1968 (9) TMI 112 - SC - Central Excise

Whether 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? Held 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

Summary

Issues Involved:
1. Liability of the appellant to pay excise duty on cotton fabrics.
2. Applicability of exemption notifications dated July 31, 1959, and April 30, 1960.
3. Interpretation of the terms "produced by" and "produced on powerlooms owned by" in the context of the exemption notifications.
4. Validity of the orders of the Assistant Collector of Central Excise and the Collector of Central Excise.

Issue-wise Detailed Analysis:

1. Liability of the appellant to pay excise duty on cotton fabrics:
The appellant, a sole proprietor of a textile business, entered into an agreement with a cooperative society (the 'Society') to manufacture cotton fabrics. The Society, registered on or before May 31, 1961, carried out weaving work for the appellant and supplied cotton fabrics between June 1, 1959, and January 3, 1961. The Excise Department issued notices demanding excise duty and imposed penalties for contravention of rule 9. The Assistant Collector of Central Excise and Customs held the appellant liable for excise duty amounting to Rs. 2,20,574.74 and imposed a penalty of Rs. 250. The appellant's appeal to the Collector of Central Excise was dismissed, leading to the filing of a writ petition in the High Court of Gujarat, which partially dismissed the petition.

2. Applicability of exemption notifications dated July 31, 1959, and April 30, 1960:
The appellant argued that the case fell within the language of the notifications dated July 31, 1959, and April 30, 1960, which exempted cotton fabrics produced by cooperative societies from excise duty. The notifications specified conditions under which the exemption applied, such as the number of powerlooms owned by the society and the membership requirements. The appellant contended that the exemption applied to all cotton fabrics produced on powerlooms owned by the cooperative society, regardless of whether the fabrics were produced by the society itself or for a third party.

3. Interpretation of the terms "produced by" and "produced on powerlooms owned by" in the context of the exemption notifications:
The Court held that the language of the notifications was clear and unambiguous. The exemption applied to cotton fabrics produced on powerlooms owned by the cooperative society, and there was no requirement that the fabrics must be produced by the society "for itself." The Court emphasized that in a taxing statute, the clear meaning of the words must be adhered to, and any supposed intention of the exempting authority could not override the plain terms of the exemption. The Court referred to established legal principles, stating that the operation of the notifications should be judged by the words employed, not by the object behind them.

4. Validity of the orders of the Assistant Collector of Central Excise and the Collector of Central Excise:
The Court concluded that the appellant was entitled to exemption from excise duty for the cotton fabrics produced during the specified periods. Consequently, the orders of the Assistant Collector of Central Excise and the Collector of Central Excise were quashed. The High Court's judgment was set aside, and the appellant's writ petition was allowed. A writ in the nature of certiorari was granted to quash the impugned orders, and the appeal was allowed with costs.

Conclusion:
The Supreme Court allowed the appeal, holding that the appellant was entitled to exemption from excise duty under the notifications dated July 31, 1959, and April 30, 1960. The Court quashed the orders of the Assistant Collector of Central Excise and the Collector of Central Excise and set aside the judgment of the High Court of Gujarat. The appellant's writ petition was allowed, and the appeal was granted with costs.