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Raghavan, J.—The above writ petition is for quashing the order of the Government of India, Ministry of Finance, dated 16th October 1970 rejecting the revision petition filed by the Petitioner against the order of the Collector of Central Excise, Madras-34, dated 5th April 1969 substantially confirming the order of the Assistant Collector of Central Excise, Coimbatore, dated 27th May 1967. The Petitioner is a private limited liability company carrying on business in the manufacture of cotton textile yarn at Pollachi, hereinafter called the company. The company is being assessed to central excise in respect of the cotton yarn manufactured and produced by it. During the month of January 1965, the company was manufacturing cone yarn of count Nf 50 and was entering into contracts for the sale with its constituents and was marketing the same as such. Under item 18-A of the First Schedule of the Central Excise and Salt Act, hereinafter referred to as the Act, the excise duty is levied on cotton twist, yarn and thread of all sorts sized or unsized, in all forms including skeins, hanks, cops, cones, etc. u/s 37 of the Act, the Central Government is given power to make rules to carry into effect the purposes of this Act and under Sub-clause (2)(i) such rules may provide for the assessment and collection of duties of excise, the authorities by whom functions under this Act are to be discharged the issue of notice, requiring payment, the manner in which the duty shall be payable, and the recovery of duty not paid. During the year 1965-66 the rate of duty eligible was 90 paise per kilogram of cotton yarn of the count of over 50 Nf and 60 paise per kg. in respect of counts 50 Nf and below. The case of the Petitioner is that the Inspector of Central Excise in exercise of the power vested in him under Rule 56 of the rules drew on 19th January 1965 a sample of the yarn manufactured by the Petitioner for testing of the count of yarn. The length of the sample so drawn was purported to be 1,000 metres, while factually only 100 metres were taken. The sample of yam so drawn was divided into 3 packets and all the packets were sealed and one of which was delivered to the Petitioner. The first sample packet in the possession of the Central Excise Department was sent to the Chemical Examiner, Customs House, Madras-1, for testing of the count and as a result of the test the Deputy Superintendent of the Central Excise, intimated the Petitioner by letter, dated 23rd March 1965 that the first packet of the sample yarn indicated the count as Nf. 54-2, while the duplicate sample packet in the custody of the Excise authorities was again sent to the Chemical Examiner and the report was that the count of yarn was Nf. 55-1, that the Deputy Superintendent of Central Excise in his letter, dated 23rd March 1965 called upon the Petitioner to pay additional duty for the quantity of 24,200 kgs. of yarn produced and cleared not only from the date of inspection but also for the months of December 1964 to January and February 1965, the difference in duty being at the rate of 30 paise kgm. exigible on counts higher than 50 Nf. Accordingly a demand notice for a sum of Rs. 7,260 was issued. The Deputy Superintendent of Central Excise intimated the Petitioner to apply to the Assistant Collector of Central Excise, Coimbatore, if the Petitioner so desired, remitting a sum of Rs. 12 to retest the sample in the possession of the Petitioner by the Chief Chemist, Central Revenue Controlled Laboratory, New Delhi. The Petitioner being dissatisfied with the test of the Chemical Examiner, requested the Assistant Collector of Central Excise to have the retest made by the Chief Chemist, Central Revenue, New Delhi. Triplicate sample of the cotton yarn drawn on 19th January 1965 was re tested by the Chief Chemist and on retest the count of yarn was found to be 53-42 Nf. In pursuance of the said letter the Deputy Superintendent, Central Excise, Pollachi, called upon the Petitioner to pay Rs. 7,260 as originally fixed by him, the count on retest having exceeded 50 Nf. The Petitioner sought clarification and requested particulars of the readings taken by the Chemical Examiner. The Deputy Superintendent of Central Excise in his reply stated that the results obtained on chemical test was properly done. The company filed an appeal to the Assistant Collector on 14th February 1966 contending that the quantity of 100 metres drawn, was opposed to the normal departmental procedure laid down for tests and further that it was improper and arbitrary to assess for any period prior to or subsequent to the date of drawal.
During the pendency of the appeal another demand notice, dated 12th April 1966 was received purporting to be the differential duty demanded. The original demand was cancelled and in place a demand for Rs. 3,660 was made. The company objected to the proposal of the Assistant Collector calling upon him to show cause why the duty of Rs. 3,660 should not be confirmed. The company again objected to the proposal, their contention being that the prescribed procedure for drawal of sample was not followed and that the levy of differential duty was arbitrary. The Assistant Collector, Central Excise, however, confirmed both the demand totaling Rs. 7,260. In making the order the Assistant Collector rejected the other contentions of the Petitioner regarding the improper conduct of sampling and testing. The Collector of Central Excise on appeal modified the order by canceling the demand for the anterior period, viz., the period prior to the date of inspection. He, however, confirmed the demand for Rs. 3,660 for the period 19th January 1965 to 30th March 1965. The company filed a revision petition against the order of the Collector to the Government of India, Department of Revenue and Insurance. The Government of India rejected the appeal petition.
The contentions put forward on behalf of the company are :--
(1) u/s 37(2)(xiv) though the Central Government is empowered to make rules authorising and regulating the inspection of factories and for making provisions, for the taking of samples and for making of tests of any substance produced in the factories, no provision in the rules has been made for making of tests or the manner of conduct of tests. Under the norms set up by the Government a minimum length of 500 or 1,000 metres of yarn should be drawn, while in the instant case 100 metres alone had been drawn in spite of the company''s objection from the very beginning. In the absence of the rules framed by the Government, the company''s contention is that the procedure followed is arbitrary and any written instructions given by the Department cannot be valid.
(2) While the Ministry of Commerce has fixed the error margin or tolerance at 5 per cent the Departments''s fixation of error margin at 2-5 per cent in respect of counts is arbitrary, illegal and improper.
(3) The variation in the results of the two tests conducted by the same Chemical Examiner is 1-6 per cent, while the variation between the tests carried by the Chemical Examiner and the Chief Chemist, Delhi, is 2-7 per cent, which variation demonstrates that the margin of error fixed is arbitrary,
(4) No guidance has been prescribed in the rules in the matter of removal for samples and tests.
(5) Unless substantial lengths of yarn are drawn at random and average taken, the result will be prejudicial both to the manufacturer and the revenue.
(6) Ignoring of records of the company in this regard is unjustified ; and
(7) The additional levy made is illegal and without the authority of law.
On behalf of the Respondents a common counter affidavit was filed and their contention is that the samples of cotton yarn manufactured by the Mills were drawn on 19th January 1965 and were subjected to tests by the Chemical Examiner, Customs House, Madras. Three samples of HO metres in length each were drawn and sealed in three packets as required by the rules. The test of the original and duplicate samples by the Chemical Examiner, Customs House, Madras, revealed that the yarn was of count Nf. 54-2 and Nf. 55.1 respectively. The cotton yarn manufactured by the Mills being in excess of 50 Nf. the demand for differential duty was raised as follows :--
(i) In respect of the cotton yarn cleared from 3rd December 1964 to 30th March 1965 for Its. 3,660 in respect of 12,200 Kgs. of cotton yarn cleared during the period from 19th January 1965 to 30th March 1965.
(ii) Rs. 3,660 in respect of 12,000 Kgs. cleared during the period from 3rd December 1964 to 18th January 1965.
On the protest received by the company, the triplicate samples of the cotton yarn was sent to the Chief Chemist, New Delhi, the result of which also attracted higher duty. After issuing a show cause notice as to why the higher demand should not be made, the Assistant Collector of Central Excise, confirmed the demands by order, dated 27th December 1967. The said order was confirmed in the appeal in part i.e., in respect of the period 19th January 1965 to 30th March 1965. The revision petition filed before the Government of India was rejected by order, dated 16th October 1970 and the present writ petition is filed against the said order. In dealing with the legal contentions raised by the Petitioner, the Respondents'' answer was that the norms--set up by the Government of India for cotton yarn are not arbitrary or without authority of law. Once there is a power to carry out test by taking samples, etc., the power to fix reasonable norms is incidental to such power. In regard to the notification by the Ministry of Commerce and Industry prescribing the error or margin of tolerance of limit of 5 per cent the Respondents., contend that the fixation of 5 per cent is reasonable and that there is no arbitrariness in the margin of error fixed by the Department. The Department further contended that actually three lengths of 110 metres each were taken as samples that is a total length of 330 metres was taken and divided into three packets and the procedure adopted for testing is just and proper. The Petitioner''s contention that the authorities should take out samples every day and conduct test is not practicable and the procedure adopted by the Department in taking 330 metres and checking is proper in the circumstances of the case. In the result, the Respondents contended that there are no grounds for interference with the orders passed by the authorities and that the procedure followed is correct.
In the reply affidavit filed on behalf of the Petitioner it is stated that the Petitioner has 56 spinning frames working in the Mill, that there are 25,006 spindles with which the yarn of various counts are spun, that the Mill works three shifts, that for each shift one spindle is capable of producing 5 hanks of Nf. 50 counts, each measuring 775 metres more or less and that for every shift the mill will produce more than 9 crores metres of yarn,. The Petitioner further states that the sample of 1,000 metres should have atleast been taken for testing while only 110 metres have been taken, which is inadequate, that in one hank there are 7 leas of 110 metres each, and that the average of test matte on 7 lens is taken as a standard and the procedure adopted by the Department cannot yield correct results.
Section 37(2)(xiv) of the Act empowers the Central Government in particular and without prejudice, to the generality of the power of Section 37(1) to make rules authorising and regulating the inspection of factories and providing for the taking of samples, and for the making of tests, of any substance produced therein. In pursuance of the power the Government has set out certain norms with a view to enable the Department to carry cut the inspection. Rule 56 authorises the Department to take samples of any manufactured products in the factory for excise purposes. Taking of samples for excise purposes involves carrying of tests of the samples taken. The non-mention of the power to test the samples taken of the cotton yarn does not mean that the power to take for testing is absent in the Department. The samples of the manufactured yarn are taken only for the purpose of determining the excise duty, which cannot be done without the samples being tested and grouped under various categories whether the yarn is below 50 counts Nf. or above 50 counts Nf. is a matter which the Department has to arrive at as a result of test carried out. In this view, the rule itself does not provide for making tests and, therefore, the objection that the carrying out of the tests by the Department is contrary to rules,, is without substance.
The next ground of attack of the learned Counsel for the Petitioner is that the Ministry of Commerce and Industry issued a notification No. 3937, dated 20th September 1962 prescribing an error margin or tolerance limit of 5 per cent, whereas the Government without any basis has fixed 2.5 per cent is arbitrary. So far as the Petitioner''s production is concerned the two tests carried out at Madras by the Chemical Examiner and the third test carried out by the Chief Chemist, Central Revenue, New Delhi, all show that the count of the Petitioner''s yarn manufactured was much higher than 53.42 count Nf. and, therefore, it is unnecessary to consider whether the error margin or tolerance limit of 5 per cent as per the notification No. 2937 or 2.5 per cent as per the Government instructions is applied. There is no arbitrariness in the Government providing the margin of error in the conduct of the tests in determining the twist of the yarn. The error of margin has been fixed at a result of experience in carrying out such tests and, therefore, there is nothing arbitrary in the instructions issued by the Department. In paragraph 37 of the hand book of excisable manufactured product published by the Government in 1961, the Central Excise Officers have been authorised to draw samples in reasonable quantities for conducting physical and chemical test and as per the departmental instructions the Excise Officer is authorised to take about 1,000 metres for conducting the tests. The practice has shown that it is enough if about 100 metres of yarn drawn from the Petitioner''s factory is tested. Further actually three lengths of 110 metres each have been taken as samples and the total length of 330 metres is divided into three parts and the three tests are conducted in regard to each of the 110 metres drawn. There has, thus, been a substantial compliance of the requirements of the rule and the departmental instructions and all contentions to the contrary are incorrect. The quantity of yam taken for tests are of substantial lengths drawn ad random and it is impossible to carry out the tests of the entire quantity. The Petitioner''s contention that unless the Excise authorities have conducted the test every day and factually found that the Petitioner on each day manufactures counts in excess of 50 Nf. the Department has no jurisdiction to make additional levy is not tenable. The Department rightly withdrew the levy prior to the period of taking of samples by them and the levy of differential duty on yarn produced after and from the period of the drawal of the samples, is therefore legal and within the competence of the taxing power of the Government. We are of opinion that Rule 56 itself contemplates the taking of samples of yarn manufactured and tested. The norms set up by the Government of India for cotton yarn, in our opinion, are not, arbitrary and that they are incidental to the power to take cut samples, which is conferred by Rule 56. As a result of the tests carried out the differential duty is charged by the Government in respect of the yarn which exceeds 50 counts. We are also of opinion that the power to provide the reasonable norms is incidental to the power to carry out the tests by taking out samples. The power to fix at what rate the duty is to be charged and what tolerance limit should be provided by the Government having regard to the slight variation in the various tests conducted by the Department is incidental to the power conferred under Rule 56. There is thus no substance in any of the contentions put forward on behalf of the Petitioner.
In the result, the writ petition fails and it is dismissed with costs.