955 Act stipulates that the Central Govt. may, by notification in the Official
Gazette, provide that from such date as may be specified in the notification,
no person shall engage in the production or manufacture of any dutiable goods
or of any specified component parts or ingredients of such goods or of
specified containers of such goods or of labels of such containers except under
the authority and in accordance with the terms and conditions of a licence
granted under this Act. Dutiable goods have been defined in the Act vide Clause
(c) of s. 2 i.e. meaning thereby the medicinal and toilet preparations
specified in the Schedule as being subject to the duties of excise levied under
the Act.
It is
stated that the State Excise authorities had posted an officer in the factory
of the petitioners at Sahibabad for physical control on a part-time basis. In
the year 1985, an officer in the rank of an Inspector was posted at the said
factory on full time basis for physical supervi- sion and control. Hence, all
the activities of the petition- er were within the knowledge of the respondent
Excise au- thorities. The version of the petitioner is that on an inquiry from
M/s. Sharda Bairon Laboratories Ltd. for manu- facturing of Homeodent tooth
paste on job work basis out of the raw-material and packing materials to be
supplied by the said loan licensee, M/s. Sharda, petitioner No. 1 undertook the
job. The petitioner-company had filed a list classifying the said Homeodent
tooth paste under Tariff item 14FF of the 1944 Act as the said tooth paste did
not contain any alcohol directly. The classification list was filed in the pre-
scribed Form and with all the particulars. It was further checked up by the
Inspector Range Inspector and it was subsequently approved by the Assistant
Collector, Central Excise, according to the petitioner.
On 31st August, 1987 there is indeed an order of the Asstt
Collector of Central Excise, Division II, Ghaziabad, stating that the tooth paste in question was classifiable under the
1944 Act and not under the 1955 Act. It has to be understood that under the
1955 Act the duties go to the State Govt. while under the 1944 Act the duties
go 310 to the Central Govt., though both these Acts are central legislations.
The authorities charged with the duties under the 1944 Act are Central Govt.
employees and Central Govt.
authorities
are different and distinct from the authorities of the State Govt. under the
1955 Act. The basic question that has to be decided is whether in such a
situation who or which authority will decide if the product in question would
be leviable to duty under the 1944 Act and go to the coffers of the Central
Government or whether it will be leviable under the 1955 Act and the realisations
go to the State Govt.
In the
facts and circumstances of this case, that will depend on the question whether
alcohol was used as any of the ingredients in production of the product or
manufacture thereof. That there was production and/or manufacture and as such
excise was leviable, there is no dispute. The question is, whether in the
process any ingredient was used contain- ing alcohol in respect of a product
which is medicinal in nature and as such would be dutiable under the 1955 Act.
(Homeodent
is a homeopathic preparation but it is also a tooth paste. Therefore, it is a
toilet preparation. Whether or not such Homeodent would be dutiable under the
1955 Act, would depend upon whether it contained 'alcohol' or not. The
authorities charged with the duties of enforcing a particu- lar Act are
enjoined with the task of determining the ques- tion whether alcohol is
contained therein or not. It is the case of the petitioner that they had paid
duties of excise on Homeodent tooth paste manufactured by it on behalf of loan
licensees under the 1944 Act. The total amount of duty claimed to have been
paid for the said period amounted to Rs.6,26,570.47. The petitioners rely
heavily on the test certificates issued by the Homeopathic Pharmacopia Laborato-
ries of the Ministry of Health & Family Welfare, Govt. of India, which
state that they had failed to detect any alco- hol in the 9 batches of the
tooth paste given to them for testing. The petitioner asserts that tooth paste
is a homeo- pathic semi-solid compound in which mother tincture is completely
absent or is present in negligible quantity with any alcohol that may be
present in pheropest completely and that there are no traces of the same in the
final product upon chemical testing. In January, 1988 there was an inquiry
about the exciseability of Homeodent tooth paste by the Superintendent of
Central Excise, under the 1955 Act. The gravamen of the charge is the order
issued by the Distt.
Excise
Officer, Ghaziabad, on 17th March, 1988 which was issued without notice to the petitioner and
without giving it any opportunity. The Distt. Excise Officer, however, on
demand from the petitioner had modified the earlier order of 17th March, 1988
and had issued on 18th March, 1988 a demand notice for 311 RS.46,66,451-45- It
is the grievance of the petitioner that as it was carrying on the manufacture
under the 1955 Act, it had applied for licence and the respondent authorities
without assigning any reason, refused to renew the licence of the petitioner
company. The implication of such absence of renewal is that the petitioner was
being called to pay an illegal demand- It, therefore, was forced to close down
'its manufacturing operations. The petitioner avers that in the meeting which
took place between the Excise Commissioner and the Managing Director of the
petitioner-company on 14th March, 1988 the petitioner was orally informed that
the licence would be renewed upon payment of dues under the orders dated 17th
and 18th March, 1988, as aforesaid. The petitioner further states that it was
told by the Excise Commissioner to deposit 1/3rd of the amount forthwith and
execute a bank guarantee for the remaining amount. According to the petitioner,
it had deposited the sum of Rs. 11,66,000 and consequently the L-I licence was
renewed for a period from 25.3.1988 to 31.3.1988. Then on 1st April, 1988 the petitioner was once again
forced to close down its manufac- turing activity in the absence of further
renewal of licence for the period from 1.4.1988 to 7.4.1988.
It is
stated that the petitioner-company had filed an appeal before the Commissioner
under rule 127 of the 1956 Rules and upon compliance with the conditions of the
State authorities, the licence was renewed from 7.4.1988 on ad hoc basis for a
period of 3 months upto 30th June, 1988. The case of the petitioner is that the
hearing of the appeal before the Excise Commissioner was over on 23.4.1988. Howev-
er, no order thereupon was passed. On 7th March, 1988 M/s.
Grindlays
Bank, who are the bankers of the petitioner, issued a bank guarantee inquiring
whether any orders had been passed by the Excise Commissioner and whether the
sum covered under the bank guarantee had become due. The peti- tioner was
informed by the bankers that the District Excise Officers and other officers
present in the bank had served an order requiring the Bank to clear the bank
guarantees.
The
petitioner states that at that time it had no informa- tion as to the order of
the Excise Commissioner but later on it came to learn that the Excise
Commissioner had passed an order on 5th May, 1988 but the same was not
communicated to it; and the bank guarantees were enforced without giving the
petitioner any opportunity of filing any revision petition.
The
petitioner thereafter moved a writ petition before the Allahabad High Court which
directed that the said bank guarantee should not be encashed until 13th May, 1988.
According
to the petitioner, the bankers under-coercion were compelled to encash the bank
guarantee on 9th May, 1988 and issue a draft for an amount of Rs.35 lakhs. The 312
writ petition of the petitioner came up for hearing before the Allahabad High
Court and it was directed to file a revision petition within two weeks from
13.5. 1988 and the same should be considered on merits. The High Court had
stayed the recovery of an amount of Rs.21,46,134.20 till the disposal of the
stay application.
On 22nd September, 1988 the Additional Secretary to the
Govt. of India allowed the revision petition of the peti- tioner and set aside
the orders of the District Excise Officer, dated 17-18th March. 1988. Thereupon
the petitioner called upon the District Excise Officer, to refund the amount of
Rs.46,47,000 but the respondents failed to refund and neglected it. The
respondents had issued a show-cause notice calling upon the petitioner as to
why an amount of Rs.68.13 lakhs be not recovered on Homeodent tooth paste
manufactured and cleared between 1985 and 1988. The High Court had dismissed
the writ petition which is the subject- matter of another special leave
petition. Respondent No. 3 i.e. the District Excise Officer. Ghaziabad. vide his order dated 19.1. 1989
had confirmed the show-cause notice issued by him on 2nd November, 1988 and also confirmed the demand for
Rs.68,50,745.20. The said order dated 19th January, 1989 is the subject-matter of challenge
in writ petition No. 426/89.
Therefore,
the basic question now is, whether the au- thorities under the 1955 Act were
entitled and authorised to levy duties under the Act. In the orders dated
18-19th January, 1989 passed by the District Excise Officer which is in
vernacular and a translation of which is given in Annex- ure XIV to the writ
petition, states that in reference to a confidential letter dated 13th January,
1988 of the Deputy Excise Commissioner, Meerut Division, during the surprise
inspection of the premises of M/s. Dabur India Ltd. and M/s. Sharda, Ghaziabad on 18th January, 1988 by Sri Lal Ji Rai, the then Distt. Excise Officer &
Excise Superintendent, Bulandshahr, it was found that M/s. Dabur India Ltd. had
been manufacturing a toilet preparation i.e. Homeodent tooth paste containing,
according to the said order, alcohol for M/s. Sharda Boiron. The question is,
did they do so. How does one find it out? As stated in the order, there is no
dispute but if it was, then calculating the duty u/s 3 of the 1955 Act a sum of
Rs.68, 13,334.28 would be found due.
The
Officer found that there was a conspiracy and without knowledge of the
officer-in-charge in a clandestine manner this production was carried on. This
is an answer, according to the impugned order, u/s 7 of the 1955 Act. Section 7
deals with the offences and penalties under the Act and provides that if any
person contravenes any of the provi- sions of a notification issued u/s 6 313
or evades the payment of any duty of excise or fails to supply any information
which he is required to supply, he shall for every such offence be punishable
to the punishment mentioned in the section. The officer has further found that
as against an outstanding sum of Rs.68, 13,334.28. Rs.
11,67,000
had been deposited. After narrating the incident and the presence of the
counsel and lawyers the officer was of the opinion that nothing has been
brought to his notice which required revision of the previous order. So, there-
fore, a break up was given and out of Rs.68,50,745.20, the actual duty payable
Rs.46,67,000 has already been realised and, therefore, the balance duty is
Rs.21,83,745.28 and they have failed to realise the same.
In
view of this Court's order dated 10th January, 1989, whereby this Court had
directed that the proceedings might go on but the demands will not be enforced,
inasmuch as orders dated 18-19th January, 1989 reiterate the order of 17th
March, 1988 it is necessary to refer to the order dated 17th February, 1988
passed by the District Excise Officer, Ghaziabad. Therein it stated that both
the units were joint- ly and severally inspected on surprise visits i.e. the
units bonded laboratories, and on the basis of the information collected it was
revealed that Dabur India Ltd. was manufac- turing a suitable toilet
preparation containing alcohol named Homeodent without obtaining necessary licence.
Accord- ing to the said order the product had been manufactured outside the
bonded premises approved under the L-I licence and the duty payable on this
product had not been paid. The order further states that on the basis of the
information and the stock a sum of Rs.68,13,334.20 was payable and a challan to
that effect was issued. In the first letter dated 13th March, 1988, Dabur India
Ltd. wrote to the Distt.
Excise
Officer, that the classification of Homeodent tooth paste made by the Excise
Officer as toilet preparation was erroneous, as this preparation, according to Dabur
India Ltd., should be classified under Item 2 of the Schedule to the 1955 Act
as a Homeodent preparation and not under Item
4.
Item 3 to the Schedule of 1955 Act contains the follow- ing: "Homeopathic
preparations containing alcohol". Item No. 4 is "Toilet preparations
containing alcohol or narcotic drugs or narcotic". So the question raised
here is whether the tooth paste is primarily a toilet preparation or a
homeopathic preparation. Such a question really, in our opinion, must be justiciable
by the authorities enjoined to enforce the provisions. On the basis that the
product was a homeopathic item, a sum of Rs.6245.29 was paid. The peti- tioner
further stated as follows:
"Assuming
and not admitting that your classification is 314 correct, even then your
calculation of duty of the product is erroneous on the following points:
a. The
total wholesale value of the goods manufactured as on 18.1.88 is Rs.65,93,91.63.
b. A
trade discount @ 20% has to be deducted from this wholesale price Rs. 13,26,373.27.
The
balance amount comes to Rs.52,67,542.36. The excise duty element in this amount
comes to Rs .26,33,77 1.18.
The
assessable value comes to Rs.26.33.77 1.18. The calculation chart showing these
calculations is attached as Annexure 'B'.
3.
Kindly note that for central Excise purpose the excise- able value declared to
the CE Deptt. on the total goods manufactured upto 18.1.88 is only Rs.46,66,45
1.45 and the wholesale price of these goods is Rs.66,31,866.35 only. This too
is evident from Annexure 'B'.
We
would, therefore, request you to kindly amend your demand notice accordingly.
Please
note that the foregoing is without any prejudice whatsoever to any arguments
that may be raised by us at the time of hearing with the Commissioner UP,
Excise, Allahabad or during any legal proceedings arising out of your afore-
mentioned demand notice or adjudicatory order of the Commis- sioner. We also
reserve the right to adduce further grounds in our defence and support at
any/all future occasions in this connections." On 18th March, 1988 there
was further amendment by the Distt. Excise Officer, Ghaziabad, he stated as
follows:
"With
reference to this office's notice No. 185/1-2 dated 18.3.88 both the units are
jointly and severally informed that in the application letters dated 17.3.88
received separately from both the units, the total wholesale price of the total
Homeodent tooth paste manufactured has been de- clared as Rs.65,739, 15.63.1t
has also been informed that 315 for the purpose of Central Excise Duty, the
total assessable value of the total quantity of Homeodent tooth paste manu- factured
until 19.1.88 is Rs.46,66,45 1.45 and that the total wholesale price on this
quantity has been declared as Rs.66,31,866.35 to the Central Excise Deptt.
Based
on your declaration and clarification given in your above application and. on
the basis of statistics and decla- rations that exciseable value on a
provisional basis for the total quantities of the cosmetics homeodent tooth
paste containing alcohol, which has been sold until 18.1.88 and which in stock
on 18.1.88 has accepted as Rs.46,66,45 1.45 instead of Rs.6,81,334.20. This
does not mean that this value has been finally accepted.
One to
the fore mentioned, the amount of Rs.68, 13,33 1.20 is amended to
Rs.46,66,451.45 in the office's notice No. 185/1-2 dated 18.1.88. On this
partial amendment, both the units are jointly and severally ordered to
provisionally deposit Rs.46,66,45 1.45 instead of Rs.68, 13,324.20 as duty in
the State Treasury, Ghaziabad immediately on receipt of this notice, under the
appropriate account head and to produce a copy of the receipted Treasury Challan
as proof of deposit in this office." In view of the facts alleged and
found by the District Excise Officer, Ghaziabad, as mentioned hereinbefore, it
appears to us that the Homeodent was a medicinal and toilet preparations and
liable to excise duty. This Court in M/s `Baidyanath Ayurved Bhawan (Pvt.)
Ltd., Jhansi v. The Excise Commissioner, U.P. & Ors., [1971] 1 SCR 590 has
held that in order to attract duty under the 1955 Act, all that is re- quired
is that a medicinal preparation should contain alco- hol. Alcohol may be part
of the preparation either because it is directly added to the solution or it
came to be in- cluded in it because one of the components of that prepara- tion
contained alcohol. It is undisputed that mother-tinc- ture was one of the
components that was used in the prepara- tion of Homeodent and it has been
found that alcohol was there and mother tincture was added in the medicinal prepa-
ration as its component. That was not the case before any authorities in this
case but being present it was found in liquid form which incidentally again was
disputed because test reports were not accepted by the petitioner but accord- ing
to the respondent authorities, indicated the presence of alcohol. Section 3(1)
of the 1955 Act was attracted. This Court in the 316 aforesaid decision further
reiterated that even if the imposition of excise duty under section 3(1) of the
said Act on preparations in which alcohol was indirectly introduced attracts
multipoint taxation that by itself would not render the duty illegal. The
provisions for rebate of duty on alcohol contained in Section 4 of the said Act
show that multipoint tax on medicinal preparations containing alcohol was
within the contemplation of the legislature otherwise there was no purpose in
incorporating section 4 into the Act. In this connection, section 4 of the 1955
Act may be referred to which is as follows:
"4.
Rebate of duty on alcohol, etc., supplied for manufac- ture of dutiable
goods--Where alcohol, narcotic drug or narcotic had been supplied to a
manufacturer of any dutiable goods for use as an ingredient of such goods by,
or under the authority of, the collecting Government and a duty of excise on
the goods so supplied had already been recovered by such Government under any
law for the time being in force, the collecting Government shall, on an
application being made to it in this behalf, grant in respect of the duty of
excise, leviable under this Act, a rebate to such manufacturer of the excess,
if any, of the duty so recovered over the duty leviable under this Act."
In this case, however, the case of the petitioner is that duty has been
recovered under the 1944 Act; if any refund has to be made, it must be made in
accordance with law. There is a question of limitation for claiming refund of
this duty. The provisions are not clear. In such a situa- tion, it appears to
us that the justice requires that provi- sions should be made more clear and in
the 'view of the facts and the circumstances that have happened, we would
direct that if the petitioners are entitled to any refund of the duty already
paid to the Central Government in view of the duty imposition now upheld
against them in favour of the State Government such refund application should
be enter- tained and considered in accordance with law. We are con- scious in
giving this direction, we are not strictly follow- ing the letter and the
provisions of the Act. But in a case of this nature, where there is some doubt
as to whether duty was payable to the Central Government under the 1944 Act or
whether the item was dutiable under the 1955 Act, it would be just and proper
and in consonance with justice in fiscal administration that the Central
Government should consider in the light of the facts found, if an application
is made under section 11B of the 1944 Act and pass appropriate order. Such
application should be made within four months from the date of the judgment. In
the facts 317 and the circumstances 01' this case, the limitation period under
section 1 lB of the 1944 Act should not apply. This direction, in our opinion,
must be confined in the facts and the circumstances of this case only.
Our
attention was drawn to the observations of this Court in Union of India &
Ors. etc. etc. v. Bombay Tyre International Ltd. etc. etc., (supra) in respect
of the valuation. But the point not having been taken at any stage before the
authorities, it is not proper for us at this stage to go into this question. We
will proceed in view of the facts and the circumstances of this case and to do
justice between the parties on the basis that the duty has been correctly
imposed. We have looked into the order of the District Excise Officer, Ghaziabad and we find that all relevant facts
have been considered and no facts were brought before us contrary to the
findings nor any conten- tions of substance raised which can induce us to hold
to the contrary.
Reference
may also be made to the observations of this Court in Mohanlal Maganlal Bhavsar
& Ors. v. Union of India & Ors., [1986] 1 SCC
122 for the test to determine whether an item of medicinal preparation falls
under Item 1 of the Schedule to the 1955 Act. It has been determined by the
authorities enjoined to enforce that Act and such finding has not been assailed
on any cogent or reliable ground in any proper manner. If that is the position,
then that order must be upheld but it must be upheld that Homeodent was
dutiable and as such the impugned order was correctly passed by the District
Excise Officer.
Our
attention was drawn to the observations of this Court in N.B. Sanjana,
Assistant Collector of Central Ex- cise, Bombay & Ors. v. The Elphinstone
Spinning and Weaving Mills Co. Ltd., [1971] 3 SCR 506. But in view of the facts
on which the parties rested their case before the authori- ties, it is not
necessary at this stage to go into this controversy.
In the
aforesaid view of the matter, we are of the opinion that the impugned order
dated 18th January, 1989 passed by the District Excise Officer, Ghaziabad, must
be given effect to and thereafter the petitioner's application for refund, if
any, made before the authorities under sec- tion 4 of the 1944 Act within the
time indicated as before should be disposed of in the manner indicated above,
if made.
Before
we part with this case, two aspects have to be adverted to--one was regarding
the allegation of the peti- tioner that in order to compel the petitioners to
pay the duties which the petitioners con- 318 tended that they were not liable
to pay, the licence was not being renewed for a period and the petitioners were
con- stantly kept under threat of closing down of their business in order to
coerce them to make the payment. This is unfor- tunate. We would not like to
hear from a litigant in this country that the Government is coercing citizens
of this Country to make payment of duties which the litigant is contending not
to be leviable. Government, of course, is entitled to enforce payment and for
that purpose to take all legal steps but the Government, Central or State,
cannot be permitted to play dirty games with the citizens of this country to
coerce them in making payments which the citizens were not legally obliged to
make. If any money is due to the Government, the Government should take steps
but not take extra legal steps or manoeuvre. Therefore, we direct that the
right of renewal of the petitioner of licence must be judged and attended to in
accordance with law and the occa- sion not utilised to coerce the petitioners
to a course of action not warranted by law and procedure. Secondly, in a
situation of this nature, we are of the opinion that the Government should
consider feasibility of setting up of a machinery under a Council to be formed
under Article 263 of the Constitution to adjudicate and adjust the dues of the
respective Governments. In these peculiar facts, it appears that the dispute is
under two different central legislations and under one the State authorities
will realise and impose the taxes on finding on certain basis and under the
other the same transaction may be open to imposition by Central Government
authorities on a particular view of the matter.
In
such a situation, how and wherein the refund should be made of any duty paid in
respect of part of a transaction to one of the authorities, the State or the
Centre, to be adjusted should be the subject matter of a settlement by the
Council to be set up under Article 263 of the Constitution.
This
is a matter on which we draw the attention of the concerned authorities for
examination because section 3 of the 1955 Act and section 3 of the 1944 Act may
overlap similar transaction in certain cases.
Writ
petitions are disposed of with the aforesaid direc- tions. Special leave
granted in SLP (Civil) No. 1610 of 1989 (M/s. Dabur India v. State of U.P. & Ors., ) and
SLP (Civil) Nos. 135-36 of 1989 (Sharde Bairon Laboratories v. State of U.P.
& Ors.). Appeals are disposed of in the light of the directions given
hereinbefore. Save as aforesaid all interim orders are vacated.
In the
facts and the circumstances of the case, the parties will pay and bear their
own costs.
R.S.S.
Petitions disposed of.
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