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Indian Organic Chemicals Ltd. Vs. Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtChennai High Court
Decided On
Case NumberWrit Petition No. 179 of 1980
Judge
Reported in1983(12)ELT34(Mad)
ActsCentral Excise Rules, 1944 - Rules 7, 8, 8(1), 9, 9A, 9B, 9B(3), 9B(4) and 9B(5); Central Excise Act, 1944 - Sections 11A
AppellantIndian Organic Chemicals Ltd.
RespondentUnion of India and ors.
Appellant AdvocateV.P. Raman for C. Hanumantha Rao, Adv.
Respondent AdvocateK.N. Balasubramanyam, Adv.
Cases ReferredInnamuri Gopalan v. State of Andhra Pradesh
Excerpt:
excise - notification - rules 7, 8, 8 (1), 9, 9a, 9b, 9b (3), 9b (4) and 9b (5) of central excise rules, 1944 and section 11a of central excise act, 1944 - issue related exemption excise duty - earlier notification not intended to benefit small units - in latter notification dated 24.04.1980 government from duty in respect of man-made fibre and tops falling under sub item i of item no 18 such fibres and tops manufactured from such wastes by processes like garnetting, combing, carding and gilling does not involve recycling of any wastes - words 'manufactured exclusively' out of wastes and 'manufactured from such wastes by processes like garnetting, combing, carding and gilling which do not involve recycling of any such waste' not present in notification - petitioner used meg as an.....1. the petitioner is a limited company registered under the indian companies act. it is engaged in the business among others of manufacturing fibres/tops. the item falls under sub-item i of them 18 of the first schedule to the central excises and salt act, 1944. the normal processes of manufacturing fibres/tops is from raw materials. the raw materials used are di methyl terephthalate (for short dmt) and mono ethylene glycol (meg). the first stage of the process is the production of what is called wet chips. the next process is spinning. in between they get what is called fibres/solid undrawn waste. ultimately, they get the end product viz., fibre/tops. they also get fibrous drawn waste. as already stated, the fibre/tops manufactured by the original process are subject to excise duty under.....
Judgment:

1. The petitioner is a limited company registered under the Indian Companies Act. It is engaged in the business among others of manufacturing fibres/tops. The item falls under sub-item I of them 18 of the First Schedule to the Central Excises and Salt Act, 1944. The normal processes of manufacturing fibres/tops is from raw materials. The raw materials used are Di Methyl Terephthalate (for short DMT) and Mono Ethylene Glycol (MEG). The first stage of the process is the production of what is called wet chips. The next process is spinning. In between they get what is called Fibres/solid undrawn waste. Ultimately, they get the end product viz., fibre/tops. They also get fibrous drawn waste. As already stated, the fibre/tops manufactured by the original process are subject to excise duty under sub-item I of Item 18 of the First Schedule to the Central Excises and Salt Act, 1944. It may also be mentioned that the company manufactures fibre/tops from waste. For the manufacture of fibre/tops using waste they add M.E.G. (Glycol) as an assisting agent. In paragraph 3 of the reply affidavit filed on behalf of the petitioner it is stated as follows : The process of making normal fibre starts with mixing of a known quantity of DMT and MEG is a reacter where it is heated with separated heat exchangers and made into molten mass. This mass is added into an easter-interchange reactor where methanol separates out and sent for recovery. The D.M.T. and MEG forms into a monomer and to his monomer, titenium dioxide is added as a delusterant to make the monomer suitable for making polyester fibre. 'During the processes admittedly the manufacturers get what is called solid undrawn waste and fibrous drawn waste. Hence the process of making fibre out of waste starts with manual sorting out of different type of wastes, washing and cleaning them manually and drying. The dried lumps and other wastes are crushed into small bits. Filament wastes are cut and pellatized. These are fed into the main plant reactor. Therein MEG is used only as an assisting agent. It is made clear in the reply affidavit that in the process of manufacturing fibre/tops using waste DMT is not at all used. MEG also is used only as an assisting agent and the entire quantity of MEG (Glycol) comes out in the same form except for marginal loss on account of handing. In other words, but for a minimal loss the entire MEG (Glycol) in the process of manufacture from waste is fully recovered by the manufacturer.

2. While so on 12th August, 1977 the Government of India issued two notifications Nos. 278 of 1977 and 279 of 1977. The said notifications made it clear that man-made fibres and tops falling under sub-item I of Item No. 18 of the First Schedule to the Central Excises and Salt Act, 1944 and made from undrawn wastes falling under Tariff Item No. 68 have been exempted from so much of duty of excise leviable thereon as is in excess of Rs. 4.50 per kilogram (vide Notification No. 278/77). Man-made fibres and tops falling under sub-item I of Item No. 18 of the First Schedule to the Central Excises and Salt Act, 1944 have been totally exempted subject to the condition that such fibres and tops are manufactured out of drawn wastes falling under sub-item I or sub-item II of Item No. 18 of the First Schedule to the Central Excises and Salt Act, 1944 on which appropriate duty of excise has already been paid vide Notification No. 279/77-CE, dated 12-8-1977. On 1-3-1978 the Government of India issued notification No. 37/78-C.E. granting exemption from the whole of the duty of excise leviable on man-made fibres and tops falling under sub-item I of Item No. 18 of the First Schedule to the Central Excises and Salt Act, 1944 subject to the condition that such fibres and tops are manufactured out of wastes falling under Item No. 18 of the said First Schedule on which appropriate duty of excise has already been paid. On the same day, the Government introduced Clause IV in Item 18 of the First Schedule by which waste was made subject to duty. It is not dispute in this case that the petitioners have paid duty on waste in terms of the Act.

3. On 6-3-1978 the petitioners filed a classification list of excisable goods where they refer to fibre/tops manufactured out of duty paid waste. This classification list shows that the Assistant Collector of Central Excise, Madras approve the list subject to the condition that tops and fibres should be manufactured from duty paid waste arising in the factory as well as duty paid waste from outside and that proper accounts are maintained for the same separately. The communication dated 29-3-1978 stated that the classification list No. 7/78, dated 6-3-78 filed for approval for the manufacture of tops and staple fibre from out of duty paid waste generated from the factory of production as well as duty paid waste received from other sources is approved subject to the observance of the conditions detailed in sub-clauses (a) to (f). On 4th October, 1978 the petitioners filed the second classification list claiming exemption. This was necessitated due to certain general changes in the levy. This classification list was approved on 4-10-1978. Thereafter, on 23rd March, 1979 the petitioners filed the third classification list which was also approved on 4-4-1979. During the period March to September, 1978 and October, 1978 to April, 1979, the petitioners filed the necessary R.T. forms and they were duly endorsed by the respondents. For the period commencing from May, 1979 onwards the petitioners filed the necessary RT forms, but they were not formally endorsed. While so, on 16th November, 1979, the Assistant Collector of Central Excise, Madras, sent communication, dated 16-11-1979. That stated that the approval granted to the petitioners in classification list No. 7/78 (vide Madras IV Division Asst. Collector's C. No. V/68/3/2/77, dated 29-3-78) extending the benefit of notification No. 279/77, dated 12-8-77, as amended by notification No. 37/78, dated 1-3-1978 to the polyester fibre manufactured out of duty paid waste may be treated as provisional till the completion of certain enquiries undertaken. Until further orders are received by the petitioners from the office, assessments would be done provisionally under rule 9-B of the Central Excise Rules, 1944. The same effect is the communication dated 26-11-1979. Thereafter, the Superintendent of Central Excise, Madras by his letter dated 6-12-1979 called upon the petitioners to execute one B-13 bond as laid down in rule 9-B of the Central Excise Rules, 1944 for Rs. 60,00,000/- with security amount equivalent to 25% of the bond amount or with surety. The surety should be solvent to the extent of full bond amount. It is, in these circumstances, the petitioners have filed this writ petition to quash the communication dated 16th November, 1979 and 26th November, 1979 and also the demand contained in the communication dated 6th December, 1979.

4. The writ petition was filed on 7-1-1980, on 10th January, after hearing the petitioners and the respondents Mohan, J., passed an order staying the operation of all the impugned letters on the terms mentioned in the order. At this stage, it may also be mentioned that on 24-4-1980 the respondents issued Notification No. 44/80-C.E. to the effect that fibre/tops manufactured out of waste will enjoy exemption provided the manufacturer employs processes like garnetting, combing, carding and grilling which do not involve recycling of any such wastes.

5. Though in the counter affidavit filed on behalf of the respondents a preliminary objection is taken that the writ petition itself is not maintainable, as it is filed only to quash certain communications sent by the respondents to the petitioner, the same was not pursued at the time of hearing. All the same, it may be stated that the communication dated 16th November, 1979 and 26th November, 1979 clearly stated that the earlier approval granted to the classification list filed by the petitioners claiming exemption in respect of fibre/tops manufactured out of duty paid waste would be treated as provisional under rule 9-B of the rules made under the Act. Similarly, the third communication called upon the petitioners to give a bond in a sum of Rs. 60,00,000/-. These communications cannot be interpreted in any manner as not to be affecting the rights of the petitioners. I have therefore no hesitation in holding that the three impugned communications really amount to orders passed by the respondents affecting the rights of the petitioners consequently the writ petition is maintainable to quash the same communications.

6. Mr. V. P. Raman, the learned counsel for the petitioners raised two contentions. First, the impugned communications dated 16-11-1979 and 26-11-1979 treating the approval granted to the classification list filed by the petitioners as early as on 13-3-1978, 4-10-1978 and 4-4-1979 cannot be treated subsequently as one made provisionally under rule 9-B of the rules. The Central Excises and Salt Act does not contain any provision enabling the authorities to review an earlier order passed. If at all, they can take action for a short levy. It could only be done under the provisions of section 11A for which a particular procedure is prescribed and for which a period of limitation is equally prescribed. Once it is found that the respondents had no authority to treat the original approval as provisional by a subsequent order, then it must automatically follow that they cannot call upon the petitioners to give a bond under rule 13(e) in a sum of Rs. 60,00,000/-. This they can do only in a case of provisional assessment. Secondly, Mr. V. P. Raman contended that there is absolutely no justification at all for treating the original list as provisional, even on the merits of the case. The petitioners manufactured fibre/tops from waste. That is not disputed. The petitioners do not use DMT. However, they use MEG (Glycol) and that only as an assisting agent. The entire quantity of MEG (Glycol) is recovered back subject to a minimal loss incurred due to handling. Further, the learned counsel argued that the original notification granted exemption in the case of fibre/tops manufactured out of waste on which duty has been fully paid. In this case, there is no dispute whatever that the petitioners have paid duty on waste and that as a matter of fact that petitioners have paid a sum of Rs. 175 lakhs towards duty on waste either generated from their factory or obtained from other sources. The Notification No. 37/78 granted full exemption on fibre/tops provided they are wholly manufactured out of duty paid waste and the same cannot be so interpreted to mean that MEG (Glycol) could not be used along with waste. The only condition is that the manufacture should be out of duty paid waste. In this context, the learned counsel made a pointed reference to the difference in language in the Notification No. 44 of 1980, dated 24th April, 1980 wherein it is stated as a condition for exemption that fibre/tops manufactured out of waste will enjoy exemption provided the manufacturer employs processes like garnetting, combing, carding and gilling which do not involve recycling of any such wastes. In this view, Mr. V. P. Raman submitted that upto 24-4-1980 on which date Notification No. 44/80-CE was issued the petitioners were entitled to full exemption.

7. Mr. K. N. Balasubramanyam, the learned Senior Standing Counsel for the Central Government, stated that what the respondents were attempting to do is only to investigate into the process of manufacture carried on by the petitioners to decide whether they should take any acting under section 11A of the Act and therefore the petitioners could not claim any relief in the Writ Petition. The learned counsel further referred to the fact that by the process of manufacture what the petitioners were doing was recycling the waste. As a result of such recycling the petitioners get back DMT and MEG which were originally raw materials used in the manufacture of fibre/tops and therefore it could not be said that the petitioners are manufacturing fibre/tops only from waste.

8. On a consideration of the facts and circumstances of the case and the arguments placed before me by the learned counsel on either side, I am of the view that the contentions of Mr. Raman are well founded and have to be accepted.

9. It is not disputed that the process of manufacture of fibre/tops with which we are now concerned is from duty paid waste. There is controversy between the petitioners and the respondents whether the petitioners are using DMT and MEG (Glycol) and if so to what extent and whether such user would disentitle the petitioners from claiming the exemption under Notification No. 37/78. Sub-item I of Item No. 18 deals with man-made fibres other than mineral fibres. Under Notification No. 278/77-CE, dated 12th August, 1977 man-made fibres and tops falling under sub-item I of Item No. 18 of the First Schedule to the Central Excises and Salt Act, 1944 and made from undrawn wastes falling under Tariff Item No. 68 have been exempted from so much of duty of excise leviable thereon as is in excess of Rs. 4.50 per kilogram. Similarly, Notification No. 279/77-CE dated 12-8-1977 stated man-made fibres and tops falling under sub-item I of Item No. 18 of the First Schedule to the Central Excises and Salt Act, 1944 have been totally exempted subject to the condition that such fibres and tops are manufactured out of drawn wastes falling under sub-item I or sub-item II of Item No. 18 of the First Schedule to the Central Excises and Salt Act, 1944 on which appropriate duty of excise has already been paid. Notification No. 37/78-CE, dated 1-3-1978 reads as follows : 'Exemption ta man-made fibres and tops made out of duty paid waste. - In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts man-made fibres and tops falling under sub-item I of Item No. 18 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) from the whole of the duty of excise leviable thereon, subject to the condition that such fibres and tops are manufactured out of wastes falling under Item No. 18 of the said First Schedule on which appropriate duty of excise has already been paid. In this case, it is admitted that man-made fibres and tops with which we are concerned falls under sub-item I of Item No. 18. It is also admitted that duty has been paid on the waste out of which according to the petitioners such fibre/tops have been manufactured. It may also be mentioned that on the basis of this notification the petitioners filed the first classification list No. 7 of 1978, dated 6-3-1978. That was approved without any qualification whatsoever on 29-3-1978. The only condition subject to which the approval was granted was the tops and fibres should be manufactured from duty paid waste arising in the factory as well as duty paid waste from outside and that proper accounts are maintained for the same separately. Paragraph 1 of the Memorandum by the Assistant Collector/Superintendent of Central Excise states that tariff classification and rate of duty leviable in respect of all goods of Item No. 4 above was approved until further orders. Paragraphs 2 and 3 of the memorandum which deals with provisional approval and assessment of goods under rule 9-B have been struck off. The communication dated 29-3-1978 stated that the classification list No. 7/78 was approved subject to the observance by the petitioners of certain conditions mentioned therein under clauses (a) to (f). It was not contended before me that the petitioners did not comply with any of the conditions. Similarly, the petitioners filed classification list on 7-10-1978 which was approved with effect from 4-10-1978 wherein also paragraphs 2 and 3 in the memorandum of approval by proper officer with regard to provisional assessment have been struck off. The same is the case with the classification list approved on 4-4-1979. From the above it is clear that the respondents did not have any doubt that the petitioners were fully qualified for being granted whole exemption in terms of Notification No. 37 of 1978. The approval of the three classification lists also makes it clear that the authorities were not making a provisional assessment or approval. Chapter III of the Central Excise Rules, 1944 deals with levy and refund of and exemption from duty. Rule 7 provides that every person who produces, cures or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such persons as may be designated in or under the authority or these rules, whether the payment of such duty or duties is secured by bond or otherwise. Rule 9 deals with the time and manner of payment of duty. It states :

'9. (1) No excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf, whether for consumption, export, or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may require and accept on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form :

Proviso : Omitted.'

Rule 9-A deals with the date for determination of duty and tariff valuation.

Rule 9-B deals with the provisional assessment to duty. It states :

'9-B. (1) Notwithstanding anything contained in these rules :-

(a) where the proper officer is satisfied that an assessee is unable to produce any document or furnish any information necessary for the assessment of duty on any excisable goods; or

(b) where the proper officer deems it necessary to subject the excisable goods to any chemical or any other test for the purpose of assessment of duty thereon; or

(c) where an assessee has produced all the necessary documents and furnished full information for the assessment of duty, but the proper officer deems it necessary to make further inquiry (including the inquiry to satisfy himself about the due observance of the conditions imposed in respect of the goods after the removal) for assessing the duty,

the proper officer may, either on a written request made by the assessee on or his own accord, direct that the duty leviable on such goods shall be, pending the production of such documents or furnishing of such information or completion of such test or enquiry, be assessed provisionally at such rate or such value (which may not necessarily be the rate or price declared by the assessee) as may be indicated by him, if such assessee executes a bond in the proper form with such surely or sufficient security in such amount, or under such conditions as the proper officer deems fit, binding himself for payment of the difference between the amount of duty as provisionally assessed and as finally assessed.'

Rule 9-B(3) is not relevant.

Rule 9-B(4) states :

'The goods provisionally assessed under sub-rule (1) may be cleared for home consumption or export in the same manner as the goods which are not so assessed.'

Rule 9-B(5) states :

'When the duty leviable on the goods is assessed finally in accordance with the provisions of these rules, the duty provisionally assessed shall be adjusted against the duty finally assessed and if the duty provisionally assessed falls short of, or is in excess of, the duty finally assessed, the assessee shall pay the deficiency or be entitled to refund, as the case may be.'

Therefore, Rule 9-B confers power on the proper officer to make a provisional assessment in certain circumstances. Rule 8 confers power to authorise exemption from duty in special cases. It reads :

'8. (1) The Central Government may, from time to time, by notification in the Official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable on such goods.'

It is therefore clear that if really the respondents felt that there were any such circumstances which warranted a provisional assessment being made, in the first instance, when the petitioners submitted their three classification lists for approval, then the respondents should have acted in terms of Rule 9-B. On the other hand, they did not have in their minds the slightest doubt that the petitioners were not entitled to take advantage of Notification No. 37/78 and claim exemption in respect fibre/tops made out of duty paid waste. Consequently, they did not make any provisional assessment. They granted an unconditional approval. The Memorandum of approval clearly show that the respondents were conscious of the fact that the approval was not provisional in terms of rule 9-B as the relevant paragraph which referred to provisional assessment under rule 9-B was struck off. In the circumstances, I unhesitatingly hold that the approval that was granted in respect of the three lists filed by the petitioners were unconditional and final.

10. The next question therefore is whether the impugned communications dated 16th November, 1979 and 26th November, 1979 could treat the completed assessments as provisional. It will be sufficient to quote the communication dated 16-11-1979 which is to the following effect :

'Sub : Central Excise - Polyester Fibre made out of duty paid waste - your C.L. No. 7/78 - reg.

You are hereby informed that the approval granted to you in classification List No. 7/78 (vide Madras IV Division Assistant Collector's C. No. V/68/3/2/77, dated 29-3-78) extending the benefit of notification No. 37/78, dated 1-3-1978 to the polyester fibre manufactured out of duty paid waste may be treated as provisional till the completion of certain enquiries undertaken. Until further orders are received by you from this office assessments would be done provisionally under Rule 9-B of the Central Excise Rules, 1944.'

The next communication is on the same lines. The effect of the two communications is to render the original final approval into a provisional approval and a provisional assessment. In other words, by these two communications, the respondents made it clear that they were treating the approval granted to the classification list in the first instances as provisional in terms of rule 9-B. In other words, as Mr. Raman pertinently argued the authorities were in effect reviewing an earlier order. The question is whether the respondents have a right to review their earlier order.

11. It is now settled law that there is no inherent power of review in an authority while acting judicially or quasi-judicially. The power of review must be conferred expressly or by necessary implication by the provisions of the statute. The power of the authorities under the Central Excises and Salt Act to review their earlier order has been considered by me in Madras Rubber Factory Ltd. v. Asst. Collector of Central Excise, Madras and another 1981 E.L T. 565 wherein it has been held that the power of review must be conferred expressly or by necessary implication by the provisions of a statute and that the Central Excises and Salt Act and the rules made thereunder do not confer upon the authorities any power of review of their own order. It must therefore follow that the respondents have no power to review the earlier order granting unconditional approval to the classification lists and treating them as a provisional order under rule 9-B long afterwards. The original approval granted unconditional right to the petitioners to clear their goods without payment of any duty by virtue of Notification No. 37/78. The two impugned orders imperil their right by rendering it provisional and making the original assessment subject to a further assessment. The impugned orders dated 16-11-1979 and 26-11-1979 are in substance and effect orders reviewing the earlier order of approval of the classification lists. I am therefore of the view that the said two orders are liable to be quashed on that sole ground. If the respondents have no power to review the earlier order of approval and treat them as provisional under rule 9-B, then the third impugned communication calling upon the petitioners to execute a bond for Rs. 60,00,000/- with a solvent surety must also fall to the ground, as that only can be demanded when a provisional assessment is made under rule 9-B.

12. The next contention is whether on the merits it could be said that the petitioners would not be entitled to the exemption granted by the Notification No. 37/78. I have already extracted Notification No. 37 of 1978 which granted full exemption to fibre/tops provided they were made out of wastes falling under Item No. 18 of the First Schedule on which appropriate duty of excise has already been paid. Mr. K. N. Balasubramanyam argued that the use of waste over again in the manufacture of fibre/tops amounted to recycling and that resulted again in the manufacture of DMT and MEG and consequently it could not be said that the petitioners manufactured fibre/tops out of duty paid waste. The Random House Dictionary gives the following meaning to the word 'recycling' : 'to pass through or undergo again, as for further treatment, use etc.' The meaning of the word 'manufacture' is given in the said dictionary thus : 'to make esp. by machinery and on a large scale'. I am referring to the dictionary meaning of the word 'manufacture' because Mr. Balasubramanyam argued that the word manufacture should not be given the same meaning which has been given to the word under the definition provisions of the Act. The learned counsel also referred to the fact that the word recycling is used in the sense of material salvage in Encyclopaedia Britannica, Vol. 11, page 623. Whatever may be the meaning that one may attach to the word recycling, in my opinion, recycling is only a process of manufacture. The end product that is obtained by recycling of duty paid waste is fibre/tops. Therefore, we cannot lose sight of the fact that fibre/tops are manufactured from duty paid waste. The learned standing counsel was not able to convince me that in the process of manufacture the original raw materials DMT and MEG were obtained and they went to help the manufacture of fibre/tops and therefore it could not be said that the petitioners were manufacturing fibre/tops from out of duty paid waste. The petitioners themselves have admitted that they use in the process of manufacture MEG (Glycol) as an assisting agent. It is also asserted that the MEG used in the manufacture as an assisting agent are fully recovered back subject to a minimal loss due to handling. This is not controverted. The Notification No. 37/78 merely refers to fibre/tops manufactured out of duty paid waste. It does not say that no other material should be used along with duty paid waste. As rightly pointed out by Mr. V. P. Raman, the notification does not use the word 'exclusively' which is normally found in similar notifications. The notification used the word 'manufactured out of waste'. That only means that the source of the end product must be duty paid waste. In paragraph 6 of the counter affidavit it is stated thus : 'This exemption was intended for small units who made fibre out of drawn and undrawn wastes by simple process of garnetting, cording etc. But in the case of petitioners, the fibre is not manufactured out of wastes, but the wastes are recycled and chips are made which, in turn are converted into fibre by the same process of manufacture as for sound fibre. It is not the case where the petitioners are manufacturing fibres out of waste. The process is recycling which would amount to breaking the wastes back into the basic ingredients and again manufacturing quality fibre.' It is not open to court to go behind the language of the notification and find out what the real intention of the authors of the notification was. In this connection, reference may be made to the decision of the Supreme Court in Hansraj v. H. H. Dave : [1969]2SCR253 . The Supreme Court was called upon to interpret certain notifications issued in pursuance of rule 8(1) of the Central Excise Rules granting exemption from excise duty on cotton fabrics. In this context, the Supreme Court observed as follows :

'It was contended on behalf of the respondents that the object of granting exemption was to encourage the formation of co-operative societies which not only produced cotton fabrics but which also consisted of members, not only owning but having actually operated not more than four power looms during the three years immediately preceding their having joined the society. The policy was that instead of each such member operating his looms on his own, he should combine with others by forming a society which, through the co-operative effort should produce cloth. The intention was that the goods produced for which exemption could be claimed must be goods produced on its own behalf by the society. We are unable to accept the contention put forward on behalf of the respondents as correct....... It is well established that in a taxing statute there is no room for any intendment but regard much be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If the tax-payer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different but that is not the case here.'

13. A similar question arose is Innamuri Gopalan v. State of Andhra Pradesh : [1964]2SCR888 . The appellants before the Supreme Court who were dealers under the Andhra Pradesh General Sales Act, 1957 claimed exemption from sales tax under certain notification in respect of the sales of textiles in their stock. The State contended that since the object of the notification was to avoid double taxation the exemption could be claimed only in cases where the additional excise duty was leviable on the goods and had been paid and that as textiles were a class of goods on which additional excise duty was leviable and the exemption could be claimed only if such duty was levied and paid. Rajagopala Ayyangar, J. speaking for the court and dealing with this contention observed thus :

'We do not feel persuaded to accept this argument. No doubt, statutes have to be construed as whole so as to avoid any inconsistency or repugnancy among its several provisions, but if there is nothing to modify, nothing to alter, or nothing to qualify the language of a statute, the words and sentences have to be construed in their ordinary and natural meaning [vide 36 Hals (3rd edn.) s. 585]. What we are now concerned with a fiscal provision and it has often been said that there is no equity in a taxing statute and either the subject is within it or not, on the words of the enactment or the rules validly made thereunder. In a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the words of the provision. If the tax-paper is within the plain terms of the exemption he cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the statute or rule or by the necessary implication therefrom, the matter is different but that is not the position here.'

In the light of the above decision, I am unable to accept the contention of Mr. K. N. Balasubramanyan that the Notification No. 37/78 was intended to benefit small units. In this connection, it will be useful to refer to the Notification No. 44/80-CE, dated 24-4-1980. A comparison of the language used in Notification No. 37/78 and No. 44/80 would reveal that only in the latter notification the Government from duty in respect of man-made fibre and tops falling under sub item I of Item No. 18 such fibres and tops should be manufactured exclusively out of wastes falling under sub-item IV of the said Item No. 18 and on which appropriate duty of excise has already been paid and such fibres and tops should be manufactured from such wastes by processes like garnetting, combing, carding and gilling which do not involve recycling of any such wastes. Be it noted 'that the words 'manufactured exclusively' out of wastes' and 'manufactured from such wastes by processes like garnetting, combing, carding and gilling which do not involve recycling of any such wastes' are not present in Notification No. 37/78. That being the case, even if the petitioners had used MEG (Glycol) as an assisting agent, they cannot be deprived of the benefit of the exemption granted under Notification No. 37/78. This question does not arise for the period subsequent to the date of the Notification No. 44/80, dated 24-4-1980.

14. In the result the impugned orders dated 16-11-1979, 26-11-1979 and 6-12-1979 are quashed. The writ petition is allowed but without costs.

15. After I read the judgment, allowing the writ petition, Mr. C. Hanumantha Rao, the learned counsel for the petitioner on behalf of Mr. V. P. Raman, submits that pending the writ petition, the petitioner had given Bank guarantee to the tune of rupees fifteen lakhs.

In view of the fact that the impugned orders are quashed, the Bank guarantee will stand cancelled and delivered.


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