1962 (9) TMI 1 - SC - Central Excise

Whether the respondents in the three respective appeals who carry on business in the manufacture of art silk fabrics, are entitled to claim exemption from the excise duty under Item 12A(v) which was inserted in First Schedule to the Central Excises and Salt Act, 1944 (No. 1 of 1944) by the Finance Act, 1954 (No. 17 of 1954)? Held that - As we feel no difficulty in holding that for the purpose of Item 12A(v) the three persons cannot be said to be the same person as claimed by the appellants. If it was the intention of the legislature to exclude cases like the present from the purview of the exemption clause, then it must be held that the legislature has failed to use appropriate words to carry out that intention. We were told that for subsequent years, the relevant item in the Schedule has been suitably modified and the present question is, therefore, not likely to arise in future. Appeal dismissed.

Summary

Issues:
- Interpretation of exemption from excise duty under Item 12A(v) for artificial silk fabrics
- Determining whether powerlooms in different factories owned by the same person should be considered collectively for exemption eligibility

Analysis:
1. The case involved the interpretation of whether the respondents, engaged in manufacturing artificial silk fabrics, were entitled to exemption from excise duty under Item 12A(v) of the Central Excises and Salt Act, 1944. The respondents claimed that their production units had less than 25 powerlooms, thus qualifying for the exemption. The High Court allowed the writ petitions filed by the respondents, quashing the duty notices issued against them. The central question was the fair and reasonable construction of the exemption clause.

2. The respondent in Civil Appeal No. 394 owned multiple factories with powerlooms, including partnerships where he had ownership stakes. The contention was whether the powerlooms in all factories should be considered cumulatively for determining exemption eligibility. The appellants argued that all powerlooms, including those in partnership factories, should be counted, thus disqualifying the respondents from the exemption under Item 12A(v).

3. The key issue revolved around the interpretation of "the same person" in Item 12A(v). The High Court held that the partnerships in which the respondent was a partner could not be considered the same person as the respondent individually. The court rejected the appellants' argument that every partner in a firm should be considered the same person as the firm for exemption purposes, emphasizing the legislative intent behind the exemption clause.

4. The appellants contended that the duty was levied on the fabrics themselves, not the individual producers, justifying a liberal interpretation of "the same person." However, the court disagreed, stating that the context of the clause did not support such a broad interpretation. The court highlighted that the production in each factory was distinct and not attributable to a single entity encompassing all partnerships.

5. Ultimately, the court upheld the High Court's decision, ruling that the respondents were entitled to the exemption under Item 12A(v). The judgment emphasized that the production units owned by the respondent individually and in partnerships should not be collectively considered for determining exemption eligibility. The court noted that subsequent modifications to the relevant item in the Schedule aimed to avoid similar interpretational issues in the future.

6. In conclusion, the Supreme Court dismissed the appeals, affirming the respondents' entitlement to exemption from excise duty under Item 12A(v) for their artificial silk fabric manufacturing businesses. The appellants were ordered to bear the costs of the legal proceedings.