Customs, Excise and Gold Tribunal - Delhi
Trimurti Weldmesh (P) Ltd. vs Collector Of Central Excise on 6 November, 1992
Equivalent citations: 1993(43)ECC56, 1993ECR427(TRI.-DELHI), 1993(64)ELT419(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The eligibility of motor vehicle parts falling under Heading 8708.00 of CETA 1985 manufactured by the appellants who are a registered small scale industry and cleared during the period from November 1988 to May 1991 (E/4013/92-B1) and June to Sept. 1991 (E/2086/92-B1) to the benefit of concessional rate of duty under Notification 175/86 dated 1-3-1986 as amended by Notification No. 223/87 dated 22-9-1987 arises for determination in both these appeals which are being disposed of by this common order. The benefit has been denied in terms of the exclusion clause contained in para 7 of the notification on the ground that the goods were affixed with name "FITWELL" which is the brand name of a trader who is not eligible for grant of exemption under the said notification, There is no dispute that the brand name/trade name was already embossed at the forging stage before such forgings were received at the appellants' unit and there is also no dispute that the appellants were not affixing any brand name/trade name. The adjudicating authority came to the finding that the appellants intended to manufacture the parts embossed with the said trade name and that is the reason why they got that name embossed at the forging stage and it was immaterial whether they affix the trade name themselves or got it affixed by others as the result is the same i.e. the goods are seized from the factory of the appellants with the trade name embossed thereon. He, therefore, held that the goods in question were covered by the embargo on exemption contained in para 7 of the Notification 175/86. The lower appellate authority has given a categorical finding that there is no dispute about the fact that the appellants are getting the goods embossed with the trade name 'Fitwell' at the forging stage and they themselves are not affixing this brand name on the goods. However, the Collector (Appeals) has relied on the "Mischief Rule" to deny the benefit of the Notification, holding as follows :
"Para 7 of the Notification No. 175/86 says that exemption contained in this Notification shall not apply to the specified goods where a manufacturer affixes the specified goods with a brand name or trade name of another person who is not eligible for the grant of exemption of this notification. No doubt the language used in para 7 of the said Notification specifically uses the expression "where a manufacturer affixes the specified goods with a brand name or trade name ...". The normal rule of interpretation requires that a statutory provision should be given a meaning as is conveyed by a plain reading of the words used therein. However, there is an equally important rule of interpretation which is called the Mischief Rule. It is to be kept in view at this juncture that the Notification No. 175/86 dt. 1-3-1986 did not originally have a provision like para 7. It was later added under Notification No. 223/87 dt. 22-9-1987. Therefore, it was a conscious addition by the legislature and obviously it was incorporated with some objective in view. The nature of the provision added makes it clear that the objective was to take care of any type of abuse of this Notification benefit by way of any person not eligible for grant of exemption under this Notification getting his branded goods manufactured by an SSI Unit and thereby getting the benefit of this exemption in a roundabout manner. In other words, this was the mischief which was not taken care of at the time of drafting this Notification in the initial stage and thus paragraph 7 was later introduced to suppress this mischief. Therefore, the scope and parameter of para 7 of this Notification have to be assessed and examined in the light of the above background and in terms of the Mischief Rule of Interpretation. I find that on page 137 of the Book "Maxwell on the Interpretation of Statutes-12th Edition by P. St. J. Langan it has been inter alia reported in the context of interpretation to prevent evasion or abuse as under :-
"There is no doubt that the office of the judge is, to make such construction as will suppress the mischief, and advance the remedy, and to suppress all evasions for the continuance of the mischief. to carry out effectually the object of a statute, it must be so construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or enjoined : quando aliquid prohibetur, prohibetur et omne per quod devcintur ad illud.
This manner of construction has two aspects. One is that the Courts, mindful of the mischief rule, will not be astute to narrow the language of a statute so as to allow persons within its purview to escape its net. The other is that the statute may be applied to the substance rather than the mere form of transactions, thus defeating any shifts and contrivances which parties may have devised in the hope of thereby falling outside the Act. When the Courts find an attempt at concealment, they will, in the words of Wikmot C.J. brush away the cobweb varnish, and show the transactions in their true light."
This Rule of Interpretation in fact originated almost 400 years ago in the Heydon's case (1584) 3 Rep. 7 in which it was resolved that that for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law four things are to be discerned and considered : (1st). What was the common law before the making of the Act. (2nd). What was the mischief and defect for which the common law did not provide. (3rd). What remedy the Parliament had resolved and appointed to cure the disease of the commonwealth. And, (4lh). The true reason of the remedy; and then the office of ail the Judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro private commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico."
It has been further elaborated in the Maxwell's book cited above on Page 40-41 thereof that "In 1898, Lindley MR. said : "In order properly to interpret any statute it is as necessary now as it was when Lord Coke reported Heydon's Case to consider how the law stood when the statute to be construed was passed, what the mischief was for which the old law did not provide, and the remedy provided by the statute to cure that mischief." Although judges are unlikely to propound formally in their judgments for the four questions in Heydon's Case, consideration of the "mischief" or object of the enactment is common, and will often provide the solution to a problem of interpretation.
In the well known case of Smith v. Hughes, for example, it was held that prostitutes who attracted the attention of passers-by from balconies or windows were soliciting "in a street" within Section 1(1) of the Street Offences Act, 1959. "For my part," said Lord Parker C.J. (at p. 832), "I approach the matter by considering what is the mischief aimed at by this Act. Everybody knows that this was an Act intended to clean up the streets, to enable people to walk along the streets without being molested or solicited by common prostitutes." Viewed in that way, the precise place from which a prostitute addressed her solicitations to somebody walking in the street became irrelevant."
4. The Indian Courts have also on various occasions applied the Mischief Rule for properly interpretating the statute. Reference can be made in this context to the following important decisions -AIR 1966 SC 1342, AIR 1968 SC 697, AIR 1975 SC 2260, AIR 1973 SC 1016 & AIR 1958 SC 468.
Apart from the above decisions, I find that the observations of the Hon'ble Supreme Court in the following two judgments are also very relevant and appropriate for the understanding of the scope and application of the Mischief Rule :-
(a) In the case of Mysore State Road Transport Corporation v. Mysore State Transport Appellate Tribunal reported in (1975) 1 SCR 615, the Hon'ble Court observed as follows :-
"The purpose and significance of an enactment is to be found after exploring the shortcomings or the defects which were sought to be removed by means of it by Parliament which does not legislate in vain or without some reason or need for it. And, as all law, including enacted law, is a response to a need which has arisen, we have to examine the situation or the context in which the need for an amendment in it arose by an addition in it or alteration of it in order to appreciate its true meaning. Law, after all, is not static. It changes in response to the growing needs it has to serve so as to advance the public good."
(b) In the case of Kanwar Singh v. Delhi Administration reported in AIR 1965 SC 871, the Hon'ble Supreme Court's observation in this context inter alia was as follows-
"It is the duty of the Court in construing a statute to give effect to the intention of the legislature. If, therefore, giving literal meaning to a word used by the draftsman, particularly in a penal statute would defeat the object of the legislature, which is to suppress a mischief the court can depart from the dictionary meaning or even the popular meaning of the word and instead give it a meaning which will advance the remedy and suppress the mischief."
4. In the light of the legal proposition laid down by the Highest Court of the land I find that in the case under consideration before me it would not be proper to go strictly by the narrow interpretation of the expression used in Para 7 and that it would be fully justified to make a departure from this narrow and plain meaning of the expression used in order to meet the objective behind introducing a provision like Para 7 in the body of the Notification No. 175/86 dt. 1-3-1986 by a subsequent amendment. Otherwise, it would result in continuance of the very mischief which was sought to be suppressed. In my view, therefore, the proper interpretation about the scope of Para 7 would be that the expression "Manufacturer affixes the specified goods" would have to be given a wider connotation than what its plain dictionary meaning would suggest so as to cover a situation in which the goods leave the factory premises of the manufacturer (who is an SSI unit claiming the benefit of Notification No. 175/86 dt. 1-3-1986), affixed with the brand name or trade name of any person who is not otherwise eligible for the benefit of this notification. In other words, in order to suppress the mischief the most logical and proper interpretation would be to put the emphasis on the condition of the goods as they leave the manufacturing premises of the SSI and not to give an abnormally narrow interpretation by restricting such mischief to a situation in which the manufacturer himself affixes the goods with such brand name or trade name.
5. Viewed in the context of the legal proposition as analysed above, I find that the decision taken by the Assistant Collector in this case is sustainable in law and on facts. There is no dispute about the fact that the brand name "Fitwell" belongs to a person who is not eligible for the benefit of the Notification No. 175/86 dt. 1-3-1986 and that the appellants are clearing the goods from their factory premises affixed with the brand name or trade name of such a person. Even if the appellants are not affixing the specified goods in their factory premises of forgings received by them from outside already affixed with such brand name or trade name yet if a narrow interpretation is given by going by the plain and dictionary meaning of the expression given in para 7, there would be an obvious judicial error in the light of the fact that the incorporation of para 7 was clearly to suppress a mischief and that very objective would be defeated if a broader interpretation is not given to the words used in this paragraph." Hence this appeal.
2. We have heard Shri J.S. Agarwal, learned Counsel and Shri M.S. Arora, learned DR and carefully considered their submissions.
3. The learned Counsel urges that the benefit of the Notification cannot be denied to the appellants on the ground that the goods are embossed with the trade name/brand name when it is not the appellants who have carried out such affixing. He submits that para 7 makes it clear that exemption will not be available only to the manufacturer who affixes these specified goods with the brand name. He points out that the appellants received rough forgings falling under Chapter 73 and carried out machining and sent the machined auto parts falling under Chapter 87 to consignees who are different from the consignors of the unmachined rough forgings. He submits that the ultimate benefit of the exemption is to a manufacturer and in the case of the notification in question, the benefit is to a manufacturer who is a SSI Unit while the object of para 7 is to deny such benefit to large and medium scale manufacturers and traders. According to him Rule in Heydon's case is not applicable to the facts of this case and the rule applies only when the words in a Statute are ambiguous as has been held by the Supreme Court in the following cases :
1. AIR 1957 SC 832
2. AIR 1976 SC 331
3. AIR 1989 SC 1024 = 1989 (40) E.L.T. 239 (SC) The learned Counsel submits that in this case there is no ambiguity or vagueness in Notification 175/86 which required clarification and para 7 was introduced by amendment in 1987 as a totally new concept. He, therefore, prays for acceptance of the appeal.
4. In reply the learned DR contends that the word "affixing" occurring in the Notification should be read in a broader sense to mean affixing done by any person. He submits that the final products viz. machined products which are being denied the benefit of the notification could not have been affixed with the brand name prior to machining and therefore, the machined final products manufactured by the appellants are excluded from the notification by virtue of para 7. He refers to the opening sentence of 175/86 to support his argument that "a manufacturer" means "any manufacturer" and submits that even according to Stroud's Judicial Dictionary "a" has been recognised as equivalent to "any". He reiterates the findings in the impugned order on the Mischief Rule.
5. We see great force in the submissions of the learned Counsel. Admittedly, the brand name/trade name of FITWELL was already embossed at the forging stage before such forgings were received at the appellants' unit for further working and, therefore, it was not the appellants who arc affixing any brand name/trade name so as to attract the exclusion clause contained in para 7 of the Notification 175/86 as amended by Notification 223/87. The lower appellate authority has, however, gone by the intendment of the exclusion clause holding that the whole arrangement was a device adopted to defeat the purpose of the amendment notification. While construing a fiscal statute the plain meaning of the language has to be looked into and there is no room for intendment in fiscal legislation. This is the legal position well settled by the decision of the Supreme Court in the case of Hemraj Gordhandas v. H.H. Dave reported in 1978 (2) E.L.T. (J 350). The Tribunal has also followed the same view in a number of decisions viz. Vikrant Tyres v. Collector of Central Excise, Bangalore reported in 1988 (38) E.L.T. 301 wherein it has been held that it is the rule of construction that nothing can be supplied and nothing can be ignored when interpreting a notification. In the case of Indian Iron and Steel Co. Ltd. v. Collector of Central Excise reported in 1990 (46) E.L.T. 409 the Tribunal has reiterated the position that in a taxing Statute there is no room for any intendment but regard must be had to the clear meaning of the words and if the tax payer is within the plain term of an exemption he cannot be denied its benefits by calling in aid any supposed intention of the exemption authority. In the case of Good Year India Ltd. v. Union of India reported in 1990 (49) E.L.T. 39 (Delhi), the Hon'ble Delhi High Court has relied upon the judgment of the Hon'ble Supreme Court reported in AIR 1979 SC 193 (Chief Justice of Andhra Pradesh v. L.V.A. Dikshitulu) to hold that the primary principle of interpretation is that a constitutional or statutory provision should be construed according to the intent of those who made it. Normally such intent is gathered from the language of the provisions and if the language or phraseology employed by the legislation is precise and plain and thus by itself proclaims its legislative intent in unequivocal terms, the same must be given effect to.
5.1 The Mischief Rule relied upon by the lower appellate authority has no application to the facts of this case. A commentary on the Mischief Rule is provided in G.P. Singh's Principles of Statutory Interpretation, 5th Edition at page 82 as follows :
(b) Rule in Heydon's case; purposive construction : mischief rule :
When the material words are capable of bearing two or more constructions the most firmly established rule for construction of such words "of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law)" is the rule laid down in Heydon's case which has "now attained the status of a classic". The rule which is also known as 'purposive construction' or 'mischief rule', enables consideration of four matters in construing an Act : (i) What was the law before the making of the Act, (ii) What was the mischief or defect for which the law did not provide, (iii) What is the remedy that the Act has provided, and (iv) What is the reason of the remedy. The rule then directs that the courts must adopt that construction which "shall suppress the mischief and advance the remedy". The rule was explained in the Bengal Immunity Co. v. State of Bihar by S.R. Das C.J. as follows : It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon's case was decided that for the sure and true Interpretation of all Statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered.
1st- What was the common law before the making of the Act.
2nd- What was the mischief and defect for which the common law did not provide.
3rd- What remedy the Parliament hath resolved and appointed to cure the disease of the commonwealth, and 4th- The true reason of the remedy;
and then the office of all the judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico."
This Rule has been interpreted by the Supreme Court in the case of Commissioner of Income Tax, M.P. v. Smt. Sodra Devi reported in AIR 1957 S.C. 832 to apply only when the words in question are ambiguous and are reasonably capable of more than one meaning. The Court held in para 14 as follows :
"It is clear that unless there is any ambiguity it would not be open to the Court to depart from the normal rule of construction which is that the intention of the Legislature should be primarily gathered from the words which are used. It is only when the words used are ambiguous that they would stand to be examined and construed in the light of the surrounding circumstances and constitutional principle and practice."
The Supreme Court has held in the case of Commissioner of Wealth Tax v. Smt. Hashmatunissa Begam reported in AIR 1989 SC 1024 = 1989 (40) E.L.T. 239 (SC) as follows :
"The rule of construction that if the statutory provision is susceptible or admits of two reasonably possible views then the one which would promote its constitutionality should be preferred on the ground that the legislature is presumed not to have intended an excess of its own jurisdiction, is subject to the further rule that it applies only where two views are reasonably possible on the statutory language. If the words of the Statute, on a proper construction, can be read only in a particular way, then it cannot be read in another way by a Court of construction anxious to avoid its unconstitutionality".
5.2 To our minds it appears that the exclusion contained in clause 7 of the notification applies only to manufacturers who actually affix the brand name/trade name on specified goods and not to goods affixed with a brand name/trade name. Therefore, in our view, as the appellants do not affix the specified goods with brand name, they cannot be denied the benefit of Notification 175/86 as amended by 223/87 as they are not excluded therefrom in terms of clause 7 thereof. In the result we set aside the impugned order and allow the appeal with consequential relief if any due to the appellants.
P.C. Jain, Member (T) 5.3 I agree with the conclusion reached by the learned Sister in para 5.2 of her order. I would, however, like to add the few words. The Revenue wants us to read para 7 of the Notification 175/86 as follows:-
"The exemption contained in this notification shall not apply to the specified goods affixed with a brand name or trade name (registered or not) of another person who is not eligible for the grant of exemption under this notification."
However, para 7 in the said notification actually reads as :
"7. The exemption contained in this notification shall not apply to the specified goods where a manufacturer affixes the specified goods with a brand name or trade name (registered or not) of another person who is not eligible for the grant of exemption under this notification."
In other words, Revenue wants to replace the expression 'where a manufacturer affixes the specified goods' with the word 'affixed' for the purpose of interpretation of para 7 of the said notification. This violence to the language of the notification, according to well settled rules of construction, can only be done if there is an ambiguity or any absurdity resulting from the original language. We do not think that any ambiguity or absurdity arises from the original language as actually used in para 7. For the same reason, mischief rule relied upon by the learned adjudicating authority would not apply in this case, as said in extenso by the learned sister in her order.
5.4 There appears to be internal evidence in the Notification 175/86 that the Central Government issuing the notification intended to apply para 7 to those branded goods in respect of which manufacturer affixes the brand name and not in respect of the branded goods on which the manufacturer has not affixed the brand name. One clue is obtained from proviso to para 3 of the said notification which enables exclusion from computation of aggregate value of clearances, the clearances of any excisable goods where a manufacturer affixes the specified goods with a brand name.
6. It is, therefore, apparent that the notification has deliberately used the words referring to the of the manufacturer with reference to which the exemption is available or not. This is in tune with the general scheme of the notification as well because the exemption has been given to a certain quantity of goods cleared by a manufacturer for home consumption.