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PETITIONER: UNION OF INDIA AND OTHERS

       Vs.

RESPONDENT: GARWARE NYLONS LTD. ETC.

DATE OF JUDGMENT:       09/09/1996

BENCH: S.P. BHARUCHA, K.S. PARIPOORNAN

ACT:

HEADNOTE:

JUDGMENT:                             WITH                CIVIL APPEAL NO. 11644 OF 1996        (Arising out of S.L.P. (C) Nos. 11008 of 1988                             AND                CIVIL APPEAL NO. 7564 OF 1996                       J U D G M E N T PARIPOORNAN, J.      Special leave granted in S.L.P. (C) No. 11008 of 1988. 2.   The above  three appeals  involve a  common question of law, namely,  whether "Nylon  Twine" can  be  considered  as "Nylon Yarn"  so as  to be  covered by  Item 18 of the First Schedule  to   the  Central   Excises  and  Salt  Act,  1944 (hereinafter referred  to as "the Act") as it stood prior to the Amendment of 1977.           "18 RAYON AND SYNTHETIC FIBRES AND YARN ------------------------------------------------------------ Tariff Item    Description of goods     Rate of duty Basic ------------------------------------------------------------ 18. RAYON AND SYNTHETIC FIBRES AND     YARN INCLUDING TEXTURED YARN, IN     OR IN RELATION TO THE MANUFACTURE     OF WHICH ANY PROCESS IS ORDINARILY     CARRIED ON WITH THE AID OF POWER:-     (i)  Fibres and Yarn other than        Rs. 85.00 per kg.          Textured Yarn.     (ii) Textured Yarn produced out of      The duty for          Base Yarn.                         the time being                                             leviable on the                                             base yarn, if                                             not already paid                                             plus Rs. 20/-                                             per kg.     (iii) Other Textured Yarn               Rs. 105.00 per                                             kg. Explanation-I "Fibres and Yarn, other than Textured yarn", shall be deemed to include -     (i) man-made fibres;     (ii) man-made metallic yarn;

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   (iii) spun (discontinuous yarn           containing not less than           ninety per cent by weight           of man-made fibres           calculated on the total           fibre content; and     (iv) man-made filament (continuous)          yarn that has not been          processed to introduce crimps,          coils, loops or curls along          the length of the filaments, but          does not include bulked yarn and          stretch yarn. Explanation-II "Textured Yarn means yarn that has been processed to introduce crimps, coils, loops or curls along the length of the filaments and shall include bulked yarn and stretch yarn. Explanation-III "Base Yarn" means yarn falling under sub-item (i) of the this Item from which the Textured Yarn has been produced. Explanation-IV - This item does not include mineral fibres and yarn." 3.   It will  be useful  to note that from 1st March, 1977 a new item  i.e. Item  68 was introduced to the first schedule to the Act which is to the following effect. " ----------------------------------------------------------- Tariff Item     Description of goods    Rate of duty Basic ------------------------------------------------------------ 68. ALL OTHER GOODS, NOT ELSEW HERE             1% Adv.     SPECIFIED, MANUFACTURED IN A     FACTORY BUT EXCLUDING - a)  alcohol all sorts including     alcoholic liquors for human     consumption;                ................" Item 18 was also amended int he following manner: "II.     Man-made filament yarns- (i)      Non-cellulosic -          (a) other than textured          (b) textured           Explanation: "Textured Yarn" means yarn that has           been processed to introduce crimps, coils, loops           or curls along the length of the filaments and           shall include bulked yarn and stretch yarn. (ii)      Cellulosic; (iii)     Metallized." 4.   We heard Counsel. 5.   In this  group, the  main appeal  is Civil  Appeal  No. 715/81. It  is an  appeal preferred  by the  Union of  India (Revenue) against  the judgment  and order of the High Court of  Bombay   dated  9.4.1980   rendered  in   Special  Civil Application  No.  2974/78.  In  the  other  two  cases,  the judgment  in  special  civil  application  No.  2974/78  was followed. The judgment in the said special civil application is reported in 1980 (6) E.L.T. 249 (Bom.). 6.   The respondents-assessees  manufacture "Nylon Yarn" and "Nylon Twine". They are doing so eversince 1962. Under first schedule, Item  18 of  the Act  excise duty  is  payable  in respect  of   "Nylon  Yarn"   as  specified   therein.   The notification  issued  under  Rule  8  of  the  Excise  Rules provided that  "Nylon Yarn",  which is  meant for use int he manufacture of  fishing nets  and parachute  cords is exempt from the  payment of  so much  of excise duty leviable under

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Item 18  as is  in excess  of Rs.4/-  per kg.  The assessees contended that  "Nylon Twine"  manufactured by  them is used for the  purpose of  making fishing nets. Prior to 1975 they were allowed  to clear  Nylon Twine  manufactured by them on payment  of   excise  duty  as  specified  under  the  above exemption notification.  Thereafter, when  the new item, viz Item 68  (residuary entry) was introduced in the Act, it was contended  by   the  Excise   Authority  that   Nylon  twine manufactured by  the assessees  was not  covered by item 18. According to  the Revenue Nylon twine and Nylon yarn are two different items and Item 18 takes within its fold Nylon yarn only and  not Nylon  twine. The  authorities claimed  excise duty on "Nylon twine" under Item 68. The assessees paid such duty under protest. Thereafter, the application filed by the assessees for  refund before the Assistant Collector failed. He passed  an order  to that effect on 28.5.1976. The appeal filed was  rejected by  Appellate  Collector  on  28.9.1976. Similarly the  Central Government  rejected the  revision by order dated  31.10.1979.  It  is  thereafter  the  assessees approached the High Court of Bombay for refund of the amount paid under protest. A Division Bench of the High Court heard and disposed  of the  petition by  judgment and  order dated 9.4.1980. Sujata  Manohar, J. delivered the leading judgment and Masodkar,  J., though  for different  reasoning,  agreed with the conclusion of Sujata Manohar, J. 7.   Sujata Manohar,  J., after  referring to  the following materials - viz. - Encyclopaedia Britennica, Vol.X (abridged version), the Indian Standards Indstitution Standard bearing No. AIS 332 of 1967 wherein the expressions "Twine and Yarn" were dealt  with, the  Indian Standards Institution Standard bearing No.  IS 1402-767  relating to "netting for fishing", the Manual  called "Netting  Materials for Fishing Gear" the manual published by the Food and Agriculture Organisation of the United  Nations, the  orders received  by the  assessees from the  Director of Fisheries, Madras, two affidavits, one from the  Managing Director  of Maharashtra  Rajya  Machimar Sekhari  Sangh   Limited  and  another  from  a  Partner  of Maharashtra Fishing  Material Company,  concluded  thus,  in paragraph 14 of the judgment:      "14. There  is, however, sufficient      material on  record which  goes  to      show that  nylon twine manufactured      by the petitioners has been treated      as a  kind of  nylon  yarn  by  the      people in the trade. It is commonly      considered as yarn. Hence it can be      classified  under   Item  18.   The      respondents    have    failed    to      establish that  nylon twine must be      taxed under  Item 68,  as it is not      covered by  Item 18  of  the  First      Schedule. The  respondents are  the      taxing authorities,  and they  must      show that  the item  in question is      taxable in  the manner  claimed  by      them. the  burden is  on the taxing      authorities to  show that  the item      in  question   is  taxable  in  the      manner claimed by them."           (Emphasis supplied)      The learned  Judge, therefore,  directed the Revenue to refund to  the assessees  the excess  amount collected  from them as  Central Excise Duty on the basis that "Nylon Twine" falls under Item 68 of the First Schedule to the Act. 8.   Sri P.A.  Chaudhary, Senior Advocate, appearing for the

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Union of  India -  appellant, contended  that Nylon Twine is different from  Nylon Yarn,  that Item  18 of  the Act would cover only  "Nylon Yarn"  and not  Nylon Twine;  that a mere look of  Nylon Twine  will go  to show  that it is different from Nylon  Yarn,; that  in  commercial  different  physical characteristics.  He   stressed  that  Nylon  Twine  --  the commodity involved int e instant case is not known as "Nylon Yarn" and  so, the same is outside the purview of Item 18 of the Act.  Certain decisions of general application were also cited. Counsel  for the  respondents -  assessees  contended that the  Nylon Twine  is nothing but Nylon Yarn, other than textured yarn  and referred to the Encyclopaedia Britennica, Vol X  (abridged version),  and the literature issued by the Indian Standards Institution and others, the trade inquiries and the affidavits filed by persons in the particular trade, would conclusively  show that Nylon Twine is considered as a kind of  Nylon Yarn  by the traders and persons dealing with the subject  matter and the High Court had abundant material to substantiate the above proposition. 9.   We do  not think  it is  necessary, especially  in this batch of cases, to refer in detail to the decisions cited by the Revenue  or the  text-books and  the literature  of  the Indian Standards Institution and the Manual published by the Food and  Agriculture Organisation,  United Nations,  as  to what is  meant by  "Twine",  "yarn",  "netting  twine"  etc. referred by the High Court. In this case, clinching evidence is afforded  to demonstrate  that trade  and industry  which deals with  the goods,  consider "Nylon  Twine" as a kind of "Nylon Yarn". 10.  Thee are innumerable decisions of this Court which have laid down  the test or the principles to be borne in mind in construing the  Items or  Entries  in  Fiscal  Statutes.  In recent decision  in Indian  Cable Company  Ltd., Calcutta v. Collector of  Central Excise, Calcutta and Others, [(1994) 6 SCC 610  - at  page 615] a three-member Bench stated the law thus:      "........   in    construing    the      relevant item  or entry,  in fiscal      statutes, if it is one of every day      use, the  authority concerned  must      normally, construe it, as to how it      is understood in common parlance or      int he  commercial world  or  trade      circles.  It   must  be  given  its      popular meaning.  The meaning given      in the dictionary must not prevail.      No should  the entry  be understood      in any  technical or  botanical  or      scientific sense.  In the  case  or      technical words,  it may call for a      different approach. The approach to      be made  in  such  cases  has  been      stated by  Lord Esher  in Unwin  v.      Hanson thus:      "If the  Act is directed to dealing      with  matters  affecting  everybody      generally, the  words used have the      meaning attached  to  them  in  the      common   and    ordinary   use   of      language. If  the Act is one passed      with  reference   to  a  particular      trade,  business,  or  transaction,      and words  are used which everybody      conversant   with    that    trade,      business or  transaction knows  and

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    understands to  have  a  particular      meaning in it then the words are to      be   construed   as   having   that      particular meaning,  though it  may      differ from  the common or ordinary      meaning of the words."      We would only add that there should      be material  to  enter  appropriate      finding in  the case.  The material      may be  either oral  or documentary      evidence."              (Emphasis supplied) 11.  In  a  subsequent  decision  in  Collector  of  Central Excise, Chandigarh  v. Steel Strips Ltd., Sangrur, [(1935) 4 SCC 241  - at  pages  243-24],  another  three-member  Bench stated the law thus:      "...............   We    find    no      evidence upon  the record in regard      to what happens to hot-rolled steel      strips  before   cold-rolled  steel      strips are produced."      It    cannot     be    sufficiently      emphasised that when it is the case      of the  Excise authorities  that an      article is  the result of a process      of   manufacture    and    it    is      commercially distinct  and known as      such,  it   is   for   the   Excise      authorities to lay evidence in this      behalf     before     the     first      adjudicating  authority  regardless      of the  fact that  he is an officer      of  the  Excise  Department.  There      should, ordinarily,  be article  is      the  result   of   a   process   of      manufacture;  in   the   event   of      difficulty, it would be open to the      Excise  authorities   to   seek   a      direction requiring the assessee to      set out  in writing what it does to      obtain the  article. Too  often, as      our experience in this Court and in      the   High   Courts,   before   the      Tribunal  was  established,  shows,      lack of  evidence has  led  to  the      failure of  the case  of the Excise      authorities and,  consequently,  to      the loss of revenue to the State.      Failure  to   lay   the   requisite      evidence  cannot   be  made  up  by      reference     to      authoritative      publications  unless   the   Excise      authorities  inform   the  assessee      that they  propose to rely upon the      same   before    the   adjudicating      authority   ...........   Technical      evidence     and      authoritative      publications  must,  therefore,  be      placed in the first instance before      the adjudicating  authority and the      Tribunal. They  have the  requisite      technical expertise to evaluate the      same."      (Emphasis supplied) 12.  The law  on the  point as  laid down  by this Court (in

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various  decisions)   has  been   summarised  int   he  book "Principles of  Statutory Interpretation"  (Sixth Edition  - 1996) by  Justice G.P.  Singh, at  pages 67,  70, 72 and 73, thus:      "............  So   in   construing      entries of goods in Excise, Customs      or Sales  Tax  Acts  resort  should      normally  be   had   not   to   the      scientific or technical meaning but      to their  popular meaning  viz. the      meaning attached to the expressions      by   those    dealing   in    them.      ............... The popular meaning      int he  context of  a Sales Tax Act      is that meaning which is popular in      commercial  circles   for  the  Act      essentially,  in  its  working,  is      concerned  with   dealers  who  are      commercial men."      "The justification of the rule that      the words  are to  be understood in      their natural,  ordinary or popular      sense is  well expressed by JUSTICE      FRANKFURTER: "After all legislation      when  not  expressed  in  technical      terms is addressed to common run of      men  and   is   therefore   to   be      understood according  to  sense  of      the thing,  as the ordinary man has      a right  to rely  on ordinary words      addressed."     In     determining,      therefore,  whether   a  particular      import  is   included  within   the      ordinary meaning  of a  given word,      one may  have regard  to the answer      which everyone  conversant with the      word and  the subject  - matter  of      statute and to whom the legislation      is  addressed,  will  give  if  the      problem were put to him."      xxxx         xxx        xxx     xxx      "As a  necessary consequence of the      principle that words are understood      in  their   ordinary   or   natural      meaning in relation to the subject-      matter, in  legislation relating to      a   particular   trade,   business,      profession, art  or science,  words      having a  special meaning  in  that      context  are   understood  in  that      sense. Such  a special  meaning  is      called  the  technical  meaning  to      distinguish it from the more common      meaning that  the  word  may  have.      ................ The  Supreme Court      "has consistently  taken  the  view      that, in determining the meaning or      connotation    of     words     and      expressions describing  an  article      in a tariff Schedule, one principle      which is  fairly  well  settled  is      that those  words  and  expressions      should be construed in the sense in      which they  are understood  in  the      trade  by   the  dealer   and   the

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    consumer. The  reason is that it is      they who  are  concerned  with  it,      and, it  is the sense in which they      understand it which constitutes the      definitive  index   of  legislative      intention". " 13.  Stated briefly,  we should  understand, the  expression occurring in  Item 18 of the Act, in the sense, in which the persons who deal in such goods understand it normally. 14.  In this case, apart from the meaning given to the words "Yarn", "Twine"  etc., in  the standard works referred to by the High  Court, two  items of  evidence stand out prominent and clinch the issue. The first is, an order received by the assessee from  the Director  of Fisheries, Madras which goes to show  that Nylon  Twine is  considered as a type of Nylon Yarn used  for making  fishing  nets.  The  second  is,  two affidavits filed  by the  assessees before the authorities - one from the Managing Director of Maharashtra Rajya Machimar Sekhari  Sangh   Limited  and  another  from  a  Partner  of Maharashtra Fishing  Material Company,  wherein it is stated that "Twine"  is a  category of  "Yarn"> What  is more - the assessees made available the above persons who have sworn to the affidavits  for cross-examination  at the  time  of  the hearing of  the applications, but the Revenue did not cross- examine them.  The trade  inquiry received  by the assessees and also  the affidavits  conclusively point  out that Nylon Twine is  considered as  a  kind  of  "Nylon  Yarn"  in  the particular trade  by persons  conversant with  the  subject- matter. The  revenue has  not let  in any  material  to  the contra. 15.  In our  view, the  conclusion reached by the High Court is fully  in accord with the decisions of this Court and the same is  justified in  law. The  burden of  proof is  on the taxing authorities  to show that the particular case or item in question,  is taxable in the manner claimed by them. Mere assertion in that regard is of no avail. It has been held by this  Court   that  there   should  be   material  to  enter appropriate finding  in that  regard and the material may be either oral  or documentary.  It is for the taxing authority to lay  evidence  in  that  behalf  even  before  the  first adjudicating authority.  Especially in  a case a this, where the claim  of  the  assessee  is  borne  out  by  the  trade inquiries received  by them and also the affidavits filed by persons dealing  with the subject matter, a heavy burden lay upon the  revenue to disprove the said materials by adducing proper evidence. Unfortunately, no such attempt was made. As stated, the  evidence led  in this case conclusively goes to show that Nylon Twine manufactured by the assessees has been treated as  a kind  of Nylon  Tarn by  the people conversant with the  trade. It  is commonly  considered as  Nylon Yarn. Hence, it  is to be classified under Item 18 of the Act. The Revenue has  failed to  establish the  contrary. We would do well to  remember the  guidelines laid down by this Court in Dunlop India  Ltd. v.  Union of  India (AIR 1977 SC 597 - at page 607), in such a situation, wherein it was stated:-      "......... When  an article has, by      all standards,  a reasonable  claim      to   be    classified   under    an      enumerated  item   in  the   Tariff      Schedule, it  will be  against  the      very principle of classification to      deny it  the parentage  and consign      it to an orphanage of the residuary      clause."           (Emphasis supplied)

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16.  We concur with the reasoning and conclusion of the High Court. There  is no substance in these appeals. The judgment s appealed  against in  this batch  of appeals are affirmed. The appeals  are dismissed  with costs,  including Counsel’s fee of Rs.5,000/- in each case.