M/S. DHANPAT OIL & GENERAL MILLSversusUNION OF INDIA & ORS.

    4
                                                                         ·-

A                   M/S. DHANPAT OIL & GENERAL MILLS
                                   v.
                          UNION OF INDIA & ORS.

                               JULY 8, 1985

B               (R.S. PATHAK AND E.S. VENKATARAMIAH, JJ.]

           Produce Cess Act, 1966, Sections 2(a),7,8,9(2),10 and
    15(2), scope of - Whether proceedings under the Act can be taken
    without appointing a "Collector" and an "Appellate Authority" by
    resort to the provisions of section 15 (2) of the Act - Monthly
    filing of obligatory returns under section 8, whether can be
c   discontinued on the plea of non~appointment of a "Collector"-
    Liability to the payment of cess for the products manufacured and
    a liability to prosecution for not filing returns and paying the
    cess during the period when the Collector and Appellate Authority
    had not been appointed.

          The Produce Cess Act, 1966 is a dual enactment. It pro-
D   vides for the levy and collection, as a cess, of customs duty on
    produce specified in the first schedule to the Act and exported
    beyond the limits of India; and (ii) of excise duty of the pro-
    duce specified in the second schedule. Section 8 of the Act
    requires the occupier of a mill to furnish to the "Collector"
    every month a return stating the total amount of produce, speci- .
E   fied in the Second Schedule consumed or brought under processing
    or extracted in the mill during the preceding month. The return
    has to be furnished before the seventh day of each month together
    with such other information as may be prescribed, and every such
    return is to be made in such form and to be verified in such
    manner as may be prescribed. There must be a "Collector" within
F   the meaning of the Act, that is as defined in section 2(a) of the
    Act to whom such monthly returns are to be furnished. On non-
    compliance with the provisions of section 8, the "Collector" so
    appointed by the Central Govermnent under the Act, is empowered
    under sub-section 2 of section 9 to proceed at once and make an
    assessment in the manner prescribed by the Produce Cess Rules
G   1969. Such a "Collector" was appointed under the Act on July 13,
    1970. The Appellate Authority, entitled to hear app~ls from the
    orders of the collector was appointed on August 21, 1972. The
    appellant carries. on the business of oil extraction from ground-
    nut, cotton-seeds, sarson and other oil seeds and also deals in
    vegetable and other essential oils. On September 29, 1972 the
H   Superintendent, Central Excise, issued a notice requiring t.he
                    DllANPAT OIL & GEN. MILLS v. UNION                 5


   appellant to produce certain docwnents and to appear before the
   authority for the purpose of an enquiry pertaining to the cess
   leviable under the Act, The appellant did not comply with the
   notice. On December 22, 1972, the Superintendent, Central Excise,
   issued a further notice r~quiring the appelllant to show cause
   against the imposition of a penalty for its failure to file a
   return and deposit the cess. The appellant questioned the                B
_, jurisdiction of the authority to levy cess.A further notice dated
   September 3, 1973 was issued by the Assistant Collector, Central
   Excise requiring the appellant to appear before him in connection
   with the aforesaid proceedings. The appellant, admittedly, did
   not deposit any cess nor file any return, contending that there
   was no jurisdiction in the authorities to levy and recover the           c
   cess on the products manufactured and dealt in by it. The
   appellant theo filed a writ petition in the High Court of Punjab
   & Haryans raising various points, including the question whether
 , sub- section (2) of section 3 and section 4 of the Act and rule 6
   of the Cesa Rules were ultra vires and whether the notices issued
   by the authorities were"Vaiid on the ground that no machinery bad        D
   been provided for the levy of the cess during the relevant period
   and prayed for relief .against the proceedings. The Writ Petition
   was dismissed and hence the appeal by special leave.

         Dismissing the appeal, the Court,

           lll!LD: 1.1. The entire machinery under the Produce Cesa Act.,   E
,. · 1966 through which the occupier of a mill must discharge his
     statutory obligations remains non-existent unless a "Collector"
    within the meaning of the definition in section 2(8) is
    appointed. So long as there is no Collector there is no
    obligation on the occupier of a mill to furnish monthly returns
    and there is no existing statutory authority for taking                 F
     proceedings for the assessment and collection of the cess.
     Clearly there can be no Collector for the purpose of the Act
    unless he is an officer appointed by . the Ce.-itral Govermoent to
     perform the duties of a Collector provided under the Act and
     Rules. A subordinate officer is also envisaged within the
     definition of section 2(a) but he 1111St be an officer authorised      G
     in writing by the Collector appointed under the Act to perform
     such duties. Even the earliest step required of an occupier, that
     is to say, the furnishing of a statement containing the parti-
     culars specified under section 7 must be made to a Collector, and
     that is also not possible in the absence of a duly appointed
     Collector under the Act. [lO B-D]                                      H
    6             SUPREME COURT REPORTS           [1985] SUPP.2 s.c.R.    '-

A         1.2. The appellant in this case, cannot be prosecuted for
    its omission to furnish monthly returns required under section 8
    of the Act during the period upto July 3q, 1970 for which there
    was no Collector appointed under the Act. The APpellate Authority
    was appointed on Auguat 21, 1972, but the delay in appointing the
    Appellate Authority can be no grpund for not furnishing the
B
    returns after July 30, 1970, when the Collector was appointed.
    [11 G-il.,12 A & 13 BJ

          1.3 The absence of duly appointed Collector under the Act
    for a certain period is a good defence against a prosecution for
    non-compliance with section 8 of the Act during thst period only.
    However, the delay in appointing the Collector under the Act does
c   not relieve the. appellant of the liability to excise duty in
    respect of the period duriri,g which the Collector was not
    appointed. [13 B-D]

          The levy is imposed by sub-section 2 of section 3 of the
    Act and comes into existence immediately on the taxable event
    attracting excise duty. The accrual of the obligation to suffer
D   the duty does not depend on the appointment of a Collector, which
    is only part of the machinery designed by the Act for the Assess-
    ment and recovery of the duty. The imposition and accrual of the
    duty is a thing apart from its assessment and collection. There
    is an obligation to file a return under section B of the produce
    and a return IDllSt be filed every month before the 7th day. Non-
E   compliance with the latter obligation is sufficient to bring the
    occupier within the mischief of sub-section 2 of section 9 of the
    Act. But where such non-compliance is due to the circlDDStance
    that no Collector was appointed to whom such returns could .be
    furnished, sub-section 2 of section 9 cannot come into play.
    However, the obligation to file a return remains and it remains
F   in respect of the entire period during which the Collector had
    not been appointed, and once the Collector is appointed the occu-
    pier is obliged to file a. return for the entire period from the
    commencement of the levy including the period during which there
    waa no Collector. That is because t.he · liability to excise duty
    had already accrued with the earliest excisable event and i t
G   subsisted during the entire period including the period during
    which there was no Collector. The position is that when the
    Collector is appointed the occupier IDllSt within a reasonable time
    thereafter, file monthly returns of the produce cowumed or
    brought under processing or extracted in the mill during each
    preceeding month, such monthly returns being in respect of all
H   the months included in the period uptodate. Or the occupier may
                DHANPAT OIL & GEN. MILLS v. UNION· [PATHAK, J.]          7


     make a composite return apecifying the amount of such produce            A
     monthwise or the entire period. The Collector will then take the
     return into consideration and take proceedings under section 9 of
     th<; Act.[12 C.,£, 13 A]

           2. Recourse to sub-section 2 of section 15 of the Act on
     the ground that no steps are instituted by the Government to        B
 J   bring sections 2(a),6,7,8,9 and 20 into working life by taking
     action under them cannot be resorted to. Sub-section 2 of
     section 15 is not intended as a substitute for the other provi-
     sions of the Act. It is not an interim provision intending that
     recourse may be had to it until action is taken by the Government
     to instal the machinery and institute the steps required by the     c
     Act for making its provisions workable. Sub-section 2 of section
     15 is intended to cover that area only which is not included
     within the area covered by the remaining provisions of the Act.
 •   It is a residual provision and nothing more. For exsmple, a
     Collector appointed under the Cesa Act can alone be the assessing .
     authority authorised to receive returns and make assessments. No    D
     officer or authority conatituted under the Central Excises and
     Salt Act can do so. Nor can the appellate authority appointed
     under the latter enactment entertain and hear appeals against
     a8sessments made under the Cesa Act. The jurisdiction to do so
     belongs solely to the appellate authority appointed under sub·
     section 1 of section 10 of the Act.[ll C-G)
                                                                              E
              CIVIL APPELLATE JURISDICTION : Civil Appeal No. 138 of
     1979.

           From the Judgment and Order dated 29.11.1978 of the Punjab
     & Haryana High Court in c.w. No. 35 of 1974.
                                                                              F
          A.K. Sen, R.L. Batta, V.K. Bahl and H.K. Puri for the
     Appellant.

             Hardyal Hardy, K. S.Gurumoorthy and Miss A. Subhashini for
     the Respondents.
                                                                              G
             The Judgment of the Court was delivered by

              PATHAK, J.   This   civil appeal arises   out   of   a   writ
     petition filed in the High Court of Punjab and Haryana for the
~,   quashing of proceedings taken under the· Produce Cess Act, 1966
     for the assessment and recovery of the cess.                             H
    8             SUPREME COURT REPORTS          [1985] SUPP.2 s.c.R.


A         The Indian Cotton Cess Act, 1923, the Indian Lac Cess Act»
    1930, the Indian Coconut Committee Act, 1944 and the Indian Oil-
    seeds Committee Act, 1946 ceased to have effect from April 1,
    1966 in consequence of which the relative Committees constituted
    under those Acts stood dissolved and there was no legislative
    sanction tor the continuance of the levy of cess on the produce
B   after March 31, 1966. While the Research Institutes and Stations
    and other research projects of those Committees now fell within      ..
    the administrative control of the Indian Council of Agricultural
    Research, and the work relating to development, marketing and
    other functions was to be looked after directly by the Ministry
    of Food and Agriculture, Department of Agriculture, assisted by
    Development Councils constituted by the Government, and suitable
c   grants were envisaged to the Indian Council of Agricultural
    Research for the maintenance of Research Institutes and for
    carrying on the research activities, the Government felt need for
    larger investments on such projects in order to undertake an
    effective programme of research and development. Accordingly, it
    decided to continue the cess on the produce even after the aboli-
    tion of the Commodity Committees. For the achievement of that
D   objective Parliament enacted the Produce Cesa Act, 1966 (shortly
    referred to as "the Act"). The Produce Cess Rules, 1969 were
    published on ~larch 28, 1969.

         , The Act is a dual enactment. It provides for the levy and
    collection, as a cess, of customs duty on produce specified in
E   the First Schedule to the Act exported beyond the Umits of
    India. And it provides for the levy and collection, as cess, of
    excise duty on the produce specified in the Second Schedule. We
    are concerned ·in this case with the levy and collection of excise
    duty.,                                                                    /


F         The appellant carries on the business of oil extraction
    from groundnut, cotton-seeds, sarson and other oil seeds and also
    deals in vegetable and other essential oils. On September 29,
    1972, the Superintefiltent, Central Excise, issued a       notice
    requiring the appellant to produce certain doctDnents and to
    appear before the authority for the purpose of an enquiry
G   pertaining to the cess leviable under the Act. The appellant did
    not comply with the notice. On December 22, 1972, the Superin-
    tendent, Central Excise, issued a further notice requiring t-he
     appellant to show cause against the imposition of a penalty for
    'its failure to file a return and to deposit the cess. The appel-
     lant questioned the jurisdiction of the authority to levy cess.
                                                                              -
H
               DHANPAT OIL a GEN. MILLS v. UNION [PATHAK, J ·]          9
-·'

      A further notice dated September 3,1973 was issued by the Assis-       A
      tant Collector, Central Excise requiring the appellant to appear
      before him in connection with the aforesaid proceedings.
      Admittedly, the appellant did not deposit any cess nor filed nn.y
      return, contending that there was no jurisdiction in the autt10-
      rities to levy and recover the cess on the products manufactured
      and dealt in by it.                                                    B
_.}

            The appellant filed a writ petition in the High Court of
      Punjab and Haryana. Various points were raised before the High
      Court, including the question whether sub-s. (2) of s .3 and s .4 of
      the Act and rule 6 of the Cess Rules were ultra vires and whether
      the notices issued by the authorities werevalid on the ground          c
      that no machinery had been provided for the levy of the ce~s
      during the relevant pPriod. All the contentions were rejected by
      the High Court, and the writ petition was dismissed •
 •'
 .
            In the appeal before us the limited point raised is that
      the appellant is not liablE to payment of cess for the period          D
      during which the Collector and appellate authority had not been
      appointed, and no penal proceeding can be taken against the appe-
      llant for not furnishing returns and depositing the cess pertain-
      ing to such period. It is pointed out that while s.9 of the Act
      confers rower on the C~llector to make assessment and recovery of
      the e=1se duty m1eh Collector was appointed only on July 13,
      1970. It is also pointed out that while s.10 of the Act provides       E
      for an appeal agair.st ~he assessment, the appellate authority was
      appoint<.d as late as Jl.ui;ust 21, 1972.

            The case before us falls into two parts. Is the appellant
      liable to prosecution for not filing returns and paying the ce~s
      during the period when the Collector and appellate authority had       F
      not been appointed '/ And is the appellant not liable to cess at
      all for the products manufactured during such period ?

            It seems to us that the appellant is right in the conten-
      tion that so long as the Collector is not appointed for the pur-
      poses of the Act no fault can be found with the appellant in not       G
      furnishing returns during such period·. S.8 of the Act requires
      the occupier of a mill to furnish to the "Collector" every month
      a return stating the total amount of produce, specified in the
      Second Schedule, consumed or brought under processing or extract-
      ed in the mill during the preceding month. The return has to be
      furnished before the seventh day of each month together with such      H
      other information as may be prescribed, and every such return is
    10            SUPREME COURT REPORTS          [1985] SUPP.2 s.c.R.


A   to be made in such form and to be verified in such manner as may
    be .prescribed. There must be a Collector within the meaning of
    the Act to whom such monthly returns are to be furnished. The
    expression "Collector" has been defined by clause (a) of s.2 of
    the Act to mean "the officer appointed by the Central Government
    to perform in any specified area the duties of a Collector under
B   the provisions of this Act and the rules made thereunder, and
    includes any officer subordinate to that officer when he may, by
    order in writing, authorise to perform his duties under those
    provisions." Clearly there can be no Collector for the purpose of
    the Act unless he is an officer appointed by the Central Govern-
    ment to perform the duties of a Collector provided under the Act
    and Rules. A subordinate officer is also envisaged within the
c   definition, but he must be an officer authorised in writing by
    the Collector appointed under the Act to perform such duties. It
    would be true to say that unless there is a "Collector"' within
    the contemplation of the Act, there can be no obligation on any
    occupier of a mill to furnish monthly returns. Even the earliest
    step required of an occupier, that is to say, the furnishing of a
    statement containing the particulars specified under a. 7 muat be
D   made to a Collector, and that is also not possible in the absence
    of a duly appointed Collector under the Act. The entire machin-
    ery under the Act through which the occupier of a mill muat dis-
    charge his statutory obligations remains non-existent unless such
    ".Collector" is appointed. So long as there is no Collector there
    is no obligation on the occupier of a mill to furnish monthly
E   returns and there is no existing statutory authority for taking
    proceedings for the assessment and collection of the cess.

          Reliance was placed before the High Court by the respondent
    on su~.(2) of s.15 of the Act. Su~.(2) of s. 15 declares that
    the provisions of the Centtlll Excises and Salt Act, 1944 and the
F   rules made thereunder, inclduing those relating to refunds and
    exemptions from duty, shall, so far as may be, apply in relation
    to the levy and collection of duties of excise on any produce
    specified in the Second Schedule as they apply in relation to the
    levy and collection of duty payable to the Central Government
    under that Act. The High Court took the view that the absence of
G   a Collector appointed under the Act was of no significance and
    proceedings could be taken under the provisions of su~ • ( 2) of
    s. 15 of the Act. We are unable to agree. In our opinion, in
    order to ascertain the scope of su~.(2) of s. 15 it is
    necessary to read the Act as a whole. We have pointed out earlier   ,
    that the expression "Collector" has been specifically defined by
H   the Act itself, and the definition requires that the officer muat
             DHANPAT OIL & GEN. MIU.S V• UNION [PATHAK, J.]        11

                                                                          A
      be one specifically appointed by the Central Governmen<, to
      perform the duties of a Collector detailed under the Act and
     Rules. There are other provisions which have been particularly ,
     enacted in the Act. They specify the persons who are liable to
      pay duty, their obligations, the powers and procedures in rela-
      tion to assessment of the duty, the constitution of an appellate
     authority and its powers, and the powers of the Central Govern-      B
     ment to revise the appellate orders. Included also are specific
      provisions in respect of the recovery of'sums due under the Act
      to the Government, and there are other incidental provisions•
     There is also an express ,provision by s.20 empowering the Central
     Government to make rules to carry out the purposes of the Act,
    ·and particularly sub-s.(2) of s.20 envisages that such rules ·       c
     should provide for the form of the monthly return and the manner
     in which such return should be verified, the information which
     every occupier is required to furnish in the monthly returns and
i    the manner in which assessment of excise duty shall be made where
     no return is furnished or the return furnished is believed by the
     Collector to be incorrect or defective. It is inconceivable to       D
     our mind that recourse should be permissible to sub-s.(2) of s.15
     of the Act on the ground that no steps were instituted by the
     Government to bring the aforesaid provisions into working life by
     taking action under them. Sub-s.(2) of s.15, we think, is not
     intended as a substitute for the other provisions of the Act. It
     is not an interim provision intending that recourse may be had to
     it until action is taken by the Government to instal the machin-     E
     ery and institute the steps required by the Act for making its
     provisions workable. In our opinion, sub-s.(2) of s.15 is inten-
     ded to cover that area only whir.h is not included within the
     area covered by the remaining provisions of the Act. It is a
     residual provision and nothing more. For example, a Collector
     appointed under the Cesa Act can alone be the assessing authority    F
     authorised to receive returns and make assessments. No officer or
     authority constituted under the Central Excises.,ond Salt Act can
     do so. Nor can the appellate authority appointed under the
     later enactment entertain and hear appeals against assessments
     made under the Cesa Act. The jurisdiction to do so belongs solely
     to the appellate authority appointed under sub-s.(l) of s.10 of      G
     the Cesa Act.

          We hold that the appellant cannot be prosecuted for its
    omission to furnish monthly returns required under s.8 of the Act
    during the period upto July 30, 1970 for which there was no
    Collector appointed under the Act. The appellate authority was        H
    appointed on August 21, 1972 but the delay in appointing the
    12            SUPREME COURT REPORTS            [1985] SUPP.2 s.c.R.     .,_ -

A   appellate authority can be no ground for not furnishing the
    returns after July 30,1970, when the Collector was appointed. We
    find it unnecessary to go into the further question whether the
    appellant can be excused from ful.. lshing monthly returns upto
    March 28, 1969, that is to say, until the Produce Cess Rules,
    which prescribed the form of the return and the mode of the veri-
B   fication, were published. That is u~cessary because in any
    event the Collector was not appointed until July 30, 1970 and for
    that reason no returns •could be filed upto that date.

           The absence of a duly appointed Collector under the Act for
     a certain period is a good defence against a prosecution for non-
     compliance with s.8 of the Act during that period. It. does not
c    however, relieve the occupier of a mill from the burden of the
     levy. The levy is imposed by sub-s.(2) of s.3 of the Act and
     comes into existence immediately on the taxable event attracting
     excise duty. The accrual ·of the obligation to suffer the duty
     does not depend on the appointment of a Collector. The appoint-
     ment of a Collector is only a part of the machinery designed by
     the Act for the assessment and recovery of the duty. The imposi-
D    tion and accrual of the duty is a thing apart from its assessment
    .and collection. Now s.8 requires the occupier to furnish a return
     every month stating the total amount of produce consumed or
     b<ought under processing or extracted in the mill during the
     preceding month. There is an obligation to file the return every
     month. Non-compliance with the latter obligation is sufficient to
E    bring the occupier within the mischief of sub-s.(2) of s.9 of the
     Act. It . empowers the Collector to proceed at once and make an
     assessment in the manner prescribed by the Rules. But where such
     non-compliance is due to the circumstances that no Collector was
     appointed to whom such returns could be furnished, sub-s.(2) of
     s. 9 cannot come into play. However, the obligation to file a
F    return remains and it remains in respect of the entire period
     during which the Collector had not been appointed, and once the
     Collector is appointed the occupier is obliged to file a return
     for the entire period from the commencement of the levy including
    the period during which there was no Collector. That is beacuse
    the liability to excise duty had already accrued with the earl-
G   iest excisable event and it subsisted during    the   entire   period
    including the period during which there was no Collector. The
    position is that when the Collector is appointed the occupier
    must within· a reasonable time thereafter, file monthly returns of
    the produce consumed or brought under processing or extract$ in
    the mill during each preceding month, such monthly returns being
H   in respect of all the months included in the period uptodate. Or
             DHANPAT OIL & GEN. MILLS v. UNION [PATHAK, J.]         13


    the occupier may make a composite return specifying the amount of    A
    such produce monthwise for the entire period. The Collector will
    then take the return into consideration and take proceedings
    under s.9 of the Act.

          We hold that the delay in appointing the Collector under       B
    the Act does not relieve the appellant of the liability to excise
    duty in respect of the period during which the Collector was not
    appointed.

          This disposes of the farther argument of the appellant         c
    that as the appellate authority ·was appointed on August 21, 1972
    only there was no liability to pay the duty in respect of the
    period until such appointment. If the delay in appointing the
    Collector does not furnish good ground for excusing the occupier
    from such liability, the delayed appointment of the appellate
    authority also constitutes no defence.
                                                                         D
          The only relief therefore to which the appellant can be
    entitled in the present appeal 'would be an order restrai.ning the
    respondents from asking any penal action against the appellant
    for not furnishing monthly returns during the period in which no
    Collector had been appointed under the Act. It seems, however,
    that counsel for the respondents stated in the High Court during
    the hearing of the writ petition that no penal action would be       E
    taken against the appellant for not furnishing monthly returns
    within the peirod mentioned in sub-s.(2) of s.8 of the Act. We
    take it that the concession remains binding on the respondents,
    and it.is no~ necessary for us to pass any express order in that
    regard.

          In the result, the appeal is dismissed, but without any        F



-
    order as to costs.




,   S.R.                                          Appeal   dismissed.