Full Judgment Text
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PETITIONER:
UNION OF INDIA & ORS.
Vs.
RESPONDENT:
RAMACHANDRA SAMBHAJI KANDEKAR ETC.
DATE OF JUDGMENT26/08/1980
BENCH:
BHAGWATI, P.N.
BENCH:
BHAGWATI, P.N.
SEN, A.P. (J)
VENKATARAMIAH, E.S. (J)
CITATION:
1981 AIR 97 1981 SCR (1) 513
1981 SCC (1) 4
ACT:
Central Excise Rules 1944-Rule 8(1) Item 7-provisos-
Scope of-
HEADNOTE:
Exercising the power of exemption conferred under rule
8(1) of the Central Excise Rules, 1944, the Central
Government by a notification dated January 5, 1957 exempted
certain varieties of cotton fabrics from the whole of the
excise duty leviable thereon. Item 7 set out one of such
varieties as under: "Cotton fabrics produced...powerlooms...
provided that the number of powerlooms producing cotton
fabrics in such factories does not exceed four."
By a notification dated November 26, 1960 a proviso was
added to this item stating that "this exemption shall not be
applicable to a manufacturer who commences production for
the first time on or after the December 1, 1960 by acquiring
powerlooms from any other person who is or has been a
licensee of a powerloom factory." From March 1, 1961 item 7
was substituted and from April 1, 1961 a proviso was added
to item 7, the effect of both of which was that while from
March 1, 1961 the benefit of exemption from excise duty was
available only to those manufacturers who had not more than
two powerlooms in their factories, from and after April 1,
1961 even this limited exemption was withdrawn from
manufacturers who commenced production for the first time on
or after April 1, 1961 by acquiring powerlooms from any
person who was or had been a licensee of powerloom factory.
From March 18, 1961 a second proviso to item 7 was
added which provides "where a person employs not more than
four powerlooms and the said powerlooms are worked in not
more than one shift no duty shall be payable in respect
thereof".
From April 1, 1961 a third proviso was added stating
"where a person commences manufacture of the said fabrics
for the first time on or after April 1, 1961 by acquiring
powerlooms from any other person who is or has been a
licensee of powerloom factory the rate per shift per month
per powerloom shall be the next higher rate if any".
The respondents had acquired powerlooms after April 1,
1961 from persons who were or had been licensees and were
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manufacturing cotton fabrics on those powerlooms prior to
April 1, 1961. They claimed that since each of them had not
more than four powerlooms which worked in not more than one
shift he was exempt from payment of excise duty by virtue of
the second proviso to item 7.
The Superintendent of Central Excise on the other hand
contended that the third proviso carved out an exception
from the second proviso and since
514
each of the respondents commenced manufacture of cotton
fabrics for the first time after April 1, 1961 he was not
exempt from payment of excise duty but was liable to pay
duty at the next higher rate provided in the amended
notification of March 18, 1961.
Appeals of the respondents having been rejected by the
Assistant Collector and the Collector they filed writs in
the High Court challenging the levy of excise duty. Their
writ petitions were allowed by the High Court.
Allowing the appeals
^
HELD:(1) It is a well settled rule of interpretation
applicable alike to the rule making authority as to the
legislature that where there are two expressions which could
have been used to convey a certain intention, but one of
these expressions conveys that intention less clearly than
the other, it is proper to conclude that if the draftsman
used that one of the two expressions which would convey the
intention less clearly, he does not intend to convey that
intention at all. [523 A]
It is clear on a plain grammatical construction of the
proviso under Item 7 of the Notification dated 5th January,
1957 that the prescription of the date 1st April, 1961 has
reference only to commencement of production of the cotton
fabrics and not to the acquisition of the powerlooms. What
is required is that the production of cotton fabrics must
have been commenced by the manufacturer for the first time
on or after 1st April, 1961 and not that the powerlooms also
must have been acquired by him on or after that date. [520
C-D]
2 (a) Even though each of the respondents owned not
more than four powerlooms he would be liable to pay excise
duty at the next higher rate under the third proviso to the
notification dated March 18, 1961, if he started manufacture
of cotton fabrics on his powerlooms for the first time on or
after April 1, 1961, irrespective whether he acquired the
powerlooms from a licensee before or after that date. [522
C-D]
(b) The exemption under item 7 is not applicable to a
manufacturer who has commenced his production of cotton
fabrics for the first time on or after April 1, 1961, by
acquiring powerlooms from another person who is or has been
a licensee of a powerloom factory. Two conditions which must
exist before the mischief of the proviso is attracted are:
(1) the manufacturer must have commenced production of
cotton fabrics for the first time on or after April 1, 1961
and (2) the powerlooms on which he manufactures cotton
fabrics must have been acquired by him from a person who is
or has been a licensee of a powerloom factory. The event
which attracts the applicability of the proviso is that the
manufacturer should have commenced production of cotton
fabrics on these powerlooms for the first time on or after
April 1, 1961. If this condition is satisfied the proviso
comes into play and withdraws the exemption which would
otherwise have been available to the manufacturer under item
7. [519H-520B, E]
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(3) The language and structure of the third proviso
being identical with the language and structure of the
proviso under item 7 of the notification dated 5th January,
1957 the same view must govern the interpretation of the
third proviso. [521 E]
515
The third proviso on its proper interpretation, enacts
a substantive provision for payment of excise duty at the
next higher rate in the cases therein specified and this
substantive provision overrides the second proviso which
exempts a manufacturer employing not more than four
powerlooms and working not more than one shift from payment
of excise duty in those cases which do not fall within the
third proviso and where a case, is covered by the third
proviso the second proviso would be inapplicable and the
manufacturer would be liable to pay excise duty at the next
higher rate. [522 A-B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Apptal Nos. 1285-
1296 of 1970.
Appeals by Special Leave from the Judgment and order
dated 6-3-1969 of the Mysore High Court in W.P. Nos. 2560-
61/66 and 46, 47, 50, 51, 975, 1718, 1719, 1921, 1979 and
1980/67.
G. L. Sanghi, M. N. Shroff and Miss A. Subhashini for
the Appellants.
R. B. Datar for the Respondent.
The Judgment of the Court was delivered by
BHAGWATI, J.-These appeals by special leave are
directed against the judgment of the Karnataka High Court
allowing 12 writ petitions filed by different respondents.
Each of the respondents owned at the material time not more
than 4 powerlooms and carried on business of manufacturing
cotton fabrics on those powerlooms. The case of the
respondents was that each of them acquired his powerlooms
from person who were or had been licensees and started
manufacturing cotton fabrics on those powerlooms prior to
1st April, 1961. The respondents claimed that since each of
them had not more than 4 powerlooms in his factory, no
excise duty was payable on the cotton fabrics manufactured
by him and this claim for exemption was based on a
notification dated 5th January, 1957 issued by the
Government of India in exercise of the powers conferred upon
it by Rule 8(1) of the Central Excise Rules, 1944. The
Superintendent of Central Excise, however. rejected the
claim for exemption on the ground that though the powerlooms
owned by each of the respondents were not more than 4,
manufacture of cotton fabrics on them had started after 1st
April, 1961 and none of the respondents was, therefore,
entitled to exemption from payment of excise duty on the
cotton fabrics manufactured by him. The excise duty was
accordingly levied on each of the respondents by the
Superintendent of Central Excise and this levy was confirmed
in appeal by the Assistant Collector and in further appeal
by the Collector of Central Excise. Each of the respondents
thereupon preferred a writ petition in the Karnataka High
Court challenging the levy of excise
516
duty and praying that a writ of mandamus may be issued
against the Excise Authorities directing them not to enforce
the notice demanding excise duty. The writ petitions were
allowed by the High Court and hence the Union of India
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preferred the present appeals after obtaining special leave
from this Court.
Before we proceed to examine the rival contentions of
the parties in regard to the controversy arising in these
appeals, it is necessary to set out briefly the relevant
provisions of law having a bearing on this controversy. The
Central Excise and Salt Act, 1944 by section 3 read with
Item 19 provided for levy of excise duty on all varieties of
cotton fabrics including cotton fabrics manufactured on
powerlooms. Section 37 sub-section (2) of the Act conferred
power on the Central Government to make Rules providing for
a number of matters including inter alia clause (xvii) which
was in the following terms:
"Exempt any goods from the whole or any part of
duty imposed by this Act."
The Central Government in exercise of this rule-making
power made the Central Excise Rules, 1944 of which Rule 8
clause (1) provided that "the Central Government may from
time to time by notification in the official Gazette exempt,
subject to such conditions as may be specified in the
notification, any excisable goods from the whole or any part
of the duty leviable on such goods." In exercise of this
power of exemption conferred under Rule 8 clause (1) the
Central Government issued a notification dated 5th January,
1957 exempting certain varieties of cotton fabrics from the
whole of the excise duty leviable thereon and one of such
varieties set out in Item 7 was as under:
"Cotton fabrics produced in factories commonly
known as powerlooms (without spinning plants) provided
that the number of powerlooms producing cotton fabrics
in such factories does not exceed four."
This item was later substituted by another item by a
notification of the Central Government dated 19th January,
1957 and the substituted item was 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 scope of the exemption granted under this item was
restricted by the addition of the following proviso by a
Central Government notification dated 26th November. 1960:
517
"Provided that this exemption shall not be
applicable to a manufacturer who commences production
of the said fabrics for the first time on or after the
1st December, 1960 by acquiring powerlooms from any
other person who is. or has been a licensee of
powerloom factory."
There was a further change made by a notification
issued by the Central Government on 1st March, 1961 and the
then existing Item 7 was substituted by the following Item:
"(7) 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 3 powerlooms in all but not roller locker
machine are installed."
The result was that the exemption granted under Item 7 was
considerably narrowed down and the proviso taking away the
exemption in certain cases was deleted. But again, by a
notification dated 1st April, 1961, the Central Government
introduced the following proviso under Item 7:
"Provided that this exemption shall not be
applicable to a manufacturer who commences production
of the said fabrics for the first time on or after the
1st April, 1961 by acquiring powerlooms from any other
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person who is or has been a licensee of powerloom
factory."
Thus from 1st March, 1961 the benefit of the exemption from
excise duty was available only to those manufacturers who
had not more than 2 powerlooms in all in their factories and
from and after 1st April, 1961 even this limited exemption
was withdrawn from manufacturers who commenced production of
cotton fabrics for the first time on or after 1st April,
1961 by acquiring powerlooms from any person who was or had
been a licensee of powerloom factory.
Now in the present appeals each of the respondents
owned admittedly not more than 4 powerlooms, but it does not
appear from the record before us as to whether any of them
owned more than 2 powerlooms. If it is found that any of the
respondents owned more than 2 powerlooms, he would not be
within the exemption granted under Item 7 of the amended
Notification dated 5th January. 1957 and excise duty would
be payable on the cotton fabrics manufactured by him. But
even if any of the respondents owned not more than 2
powerlooms and was, therefore, within the exemption granted
under item 7 of the amended notification dated 5th January,
1957, the question would still arise whether he forfeited
the exemption by reason of the proviso to Item 7 introduced
by the notification dated 1st
518
April, 1961. The answer to this question would depend upon
the true construction of the proviso and we shall presently
consider this question, but before we do so, it is necessary
to refer to some other notifications issued by the Central
Government under the Central Excise Rules, 1944.
On 1st March, 1961, the Central Government in exercise
of the power conferred upon it under Rule 96-J of the
Central Excise Rules, 1944 issued a notification providing
for a compounded levy scheme for payment of excise duty on
cotton fabrics. By this notification, the Central Government
fixed different rates "per shift, per month, per powerloom
employed by or on behalf of the same person in the
manufacture of cotton fabrics" depending upon the number of
powerlooms employed by such person. The rates prescribed for
a case where more than 2 but not more than 24 powerlooms
were employed were Rs. 20 where medium and/or coarse fabrics
were manufactured and Rs. 25 where the powerlooms were
employed in the manufacture of superfine and/or fine
fabrics. There was a proviso at the foot of the notification
(hereinafter referred to as the first proviso) which laid
down as to how the computation should be made where roller
locker machines were employed. The rates prescribed for a
case where more than 2 but not more than 24 powerlooms were
employed, were partially modified with retrospective effect
by a subsequent notification issued by the Central
Government on 18th March, 1961 and the new rates were Rs. 10
and Rs. 12.50 in respect of the first 4 powerlooms and Rs.
20 and Rs. 25 in respect of the balance. The first proviso
dealing with the case where roller locker machines were
employed however, remained unchanged. Then came another
notification of the Central Government dated 1st April, 1961
by which the notification dated 18th March, 1961 was amended
by substituting the words "where more than 2 but not more
than 24 powerlooms are employed" by the words "where not
more than 24 powerlooms are employed" and adding a further
proviso (hereinafter referred to as the third proviso) after
the existing first proviso:
"Provided also that where a person commences
manufacture of the said fabrics for the first time on
or after the 1st April, 1961, by acquiring powerlooms
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from any other person who is, or has been. a licensee
of powerloom factory, the rate per shift, per month,
per powerloom shall be the next higher rate, if any."
This was followed by a notification dated 20th April, 1961
issued by the Central Government by which after the first
proviso, the following proviso (hereinafter referred to as
the second proviso) was inserted in the notification dated
18th March, 1961
519
"Provided further that where a person employs not
more than four powerlooms and the said powerlooms are
worked in not more than one shift, no duty shall be
payable in respect thereof."
The result was that from 18th March, 1961 upto 1st April,
1961, a manufacturer having more than two but not more than
24 powerlooms was liable to pay excise duty at the rates set
out in the amended notification dated 18th March, 1961 and
from 1st April, 1961 to 21st April, 1961, the position was
that if such a manufacturer was found to have commenced
manufacture of cotton fabrics for the first time on or after
1st April, 1961 by acquiring powerlooms from another person
who was or had been a licensee of powerloom factory, the
rate at which excise duty would be payable by him would be
the next higher rate specified in the amended notification
dated 18th March, 1961. So far as a manufacturer having two
or less powerlooms was concerned, he was during the period
from 18th March, 1961 upto 1st April, 1961 exempt from
excise duty by reason of the notification dated 5th January,
1957, but from 1st April, 1961 to 21st April, 1961 this
exemption stood with-drawn if it was found that the
manufacturer had commenced manufacture of cotton fabrics for
the first time on or after 1st April, 1961 by acquiring
powerlooms from another person who was or had been a
licensee of powerloom factory and in such a case a
manufacturer would be liable to pay excise duty at the next
higher rate prescribed in the amended notification dated
18th March, 1961. This was the position which obtained upto
20th April, 1961, when the second proviso was introduced
exempting a manufacturer employing not more than 4
powerlooms and working even in not more than one shift from
payment of excise duty. Each of the respondents had
admittedly not more than 4 powerlooms and it was the case of
the respondents that these powerlooms were worked in not
more than one shift and hence the respondents claimed that
they were exempted from liability for payment of excise duty
by virtue of the second proviso. But the answer made on
behalf of the Revenue was that the third proviso carved out
an exception from the second proviso and since each of the
respondents commenced manufacture of cotton fabrics for the
first time after 1st April, 1961, he was not exempt from
payment of excise duty, but was liable to pay the same at
the next higher rate provided in the amended notification
dated 18th March, 1961.
Now going back to the proviso under Item 7 of the
notification dated 5th January, 1957, we find that the
language of this proviso is clear and explicit and does not
admit of any doubt or equivocation. It says in so many terms
that the exemption under Item 7 shall not be applicable to a
manufacturer who has commenced his production
520
of cotton fabrics for the first time on or after 1st April,
1961 by acquiring powerlooms from another person who is or
has been a licensee of powerloom factory. There are two
conditions which must exist before the mischief of the
proviso is attracted. One is that the manufacturer must have
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commenced production of cotton fabrics for the first time on
or after 1st April, 1961 and the other is that the
powerlooms on which he manufactures cotton fabrics must have
been acquired by him from a person who is or has been a
licensee of powerloom factory. It is clear on a plain
grammatical construction that the prescription of the date,
1st April, 1961, has reference only to commencement of
production of the cotton fabrics and not to the acquisition
of the powerlooms. What is required is that the production
of cotton fabrics must have been commenced by the
manufacturer for the first time on or after 1st April, 1961
and not that the powerlooms also must have been acquired by
him on or after that date. It is immaterial as to when the
manufacturer acquired the powerlooms; he may have acquired
them prior to 1st April, 1961; that is totally irrelevant.
The only attribute that the powerlooms must satisfy is that
they must have been acquired from a person who is or has
been a licensee of powerloom factory and if this attribute
is present, then it is of no consequence as to when the
powerlooms were acquired by the manufacturer. The event
which then attracts the applicability of the proviso is that
the manufacturer should have commenced production of cotton
fabrics on these powerlooms for the first time on or after
1st April, 1961. If this condition is satisfied, the proviso
comes into play and withdraws the exemption which would
otherwise have been available to the manufacturer under the
main Item 7. If the intention of the Central Government in
framing the proviso was that not only the production of
cotton fabrics on the powerlooms should have commenced on or
after 1st April, 1961, but that the powerlooms also should
have been acquired by the manufacturer on or after that
date, the Central Government could have easily expressed
such intention by using appropriate language in the proviso.
The Central Government could have transposed the words "on
or after the 1st April, 1961" and put them at the end of the
proviso. That would have clearly conveyed the intention of
the Central Government that the powerlooms must be acquired
by the manufacturer on or after 1st April, 1961 and if the
powerlooms are acquired on or after 1st April, 1961, it must
follow a fortiorari that the production of cotton fabrics on
the powerlooms by the manufacturer would necessarily
commence on or after that date. But the Central Government
advisedly placed the words "on or after the 1st April, 1961"
after the clause referring to commencement of production and
before the clause relating to acquisition of powerlooms. It
is a
521
well settled rule of interpretation applicable alike to the
rule making authority as to the legislature that where there
are two expressions which could have been used to convey a
certain intention, but one of these expressions conveys that
intention less clearly than the other, it is proper to
conclude that if the draftsman used that one of the two
expressions which would convey the intention less clearly,
he does not intend to convey that intention at all.
Moreover, here the dictates of grammar as well as language
compel us to take the view that the date 1st April, 1961 has
reference only to commencement of production and not to
acquisition of the powerlooms. It is to our mind clear that
if a manufacturer is found to have commenced production of
cotton fabrics on powerlooms for the first time on or after
1st April, 1961, he would fall within the mischief of the
proviso and it would be entirely immaterial as to when he
acquired the powerlooms, whether before or after 1st April,
1961, so long as the powerlooms are acquired from a person
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who is or has been a licensee of powerloom factory. The High
Court was, therefore, clearly in error in construing the
language of this proviso to mean that the powerlooms also
must have been acquired by the manufacturer on or after 1st
April, 1961 in order to attract the applicability of the
proviso.
The same construction must obviously be placed on the
third proviso introduced in the notification dated 18th
March, 1961 by the notification of 1st April, 1961. The
language and structure of the third proviso are identical
with the language and structure of the proviso under Item 7
of the notification dated 5th January, 1957 and the same
view must, therefore, govern the interpretation of the third
proviso. It is unnecessary to repeat what we have said in
the foregoing paragraph, because what we have said there
applies fully and completely in regard to the interpretation
of the third proviso and, therefore, in order to determine
whether this proviso is applicable to any of the
respondents, we have to consider whether the respondent
concerned commenced manufacture of cotton fabrics on the
power-looms for the first time on or after 1st April, 1961,
irrespective whether he acquired the powerlooms before or
after that date. The only relevant inquiry necessary to be
made is as to when the manufacturer of cotton fabrics on the
powerlooms was commenced for the first time by the
respondent. If it was on or after 1st April, 1961, the
mischief of the third proviso would be attracted and the
respondent would be liable to pay excise duty at the next
higher rate. Of course, the second proviso introduced in the
notification dated 18th March, 1961 with effect from 20th
April, 1961 provided that where a person employs not more
than 4 powerlooms and these powerlooms are worked in not
more than one shift, no excise duty shall be payable in
respect thereof,
522
but the third proviso on its proper interpretation, enacts a
substantive provision for payment of excise duty at the next
higher rate in the cases therein specified and this
substantive provision overrides the second proviso. The
second proviso exempts a manufacturer employing not more
than 4 powerlooms and working not more than one shift from
payment of excise duty in those cases which do not fall
within the third proviso and where a case is covered by the
third proviso, the second proviso would be inapplicable and
the manufacturer would be liable to pay excise duty, at the
next higher rate. This is the only way in which the two
provisos can be harmoniously construed in a manner which
would give effect to both.
We are, therefore, of the view that even though each of
the respondents in the present case owned not more than four
powerlooms, he would be liable to pay excise duty at the
next higher rate under the third proviso to the notification
dated 18th March, 1961, if he started manufacture of cotton
fabrics on his powerlooms for the first time on or after 1st
April, 1961, irrespective whether he acquired the powerlooms
from the licensee before or after that date. We must,
therefore, set aside the judgment of the High Court and send
the matter back to the High Court so that the High Court may
decide the writ petitions of the respondents in accordance
with law and in the light of the observations contained in
this judgment.
We accordingly allow the appeals, set aside the
judgment of the High Court and remand the writ petitions to
the High Court for disposal in accordance with the law.
Though the appellants have succeeded, they will pay the
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costs of the respondents as provided in the order granting
special leave.
N.K.A. Appeals allowed.
523