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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 ..... o payment of Excise duty. In our view, the High Court by the impugned judgment has rightly held that the appellants are not liable to pay any Excise duty on the yarn after it is sized for the purpose of weaving the same into fabrics. No distinction can be made between unsized yarn and sized yarn, for the unsized yarn when converted into sized yarn does not lose its character as yarn. Appeal dismissed. - 297/83, 2658/83 and 4168/83 - - - Dated:- 30-10-1987 - R.S. Pathak, CJ, Ranganathan Misra and M.M. Dutt, JJ. [Judgment per : Dutt, J.]. - This appeal is directed against the judgment of the Delhi High Court allowing in part only the petition of the appellants under Article 226 of the Constitution of India. 2. The Appellant No. 1, J.K. Cotton Spinning and Weaving Mills Limited, has a composite mill wherein it manufactures fabrics of different types. In order to manufacture the said fabrics, yarn is obtained at an intermediate stage. The yarn so obtained is further processed in an integrated process in the said composite mill of the Appellant No. 1 for weaving the same into fabrics. The appellants do not dispute that the different kinds of fabrics which are manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrospective effect given by Section 51 will be subject to the provisions of Sections 11A and 11B of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act'). Further, it has been held that the yarn which is produced at an intermediate stage in the mill of the appellants and subjected to the integrated process of weaving the same into fabrics, will be liable to payment of Excise duty in view of the amended provisions of Rules 9 and 49 of the Rules. But the seized yarn which is actually put into the integrated process will not again be subjected to payment of Excise duty for, the unseized yarn, which is seized for the purpose, does not change the nature of the commodity as yarn. The writ petition was, accordingly, allowed in part. Hence this appeal by the appellants upon a certificate granted by the High Court. 5. At this stage, we may refer to Rules 9 and 49 before and after amendment of the same. The relevant portion of Rule 9 before the same was amended is as follows :- Rule 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other place of storage, as the case may be, immediately before such consumption or utilisation. 9. It has been already noticed that by Section 51 of the Finance Act, 1982, amendments made to Rules 9 and 49 have been given retrospective effect from the date on which the Rules came into force, that is to say, from February 28, 1944. 10. It is not disputed before us that under Section 3(1) of the Act, the taxing event is the production or manufacture of the goods in question. Indeed, Section 3 provides that there shall be levied and collected in such manner as may be prescribed, duties of excise on all excisable goods other than salt which are produced or manufactured in India and at the rates set forth in the First Schedule. It is, therefore, clear that as soon as the goods in question are produced or manufactured, they will be liable to payment of Excise duty. While Section 3 lays down the taxable event, Rules 9 and 49 provide for the collection of duty. There is a distinction between levy and collection of duty. In The Province of Madras v. Boddu Paidanna and Sons - A.I.R. 1942 FC 33 = 1978 E.L.T. (J 272) it has been observed by the Federal Court as follows :- There is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. In Caltex Oil Refining (India) Ltd. v. Union of India and Others, 1979 (4) E.L.T. (J 581) it has been held by the Delhi High Court that there can be removal only if the product goes out of one stream of production into another stream of production or if the product is issued out of or taken out or consumed if no further processing of that product is to be done. Further, it has been observed that there can be no removal of a product within the plant itself so long as the product is in the process of manufacture. According to this decision, if the product, which is obtained at an intermediate stage of an integrated and uninterrupted process of manufacture, there is no removal of such product. But, if the intermediary product is transferred from one plant to another for the manufacture of another commodity, there will be removal for the purpose of collection of duty. 14. In an earlier decision in Delhi Cloth and General Mills Co. Ltd. v. Joint Secretary, Government of India - 1978 E.L.T. 121 the Delhi High Court had taken a different view. In that case calcium carbide manufactured in the factory in one plant was used to generate acetylene gas by the transfer of the article fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product manufactured in the factory is not actually removed from the factory premises, there is no removal and, accordingly, no Excise duty is payable on the product, even if the product is used for the manufacture of another commodity inside the factory. The other view is that if at one stage a commodity known to the market is produced and is transferred within the factory for the manufacture of another commodity, there is removal within the meaning of Rules 9 and 49. 18. Apart from the above two views, there is a third view which has also been expressed by the Delhi High Court, namely, that if an intermediate product is obtained in an integrated process of manufacture of a commodity, there is no removal and, therefore, such intermediate product although known to the market and comes under a particular tariff item yet, as there is no removal, there will be no question of payment of Excise duty on such intermediate product. 19. The Nagpur Bench of the Bombay High Court in Oudh Sugar Mills Ltd. v. Union of India - 1980 E.L.T. 327 has adopted the second and third views. It has been held that if the purpose of removal of excisable goods is consumption in the same place where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture of another commodity, then it will be a case of removal for the purpose of payment of Excise duty. This view which we take clearly follows from the expression whether for consumption, export or manufacture of any other commodity in or outside such place . Thus consumption of excisable goods may be within such place or outside such place. The decisions which have taken the view that if a commodity manufactured within the factory in one plant is transferred to another plant for the purpose of production of another commodity will be removal for the purpose of payment of Excise duty are, in our opinion, correct. It is not easily understandable why the definition of expression 'factory' under Section 2(e) of the Act has been taken resort to in some of the decisions for the purpose of interpretation of Rule 9. There can be no doubt that if a commodity is taken outside the factory it will be removal, but Rule 9 does not, in any manner, indicate that it is only when the goods are removed from the factory premises it will be removal and when the excisable goods manufactured within the factory is removed from one plant to another it will not be a case of removal. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the factory in a continuous process may be so paid at the end of the factory day. From the above provisions of the Explanation to Rule 173A and the proviso to Rule 173G, the learned Judge has taken the view that a continuous or integrated process of manufacture has come to be contemplated by the scheme of the Act and the Rules framed thereunder for the first time only in May, 1968, the scheme having been brought into force with effect from June 1, 1968 and prior thereto such a continuous or integrated manufacturing process was never contemplated by the Act or the Rules. 25. The learned Attorney General gets inspiration from the said unreported case of the Bombay High Court and submits that at least since after May, 1968, Rule 9 and Rule 49 envisage the case of an integrated and continuous process of manufacture involving the use or utilisation of a commodity produced at an intermediate stage of such process for the manufacture of an end product or commodity. It is submitted by him that if the interpretation as given by the learned Single Judge of the Bombay High Court in the above unreported decision is accepted, in that case, it will not be necessary to consider the effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d within the factory premises. The appellants will not, however, be able to pass on this burden to consumers and will have to bear the same themselves. It is submitted that in view of the arbitrariness and unreasonableness of the amendments and the hardships that will be caused to the appellants and other manufacturers of excisable goods, the amendments should be struck down as violative of the provisions of Article 14 and Article 19(1)(g) of the Constitution of India. 29. It is not disputed that the Legislature is competent to make laws both prospectively and retrospectively. But, as pointed out by this Court in Jawaharmal v. State of Rajasthan and Others, (1966) 1 S.C.R. 890, the cases may conceivably occur where the court may have to consider the question as to whether excessive retrospective operation prescribed by a taxing statute amounts to the contravention of the citizens' fundamental rights; and in dealing with such a question the court may have to take into account all the relevant and surrounding facts and circumstances in relation to the taxation. Again in Rai Ramkrishna and Others v. State of Bihar, (1964) 1 S.C.R. 897 this Court has pointed out that if the retr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11A not being applicable in the present case. Thus although Section 51 of the Finance Act, 1982 has given retrospective effect to the amendments of Rules 9 and 49, yet it must be subject to the provision of Section 11A of the Act. We are unable to accept the contention of the learned Attorney General that as Section 51 has made the amendments retrospective in operation since February 28, 1944, it should be held that it overrides the provision of Section 11A. If the intention of the Legislature was to nullify the effect of Section 11A, in that case, the Legislature would have specifically provided for the same. Section 51 does not contain any non-obstante clause, nor does it refer to the provision of Section 11A. In the circumstances, it is difficult to hold that Section 51 overrides the provision of Section 11A. 32. It is, however, contended by the learned Attorney General that as the law was amended for the first time on February 20, 1982, the cause of action for the Excise authorities to demand Excise duty in terms of the amended provision, arose on that day, that is, on February 20, 1982 and, accordingly, the authorities are entitled to make such demand with retrospective eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trospective effect is arbitrary and unreasonable and should be struck down as violative of Article 14 of the Constitution. 36. Attractive though the argument is, we regret we are unable to accept the same. It is true that the Explanation to Section 51 has not mentioned anything about the penalties and confiscation of goods, but we do not think that in view of such non-mention in the Explanation excluding imposition of penalties for acts or omissions before amendment, such penalties can be imposed or goods can be confiscated by virtue of the amended provision of Rules 9 and 49. It will be against all principles of legal jurisprudence to impose a penalty on a person or to confiscate his goods for an act or omission which was lawful at the time when such act was performed or omission made, but subsequently made unlawful by virtue of any provision of law. The contention made on behalf of the appellants is founded on the assumption that under the Explanation to Section 51, the penalties can be imposed and goods can be confiscated with retrospective effect. In the circumstances, the challenge to the amendments of Rules 9 and 49, founded on the provision of the Explanation to Section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the word 'removal' contemplates shifting of a thing from one place to another. In other words, it contemplates physical movement of goods from one place to another. 39. It is well settled that a deeming provision is an admission of the non-existence of the fact deemed. Therefore, in view of the deeming provisions under Explanations to Rules 9 and 49, although the goods which are produced or manufactured at an intermediate stage and, thereafter, consumed or utilised in the integrated process for the manufacture of another commodity is not actually removed, shall be construed and regarded as removed. The Legislature is quite competent to enact a deeming provision for the purpose of assuming the existence of a fact which does not really exist. It has been already noticed that the taxing event under Section 3 of the Act is the production or manufacture of goods and not removal. The Explanations to Rules 9 and 49 contemplate the collection of duty levied on the production of a commodity at an intermediate stage of an integrated process of manufacture of another commodity by deeming such production or manufacture of the commodity at an intermediate stage to be removal f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the licence which is required to be obtained under Rule 174 of the Rules. Rule 178 provides for the form of licence. Clause (b) of Rule 178(1) provides that every licence granted or renewed under Rule 176 shall have reference only to the premises, if any, described in such licence. Form A.L. - IV is the form of an application for licence under Rule 176. In the Schedule to the Form, description of the premises intended to be used as a factory and of each main division or sub-division of the factory has to be given. Further, the detailed description of store-room or other place of storage and the purpose of each has also to be given in the application form for the grant of licence for the manufacture of excisable goods. Again under Rule 44 of the Rules, the Collector may require any manufacturer to make a prior declaration of factory premises and its equipments. Such a declaration has to be given in Form D-2 in respect of buildings, rooms, vessel, etc. In view of the particulars which are required to be given by a licensee for the manufacture of excisable goods, it is submitted by the learned Attorney General that the specification that is required to be made under Rule 9(1), is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poranea exposito rendering useful aid in the construction of the provision of Rule 9(1) of the Rules. This contention finds support from the decision of this Court in K.P. Varghese v. The Income-Tax Officer, Ernakulam, - (1982) 1 S.C.R. 629 relied on by the learned Counsel of the appellants. Indeed, it has been observed in that case that the rule of construction by reference to contemporanea exposito is a well established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous. In our opinion, the language of Rule 9(1) admits of only one interpretation and that is that the specification that has to be made by the Collector is of any premises appurtenant to the place of manufacture or production of the excisable goods. The specification is not required to be made and, in our view, cannot be made of the place of manufacture or production of the excisable goods. Apart from that, a observed by Subba Rao, J., upon a review of all the decisions on the point, in an earlier decision of this Court in the Senior Electric Inspector and Others v. Laxmi Narayan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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