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Bengal Luxmi Cotton Mill Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(15)ELT472TriDel
AppellantBengal Luxmi Cotton Mill
RespondentCollector of Central Excise
Excerpt:
.....goods could not be regarded as "cloth" as ordinarily understood.5. on the question of limitation, shri bannerjee first argued that under rule 10, as applicable at the relevant time, a demand could be made only for the period of three months prior to the issue of the show-cause notice. however, when it was pointed out to him that under rule 173j, which came into effect in 1969, the applicable time limit under rule 10 was one year for goods covered by the self removal procedure (as the goods under consideration were), shri bannerjee accepted that the time limit under rule 10 at the relevant time would be one year. it was found that in this view the demands which are the subject matters of the appeals nos. 364/79, 365/79 and 366/79, would be wholly within time. as regards the demand which.....
Judgment:
1. These are revision applications (hereinafter called "appeals") filed before the Central Government which under Section 35P of the Central Excises and Salt Act, 1944, stand transferred to this Tribunal to be disposed of as if they were appeals presented before the Tribunal.

2. These four appeals arise from a combined Order-in-Appeal of the Appellate Collector of Central Excise, Calcutta, in which he had confirmed four Orders-in-Original of the Assistant Collector of Central Excise, Calcutta IV Division, whereby the Assistant Collector had demanded different amounts as handloom cess payable under the Khadi and Other Handloom Industries Development (Additional Excise Duty on Cloth) Act, 1953, for different periods between May, 1972 and March, 1976. For facility of reference, the particulars relating to the four appeals, essential for the further discussion, are given below :-No. of Tribunal's No. & Date of Date of Period AmountAppeal File Assistant Collector's Show Cause Covered DemandedOrder Notice Rs.100/79 No. V(19)3-26CGR/75 25-3-75 May 1972- 21,214.05dated 18-10-76 Nov. 1974364/79 No. V(19)J5-5/75/Cal.

9-12-75 June 1975- 3,165.55IV dated 18-10-76 Sep. 1975365/79 No. V(19)30-3/76 30-6-75 March-dated 18-10-76 May 1975 1,351.58366/79 No. V(19) 15-5/76 30-3-76 Oct. 1975-dated 18-10-76 March 1976 3,699.07 3. All these appeals involve an identical question, namely, whether the goods described by the appellants as "grey markin (Medium A and Medium B) for use of the coated abrasive industry" were liable to handloom cess. These goods were being cleared without payment of basic Central Excise duty in terms of exemption notification No. 70/69, dated 1-3-69.

No amount was paid at the time of clearance as additional excise duty (hereinafter referred to as "handloom cess") under the Khadi and Other Handloom Industries Development (Additional Excise Duty on Cloth) Act, 1953 (hereinafter referred to as the "Charging Act"). Subsequently, four show-cause notices for different periods, as set out in para 2 above, were issued by the Central Excise authorities, proposing to demand various amounts as handloom cess for the periods specified in the show-cause notices. In pursuance of the show-cause notices, four orders-in-original were passed by the Assistant Collector, confirming the demands for the respective amounts shown in para 2 above. On appeal to the Appellate Collector, he confirmed the orders of the Assistant Collector.

4. Appearing before us for the appellants, Shri H.L. Bannerjee, Consultant, advanced the following arguments :- (a) All the demands were wholly or substantially barred by limitation ; (b) the appellants were one of the textile mills taken over by the Central Government under the Sick Textile Undertakings (Nationalisation) Act, 1974, with effect from 1-4-1974; and became a unit of the National Textile Corporation (West Bengal, Assam, Bihar and Orissa) Limited which was a subsidiary of the National Textile Corporation Ltd. (hereinafter referred to as "NTC"). In terms of the above Act, the NTC was not liable for any liability of the erstwhile owners of the mills incurred prior to 1-4-1974; (c) the show-cause notice had been issued to Bengal Luxmi Cotton Mill, whereas it should have been issued to the NTC, of which the Mill was a unit with effect from 1-4-1974; the notice was, therefore, invalid; (d) in terms of the definition contained in section 2(b) of the Charging Act, no handloom cess could be levied on the goods in question; and (e) in any event, the goods could not be regarded as "cloth" as ordinarily understood.

5. On the question of limitation, Shri Bannerjee first argued that under Rule 10, as applicable at the relevant time, a demand could be made only for the period of three months prior to the issue of the show-cause notice. However, when it was pointed out to him that under Rule 173J, which came into effect in 1969, the applicable time limit under Rule 10 was one year for goods covered by the Self Removal Procedure (as the goods under consideration were), Shri Bannerjee accepted that the time limit under Rule 10 at the relevant time would be one year. It was found that in this view the demands which are the subject matters of the appeals Nos. 364/79, 365/79 and 366/79, would be wholly within time. As regards the demand which is the subject matter of the appeal in file No. 100/79 (which constitutes the lion's share of the total amount involved), it would be within time in regard to the period from about 25-3-74 to 30-11-1974, and tune-barred for the earlier period. In view of the conclusions contained elsewhere in this Order, it is not necessary to go further into the issue at this stage.

6. On the question of liability of the NTC, of which the present appellants are a unit, Shri Bannerjee referred to the provisions of section 5 of the Sick Textile Undertakings (Nationalisation) Act, 1974, which run as follows :- "(1) Every liability, other than the liability specified in Sub-section (2) of the owner of a sick textile undertaking, in respect of any period prior to the appointed day, shall be the liability of such owner and shall be enforceable against him and not against the Central Government or the National Textile Corporation ; (a) loans advanced by the Central Government, or a State Government or both to a sick textile undertaking (together with interest due thereon) after the management of such undertaking had been taken over by the Central Government, (b) amounts advanced to a sick textile undertaking (after the management of such undertaking had been taken over by the Central Government, by the National Textile Corporation or by a State Textile Corporation, or by both, together with interest due thereon, (c) wages, salaries and other dues of employees of the sick textile undertaking in respect of any period after the management of such undertaking had been taken over by the Central Government, shall on and from the appointed day, be the liability of the Central Government and shall be discharged by, for and on behalf of that Government, by the National Textile Corporation as and when repayment of such loans or amounts becomes due or as and when such wages, salaries or other due becomes due and payable.

(a) save as otherwise expressly provided in this Section or in any other Section of this Act, no liability other than the liability specified in Sub-section (2) in relation to a sick textile undertaking in respect of any period prior to the appointed day, shall be enforceable against the Central Government or the National Textile Corporation; (b) no award, decree or order of any Court, tribunal or other authority in relation to any sick textile undertaking passed after the appointed day in respect of any matter, claim or dispute in relation to any matter not referred to in Sub-section (2), which arose before that day shall be enforceable against the Central Government or the National Textile Corporation ; (c) no liability of any sick textile undertaking or any owner thereof for the contravention, before the appointed day, of any provision of law for the time being in force, shall be enforceable against the Central Government or the National Textile Corporation." Shri Bannerjee pointed out that the demand which is the subject-matter of appeal No. 100/79 related to alleged liabilities over the period May, 1972 to November, 1974. According to him, any liability for the period May, 1972 to March, 1974 could be enforced only against the erstwhile owners of the mill and not against the NTC.7. Shri Bannerjee admitted that this argument would not be applicable in respect of the demands covered by the other three appeals, all of which related to the period on or after 1-4-1974.

8. For convenience, we may mention, even at this stage, that Shri Tayal, the learned representative of the Department, stated that he had received instructions from the respondent Collector that there was substance in this contention of the appellants, and that the NTC would not be liable for any demand in respect of taxes relating to the period prior to 1-4-1974. In effect, therefore, the Department has conceded that the present appellants, who are a unit of the NTC, could not be held liable for demands relating to the period from May, 1972 to March, 1974, which is the major part of the period covered in appeal No.100/79.

9. As regards the third argument of Shri Bannerjee, namely, that the show cause notice was invalid as it was addressed to Bengal Luxmi Cotton Mill and not to the NTC, he had no detailed justification. We find that this ground has apparently not been taken at any earlier stage. Further, even now the appellants appear to be using the name of Bengal Luxmi Cotton Mill, as seen even from the vakalatnama filed by them along with the revision application. Having regard also to the fact that they are not now proposed to be held liable for any dues prior to the Mill being taken over by the NTC, this ground lacks substance and need not be discussed further.

10. The next argument of Shri Bannerjee turns on the wording of section 2(b) of the Charging Act. In this section, which deals with definitions, the term "cloth" has been defined as follows :- '(b) "cloth" has the meaning assigned to it in the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944);'.

The charging section, namely section 3, provides that the handloom cess shall be levied and collected "on all cloth...". Shri Bannerjee's argument was that the handloom cess was leviable only on "cloth". This term had been defined to have the meaning assigned to it in the First Schedule to the Central Excises and Salt Act. Shri Bannerjee argued that the term "cloth" had not been defined in the said Schedule. Nor did the description of item 19 of that Schedule, with reference to which handloom cess was sought to be levied, refer to "cloth". The main description as given in this item was "Cotton fabrics". Similarly, the descriptions in other items of the First Schedule dealing with textile items refer to "silk fabrics", "woollen fabrics", "man-made fabrics", etc. Shri Bannerjee accordingly argued that no handloom cess could be levied on the goods under consideration.

11. It would be convenient here to refer to a connected point made in the memorandum of appeal (although not specifically argued by Shri Bannerjee). This is that section 3(2) of the Charging Act provides that handloom cess "shall be in addition to the duty of excise chargeable on cloth under the Central Excises and Salt Act, 1944 (1 of 1944), and shall be levied and collected in the same manner as the duty of excise on cloth levied and collected under the Act". It was, therefore, argued that where no basic duty of Central Excise was chargeable, the handloom cess would not be chargeable.

12. Finally, Shri Bannerjee argued that the grey markin was not known in common parlance as "cloth". It was pointed out by the Bench that no specific evidence in this regard had been advanced and that there was reason to believe that "grey markin" was included in the definition of "long cloth" as laid down by the Textile Commissioner. Shri Bannerjee did not contest the latter point, but reiterated that "grey markin" was not commonly known as "cloth".

13. Replying for the Department, Shri Tayal sought to argue that the entire demand for the period May, 1972 to November, 1974, covered by the appeal No. 100/79, was in time. However, in view of the concession made by the Department on the question of liability of the NTC for taxes payable for the period prior to 1-4-1974, this point ceases to be relevant. If the NTC, who are the present appellants, are fully exempt from liability for the period prior to 1-4-74, the question whether the demand for liabilities related to that period was within time or not ceases to be relevant and need not be further considered.

14. Shri Tayal strongly opposed the argument of Shri Bannerjee that in view of the definition of "cloth" in the Charging Act, the handloom cess was not applicable to the goods under consideration. Shri Tayal pointed out that in the First Schedule to the Central Excises and Salt Act (referred to for convenience as "the Central Excise Tariff Schedule"), various items of what is popularly known as cloth have been described as "cotton fabrics", "silk fabrics", etc. The term "fabrics" had been used as a synonym for the term "cloth", and in each of the relevant Tariff items the scope of that item had been precisely set down. Accordingly, the handloom cess should be taken as applicable to fabrics of cotton, silk, etc., as defined in the respective items of the Central Excise Tariff Schedule.

15. Shri Tayal further pointed out that if Shri Bannerjee's argument in this regard were to be accepted, it would mean that not only the goods under consideration but in fact any variety of fabric, whether of cotton, silk, wool, man-made fabrics or anything else, could not be charged to handloom cess. In fact, handloom cess could not be charged on any goods, and the Charging Act would be rendered a nullity. Shri Tayal submitted that there were innumerable authorities for the proposition that an interpretation which would render a provision of law a nullity should be avoided if an alternative interpretation was possible. He, therefore, submitted that the term ''cloth" should be taken as synonymous with the term "fabrics" appearing in the relevant items of the Central Excise Tariff Schedule.

16. As regards Shri Bannerjee's last argument that "grey markin" was not known in common parlance as "cloth", Shri Tayal submitted that no evidence in this regard had been led, and that a simple assertion in this regard was not sufficient. The goods in question would fall within the generic description of "cloth" and would, therefore, be liable to handloom cess.

17. We have carefully considered the arguments advanced on both sides.

In view of the position now taken by the Department on the liability of NTC for the period prior to 1-4-1974, the present appellants clearly cannot be held liable for that portion of the demand of duty for the period May, 1972 to March, 1974, which is part of the amount covered by appeal No. 100/79. This argument is, however, not available to them for the remaining part of the demand covered by that appeal, nor is it at all available in respect of the demands covered by the other three appeals.

18. On the question of limitation, we have already observed that the demands covered by the three appeals Nos. 364/79, 365/79 and 366/79 were within the time limit of 12 months under Rule 10 as applicable at the relevant time. The demand covered by appeal No. 100/79 is also within time for the period from 1-4-74. In the view we have taken regarding the liability of NTC, the demand for the period prior to 1-4-1974 is not enforceable against NTC, irrespective of the question of limitation.

19. As regards the argument of Shri Bannerjee, based on the definition of "cloth" in the Charging Act, we find substance in the submission of Shri Tayal that acceptance of Shri Bannerjee's argument would mean that handloom cess could not be levied on any single article, and would reduce the Charging Act to a nullity. It is well-known that the courts strongly lean against a construction which would reduce a statute to a nullity or futility. Several weighty authorities in support of this principle are found in the standard works on the interpretation of statutes. A number of examples of the application of this principle, namely, Construction it res magis valeat quampereat, have been given in Maxwell on "The Interpretation of Statutes" (Twelfth Edition, Chapter 2). It is also dealt with at length in "Principles of Statutory Interpretation" by G.P. Singh (3rd Edition 1983). In the latter work there are several references to the Supreme Court judgments which uphold this principle. It is not necessary to repeat the various authorities given by the learned author, since the principle is so well-known and so well-established that it can not be controverted. It is quite obvious that if the interpretation advocated by Shri Bannerjee were to be adopted the Charging Act which has as its object "the levy and collection of an additional duty of excise on cloth for raising funds for the purpose of developing khadi and other handloom industries and for promoting the sale of khadi and other handloom cloth" would totally fail in its avowed object. We would therefore, not be prepared to accept this interpretation if a reasonable alternative can be found.

The alternative proposed by Shri Tayal, namely, that the term "cloth" should be considered as a synonym for the term "fabrics" used in the Central Excise Tariff Schedule, appears to us in this context to be quite reasonable. As already observed, the term "fabrics" which is used in the various relevant items of the Central Excise Tariff Schedule, is precisely defined in each of these items. We also find that it is used in the sense in which the term "cloth" is normally used and it could reasonably be considered as a synonym for the term "cloth" for the purpose of levy of handloom cess. We do not, therefore, accept the argument of Shri Bannerjee in this regard.

20. As regards the further argument, based on section 3(2) of the Charging Act, that handloom cess cannot be charged where the basic duty of excise is not charged, we do not find that this follows from the wording of section 3(2), which has been quoted in para 11 above. It appears to us that the object of the above sub-section is to make it clear that the handloom cess is separate from the basic duty of excise, and also that the procedure for levying and collecting it should be the same as the procedure for levying and collecting the basic excise duty.

The provisions of Sub-section (1) of section 3 are quite Clear that the handloom cess sh...all be levied and collected "on all cloth...", and in the absence of a specific provision that it shall not be collected on cloth on which basic excise duty is not collected, Shri Bannerjee's argument in this regard cannot be accepted.

21. There remains Shri Bannerjee's argument that "grey markin" is not "cloth" in common parlance. As pointed out by Shri Tayal, no evidence in this regard has been placed before us. Apart from this, we would hesitate to say that the expression "grey markin" is itself common parlance. We think most laymen would be unfamiliar with this expression and if shown the goods under consideration would be inclined to consider them as a variety of cloth and would certainly not light upon the expression "grey markin" to describe them. So far as use by the textile industry is concerned, as pointed in para 12 above, it appears that grey markin is in fact included in the definition of long cloth as laid down by the Textile Commissioner. Further, we observe that the appellants themselves have referred to the goods as "cotton fabrics".

Thus, in para 6 of their memorandum of appeal it has been stated "The said Unit produced among other varieties of cotton fabrics, grey-markin (Medium A and Medium B) for use of the coated abrasive industry". We have already held for the purpose of levy of handloom cess the term "cloth" should be taken as synonymous with the term "fabrics". Since the goods are "fabrics" as described by the appellants themselves, we see no reason, in the absence of any specific evidence, to hold that they were not "cloth".

21. In the result, we find that the goods in question were clearly liable to handloom cess. However, the present appellants were not liable to pay handloom cess for the period prior to 1-4-1974. We accordingly allow appeal No. 100/79 to the extent of setting aside the demand against the present appellants for duty for the period prior to 1-4-1974. The appeal is otherwise rejected. The other three appeals are rejected in toto.


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