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TMI Blog1987 (10) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... m the factory. They also do not dispute their liability in respect of yarn which is also removed from the factory. It is the contention of the appellants that no duty of excise can be levied and collected in respect of yarn which is obtained at an intermediate stage and, thereafter, subjected to an integrated process for the manufacture of different fabrics. Indeed, on a writ petition of the appellants, the Delhi High Court by its Judgment dated October 16, 1980 held that yarn obtained and further processed within the factory for the manufacture of fabrics could not be subjected to duty of excise. It is the case of the appellants that in spite of the said decision of the Delhi High Court, the Central Board of Excise has wrongly issued a Circular dated September 24, 1980 purporting to interpret Rules 9 and 49 of the Central Excise Rules, 1944 (hereinafter referred to as 'the Rules') and directing the subordinate Excise authorities to levy and collect duty of excise in accordance therewith. In the said circular, the Board has directed the subordinate Excise authorities that "use of goods in manufacture of another commodity even within the place/premises that have been specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumption, export, or manufacture of 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 firm:" [The remaining provisions of Rule 9 which are not relevant for our purpose are omitted.] 6. By a Notification No. 20/82-C.E., dated 20-2-1982 of the Central Government, Rule 9 was amended by the addition of the following Explanation thereto :- "Explanation. - For the purposes of this rule excisable goods produced, cured or manufactured in any place and consumed or utilised - (i) as such or after subjection to any process or processes; or (ii) for the manufacture of any other commodity, whether in a continuous process or otherwise, in such place or any premises appurtenant thereto, specified by the Collector under sub-rule (1), shall be deemed to have been removed from such place or premises immediately before such consumption or utilisation." 7. Rule 49 before its amendment was as follows :- "Rule 49. Duty chargeab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed or given away. A taxing authority will not ordinarily impose such a duty, because it is much more convenient administratively to collect the duty (as in the case of most of the Excise Acts) when the commodity leaves the factory for the first time, and also because the duty is intended to be an indirect duty which the manufacturer or producer is to pass on to the ultimate consumer, which he could not do if the commodity had, for example, been destroyed in the factory itself. It is the fact of manufacture which attracts the duty, even though it may be collected later." 11. Relying upon the aforesaid observation of the Federal Court, it has been urged by Mr. Soli Sorabjee, learned Counsel appearing on behalf of the appellants, that although it is true that as soon as the commodity is manufactured or produced it is liable to the payment of Excise duty, the duty will not, however, be collected unless the commodity leaves the factory. It is submitted by him that the commodity must be removed from one place to another either for the purpose of consumption in the factory or for sale ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was removal of calcium carbide for the purpose of levy and collection of Excise duty. The High Court relied upon the definition of 'factory' under Section 2(e) of the Act and took the view that the definition was not restricted to only the part in which the excisable goods were manufactured. It was, accordingly, held that it could not, therefore, be said that calcium carbide made by the petitioner-Company was removed from the factory in which it was produced. This decision lays down that so long as a commodity is not removed from the factory premises, there is no removal within the meaning of Rules 9 and 49. A similar view has been taken by the Delhi High Court in a later decision in Modi Carpets Ltd. v. Union of India - 1980 E.L.T. 320 where the High Court has expressed the view that no Excise duty can be levied and recovered on 'silver' obtained by the petitioners, if it is consumed within the very premises in which it is manufactured because in such cases there is no removal of sliver from the place of manufacture as envisaged by Rules 9 and 49. 15. More or less a similar view has been taken by the Delhi High Court in another decision in Synthetics and Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e place, this cannot be done without payment of Excise duty at the place and in the manner prescribed. Further, it has been held that where the plant of production is treated as a composite plant and where the process of manufacture is an integrated, continuous and uninterrupted process, a transfer of a produce which is a component of the final produce from one part of the plant to another, does not amount to removal as contemplated by Rule 9. According to this decision, a process of onward movement of a component for being converted into a final product is not covered by the concept of removal contemplated by the provision of Rule 9 of the Rules. 20. In Oudh Sugar Mills Ltd. v. Union of India, 1982 E.L.T. 927, the Allahabad High Court has taken more or less the same view as that of the Bombay High Court. It has been observed that an intermediate product which by itself is goods known to the market and is used in captive consumption for bringing out altogether a new goods not by an integrated process, but by a distinct and separate process, is liable to Excise duty before its removal. 21. So far as captive consumption is concerned, the Gujarat High Court has taken the same view a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able goods manufactured in the factory are used for production of another commodity. 23. Now the question is whether Rule 9 before it was amended also envisaged a case of an intermediate product obtained in an integrated and continuous process of manufacture of another commodity, that is, the end product. It must be admitted that prima facie Rule 9 does not show that it also covers a case of integrated, continuous and uninterrupted process of manufacture producing a commodity at an intermediate stage which again is utilised in such continuous process for the manufacture of the end product. The learned Attorney General, appearing on behalf of the Union of India, submits that Rule 49 and Rule 49 also envisaged such a case of integrated process of manufacture of the end product using a product produced at an intermediate stage. In support of his contention he has placed reliance on an unreported decision of the Bombay High Court in Misc. 491 of 1964, dated April 30, 1970 (Nirlon Synthetic Fibres and Chemicals Ltd. v. Shri R.K. Audium, Assistant Collector and Others). The learned Single Judge of the Bombay High Court took the view that a continuous or integrated process of manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continuous or integrated process of manufacture has been recognised in the Explanation to sub-rule (2) of Rule 173A and in the proviso to Rule 173G, but we do not think that Rule 9 or Rule 49 should be interpreted in the light of provisions of the Explanation to sub-rule (2) of Rule 173A or the proviso to Rule 173G. Moreover, we are not concerned with the interpretation of Rule 9 and Rule 49, as they stood before the amendment. In the instant case, the appellants have challenged Rule 9 and Rule 49 as amended by the Notification dated February, 20 1982. We are, therefore, concerned with the interpretation of these rules as amended, particularly the question of validity of these rules. 27. Before we proceed to consider the contentions made on behalf of the parties, it may be stated that in view of the divergence of judicial opinion as to the interpretation of Rules 9 and 49, before they were amended, the Explanations to Rules 9 and 49 have been added so as to obviate any doubt. The Explanations to Rule 9 and Rule 49, inter alia, provide that commodity obtained at an intermediate stage of manufacture in a continuous process shall be deemed to have been removed from such place or prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epend on the circumstances of each case; and the test of the length of time covered by the retrospective operation cannot, by itself, necessarily be a decisive test. 30. The apprehension of the appellants is that the amendments to Rules 9 and 49 having been made retrospective from the date the Rules were framed, that is, from February 28, 1944, the appellants and others similarly situated may be called upon to pay enormous amounts of duty in respect of intermediate goods which have come into existence and again consumed in the integrated process of manufacture of another commodity. There can be no doubt that if one has to pay duty with retrospective effect from 1944, it would really cause great hardship but, in our opinion, in view of Section 11A of the Act, there is no cause for such apprehension. Section 11A(1) of the Act provides as follows :- "Section 11A. - (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the date of the amendment. 33. There is no provision in the Act or in the Rules enabling the Excise authorities to make any demand beyond the periods mentioned in Section 11A of the Act on the ground of the accrual of cause of action. The question that is really involved is whether in view of Section 51 of the Finance Act, 1982, Section 11A should be ignored or not. In our view Section 51 does not, in any manner, affect the provision of Section 11A of the Act. In the absence of any specific provision overriding Section 11A, it will be consistent with rules of harmonious construction to hold that Section 51 of the Finance Act, 1982 insofar as it gives retrospective effect to the amendments made to Rules 9 and 49 of the Rules, is subject to the provision of Section 11A. 34. In the circumstances, there is no question of the amended provision of Rule 9 and Rule 49 being arbitrary, unreasonable or violative of the provision of Article 14 and Article 19(1)(g) of the Constitution of India. 35. We may now deal with the challenge made to the retrospective operation of amendments of Rules 9 and 49 on another ground. In order to appreciate the ground of such challenge, we may once mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduced by amendments of the same. It is strenuously urged by Mr. Sorabjee, learned Counsel for the appellants, that even after amendment there must be removal of the goods from one place to another for the purpose of collection of Excise duty. Our attention has been drawn on behalf of the appellants to Clause (b) of sub-section (4) of Section 4 of the Act, which defines "place of removal" as follows :- "Sub-section (4). - For the purpose of this section, - (a) ................................................................................................................... .................................................................................................................... (b) "place of removal" means - (i) a factory or any other place or premises of production or manufacture of the excisable goods; or (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed;" 38. It is submitted on behalf of the appellants that the Explanations to Rule 9 and Rule 49 are ultra vires the provision of Clause (b) of sub-section (4) of Section 4 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in theory nothing to prevent the central legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed or destroyed or given away. It is for the convenience of the taxing authority that duty is collected at the time of removal of the commodity. There is, therefore, nothing unreasonable in the deeming provision and, as discussed above, it is quite in conformity with the provision of Section 3 of the Act. The contention that the amendments to Rules 9 and 49 are ultra vires Clause (b) of sub-section (4) of Section 4 of the Act, is without substance and is overruled. 40. It is next contended on behalf of the appellants that even assuming that there can be fictional removal as provided in the Explanations to Rules 9 and 49, there cannot be such fictional or deemed removal without the specification of the place where the excisable goods are produced, cured or manufactured or any premises appurtenant thereto. Rule 9(1), inter alia, provides that no excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, but the question is what has to be specified by the Collector. It is the contention of the appellants that the Collector has to specify the place of manufacture and also any premises appurtenant thereto. We are, however, unable to accept this contention. The place where the goods are to be manufactured by a manufacturer, that is to say, the site of the factory cannot be specified by the Collector. It is for the manufacturer to choose the site or the place where the factory will be constructed and goods will be manufactured. Rule 9(1), in our opinion, does not require the Collector to specify the place where the excisable goods are produced, cured or manufactured. The words "which may be specified by the Collector in this behalf" occurring in Rule 9(1) of the Rules do not qualify the words "any place where they are produced, cured or manufactured", but relate to or qualify the words "any premises appurtenant thereto". In other words, if the place of removal is not the place where the goods are produced, cured or manufactured, but any premises appurtenant to such place, in that case, the Collector has to specify such premises for the purpose of collection of Excise duty. Thus the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has been observed that in a modern progressive society it would be unreasonable to confine the intention of a Legislature to the meaning attributable to the word used at the time the law was made and, unless a contrary intention appears, an interpretation should be given to the words used to take in new facts and situations, if the words are capable of comprehending them. Most respectfully we agree with the said observation of Subba Rao, J. In the circumstances, we do not agree with the direction of the Board of Central Excise and Customs given in the impugned circular that both the place of manufacture and the premises appurtenant thereto must be specified by the Collector under Rule 9(1) of the Rules. Thus, there being no question of specification of the place of manufacture, the contention of the appellants that without such specification there cannot be any deemed removal, fails. 45. In view of the discussion made above, we hold that the amendments to Rules 9 and 49 are quite, legal and valid. Further, Section 51 of the Finance Act, 1982 giving retrospective effect to the said amendments is also legal and valid. 46. In the instant, case, the appellants are liable to pay Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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