J.K. Steel Ltd. Vs. Union of India
[1968] INSC 254 (18 October 1968)
18/10/1968 SIKRI, S.M.
SIKRI, S.M.
BACHAWAT, R.S.
HEGDE, K.S.
CITATION: 1970 AIR 1173 1969 SCR (2) 481
CITATOR INFO :
R 1971 SC2039 (14,26) RF 1977 SC1884 (26) R
1980 SC1255 (11) RF 1986 SC1682 (17)
ACT:
Central Excise and Salt Act (1 of 1944),
First Schedule, item 25 AA, Indian Tariff Act (32 of 1934), First Schedule,
entry 63(36) and Finance Act (20 of 1962)--Steel wires made from imported steel
rods--Whether excise duty is leviable.
Central Excise and Salt Rules, 1944. rr. 9(2)
and 10--Wrong rule mentioned--No prejudice to assessee--If could be justified
under the correct rule.
HEADNOTE:
The appellant was a manufacturer of iron and
steel products. It was importing steel rods from which steel wires were
manufactured. On April 24, 1962 Finance Act (No. 2) 1962 imposed excise duty on
iron and steel products by introducing item 26AA in the Central Excise and Salt
Act, 1944. Under that item, on wires, 5% ad valorem plus the excise duty for
the time being leviable on pig iron and steel ingots as the case may be was
payable. Pig iron 'and steel ingots were already subject to excise duty under
items 25 and 26 respectively. On the same day, the first Schedule of the Tariff
Act 1934 was amended and two Notifications Nos. 70 and 77 were issued in
exercise of the powers conferred by r. 8(1) of the rules framed under the
Excise Act. In the Tariff Act item 63(36) which deals with imported iron and
steel products was added to the First Schedule by. Finance Act (No. 2),.
1962.The items included therein are the very items set out in item 26AA of the
Excise Act. The standard rule of duty is mentioned as 'the excise duty for the
time being leviable on like articles if produced or manufactured in India...
and the duty so leviable shall be in addition to the duty which would have been
levied if this entry had not been inserted Under Notification 70, the Central
Government exempted iron and steel products falling under item 26AA if made
from pig iron or steel in gots on which the appropriate amount of excise duty
has already been paid from so much of the excise duty leviable thereon as is
equivalent to the duty leviable under item 25 or 26 as the case may be. Under
Notification 77, the Central Government exempted other iron and steel products
falling under sub-items (2), (3), (4) and (5) of item 26 AA if made from
articles which have already paid the 'appropriate. excise duty under sub-item
(1) of item 26AA, from so much of the excise duty as is equivalent to the duty
payable under sub-item (1). This notification was later superseded by another
Notification No. 89. by, which the Government exempted with effect from April,
24, 1962, iron and steel products falling under item 26AA if made from another
article falling under the said item and having already paid the appropriate
amount of' duty, from so much of the excise duty as is equivalent to the duty
payable on the said article. On and after April 24, 1962, the appellant cleared
from its warehouse wires produced from the imported steel rods. The required
permission from the excise authorities was obtained and the duty assessed was
paid', At that time the excise authorities proceeded on the basis that only ad
valorem duty had to be levied and not 'excise duty for the time leviable on pig
iron or steel ingots.' On March 21, 1963, the assessing authority issued a
written demand under r. 9(2) demanding steel ingot duty which, according to the
authority the appellant had evaded to pay. The appellant paid the duty demanded
under protest 482 and appealed to higher authorities. The Government, in
revision. treated the demand as one under r. 10, because, there was no question
of any evasion by the appellant, and confined the demand to clearances effected
after December 21, 1962.
In appeal to this Court against the order of
the Central Government, the. appellant contended that: (1) The clause 'excise
duty for the time being leviable under the Act on pig iron or steel ingots' is
attracted only when any pig iron or steel ingot dutiable under the Act is Used
in the manufacture of any article dutiable under item 26AA (1), and, as the
steel bars used in the manufacture of wire were imported and were not made out
of steel ingots dutiable under the Act, that loan of the levy was not attracted
to the wires; and (2) The demand by the Central Government was barred by
limitation under r. 10.
HELD: (1) (Per Sikri and Bachawat, JJ.) The
excise duty was levied correctly as determined by the Central Government.
Item 26AA prescribes a rate of duty as the
heading of its column 3 indicates. The rate consists of two parts, one part is
the ad valorem duty and the other excise duty. The context indicates that the
words 'as the case may be' denote the excise duty leviable on pig iron under item
25 is to be charged if the product is an iron product; if it is a steel product
then the excise duty leviable on steel ingots under item 26 is to. be levied.
The weight to be taken into consideration for determining the excise duty would
be the weight of the products made out of iron steel ingots and not that of the
pig iron or steel ingot out of which they were made. That is, the duty will be
the duty leviable on the hypothetical piece of pig iron or steel ingot 'as the
case may be of the same weight as the particular products to be assessed. The
duty is not -concerned with the actual price of pig iron or steel ingot out of
which other articles are made, and it is not concerned with whether any excise
duty or countervailing duty was paid on the pig iron or steel ingot used.
Therefore it is irrelevant whether the article out of which the assessed
article was manufactured was imported or not. [486 A B; F--H; 487 B--E] The
effect of item 63(36) in the Tariff Act, is to levy a countervailing duty as an
additional custom duty equivalent to the prevalent .excise duty on like
articles produced and manufactured. The manufacturer in India, who used steel
rods made in India and made wires from them was given a certain relief under
Notification 77, but the manufacturer who used steel rods made abroad was not
given this exemption. Later by Notification 89, and suitable amendments, he was
also given a similar exemption. But the item in the Tariff Act does not throw
any light on item 26AA(1) of the Excise Act. [487 H; 488 A B] Assuming that it
is permissible to look at the notifications issued by the. Central Government
for interpreting item 26AA, they proceed on the interpretation of the item that
it refers to a rate. The Notifications do not exempt an article from the levy
of duty; they give relief which may in a particular case be the excise duty or
the countervailing duty levied on the article out of which the assessed article
has been manufactured. The rule that a fiscal enactment should be strictly
construed does not mean that close reasoning should not be employed to arrive
at the true meaning of a badly drafted entry in an Excise Act. [487 A-C] Per
Hegde, J. (dissenting): The expression leviable of pig iron and steel ingots as
the case may be' has reference to pig iron or steel ingots dutiable under the
Excise Act.
Therefore. the wires which 'are the subject
matter of the impugned levy in the present case, are not liable to pay the duty
in dispute as they were made out of imported steel rods and hence not dutiable
under the Excise Act. [495 A-B; 505 B] 403 If the item 26AA refers to a rate
Parliament would have conveyed such intention without any ambiguity as it has
done in item 5. The words used are 'the excise duty'. If the clause refers to a
rate the article 'the' has no place in the context. The expression 'the excise
duty for the time being leviable' by necessary implication refers to an article
dutiable under the Act That must necessarily be the 'article which is one of
the components of the article on which duty is sought to be levied, that is, in
the instant case, the steel ingot used in the production of wires.
Moreover pig iron is the intermediate form
through which iron must pass in the manufacture of steel. Therefore, every
steel product is also an iron product. If the clause in item 26AA refers to a
rate and not to the duty leviable on the material used in the manufacture of
the dutiable article, then the question would be whether the rate is that at
which duty is leviable on steel ingot or that leviable on pig iron. If it
merely depends on the practice prevailing in the trade then the power of the
assessing authorities to determine the nature of an. article would be an
arbitrary power, and the legislature is not likely to have conferred such an
arbitrary power on the authorities. If on the other hand. the item refers to
the material from which the article on which duty is sought to be levied is
made--the proximate, raw material and not the material from which that raw
material is made, then there is definiteness for the purpose of finding out the
amount. [495 A--C, E--F; 496 E--G; 497 A-B] Observations in C.A. Abraham v.
I.T.O. Kottayam [1961] 2 S.C.R. 765, 771; C.I.T.v. Karamchcmd Premchand,
Ahmedabad, [1960] 3 S.C.R. 727, 742; Inland Revenue Commissioners v. Duke of
West minister [1936] A.C. 1, 24 and Partington v. The Attorney-General, (1869)
4 H.L 100, 122, applied Entry 63(36) in the Tariff Act and item 26AA in the
Excise Act were enacted simultaneously, came into force on the same day from
one code and are pari materia. They were introduced in pursuance of a common
purpose, namely, that the articles listed in item 26AA, whether produced out of
indigenous pig iron or steel ingot or made of imported pig iron or steel ingot
must bear the same amount of duty. The duty levied under item 63(36) being a
countervailing duty it cannot be considered as an additional duty over and
above the duty imposed under item 26AA of the Excise Act. [497 C--E, F---G] For
finding out the scope of a particular levy, notifications issued by the
executive Government providing for exemption from levy can be looked into as
they disclose the overall scheme. The notifications Nos. 70, 77 and 89 were
issued with a view to avoid double taxation, and the exemption granted provides
a clue to the scope of item 26AA. The effect of Finance Act (2), 1962, and the
various Notifications is that excise duty is leviable at the rate mentioned in
item 26-AA on pig iron or steel ingot used in the production of the article on
which duty under item 26AA is sought to be levied but. to the extent any excise
duty or countervailing custom duty has been paid on any of the material used in
the manufacture of the article, the same is exempt. Therefore, when item 26AA
speaks of 'the excise duty for the time being leviable on pig iron or steel
ingots as the case may be' it refers to the excise duty payable on pig iron or
steel ingots used in the production of the article dutiable under that item.
[503 C--E; 504 G--H] Kailash Nath v. State of U.P.A.I.R. 1957 S.C. 790,
followed.
(2) (By Full Court): If the exercise, of a
power can be traced to a legitimate source, the fact that it was purported to
have been exercised under a different power does not vitiate the exercise of
the power. In 484 the present case, a common form is prescribed for issuing
notices under rr. 9(2) and 10 and the incorrect statements in the written
demand did not prejudice the appellant as shown from its answer to the demand:
Therefore, though the demand was made under r. 9(2), the Revenue could change
its position and justify the demand under r. 10. [484 E; 505 D--H; 506 A--B] B.
Balakotaiah v. Union of India [1958] S.C.R. 1052 and Afzal Ulah v. State of
U.P. [1964] 4 S.C.R. 991, referred to
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1263 of 1968.
Appeal by special leave from the order, dated
November 2, 1967 of the Government of India, Ministry of Finance, Department of
Revenue & Insurance, New Delhi in Central Excise Revision Application No.
1323 of 1967.
K. Sen, S.V. Gupte, Rameshwar Nath, Mahinder
Netrain and Ravinder Nath, for the appellant.
V.A. Seyid Muhammad and S.P. Nayar, for the
respondents.
[ SIKRI, J. delivered the majority Judgment
on behalf of himself and BACHAWAT, J. HEGDE, J. gave a dissenting Opinion].
Sikri, J. I have had the advantage of reading
the draft judgment prepared by Hegde, J., but, while I agree with him that
there is no force in the plea of limitation advanced on behalf of the assessee,
in my opinion the appeal should fail on the ground that the excise duty was
levied correctly as determined by the Central Government in its order, dated
November 2, 1967.
The facts are fully set out in the judgment
of Hegde, 21'. It is only necessary to mention a few facts in order to make
this judgment readable. The assessee manufactures iron and steel products. It
manufactured wires out of steel rods, which had been imported by it prior to
April 24, 1962.
Item 26AA was added to the First Schedule of
the Central Excises and Salt Act, 1944 (I of 1944)-hereinafter referred to as
the Excise Act--by Finance Act (No. 2), 1962 (XX of 1962) with effect from
April 24, 1962. This reads as under:
"26-AA.IRON OR STEEL PRODUCTS, THE
FOLLOWING, NAMELY :-(i)Bars,rods,coils,wires,joiFive per cent. ad volorem plsts,
girders, angles,channaus excise duty for the time ls,tees,flats,beams,zeds,trbeing
leviable on pig iron ough,pilling and all other or steel ingots,as the case
rolled forced or extruded may be.
shapes and sections,not otherwise specified.
(ii) Plates and sheets, other Seven and a
half per cent.ad than plates and sheets intenvalorem plus the excise duty for
485 tinning and hoops, and str the time being leviable on ipe, all sorts including
pig iron or steel ingots as galvanised or corrugated the case may be.
and sheets.
(iii) Uncoated plates and Seven and a half
per cent.
sheets intended for tinad valorem plus the
excisening. duty for the time being leviable on pig or iron steel (iv) Pipes
and tubes ingots, as the case may be.
(including blanks therefore)all sorts,
whether Five per cent.ad valorem rolled,forged,spun,cast plus the excise duty
for drawn annealed welded or the time being leviable extruded. on pig iron or
steel ingots as the case may be.
(v) All other steel Five per cent.ad valorem
castings not otherwise surplus the excise duty for ecified. the time being
leviable on steel ingots.' The short point that arises is this: What is the
duty leviable on the wires manufactured by the assessee out of steel rods which
had already been imported ? For the time being I will ignore notifications
issued under r. 8 (1) of the rules made under the Excise Act, and the
amendments made by the Finance Act (No. 2) of 1962, and Indian Tariff
(Amendment Act) 1963 (III of 1963) to the Indian Tariff Act, 1934. '
"Wires". are mentioned in item No. 26AA(i).Therefore we have to
scrutinize the third column of item 26AA(i) for the rate of duty. Three points
need clarification:
(a) What is the meaning of or inference
derivable from the word 'plus'? (b) What is the meaning of the formula
"the excise duty for the time being leviable on pig iron or steel
ingots"? (c) What is the import of the words "as the case may
be"? The word 'plus' in the context indicates that the rate of duty
consists of 2 parts: one part is ad valorem duty and the other is the excise
duty calculated according to the formula given. In other words, both duties
have to be levied. I will presently discuss what the formula means but this is
clear that the third column contemplates one duty, consisting of two parts,
being levied.
Before I discuss the meaning of the formula
it will clarify matters if the import of the words "as the case may
be" is first ascertained. These words indicate that a choice has to be
made between two types of excise duties--excise duty leviable on pig iron or
excise duty leviable On steel ingots, Sub-items (ii), (iii) and (iv) of item
26AA use the same set of words. In sub-item (v) excise duty leviable on steel
ingots is only mentioned. This sub item consists of steel casting. This
indicates that the duty is being calculated thus because steel castings have
been made 486 from steel ingots. Item 26AA deals with iron 'and steel products.
It seems to me that the context indicates that the words "as the case may
be" denote that the excise duty leviable on pig iron is to be charged of
the product is an iron product; if it is a steel product then the excise duty
leviable on. steel ingots is to be levied. In other words, this decides the
choice whether item 25 (pig iron) or item 26 (steel ingots) is to be looked at.
Although 1 was not enlightened on the point by counsel during the course of the
hearing, I have no doubt that the Excise Department and the trade know how to
distinguish a steel product from an iron product. If there is a dispute on the
point it will have to be resolved in the future.
Now to come to the formula "the excise
duty for the time being leviable on pig iron or steel ingots." Let me give
a simple problem in order to illustrate the points which' arise under this head
of inquiry. "A" manufactures a steel ingot 'X' in May 1961 in
Jamshedpur. He pays excise duty on it in May 1961 as he removes it out of the
factory. Its value is determined at the wholesale cash price at the time of
removal in accordance with s. 4 of the Excise Act. Steel ingot 'X' is sold to a
manufacturer "B" in Faridabad who manufactures steel rods ('Y' &
'Z') out of it in May 1962 and removes them in May 1962. What is the excise
duty payable on steel rods ('Y' & 'Z') ? Ad valorem duty is easy to
calculate. What about the additional duty ? We know that the steel ingot 'X'
has paid excise duty. But this does not make any difference. The additional
duty has still to be calculated under the formula. It is also plain that no
excise duty is strictly leviable under ss. 3 and 4 of the Excise Act on steel
ingot 'X' as such. Not only that it does not exist any longer but duty on it
has already been paid and further no duty would be leviable under s. 4 for it
was removed from the factory long time ago in May 1961.
Therefore, it is clear that the formula
cannot be concerned with the particular ingot 'X' at all.' It seems to me that
what it is concerned with is the duty leviable on a hypothetical steel ingot if
it had been manufactured or removed at the same time as the steel rods ('Y'
& 'Z') were manufactured or removed. In the example given above, under the
formula the excise duty leviable under item 26 in May 1962 would have to be
charged, i.e., 39.35 per metric tonne.
The weight to be taken into consideration
would be the weight of steel rods 'Y' & 'Z', and not of the steel ingot 'X'
out of which they were made.
It seems to me that this is the true
interpretation of column 3 of items 26AA(i). It simply prescribes a rate of
duty as the heading of column indicates. It is not concerned with actual ingots
out of which other articles are made. It is not concerned with whether that
steel ingot has paid excise duty or countervailing duty or not. It is a simple
formula perhaps inartistically formulated. It is said that the item should be
strictly construed, it being a taxing enactment. But no rule or principle ,of
construction requires that close reasoning should not be employed to arrive at
the true meaning of a badly drafted entry in an Excise Act. I believe I am not stretching
the language of the entry against the subject, but it, appears to me that in
the context of scheme of the Excise Act this is the only reasonable
construction to give to the entry.
If it is permissible to look at the
notifications issued by the Central Government which have given reliefs of
various kinds, they seem to me to proceed on the interpretation which I have
given above. It will be noted that they do not exempt the article from the levy
of duty;
they give relief which may in a particular
case be the excise duty or countervailing duty levied on the article out of
which the assessed article has been manufactured.
To revert to the example given by me above,
notification No.70/62, dated April 24, 1962, would exempt manufacturer B'"
from so much of the duty of excise leviable on steel rods as is equivalent to
.the duty leviable under item 26." Therefore, reading entry 26AA(i) with
this notification, manufacturer 'B' does not pay the whole of the duty leviable
on steel rods ('Y' & 'Z') under col. 3 (item 26AA) because the steel ingot
which he has used had already paid the appropriate amount of duty.
I am not able to appreciate how the insertion
of item No. 63 (36) in the First Schedule of the Tariff Act or the subsequent
amendment of the Indian Tariff Act, 1934, by Indian Tariff (Amendment Act) 1963
throw any light on .the interpretation of item 26-AA(i). Item No. 63(36) is in
respect of the same iron and steel products as are mentioned in item 26AA.
Column 4 (standard rate of duty) reads:
"The excise duty for the time being
leviable on like articles if produced or manufactured in India, and where such
duty is leviable at different rates the highest duty;
and the duty so leviable shall be in addition
to the duty which would have been levied 'if this entry had not been
inserted." The effect of this entry is to levy an additional customs duty
equivalent to the prevalent excise duty on like articles produced and
manufactured. In other words, if the customs duty leviable under other entries
in the Second Schedule on steel rods is 'D', an additional duty 'E' has to be
levied equal to the excise duty leviable on steel rods, i.e., under item 26AA.
This has been called countervailing duty.
488 The manufacturer India, who used steel
rods made in India, and made wires from them was given a certain relief by
notification No. 77 of 1962, but the manufacturer in India who used steel rods
made abroad to make wires was not first given this exemption. Later by
amendments he was given a similar exemption. The' Central Excise Manual
(Seventh Edition) at p. 123 states the position thus:
"26AA(2) Iron or Steel products falling
under item No. 26AA, if made from another article falling under the said item
or item No. 63 36) of the First Schedule to the Indian Tariff Act, 1934 (32 of
1934) and having already paid the appropriate amount of excise or countervailing
customs duty, as the case may be, are exempt with effect from 24th April, 1962,
from so much of the duty of excise as is equivalent to the excise or
countervailing customs duty payable on the said article '--vide Government of
India, Ministry of Finance (Department of Revenue) Notification No.
89/62-Central Excise, dated 10th May, 1962 (issued in supersession of
Notification No. 77/62-Central Excises, dated 24th April, 1962, as further
amended by Notifications No. 93/62-Central Excises, dated 26th May, 1962, and
No. 225/62-Central Excises dated 29th December, 1962." The only light
thrown by these amendments. and the notifications referred to above is that it
is not the idea to levy excise duty at various stages of manufacture of certain
articles and this is achieved by issuing notifications giving appropriate
reliefs. But if there is no relief given by notifications the full duty at the
rate mentioned in col. 3 of entry (i) of item 26-AA has to be paid.
In the result the appeal fails and is
dismissed with costs.
Bachawat, J. I agree with Sikri, J.
Hegde, J. This is an appeal by special leave.
It is directed against the order of the Government of India in No.
1323 of 1967, dated November 2, 1967
rejecting the appellant's application for refund of the excise duty paid by him
under protest.
In order to appreciate the controversy
between the parties it is necessary to set out the material facts. The
appellant is a Company having a factory at Rishara in the State of West Bengal.
It manufactures, among other items, Iron and Steel Products such as Jute Baling
Hoops, Wire Ropes, Cold Rolled Strips, Chain Pulley Blocks, Electric
Hoists.etc. Between December 1961 and January 1962 the appellant received
various consignments of imported High Carbon Steel Wire Rods. Its opening stock
of imported High Carbon Steel Wire Rods on April 24, 1962 was 489 2,788.401
metric tons. As before, the appellant manufactured wires from those steel rods
even after April 24, 1962.
Finance (No. 2) Act 1962 (Act No. 20 of 1962)
imposed for the first time excise duty on the Iron and Steel Products; and by
sub-el. (S) of sub-s. (2) of s. 16 of the said Act an amendment was made to the
First Schedule of the Central Excise and Salt Act, 1944 (hereinafter referred
to as the Act) incorporating after item 26A item 26AA. The relevant portion of
that entry reads thus:
Iron or Steel Products.
The following namely:
(1) Bars, rods,coils,wires 5% ad valorem plus
the exjoists girders,angels,channels cise duty for the time tees,flats
beam,zeds,trough, being leviable on pig iron piling and all other rolled and
Steel Ingots as the forged or extruded shapes and case may be.
section not otherwise specified.
Pig Iron and Steel Ingots were already
subject to excise duty under Items Nos. 25 and 26 in the First Schedule of the
Act. The rate of duty in the case of the former at the material time was Rs. 10
per metric tonne and that of the latter Rs. 39/35 per metric tonne. The newly
imposed duty under Item 26AA came into force on April 24, 1962. The Collector
of Central Excise, West Bengal, Calcutta by a Trade Notice, Central Excise No.
32--Iron and Steel Products 2/62 dated Calcutta the 16th May 1962 notified the
procedure to be followed.
By Notification No. 70/62, dated April 24,
1962 issued in exercise of the powers conferred by rule 8 (1 ) of the rules
framed under the Act (to be hereinafter referred to as the rules), the Central
Government exempted Iron and Steel Products falling under Item 26AA, if made
from Pig Iron or Steel Ingots on which the appropriate amount of excise duty
has already been paid, from so much of the duty of the excise leviable thereon
as is equivalent to the duty leviable under Item 25 or 26 as the case may be.
On the same day as per Notification No. 77 of
1962, the Central Government exempted Iron and Steel Products falling under
sub-items (2), (3), (4) and (5) of Item 26AA, if made from articles which have
already paid the appropriate duty of excise under sub item (1 ) of the said
Item, from so much of the duty of excise as is equivalent to the duty payable
under the sub item (1). Finance (Act No. 2) of 1962 by s.
15 amended the First Schedule of the Tariff
Act by adding Item No. 63 (36) which deals with imported Iron and Steel
Products. The second column of that entry mentions the various Iron and Steel
Products included therein. The items included therein are the very items set
out in Sup CI/69-14 490 Item 26AA of the First Schedule to the Act. The third
column of that Item which specifies the levy reads thus:
"The excise duty for the time being
leviable on like articles if produced or manufactured in India, and where such
duty is leviable at different rates the highest duty so leviable shall be in
addition to the duty which would have been levied if this entry had not been
inserted." On May 10, 1962, the Government issued a fresh Notification
(No. 89 of 1962) under rule 8(1) of the rules in supersession of the
Notification No. 77/62 dated April 24, 1962. By that Notification, the
Government exempted with effect from April 24, 1962, Iron and Steel Products
falling under Item 26AA if made from another article falling under the said
Item and having already paid the appropriate amount of duty from so much of the
duty of excise as is equivalent to the duty payable on the' said article.
On the same day namely May 10, 1962, the
Government issued yet another Notification (Notification No. 90 of 1962) under
rule 8 (1) under which it exempted Iron and Steel Products falling under Item
26AA specified in column 2 of the table annexed to the Notification if made
from Pig Iron or Steel Ingots on which appropriate amount of excise duty has
already been paid, from so much of the duty of excise leviable on such products
as in excess of the duty corresponding entry in column 3 of the said table.
(Wire) the product with which we are concerned in this case is also included in
the table. That Notification contains a proviso which says:
"Provided that if the products are made
from pig iron and steel ingots on which appropriate amount of duty has not been
paid the excise duty for the time being leviable on pig iron or steel ingots as
the case may be shall be payable in addition to the duties specified in the appropriate
entry in column 3 of the table." On December 29, 1962, the Government
issued yet another Notification under rule 8(1) amending the Notification No.
89 of 1962 issued on May 10, 1962. In the
place of words "if made from another article falling under the said item
and having already paid the appropriate amount of duty from so much of the duty
of excise as is equivalent .to the duty payable on the said article.", the
following was substituted:
"if made from another article falling
under the said Iterm or Item No. 63(36) of the First Schedule to the Indian
Tariff Act 1934 (32 of 1934) and having already paid the appropriate amount of
excise or court491 tervailing custom duty as the case may be from so much of
the duty of excise as is equivalent to the excise or countervailing custom duty
payable on the said article." By Indian Tariff (Amendment Act 1963) (Act
No. 3/63) effective from the 25th January 1963, the Indian Tariff Act 1934 was
amended and after s. 2, the following section was inserted namely:
2(a) (1).--Any article which is imported into
India shall be liable to custom duty equal to the excise duty for the time
being leviable on a like article if produced or manufactured in India.
Explanation: In this sub-sec. the expression
"the excise duty for the time being leviable on a like article if produced
or manufactured in India" means the excise duty for the time being in
force which would be leviable on a like article if produced or manufactured in
India or if a like article is not so produced or manufactured, which would be
leviable on the class or description of articles to which the' imported article
belongs and where. such duty is leviable at different rates, the highest duty.
(2) The customs duty referred to in subsection
(i) shall be in addition to any duty imposed under this Act or under any other
law for the time being in force." On or after April 24, 1962, the
appellants cleared from their warehouse wires produced from the aforementioned
imported Steel Rods after obtaining the required permission from the excise
authorities and after paying the duty assesse. d. On those wires, duty was
assessed without taking into consideration "the excise duty for the time
being leviable on Pig Iron and Steel Ingots as the case may be." At that
time the Central Excise authorities proceeded on the basis .that on the stock
of wire in question only ad valorem duty had to be levied and not "excise
duty for the time being leviable on Pig Iron or Steel Ingots as the case may
be." On March 21, 1963, the Inspector of Central Excise attached to M/s.
J.K. Steel Ltd., Rishara issued the following notice:
"COLLECTORATE OF CENTRAL EXCISE WEST
BENGAL No. 6 Range RIS. I.
Date: 21-3-1963. Circle-CGR.
Notice of Demand for duty under rule 9(2) of
C.E. Rules, 1944.
492 To M/s. J.K. Steel Ltd., Rishara,
Hooghly.
Take notice that on behalf of the Central
Government, I hereby demand payment by you of the sum of Rs. 4,18,801/30 N.P.
(Rupees four lacs eighteen thousand eight hundred one and paise thirty only)
within ten days from the date hereof.
Particulars of Demands
----------------------------------------------------------Quantity Rate of duty
Amount of duty involved
----------------------------------------------------------Steel Ingot Duty on
6932.964 Rs.39.36 NP Rs.2,72,812/13 M.T.Hoops Per M.T.
Steel Ingot Duty on 921.937 Rs.39.36 NP Rs.
36,278/22 M.T.Strips Per M.T.
Steel Ingot Duty on 2788.00 Rs.39.36 NP
Rs.1,09,710/95 Wire. -------------Total Rs.4,18,801/30 No.
VI/5A/I&S/JKS/CE/63/183, dated 21-3-1963.
Sd/Inspector I/C Central Excise M/s. 1. K.
Steel Ltd., Rishara." The appellants objected to the demand in question as
per their letter of March 24, 1963. They contended that they had not
contravened rule 9(2) of the rules nor was there any short levy. As per his
letter of August 26, 1963, the Assistant Collector of Central Excise Calcutta
4th Division confined the demand to that made under serial No. 3 of the notice.
The appellants paid' the same under protest and thereafter took up the matter
in appeal to the Collector of Central Excise who dismissed their appeal as per
his order of March 19, 1964, with these observations:
"The crucial point of this appeal is
whether counter vailing import duty was paid by the appellants on the imported
steel rods from which steel wires were manufactured. The appellants could not
produce any documents in support of their argument that either import duty or
countervailing duty equivalent to steel ingot rate was paid by them on the iron
rods from which steel wires were drawn. Such duty is leviable on steel rods
under tariff item No. 26AA. As no such duty on steel rods was paid by the
appellants, countervailing 493 duty equivalent to steel ingot duty has,
therefore, to be paid." As against the order of the Collector, the appellants
went up in revision to the Central Government. The Central Government allowed
the revision petition to some extent.
This is what the Central Government ordered:
"The Government of' India have carefully
considered all the points raised by the petitioners but see no reason to
interfere with the Collectors stated that the Steel Wires manufactured out of
steel wire rods imported prior to 24-4-1962 on which no countervailing duty was
paid, and cleared during the period, from 24-4-1962 to 10-8-1963 were subject
to full duty as then leviable under Item 26AA (1) of Central Excise Tariff.
However the demand for differential duty
initially made on 2-3-1963 and subsequently amended vide the Asstt. Collector's
order, dated 26-8-1963 shall be restricted to the clearance effected during the
3 months period prior to the initial service of demand on 2131963 that is to
say, up to 21,12-1962 only as per the provisions of Rule 10 of Central Excise
Rules, 1944 which was applicable to this case. The demand in respect of clearances
effected prior to 21-12-1962 is hereby set aside and consequential refund shall
be granted to the petitioners.
Subject to the above modifications, the
revision application is otherwise rejected." Aggrieved by that order, the
appellants have brought this appeal. The questions that arise for decision in
this appeal are:
(1) What is the true scope of entry No. 26AA
of the First Schedule to the Act ? (2) In considering the scope of the said
entry, can the Notifications issued by the Government on or after April 24,
1962 be taken into consideration? (3) Is the demand barred by limitation under
rule 10 of the rules ? One other question had been raised in the grounds of
appeal namely that the order of the Central Government is vitiated as it had
contravened the principles of natural justice. That contention was not pressed
at the hearing.
In the context of this case that contention
loses much of its significance If we accept the appellant's contention as
regards the scope of entry 26AA then' the fact that the Government's illegal is
immaterial illegal is immaterial.
If 494 on the other hand we accept the
interpretation placed by the Revenue on that entry remand of the case to
Central Government serves no purpose.
I shall now proceed to consider the questions
earlier formulated for decision.
According to the assessee the true import of
the clause in column 3 of entry 26AA is that goods mentioned in column 2 of
that entry are dutiable at 5 per cent ad valorem plus the excise duty for the
time being leviable under the Act on pig iron or steel ingot used in the
production of those goods. Shri A.K. Sen, the learned Counsel for the assessee
urged that the expression leviable in that clause means leviable under the Act;
in other words dutiable under the Act; the words 'Pig Iron' and 'Steel Ingots'
referred to therein is the Pig Iron or the Steel Ingot used in manufacture of
the articles on which duty is sought to be levied; otherwise the word leviable
becomes inappropriate.
In other words according to him the second
limb of the levy under that clause is attracted only when any pig iron or steel
ingot dutiable under the Act is used in the manufacture of any article dutiable
under sub-cl. (1) of entry 26AA. As the steel bars used in manufacturing the
'wires' with which we are concerned in tiffs case were not made out of steel
ingot dutiable under the Act, as they were imported bars, that part of the levy
is not attracted on those wires.
The contention for the Revenue is that the
expression "the excise duty for the time being leviable on Pig Iron or
Steel Ingot as the case may be" sets out only a measure; the rate at which
the duty is leviable; it has no reference to any particular material; it is
merely a yardstick. The argument of Dr. Syed Muhammad, learned Counsel for the
Revenue proceeded thus:
The entry in question deals with two classes
of products i.e., iron products and steel products. The assessing authority has
first to decide whether a particular article is an iron product or steel
product. If he comes to the conclusion that it is a steel product then he
should assess the duty payable firstly by determining the ad valorem duty
payable on it, thereafter he must find out its weight in metric tons and add to
the ad valorem duty the amount payable as excise duty under entry 26 of the
First Schedule on steel ingot of that weight.
If the intention of the Parliament was as
suggested by the learned Counsel for the Revenue then column 3 should have read
thus:
"5 per cent ad valorem plus excise duty
at the rate for the time being leviable on pig iron or steel ingots as the case
may be." 495 It is difficult to interpret the words "for the time
being leviable" as indicating a rate. The expression "leviable on pig
iron and steel ingots as the case may be" in my opinion has reference to
pig iron or steel ingots dutiable under the Act. In fiscal legislation the
terms "rate" is a familiar term. In fact entry 5 of the First
Schedule dealing with salt speaks of "rate fixed annually by a Central
Act". Therefore it would have been the easiest tiring for the Parliament
to convey its intention without ambiguity. At this stage it may also be noted
that the clause in question refers to "the excise duty" and not
excise duty in general. The definite article "the" has considerable
significance. It refers to some particular excise duty. If the second part of
the clause merely refers to a rate than the article "the" has no
place in that context.
It was urged on behalf of the Revenue that to
accept the contention of the assessee and to hold that the second part of the.
clause refers to the steel ingot used in the production of the
"wires" is .to read into the clause the words "used in the
production of the article in question." It was said that such a
construction is impermissible.
Therefore we should not accede to that
contention. I am not prepared to accept that reasoning. In fact in my opinion
to accept the construction contended for on behalf of the Revenue, it would be
necessary for us to include the words "at the rate" after the words
"excise duty" and before the words "for the time being". No
such difficulty arises if we accept the interpretation placed by the assessee
on that clause. The expression "the excise duty for the time being
leviable" by necessary implication refers to an. article dutiable under
the Act. That must necessarily be the article which is one of the components'
of the article on which duly is sought to be levied. In the instant case that
must be the steel ingot used in the production of the "wires" with
which we are concerned in this case.
As laid down by this. Court in C.A. Abraham
v. I.T.O., Kottayam and Anr.(1) "In interpreting a fiscal statute the
Court cannot proceed to make good deficiencies if there may be any; the court
must interpret the statute as it stands and in case of doubt in a manner
favourable to the tax payer." This Court also laid down in Commissioner of
Income Tax v.
Karamchand Premchand Ltd., Ahmedabad(2) that
if there is any ambiguity of language in a fiscal statute, benefit of that
ambiguity must be given to the assessee. At this. stage I am tempted to recall
to my mind the well known observations of Lord Russel of Killowen in Inland
Revenue Commissioners v. Duke of Westminister(3) viz.:
(1) [1961] 2 S.C.R. 765:A.I.R.1961
S.C.607,612 (2) [1960] 3 S.C.R. 727, 742.
(3) [1936] A.C.1, 24.
496 "I confess that I view with disfavour
the doctrine that in taxation cases the subject is to be taxed if in accordance
with a Court's view of what it considers the substance of the transaction, the
Court thinks that the case falls within the contemplation or spirit of the
statute. The subject is not taxable by inference or by analogy, but only by the
plain words of a statute applicable to the facts and circumstances of his
case." About a century ago Lord Cairns in Partington v. The Attorney
General(x) observed:
"As I understand the principle of all
fiscal legislation it is tiffs: If the person sought to be taxed comes within
the letter of the law he must be taxed however great the hardship may appear to
the judicial mind to be. On the other hand, if the Crown, seeking to recover
the tax cannot bring the subject within the letter of the law, the subject is.
free, however apparently within the spirit of the law the case might otherwise
appear to be." Unless I am satisfied that the only reasonable
interpretation that can be placed on the clause in col. 3 of entry 26AA is that
placed by the Revenue, it is not possible to justify the impugned levy.
There is yet another difficulty in accepting
the interpretation tried to be placed by the Revenue on entry 26AA. According
to books on steel making pig iron is the intermediate form through which almost
all iron must pass in the manufacture of steel (see "The Making, Shaping
and Treating of Steel" edited by Harold E. Mcgannon at p. 384).
Therefore every steel product is also. an
iron product. If the second part of the clause in column 3 of entry 26AA refers
to .a rate and not the duty leviable on the material used in the manufacture of
the dutiable article under that entry then the question arises whether the rate
in question is that at which duty is leviable on steel ingot or that leviable
on pig iron. That part of the clause refers to two different materials dutiable
at different rates. If on the other hand it refers. to the material from which
the article on which duty is sought to be levied is made-the proximate raw
material and not the material from which that raw material is made, then there
is no difficulty in finding out the amount.
Dr. Syed Muhammad was not able to tell us how
the assessing authorities classify articles into iron products and steel
products. It is not his case that there is any recognised basis for doing so.
It is also not his case that there is any prescribed procedure for deciding
that question. His explanation that it is done on the basis of the practice
prevailing in the trade is far from satisfactory.
(1) [1869] 4, H.L. 100, 122.
497 He was not able to tell us how we can
ascertain that practice or what that practice is. If his contention is correct
then the power of the assessing authorities to determine the nature of an
article is an arbitrary power.
It is undefined and unguided. The
determination may vary from officer to officer. It is doubtful whether such a
power is a valid power. That apart legislature is not likely to have conferred
such an arbitrary power on the authorities. That difficulty will not arise if
the duty under the second limb of the levy in column 3 of entry 26AA is
determined on the basis of the actual material used.
For the purpose of interpreting the clause in
question, reference may also be made to entry 63(36) in the First Schedule to
the Tariff Act. It may be remembered that entry as well as entry 26AA in the
First Schedule of the Act were enacted simultaneously under Finance (No. 2)
Act, 1962.
Both these entries came into force on the
same day namely on 24th April 1962 The Act and the Tariff Act are cognate
legislations. In other words they are legislations which are pari materia. They
form one code. They must be taken together as forming one system and as
interpreting and enforcing each other. It is proper to assume from the
surrounding circumstances, that these two entries were introduced in pursuance
of a common purpose, that purpose being that the articles listed in entry 26AA
whether produced out of indigenous Pig Iron or Steel Ingot or made out of
imported Pig Iron or Steel Ingot must bear the same amount of duty. If the
interpretation placed on entry 26AA by the learned Counsel for the assessee is
accepted then it would be seen that entry by itself would not impose the duty
contemplated by the second part of the clause in col. 3 of entry 26AA on
imported Pig Iron or Steel Ingot. Evidently in order to equalise the duty on
articles made out of indigenous material as well as imported material entry 63
(36) of the First Schedule to the Tariff Act was enacted. In other words that
entry imposes countervailing duty and not additional duty. It was conceded by
the learned Counsel for the Revenue that the duty levied under entry 63(36) of
the First Schedule of the Tariff Act is only a countervailing duty. If that be
so, that duty cannot be considered as an additional duty over and above the
duty imposed under entry 26AA of the First Schedule of the Act. But it would be
an additional duty if the interpretation of entry 26AA canvassed on behalf of
the Revenue is accepted because according to the Revenue the rate prescribed in
that entry is equally applicable to all articles mentioned therein whether
manufactured from indigenous or imported material.
If that be so the duty collected under entry
63(36) of the First Schedule under the Tariff Act will be an additional duty
and not a countervailing duty. It is true that despite entry 26AA of the First
Schedule to the Act and entry 63(36) of the First Schedule 498 of the Tariff
Act if pig iron or steel ingot imported before April 24, 1962 is used in the
manufacture of an article dutiable under entry 26AA only the ad valorem duty
prescribed under that entry can be levied on that article.
It may be that the legislature intended it to
be so or there is a lacuna in the provision. In either case the effect is the
same.
I now come to the question whether in
interpreting a taxing entry I can take any aid from the various steps taken by
the Department in implementing that levy, I have earlier referred to a large
number of Notifications issued under rule 8 (1 ) of the rules. The parties have
also produced before us the instructions issued by the Department on May 16,
1962 in the matter of implementation of entry 26AA. I have now to see whether
any aid can be taken from these instructions as well as the Notifications for
finding out the true scope of entry 26AA.
So far as the instructions issued by the
Department are concerned there is hardly any doubt that the same are wholly
irrelevant. In Craies on Statute Law Sixth Edn. at page 131 it is stated:
"Explanatory notes regarding the working
of an Act issued by a government department for the assistance of their
officials are inadmissible for the purpose of construing the Act." .
The same conclusion was arrived at by this
Court in Commissioner Income' Tax, Madras v.K. Srinivasan and K. Gopalan.(1) At
pages 502-503 of that report it is observed:
"He,(learned Counsel for the assessee),
however, drew our attention to the directions contained in the Income-tax
Manual in force for a number of years and contended that the department itself
placed on sub-sections (3) and (4) of section 25 the same construction as was
placed on them by the senior Judge in the High Court and that was the true
construction of these two sub-sections. This argument in our opinion, has no
validity. The department changed its view subsequently and amended the manual.
The interpretation placed by the department on these sub-sections cannot be
considered to be a proper guide in a matter like this when the construction of
a statute is involved." Therefore I have to exclude from consideration the
instructions issued by the Government.
This takes me to the Notifications issued by
the Government under rule 8(1) of the rules. Under s. 38 of the Act all rules
(1) [1953] S.C.R. 486, 502-503.
499 made and notifications issued under the
Act shall be made and issued by publication in the official Gazette. All such
rules and notifications shall thereupon have effect as if enacted in the Act.
The rules made have to be placed on the table of the Parliament. The Parliament
can amend those rules. Section 3 8 is of no assistance. to us in the present
case because the notifications referred to earlier are not those issued under
the Act. They are notifications issued under rule 8 (1) of the rules. Therefore
their relevance has to be considered without taking any assistance from s.
38. In Halsbury's Laws of England 3rd edn.
vol. 36 at page 401 it is observed:
"Where a statute provides that
subordinate legislation made under it is to have effect as if enacted in the
statute, such legislation may be referred to for the purpose of construing a
provision in the statute itself. Where a statute does not contain such a
provision, and does not confer any power to modify the application of the
statute by subordinate legislation, it is clear that subordinate legislation
made under the.
statute cannot alter or vary the meaning of
the statute itself where it is unambiguous, and it is doubtful whether such
legislation can be referred to for the purpose of construing an expression in
the statute, even if the meaning of the expression is ambiguous." No
decision of this Court or of any of the High Courts in this country dealing
with tiffs aspect has been brought to my notice. Even the Counsel for the
parties were not definite about the stand that they should take. They were
changing their position again. and again. On this question the opinion in
English courts is not unanimous. That question came up for consideration as
early as in 1871 in Ex Parte Wier In re Wier.(1). Sir G. Mellish L.J.
delivering the judgment of the Court observed:
"We do not think that any other section
of the Act throws any material light upon the proper construction of this
section,. and if the question had depended upon the Act alone we should have
had great doubt what the proper construction was; but we are of opinion that,
where the construction of the Act is ambiguous and doubtful on any point,
recourse may be had to the rules which have been made by the Lord Chancellor
under the authority of the Act, and if we find that in the rules any particular
construction has been put on the Act, that it is our duty to adopt and follow
that construction." (1) Ch. Appeal Cases (Vol. 6) p. 879.
500 In Re: Normal Ex parte Board of Trade (1)
Lord Esher,M.R.Observed:
"It was urged that we ought to hold the
Act to be retrospective by reason of the rules and forms which have been made
under it, and which have a statutory force; and it is said that shew that that
the trustee must go back in his accounts to matters which happened before the
Act came into operation. But, when we look at the forms, we see that they are
in express terms headed so as to relate to transactions taking place after the
coming into operation of the Act; and, therefore, they supply no reason why we
should depart from the ordinary rule that an Act is not retrospective."
From these observations, it is clear that Lord Esher did take into consideration
the subordinate legislation in considering the principal Act.
In Billings v. Reed,(2) Lord Greene stated
that:
"The fact that the object .of this Act
was in substance what I have suggested can be seen from a consideration of the
way in which the scheme has been framed pursuant to the Act itself and with the
tacit approval of Parliament as provided in the Act. At any rate, we are
entitled to look at the scheme for the purpose of seeing the kind of practical
treatment of these questions which Parliament has authorised." From this
observation, it is seen that the learned Judge did look into the subordinate
legislation in finding out the object of the Act.
In Hale v. Bolton Leathers Ltd.,(8) Somervell
L. J. observed:
"The county court judge was referred, as
we were, to various paragraphs in the regulations made under the Act of 1946.
He took the view that these regulations could not affect the construction of
the Act. The regulation making power is conferred by s. 89, sub-s. 1, proviso
(b), and is as follows:
'regulations may make such transitional 'or
consequential provisions as appear to the Minister to be necessary or
expedient, having regard to the repeal of the said enactments in relation to
diseases and to injuries not caused by accident, including provision for
modifying or winding up any scheme made there under.' We agree that these
regulations could not contradict the Act.
(1) [1893] 2 Q.B.D. 369, 373:.
(2) [1945] K.B. 11.
(3) [1950] K.B. 493, 505.
501 They might, we think, properly be
referred to as working out in detail the provisions of the Act consistently
with its terms." In Howgate v. Ganall and .Anr.(1) Barry J. observed:
"I cannot, of course, have recourse to
these schemes as a guide to the correct interpretation of the Act under which
they were made, but I am, I think, entitled to consider them for certain
limited purposes.
In Billings v. Reed(1) Lord Greene H.R.,
.said, in reference to a scheme made under the Act: 'The fact that the object
of this Act was in substance what I have suggested can be seen from a
consideration of the way in which the scheme has been formed pursuant to the
Act itself and with the tacit approval of Parliament as provided in the Act.
At any rate we are entitled to look at the
scheme for the purpose of seeing the kind of practical treatment of these
questions which Parliament has authorized. It is abundantly clear from the
wording of the various schemes made under the Act that the Minister, with the
tacit consent of Parliament has throughout considered that 'war injuries' may
be sustained outside the United Kingdom ............ " The decision in
Hales v. Bolton Leathers Ltd.(a) to which references has been made earlier was
taken in appeal to the House of Lords. The judgment of the House of Lords is
reported in [1951] A.C.p. 531. Dealing with the question whether subordinate
legislation could be taken into consideration in interpreting the principal Act
lord Simonds said:
"I much doubt whether I am entitled. to
look to the regulations for guidance on the eaning of the word in sub-s. (1),
but I will say something on this point later." Reverting back to that
topic again (at p. 541 of the report) the learned Judge observed:
"First, if I may look at the regulations
made under s. 55, sub-s. (4), to assist in the interpretation of the word, I
agree with my noble and learned friend Normand, in thinking that they assist or
at least are consistent with this interpretation." Lord Normand one of the
other Judges who heard the appeal observed:
"The National Insurance (Industrial
Injuries) (Prescribed Diseases) Regulations, 1948, were made under (1) [1951] 1
K.B. 265, 274.
(2) [1945] K.B. 11.
(3) [1950] K.B. 493. 505.
502 s. 55, sub-s. 4, and though in my opinion
they cannot control the construction of the Act, it is yet of some importance
to consider whether they fit into the construction which I think the Act
properly hears." Lord Oaksey in the same case was positive that the
regulations could be looked into for certain limited purposes. This is what
observed:
"I agree with your Lordships in thinking
that the regulations themselves (National Insurance) (industrial Injuries)
(Prescribed Diseases) (Regulations 1948) cannot alter the meaning of the words
of the statute, but they may, I think, be looked at as being an interpretation
placed by the appropriate Government department on the words of the
statute." Therein Lord MacDermott also took the assistance of the
regulations while considering the statute.
Lastly we come to the decision of the
Chancery Division in London County Council v. Central Land Board(1).
Danckwerts J. in that case referred to the
regulations made under the Housing Act, 1936 while construing the provisions of
the Act.
From the above decisions, it is clear that
several judges in England have referred to the subordinate legislation made
under a statute for the purpose of interpreting that statute though for the
limited purpose of know how the department which was entrusted with the task of
implementing that statute had understood that statute. In the case of fiscal
statutes, it may not be inappropriate to take into consideration the exemptions
granted in interpreting the nature and the scope of the impost. In the matter
of fiscal legislation the initiative is in the hands of the executive. Under Art.
112(1) of our Constitution, the President shall in respect of every financial
year.
cause to be laid before both the Houses of
Parliament a statement of the estimated receipts and expenditure for that year.
Under sub Art. (3) of Art. 113 no demand for a grant shall be made except on
the recommendation of the President.
In the matter of taxation very large powers
are left in the hands of the executive. Generally speaking the question of
exemption is left to the discretion of the Government. It ought to be so
because the exercise of that power depends on various circumstances some of
which cannot be anticipated in advance. But yet the levy and exemptions are
parts of the same scheme of taxation. The two together carry into effect the
purpose of the legislation. For finding out the true scheme of a taxing measure
we have to take into consideration not merely the levy but also (1) [1959] Ch.
D. 386.
503 the exemptions granted. This Court in
Kailash Nath and another v. State of U.P. and ors. (1) held that the exemption
granted in pursuance of a notification issued under the.U.P. Sales Tax Act must
be considered as having been contained in the parent Act itself. This is what
this Court stated therein:
"This notification having been made in
accordance with the power conferred by the statute has statutory force and
validity and, therefore, the exemption is as if it is contained in the parent
Act itself." I do not think it is necessary for me to decide in this case
the general question whether subordinate legislation can be used for
interpreting a provision in the parent Act. I am not unaware of the danger in
accepting that it could be so done. But for the present purpose, it is
sufficient to hold that for finding out the scope of a particular levy,
notifications issued by the executive Government providing for exemption from
that levy can be looked into as they disclose the overall scheme.
Even according to the learned Counsel for the
Revenue the notifications referred to earlier were issued with a view to avoid
double taxation. If that is so, the exemption granted under those notifications
provide a clue as to the scope of the levy made under Item 26AA.
We have earlier seen that on the very day,
the levy came into force the Government had issued two notifications i.e.,
Notifications Nos. 70 and 77 of 1962. Under Notification No. 70 it exempted
Iron and Steel Products falling under item 26AA if made from Pig Iron or Steel
Ingots on which the appropriate amount of duty has already been paid, from so
much duty of the excise leviable thereon as is equivalent to the duty leviable
under Item 25 or as the case may be under Item 26. Under Notification. No. 77,
it exempted Iron and Steel Products falling under sub items Nos. 2, 3, 4 and 5
of Item 26AA, if made from articles which have already paid appropriate duty of
excise under subitem (1) of the said item from so much of the duty of excise as
is equivalent to the duty payable under the said sub-item (1). These
Notifications clearly indicate that under Item 26AA, there was no intention to
levy double excise duty on the same material. The intention appears to be that
if one article is made out of another article both of which are subject to
excise duty, the excise duty paid on the raw material should be deducted in
putting the excise duty payable on the finished product. In addition these
Notifications clearly show that the Pig Iron and Steel Ingot mentioned in el. 3
of entry 26AA are those used in the manufacture of the article on which duty is
sought to be levied under that entry.
(1) A.I.R. 1957 S.C.790.
504 In this connection we may also refer to
Notification No. 89/62. Notification No. 77/62 referred merely to Iron and
Steel Products falling under sub items 2, 3, 4 and 5 of item 26AA manufactured
out of articles falling under sub item (1) thereof. That Notification by itself
was not all comprehensive. It did not take in other articles made out of Pig
Iron or Steel Ingot. It is that reason Notification No. 89/62 was issued on May
10, 1962 under which exemption was given with effect from April 24, 1962 to all
Iron and Steel Products falling under Item 26AA if made from another article
falling under the said item and having already paid appropriate amount of duty
from so much of the duty of excise as is equivalent to the duty payable on the
said article. Notifications Nos. 70, 77 and 89 exempted payment of excise duty
on an article to the extent duty had been paid on the raw material used in the
manufacture of the article dutiable under entry 26AA. All these Notifications
proceeded on the basis that the second limb of the levy in column 3 of entry
26AA refers to the duty payable on the Pig Iron or Steel Ingot, as the case may
be used in the manufacture of an article dutiable under 26AA.
But the above Notifications do not deal with
the counter vailhag duty levied under entry 63(36) of the First Schedule to the
Tariff Act. This was clearly an omission.
To make good that omission the Government
amended Notification No. 89/62 by its order, dated December 29, 1962. The
amended Notification in addition to the exemption already given under
Notification No. 89/62 also exempted from the payment of duty any article
falling Within any of the sub-items in item 26AA if made from an article on
which countervailing duty has been paid under item 63(36) of the First Schedule
to the Tariff Act from so much ,of the duty of excise as is equivalent to the
countervailing custom .duty payable on the said article. This Notification
clearly shows that the countervailing duty in question was levied on the basis
that the excise duty contemplated by entry 26AA will not apply to articles made
out of imported Pig Iron or Steel Ingot. Further if the legislature intended
the duty under entry 63(36) to be an additional duty, the exemption granted
would nullify the legislative mandate.
To summarise the effect of the Finance (No.
2) Act of 1962 and the various Notifications issued for the purpose of
implementing the scheme under that Act is that excise duty is leviable at the
rate mentioned in column 3 of Item 26AA on pig iron or steel ingot used in the
production of the article on which duty under entry 26AA is sought to be levied
but to the extent .any excise duty or countervailing custom duty had been paid
on any of the material used in the manufacture of any of that article, the
,same is exempt.
From this scheme it is clear that when Item
26AA 505 speaks of ,'the excise duty for the time being leviable on Pig Iron or
Steel Ingots: as 'the case may be" it refers to the excise duty payable
on' the Pig Iron or Steel Ingots used in the production of the article dutiable
under that item.
From the above discussion, it follows that
the wires which are the subject matter of the levy impugned in this case are
not liable to pay the duty in dispute in this case.
At one Stage it was contended on behalf of
the assessee that the levy under sub item (1) of Item 26AA comes into effect
only when an article is made directly from out of Pig Iron or Steel Ingot as
the case may be and not otherwise.
It is not necessary to examine the
correctness of this contention because at no stage the assessee had challenged
his liability to pay ad valorem duty .under Item 26AA. He paid the same without
objection nor had he claimed refund of the same.
I shall now take up the question of limitation.
The written demand made on March 21, 1963 purports to have been made under rule
9 (2) of the rules. Therein the assessing authority demanded steel ingot duty
which according to it the assessee had failed to pay. Quite clearly rule 9(2)
is inapplicable to the facts of the case. Admittedly the assessee had cleared
the goods from the warehouse after paying the duty demanded and after obtaining
the permission of the concerned authority. Hence there is no question of any.
evasion. Despite the fact that the assessee challenged the validity of the
demand made on him both the Assistant Collector as well as the Collector
ignored that contention;
but when the matter was taken up to the
Government it treated the demand in question as a demand under rule 10.
The Government confined the demand to
clearances effected after December 21, 1962. The demand so modified is in
conformity with rule 10. But the contention of the assessee is that the demand
having been made under rule 9 (2) and there being no indication in that demand
that it was made under rule 10, the Revenue cannot now change its position and
justify the demand under rule 10; at any rate by the time the Government
amended the demand, the duty claimed became barred even under rule 10. We are
unable to accept this contention as correct. There is no dispute that the
officer who made the demand was competent to make demands both under rule 9(2)
as well as under rule 10. If the exercise of a power can be traced to a
legitimate source, the fact that the same was purported to have been exercise
under a different power does not vitiate the exercise of the power in question.
This is a well settled proposition of law. In this connection reference may
usefully be made to the decisions of this Court in B. Balakotaiah v. The Union
of India and Ors. (1) and (1) [1958] S.C.R. 1052.
3sup.CI/69-15 506 Afzal UIlah v. State of
U.p.(1). Further a common form is prescribed for issuing notices both under
rule 9(2) and rule
10. The incorrect statements in the written
demand could not have prejudiced the assessee. From his reply to the demand, it
is clear that he knew as to the nature of the demand.
Therefore I find ass suesseeance in the plea
of Limitation advanced on behalf of the For the reasons mentioned above, this
appeal is the Revenue is directed to refund the excess duty paid under protest.
ORDER In accordance with the opinion of the
appeal is dismissed with costs.
V.P.S.
(1) [1964] 4 S.C.R. 991.
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