The judgment of the court was delivered by

SAIKIA J. -- This appeal by special leave is from the judgment and order of the High Court of Judicature at Madras, dated July 19, 1972, in Writ Petition No. 1064 of 1967, allowing the petition and quashing the demand made by the appellant under rule 10A of the Central Excise Rules, hereinafter referred to as " the Rules ", payable by the respondent under the Central Excises and Salt Act, 1944, hereinafter referred to as " the Act ".

Ramakrishnan Kulwant Rai, the respondent firm, owned the steel rolling mill located at No. 4-B, 4-C, North Railway Terminus Road, Royapuram, Madras-13. The said mill was leased out to a partnership firm known as Steel Industries. After termination of the lease, the respondent firm took back possession of the said mill on August 1, 1962, and informed the Central excise authorities about this by their letter dated November 16, 1962, and resumed manufacture of steel from scrap and was advised to take out a licence for which it applied on November 30, 1962. Though the respondent firm had ultimately sold away the rolling mill on April 4, 1963, the Superintendent of Central Excise, by his letter dated October 13, 1965, demanded a sum of Rs. 31,018.20 as excise duty. On information furnished by the firm about its manufacture of only 775.455 metric tonnes of steel, the Deputy Superintendent of Central Excise reduced the demand to a sum of Rs. 6,419.38 only, and the demand was reiterated by notice dated April 13, 1967, pursuant where to the respondent firm showed cause on May, 15, 1967, but the Assistant Collector of Customs, by his order dated June 14, 1967, confirmed the demand.

The respondent firm challenged the demand by moving Writ Petition No. 1064 of 1967 in the High Court of Judicature at Madras contending, inter alia, that it was manufacturing steel products prior to June 13, 1962, suspending manufacture only during the period of lease and resuming thereafter, and, as such, was entitled to exemption from payment of duty ; that the demand for payment of duty was time-barred ; that rules 10 and 10A invoked in support of the demand were ultra vires inasmuch as there was no provision in the Act to enable the Government to frame rules for the recovery of duty short-levied.

The High Court, by the impugned order, following its earlier judgment in Writ Petitions Nos. 265 and 266 of 1967, which relied upon its earlier decision in Writ Petition No. 1053 of 1968 (Citadel Fine Pharmaceuticals P. Ltd. v. District Revenue Officer [1973] 1 MLJ 99 (Mad)), upheld the contention of the respondent firm holding that rule 10A did not apply to cases where there had been no prior levy of excise duty in respect of the articles manufactured during the relevant period and that the duty was sought to be recovered only by the issue of demand under rule 10A of the Rules. The High Court having rejected leave to appeal, the appellant obtained special leave on July 23, 1974.

Mr. Anil Dev Singh, learned counsel for the appellant, submits that it is necessary to decide the substantial question of law of general importance, namely, whether rule 10A of the Rules, as it stood at the relevant time, was valid or not, as conflicting decisions have been creating difficulties for the department in collecting short-levies or escaped excise duties. Counsel refers us to Agarwal Brothers v. Union of India [1972] 2 MLJ 476 (Mad), Asst. Collector v. National Tobacco Co. of India Ltd., AIR 1972 SC 2563, Citadel Fine Pharmaceuticals P. Ltd. v. District Revenue Officer [1973] 1 MLJ 99 (Mad) and Kerala Polythene Industries v. Superintendent of Central Excise [1977] Tax LR 1680 (Ker). Learned counsel states that rule 10A was in force up to August 6, 1977, whereafter it was amended with effect from that date and the amended rule continued till November 16, 1980, whereafter it was enacted as section 11A of the Act by the Amendment Act 25 of 1978 and that section came into force with effect from November 17, 1980.

Mr. Ambrish Kumar, learned counsel for the respondent, submits that learned standing counsel for the Central Government having conceded that the rationale of the decision in Haji J. A. Kareem Sait v. Deputy Commercial Tax Officer, [1966] 18 STC 370 (Mad.), which held that sub-rule (7) of rule 5 of the Central Sales Tax (Madras) Rules, 1957, providing for limitation and determination of escaped turnover by a best judgment was in excess of the rule-making power and that the sub-rule as a whole was, therefore, invalid, would apply with equal force to rule 10A as well and that, in view of the same decision, he would not be able to sustain the demands under rule 10A and yet he could sustain the demand under rule 9(2) of the rules, it is no longer open to the appellant to challenge the validity of rule 10A in this appeal, and that too after so many years.

Counsel for the appellant answers that thereby learned standing counsel cannot be said to have conceded that rule 10A was invalid. He had only said that, in view of the decision in Haji A. Kareem Sait v. Deputy Commercial Tax Officer [1966] 18 STC 370 (Mad), he would not be able to sustain the demands under rule 10A ; and that even if it could be taken as a concession, the appellant could not be estopped from showing that the rule is valid so that Central excise revenue is not allowed to escape. We agree with learned counsel for the appellant and proceed to examine the validity of rule 10A as it stood at the relevant time. Rule 10A of the Rules read as under :

" 10A. Residuary powers for recovery of sums due to Government. -- Where these Rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty has for any reason been short levied, or of any other sum of any kind payable to the Central Government under the Act or these Rules, such duty, deficiency in duty or sum shall, on a written demand made by the proper officer, be paid to such person and at such time and place, as the proper officer may specify. "

Rule 10A provided the machinery for collection of tax from the 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 collection of any duty or of any deficiency in duty if the duty had for any reason been short-levied. Therefore, before rule 10A could be resorted to, it had to be found that either the Central Excise Rules did not make any specific provision for the collection of duty in respect whereof a demand was being made by the proper officer, or that there was no specific provision therein for the collection of the deficiency in duty which had been short-levied for any reason. It was a residuary provision and it 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 the claim and demand of the respondent could not be said to be recoverable under rule 10A.

Learned counsel for the appellant submits that this rule is perfectly valid being covered by the rule-making powers under the Act while learned counsel for the respondent submits that it is ultra vires the Act being not covered by its rule-making powers. The question, therefore, is whether the rule is valid.

Chapter II of the Act deals with levy and collection of duty. Under section 3 of the Act, duties specified in the First Schedule to the Act were to be levied. Sub-section (1) of section 3, at the relevant time, read as follows :

" (1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India, as, and at the rates, set forth in the First Schedule. "

In Citadel Fine Pharmaceuticals P. Ltd. v. District Revenue Officer [1973] 1 MLJ 99 (Mad), where the enactment, namely, the Medicinal and Toilet Preparations (Excise Duties) Act (XVI of 1955), was silent on the question of levy of escaped assessment, it was held that the Rules made under that Act could not extend the charging power and rule 12 in so far as it sought to extend the charging power under section 3 of that Act was held to be invalid and without jursidiction. Rule 12 of those Rules read as follows :

" 12. Residuary powers for recovery of sums due to Government. Where these rules do not make any specific provision for the collection of any duty or of any deficiency in duty if the duty has for any reason been short-levied, or of any other sum of any kind payable to the collecting Government under the Act or these rules, such duty, deficiency in duty or sum shall, on written demand made by the proper officer, be paid to such person and at such time and place, as the proper officer may specify. "

Rule 12 was somewhat similar to rule 10A of the Rules and had been held to be ultra vires on the ground that it did not have the required statutory backing. In Agarwal Brothers v. Union of India [1972] 2 MLJ 476 (Mad), it was held that a licence issued under the Central Excise Rules was personal to the licensee and, therefore, a transferee of a factory licensed to manufacture iron and steel products from the former licensee could only be treated as a new licensee after the relevant date mentioned in the Notification No. 131 of 1962, dated June 13, 1962, and as the petitioner applied for a licence much later, the notification was not available to the petitioner who could not be applying for renewal of the earlier licence held by the transferors and hence the exemption under the notification was not available to the petitioner. Demand, therefore, could only be made under rule 10A which, it was held, could not be invoked in view of the decision in W. P. No. 1053 of 1968, namely, Citadel Fine Pharmaceuticals P. Ltd. [1973] 1 MLJ 99 (Mad).

A Division Bench of the Kerala High Court in Kerala Polythene Industries v. Superintendent of Central Excise, since reported in [1977] Tax LR 1680, held that rule 10A of the Rules was not ultra vires the rule-making power conferred by the Act on the Central Government. Balakrishna Eradi J., as he then was, observed that the scope of the rule-making power conferred by section 3(1) of the Act was wide enough to embrace all matters relating to the manner in which both the levy and the collection of duties of excise on all excisable goods other than salt were to be made. The provision contained in rule 10A was thus fully within the scope of the said power and hence it was not correct to say that rule 10A was ultra vires the rule-making power conferred by the Act on the Central Government. The cases of Agarwal Brothers [1972] 2 MLJ 476 (Mad) and Citadel Fine Pharmaceuticals [1973] 1 MLJ 99 (Mad) were distinguished pointing out that there was much difference in the scope of section 3 of the Medicinal and Toilet Preparations (Excise Duties) Act (XVI of 1955), and of section 3 of the Act. Comparing the provisions of the two sections, it was observed that there was a fundamental difference between their policy and scheme. Under section 3 of the Medicinal and Toilet Preparations Act, only the manner of collection of the duties was left to be prescribed by the rules but levy of the duty was to be made at the rates specified in the Schedule to the Act. In enacting section 3 of the Act, i.e., the Central Excises and Salt Act, Parliament had empowered the rule-making authority to prescribe by rules the manner of levy of duties and also the manner of collection of duties of excise on all excisable goods other than salt. Manifestly, the rule-making power conferred by this section is very much wider in its ambit than the power conferred on the rule-making authority under section 3 of the Medicinal and Toilet Preparations (Excise Duties) Act, whereunder only the manner of collection of duties could be laid down by the rules. We respectfully agree with this view. We also find that in Agarwal Brothers case [1972] 2 MLJ 476 (Mad), though one of the questions raised was the validity of rule 10A of the Rules, the court did not consider the said question on merits in view of the submission made by standing counsel for the State Government on the basis of rule 10A in the light of the earlier decisions of the same High Court, striking down rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Rules. That decision cannot obviously be regarded as authority supporting the contention that rule 10A was ultra vires the rule-making power.

We find that rule 10A was incorporated because of the decision of the Nagpur High Court in Chhotabhai Jethabhai Patel and Co. v. Union of India [1952] ILR. Nag 156. After that decision, the Central Government, by a notification dated December 8, 1951, amended the rules by addition of the new rule 10A. The assessee challenged the validity of the rule but a Full Bench of the Nagpur High Court rejected the assessee's contention and held that rule 10A covered a case for increased levy on the basis of a change of law. That decision was challenged before this court unsuccessfully. This court, in Chhotabhai Jethabhai Patel and Co. v. Union of India [1962] Suppl. 2 SCR 1, rejected the assessee's claim regarding non-applicability of rule 10A stating that it had been specifically designed for the enforcement of a demand like the one in that case.

We also find that in N. B. Sanjana v. Elphinstone Spinning and Weaving Mills Co. Ltd. [1971] 1 SCC 337, while holding that rule 10A did not apply to the facts of that case, this court observed that rule 10A did not apply as the specific provision for collection of duty in a case like that was specially provided for by rule 10 and, therefore, action should have been taken under that rule.

In Assistant Collector of Central Excise v. National Tobacco Co. of India Ltd. [1973] 1 SCR 822, this court held that the High Court erroneously refused to consider whether the impugned notice in that case fell under rule 10A. It was observed that rules 10 and 10A seemed to be so widely worded as to cover any inadvertence, error, etc., whereas rule 10A would appear to cover any deficiency in duty if the duty had, for any reason, been short-levied, except that it would be outside the purview of rule 10A if its collection was expressly provided for by any rule. It was further observed that both the rules as they stood at the relevant time dealt with collection and not with assessment and what was said in N. B. Sanjana's case [1971] 1 SCC 337 that rule 10A was of residual character and would be inapplicable if a case fell within a specified category of cases mentioned in rule 10, was reiterated.

In D. R. Kohli v. Atul Products Ltd. [1985] 2 SCR 832, this court pointed out the differences between the two rules, namely, rule 10 and rule 10A as :

" (i) whereas rule 10 applies to cases of short levy through inadvertence, error, collusion or misconstruction on the part of an officer, or through misstatement as to the quantity, the description or value of the excisable goods on the part of the owner, rule 10A was a residuary clause which applied to those cases which were not covered by rule 10 and that ; (ii) whereas under rule 10, the deficit amount could not be collected after the expiry of three months from the date on which the duty or charge was paid or adjusted in the owner's account current or from the date of making the refund, rule 10A did not contain any such period of limitation. "

It would thus be clear that this court interpreted rule 10A, distinguished it from rule 10 and applied it to the appropriate facts and circumstances of different cases. It would be reasonable to infer that, in none of the cases, any doubt about the validity of the rule 10A was entertained.

We may now examine the contention that, at the relevant time, rule 10A was not covered by the rule-making power conferred on the Central Government by section 37. Section 37 dealt with the power of Central Government to make rules. Sub-section (1) said :

" The Central Government may make rules to carry into effect the purposes of this Act. " Sub-section (2) enumerated the matters the rules might provide for " in particular " and " without prejudice to the generality of the foregoing power ". Thus, the section did not require that the enumerated rules would be exhaustive. Any rule, if it could be shown to have been made " to carry into effect the purposes of the Act ", would be within the rule-making power. Chapter II of the Act dealt with the levy and collection of duty. Section 3, as it stood at the relevant time, provided that duties specified in the First Schedule were to be levied. We have quoted sub-section (1).

The First Schedule contained item Nos., description of goods and rate of duty. Section 3 has subsequently been amended by the Finance Acts of 1982 and 1984, and the Central Excise Tariff Act of 1985. This section, it could be seen, expressly empowered the levy and collection of duties of excise on all excisable goods as provided in the Act including its First Schedule. It could not, therefore, be said that rule 10A was not covered by the above provision.

It is an accepted principle that delegated authority must be exercised strictly within the limits of the authority. If rule-making power is conferred and rules made are in excess of that power, the rules would be void even if the Act provided that they shall have effect as though enacted in the Act as was ruled in State of Kerala v. K. M. Cheria Abdulla and Co. [1965] 1 SCR 601. Therein, the High Court having declared rule 14A of the Madras General Sales Tax Rules, 1939, ultra vires, on appeal, this court, by a majority, held that the validity of the rule, even though it was directed to have effect as if enacted in the Act, was always open to challenge on the ground that it was unauthorised. The validity of delegated legislation is generally a question of vires, that is, whether or not the enabling power has been exceeded or otherwise wrongfully exercised. Scrutinising the provisions of rule 10A in the light of the above principles and pronouncements of this court, we have no doubt that rule 10A of the Rules, as it existed at the relevant time, was valid and not ultra vires the rule-making power. Demand notices lawfully issued under the rule by the competent authority could not, therefore, be challenged on the ground of the rule 10A itself being ultra vires. Whether those could be challenged on any other ground must necessarily depend on the facts and circumstances of the case.

The High Court having proceeded on the basis that rule 10A was not available to support the demand notice, we set aside the impugned order of the High Court, allow the appeal, and remand the case to the High Court for disposal in accordance with law. We leave the other questions open. Under the peculiar facts and circumstances of the case, we leave the parties to bear their own costs.

Appeal allowed : Case remanded