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PETITIONER: ALUMINIUM CORPORATION OF INDIA LTD.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT22/08/1975

BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, V.R. KHANNA, HANS RAJ GUPTA, A.C. FAZALALI, SYED MURTAZA

CITATION:  1975 AIR 2279            1976 SCR  (1) 400  1975 SCC  (2) 472

ACT:      Central Excise Rules, 1944-Rule 8(1)-Finance Act, 1960- Excise duty  on Aluminium-Item  27-Notification of  Govt. of India dated Ist March, 1960-Exemption for use of excise paid aluminium.

HEADNOTE:      The appellant  manufactures aluminium  plates,  sheets, circles, strips  and foils which are the end products of its composite factory,  but, as  intermediate products,  it also turns out ingots, bars, slabs, billets, pellets and the like which get  consumed mostly  in the process of manufacture of plates, sheets,  and other  end products. Aluminium is first converted into  items like ingots bars slabs, etc., but when they are  used up  for finished  products  like  plates  and sheets, nearly  half of  the stuff is thrown back into scrap in which  state it  is remelted and starts its manufacturing journey over again. Under the Finance Act for the year 1960, Excise  Duty   was  imposed   on  the   aluminium.  On   the manufacturing of  the aluminium,  plates,  sheets,  circles, strips and  foils in any form or size, the duty leviable was rupees five  hundred per  metric tonne.  A note  appended to Item 27 reads as under:      "Under the  Government of  India, Ministry  of Finance, (Department  of  Revenue)  Notification  No.  29/60  Central Excises, dated  the Ist  March 1960, the following aluminium manufactures, namely  plates, sheets,  circles,  strips  and foils in  any form  is used,  are exempt from so much of the duty leviable  thereon as  is in  excess of  Rs. 200.00  per metric tonne."      The appellant  manufactured certain plates, sheets etc. by using  partly duty paid aluminium and partly aluminium on which no  duty was  paid.  The  authorities  under  the  Act disallowed exemption  under note  to Item  27 on  the ground that  the   plates,  sheets,  etc.,  were  not  manufactured exclusively out of the duty paid aluminium.      Allowing the appeal, ^      HELD :  (1) The  whole scheme  of the exemption is that where ingots,  bars, blocks,  slabs, billets,  pellets  etc.

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made out  of aluminium  scrap or  scrap  obtained  from  the virgin metal on which excise duty was already paid, are used for making  finished items  like sheets, reduction pro tanto in the  rate of  duty leviable on the final product is to be given. [403BC]      (2) The  marginal mystique in interpretation has arisen from   misunderstanding    the   spirit   letters   of   the notification. [405-D]      (3) We  feel confident  that the  State will  seriously consider:  (a)   that  good  government  involves  not  only diligent collection  of taxes,  but also  ready  refunds  of excess levies; (b) that simplicity or easy comprehensibility in drafting  legislation, including  rules and notifications affecting the  laity, is  an art  found absent, although not difficult to  accomplish, given  a fresh  approach to use of statutory language;  and (c)  that a  fair  construction-not always one adverse to the assessee-is permissible and proper on the  part of  government and  the  taxing  officers  when enforcing fiscal legislation. [401DE]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeal No. 677 of 1968      Appeal by  special leave  from the  judgment and  order dated the  21st August,  1967 of the Govt. of India, Central Excise in No. 1036 of 1967. 401      A. K.  Sen, Anjana  Sen and  Rameshwar  Nath,  for  the      appellant.      G. L.  Sanghi and S. P. Nayar, for the respondents. The      Judgment of the Court was delivered by      KRISHNA IYER,  J.-The fate  of this  appeal, by special leave, turns on the construction of a notification issued by the Government  of India  dated April 20, 1960 under r. 8(1) of the  Central  Excise  Rules,  1944  whereby  a  qualified exemption  was   accorded  to  certain  types  of  aluminium manufactures in  the matter  of excise  duty.  The  ultimate statutory revision  to the  Central Government  having  been decided against the appellant company, it has challenged the correctness of the view based on which the revision petition was dismissed.      The facts,  fortunately, are few and beyond controversy although the  length of the litigation has been considerable and  beyond  necessity,  this  being  the  second  time  the appellant has  had to  come to  this Court  aggrieved by the revisory authority is refusal to grant refund of over levied excise duty,  as claimed  by it. Had there been disputes’ on facts, we  would have hesitated to reassess the findings but as  the   record  stands,   the  sole  question  is  one  of construction.      If we  may anticipate  our ultimate  conclusion even at the opening  stage, this  appeal deserves to be allowed as a matter of  law, but what is more significant for society are three unhappy  features which,  we feel confident, the State will seriously  consider. They are: (a) that good government involves not  only diligent  collection of  taxes, but  also ready refunds  of excess levies. (b) that simplicity or easy comprehensibility in  drafting legislation,  including rules and notifications  affecting the  laity,  is  an  art  found absent, although  not difficult to accomplish, given a fresh approach to  use of  statutory language; and (c) that a fair construction not  always one  adverse  to  the  assesses  is permissible and  proper on  the part  of government  and the

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taxing officers when enforcing fiscal legislation.      The appellant  manufactures aluminium  plates,  sheets, circles strips  and foils  which are the end products of its composite factory,  but, as  intermediate products,  it also turns out ingots, bars, slabs, billets, pellets and the like which ,get  consumed mostly in the process of manufacture of plates, sheets,  and other end products and rarely by way of sales of  clabs’as such.  The raw material, i.e.? aluminium, is extracted  by the company from bauxite from which ingots, slabs and the like are made which, in turned are rolled into sheets, circles  etc., for  sale. It  is one of the admitted features of this manufacturing process that about 50% of the ingots? slabs  and billets  used for  further manufacture of plates, sheets  circles etc. become scrap and are melted, to be put  back  along  with  raw  scrap  for  the  purpose  of recycling. In short, aluminium is first converted into items like ingots, bars, slabs etc., but when they are used up for finished products like plates and sheets, nearly half of the stuff is  throwing back  into scrap  in which  state  it  is remelted and starts its manufacturing journey over again.      We have  now indicated  how there are really two stages in the course of turn-out of the finished goods. Excise duty came to be  imposed 402 from March  1, 1960  on aluminium  under the Finance Act for that year  (we are  not concerned  with the same duty on the same commodity  imposed in  prior years).  Item no. 27 which relates to aluminium, reads:           Description of goods                Rate of Duty                Aluminium (a)  In any crude form including        Three hundred rupees      ingots,bars,blocks,slabs, shots    per metric tonne      & pellets (b)  Manufactures,the following,      namely,plates,sheets,circles,      Five hundred rupees      strips,and foils in any form or    per metric tonne      size      A note  appended to  the entry  is of  significance and      states:           "Under  the   Government  of  India,  Ministry  of      Finance (Department  of Revenue) Notification No. 29/60      Central  Excises,   dated  the   1st  March  1960,  the      following  Aluminium   manufactures,   namely   plates,      sheets, circles strips and foils in any form or size in      the manufacture  of which  duty paid  aluminium in  any      form is  used, are  exempt from  so much  of  the  duty      leviable thereon  as is  in excess  of Rs.  200.00  per      metric tonne" From March l, 1960 to April 24, 1960 this two-tier system of levy at  differential rates  prevailed, it  being not-worthy that the  manufacturer of plates, sheets, and other finished products had to pay only at an overall rate of Rs. 500/- per metric  tonne.   Moreover,  he   was  also   entitled  to  a proportionate exempting,  in the event of using aluminium in any form  already dutied, ’from so much of the duty leviable thereon as is in excess of Rs. 200.00 per metric tonne."      There was-avoidable  complication  experienced  in  the enforcement of  the two-tier  system  of  duty  and  on  the representation of the concerned composite manufacturers, the Government of  India switched over to a single point levy at the ultimate  stage of  the manufacture  and in that behalf, issued an exemption notification on the meaning of which the parties have joined issue before us. This notification reads thus:           "The  Central  Government  exempts  the  following

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    aluminium   manufactures,   namely,   plates,   sheets,      circles, strips,  ’ and  foils in  any form or size, in      the manufacture  of which  aluminium in  any crude form      including ingots,  bars, blocks,  slabs, billets, shots      and pellets  made out  of old  aluminium scrap or scrap      obtained from the virgin metal on which the appropriate      excise duty  has been  paid from  so much  of the  duty      leviable thereon  as is  in excess  of Rs.  200.00  per      metric tonne."      (Notification    No.     66/60     dated     20-4-1960) Notwithstanding the ll stilted style of the notification, it is, to  our mind,  clear that  what the  Central  Government intended and effected by this notification was to 403 fix the rate of levy at Rs. 500/- for the fully manufactured aluminium products,  thus making up for the levy at the rate of Rs.  300/- at  an intermediate stage. But these composite mills  which   made  both   half  manufactured   and   fully manufactured items  had to  be granted an exemption in cases where the  half-manufactured items  went into further stages of manufacture  after they  had  suffered  duty.  The  whole scheme of the exemption, as we see it, is that where ingots, bars, blocks  slabs billets,  shots and  pellets made out of aluminium scrap  or scrap  obtained from the virgin metal on which excise duty has already been paid, are used for making finished items  like sheets, there should be a reduction pro tanto in  the rate  of duty  leviable on  the final product. Thereby the  manufacturer would  have paid Rs. 300/- for the items at  the intermediate  stage of manufacture and if such items were  used up  in the  later stages  of  manufacturing finished goods,  he would  get concession  to that extent by being charged Rs. 200/- per metric tonne.      We have earlier pointed out that one of the features of the manufacturing  process is that when ingots, bars and the like are  used for  manufacturing  plates,  sheets,  circles etc., nearly  50% of  the former become scrap and have to be melted and recycled over again. Taking note of the fact that this 50%  deteriorates into  scrap, although it has suffered duty as  ingot, bar  or block,  the  exemption  notification included scrap  metal which  has suffered  tax as qualifying for the  concessional rate  of Rs.  200/- when it eventually went into  the  manufacture  of  the  final  products  viz., plates,  sheets,  circles,  etc.  Once  we  understand  this commonsense view,  which fits  in with  fairness and  law as expressed  in   the  language   of  the   notification,  the resolution of  the  conflicting  contentions  becomes  easy, since, on the facts, there is no dispute.      We will  now proceed  to a  statement of  the  relevant circumstances which invited the application of the exemption notification. The  official materials  before  us  establish beyond  doubt-and  so  no  serious  difference  between  the parties is discernible-that from March, 1, 1960 to April 24, 1960 aluminium  slabs  which  had  suffered  duty  on  semi- finished manufacture  was 649.5620 MT. From this quantity of slabs, sheets.,  strips and circles amounting to 283.2925 MT were manufactured,  of which  188.7336 MT  were  cleared  by payment of duty at the rate of Rs. 200/- per MT. 10490 MT of sheets and  strips was  eligible to  be cleared free of duty being for  purposes of  electrolysis which was duty-free. By simple arithmetic  worked out  by the  Collector of  Central Excise and forwarded to the Central Government (Annexure E), the balance  of stock  of finished goods manufactured out of duty paid  slabs as  on April  25, 1960 was 93.5099 MT. This quantity was actually cleared on payment of duty at the rate of 500/- per MT. But having been made out of duty-paid slabs

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the exemption notification applied and only Rs. 200/- per MT was payable.  Thus the  excess collected i.e., Rs. 300/- per MT was  refundable. So obvious. And yet it took an appeal to this Court  (C.A. No.  635 of  1964)  and  a  direction  for reconsideration  before   the   Central   Government   would reluctantly consent  to refund  as per  order  db-  21-8-67. There is no surviving dispute on this matter. 404      Shri A.  K. Sen, appearing for the appellant, contended that much  h more  by way  of excess  exaction had been made whose return  he claimed  in this  appeal. He  relied on the figures furnished  by the  Collector of  Central  Excise  in Annexure to  make good  his case.  For,  according  to  that report, ’duty-paid  slabs issued  for Rolling  Mill  between March, 1  1960 and April 24, 1960.... 649.5620 MT. Duty paid slabs in  stock as  on April  25, 1960....  12.9830 MT. Duty paid slabs  in form  of scrap  and under processing 353.2865 MT.. This was natural, as the manufacture of sheets, circles etc., out  of slabs  involved degradation of about 50%, into scrap which,  of course,  after  sustaining  slight  losses, would go  back into  the re-cycling  process of manufacture. ’two important  points need  mention. The  State has no case (in the  order  under  attack)  that  any  slabs  which  had suffered duty  had been  sold as  slabs. ’the whole quantity had gone  into manufacture  of sheets, circles and what not. It is  common case that from April 25, 1960 all the finished goods cleared  by Excise officials had been subjected to Rs. 500/- per MT of duty.      The above  facts make out, fool-proof fashion, that the entire 649  odd MT of slabs had been transformed into sheets and the  like. If  the latter had been cleared on payment of excise at  Rs. 500 per MT-and it is admitted to have been so done-it follows  that the levy was excessive to the tonne of Rs. 300,/-  per MT as the Notification granting exemption on April 20,  1960 had  reduced the  levy in  such cases to Rs. 200/- per MT.      This almost  inescapable conclusion  was sought  to  be countered by  Sri Sanghi  in a  strenuous  but  unsuccessful submission which  had appealed  to the Central Government in its order  d/- 21-8-67  ’the reasoning, only to be stated to be rejected, urged was that only if the sheets, circles etc. had been  manufactured wholly  and solely  out of  duty-paid slabs could  the exemption  be enjoyed.  This  condition  of eligibility for  concessional rate  of duty  is  beyond  the notification altogether and perhaps beyond reason. True, the order of  Government in revision, rejecting the refund claim states this  as the  solitary ground.  We quote the relevant portion: P       "As the wordings of the Notification would go to show,      the  concessional   rate  of   Rs.  200/-  per  MT  was      applicable only  to those Aluminium manufactures, which      were made out of duty paid aluminium in any crude form;      this would  evidently not  cover aluminium manufactures      made partly out of duty paid and partly out of non-duty      paid crude."                     (emphasis, ours) We wonder  where the  author  of  this  order  discovers  in statutory notification from exemption altogether manufacture partly out  of duty  paid crude‘  if 99%  of duty paid crude were used  for manufacture  of sheets  etc.,should the final product be  exigible to  tax at  Rs.500 per MT? would it not virtually mean  that merely  because a  wee bit  of non-duty paid ’crude’ were mixed the party is penalised by payment at Rs. 800/- per 405

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MT ?  An odd  and unreasonable  result   Shri Sanghi for The respondent rightly  asked whether a manufacturer who used 1% duty paid  and 99%  non-duty paid  slabs in producing sheets can get  away within  from liability for duty at the rate of Rs. 500/-  ? No,  not at  all. Such an assessee will get the benefit of  the concessional rate (shall we call it rebate?) only to  the extent  of the  1% and will be  subject to full payment at Rs. 500/- for the rest. If the mathematical facts are undisputed,  the factual  conclusion is  irrefutable. Of course, had  there been  failure on the part of the assessee to keep  the statutory  stock registers  or other  wise  his figures were  suspicious the  Collector of  Excise could and would, ordinarily  without fear  of  judicial  interference, work out  how much  of’ the  raw  material  had  borne  duty already. Here  the facts  are  free  from  dispute  and  the respondent does  not even  hint at the possibility of a part of the  gross mass  of 649.5620  MT which  had been  already dutied at  the slab  stage (some  of which had been shed but reverted to  the scrap  state in  the inevitable  process of manufacture and had been thrown, as fresh raw material, into the  on-going  cyclic  movement  for  re-creation  of  final products) had  been sold away at that intermediate level. On that footing,  the  appellant  was  entitled  to  pro  tanto remission as  explained above.   Both  sides are at one that after April  24, 1960 excise clearance of finished aluminium products was  granted to  the appellant  on the single point levy system at Rs. 500/- per MT.      The marginal mystique in interpretation has arisen from mis-r  understanding   the  spirit   and   letter   of   the notification where  it reads  ’the virgin metal on which the appropriate Excise  Duty has  been paid  from so much of the duty leviable  thereon as  is in  excess of  Rs. 200.00  per metric tonne.  There is  no need  to go down to the order of the Collector  of Excise  and examine his reasons because it is somewhat  obscure and  sheds no  more light  on the issue before us.      To return what has been taken wrongly is as much a duty and grace  of government  as to  levy relentlessly and fully what is  due. Default  in either  not altogether unfamiliar, brings  down   the  confidence   of  the  community  in  the Administration. That  a party  should have  been put  to two expensive and  elongated litigations to recover a relatively small’ sum is regrettable.      Assuming that  the tax  officers have  an alibi  of two interpretations of  the given  notification, the question is whether plainer  use  of  language  is  an  art  beyond  the draftsman skills  ? We  think not. To liquidate obscurity in legislative language,  by abandoning  obsolescent vocabulary and style of expression is an overdue measure if we remember the  Renton   Committee’s  observations   made  for  British consumers but applies a fortiori to our Republic:           "There is  hardly any part of our national life or      of our  personal lives  that is  not  affected  by  one      statute or  another. The  affairs of local authorities,      nationalized  industries,   public   corporations   and      private commerce are regulated by legislation. The life      of  the   ordinary  citizen   is  affected  by  various      provisions of the statute book from credle to grave." 406 The rule  of law is the cornerstone of democracy and how can there be  A ra  rule of law society if the members, the bulk of whom  are too  poor to  buy legal services, cannot decode the   legislator’s    law   and    therefore   obey   it   ? Incomprehensible law annoys the Administration and estranges the citizen  at a  time when  quick justice and less sterile

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litigation are  the desiderata.  The command  of the law can claim the  allegiance of  the  lay  only  by  simplicity  in legislation. B      The appeal,  for reasons  assigned earlier.  is allowed with costs.                                              Appeal allowed. P.H.P. 407