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PETITIONER: COLLECTOR OF CENTRAL EXCISE, PATNA

       Vs.

RESPONDENT: USHA MARTIN INDUSTRIES

DATE OF JUDGMENT:       28/08/1997

BENCH: SUHAS C. SEN, B. N. KIRPAL, K. T. THOMAS

ACT:

HEADNOTE:

JUDGMENT:                             WITH  [Civil Appeal Nos. 2080-2081 of 1996, 10440-10441 of 1995)                       J U D G M E N T THOMAS, J.      The common  question involved  in all  these appeals is whether the benefit of excise duty exemption (granted by the Central Government  as per  certain  notifications)  can  be claimed in  respect of commodities made out of raw materials on  which   no  excise   duty  was   payable.  The  relevant notifications exempted  such commodities  from  excise  duty under the  Central Excise and Salt Act, 1944 (for short "the Act’), if  they were  produced from  materials on  which the appropriate amount  of duty of excise has already been paid. As the  Central Excise and Gold (Control) Appellate Tribunal (for short  the Tribunal)  by different  ordered upheld such claims made  by certain  manufacturers the Revenue has filed these appeals  through  the  collectors  of  Central  Excise concerned.      Avoiding  proliferation  with  facts  in  Civil  Appeal No.2319 of  1989 filed by Collector of excise, Patna against the respondent M/s Usha Martin Industries Ltd.      Respondent in  that case  manufacturers wire-rods(which fall under  Tariff  Item  26AA(1a)  of  the  central  Excise Tariff). For  manufacturing such wire-rods the raw materials used were  steel  products  including  billets.  Such  steel products were procured from stockyards of manufacturers like TISCO etc.  The Superintendent  of Central Excise concerned, while  making   assessment  of   the  duty  payable  by  the respondent, demanded  that excise duty should have been paid on ire  rods since the billets used for its manufacture were totally exempted  from  duty.  The  Assistant  Collector  of central  Excise   upheld  the   aforesaid   stand   of   the Superintendent and assessed excise duty on 1721.36 Mt. tones of such  wire-rods. However,  the said order was reversed by the Collector  of Central  Excise (Appeals)  on the  premise that the  input goods  cleared on nil payment of excise duty should  be   treated  as  goods  cleared  after  payment  of appropriate amount  of duty. Revenue did not agree with that premise and  hence they  approached the  Tribunal in  second appeal and the Tribunal passed the impugned order confirming

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the view of the Collector of Appeals.      In the  remaining appeals  also the  same position  has been adopted  by different  benches of  the Tribunal, though the notifications  under which  exemption was  claimed  were different,   nevertheless    closely   similar.    If    the interpretation placed  by the  Tribunal on the expression in the notification  i.e." on  which appropriate amount of duty has been  paid" is  sustainable the result would be that all the impugned orders would deserve to be upheld.      The notification on which both sides placed reliance in the case  against M/s  Usha Martin Industries Ltd. was dated 30.11.63, but  that was  amended from  time to  time. As the assessment order  related to  a  period  in  1982  we  would reproduce  the   notification  as  it  stood  buy  the  last amendment thereto dated 7.4.1981.      "Exemption in  goods falling  under      item 26AA  (1a) made from duty paid      material:           In  exercise   of  the  powers      conferred by sub-rule (1) of Rule 8      of the  Central excise  rules, 1944      and   in    supersession   of   the      Notification of  the Government  of      India  in   the  M.F.   (D.R.)  No.      131/62-CE.,  dated  13.6.1962,  the      Central Government  hereby  exempts      Iron  or   Steel  products  falling      under sub-item (1a) of Item No.26AA      made  from  any  of  the  following      materials or a combination there of      namely:-      (i) fresh  unused re-rollable scrap      on which  the appropriate amount of      duty of  excise  has  already  been      paid.      (ii) semi-finished  steel including      blooms, billets.  slabs, sheet bars      tin bars and hoe bars, on which the      appropriate  amount   of  duty   of      excise has already been paid.      (iii)  old   and  used  re-rollable      scrap.      (iv) other  iron or  steel products      falling under sub-item (1a) of item      No. 26AA of the said first schedule      on which  the appropriate  duty  of      excise has  already been  paid from      payment of the whole of the duty of      excise leviable  on such products."      ( underlines supplied)      There is no doubt that as per the above notification if any amount  of duty  has been  paid on the raw material, the output product  would escape  from excise  duty.  The  doubt arose was regarding the expression in the notification i.e." on which  the appropriate  amount  of  duty  of  excise  has already been  paid" as  to whether  it  is  capable  of  two interpretations, one  as claimed  by the  assessee  and  the other as putforth by the revenue".      Much reliance was placed by the Revenue on the judgment of this  Court in Ahura Chemical products Pvt Ltd. vs. Union of India  (1981 ELT  613). The  Tribunal found that the said decision was  not relevant  for the reason that the question before  the   Supreme  Court  was  whether  the  goods  were purchased from  open market  or from the manufacturer. A two judge Bench  of this  Court  has  considered  the  exemption

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clause in  a similar  notification involved  in that case as per  which   certain  "preparations   intended  for  use  in industrial process"  were exempted from duty " if in respect of surface  active agents  used in  the manufacture  of such preparations the appropriate amount of the duty of excise or the additional  duty has  already been  paid or  where  such surface active  agents are purchased from the open market on or after  20th day  of January, 1968." if the surface active agents were  purchased from open market it was immaterial in that case whether the input commodity was exempted from duty or not.  The assessee’s  stand in that case was that the raw material was  purchased from  open market. The said stand of the assessee was upheld and hence there was no need for this Court in  that case  to embark  on the  first  limb  of  the exemption Clause.  So the observations relating to that limb are only obiter.      Mr. M.  Gaurishankar Murthy,  learned counsel  for  the Revenue placed  reliance on  the following  observations  of this Court  in Andhra  Re-Rolling Works, Hyderabad vs. Union of India & Others [1986 Supple. SCC 263]:      " It  is only  if  the  appropriate      amount of  duty  had  already  been      paid on  the article  which  formed      the raw material for manufacture of      the product  covered by  item 26AA,      that  the   manufacturer  will   be      entitled   to    a    proportionate      remission of the duty on the latter      product. Inasmuch  as the  untested      rails were  exempt  from  duty  and      hence no  amount whatever  had been      paid by  way of  duty on  the  said      article  from   out  of  which  M.S      Rounds  were  manufactured,  it  is      obvious that  the  benefit  of  the      notification cannot  be claimed  by      the appellant."      The said  observations were  made by  this court  while interpreting a notification issued by the Central Government exempting iron  and steel  products under  tariff Item  26AA "if made  from another  article falling  under the said item and having  already paid the appropriate amount of duty from so much  of the  duty of excise as is equivalent to the duty payable on the said article." (emphasis supplied)      Even a  glance through the said notification would show that the  exemption envisaged therein was not total but only partial. What  it clearly  meant was  deduction on duty from the  amount  of  duty  already  paid  and,  therefore,  that notification is  different in content as  well as intent and the ratio  therein cannot  be taken  as sufficient to fit in with the notification involved in the present appeals.      Learned counsel  on both  sides referred to the meaning of  the   words  "paid"  and  ’already  paid’  etc.  in  the notification  under   consideration  and   they  cited  some decisions as  to how  those words  were interpreted in other judgments. We  must bear  in mind  that  the  meaning  of  a particular English would used in a particular collocation of words need  not be  the exact  meaning when  used  in  other permutations. Lord  Green has  observed in Bidie vs. General Accident, Fire and Life Assurance corporation Ltd. [1948 (2) all. E.R. 995]      "Few words  in the English language      have a  natural or ordinary meaning      in the  sense that  they must be so      read that their meaning is entirely

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    independent of  their context.  The      method of  construing statutes that      i prefer  is not to take particular      words and  attribute to them a sort      of prima  facie meaning  which  you      may have  to displace or modify. it      is to  read the  statute as a whole      and ask  one-elf  the  question  in      this  state,   in   this   context,      relating  to  this  subject-matter,      what is  the true  meaning of  that      word."      In Bourne  vs. Norwich  Crematorium Ltd.  [1967 (2) AER 576] Stamp J. has reminded that "English words derive colour from those  which surround  them and  sentences are not mere collections of  words to  be  taken  out  of  the  sentence, defined separately by reference of the dictionary or decided cases."      If we take the words "already paid" in the notification delinked from  other words  employed  therein,  they  would, perhaps, land  support to  the contention  of the Revenue as the  said  combination  relates  to  an  antecedent  act  of payment. But  the word "already" is not the decisive term in the context because ‘he preceding word "appropriate", cannot be sidelined to piffle. The word "appropriate" is defined in Websters’s   New Dictionary  and Thesaurus (Concise Edition) as "  applicable, apposite,  appurtenant, apropos, apt.." In the World  book Dictionary  it is defined as ’ right for the occasion, suitable , proper, fitting...."      What is  the idea  behind  granting  exemption  to  the commodities indicated  in the  notification? One  reason  is that Central Government wanted to save certain raw materials and the  end products  made  with  them  from  double  duty. Another idea,  as could  be discerned  from it,  is that the reason which  prompted the Central Government to absolve one commodity from  duty must as well be applicable to the other commodity which is made out of the former. Therefore, we are not disposed  to  afford  a  narrow  interpretation  to  the expression (i.e.  on which the appropriate amount of duty of excise has  already been  paid) as excluding all cases where nil duty was paid for the input materials.      Sri V.  Sridharan, learned  counsel for  the respondent invited out  attention to another notification issued by the central Government (No. 178/83 CE dated 1.7.83) by which the Government exempted" textured yarn" from excise duty subject to the  condition that  the appropriate  duty of  excise has already been  paid in  respect of  the filament yarn used in the manufacture  of such  textured yarn.  The said exemption was further  circumscribed through  a proviso  added to  the main exemption clause which reads thus:      "Provided that nothing contained in      this notification  shall  apply  to      the  said  textured  yarn  if  such      textured yarn has been manufactured      out of      (i) the  said filament  yarn  other      than textured,  in respect of which      the exemptions  from the  whole  of      the duty  of excise  under the said      Central Excises  and  Salt  Act  or      from the  whole of  the  additional      duty under the said Central Excises      and Salt  Act or  from the whole of      the  additional   duty  under   the      Customs Tariff Act, as the case may

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    be, has been availed of ..."      On the  strength of  the above  proviso learned counsel advanced an  argument that  absence of such a proviso in the notification (with  which we are concerned in these appeals) would clinch  the issue. Mr. M. Gaurishankar Murthy, learned counsel for the Revenue, on the other hand, pointed out that the notification involved in the appeal was issued in 1963 and submitted  that it  was when  the manufacturers  claimed exemption even  in respect of goods whose raw materials were totally exempted from duty that the Central Government found it necessary  to make appropriate clarification in the later notification. Hence  he contended  that no  leverage can  be given to  the respondent  on the  Strength  of  the  proviso employed in the 1983 notification.      Having  bestowed   our  consideration   on  the   rival contentions we  are persuaded  to accept the argument of the learned counsel  for respondent for the main reason that the Central Government  could have  inserted the same proviso in the  notification   now  under   consideration,  by  way  of modification or  amendment if  the  Government  wanted  that meaning to  be adopted  to it. We find considerable force in the contention  that absence  of any  such  proviso  in  the notification(under our consideration) is consistent with the construction sought to be placed on it by the respondents.      How the Revenue has understood the notification or made others to  understand this  position can  be seen  from  the instructions or  circulars issued  by the  Central Board  of Excise and  Customs (for  short "the  Board") from  time  to time. One such circular is dated 15.5.1995 no. 125/36/95-CX. The material portion thereof are extracted below:           "There   are   a   number   of      notifications     which      exempt      specified goods provided such goods      have been  made from other goods on      which  the   appropriate  duty   of      excise has  already been paid board      has issued  instructions from  time      to time that in such cases, even if      the issued  instructions from  time      to time that in such cases, even if      the inputs are exempted from excise      duty, the exemption on the finished      goods  cannot  be  denied  on  that      ground.  Still,   cases  have  been      brought to  notice where  exemption      is being  denied on the ground that      the inputs  did not bear any excise      duty..... It  was clarified  by the      Board that in the case of S.O. dyes      made  from   exempted   dyes,   the      exemption cannot  be denied  on the      ground   that   the   inputs   were      exempted from the whole of the duty      of excise.  This logic  would apply      to other  similar cases  also where      exemption has  been  given  on  the      consideration  that   the  finished      products have been made from inputs      on which appropriate duty of excise      has already been paid."      Learned counsel  for the appellant adopted a contention that the circulars issued by the Board cannot take the place of judicial  interpretation of  statutory  notifications  as those circulars  could at best be reflective of that line of thinking or  the part  of the  department  for  a  time.  He

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pressed into  service  that  judicial  interpretation  of  a statutory provisions  or notifications thereunder should not be influenced  by  what  the  department  thought  it  at  a particular time.      No  doubt   the  court   has  to   interpret  statutory provisions and  notifications thereunder  as they  are  with emphasis to  the intention  of the legislature. But when the Board made  all others  to understand  a notification  in  a particular  manner   and  when   the   latter   have   acted accordingly, is  it open to the Revenue to turn against such persons on a premise contrary to such instructions?      Section 37-B  of the Act enjoins on the Board a duty to issue  such   instructions  and  directions  to  the  excise officers as  the Board  considers necessary or expedient for the purpose of uniformity in the classification of excisable goods or  with respect  to levy  of  duty  excised  on  such goods." It  is true that Section 37b was inserted in the Act only in December, 1985 but that fact cannot whittle down the binding effect  of the  circulars or  instructions issued by the Board earlier. Such instructions were not issued earlier for fancy  or as  rituals. Even  the pre-amendment circulars were issued  for the same purpose of achieving uniformity in imposing excise  duty on  excisable goods.  So the circular, whether issued  before December  1985 or  thereafter  should have the same binding effect on the Department.      Through a catena of decisions this Court has pronounced that Revenue cannot be permitted to take a stand contrary to the instructions  issued by  the Board.  It is  a  different matter that an assessee can contest the validity or legality of a  departmental instruction.  But that  right  cannot  be conceded to  the department,  more so when others have acted according to  such instructions,  [vide Collector of Central Excise. Bombay vs. Collector of Central Excise [1996(88) ELT 638], Ranadey Micronutrients vs. collector of Central Excise [1996(87) ELT  19] ,  Poulose and  Mathen vs.  collector  of central Excise [1997(90) ELT 264, British Machinery Supplies Co. vs.  Union of  India[1996(86) ELT  449]. Of  course  the appellate authority  is also not bound by the interpretation given by  the Board  but the assessing officer cannot take a view contrary to the Board’s interpretation.      We may  observe  particularly  that  a  special  aspect highlighted by the Bench in Poulose and Mathen vs. Collector of  Central  Excise  [1997(90)  ELT  264]  is  apposite  for fastening the  revenue with  binding force  as  regards  the instructions issued, while constructing a notification which was not  free from  doubt, Learned  judges in  that decision have observed thus:           "One  aspect  deserves  to  be      noticed  in   this   context.   The      earlier tariff  advice no. 83/81 on      the basis of which trade notice No.      222/81 was  issued by the Collector      of Central  Excise and  Customs  is      binding  on   the  department.   It      should be  given effect  to . There      is no  material on  record to  show      that this  has  been  rescinded  or      departed from, and even so, to what      extent.  Even   assuming  that  the      later  tariff  advice  No.6/85  has      taken a  different view about which      there is  no positive  material the      facts point  out that the concerned      department   itself    was   having      considerable   doubts   about   the

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    matter. The  position was  not free      from doubt.  It was far from clear.      In such  a case, where two opinions      are possible,  the assessee  should      be given  the benefit  of doubt and      that opinion which is in its favour      should be  given effect  to. In the      light   of   the   above,   it   is      unnecessary to adjudicate the other      points involved  in the  appeal  on      the merits."              (emphasis supplied)      Thus, looking  from different angles we are inclined to take the  view that  benefit  of  exemption  from  duty  can legitimately be  claimed by  the respondents  in respect  of those  goods   referred  to   in  the   notifications  under consideration the  raw materials  of which were not exigible to any  excise duty  at all.  In the  result, we dismiss all these appeals.