THE COMMISSIONER OF EXCISE Vs. PADMANABHAN NAIR

JUDGEMENT

(1.) This appeal has been preferred by the Commissioner of Excise, Board of Revenue, Trivandrum and two other officers against the judgment of a learned Single Judge of this court allowing O.P. No. 3968 of 1976 filed by the respondent herein and quashing the notice Ext. P1, dated 17th December 1973 issued by the Commissioner of Excise to the respondent herein. The impugned notice was issued by the Excise Commissioner in purported exercise of the power conferred by R.12 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 (hereinafter referred to as M. and T. P. Rules) informing the respondent that a detailed investigation conducted by the Board of Revenue into the activities of Messrs. Pratap Industries, Tirur a proprietary concern of the respondent had revealed that there was large scale evasion of excise duty by falsification of invoices by showing items of medicine manufactured and released from the factory and its bonded depots as low duty items while, in truth, they were high duty items and that by the said process the respondent had escaped payment of duty in respect of 852,041 proof litres of spirit used for high duty preparations manufactured during the years 197071, 197172 and 197273. The respondent was called upon under Ext. P1 to remit a sum of Rs. 23,43,110 being the duty payable by him in respect of the aforesaid quantity of spirit used in the manufacture of high duty preparations within two weeks of the receipt of the said notice. It was also stated in Ext. P1 that in case the respondent had any objection to the payment he may submit his explanation and produce all records, invoices of sale, etc. The respondent furnished a detailed explanation stating that there had not been any falsification of invoices nor any evasion of the duty legitimately payable by him in respect of the medicinal preparations manufactured and cleared from his factory. It was further contended that even if it is to be assumed that there was any short collection of duty, the demand should have been made within six months from the date of short payment of duty and removal of the goods since the matter is directly governed by R.11 of the M. and T. P. Rules and not by R.12 under which the notice was purported to be issued by the Commissioner. Ext. P2 is a copy of the said explanation dated 27th December 1973 filed by the respondent. Without passing any further orders in the matter after considering the explanation Ext. P2 submitted by the respondent, revenue recovery proceedings were initiated against the respondent for the realisation of the aforesaid amount of Rs. 23,43,110. The Tahsildar, Tirur (3rd appellant) is said to have gone to the respondent's premises on 27th July 1976 and presented the notice of demand under the Revenue Recovery Act with a threat of immediate attachment in the event of failure to comply with the same. The respondent, thereupon, came to this court and filed the writ petition seeking to quash Ext. P1 as well as the revenue recovery proceedings initiated against him pursuant thereto. Before the learned Single Judge it was conceded by the Additional Advocate General appearing on behalf of the Commissioner of Excise that an illegality had been committed in initiating the revenue recovery proceedings without passing final orders in the matter after considering the explanation submitted by the petitioner in response to the notice Ext. P1. It was further conceded that there had been a violation of the principles of natural justice in as much as the petitioner had not been afforded an opportunity to substantiate the case put forward by him in the explanation Ext. P2. These concessions, however, related only to the legality of the revenue recovery proceedings initiated pursuant to Ext. P1. The important question still remained as to whether the Commissioner of Excise had acted validly within the scope of the power conferred by R.11 of the M. and T. P. Rules in issuing the impugned notice Ext. P1 or whether, on the other hand, the matter was covered by R.12 and the demand made far beyond the period of six months mentioned in the said rule was illegal and without jurisdiction as contended by the respondent. The learned Judge went into the said question elaborately and came to the conclusion that the case was governed by R.11 and not by R.12 and since the demand had been made only long after the expiry of the period of six months prescribed under R.11, the action initiated under Ext. P1 was wholly illegal and without jurisdiction. The original petition was accordingly allowed with costs. Hence this appeal by the department.

(2.) After hearing both sides we have come to the conclusion that the view taken by the learned Judge that it is R.11 and not R.12 of the M. and T. P. Rules that governs the present case is absolutely correct.

(3.) R.11 deals specifically with the subject of recovery of duties or charges Short levied. It reads: