Bombay High Court
Mechanical Packing Industries Pvt. ... vs Union Of India And Others on 1 January, 1800
Equivalent citations: 1988(1)BOMCR664, 1988(18)ECC176, 1987(32)ELT35(BOM)
ORDER
1. The petitioners are the manufacturers of what are called as "PTFE Sheets". These are plastic sheets and are for the purpose of excise covered by Tariff Item No. 15A(2) of the first Schedule to the Central Excise and Salt Act, 1944. It is an admitted position that the petitioners' articles fell within the classification "semi-rigid". It appears that there was a notification dated may 29, 1971 whereby the Government exempted articles made of plastic, all sorts, falling under sub-item (2) of Item 15A of the first Schedule to the said Act, (Except rigid plastic boards, sheeting sheets and films, whether laminated or not...).
2. The petitioners sought the benefit of this exemption notification. However, the department would not agree. Finally the petitioners had to file a writ petition in this Court being Misc. Petition No. 1005 of 1974. That petition came to be decided by Barucha, J., by his order dated February 7/8, 1979 whereby he made the petition absolute and held that the petitioners were entitled to the benefit of the exemption notification in as much as the goods manufactured by them were not "rigid".
3. During the pendency of this petition, the Government issued another notification dated November 25, 1978. Wherein they retained the same exemption but sought to be define what was "rigid" and what was "flexible". The relevant portion of the Notification is as follows:
"G.S.R. 1383. - In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby makes the following further amendments to the notifications of the Government of India in the Ministry of Finance (Department of Revenue and Insurance) No. 39/73-Central Excise dated the 1st March, 1971, and No.39/73-Central Excise dated the 1st March 1973, namely :-
"Explanation. - for the purpose of this notification -
(i) the expression "flexible", in relation to an article made of plastics means the article which has a modules of elasticity either in flexture or in tension of not over 700 kilograms per square centimeter at 23 degrees centigrade and 50 per cent relative humidity when tested in accordance with the method of test for stiffness of plastics (ASTM Designation D-474-73), the flextural properties of plastics (ASTM Designation D-790-53), for Tensile properties of plastics (ASTM Designation D-638-64T), or for Tensile Properties of this plastic sheeting (ASTM Designation D-822-64);
(ii) the expression "rigid" in relation to an article made of plastic, means all articles other than "flexible" articles as defined in clause (i)".
4. By a trade notice they explained the notification as follows;
"(i) Notification No. 198/78-C.E : An explanation has been inserted at the end of Notification No. 68/71-C.E., dated 29-5-1971 and No. 39/73- C.E., dated 1-3-1978, which lays down norms for determining the "flexible" and "rigid" articles made of plastics falling under T.I 15(2) of C.E.T".
5. The effect of this is that was held to be not "rigid" would become the "rigid" or by virtue of this definition or norm introduced by the Government. It is this notification which under challenge in the current petition.
6. Mr. Rana, appearing for the petitioners, pointed out that it is not open to the Government to provide any norm or standard without classifying what is "rigid" or what is "flexible" in the Act itself. In other words, he submitted, that by introducing this definition or norm or standard, whatever it may be, the Government has spread the power to classify which is not vested in it and that, therefore, this notification cannot be considered as valid.
7. In this connection he drew my attention to a judgment of Mysore High Court being the case of W.C. Paper Mills v. Supdt., Central Excise, Dandeli, reported in 1972 Tax. L.R. 2631, and the relevant portion is at page 2634 which read as follows :
"It is relevant to state that the classification for purposes of rate of duty can be made only by the legislature and not by the taxing authorities to classify under Item 17(1) the varieties of paper which do not fall under the said classification".
The further observations are as follows :
"In the absence of any definition of the several varieties of paper, they have to be understood in the manner understood by paper trade and industry".
In the present case Barucha, J., in the earlier petition, has considered the meting of the word "rigid" and flexible since the same was not defined under the Act, in the manner understood by the trade and industry and in the manner as understood in it's dictionery meaning. There is no reason as to why that meaning should be discarded unless legislature itself defines it in other manner.
8. Mr. Rana also drew my attention to another case of Bata India Ltd., v. Assistant Collector, C.E., Patna, reported in 1978 E.L.T. (J 211). The legal position has been started at 2 or 3 places in this judgment but I think I would quote the following passage at page 224 which is as follows :
" Under sub-rule (1) of Rule 8 of the Rules, the Central Government has been authorized to exempt, on such conditions as may be specified in the notification, any excisable goods from the whole or part of the duty leviable on such goods by a notification in the Official Gazette. A plan reading of this provision, which has been quoted in the judgment of the Learned Chief Justice, it is manifest that the power given to the Central Government is to exempt whole or part of the duty leviable. In other words, the power is given to the Central Government to grant exemption and not to impose any excise duty. By the explanation attached to the impunged notification it seems obvious to me, that the Central Government has provided for the imposition of excise duty on a manufacturer who has not manufactured the footwear. In other words, the Explanation has attempted to give an extend meaning to the words 'manufacture' as it has been defined in the Central Excise and Salt Act, 1944. Section 2(f) of that Act provides that 'manufacture' includes any process incidental or ancillary to the completion of a manufactured product. By the explanation appended to the impunged notification the word 'manufacture' has been deemed to include any footwear which is affixed with the brand or trade name registered or not of any manufacturer. By this explanation, the word 'manufacture' has been included to mean a purchaser of a manufactured product i. e The foot wears as also such footwear to which is affixed the brand or trade name or registered or not any manufacture. In doing this, the Central Government, to my mind gone beyond the four corners of the Statute itself and has acted in excess of the corners of the Statute itself and has acted in excess of the power delegated to it under sub-rule (1) of Rule 8. The submission of the Learned standing counsel appearing on behalf of Respondent Nos. 1 to 3, that the explanation appended to the impungent notification was merely a condition as contemplated under Rule 8 (1) imposed by the Central Government for exemption of certain foot wears from the duty leviable on such goods cannot in view of what I have stated above, be accepted."
I understand that this judgment of Patna High Court was accepted by Pendese, J., in the case of Carona Sahu Co. Ltd. v. Supdt., Central Excise and others, reported in 1981 E.L.T. 730 (Bomb.) and the same legal position has been reiterated.
9. Mr. Vyas, appearing for the Respondents, submitted that the Government sought to explain as to what is meant by "rigid" and as to what is meant by "flexible" in the absence of any explanation manufacturers enabling them to get clearly the benefit of exemptions. He submitted that thereby the Government has not done any classifications. He submitted that the word "rigid' or "flexible" has not been defined and that is how it had led to various controversies earlier. The controversy was set at rest by this notification and the explanation given under this notification.
10. There are two answers to this contention. Firstly, the Government itself has not understood the way it has been presented by Mr. Vyas. That can be seen from the affidavit filed on behalf of the department by one Arjun R. Mirchandani, Assistant Collector of Central Excise, wherein he had categorically stated that the explanation was done for classifying "rigid" and "flexible". Affidavits of the people in the trade cannot be relied upon to arrive at a contrary result, I say that the word 'rigid' and 'flexible' having been defined, the petitioners' product has to fall in one of two classifications as defined and the petitioners are not entitled to rely upon any trade meaning or understanding".
11. Secondly, this is exactly what the Government cannot do by virtue of a exemption notification. If there has to be any exemption, or classification that necessarily must be done by the legislature and not by virtue of any power to issue exemption notification under Rule 8(1) or (2) of the Central Excise Rules.
12. Mr. Vyas submits that explanation as provided for, was within the scope of Tariff Items itself and that no further classification was done at all. I am not inclined to accept this submission of Mr. Vyas. The words have not been defined in the Tariff Item. Therefore, Mr. Justice Bharucha had to construe those terms according to its popular meaning or as understood commercially.
13. In the result, the petitioners succeed. I, therefore, pass the following orders:
Rule is made absolute in terms of prayer (c). Consequently the amount deposited by the petitioners pursuant to an interim order dated March 22, 1979 will have to be returned to the petitioners. I am told that the money has been invested in some Fixed Deposit account. The prothonotary and Senior Master to recall the amount and return the same together with such interest as might have been accrued thereon to the petitioners.
The Prothonotary and Senior Master to comply with the order within a period of six weeks from today. However, in the circumstances of the case, there will be no order as to costs.