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PETITIONER: UNION OF INDIA & ORS.

       Vs.

RESPONDENT: RAMACHANDRA SAMBHAJI KANDEKAR ETC.

DATE OF JUDGMENT26/08/1980

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. SEN, A.P. (J) VENKATARAMIAH, E.S. (J)

CITATION:  1981 AIR   97            1981 SCR  (1) 513  1981 SCC  (1)   4

ACT:      Central Excise  Rules 1944-Rule  8(1) Item  7-provisos- Scope of-

HEADNOTE:      Exercising the  power of exemption conferred under rule 8(1)  of   the  Central  Excise  Rules,  1944,  the  Central Government by  a notification dated January 5, 1957 exempted certain varieties  of cotton  fabrics from  the whole of the excise duty  leviable thereon.  Item 7  set out  one of such varieties as under: "Cotton fabrics produced...powerlooms... provided that  the number  of  powerlooms  producing  cotton fabrics in such factories does not exceed four."      By a notification dated November 26, 1960 a proviso was added to this item stating that "this exemption shall not be applicable to  a manufacturer  who commences  production for the first time on or after the December 1, 1960 by acquiring powerlooms from  any other  person who  is  or  has  been  a licensee of  a powerloom factory." From March 1, 1961 item 7 was substituted  and from  April 1, 1961 a proviso was added to item  7, the  effect of both of which was that while from March 1,  1961 the benefit of exemption from excise duty was available only  to those manufacturers who had not more than two powerlooms  in their  factories, from and after April 1, 1961  even   this  limited   exemption  was  withdrawn  from manufacturers who commenced production for the first time on or after  April 1,  1961 by  acquiring powerlooms  from  any person who was or had been a licensee of powerloom factory.      From March  18, 1961  a second  proviso to  item 7  was added which  provides "where  a person employs not more than four powerlooms  and the  said powerlooms  are worked in not more than  one shift  no duty  shall be  payable in  respect thereof".      From April  1, 1961  a third  proviso was added stating "where a  person commences  manufacture of  the said fabrics for the  first time  on or  after April 1, 1961 by acquiring powerlooms from  any other  person who  is  or  has  been  a licensee of  powerloom factory  the rate per shift per month per powerloom shall be the next higher rate if any".      The respondents  had acquired powerlooms after April 1, 1961 from  persons who  were or  had been licensees and were

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manufacturing cotton  fabrics on  those powerlooms  prior to April 1,  1961. They claimed that since each of them had not more than  four powerlooms which worked in not more than one shift he was exempt from payment of excise duty by virtue of the second proviso to item 7.      The Superintendent  of Central Excise on the other hand contended that  the third  proviso carved  out an  exception from the second proviso and since 514 each of  the respondents  commenced  manufacture  of  cotton fabrics for  the first  time after  April 1, 1961 he was not exempt from  payment of  excise duty  but was  liable to pay duty at  the  next  higher  rate  provided  in  the  amended notification of March 18, 1961.      Appeals of  the respondents having been rejected by the Assistant Collector  and the  Collector they  filed writs in the High  Court challenging  the levy  of excise duty. Their writ petitions were allowed by the High Court.      Allowing the appeals ^      HELD:(1) It  is a  well settled  rule of interpretation applicable alike  to the  rule making  authority as  to  the legislature that where there are two expressions which could have been  used to  convey a  certain intention,  but one of these expressions  conveys that  intention less clearly than the other,  it is  proper to  conclude that if the draftsman used that  one of the two expressions which would convey the intention less  clearly, he  does not  intend to convey that intention at all. [523 A]      It is  clear on a plain grammatical construction of the proviso under  Item 7 of the Notification dated 5th January, 1957 that  the prescription  of the date 1st April, 1961 has reference only  to commencement  of production of the cotton fabrics and  not to  the acquisition of the powerlooms. What is required  is that  the production  of cotton fabrics must have been  commenced by  the manufacturer for the first time on or after 1st April, 1961 and not that the powerlooms also must have  been acquired  by him on or after that date. [520 C-D]      2 (a)  Even though  each of  the respondents  owned not more than  four powerlooms  he would be liable to pay excise duty at  the next higher rate under the third proviso to the notification dated March 18, 1961, if he started manufacture of cotton fabrics on his powerlooms for the first time on or after April  1, 1961,  irrespective whether  he acquired the powerlooms from  a licensee  before or after that date. [522 C-D]      (b) The  exemption under  item 7 is not applicable to a manufacturer who  has commenced  his  production  of  cotton fabrics for  the first  time on  or after  April 1, 1961, by acquiring powerlooms  from another person who is or has been a licensee of a powerloom factory. Two conditions which must exist before  the mischief  of the proviso is attracted are: (1) the  manufacturer  must  have  commenced  production  of cotton fabrics  for the first time on or after April 1, 1961 and (2)  the powerlooms  on  which  he  manufactures  cotton fabrics must  have been acquired by him from a person who is or has  been a  licensee of  a powerloom  factory. The event which attracts  the applicability of the proviso is that the manufacturer should  have  commenced  production  of  cotton fabrics on  these powerlooms  for the first time on or after April 1,  1961. If  this condition  is satisfied the proviso comes into  play and  withdraws the  exemption  which  would otherwise have been available to the manufacturer under item 7. [519H-520B, E]

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    (3) The  language and  structure of  the third  proviso being identical  with the  language  and  structure  of  the proviso under  item 7 of the notification dated 5th January, 1957 the  same view  must govern  the interpretation  of the third proviso. [521 E] 515      The third  proviso on its proper interpretation, enacts a substantive  provision for  payment of  excise duty at the next higher  rate in  the cases  therein specified  and this substantive provision  overrides the  second  proviso  which exempts  a   manufacturer  employing   not  more  than  four powerlooms and  working not more than one shift from payment of excise  duty in  those cases which do not fall within the third proviso  and where  a case,  is covered  by the  third proviso the  second proviso  would be  inapplicable and  the manufacturer would  be liable to pay excise duty at the next higher rate. [522 A-B]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Apptal Nos. 1285- 1296 of 1970.      Appeals by  Special Leave  from the  Judgment and order dated 6-3-1969  of the  Mysore High Court in W.P. Nos. 2560- 61/66 and  46, 47,  50, 51,  975, 1718, 1719, 1921, 1979 and 1980/67.      G. L.  Sanghi, M.  N. Shroff and Miss A. Subhashini for the Appellants.      R. B. Datar for the Respondent.      The Judgment of the Court was delivered by      BHAGWATI,  J.-These   appeals  by   special  leave  are directed against  the judgment  of the  Karnataka High Court allowing 12  writ petitions  filed by different respondents. Each of  the respondents owned at the material time not more than 4  powerlooms and  carried on business of manufacturing cotton  fabrics   on  those  powerlooms.  The  case  of  the respondents was  that each  of them  acquired his powerlooms from person  who were  or had  been  licensees  and  started manufacturing cotton  fabrics on  those powerlooms  prior to 1st April,  1961. The respondents claimed that since each of them had  not more  than 4  powerlooms in  his  factory,  no excise duty  was payable  on the cotton fabrics manufactured by  him  and  this  claim  for  exemption  was  based  on  a notification  dated   5th  January,   1957  issued   by  the Government of India in exercise of the powers conferred upon it by  Rule 8(1)  of the  Central Excise  Rules,  1944.  The Superintendent of  Central  Excise,  however.  rejected  the claim for exemption on the ground that though the powerlooms owned by  each of  the respondents  were not  more  than  4, manufacture of  cotton fabrics on them had started after 1st April, 1961  and none  of the  respondents  was,  therefore, entitled to  exemption from  payment of  excise duty  on the cotton fabrics  manufactured by  him. The  excise  duty  was accordingly  levied  on  each  of  the  respondents  by  the Superintendent of Central Excise and this levy was confirmed in appeal  by the  Assistant Collector and in further appeal by the  Collector of Central Excise. Each of the respondents thereupon preferred  a writ  petition in  the Karnataka High Court challenging the levy of excise 516 duty and  praying that  a writ  of mandamus  may  be  issued against the Excise Authorities directing them not to enforce the notice  demanding excise  duty. The  writ petitions were allowed by  the High  Court and  hence the  Union  of  India

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preferred the  present appeals after obtaining special leave from this Court.      Before we  proceed to  examine the rival contentions of the parties  in regard  to the  controversy arising in these appeals, it  is necessary  to set  out briefly  the relevant provisions of  law having a bearing on this controversy. The Central Excise  and Salt  Act, 1944  by section  3 read with Item 19 provided for levy of excise duty on all varieties of cotton fabrics  including  cotton  fabrics  manufactured  on powerlooms. Section  37 sub-section (2) of the Act conferred power on  the Central Government to make Rules providing for a number of matters including inter alia clause (xvii) which was in the following terms:           "Exempt any  goods from  the whole  or any part of      duty imposed by this Act."      The Central  Government in exercise of this rule-making power made  the Central  Excise Rules,  1944 of which Rule 8 clause (1)  provided that  "the Central  Government may from time to time by notification in the official Gazette exempt, subject to  such conditions  as  may  be  specified  in  the notification, any excisable goods from the whole or any part of the  duty leviable  on such  goods." In  exercise of this power of  exemption conferred  under Rule  8 clause  (1) the Central Government  issued a notification dated 5th January, 1957 exempting  certain varieties of cotton fabrics from the whole of  the excise  duty leviable  thereon and one of such varieties set out in Item 7 was as under:           "Cotton fabrics  produced  in  factories  commonly      known as  powerlooms (without spinning plants) provided      that the  number of powerlooms producing cotton fabrics      in such factories does not exceed four."      This item  was later  substituted by  another item by a notification of  the Central  Government dated 19th January, 1957 and the substituted item was 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 scope  of the  exemption granted  under  this  item  was restricted by  the addition  of the  following proviso  by a Central Government notification dated 26th November. 1960: 517           "Provided  that   this  exemption   shall  not  be      applicable to  a manufacturer  who commences production      of the  said fabrics for the first time on or after the      1st December,  1960 by  acquiring powerlooms  from  any      other  person  who  is.  or  has  been  a  licensee  of      powerloom factory."      There was  a further  change  made  by  a  notification issued by  the Central Government on 1st March, 1961 and the then existing Item 7 was substituted by the following Item:           "(7) 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  3 powerlooms  in all  but not  roller locker      machine are installed." The result  was that  the exemption granted under Item 7 was considerably narrowed  down and  the proviso taking away the exemption in  certain cases  was deleted.  But again,  by  a notification dated  1st April,  1961, the Central Government introduced the following proviso under Item 7:           "Provided  that   this  exemption   shall  not  be      applicable to  a manufacturer  who commences production      of the  said fabrics for the first time on or after the      1st April,  1961 by acquiring powerlooms from any other

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    person who  is or  has been  a  licensee  of  powerloom      factory." Thus from  1st March, 1961 the benefit of the exemption from excise duty  was available  only to  those manufacturers who had not more than 2 powerlooms in all in their factories and from and  after 1st  April, 1961 even this limited exemption was withdrawn from manufacturers who commenced production of cotton fabrics  for the  first time  on or  after 1st April, 1961 by  acquiring powerlooms from any person who was or had been a licensee of powerloom factory.      Now in  the present  appeals each  of  the  respondents owned admittedly not more than 4 powerlooms, but it does not appear from  the record  before us as to whether any of them owned more than 2 powerlooms. If it is found that any of the respondents owned  more than  2 powerlooms,  he would not be within the  exemption granted  under Item  7 of  the amended Notification dated  5th January.  1957 and excise duty would be payable  on the  cotton fabrics  manufactured by him. But even if  any of  the  respondents  owned  not  more  than  2 powerlooms and  was, therefore, within the exemption granted under item  7 of the amended notification dated 5th January, 1957, the  question would  still arise  whether he forfeited the exemption  by reason of the proviso to Item 7 introduced by the notification dated 1st 518 April, 1961.  The answer  to this question would depend upon the true  construction of the proviso and we shall presently consider this question, but before we do so, it is necessary to refer  to some  other notifications issued by the Central Government under the Central Excise Rules, 1944.      On 1st  March, 1961, the Central Government in exercise of the  power conferred  upon it  under  Rule  96-J  of  the Central Excise  Rules, 1944  issued a notification providing for a  compounded levy  scheme for payment of excise duty on cotton fabrics. By this notification, the Central Government fixed different  rates "per  shift, per month, per powerloom employed  by  or  on  behalf  of  the  same  person  in  the manufacture of  cotton fabrics" depending upon the number of powerlooms employed by such person. The rates prescribed for a case  where more  than 2  but not  more than 24 powerlooms were employed were Rs. 20 where medium and/or coarse fabrics were manufactured  and Rs.  25  where  the  powerlooms  were employed  in   the  manufacture  of  superfine  and/or  fine fabrics. There was a proviso at the foot of the notification (hereinafter referred  to as  the first  proviso) which laid down as  to how  the computation should be made where roller locker machines  were employed.  The rates  prescribed for a case where  more than 2 but not more than 24 powerlooms were employed, were  partially modified with retrospective effect by  a   subsequent  notification   issued  by   the  Central Government on 18th March, 1961 and the new rates were Rs. 10 and Rs.  12.50 in  respect of the first 4 powerlooms and Rs. 20 and  Rs. 25  in respect of the balance. The first proviso dealing with  the case  where roller  locker  machines  were employed however,  remained  unchanged.  Then  came  another notification of the Central Government dated 1st April, 1961 by which the notification dated 18th March, 1961 was amended by substituting  the words  "where more  than 2 but not more than 24  powerlooms are  employed" by  the words  "where not more than  24 powerlooms  are employed" and adding a further proviso (hereinafter referred to as the third proviso) after the existing first proviso:           "Provided  also  that  where  a  person  commences      manufacture of  the said  fabrics for the first time on      or after  the 1st  April, 1961, by acquiring powerlooms

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    from any  other person  who is, or has been. a licensee      of powerloom  factory, the  rate per  shift, per month,      per powerloom shall be the next higher rate, if any." This was  followed by  a notification dated 20th April, 1961 issued by  the Central  Government by  which after the first proviso, the  following proviso  (hereinafter referred to as the second  proviso) was  inserted in the notification dated 18th March, 1961 519           "Provided further  that where a person employs not      more than  four powerlooms  and the said powerlooms are      worked in  not more  than one  shift, no  duty shall be      payable in respect thereof." The result  was that  from 18th  March, 1961 upto 1st April, 1961, a  manufacturer having more than two but not more than 24 powerlooms was liable to pay excise duty at the rates set out in  the amended  notification dated 18th March, 1961 and from 1st  April, 1961  to 21st April, 1961, the position was that if  such a  manufacturer was  found to  have  commenced manufacture of cotton fabrics for the first time on or after 1st April,  1961 by acquiring powerlooms from another person who was  or had  been a  licensee of  powerloom factory, the rate at  which excise  duty would be payable by him would be the next  higher rate  specified in the amended notification dated 18th  March, 1961. So far as a manufacturer having two or less  powerlooms was  concerned, he was during the period from 18th  March, 1961  upto 1st  April,  1961  exempt  from excise duty by reason of the notification dated 5th January, 1957, but  from 1st  April, 1961  to 21st  April, 1961  this exemption  stood   with-drawn  if  it  was  found  that  the manufacturer had commenced manufacture of cotton fabrics for the first  time on  or after  1st April,  1961 by  acquiring powerlooms from  another  person  who  was  or  had  been  a licensee  of   powerloom  factory  and  in  such  a  case  a manufacturer would  be liable to pay excise duty at the next higher rate  prescribed in  the amended  notification  dated 18th March,  1961. This was the position which obtained upto 20th April,  1961, when  the second  proviso was  introduced exempting  a   manufacturer  employing   not  more   than  4 powerlooms and  working even in not more than one shift from payment  of   excise  duty.  Each  of  the  respondents  had admittedly not more than 4 powerlooms and it was the case of the respondents  that these  powerlooms were  worked in  not more than  one shift  and hence the respondents claimed that they were exempted from liability for payment of excise duty by virtue  of the  second proviso.  But the  answer made  on behalf of  the Revenue was that the third proviso carved out an exception  from the  second proviso and since each of the respondents commenced  manufacture of cotton fabrics for the first time  after 1st  April, 1961,  he was  not exempt from payment of  excise duty,  but was  liable to pay the same at the next  higher rate  provided in  the amended notification dated 18th March, 1961.      Now going  back to  the proviso  under Item  7  of  the notification dated  5th January,  1957,  we  find  that  the language of  this proviso is clear and explicit and does not admit of any doubt or equivocation. It says in so many terms that the exemption under Item 7 shall not be applicable to a manufacturer who has commenced his production 520 of cotton  fabrics for the first time on or after 1st April, 1961 by  acquiring powerlooms  from another person who is or has been  a licensee  of powerloom  factory. There  are  two conditions which  must exist  before  the  mischief  of  the proviso is attracted. One is that the manufacturer must have

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commenced production of cotton fabrics for the first time on or  after  1st  April,  1961  and  the  other  is  that  the powerlooms on which he manufactures cotton fabrics must have been acquired  by him  from a  person who  is or  has been a licensee of  powerloom factory.  It  is  clear  on  a  plain grammatical construction  that the prescription of the date, 1st April,  1961, has  reference  only  to  commencement  of production of  the cotton fabrics and not to the acquisition of the  powerlooms. What  is required is that the production of  cotton   fabrics  must   have  been   commenced  by  the manufacturer for  the first time on or after 1st April, 1961 and not  that the powerlooms also must have been acquired by him on  or after  that date. It is immaterial as to when the manufacturer acquired  the powerlooms;  he may have acquired them prior  to 1st  April, 1961; that is totally irrelevant. The only  attribute that the powerlooms must satisfy is that they must  have been  acquired from  a person  who is or has been a  licensee of  powerloom factory and if this attribute is present,  then it  is of  no consequence  as to  when the powerlooms were  acquired by  the  manufacturer.  The  event which then attracts the applicability of the proviso is that the manufacturer  should have commenced production of cotton fabrics on  these powerlooms  for the first time on or after 1st April, 1961. If this condition is satisfied, the proviso comes into  play and  withdraws the  exemption  which  would otherwise have  been available to the manufacturer under the main Item  7. If  the intention of the Central Government in framing the  proviso was  that not  only the  production  of cotton fabrics on the powerlooms should have commenced on or after 1st  April, 1961,  but that the powerlooms also should have been  acquired by  the manufacturer  on or  after  that date, the  Central Government  could have  easily  expressed such intention by using appropriate language in the proviso. The Central  Government could  have transposed the words "on or after the 1st April, 1961" and put them at the end of the proviso. That  would have  clearly conveyed the intention of the Central  Government that the powerlooms must be acquired by the  manufacturer on  or after 1st April, 1961 and if the powerlooms are acquired on or after 1st April, 1961, it must follow a fortiorari that the production of cotton fabrics on the  powerlooms   by  the   manufacturer  would  necessarily commence on  or after  that date. But the Central Government advisedly placed the words "on or after the 1st April, 1961" after the clause referring to commencement of production and before the  clause relating to acquisition of powerlooms. It is a 521 well settled  rule of interpretation applicable alike to the rule making authority as to the legislature that where there are two  expressions which  could have been used to convey a certain intention, but one of these expressions conveys that intention less  clearly than  the other,  it  is  proper  to conclude that  if the  draftsman used  that one  of the  two expressions which  would convey  the intention less clearly, he  does  not  intend  to  convey  that  intention  at  all. Moreover, here  the dictates  of grammar as well as language compel us to take the view that the date 1st April, 1961 has reference only  to commencement  of production  and  not  to acquisition of  the powerlooms. It is to our mind clear that if a  manufacturer is  found to have commenced production of cotton fabrics  on powerlooms for the first time on or after 1st April,  1961, he  would fall  within the mischief of the proviso and  it would  be entirely  immaterial as to when he acquired the  powerlooms, whether before or after 1st April, 1961, so  long as  the powerlooms are acquired from a person

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who is or has been a licensee of powerloom factory. The High Court was,  therefore, clearly  in error  in construing  the language of  this proviso  to mean  that the powerlooms also must have  been acquired by the manufacturer on or after 1st April, 1961  in order  to attract  the applicability  of the proviso.      The same  construction must  obviously be placed on the third proviso  introduced in  the  notification  dated  18th March, 1961  by the  notification of  1st April,  1961.  The language and  structure of  the third  proviso are identical with the  language and structure of the proviso under Item 7 of the  notification dated  5th January,  1957 and  the same view must, therefore, govern the interpretation of the third proviso. It  is unnecessary  to repeat  what we have said in the foregoing  paragraph, because  what we  have said  there applies fully and completely in regard to the interpretation of the  third proviso  and, therefore, in order to determine whether  this   proviso  is   applicable  to   any  of   the respondents, we  have to  consider  whether  the  respondent concerned commenced  manufacture of  cotton fabrics  on  the power-looms for  the first time on or after 1st April, 1961, irrespective whether  he acquired  the powerlooms  before or after that  date. The  only relevant inquiry necessary to be made is as to when the manufacturer of cotton fabrics on the powerlooms  was   commenced  for   the  first  time  by  the respondent. If  it was  on or  after 1st  April,  1961,  the mischief of  the third  proviso would  be attracted  and the respondent would  be liable  to pay  excise duty at the next higher rate. Of course, the second proviso introduced in the notification dated  18th March,  1961 with  effect from 20th April, 1961  provided that  where a  person employs not more than 4  powerlooms and  these powerlooms  are worked  in not more than  one shift,  no excise  duty shall  be payable  in respect thereof, 522 but the third proviso on its proper interpretation, enacts a substantive provision for payment of excise duty at the next higher  rate   in  the  cases  therein  specified  and  this substantive provision  overrides  the  second  proviso.  The second proviso  exempts a  manufacturer employing  not  more than 4  powerlooms and  working not more than one shift from payment of  excise duty  in those  cases which  do not  fall within the  third proviso and where a case is covered by the third proviso,  the second proviso would be inapplicable and the manufacturer  would be liable to pay excise duty, at the next higher  rate. This  is the  only way  in which  the two provisos can  be harmoniously  construed in  a manner  which would give effect to both.      We are, therefore, of the view that even though each of the respondents in the present case owned not more than four powerlooms, he  would be  liable to  pay excise  duty at the next higher rate under the third proviso to the notification dated 18th  March, 1961, if he started manufacture of cotton fabrics on his powerlooms for the first time on or after 1st April, 1961, irrespective whether he acquired the powerlooms from the  licensee before  or  after  that  date.  We  must, therefore, set aside the judgment of the High Court and send the matter back to the High Court so that the High Court may decide the  writ petitions  of the respondents in accordance with law  and in  the light of the observations contained in this judgment.      We  accordingly   allow  the  appeals,  set  aside  the judgment of  the High Court and remand the writ petitions to the High  Court for  disposal in  accordance with  the  law. Though the  appellants have  succeeded, they  will  pay  the

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costs of  the respondents  as provided in the order granting special leave. N.K.A.                                     Appeals allowed. 523