E.M. Karuppannan vs Union of India

Ramanujam, J.—The petitioner herein is a grower of tobacco at his village at Elugamvalasu, Ponniyadi, Dharapuram talk, Coimbatore

District for several years. He has taken out a licence for the purpose of curing tobacco which he grew, under the Central Excise Rules. Under the

said licence the petitioner is permitted to cure tobacco and the quantity so cured would have to be accounted for to the Central Excise Authority In

the year 1967- 68 he submitted a return on 15-3-1968 showing that the has cured 1140 kgs. of chewing tobacco. When the Central Excise

Officer visited the petitioners place on 9-91968 for ascertaining as to how be disposed of the cured tobacco, the petitioner stated that he had

transferred 1106 kgs. of tobacco to a private warehouse licensee, one K. S. Ponnuswami who is a licensed dealer in Bhavani as per transport

certificate T. P. 2 No. 247123 dated 24- 8-1968. When the said Ponnuswami was contacted he denied having transported the tobacco from the

petitioner''s premises.

Thereafter an excise duty of Rs. 2388.96 payable on the said stock of 1160 Kgs. of chewing tobacco was demanded from the petitioner by an

order of the Superintendent of Central Excise. Integrated Divisional Office. Erode dated 24-9-69 on the ground that the liability of the petitioner as

a curer of the tobacco continues under rule 29 of the Central Excise is in accordance with law. Against the orders of the Collector the petitioner

filed a revision petitioner before the Central Government but that also failed. The petitioner has thereupon approached this Court for the issue or a

writ of Certiorari to quash the order of the Central Government upholding the demand for excise duty made against the petitioner.

The petitioner of the petitioner is that his liability to pay Central Excise duty in respect of the tobacco disposed of by him has ceased as soon as

the tobacco has been disposed of in accordance with the rule and the that in the circumstances of this case where the gods have been transported

under the valid permit issued by the authorities to one Ponnuswami rule 29 cannot be invoked to recover the excise duty from the petitioner

According to the respondent however, rule 29 preserve the liability of the curer to pay excise duty until the transfer ownership of the tobacco from

the petitioner to another warehouse licensee is reported and acknowledged the by the proper officer and that the petitioner not having reported the

transfer of ownership and the acknowledge by the Central Excise Officer at bhavani, the proper officer, the petitioner cannot question the levy of

excise duty on him.

In the counter affidavit the respondent have not disputed the assertion made by the petitioner that the goods were transferred under the valid

transport permit signed by the vendee Ponnuswamy and that this has been reported to the Excise Officer at Dharapuram who has acknowledge the

same. The Central Excise Officer at Dharapuram who has acknowledged the same. The Central Officer at Dharapuram is the proper officer with

reference to the petitioner. The counter affidavit also proceeds on the basis that the petitioner in fact produced the duplicate foil dated 24-8-11968

issued by the purchaser the said Ponnuswami, a bonded warehouse license at Bhavani. However, the stand taken the in the counter filed is that

since the alleged purchaser Ponnuswamy has denied having transported tobacco from the the curer''s premises the liability of the petitioner cannot

cease until the transfer of the ownership of the tobacco is reported to and acknowledged by the Central Excise Duty Bhavani whose. jurisdiction

Ponnuswami. the warehouse on business. Thus the controversy between the parties appears to lie in a narrow compass.

It is not the respondent case in the counter affidavit that the petitioner has clandestinely disposed of the cured tobacco for consumption. That the

goods have been transported on the basis of a valid permit sent by the Ponnuswamy is not in dispute. It is only because Ponnuswamy has not

admitted the transport of the goods the authorities have been chosen to involve rule 29 on the ground that the petitioner has not reported and

satisfied the proper officer at Bhavani about the transfer of ownership of the tobacco. If the Ponnuswami has admitted the transport of the good no

liability could be attached to the petitioner in respect of the tobacco transported. It is because Ponnuswami has denied the transport

notwithstanding his furnishing a valid transport permit, it has been taken that the transfer of ownership was not reported to and acknowledged by

the proper office at Bhavani. The counter affidavit refers to statement given by Ponnuswamy, admitting the dispatch of the transport permits by him

to six dealers including the petitioner, but the denying the receipt of the goods on the basis of the transport permits. Ponnuswamy does not

however seem to have taken any steps for finding out what happened to the permits dispatched by him. His conduct in obtaining the transport

permit form the excise authorities and sending it to six dealers and keeping quiet even though he has not received the goods in the pursuance of the

permits sent by him seems to be quite suspicious. It may be that the after the receipt of the goods he has not accounted for the stocks received the

goods in the pursuance of the permits sent by him seems to be quite suspicious. It may be that after the receipt of the goods he has not accounted

fro the stock received by him in his accounts with a view to evade his liability towards excise duty. However, it is not necessary to go into

Ponnuswamy''s conduct in this case, It is sufficient to consider the scope of the rule 29 to find out whether the petitioner liability continues even

after the transport of the goods under a valid permit. Rule 29 to find out the whether the petitioner''s liability continues even after the transport of

the goods under a valid permit. Rule 29 is as follows.:

''Continuance of curer''s liability for the payment of duty : when the curer sells unmanufactured products. Without the payment of duty as provided

in rule 24 both the purchasers of the products and the person into the whose possession the products pass after purchase shall be not absolved

from the liability laid upon him by rule 19 until the transfer of ownership has been reported to , and acknowledged by the proper officer.

This rule down that the where the curer has sold tobacco in unmanufactured state without payment of duty as provided in section 24, his liability for

the payment of excise duty will continue until the transfer of ownership in the tobacco has been reported to and acknowledged by the proper

officer. It has been asserted by the petitioner in his affidavit that the the transfer of permit has been reported to and acknowledged by the Central

Excise Officer at Dharapuram who is the proper officer so far as he is concerned. In the counter affidavit this averment has not been denied. But it

is stated that the transfer of ownership has not been reported to and acknowledged by the Excise Officer at Bhavani. Therefore the question is as

to who is the proper officer to whom the petitioner has to report the transfer of ownership of the tobacco and who is to acknowledge the same.

In this context it is necessary to scan through the relevant rules Rule 19 imposes a duty on cured tobacco, as soon as the it is cured and is in a fit

state for sale, and makes the curer liable for payment of the duty until the liability is to the knowledge and the satisfaction of the proper officer is

transferred as the provided in rule 29 to another person duly licensed to carry on business in such tobacco. Rule 24 enables the curer to clear the

tobacco on payment of the duty or deposit the same in a public warehouse or to deposit in bonded store room in the curer''s own premises or

transfer to a private dealer for the storage of such products. In this case the petitioner claims to have transferred the tobacco to a wholesale dealer

possessing a warehouse licence. Rule 26 provides that the whenever the goods are transferred to a warehouse licence dealer the transport should

be under a transport certificate prepared as the described in rule 31. Rule 31 states that all the products sent by a curer to a public or private

warehouse should be accompanied by a certificate in the proper form signed by the or on behalf of the grower or curer or the warehouse licensee,

and such a certificate should certain contain the name and the address of the person to whose premises the tobacco are transferred.

It has been conceded in para 8 of the counter affidavit that the petitioner has complied with the requirements of rules 24 and 26 and 31. But the

complaint appears to be that the petitioner has not compelled with rule 29 in the that he has not reported the transfer of the ownership of the gods

to and the acknowledged by the Excise Officer at Bhavani . thus the controversy between the parties is as to the scope to the words ""proper

officer "" ""Proper Officer"" has been defined under Rule 2(xi) of the rules thus :

the office in whose jurisdiction the land or premises of the producer of any excisable goods, or of any person engaged in any process of the

production of or trade a such gods or containers there of whether as a grower, curer wholesale dealer, broker or commission agent or

manufacturer, or intended to grower, curer, wholesale dealer, broker, commission agent or manufacturer are sachet :

According to this definition so far s the curer is concerned the officer in the whose jurisdiction he has carried on the curing operation will be the

proper officer. Therefore the Central Excise Officer, Dharapuram within the whose jurisdiction the petitioner has cured the tobacco is the proper

officer so far as the he is concerned and the petitioner duty is only to report to him about the transfer of the ownership of the tobacco and get his

acknowledgment for the same. Even otherwise, the having regard to the object of the rules the petitioner is liable to the account for the tobacco in

his possession only to the Central Excise Officer at Dharapuram. Therefore by way of rendering an account of the stocks held by him he has to

report the ownership of the tobacco to the officer the at the Dharapuram. It is true Ponnuswami, the alleged purchaser from the petitioner in the

view of this having a licensed warehousing at Bhavani is accountable for his stocks to the Central Excise Officer at Bhavani who he is the proper

officer so far as he is concerned. But that does not mean that the petitioner has become accountable for the stocks to the Excise Officer. at

Bhavani The fact that the transport of cured tobacco is required to be done under the permit issued in accordance with the rule 31 indicated that

the movement of the goods is shown to be in pursuance of the transport certificate given by the warehousing licensee the local officer within the

whose jurisdiction the vendor carries on business will have been to be satisfied and the officer from whom the transfer form has been obtained by

the transferee has to take up follow up action for the recovery of the excise duty from the transferee. Having regard to the object and the purpose

of rule 31 requiring a transport permits in the prescribed authority the curer is not liable to satisfy the proper officer in whose jurisdiction the

licensed warehouse of the transferee is located the Curer''s obligation is only t satisfy the proper officer within whose jurisdiction the curing

operations have been perfumed and to whom he is accountable for the stocks in his possession. I am therefore of the view and that the stocks in

his possession. I am there fore the of the view that once the petitioner has satisfied the Central Excise Officer at Bhavani Dharapuram about the

transfer of ownership of the tobacco and the same has been acknowledged by that the transfer of ownership of the tobacco and the same has been

acknowledged by that the officer his liability should be taken to have ceased under rule 29. In my view therefore, the order of the Superintendent

of the Central Excise, Integrated Divisional Office Erode, demanding a sum of Rs. 2388.96 and affirmed by respondents 1 and 2. has to be set

aside and is according set aside. the writ petition is allowed. But there will be no order as to the costs.