Hansraj Gordhandas Vs. H. H. Dave,
Assistant Collector of Central Excise [1968] INSC 237 (27 September 1968)
27/09/1968 RAMASWAMI, V.
RAMASWAMI, V.
SHAH, J.C.
MITTER, G.K.
HEGDE, K.S.
GROVER, A.N.
CITATION: 1970 AIR 755 1969 SCR (2) 343
CITATOR INFO:
R 1982 SC 149 (225) D 1985 SC 537 (11) R 1991
SC 772 (15) E&D 1991 SC2049 (6) E&D 1992 SC2014 (23)
ACT:
Central Excises & Salt Act 1944--Rules
made under--Rule 8 giving power to Central Government to exempt excisable goods
from duty--Exemptions under Notifications dated july 31, 1959 and April 30,
1960 whether apply only to goods produced by a cooperative society for itself
and not for others--Taxing statutes--interpretation of--Relevance of object of
giving exemption from duty.
HEADNOTE:
The appellant who was a dealer in textiles in
Bombay entered into an agreement with a registered cooperative society for
weaving yarn supplied by him into cotton fabrics on power looms owned by its
members. The Society had obtained L-4 licence as required by the Central
Excises and Salt Act. 1944. Under Rule 8 of the Rules made under the Act. the
Central Government was empowered to exempt any excisable goods from the whole
or any part of duty payable on such goods. In exercise of the power under Rule
8, the Central Government by a notification dated July 31, 1959' granted
exemption to "cotton fabrics produced by any Cooperative Society/formed of
owners of cotton power looms which is .registered or which may be registered on
or before March 31, 1961" subject to certain conditions set out in the
notification. A subsequent notification dated April 30, 1960 granted exemption
to "cotton fabrics produced on power looms owned by any Cooperative
Society or owned by or allotted to the members of the Society which is
registered on or before March 31, 1961". On the strength of these
notifications the appellant sought exemption from excise duty in respect of'
the cotton fabrics which were manufactured for it on power looms by the
Cooperative Society. The excise authorities did not accept the claim for
exemption and in a writ petition filed by the appellant, the High Court gave
only partial relief. In appeal before this Court the question was whether the
exemption granted under the;
notifications in question could be claimed
only when the cotton fabrics were manufactured by a Cooperative Society 'for
itself.
HELD: On a true construction of the language
of the notifications dated July 31, 1959 and April 30, 1960, it is clear that
all that is required for claiming exemption is that the cotton fabrics must be
produced on powerlooms owned by the Cooperative Society. There is no further
requirement under the two notifications that the cotton fabrics must be
produced by the cooperative society on powerlooms "for itself'. The
appellant was therefore entitled to the exemption claimed. [259 D-E] It is well
established that in a taxing statute there is no room for any intendment but
regard must be had to the dear meaning of words. A statutory notification may
not be extended so as to meet a casus omissus. It could be that the object
behind the two notifications in question was to encourage the actual manufacturers
of handloom cloth to switch over, to power looms by constituting themselves
into Cooperative Societies. But, the. operation of the notifications had to be
judged not by the object which 254 the rule, making authority had in mind but
by the words which it had employed to effectuate the legislative intent.
Applying this principle, the case of the
appellant was covered by the language of the: two notifications and the
appellant was entitled to exemption from excise duty for the cotton fabrics.
[259 E; 260 A-D)] Salomon v. Salomon & Co. [1897] A.C. 22, 38 and Crawford
v. Spooner, 6 Moo P.C.C. 8, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1049 of 1965.
Appeal from the judgment and order dated July
31, 1964 of the Gujarat High Court in Special Civil Application No.
1054 of 1963.
Soli Sorabjee, D.M. Damodar, B. Datta and
J.B.
Dadachanji, for the appellant.
V. A. Seyid Muhammad and S.P. Nayar, for the
respondents.
P.R. Mridul, Janendra Lal and B.R. Agarwala,
for intervener No. 1.
J.B. Dadachanji, for interveners Nos. 2 and
3.
Ramaswam, J. This appeal is brought by
certificate from the judgment of the High Court of Gujarat, dated July 31, 1964
in Special Civil Application No. 1054 of 1963.
The appellant is the sole proprietor of
Messrs Gordhandas and Co. carrying on business as a dealer in textiles in
Bombay. Under an agreement between the appellant on the one hand and the
Gandevi Vanat Udhoog Sahkari Mandli Ltd. (hereinafter referred to as the
'Society') the Society manufactured cotton fabrics during the period between
June, 1959 and September 1959 and from October 1, 1959 to January 31, 1961 for
the appellant on certain terms and conditions which were later reduced to
writing on October 12, 1959.
Under these terms, the Society agreed to
carry out weaving work on behalf of the appellant on payment of weaving charges
fixed at 19 nP. per yard which included expenses the Society would have to
incur in transporting yarn from Bombay and cotton fabrics woven by the Society
to Bombay. The appellant was to supply yarn to be delivered at Bombay to the
Society and the Society was to made its own arrangement to bring the yarn to
its factory at Gandevi. Clause 11 provided that the yarn supplied by the
appellant, remaining either in stock or in process or in the form of ready-made
pieces would be in the absolute ownership of the appellant and the Society, as
the bailee of the yarn, undertook to 255 take such care of it as it would
normally take if the yarn belonged to it. The Society also undertook to have
the yam insured against fire, theft and all other risks including transit risks
and further undertook to reimburse the appellant in case it failed to do so.
The terms of the agreement though recorded on October 12, 1959 were to be
deemed to be effective as from April 21, 1959 and the agreement was terminable
by either party by giving one month's notice.
The Society was a cooperative society
carrying on its work at Gandevi and was registered on or before May 31, 1961
and consisted of members who owned power looms. The Society started the weaving
work for the appellant sometime in May or June 1959 and supplied to the
appellant between June 1, 1959 and January 3, 1961 cotton fabrics measuring
3,19,460 yards. The Society had obtained L-4 licence as required by the Central
Excises and Salt Act, 1944 (hereinafter referred to as the 'Act'). By letters,
dated August 29, 1959 and October 27, 1961 the Excise Department had granted
exemption from excise duty payable on cotton fabrics manufactured by the
Society under the notification issued by the Central Government. On November
10, 1961 the excise authorities issued a notice. to. the appellant demanding a
sum of Rs. 1,69,263.44 payable as excise duty.
It was alleged that the duty was. payable by
the appellant as it had got the goods manufactured through the Society and had
got them removed from the Society's factory at Gandevi without payment of duty.
On January 10, 1962 the Superintendent of Central Excise:, Bulsar sent another
notice to show cause why penalty should not be imposed upon the appellant for
contravention of rule 9 and why duty should not be charged for the cotton
fabrics so removed by the appellant. The appellant showed cause and on November
26, 1962 the Assistant Collector of Central Excise and Customs, Surat held that
the appellant was liable to pay excise duty to. the extent of Rs.. 2,20,574.74,
being the total amount of basic duty and a penalty of Rs. 250 was levied for
contravention of rule 9. The appellant preferred an appeal to the Collector of
Central Excise Baroda but the appeal was dismissed. Thereafter the appellant
moved the High Court of Gujarat for grant of a writ under Art. 226 of the
Constitution. The High Court dismissed the writ petition by its judgment, dated
July 31, 1964 but gave a direction that the: respondent was to work out the
excise duty on the footing that the appellant was entitled to exemption from
duty altogether in respect of goods supplied for the period from June 1, 1959
to September 30, 1959. As regards the two other periods i,e., October 1, 1959
to April 30, 1960 and from May 1, 1960 to January 31, 1961, the High Court
dismissed the writ petition and directed the respondent to charge duty at the
rate of 29.3 nP per square meter.
256 Clause (d) of s. 2 of the Act defines
"excisable goods" as meaning goods specified in the First Schedule as
being subject to a duty of excise. Item 19 in the First Schedule provides for
excise duty at different rates depending upon the variety of cotton fabrics.
Section 3 which is the charging section, provides for the levy. and collection
of duties specified in the First Schedule on all excisable goods which are
produced or manufactured in India. Rule 8 authorises the Central Government to
exempt any excisable goods from the whole or any part of duty payable on such
goods. Clause (1) of rule 9 provides that no excisable goods shall be removed
from any place where they are produced, cured or manufactured or any premises
appurtenant thereto, which may be specified by the Collector in this behalf,
whether for consumption, export or manufacture of any other commodity in or
outside such place, until the excise duty leviable thereon has been paid at
such place and in such manner as is prescribed. Clause (2) of that rule
provides that if any excisable goods are, in contravention of sub-rule (1 ),
deposited in, or removed from any place specified therein, the producer or
manufacturer thereof shall pay the duty leviable on such goods upon written
demand made by the proper officer and shall also be liable to a penalty which
may extend to two thousand rupees and such goods shall be liable to
confiscation. In pursuance of the power under rule 8, the Central Government
issued notifications from time to time granting exemptions on cotton fabrics,
though such goods were excisable goods under tariff item 19. The first relevant
notification is dated January 5, 1957. By this notification certain classes of
cotton fabrics were exempt from payment of excise duty. of the items exempted
the seventh item is as follows:
"Cotton fabrics manufactured by or on
behalf of the same person in one or more factories commonly known as power looms
(without spinning plants) in which less than 5 power looms in all are
installed;" The next relevant notification is notification No. 74/59,
dated July 31, 1959 which reads. as follows:
"G.S.R. 899 In pursuance of sub-rule (1)
of rule 8 of the Central Excise Rules, 1944, as in force in India and as
applied to the State of Pondicherry,' the Central Government hereby exempted
cotton fabrics produced by any cooperative society formed of owners of cotton
power looms, which is registered or which may be registered on or before the
31st March, 1961 under any law relating to co-operative societies from the
whole of the duty leviable thereon, subject to the following conditions :-- 257
(a) that every member of the co-operative society has been exempt from excise
duty for- three years immediately preceding the date of his joining such
society;
(b) that the total number of cotton power looms
owned by the co.-operative society is not more than four times the number of
members forming such society;
(c) that a certificate is produced by each
member of the co-operative society from the State Government concerned or such
officer as may be nominated by the State Government that he is a bona fide
member of the society and that the number of cotton power looms in his
ownership and actually operated by him does not exceed four and did not exceed
four at any time during the three years immediately preceding the date of his
joining the society, and that he would have been exempt from excise duty even
if he had not joined the co-operative society;................
The Central Government issued another
notification, dated April 30, 1960 by which the earlier notification, dated
July 31, 1959 was superseded. By this notification the Central Government
exempted cotton fabrics produced on power-looms owned by any co-operative
society or owned by or allotted to the members of the society from the whole of
the duty leviable thereon subject .to the four conditions.
therein set out. The notification dated April
30, 1960 is to the following effect:
"In pursuance of sub rule (1 ) of rule 8
of the Central. Excise Rules, 1944, as in force in India and as applied to the
State of Pondicherry, and in supersession of the Notification of the Govt. of
India, Ministry of Finance (Department of Revenue) No. 74/59 Central Excise,
dated the 31st July 1959, the Central Government hereby exempts cotton fabrics
produced on power looms owned by any cooperative society or owned by or
allotted to the members of the society, which is registered or which may be
registered on or before the 31st March, 1961 under any law relating to
cooperative societies, from the whole of the duty leviable thereon subject to
the following conditions :- (a) that every member of the cooperative society
who has been a manufacturer of cotton fabrics on power looms, has been exempt
from excise duty for three years immediately preceding the date of his joining
such society.
258 (b) that the total No. of cotton power looms
owned by the cooperative society or owned by or allotted to its members is not
more than four times the number of members forming such society.
(c) that each member of the cooperative
society produces a certificate from the State Government concerned or such
officer as. may be nominated by the State Government that he is a bona fide
member of the society and that the number of cotton power-looms owned by or
allotted to him and actually operated by him does not exceed four and did not
exceed four at .any time during that three years immediately preceding the date
of his joining the society and that he would have been exempt from excise duty
even if he had not joined the cooperative society and.......................
" The main contention on behalf of the appellant is. that the ,case fell
within the language of the two notifications, dated July 31, 1959 and April 30,
1960 and the appellant was entitled to ,exemption from payment of excise duty
on the cotton fabrics. The argument was stressed that the exemption applied to.
all cotton fabrics which were produced on power- looms owned by the Cooperative
Society or on power looms.
allotted to its members and it was not a
relevant consideration as to who. produced or manufactured such fabrics,
whether it was the Society itself or its members or even outsiders. It was
conceded by the appellant that it was the owner of the cotton fabrics. But even
upon that assumption the claim of the appellant is that it was entitled to
exemption from excise duty as it was covered by the language of the two
notifications already referred to.
In our opinion, the argument of the appellant
is well- founded and must be accepted as. correct. The notification, dated July
31, 1959 grants exemption to "cotton fabrics produced by any Co-operative
Society formed of owners ,of cotton power looms which is registered or which
may be registered on or before March 31, 1961" subject to four conditions
set out in the notification. In the next notification, dated April 30, 1960
exemption was granted to "cotton fabrics. produced on power looms owned by
any cooperative society or owned by or allotted to the members of the society,
which is registered or which may be registered on or before March 31,
1961" subject to, the conditions specified in the notification. It was
contended on behalf of the appellant that under the contract between the
appellant and the 'Society there was no relationship of master and servant but.
the appellant supplied raw material and the contractor i.e., the Society
produced the goods.
But even on the assumption that the appellant
had manufactured the goods by employing hired labour and was therefore a
manufacturer, still the appellant was entitled to 259 exemption from excise
duty since the case fell within the language of the two notifications, dated
July 31, 1959 and April 30, 1960, and the cotton fabrics. were produced on
power-looms owned by the co-operative society and there is nothing in the
notifications to suggest that the cotton fabrics should be produced by the
Cooperative Society "for itself" and not for a third party before it
was entitled to claim exemption from excise duty. It was contended on behalf of
the respondent that the object of granting exemption was to encourage the
formation of co-operative societies which not only produced cotton fabrics but
which also consisted of members, not only owning but having actually operated
not more than four power-looms during the three years immediately preceding
their having joined the society. The policy was that instead of each such
member operating his looms on his own, he should combine with others by forming
a society which, through the cooperative effort should produce cloth. The
intention was that the goods produced for which exemption could be claimed must
be goods produced on its own behalf by the society. We are unable to accept the
contention put forward on behalf of the respondents as correct. On a true
construction of the language of the notifications, dated July 31, 1959 and
April 30, 1960 it is clear that all that is. required for claiming exemption is
that the cotton fabrics must be produced on power-looms owned by the
cooperative society. There is no further requirement under the two
notifications that the cotton fabrics must be produced by the Co-operative
Society on the power looms "for itself". It is well established that
in a taxing statute there is no room for any intendment but regard must be had
to the clear meaning of the words.
The entire matter is governed wholly by the
language of the notification. If the tax-payer is within the plain terms of the
exemption it cannot be denied its benefit by calling in aid any supposed
intention of the exempting authority. If such intention can be gathered from
the construction of the words of the notification or by necessary implication there
from, the matter is different, but that is not the case here. In this
connection we may refer to the observations of Lord Watson in Salomon v. Salomon
& Co.(1):
"Intentlon of the legislature is a
common but very slippery phrase, which, popularly understood may signify
anything from intention embodied in positive enactment to speculative opinion
as to what the legislature probably would have meant, although there has been
an omission to enact it. In a Court of Law or Equity, what the Legislature
intended to be done or not to be done can only be legitimately ascertained from
that which it has chosen to enact, either in express words o.r by reasonable
and necessary implication." (1) [1897] A.C. 22, 38.
260 It is an application of this principle
that a statutory notification may not be extended so as to meet a casus
omissus. As appears in the judgment of the Privy Council in Crawford v.
Spooner(1).
"....we cannot aid the legislature's
defective phrasing of the Act, we cannot add, and mend, and, by construction,
make up deficiencies which are left there." Learned Council for the
respondents is possibly right in his submission that the object behind the two
notifications is to encourage the actual manufacturers of handloom cloth to
switch over to power-looms by constituting themselves into Cooperative
Societies. But the operation of the notifications has to be judged not by the
object which the rule-making authority had in mind but by the words which it
has employed to effectuate the legislative intent. Applying this principle we
are of opinion that the case of the appellant is covered by the language of the
two notifications, dated July 31, 1959 and April 30, 1960 and the appellant is
entitled to exemption from excise duty for the cotton fabrics produced for the
period between October 1, 1959 to April 30, 1960 and from May 1, 1960 to
January 3, 1961. It follows therefore that the appellant is entitled to the
grant of a writ in the nature of certiorari to quash the order of the Assistant
Collector of Central Excise of Baroda, dated November 26, 1962 and the
appellate order of the Collector of Central Excise, dated November 12, 1963.
For the reasons expressed we hold that the
judgment of the High Court of Gujarat, dated July 31, 1964 should be set aside,
that Special Civil Application No. 1054 of 1963 should be allowed and that a
writ in the nature of certiorari should be granted to quash the order of the
Assistant Collector of Excise and Customs dated November 26, 1962 and the order
of the Collector of Excise dated November 12, 1963. This appeal is accordingly
allowed with costs.
R.K.P.S. Appeal allowed.
(1) 6 Moo. P.C.C. 8.
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