judgement:
tion (Civil) No. 426 of 1989 etc.
(Under Article 32 of the Constitution of India).
P. Chidambaram, K.K. Venugopal, Dushyant Dave, R. Karan jawala, Ms. Meenakshi Arora, Mrs. Manik Karanjawala (N.P.), C.S. Vaidyanathan and S.R. Setia for the Petitioners.
Yogeshwar Prasad, R.S. Rana and Ashok Srivastava for the Respondents.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, CJ.
The challenge in these writ petitions and special leave petitions is basically to the order dated 18th January, 1989, passed by the District Excise Officer, Gaziabad, seeking to recover duties of excise on Homeodent under the Medicinal & Toilet Prepara tions (Excise Duties) Act, 1955 (hereinafter called 'the 1955 Act '), even though the product was classifiable under the Central Excises & Salt Act, 1944 (hereinafter called 'the 1944 Act ') and was, in 299 fact, assessed to duty under the said.
Act between 1985 and 1988.
Necessarily, the question arises as to whether, in the facts and circumstances of the case, the 1944 Act would apply or the 1955 Act would apply.
The factual dispute is whether in the facts, as enumerated hereinafter, alcohol was present in Homeodent and further whether Homeodent was Homeopathic medicine or toilet preparation and further whether the same was dutiable under the 1944 Act.
We must recapitulate the basic facts in the several matters involved herein.
M/s. Dabur India Limited which is the petitioner in special leave petition No. 1610/89 arising out of judgment and order dated 20th December, 1988 in civil miscellaneous writ petition No. Nil of 1988 connected with civil miscella neous writ petition No. Nil of 1988 of the High Court of Allahabad, and also the petitioner in writ petition No. 426/89, is a public limited company engaged in manufacture of Ayurvedic medicaments and Allopathic medicaments along with cosmetics.
It had agreed to manufacture for and on behalf of M/s. Sharda Boiron Laboratories Ltd. (hereinafter called 'the company ') being the petitioner in special leave petition Nos. 135 36/89, used to manufacture and/or produce a Homeopathic tooth paste called 'Homeodent ' out of the raw materials supplied by the company on job work basis.
The petitioner states that it accordingly manufactured Homeodent during 1985 to 1988, duly paying duties of excise on Homeo dent under the 1944 Act at appropriate leviable rates and recovered the same from the company.
According to the peti tioner, Homeodent did not contain alcohol but contained ingredients "mother tinctures" containing alcohol.
It is stated that alcohol, due to various reasons, has a tendency to evaporate during the process of manufacture of Homeodent.
It is further the case of the petitioner company that during the period from 1979 to 1988 it also manufactured certain other medicinal products containing alcohol which were classifiable under the 1955 Act.
The petitioner company held at all material times licence as required under the 1955 Act to manufacture these products.
The State Excise authorities enforcing the provisions of the Act had perma nently posted an Inspector as also a peon in the factory of the petitioner where these dutiable products were manufac tured.
The bonded manufactory in which these products were manufactured was under lock and key of the said officers, according to the petitioner.
The activities of the petition er, the petitioner asserts, were clearly within the knowl edge of the State excise authorities for over a considerably long period.
During the period from 1985 1988, the company supplied 300 to the petitioner amongst other ingredients, "mother tinc tures" under BM 9 forms, stating clearly that such mother tinctures were intended to be used in manufacture of Homeo dent in the factory of the petitioner.
These BM 9 forms, according to the petitioner, were filed with the State excise authorities regularly.
Therefore, the petitioner asserts that the State excise authorities were aware of the manufacture of Homeodent by the petitioner and the activity of the company in getting the same manufactured in the factory of the petitioner out of mother tinctures.
However, the State excise authorities did not object to the same nor did they call upon either the petitioner or the company to pay duty under the 1955 Act.
On 1st January, 1985, the petitioner states, the peti tioner filed classification list classifying Homeodent under the Act of 1944, declaring therein the ingredients of Homeo dent.
On 17th January, 1985, the classification list filed by the petitioner on 1.1.
1985 was approved finally and Homeodent was held to be classifiable under the Act of 1944.
On 31st August, 1987 the Assistant Collector of Central Excise passed an order which was an appealable one classify ing Homeodent under the Act of 1944.
The petitioner asserts that this order had subsequently been upheld by the Collec tor of Central Excise (Appeals), New Delhi, on an appeal filed by the company.
However, on 18th January, 1989 the Superintendent of State Excise, Bulandshahr visited the factory of the petitioner and after inspecting the same, enquired about Homeodent.
It is the case of the petitioner that it had explained that Homeodent was classified under the Act of 1944 in view of the orders passed by the Central Excise authorities.
However, it is stated that the Superin tendent of State Excise, Bulandshahr called upon the peti tioner to furnish details in respect of Homeodent including its ingredients and total value of clearances etc.
On 20th January, 1988 the petitioner addressed a detailed letter to the Superintendent of State Excise, Bulandshahr, explaining its stand, and that duty had been paid thereon.
State Excise authorities, thereafter, did not take any action against the petitioner nor did they take out samples of Homeodent tooth paste to get appropriate results as required under the Act of 1955 and the rules framed thereunder.
However, on 17th March, 1988 the Superintendent of State Excise, Bulandshahr passed a demand order directing the petitioner to deposit a sum of Rs.68,13,334.20 being the alleged duty payable on 'Homeodent ' manufactured and cleared between January, 1985 and January, 1988.
This order was passed without issuing any notice to show cause and, according to the petitioner, without affording the petitioner any opportunity of hearing.
The petitioner on the same day sent a rep 301 resentation requesting for compliance with the principles of natural justice and disputing the claim for duty.
On 18th March, 1988 the Superintendent of State Excise, Bulandshahr, modified his earlier order and confirmed the demand of duty amounting to Rs.46.67 lakhs on provisional basis.
Once again the petitioner was neither served with a show cause notice nor was afforded an opportunity of personal hearing, accord ing to the petitioner.
While passing either of the orders, no test result, it is asserted, was obtained to establish whether Homeodent contained alcohol or not.
However, on 18th March, 1988 the petitioner deposited a sum of Rs.11.66 lakhs.
The petitioners also executed a bank guarantee in favour of the District Magistrate, Ghaziabad, for a sum of Rs.35 lakhs.
On 6th April, 1988 the petitioners filed an appeal before the Excise Commissioner, U.P. against the illegal orders of the District Excise Officer.
The petitioners also appeared for personal hearing before the Excise Commissioner through their advocate on 23rd April, 1988.
On 5th May, 1988 the Excise Commissioner, U.P., passed an order dismissing the appeal of the petitioners.
However, petitioner No. 1 states that copy of the order was not served upon it.
The petitioner No. 1 further asserts that without serving a copy of the order on it and without intimating whether the order had been passed or not, the District Excise Officer ap proached M/s. Grindlays Bank for encashment of the bank guarantee of Rs.35 lakhs and coerced, according to the petitioners, the bankers to encash the same forthwith.
Thereafter, the petitioner moved the High Court of Allahabad against the illegal actions of the respondents.
The High Court directed the authorities to serve a copy of the order and restrained the respondents from encashing the bank guarantee.
It is stated that while the High Court of Allaha bad was considering the writ petition of the petitioner and had granted stay as aforesaid, the respondent District Excise officer encashed the bank guarantee of Rs.35 lakhs without even calling upon the petitioner first to pay the amount.
On 13th May, 1988 the High Court of Allahabad di rected the petitioner to file a revision petition with the Central Government.
A revision petition was filed along with stay application on 28th May, 1988.
Thereafter, the Central Government granted stay against recovery of the balance amount of Rs.21.46 lakhs.
On 22nd September, 1988 the Addi tional Secretary to the Government of India in exercise of his revisional powers allowed the revision of the petition ers and declared the orders of the District Excise Officer dated 17th and 18th March, 1988 as upheld in appeal by the Excise Commissioner as null and void having been passed in violation of principles of natural justice.
Thereupon it, the petitioners state, 302 called upon the District Excise Officer and the District Magistrate to refund the amount of Rs.46.67 lakhs recovered from it by way of cash payment and encashment of bank guar antee in view of the revision order.
The case of the peti tioner is that the State Excise authorities failed to grant the petitioner refund as prayed for despite the order of the revisional authorities.
On 2nd November, 1988 the District Excise Officer issued a show cause notice requiring the petitioner to show cause as to why an amount of Rs.68.13 lakhs be not recovered from it in respect of Homeodent manufactured and cleared during January, 1985 to January, 1988.
In December, 1988 the petitioner moved the High Court of Allahabad under Article 226 of the Constitution of India, inter alia, praying for a writ of mandamus for quashing and setting aside the show cause notice dated 2.11.1988 and for refund of duty amounting to Rs.46.67 lakhs.
On 20th Decem ber, 1988 the High Court of Allahabad dismissed the writ petition filed by the petitioner.
It is stated that on 10th January, 1989 this Court upon special leave petitions Nos.
135 36/89 filed by the company was pleased to issue notice and directed stay of operation of the notice of demand.
Thereafter, on 20th January, 1988 the District Excise Offi cer directed the petitioner to appear for personal hearing in response to the show cause notice.
The petitioner ap peared before the District Excise Officer without prejudice and submitted a detailed reply to the show cause notice and also contended during personal hearing that the notice was required to be withdrawn.
In its reply the petitioner cate gorically stated that the reply was being submitted without prejudice to petitioner 's right to move this Court by way of a special leave petition.
Thereafter, the petitioner moved this Court on 21st January, 1989.
It is, therefore, neces sary to refer to the judgment and order dated 20th December, 1988 in civil writ petition No. Nil/88 connected with civil miscellaneous writ petition No. Nil/88 in the High Court of Allahabad.
It appears that M/s. Dabur India Limited had filed the said writ petition in the High Court challenging the show cause notice dated 2nd November, 1988 by the District Excise Officer.
Ghaziabad.
Another writ petition being writ peti tion No. 1160/88 which is the subject matter of special leave petition Nos.
135 36/89 was filed by M/s. Sharda (the company) for quashing the order of the Central Government dated 3.6.1988 which was annexure 1 to the writ petition.
These two were disposed of by the said judgment.
The ques tion that was mainly involved therein was that the conten tion of the petitioner that the Homeodent did not contain alcohol, though one of the ingredients of such preparation was mother tincture containing alcohol and the same was assessable under Item 14FF of the 1944 Act.
The Asstt.
303 Collector of Central Excise, Ghaziabad, had taken the view that the Homeodent was classifiable Under sub heading No. 3306 02 of the Chapter 33 of the and on that duty @ 15% ad valorem was leviable.
This duty computed at the said rate by the Central Excise author ities was paid, according to the petitioner, on the goods manufactured from 1.1.1986.
On 18th January, 1988 the Dis trict Excise Officer made a surprise inspection of the units of the petitioner and when it was revealed that the Homeo dent tooth paste manufactured by M/s. Dabur was toilet preparation containing alcohol within the meaning of Section 2(k), read with Item 4 of the Schedule, referred to in section 3 of the 1955 Act, and was therefore assessable to duty @ 100% ad valorem.
The District Excise Officer, Ghazia bad, therefore had caused a common notice dated 17.3.1988 to be served on the petitioner requiring it to pay duty aggre gating to Rs.68,13,334.20 under the provisions of the 1955 Act on such goods manufactured from 1st January, 1985 till the date of notice.
As mentioned hereinbefore, against this notice some representation was made by the petitioner to the District Excise Officer and thereupon the petitioner was directed to deposit provisionally the excise duty to the tune of Rs.46,55,45 1.45 under the 1955 Act and the same was deposited by the petitioner.
Such demand wad.
challenged by M/s. Dabur in appeal before the Excise Commissioner.
The Excise Commissioner affirmed the order of the District Excise Officer and dismissed the appeal.
No appeal was filed by M/s. Sharda against the demand notice of excise duty under the 1955 Act.
However, both the petitioners approached the Central Govt.
in revision under Rule 128 of the 1956 Rules.
The revision of M/s. Dabur was disposed of by the Central Govt.
and the result was communicated by the Addi tional Secretary to the Govt.
of India by the order dated 22.9.1988.
The contention of M/s. Dabur that the demand was raised on it without any opportunity of being heard and in violation of principles of natural justice, was accepted and a direction was given that the case be adjudicated upon de nove after giving a show cause notice and proper opportunity of being heard to the party.
The revision filed by M/s. Sharda was also not entertained by the Central Government on the ground that a right of appeal was vested in M/s. Sharda which could have been exercised upto 17.6.1988, which was not done.
However, pursuant to the order of the Central Govern ment, the District Excise Officer issued the impugned show cause notice dated 2.11.1988 to the petitioners jointly, validity of which was challenged by them in the writ peti tion and the other writ petition I. as been filed by M/s. Sharda only to challenge the order of the Central Govt.
refusing 304 to entertain its revision.
The learned Judges in the judg ment under appeal noted that the petitioner did not advance any argument on the merits of the question; whether Homeo dent tooth paste is assessable to duty under the 1944 Act or under the 1955 Act and rightly so because that involved a factual scrutiny which could hardly be gone into by the High Court.
The High Court was of the opinion that the question, whether Homeodent tooth paste is sans alcohol, cannot be adjudicated upon under the extra ordinary writ jurisdiction.
On behalf of the petitioners before the High Court two contentions were raised.
Firstly that the Central Govt.
having set aside the order of District Excise Officer, Ghaziabad, whereunder excise duty to the tune of Rs.46,66,451.45 was paid, there was no justification for the respondents to retain that amount thereafter and a writ of mandamus be issued against the respondents directing them to refund this amount; and secondly, that under Rule 11 of the 1956 Rules when duties are short levied, a written demand by the proper officer being made within six months from the date on which the duty was paid, the short fall could be recovered.
The submission was that no duty can be recovered for the period anterior to six months to be reckoned from the date of payment of duty.
It was, therefore, urged that the show cause notice was invalid, inasmuch as the District Excise Officer, Ghaziabad, had exceeded the jurisdiction in having recovered the duty beyond limitation.
The High Court addressed itself to the question whether Article 226 of the Constitution of India was a proper reme dy.
We are not really concerned with this question.
The High Court, however, came to the conclusion that both the 1944 & 1955 Acts operate in different fields and there is no over lapping between the two.
If the Homeodent tooth paste is found to be assessable to duty under the 1955 Act then it will not amount to review of the order of the Central Excise authorities.
It was emphasised before the High Court that adjudication by the Central Excise authorities does not stop the State Excise authorities from considering the case under the provisions of the 1955 Act.
Both the Acts are mutually exclusive and the authorities thereunder are fully empowered to consider the assessability separately, according to the High Court.
The High Court came to the conclusion that where the parties fully acquiesced with the matter and subjected themselves to the statutory procedure, no action should be allowed to be taken under Article 226 of the Constitution unless the case is patently without jurisdiction.
The orders having been made under the statutory provisions, the Court should be loath to interfere under Article 226 of the Con stitution of India.
It was emphasised by the High 305 Court that once the parties choose the statutory procedure they must to the logical end.
The Central Govt.
had directed the State Excise authorities to adjudicate the case de novo and, therefore, the District Excise Officer, Ghaziabad, had no option but to issue show cause notice.
So the show cause notice dated 22nd November, 1988 was jointly given to the petitioner pursuant to the direction of the Central Govern ment much after the orders had been passed initially or in appeal.
Therefore, the common show cause notice to the parties cannot, according to the High Court, be characte rised as a sparking point and from the backdrop of the case stated above, it is amply clear that the Excise authorities had not assumed jurisdiction to proceed against the peti tioner for the first time by way of a show cause notice dated 2nd November, 1988 rather it had been issued at much subsequent stage pursuant to the direction of the Central Government.
The High Court came to the conclusion that the show cause notice having been issued in accordance with the directions of the Central Govt.
in the revisional jurisdic tion which the petitioner itself subjected to, cannot be assailed under Article 226 of the Constitution.
So this show cause notice dated 2nd November, 1988 cannot be equated with the showcause notice given at the initial stage to assume jurisdiction in the matter.
The High Court also came to the conclusion that no writ can be issued in favour of the parties who remain sitting on the fence and took a chance of the proceedings taken up under the statutory provisions going in their favour.
The High Court held the petitioner who had resorted to statutory remedies on its own could not be permitted to take recourse under Article 226 of the Constitution of India, in the event of their having become successful under the former.
Coming to writ petition No. 1160/88 wherein the order of the Central Government refusing to entertain the revision had been challenged.
The Central Government had refused to entertain the revision on the sole ground that the right of appeal that vested in M/s. Sharda could not be exercised thereby.
The High Court, however, came to the conclusion that the case of M/s. Dabur was that it is manufacturing Homeodent tooth paste on job basis under the loan licence of M/s. Sharda as per the specifications and control and the raw material of the latter but factually both the petition ers are different entities under the law and therefore each petitioner had to pursue its own remedy.
Therefore, on an analysis of the material, the High Court found that there was nothing to interfere with the order of the Central Government.
Therefore, the questions that fall for determination are firstly, 306 whether the High Court was justified in dismissing the writ petition of the petitioner on the ground of alternative remedy particularly when the writ petition challenged the actions of the respondents in seeking to levy and recover duties of excise under the 1955 Act as being without juris diction and/or without authority of law.
The next question that arises is whether the High Court was justified in dismissing the writ petition challenging particularly in two sets as has already been subjected to duty of excise under the 1944 Act.
The next question that fails for consideration is whether the High Court was justified in dismissing the writ petition of the petitioner which had prayed for refund of duties of excise amounting to Rs.46.67 lakhs illegally recovered from the petitioner on Homeodent tooth paste under the 1955 Act in pursuance of the order which was declared null and void in revision by the Central Government.
It is also necessary to consider whether the High Court was justi fied in dismissing the writ petition of the petitioner particularly when it challenged levy and recovery of duty under 12 of the 1956 Rules framed under the 1955 Act when the said rules have already been declared to be invalid and without jurisdiction by a Division Bench of the Madras High Court in the case of Citadel Fine Pharmaceuticals Pvt. Ltd. vs D.R.O., [1973] Madras Law Journal p. 99.
The next main question requiring consideration is wheth er the respondents were acting within their jurisdiction while levying duty of excise on Homeodent under the 1955 Act when in the manufacture of Hemeodent alcohol had not been used as a raw material but mother tinctures containing alcohol had been used and particularly when at the final stage of manufacture Homeodent did not contain any trace of alcohol.
The question that has really to be determined in this case is, whether firstly Homeodent was classifiable under the 1944 Act or 1955 Act and who will determine that; and secondly, which Act will prevail in the facts and circum stances of the case.
In this connection, it may be mentioned that M/s. Sharda had applied for a licence and was granted a loan licence to manufacture tooth paste as per the provisions of Drugs & Cosmetics Act, 1944 and the Rules framed thereunder.
The said licence was granted under rule 139B and was in Form 31A for manufacture of cosmetics.
Subsequently, Homeodent was envisaged by the Drug authorities as a homeopathic medica ment and licence had been granted accordingly.
It is the case of the petitioner that tooth pastes were manufactured by the petitioner company for and on behalf of the loan licensee from the 307 following chemicals and ingredients: "Potassium Chlorate BPC 73 Sodium Benxoate IP Sodium Flou ride BP Plantago Offionle Mt HP 1 Cochloric Armorocie MT NP 1 Cochloric Officincie MT HP 1 Phytolecca Decandra NT Methyl Parehudron Benxoate IP Prophyle Paraphydroxy Benxoate IP Calcium Carbonate IP Sodium Alginete USP NF 1980 Titenium Oxide BP Precipitate Silico USP NF Liquid Sodium Socicylate 15 381: 1972 Sodium Leuryle Sulphate (High Purity) Saccharine IP" It is further to be noted that the final product i.e. the tooth paste is a homeopathic semi solid compound in which mother tincture was completely absent or present in fractionally negligible quantity, depending upon the manu facturing conditions, vacuum and the temperature.
It is the case of the petitioner that at the time the tooth paste is manufactured, packed and is ready for delivery, the alcohol would diminish completely and would not be left at all.
Nor can it be so traced upon any chemical testing.
In this connection, the petitioner sought to crave leave to several documents and some test examination reports.
According to the Laboratory test which the petitioner produced, the alcohol content was absent in the nine samples sent by the loan licensee.
It was further stated that the Govt.
of India had issued instructions vide letter dated 19th December, 1957 requiring for determination of alcohol content of any product the samples must be sent to specified laboratories.
Despite the said position, it is the case of the petitioner that the Excise authorities acting under the 1955 Act, had never withdrawn any sample of tooth paste manufactured by the petitioner within their knowledge between 1985 and 1988 a sufficiently long period during which their inspector in charge was physically present in the factory of M/s. Sharda and had not only access but knowledge of the activities including the manufacture of the said tooth paste.
The Superintendent of Excise, Bulandshahr, visited the factory of the petitioner company on 18th January, 1988 and after inspecting the same enquired about the exciseability of Homeodent tooth paste.
The petitioner 's officers explained that Homeodent was classified under the 1944 Act and the duty had been paid accordingly.
Subsequently, the Superin tendent (Excise) called upon the petitioner to furnish details about the quantity and value of Homeodent manufac tured and cleared between 1985 and 1988.
In pursuance there of, tile petitioner replied vide his letter dated 20th January, 1988 and in 308 details explained the reasons by Homeodent was not liable to duty under the 1955 Act.
In pursuance of the reply of the petitioner no action was taken and the petitioner assumed that the matter had been closed.
The petitioner has given detailed episodes of harassment.
The main point that the petitioner seeks to emphasis in this case is that the High Court ought to have appreciated that the petitioner 's product Homeodent tooth paste having been subjected to duty under the provisions of the 1944 Act, the question of levying and recovering duty under the 1955 Act did not and cannot arise.
Therefore, the impugned ac tions of the respondents were required to be set aside by issuing appropriate writ of mandamus.
The High Court was, therefore, in error, according to the petitioner, in dis missing the writ petition without appreciating this conten tion.
The High Court ought to have appreciated that the petitioner was not seeking to circumvent the alternative remedy provided under the Act but in view of the conflicting claims of the Central and State Excise authorities seeking to classify Homeodent tooth paste under the respective Acts of 1944 and 1955, the petitioner was left with no other alternative but to challenge the actions by way of writ petition under Article 226 of the Constitution.
It is con tended that the High Court ought to have appreciated the actions of the State authorities were ex facie and without authority in law in so far as they sought to levy and recov er duty on Homeodent tooth paste under the 1955 Act.
There fore, the petitioner was justified in challenging such actions by way of a writ petition before the High Court.
It was further urged that the High Court had committed an error on the ground of alternative remedy before the High Court as also the demand raised against it could not be justified under Rule 12 beyond a period of six months as prescribed under Rule 11 particularly in view of the fact that Rule 12 as had been declared to be invalid and without jurisdiction as per the judgment of the Madras High Court.
It is further contended that the High Court committed an error in dismiss ing the writ petition of the petitioner challenging the demand of duty made by the State Excise authorities amount ing to Rs.68 lakhs particularly in view of the fact that as per S.4 of the 1944 Act which is made the basis of valuation even under the Act of 1955 as per the Explanation II to the Schedule as interpreted by this Court in the cases of Union of India & Ors.
vs Bombay Tyre International Ltd. etc.
; , and Asstt.
Collector of Central Excise & Ors.
vs Madras Rubber Factory Ltd etc.
, 1 the duty liability could not exceed the sum of Rs.26 lakhs.
It was further emphasised that the High Court commit ted error in not directing the State Excise authorities to refund the amount of Rs.46.67 lakhs which was recovered from 309 the petitioner under Orders dated 17/18.3.
1988 which were declared to be null and void having been passed without giving any opportunity of hearing.
The Sahibabad factory of M/s. Dabur India Ltd. was set up in the year 1979.
From the very beginning the petitioner had undertaken the job of manufacturing various products covered under the 1955 Act.
The petitioner had obtained the necessary licence and fell under the purview of the 1955 Act.
Section 6 of the 1955 Act stipulates that the Central Govt.
may, by notification in the Official Gazette, provide that from such date as may be specified in the notification, no person shall engage in the production or manufacture of any dutiable goods or of any specified component parts or ingredients of such goods or of specified containers of such goods or of labels of such containers except under the authority and in accordance with the terms and conditions of a licence granted under this Act.
Dutiable goods have been defined in the Act vide Clause (c) of section 2 i.e. meaning thereby the medicinal and toilet preparations specified in the Schedule as being subject to the duties of excise levied under the Act.
It is stated that the State Excise authorities had posted an officer in the factory of the petitioners at Sahibabad for physical control on a part time basis.
In the year 1985, an officer in the rank of an Inspector was posted at the said factory on full time basis for physical supervi sion and control.
Hence, all the activities of the petition er were within the knowledge of the respondent Excise au thorities.
The version of the petitioner is that on an inquiry from M/s. Sharda Bairon Laboratories Ltd. for manu facturing of Homeodent tooth paste on job work basis out of the raw material and packing materials to be supplied by the said loan licensee, M/s. Sharda, petitioner No. 1 undertook the job.
The petitioner company had filed a list classifying the said Homeodent tooth paste under Tariff item 14FF of the 1944 Act as the said tooth paste did not contain any alcohol directly.
The classification list was filed in the pre scribed Form and with all the particulars.
It was further checked up by the Inspector Range Inspector and it was subsequently approved by the Assistant Collector, Central Excise, according to the petitioner.
On 31st August, 1987 there is indeed an order of the Asstt Collector of Central Excise, Division II, Ghaziabad, stating that the tooth paste in question was classifiable under the 1944 Act and not under the 1955 Act.
It has to be understood that under the 1955 Act the duties go to the State Govt.
while under the 1944 Act the duties go 310 to the Central Govt.
, though both these Acts are central legislations.
The authorities charged with the duties under the 1944 Act are Central Govt.
employees and Central Govt.
authorities are different and distinct from the authorities of the State Govt.
under the 1955 Act.
The basic question that has to be decided is whether in such a situation who or which authority will decide if the product in question would be leviable to duty under the 1944 Act and go to the coffers of the Central Government or whether it will be leviable under the 1955 Act and the realisations go to the State Govt.
In the facts and circumstances of this case, that will depend on the question whether alcohol was used as any of the ingredients in production of the product or manufacture thereof.
That there was production and/or manufacture and as such excise was leviable, there is no dispute.
The question is, whether in the process any ingredient was used contain ing alcohol in respect of a product which is medicinal in nature and as such would be dutiable under the 1955 Act.
(Homeodent is a homeopathic preparation but it is also a tooth paste.
Therefore, it is a toilet preparation.
Whether or not such Homeodent would be dutiable under the 1955 Act, would depend upon whether it contained 'alcohol ' or not.
The authorities charged with the duties of enforcing a particu lar Act are enjoined with the task of determining the ques tion whether alcohol is contained therein or not.
It is the case of the petitioner that they had paid duties of excise on Homeodent tooth paste manufactured by it on behalf of loan licensees under the 1944 Act.
The total amount of duty claimed to have been paid for the said period amounted to Rs.6,26,570.47.
The petitioners rely heavily on the test certificates issued by the Homeopathic Pharmacopia Laborato ries of the Ministry of Health & Family Welfare, Govt.
of India, which state that they had failed to detect any alco hol in the 9 batches of the tooth paste given to them for testing.
The petitioner asserts that tooth paste is a homeo pathic semi solid compound in which mother tincture is completely absent or is present in negligible quantity with any alcohol that may be present in pheropest completely and that there are no traces of the same in the final product upon chemical testing.
In January, 1988 there was an inquiry about the exciseability of Homeodent tooth paste by the Superintendent of Central Excise, under the 1955 Act.
The gravamen of the charge is the order issued by the Distt.
Excise Officer, Ghaziabad, on 17th March, 1988 which was issued without notice to the petitioner and without giving it any opportunity.
The Distt.
Excise Officer, however, on demand from the petitioner had modified the earlier order of 17th March, 1988 and had issued on 18th March, 1988 a demand notice for 311 RS.46,66,451 45 It is the grievance of the petitioner that as it was carrying on the manufacture under the 1955 Act, it had applied for licence and the respondent authorities without assigning any reason, refused to renew the licence of the petitioner company.
The implication of such absence of renewal is that the petitioner was being called to pay an illegal demand It, therefore, was forced to close down 'its manufacturing operations.
The petitioner avers that in the meeting which took place between the Excise Commissioner and the Managing Director of the petitioner company on 14th March, 1988 the petitioner was orally informed that the licence would be renewed upon payment of dues under the orders dated 17th and 18th March, 1988, as aforesaid.
The petitioner further states that it was told by the Excise Commissioner to deposit 1/3rd of the amount forthwith and execute a bank guarantee for the remaining amount.
According to the petitioner, it had deposited the sum of Rs. 11,66,000 and consequently the L I licence was renewed for a period from 25.3.1988 to 31.3.1988.
Then on 1st April, 1988 the petitioner was once again forced to close down its manufac turing activity in the absence of further renewal of licence for the period from 1.4.1988 to 7.4.1988.
It is stated that the petitioner company had filed an appeal before the Commissioner under rule 127 of the 1956 Rules and upon compliance with the conditions of the State authorities, the licence was renewed from 7.4.1988 on ad hoc basis for a period of 3 months upto 30th June, 1988.
The case of the petitioner is that the hearing of the appeal before the Excise Commissioner was over on 23.4.1988.
Howev er, no order thereupon was passed.
On 7th March, 1988 M/s. Grindlays Bank, who are the bankers of the petitioner, issued a bank guarantee inquiring whether any orders had been passed by the Excise Commissioner and whether the sum covered under the bank guarantee had become due.
The peti tioner was informed by the bankers that the District Excise Officers and other officers present in the bank had served an order requiring the Bank to clear the bank guarantees.
The petitioner states that at that time it had no informa tion as to the order of the Excise Commissioner but later on it came to learn that the Excise Commissioner had passed an order on 5th May, 1988 but the same was not communicated to it; and the bank guarantees were enforced without giving the petitioner any opportunity of filing any revision petition.
The petitioner thereafter moved a writ petition before the Allahabad High Court which directed that the said bank guarantee should not be encashed until 13th May, 1988.
According to the petitioner, the bankers under coercion were compelled to encash the bank guarantee on 9th May, 1988 and issue a draft for an amount of Rs.35 lakhs.
The 312 writ petition of the petitioner came up for hearing before the Allahabad High Court and it was directed to file a revision petition within two weeks from 13.5.
1988 and the same should be considered on merits.
The High Court had stayed the recovery of an amount of Rs.21,46,134.20 till the disposal of the stay application.
On 22nd September, 1988 the Additional Secretary to the Govt.
of India allowed the revision petition of the peti tioner and set aside the orders of the District Excise Officer, dated 17 18th March.
Thereupon the petitioner called upon the District Excise Officer, to refund the amount of Rs.46,47,000 but the respondents failed to refund and neglected it.
The respondents had issued a show cause notice calling upon the petitioner as to why an amount of Rs.68.13 lakhs be not recovered on Homeodent tooth paste manufactured and cleared between 1985 and 1988.
The High Court had dismissed the writ petition which is the subject matter of another special leave petition.
Respondent No. 3 i.e. the District Excise Officer.
Ghaziabad.
vide his order dated 19.1.
1989 had confirmed the show cause notice issued by him on 2nd November, 1988 and also confirmed the demand for Rs.68,50,745.20.
The said order dated 19th January, 1989 is the subject matter of challenge in writ petition No. 426/89.
Therefore, the basic question now is, whether the au thorities under the 1955 Act were entitled and authorised to levy duties under the Act.
In the orders dated 18 19th January, 1989 passed by the District Excise Officer which is in vernacular and a translation of which is given in Annex ure XIV to the writ petition, states that in reference to a confidential letter dated 13th January, 1988 of the Deputy Excise Commissioner, Meerut Division, during the surprise inspection of the premises of M/s. Dabur India Ltd. and M/s. Sharda, Ghaziabad on 18th January, 1988 by Sri Lal Ji Rai, the then Distt.
Excise Officer & Excise Superintendent, Bulandshahr, it was found that M/s. Dabur India Ltd. had been manufacturing a toilet preparation i.e. Homeodent tooth paste containing, according to the said order, alcohol for M/s. Sharda Boiron.
The question is, did they do so.
How does one find it out? As stated in the order, there is no dispute but if it was, then calculating the duty u/s 3 of the 1955 Act a sum of Rs.68, 13,334.28 would be found due.
The Officer found that there was a conspiracy and without knowledge of the officer in charge in a clandestine manner this production was carried on.
This is an answer, according to the impugned order, u/s 7 of the 1955 Act.
Section 7 deals with the offences and penalties under the Act and provides that if any person contravenes any of the provi sions of a notification issued u/s 6 313 or evades the payment of any duty of excise or fails to supply any information which he is required to supply, he shall for every such offence be punishable to the punishment mentioned in the section.
The officer has further found that as against an outstanding sum of Rs.68, 13,334.28.
Rs. 11,67,000 had been deposited.
After narrating the incident and the presence of the counsel and lawyers the officer was of the opinion that nothing has been brought to his notice which required revision of the previous order.
So, there fore, a break up was given and out of Rs.68,50,745.20, the actual duty payable Rs.46,67,000 has already been realised and, therefore, the balance duty is Rs.21,83,745.28 and they have failed to realise the same.
In view of this Court 's order dated 10th January, 1989, whereby this Court had directed that the proceedings might go on but the demands will not be enforced, inasmuch as orders dated 18 19th January, 1989 reiterate the order of 17th March, 1988 it is necessary to refer to the order dated 17th February, 1988 passed by the District Excise Officer, Ghaziabad.
Therein it stated that both the units were joint ly and severally inspected on surprise visits i.e. the units bonded laboratories, and on the basis of the information collected it was revealed that Dabur India Ltd. was manufac turing a suitable toilet preparation containing alcohol named Homeodent without obtaining necessary licence.
Accord ing to the said order the product had been manufactured outside the bonded premises approved under the L I licence and the duty payable on this product had not been paid.
The order further states that on the basis of the information and the stock a sum of Rs.68,13,334.20 was payable and a challan to that effect was issued.
In the first letter dated 13th March, 1988, Dabur India Ltd. wrote to the Distt.
Excise Officer, that the classification of Homeodent tooth paste made by the Excise Officer as toilet preparation was erroneous, as this preparation, according to Dabur India Ltd., should be classified under Item 2 of the Schedule to the 1955 Act as a Homeodent preparation and not under Item 4.
Item 3 to the Schedule of 1955 Act contains the follow ing: "Homeopathic preparations containing alcohol".
Item No. 4 is "Toilet preparations containing alcohol or narcotic drugs or narcotic".
So the question raised here is whether the tooth paste is primarily a toilet preparation or a homeopathic preparation.
Such a question really, in our opinion, must be justiciable by the authorities enjoined to enforce the provisions.
On the basis that the product was a homeopathic item, a sum of Rs.6245.29 was paid.
The peti tioner further stated as follows: "Assuming and not admitting that your classification is 314 correct, even then your calculation of duty of the product is erroneous on the following points: a.
The total wholesale value of the goods manufactured as on 18.1.88 is Rs.65,93,91.63.
b. A trade discount @ 20% has to be deducted from this wholesale price Rs. 13,26,373.27.
The balance amount comes to Rs.52,67,542.36.
The excise duty element in this amount comes to Rs .26,33,77 1.18.
The assessable value comes to Rs.26.33.77 1.18.
The calculation chart showing these calculations is attached as Annexure 'B '.
Kindly note that for central Excise purpose the excise able value declared to the CE Deptt.
on the total goods manufactured upto 18.1.88 is only Rs.46,66,45 1.45 and the wholesale price of these goods is Rs.66,31,866.35 only.
This too is evident from Annexure 'B '.
We would, therefore, request you to kindly amend your demand notice accordingly.
Please note that the foregoing is without any prejudice whatsoever to any arguments that may be raised by us at the time of hearing with the Commissioner UP, Excise, Allahabad or during any legal proceedings arising out of your afore mentioned demand notice or adjudicatory order of the Commis sioner.
We also reserve the right to adduce further grounds in our defence and support at any/all future occasions in this connections.
" On 18th March, 1988 there was further amendment by the Distt.
Excise Officer, Ghaziabad, he stated as follows: "With reference to this office 's notice No. 185/1 2 dated 18.3.88 both the units are jointly and severally informed that in the application letters dated 17.3.88 received separately from both the units, the total wholesale price of the total Homeodent tooth paste manufactured has been de clared as Rs.65,739, 15.63.1t has also been informed that 315 for the purpose of Central Excise Duty, the total assessable value of the total quantity of Homeodent tooth paste manu factured until 19.1.88 is Rs.46,66,45 1.45 and that the total wholesale price on this quantity has been declared as Rs.66,31,866.35 to the Central Excise Deptt.
Based on your declaration and clarification given in your above application and.
on the basis of statistics and decla rations that exciseable value on a provisional basis for the total quantities of the cosmetics homeodent tooth paste containing alcohol, which has been sold until 18.1.88 and which in stock on 18.1.88 has accepted as Rs.46,66,45 1.45 instead of Rs.6,81,334.20.
This does not mean that this value has been finally accepted.
One to the fore mentioned, the amount of Rs.68, 13,33 1.20 is amended to Rs.46,66,451.45 in the office 's notice No. 185/1 2 dated 18.1.88.
On this partial amendment, both the units are jointly and severally ordered to provisionally deposit Rs.46,66,45 1.45 instead of Rs.68, 13,324.20 as duty in the State Treasury, Ghaziabad immediately on receipt of this notice, under the appropriate account head and to produce a copy of the receipted Treasury Challan as proof of deposit in this office.
" In view of the facts alleged and found by the District Excise Officer, Ghaziabad, as mentioned hereinbefore, it appears to us that the Homeodent was a medicinal and toilet preparations and liable to excise duty.
This Court in M/s `Baidyanath Ayurved Bhawan (Pvt.) Ltd., Jhansi vs The Excise Commissioner, U.P. & Ors., has held that in order to attract duty under the 1955 Act, all that is re quired is that a medicinal preparation should contain alco hol.
Alcohol may be part of the preparation either because it is directly added to the solution or it came to be in cluded in it because one of the components of that prepara tion contained alcohol.
It is undisputed that mother tinc ture was one of the components that was used in the prepara tion of Homeodent and it has been found that alcohol was there and mother tincture was added in the medicinal prepa ration as its component.
That was not the case before any authorities in this case but being present it was found in liquid form which incidentally again was disputed because test reports were not accepted by the petitioner but accord ing to the respondent authorities, indicated the presence of alcohol.
Section 3(1) of the 1955 Act was attracted.
This Court in the 316 aforesaid decision further reiterated that even if the imposition of excise duty under section 3(1) of the said Act on preparations in which alcohol was indirectly introduced attracts multipoint taxation that by itself would not render the duty illegal.
The provisions for rebate of duty on alcohol contained in Section 4 of the said Act show that multipoint tax on medicinal preparations containing alcohol was within the contemplation of the legislature otherwise there was no purpose in incorporating section 4 into the Act.
In this connection, section 4 of the 1955 Act may be referred to which is as follows: "4.
Rebate of duty on alcohol, etc., supplied for manufac ture of dutiable goods Where alcohol, narcotic drug or narcotic had been supplied to a manufacturer of any dutiable goods for use as an ingredient of such goods by, or under the authority of, the collecting Government and a duty of excise on the goods so supplied had already been recovered by such Government under any law for the time being in force, the collecting Government shall, on an application being made to it in this behalf, grant in respect of the duty of excise, leviable under this Act, a rebate to such manufacturer of the excess, if any, of the duty so recovered over the duty leviable under this Act.
" In this case, however, the case of the petitioner is that duty has been recovered under the 1944 Act; if any refund has to be made, it must be made in accordance with law.
There is a question of limitation for claiming refund of this duty.
The provisions are not clear.
In such a situa tion, it appears to us that the justice requires that provi sions should be made more clear and in the 'view of the facts and the circumstances that have happened, we would direct that if the petitioners are entitled to any refund of the duty already paid to the Central Government in view of the duty imposition now upheld against them in favour of the State Government such refund application should be enter tained and considered in accordance with law.
We are con scious in giving this direction, we are not strictly follow ing the letter and the provisions of the Act.
But in a case of this nature, where there is some doubt as to whether duty was payable to the Central Government under the 1944 Act or whether the item was dutiable under the 1955 Act, it would be just and proper and in consonance with justice in fiscal administration that the Central Government should consider in the light of the facts found, if an application is made under section 11B of the 1944 Act and pass appropriate order.
Such application should be made within four months from the date of the judgment.
In the facts 317 and the circumstances 01 ' this case, the limitation period under section 1 lB of the 1944 Act should not apply.
This direction, in our opinion, must be confined in the facts and the circumstances of this case only.
Our attention was drawn to the observations of this Court in Union of India & Ors.
vs Bombay Tyre International Ltd. etc.
, (supra) in respect of the valuation.
But the point not having been taken at any stage before the authorities, it is not proper for us at this stage to go into this question.
We will proceed in view of the facts and the circumstances of this case and to do justice between the parties on the basis that the duty has been correctly imposed.
We have looked into the order of the District Excise Officer, Ghaziabad and we find that all relevant facts have been considered and no facts were brought before us contrary to the findings nor any conten tions of substance raised which can induce us to hold to the contrary.
Reference may also be made to the observations of this Court in Mohanlal Maganlal Bhavsar & Ors.
vs Union of India & Ors., for the test to determine whether an item of medicinal preparation falls under Item 1 of the Schedule to the 1955 Act.
It has been determined by the authorities enjoined to enforce that Act and such finding has not been assailed on any cogent or reliable ground in any proper manner.
If that is the position, then that order must be upheld but it must be upheld that Homeodent was dutiable and as such the impugned order was correctly passed by the District Excise Officer.
Our attention was drawn to the observations of this Court in N.B. Sanjana, Assistant Collector of Central Ex cise, Bombay & Ors.
vs The Elphinstone Spinning and Weaving Mills Co. Ltd., ; But in view of the facts on which the parties rested their case before the authori ties, it is not necessary at this stage to go into this controversy.
In the aforesaid view of the matter, we are of the opinion that the impugned order dated 18th January, 1989 passed by the District Excise Officer, Ghaziabad, must be given effect to and thereafter the petitioner 's application for refund, if any, made before the authorities under sec tion 4 of the 1944 Act within the time indicated as before should be disposed of in the manner indicated above, if made.
Before we part with this case, two aspects have to be adverted to one was regarding the allegation of the peti tioner that in order to compel the petitioners to pay the duties which the petitioners con 318 tended that they were not liable to pay, the licence was not being renewed for a period and the petitioners were con stantly kept under threat of closing down of their business in order to coerce them to make the payment.
This is unfor tunate.
We would not like to hear from a litigant in this country that the Government is coercing citizens of this Country to make payment of duties which the litigant is contending not to be leviable.
Government, of course, is entitled to enforce payment and for that purpose to take all legal steps but the Government, Central or State, cannot be permitted to play dirty games with the citizens of this country to coerce them in making payments which the citizens were not legally obliged to make.
If any money is due to the Government, the Government should take steps but not take extra legal steps or manoeuvre.
Therefore, we direct that the right of renewal of the petitioner of licence must be judged and attended to in accordance with law and the occa sion not utilised to coerce the petitioners to a course of action not warranted by law and procedure.
Secondly, in a situation of this nature, we are of the opinion that the Government should consider feasibility of setting up of a machinery under a Council to be formed under Article 263 of the Constitution to adjudicate and adjust the dues of the respective Governments.
In these peculiar facts, it appears that the dispute is under two different central legislations and under one the State authorities will realise and impose the taxes on finding on certain basis and under the other the same transaction may be open to imposition by Central Government authorities on a particular view of the matter.
In such a situation, how and wherein the refund should be made of any duty paid in respect of part of a transaction to one of the authorities, the State or the Centre, to be adjusted should be the subject matter of a settlement by the Council to be set up under Article 263 of the Constitution.
This is a matter on which we draw the attention of the concerned authorities for examination because section 3 of the 1955 Act and section 3 of the 1944 Act may overlap similar transaction in certain cases.
Writ petitions are disposed of with the aforesaid direc tions.
Special leave granted in SLP (Civil) No. 1610 of 1989 (M/s. Dabur India vs State of U.P. & Ors., ) and SLP (Civil) Nos.
135 36 of 1989 (Sharde Bairon Laboratories vs State of U.P. & Ors.).
Appeals are disposed of in the light of the directions given hereinbefore.
Save as aforesaid all interim orders are vacated.
In the facts and the circumstances of the case, the parties will pay and bear their own costs.
R.S.S. Petitions disposed of.

summary/full:
M/s Dabur India Limited, petitioner in one set of peti tions, is a public limited company engaged in the manufac ture of Ayurvedic as well as Allopathic medicaments, along with cosmetics.
It used to manufacture for and on behalf of M/s Sharda Boiren Laboratories The petitioner in the second set of petitions a Homeopathic tooth paste called 'Homeo dent ' out of the raw materials supplied by M/s Sharda, on job basis.
It accordingly manufactured Homeodent during 1985 to 1988, duly paying duties of excise on Homeodent under the Central Excises & Salt Act, 1944.
The Superintendent of State Excise visited the factory of M/s Dabur on 18th January, 1988 and enquired about the excisability of Homeodent under the Medicinal & Toilet Preparations (Excise Duties) Act, 1955.
He was told that Homeodent had been classified under the 1944 Act in view of the orders passed by the Central Excise authorities.
Howev er, when it was revealed that the Homeodent tooth paste was toilet preparation containing alcohol, within the meaning of section 2(k), read with Item 4 of the Schedule, referred to in section 3 of the 1955 Act, the District Excise Officer caused a common notice dated 17.3.1988 to be served on M/s Dabur requiring it to pay duty aggregating to Rs.68,13,334.20 under the provisions of the 1955 Act on such 295 goods manufactured and cleared between January 1985 and January 1988.
This order was passed without issuing any notice to show cause, and without affording any opportunity of hearing, to the petitioner.
The Petitioner sent a representation requesting for compliance with the principles of natural justice and also disputing the amount claimed as duty.
On 18th March, 1988 the Superintendent of State Excise modified the earlier order and confirmed the demand of duty amounting to Rs.46.67 lakhs, on provisional basis.
On that day the petitioner deposited a sum of Rs. 11.66 lakhs and further executed a bank guarantee for the balance.
Simultaneously, the peti tioner appealed against the order dated 18th March, 1988.
The Excise Commissioner dismissed the appeal.
No appeal was filed by M/s Sharda against the demand notice of excise duty under the 1955 Act.
The petitioner moved the High Court.
On 13th May, 1988 the High Court directed the petitioner to file a revision petition with the Central Government.
Both the petitioners then approached the Central Government in revision.
On 22nd September, 1988 the Additional Secretary to the Government of India in exercise of his revisional powers allowed the revision filed by M/s Dabur and declared the orders of the District Excise Officer and the Excise Commissioner as null and void having been passed in violation of the principles of natural justice.
The revision filed by M/s Sharda was not entertained by the Central Government on the ground that a right of appeal was vested in Sharda, which was not availed of.
The High Court dismissed Sharda 's petition challenging the order of the Central Government declining to entertain its review.
Against the order of the High Court M/s Sharda have filed the special leave petition in this Court.
On the basis of the revision order, the petitioners called upon the District Excise Officer to refund the amount of Rs.46.67 lakhs recovered from it by way of cash payment and encashment of bank guarantee.
The State Excise authori ties however failed to grant the refund, and instead issued a fresh show cause notice to the petitioners jointly on 2nd November, 1988.
In December 1988, M/s Dabur moved the High Court under Article 226 of the Constitution for quashing and setting aside the showcase notice dated 2.11.1988 and for refund of duty amounting to Rs.46.67.
The High Court dismissed the writ petition.
The High Court was 296 of the opinion that the question whether Homeodent tooth paste was sans alcohol could not be adjudicated upon under the extraordinary writ jurisdiction.
The High Court however came to the conclusion that both the 1944 and 1955 Acts operated in different fields and there was no overlapping between the two.
The High Court further observed that where the parties fully acquiesced with the matter and subjected themselves to the statutory procedure, no action should be allowed to be taken under Article 226 of the Constitution unless the case was patently without jurisdiction.
In this connection, it was emphasised by the High Court that once the parties chose the statutory procedure they must go to the logical end.
It was inter alia urged before this Court on behalf of the petitioner that it was not seeking to circumvent the alternative remedy provided under the Act but in view of the conflicting claims of the Central and State Excise authori ties seeking to classify Homeodent tooth paste under the respective Acts of 1944 and 1955, the petitioner was left with no other alternative but to challenge the actions by way of writ petition under Article 226 of the Constitution.
It was further contended that Homeodent did not contain alcohol but contained ingredient "mother tincture" contain ing alcohol, which had a tendency to evaporate during the process of manufacture of Homeodent; that no test result as required under the 1955 Act was obtained to establish wheth er Homeodent contained alcohol or not; and that on 31st August, 1987 the Assistant Collector of Central Excise had already passed an order classifying Homeodent under the Act of 1944 which order had been upheld by the Collector of Central Excise (Appeals).
The main point that the petitioner sought to emphasis was that the High Court ought to have appreciated that Homeodent tooth paste having been subjected to duty under the provisions of the 1944 Act, the question of levying and recovering duty under the 1955 Act did not and could not arise.
Dismissing the petitions, this Court, HELD: (1) Homeodent is a homeopathic preparation but it is also a tooth paste.
Therefore, it is a toilet prepara tion.
Whether or not such Homeodent would not be dutiable under the Medicinal & Toilet Preparations (Excise Duties) Act, 1955 would depend upon whether it contained alcohol or not.
[315E] (2) It is undisputed that mother tincture was one of the components that was used in the preparation of Homeodent and it has been found that alcohol was there and mother tincture was added in the 297 medicinal preparation as its component.
[315G] M/s Baidyanath Aryurved Bhawan (Pvt.) Ltd. Jhansi vs The Excise Commissioner U.P., , referred to.
(3) The authorities charged with the duties of enforcing a particular Act are enjoined with the task of determining the question whether alcohol is contained therein or not.
[310D] (4) It has been determined by the authorities enjoined to enforce the 1955 Act that Homeodent was a medicinal and toilet preparation and liable to excise duty, and such finding has not been assailed on any cogent ground in any proper manner.
If that is the position, then it must be upheld that Homeodent was dutiable.
[317D] Union of India vs Bombay Tyre International Ltd., ; ; Mohanlal Magan Lal Bhavsar vs Union of India, and N.B. Sanjana, Assistant Collector of Central Excise, Bombay vs The Elphinston Spinning and Weav ing Mills Co. Ltd.; , , referred to.
(5) Provisions for rebate of duty on alcohol contained in section 4 of the 1955 Act show that multipoint tax on medicinal preparations containing alcohol was within the contemplation, otherwise there was no purpose in incorporat ing section 4 into the Act.
[316B] (6) Justice requires that provisions for claiming refund of this duty should be made more clear.
However, in the view of the facts and the circumstances that have happened, it is directed that if the petitioners are entitled to any refund of the duty already paid to the Central Government in view of the duty imposition now upheld against them in favour of the State Government such refund application should be entertained and considered in accordance with law.
[316E F] (7) In a case of this nature, where there is some doubt as to whether duty was payable to the Central Government under the 1944 Act or whether the item was dutiable under the 1955 Act, it would be just and proper and in consonance with justice infiscal administration that the Central Gov ernment should consider in the light of the facts found, if an application is made under section 11B of the 1944 Act, and circumstances of this case, the limitation period under section 11B of the 1944 Act should not apply.
This direction must be confined in the facts and the circumstances of this case only.
[316G H; 317A] 298 Citadel Fine Pharmaceuticals Pvt. Ltd. vs D.R.O., [1973] Mad.
Law Journal 99; Union of India vs Bombay Tyre Interna tional Ltd.; , and Assistant Collector of Central Excise vs Madras Rubber Factory Ltd., [1986] supp.
SCC 751, referred to.
(8) Government should consider feasibility of a machin ery under a Council to be formed under Article 263 of the Constitution to adjudicate and adjust the dues of the re spective Governments.
[318D] (9) This Court would not like to hear from a litigant in this country that the Government is coercing citizens of this country to make payment which the litigant is contend ing not leviable.
Government, of course, is entitled to enforce payment and for that purpose to take all legal steps but the Government, Central or State, cannot be permitted to play dirty games with the citizens to coerce them in making payments which the citizens were not legally obliged to make.
If any money is due to the Government, the Government should take steps but not take extra legal steps or manoeu vre.
Therefore, the right of renewal of the petitioner of licence must be judged and attended to in accordance with law and the occasion not utilised to coerce the petitioners to a course of action not warranted by law and procedure.
[318A C]


judgement:
Appeal No. 122 of 1957.
Appeal from the order dated November 4, 1954, of the Punjab High Court (Circuit Bench) at Delhi in Civil Reference No. 15 of 1953.
R. Ganapathy Iyer, R. H. Dhebar and D. Gupta, for the appellant.
P. M. Mukhi, Gopal Singh for Udhai Bhan Choudhry, for the respondent.
P. M. Mukhi and Ganpat Rai, for Dalmia Jain Aviation Ltd. (now Asia Udyog Ltd.) (Intervener).
November 5.
The Judgment of the Court was delivered by VENKATARAMA AIYAR, J.
This is an appeal against the judgment of the High Court of Punjab in a reference under section 66(1) of the Indian Income tax Act, 1922, hereinafter referred to as the Act.
The facts are that the respondent, had not been assessed to income tax prior to the assessment year 1948 49.
On July 4, 1949, he made suo motu returns showing an income of Rs. 4,494 for the accounting year 1947 48 being the previous year for the assessment year 1948 49 and an income of Rs. 31,646 for 396 the accounting year 1948 49 being the previous year for the assessment year 1949 50.
By orders dated August 25, 1949, the Income tax Officer assessed the income for the assessment year 1948 49 at Rs. 6,277 and for the assessment year 1949 50 at Rs. 36,281.
The correctness of these orders is not in question before us.
We are concerned in these proceedings with the vires of an order, which the Income tax Officer made on October 9, 1950, under section 28 read with sections 18A(3) and 18A(9) of the Act.
It will be convenient to set out these provisions, so far as they are material for the purpose of this appeal.
Section 18A(3) provides that : " Any person who has not hitherto been assessed shall, before the 15th day of March in each financial year, if his total income of the period which would be the previous year for an assessment for the financial year next following is likely to exceed six thousand rupees, send to the Income tax Officer an estimate of the tax payable by him on that part of his income to which the provisions of section 18 do not apply of the said previous year calculated in the manner laid down in sub section (1), and shall pay the amount, on such of the dates specified in that sub section as have not expired, by instalments which may be revised according to the proviso to sub section (2)." Section 18A(9) is as follows: " If the Income tax Officer, in the course of any proceedings in connection with the regular assessment, is satisfied that any assessee (a) has furnished under sub section (2) or sub section(3) estimates of the tax payable by him which he knew or had reason to believe to be untrue, or (b) has without reasonable cause failed to comply with the provisions of subsection (3), the assessee shall be deemed, in the case referred to in clause (a), to have deliberately furnished inaccurate particulars of his income, and in the case referred to in clause (b), to have failed to furnish the return of his total income; and the provisions of section 28, so far ' as may be, shall apply accordingly:".
397 Then, there is a proviso which imposes a limit on the amount of penalty, which can be levied.
Section 28 of the Act runs as follows: (1) " If the Income tax Officer. . in the course of any proceedings under this Act, is satisfied that any person (a)has without reasonable cause failed to furnish the return of his total income which he was required to furnish by notice given under sub section (1) or subsection (2) of section 22 or section 34 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by such notice, or (b)has without reasonable cause failed to comply with a notice under subsection (4) of section 22 or subsection (2) of section 23, or (c)has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he. . may direct that such person shall pay by way of penalty, in the case referred to in clause (a), in addition to the amount of the income tax and supertax, if any, payable by him a sum not exceeding one and a half times that amount, and in the cases referred to in clauses (b) and (c), in addition to any tax payable by him, a sum not exceeding one and a half times the amount of the income tax and super tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income:".
The Income tax Officer held that as the respondent had failed to send an estimate of the tax on his income as provided in section 18A(3) he became liable to be proceeded against under section 28, and accordingly imposed a penalty of Rs. 40 for the year 1948 49 and Rs. 1,000 for the year 1949 50.
On appeal, the Appellate Assistant Commissioner confirmed the order in so far as it imposed a penalty for the year 1948 49 but set it aside as regards the year 1949 50 on the ground that by reason of the assessment for the year 1948 49 the respondent ceased to be a new assessee for 1949 50, and that, in consequence, section 18A(3) had no application.
Against the order cancelling the penalty for 1949 50, 398 the Income tax Officer preferred an appeal to the Appellate Tribunal, which disagreed with the view of the Appellate Assistant Commissioner that the respondent was no longer a new assessee within section 18A(3) of the Act, but held that the order of the lncome tax Officer imposing a penalty under section 28 was ultra vires, because that section would, in terms, apply only when a person failed to furnish the return when he was required so to do by notice under section 22 or section 34 of the Act, and that there could be Do such notices with reference to estimates of tax on income to be sent under section 18A(3).
In the result, the appeal was dismissed.
On the application of the appellant, the Tribunal referred the following question for the opinion of the High Court: " Whether on a true construction of Section 18A(9) (b) read with section 28 of the Indian Income tax Act,1922, a penalty may be imposed for a total failure to comply with the provisions of Section 18A(3) of the said Act ?" The reference was heard by Bhandari, C. J., and Falshaw, J., who agreed with the Tribunal that the conditions as to notice laid down in section 22(1) or section 22(2) must be satisfied even when action was sought to be taken under section 28 in respect of a failure to comply with section 18A(3), and that as those conditions had not been satisfied, the order imposing penalty was bad.
The appellant applied for a certificate under section 66A(2) of the Act, and the same was granted, and that is how the appeal comes before us.
The sole question that arises for our determination in this appeal is whether under section 28(1) read with section 18A(9) of the Act, it is competent to the Income tax authorities to impose a penalty on a person who has failed to comply with section 18A(3) of the Act.
In answering it in the negative, the learned Judges in the court below were influenced almost exclusively by the terms of section 28 which they held did not cover failure to comply with section 18A(3).
Now, section 28(1) provides for penalty being imposed in three classes of cases which are mentioned respectively in cls.
(a), (b).
and (c).
Clause (b) deals with cases where there has been failure 399 to produce documents or accounts or other evidence which the assessee had been required to produce under section 22(4) or section 23(2) of the Act, and that is not relevant for the purpose of the present discussion.
Then, there are cls.
(a) and (c), and they have reference, stating it in plain language, cl.
(a) to failure to make a return and cl.
(c) to making false return.
Now, the learned Judges observe that if an estimate of the tax is furnished under section 18A(3) and that is deliberately inaccurate, that will fall under section 28(1)(c) read with section 18A (9)(a) and penalty could be imposed under that section, but that that could not be done when there is failure to furnish an estimate as required by section 18A(3), be cause sub section
(1) of section 28 would apply only when a person failed to furnish the return when he had been required to do so by notice under section 22(1) or section 22(2) or section 34, or had failed to furnish it within the time allowed and in the manner required by the notice, and that there could be no such notice with reference to section 18A(3).
Say the learned Judges: " In the first place, a person who fails to send an estimate under section 18A(3) cannot be said to have failed to furnish the return of his total income which he was required to furnish in response to a notice issued under section 22 or section 34; secondly, the said person cannot be said to have failed to furnish it.
within the time allowed and in the manner required by such notice, for, estimates under section 18A(3) must be furnished before the 15th March in the financial year immediately preceding the year of assessment whereas the returns required by the notices under sections 22 and 34 can be furnished at later dates." With respect, the error in this reasoning lies in this that it fails to give due effect to the fiction contained in section 18A(9)(b) of the Act.
Under that provision, when an assessee has failed to comply with section 18A(3) he " shall be deemed to have failed to furnish the return of his total income and the provisions of section 28, so far as may be, shall 'apply accordingly." In other words ' by a legal fiction the failure to send an estimate of the tax under section 18A(3) is treated as a 400 failure to furnish return of income under section 22.
It is a necessary implication of this fiction that the estimate of tax on the income to be submitted under section 18A(3) is, in fact, different from the return to be furnished under section 22, and to appreciate the full significance of this fiction, it is necessary to examine what the distinction is.
Under section 3 of the Act, the tax is payable on the income of the previous year.
A statement of that income can be furnished only after that year ends, and section 22 enacts provisions as to when it is to be furnished in the assessment year.
Sub sections (1) and (2) provide for notices being given and the assessee is required to file his statement of income within the period provided therein, and it is this statement that is termed " return ".
Section 18A(3), however, relates to the sending of a statement of tax on the income of the accounting year before the 15th day of March of that year itself, and that statement is termed not a return but an estimate, and quite rightly, because in the very nature of it, it can only be that.
A person who sends an estimate under section 18A(3) has also to send a return of his income for the accounting year under section 22, and sub sections
(4) and (5) of section 18A provide for adjustment of advance tax paid under section 18A(3) towards the tax as finally computed under section 23.
Thus, there is a clear distinction between a return of income under section 22, which can only be during the year of assessment and an estimate of tax on income under section 18A(3), which can only be in the year of account.
It is in the light of this distinction that the effect of the legal fiction enacted ins.
18A(9) (b) that when a person fails to send an estimate of tax on his income under section 18A(3) he shall be deemed to have failed to furnish return of his income, will have to be judged.
The respondent contends that its effect is only to place the estimate to be sent under section 18A(3) on the same footing as the return under section 22 for purposes of section 28, and that that does not abrogate the other conditions laid down in that section on which alone action could be taken thereunder and penalty imposed, and one of those conditions is the issue of notice under section 22(1) or section 22(2).
But it must be noted that section 18A(9) (b) does 401 not merely say that an estimate under section 18A(3) shall be deemed to be a return.
It enacts that the failure to send an estimate in accordance with section 18A(3) is to be deemed to be a failure to make a return.
Now, there can be no failure to make a return, unless notice had been issued under section 22(1) or section 22(2) and there has been a default in complying with that notice.
Therefore, the fiction that the failure to send an estimate is to be deemed to be a failure to send a return necessarily involves the fiction that notice had been issued under section 22, and that had not been complied with.
It is a rule of interpretation well settled that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate.
The following off quoted observations of Lord Asquith in East End Dwellings Co. Ltd. vs Finsbury Borough Council (1) may appropriately be referred to: " If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it.
One of these in this case is emancipation from the 1939 level of rents.
The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.
" The fiction under section 18A(9) (b) therefore that failure to send an estimate under section 18A(3) is to be deemed to be a failure to send a return must mean that all those facts on which alone there could be a failure to send the return must be deemed to exist, and it must accordingly be taken that by reason of this fiction, the notices required to be given under section 22 must be deemed to have been given, and in that view, section 28 would apply on its own terms.
Some argument was addressed to us based on the use of the definite article "the" qualifying the word (1) , 132.
51 402 "return" in section 18 A(9)(b).
It was said that that expression meant the return which is to be furnished under of section 22, and that that requires that there must have been a notice issued under section 22(1) or section 22(2), before action could be taken under section 28.
In the view expressed above that the fiction enacted in section 18 A(9)(b) involves the fiction that notices had been issued under section 22(1) or section 22(2), this contention does not call for further consideration.
It was finally argued that a fiscal statute and especially one imposing a penalty, should be strictly construed and that if the words of the enactment be not sufficiently explicit to reach the subject, the Revenue must fail, and the following observations in Vestey 's (Lord) Executors vs Inland Revenue Commissioners (1) were relied on in support of this position : "Parliament in its attempts to keep pace with the ingenuity devoted to tax avoidance may fall short of its purpose.
That is a misfortune for the taxpayers who do not try to avoid their share of the burden and it is disappointing to the Inland Revenue.
But the court.
will not stretch the terms of taxing Acts in order to: improve on the efforts of Parliament and to stop gaps which are left open by the statutes.
Tax avoidance is an evil, but it would be the beginning of much greater evils if the courts were to overstretch the language of the statute in order to subject to taxation people of whom they disapproved.
" These observations would be in, point if the language of the enactment left us in any doubt as to what the legislature meant.
But can that be said of section 18 A(9)(b)? Its object avowedly is to assimilate the position of a person who has failed to send the estimate under section 18 A 3) to that of a person who has failed to furnish the return. under section 22, and that object is sought to.
be achieved by enacting the fiction which is contained in section 18 A(9)(b).
And 'if, on the principles laid down in East End Dwellings Co. Ltd. vs Finsbury Boorough Council (2), the true effect of that fiction is that it imports that notice had been issued under section 22, then the conditions prescribed in section 28 of the Act are satisfied and (1) [1949] 1 All E.R. 1108, 1120.
(2) , 132.
403 penalty could be imposed under that section for failure to comply with section 18 A(3), on the clear language of that enactment itself without straining or overstretching it.
We must now refer to an aspect of the question, which strongly reinforces the conclusion stated above.
On the construction contended for by the respondent, section 18 A(9)(b) would become wholly nugatory, as sections 22(1) and 22(2) can have no application to advance estimates to be furnished under section 18 A(3), and if we accede to this contention, we must hold that though the legislature enacted section 18 A(9)(b) with the very object of bringing the failure to send estimates under section 18 A(3) within the operation of section 28, it signally failed to achieve its object.
A construction which leads to such a result must, if that is possible, be avoided,, on the principle expressed in the maxim, "ut res magis valeat quam pereat".
Vide Curtis vs Stovin (1) and in particular the following observations of Fry, L. J., at page 519 : I "The only alternative construction offered to us would lead to this result, that the plain intention of the legislature has entirely failed by reason of a slight inexactitude in the language of the section.
If we were to adopt this construction, we should be construing the Act in order to defeat its object rather than with a view to carry its object into effect".
Vide also Craies on Statute Law, p. 90 and Maxwell on The Interpretation of Statutes, Tenth Edn., pp. 236 237.
"A statute is designed", observed Lord Dunedin in Whitney vs Commissioners of Inland Revenue (2), "to be workable, and the interpretation thereof by a court should be to secure that object, unless crucial omission or clear direction makes that end unattainable".
We are accordingly of opinion that it was competent to the Income tax authorities to impose a penalty under section 28 read with section 18 A(9)(b) where there has been a failure to comply with section 18 A(3).
in the result.
, we set aside the order of the court below and answer the reference in the affirmative.
(1) (2) , 110.
404 The appellant will have his costs here and in the court If below.
Appeal allowed.

dataset_name: IN-Abs

summary/full:
The respondent who bad not been assessed to income tax prior to the assessment year 1948 49 made suo motu returns on July 4, 1949, showing an income of Rs. 4,494 and Rs. 31,646 respectively, for the assessment years 1948 49 and 1949 5o, but failed to send an estimate of the tax on his income as provided in section 18A(3) of the Indian Income tax Act, 1922.
The Incometax Officer took action under section 28 read with section 18A(9) of the Act and imposed a penalty on him for the years 1948 49 and 1949 50. 395 The Appellate Tribunal held that the order imposing the penalty was ultra vires on the ground that section 28 would, in terms, apply only when a person failed to furnish the return when he was required so to do by notice under section 22 or section 34 of the Act, and that there could be no such notices with reference to estimates of tax on income to be sent under section 18A(3).
The High Court, on reference, agreed with the view of the Tribunal.
Held, that in view of the legal fiction contained in section 18A(9) of the Act that when an assessee has failed to comply with section 18A(3) he "shall be deemed to have failed to furnish the return of his total income and the provisions of section 28, so far as may be, shall apply accordingly ", the failure to send an estimate of the tax under section 18A(3) should be treated as failure to furnish return of income under section 22.
Accordingly, it was competent to the Income tax authorities to impose a penalty under section 28 read with section 18A(9)(b) where there has been a failure to comply with section 18A(3).
The relevant provisions of the Indian Income tax Act, 1922, are set out in the judgment.