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Judgment
Gangadhara Rao
Since com non questions are raised in all these writ petitions I am disposing them of by this common judgment. The petitioner in all these writ petitioners are Khandasari Sagar Mills. They manufacture Khandasari Sagar. Normally, excise duty is payable on the Khandasari sugar manufactured, in accordance with item No. 1(2) of the Schedule I read with Section 3 of the Central Excise and Salt Act 1944, But, the Government have evolved a scheme generally called ''Compounded Levy Scheme''. It is contained in Rules 92A to 92F in Chapter V of the Central Excise Rules 1944. Under that Scheme, duty is payable for each centrifugal, instead of on total production of sugar at full rate mentioned in the I Schedule. Thus the manufacturers of Khandasari sugar stand to benefit by opting to that scheme and in fact, the petitioners in all writ petitions did so.
It is sufficient for me if I refer to the facts in W.P. No. 725 of 1976 The petitioner started functioning his unit with one centrifugal since the last week of November 1975, He was paying duty on one Centrifugal only every week. Due to the availability of sugarcane the petitioner thought it fit to instal another centrifugal from 1-1-1976. So on 22-12-1975 he applied for permission, Permission was granted by the Superintendent of Central Excise on 26-12-75 He installed a second centrifugal. On 7-2-1976 the petitioner intimated the Superintendent that since the supply position of cane was not so encouraging as was anticipated he would remove from his factory one centrifugal and would work with the remaining one from the week commencing from 15-2-76 and requested for exemption of Central Excise Duty on the centrifugal that would be removed from the factory. The petitions also filed A.R. 8 dated 12-2-1976 for one centrifugal for the week commencing from 15-2-1976. The request was turned down on 7-2-1976 by the Inspector of Central Excise, Yella Reddy, with a direction that the Central Excise Duty should be paid in respect of both the centrifugals, even if the petitioner removed one centrifugal from the factory. The petitioner made a representation to the Superintendent of Central Excise, Medak, for permission to pay on the centrifugal only with effect from 15-2-1976 without result. The petitioner removed one centrifugal from the foundation with screws and intimated the same by telegram to the Superintendent of Central Excise, Medak. The Superintendent visited the factory on 17-2-1976 and made an endorsement in the registers of the factory that one centrifugal was removed from the foundations along with the screws and it cannot be re-fixed. Inspite of this, the petitioner was compelled to pay for the centrifugal for week commencing from 15-2-1976. He paid under protest. The petitioner made two representations to the Collector of Central Excise on 13-2-1976 and 16-2-1976 in this regard. He says that in addition, he has also made oral representations to him, but the Collector said that the matter was decided by the Government of India on the administrative side and the demands issued are correct in law and he cannot help him. He did not pass any written orders or communicate them to the petitioner. Hence he has filed the writ petition.
It is submitted by Sri Jogayya Sarma, the learned counsel for the petitioners in these writ petitions, that according to the rules, the duty is payable only on the number of centrifugals that actually work in a week, but not on the centrifugals that are not worked. Secondly, he submitted that when the department has permitted the petitioner to instal the second centrifugal without informing him that he had to pay duty for the period before the date of its installation, the department is estopped from contending that he should pay duty even for the earlier period also. On the other hand, it is submitted by Sri Subrahmanya Reddy, the learned counsel for the Central Government that duty liability is for the whole season though it is discharged by weekly payments and the petitioner must pay the duty whether he works the centrifugal or not.
The primary question for my consideration is whether the petitioners should pay duty on the centrifugals removed by them or not worked by them, in their factories, after giving due notice to the concerned authorities? In order to decide it, it is necessary to refer to Rules 92A, 92B and 93C of the Central Excise Rules 1944.
C--1 KHANDASARI SUGAR
"92A. Application to avail of special procedure:--(1) Where a manufacturer who produces Khandasari Sugar makes in the proper form an application to the Collector in this behalf, the special provisions contained in this section shall on such application being granted by the Collector, apply such manufacturer in substitution of the previsions contained elsewhere in these rules, other than in this section, for the period in respect of which the application has been so granted. (2) Such application shall be made each year so as to cover a period of atleast one manufacturing season.
3) If, at any time during such period, the manufacturer fails to avail himself of the special provisions contained in this section, he shall unless the Collector is satisfied that such failure is for justifiable reasons, be precluded from availing himself of such provisions for a period nor exceeding 12 months from the date of such failure.
4) if the manufacturer desires to avail himself, of the special provisions contained in this section on the expiry of the period for which his application was granted, he shall make, before such expiry, an application to the Collector under sub-rule (1): and on his failure to do so, he shall, unless the Collector is satisfied that such failure is for justifiable reasons be precluded from availing himself of such provisions for a period not exceeding 12 months from the date of such expiry."
"92 B. Discharge of liability for duty on payment of certain sums:--(1) Having regard to the average production in India of Khandasari Sugar, falling under sub-item (2) of item 1 of the First Schedule to the Act, per week for different sizes of centrifugals installed for the manufacture of Khandasari Sugar, and any other relevant factor, the Central Government may by notification in the Official Gazette, fix from time to time a rate of duty pet week or to such conditions and limitations as it may think fit and if a manufacturer whose application has been granted under rule 92A pays a sum calculated according to such rate of duty in the manner and subject to the conditions and limitations hereinafter laid down, such payment shall be a full discharge for the duty leviable on his production of such Khandasari Sugar during the period for which the said sum has been paid.
Provided that if there is an alteration in the rate of duty or in the limit of exemption or both, the sum payable shall be recalculated on the basis of the revised rates or exemption limit or both, from the date of alteration and liability for duty leviable on the production of Khandasari Sugar from that date shall not be discharged unless the differential duty is paid, should, however, the amount of duty so recalculated be less than the sum paid the balance shall be refunded to the manufacturer.
Provided also that for the period, beginning with the 1st day of July and ending with the 31st day of October, the rate of duty applicable to any type of centrifugal shall be two-third of the rate fixed for that type.
2) The sum payable under sub-rule 1) Shall be calculated by applying the appropriate rate for the number and size of centrifugals, declared by the manufacturer in the application made by him under rule 92C and installed by him for the manufacture of Khandasari sugar'' and the sum as afore said shall be payable from the date on which the unit commences manufacturing operations during a season to the date on which the unit closes down at the and of that season.
Explanation:- For the purpose of this sub-rule:-
a) "Season" shall be reckoned from the 1st day of November to the the 30th day of June of the year next following: and from the 1st day of July next following to the 31st day of October of that year;
b) the unit shall be deemed to commence manufacturing operations from the date on which its centrifugal starts producing Khandasari Sugar in a season and shall be deemed to close down on the date on which its centrifugal finally stops for the season:
c) in computing the liability of any unit producing Khandasari Sugar for duty, the period during which the Collector is satisfied that such unit had remained entirely closed for a continuous period of not less than fifteen days, shall be excluded.
3) Before commencing or closing its manufacturing operations, every manufacturer shall give a notice in writing to the proper officer and the notice shall be so despatched as to ensure that it reaches the proper officer not less than seven days before such commencement;
Provided that the Collector may, in exceptional circumstances, accept a notice shorter than seven days.
4) The sum referred to in sub-rule (2) shall be tendered by manufacturer, at the time of submission of the application under rule 92C, initially for a period of two weeks and thereafter weekly payment shall be made by such manufacturer two days in advance of the week next following so that at the beginning of every week such manufacturer''s deposit shall be equal to the amount of duty payable by him for two weeks, and the balance out of the duty so deposited, if any shall be adjusted at the end of the season, if so desired by the manufactured who had made the deposit.
"92. C. Manufacturer''s declaration, accounts and returns:- (1) The manufactuer referred to in rule 92A shall, at any time, during the calendar month immediately preceding the season in respect of which he had been permitted to avail himself of the provisions of this section, make an application to the proper officer in the proper form for leave to remove Khandasari Sugar from his licensed premises during the ensuing season, declaring therein the number and size of centrifugals installed or proposed to be installed together with their height and diameter. The permission so granted for a whole season shall be subject to be fulfilment of the condition of weekly payment of duty under rule 92-B (4) and such other conditions as may be prescribed. Failure to comply with these conditions will render the permission null and void.
2) If such application is not made to the proper officer in accordance with sub-rule (1) or the weekly deposits are not made as required under sub-rule 4 of Rule 92-B, the manufacturer shall, unless otherwise directed by the Collector, and in exceptional circumstances be liable to pay duty on his entire production of Khandasari sugar during the season in respect of which the application was to be made, at the full fate set forth in the first schedule to the Act.
(3) Such manufacturer shall also :
(a) maintain a true account in the proper form so as to enable the accurate calculation of the sums due : (b) append to his monthly return in form R.T. 3 made under rule 54, a duly signed statement showing the number of days worked and the number and sizes of the centrifugals installed as well as employed on each such day during the month to which such return relates.
Before I discuss these rules, I must say, they are not happily and correctly worded. For instance, in Rule 29A, I am not able to understand the use of the word ''section'' and again the words ''other than in this section.'' Similarly to me, Rule 92C is a little confusing. But they do not stand in my way of deciding the main question.
These rules show that when a manufacturer of Khandasari Sugar wants to opt to the Compounded Levy Scheme he should make an application in the proper form under Rule 92A to the Collector. When the Collector grants such an application these rules apply but not the other provisions. The application should be made every year so as to cover a period of atleast one manufacturing season. Under Rule 92B the Central Government fixes from time to time a rate of duty by a notification in the official gazette. It is fixed having regard to two factors: (1) average production in India of Khandasari Sugar per week for different sizes of centrifugals installed for the manufacture of Khandasari Sugar, and (2) any other relevant factor. The rate of duty is fixed per week or per month per each such centrifugal. Payment of such duty shall be in full discharge for the duty leviable on his production of Khandasari Sugar during the period for which the said sum had been paid. If there is an alteration in the rate of duty or in the limit of exemption or both, the sums payable will be accordingly re-calculated and shall be either paid or refunded. The sum payable shall be calculated by applying the appropriate rate for the number and size of centrifugals declared by the manufacturer in his application and installed by him. It shall be payable from the date on which the unit commences manufacturing operations during a season till the date on which the unit closes down at the end of that season. The season is, from 1st of November to 30th of June and from 1st of July to 31st of October. The unit is deemed to commence manufacturing operations from the date on which its centrifugal starts producing Khandasari Sugar in a season and shall be deemed to be closed down from the date on which its centrifugal finally stops for the season If the unit remains entirely closed for a continuous period of not less than fifteen days, that period is excluded in computing the liability. For the period from 1st July to the 31st of October, the rate of duty applicable to any type of centrifugal is two thirds of the rates fixed for the type. The manufacturer should tender the duty at the time of submission of his application under rule 92C initially for a period of two weeks. Thereafter he should make weekly payments.
Under Rules 92C, the manufacturer should make an application for leave to remove Khandasari Sugar from his premises during the ensuing season. That application should be made during the calendar month immediately preceding the season. In that application he should declare the number and size of centrifugals installed or proposed to be installed together with their height and diameter. The permission so granted for a whole season is subject to the condition of his making weekly payment of duty.
If such application is not made of weekly deposits are not made; the manufacturer is liable to pay duty on his entire production of Khandasari Sugar, during the season at the full rate set forth in the I Schedule of the Act.
The Government of India issued notification No. 96/75 dt. 30-4-1975 under Rule 92B, fixing weekly rate of duty for different sizes of centrifugals. The application to be made under Rule 92A should be in Form A. S. P. The application to be made under Rule 92-C should be in Form A. R. C.
Four prominent features stand out in these rules which help to solve the problem. First, the Government of India fixes the rate of duty taking into consideration the average production of Khandasari sugar in the country per week, for different sizes of centrifugals installed for manufacturing that sugar. It means centrifugals not installed or removed will not be taken into consideration, for they do not produce Khandasari sugar. There is no production without installation. If a person removes a centrifugal it cannot be said he is producing Khandasari sugar. Secondly, rate of duty is fixed with reference to a centrifugal that is installed for manufacturing Khandasari sugar. When a centrifugal is remove it is not installed, much less does it manufacture Khandasari sugar. Consequently, no duty is payable with reference to it. Thirdly, the unit is deemed to commence manufacturing operations from the date when the centrifugal starts producing sugar, Similarly it is deemed to close down on the date when the centrifugal stops for the season. It postulates a working centrifugal but not a non-functioning or a removed centrifugal. Fourthly, he pays this duty in discharge of duty otherwise payable by him on his production of sugar, under Schedule I. If there is no production of sugar, he need not pay. There is no production, if the centrifugal does not work. Therefore to my mind these features show that duty need not be paid for centrifugal that was removed.
Further I do not gather from the rules that he should pay duty even for centrifugals that were removed by him during the season. It is true that under the rules he must pay duty for the period. But that can only be for a centrifugal that works. The rules do not say that even if a centrifugal is removed, he should pay for it for the season or the period. Consequently, I am not able to agree with the learned counsel for the Central Government, that the petitioner should pay duty for the whole season for all the centrifugals even if they were removed. I agree with the learned counsel for the petitioners that the petitioners need not pay duty for the centrifugals that were removed.
I do not also agree with the learned counsel for the Central Government that the petitioner should pay duty for a centrifugal even for the period prior to the date of its installation. Clause (c) of sub-rule (2) of Rule 92B says that the unit shall be deemed to commence manufacturing operations from the date on which its centrifugal starts producing Khandasari sugar but not for the previous period of the season.
It is also submitted by the learned counsel for the Central Government that these writ petitions are not maintainable since the petitioners can agitate these questions before the Departmental authorities by way of applications before the competent authority and they can further agitate by way of appeal and revision as provided u/s 35 and section 36 of the Central Excise and Salt Act 1944. But the petitioners in their writ petitions have stated that they had made written representations to the Collector of Central Excise and they also made a personal representation to him to which he had replied that the collection of duty on the two centrifugals was correct and that the matter was already decided by the Government of India. These averments are not denied in the counter affidavit filed by the Collector, Customs and Central Excise. He has not also passed any orders on their representations and communicated them to the petitioners. If so, no useful purpose would be served by directing the petitioners to make once again a representation to the Collector. Apart from that, an appeal can be filed only against an order passed by an authority and not otherwise. When the Collector has not passed any orders petitioners could file an appeal against his order. Consequently, I reject this contention. In the result, I allow these writ petitions and I direct the respondent not to collect duty on the centrifugals not in existence in the factories of the petitioners in W.P. Nos. 725/76 and 834/1976 from the week commencing from 15-2-1976 of the petitioners in W.P. Nos. 862/1976 and 911/1976 from the week: commencing from 21-12-1975, of the petitioner in W.P. No. 910/1976 from the week commencing from 16-1-1976, of the petitioner in W.P. No. 1041/1976 from the week commencing from 1-2-1976 and of the petitioner in W.P. No. 3439/76 from the week commencing from 22-1-1976. In the circumstances of the case. I direct each party to bear his costs in these writ petitions.