UNION OF INDIA Vs. VENGUNTA SURYAPRAKASA RAO

JUDGEMENT

(1.) Two plaintiffs, who constituted a registered firm of traders at Eluru, filed O. S. No. 26 of 1960 in the City Civil Court, Hyderabad for refund of tax of Rs. p. Being the amount of tax of Rs. 19,388-31 plus. Rs. 500 which had been levied and collected from the plaintiffs by the Collector of Central Excise and also for interest and costs. The sole defendant viz., the Union of India, contested the suit. The learned IVth Additional Judge, City Civil Court, who tried the suit, decreed it as prayed for except for awarding interest only from the date of the plaint and not from 5-3-1960 as claimed in the plaint. The defendant filed this appeal against the judgment and decree.

(2.) The plaintiffs are a firm of tobacco merchants who manufacture cheroots from country tobacco. They are manufacturing four brands namely, (1) Senior Langar, (2) Chinna Langar, (3) Key brand and (4) Special Langar. Senior Langar was beyond doubt taxable under Item No. 9 (II) (viii) of Schedule I to Central Excises and Salt Act. 1944 (hereinafter called the Act). The other three brands of cheroots were being sold by the plaintiff at a whole-sale cash price of Rs. 0-14-0 per hundred to M/s Maganti Veeriah and Company (hereafter referred to for convenience as the Company) which was the sole selling agent of the plaintiffs firm (hereafter referred to for convenience as the firm). There was a trade agreement between that company and the firm. Under Item NO. 9(II) (ix) of Schedule I, no duty was leviable if the price per hundred did not exceed Rs. 0-14-0. The Deputy Superintendent of Central Excise conducted experiment on 5-2-1956 and other dates to ascertain the cost structure of the brands of Chinna Langar, Key (Talam) and Special Langar. He decided that all the three varieties fell under taxable categories. On 29-5-1956 the Superintendent of Central Excise went to the firms factory and seized the stock these three brands of cheroots totalling in all 2,83,084 declaring that they were excisable goods.

(3.) He released the goods only on payment under protest, of an amount of Rs. 700.00 as advance penalty and directed them to sell the goods only after affixing bond rolls of the value of duty payable of them under item No. 9 (II) (ix) of Schedule I to the Act. The Superintendent ascertained the number of cheroots which had been manufactured between 5-2-1956 the date of the earliest experiment by the Deputy Superintendent, Central Excise, Nellore and 29-5-1956 the date of seizure of cheroots by the Superintendent of Central Excise. On 7-9-1956, the Collector of Central Excise issued a notice to the firm and, after due enquiry, passed an order (Ex. A-6) dated 8-11-1956 levying a duty of Rs. 19,388-5-0 on the cheroots removed from the factory during the period 5-2-1956 to 29-5-1956 and penalty of Rs. 500 that is, the suit amount. The plaintiffs firm filed an appeal before the Central Board of Revenue under S. 35 of the Act against the said order of the Collector dated 8-11-1956. But, the said appeal was dismissed by an order of the Board dated 29-7-1958. Against the said order, the plaintiffs firm filed Revision Application No. 267 of 1959 before the Central Government, Ministry of Finance (Department of Revenue), New Delhi. That also was dismissed on 30-6-1959. The firm paid the full amount of tax and penalty under protest in instalments ending with 27-11-1957.