TMI Blog1982 (9) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... evity. 3. The Company manufactures granulated compound fertilizers and for the purposes of manufacture uses as raw material certain base fertilizers. These base fertilizers are manufactured by other persons and certain excise duty is levied on the base fertilizers. The product manufactured by the Company was, during the period 1st March, 1969 to 28th February, 1980, subject to levy of excise duty. However, as in the process of manufacture the company had used as raw material excise duty paid goods viz. the base fertilizers, the Company sought credit under Rule 56-A of the Central Excise Rules, 1944. At this juncture the relevant portion of the rule as it then stood may be set out : "56-A. Special Procedure for movement of duty-paid materials or component parts for use in the manufacture of finished excisable goods. - (1) Notwithstanding anything contained in these rules, the Central Government may, by notification in the official Gazette, specify the excisable goods in respect of which the procedure laid down in sub-rule (2) shall apply. (2) The Collector may, on application made in this behalf and subject to the conditions mentioned in sub-rule (3) and such other conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit allowed in respect of any material or component parts shall be utilised towards payment of duty on the finished excisable goods in the manufacture of which such materials or component parts are used or on the materials or component parts themselves and no part of such credit shall be refunded in cash or by cheque". 4. As stated earlier, a few changes have taken place in Rule 56-A and we may note sub-rule (3)(vi) as it stands amended to-day. The said provision now reads as under : "(vi) (a) The credit of duty allowed in respect of any material or component parts may be utilised towards payment of duty on any finished excisable goods for the manufacture of which such material or component parts were permitted to be brought into the factory under sub-rule (2) or where such material or component parts are cleared from the factory as such, on such material or component parts. (b) No part of such credit shall be utilised save as provided in sub-clause (a) or shall be refunded in cash or by cheque." 5. Broadly speaking, the procedure envisaged under Rule 56-A of the Central Excise Rules, 1944, seems to be to credit to the account of a manufacturer an amount equivalent to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he two authorities and ultimately as a result of this correspondence the Central Excise Department Office at Baroda finally issued to the Company requisite subsidiary A.R.I. forms. These were accordingly received towards the end of October, 1969. 7. However, in the meantime the Company had already manufactured its compound fertilizers and as the period March to May is the period when the demand for the product is at its peak the Company was on commercial and business considerations required to remove the manufactured product from its godown. For this purpose it was required to pay the excise duty leviable thereon and it, therefore, was required to deposit in the cash P.L. Account, the sum of Rs. 5,16,716.93 to enable the Company to clear the goods. Such a large cash deposit became necessary as the proforma credit was not given for the base fertilizers utilised in the manufacture, which credit was subsequently allowed as the extract of the account shows, in October, 1969. It was obvious that had the credit been allowed earlier, the sum of Rs. 5,16,000/- and odd which is the cash deposit would have stood reduced by about Rs. 2,40,000/- which is the approximate quantum of the profor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led on 30-6-1975. However, the Appellate Collector by his order dated 26-2-1976 chose not to go into the merits of the appeal, but dismissed it on the ground that it was time-barred despite the fact that it was filed within 3 months of the date of receipt of the letter dated 14-3-1975. On 18-3-1976 the Company preferred a revision to the Government of India. This revision was rejected by an order dated 15-7-1976. 11. One of the contentions of the petitioners in their revision application was that their appeal was in time since they had filed an appeal within three months of the receipt of the letter dated 14-3-1975 which was the information conveyed to the Company by the said letter. The Government of India, however, upheld the appellate order observing that wrong information had indeed been conveyed to the Company by the Assistant Collector, but this could not constitute an estoppel or extend the period of limitation. Being aggrieved by these orders a miscellaneous petition was filed in March, 1977. It came up for hearing in July, 1980 and Agarwal J. by his judgment and order dated 28-7-1980 quashed the impugned appellate order dated 26-2-1976 as well as the impugned revisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quickly and diligently. 13. Alternatively, the petitioners have contended for a very limited or modified construction of clause (vi) in the sense that such provision only clarifies that cash refund is not permissible in the sense of cash payment, a situation which could arise when the excise duty on finished goods is lower than the duty on raw materials. According to the petitioners, whilst clause (vi) can be pressed into service in such a contingency it cannot be pressed in service in a case of claim of the nature as revealed in the petition. In other words, the petitioners are contending for acceptance of the position that their claim is for refund of the amount deposited in their personal ledger account which deposits became necessary on account of the special circumstances viz. failure or default or improper conduct on the part of the respondents and is not for cash refund of any part of the proforma credit simpliciter. According to the petitioners, cash refund of proforma credit simpliciter is only barred and that clause (vi) only comes into the picture in respect of such a claim. The petitioners have called upon the Court to consider the petitioners' claim as something tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in so far as it bars the payment of amounts lying to the credit of the citizen, would amount imposition of excessive and disproportionate restriction on the fundamental rights guaranteed to the citizens to acquire, hold and dispose of their property as also on their right to carry on business. It is submitted that the restrictions are not saved under provisions contained in Article 19(5) of the Constitution of India. 17. The petitioners have also claimed hostile discrimination contending that there is not the slightest justification for retention and appropriation by the State of the amount really due and payable to citizens at the time when the account is closed by operation of law. 18. The answer given by Mr. Dalal to these submissions may be briefly stated. According to his submission, the refund provided by Rule 56-A was not a matter of right but of grace. My attention was drawn to the provisions contained in the rule whereby the facility is to be selective and not universal. It was contended that this facility may not be extended to a particular commodity in which case the manufacturer would have to pay excise duty fully without having the benefit of any adjustments or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive refund or set-off or adjustment although they were entitled to the same. The situation had come about because the manufacturing activity is a cyclical activity. The petitioners became entitled to the adjustment during the period of peak manufacture, but the same was actually allowed at a time when the manufacturing activities were at a low ebb. By the time the peak season again commenced, the excise duty on the item manufactured by the petitioners stood totally abolished and hence further adjustment could not take place. 25. There are, however, two aspects of the matter which require elaborate consideration. The petitioners have a grievance that clause (vi) came into play in the instant case because of delay on the part of the excise authorities and in particular because of lack of co-ordination between the excise authorities at Bombay and Baroda. The Baroda excise authorities maintained that the documents given by them were sufficient to obtain refund which view was not accepted by the excise authorities at Bombay who denied to the petitioners the adjustments on the basis that the necessary documents were not produced. The petitioners could not submit these documents because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is the limited interpretation sought for by the petitioners on the sub-rule. 27. As stated earlier, it is now well settled that where a taxing provision or an exemption provision is capable of more than one interpretation, then that interpretation must be put which would reduce the incidence of tax or enlarge the ambit of the exemption provision. This is a well settled principle for which no authority is required to be cited. 28. There is another principle of interpretation which is equally well settled. The principle is that if two interpretations of a provision are permissible and one interpretation may render the provision subject to serious constitutional challenge, the other interpretation ought to be preferred. In other words, the provision must be read down and given a restricted meaning to protect it from a legal challenge as to its vires or validity. 29. In the instant case it is not the case of the respondents that if refund is directed to be made the petitioners will receive something in excess of the excise duty paid by them. Such a position only arises if the two accounts are kept distinct and viewed separately. If the two accounts are considered together a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the way of the petitioners claim. 32. On the other points there is no serious dispute that the petitioners were entitled to the benefit. It is almost conceded that had the benefit been given in time the petitioners would not have been required to bring in their personal account large sums of money as already explained. Indeed, the petitioners want a return to be made of (a part of) the said large sum of money subject to the limit of Rs. 77,587/- since the rest of the amount had already been adjusted. 33. The result of the foregoing discussion would be to hold that the Appellate Collector was in error in resorting to clause (vi) of sub-rule (3) of Rule 56-A for denying to the petitioners their claim for refund. If the conclusion is that they were entitled to the amount, and the claim was not barred by limitation and also not prescribed by clause (vi) of sub-rule (3), then the said claim ought to have been allowed and the petitioners would be entitled to the relief sought for in this petition. In the circumstances, the order of the Appellate Collector is quashed. As the said order of the Appellate Collector (Ex. P) is quashed as being erroneous, a mandamus is issued in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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