1. The Collector of Central Excise, Calcutta has filed an appeal being aggrieved from Order No. 909/Cal/83 dated 22nd Aug. (83 passed by the Collector (Appeals), Central Excise, Calcutta.
2. The Respondent, M/s. Polar Fans Industries No. 2, Calcutta is the manufacturer of electric fans and regulators and had cleared 3701 pcs.
of electric fan regulators valued at Rs. 62,917.00 during the period from 7th February, 1979 to 31st March 1979 and had availed the benefit of 25% tax relief as envisaged in the Notification No. 198/76 dated 16th June 1976. A show cause notice was issued to the Respondent Company as to why they should not be required to pay the amount of Rs. 2,414.85 (Rs. 2359.39+Rs, 55.46) as the benefit of Notification No.198/76 dated 16-6-76 was not available to the Respondent and as the goods are not specified in the Schedule of the said Notification. In reply, the Respondent company pleaded that the Respondent Company's regulators fall under tariff description of Tariff Item 33 as the same was introduced by Budget 1977 and the Respondent had contended that the respondent is entitled to concessional rate of duty under Notification No. 198/76 dated 16-6-76. The learned Assistant Collector, Central Excise, Calcutta XV Division, while adjudicating the case, held that the goods were not specified in the table annexed to Notification No.198/76 and hence not eligible for the benefit of tax relief and a demand of duty was raised. The Respondent being aggrieved from the aforesaid order, had filed an appeal before the Collector (Appeals), Central Excise, Calcutta, which was acceptable. Being aggrieved from the aforesaid order, the Revenue has come in appeal before this court as an appellant.
3. Shri A.K. Saha, Sr. D.R. has appeared on behalf of the appellant. He reiterated the statement of facts and the grounds of appeal mentioned in the Memorandum of Appeal. He has pleaded that in the Notification No. 198/76 dated 16-6-76 at SI. No. 32, the description of the goods falling under Tariff Item 33 has been specified as "Electric Fans, All Sorts" which are eligible for the benefit of exemption under Production Incentive Scheme. He has pleaded that the regulators do not fall within the description of "Electric Fans, All Sorts". He has further pleaded that prior to 1977 Budget the description "Electric Fans, All Sorts" under Tariff Item did not include the regulators for fans which were then being assessed separately under Tariff Item 68. He has further pleaded that after 1977 Budget the changes were brought to the description of Tariff Item 33 which read as "Electric Fans including regulators for electric fans, all sorts" but no changes were made to the description of the goods specified in the above notification dated 16-6-76 which did not cover regulators for fans. He has pleaded that the Respondent is not entitled to the benefit of Notification No.198/76 dated 16-6-76 as the same cannot be extended to the regulators for fans which are manufactured and cleared separately. He has pleaded that the Respondent's appeal has been wrongly accepted by the Collector (Appeals) and the order should be set aside. He has referred to judgment in the case of Jay Engineering Works Ltd. v, Union of India of the Delhi High Court reported in 1981 E.L.T. 284 (Del.) wherein it was held that it cannot be said that the manufacture of electric ceiling fan was incomplete without the manufacture of speed regulator or the regulator was the integral and indispensable part of the fan.
Therefore, the cost of regulator was not includible in the assessable value of fans under Section 4 of the Central Excise Act. He has pleaded that the said Delhi High Court judgment fully covers his case and as such the appellant's appeal should be accepted. He has also referred to a judgment of the Bombay High Court in the case of Union Carbide (India) Ltd. v. Union of India and Ors. reported in 1979 E.L.T. (J) 633) wherein it was held that the provisions of a taxing statute must be construed by the interpretation of the words and phraseology of the section without resorting to inferences and common sense which may like the Chancellor's foot vary from person to person. He has also referred to the Supreme Court judgment in the case of Hansraj Govardandas v.H.H. Dave reported in the compilation of Central Excise cases of 1932-82 in Civil Appeal No. 1059 of 1965 (page 274). He has also referred to the following judgments on the interpretation of statute : Shetkari Sahakari Sakhar Karkhana Ltd. v. Collector of Central Excise, Bombay.
He stated that the clearance period was from 7th Feb. 1979 to 31st...
He has submitted that in view of the above judgments, the appeal should be accepted and the order passed by the Collector (Appeals) should be quashed.
4. In reply, Shri S.R. Guha, who has appeared on behalf of the respondent, has submitted that the regulators were never cleared separately but were always cleared simultaneously with the electric fans. He has also pleaded that price list of the fans is inclusive of the cost of the regulators. He has referred to the judgment of the Hon'ble High Court in the case of Jay Engineering Works Ltd., Hyderabad v. Government of India, wherein the Hon'ble High Court of Judicature, Andhra Pradesh has held that the fans are understood in the popular sense and commercial transactions. In a transaction regarding the fan the purchaser as well as the seller has always in mind the regulator when the expression 'fan' is used. It may be in certain circumstances that the ceiling fan is used without a regulator, but these circumstances cannot affect the position that the ceiling fan is usually considered as inclusive of regulator. In ordinary parlance and in commercial practice as well the expression 'ceiling fan' is used in association with the regulator invariably. He has submitted that the Delhi High Court judgment cited by the learned Sr. D.R. has been duly considered in this Andhra Pradesh High Court in para 5. He has also referred to the Budget Proposals 1977 from Cencus Budget 1977. The same is reproduced as under (page 178C):----------------------------------------------------------------------"Sl. T.I. Commodity Rate of duty Estimated No. No. Existing Proposed net effect Basic + (Basic) Ax.in one full----------------------------------------------------------------------46 33 Electric fans, etc.
15% NC 65 (1) Table, Cabin, Carriage (1) above 5% 10%---------------------------------------------------------------------- Regulators for electric fans, all sorts, have been specially mentioned in the tariff description. This amendment is of a clarificatory nature.
He has also referred to a Government of India decision in the case of Himadri Electricals reported in 1981 E.C.R. 622D, wherein it was held that the value of regulators was to be included in assessable value of electric fans prior to 17-6-77. In that decision it was held that regulator is a part of ceiling fan and the trade practice followed by the petitioner was in general to supply regulator along with fan. The Government do not, therefore, find any substance in the petitioner's plea that the assessable value of the ceiling fan should be arrived at without any reference to the value of the regulator. He has further referred to a Supreme Court judgment in the case of Indo-China Steel Navigation Co. Ltd. v. Jasjit Singh, Additional Collector of Customs, Calcutta, 1983 E.L.T. 1392 (S.C.), wherein it was held that where the Central Board of Revenue or the Central Government is exercising appellate or revisional powers the same are Tribunals within the meaning of Article 136 of the Constitution. He has pleaded that the decision passed by the Government of India is a decision of the Tribunal in view of the Supreme Court judgment. The respondent should be given the benefit of Notification No. 198/76 and regulator should be treated as part of a fan. He has further submitted that regulator is fitted with a table fan and there the Revenue has not disputed at all and it amounts to discrimination between a ceiling and a table fan. He has further pleaded that there is no dispute as to the classification of regulator. It falls under Tariff Item 33. He has pleaded that in view of the Andhra Pradesh High Court judgment and other judgments referred to by him the appellant's appeal should be dismissed.
5. In reply, Shri Saha has again referred to the Notification No.198/76 dated 16-6-76 and has pleaded that the words 'all sorts" do not include regulators and the appeal filed by the Revenue should be accepted.
6. After hearing both the sides and going through the facts and circumstances of the case, I hold that the regulator is an indispensable part of a fan and the respondent is entitled to the benefit of Notification No. 198/76-C.E. dated 16th June, 1976. The judgment of the Hon'ble Delhi High Court cited by the appellant does not help him. In the judgment of the Hon'ble Delhi High Court in the case of Jay Engineering Works Ltd. v. Union of India, reported in 1981 E.L.T. 284, the Hon'ble Mr. Justice S. Ranganathan, speaking on behalf of the court, had held that cost of speed regulator is not includible in assessable value of ceiling fan and held that it cannot be said that the manufacture of electric ceiling fan was incomplete without the manufacture of speed regulator or the regulator was the integral and indispensable part of the fan. Therefore, the cost of regulator was not includible in the assessable value of fans under section 4 of the Central Excise Act. It appears that the Hon'ble High Court had come to the conclusion on the basis of subsequent amendment of Tariff Item 33 w.e.f. 9th June, 1977. Originally, the Tariff Item 33 only referred to fan and the regulator was not mentioned in the Tariff Item 33. The Tariff Item 33 before amendment has been reproduced at page 3, para 5 of this order and the same after amendment is reproduced as under:------------------------------------------------------------------------------ Description of goods Rate of duty------------------------------------------------------------------------------ 33.
Electric fans, including regulators for elec- Fifteen per cent trical fans, all sorts- ad valorem.
(1) Table, cabin, carriage, pedesal and (2) Electric fans, designed for use in Fifteen per cent an industrial system as parts indispensa- ad valorem. able for its operation and have been (3) Electric fans, not otherwise Twenty per cent specified, and regulators.
ad valorem."---------------------------------------------------------------------------- The judgment cited by the learned Consultant, Shri S. R. Guha, for the respondent in the case of Jay Engineering Works Ltd., Hyderabad v.Govern' ment of India reported in 1982 E.C.R. 603D (Andhra Pradesh High Court), fully covers the case of the respondent in para 5 of the said judgment. The Delhi High Court judgment has been duly considered and discussed in the said judgment. The relevant portions of the judgment are reproduced as under.
5. The learned counsel for the appellant contended that fans can be purchased apart from the regulator and the fans as such can be operated Without the regulator and the regulator is meant only to regulate the speed of the fan but it cannot be said that the fan does not work without regulator and, therefore, the regulator cannot be considered as integral part of the fan. In support of this contention, the learned counsel for the appellant has profusely relied upon the decision of the Delhi High Court reported in Jay Engineering Works Ltd. v. Union of India, (2) 1981 E.L.T. 284 (Del.) Ranganathan, J. speaking for the court observed that the speed regulator is not an integral or indispensable part of the electric fan and it cannot be said that a fan without speed regulator is no fan at all. The learned judge was apparently influenced by the circumstance that the amendment which was inserted with effect from 19-6-77 including regulators, excluded the regulator from the purview of the fan anterior to 19-6-77 by implication. We are not inclined to agree with the view of the Delhi High Court. It is too late in the day to say that the ceiling fan is operated without regulator. It may be that sometimes in the past the ceiling fans were manufactured and they were operated without regulation of speed by a regulator. But, by efflux of time the regulator has been made use of for facilitating the working of the fan, and thus the regulator has become a necessity and also became an indispensable part of the electric fan. The functioning of the fan is conditioned by the operation of the regulator. The regulator is designed to control the speed. If the regulator is at 'off' stage the fan does not function. The breeze can be adjusted according to necessity through the regulator. Thus, it is abundantly clear that the regulator is an indispensable part of the fan.
6. The electric fan is not defined under the Act and in the absence of the definition recourse to the commercial practice or normal parlance or some other statutes or rules where this expression has been considered will furnish some guidelines. The learned single judge adverted to the C.B.R. circular, dated 28-10-1971 wherein the Indian Standard Specification has been considered.. Though the circular is not binding however, it appears the learned judge adverted to the circular and the reference made to the Indian Standard Specification No. 374/66 therein as indicative of the coverage of fan and it is also made clear by the learned judge that the instructions are not binding on the court and have no legal effect. The learned counsel for the appellant has referred to the statements of objects and reasons of the Indian Standards Institution (Certification Marks) Act, 1952 to support his contention that this Act is not concerned with the definition or amplitude of any commodity and it is only concerned with the standardisation and specifications for manufacture of goods and as such the reference to I.S.I, specification does not throw any light. In the statement of objects and reasons it is stated that the I.S.I, are finalising standard specifications for most of the commodities and manufactured articles which figure in the export trade and also in the home markets. In the process of finalising such specifications, it is necessary to describe the commodity or its associated components or delineate the ambit of any expression. The presence of I.S.I, certification mark on the products conveys an assurance that they have been produced in compliance with the requirements of that standard and well defined system of inspection, testing and quality control during production. The relevant portions of the I.S.I. specification 374-76 are set out herein.
Item 9.2 states that the regulator shall have an 'off' position preferably next to the lowest speed contact. Item 10.1 under the caption "starting" states that the fan shall be capable of starting up from rest with the regulator, if any, at the lowest speed step when 85% of the rated voltage or 35% of the lowest voltage in the voltage range is applied. Item 11.1 says that the motor of the fan of a particular size and model and its associated regulator and set of blades shall be interchangeable such that the performance of the fan keeps within limits specified in this standard. 12.1 provides that precautions shall be taken in the manufacture of fans and regulators to ensure a reasonable degree of...all speeds. These specifications clearly disclose that the fan is always understood as being associated or accompanied by regulator and regulator can be considered as an integral part of fan. The specifications furnish a guidance to several components of the commodity and their functioning. In view of the 'off' position fixed in the regulator the fan cannot function unless the regulator is set in motion and as such the regulator is an indispensable part of the fan.
7. In support of the contention that in the absence of definition of 'electric fan' under the Act the recourse should be to popular meaning in common parlance or commercial usage, the learned counsel for the respondent relied upon the decisions of the Supreme Court in State of W.B. v. Washi Ahmed,Dunlop India Ltd. v. Union of India, (4) AIR 1977 S.C. 597 and Indo International Industries v.S.T. Commissioner (5) AIR 1981 S.C. 1079. In Indo International Industries v. S.T. Commissioner (5 supra) the issue is whether clinical syringes can be considered as 'glassware' falling within entry 39 of first sch. of U.P. Sales Tax Act. In considering the connotation of "glassware" the Supreme Court observed as follows at page 1081 : "It. is well settled that in interpreting items in statutes like the Excise Tax Acts or Sales Tax Acts, whose primary object is to raise revenue and for which purpose they classify diverse products, articles and substances, resort should be had not to the scientific and technical meaning of the terms or expressions used but to their popular meaning, that is to say, the meaning attached to them by those dealing in them. If any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted. In Ramavatar Budhaiprasad etc. v. Assistant Sales Tax Officer, Akola, (1962) I SC R 279 (AIR 1961 SC 1325) the question was whether 'betel leaves' fell within item 'vegetable' so as to earn exemption from sales tax and this Court held that word 'vegetable' had not been defined in the Act and that the same must be construed not in any technical sense nor from the botanical point of view but as understood in common parlance and so construed it denoted those classes of vegetable matter which are grown in kitchen garden and are used for the table and did not comprise betel leaves within it and therefore, betel leaves were not exempt from taxation."In State of W.B. v. Washi Ahmed (3 supra) the issue is whether the expression vegetable takes in green ginger also under Sch. I item 6 of Bengal Finance (Sales Tax) Act. The Supreme Court has held as follows at page 1639 : "It will, therefore, be seen that the word 'vegetable' in item 6 of Sch. I to the Act must be construed as understood in common parlance and it must be given its popular sense, meaning 'that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it', and so construed, it denotes those classes of vegetables which are grown in a kitchen garden or in a farm and are used for the table. Now, obviously green ginger is a vegetable grown in a kitchen garden or in a farm and is used for the table. It may not be used as a principal item of the meal but it certainly forms part of the meal as a subsidiary item. It is an item which is ordinarily sold by a vegetable vendor and both the vegetable vendor who every day deals in vegetables and the house-wife who daily goes to the market to purchase vegetables would unhesitatingly regard green ginger as vegetable." 9. Bearing in mind the principles enunciated by the Supreme Court, it has to be seen how the fans are understood in the popular sense and commercial transactions. In a transaction regarding the fans the purchaser as well as the seller has always in mind the regulator when the expression 'fan' is used. It may be in certain circumstances that the ceiling fan is used without a regulator, but these circumstances cannot affect the position that the ceiling fan is usually considered as inclusive of regulator. In ordinary parlance and in commercial practice as well the expression 'ceiling fan' is used in association with the regulator invariably.
10. The learned counsel for the appellant contended that regulators for the fans are made liable to excise duty for the first time with effect from 19-6-77 and as such it is not open to the authorities to conclude that the expression electric fan at the relevant time and prior to amendment takes in its fold the regulator also. Though the contention first blush appear to be plausible the context and text of item 33 does not support the contention. The subsequent legislation can be considered as clarificatory in nature sometimes, or may be inserted by way of abundant caution, and in situations it may be considered as parliamentary exposition of the earlier Act when it is not free from ambiguity. The learned counsel for the respondent invited us to the decision of the Supreme Court reported in Jogendranath v. I.T.Commissioner, (6) AIR 1969 S.C. 1089 at 1094. In this case the question that was considered is whether the Hindu deity falls within the meaning of the word 'individual' under sec. 3 of the Income Tax Act and can be treated as unit of assessment under that section. In the context of considering this issue, the Supreme Court observed at page 1094 as follows :- "On a comparison of the provisions of the two Acts counsel on behalf of the appellant contended that a restricted meaning should be given to the word 'individual' in sec. 3 of the earlier Act. We see no justification for this argument. On the other hand we are of the opinion that the language employed in 1961 Act may be relied upon as a parliamentary exposition of the earlier Act even on the assumption that the language employed in sec. 3 of the earlier Act is ambiguous. It is clear that the word 'Individual' in sec. 3 of the 1922 Act includes within its connotation all artificial jurisdical persons and this legal position is made explicit and beyond challenge in the 1961 Act." 11. Again in the decision reported in S.V.P. Cement Co. v. G.M.S. Pvt.
Ltd., (7) AIR 1976 S.C. 2521 the Supreme Court held that the Parliamentary exposition as revealed in the later Act can be considered to clarify any doubt or ambiguity in the prior Act in the context of considering whether a Head Lessee in respect of mines and minerals under an Indenture of Lease executed prior to the date of vesting of mines under Bihar Land Reforms Act, does not become a tenure-holder consequent on vesting under the Act. At page 2527 the Supreme Court observed as follows :- "We also find ourselves unable to accept this contention and to disregard the well settled cannon that sometimes light may be thrown upon the meaning of an Act by taking into consideration 'Parliamentary expositions' as revealed by the later Act which amends the earlier one to clear up any doubt or ambiguity. The principle has to be followed where, as in the instant case, a particular construction of the earlier Act will render the later incorporated Act ineffectual or otiose or inept. [See Kirkness v. John Hudson & Co., 1955 AC 696 (HL). This view also receives support from the decision of this Court in Yogendra Nath Naskar v. C.I.T., Calcutta (1969) 1 SCC 555=(AIR 1969 S.C. 1089) where approving the authoritative pronouncement in Cape Brandy of Syndicate v. Inland Revenue Commrs., (1921) 2 K.B. 403 that the subsequent legislation may be looked at in order to see the proper construction to be put upon an earlier Act where that earlier Act is ambiguous, it was held that the language employed in Income Tax Act, 1961 may be relied on a Parliamentary exposition of the earlier Act (I.T. Act, 1922) even on the assumption that the language employed in sec. 3 of the earlier Act is ambiguous." 12. It is a matter of common experience that the fan as such is not used without the regulator and when any customer or a purchaser asks for the fan, he has in hi? mind invariably the regulator also and the seller also has the same view. In spite of this, some doubt is cast whether the expression "Fan" by itself includes the regulator in view of the circumstances that fans are not invariably associated with regulators in places like cinema halls, etc. This doubt has been amply cleared and set at rest by the amendment. Therefore, in the circumstances the concept of Parliamentary exposition of an earlier Act can be invoked in this case and the expression 'ceiling fan' used in item 33 takes in its fold the regulator also.
13. Thus subsequently the amendment of Tariff Item 33 with effect from 18th June, 1977 is clarificatory. The Revenue has always been agitating that regulator is an indispensable part of a fan but when an assessee comes forward to take the benefit of Notification No. 198/76-C.E., dated 16th June, 1976 under the Production Incentive Scheme the Revenue changes its stand that the regulator is not an integral part of a fan.
In a decision of the Government of India in the case of Himadri Electricals cited by the learned counsel for the respondent reported in 1981 E.C.R. 622D the Government of India had held that the value of a regulator was to be included in the assessable value of the electric fan prior to 17th June, 1977. Shri A.K. Saha, during the course of his argument has drawn my attention to the Hon'ble Supreme Court judgment in the case of Hansraj Govardandas v. H.H. Dave reported in E.C.R. C274 S.C. (1932-82). The Hon'ble court had held that in a taxing statute there is no room for any intentment. The matter is going wholly by the language of the Notification. In Notification No. 198/76-C.E., dated 16th June, 1976 (Sl. No. 32) it was mentioned "Electric Fans, All Sorts". The words 'electric fans, all sorts' have to be construed liberally. I have already given my finding that the regulator is the indispensable part of the fan.
15. The respondent has also filed a Cross Objection which just supports the order passed by the Collector (Appeals) and is infractuous. Since no new point has been raised in the Cross Objection the same filed by the respondent is dismissed.