1983 PLP 784 (CLC)

‑ Rr. 7 & 10‑Interpretation‑Purpose of R. 10, held, to provide a limitation for levy and recovery of excise duty ‑ Rule 7 not independent of r. 10 in matter of recovery‑Expression "for any reason" in r. 10 comprehensive enough to cover omission to levy excise duty so also non‑payment or short payment thereof including one resulting from inaction of department and evasion by assessee. A. Karim Malik for Petitioner. Syed Iftikhar Ahmad, D. A.‑G. for Respondents. Date of hearing : 24th October, 1987‑ The petitioner‑Company is* a manufacturer of "Hair Belting" of two qualities namely, "Commander Brand and Elephant grand". The Company was served by the Superintendent Central Excise & Land Customs, with a notice dated 2‑10‑1970 (Annexure 'A'), under rule 7 of the Central Excise Rules, that its products, which fell within the definition of "woolen fibrics", wore liable to excise duty, at the rate of 10% ad valorem but Turing the period from the. year 1963 t9 28‑6‑1969, it manufactured and removed away from the factory premises, the said excisable goods, without payment of the duty. A demand of Rs. 1,18,162 was thus raised against the Company. Its appeal before the Collector failed, however, in revision the Joint Secratary, Government of Pakistan, Ministry of Finance, C. B. R., who has been impleaded as 'respondent No. 1, acted as a revisional authority and by his order dated 31‑&1974, exempted from excise 6ty, the Elephant Brand, which contained less than 10% wool. but maintained the levy on the other Brand. The petitioner has now invoked the text ordinary jurisdiction of this Court. 2. 1 have heard the learned counsel for the parties, and examined the available record. It is not disputed by the petitioner that its Commander Brand goods are excisable. The fact that the Company manufactured and removed away without payment of excise duty, such goods during the period from 8‑6‑1963 to 28‑6‑1969 is also not in controversy, The contention raised by the petitioner's ‑ learned counsel, however, is that under rule 10 of the Central Excise Rules, the recovery for the period prior to 2nd October, 1967, became barred by time and thus could not be enforced. It is to be noticed that in terms of the order dated 14‑1‑1975, passed by this Court, the petitioner claims to have cleared the admitted liability and paid the duty for the period other than from 1963 to 1‑10‑1967.

3. The learned Deputy Attorney‑General endeavoured to draw a distinction between rules 7 and 10. ‑ According to him, the latter provision is attracted only in a case where the products of a manufacturer are generally subjected to excise duty and the assessee clears the goods in a regular way but somehow or other, some consignment escapes the levy or is short levied or ‑ short‑paid. He urged that' when the duty is; purposely evaded and the goods cleared away without documentation, under rule 7, there is no bar to enforce the levy at any time and such recovery is not governed by any period of limitation.

4. I am unable to agree with the learned Deputy Attorney‑General. Section 3 of the Central Excise Act, is the charging section, which create charge on all the excisable goods, the moment these are manufactured. The charge, however, remains dormant until it is quantified and the payment of the duty made or enforced under the provisions of the rules. Rule 7 can conveniently be divided into two parts; the earlier part merely provides that duty shall be paid, on the excisable goods, at such time and place and to such person as may be designated under the rules. To the extent of direction as to the payment of duty, this rule does ' not make any contribu tion, for, under section 3, the excisable goods have already been subjected to a charge. The latter part of the rule, however, orders that in case the duty is not paid in accordance with the. rules, or upon a written demand made by the departmental authorities, the person responsible to pay the duty, would be liable to a penalty, which may exceed to Rs. 2,000 or 10 times of the amount of the duty, whichever is greater. On the other hand, rule 10 specifically lays down that when for any reason, the duty has not been levied or short levied or short‑paid the person on whom the liability is cast, shall pay the duty, on a written demand being made within three years; the date on which the duty became due. It may be observed that under Notification bearing No. SRO‑1645(1)/73. dated 26‑11‑1973, rule 10 was amended and the time limit of three years sub stituted by 10 years. The purpose of this rule appears to be, to provide a limitation for the levy and recovery of the excise duty. In the matter recovery of the duty, rule 7 is not independent of rule

10. Both the rule .are to be read together and the payment of duty envisaged by rule 7 has got to be enforced within the period prescribed by rule

10. The expression "for any reason" figuring in rule 10, is comprehensive enough to cover the ,omission to levy the excise duty and so also the non‑payment or short payment thereof, relatable 'to any cause, including the one resulting from inaction of the department and the evasion made by the assessee. The language of rules 7 and 10 is Dot open to the interpretation sought to be put thereon by the learned Deputy Attorney‑General.

5. It thus follows that under *rule 10, the recovery beyond a period of three years from the date of the notice Annexure 'A' had become barred by time and thereof, one could not be enforced. Even the learned Joint Secretary, ‑in the parawise comments, does not appear to have seriously disputed the correctness of the proposition. As observed above, according to the petitioner the entire duty for the period from 2‑10‑1~167 to ‑28‑6‑1969 has already .been paid. In case some duty, relating to this period, is outstanding against the petitioner, that can be recovered by the department. However, for the .period prior to 240‑1967 the demand is barred by time.

6. For the foregoing reasons this writ petit impugned order to the extent of upholding the recovery of the excise duty, in respect of the Commander Bra rid, for the period prior to 2‑10‑1967 is declared to have been passed without lawful authority. In view of the partial success of the petitioner, the parties are left to bear their own costs. M. Y. M. Petition accepted.