TMI Blog1968 (10) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ereinafter referred to as the Excise Act - by Finance Act (No. 2) 1962 (XX of 1962) with effect from April 24, 1962. This reads as under : ******* The short point that arises is this : What is the duty leviable on the wires manufactured by the assessee out of steel rods which had already been imported? For the time being I will ignore notifications issued under Rule 8(1) of the rules made under the Excise Act, and the amendments made by the Finance Act (No. 2) of 1962, and Indian Tariff (Amendment) Act, 1963 (III of 1963) to the Indian Tariff Act, 1934. 3. "Wires" are mentioned in Item No. 26AA(i). Therefore we have to scrutinize the third column of Item 26AA(i) for the rate of duty. Three points need clarification (a) What is the meaning of or inference derivable from the word `plus'? (b) What is the meaning of the formula "the excise duty for the time being leviable on pig iron or steel ingots"? (c) What is the import of the words "as the case may be"? 4. The word `plus' in the context indicates that the rate of duty consists of 2 parts : one part is ad valorem duty and the other is the excise duty calculated according to the formula given. In other words, both dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also plain that no excise duty is strictly leviable under Sections 3 and 4 of the Excise Act on steel ingot `X' as such. Not only that it does not exist any longer but duty on it has already been paid and further no duty would be leviable under Section 4 for it was removed from the factory long time ago in May 1961. Therefore, it is clear that the formula cannot be concerned with the particular ingot `X' at all. It seems to me that what it is concerned with is the duty leviable on a hypothetical steel ingot if it had been manufactured or removed at the same time as the steel rods ("Y" and "Z") were manufactured or removed. In the example given above under the formula excise duty leviable under Item 26 in May 1962 would have to be charged, i.e. 39.85 per metric tonne. The weight to be taken into consideration would be the weight of steel rods `Y' and `Z' and not of the steel ingot `X' out of which they were made. 7. It seems to me that this is the true interpretation of column 3 of Item 26AA(i). It simply prescribes a rate of duty as the heading of column indicates. It is not concerned with actual ingots out of which other articles are made. It is not concerned with whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customs duty leviable under other entries in the Second Schedule on steel rods is `D', an additional duty `E' has to be levied equal to the excise duty leviable on steel rods, i.e., under Item 26AA. This has been called countervailing duty. 11. The manufacturer in India, who used steel rods made in India and made wires from them was given a certain relief by Notification No. 77 of 1962, but the manufacturer in India who used steel rods made abroad to make wires was not first given this exemption. Later by amendments he was given a similar exemption. The Central Excise Manual (Seventh edition) at p.123 states the position thus : "26AA (2) Iron or steel products falling under Item No. 26AA, if made from another article falling under the said Item or Item No. 63(36) of the First Schedule to the Indian Tariff Act, 1934 (32 of 1934) and having already paid the appropriate amount of excise or countervailing customs duty as the case may be, are exempt with effect from 24th April, 1962, from so much of the duty of excise as is equivalent to the excise or countervailing customs duty payable on the said article - vide Government of India, Ministry of Finance (Department of Revenue) Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Collector of Central Excise, West Bengal, Calcutta by a Trade Notice, Central Excise No. 32 - Iron and Steel Products 2/62 dated Calcutta the 16th May, 1962 notified the procedure to be followed. 17. By Notification No. 70/62, dated April 24, 1962 issued in exercise of the powers conferred by Rule 8(1) of the rules framed under the Act (to be hereinafter referred to as the rules), the Central Government exempted iron and steel products falling under Item 26AA, if made from pig iron or steel ingots on which the appropriate amount of excise duty has already been paid, from so much of the duty of the excise leviable thereon as equivalent to the duty leviable under Item 25 or 26 as the case may be. 18. On the same day as per Notification No. 77 of 1962, the Central Government exempted Iron and Steel Products falling under sub-items (2), (3), (4) and (5) of Item 26AA, if made from articles which have already paid the appropriate duty of excise under sub-item (1) of the said Item, from so much of the duty of excise as is equivalent to the duty payable under the sub-item (1). Finance (Act No. 2) of 1962 by Section 15 amended the First Schedule of the Tariff Act by adding Item No. 63( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of excise as is equivalent to the duty payable on the said article, "the following was substituted : "If made from another article falling under the said Item or Item No. 63 (36) of the First Schedule to the Indian Tariff Act, 1934 (32 of 1934) and having already paid the appropriate amount of excise or countervailing custom duty as the case may be from so much of the duty of excise as is equivalent to the excise or countervailing custom duty payable on the said article." By Indian Tariff (Amendment) Act, 1963 (Act No. 3/63) effective from the 25th January, 1963, the Indian Tariff Act, 1934 was amended and after Section 2, the following section was inserted namely : "2. (a) (1) Any article which is imported into India shall be liable to customs duty equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. Explanation : In this sub-section the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India" means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India or if a like article is not so produced or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Government allowed the revision petition to some extent. This is what the Central Government ordered : "The Government of India have carefully considered all the points raised by the petitioners but see no reason to interfere with the Collectors stated (sic-statement?) that the Steel Wires manufactured out of steel wire rods imported prior to 24-4-1962 to 10-8-1963 were subject to full duty as then leviable under Item 26AA (a) of Central Excise Tariff. However the demand for differential duty initially made on 2-3-1963 and subsequently amended vide the Assistant Collector's order dated 28-8-1963 shall be restricted to the clearance effected during the 3 months period prior to the initial service of demand on 21-3-1963 that is to say, upto 21-12-1962 only as per the provisions of Rule 10 of Central Excise Rules, 1944 which was applicable to this case. The demand in respect of clearances effected prior to 21-12-1962 is hereby set aside and consequential refund shall be granted to the petitioners. Subject to the above modifications, the revision application is otherwise rejected." Aggrieved by that order, the appellants have brought this appeal. The questions that aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e; it has no reference to any particular material, it is merely a yardstick. The argument of Dr. Syed Muhammad, learned Counsel for the Revenue proceeds thus : "The entry in question deals with two classes of products i.e. iron products and steel products. The assessing authority has first to decide whether a particular article is an iron product or steel product. If he comes to the conclusion that it is a steel product then he should assess the duty payable firstly by determining the ad valorem duty payable on it, thereafter he must find out its weight in metric tons and add to the ad valorem duty the amount payable as excise duty under Entry 26 of the First Schedule on steel ingot of that weight." 24. If the intention of the Parliament was as suggested by the learned Counsel for the Revenue then column 3 should have read thus : "5 per cent ad valorem plus excise duty at the rate for the time being leviable on pig iron or steel ingots as the case may be. It is difficult to interpret the words "for the time being leviable" as indicating a rate. The expression "leviable on pig iron and steel ingots as the case may be" in my opinion has reference to pig iron or steel ingots dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mind the well known observations of Lord Russel of Killowen in Inland Revenue Commissioners v. Duke of Westminister, 1966 AC 1 at p. 24 (A) viz : "I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if in accordance with a Court's view of what it considers the substance of the transaction, the Court thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case." About a century ago Lord Cairns in Partington v. The Attorney-General- (1869) 4 HL 100 at p. 122 (B) observed : "As I understand the principle of the fiscal legislation it is this : If the person sought to be taxed comes within the letter of the law he must be axed however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax cannot bring the subject within the letter of the law, the subject is free, of the law, the case might otherwise appear to be." Unless I am satisfied that the only reasonable interpretation, that can be placed on the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... First Schedule of the Act were enacted simultaneously under Finance (No. 2) Act, 1962. Both these entries came into force on the same day namely on 24th April, 1962. The Act and the Tariff Act are cognate legislations. In other words they are legislations which are pari materia. They form one code. They must be taken together as forming one system and as interpreting and enforcing each other. It is proper to assume from the surrounding circumstances, that these two entries were introduced in pursuance of a common purpose, that purpose being that the articles listed in entry 26AA whether produced out of indigenous Pig Iron or Steel Ingot or made out of imported Pig Iron or Steel Ingot must bear the same amount of duty. If the interpretation placed on entry 26AA by the learned Counsel for the assessee is accepted then it would be seen that that entry by itself would not impose the duty contemplated by the second part of the clause in column 3 of entry 26AA on imported Pig Iron or Steel Ingot. Evidently in order to equalise the duty on articles made out of the indigenous material as well as imported material entry 63(36) of the First Schedule to the Tariff Act was enacted. In other wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02-503 (of SCR) = (at p. 118 of AIR) of that report it is observed : "He, (learned Counsel for the assessee) however, drew our attention to the directions contained in the Income-tax Manual in force for a number of years and contended that the department itself placed on sub-sections (3) and (4) of Section 25 the same construction as was placed on them by the senior Judge in the High Court and that was the true construction of these two sub-sections. This argument in our opinion, has no validity. The department changed its view subsequently and amended the manual. The interpretation placed by the department on these sub-sections cannot be considered to be a proper guide in a matter like this when the construction of a statute is involved." Therefore I have to exclude from consideration the instructions issued by the Government. 32. This takes me to the Notifications issued by the Government under Rule 8(1) of the rules. Under Section 38 of the Act all rules made and notifications issued under the Act shall be made and issued by publication in the Official Gazette. All such rules and notifications shall thereupon have effect as if enacted in the Act. The rules made have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act to be retrospective by reason of the rules and forms which have been made under it, and which have a statutory force; and it is said that they shew that the trustee must go back in his accounts to matters which happened before the Act came into operation. But, when we look at the forms, we see that they are in express terms headed so as to relate to transactions taking place after the coming into operation of the Act and, therefore, they supply no reason why we should depart from the ordinary rule that an Act is not retrospective." From these observations, it is clear that Lord Esher did take into consideration the subordinate legislation in considering the principal Act : 34. In Billings v. Reed, 1945 KB II Lord Green stated that : "The fact that the object of this Act was in substance what I have suggested can be seen from a consideration of the way in which the scheme has been framed pursuant to the Act itself and with the tacit approval of Parliament as provided in the Act. At any rate, we are entitled to look at the scheme for the purpose of seeing the kind of practical treatment of these questions which Parliament has authorised." From this observation, it is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled to look to the regulation for guidance on the meaning of the word in sub-section (1), but I will say something on this point later." Reverting back to that topic again (at p. 541 of the report) the learned Judge observed : "First, if I may look at the regulations made under Section 55, sub-section (4), to assist in the interpretation of the word, I agree with my noble and learned friend Normand, in thinking that they assist or at least are consistent with this interpretation." Lord Normand one of the other Judges who heard the appeal observed : "The National Insurance (Industrial Injuries) (Prescribed Diseases) Regulations, 1948, were made under Section 55, sub-section (4), and though in my opinion they cannot control the construction of the Act, it is yet of some importance to consider whether they fit into the construction which I think the Act properly bears." Lord Oaksey in the same case was positive that the regulation could be looked into for certain limited purposes. This is what he observed : "I agree with your Lordship in thinking that the regulations themselves [National Insurance (Industrial Injuries) (Prescribed Diseases) Regulations, 1948] cannot alter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the statute has statutory force and validity and, therefore, the exemption is as if it is contained in the parent Act itself." I do not think it is necessary for me to decide in this case the general question whether subordinate legislation can be used for interpreting a provision in the parent Act. I am not unaware of the danger in accepting that it could be so done. But for the present purpose, it is sufficient to hold that for finding out the scope of a particular levy, notifications issued by the executive Government providing for exemption from that levy can be looked into as they disclose the over-all scheme. 38. Even according to the learned Counsel for the Revenue the notifications referred to the earlier were issued with a view to avoid double taxation. If that is so, the exemption granted under those notifications provide a clue as to the scope of the levy made under Item 26AA. 39. We have earlier seen that on the very day, the levy came into force the Government had issued two notifications i.e. Notification Nos. 70 and 77 of 1962. Under Notification No. 70 it exempted Iron and Steel Products falling under Item 26AA if made from Pig Iron or Steel Ingots on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty levied under Entry 63(36) of the First Schedule to the Tariff Act. This was clearly an omission. To make good that omission the Government amended Notification No. 89/62 by its order dated December 29, 1962. The amended Notification is addition to the exemption already given under Notification No. 89/62 also exempted from the payment of duty any article falling within any of the sub-items in Item 26AA if made from an article on which countervailing duty has been paid under Item 63(36) of the First Schedule to the Tariff Act from so much of the duty of excise as is equivalent to the countervailing custom duty payable on the said article. This Notification clearly shows that the countervailing duty in question was levied on the basis that the excise duty contemplated by entry 26AA will not apply to articles made out of imported Pig Iron or Steel Ingot. Further if the legislature intended the duty under entry 63(36) to be an additional duty, the exemption granted would nullify the legislative mandate. 42. To summarise the effect of the Finance (No. 2) Act of 1962 and the various Notifications issued for the purpose of implementing scheme under that Act is that excise duty is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue cannot now change its position and justify the demand under Rule 10 at any rate by the time the Government amended the demand, the duty claimed became barred even under Rule 10. We are unable to accept this contention as correct. There is no dispute that the officer who made the demand was competent to make demands both under Rule 9(2) as well as under Rule 10. If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. This is a well-settled proposition of law. In this connection reference may usefully be made to the decisions of this Court in P. Balakotaiah v. The Union of India, 1958 SCR 1052 = (AIR 1958 SC 232) and Afzal Ulah v. State of U.P., 1964 - 4 SCR 991 = (AIR 1964 SC 264). Further a common form is prescribed for issuing notices both under Rule 9(2) and Rule 10. The incorrect statements in the written demand could not have prejudiced the assessee. From his reply to the demand, it is clear that he knew as to the nature of the demand. Therefore, I find no substance in the plea of limitation advanced on behalf of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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