Customs, Excise and Gold Tribunal - Delhi
Madras Rubber Factory Ltd. vs Collector Of Central Excise on 31 January, 1985
Equivalent citations: 1987(29)ELT732(TRI-DEL)
ORDER K.L. Rekhi, Member (T)
1. The appellants manufacture miniature tyres for distribution as free gifts. They claim that these tyres are entitled to exemption from payment of central excise duty under the ad hoc exemption order issued by the Central Board of Excise & Customs on 27-10-1964 which, they say, is still current and valid. We reproduce below the said exemption order for ready reference:-
CIRCULAR LETTER NO. Tyres/8/64 F.No. 7/20/64-CX.II CENTRAL BOARD OF EXCISE & CUSTOMS NEW DELHI, the 27th October, 1964.
From:
Shri N.B. Sanjana, Under Secretary, Central Board of Excise & Customs.
To M/s Madras Rubber Factory Ltd., 175/1, Mount Road, Madras-600 002.
Dear Sirs, Sub: Tyres - Miniature tyres for exhibition and distribution as free gifts - Grant of exemption - request reg.
...
I am directed to refer to your letter No. 03/1/PTJ dated the 3rd October 1964, on the above subject and to say that in pursuance of Sub-rule (2) of Rule 8 of the Central Excise Rules, 1944, the Central Board of Excise and Customs grants exemption from whole of the Central Excise duty leviable on miniature tyres proposed to be manufactured and distributed as free gifts.
Yours faithfully, Sd/-
(N.B. SANJANA) Under Secretary, Central Board of Excise & Customs It is the appellants' case that their miniature tyres fall under Item 16-111 (All other tyres) of the Central Excise Tariff and that even if it be assumed, as held by the Appellate Collector, that such tyres would fall under the residuary Item 68 of the Tariff which came into force from 1-3-1975, these tyres would still be entitled to exemption as the aforesaid exemption order does not mention any tariff item number. The appellants showed a sample miniature tyre during the hearing and stated that whereas the Central Excise officers in-charge of their Madras factory were allowing them the exemption in respect of the tyres manufactured in that factory, the officers in-charge of their Goa factory were not doing so and that they had been paying duty under protest at Goa w.e.f. 16-5-1978. The Department's Representative stated that the miniature tyres contained no bead wire, were not meant for locomotion and, therefore, fell under Item 68 and not under Item 16. He reiterated the Appellate Collector's finding that since the aforesaid exemption order had been issued in 1964 when Item 68 did not exist in the Tariff, the exemption order was no longer applicable after Item 68 came into force from 1-3-1975.
2. We have carefully considered the matter. We do not consider it necessary for the decision of this case to go into the question whether the subject miniature tyres fell under Item 16 or 68 for the simple reason that the aforesaid exemption order, which is still in force, does not tie up the exemption with any particular Tariff entry. The order contains only two conditions for the exemption - (1) the goods should be miniature tyres manufactured by the appellants and (2) they should be distributed as free gifts. There is no dispute on either of these points of fact. We, therefore, hold that miniature tyres manufactured by the appellants and distributed as free gifts are entitled to full exemption from duty under the aforesaid exemption order. Accordingly, we set side the impugned order of the Appellate Collector and allow this appeal with consequential relief to the appellants.
S. Venkatesan
3. I fully agree with the reasoning and the conclusions of my learned brother, but would like to add a few observations.
4. A question was. raised during the hearing whether, in the event that the goods were not excisable under Item 16, but only (with effect from 1-3-1975) under Item 68, the exemption order issued by the Central Board of Excise and Customs on 27-10-1964 could be considered as a dead letter and ineffective even after 1-3-1975. I think this would not be a correct view. There are many cases where the same goods could be covered by more than one exemption notification: one may grant full exemption and the other a partial exemption. Obviously, so long as the full exemption is operative, the partial exemption is superfluous and in that sense inoperative. Can it then be said that such a partial exemption is a dead letter, and would not become operative if the complete exemption is rescinded? The answer, 1 think, is obvious: in such an event the assessee would clearly be entitled to the benefit of the partial exemption. The same principle should apply in the present case. If the goods are taken as outside the scope of Item 16, then no doubt the Board's exemption order was initially superfluous and therefore ineffective. But when the goods attracted duty under Item 68, and the exemption Order, which contained a clear description of those goods without reference to any Tariff item, continued without having been rescinded, that exemption order would clearly become operative. There could be little doubt that if an identically worded exemption had been issued on 27-10-1984 instead of 27-10-1964, it would have been taken as fully covering these goods. Merely because the order was made earlier and may have been superfluous and ineffective because the goods fell outside the scope of Item 16 (which itself is an open question), its effect could not be ignored. Shri Ignatius, appearing for the appellants, informed us, and we have no reason to doubt it, that it was only the excise authorities concerned with their Goa factory who had held the Board's order as inoperative, whereas the excise authorities concerned with their Arkonam and Madras factories continue to honour the same order in respect of similar goods. 1 consider that this was the proper view to take. In the light of these additional considerations I agree with my learned brother that the appeal has to be allowed.
M. Gouri Shankar Murthy
5. I regret, with respect, any inability to agree with my learned Brothers.
6. Two questions arise in this Appeal and they are -
(a) Do the goods, in question, come within the ambit of Item 16 of the First Schedule to the Central Excises and Salt Act, 1944?
(b) What is the effect of the circular letter dated 27-10-1964 (reproduced in para (1) of my learned Brother Rikhi's order)? Does it serve to exempt the goods from liability to duty if the goods became ultimately exigible to duty under item 68 as and from 1-3-1975?
7. My learned Brothers were disinclined to go into question (a) supra, for in their view, the circular letter, on its terms, applies to the goods, regardless of whether they fall under one or the other of the aforesaid items and the exemption in terms thereof cannot be considered to be a dead letter and ineffective after 1-3-1975, even if the goods were not leviable to duty earlier under Item 16 and became exigible to duty only on the said date for the first time in terms of Item 68. In my opinion, however, it would be imperative to go into the aforesaid question (a) with a view to consider, in the first instance, the scope, validity, the purpose and effect of the circular letter for a determination of its applicability, all on a sudden to the goods in question, even if it were assumed they become exigible to duty under item 68 for the first time on and from 1-3-75. Again, it cannot be forgotten that it was on the assumption that the goods in question fell within item 16 that the circular letter was issued and if they did not, on a proper construction of item 16, can it not be said that the exemption was still born, not to be resuscitated on the introduction of the residuary item 68 in the First Schedule to the Act?
8. Item 16 of the First Schedule to the Act, at all material times, defined "tyres" inclusively to mean "a pneumatic tyre in the manufacture of which rubber is used and includes the inner tube, the tyre flap and the outer cover of such a tyre"; proceeded to levy duty at different rates on "tyres" for diverse vehicles and ended up with a residuary entry "All other tyres". The question is if a miniature tyre cover intended for use as an ash tray, and therefore useless for vehicles, can fall within the residuary entry. To put it differently is an outer cover of a miniature tyre, a "tyre" as defined in the first place and if so, does the residuary entry comprehend within its scope such a tyre cover even though it is useless for vehicles?
9. The first essential requisite of a "tyre" as defined, it will be observed, is that it should be "pneumatic". What is meant by "pneumatic" ? The Twentieth Century Dictionary (Eight Reprint) has this to say of the word -
"relating to air or gasses - containing or inflated with air - worked or driven by air - spiritual".
Obviously, in the context of the First Schedule a "pneumatic tyre" cannot be any thing other than one "containing or inflated with air".
10. By virtue of the inclusive definition, an outer cover by itself of "such a tyre" is also a tyre. The words "Such a tyre" are significant here. Clearly, if the outer cover does not pertain to a pneumatic tyre, it cannot come within the inclusive definition. The miniature tyre in question, for use as an ash try is an outer cover only but merely on that account it cannot be "tyre" as defined, for the simple reason it does not pertain a pneumatic tyre. "All other tyres" in the residuary entry cannot, in the premises, include an outer cover of a tyre which neither can be nor intended to be inflated with air.
11. Again, significantly, each of the various entries classify tyres with reference to their use for different tyres of vehicles. The utility of a tyre for the vehicle specified is not only determinative of the charge to duty but is the sine qua non for the levy itself. Once this is so, can be residuary entry "All other tyres" be construed to comprehend miniature or ornamental tyres useless for any vehicle whatsoever?
12. In the construction of statutes, the rule of "ejusdem generis" is not of infrequent application, as a legitimate rule of construction when -
(a) the statute contains an enumeration of specific words;
(b) the subjects of enumeration constitute a class or category;
(c) that class or category is not exhausted by the enumeration;
(d) the general terms follow the enumeration; and
(e) there is no indication of a different legislative intent. [AIR 1972 SC 1863 - Amar Chandra v. Collector of Excise, Tripura].
Similarly, in (1920) 1KB 773, (A.G. Brown) the words "any other goods" [in section 43 of the Customs (consolidation) Act, 1876 which empowered His Majesty by order in council to prohibit the importation of "arms, ammunition, or gun powder, or any other goods"] were construed to be goods similar to arms, ammunition or gun powder.
13. It will be observed that the common factor in all the sub-items of item 16 is the user of the "tyre" in a vehicle. "Tyres" used for various types of vehicles are the genus as would appear from all but the residuary sub-item. The enumeration of such tyres for use vehicle-wise was not exhausted. To cite one example - there are tyres for an aeroplane that are left out. In the absence of a different legislative intent, it is imperative to restrict the amplitude of the residuary entry "All other tyres" to those meant for indispenable use for mobility for other vehicles.
14. Applying the aforesaid rule of construction, therefore, it has necessarily to be held that miniature tyres or the outer covers of such tyres (not pneumatic) intended for use as ash trays, and not for vehicles, cannot fall within the sub-item "All other tyres" in Item 16 of the First Schedule and cannot, therefore, be "leviable" to duty on 27-10-1964 when the circular letter was issued.
15. (a) It is axiomatic in the construction of fiscal enactments that an exemption from the levy has to be construed strictly against the assessee claiming it. Nor can a levy be inferred from an exemption, when, in fact, there is none [the two Golden Paper Udyog cases in 1983 ECR 799 and 1983 ECR 1349].
(b) The expression "leviable on miniature tyres" in the circular letter does not merely qualify the "duty" but also signifies that on the date of issue of the letter, such duty was, in fact and law, leviable. It was, indeed, on the wrong assumption that it was so leviable that the exemption was granted;
(c) Item 68 was not in existence in the First Schedule at that time;
(d) The assumption was, therefore, that duty was leviable on 27-10-64 under Item 16 itself, the only other item that could, if at all, apply.
(e) What was exempted was, in the premises, the duty that was erroneously assumed to be leviable on "tyres" on and after 27-10-1964 in terms of Item 16 of the First Schedule.
(f) No exemption from a levy could ever be construed to have been granted for a future levy, if all imposed. An exemption from a levy cannot be anterior to the levy itself. It has a nexus, real or imaginary, only with the levy in presenting and not a levy in future that may or may not materialise.
(g) The exemption cannot, therefore, be held to be applicable to a future levy that may or may not be imposed just because the object of the levy in terms of the Item in the First Schedule had not been specified and is capable of being applied to goods that would, in course of time, be brought to levy under other items by amendments made in the said Schedule.
(h) The word "leviable" in the letter has, therefore, necessarily to be construed as leviable on the date of the letter and is, thus, relatable or referable to the duty in terms of Item 16 only and not any other Item that may be introduced in the First Schedule subsequently;
(i) The analogy of a plurality of exemption Notification providing for varying extents of exemption is not, with respect, quite apposite. It is implicit in the analogy that the two Notifications in question are relatable to a levy in presenti and one of them became otiose because the extent of exemption in the other is larger. But when the latter was rescinded, the former still remained to be applicable. That is not the case here. There cannot, to reiterate, be an exemption without a levy. On its language, the exemption sought to be granted is referrable to the levy under Item 16 only and to no other. It cannot, therefore, apply to future levies under items other than Item 16.
16. The answers to the questions formulated in para (2) supra are, in the premises, -
(a) the goods in question do not fall within the ambit of Item 16 at any material time;
(b) the exemption in the circular letter is relatable only to the goods falling within Item 16, on the erroneous assumption they did and cannot apply to the goods in question coming within Item 68.
Accordingly, the Appeal is to be dismissed.
Sd/-
(M. Gouri Shankar Murthy) Member (Judicial) New Delhi, the 26th February, 1985 TRIBUNAL'S ORDER In accordance with the judgment of the majority of the Members who have heard this matter, the appeal is allowed with consequential relief to the appellants.