TMI Blog1985 (7) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... sh, Karnataka in the financial year of 1982 the company had paid more than 350 crores as Central Excise Duty. It has been averred that the petitioner-company manufacture two distinctly different categories of tobacco products from unmanufactured tobacco, namely, factory-made cigarettes on the one hand and smoking mixture for pipes and hand-rolled cigarettes on the other. It is their case that the smoking mixture for pipes and hand-rolled cigarettes is essentially different in its raw material, the process of manufacture and its character and content from the Contents of machine-made factory cigarette. In paragraph 8 and in particular sub-paragraphs (a) to (n) thereof the distinctive features of the content and the process of manufacture of smoking mixture for pipes and hand-rolled cigarettes are detailed seriatim to highlight their contrast with the content and process of manufacture of the machine-made cigarettes spelt out in sub-paragraphs (a) to (g) of paragraph 9. It is the case that the unmanufactured tobacco, i.e., in-process material used for the manufacture of machine-made cigarettes, is referred to and commercially known as cut tobacco and is not a finished product which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garettes wrongly describing the said product as manufactured tobacco mixture for the years 1978-79 to October, 1982. 4. It is the petitioner company's stand that because of the oppressive nature of the demand, the company had no alternative but to close down their production in the factory at Munger because it was impossible to continue the manufacture of their products by paying excise duty at the rate of 300 per cent before the completion of the manufacture of cigarettes and also to pay duty at the rates ranging from 372 to 413 per cent on the same cigarettes when so manufactured. Facing grave financial loss, the petitioner company preferred an appeal under Section 35B of the Central Excises and Salt Act, 1944 (hereinafter to be referred to as the 'Act') to the Tribunal and sought relief by way of an interim stay which, however, could not be secured. The petitioner company's efforts to secure any other interim relief from the respondents also met with the same fate and (vide Annexure A) the respondents reiterated their stand and requested the petitioner company to submit the price list for the alleged smoking mixture used in the rolling of the cigarettes in the factory which, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ayurved Bhawan (Pvt.) Ltd., Jhansi v. The Excise Commissioner, U.P. and Others (A.I.R. 1971 S.C. 378) - "Coming to the medicinal preparations with which we are concerned in this case, it was urged that if the view taken by the High Court is correct then, first the tincture used became dutiable and hereafter the medicinal preparations in which tincture was used became dutiable. It was said that that could not be the intention of the Parliament. We are unable to appreciate this contention. Multi-point taxation is not unknown to us." It was again observed in Avinder Singh and Others v. State of Punjab and Others - (1979) Supreme Court Cases 137 - that there was no constitutional bar against double taxation. There is thus no manner of doubt that the legislature, if so minded, can levy multi-point excise duty on unmanufactured or manufactured tobacco as well. The question here is not at all one of the power or competence of the legislature to do so which is not at all in dispute. It is plainly one of interpretation only. The issue herein is whether on fair construction of the language of the tariff item from the legislature has clearly mandated a multi-point excise levy firstly at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nty Rupees Ten per cent of the basic duty (2) if flue-cured and used for the manufacture of smoking mixtures for pipes and cigarettes; Forty Rupees - do - (3) if flue-cured and not otherwise specified; Twenty Rupees - do- (4) if other than flue-cured and used for the manufacture of (a) cigarettes or (b) smoking mixtures for pipes and cigarettes; Twenty Rupees - do- (5) if other than flue-cured and not actually used for the manufacture of - (a) cigarettes or (b) smoking mixtures and cigarettes or (c) biris - stems of tobacco larger than 6.35 millimetres in (i) size, (ii) dust of tobacco, (ii) (iii)x x x (iv) tobacco cured in whole leaf form and packed or tied in bundles, hanks or bunches or in form of twists or coils; Three Rupees - do - if other than flue-cured and not otherwise (6) specified; Four Rupees - do - if used for agricultural purposes; (7) (8) Stalks. One Rupees Ninety Paise -do - II Manufactured tobacco - (1) Cigars an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, category II of manufactured tobacco has been divided into 6 sub-items with distinct descriptions including that in sub-item 4, which falls for construction, and each has been given a specific varying rate of duty. It would thus appear that the clear legislative intent is that for purposes of excise levy manufactured tobacco and unmanufactured tobacco are not to overlap with regard to each of the sub-items. 11. To complete the legislative background, it deserves mention that in the year 1973 Mr. Y.V. Chavan, the then Finance Minister, moved the Finance Bill, which was subsequently enacted, to significantly enhance the excise levy on machine-made cigarettes. He also introduced a levy separately on smoking mixtures for pipes and hand-rolled cigarettes in order to bring this class also within the net. The purpose and object of these changes was well elaborated by the Finance Minister whilst moving the Finance Bill and in view of some obscurity and intricacy of interpretation involved it would become necessary to make some detailed reference to this aspect hereinafter. 12. Against the aforesaid background, one may now turn to the specific language of sub-item (4), category II. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n State of Uttar Pradesh and Another v. M/s. Kores (India) Ltd. (A.I.R. 1977 S.C. 132), The Deputy Commissioner of Sales Tax (Law) v. M/s. G.S. Pai and Co. (A.I.R. 1980 S.C. 611) = 1980 E.L.T. 343 (S.C.) and M/s. Indo International Industries v. Commissioner of Sales Tax (A.I.R. 1981 S.C. 1079). 13. Now once it is told - as it must be - that the smoking mixtures for pipes and cigarettes should be construed as understood in common parlance or in the commercial parlance of the market yard, the matter becomes somewhat easy sailing for the petitioners. The firm stand taken on behalf of the writ petitioners has been that in the tobacco trade and equally in the commercial parlance of the consumers the smoking mixtures for pipes and hand-rolled cigarettes, which is directly used by the consumers, is radically different from the cut tobacco which is in-process for the manufacture of machine-made cigarettes in a factory. In paragraphs 8 and 9 of the writ petition the glaring difference betwixt the raw material, the process of manufacture, the methodology of packing and marketing, the end product of smoking mixture for pipes and cigarettes on the one hand and those of making machine made c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final product is marketed at 16% moisture content at which there is a great risk of mould attack in the market place. 5. FLAVOUR Some blends do not receive any flavour. Only unobstrusive formulations are used on certain blends still preserving the basic flue cured or air cured characteristic of the smoke. Aromatic characteristic of flavours are prominent both in tobacco and smoke and desirable for pipe smoking. 6. APPLICATION OF FLAVOUR Sometimes applied on specific part of the blend with casing and sometimes on cut tobacco after drying to 13-14%M.C. Always carried out mechanically through sprays. The total blend re-eives the flavours manually on layered tobacco with a whisk brush. 7. BULKING TIME 3-4 hours before cutting. Minimum 48 hours to allow absorption of high level of casing and flavour. 8. PRE-CUTTING No special treatment reqd. as the fluffy character of tobacco has to be maintained. Kept' under heavy pressure to allow caking for which 48 hours period of holding the tobacco under pressure is necessary. 9. CUTTING 40-50 cuts per inch at 13-20% moisture content. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n machine made cigarettes the tobacco stems form a very substantial part of its content. Equally, in process of manufacture, the end finished product and even in the method of their ultimate consumption by the consumer the two products are wholly dissimilar. The tobacco content in the machine made cigarette is too dry and breakable to be smoked in a pipe because fast burning tobacco is not suitable for pipe smoking as it would burn furiously therein. Similarly, this material cannot be rolled by hand into a cigarette because of the lack of moisture and breakability, it would drop out of the paper forthwith. On the other hand, smoking mixtures for pipes and cigarettes, if attempted to be rolled in a machine, would jam the mechanism because of the moisture and their sticky and non-fluffy content. 14. No pleading worth the name or rebuttal material has been brought on the record by the respondents to repel the clear cut stand of the writ petitioners in this context. In any event, if it was the stand of the respondents that cut tobacco in the process of manufacture of machine made cigarettes is commonly known as smoking mixture, the burden of proof would squarely lie on them. The resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I of manufactured tobacco were dealing separately and exclusively with end products of manufactured tobacco and not with any intermediary or as yet an in-process product. In any case, sub-item (4) of smoking mixtures for pipes and cigarettes in particular deals only with the end product sold over the counter to the pipe-smoking consumer or connoisseur who hand-rolls his own cigarette. It seems to have little or no relevance to cut tobacco in the pipe line in an automated cigarette factory rolling out machine-made cigarettes by the billion. This seems to be the more so when this item is further sub-divided as it must be. So done, it will read as follows : (i) Smoking mixtures for pipes. (ii) Smoking mixtures for cigarettes. Even the learned Advocate-General had no option but to concede that so far as the smoking mixtures for pipes were concerned, they are obviously and patently an end consumer product. The smoking mixture is packed in pouches and sold and passed to the consumer for stuffing into his pipe and smoking it without any further intervening process. Would this identical smoking mixture, if stuffed and rolled into the cigarette of the connoisseur who chooses to hand- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... category I. Herein also there are repeated reference to the manufacture of cigarettes on one hand and the manufacture of smoking mixtures for pipes and cigarettes on the other. It is thus plain that the framers are themselves drawing a distinct line between manufacture of machine-made cigarettes and the manufacture of smoking mixtures for pipes and hand-rolled cigarettes. If the manufacture of cigarettes and the manufacture of smoking mixtures for pipes and hand-rolled cigarettes were identical, the legislature would not have wasted its words repeatedly by drawing the clear cut distinction between the two in category I as well. 19. To sum up on this limited aspect, it has to be held that sub-item (4) in category II like its other sub-items (1) to (3) and (5) to (7) is also intended to apply to the end finished product for the immediate consumption of the limited and elitist class of consumers, smoking pipes or hand-rolling their own cigarettes only. It cannot be stretched or strained to cover any in-process or intermediary material without doing patent violence, to its language. 20. The learned Advocate-General with his usual perspicacity had contended that there was no warran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Verghese v. Income-tax Officer (A.I.R. 1981 S.C. 1922) wherein it was held that the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of interpretation and the speech of the Finance Minister was then in terms adverted to and relied upon. 22. Following the above, the categoric statement of the Finance Minister in his budget speech directly relevant to the point not only needs reference but necessitates quotation. Therein after referring to his proposal for steeply raising excise levies on factory made cigarettes, by which he hoped to raise rupees 32 crores in a full year, he expressly stated as follows : "I am afraid I cannot, while coming down on the cigarette smoker make things easier for the pipe smoker or the person who rolls his own cigarettes. I, therefore, propose to levy a duty on manufactured smoking mixtures for pipes and cigarettes, which will yield about Rs. 80 Lakhs of which Rs. 22 Lakhs will accrue to the States." It is plain from the above that the Finance Minister himself drew the sharp distinction betwixt the ordinary machine made cigarette smoker and the person who rolls ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal duty of excise. Mr. Chatterji had submitted with some plausibility that in the wake of this exemption from the excise levy on unmanufactured tobacco, the somewhat over zealous officers of the revenue in some regions looked for fresh pastures of excise levy and seem to have hit on the ingenious idea of claiming for the first time that even in-process out tobacco in the continuous pipe line of manufacture of machine-made cigarettes in a factory should be equated with smoking mixtures for pipes and cigarettes and become doubly leviable first under sub-item (4) and then under sub-item (2) of category II. It is common ground that neither any change in law had occurred since the insertion of sub-item (4) of category II in 1973 nor any binding statutory instruction at the national level for universal application has been issued to deviate from the stand and policy consistently adhered to for nearly 10 years, as in the present case it was only on the 7th of October, 1982 that the Additional Collector, Central Excise, made a visit to the factory of the petitioner at Munger. Within 16 days thereafter, unexplicably, on the 23rd of October, 1982 (vide Annexure 2) he seems to have come to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unduly restricted against the Crown, or that there is to be any discrimination against the Crown in those Acts. It simply means that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." The aforesaid enunciation has received an unbroken affirmance in England as well as by our Final Court in The Commissioner of Income-tax, Patiala v. M/s. Shahzada Nand and Sons and others (A.I.R. 1966 Supreme Court 1342), M/s. Baidyanath Ayurved Bhawan (Pvt.) Ltd., Jhansi v. The Excise Commissioner, U.P. and others (A.I.R. 1971 Supreme Court 378) and C.A. Abraham v. Income-tax Officer, Kottayam and another (A.I.R. 1961 Supreme Court 609). It is thus well-settled that any alleged hardship ensuing from a taxing statute is a consideration foreign to its validity or scope in a court of law. However, this rule cannot be stretched to the limit that even though a construction based on the language of a taxing statute leads to patently mischievous and anomalous results, the same should not b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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