1984 (12) TMI 302 - AT - Central Excise

Issues Involved:

1. Whether "4-harness drill" was entitled to a concessional rate of duty under Notification No. 226/77-C.E., dated 15-7-1977.
2. Interpretation of "controlled drill" under the Cotton Textiles (Control) Order, 1948.
3. The effect of amendments to the definition of "controlled drill" on the applicability of exemptions.
4. The relevance of legislation by incorporation versus legislation by reference.

Issue-wise Detailed Analysis:

1. Entitlement to Concessional Rate of Duty:

The main question was whether "4-harness drill" cleared by the respondents from 1-7-1981 to 19-8-1981 was entitled to a concessional rate of duty under Notification No. 226/77-C.E., dated 15-7-1977. Proviso (v) of this notification provided for concessional rates of duty for "controlled drill" for which maximum ex-factory prices had not been specified by the Textile Commissioner. The Department argued that "4-harness drill" was not included within the definition of "controlled drill" and thus not eligible for the exemption.

2. Interpretation of "Controlled Drill":

The Department's contention was that "controlled drill" referred only to drill varieties whose prices were controlled. They cited Notification No. CER/1/68, dated 2-5-1968, which prescribed maximum ex-factory prices for various cotton fabrics, including "controlled drill," defined as either "three harness warp or weft faced fabric" or "four harness warp or weft faced fabric." However, Notification No. CER/1/69, dated 4-10-1969, effective from 1-11-1969, deleted "4-harness drill" from this definition.

The respondents argued that the term "controlled drill" also referred to the requirement of stamping under the Cotton Textiles (Control) Order, 1948. They relied on Notification No. CER/3/69, dated 19-9-1969, which required stamping of "controlled drill" as per the definition in Notification No. CER/1/68, dated 2-5-1968.

3. Effect of Amendments:

The respondents contended that the subsequent amendment to Notification No. CER/1/68 did not affect the definition of "controlled drill" in Notification No. CER/3/69, as it was a case of legislation by incorporation. They cited the Supreme Court's judgment in Mahindra & Mahindra Ltd. v. Union of India, which held that subsequent amendments to the incorporated statute do not affect the provisions of the incorporating statute.

The Tribunal, however, found that Notification No. CER/3/69, dated 19-9-1969, only applied to cloth subject to price control, and the term "controlled drill" in this notification referred only to drill varieties under price control. Since "4-harness drill" was removed from price control effective 1-11-1969, it was not covered by Notification No. CER/3/69.

4. Legislation by Incorporation vs. Reference:

The Tribunal considered whether the case involved legislation by incorporation or by reference. They noted that even in cases of legislation by incorporation, exceptions apply where the subsequent Act and the previous Act are supplemental to each other or in pari materia. The Tribunal found that the notifications in question were supplemental and in pari materia, and thus the amendment to Notification No. CER/1/68 affected Notification No. CER/3/69.

The Tribunal also noted that provisos (iv) and (v) to Notification No. 226/77-C.E. referred to "controlled drill" as defined "from time to time" by the Textile Commissioner, indicating that all amendments should be considered. Therefore, the amendment removing "4-harness drill" from the definition of "controlled drill" was relevant.

Conclusion:

The Tribunal concluded that "4-harness drill" was not covered by proviso (v) to Notification No. 226/77-C.E., dated 15-7-1977, at the relevant time. The order of the Collector of Central Excise (Appeals) was set aside, and the order of the Assistant Collector of Central Excise, Gwalior, was restored. The appeal by the Collector of Central Excise, Indore, was allowed.

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