Bombay High Court
Smt Kaushalya Narayanan And Others vs Dadaji Dhackjee & Co. (Pvt.) Ltd. on 1 January, 1800
Equivalent citations: 1980(6)ELT102(BOM)
ORDER Kantwala, C.J.
1. Two officers of the Central Excise Department and the Union of India have filed this appeal against the judgment and order of Madon J. whereby he set aside the order dated April 3, 1965 passed by Mrs. Kaushalya Narayanan, the Deputy Collector of Central Excise, Bombay and the demand notice dated July 2, 1965 issued by the Inspector of Central Excise, In- charge, section No. 45. The learned Judge also issued a writ of Mandamus directing the respondents forthwith to return to the Petitioners the 116 electric storage batteries that were seized by the Excise Authorities and such batteries were to be returned without demanding or recovering any excise duty in respect thereof.
2. Messrs. Dadajee Dhackjee and Company Private Ltd., the petitioners carry on business, inter alia, of sale and servicing inclusive of repairs of motor cars and manufacture, sale and servicing of electric storage batteries and air-conditioning plants. In the year 1955 Central Excise duty was imposed on electric batteries and parts thereof with effect from March 1, 1955, under the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) by the Finance Act of 1955. By a Notification dated April 18, 1955 issued by the Government of India, Ministry of Finance, (Revenue Division) in exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government exempted electric batteries produced in any factory in which not more than five worker are working or were working on any day of the preceding 12 months from the whole of the excise duty leviable thereon under the Act. In this Notification there was an Explanation in relation to the expression "worker", but it is unnecessary for the present purpose to refer thereto. After the said Notification, a Trade Notice bearing No. 52(MP) Batteries/58 was issued on May 2, 1958 by the Collector of Central Excise, Bombay. It is inter alia stated in this notice that in accordance with this Government of India's orders the term "worker" used inter alia in the Notification dated APril 18, 1955 should be interpreted in the light of definition of "worker" given in section 2(1) of the Factories Act, 1948, namely:-
"Workers' means a person employed, directly or through any agency, whether for wages or not in any manufacturing process or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to, or connected with the manufacturing process, or the subject of the manufacturing process."
3. In or about January 1959, the petitioners started the business of manufacturing and assembling batteries and continued the same till July24, 1964. Right up to this date no action whatsoever was taken by the officers of the Excise Department for levy or collection of excise duty. On July 25, 1964 the premises of the petitioner company were searched and inspected and about 116 batteries were seized therefrom. On july 27, 1961 the petitioner company made an application for license or permission to continue its business upon agreeing to pay duty under protest. By the letter dated July 29, 1964 the Assistant Collector of Central Excise, Bombay intimated to the petitioner company that the value of the 116 batteries that were seized was Rs. 12,560 and excise duty amounting to Rs. 1,884 was payable in respect thereof. On August 3, 1964 the petitioner company wrote a letter to the Assistant Collector of Central Excise, Bombay. setting out their case in relation to the action taken by the Authorities. Ultimately after certain correspondence, on October 17, 1964 a show cause notice was issued on behalf of the Collector of Central Excise, Bombay to show cause why penalty should not be imposed on the petitioner company under rules 9(2), 52A(5), 210 and 226 of the Central Excise Rules, 1944 and why a central excise duty at the appropriate rate should not be charged from the petitioner company on 4,448 batteries manufactured and cleared by it without payment of duty. Pursuant to the said show cause notice after proper enquiry on APril 3, 1965 an order was passed by the Deputy Collector of Central Excise, Bombay, the respondent No. 1, directing the petitioner company to pay duty at appropriate rate on all the batteries so far assembled and cleared since the date they started assembling electric storage batteries on receipt of demand from the Central Excise Officer concerned and further ordered that 116 electric storage batteries seized earlier should be released to them on recovery of the appropriate Central Excise duty leviable there3on. On May 11, 1965 the petitioner company filed a petition to challenge the validity of this order dated April 3, 1965 and the demand notice dated July 2, 1965.
4. Before the trial Court two main questions were canvassed on behalf of the petitioner company; Firstly that the purpose of considering the question of levy and collection of excise duty only the section of Shree Pant Bhavan where the batteries are being assembled by the petitioner company is factory within the definition of that term as given in section 2(e) of the Act.l Secondly it was contended that the restriction as to the number of workers working in the factory referred to in the Notification dated April 18, 1955 read with the Trade Notice dated May 2, 1958 applied only to those workers who are employed in any manufacturing process connected with the manufacture of excisable goods; that under the said Notification read with the said Notice it was not open to the officer of the Central Excise Department to take into account all workers employed in any manufacturing process as defined in section 2(k) of the Factories Act, 1948.
5. The learned Judge took the view that the term "Factory" as defined in section 2(e) of the Act is sufficient to show that the whole of the ground floor of Shree Pant Bhavan constituted a factory within the meaning of the Act. Upon the second contention the learned Judge took the view that the term "working" has to be construed to refer only to "workers employed in the manufacturing *** process of excisable goods" and that the only excisable goods that were manufactured in Shree Pant Bhavan premises were batteries. In view of this finding the learned Judge took the view that as admittedly in the battery assembling section at no time more than four workers were engaged the electric batteries produced therein were exempted from payment of excise duty in view of the Notification dated APril 18, 1955 read with the Trade Notice dated May 2, 1958. He accordingly set aside the order that was passed by the respondent No. 1 and issued a Write of Madamus forbearing the Customs Authorities from demanding excise duty in respect of batteries manufactured by the petitioners company.
6. The Excise Authorities and the Union of India being aggrieved by the order passed by the learned Judge have come in appeal to this Court.
7. Mr. Dalal on behalf of the appellants contended that while calculating the number of workers employed in the factory the learned Judge was in error in restricting the number of workers who were engaged or employed in the manufacturing process in relation to production or manufacture of electric batteries. His submission was that the learned Judge rightly took the view that the entire promises constituted factory within the meaning of the Act and having regard to the provisions of the Trade Notice dated May 2, 1958, all workers employed in any manufacturing process whether in relation to production and manufacture of electric batteries or otherwise, have to be taken into account for the purpose of deciding whether the petitioner company is entitled to exemption under the Notification dated April 18, 1955. His submission was that admittedly apart from the business of assembling electric batteries, the petitioners company was carrying on the business in the same premises of repairs of motor cars and of recharging batteries brought by customers from outside; that each one of these processes constituted manufacturing process within the meaning of Act read with the Notification and the Trade Notice and that admittedly the total number of workers employed in all these manufacturing processes exceeded five; that the petitioner company was liable to pay excise duty in respect of electric batteries even though the only goods manufactured by them constituted electric batteries.
8. For the purpose of the present appeal, we consider it unnecessary to decide whether the finding of the learned Judge, that the whole of the ground floor of Shree Pant Bhavan constituted a factory within the meaning of the Act, is correct or not. We may, however, note that Mr. Joshi on behalf of the Petitioner company has not accepted the correctness of this finding. We proceed on the assumption without so deciding, that the whole of the ground floor of Shree Pant Bhavan constituted a factory within the meaning of the Act.
9. There is no controversy so far as the facts in the present case are concerned. In Shree Pant Bhavan the petitioner company is carrying on the business of assembling batteries, of repairs of motor cars and of re-charging batteries brought by customers from outside. The battery assembling section of the petitioner company is located in one part of the motor serving department. It has its approach through the motor servicing hall. It is effectively partitioned up to the roof and is provided with a separate entrance door with locking arrangement. All processes of assembling batteries whether incidental or ancillary to their completion are carried on within the said section. Full assembled and charged batteries are removed direct from the said section for delivery to the customers. No other excisable or non- excisable article is manufactured within the said section. It is an admitted position that the section where the petitioner company assembled batteries was quite independent and self- contained in all respects; that the work in the petitioners' other premises, namely, repairs of motor cars and re-charging of batteries brought by customers was in no way whatsoever connected with the section in which batteries were assembled by them: that the batteries brought by customers for repairs and re-charging were never taken inside the assembling section nor were the batteries from the assembling section taken inside the assembling section nor were the batteries from the assembling section taken into the motor servicing department for any operation; that the amperage for charging batteries inside the battery assembling section was different from the amperage for charging the batteries brought for repairs or re-charging in the motor- servicing department.
10. The validity of the impugned order has to be decided upon the correct interpretation of the Notification dated April 18, 1955 read with the Trade Notice dated May 2, 1968. By this Notification the Central Government exempted "electric batteries, produced in any factory in which not more than 5 workers are working or were working on any day of the preceding twelve months from the whole of the duty leviable thereon under the Central Excise and Salt Act, 1944. It is made clear by the Trade Notice dated May 2, 1958 that in accordance with the Government of India's orders, the term "worker" used inter alia in the Notification dated APril 18, 1955 should be interpreted in the light of the definition of "workers" given in section 2(1) of the Factories Act, 1948 namely, "`worker' means a person employed, directly or through any agency, whether for wages or not in any manufacturing process or in cleaning any part of the machinery of premises used for a manufacturing process, or in any other kind of work incidental to, or connected with the manufacturing process, or the subject of the manufacturing process"
11. The argument of Mr. Dalal on behalf of the Excise Authorities is that as by this Trade Notice the definition of the word "worker" as given in the Factories Act, 1948 is adopted the phrase or expression "manufacturing process" used in this definition must be given the same meaning as is given to that expression under section 2(k) of the Factories Act, 1948. Under section 2(k) the expression "manufacturing process" is defined as under:-
`(K) "manufacturing process" means any process for-
(i) making. altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal or
(ii) pumping oil, water or sewerage, or
(iii) generating, transforming or transmitting power, or
(iv) composing types for printing, printing by letter press, lithography, photogravure, or other similar process or book binding.
(v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels;'.
12. The argument of Mr. Dalal was that as in a part of the premises suitable on the ground floor of Shree Pant Bhavan the work of repairing of motor cars and re-charging of batteries is carried on, such of the workers as are connected with the section for repairs of motor cars and re-charging of batteries as performing manufacturing process within the definition of the expression under section 2(k) of the Factories Act, ought to be taken into account for the purpose of deciding whether the total number of workers employed in the factory exceeded five or not. His submission was that the effect of the Trade Notice is that every worker engaged in any manufacturing process whatsoever, whether related to or connected with the production or manufacture of excisable goods or not, has to be taken into account for the purpose of determining whether more than five workers are employed or engaged in the factory. In our opinion, such a canon of construction cannot be accepted if regard be had to well settled principles of construction. In constructing any provisions and more so of a document in the nature of a trade notice, regard should be had to the dominant intention of those who issued this notice and who granted the exemption under the Notification. Even if the words used are general and without any restriction or limitation they have to be interpreted in such a manner as to carry out the intention of those who issued the Notification and the Trade Notice. While construing the Notification and the Trade Notice the principles which apply in case of interpretation of statute cannot be ignored. As pointed out in Maxwell on the Interpretation of Statues, 12th edition, page 228, it is permissible to modify the language of a statute to meet the intention. It is there stated :
"Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity which can hardly have been intended, a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence. This may be done by departing from the rules of grammar, by giving an unusual meaning to particular words, or by rejecting them altogether, on the ground that the legislature could not possibly have intended what its word signify, and that the modifications made are mere corrections of careless language and really give the true meaning. Where the main object and intention of a statute are clear, it must not be reduced to a nullity by the draftsman's unskilfulness or ignorance of the law, except in a case of necessity, or the absolute intractability of the language used."
Lord Reid has said that he prefers to see a mistake on the part of the draftsman in doing his revision rather than a deliberate attempt to introduce an irrational rule; "the canons of construction are not so rigid as to prevent a realistic solution."
13. Undoubtedly in the deflation of the word "worker" as given in section 2(1) of the Factories Act very person employed in any manufacturing process has to be taken into account but the words "manufacturing process" should not be interpreted without any restriction or limitation. The object of the Act is to levy excise duty on manufacture and production of excisable goods. The relevant part of the definition of the word "manufacture" in section 2(f) of the Act shows that the expression "manufactures" includes any process incidental or ancillary to the completion of a manufactured product. Thus while interpreting the words "manufacturing process" the dominant intention that that process must be related to or connected with the manufacture or production of excisable goods ought not to be lost sight of. It is not permissible to interpret the words "any manufacturing process" so as to include within its scope a manufacturing process unconnected with the manufacture or production of excisable goods. These words have to be correlated to every manufacturing process connected with or in relation to manufacture or production of excisable goods. A process which has nothing to do with the manufacture or production of excisable goods and persons employed in such a process are not to be taken into account. There is no controversy in the present case that the only production or manufacture that is carried on on the ground floor of Shree Pant Bhavan is of assembling batteries and in that section at no time was more than four workers were engaged. Neither in the section of repairs to motor cars nor in the section of re-charging of batteries was any manufacture of production of excisable commodity or goods, carried on. Thus for the purpose of determining whether the petitioner company is entitled to exemption under the Notification regard is to be had to the number of workers employed by it in the manufacturing process connected with the incidental to the assembling of batteries. On that footing there is no controversy whatsoever that a too time the workers exceeded four. Thus the petitioner company was right in claiming exemption under the Notification dated April 18, 1955 read with the Trade Notice dated May 2, 1958. In our opinion, the Excise Authorities were in error in taking the view that the batteries manufactured or produced in the assembling section were liable to excise duty notwithstanding the provisions of the Notification dated April 18 1955.
14. In the result the appeal fails and is dismissed with costs. Liberty to the respondents attorneys to withdraw the sum of Rs. 500 deposited towards the costs of the appeal.