TMI Blog1989 (1) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... re" within the meaning of section 2(f), even as unamended, is an eminently plausible view and is not shown to suffer from any fallacy. Indeed, on this point, the referring Bench did not disagree or have any reservations either. It is to be noticed that if the amending law is valid, this aspect becomes academic. So far as the exclusive competence of the Union Parliament to legislate is concerned, all that is necessary is to find out whether the particular topic of legislation is in List 11 or List 111. If it is not, it is not necessary to go any further or search for the field in List I ; Parliament has exclusive power to legislate upon that topic or field. Of course, it has concurrent power also in respect of the subjects in List 111. What appears, therefore, clear is that what applies to the main levy, applies to the additional duties as well. In testing whether a retrospective imposition of a tax operates so harshly as to violate fundamental right under article 19(1)(g), the factors considered relevant include the context in which retroactivity was contemplated such as whether the law is one of validation of a taxing statute struck down by courts for certain defects : th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose, we are not concerned with the provisos nor the situation where the normal price of goods is not ascertainable for any reason. In Empire Industries Ltd. v. Union of India [1986] 162 ITR 846 [1985] Suppl. 1 SCR 292, it was held that where, for the purpose of calculating assessable value, a notional gum is laid down by the Legislature to be arrived at on a certain basis, it is not permissible for the courts to engraft into it any other deduction or allowance or addition or read it down on the score that the said deduction or allowance or addition is authorised elsewhere in the Act or in the Rules. A statutory charge should be measured by the method of its own computation as laid down in the statute and not by any other method of computation. The circumstances that thereby the benefit of any exemption granted by the Legislature may be lost and that in some cases hardship might result are not matters which would influence courts in the construction of the statute. A taxpayer is entitled only to such benefit as is granted by the Legislature. It was emphasised that taxation under the Act is the rule and the benefit or exemption, is the exception. And it was held that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng profit of the trader who subsequently sells the processed fabrics. The learned Chief Justice reiterated that it is at the point when the processed fabric leaves the factory of the processor that its assessable value has to be determined and that assessable value cannot include the selling profit of the trader. Empire Industries' case [1986] 162 ITR 846 (SC) did not say that the post-manufacturing profits or post-manufacturing costs could be included in the assessable value of the processed fabric. If the trader who entrusted cotton or man-made fabrics to the processor for processing on job-work basis would give a declaration to the processor as to what would be the price at which he would be selling the processed goods in the market, that would be taken by the excise authorities as the assessable value of the processed fabrics and excise duty would be charged to the processor on that basis. Where a manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at arms length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the goods for purpose of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. In the aforesaid view of the law and for the reasons mentioned by my learned brother, I agree with his answer to this contention. The assessable value would, therefore, include the value of the grey cloth in the hands of the processors plus the value of the job-work done plus manufacturing profit and manufacturing expenses whatever would be included in the price at the factory gate. The correct assessable value must be the value of the fabric at the factory gate, that is to say, the value at which the manufactured goods leave the factory and enter the main stream. One more aspect will have to be reiterated. Computation of the assessable value is one question and as to who should be liable for the same is another. Duties of excise are imposed on production or on manufacture of goods and are levied upon the manufacturer or the producer in accordance with the relevant rules. This is quite independent of the ownership of goods. It is, therefore, necessary to reiterate that the value for the assessment under section 4 of the Act will not be the processing charge alone but the intrinsic value of the processed fabrics which is the price at which the fabrics are sold for the first t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain impost, the levy of additional duties also fails and that, at an events, even after the amendment, the concept of "manufacture" under the said Additional Duties Act had not been correspondingly widened by an appropriate amendment. The present batch of appeals and writ petitions comprises a large number of cases. It is not, having regard to the questions requiring to be decided in these matters, necessary to go into, in any particular detail, the fact-situation of each individual case. The processors in these cases, who may conveniently be referred to as the "processors" or "jobbers", mainly carry out these operations of bleaching, dyeing, printing, sizing, finishing, etc., of "grey fabric" on "job work" against payment of processing charges to them by the customers who are the owners of the grey fabric. The ownership of the cloth rests with the customers who get these processes done to their specifications from these processing houses on payment of processing charges. The grey fabric, after processing, is returned by the processing house to the customers. The facts of W. P. No. 12183 of 1985 (Ujagar Prints v. Union of India) in which the petitioner has challenged the levy b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rics, the processing charges, as well as the selling profits of the customers is at once unfair and anomalous, for, in conceivable cases, the duty itself might far exceed the processing charges that the processors stipulate and get. The batch of cases also includes cases where the grey fabric is also purchased by these processing houses and are sold by them, after processing. In some cases, the manufacturers of the grey fabric subject it to captive consumption and process them in their own composite establishments. The essential question is whether these situational differences have bearing on the principles of determination of the assessable value of processed grey fabric and whether the assessable value could be different in the different fact situations which would be the logical corollary if the contention of the processing houses which do the processing work for charges on goods not their own is accepted and the assessable value determined on the basis of mere processing charges. But the main questions that arise are whether "processing" of the kind concerned in these cases amounts to "manufacture", whether the provisions of section 2 of the Amending Act which impart an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutorily expanded import. "2(f) 'manufacture' includes any process incidental or ancillary to the completion of a manufactured product ; and (i) ... [Omitted as unnecessary.] (ii) ..." The reasoning of the Gujarat High Court was on these lines (see [1980] Tax LR 1766, 1775) : "In the instant case, the excise duty claimed on the basis of the market value of the processed cotton fabrics or man-made fabrics cannot be levied because, assuming that process amounts to manufacture, all that they have done is to manufacture processed cloth, processed fabric, either cotton or man-made and that not being a taxable event in the light of section 3 read with section 2(d) of the Act and items Nos. 19 and 22 levy of excise duty on this basis was ultra vires the Act and contrary to law . . . " This view, according to the Revenue, was incorrect and caused serious prejudice to the legitimate financial interests of the State. Accordingly, the President of India promulgated an Ordinance called the Central Excises and Salt and Additional Duties of Excise (Amendment) Ordinance, 1979 (Central Ordinance No. 12 of 1979), subsequently replaced by the Central Act VI of 1980 of the same name wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e printing, shrink-proofing, tentering, metre." heat-setting, crease resistant processing or any other process or any two or more of these processes Section 4 of the Amending Act amended the relevant entries in the Schedule to the Additional Duties Act. Section 5(2) of the Amending Act provided : "5. Special provisions as to duties of excise on cotton fabrics, woollen fabrics, man-made fabrics, etc., during a certain past period and validation :- . . . (2) Any rule or notification or any action or thing made, issued, taken or done or purporting to have been made, issued, taken or done under a Central Act referred to in sub-section (1) before the date of commencement of this Act, with respect to or in relation to the levy of duties of excise on (a) 'cloth', 'cotton cloth', or, as the case may be, 'cotton fabrics', (b) 'woollen fabrics', (c) 'rayon or artificial silk fabrics' or, as the case may be, 'manmade fabrics', shall, for all purposes, be deemed to be, and to have always been, as validly and effectively made, issued, taken or done as if the provisions of this section had been in force at all material times and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 904) and C. A. Nos. 1685 to 1766 of 1979- Union of India v. Narendra Processing Industries [1987] 167 ITR 904 (SC). Two questions arose before, and were examined by, the referring Bench. The first was whether the processing of grey fabric amounted to "manufacture" within the meaning of section 2(f) as it stood prior to its amendment. The second question was whether, even if such processing did amount to "manufacture", what should be the proper basis for determining the assessable value of the processed fabrics. Both these questions had earlier been examined and answered in Empire Industries' case [1986] 162 ITR 846 (SC). It is necessary to ascertain as to the precise points on which the Empire Industries' decision was required to be reconsidered. The referring Bench did not disagree with the decision in Empire Industries' case [1986] 162 ITR 846 (SC) on the question whether "processing" did amount to "manufacture". Indeed, the referring Bench appears to have proceeded on the premise that the view taken in Empire Industries' case [1986] 162 ITR 846 on the point was the correct one. The referring Bench said this on the point : "... So far as the first question is concerned, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was common ground between the parties that the procedure followed by the excise authorities was that the trader, who entrusted cotton or man-made fabrics to the processor for processing on job work basis, would give a declaration to the processor as to what would be the price at which he would be selling the processed goods in the market and that would be taken by the excise authorities as the assessable value of the processed fabrics and excise duty would be charged to the processor on that basis. This may be illustrated by giving the following example Rs. (1) Value of grey cloth in the hands of the processor 20.00 (2) Value of job work done 5.00 ----- Value of the finished cloth returned to trader (1+2) 25.00 ----- (3) Trader's selling price inclusive of his selling profits, etc. 30.00 The assessable value in the case given in this example would be taken by the excise aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCR 292 ; [1986] 162 ITR 846, holding that these operations amount to manufacture is wrongly decided and requires reconsideration ? (b) (i) Whether the amendment brought about by the Amending Act of 1980 of section 2(f) and to tariff items Nos. 19 and 22 of the Central Excises Act is ultra vires entry 84, List 1, and, therefore, beyond the competence of the Union Parliament ? (ii) Whether, at all events, even if the expanded concept of " manufacture" introduced by the amendment is beyond the scope of entry 84, List 1, the impost is, at all events, referable to and supportable by the residual entry 97 of List I ? (c) Whether, at all events, even if the amendments to the Central Excises Act are valid, the levy under the Additional Duties Act is unsupportable and without the authority of law as there is no corresponding enlargement of the definition of "manufacture" under the Additional Duties Act ? (d) Whether the retrospective operation of the Amending Act is an unreasonable restriction on the fundamental right of the "processors" under article 19(1)(g) of the Constitution ? (e) Whether, even if the levy is justified, at all events, the computation of the assessable value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. United States (52 L Ed. 336) which were referred to with approval by this court in the case of Pio Food Packers' case [1980] 46 STC 63, 66 (SC), were relied upon: "At some point, processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage, we cannot say that it has been 'manufactured'." (Emphasis supplied). The following observations of Pathak J. in Pio Food Packers' case [1980] 46 STC 63 at 65 were cited: ". . . manufacture is the end result of one or more processes through which the original commodity is made to pass ... where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone degree of processing, it must be regarded as still retaining its original identity." (Emphasis supplied). The observations of this court in Kailash Nath v. State of U. P. [1957] 8 STC 358 at 364, made while repelling the contention of the Revenue urged in that case that when cloth is printed and coloured, it gets transformed to some other material and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully considered these submissions. In Empire Industries' case [1986] 162 ITR 846, this court considered similar submissions in an almost identical context and situation. Learned judges referred to the observations of this court in CST v. Harbilas Rai and Sons [1968] 21 STC 17, in which the view expressed by the Division Bench of the Madhya Pradesh High Court in Hiralal Jitmal v. CST [1957] 8 STC 325, 326, was held supportable on the reasoning that (see [1986] 162 ITR 846, 862) ".... The decision of the Madhya Pradesh High Court might perhaps be justified on the ground that a printed or dyed cloth is commercially different article from the cloth which is purchased and printed or dyed." The Division Bench also referred to, with approval, the decision of the Bombay High Court in Kores (India) Ltd. v. Union of India [1982] 10 ELT (J) 253. The Division Bench noticed the question arising for decision (see [1986] 162 ITR 846, 862) : "Fabric itself means woven materials. It was contended that processing the manufactured fabric does not bring into existence any new woven material but the question is : do new and different goods emerge having distinctive name, use and character ?" An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions either. It is to be noticed that if the amending law is valid, this aspect becomes academic. We think, we should reject contention (a). Re : Contention (b) : The concept of "manufacture" embodied in entry 84 of List I, it is urged, should be construed not in an artificial sense, but in its recognised legal sense and so construed, artificial dimensions sought to be imparted to it by the amendment would be impermissible. Learned counsel drew attention to the following observations of this court in Diamond Sugar Mills Ltd. v. State of U. P. [1961] 3 SCR 242 at 248; AIR 1961 SC 652, 655: ". . . we have, on the one hand, to bear in mind the salutary rule that words conferring the right of legislation should be interpreted liberally and the powers conferred should be given the widest amplitude ; on the other hand, we have to guard ourselves against extending the meaning of the words beyond their reasonable connotation, in an anxiety to preserve the power of the Legislature." (Emphasis supplied). Though entries in the legislative lists are to be construed liberally and the widest possible amplitude given to them, however, no artificial or arbitrary extensions of the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onably be regarded as an activity of ,'manufacture" cannot be described as a levy of duties of excise under entry 84, List I. If it is a nondescript tax under entry 97, Parliament it is urged, has not chosen to enact any such law in this case. The charging section does not, it is urged, bring such a taxable event to charge. This argument was noticed in Empire Industries' case [1986] 162 ITR 846 thus (at p. 871 ) : ". . . It was then argued that if the legislation was sought to be defended on the ground that it is a tax on an activity like processing and would be covered by the powers enumerated under entry 97 of List I of the Seventh Schedule, then it was submitted that there was no charging section for such an activity and, as such, the charge must fail, and there cannot be any levy . . . " The contention was rejected. ". . . This argument proceeds on an entire misconception. The charging section is the charging section 3 of the Central Excises and Salt Act, 1944. It stipulates the levy and charge of duty of excise on all excisable goods produced or manufactured. 'Manufactured' under the Act after the amendment would be 'manufacture' as amended in section 2(f) and tariff ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der two or more entries in List I of the Seventh Schedule. Illustrations of such legislation are not wanting in our statute book, and the fact that one of such entries is the residuary entry does not also attract any disability . . . " So far as the exclusive competence of the Union Parliament to legislate is concerned, all that is necessary is to find out whether the particular topic of legislation is in List 11 or List 111. If it is not, it is not necessary to go any further or search for the field in List I ; Parliament has exclusive power to legislate upon that topic or field. Of course, it has concurrent power also in respect of the subjects in List 111. Contention (b) is, therefore, insubstantial. Re: Contention (c) : This pertains to the validity of levy of additional duties. The contention proceeds on the pre-supposition that processing does not amount to "manufacture" under section 3(1) of the Additional Duties Act. If it does, as has been held on contention (a), this argument does not survive at all. The point, however, sought to be put across is that, even if the concept of "manufacture" for purposes of levy of excise duty under the Central Excises Act is valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erious consideration of the validity of the levy of additional duties. But, on a closer examination of the concept of, and the scheme for, levy and collection of the additional duties and the specific statutory provisions, the tensile strength of the argument breaks down. There are at least two circumstances which render the definition of "manufacture" under section 2(f) attracted to the additional levies. Section 3 (3) of the Additional Duties Act provides: "...levy and collection of the additional duties as they apply in relation to the levy and collection of the duties of excise on the goods specified in sub-section (1)." It is plain that the statute expressly makes the provisions in the Central Excises Act apply in relation to "levy and collection" of the additional duties. The question is whether this provision is sufficient to attract section 2(f) of the main Act as amended. This, in turn depends upon what the expression "levy" connotes and carries with it. The term "levy" it is held, is an expression of wide import. It includes both imposition of a tax as well as its quantification and assessment. In Assistant Collector of Central Excise v. National Tobacco Co. of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstance in the grievance that the retroactivity imparted to the amendments is violative of article 19(1)(g). A competent Legislature can always validate a law which has been declared by courts to be invalid, provided the infirmities and vitiating factors noticed in the declaratory-judgment are removed or cured. Such a validating law can also be made retrospective. If, in the light of such validating and curative exercise made by the Legislature granting legislative competence the earlier judgment becomes irrelevant and unenforceable, that cannot be called an impermissible legislative overruling of the judicial decision. All that the Legislature does is to usher in a valid law with retrospective effect in the light of which the earlier judgment becomes irrelevant. (See Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality [1971] 79 ITR 136 (SC) ; [1970] 1 SCR 388. Such legislative expedience of validation of laws is of particular significance and utility and is quite often applied in taxing statutes. It is necessary that the Legislature should be able to cure defects in statutes. No individual can acquire a vested right from a defect in a statute and seek a windfall from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished from both the extent of the power to impose and the stage at which the tax is imposed. Though the levy is on the production or manufacture of the goods, the imposition of the duty could be at the stage which the law considers most convenient to impose as long as a rational relationship with the nature of the tax is maintained. The processors contend that the assessable value could only be the job work charges received by them for the processing of "grey fabric" and cannot be the selling price at which the customer who entrusts the grey fabric for processing ultimately sells it in the market. Such a sale price, it is said, would, quite plainly, include the value of the grey fabric, the processing charges and also the selling profits of the customer. Even in regard to the price of the grey fabric itself which comes to the processing houses in fully manufactured condition, it would again depend upon how many hands it has changed before reaching the particular customer who brings them for processing. The determination of assessable value at the actual or hypothetical selling price of goods of like nature and quality in the wholesale market would include the post-manufacturing p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied on the basis of second or subsequent wholesale price, it would load the price with a post-manufacturing element, namely, selling cost and selling profit of the wholesale dealer. That would be plainly contrary to the true nature of excise as explained in the Voltas' case [1973] 2 SCR 1089 ; AIR 1973 SC 225. Secondly, this would also violate the concept of the factory gate sale which is the basis of determination of value of the goods for the purpose of excise. There can, therefore, be no doubt that where a manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at arms length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the goods for the purpose of assessment of excise . . . Explaining what really is the idea of "post-manufacturing profit" referred to in Atic's case [1975] 3 SCR 563, this court in Union of India v. Bombay -Tyre International Ltd. [1986] 59 Comp Cas 460, 483 ;[1984] 1 SCR 347, 375 said: ". . . When it refers to post manufacturing profit arising from post-manufacturing operations, it clearly intends to refer not to the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fluenced by fortuitous considerations. The method of determination of the assessable value suggested by the processors would lead to the untenable position that while in one class of grey fabric processed by the same processor on bailment, the assessable value would have to be determined differently, dependent upon the consideration that the processing house had carried out the processing operations on job work basis, in the other class of cases, as it not unoften happens, the goods would have to be valued differently only for the reason that the same processing house has itself purchased the grey fabric and carried out the processing operations on its own. It is to solve the problem arising out of the circumstance that goods owned by one person are "manufactured" by another that at a certain stage under rule 174A, a notification was issued by the Central Government exempting from the operation of rule 174A : ". . . every manufacturer who gets his goods manufactured on his account from any other person, subject to the conditions that the said manufacturer authorises the person, who actually manufactures or fabricates the said goods to comply with all procedural formalities unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e removal of the goods from the factory. The post-amendment section made certain changes in the concept of sale at the factory gate by excluding therefrom sales effected in favour of a category of persons defined as " related persons" with which we are not concerned here. The amendment also defined the "assessable value" so as to include packing charges but to exclude the amount of excise duty, sales tax and other taxes as well as trade discount. The question was whether this amendment precluded the deduction, from the wholesale factory gate price, of post-manufacturing expenses and profits. The question had been answered by several High Courts in the negative, principally on the ground that the duty sought to be levied under the Act was an excise duty, the very nature of which required a proximate connection with production or manufacture and that what had passed beyond this region and entered the domain of sale could not pass as excise duty. Counsel for the Union of India, with a view to overcome these decisions, had contended that since entry 97 of List I in the Seventh Schedule to the Constitution enabled Parliament to enact a legislation even beyond the purview of an excise du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Legislature could not, but that it did not, make any radical change in the nature of the levy. The position considered in the Hindustan Milkfood Manufacturers Ltd.'s case [1980] ELT (J) 487 may be illustrated by an analogy. Entry 82 in List I of the Seventh Schedule to the Constitution permits the enactment, by the Union Legislature, of a law relating to taxation of "income". The entry does not restrict such laws only to the income of a "previous year", though this was the pattern of the prevalent Income-tax Acts activated by annual Finance Acts. Between 1948 and 1955, however, the Finance Acts purported to impose a tax on "excess dividends" which, in brief, was a tax on dividends declared out of profits of past years. The effect of these enactments was considered by the Bombay High Court as well as this court. In CIT v. Elphinstone Spinning and Weaving Mills Co. Ltd. [1960] 40 ITR 142 ; [1960] 3 SCR 953, this court held that the language of the relevant provision in the Finance Acts was so framed that it could not be read as an independent charging section. It will be appreciated that the Finance Acts were also enactments of the Union Legislature and taxation of profits, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined by reference to entry 97 of List I in the Seventh Schedule to the Constitution of India, if it cannot be upheld as falling under the purview of entry 84. The second point on which I feel inclined to add a few words is in regard to the contention on behalf of the petitioners that the definition of the term "manufacture" enacted in the Central Excises and Salt Act, 1944, as enlarged by Amendment Act No. 6 of 1980, cannot be read into the provisions of the Additional Duties of Excise Act, 1957 (No 58 of 1957). The argument is in three phases and runs thus : (i) Section 3 of the 1957 Act, which is the charging section, fastens the charge of duty at the stage of "manufacture" but this expression is deliberately left undefined, though the statute takes special care in section 2 to adopt, for its purposes, the definition of "specified goods" as contained in the 1944 Act. This excludes the definition of "manufacture" enacted in section 2 (f) of the 1944 Act and enlarged from time to time. (ii) Section 3(3) cannot help the Revenue in this regard, as its only purpose and effect is to avoid a repetition, in this Act, of the procedural provisions of the 1944 Act. The charge or impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the same as the words used in article 265 of the Constitution which have been interpreted as comprehending the entire process of taxation commencing from the imposition of the tax by enacting a statute to the actual taking away of money from the pocket of the citizen. They take in every stage in the entire process of taxation. The word "levied" is a wide and generic expression. One can say with as much appropriateness that the Income-tax Act levies a tax on income as that the Income-tax Officer levies the tax in accordance with the provisions of the Act. It is an expression of wide import and takes in all the stages of charge, quantification and recovery of duty, though in certain contexts, it may have a restricted meaning. In the context of sub-section (1), the word "levied" admittedly means "charged" as well as "assessed". The words "levy and collection" in subsection (3) cannot be construed differently from the words "levied and collected" used in sub-section (1). Section 3(3), therefore, also covers the entire gamut of section 3(1) and cannot be construed as becoming operative at a somewhat later stage. Its operation cannot be excluded in determining the scope of the charge. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax credit could also be given in respect of the amount of the special duty of excise levied and collected under the Finance Act. This court held that, obviously, the special duty levied under section 80 could not be regarded as having been levied under the Central Excises Act. It said (at p. 325 of 153 ITR) : It is true that the expression 'leviable' is an expression of wide import and includes stages of quantification and recovery of the duty but in the context in which that expression has been used in clause (b) of sub-section (6) of section 280ZD, it is clear that it has been used in the sense of chargeability of the duty. In other words, the duty of excise in respect whereof tax credit is available would be in respect of such duty of excise as is chargeable under the Excise Act and clearly the special excise duty in respect whereof additional tax credit is sought by the appellant company is not chargeable under the Excise Act but chargeable under the Finance Act." Having said this, the court added (at p. 325 of 153 ITR) "Sub-clauses (3) and (4) of section 80 of the Finance Act on which reliance has been placed by the counsel for the appellant company in terms refer to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct (a) cannot be understood differently from, or independently of, the definition in the main enactment. Having regard to the nature and content of the levy indicated in section 3(1), it is obvious that section 3(3) has to have the effect of attracting not only the purely procedural and machinery provisions of the 1944 Act but also some of its charging provisions. It is, therefore, difficult to consider section 3(1) of the 1957 Act in contrast to the Finance Act of 1965-as covering the entire ambit of the charge imposed. In short, the language of section 3(3) has to be given wider meaning than under the Finance Act, 1965. I have referred to the fact that a provision similar to that in section 80 of the Finance Act, 1965, is also found in other Finance Acts. On a perusal of these provisions, it will be found that a like position exists there also. These provisions are all self-contained and completely specify the scope of the charge either as a percentage of the excise duty normally chargeable under the Central Excises and Salt, Act, 1944, or as a percentage of the "assessable value determined under section 4 of the 1944 Act". This, in my view, is a very important reason why the obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed goods" have to be understood in the way they were defined in the Central Excises and Salt Act, 1944. The idea in 1956 was to restrict the powers of the States to levy sales tax in respect of such goods and other goods. In 1958, the idea was conceived of the Centre levying an additional excise duty on these goods and distributing the same to the States subject to the condition specified in Schedule 11 that such States did not impose any sale or purchase tax on these commodities. Subsequently perhaps, it was realised that section 7 served no specific purpose under the Act except those of the definitions which were an aspect already covered by section 2(c). In these circumstances, not much significance need be attached to section 2(c) much less can it be construed as negativing the import of other definitions from the 1944 Act. The next question that arises for consideration is, whether, even assuming that the terms of section 3(3) are applicable, its terms are wide enough, to take in not merely the provisions of the Central Excises and Salt Act, 1944, and, in particular, its definition clauses, as they stood in 1957 on the date when the 1957 Act came into force but also the amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chetty [1962] 3 SCR 786, New Central jute Mills Co. Ltd. v. Assistant Collector [1971] 2 SCR 92 and Special Land Acquisition Officer, City Improvement Trust Board v. P. Govindan [1977] 1 SCR 549. Whether a particular statute falls into the first or second category is always a question of construction. In the present case, in my view, the legislation falls into the second category. Section 3(3) of the 1957 Act does not incorporate into the 1957 Act any specific provisions of the 1944 Act. It only declares generally that the provisions of the 1944 Act shall apply "so far as may be", that is, to the extent necessary and practical, for the purposes of the 1957 Act as well. That apart, it has been held, even when a specific provision is incorporated and the case apparently falls in the first of the above categories, that the rule that repeals, modifications or amendments of the earlier Act will have to be ignored is not adhered to in certain situations. These have been set out in State of Madhya Pradesh v. M. V. Narasimhan [1976] 1 SCR 6. In that case, the Supreme Court was considering the question whether the amendment of section 21 of the Penal Code by the Criminal Law Amendment Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned and the duty has to be levied either at a percentage of the normal excise duty payable under the 1944 Act or at a percentage of the value of the assessable goods as determined under the 1944 Act. All that was further needed was the applicability of the procedural provisions of the 1944 Act. Here, however, the 1957 Act is incomplete as to the basis of the charge and its provisions would become totally unworkable unless the concepts of "manufacture" and "assessable value" as determined under the 1944 Act are carried into it. In the circumstances, I agree that we should give full and literal effect to the language of section 3(3) and hold that it has the effect not only of attracting the procedural provisions of the 1944 Act but also all its other provisions including those containing the definition. ORDER BY THE COURT (January 27, 1989) : In respect of the civil miscellaneous petition for clarification of this court's judgment dated November 4, 1988, it is made clear that the assessable value of the processed fabric would be the value of the grey cloth in the hands of the processor plus the value of the job work done plus manufacturing profit and manufacturing expense ..... X X X X Extracts X X X X X X X X Extracts X X X X
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