Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Jiyajeerao Cotton Mills Ltd. on 19 December, 1984
Equivalent citations: 1985(21)ELT317(TRI-DEL)
ORDER
S. Venkatesan, Senior Vice-President
1. This is an appeal by the Collector of Central Excise, Indore, against the Order No. 52/CE/IND/84, dated 23-2-1984 of the Collector of Central Excise (Appeals), New Delhi, by which the Collector (Appeals) set aside the Order No. V( 18) 30-99/81/1196-99, dated 24-1-1983 passed by the Assistant Collector of Central Excise, Gwalior. In that Order the Assistant Collector had confirmed the demand for Rs. 1,26,447.66 P. on a quantity of "4-harness drill" manufactured by the respondents and cleared by them during the relevant period, namely, 1-7-1981 to 19-8-1981, availing themselves of the exemption for "controlled drill" in terms of proviso (v) to Notification No. 226/77-C.E., dated 15-7-1977. The order of the Assistant Collector is not self-contained, as it refers to an earlier order dated 18-11-1980, but it is apparent that the ratio of the Assistant Collector's order was that the "4-harness drill" was not "controlled drill" within the meaning of the aforesaid proviso.
2. Shri K.D. Tayal, SDR, representing the appellant Collector, and Shri J.P. Gupta, Advocate, representing the respondents, addressed us in detail. Both sides filed copies of various notifications which were claimed to have a bearing on the issues involved. Both during the hearing and afterwards we experienced some difficulty in appreciating the facts, because some of the notifications filed on behalf of the appellant Collector were not correctly reproduced, and a number of the notifications filed by Shri Gupta were found in the end to be not relevant to a decision in the matter. In view of this position we are not recapitulating the arguments of both sides as advanced, but setting out the basic issues as they became apparent, and then dealing with the arguments relevant to those issues.
3. The main question involved is whether at the material time, that is, from 1-7-1981 to 19-8-1981, the "4-harness drill" which was cleared by the respondents was entitled to a concessional rate of duty. Notification No. 226/77-C.E., dated 15-7-1977 provided for concessional rates of duty to a wide range of cotton fabrics. Proviso (iv) to the notification made a specific provision in regard to certain fabrics for which maximum ex-factory prices had been specified by the Textile Commissioner, and proviso (v) ibid made a similar provision in respect of drill for which maximum ex-factory prices had not been specified by the Textile Commissioner. The above notification was amended by Notification No. 301/79-C.E., dated 30-11-1979, the effect of the amendment being to modify the descriptions of the textile items covered by the aforesaid provisos. At the relevant time it was the notification as amended which was in force, and the provisos as so amended read as under :
"(iv) In the case of fabrics which answer to the description of "Controlled Dhoti", "Controlled Saree", "Controlled Long Cloth", "Controlled Shirting" or "Controlled Drill" as defined from time to time by the Textile Commissioner under the Cotton Textile (Control) Order, 1948 and for which maximum ex-factory prices have been specified by the Textile Commissioner under the said Order, the appropriate rate of duty as specified in the Table shall be reduced by fifty per cent of such rate, subject to the condition that such fabrics are not supplied by the factory in which they are manufactured or processed to an industrial concern, and if such fabrics are so supplied the purchasing industrial concern certifies that the fabrics so purchased by it will be used exclusively for wearable purposes and not for any other purpose ;
(v) In the case of Drill which answers to the description of "Controlled Drill" as defined from time to time by the Textile Commissioner under the Cotton Textile (Control) Order, 1948, for which maximum ex-factory prices have not been specified by the Textile Commissioner under the said Order, the appropriate rate of duty as specified in the Table shall be reduced by fifty per cent of such rate."
4 It is common ground that at the relevant time there was no price control on 4-harness drill. Therefore, if at all the respondents were entitled to the exemption under the above notification it could only be with reference to proviso (v) thereto.
5. It is the case of the Department that not only was there no price control on 4-harness drill", but that it was not included within the definition of "controlled drill". The grounds for this contention are set out below.
6. Notification No. CER/1/68, dated 2-5-1968 of the Textile Commissioner, having reference to price control and issued under Clause 22 of the Cotton Textiles (Control) Order, 1948, prescribed the maximum ex-factory prices of various varieties of cotton fabrics, including "controlled drill" The notification included a detailed definition of "controlled drill". For our present purpose it is necessary to note only one ingredient of the definition namely the weave of the fabric, which could be either "three harness warp or weft faced fabric" or "four harness warp or weft faced fabric" (for convenience, these will be referred to as "3-harness drill" and "4-harness drill" respectively). By Notification No. CER/1/69, dated 4-10-1969 of the Textile Commissioner, which took effect from 1-11-1969, the aforesaid notification was amended. One of the amendments was that from the definition of "controlled drill", the description of "4-harness drill" was deleted.
7. Therefore, the case of the Department in substance is that during the relevant period, namely from 1-7-1981 to 19-8-198), "4-harness drill" was not included within the meaning of the expression "controlled drill" as defined by the Textile Commissioner under the Cotton Textiles (Control) Order 1948 and (apart from the fact that no maximum ex-factory price had been specified for it) it was not eligible for the exemption under proviso (v).
8. As against the above contention of the Department, the contention of the respondents is that the expression "controlled drill" does not have reference only to price control. Under the Textiles (Control) Order 1948 there was also a requirement of stamping of cotton fabrics, and for this purpose also there were definitions of various varieties of cotton fabrics including "controlled drill". According to the respondents, if it could be shown that there was a requirement under the Cotton Textiles (Control) Order 1948 of stamping of a certain fabric known as "controlled drill", and for the purpose of the stamping requirement "controlled drill" could be shown to include "4-harness drill", it would come within the scope of proviso (v). It is their contention that under the various notifications issued from time to time their "4-harness drill" was at the material time "controlled drill" for the purpose of stamping, and was, therefore, entitled to the benefit of the exemption.
9. The main reliance of the respondents is on Notification No CER/3/6o dated 19-9-1969 effective from 1-10-1969 issued by the Textile Commissioner under the Cotton Textiles (Control) Order, 1948, which contains regulations for marking of textile fabrics. Para II of this notification includes the following :
"The following markings shall be made in the manner detailed hereinafter on the face plait of each piece of controlled cloth :
(1) Name of the variety, namely "controlled dhoti", "controlled saree", controlled long cloth", "controlled shirting" or "controlled drill" as the case may be as specified in the Textile Commissioner's Notification No. CER/1/68, dated the 2nd May, 1968..."
Therefore, according to them, there was under this notification a requirement for stamping "controlled drill". The definition of "controlled drill" for this purpose was to be found in the Textile Commissioner's Notification No. CER/1/68, dated 2-5 1968, to which reference has been made in para 6 above. Further, on the date on which Notification No. CER/3/69, dated 199-1969 was issued, the definition of "controlled drill" in Notification No. CER/1/68, dated 2-5-1968 included "4 harness drill". No doubt with effect from 1-11-1969 "4 harness drill" was deleted from the scope of Notification No. CER/1/68 through amending Notification No. CER/i/69, dated 4-10-1969 (vide para. 6 above). However, the contention of the respondents is that this made no difference to the definition of "controlled drill" in Notification No. CER/3/69, dated 19-9-1969, because once the definition of "controlled drill" in the earlier Notification No. CER/1/68, dated 2-5-1968 as in force on 19-9-1969/1-10-1969 (when the later notification came into force) had been incorporated in the later Notification No. CER/1/69. dated 19-9-1969, any further amendments to the earlier notification had no effect on the latter notification. As already stated, this latter notification, namely No. CER/3/69, dated 19-9-1969, relating to marking regulations, continued in force up to and beyond the relevant period.
10. In support of his arguments. Shri Gupta relied on some authorities relating to the effect of legislation by incorporation as against legislation by reference. He referred, without going into detail, to the judgment of the Supreme Court in the case of Collector of Customs, Madras v. Nathella Sampathu Chetty (AIR 1962 S.C. 316), and in some detail to the judgment of the Supreme Court in Mahindra & Mahindra Ltd. v. Union of India and Anr. AIR 1979 S.C. 798. He drew our attention to the observations in para 8 of the judgment that "if a provision of one statute is incorporated in another, any subsequent amendment in the former statute or even its total repeal would not affect the provision as incorporated in the latter statute". He went into the details of that case to show that the position was similar to that in the case before us, and he accordingly relied on that judgment to support his view that the present case also was one of legislation by incorporation, with the consequence that the definition of "controlled drill" in Notification No. CER/3/69, dated 19-9-1969 remained unaffected by the subsequent amendment contained in Notification No. CER/1/69, dated 4-10-1969.
11. We have carefully considered the arguments advanced from both sides. Shri Gupta, the learned advocate for the respondents, presented its with a mass of material in the form of Various notifications. The distinction which he made between price control and stamping control was also an interesting one because it appeared to answer a question which could otherwise arise in regard to the effect of exemption Notification No. 226/77-C.E. As already mentioned, that notification provides for exemption both in respect of "controlled drill" for which maximum ex-factory prices have been specified by the Textile Commissioner and "controlled drill" for which maximum ex-factory prices have not been specified by the Textile Commissioner. On the face of it, it would appear that if the argument of the Department is correct, and "controlled drill" refers only to drill whose price is controlled, proviso (v) would become redundant and ineffective, and normally we should strive to avoid such an interpretation. In fact, in this connection Shri Gupta referred to the observations of this Bench to this principle in its earlier Order No. 662/83-D in the case of the same respondents.
12. However, on a closer scrutiny of Shri Gupta's arguments, we find that they ignore certain material aspects. Quite apart from the legal question whether this is a case of legislation by incorporation or legislation by reference, and if it is the former, what is the effect of the incorporation, it would appear that, that question may not arise at all for our consideration, in view of the reasons given below.
13. We have first to observe that, starting from Notification No. 3658, dated 13-10-1964, or perhaps even earlier, there was a series of orders on the subject of stamping of textile fabrics. However, these were in the form of amendments to the Textile Commissioner's Notification No. 80-Tex. I/48(iii), dated 2-8-1948. Notification No. CER/3/69, dated 19-9-1969, on which the respondents are basing their case, was in supersession of Notification No. 80-Tex. I/48(iii), dated 2-8-1948. Therefore, with effect from 1-10-1969, on which date Notification No. CER/3/69 came into force, all previous definitions contained in Notification No. 80-Tex. I/48(iii), dated 2-8-1948, whether as they stood originally or as amended, became otiose and ineffective.
14. We have now to see what is the effect of the definition of "controlled drill" in Notification No. CER/3/69, dated 19-9-1969 on which the respondents have placed heavy reliance. In the first instance, we find that the definition clause of the notification defines "controlled cloth" as follows :-
'(1) (b) "controlled cloth" means any variety or class or specification of cloth for which the maximum prices or the principles on which and the manner in which the maximum prices are to be determined by a manufacturer, have been specified by the Textile Commissioner under Clause 22 of the Cotton Textiles (Control) Order, 1948.' Para II of the notification (the relevant part of which was reproduced in para 9 above) clearly prescribes the markings which shall be made on each piece of controlled cloth (emphasis ours). Therefore, the notification concerns itself only with the markings to be made on the varieties of cloth for which either the maximum price has been specified or the principles on which and the manner in which the maximum prices are to be determined by a manufacturer have been specified. This being so, we do not see how the expressions "controlled drill", etc., in sub-para (1) under Para II of this order can be read as referring to any variety of cotton fabrics for which either the controlled price or the manner of determining the controlled price has not been specified. In our view, Notification No. CER/3/69, dated 19-9-1969 only has application to cloth which is subject to price control and the expression "controlled drill" in that notification has to be read as referring only to such drill as is subject to price control. As we have already seen, Notification No. CER/1/68, dated 2-5-1968 is concerned with price control and though when it was issued "4 harness drill" came within its scope, it went out of the scope of that notification and of price control with effect from 1-11-1969, in view of Notification No. CER/1/69, dated 4-10-1969. Therefore, with effect from 1-11-1969 "4 harness drill" also went outside the scope of Notification No. CER/3/69, dated 19-9-1969. Since the case of the respondents rests on the inclusion of "4 harness drill" within the scope of this notification, this cuts at the very basis of their stand.
15. We have seen Clause 22 of the Cotton Textiles (Control) Order, 1948, under which the various notifications cited by both parties were issued. Sub-clause (1) of this clause reads as follows : -
"(1) The Textile Commissioner may specify :
(a) the maximum prices, ex-factory, wholesale and retail, at which any class or specification of cloth or yarn may be sold ; or (aa) the principles on which and the manner in which such maximum prices may be determined by a manufacturer ; and
(b) the marking to be made by a manufacturer or dealer or any class or specification of cloth or yarn manufactured or sold by him and the time and manner of making such markings."
Clause 3 of the same Order contains definitions of various terms used therein. Definition (aaa) which was added by Notification No. S.O. 4403, dated 23-9-1975 is also reproduced below : -
'(aaa) (i) "controlled cloth" means any variety or class or specification of cloth for which the maximum prices or the principles on which and the manner in which the maximum prices are to be determined by a manufacturer have been specified by the Textile Commissioner under Clause 22 ; and
(ii) "non-controlled cloth" means any cloth for which the maximum prices or the principles on which and the manner in which the maximum prices are to be determined by a manufacturer have not been specified by the Textile Commissioner under Clause 22.'
16. The issue in this case gets narrowed down to the points whether the definition of "controlled cloth" in proviso (v) to Notification No. 226/77-C.E., dated 15-7-1977, should be related to the definition of controlled drill in Notification No. CER/3/69, dated 19-9-1969 and if so whether that notification should be read as incorporating the definition of controlled drill m Notification No. CER/1/68, dated 2-5-1968 as it stood on 15-7-1977, even after amendment of Notification No. CER/1/68, dated 2-5-1968.
17. One point which raised some doubt in our minds was the reason for having a separate proviso (v) in Notification No. 226/77-C.E., dated 15-7-1977 as set out in para 3 above. It will be seen that controlled drill" which is referred to in proviso (v) is also covered under proviso (iv). However proviso (iv) refers to certain controlled fabrics for which maximum ex-factory prices have been specified by the Textile Commissioner m other words, what would popularly be understood as price controlled fabrics. On the other hand, proviso (v) appears to refer to drill winch is not subject to price control, although called "controlled drill". The extent of duty concession is however, exactly the same under both provisos. As Shri Gupta had rightly pointed out, one should seek to avoid an interpretation of any legal provision which would result in its becoming ineffective. If, therefore, in the expression "controlled drill" the control contemplated was price control as held by the lower authorities, it would appear that proviso (v) would be practically ineffective. Shri Tayal sought to answer this objection by arguing that at the time that Notification No. 226/77-C.E. was issued, there were in effect certain varieties of drill for which no price had been specified and which would attract proviso (v), but that with the amendment of Notification No. CER/1/68, dated 2-5-1968 with effect from 1-11-969 this proviso went into slumber, but only temporarily. It could be reactivated at any time. It could not, therefore, be regarded as having become ineffective.
18. We must observe here that the concept of "stamping control" as out before us by Shri Gupta does not appear to have been agitated before the lower authorities, nor is there any reference to it in their orders. No information was placed before us to show whether the provisions relating to stamping in terms of Notification No. CER/3/69, dated 19-9-1969 which according to Shri Gupta are in force even today, are m fact being interpreted and administered by the textile control authorities in the manner advocated by him that is whether for purposes of stamping they are administering the definition of "controlled drill" as different from the definition of controlled drill" for the purposes of price control. In the absence of such information we have to reach a conclusion on the basis of our own interpretation of the provisions as placed before us by both sides.
19. Approaching the matter in this light, it appears to us that the introduction of a concept of "stamping control" would be both unnecessary and anomalous. It is unnecessary because proviso (v) to Notification No. 226/77-C.E. can be given a logical meaning without resorting to such a concept. In para 15 above we have reproduced the relevant part of Clause 22 of the Cotton Textiles (Control) Order, 1948, under which all the notifications of the Textile Commissioner have been issued. It will be seen therefrom that this clause makes a distinction between the specification of the maximum prices themselves of any class or specification of cloth, and the specification of the principles on which and the manner in which such maximum prices may be determined by a manufacturer. The same distinction (vide para 14 above) appears in Clause I(1)(b) of the definition of "controlled cloth" in Notification No. CER/3/69, dated 19-9-1969, which has been issued in pursuance of the above-mentioned Clause 22. Therefore, although specifying the actual controlled prices and specifying the principles on which and the manner in which the controlled prices are to be determined are in effect more or less the same thing, they have been kept as two separate legal concepts. If this distinction is kept in mind, it would no longer appear that proviso (v) to Notification No. 226/77-C.E. is redundant, because it would be taken as referring to drill which is subject to price control, but where the price control is by specifying the principles or the manner in which maximum prices are to be determined by a manufacturer, instead of the price itself being specified by the Textile Commissioner. This interpretation would also be in harmony with the fact that the same degree of tariff concession has been extended to controlled drill falling within provisos (iv) and (v).
20. We have seen that the concept of "stamping control" put forward by Shri Gupta is not necessary. We shall now explain why we consider that it would also lead to anomalous results. As already explained in para 14 above, we are of the view that Notification No. CER/3/69, dated 19-9-1969 cannot at all refer to any cloth which is not subject to price control. Apart from this, we cannot also see how the mere fact of having to be stamped could convert any drill into "controlled drill" or "controlled cloth". The purpose of stamping is always to convey some information, apart from the mere fact of the stamping itself. Stamping is not intended to be a process of ornamentation. The interpretation that the stamping of any drill as "controlled drill" is to indicate that it is subject to price control is logical and can be seen to serve a public purpose. As against this, Shri Gupta's a contention that stamping as "controlled drill" only shows that it is required co be stamped is neither logical nor can be seen to serve any obvious public purpose. This argument, therefore, fails to carry any conviction.
21. We have already pointed out that whether in the definitions Clause 3 of the Cotton Textiles (Control) Order, 1948, or in the definitions clause of Notification No. CER/3/69, dated 19-9-1969, the expression "controlled cloth" is clearly defined as referring only to cloth of which the price is either specified in terms or enforced through a formula. We have also seen that when Notification No. CER/3/69, dated 19-9-1969 was issued, it had incorporated the definition of "controlled drill" appearing in Notification No. CER/1/68, dated 2-5-1968, which by definition was drill which was subject to price control. Thus, to begin with, the notification which was concerned with stamping provided for stamping of only such drill as was subject to price control and no contrary intention was indicated. Shri Gupta sought to persuade us that when an amendment was subsequently made to the definition of controlled drill in Notification No. CER/1/68, dated 2-5-1968, a divergence developed between the price control notification and the stamping control notification and has continued ever since. We have already explained that we cannot think of the stamping requirement being in a vacuum as it were, and divorced from the important question of price control. It is possible to conceive of a situation where divergent meanings are deliberately given. For instance, if instead of incorporating the definition in the price control notification the stamping notification had adopted its own definition, which was different from the definition in the price control notification, this could have been deemed to be a deliberate measure and given its full significance. We are, however, unable to accept that when there was uniformity to begin with, and that uniformity was obviously desirable and logical, we should later on read the notification in such a manner as to bring about lack of uniformity between the stamping requirement and the price control position.
22. Taking a view as above might appear to be contrary to the principle of legislation by incorporation. We have however made a careful study of the law in this regard and we are satisfied that it is not so. Shri Gupta cited before us the decision of the Supreme Court in Mahindra & Mahindra Ltd. v. Union of India. He did not however refer to another well-known judgment of the Supreme Court on the same subject, namely that in State of Madhya Pradesh v. M.V. Narasimhan (AIR 1975 S.C. 1835). In that case, the Supreme Court, on a consideration of a number of earlier decisions of the Privy Council and the Supreme Court itself, observed as follows :-
"16. On a consideration of these authorities, therefore, it seems that the following proposition emerges :
Where a subsequent Act incorporates provisions of a previous Act then the borrowed provisions become an integral and independent part of the subsequent Act and are totally unaffected by any repeal or amendment in the previous Act. This principle, however, will not apply in the following cases :
(a) where the subsequent Act and the previous Act are supplemental to each other ;
(b) where the two Acts are in pari materia ;
(c) where the amendment in the previous Act, if not imported into the subsequent Act also, would render the subsequent Act wholly unworkable and ineffectual; and
(d) where the amendment of the previous Act, either expressly or by necessary intendment, applies the said provisions to the subsequent Act."
The Supreme Court thus made it clear that even where there is legislation by incorporation, there could nevertheless be cases where the incorporated provision cannot be taken as totally unaffected by an amendment in the previous Act. We have no doubt that the present case should be considered as one of legislation by incorporation and therefore generally governed by the principle applicable in that situation. Equally, we find that this is a case where the first two exceptions laid down by the Supreme Court are very relevant. Both notifications under consideration, namely CER/1/68, dated 2-5-1968 and CER/3/69, dated 19-9-l969, were issued under the same Clause 22 of the Cotton Textiles (Control) Order, 1948, and relate to the same commodity, namely cotton fabrics. Further, as we have already observed, the requirement of stamping cannot be regarded as an end in itself, but must necessarily have reference to what information is sought to be conveyed by stamping. Thus, the two notifications are clearly in pari materia and should also be considered as supplemental to each other. Therefore, the present is clearly a case where the general rule regarding the effect of legislation by incorporation would not apply, but rather the exceptions thereto.
23. We may add that though the Supreme Court judgment in the case of Mahindra & Mahindra Ltd., did not refer to the exceptions to the rule, even in that case the Supreme Court did not take the question as concluded by referring to that rule. Having observed that they had no doubt that the section under consideration was an instance of legislation by incorporation and not legislation by reference, the Hon'ble Judges of the Supreme Court went on to examine in detail the implications of the alternative views and the consequences which would follow by adopting either view. It was in the light of this discussion that they held that in that case the general rule relating to legislation by incorporation should be applied. This clearly shows that in any given case it is not enough to cite the general rule, but it has also to be seen whether it is the general rule which is applicable or the exceptions to that rule
24. Finally, there is one more argument in support of the conclusions we have reached. It was pointed out by Shri Tayal that provisos (iv) and (v) to Notification No. 226/77-C.E., dated 15-7-1977 refer to Controlled Drill "as defined from time to time by the Textile Commissioner under the Cotton Textiles (Control) Order, 1948 ..." (Emphasis added). Shri Tayal therefore argued that every amendment of the definition should be taken into account. We find substance in this argument. There is nothing in provisos (iv) and (v) to say that one particular notification or series of notifications under the Cotton Textiles (Control) Order, 1948, should alone be taken into account (by introducing a concept of 'Stamping Control', as Shri Gupta would have liked us to do). If the words "from time to time" are given their normal significance, the amendment brought about by Notification No. CER/1/69, dated 4-10-1969 cannot be ignored while interpreting provisos (iv) and (v).
25. In the view that we have taken, it is clear that at the relevant time "4 harness drill" was not covered by proviso (v) to Notification No. 226/77-C.E., dated 15-7-1977. The order of the Collector of Central Excise (Appeals) taking a contrary view was not correct, as it did not take into account the amendment made with effect from 1-11-1969 to Notification No. CER/1/68, dated 2-5-1968. We accordingly allow the appeal, set aside the Order-in-Appeal No. 52/CE/IND/84, dated 23-2-1984 of the Collector of Central Excise (Appeals), New Delhi, and restore the Order-in-Original No. V(l8)30-99/81/ 1196-99, dated 21-1-1983 of the Assistant Collector of Central Excise, Gwalior.