1. This revision by M/s. Modella Textile Industries Pvt. Ltd. filed before the Central Government under the provisions of Section 131 of Customs Act, 1962, has been received by transfer, to be disposed of an appeal by the Tribunal by virtue of provisions of Section 131B(2) of the said Act and the same is being disposed of as such.
2. The company, hereinafter referred to as the appellant, had imported 6 consignments of what is described as "woollen rags" by means of different Bills of Entry which were presented to the Import Department of the Customs at Bombay on different dates falling between 1-3-1979 and 9-3-1979. The goods were treated to be falling under Tariff Entry 63.02 of the Customs Tariff for the purpose of customs duty. So far as charge of countervailing duty was concerned, the same was realised with reference to Item 68 of the Central Excise Tariff. After the goods were cleared on payment of duty as assessed and demanded, refund claims were filed by the party for all the six consignments.
3. The refund claims were lodged on the plea that previously these type of goods, known as woollen rags, were enjoying concessional rates along with other categories of goods, such as woollen waste, etc. by virtue of Government Notification No. 240-Cus/76 but with the introduction of the Budget for the year 1979-80, another notification was issued, being Notification No. 49 of 1-3-1979, giving total exemption from countervailing duty to a number of articles, detailed in the Schedule annexed thereto. However, this description was not with reference to the goods, but to the notifications, covering certain goods and originally in the notification issued on 1-3-1979, Notification No.240-Cus/76 dated 2-8-1976 which had covered the goods described as "woollen rags", was not included. It was in this situation that the goods imported by means of six consignments and cleared during the period 1-3-1979 to 9-3-1979 were charged to countervailing duty on the view, that the amendment to Notification No. 49 of 1-3-1979 took effect only from the date of its issue, i.e. 13-3-1979, and did not have retrospective operation, so as to cover the subject consignments.
4. The party's contention, while forwarding the refund claims which were lodged after the issuance of Notification No. 69, dated 13-3-1979 inserting Notification No. 240-Cus/76 also, in the Schedule attached to Notification No. 49 of 1-3-1979, was to the effect that this amending Notification of 13-3-1979 shall be deemed to have been in existence with effect from the issuance of the Notification of 1-3-1979, and as such the benefit thereof had to be given to the goods cleared even before 13-3-1979.
5. This assertion of the party was rejected by the Assistant Collector who passed two separate orders in respect of the six refund claims, both dated 4-10-1979, holding that there was nothing in the wording of the Notification issued on 13-3-1979, namely, Notification No. 69/79, to indicate an intention to give it a retrospective effect and that the benefit could be given only with effect from the date of issuance thereof, and not to clearances having been effected before the date on which this notification came into being.
6. The appellant went in appeal to the Appellate Collector of Customs, Bombay against rejection of their refund claims, having filed two appeals against .the two orders in original and both these appeals were disposed of by one consolidated order passed on 28-4-1980. The Appellate Collector upheld the view of the Assistant Collector that Notification No. 69, dated 13-3-1979 could not be held to be having any retrospective operation, in the absence of. any express indication to that effect and since all the goods which were subject matter of the appeals before him, had been cleared before the issuance of Notification No. 69 of 13-3-1979, the rates prevalent as on 12-3-1979 or before that would be applicable by virtue of provisions of Section 12(1) (a) of the Customs Act. He categorically expressed the view that appellant's plea that proper statutory interpretation required that the Notification dated 13-3-1979, became effective from 1-3-1979, was devoid of force, and liable to be rejected.
7. Feeling aggrieved by this order, the appellant took the matter to the Central Government by means of the revision, now being taken up as an appeal. Shri T.V. Krishnamurthy appeared for the appellant on the date of hearing whereas the Department was represented by Shri Kunhi Krishnan.
8. It was observed at the outset that there were originally two causes of actions inasmuch as two orders had been separately passed by the Assistant Collector and even the party had filed two appeals before the Appellate Collector, and it was pointed out to Shri Krishnamurthy, that one revision petition filed before the Central Govenment, could not cover both the causes of action. Although Shri Krishnamurthy urged in the beginning that since the two orders had been disposed of by one appeal by the Appellate Collector, the two original causes of actions stood merged into one, he appreciated and conceded that separate appeals were required to be filed corresponding to the original causes of action. However, in view of the fact this had not been done, he gave statment to the effect that the present appeal may be treated in relation to that order-in-original which covered five Bills of Entry and, in the circumstances, he would give up the other matter representing only one Bill of Entry. As a sequel to this statement, what is being disposed of by means of the present order is the matter covering five Bills of Entry, relating to Order-in-Original No.S/6-3123 to 3127/79, dated 4-10-1979 and the Order-in-Appeal being No.S/49-94/80 in respect of Appeal No. 375, dated 1-2-1980.
9. After the preliminary position was cleared, Shri T.V. Krishnamurthy addressed arguments on merits. He reiterated the contention that the goods : "woollen rags and woollen wastes", were treated originally on the same footing by means of single Notification, being Notification No. 240, whereby they were given some partial exemption and that it was only an act of omission that while introducing total exemption by means of Notification No. 49 of 1-3-1979 that this Notification No. 240 did not find mention in the Schedule to this latter Notification issued on 1-3-1979 and that the very fact that after a few days only, the Central Government issued an amendment by inserting Notification No. 240 also, in the Schedule by issuance of Notification No. 69, the intention is clear that these goods known as woollen rags also were meant to be conferred the same benefits as woollen waste and that it was only through some oversight that they did not find mention in the beginning.
He strongly argued that woollen rags and woollen wastes are the main raw materials for shoddy woollen industry and both these items have all along been treated equally and assessed to same rate of duty and whereas wool waste was exempt from additional duty equivalent to excise duty payable on the like article,, commonly known as countervailing duty, by inclusion of Tariff Heading No. 53.01/05 relating thereto, in the Notification No. 48 of 1-3-1979 at S. No. 10, the notification pertaining to woollen rags did not find mention in the other notification issued same day, namely, Notification No. 49 of 1-3-1979 .and that it was for this reason that countervailing duty was charged in respect to woollen rags until the notification of 13-3-1979.
According to him, the wording of the amending notification whereby this Notification No. 240/76 was only, "inserted" in between, vide S. No.4A, is a clear indication of the fact that the intention was to exempt woollen rags from the start of this notification of 1-3-1979 and thus the refund claims on countervailing duty paid because of the omission to include this item in the beginning ought to have been allowed.
10. He further built up his arguments, urging alternatively, that in any case countervailing duty, known as : 'additional duty equal to excise duty for the time being leviable on a like article if produced or manufactured in India', could not be charged on these items which were imported as rags and old woollen fabrics and furnishing, because they were not "excisable goods" at all within the meaning of Section 2(d) of the Central Excises and Salt Act, 1944, nor any manufacturing activity, as contemplated by Section 2(f) of the said Act was involved.
He, thus contended that no excise duty would be leviable, on the collection or disposal of these rags in India, and an inescapable inference would be that no countervailing duty could be levied in respect thereto. He also referred to certain authorities as what constituted "manufacture" within the meaning of the Central Excises Act, so as to hold the particular goods liable to excise duty, and that meanings attached to an article by trade or people commonly dealing therewith, ought to be the governing principle.
11. Shri M. Chatterjee appearing for the Revenue countered these arguments by contending that known canons for interpretation of statutes, which would include statutory notifications, lay down that unless an express intention could be spelt out, from the wording of a particular legislation to give it a retrospective operation, on such intention could be attributed or imputed to be implied. He thus averred that the plea of the appellant that by virtue of second notification of 13-3-1979, these goods could be treated I to be exempt from countervailing duty retrospectively even for the period prior to issuance thereof, was totally misconceived and liable to be rejected.
He answered the second arguments of the learned Consultant regarding the very excisability of these goods by urging that question of manufacture does not arise for purposes of countervailing duty and that in such cases the only requirement could be that if the "goods are likely to be manufactured", then in case they were not covered by any express Tariff Entry, they would be chargeable for the purposes of excise under residuary Item 68-C.E.T. and countervailing duty would be recoverable correspondingly. He strongly contended that if new rags are to be produced in India, those would be excisable.
12. After the hearing was concluded, we have very carefully gone through the file and given our earnest consideration, to the contentions canvassed on both sides. We do not find it possible to uphold the contention set forth on behalf of the appellant that Notification No. 69 issued on 13-3-1979 would have retrospective operation for the reason that no such intention could be spelt out from the plain wording of this notification, and it is an established proposition that in the absence of any ambiguity, the express intention, as embodied in the wording of a provision of law or notification, has to be given precedence, as against any implied intent sought to be imputed thereto. This proposition would hold good, irrespective of the situation as highlighted by the learned Consultant, by urging that the insertion of the previous Notification No. 240/76 in between as S. No. 4A, was an unmistakable indication of the fact that intention was to have it included in the original notification, for the short reason that even this "insertion", would take effect from the date it was brought forth, and not from any date prior thereto.
13. However, we find that the alternative plea set forth by learned Consultant for the appellant deserves careful consideration because it is apparent from the wording of Section 3 of the Customs Tariff Act that the criterion for levy of countervailing duty was that it was recoverable only, if excise duty was leviable on the goods at the relevant time under relevant provisions of the Central Excises Act.
This proposition will find support in the authority of Rajasthan High Court in the case of Prem Cables Pvt. Ltd. y. Assistant Collector, Customs, Bombay (1981 ELT 440), wherein it was held in clear and categorical terms that- "If excise duty was not leviable on the goods at the relevant time under relevant provisions of the Central Excises Act, the Customs authorities were not entitled to recover the countervailing duty on those goods under Section 2A of the Indian Tariff Act." 14. With this basic proposition in view, we find it worthwhile to advert to the nature of the goods as described in the import documents, namely, the Invoices, and Bills of Entry. We find, on a reference to various invoices, that the goods have been procured from different foreign dealers of Textiles waste, but the import has taken place through the agency of the State Trading Corporation of India. This has been brought into focus to pinpoint the fact that the appellant is not in direct contact with the foreign suppliers but received the goods in India through a Government body of the status and standing of the State Trading Corporation of India. As such, the description of the goods given in Invoices would merit, every claim to credibility and there cannot be any scope to entertain any doubt regarding veracity of the description given therein.
15. A reference to these invoices reveals that the goods have been invariably described as- "Old rags of woollen textile fabrics" (including knitted and crocheted fabrics) which are required for, manufacture of shoddy yarn, and may consist of articles of furnishing or clothing or other clothings worn out, soiled or torn as to be beyond cleaning or repair." 16. It is pertinent to note that the specifications are not only that the goods should be "old rags or woolen textile fabrics" but it has been further specified that they are required for manufacture of shoddy yarn, and consisted of articles of furnishing or clothing : so, "worn out, soiled or torn, as to be beyond cleaning or repair". The description of the goods in the Bills of Entry is also as "old rags of woollen textile fabrics". It is further significant to note that these goods have been accepted to be so by the Customs Department at the time of clearance because for the purpose of customs duty under the Customs Act, they have been classified under Tariff Entry 63.02 which reads as under :- "Used or new rags, scrap twine, cordage, rope and cables and worn out articles of twine, cordage, rope or cables." There can thus be no doubt that the imported goods were rags, and when read commultatively with the description in the invoices, they were undoubtedly used rags not only of clothings, but also of furnishings and other fabrics. It goes without saying that rags by themselves do not require any manufacturing activity nor do they entail any such process which could be deemed to be "manufacture" within the meaning of Section 2 (f) of the Central Excises Act.
17. . We also consider the contention of the learned departmental representative, that no manufacturing activity was contemplated for the purposes of countervailing duty, as not sustainable because of the plain wording of Section 3(1) of the Customs Tariff Act, 1975 read with Explanation thereto, which makes it clear that this duty for the time being leviable on a like article if produced or manufactured in India, which, by virtue of the Explanation, would mean the exise duty for the time being in force which would be leviable on a like article, if produced or manufactured in India. This Explanation has obviously been added by way of abundant caution to meet contingencies where though similar like goods may not be under manufacture at the relevant time but in case they would be chargeable to excise duty if manufactured, even then the import of such like articles, would attract additional duty equal to possible excise duty, which those articles, if and when manufactured, may attract.
18. The position would be entirely different when not only such like articles are not being manufactured in India but from the very nature thereof, they are not such which are likely to be manufactured. These articles described as 'old rags'; particularly when the specifications in the Invoices, indicate that they were meant for a specific purpose, namely for manufacture of shoddy yarn and were to be so "worn out, soiled or torn as to be beyond cleaning or repair", by no straining of reasoning could be averred to be such goods as could be considered 'excisable'. Nor can they be imputed to be serviceable garments, because apart from the fact that the consignments also included "other textile fabrics, such as furnishings, etc. and there is no indication as to the proportion inter se of goods or rags of different categories; further even the Customs, when the goods were under their charge, have accepted them to be "old rags" and levied customs duty accordingly.
These have thus to be accepted, as to have been nothing but "old rags".
19. We may also mention that the term "rags", as understood in the Excise Tariff, has an entirely different connotation which cannot even be remotely correlated with the subject goods. Although the term "woollen rags" has nowhere been defined but there is an indication in the Central Excise Tariff by virtue of a statutory notification as to what was intended to be meant by the term "rags" as found in series of notifications appended to Tariff Entry 19 relating to cotton fabrics.
In these notifications, such as Notification No. 106/73-CE, dated 28-4-1973, as amended by Notification No. 29/75-CE, dated 1-3-1975, Notification No. 73/76-CE, dated 16-3-1976 and Notification No.139/77-CE, dated 18-6-1977, and Notification No. 136/77-CE, dated 18-6-1977 as amended by Notification No. 324/77-CE, dated 26-11-1977, the expresssion "rags" has been defined to mean- (i) bona fide cut-pieces of cotton fabrics of length more than 23 centimetres, but less than 45 centimetres, where the width of the fabric is one metre or more, and of length more than 23 centimetres but less than 65 centimetres, where the width of the fabric is less than one metre, arising during the normal course of manufacturing (including processing) or packing or drawing samples ; and (ii) cut-pieces of damaged or sub-standard cotton fabrics of length more than 23 centimetres but less than 45 centimetres, where the width of the fabric is one metre or more and of length more than 23 centimetres but less than 65 centimetres where the width of the fabric is less than one metre.
This definition can certainly furnish an unmistakable guideline as to what is meant by the term "rags" within the meaning of the Excise Tariff. As a corollary, any goods not conforming to this description cannot be deemed to be excisable goods, as 'rags' within the contemplation of the C.E.T.20. In-this context, the alternative plea of the appellant that rags as such, if collected in India, would not be termed as "excisable goods", as no manufacturing activity was involved, also assumes high degree of plausibility, benefit whereof has to go to the assessee, and there could be no room for entertaining any doubt on this score too; firstly, because, as already observed, Customs did not dispute or doubt the nature of goods for purposes of customs duty, when the goods were under their charge; and secondly, there is nothing on record to cast doubt on the correctness of the description given in Foreign Suppliers' Invoices, particularly when the import is through the State Trading Corporation. It is an accepted proposition in the matter of interpretation of fiscal statutes, that same meaning should be given to articles, as is commonly understood in trade or commercial parlance or would be given by the people in trade and commerce or conversant with the subject or the way they were treated and understood in usual course. This proposition was laid down in unambiguous terms by Hon'ble Supreme Court in Dunlop India Ltd. v. Union of India (AIR 21. As already discussed, these articles were such "worn out rags" according to the terms and specifications as could not be retrieved, for any use, other than manufacture of shoddy yarn. These, therefore, cannot be treated as "excisable goods" within the meaning of Section 2(d) of the Central Excises Act, not involving any process of manufacture. The mere activity of collection or disposal of these goods in India would not, in our considered view, attract any excise duty and as such countervailing duty could not be levied by having recourse to the residuary item; namely, Tariff Entry 68 of the C.E.T. We, accordingly, consider it to be a fit case, where levy of countervailing duty has to be set aside. As a result, we allow the appeal, and direct that countervailing duty which was charged on goods, covered by Bills of Entry, which are subject matter of this appeal, be refunded by the concerned authorities of Customs at Bombay within sixty days of the receipt of this order.