Full Judgment Text
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PETITIONER:
HANSRAJ GORDHANDAS
Vs.
RESPONDENT:
H. H. DAVE, ASSISTANT COLLECTOR OF CENTRAL EXCISE &
DATE OF JUDGMENT:
27/09/1968
BENCH:
RAMASWAMI, V.
BENCH:
RAMASWAMI, V.
SHAH, J.C.
MITTER, G.K.
HEGDE, K.S.
GROVER, A.N.
CITATION:
1970 AIR 755 1969 SCR (2) 343
CITATOR INFO :
R 1982 SC 149 (225)
D 1985 SC 537 (11)
R 1991 SC 772 (15)
E&D 1991 SC2049 (6)
E&D 1992 SC2014 (23)
ACT:
Central Excises & Salt Act 1944--Rules made under--Rule
8 giving power to Central Government to exempt excisable
goods from duty--Exemptions under Notifications dated july
31, 1959 and April 30, 1960 whether apply only to goods
produced by a cooperative society for itself and not for
others--Taxing statutes--interpretation of--Relevance of
object of giving exemption from duty.
HEADNOTE:
The appellant who was a dealer in textiles in Bombay
entered into an agreement with a registered cooperative
society for weaving yarn supplied by him into cotton fabrics
on powerlooms owned by its members. The Society had
obtained L-4 licence as required by the Central Excises and
Salt Act. 1944. Under Rule 8 of the Rules made under the
Act. the Central Government was empowered to exempt any
excisable goods from the whole or any part of duty payable
on such goods. In exercise of the power under Rule 8, the
Central Government by a notification dated July 31, 1959’
granted exemption to "cotton fabrics produced by any
Cooperative Society/formed of owners of cotton powerlooms
which is .registered or which may be registered on or before
March 31, 1961" subject to certain conditions set out in the
notification. A subsequent notification dated April 30, 1960
granted exemption to "cotton fabrics produced on powerlooms
owned by any Cooperative Society or owned by or allotted to
the members of the Society which is registered on or before
March 31, 1961". On the strength of these notifications the
appellant sought exemption from excise duty in respect of’
the cotton fabrics which were manufactured for it on
powerlooms by the Cooperative Society. The excise
authorities did not accept the claim for exemption and in a
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writ petition filed by the appellant, the High Court gave
only partial relief. In appeal before this Court the
question was whether the exemption granted under the;
notifications in question could be claimed only when the
cotton fabrics were manufactured by a Cooperative Society
’for itself.
HELD: On a true construction of the language of the
notifications dated July 31, 1959 and April 30, 1960, it is
clear that all that is required for claiming exemption is
that the cotton fabrics must be produced on powerlooms owned
by the Cooperative Society. There is no further requirement
under the two notifications that the cotton fabrics must be
produced by the cooperative society on powerlooms "for
itself’. The appellant was therefore entitled to the
exemption claimed. [259 D-E]
It is well established that in a taxing statute there
is no room for any intendment but regard must be had to the
dear meaning of words. A statutory notification may not be
extended so as to meet a casus omissus. It could be that the
object behind the two notifications in question was to
encourage the actual manufacturers of handloom cloth to
switch over, to powerlooms by constituting themselves into
Cooperative Societies. But, the. operation of the
notifications had to be judged not by the object which
254
the rule, making authority had in mind but by the words
which it had employed to effectuate the legislative intent.
Applying this principle, the case of the appellant was
covered by the language of the: two notifications and the
appellant was entitled to exemption from excise duty for the
cotton fabrics. [259 E; 260 A-D)]
Salomon v. Salomon & Co. [1897] A.C. 22, 38 and
Crawford v. Spooner, 6 Moo P.C.C. 8, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1049 of
1965.
Appeal from the judgment and order dated July 31, 1964
of the Gujarat High Court in Special Civil Application No.
1054 of 1963.
Soli Sorabjee, D.M. Damodar, B. Datta and J.B.
Dadachanji, for the appellant.
V. A. Seyid Muhammad and S.P. Nayar, for the
respondents.
P.R. Mridul, Janendra Lal and B.R. Agarwala, for
intervener No. 1.
J.B. Dadachanji, for interveners Nos. 2 and 3.
Ramaswam, J. This appeal is brought by certificate from
the judgment of the High Court of Gujarat, dated July 31,
1964 in Special Civil Application No. 1054 of 1963.
The appellant is the sole proprietor of Messrs
Gordhandas and Co. carrying on business as a dealer in
textiles in Bombay. Under an agreement between the appellant
on the one hand and the Gandevi Vanat Udhoog Sahkari Mandli
Ltd. (hereinafter referred to as the ’Society’) the Society
manufactured cotton fabrics during the period between June,
1959 and September 1959 and from October 1, 1959 to January
31, 1961 for the appellant on certain terms and conditions
which were later reduced to writing on October 12, 1959.
Under these terms, the Society agreed to carry out weaving
work on behalf of the appellant on payment of weaving
charges fixed at 19 nP. per yard which included expenses the
Society would have to incur in transporting yarn from Bombay
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and cotton fabrics woven by the Society to Bombay. The
appellant was to supply yarn to be delivered at Bombay to
the Society and the Society was to made its own arrangement
to bring the yarn to its factory at Gandevi. Clause 11
provided that the yarn supplied by the appellant, remaining
either in stock or in process or in the form of ready-made
pieces would be in the absolute ownership of the appellant
and the Society, as the bailee of the yarn, undertook to
255
take such care of it as it would normally take if the yarn
belonged to it. The Society also undertook to have the
yam insured against fire, theft and all other risks
including transit risks and further undertook to reimburse
the appellant in case it failed to do so. The terms of the
agreement though recorded on October 12, 1959 were to be
deemed to be effective as from April 21, 1959 and the
agreement was terminable by either party by giving one
month’s notice.
The Society was a cooperative society carrying on its
work at Gandevi and was registered on or before May 31, 1961
and consisted of members who owned powerlooms. The
Society started the weaving work for the appellant some time
in May or June 1959 and supplied to the appellant between
June 1, 1959 and January 3, 1961 cotton fabrics measuring
3,19,460 yards. The Society had obtained L-4 licence as
required by the Central Excises and Salt Act, 1944
(hereinafter referred to as the ’Act’). By letters, dated
August 29, 1959 and October 27, 1961 the Excise Department
had granted exemption from excise duty payable on cotton
fabrics manufactured by the Society under the notification
issued by the Central Government. On November 10, 1961 the
excise authorities issued a notice. to. the appellant
demanding a sum of Rs. 1,69,263.44 payable as excise duty.
It was alleged that the duty was. payable by the appellant
as it had got the goods manufactured through the Society and
had got them removed from the Society’s factory at Gandevi
without payment of duty. On January 10, 1962 the
Superintendent of Central Excise:, Bulsar sent another
notice to show cause why penalty should not be imposed upon
the appellant for contravention of rule 9 and why duty
should not be charged for the cotton fabrics so removed by
the appellant. The appellant showed cause and on November
26, 1962 the Assistant Collector of Central Excise and
Customs, Surat held that the appellant was liable to pay
excise duty to. the extent of Rs.. 2,20,574.74, being the
total amount of basic duty and a penalty of Rs. 250 was
levied for contravention of rule 9. The appellant preferred
an appeal to the Collector of Central Excise Baroda but the
appeal was dismissed. Thereafter the appellant moved the
High Court of Gujarat for grant of a writ under Art. 226
of the Constitution. The High Court dismissed the writ
petition by its judgment, dated July 31, 1964 but gave a
direction that the: respondent was to work out the excise
duty on the footing that the appellant was entitled to
exemption from duty altogether in respect of goods supplied
for the period from June 1, 1959 to September 30, 1959. As
regards the two other periods i,e., October 1, 1959 to April
30, 1960 and from May 1, 1960 to January 31, 1961, the High
Court dismissed the writ petition and directed the
respondent to charge duty at the rate of 29.3 nP per square
meter.
256
Clause (d) of s. 2 of the Act defines "excisable goods"
as meaning goods specified in the First Schedule as being
subject to a duty of excise. Item 19 in the First Schedule
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provides for excise duty at different rates depending upon
the variety of cotton fabrics. Section 3 which is the
charging section, provides for the levy. and collection of
duties specified in the First Schedule on all excisable
goods which are produced or manufactured in India. Rule 8
authorises the Central Government to exempt any excisable
goods from the whole or any part of duty payable on such
goods. Clause (1) of rule 9 provides that no excisable
goods shall be removed from any place where they are
produced, cured or manufactured or any premises appurtenant
thereto, which may be specified by the Collector in this
behalf, whether for consumption, export or manufacture of
any other commodity in or outside such place, until the
excise duty leviable thereon has been paid at such place and
in such manner as is prescribed. Clause (2) of that rule
provides that if any excisable goods are, in contravention
of sub-rule (1 ), deposited in, or removed from any place
specified therein, the producer or manufacturer thereof
shall pay the duty leviable on such goods upon written
demand made by the proper officer and shall also be liable
to a penalty which may extend to two thousand rupees and
such goods shall be liable to confiscation. In pursuance of
the power under rule 8, the Central Government issued
notifications from time to time granting exemptions on
cotton fabrics, though such goods were excisable goods under
tariff item 19. The first relevant notification is dated
January 5, 1957. By this notification certain classes
of cotton fabrics were exempt from payment of excise
duty. of the items exempted the seventh item is as
follows:
"Cotton fabrics manufactured by or on
behalf of the same person in one or more
factories commonly known as powerlooms
(without spinning plants) in which less than
5 powerlooms in all are installed;"
The next relevant notification is notification No. 74/59,
dated July 31, 1959 which reads. as follows:
"G.S.R. 899 In pursuance of sub-rule
(1) of rule 8 of the Central Excise Rules,
1944, as in force in India and as applied to
the State of Pondicherry,’ the Central
Government hereby exempted cotton fabrics
produced by any cooperative society formed of
owners of cotton powerlooms, which is
registered or which may be registered on or
before the 31st March, 1961 under any law
relating to co-operative societies from the
whole of the duty leviable thereon, subject to
the following conditions :--
257
(a) that every member of the co-operative
society has been exempt from excise duty for-
three years immediately preceding the date of
his joining such society;
(b) that the total number of cotton powerlooms
owned by the co.-operative society is not more
than four times the number of members
forming such society;
(c) that a certificate is produced by each
member of the co-operative society from the
State Government concerned or such officer as
may be nominated by the State Government that
he is a bona fide member of the society and
that the number of cotton powerlooms in his
ownership and actually operated by him does
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not exceed four and did not exceed four at
any time during the three years immediately
preceding the date of his joining the
society, and that he would have been exempt
from excise duty even if he had not joined the
co-operative society;................
The Central Government issued another notification,
dated April 30, 1960 by which the earlier notification,
dated July 31, 1959 was superseded. By this notification
the Central Government exempted cotton fabrics produced on
power-looms owned by any co-operative society or owned by or
allotted to the members of the society from the whole of the
duty leviable thereon subject .to the four conditions.
therein set out. The notification,dated April 30, 1960 is
to the following effect:
"In pursuance of sub rule (1 ) of rule 8
of the Central. Excise Rules, 1944, as in
force in India and as applied to the State of
Pondicherry, and in supersession of the
Notification of the Govt. of India, Ministry
of Finance (Department of Revenue) No. 74/59
Central Excise, dated the 31st July 1959, the
Central Government hereby exempts cotton
fabrics produced on powerlooms owned by any
cooperative society or owned by or allotted to
the members of the society, which is
registered or which may be registered on or
before the 31st March, 1961 under any law
relating to cooperative societies, from the
whole of the duty leviable thereon subject to
the following conditions :-
(a) that every member of the cooperative
society who has been a manufacturer of cotton
fabrics on powerlooms, has been exempt from
excise duty for three years immediately
preceding the date of his joining such
society.
258
(b) that the total No. of cotton
powerlooms owned by the cooperative society or
owned by or allotted to its members is not
more than four times the number of members
forming such society.
(c) that each member of the
cooperative society produces a certificate
from the State Government concerned or such
officer as. may be nominated by the State
Government that he is a bona fide member of
the society and that the number of cotton
power-looms owned by or allotted to him and
actually operated by him does not exceed four
and did not exceed four at .any time during
that three years immediately preceding the
date of his joining the society and that he
would have been exempt from excise duty even
if he had not joined the cooperative society
and....................... "
The main contention on behalf of the appellant is. that the
,case fell within the language of the two notifications,
dated July 31, 1959 and April 30, 1960 and the appellant was
entitled to ,exemption from payment of excise duty on the
cotton fabrics. The argument was stressed that the exemption
applied to. all cotton fabrics which were produced on power-
looms owned by the Cooperative Society or on powerlooms.
allotted to its members and it was not a relevant
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consideration as to who. produced or manufactured such
fabrics, whether it was the Society itself or its members or
even outsiders. It was conceded by the appellant that it
was the owner of the cotton fabrics. But even upon that
assumption the claim of the appellant is that it was
entitled to exemption from excise duty as it was covered by
the language of the two notifications already referred to.
In our opinion, the argument of the appellant is well-
founded and must be accepted as. correct. The notification,
dated July 31, 1959 grants exemption to "cotton fabrics
produced by any Co-operative Society formed of owners ,of
cotton powerlooms which is registered or which may be
registered on or before March 31, 1961" subject to four
conditions set out in the notification. In the next
notification, dated April 30, 1960 exemption was granted to
"cotton fabrics. produced on powerlooms owned by any
cooperative society or owned by or allotted to the members
of the society, which is registered or which may be
registered on or before March 31, 1961" subject to, the
conditions specified in the notification. It was contended
on behalf of the appellant that under the contract between
the appellant and the ’Society there was no relationship of
master and servant but. the appellant supplied raw material
and the contractor i.e., the Society produced the goods.
But even on the assumption that the appellant had
manufactured the goods by employing hired labour and was
therefore a manufacturer, still the appellant was entitled
to
259
exemption from excise duty since the case fell within the
language of the two notifications, dated July 31, 1959 and
April 30, 1960, and the cotton fabrics. were produced on
power-looms owned by the co-operative society and there is
nothing in the notifications to suggest that the cotton
fabrics should be produced by the Cooperative Society "for
itself" and not for a third party before it was entitled to
claim exemption from excise duty. It was contended on
behalf of the respondent that the object of granting
exemption was to encourage the formation of co-operative
societies which not only produced cotton fabrics but which
also consisted of members, not only owning but having
actually operated not more than four power-looms during the
three years immediately preceding their having joined the
society. The policy was that instead of each such member
operating his looms on his own, he should combine with
others by forming a society which, through the cooperative
effort should produce cloth. The intention was that the
goods produced for which exemption could be claimed must be
goods produced on its own behalf by the society. We are
unable to accept the contention put forward on behalf of
the respondents as correct. On a true construction of the
language of the notifications, dated July 31, 1959 and April
30, 1960 it is clear that all that is. required for claiming
exemption is that the cotton fabrics must be produced on
power-looms owned by the cooperative society. There is no
further requirement under the two notifications that the
cotton fabrics must be produced by the Co-operative Society
on the powerlooms "for itself". It is well established
that in a taxing statute there is no room for any intendment
but regard must be had to the clear meaning of the words.
The entire matter is governed wholly by the language of
the notificatlon. If the tax-payer is within the plain
terms of the exemption it cannot be denied its benefit by
calling in aid any supposed intention of the exempting
authority. If such intention can be gathered from the
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construction of the words of the notification or by
necessary implication therefrom, the matter is different,
but that is not the case here. In this connection we may
refer to the observations of Lord Watson in Salomon v.
Salomon & Co.(1):
"Intentlon of the legislature is a common
but very slippery phrase, which, popularly
understood may signify anything from intention
embodied in positive enactment to speculative
opinion as to what the legislature probably
would have meant, although there has been an
omission to enact it. In a Court of Law or
Equity, what the Legislature intended to be
done or not to be done can only be
legitimately ascertained from that which it
has chosen to enact, either in express words
o.r by reasonable and necessary implication."
(1) [1897] A.C. 22, 38.
260
It is an application of this principle that a statutory
notification may not be extended so as to meet a casus
omissus. As appears in the judgment of the Privy Council in
Crawford v. Spooner(1).
"....we cannot aid the legislature’s
defective phrasing of the Act, we cannot add,
and mend, and, by construction, make up
deficiencies which are left there."
Learned Council for the respondents is possibly right in his
submission that the object behind the two notifications is
to encourage the actual manufacturers of handloom cloth to
switch over to power-looms by constituting themselves into
Cooperative Societies. But the operation of the
notifications has to be judged not by the object which the
rule-making authority had in mind but by the words which it
has employed to effectuate the legislative intent. Applying
this principle we are of opinion that the case of the
appellant is covered by the language of the two
notifications, dated July 31, 1959 and April 30, 1960 and
the appellant is entitled to exemption from excise duty for
the cotton fabrics produced for the period between October
1, 1959 to April 30, 1960 and from May 1, 1960 to January 3,
1961. It follows therefore that the appellant is entitled
to the grant of a writ in the nature of certiorari to quash
the order of the Assistant Collector of Central Excise of
Baroda, dated November 26, 1962 and the appellate order of
the Collector of Central Excise, dated November 12, 1963.
For the reasons expressed we hold that the judgment of
the High Court of Gujarat, dated July 31, 1964 should be set
aside, that Special Civil Application No. 1054 of 1963
should be allowed and that a writ in the nature of
certiorari should be granted to quash the order of the
Assistant Collector of Excise and Customs dated November 26,
1962 and the order of the Collector of Excise dated November
12, 1963. This appeal is accordingly allowed with costs.
R.K.P.S. Appeal allowed.
(1) 6 Moo. P.C.C. 8.
261