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PETITIONER: HANSRAJ GORDHANDAS

       Vs.

RESPONDENT: H.  H.  DAVE,  ASSISTANT  COLLECTOR  OF   CENTRAL  EXCISE  &

DATE OF JUDGMENT: 27/09/1968

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SHAH, J.C. MITTER, G.K. HEGDE, K.S. GROVER, A.N.

CITATION:  1970 AIR  755            1969 SCR  (2) 343  CITATOR INFO :  R          1982 SC 149  (225)  D          1985 SC 537  (11)  R          1991 SC 772  (15)  E&D        1991 SC2049  (6)  E&D        1992 SC2014  (23)

ACT:     Central Excises & Salt Act 1944--Rules made  under--Rule 8  giving  power to Central Government to  exempt  excisable goods  from duty--Exemptions under Notifications dated  july 31,  1959  and April 30, 1960 whether apply  only  to  goods produced  by  a cooperative society for itself and  not  for others--Taxing   statutes--interpretation of--Relevance   of object of giving exemption from duty.

HEADNOTE:     The  appellant  who was a dealer in textiles  in  Bombay entered  into  an agreement with  a  registered  cooperative society for weaving yarn supplied by him into cotton fabrics on  powerlooms  owned  by  its  members.   The  Society  had obtained L-4 licence as required by the Central Excises  and Salt  Act.  1944. Under Rule 8 of the Rules made  under  the Act.  the  Central Government was empowered  to  exempt  any excisable  goods from the whole or any part of duty  payable on  such goods.  In exercise of the power under Rule 8,  the Central  Government by a notification dated July  31,  1959’ granted  exemption  to  "cotton  fabrics  produced  by   any Cooperative  Society/formed of owners of  cotton  powerlooms which is .registered or which may be registered on or before March 31, 1961" subject to certain conditions set out in the notification. A subsequent notification dated April 30, 1960 granted exemption to "cotton fabrics produced on  powerlooms owned by any Cooperative Society or owned by or allotted  to the members of the Society which is registered on or  before March 31, 1961".  On the strength of these notifications the appellant  sought exemption from excise duty in respect  of’ the  cotton  fabrics  which  were  manufactured  for  it  on powerlooms   by  the  Cooperative  Society.     The   excise authorities did not accept the claim for exemption and in  a

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writ  petition filed by the appellant, the High  Court  gave only  partial  relief.  In  appeal  before  this  Court  the question  was  whether  the  exemption  granted  under  the; notifications  in  question could be claimed only  when  the cotton  fabrics were manufactured by a  Cooperative  Society ’for itself.     HELD:  On  a true construction of the  language  of  the notifications dated July 31, 1959 and April 30, 1960, it  is clear  that all that is required for claiming  exemption  is that the cotton fabrics must be produced on powerlooms owned by the Cooperative Society.  There is no further requirement under the two notifications that the cotton fabrics must  be produced  by  the  cooperative society  on  powerlooms  "for itself’.  The  appellant  was  therefore  entitled  to   the exemption claimed. [259 D-E]      It  is well established that in a taxing statute  there is no room for any intendment but regard must be had to  the dear meaning of words.  A statutory notification may not  be extended so as to meet a casus omissus. It could be that the object  behind  the  two notifications in  question  was  to encourage  the  actual manufacturers of  handloom  cloth  to switch  over, to powerlooms by constituting themselves  into Cooperative   Societies.   But,  the.   operation   of   the notifications had to be judged not by the object which 254 the  rule,  making authority had in mind but  by  the  words which it had employed to effectuate the legislative intent.     Applying  this principle, the case of the appellant  was covered  by the language of the: two notifications  and  the appellant was entitled to exemption from excise duty for the cotton fabrics. [259 E; 260 A-D)]     Salomon  v.  Salomon  & Co. [1897]  A.C.  22,   38   and Crawford  v. Spooner, 6 Moo P.C.C. 8, referred to.

JUDGMENT:     CIVIL APPELLATE JURISDICTION:  Civil Appeal No. 1049  of 1965.     Appeal  from the judgment and order dated July 31,  1964 of  the Gujarat High Court in Special Civil Application  No. 1054 of 1963.     Soli  Sorabjee,  D.M.  Damodar,  B.  Datta   and    J.B. Dadachanji, for the appellant.     V.   A.   Seyid  Muhammad  and  S.P.  Nayar,   for   the respondents.     P.R.  Mridul,  Janendra  Lal  and  B.R.  Agarwala,   for intervener No. 1.     J.B. Dadachanji, for interveners Nos. 2 and 3.     Ramaswam, J.  This appeal is brought by certificate from the  judgment of the High Court of Gujarat, dated  July  31, 1964 in Special Civil Application No. 1054 of 1963.     The   appellant  is  the  sole  proprietor   of   Messrs Gordhandas  and  Co.  carrying on business as  a  dealer  in textiles in Bombay. Under an agreement between the appellant on the one hand and the Gandevi Vanat Udhoog Sahkari  Mandli Ltd. (hereinafter referred to as the ’Society’) the  Society manufactured  cotton fabrics during the period between June, 1959 and September 1959 and from October 1, 1959 to  January 31,  1961 for the appellant on certain terms and  conditions which   were  later reduced to writing on October 12,  1959. Under  these terms, the Society agreed to carry out  weaving work  on  behalf  of the appellant  on  payment  of  weaving charges fixed at 19 nP. per yard which included expenses the Society would have to incur in transporting yarn from Bombay

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and  cotton  fabrics woven by the Society  to  Bombay.   The appellant  was to supply yarn to be delivered at  Bombay  to the Society and the Society was to made its own  arrangement to  bring  the yarn to its factory at  Gandevi.   Clause  11 provided that the yarn supplied by the appellant,  remaining either  in stock or in process or in the form of  ready-made pieces  would be in the absolute ownership of the  appellant and the Society, as the bailee of the yarn, undertook to 255 take  such care of it as it would normally take if the  yarn belonged  to it.  The Society also undertook to   have   the yam  insured  against  fire,  theft  and  all  other   risks including  transit risks and further undertook to  reimburse the appellant in case it failed to do so.  The terms of  the agreement  though  recorded on October 12, 1959 were  to  be deemed  to  be  effective as from April  21,  1959  and  the agreement  was  terminable  by either party  by  giving  one month’s notice.     The  Society was a cooperative society carrying  on  its work at Gandevi and was registered on or before May 31, 1961 and  consisted  of  members   who  owned   powerlooms.   The Society started the weaving work for the appellant some time in  May or June 1959 and supplied to the  appellant  between June  1, 1959 and January 3, 1961 cotton  fabrics  measuring 3,19,460  yards.  The Society had obtained  L-4  licence  as required   by  the  Central  Excises  and  Salt  Act,   1944 (hereinafter  referred to as the ’Act’). By  letters,  dated August  29, 1959 and October 27, 1961 the Excise  Department had  granted exemption from  excise  duty payable on  cotton fabrics  manufactured by the Society under the  notification issued by the Central Government.  On November 10, 1961  the excise  authorities  issued  a  notice.  to.  the  appellant demanding  a sum of Rs. 1,69,263.44 payable as excise  duty. It  was alleged that the duty was. payable by the  appellant as it had got the goods manufactured through the Society and had  got them removed from the Society’s factory at  Gandevi without   payment  of  duty.   On  January  10,   1962   the Superintendent  of  Central  Excise:,  Bulsar  sent  another notice to show cause why penalty should not be imposed  upon the  appellant  for  contravention of rule 9  and  why  duty should  not be charged for the cotton fabrics so removed  by the  appellant.  The appellant showed cause and on  November 26,  1962  the  Assistant Collector of  Central  Excise  and Customs,  Surat  held that the appellant was liable  to  pay excise  duty to. the extent of Rs.. 2,20,574.74,  being  the total  amount  of basic duty and a penalty of  Rs.  250  was levied for contravention of rule 9.  The appellant preferred an appeal to the Collector of Central Excise Baroda but  the appeal  was dismissed.  Thereafter the appellant  moved  the High   Court  of Gujarat for grant of a writ under Art.  226 of  the  Constitution.  The High Court  dismissed  the  writ petition  by  its  judgment, dated July 31, 1964 but gave  a direction  that the: respondent was to work out  the  excise duty  on  the  footing that the appellant  was  entitled  to exemption from duty altogether in respect of goods  supplied for the period from June 1, 1959 to September 30, 1959.   As regards the two other periods i,e., October 1, 1959 to April 30, 1960 and from May 1, 1960 to January 31, 1961, the  High Court   dismissed  the  writ  petition  and   directed   the respondent to charge duty at the rate of 29.3 nP per  square meter. 256     Clause (d) of s. 2 of the Act defines "excisable  goods" as  meaning goods specified in the First Schedule  as  being subject  to a duty of excise. Item 19 in the First  Schedule

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provides  for excise duty at different rates depending  upon the  variety  of  cotton fabrics.  Section 3  which  is  the charging  section, provides for the levy. and collection  of duties  specified  in the First Schedule  on  all  excisable goods  which are produced or manufactured in India.  Rule  8 authorises  the Central Government to exempt  any  excisable goods  from  the whole or any part of duty payable  on  such goods.   Clause  (1) of rule 9 provides  that  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  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. Clause (2) of  that  rule provides  that if any excisable goods are, in  contravention of  sub-rule (1 ), deposited in, or removed from  any  place specified  therein,  the producer  or  manufacturer  thereof shall  pay  the  duty leviable on such  goods  upon  written demand  made by the proper officer and shall also be  liable to  a  penalty which may extend to two thousand  rupees  and such goods shall be liable to confiscation.  In pursuance of the  power  under  rule  8, the  Central  Government  issued notifications  from  time  to time  granting  exemptions  on cotton fabrics, though such goods were excisable goods under tariff  item 19.  The first relevant notification  is  dated January  5, 1957.  By  this  notification   certain  classes of   cotton  fabrics  were  exempt from payment   of  excise duty.   of  the  items exempted the seventh   item   is   as follows:                    "Cotton  fabrics  manufactured by  or  on               behalf  of  the  same person in  one  or  more               factories   commonly   known   as   powerlooms               (without spinning  plants)  in which less than               5 powerlooms in all are installed;" The  next relevant notification is notification  No.  74/59, dated July 31, 1959 which reads. as follows:                    "G.S.R.  899   In pursuance  of  sub-rule               (1)   of rule 8 of the Central  Excise  Rules,               1944,  as in force in India and as applied  to               the  State   of   Pondicherry,’  the   Central               Government   hereby  exempted  cotton  fabrics               produced by any cooperative society formed  of               owners   of   cotton  powerlooms,   which   is               registered  or which may be registered  on  or               before  the  31st March, 1961  under  any  law               relating  to co-operative societies  from  the               whole of the duty leviable thereon, subject to               the following conditions :-- 257               (a)  that  every member  of  the  co-operative               society  has been exempt from excise duty for-               three years immediately preceding the date  of               his  joining  such society;               (b) that the total number of cotton powerlooms               owned by the co.-operative society is not more               than   four  times  the  number  of    members               forming  such society;               (c)  that  a certificate is produced  by  each               member  of the co-operative society  from  the               State Government concerned or such officer  as               may be nominated by the State Government  that               he is a bona fide member of the   society  and               that  the number of cotton powerlooms in   his               ownership  and actually operated by  him  does

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             not   exceed four and did not exceed  four  at               any  time during  the three years  immediately               preceding   the  date  of  his   joining   the               society,  and that he would have  been  exempt               from excise duty even if he had not joined the               co-operative  society;................     The  Central  Government issued  another   notification, dated  April  30, 1960 by which  the  earlier  notification, dated  July 31, 1959 was superseded.  By  this  notification the  Central Government exempted cotton fabrics produced  on power-looms owned by any co-operative society or owned by or allotted to the members of the society from the whole of the duty  leviable  thereon  subject .to  the  four  conditions. therein  set out.  The notification,dated April 30, 1960  is to the following effect:                   "In pursuance of sub rule (1 ) of  rule  8               of   the  Central. Excise Rules, 1944,  as  in               force in India and as applied to the State  of               Pondicherry,   and  in  supersession  of   the               Notification  of the Govt. of India,  Ministry               of  Finance (Department of Revenue) No.  74/59               Central Excise, dated the 31st July 1959,  the               Central   Government  hereby  exempts   cotton               fabrics  produced on powerlooms owned  by  any               cooperative society or owned by or allotted to               the   members  of  the   society,   which   is               registered  or which may be registered  on  or               before  the  31st March, 1961  under  any  law               relating  to cooperative societies,  from  the               whole of the duty leviable thereon subject  to               the following conditions :-                    (a) that every member of the  cooperative               society who has been a manufacturer of  cotton               fabrics  on powerlooms, has been  exempt  from               excise   duty   for  three  years  immediately               preceding   the  date  of  his  joining   such               society. 258                      (b)  that  the  total  No.  of   cotton               powerlooms owned by the cooperative society or               owned  by  or allotted to its members  is  not               more  than  four times the number  of  members               forming such society.                      (c)    that   each   member   of    the               cooperative   society produces  a  certificate               from  the State Government concerned  or  such               officer  as.  may be nominated  by  the  State               Government that he is a bona fide  member   of               the  society  and that the  number  of  cotton               power-looms  owned by or allotted to  him  and               actually operated by him does not exceed  four               and  did not exceed four at .any  time  during               that  three  years immediately  preceding  the               date  of his joining the society and  that  he               would  have been exempt from excise duty  even               if  he had not joined the cooperative  society               and.......................  " The main contention on behalf of the appellant is. that  the ,case  fell  within the language of the  two  notifications, dated July 31, 1959 and April 30, 1960 and the appellant was entitled  to ,exemption from payment of excise duty  on  the cotton fabrics. The argument was stressed that the exemption applied to. all cotton fabrics which were produced on power- looms  owned  by the Cooperative Society or  on  powerlooms. allotted   to  its  members  and  it  was  not  a   relevant

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consideration  as  to  who. produced  or  manufactured  such fabrics, whether it was the Society itself or its members or even  outsiders.  It was conceded by the appellant  that  it was  the  owner of the cotton fabrics.  But even  upon  that assumption  the  claim  of  the appellant  is  that  it  was entitled to exemption from excise duty as it was covered  by the  language of the two notifications already referred  to. In  our  opinion,  the argument of the  appellant  is  well- founded and must  be accepted as. correct. The notification, dated   July  31, 1959 grants exemption to  "cotton  fabrics produced  by any Co-operative Society formed of  owners  ,of cotton  powerlooms  which  is registered  or  which  may  be registered  on  or before March 31, 1961"  subject  to  four conditions  set  out  in  the  notification.   In  the  next notification, dated April 30, 1960 exemption was granted  to "cotton  fabrics.  produced  on  powerlooms  owned  by   any cooperative  society or owned by or allotted to the  members of  the  society,  which  is  registered  or  which  may  be registered  on  or before March 31, 1961"  subject  to,  the conditions specified in the notification.  It was  contended on  behalf of the appellant that under the contract  between the appellant and the ’Society there was no relationship  of master and servant but. the appellant supplied raw  material and  the  contractor i.e., the Society produced  the  goods. But   even  on  the  assumption  that  the   appellant   had manufactured  the  goods by employing hired labour  and  was therefore  a manufacturer, still the appellant was  entitled to 259 exemption  from excise duty since the case fell  within  the language  of the two notifications, dated July 31, 1959  and April  30,  1960, and the cotton fabrics. were  produced  on power-looms  owned by the co-operative society and there  is nothing  in  the notifications to suggest  that  the  cotton fabrics  should be produced by the Cooperative Society  "for itself" and not for a third party before it was entitled  to claim  exemption  from  excise duty.  It  was  contended  on behalf  of  the  respondent  that  the  object  of  granting exemption  was  to encourage the formation  of  co-operative societies  which not only produced cotton fabrics but  which also  consisted  of  members, not  only  owning  but  having actually operated not more than four power-looms during  the three  years immediately  preceding their having joined  the society.   The policy was that  instead of each such  member operating  his  looms  on his own, he  should  combine  with others  by forming a society which, through the  cooperative effort  should  produce cloth.  The intention was  that  the goods produced for which exemption could be claimed must  be goods  produced on its own behalf by the society.   We   are unable  to accept the contention put forward on   behalf  of the   respondents as correct. On a true construction of  the language of the notifications, dated July 31, 1959 and April 30, 1960 it is clear that all that is. required for claiming exemption  is  that the cotton fabrics must be  produced  on power-looms  owned by the cooperative society.  There is  no further requirement  under  the  two notifications that  the cotton fabrics must be produced by the Co-operative  Society on  the powerlooms "for  itself".  It  is  well  established that in a taxing statute there is no room for any intendment but  regard must be had to the clear meaning of  the  words. The  entire matter is governed wholly by  the  language   of the  notificatlon.   If the tax-payer is  within  the  plain terms  of  the exemption it cannot be denied its benefit  by calling  in  aid  any supposed intention  of  the  exempting authority.   If  such intention can  be  gathered  from  the

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construction  of  the  words  of  the  notification  or   by necessary  implication therefrom, the matter  is  different, but  that is not the case here.  In this connection  we  may refer  to  the  observations of Lord Watson  in  Salomon  v. Salomon & Co.(1):                    "Intentlon of the legislature is a common               but  very  slippery phrase,  which,  popularly               understood may signify anything from intention               embodied in positive enactment to  speculative               opinion  as to what the  legislature  probably               would  have meant, although there has been  an               omission  to enact it.  In a Court of  Law  or               Equity,   what the Legislature intended to  be               done   or   not  to  be  done  can   only   be               legitimately  ascertained from that  which  it               has  chosen to enact, either in express  words               o.r by reasonable and necessary implication." (1) [1897] A.C. 22, 38. 260 It  is  an application of this principle  that  a  statutory notification  may  not  be extended so as to  meet  a  casus omissus. As appears  in the judgment of the Privy Council in Crawford v. Spooner(1).                 "....we   cannot  aid   the    legislature’s               defective phrasing of the Act, we cannot  add,               and  mend,  and,  by  construction,  make   up               deficiencies which are left there." Learned Council for the respondents is possibly right in his submission  that the object behind the two notifications  is to  encourage the actual manufacturers of handloom cloth  to switch  over to power-looms by constituting themselves  into Cooperative   Societies.   But   the   operation   of    the notifications  has to be judged not by the object which  the rule-making authority had in mind but by the words which  it has employed to effectuate the legislative intent.  Applying this  principle  we  are of opinion that  the  case  of  the appellant   is   covered  by  the  language   of   the   two notifications,  dated July 31, 1959 and April 30,  1960  and the appellant is entitled to exemption from excise duty  for the  cotton fabrics produced for the period between  October 1, 1959 to April 30, 1960 and from May 1, 1960 to January 3, 1961.   It follows therefore that the appellant is  entitled to the grant of a writ in the nature of certiorari to  quash the  order of the Assistant Collector of Central  Excise  of Baroda,  dated November 26, 1962 and the appellate order  of the Collector of Central Excise, dated November 12, 1963.     For  the reasons expressed we hold that the judgment  of the High Court of Gujarat, dated July 31, 1964 should be set aside,  that  Special  Civil Application No.  1054  of  1963 should  be  allowed  and  that  a  writ  in  the  nature  of certiorari  should  be  granted to quash the  order  of  the Assistant Collector of Excise and Customs dated November 26, 1962 and the order of the Collector of Excise dated November 12, 1963.  This appeal is accordingly allowed with costs. R.K.P.S.                                 Appeal allowed. (1) 6 Moo. P.C.C. 8. 261