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TMI Blog1985 (8) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... present case are manufacturers of cutting tools classifiable under Central Excise Tariff Item 51 A. They had been manufacturing these goods for several years, but the goods became excisable only with effect from 1-3-1974. The value of the goods cleared by the appellants from their factory during the relevant financial years (using the term "cleared" to cover all removals) was as follows :- 1973-74 ... ₹ 1,51,36,067.00 1974-75 ... ₹ 3,27,44,124.36 1975-76 ... ₹ 4,17,01,768.87 (Certain adjustments were required to be made to the above figures to take into account changes in the price index, but this does not affect the discussion). 4. The benefit of the above notification was to be calculated with reference to the "base clearances" of the specified goods during the "base period". The base period and the base clearances were to be arrived at in the manner prescribed in the notification. The Central Excise authorities in the first instance fixed the base clearances of the appellants as ₹ 2,52,94,080.09. The matter was subsequently reconsidered and after issue of a show cause notice the base clearance was refixed as ₹ 4,17,01,768.87. Consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d arrived at a figure of ₹ 2,52,94,080.09 as the base clearance. Subsequently however they had taken the view that even removals of goods prior to the date of imposition of excise duty should be taken into account. Since the factory had been in existence and had been producing goods even prior to 1-4-1973, they had applied Clause 2(c) of the abovementioned provision, with the result that the maximum of the "clearances" during the three financial years 1973-74, 1974-75 and 1975-76 became the "base clearance". This revised figure was much higher than the-original one, as a result of which not only were refunds denied to them but they were called upon to pay extra duty. 6. In support of his argument that the reference to "clearances" was intended only to cover goods which were excisable, Shri Ramasubramaniam pointed to two other provisions in the notification. One of these was Clause (a) of para 1 of the notification. In this clause it has been provided that "the" clearances made during any financial year shall be separately calculated...... on the basis of the accounts maintained under the Central Excise Rules, 1944...". The other was Explanation (2) under Clause (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore be interpreted in a manner which would result in the exemption being given even when there was no increase in production. This however would be the case if the interpretation advocated by the appellants were adopted. 10. Smt. Saxena further submitted that the exemption was in respect of excisable goods of the description specified in the table annexed to the notification. It was clear from this that they were goods which at the time of issue of the notification were excisable. There was no basis to hold that they should also have been excisable earlier. 11. Smt. Saxena further submitted the term "clearances" used in the notification had not been defined therein. Having regard to the intention behind the notification, it should not be taken as applying only to clearances of goods which were excisable at the time of clearance. The term "clearance" should be understood in a broad sense consistent with the purpose of the notification. 12. Smt. Saxena therefore submitted that the interpretation adopted by the lower authorities was correct and that the appeals should be rejected. 13. In reply, Shri Ramasubramaniam referred to Clause 1 of para 2 of the notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding) reads as "25% rebate scheme on excess clearances". The operative part of the notification contains internal evidence to the same effect. It reads as follows :- "The Central Government hereby exempts the excisable goods......... cleared from one or more factories in excess of the base clearances by or on behalf of a manufacturer, from so much of the duty of excise leviable thereon...... as is in excess of 75% of such duty.......". Whatever may be the complexities in the succeeding parts of the notification, the operative part makes it very clear that its effect was to grant partial exemption from duty on excess clearances by a manufacturer. 17. The intention behind the notification was specifically set out in para 2.15 of the budget speech of the then Finance Minister, which reads as follows:- "It has been decided to introduce a new scheme of excise duty relief to encourage higher production. The scheme visualises grant of relief in respect of selected commodities to the extent of 25 per cent of duty payable on goods produced in excess of production in a selected base year. Details of the scheme are now being worked out and I expect that it will be introduced for one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in particular cases, as is in fact seen from the qualification added on in both the above enunciations. Thus in the case of Mahadeolal Kanodia v. Administrator General of West Bengal (AIR 1960 S.C. 936) the Supreme Court has observed as follows :- "If the strict grammatical interpretation gives rise to an absurdity or inconsistency such interpretation should be discarded and an interpretation which will give effect to the purpose the legislature may reasonably be considered to have had, will be put on the words, if necessary even by modification of the language used." 21. The other rule which is relevant and, in our view applicable to the present case is the one which has been termed by Maxwell the "mischief rule" following from Heydon's case. It has been stated as follows by Shah J. (as he then was) :- "It is recognised rule of interpretation of statutes that expressions used therein should ordinarily be understood in a sense in which they best harmonise with the object of the statute, and which effectuate the object of the legislature." (New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar, AIR 1963 S.C. 1207). It has therefore been held in a number of decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecame entitled to the rebate for "excess clearances". Even if there was a substantial fall in their production during 1976-77 as compared with their average production during the three preceding years-say a fall by 15%, leaving their production at 27/108 of their total production during the three-year base period, they would still have got the benefit of the exemption on a part of their production. In other words, they would have been "rewarded" for a substantial fall in their production, something directly contrary to the expressed object of the measure. 24. As against this, the interpretation sought to be given by the Department would ensure that the benefit of the notification accrued to the appellants only if they actually produced goods in excess of their best performance during the three preceding years, and thus achieved the objective behind the scheme. 25. Where the alternatives are so diametrically opposed, it appears to us that this is a case where we should adopt that interpretation which would best harmonise with the object of the statute and would effectuate the object of the legislature. 26. We have reproduced above Clause 2(2) of the notification wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here would be no Central Excise accounts for the 11 months April 73 to February 74, nor would the goods produced and removed by the appellants during that period have been valued in terms of Section 4 of the Central Excises and Salt Act. Therefore for this period of 11 months the data on clearances in terms of the notification would not be available. As will be explained later, the absence of data for this period would not affect the calculation in terms of sub-clause (c) of Clause 2(2), under which the Excise Department has classified the case of the appellants; or rather, the absence of such data might be to the benefit of the appellants. It is perfectly possible to work out the basic clearance in the case of the appellants, and to give them the benefit of the notification (subject to their clearances reaching a sufficient level) even in the absence of such data for the said 11 months. We do not therefore think that the references to Central Excise accounts and Section 4, which involve an apparent but not a real difficulty in an isolated case like the present one, should lead us to give an interpretation to the terms "clearances" and "cleared" which would be directly contrary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ures of "clearances" on the basis of the Central Excise accounts, with the values being in terms of Section 4 of the Central Excises and Salt Act. In the nature of things, figures of such "clearances" by the appellants for the period April 73 to February 74 would not be available. We have to consider how this would affect the application of the aforesaid provision. 31. It is apparent that while the fact of pre-excise "clearances" could be taken into account for deciding whether alternative (a) or (b) or (c) of Clause 2(2) applies (taking the broad interpretation of the term "clearances which alone would give effect to the intention of the legislature), when it comes to the actual quantum of clearances the other provisions of the notification which refer to Central Excise accounts and Section 4, cannot be ignored. The result would then be that for 11 months of the financial year 1973-74, and therefore in effect for the whole of that financial year, figures of "clearances" in terms of the prescribed yardsticks would not be available. What would be the effect of this non-availability ? 32. Under Clause (c), it is the highest of the clearances during the three financia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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