TMI Blog1993 (3) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 1-3-1987 as amended (referred to as the Notification) exempted various goods described in the notification from so much of the duty of excise leviable thereon as was in excess of the amount laid down in the corresponding entry in column 5 of the Table to the notification. The relevant entry in the table is Entry 06. This Entry reads: "S.No. Heading No. or sub-heading No. Description of Rate goods Conditions 06 63.01 Sacks and bags of Jute Rupees 660 per tonne" In other words, the maximum Excise duty on sacks and bags of jute was Rs. 660 per tonne. 3. The petitioners submitted Classification Lists claiming exemption under the said notification in respect of the said polythene-lined jute bags. The classification lists gave full particulars of the bags manufactured by the petitioners including inter alia the weight of the jute cloth, weight of the polythene lining and the twine. The classification lists were approved and the petitioner was granted the benefit of the notification. In the same manner the petitioners submitted classification lists effective from 17-2-1991, 5-4-1991, 8-4-1991 and 19-8-1991. The last three c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's case was that though the bags were made out of jute but for marketability of such product the polythene lining was inserted and it was only after the insertion of the polythene lining that the product could be considered as a finished product for marketing. The polythene lining was, therefore, according to the respondent No. 1 an essential ingredient for the purpose of completion of manufacture, and the finished product could not be said to be of jute within the meaning of the notification. The respondent No. 1 has further noted in the impugned order that there was no dispute that the product in question confirmed to the description "made up textile articles not elsewhere specified" under Chapter 63 sub-heading No. 6301.00 but, according to the respondent No. 1, for the purpose of levy of duty the bags were required to be made only of jute. The respondent No. 1 rejected the application of the principle that an item is to be classified according to its predominant content because Note 2A of Section XI of the Act which laid down the principle of pre-dominance was applicable only to articles classifiable under Chapters 50-55 of the Schedule to the Act and not to Chapter 63 which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification plainly read would include all bags of jute including jute bags which may have a lining of polythene. The notification did not refer to bags exclusively or wholly made of jute. Reliance has been placed on the following decisions in this connection: Union of India and Ors. v. Tata Iron and Steel Co. Ltd., Jamshedpur reported in 1977 (1) E.L.T. (J 61), Collector of Central Excise v. Protein Products India reported in 1988 (38) E.L.T. 749; Bhor Industries Ltd. v. Union of India reported in 1980 (6) E.L.T. 752; Indian Organic Chemicals Ltd. v. Union of India and Ors. reported in 1983 (12) E.L.T. 34 and Collector of Customs and Central Excise and Anr. v. Oriental Timber Industries reported in 1985 (20) E.L.T. 202. (2) Specific rules for interpretation had been provided under Section 2 of the Central Excise Tariff Act, 1944 [i] read with Rules 2(b) and 3(b) of the Rules for the Interpretation of the Schedule to the Act. This provided for the application of the principle of pre-dominance to determine the description of the excisable goods. The respondent No. 1 had incorrectly construed Notes 2(A) and 14 (A) in Section XI of the said Act. Both these notes related to the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of the principles of Natural Justice by the Respondent No. 1. The Court entertained the application and heard the matter. It is submitted, that for all these reasons it would not be proper for the petitioner to be asked to prefer an appeal at this stage. Reliance has been placed on the decisions reported in 1982 (10) E.L.T. 129; 1991 (55) E.L.T. 189 and 1992 (59) E.L.T. 522 in this connection. 10. It has been contended by the respondents : (1) That the phrase "of Jute" plainly read means "only of Jute". It is stated that bags may be only of jute and of jute with lining. The phrase bags of jute must refer to the former and necessarily exclude the latter. It is argued that if bags of pure jute were not sold in the market then the petitioner's case would have some substance. But with both kinds of bags being available in the market, the reference to one kind would not include the second. The benefit of the notification was, therefore, limited to pure jute goods. There was no mention of polylined jute bags although there was a distinction between polylined jute bags and plain jute bags in the market. Reliance has been placed on Entry 07 in the Table to the notification t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is submitted that no prejudice has in fact been caused to the petitioner as the point in issue was substantially the same both in respect of classification list dated 17-2-1991 and the classification list dated 17-5-1991. (5) It is contended that merely because the benefit of the exemption notification might have been given to some other manufacturer of polylined Jute Bags by mistake, no right could be claimed by the petitioner. Reference has been made to the decision in Coromandel Fertilisers v. Union of India: AIR 1984 SC 1172 = 1984 (17) E.L.T. 17 (S.C). (6) Finally it is submitted that the petitioner should have availed of the alternative remedy under the Act. It is submitted that the Court exercising jurisdiction under Article 226 was not sitting in appeal and that where two views were possible on the issue in question and the department chose one the Court could neither interfere under Article 226 nor even on appeal. Reliance has been placed on the decision in V.V. Iyer v. Jasjit Singh: AIR 1973 SC 194 : 1973 (1) SCC 148 and Collector of Central Excise v. Swastik Woollen : AIR 1988 SC 2176 = 1988 (37) E.L.T. 474 (S.C.). It is stated that the decisions cited by the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, that if there were two constructions which an entry could reasonably bear and the one that was in favour of the revenue was adopted, the Court had no jurisdiction to interfere merely because the other interpretation favourable to the subject appeals to the Court as the better one to adopt. The Supreme Court held that although it was not for the Courts to come to a conclusion of facts as to whether the product could come under the description of skelp, nevertheless when there was no clear criteria to determine what is skelp and not strip, the Court should not permit the confusion to persist in a fiscal legislation which by all standards should adopt a clear definition of an excisable item. The Court further went out to hold :- "In absence of any clear criterion to determine what is skelp and not strip no useful purpose would be served by even remanding the matter to the Excise authorities for a decision after taking necessary evidence. It is only when a taxing law provides for a clear and unequivocal test for determination as to whether a particular product would fall under strip or skelp it may be possible for the authorities to address itself to the evidence submitted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the Excise Authorities have interpreted the notification in accordance with the established norms of interpretation. If they have not, then their action in denying the petitioner the relief under the exemption notification must be held to be without jurisdiction. Accordingly and for these reasons, I reject the preliminary objection of the respondents. 18. Coming to the merits of the case, four methods have been urged by the parties by which the notification should be construed. The first is the plain meaning of the phrase "made of, the second is the meaning placed on the phrase "made of" by judicial and other authorities; the third is the meaning placed on the phrase by the trade or in common parlance and the fourth by the specific rules of interpretation provided in the statute. 19. As far as the dictionary meaning is concerned the relevant use of the word "of" has been construed in the Shorter Oxford English Dictionary (3rd Edition) as "Indicating the material or substance of which anything is made or consists". This does not take the matter any further as it does not clarify whether the material or substance must be the sole ingredient. 20. As far as judicial preceden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vely" which was normally found in similar notifications. 22. In Aravali Ispat Ltd. v. Collector of Central Excise, Jaipur reported in 1986 (26) E.L.T. 259 the Tribunal had to consider the scope of the benefit of Notification 208/83 dated 1-8-1983 which related to the manufacture of iron castings. It was contended by the Excise Authorities that the said notification gave the benefit of duty on iron casting if it was made out of raw materials specified in the notification alone. It was the admitted case that the raw materials mentioned in the notification did not include M.S. Scrap which had also been used by the manufacturer in the manufacture of iron castings. The Tribunal held: "Notification 208/83 does not stipulate that the final product must be manufactured wholly or entirely or exclusively out of the raw materials mentioned in col. 2 of the corresponding entry of the table to the said notification. In the absence of these words finding of the adjudicating authority is not tenable in law." 23. Finally in Nayak Associates v. Union of India : 1991 (55) E.L.T. 189, a Learned Single Judge of this Court had to construe an exemption notification which granted excise duty reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bag. The query would be necessary only because a poly-lined jute bag would be considered a jute bag. Secondly, the Excise Authorities themselves had all along considered the poly-lined jute bags manufactured by the petitioners as bags/sacks of jute. Presumably the Excise Authorities had taken into consideration the common understanding of the phrase bags/sacks of jute before according approval to the classification lists submitted by the petitioner in respect of poly-lined jute bags. Thirdly, the Excise Authorities are still treating poly-lined jute bags as bags/sacks of jute as far as other manufacturers are concerned. It cannot be assumed that the Excise Authorities in all these cases are acting on any mis-appreciation or mistaken view of the trade parlance. It is a well known principle of evidence that all acts are presumed to have been done rightly and regularly (Omnia praesumuntur rite et solenniter esse acta) and the burden of showing the contrary would be on the persons (in this case the respondents) seeking to prove this. There is no evidence relied upon by the respondent authorities which would justify their taking different view from that taken in the petitioners' own ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation cannot hold the citizen to their whims and caprices in matters, concerning essential practices of trade and business, allowing deductions under Section 5(2)(a)(ii) in some cases and disallowing such deductions in some others, although the circumstances, appertaining to both the categories, were exactly similar.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. P.B. Mukharji - J., in the case of Mercantile Express Co. Ltd. v. Asst. Collector of Customs: 62 Cal. WN 661 : (AIR 1958 Cal. 630), where his Lordship held that such change of mind, varying from case to case, 'will lead to utter confusion in the very basis and principle-of taxation and grave uncertainty of business and the most unfair discrimination of taxes'. The grave reason behind the above observations of P.B. Mukharji, J. has full application to the facts of the present case. We, accordingly, hold that the Board of Revenue acted arbitrarily and in violation of natural justice by not adhering to their own precedents in administering this taxing statute when there was no reason or circumstance to justify any change of mind of that Tribunal. On that ground also, the order of the Additional Member, B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct their own error and if such correction requires an adjudication it would not be just and proper for this Court to refuse them an opportunity to do so." 33. There can be no doubt that an erroneous decision would not bind the authorities to hold similarly in future and perpetuate the mistake. But there must be some ground for the authorities to consider that the earlier view was a mistaken one. This is clear from a close reading of the judgment relied on by the respondents. At page 312 of the Report the Court observed : "The Customs authorities, however, had sufficient materials before them to doubt the correctness of the earlier actions taken by the appraisers. The proceedings disclosed in the supplementary affidavit filed by the Customs authorities clearly go to show that there exist bona fide grounds for them to doubt the correctness of their previous decision to release similar goods under similar licenses." No such ground has been disclosed by the respondent in this case. 34. In fact the Bench considered but did not overrule the finding of P.B. Mukharji, J. in the case of Mercantile Express Co. Ltd. (supra). They said : "That was a case where the Court was dealing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the Respondent No. 1 to take a view contrary to the earlier decisions taken on the identical facts and in respect of the same notification. 39. The respondents have called in aid the principle enunciated in the decision of V.V. Iyer v. Jasjit Singh (supra) and Collector of Customs, Bombay v. Swastik Woollen (P) Ltd. to the effect that where two views are possible and the authorities adopt one of such views which cannot be termed to be unreasonable, the authorities' finding cannot be interfered with by the High Court. This principle appears to be in direct conflict with the well-known norm of construction that in the event of ambiguity in a fiscal statute the construction beneficial to the assessee should be adopted. The case of Collector of Central Excise, Bombay-I and Anr. v. M/s. Parle Exports (P) Ltd. - AIR 1989 S.C. 644 = 1988 (38) E.L.T. 741 (S.C.) is an authority for the latter proposition. There the Supreme Court held "When two views of a notification are possible, it should be construed in favour of the subject". 40. The conflict does not need resolution at least for the purpose of this case. The first principle operates when the authorities have adopted a partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified in the Schedule." 46. The Schedule which contains the rates of duties in respect of specified items has categorised these items sectionally. Within each section are chapters covering sub-categories of the section. Each section contains specific rules of interpretation in respect of entries in the section and relate to inter-sectional admixtures. The Rules relied upon by the petitioners are the Rules for the interpretation of the schedule itself. There are general rules of interpretation applicable to inter-sectional admixtures and like all general rules are to be resorted to when the sectional rule does not provide to the contrary. The item in question is an admixture of jute and plastic classifiable under Sections XI and VIII respectively. The specific rules of interpretation provided for those sections do not provide for inter-sectional admixtures. The general rules of interpretation will thus apply. 47. The rules on which reliance has been placed : "2.(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other material or substance. Any reference to goods of a gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y limitation as to the nature of the products that are entitled to exemption and that although other raw materials were used in the manufacture of Gelatine and Ossein, such other raw materials were not used to such an extent "as to completely overshadow or render insignificant the utilisation of bones in the process". In other words the nature of the product was to be determined by reference to the predominant material. 53. There is no dispute that in the bags manufactured by the petitioners jute is the predominant component and the real character of the bag is determined thereby. 54. Accordingly on this basis also the poly-lined jute bags manufactured by the petitioner must be described as a jute bag. 55. The respondent authorities admit that the bags produced by the petitioner are assessable to excise duty under tariff sub-heading 6301.00 of the Schedule to the Tariff Act. That sub-heading relates to made up "Textile articles". Therefore, the bag of the petitioner, in spite of containing a polythene lining, is still treated as a textile article - in other words with reference to, the jute content of the bag. 56. If the principle of predominant ingredient is adopted for cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted earlier, there is a special principle of interpretation recognised by the Supreme Court in Parle's case (supra) relating to exemption clauses, viz. "While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed." It cannot be said that any violence is done to the language employed in the exemption notification in construing it to include poly-lined jute bags. 59. The Respondents have however sought to rely upon another decision of the Supreme Court which predicates a restrictive approach to exemption clauses. That other decision is M/s. Mysore Metal Industries v. The Collector of Customs, Bombay - 1988 (36) E.L.T. 369 (S.C.) = 1988 (17) ECR 636 (SC), in which the Supreme Court held: "The burden is on the party who claims exemption, to prove the facts that entitled him to exemption." 60. I do not propose to attempt to synchronize these two apparently divergent views in this case. It is not necessary as I am of the opinion that the principle enunciated in Mysore Metal Industries is not applicable when the authorities concerned had already given the petitioner the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rules made thereunder do not confer upon the authorities any power of review of their own order. It must therefore follow that the respondents have no power to review the earlier order granting unconditional approval to the classification lists. .......... ........... ......" 65. The impugned order insofar as it relates to the classification list dated 17-5-1991 is, therefore, even apart from the merits, unsustainable. 66. Having held that the poly-lined jute bags manufactured by the petitioner are exempted articles to the extent specified in the notification, the subsequent show cause notices must be held to be bad. The Excise Authorities do not have the jurisdiction to initiate proceedings to recover excise duty from the petitioners otherwise than at the rates specified in the notification. [See : Collector of Central Excise, Calcutta Ors. v. Madura Coats Ltd., Serampore -1982 (10) E.L.T. 129 (Cal.) (DB)]. 67. For the reasons aforesaid the writ petition must be allowed. The impugned order dated 21st April, 1992 and the notices dated 17th February, 1992 and 31st March, 1992 are quashed. The respondents are also directed to allow the Exemption under Notification No. 65/87- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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