JG VACUUM FLASKS LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) Two reasonable persons can perfectly reasonably come to opposite conclusion on the same set of fact without forfeiting their title to be regarded as reasonable, so said Lord Hailsham L.C. in (Re : W. An Infant) (1971) A.C. 682 at 700. But, in this appeal, we meet two reasonable men who are as different from each other as cheese from chalk. One reasonable manufacturer of vacuum flasks tells revenue that the refills which are made of glass are a fragile commodity and consequently about 5% of his manufactured goods broke in the process. Another equally reasonable officer of Central Excise feels that not a single vacuum flask should be accounted for under the head of breakages. This thus is the focal point of the controversy.

(2.) Jg. Vaccum Flasks Limited are engaged in the manufacture of vacuum flasks and refills at Chinchvad, Poona-19, and hold Central Excise 1-4 Licence. Under section 3 of the Central Excise and Salt Act, 1944, duties of excise are levied on all excisable goods at the rates set forth in the First Schedule. Item 55 of the First Schedule speaks of vacuum flasks and other vacuum vessels. Under Chapter VII A of the Central Excise Rules, it is permissible for the manufacturer to remove excisable goods kept in private warehouses, sometimes designated as bonded store-rooms. Such bonded store-rooms are subject to inspection, and under Rule 9 excisable goods cannot be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, until the excise duty leviable is paid. Under Rule 223-A an account of stock of goods in the warehouse is to be taken and if the owner of the bonded store-room cannot account for the deficiency at the time of its checking, the owner is liable to pay the full amount of duty chargeable on such goods as are found deficient, as well as penalty.

(3.) As a result of an annual stock taking under Rule 223-A a shortfall of 1,74,545 refills came to the notice of excise authorities for which a show cause notice dated 23-7-1973 was issued under Rule 9, alleging that the manufacturer had disposed of the excisable goods. A reply by the manufacturer on 30-10-1973 resulted in a corrigendum to be issued whereby the notice was deemed to be under Rule 223-A instead of Rule 9 as adumbrated earlier. The manufacturer replied on 16-11-1973 attributing the shortage due to breakage in the storage but the Assistant Collector of Central Excise, Poona, did not accept the plea of breakage and by his order dated 17-12-1973 demanded from the manufacturers a duty of Rs. 58,975,68 and in addition imposed a penalty of Rs. 200/-. An appeal against the order, as well as a revision application which followed, met with no success and the manufacturers, after serving a notice under section 80 of the Civil Procedure Code, filed a declaratory suit in the Court of the Civil Judge, Senior Division, Poona, challenging the demand. The suit also met with the same fate and the manufacturers are now before this Court in appeal.