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TMI Blog1986 (3) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... les of 1944 framed thereunder ('the Act and the Rules'). The different kinds of yarn manufactured at the factory are dutiable to excise duty under tariff item Nos. 18 III, 18A and 18E of the First Schedule to the Act and we are concerned with the levy of duty on such yarn manufactured at its factory. 3. Ever since the Act was extended to the area viz., from 1-4-1950 by the Finance Act of 1950, the petitioner was paying excise duty on yarn manufactured and consumed in its mill, without demur, till the end of August, 1981. But, like a Rip Van Winkle the petitioner inspired by a ruling of the Delhi High Court rendered on 16-10-1980 to which we will make a detailed reference at a later stage woke up in the later part of 1981 and approached this Court on 8-9-1981 under Article 226 of the Constitution for a declaration that the yarn manufactured without removing the same from its factory premises was not dutiable to duty under the Act. The petitioner after obtaining the leave of this Court has also challenged the amendments made to Rules 9 and 49 of the Rules and Section 51 of the Finance Act of 1982 (1982 Act). The challenge to these provisions are based on a large number of grounds w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udge Learned Hand has explained the principle of progressive rule of construction of statutes in these words : "The task of interpretation of a statutory enactment is not a mechanical task. It is more than a mere reading of mathematical formulae because few words possess the precision of mathematical symbols. It is an attempt to discover the intent of the legislature from the language used by it and it must always be remembered that language is at best an imperfect instrument for the expression of human thought and as pointed out by Lord Denning, it would be idle to expect every statutory provision to be "drafted with divine prescience and perfect clarity". We can do no better than repeat the famous words of Judge Learned Hand when he said : "...it is true that the words used, even in their literal sense, are the primary and ordinarily the most reliable, source of "interpreting the meaning of any writing ; be it a statute, a contract or anything else. But, it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the discionary ; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imagin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost, that it is a duty on the manufacture or production, is not lost. The method of collection does not affect the essence of the duty, but only relates to the machinery of collection for administrative convenience......" In Union of India and Others v. Bombay Tyre International Limited and others [(1984) (1) Supreme Court Cases 467=1983 E.L.T. 1896] the Court has followed this enunciation (vide para 12 at pages 480 and 481). 11. On the mode of collection of duty levied under the Act, the Federal Court in The Province of Madras v. Messrs Boddu Paidanna and Sons [AIR 1942 Federal Court 33=1978 E.L.T. (J 272)] expressed thus : "The duties of excise which the Constitution Act assigns exclusively to the Central Legislature are, according to 1939 FCR 18, duties levied upon the manufacturer or producer in respect of the manufacture or producer in respect of the manufacture or production of the commodity taxed.........The two taxes which he is called on to pay are economically two separate and distinct imposts. There is in theory nothing to prevent the Central Leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty at the moment when the excisable article leaves the factory or workshop for the first time upon the occasion of its sale. But, that method of collecting the tax is an accident of administration ; it is not of the essence of the duty of excise which is attracted by the manufacture itself. That this is so is clearly exemplified in those excepted cases in which the Provincial, not the Federal, Legislature has power to impose a duty of excise. In such cases there appears to be no reason why the Provincial Legislature should not impose a duty of excise in respect of the commodity manufactured and then a tax on first or other sales of the same commodity. Whether or not such a course is followed appears to be merely a matter of administrative convenience. So, by parity of reasoning may the Federal Legislature impose a duty of excise upon the manufacture of excisable goods and the provincial Legislature impose a tax upon the sale of the same goods when manufactured". In R.C. Jail's case the Supreme Court approving the above exposition expressed thus : "The argument confuses the incidence of taxation with the machinery provided for the collection thereof ?" With these basic postul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their retrospectivity and validation by the 1982 Act do not really make any impact and difference to hold that yarn manufactured as intermediate goods but not removed from the factory premises was not dutiable duty under the Act. We are of the view that on this conclusion of the Act which is the only conclusion to be reached on the principles enunciated by the Supreme Court, we cannot uphold the plea of the petitioner. 13. Rules 9 and 49 of the Rules as they stood prior to their amendments and the 1982 Act read thus : "9. Time and manner of payment of duty : (1) 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 or 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 in these rules or as the Collector may require, and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form: Provided that such goods may be deposited without payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 : Provided that the manufacturer shall on demand pay the duty leviable on any goods which are not accounted for in the manner specifically provided in these rules, or which are not shown to the satisfaction of the proper officer to have been lost or destroyed by natural causes or by unavoidable accident during handling or storage in such store-room or other approved premises : Provided further that the proper officer may not demand duty due on any goods claimed by the manufacturer as unit for consumption or for marketing subject to such conditions as may be imposed by the Collector by order in writing. (2) Notwithstanding anything contained in sub-rule (1), excisable goods made in a factory to which provisions of Chapter VII of these Rules have been extended by the Central Government by notification in the Official Gazette, may be removed from the factory in which they are made to any warehouse licensed premises of the factory and subject to such exemptions, limitations and conditions as may, from time to time, specified in this behalf by the Central Government. (3) Notwithstanding anything contained in sub-rule (1), the Central Government may, under circumstances of exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les is also an enabling rule and must be read in conjunction with Rule 9 of the Rules. Rule 49 does not in any way destroy the effect of Rule 9 of the Rules. Rule 49(1) only permits the postponement of Collection of duty on intermediate or other goods manufactured till they are removed from the factory gate or premises subject to the terms and conditions stipulated in that rule. But, that postponement of payment of duty does not and cannot mean that the duty already attracted on the manufactured goods at the place of manufacture is obliterated or extinguished. 16. The rules only facilitate the smooth Collection of duty and the time of removal of goods from the factory gate. The enabling rules do not destroy the incidence of taxation but only facilitate the Collection of duty on goods manufactured and delivered taking due note of and providing for the possibility of destruction of manufactured goods for a variety of purposes. 17. The explanation added to Rules 9 and 49 of the Rules apparently with the object of overcoming the effect of the rulings of the Delhi and other High Courts in any event, in our view were introduced exabundanti cautela. Even without those amendments the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the factory of the petitioner consumed in the end product of 'acetylene gas' was goods or not and if it was goods whether the former was exigible to excise duty or not. We are not concerned with the question whether 'calcium carbide' was goods or not. 20. But, on the other aspect, a contention similar to the contention urged before us was urged before their lordships in that case and the same was accepted by the Court speaking through Deshpande, J. (as His Lordship then was) in these words : "(4) The expression "factory" is defined in Section 2(e) to mean any premises including the precincts thereof wherein or in any part of which excisable goods are manufactured. The definition covers the present case because the calcium-carbide is manufactured in one part of the factory while the acetylene gas is manufactured in another part thereof. The definition of "factory" makes it clear that the meaning of factory is not restricted to only the part in which the excisable goods are manufactured. On the other hand, it includes the whole of the premises in a part of which such goods are manufactured. At any rate the case of the petitioner is that the whole of the premises which compr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of the Gujarat High Court consisting of Diwan CJ. and D.P. Desai had occasion to examine the very question and also notice the ruling of the Delhi High Court in DGM's case. In rejecting the very contention, the Court speaking through Divan, CJ expressed thus : "13. Under Rule 9, it is clear that excise duty must be paid before the goods are removed from the place where they are produced or manufactured and in the light of Rule 175 and the provision as to licences, it is clear that in the case of each excisable article, a separate licence has to be taken specifying the particular place where the excisable goods in question are to be manufactured. Unless the place is specified in the licence, it is not open to the manufacturer of any excisable goods to carry on manufacturing activity, and for the purposes of Rule 9, it is the place specified in the licence concerned that is the place where the goods are produced or manufactured and it is the removal from the place thus specified in the licence in question that is the place referred to in Rule 9. Once this position is clearly appreciated in the light of the licensing procedure and it is borne in mind that each licence has to spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Mills Co. Ltd. v. Joint Secretary Government of India and another, 1978 E.L.T. (J 121) In that case, the question before the Delhi High Court was whether excise duty was leviable on calcium carbide produced by the Delhi Cloth and General Mills which was consumed in the manufacture of acetylene gas. It was found as a fact that calcium carbide manufactured by the company was not known to the market as calcium carbide, and one of the contentions which was also urged before the Delhi High Court was that calcium carbide was not removed from the factory of the petitioner and the passage of calcium carbide from the plant where calcium carbide was manufactured to the plant where acetylene gas was manufactured, both plants being located in the same factory, was not tantamount to removal from the factory to any other place. It is obvious from what we have stated in connection with the two cases of the Supreme Court referred to above that since calcium carbide which was produced by the manufacturer before the Delhi High Court did not amount to a marketable commodity known to the market as such, excise duty was not payable on the intermediate product in that particular case. However, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excisable article, arises for consideration, it is always a part of the larger factory where intermediate product will be manufactured if it is manufactured in the same larger premises of the factory. But, in view of the licensing procedure and in view of Rule 9, it is the place where a particular excisable article is manufactured that is material so far as collection at the stage of removal is concerned and not the larger factory. Reading in the wording of rule 9 a factory as equivalent to the place where goods are manufactured is, with great respect to learned Judges of the Delhi High Court, not permissible and with great respect we differ from them. In para 13 the Court has referred to the removal of goods from the licensed place. We are of the view that this expression has been used by their Lordships only to rebut the contention urged before them but not to hold that the manufacture of goods by a non-licensee does not attract levy of excise duty on excisable goods. We are also of the view that the other expressions used do not militate and take a different view than what we have expressed on the true construction of Section 3(1) and Rules 9 and 49 of the Rules. When so read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the Government of India in the Ministry of Finance (Department of Revenue) No. G.S.R. 74(E), dated the 20th day of February, 1982, shall be deemed to have, and to have always had effect on and from the date on which the Central Excise Rules, 1944 came into force. (2) Any action or thing taken or done or purporting to have been taken or done before the 20th day of February, 1982 under the Central Excises Act and the Central Excise Rules, 1944 shall be deemed to be, and to have always been, for all purposes, as validly and effectively taken or done as if the amendments referred to in Sub-section (1) had been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any Court, tribunal or other authority : (a) all duties of excise levied, assessed or collected or purporting to have been levied, assessed or collected before the 20th day of February, 1982 on any excisable goods under the Central Excises Act, shall be deemed to be, and shall be deemed to have always been, as validly levied, assessed or collected as if the amendments referred to in Sub-section (1) had been in force at all material times ; (b) no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cast on this position, as a result of judgments of some High Courts, which interpreted certain provisions of the Central Excise Rules to hold that duty could not be collected on such goods as they had not been 'removed' from the factory. A number of manufacturers have also obtained stay orders from courts based on the same grounds. The matter has been taken up in appeal. Nevertheless, in order to place the position beyond doubt, the relevant Central Excise Rules have been suitably amended. A provision has also been included in the Finance Bill so that these amendments will have retrospective effect and the collections of duty made in accordance with the existing practice will also be validated", (vide : Budget Speech of Finance Minister 1982-83). Clause 51 seeks to give retrospective effect to amendments made on the 20th February, 1982, to Rules 9 and 49 of the Central Excise Rules, 1944, relating to charging of duty of excise on excisable goods used for captive consumption within the factory of production and to validate the collection of duty made prior to these amendments." (vide : Finance Bill, 1982 : NOTES ON CLAUSES) We need hardly say that Section 51 enacted achieves th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislate in the manner it did. When once it is held that Parliament was competent to legislate Section 51, it follows from the same that it was competent to legislate retrospectively. We cannot on principle or authority hold that the Parliament was not competent to legislate in the manner it did to meet or overcome an extraordinary situation created by the rulings of the Delhi and other High Courts. 35. In The Cannaaore Spinning and Weaving Mills Limited v. The Collector of customs and Central Excise Cochin and others (AIR 1970 Supreme Court 1950) 1978 E.L.T. (J 375) (S.C.) the Supreme Court was only dealing with the validity of an amendment to a rule made under the Act and not of the Parliament legislating as in the present case. In The Kerala State Electricity boards. The Indian Aluminium Co. Ltd. and Others (AIR 1976 Supreme Court 1031 at 1046 para 25) the Court was only dealing with the effect of laying subordinate legislation before the competent legislature and not of a similar situation as in the present case. Hence, the ratio in these cases relied on by Sri Srinivasan do not bear on the point. 36. In J.K. Cotton Spinning and Weaving Mills and Another v. Union of India an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was violative of Article 14 of the Constitution. 43. What we have said earlier for rejecting the challenge to retrospectivity based on Article 14 of the Constitution equally applies to this contention of the petitioner. Even otherwise, the explanation to Section 51 of the 1982 Act far from exposing the petitioner and its officers to personal penalties, expressly provides to the contrary. We see no merit in this contention of Sri Srinivasan and reject the same. 44. The petitioner has urged that Section 51 of the Act making omissions and commissions of Rules 9 and 49 of the Rules an offence, though that was not so, prior to their incorporation in the Rules was violative of the protection guaranteed to it and its employees by Article 20 of the Constitution. Sri Srinivasan, in our opinion, did not rightly pursue and urge this ground at the hearing. 45. We have earlier set out the explanation added to Section 51 of the Act and analysed its scope and ambit also. The Parliament naturally conscious of the requirements of Article 20 of the Constitution viz., Criminal offences must be adjudicated with reference to the law that was then in force and there cannot be retrospectivity on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner for grant of a certificate of fitness to appeal to the Supreme Court Under Articles 133 and 134-A of the Constitution of India and for stay. 49. Immediately after we pronounced our order dismissing the writ petition, Sri Srinivasan make an oral application for grant of a certificate of fitness to appeal to the Supreme Court under Articles 133 and 134-A of the constitution on the ground that the questions decided by us are substantial questions of law of general importance and they need to be decided by the Supreme Court and for stay of the operation of our order for a period of two months from this day. 50. Sri Shivashankar Bhat opposes the oral application made by Sri Srinivasan. 51. On one of the principal questions that arises for determination in this case, viz., the Construction of Rules 9 and 49 of the Central Excise Rules, 1944, as they stood prior to their amendment on 20-2-1982 and the consequent liability over intermediate goods manufactured and consumed within its factory premises, we have differed from the rulings of the Delhi High Court noticed in our order. Even otherwise, on the aforesaid question and other questions, viz., the validity of S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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