Holding

The case falls within the purview of Rule 1OA, not Rule 10, and the revenue may recover the short‑levied duty.

Summary

Shiva Glass Works Co. Ltd., a licensee under the Central Excises and Salt Act, 1944, paid excise duty on glassware based on price lists submitted for provisional assessment. A search revealed two sets of bills, indicating that duty had been paid at lower rates than the actual sale prices. The Assistant Collector issued a notice under Rule 1OA of the Central Excise Rules, 1944, demanding recovery of the short‑levied duty. The appellant contended that Rule 10, which imposes a three‑month limitation, applied and thus the recovery was barred. The High Court Single Judge agreed, but the Division Bench reversed, holding that the case fell under Rule 1OA. The Supreme Court affirmed the Division Bench, observing that the duty was calculated on provisional price lists and the final amount was to be determined after verification, making it a case for recovery under Rule 1OA, not Rule 10. Consequently, the appeal was dismissed.

Issues considered

Whether the recovery of short‑levied excise duty in the present case is governed by Rule 10 or Rule 1OA of the Central Excise Rules, 1944.
Whether the limitation period under Rule 10 bars the revenue's claim for additional duty.

Legislation cited

Central Excise Rules, 1944s. Rule 10, s. Rule 1OA, s. Rule 9B
Central Excises and Salt Act, 1944

Subjects

Central Exciseshort levyRule 10Rule 1OAprovisional assessmentexcise duty recoveryprice listassessment

Judgment

SHIVA GLASS WORKS CO. LTD.
v. A
ASSISTANT COLLECTOR OF CENTRAL EXCISE AND OTHERS.

JANUARY 11, 1991

[N.D. OJHA AND K.N. SAIKIA, JJ.] B

Central Excises and Salt Act, 1944/Central Excise Rules, 1944:
Section 3/Rules JO and JOA-Assessee-Price list of goods furnished-
Accepted provisionally-Excise duty paid-Goods cleared-Discre-
~--'.," pancy-Detected late:-Recovery of excise duty-Whether permissible.

The appellant company a licensee under the Central Excises and c
Salt Act, 1944 and during the relevant period namely 1st September,
1961 to 26th September, 1963 carried on the business of manufacturing
different types of glasswares which were excisable goods under the Act.

The appellant used to present A.R.I. forms accompanied with D
price lists of the goods and after paying excise duties calculated on the
basis of the price lists used to remove the goods. The office of the
appellant was searched by the Excise Authorities on 26th September,
1963 and several documents, books and papers were seized, and as a
consequence thereof it transpired that the appellants were maintaining
two sets of bills. The bills of one set were those on the basis of which the E
appellant used to pay excise duty befQre clearance of the goods and
those of the other were such which were never issued to the dealers. In
these two sets of bills, the rate of discount was differently shown.

- A notice dated 26th March, 1968 was served on the appellant by
the Assistant Collector stating that it appeared that during the relevant
period the appellant had n~t paid excise duty. on the goods at the prices
F

at which they were s·old, but duty was paid at lower rates and requiring
it to show cause as to why duty on the prices at which the goods were
actually sold, as found on scrutiny of sale vouchers/sale documents
should not be recovered under Rule lOA of the Central Excise Rules,
1944. In reply the appellant asserted that it was the provision of Rule 10 G
and not Rule 1OA which was attracted to the facts and consequently the
initiation of proceedings was barred by time. This plea did not find
favour with the Excise Authorities, and the appellant was required to
pay the additional duty ofRs.1.41 lakhs.

The aforesaid order was challenged by the appellant before the H

43
44 SUPREME COURT REPORTS [1991) 1 S.C.R.

High Court under Article 226 of the Constitution and a Single Judge
A acceptt:d the contention of the appellant that Rule 10 and not Rule lOA
f

)._.
of the Rules was applicable and on this view quashed the order dated
26th August, 1968.

The respondents preferred an appeal to the Division Bench which
B has reversed the order of the Single Judge, on the finding that it was a
case falling under Rule 1OA and dismissed the writ petition.

In the appeal to this Court it was contended that the Single Judge >--
was right in taking the view that the case fell within the purview of Rule
10 of the Rules and that the Division Bench committed an error in
c
reversing the judgment, while the Revenue contested the appeal urging
that on the facts found by the Division Bench, and indeed on the case set
up by the appellant itself no exception could be taken to the finding of
the Division Bench that it was Rule lOA and not Rule 10 which was
--
attracted to the facts of the case. -,...-
D Dismissing the Appeal, this Court,

HELD: 1. The question as to whether Rule 10 or Rule lOA was
applicable has to be determined in the background of the procedure
which was followed. The legal position is that Rule lOA does not apply
where the case is covered by Rule lOofthe Rules. [48E]
,,A
E
N.B. Sanjana v. Elphinstone Mills, [1971] 3 S.C.R. 506, relied
on.

2. Simply because Rule 9B of the Rules, was conceded not to have
...
been taken recourse to by the respondent~ so that provisional assess-
F ment could be said to have come into existence in its statutory sense as ~
contemplated by the said rule when duty was paid at the time of clea- )
ranee of the goods, the conclusion was not inescapable, that a f'.mal
assessment had came into being at that time. [49A-B]

3. In view of the procedure adopted by the appellant it was appa-
G rently a case where duty was calculated on the basis of price lists sup-
plied by the appellant to facilitate the clearance of the goods and the
correct amount of duty payable was yet to be determined after subse- "
queµt verification, and appellant was under an obligation to pay, on the r
basis of the bond executed by them, the difference of the amount of the
duty paid at the time of clearance of the goods and !!Je amount found
H payable after subsequent verification. [49B-C]
SHIVA GLASS CO. v. ASSTI. COLLECTOR [OJHA, J.] 45

4. The Division Bench of the High Court has found that there was
J A
__A no ?Ssessment as is understood _in the eye ot law! but m_lly a mechanical
settlement or adjustment of duties on the basis of the sale prices flied by
the appellant had been made and at best, it was a case of incomplete
assessment which tile Excise Authorities were entitled to complete
under Rule lOA. [490]
B
Assistant Collector of Central Excise, Calcutta Division v.
National Tobacco Co. of India Ltd., [1973] 1 S.C.R. 822, referred to.

5. The instant case therefore falls within the J>Urview of Rule lOA
and not Rule lOofthe Rules. [SOB]

CIVtL APPELLATE JURISDICTION: Civil Appeal No. 763. C
of 1977.

From the Judgment and Order dated 30.7.1976 of the Calcutta
High Court in Appeal No. 167 of 1972.
D
Raja Ram Agrawal, K.B. Rana and Praveen Kumar for Khaitan
& Co. for the Appellant.

A. Subba Rao, P. Parineshwaran and A.D.N. Rao for the
Respondents.
E
The Judgment of the Court was delivered by

OJHA, J. Thi§ appeal by special leave has been preferred
against the judgment dated 30th July, 1976 of the Calcutta High Court
in Appeal from Original Order No. 167/1972. The facts in nutshell
necessary for the decision of this appeal are that the Appellant- F
Company,- a licensee under the Central Excise and Salt Act, 1944
(hereinafter ,referred to as the Act) carried on during the relevant
time, namely.t 1st September, 1961 to 26th September, 1963, business
of manufacturing different types of glasswares which were excisable
goods under the Act. The appellant used to present A.R.I. forms
accompanied with price lists of the goods and after paying excise duties G
calculated on the basis of the price lists used to rerµove the goods. The
appellant's office was searched by the Excise Authorities on 26th
September, 1963 and several documents, books and papers were
seized. As a consequence of this search and seizure it transpired that
the appellant was maintaining two sets of bills. The bills of one set
were those on the basis of which the appellant used to pay excis_e du_ty H·
46 SUPREME COURT REPORTS (1991] 1 S.C.R.

before clearance of the goods and those of the other were such which I
A were never issued to the dealers. In these two sets of bills inter alia the
rate of discount was differently shown. A notice dated 26th March,
>---
1968 was served on the appellant by the Assistant Collector of Central
Excise, Calcutta-II Division, Calcutta stating that it appeared that the
appellant had, during the relevant period, not paid excise duty on the
B goods at the prices at which they were sold but duty was paid at lower
rates declared by it. The appellant was required to show cause as to
why duty amounting to Rs.1,43,633.84 p. on the prices at which the
goods were actually sold, as found on scrutiny of sale vouchers/sale >---
documents should not be recovered under Rule lOA of the Central
Excise Rules, 1944 (hereinafter referred to as the Rules). The appel-
c
lant, in reply to the show cause notice, inter alia asserted that it was the
provisions of Rule 10 and not Rule lOA of the Rules which were
attracted to the facts of the instant case and that consequently the
initiation of proceedings against the appellant was barred by time. This
-
plea did not find favour with the Excise Authorities and the appellant 'Y"
was required, by order dated 26th August, 1968, to pay to the Central
D Government, an additional duty of Rs.1,41,829.11 p. This order was
challenged by the appellant before the High Court under Article 226 of
the Constitution of India. A learned Single Judge of the High Court accepted
the contention of the appellant that Rule 10 and not Rule lOA of the
Rules was applicable and on this view the order dated 26th August,
1968 was quashed. Aggrieved by that order, the respondents preferred
~
E an appeal before a Division Bench of the High Court. The judgment of
the learned Single Judge was reversed, and on the findin_g that it was a
case f~lling under Rule lOA, the writ petition was dismissed by the
judgment under appeal. -
The only point which has been urged by learned counsel for the
F appellant in support of this appeal is that the learned Single Judge was '~-
right in taking the view that the case fell within the purview of Rule 10
of the Rules and the Division Bench committed an error ir, reversing J,_...._
his judgment. For the respondents on the other hand, it has been
urged that on the facts found by the Division- Bench and indeed on the
case set up by the appellant itself no exception could be taken to the
G finding of the Division Bench that it was Rule lOA of the Rules and
not ·Rule 10 which was attracted to the facts of the instant case, In
order to appreciate the respective submissions made by learned
counsel for the parties it would be useful to extract Rules 10 and lOA. "r
They read as hereunder:

H "10. Recovery of duties or charges short-levied or errones-
SHIVA GLASS CO. v. ASSTI. COLLECTOR [OJHA, J.] 47

ously refunded-~hen duties or charges have been short-
A
levied through inadvertence, error, collusion or miscons-
truction on the part of an officer, or through mis-statement
as to the quantity, description or value of such goods on the
part of the owner, or when any such duty or charge, after
having been levied, has been owning to such cause, errone-
ously refunded, the person chargeable with the duty or B
charge so short-levied, or to whom such refund has been
__ ___._ erroneously made, shall pay the deficiency or the amount
paid to him in excess as the case may be, on written
demand by the proper officer being made within three
months from the date on which the duty or charge was paid
- or adjusted in the owners' account, current, if any, or from
the date of making the refund." C

"lOA. Residuary powers for recovery of sums due to
Government-Where these Rules do not make any specific
provision for the collection of any duty, or of any defi-
ciency in duty has for any reason been short-levied, or of D
any other sum of any kind payable to the Central Govern-
ment under the Act or these Rules, such duty, deficiency in
duty or sum shall on a written demand made by the proper
officer, be paid to such person and at such time and place,
as the proper officer may specify."
E
In elaboration of his submission that it was a case covered by
Rule 10 of the Rules learned.counsel for the appellant pointed out that
since the case of the respondents was that on the basis of the docu-
ments seized during the search of the appellant's office on 26th
September, 1963 it was found that the duty paid by the appellant on
' the basis of price lists furnished by the appellant at the time of clea- F
\
(,,...,,__ ranee of the goods was deficient, it was a case where duty had been
short-levied "through mis-statement as to the quantity, description or
value of such goods on the part of the owner" as contemplated by Kule
10. We find it difficult to agree with the submission. The procedure
adopted by the appellant/was indicated by the appellant under its
letter dated 23rd March, 1961, a portion whereof as extracted by the G
learned Single Judge reads as hereunder:

"We enclose herewith our three price lists for 1) Bottles
and phials 2) Glass-Wares and 3) Fancy Wares for the
purposes of provisional assessment. These prices are inclu-
sive of Central Excise duty. As regards Trade discounts to H
48 SUPREME COURT REPORTS [1991] 1 S.C.R.

be deducted from the said prices as per Section 4 of the Act
A we declare that 1) 25% should be deducted from the price ,A_
. fist for bottles and phials. 2) 35% from the price list for
glass-wares and 3) 20% from the price list for fancy wares
over and above necessary deduction for Central Excise
duty included in the prices."
B
The learned Single Judge has also pointed out that the appellant
used to clear the goods by executing bond and that in the specimen ).__
copy of the bond produced in court it was stated that whereas final
assessment of, excise duty of glass and glasswares made by the appel-
Iant from time to time could not be made for want of full particulars as
c
regards value, description, quality or proof thereof or for non-comple-
tion of chemical or other tests and whereas the appellant.had requested
the Excise Authorities as per Rule 9B of the Rules to m~ke provisional
-·
assessment of excise duty of the goods pending final assessment, the·
appellant was giving a guarantee to the extent of the sum mentioned in y
the bond for payment of the duties. The learned Single Judge has also
D pointed out that it appeared to be the common case of the parties that
in order to facilitate the assessment of the goods by Excise Authori-
ties, the appellant used to file the price list in advance and after accep-
tance provisionally of the price list, the goods used to be cleared and if
subsequently any discrepancy was detected or found, the same used to
be paid by the appellant. ~
E
The question as to whether Rule 10 or Rule lOA of the Rules was
applicable has to be determined in the background of the procedure
which was followed even according to the appellant as indicated
above:The legal position that Rule lOA does not apply where the case
is covered by Rule 10 of the Rules is well-settled in view of the decision
F of this Court in N.B. Sanjana v. Elphinstone Mills, [1971] 3 S.C.R. ?-.
'
506, on which reliance has been placed by learned counsel for the ~
appellant. Consequently, Rule lOA could be attracted only if the case
does not fall within the purvi~w of Rule 10, It was conceded before the
learned Single Judge on behalf of the respondents that the respondents
were not proceeding under the provisions of Rule 9B. On this basis
G and on his own finding also that Rule 9B was not attracted, the le.arned
Single Judg_e held that it was not a case of proviSional ·assessment but a
case of regular assessment in pursuance whereof duty was paid by the r-·
appellant and that since the case of the respondents was that the appel-
!ant had manufactured documents as was revealed as a consequence of
the search and seizure referred to above it was a case of short-levy due
fl to mis-statement by the appellant. Consequen~ly, the case dearly fell
SHIVA GLASS CO. v. ASSTI. COLLECTOR [OJHA, .I.] 49

within the purview of Rule. JO of the Rules. The Division Bench of the
) High Court in appeal did not, and in our opinion rightly, subscribe to A
_,}., the aforesaid finding. Simply because Rule 9B of the Rules was con-
ceded not to have been taken recourse to by the respondents so that a
provisional assessment could be said to have come into existence in its
statutory sense as contemplated by the said rule when duty was paid at
the time of clearance of the goods, the conclusion was not inescapable, B
that a final assessment had come into being at that time. In our opi"
nion, in view of the procedure adopted by the appellant referred to
above it was apparently a case where duty was calculated on the basis
of price lists supplied by the appellant to facilitate the clearance of the
goods and the correct amount of duty payable was yet to be deter-
mined after subsequent yerification and appellant was under an obliga-
tion to pay, on the basis of the bond executed by them, the difference c
of the amount of the duty paid at the time of clearance of the goods and
the amount found payable after subsequent verification. In the judg-
ment appealed against the Division Bench of the High Court has found
that there was no assessment as is understood in the eye of law but only a
mechanical settlement or adjustment of duties on the basis of the sale D
prices filed by the appellant had been made and at best, it was a case of
an incomplete assessment which ·the Excise Authorities were entitled
to complete under Rule lOA. In taking this view the Division Bench of
the High Court has relied on a decision of this Court in Assistant
Collector of Central Excise, Calcutta Division v. National Tobacco Co.
of India Ltd., [1973] 1 S.C.R. 822. In that case also the Company used E
to furnish quarterly price lists which used to be accepted for purpose of
enabling the Company to clear its goods and according to the Excise

- Authorities these used to be verified afterwards by obtaining evidence
of actual sale in the market before issuing final certificates that the
duty had been fully paid up. The prices of the goods to be cleared were
furnished by the Company on forms known as A.R.I. forms in that f.
case also. It was held that only a mechanical adjustment for settlement
of accounts by making debit entries was gone through and that it could
not be said that any such adjustment was assessment which was a
quasi-judicial process and involved due application of mind to the facts
as well' as the requirements of law. With regard to the debit entries it
was held that the making of such entries was only a mode of collection · G
of tax and even if payment or actual collection of tax could be spoken
.: of as a de facto "levy" it was only provisional and not final. It could
only be clothed or invested with the validity after carrying out the
obligation to make an assessment to justify it. It was also held that.it
was the process of adjustment that really determined whether levy was
short or complete. It was not a factual or presumed levy which could in· H
50 SUPRE:WtE COURT REPORTS (1991] 1 S.C.R.

A a disputed case prove an ".assessment". This had to be done by proof
of the actual steps taken which constitute assessment.

We are of the opinion that in view of the procedure adopted by
the appellant in the instant case referred to above and the law laid
down by this Court in the case of National Tobacoo Co. of India Ltd.
B
(supra) it is not possible to take any exception to the finding of the
Division Bench in the judgment appealed against that it was a case ·
which fell within the purview of Rule lOA and not Rule 10 of the
Rules. In the result, we find no merit in this appeal. It is accordingly
dismissed with costs.

N.V.K. Appeal dismissed.

-