ASSISTANT COLLECTOR OF CENTRAL EXCISE versus RAMAKRISHNAN KULWANT RAI

Citation: [1989] 2 S.C.R. 444 · Decided: 12-04-1989 · Supreme Court of India · Bench: K.N. SINGH · Disposal: Appeal(s) allowed

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Judgment (excerpt)

·,J 
A 
ASSISTANT COLLECTOR OF CENTRAL EXCISE 
v. 
RAMAKRISHNAN KULWANT RAI 
APRIL 12, 1989 
B 
[K.N. SINGH AND K.N. SAIKIA, JJ.] 
)" 
Central Excises and Salt Act, 1944/Central Excise and Salt Rules, ' 
1944-Section 3/Rules JO and JOA-Rules whether ultra vires rule 
making power-Whether applicable to cases where there has been no 
-.
prior levy of Excise duty in respect of article manufactured. 
c 
Respondent firm owned a Steel Rolling Mill situate at Madras. 
~ 
The said mill was leased out to a partnership firm viz., M/s. Steel 
Industries and after the expiry of the lease period, the Respondent took 
•
hack the possession of the Mill on 1.8.1962 and informed the Central 
D Excise Authorities, who advised the Respondent to take out a licence for 
which it applied on 30.11.1962 Respondent sold away the Rolling Mill 
on 8.4.1963. The Superintendent of Central Excise by his letter dated 
13.10.1965 raised a demand of Rs.31,018.20 p. on the respondent on 
account of excise duty. The Respondent having informed the Depart-
~ 
ment that the firm had manufactured only 775.455 metric tonnes Of 
E steel, the demand of excise duty was reduced to Rs.6,419.38 p. only. I 
The Respondent, though pleaded that it was not liable to pay excise 
duty demanded, yet the Assistant Collector of Customs by his order 
dated 14.6.1967 confirmed the demand. 
~ 
The Respondent-firm challenged the validity of the demand by 
;.. 
filing a Writ Petition in the High Court. Respondent contended before 
F the High Court that (i) it was entitled to exemption of duty; (ii) that the 
demand for payment of excise duty was time-barred and (iii) that Rules 
IOA under which the demand has been made are ultra vires as there was -.. 
no provision in the Act to enable the Government to frame rules for the 
i 
rerovery of duty short-levied. 
0 
The High· Court allowed the Writ Petition and upheld the conten-
,.... 
tion advanced by the Respondent holding that Rule lOA did not apply to 
! 
cases where there has been no prior levy of excise duty in respect of the 
articles manufactured during the relevant period. 
H 
Hence this appeal by the Department. 
444 
•• 
ASST. COLLECTOR OF CENTRAL EXCISE v. R.K. RAJ 
445 
The question that arose for determination by this Court was 
whether Rule IOA of the Rules, as it stood at the relevant time, was 
valid? Counsel for the appellant while pleading that the Rule was valid 
submitted that it was necessary to decide this question ·in view of the 
conflicting decisions creating difficulty for the Department in collecting 
short-levies or escaped excise duty. Counsel referred to decisions re-
ported in 1972(2) MLJ 476; A.I.R. 1972 SC 2563; 1973 (l) MLJ 99; and 
1977(2) Tax L.R. l6SO . 
Counsel for the Respondent urged that the Standing Counsel for 
the Central Government had conceded the rationale of the decision in 
Haji J.A. Kareem sait v. Dy. Commercial Tax Officer, Mettupalayam;, 
A 
B 
18 STC 370 which held that Suh-Rule (7) of Rule 5 of the Central Sales 
Tax (Madras) Rules. 1957 was in excess of the rule making power and as 
C 
·)o such the Sub-rule as a whole was invalid. ln view of the said decision, 
the appellant wonld not be able to sustain tbe demand under Rule IOA; 
and it is no longer open to the appellant to challenge the validity of Role 
lOA in the appeal. 
Allowing the appeal and remanding the matter to the High Conrt, 
this Court, 
D 
' 
. },.. 
HELD: Chapter II of the Act deals with levy and collection of 
duty. Under Section 3 of the Act, duties specified in First Schedule 
to the Act were to be levied. Rule IOA provided the machinery for E 
collection of tax from assessee after the goods had left the factory 
premises. This rule contemplated that the duty or deficiency in duty 
was payable on a written demand made by the proper officer in cases 
where either the rules did not make any specific provision for the 
.Ji 
collection of any duty or of any deficiency in duty, if the duty had for 
any reason been short levied. It was a residuary provision and it 
F 
applied only when there was no other specific provision in the Rules. 
Where there had been no assessment at all there was no reason why 
· ,...... claim and demand of the Respondent could not be said to be recover-
able under Rule IOA. [449E; 448H; 449B-C) 
The validity of the delegated legislation is generally a question of G 
vires, that is, whether or not the enabling power has been exceeded or 
not. Rule IOA as it existed at the relevant time

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