(1) Prior to march 1, 1961, only cotton fabrics were under entry 19 in the First Schedule to the Central Excises and Salt Act, 1944, chargeable to excise duties therein set out. By Finance Bill of 1961, item 18A was inserted in that Schedule and accordingly cotton yarn amongst other Articles became chargeable to excise duty at the rate of 30 naye Paies per kilogram in respect of yarn of less than 35 counts. By a trade notice bearing No. 16 of 1961 dated March 6, 1961, the Central Excise authorities notified that the aforesaid duty at the prescribed rates would be leviable on cotton yarn, twist, thread, ect., with reference effect from the midnight of February 28 and March 1, 1961, the trade c also made to clear that the duty on yarn would be in addition to the duty cotton fabrics and that yarn used in the weaving section of a factory by itself shall be assessed to duty before its issue to the weaving section. It appears that owing to certain difficulties felt by the authorities as also the trade in the matter of the proper assessment and levy of the said duty on yarn, Section EVI containing Rules 96V, 96W and 96X was inserted in the Central Excise Rules, 1944, called the Central Excise (sixth Amendent) Rules, 1961, under which a new procedure called the producer as to compounded levy was evolved. The effect of who produced was that a manufacturer that a manufacturer or part thereof in the manufacture of cotton fabrics in his own factory would have the option to pay compounded duty as might be prescribed by the Central Government from time to time, not at the time when the yarn was issued to the wearing section but at there time when cotton fabrics made from such yarn were cleared, on ascertain basis namely, on per square meter of cotton fabrics c from such yarn. These rules were published by a notification bearing No. 110 of 1961 dated April 20, 1961.
(2) Under clause (1) of Rule 96 V such a manufacturer has to make an application for permission to apply the new procedure and on such application being grand, he would have the right to pay the compounded levy during the period so permitted insead of the standard rate of duty prescribed by the new entry 18A. Calues (2) of Rule 96V, however provided that such an application should be made so as to cover a period of at least six consecutive calendar months though the claues gave discretion to the Collector to given such permission felt that he did not wish to avail himself of the produce of compounded levy, he could recede the standard duty payable under entry 18A but such a manufacturer would have to give one week's notice in writing to the proper officer of his intention not to avail to the new procedure and if he were to fail to give himself such a notice, he would procedure for a period of six months from the date so such 1961. By a further notification dated April 20, bearing No. III of 1961, the central Government in pursuance of rule 96W direct that the rate of duty in respect of cotton yarn of any count shall be 1.2 naye paise pre square yarn metre of cotton fabrics produced from such yarn. The result of rule 96V and the said notification was that a manufacturer working a composite factory would be entitle to pay duty at the rate of 1.2 naye paise pre square metre of cotton fabrics produced by him at the time of clearance of those fabrics rather than pay the standard duty on yarn issue by him for there manufacturing process as prescribe by entry 18A of the first schedule. It appears, however, that certain difficulties in applying Rule 96V and in making assessment of compound duty arose and to obviate those Baroda, issued trade notices from time to time in pursuance of the power reserved under Rules of the collector to issue written instructions providing for supple mental maters arising out of the rules. By a trade notice No. 92 of 1961 dated April 27, 1961, after setting out the procedure a to the application provided that cotton fabrics produced from non-duty paid yarn under the new system previously produced from yarn on which duty was paid at the standard rate and separate accounts in from RGI and EB 4 should be mainted in respect of such fabrics. The trade the seciple procedure could be availed of if so desired by a manufacture with effect from April 1, 1961, such a manufacture would have segregation of the two kinds of stocks of cotton fabrics and maintaince of as provided by clause 8 thereof. A provision for retrospective opting to the new procedure as necessary by reason of the fact that thorough compounded duty became leviable as from April 1, 1961, the notification publishing the published on April 1, 1961, and the trade notice informing the trade of the special procedure was issued for the first time on April 20, 1961, and the trade notice informing the trade of the special procedure was issued first time on April 27, 1961,. As further difficulties were reported to the excise authorities in the matter of segregating the two stocks and of maintenance of the two separate accounts, an interim scheme and procedure were evolved by the authroises as set out in the trade notice No. 109 of 1961 issued on May 19, 1961. In this trade notice, after drawing the attention of the trade to the earlier trade notice 4 No. 92 of 1961 it as stated that by the artier trade notice N. 92 of 1961 it was already decided that the scheme of compounded levy if so desired by any factory; would-be applied to it with effect from April 1, 1961 although an application under R. 96V(1) was made and permission obtained thereon after April, 1, 1961. The trade notice further stetted tithe was rerouted to the authorities that there was generally a time-lag of about five to six weeks between the completion of the manufacturer of cotton fabricsand their packing in bals and that on account f this time-lag cotton mills were experiencing difficulties in separating and distinguishing cotton fabrics manufactured from yarn liable to duty from cotton fabrics manufactured from yarn cleared before March 1, 1961 and therefore not liable to duty or from yarn on which duty was already paid at the time of clearance during the month of March 1961. In order to eliminate this difficulty the trade notice provided that duty at the compounded rate of 1.2 naye Paise per square metre should be charged on al fabrics which wee baled on or after April 1, 1961, or before it and that no yarn duty should be charged on fabrics packed before April 1, 1961, irrespective of whether they were made from yarn issued on and from April 1, 1961, or before it and that noyarn duty should bechargedon fabrics packed before April 1, 1961. Having provided for such a uniform system of charging compounded duty the trade notice further provided that it had also ben decided that duty paid on yarn during the month of March 1961 and till such date in April when the compounded levy payable by a such a mill from April 1, 1961. This was explained by the trade notice stating that 'from such mill as opt for the compounded levy from 1st April 1961 there would beno conception of duty on yarn cleared during the month of March 1961 for manufacture of fabrics with the factory itself and duty will be realised on al fabrics baled on or after 1st April 1961 at the time of their clearance.' Since an argument was addressed to us on the language of clause 5 of this trade notice, it is necessary to quote clause 5 in its entirely. That clause provides-
'The above procedure is an intemrim arrangement for three months only. Continuance of this scheme beyond 30-6-1961 should not be necessary and the duty thereafter shall be collected on the normal basis of actual clearance without reference to the date of packing.'
It appears that it was subsequently feat that though cotton fabrics contemplated by this trade notice might have been manufactured and baled before April 1, 1961, there was a possibility of their not being cleared by June 30, 1961. N order to obviate this difficulty a trade notice No. 127 of 1961 dated July 1, 1961, was issued whereby after referring to the aforesaid trade notice No. 109 of 1961 it was stated that 'The procedure for clearance of cotton fabrics packed before 1-4-1961 conveyed therein has been extended up to 30-9-1961. After the expiry of this period the duty shall be collected on the normal basis of actual clearance without reference to the date of packing.' By further trade notices bearing Nos. 166 of 1961 and 173 of 1961, respectively dated October 7 and November 2, 1961, the period for clearance of cotton fabrics packed before April 1, 1961, was extended first up to October 31, 1961 and thereafter up to December 31, 1961. Finally, trade notice No. 157 of 1961 dated September 12, 1961, was issued by the Central Excise Collector, Baroda, by which he provided that composite mills switching over to the compounded levy scheme after June 30, 1961, were not entitled to opt for the new procedure retrospectively from April 1, 1961, an further mow, that they would not be entitled to avail of 'the procedure outlined in Collectorate trade Notice No. 109/1961 for adjustment of duty on yarn.' This trade notice also provided that that the composite mills which opt after June 30, 1961, should follow the procedure laid down in para 8; of the aforesaid Trade Notice No. 92 of 1961 and that Para 9 of the said trade notice No. 92 of 1961 would not be applicable to the mills switch govern to the compounded levy scheme after June 30, 1961.
(3) On April 6, 1961 the petitioner mills applied to the Superintendent, Central Excise, Ahmedabad, for the prescribed form stating that the mills intended to adopt the new procedure and that therefore in the meantime the mills should be permitted to discontinue to pay the standard rate of duty on yarn produced by it with immediate effect and to refund to them he duty so far levied and collected from them. On May 8, 1961 the excise authorities replied that cotton fabrics produced from non-duty paid yarn under the compounded levy system should be kept completely segregated from the previsouly produced cotton fabrics from yarn on which duty had ben paid at the standard rate and that separate accounts in the aforesaid two prescribed forms should be maintained in respect of the said fabrics. These instructions wherein accordance with Clause 8 of the trade notice No. 92 of 1961 dated April 27, 1961. Along with this letter the excise authorities enclosed the prescribed form for enabling the petitioner mills to make the application as provided under Rule 96-V. On may 11, 1961 the petitioner mills sent the prescribed from duly filled in asking for permission to adopt the compounded levy system for the period from April 1, 1961 to September 30, 1961. On May 24, 1961, the Inspector, Central Excise, Ahmedabad intimated to the petitioner mills that the competent authority had granted permission to them to avail of the compounded levy system in respect of cotton yarn duty for the period commencing from April 1, 1961 to September 30, 1961. On May 29, 1961 the petitioner mills asked for certain clarification with regard to goods exported by them and on May 31, 1961 the Superintendent, Central Excise advised the mills to pay up the compounded duty on yarn in question till the matter was clarified by the Collector in whom the matter had ben referred. Since the petitioner mills did not exercise the option granted to them, the Inspector, Central Excise by his letter dated June 13, 1961 requested the petitioner mills to give reasons for not having so far exercised the option of the compounded levy scheme. On June 14, 1961 the petitioner mill replied that since the compounded levy system was for a temporary period of three months only, they were not inclined to operate the optional for the month of June 1961 and that they would inform the authorities the next month if the aforesaid system was extended. On July 27, 1961 the petitioner mils wrote to the Inspector, Central Excise that they would be enforcing the option to pay the compounded duty permitted to them on and from August 1, 1961. On august 14, 1961 the petitioner mils applied to the Inspector, Central Excise claiming a sum of R. 39,545-12 an Paise, excluding the compounded duty for the month of July 1961. Presumably this differences was claimed by the petitioner mills on the footing that though they had exercised the option only firm August 1, 1961 the said option would be retrospectively effective as from April 1, 1961 and therefore the petitioner mills would be bound to pay only duty at the compounded, rate and not the standard duty prescribed under Entry 18-A. In the meantime, as aforesaid, the Collector, Central Excise issued his trade notice dated September 12, 1961 which inter aia provided that composite mills switching over the compounded levy scheme after June 30, 1961 were not entitled to exercise retrospectively their option as from April 1, 1961 and consequntly were also not entitled to the benefit of refund and adjustment provided by the trade notice No. 109 of 1961 dated May 19, 1961. By his order dated October 12, 1961 the Assistant Collector rejected the aforesaid claim on the ground that the petitioner mills had switched over to the compounded levy system after June 30, 1961 and as clarified byte trade notice No. 157 of 1961 dated September 15, 1961 they were not entitled to claim either refund or adjustment of the aforesaid sum of Rs. 39,545-12 nP. Aggrieved by this order the petitioner mills filed an appeal before the Collector, Central Excise, raising a number of contentions. These contentions were, however, rejected by the Collector and by his order dated February 19, 1962 the Collector held that the petitioner mils were not entitled to the said refund or adjustment, first by reason of the fact that they had exercised the option on and from August 1, 1961, i.e., after June 30, 1961, and secondly because in terms of Para 8 of the trade notice No. 92 of 1961 dated April 27, 1961, the millshad failed to segregate cotton fabrics produced fro duty-paid and non-duty-paid yarn and had also failed to maintain separate accounts in respect thereof as directed therein. This petition is directed against the correctness of these two orders.
(4) On behalf of the petitioner in Nanavati contended-
(1) that on a proper construction of R. 96 V once the petitioner mills applied and were grand permission to opt for the compounded duty ret from April 1, 1961 upto September 30, 1961, the exise authorities were bound and the ptitioner mills were entitled to pay the compounded duty;
(2) that it was implicit in Rue. 96-V that the mills became entitled to claim refund or adjustmen of standard duty paid by them from March 1, 1961 until they opted for the now procedure of compounded duty;
(3) that the excise authorities had no authority to issue the said trade notice dated September 15, 1961 prohibiting a manufacturer from claiming the benefit of such refund or adjustment if he exercised the option after June 30,1961; and
(4) that once permission was applied for and granted for the period April 1, 1961 to September 30, 1961, a manufacturer became entitled to pay only the compounded duty as from April 1, 1961 and therefore even if he opted for the system of compounded duty at stage subsequent to June 30, 1961, that system would be applicable to him retrospectively from April 1,1961 and therefore he would be entitled to refund or adjustment as provided under the trade notices in respect of yarn used in manufacturing cotton fabrics baled and cleared first upto June 30, 1961 and as provided in the subsequent trade notices, upto December 31, 1961.
(5) In order to appreciate these contentions, it is necessry to consider the provisions of Rule 96-V the trade notices and the circumstances and the difficulties to obviate which those trade notices were issued from time to time.
(6) With the introduction f excise duty yarn under the new Entry 18-a as fro March 1, 1961 yarn as aforesaid became a separate excitable Article. In the case of a composed factory which used yarn made by it in manufacturing cotton textiles, duty on yarn became chargeable not on the date of its clearance or removal, as in the case of cotton fabrics and other articles but on the date when it was issued for the purpose of manufacturing cotton fabrics. The first difficlty that was felt in assessing such yarn was as to how to ascertain the amount of duty on yarn used in the manufacturing process as it was possible that such yarn would consist of yarn made and issued both before and after March 1, 1961. The former would be duty free as there was no duty on yarn made and issued before March 1, 1961 and the latter would be chargeable at the standard rate laid down in Entry 18-A. Obviously it was to obviate this difficulty that Rule 96-V was inserted in the excise rles which provided for the compounded duty on yarn issued for themanufacturing process but not onthe weight of yarn but on the square metre of the manufactured textiles onthe basis that kilogramofyarn would produce a certainlength of cotton fabrics. The second difficulty was that even where such a manufactuere opted for the compounded dutysince the new system was to be in effect as from April 1,1961 if the manufacturer whilemaking thecotton fabrics were to use the yarn made andissued before Maarch 1961 and alsoyarn issued inMarach 1961, he would bepaying compounded dutyin thefirst case on yarn which was dutyfrree and inthe second case on yarn on which he had alreadypaid dutyat the standard rate. This difficultyno doubt woud be for a temporary period, for after some time there would be no questionof duty-free yarn or yarn having borne standard dutywhich woudbe used in the manufacturing process and the compounded dutycouldbe levied at the time of clearance ofte textile fabrics without the danger of levying dity on taax-free yarn oron yarn onwhich duty was alreadypaid in March 1961. Butit seems that the excise authorities felt that there was a genuine difficulty and therefore as supplemental provisions to the rule the Collectorate, Baroda, isued the trade notices making provisions to get over these difficulties.
(7) Keeping this background in mind we shal first examine theprivisions of Rule 96-V bywhich the procedure for levying the compounded dutywas enacted. Clauae (1) of that rule provides that where a manufacturer who produces cotton yarn and uses the whole or part of the yarn produced by him in the manuof cotton fabrics inhis own factory, applies to the Collector and the Collector grants such appliction,t he special provisions containead in Section EVI contaning Rules 96-V to 96-X would apply tosuch a manufacturer in substitution of th eprovisions contained inthe section for the period in respect ofwhich his application has bengrantd. The effect ofthis clause is that such a manuwoldhav e to pay the co dutyinstead of the standard duty durng the perod for hwich he has ben granted permission. Clause (2) provides that such an aplication should b mae so as to cover a period not ess than six consecutive calendar months but the Collector has discretion togrant permision even for a shorter period. Clause (3) provides that if at anytime during suchperiod of a manufacturer does not want toavail himself of the new procedure he shall give a notice inwriting of his intention at least one week in advance and if he fails to give such a notice, he shal be precluded from availing himself of these provisions for a period of six months from the date of such failure it will be seen that Clause (1) of this rule does not rpovide that the appliction should necessarilybe for the period commencing from April 1, 1961 when the new procedure was tocome nto effect. It simply rpovides that as and when an manufacturer applies and is application is granted, he wouldbe entitled to opt for the ne wprocedure and on exercising such option he wouldbe iable topaythe compounded duty, ie.e, dutycalculated on a square meterofcloth produced from yarn manufacturer byhim and at the date ofclearance of the cotton fabrics and not at the date when the yarn is isued for such manufacturing process. Prima facie, therefore, he would be entitled topaythecom duty at anytime he opts for the new procedure,either as from April 1, 1961 or at any susbsequent time.his right to be taxed under the compounded levy system would arise during such period for which he has applied and obtained permissin. If he optsfor thenew procedure from April 1, 1961he would pay the compounded duty asfrom that day. If, on the other hand, he opts at a later date, he would paythe compounded duty fromsuch later date in the preent case, the petitioner mills no doubt applied for the period from April 1, 1961 to September 30,1961 and the Collector granted permission for that period. The epttitioner mills on this simple would be entitled to be taaxed under the nw proceduef for the whole of this period. But it is clear from theirown letters that they;continued toaythe standard duty till the end of July 1961 and made it plain that they would exercise the option granted tothem to from April 1, 1961 but from August 1, 1961. In other words though the period permitted to them was from April 1, 1961 to September 30, 1961 theytold the ecise authorities inclearest possible terms that theywould exercise the option granted to them not for that periodbut onyfor the peiod commencing from August 1, 1961. Though this positionisfairly clear frm the correspondence that ensued between the parties, Mr. Nanavati argued that the mills were entitled topay dutyat the compounded rate throughtout the period permitted to them , i.e., for the peirod from April 1, 1961 to September 30, 1961 eventhough themills in fact exercised the optin at a later stage and that since Clause (1) of Rule -96-V provides that the Collector has to charge the compounded dutyfor the period permitted thereuner it was implicit in that clause that if the Colleactor has levied the standard dutyhe would have to refund or adjust that dutyagaist the compounded dutywhichaone a manufacturer is liable payeven though he were to exercise the option at a late rdate. This, in short, was the contention of Mr. Nanavati though he propounded in a somewhat elaborate manner.
(8) The contentionin fact rests on te construction Clause (1) of this rule. As alreadyobserved, Clause (1) simplyprovides that a manufacturer is entitled to thebenefit of the new procedure and is entitled tobe charged the compounded duty for the period for which he applies and obtains permision. But such a appiction and the permission granted on woldbe fore the purpose of exercising the option and therefore it would seem that even if a manufacturer has obtained permisin for a particlar period, if he does not choose to exercise theoptionfor the entire period but chooses toput that option inforce at a later date he would be entitled tobe taxed at the compounded rate from suchlater date and theeexercise of that option at suchlatear date woud surelynot be retrospectively. That in effect and substance is Clause (1) ofthe rule. Suppose a manufacturer has applied under Clause (1) for the period from April 1, 1961 to December 31, 1961 and has obtained the requisite permission for that period. If he were to tel the Collector that he desires toexercise that option,s ayfromSeptember 1, 1961, surely the Collector cannot insist that he shouldbe charged with co dutyas from April 1,1961 merely becuse themanu had applied for that period and obtained would, in our opinion, be incorrect, for what is contemplated by Clause (1) is that the manufacturer wouldbe entitled to opt for thenew procedure from the date from hwich h exercises that option granted to him. We do not find in Clause (1) of the rule any provision whichlaysdown that evenif th exercise of the option is at a subsequent dte, such exercise is to operate retrospectively from the date from which the permitted period commences. Theonything,as we have aleadyobserved, which is provided in clause (1) is that themanu wold be entitled otaythe compounded duty during the period appied for and permitted bytheCollecotr. But that surelywouldnot mean that though he does not wish to be taaxedat the compounded rate for the whole oftht periodbut only for a partial period, the Collector would and can insist tolevythe compounded duty for the whole of the period. The argumnt, therefore, that though themills exercised te option on an drom august 1, 1961, once they exercised the option it would operate retrospectively from April n1, 1961 in spite of the mills having clearlystated that theydid not wish to opt until August 1, 1961, has in our view no validity.
(9) Nor can the contention that there is implicit in Clause (1) a provision for refund and adjustment be sustained, fro the clause merely provides that on such option being made a manufacturer would be entitled to be charged the compounded duty. But that again would not mean that if a manufacturer opts at a later date and has therefore paid duty till then at the standard rate he would be entitled to claim under this clause an adjustment on the footing that he was liable to pay the compounded duty even for the period before he actualy opted. That, in our view, would be reading something in that clause which is not there. In other words, Mr. Nanavti's contenton comes to this that in the case of a manufacturer who first obtains permission for a certain period but decides not to opt for the whole of the period but only for a part of it and therefore pays duty at the standard rate till he exercises his option once he exercises the option he would be entitled to be taxed at the compounded rate for the whole of the period and can therefore claim refund or adjustment of the difference between the two rates. There is nothing in clause 91) of the rule which in our view justifies such a conclusion.
(10) It appears from Clause (3) of the rule that where a manufacturer who has obtained permission for a particular period does not wish to avail himself of the new procedure throughout that period, the clause permits him to revert to the procedure of the standard duty and the only restriction put upon him is that he must give a week's notice in advance and if he fails to do so the penalties that he would not be permitted to return to the new system for six months from the date of such failure. This restriction, it would seem, is placed to preserve a certain degree of continuity and to ensure an advance notice to the authorities of reversion to the standard duty. The petitioner mills, no doubt, obtained permission for the period from April 1 to September 30, 1961 but instead of exercising the option they preferred to switch over to the new system only from August 1, 1961 it would appear that no such a case Clause (3) would apply and therefore again, they would be entitled to the benefit of the new procedure only from August 1, 1961.
(11) But then Mr. Nanavati argued that Clause (3) would apply to a period next after the permitted period, that the notice there provided for would have to be given by a manufacturer not wishing to continue to avail of the new procedure for the succeeding period and that therefore Claus are (3) would not apply in the present case. That again is not a legitimate construction, for such a construction does not take into consideration the words 'if at anytime during such period' it hat clause which must in the context mean the period for which permission has ben obtained under Clause (1) of the rule. Clause (2) contemplates that permission has to be obtained for a specified period and on the expiry of such period a fresh application for the next succeeding period is necessary. A notice for a succeeding period for which permision is to be obtained obviously is not the notice which is contemplated by Clause (3). The words 'such period' in Clause (3) cannot possibly mean any further period but must in the context of what is stated in Clauses (1) and (2)mean such period for which permission has been applied for and obtained. Therefoere, even though a manufacturer has obtained permission for a specified period but deices not to avail of the new system, he can, by giving a notice, revert to the system of standard duty and in that event the excise authorities cannot compile him to exercise the option merely on the ground the he had applied and had obtained it. If a manufacturer can do so in the midst of such a period, we do not see why he cannot say that though the period permitted to him was from April 1, 1961 to September 30, 1961 he would in a actuality opt of the new system at a latter stag and that, n our view, the petitioner mills did and therefore they could avail of the new system not from April 1, 1961 but form the date when they exercised the option. Cnsequently the exercise of the option cannot have a retrospectively effect from April 1, 1961 merely because the period for which the permission was obtained was from April 1, 1961 to September 30, 1961. Therefore, it is difficult to see how Rule 96-V(1) can assist the petitioner mills their contention that they entitled to adjust the standard duty against the compounded duty which they had paid prior to August 1, 1961.
(12) We will now consider trade notice issued from time to time by the Baroda Collector at and on which Mr. Nanavati sought lance to justify the claim of the petitioner mills.
(13) As already observed, the new procedure of compounded duty was evolved in consequence of certain difficulties felt by the manufacturer of a composite factory when yarn used in the manufacturing processes was treated as an independent excitable article . It seems however that the new procedure by itself did not obviate these difficulties entirely and therefore supplemental provisions had to be made from time to time. This was done by the Collector under Rule 233 by issuing the trade notices as and when the authorities saw the difficulties or when such difficulties were reported to them. The first difficulty was where a manufacturer opted for the new system as from April 1, 1961 and was therefore entitled to be charged with the compounded duty from that date on measurement of textile fabrics, how was the duty to be levied if he had used the yarn issued to him (a) before March 1961 when yarn wad duty free and (b) during March 1961 when the standard duty was livable as the new system was to come into effect from April 1, 1961. In the first place, he would have to pay duty on yarn though it was duty free before March 1, 1961. In the latter case, he would have to pay duty at the compounded rate even though the yarn was already taxed during the month of March at the standard rate. This difficulty appears to have been felt at a very early stage and therefore the Collector issued the trade notice No. 92 of 1961 dated April 27, 1961. After setting out the provisions of Rule 96-V, the trade notice provided as follows:-
' 8.- Cotton fabrics produced from non duty paid yarn under this system shall be kept completely segregated from that previously produced from yarn on which duty was paid at the standard rates. Separate accounts in form R. G. 1 and E. B. 4 shall be maintained in respect of such fabrics.
9. - The special procedure will be availed of if so desired by the mill with effect from 1-4-61. In that case the mills have to comply with the instruction in Para 8 above retrospectively with effect from 1-4-61'.
It is clear from Clause 9 that it envisages a case where a manufacturer opts for the new procedure as from April 1, 1961. Clause 8 then directs a classification of cotton fabrics on the measure of which compounded duty was livable and therefore visualising the difficulty which we have referred to above divided the fabrics (1) those produced from non-duty paid yarn under the new system which must mean yarn issued on and after April 1, 1961 and on which the standard duty would not be payable by a person who opts from April 1, 1961 to the new system, and (2) those produced from yarn on which duty has already been paid, i. E. Yarn issued in March 1961. Clause 8 directs in express terms that these two classes of cotton fabrics should be segregated and separate accounts thereof in forms R. G. 1 and E. B. 4 should be maintained. It will be observed, however, that besides instructing the manufacturers to segregate these two classes of cotton fabrics and keeping accounts in the prescribed forms and giving liberty to manufacturers to opt retrospectively from April 1, 1961, this trade notice did not expressly provide for any relief. It, however, appears from trade notice No. 109 of 1961, dated May 19, 1961 that there would still be the difficulty in segregating stocks of cotton fabrics because there would generally be a time lag of about five or six weeks between the completion of the manufacture and the packing of bales of such manufactured fabrics. Therefore there was the difficulty of classifying cotton fabrics made from yarn (1) liable to duty, (2) from yarn not liable to duty before March, 1, 1961 and (3) from yarn on which duty was already paid during March 1961. Clause 3 of this trade notice therefore provided for a uniform system of levying compounded duty on all cotton fabrics baled on or after April 1, 1961 whether made from yarn issued on and from March 1, 1961. Having provided for such a uniform system, Clause 4 provided for adjustment in respect of yarn on which duty was paid in March 1961 and till such date in April when a particular factory opted for the compounded duty against the ultimate assessment which would be made when the cotton fabrics were cleared by that factory. The working of the arrangement was made clear by an explanation to that clause which states that in the case of those mills which opted for the compounded duty as from April 1, 1961, duty would not be collected in respect of yarn issued during March 1961 and compounded duty would be levied only on fabrics baled on and after April 1, 1961 at the time of their clearance. Clause 4 thus clearly contemplates the case of those mills which opted as from April 1, 1961 and not others and applied to cotton fabrics baled on or after April 1, 1961. Clause 5 provided that the aforesaid scheme where under the right to op retrospectively as from April 1, 1961 was given and the procedure laid down in Clauses 3 and 4 were an interim arrangement and stated that its continuance would not be necessary after June 30, 1961 and that on and after June 30, 1961 duty at the compounded rate would be levied on all cotton fabrics at the time of clearance without any references as to when the yarn used therein was issued for the manufacturing process. As already stated, Clause 9 of trade notice No. 92 of 1961 had already given a right to apply the new procedure retrospectively from April 1, 1961. The difficulty which trade notice No. 109 of 1961 dated May 19, 1961 sought to obviate was in respect of manufacturers who wanted to opt retrospectively as from April 1, 1961. It was therefore that a scheme was set out in this trade notice providing (1) the right to opt retrospectively and (2) the right to a refund or adjustment in the case of such persons who opt from April 1, 1961 provided that the cotton fabrics in question were packed before April 1, 1961 and were cleared before June 30, 1961. Therefore, what the trade notice No. 109 of 1961 provided was that the scheme to opt retrospectively from April 1, 1961 was to have effect until June 30, 1961 which would mean that the right to opt retrospectively and to claim refund or adjustment was not to continue beyond June 30, 1961. The scheme to retrospectively opt as from April 1, 1961 is contained in Para 2 of this trade notice and Paras 3 and 4 lay down the procedure under which the system to levy the compounded duty uniformly and the right to claim refund and adjustment are provided for. Reading the trade notice as a whole, it is clear that Paras 3 and 4 apply only to those persons who under the scheme set out in Para 2 have exercised their option for compounded duty retrospectively from April 1, 1961. The scheme for the retrospective exercise of option as from April 1, 1961 became necessary because the notification and the trade notices were issued rather late and therefore even though the compounded levy system was intended to come into effect as from April 1, 1961, a manufacturer could not exercise his option from that date as the notification in respect of the compounded system was issued as late as April 20, 1961 and the trade notice relating thereto was circulated to the trade associations as late as April 28, 1961. It is this scheme as set out in Para 2 which gives the right to opt retrospectively from April 1, 1961 even though a manufacturer may have applied and obtained permission subsequently. Clause 5 of this trade notice significantly uses two different expressions, namely, 'the above procedure' and 'this scheme'. The fact that the draftsman has used these different expressions makes it clear that the 'above procedure' and 'this scheme' were the scheme of opting retrospectively as from April 1, 1961 and the procedure laid down in Paras 3 and 4 providing for the uniform application of compounded duty and the right to claim refund and adjustment. These expressions in Clause 5, therefore, support the conclusion to which we are inclined to arrive at that the said scheme and the said procedure were an interim arrangement for three months only, i.e., from April 1, 1961 to June 30, 1961. Therefor, what emerges from the trade notice No. 109 of 1961 is (1) that it applied to mills who opted retrospectively from April 1, 1961, (2) that the right to opt retrospectively as from April , 1961 was an interim arrangement, and (3) that it was expected that cotton fabrics produced by such mills and packed prior to April 1, 1961 would be cleared by June 30, 1961 and therefore the aforesaid arrangement was an interim arrangement which was to last until June 30, 1961 and lastly (4) that it was a supplemental provision distinct from the system of compounded duty provided in Rule 96-V.
(14) Mr. Nanavati, however, contended that the construction to which we are inclined to arrive at of the trade notices Nos. 92 and 109 of 1961 would not be borne out by the subsequent trade notices Nos. 127, 166 and 173 of 1961 where under the period of clearance of the aforesaid cotton fabrics was extended from time to time from June 30, 1961 ultimately to December 31, 1961. His contention was that since the time for clearance of the textile goods baled prior to April 1, 1961 was extended upto December 31, 1961 the right of refund and adjustment provided in the trade notice No. 109 of 1961 would apply to the petitioner mills because they had in any event exercised their option from August 1, 1961, i.e., before the expirty of the period of clearance which was extended to December 31, 1961. In our view, this contention cannot be accepted as it does not take into account the distinction between the period for which the aforesaid interm in arrangement was made and the period of clearance within which the bales referred to therein were expected to be cleared vix., June 30, 1961 what the subsequent trade notices did was to to extended the period of the aforesaid in term arrangement but to extend the period of clearance, first from June 30, 1961 to September 30, 1961 and thereafter upto December 31, 1961. The result of the examination of these trade notices, therefore, s (1) that the aforesaid interim arrangement was distinct from Rule 96-V and made under the power reserved to the Collector by Rule 233 enabling those manufacturers to whom it applied to claim refund and adjustment, (2) that it applied only to those manufacturers who opted as from April 1, 1961 and (3) the it applied to those only who had segregated cotton fabrics and maintained accounts as required by Clause 8 of the trade notice No. 92 of 1961. Conditions (2) and (3) clarly did not apply to the petitioner mills as they never exercised the option as from April 1, 1961 and it is clear from the impugned orders that they had failed to segregate the two classes of cotton fabrics and had aso failed to maintain accounts as required by trade notice No 92 of 1961.
(15) Mr. Nanavati, however, contended that assuming that the construction placed by us on the trade Notice 92 and 109 of 1961 were to be correct, the mills were misled into believing that the compounded duty system was for a temporary Period for three months upto June 30, 1961, that the extension thereof was yet to be decided upon by the department after June 30, 1961 and that it was as a result of the being so misled that the petitioner mills wrote the aforesaid letters dated June 14, 1961, and July 27, 1961, whereby they stated that they would opt for the compound system as from August 1, 1961,. In our view, there is no justification for such a contention, for if the petitioner mills misconstrued the provisions of Rules 69-V or the aforesaid trade notices, it was because the authorities in any way misled the petitioner mills. As already stated, the system of compounded levy was permanent measure enacted by Rule 96-V. There was no justification or occasion for the petitioner mills to believe that that system was in any way an interim measure. The petitioner mils being in the trade for a long time could not possibly have misunderstood the trade notices issued from time to time by the Baroda Collectorate and must have been aware that the trade notices were issued as and by way of supplemental provisions to Rule 96-V there was, therefore, no reason for the petitioner mils to believe that the system of compounded levy enacted by Rule 96-V was a temporary measure or that its alleged extension was not to be decided upon by the department on and after June 30, 196 and that it was for that reason that the petitioner mills did not exercise their option until August 1, 1961. Mr. Nanavati argued in the alternative that even if the mills had wrongly misconstrued the aforesaid trade notices, the letter dated June 14, 1961 did not amount to a notice under clause 3 of rule 96V. According to him, that letter was merely an intimation that the petitioner mills would put the compounded system in force after June 30, 1961. He argued that under the order dated May 10, 1961 it was competent for the mills to operate the system of compounded levy at any time during the permitted period and that therefore even though they opted for the new procedure as from August 1, 1961 the exercise of that option must be held to be retrospective as from April 1, 1961. In our view, the alternative contention raised by Mr. Nanavati also cannot be sustained for as already observed, there is nothing in Clause 1 of Rule 96-V which justifies the construction suggested by him, namely, that once the mills exercised the option, at whatever subsequent stage it was done, the effect of that exercise would be as if the option had been exercised as from April 1, 1961. The letter dated June 14, 1961 as also the one dated July 27, 1961 in plain terms informed the excise authorities that the petitioner mills were not to opt for the new procedure until August 1, 1961. In face of those plain words and on the construction of Clause 1 of Rule 96-V which we have accepted, it would be difficult to sustain the argument that the petitioner mills had opted retrospectively as from April 1, 1961. These contentions, therefore, have to be rejected.
(16) Lastly Mr. Nanavati argued that neither the Assistant Collector nor the Collector were entitled to rely upon trade notice No. 157 of 1961 issued on September 12, 1961 which provided that composite mills switching over to the compounded levy system after June 30, 1961 could not be given the benefit of the option with effect from April 1, 1961 and that therefore they could not avail of the procedure outlined in trade notice No. 109 of 1961 for adjustment of duty on yarn. The argument of Mr. Nanavati was that this trade notice would not apply to the petitioner mills as they had, prior to September 12, 1961, already opted for the compounded levy system and that as there was no such prohibition prior to September 12, 1961 the new restriction provided by this trade notice would not apply to them and therefore the two officers were in error when they rejected their application for refund by relying upon trade notice No. 157 of 1961. It is, no doubt, true that trade notice No. 157 of 1961 having been issued after the petitioner mills opted for the new procedure, it would not apply to the case of the petitioner mills as the trade notice did not contain any provision indicating that it was intended to have retrospective effect. In our view, however, the trade notice No. 157 of 1961 did not lay down any new restriction and that what it simply did was to reiterate what was already provided for in the earlier notice No. 109 of 1961 dated May 19, 1961. The contention raised by Mr. Nanavati suffers from an infirmity because it refuses to perceive the distinction between the date upto which the interim arrangement set out in the trade notice No. 109 of 1961 was to continue and the period for clearance of cotton fabrics which in that notice was fixed upto June 30, 1961 and which, as aforesaid, was extended form time to time. The procedure mentioned in the trade Notice 157 of 1961 was, as expressly stated therein, the procedure outlined in the he trade notice No. 169 of 1961 for adjustment of duty on yarn. That procedure was no other procedure than the one set out in Paras 3 and 4 of the trade notice No. 109 of 1961 and as already observed, the scheme and the procedure set out in that trade notice constituted the interim arrangement which, as clarified in Para 5 of that trade notice, was to remain in force only until June 30, 1961. That clearly meant that only those who had opted for the compounded levy system by June 30, 1961 were entitled to opt for that scheme retrospectively as from April 1, 1961 and since it was only those manufacturers who exercised their option as from April 1, 1961 who were entitled to the right of refund and adjustment, those who exercised the option after June 30, 1961 would not be entitled to exercise that option retrospectively from April 1, 1961 and would, therefore, preclude themselves from claiming the benefit of refund and adjustment. On this reading of the two trade notices Nos. 109 and 157 of 1961, the contention raised by Mr. Nanavati must fail and has to be rejected.
(17) For the reasons aforesaid, the ..... mills were not entitled to claim any relief by way of refund and/or adjustment in respect of the standard duty paid by them prior to August 1, 1961 or to have it adjusted as against the compounded duty which they would pay on their opting to the new procedure on and after August 1, 1961. Consequently both the Assistant Collector as also the Collector were not in error in refusing the relief of refund and/or adjustment claimed by the petitioner mills.
(18) Our attention has, however, been drawn to a letter by the petitioner mills dated October 15, 1963 and the reply thereto dated October 28, 1963 wherein, presumable because of a subsequent trade notice No. 171 of 1962 dated November 9, 1962 the excise authorities have assured the petitioner mills that they would consider the case of adjustment of standard duty paid by the petitioner mills during the month of July 1961 when they would be considering the compounded duty payable by the petitioner mills for the month of August 1961, Though, therefore, we are upholding the tow impugned orders, it should not mean that the excise authorities have not to carry out their assurance given in the said letter dated October 28, 1963 or their obligations arising under the aforesaid trade notice No. 171 of 1962 dated November 9, 1962 if the claim of the petitioned mills is in order either under the rules or under the said trade notice.
(19) The petition otherwise fails and is therefore, rejected. Rule discharged. The petitioner mills will pay to the respondents the cost of this petition.
(20) Petition dismissed.