Full Judgment Text
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PETITIONER:
ALUMINIUM CORPORATION OF INDIA LTD.
Vs.
RESPONDENT:
UNION OF INDIA & ORS.
DATE OF JUDGMENT22/08/1975
BENCH:
KRISHNAIYER, V.R.
BENCH:
KRISHNAIYER, V.R.
KHANNA, HANS RAJ
GUPTA, A.C.
FAZALALI, SYED MURTAZA
CITATION:
1975 AIR 2279 1976 SCR (1) 400
1975 SCC (2) 472
ACT:
Central Excise Rules, 1944-Rule 8(1)-Finance Act, 1960-
Excise duty on Aluminium-Item 27-Notification of Govt. of
India dated Ist March, 1960-Exemption for use of excise paid
aluminium.
HEADNOTE:
The appellant manufactures aluminium plates, sheets,
circles, strips and foils which are the end products of its
composite factory, but, as intermediate products, it also
turns out ingots, bars, slabs, billets, pellets and the like
which get consumed mostly in the process of manufacture of
plates, sheets, and other end products. Aluminium is first
converted into items like ingots bars slabs, etc., but when
they are used up for finished products like plates and
sheets, nearly half of the stuff is thrown back into scrap
in which state it is remelted and starts its manufacturing
journey over again. Under the Finance Act for the year 1960,
Excise Duty was imposed on the aluminium. On the
manufacturing of the aluminium, plates, sheets, circles,
strips and foils in any form or size, the duty leviable was
rupees five hundred per metric tonne. A note appended to
Item 27 reads as under:
"Under the Government of India, Ministry of Finance,
(Department of Revenue) Notification No. 29/60 Central
Excises, dated the Ist March 1960, the following aluminium
manufactures, namely plates, sheets, circles, strips and
foils in any form is used, are exempt from so much of the
duty leviable thereon as is in excess of Rs. 200.00 per
metric tonne."
The appellant manufactured certain plates, sheets etc.
by using partly duty paid aluminium and partly aluminium on
which no duty was paid. The authorities under the Act
disallowed exemption under note to Item 27 on the ground
that the plates, sheets, etc., were not manufactured
exclusively out of the duty paid aluminium.
Allowing the appeal,
^
HELD : (1) The whole scheme of the exemption is that
where ingots, bars, blocks, slabs, billets, pellets etc.
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made out of aluminium scrap or scrap obtained from the
virgin metal on which excise duty was already paid, are used
for making finished items like sheets, reduction pro tanto
in the rate of duty leviable on the final product is to be
given. [403BC]
(2) The marginal mystique in interpretation has arisen
from misunderstanding the spirit letters of the
notification. [405-D]
(3) We feel confident that the State will seriously
consider: (a) that good government involves not only
diligent collection of taxes, but also ready refunds of
excess levies; (b) that simplicity or easy comprehensibility
in drafting legislation, including rules and notifications
affecting the laity, is an art found absent, although not
difficult to accomplish, given a fresh approach to use of
statutory language; and (c) that a fair construction-not
always one adverse to the assessee-is permissible and proper
on the part of government and the taxing officers when
enforcing fiscal legislation. [401DE]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 677 of
1968
Appeal by special leave from the judgment and order
dated the 21st August, 1967 of the Govt. of India, Central
Excise in No. 1036 of 1967.
401
A. K. Sen, Anjana Sen and Rameshwar Nath, for the
appellant.
G. L. Sanghi and S. P. Nayar, for the respondents. The
Judgment of the Court was delivered by
KRISHNA IYER, J.-The fate of this appeal, by special
leave, turns on the construction of a notification issued by
the Government of India dated April 20, 1960 under r. 8(1)
of the Central Excise Rules, 1944 whereby a qualified
exemption was accorded to certain types of aluminium
manufactures in the matter of excise duty. The ultimate
statutory revision to the Central Government having been
decided against the appellant company, it has challenged the
correctness of the view based on which the revision petition
was dismissed.
The facts, fortunately, are few and beyond controversy
although the length of the litigation has been considerable
and beyond necessity, this being the second time the
appellant has had to come to this Court aggrieved by the
revisory authority is refusal to grant refund of over levied
excise duty, as claimed by it. Had there been disputes’ on
facts, we would have hesitated to reassess the findings but
as the record stands, the sole question is one of
construction.
If we may anticipate our ultimate conclusion even at
the opening stage, this appeal deserves to be allowed as a
matter of law, but what is more significant for society are
three unhappy features which, we feel confident, the State
will seriously consider. They are: (a) that good government
involves not only diligent collection of taxes, but also
ready refunds of excess levies. (b) that simplicity or easy
comprehensibility in drafting legislation, including rules
and notifications affecting the laity, is an art found
absent, although not difficult to accomplish, given a fresh
approach to use of statutory language; and (c) that a fair
construction not always one adverse to the assesses is
permissible and proper on the part of government and the
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taxing officers when enforcing fiscal legislation.
The appellant manufactures aluminium plates, sheets,
circles strips and foils which are the end products of its
composite factory, but, as intermediate products, it also
turns out ingots, bars, slabs, billets, pellets and the like
which ,get consumed mostly in the process of manufacture of
plates, sheets, and other end products and rarely by way of
sales of clabs’as such. The raw material, i.e.? aluminium,
is extracted by the company from bauxite from which ingots,
slabs and the like are made which, in turned are rolled into
sheets, circles etc., for sale. It is one of the admitted
features of this manufacturing process that about 50% of the
ingots? slabs and billets used for further manufacture of
plates, sheets circles etc. become scrap and are melted, to
be put back along with raw scrap for the purpose of
recycling. In short, aluminium is first converted into items
like ingots, bars, slabs etc., but when they are used up for
finished products like plates and sheets, nearly half of the
stuff is throwing back into scrap in which state it is
remelted and starts its manufacturing journey over again.
We have now indicated how there are really two stages
in the course of turn-out of the finished goods. Excise duty
came to be imposed
402
from March 1, 1960 on aluminium under the Finance Act for
that year (we are not concerned with the same duty on the
same commodity imposed in prior years). Item no. 27 which
relates to aluminium, reads:
Description of goods Rate of Duty
Aluminium
(a) In any crude form including Three hundred rupees
ingots,bars,blocks,slabs, shots per metric tonne
& pellets
(b) Manufactures,the following,
namely,plates,sheets,circles, Five hundred rupees
strips,and foils in any form or per metric tonne
size
A note appended to the entry is of significance and
states:
"Under the Government of India, Ministry of
Finance (Department of Revenue) Notification No. 29/60
Central Excises, dated the 1st March 1960, the
following Aluminium manufactures, namely plates,
sheets, circles strips and foils in any form or size in
the manufacture of which duty paid aluminium in any
form is used, are exempt from so much of the duty
leviable thereon as is in excess of Rs. 200.00 per
metric tonne"
From March l, 1960 to April 24, 1960 this two-tier system of
levy at differential rates prevailed, it being not-worthy
that the manufacturer of plates, sheets, and other finished
products had to pay only at an overall rate of Rs. 500/- per
metric tonne. Moreover, he was also entitled to a
proportionate exempting, in the event of using aluminium in
any form already dutied, ’from so much of the duty leviable
thereon as is in excess of Rs. 200.00 per metric tonne."
There was-avoidable complication experienced in the
enforcement of the two-tier system of duty and on the
representation of the concerned composite manufacturers, the
Government of India switched over to a single point levy at
the ultimate stage of the manufacture and in that behalf,
issued an exemption notification on the meaning of which the
parties have joined issue before us. This notification reads
thus:
"The Central Government exempts the following
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aluminium manufactures, namely, plates, sheets,
circles, strips, ’ and foils in any form or size, in
the manufacture of which aluminium in any crude form
including ingots, bars, blocks, slabs, billets, shots
and pellets made out of old aluminium scrap or scrap
obtained from the virgin metal on which the appropriate
excise duty has been paid from so much of the duty
leviable thereon as is in excess of Rs. 200.00 per
metric tonne."
(Notification No. 66/60 dated 20-4-1960)
Notwithstanding the ll stilted style of the notification, it
is, to our mind, clear that what the Central Government
intended and effected by this notification was to
403
fix the rate of levy at Rs. 500/- for the fully manufactured
aluminium products, thus making up for the levy at the rate
of Rs. 300/- at an intermediate stage. But these composite
mills which made both half manufactured and fully
manufactured items had to be granted an exemption in cases
where the half-manufactured items went into further stages
of manufacture after they had suffered duty. The whole
scheme of the exemption, as we see it, is that where ingots,
bars, blocks slabs billets, shots and pellets made out of
aluminium scrap or scrap obtained from the virgin metal on
which excise duty has already been paid, are used for making
finished items like sheets, there should be a reduction pro
tanto in the rate of duty leviable on the final product.
Thereby the manufacturer would have paid Rs. 300/- for the
items at the intermediate stage of manufacture and if such
items were used up in the later stages of manufacturing
finished goods, he would get concession to that extent by
being charged Rs. 200/- per metric tonne.
We have earlier pointed out that one of the features of
the manufacturing process is that when ingots, bars and the
like are used for manufacturing plates, sheets, circles
etc., nearly 50% of the former become scrap and have to be
melted and recycled over again. Taking note of the fact that
this 50% deteriorates into scrap, although it has suffered
duty as ingot, bar or block, the exemption notification
included scrap metal which has suffered tax as qualifying
for the concessional rate of Rs. 200/- when it eventually
went into the manufacture of the final products viz.,
plates, sheets, circles, etc. Once we understand this
commonsense view, which fits in with fairness and law as
expressed in the language of the notification, the
resolution of the conflicting contentions becomes easy,
since, on the facts, there is no dispute.
We will now proceed to a statement of the relevant
circumstances which invited the application of the exemption
notification. The official materials before us establish
beyond doubt-and so no serious difference between the
parties is discernible-that from March, 1, 1960 to April 24,
1960 aluminium slabs which had suffered duty on semi-
finished manufacture was 649.5620 MT. From this quantity of
slabs, sheets., strips and circles amounting to 283.2925 MT
were manufactured, of which 188.7336 MT were cleared by
payment of duty at the rate of Rs. 200/- per MT. 10490 MT of
sheets and strips was eligible to be cleared free of duty
being for purposes of electrolysis which was duty-free. By
simple arithmetic worked out by the Collector of Central
Excise and forwarded to the Central Government (Annexure E),
the balance of stock of finished goods manufactured out of
duty paid slabs as on April 25, 1960 was 93.5099 MT. This
quantity was actually cleared on payment of duty at the rate
of 500/- per MT. But having been made out of duty-paid slabs
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the exemption notification applied and only Rs. 200/- per MT
was payable. Thus the excess collected i.e., Rs. 300/- per
MT was refundable. So obvious. And yet it took an appeal to
this Court (C.A. No. 635 of 1964) and a direction for
reconsideration before the Central Government would
reluctantly consent to refund as per order db- 21-8-67.
There is no surviving dispute on this matter.
404
Shri A. K. Sen, appearing for the appellant, contended
that much h more by way of excess exaction had been made
whose return he claimed in this appeal. He relied on the
figures furnished by the Collector of Central Excise in
Annexure to make good his case. For, according to that
report, ’duty-paid slabs issued for Rolling Mill between
March, 1 1960 and April 24, 1960.... 649.5620 MT. Duty paid
slabs in stock as on April 25, 1960.... 12.9830 MT. Duty
paid slabs in form of scrap and under processing 353.2865
MT.. This was natural, as the manufacture of sheets, circles
etc., out of slabs involved degradation of about 50%, into
scrap which, of course, after sustaining slight losses,
would go back into the re-cycling process of manufacture.
’two important points need mention. The State has no case
(in the order under attack) that any slabs which had
suffered duty had been sold as slabs. ’the whole quantity
had gone into manufacture of sheets, circles and what not.
It is common case that from April 25, 1960 all the finished
goods cleared by Excise officials had been subjected to Rs.
500/- per MT of duty.
The above facts make out, fool-proof fashion, that the
entire 649 odd MT of slabs had been transformed into sheets
and the like. If the latter had been cleared on payment of
excise at Rs. 500 per MT-and it is admitted to have been so
done-it follows that the levy was excessive to the tonne of
Rs. 300,/- per MT as the Notification granting exemption on
April 20, 1960 had reduced the levy in such cases to Rs.
200/- per MT.
This almost inescapable conclusion was sought to be
countered by Sri Sanghi in a strenuous but unsuccessful
submission which had appealed to the Central Government in
its order d/- 21-8-67 ’the reasoning, only to be stated to
be rejected, urged was that only if the sheets, circles etc.
had been manufactured wholly and solely out of duty-paid
slabs could the exemption be enjoyed. This condition of
eligibility for concessional rate of duty is beyond the
notification altogether and perhaps beyond reason. True, the
order of Government in revision, rejecting the refund claim
states this as the solitary ground. We quote the relevant
portion: P
"As the wordings of the Notification would go to show,
the concessional rate of Rs. 200/- per MT was
applicable only to those Aluminium manufactures, which
were made out of duty paid aluminium in any crude form;
this would evidently not cover aluminium manufactures
made partly out of duty paid and partly out of non-duty
paid crude."
(emphasis, ours)
We wonder where the author of this order discovers in
statutory notification from exemption altogether manufacture
partly out of duty paid crude‘ if 99% of duty paid crude
were used for manufacture of sheets etc.,should the final
product be exigible to tax at Rs.500 per MT? would it not
virtually mean that merely because a wee bit of non-duty
paid ’crude’ were mixed the party is penalised by payment at
Rs. 800/- per
405
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MT ? An odd and unreasonable result Shri Sanghi for The
respondent rightly asked whether a manufacturer who used 1%
duty paid and 99% non-duty paid slabs in producing sheets
can get away within from liability for duty at the rate of
Rs. 500/- ? No, not at all. Such an assessee will get the
benefit of the concessional rate (shall we call it rebate?)
only to the extent of the 1% and will be subject to full
payment at Rs. 500/- for the rest. If the mathematical facts
are undisputed, the factual conclusion is irrefutable. Of
course, had there been failure on the part of the assessee
to keep the statutory stock registers or other wise his
figures were suspicious the Collector of Excise could and
would, ordinarily without fear of judicial interference,
work out how much of’ the raw material had borne duty
already. Here the facts are free from dispute and the
respondent does not even hint at the possibility of a part
of the gross mass of 649.5620 MT which had been already
dutied at the slab stage (some of which had been shed but
reverted to the scrap state in the inevitable process of
manufacture and had been thrown, as fresh raw material, into
the on-going cyclic movement for re-creation of final
products) had been sold away at that intermediate level. On
that footing, the appellant was entitled to pro tanto
remission as explained above. Both sides are at one that
after April 24, 1960 excise clearance of finished aluminium
products was granted to the appellant on the single point
levy system at Rs. 500/- per MT.
The marginal mystique in interpretation has arisen from
mis-r understanding the spirit and letter of the
notification where it reads ’the virgin metal on which the
appropriate Excise Duty has been paid from so much of the
duty leviable thereon as is in excess of Rs. 200.00 per
metric tonne. There is no need to go down to the order of
the Collector of Excise and examine his reasons because it
is somewhat obscure and sheds no more light on the issue
before us.
To return what has been taken wrongly is as much a duty
and grace of government as to levy relentlessly and fully
what is due. Default in either not altogether unfamiliar,
brings down the confidence of the community in the
Administration. That a party should have been put to two
expensive and elongated litigations to recover a relatively
small’ sum is regrettable.
Assuming that the tax officers have an alibi of two
interpretations of the given notification, the question is
whether plainer use of language is an art beyond the
draftsman skills ? We think not. To liquidate obscurity in
legislative language, by abandoning obsolescent vocabulary
and style of expression is an overdue measure if we remember
the Renton Committee’s observations made for British
consumers but applies a fortiori to our Republic:
"There is hardly any part of our national life or
of our personal lives that is not affected by one
statute or another. The affairs of local authorities,
nationalized industries, public corporations and
private commerce are regulated by legislation. The life
of the ordinary citizen is affected by various
provisions of the statute book from credle to grave."
406
The rule of law is the cornerstone of democracy and how can
there be A ra rule of law society if the members, the bulk
of whom are too poor to buy legal services, cannot decode
the legislator’s law and therefore obey it ?
Incomprehensible law annoys the Administration and estranges
the citizen at a time when quick justice and less sterile
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litigation are the desiderata. The command of the law can
claim the allegiance of the lay only by simplicity in
legislation. B
The appeal, for reasons assigned earlier. is allowed
with costs.
Appeal allowed.
P.H.P.
407