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Madhya Pradesh High Court · body

2003 DIGILAW 1064 (MP)

MADHUMILAN v. UNION OF INDIA

2003-09-05

AJIT SINGH, DIPAK MISRA

body2003
Judgment ( 1. ) IN these two petitions the relief being almost similar and the challenge being made on the common grounds they were heard analogously and disposed of by this common order. For the sake of clarity and convenience the facts stated in M. P. No. 730/93 are adumbrated herein. ( 2. ) THE petitioner No. 1 is a company registered under the Companies Act, 1956 having its registered office at Madhu Milan Cinema Premises, indore and the petitioner No. 2 is its Managing Director. The petitioner No. 1 company owns a factory at Biaora, District Rajgarh wherein spun yarn is manufactured. ( 3. ) ACCORDING to the petitioner spun yarn is an excisable item and the petitioner No. 1 has a licence under the Central Excise and Salt Act, 1944 amended as Central Excise Act (hereinafter referred to as the Act ). It is putforth in the petition that the Central Excise tariffs in the year 1990-91 under chapter 55 related to man made staple fibre. In the writ petition the tariff for years 1990-91 and 1991-92 have been produced. It is pertinent to state here that while reproducing the same the petitioners have also referred to the notification No. 47/90, dated 20-3-1990 and Notification No. 53/91, dated 25-7-1991. For the sake of convenience the manner in which the tables have been produced in the writ petition are reproduced below:- ( 4. ) IT is urged that the Notification No. 51/91 is bad in law to the extent it has direct legal effect in amending of tariff heading which only the competent body, i. e. , the Legislature is empowered to do so. It is putforth that the Central Government has no power and jurisdiction to amend and substitute the heading in the tariff. It is averred in the petition that the Central government while exercising the powers conferred under Section 5-A of the act has travelled beyond the scope of the powers available and this transgression is evident as it has entrenched upon the jurisdiction of the Legislature. It is contended that it has modified the tariff sub-heading by substituting not containing synthetic staple fibre. It is putforth that the substitution not containing any synthetic textile material only the Legislature was alone competent to do. ( 5. It is contended that it has modified the tariff sub-heading by substituting not containing synthetic staple fibre. It is putforth that the substitution not containing any synthetic textile material only the Legislature was alone competent to do. ( 5. ) IT is setforth in the petition that Section 5-A of the Act confers power on the Central Government to grant exemption from duty of excise as excisable goods of any specified description of goods as provided under the central Excise Tariff Act, 1985 (hereinafter referred to as the 1985 Act ). The heading 55. 05 provides the specified description of goods for the purpose of grant exemption from excise duty by issuance of a notification under Section 5-A. The exemption Notification No. 47/90 was in order as exemption was granted in respect of excisable goods of description specified in Heading 55. 05. The exemption Notification 53/91 has gone beyond the powers conferred by section 5-A inasmuch as specified description of excisable goods under Heading 55. 05 has been modified. Thus, as pleaded, the said notification is invalid and ultra vires to the extent it modifies the language of Heading 55. 05. It is averred in the petition that section enables and only permits the Central government to select in public interest the goods which are specified in the tariff for the purpose of effective duty but does not permit the Central government to give birth to a new kind of goods by changing the description of heading. It is urged that the principal heading provides the classification of goods under heading 55. 05 and change or addition is beyond the purview of principal heading. It is pertinent to mention here that a reference has been made to Central Excise Rules 173 (B ). By virtue of the classification list 4/87, dated 31-8-1987 has come into existence. The language used in the amended classification of the list reads as under :- ( 6. ) IT is putforth in the petition that products of the petitioner No. 1 company do not contain synthetic waste and, therefore, the petitioner claims for exemption under the Notification No. 53/91, dated 25-7-1991. It is contended that their product falls under the heading 55. 05 (a) as the product permissible under the aforesaid notification. ) IT is putforth in the petition that products of the petitioner No. 1 company do not contain synthetic waste and, therefore, the petitioner claims for exemption under the Notification No. 53/91, dated 25-7-1991. It is contended that their product falls under the heading 55. 05 (a) as the product permissible under the aforesaid notification. It is further urged that the classification list has been duly approved and maintained by the final judgment of the Tribunal that both are different commodities and, therefore, the product of the petitioner No. 1 for the purpose of levy of duty would be deemed to be containing waste and not containing pure and fresh fibre. It is claimed that on the face of the approved classification lists the exemption was operative. It is highlighted that the exemption notification can not have the effect of modifying the principal heading and it can not curtail or enlarge the scope of the heading. ( 7. ) IN this backdrop it has been prayed that Notification No. 53/91, dated 25-7-1991 is inconsistent with the principal heading 55. 05 being beyond the competence of the Central Government and there has been transgression of jurisdiction and power under Section 5-A of the Act which is confined and constricted only to specify the goods falling under a particular heading and determine the rate of duty applicable and recoverable to it but it can not include any new product which is otherwise not classified under the said notification. It is further contended that the Notification is violative of the provisions of Section 3 (2) of the Central Excise Act, 1944, and, therefore, beyond the jurisdiction of the Central Government. ( 8. ) A return has been filed by the contesting respondents contending, inter alia, that the Notifications No. 53/91, dated 25-7-91 and 23/92, dated 1-3-92 were issued which prescribe effective rates of duty of excise on yarn falling under Chapter 55. 05 of the schedule to the Central Excise Tariff Act, 1985. It is putforth that the Notification No. 53/91, dated 25-7-91 has no effect of amending a tariff heading. In this Notification no change has taken place pertaining to heading. In this Notification the yarn (including sewing thread)of artificial staple fibre falling under Chapter heading 55. 05 of the schedule to the Central Excise Tariff Act, 1985. It is putforth that the Notification No. 53/91, dated 25-7-91 has no effect of amending a tariff heading. In this Notification no change has taken place pertaining to heading. In this Notification the yarn (including sewing thread)of artificial staple fibre falling under Chapter heading 55. 05 of the Central excise Tariff Act, 1985 has been bifurcated into two categories including sewing thread of artificial staple fibre which do not contain any synthetic textile materials and other yard of artificial staple fibre. This compartmentalisation and bifurcations is permissible in law. It is averred that the Finance Bill, 1991 was presented on 25-7-91 and amongst other notifications the Notification no. 53/91-CE, dated 25-7-91 was issued. The Finance Bill was presented before the Parliament after getting consent of both the Houses. It got assent of the President of India and the Notification was issued in terms of the powers vested with the Government. It is urged that the Central Government has exercised its powers within its jurisdiction and within the frame work of law and there is no illegality in the same. Emphasis has been laid on the public interest to show that the bifurcation was done keeping the public interest in view. It is also averred that the stand of the petitioner that the Notification no. 53/91 has been issued by the Central Government in exercise of its powers conferred by Section 5-A of the Act is not correct inasmuch as the specific description of excisable goods under chapter heading 55. 05 has not been changed by issue of this notification. The language of the Notification has not changed the language used in the principal heading. It is also putforth that classification is under Chapter 55. 05 of Schedule to the Central Excise Act and the respondents do not have difference of opinion in this regard. The question raised by the respondents is only relatable to the applicability of the rate of duty of excise in terms of Notification No. 53/91, dated 25-7-91. It is also highlighted that when two rates of duty of excise were prescribed for the yarn falling under Chapter 55. 05 of Schedule to the Central Excise Tariff Act, 1985 the higher rate of excise duty was made chargeable on yarn containing synthetic textile material and since the yarn of the petitioner is classifiable under chapter 55. It is also highlighted that when two rates of duty of excise were prescribed for the yarn falling under Chapter 55. 05 of Schedule to the Central Excise Tariff Act, 1985 the higher rate of excise duty was made chargeable on yarn containing synthetic textile material and since the yarn of the petitioner is classifiable under chapter 55. 05 of Schedule to the Central Excise Act, 1985 and has been blended with synthetic textiles (material derived from synthetic waste), the higher rate of duty of excise is chargeable from the petitioners on yarn falling under Chapter 55. 05 blended with synthetics textile materials. The petitioner is manufacturing yarn by using synthetic waste. It is also putforth that the stand of the petitioner is contradictory inasmuch as it has made allegation that the notification No. 53/91, dated 25-7-91 is bad in law and on the other hand it is claiming exemption on the basis of same notification to get the benefit of yarn covered in the lower compartment. It is putforth that there is difference between wastes and fibre and such differentiation is based on the report of chemical examiner. According to the respondents the contention of the petitioner that there has been introduction of new heading is not correct inasmuch as only the proper rate of duty in terms of notification has been provided. It is contended that the Notification under Chapter Heading 55. 05 has nowhere been amended as alleged by the petitioner but only bifurcation has been done for the sake of simplicity. It is also urged that the Notification neither enlarges the scope of heading nor has altered the same. The heading has not been modified by the said Notification but only the yarn of artificial staple fibre has been divided into two parts/categories and such bifurcation is not impermissible. ( 9. ) IT is putforth that the Central Government has exercised its power within the jurisdiction and framework of law and the contention of the petitioner is totally devoid of substance and based on misinterpretation. The bifurcation has taken place as a method of clarification and to simplify the procedure in public interest. Notification No. 53/91 has been issued in exercise of power conferred on the Central Government under Section 5-A of the Act and there was no change to excisable good under Chapter Heading 55. 05. The bifurcation has taken place as a method of clarification and to simplify the procedure in public interest. Notification No. 53/91 has been issued in exercise of power conferred on the Central Government under Section 5-A of the Act and there was no change to excisable good under Chapter Heading 55. 05. Claim of the petitioner relates to realm of classification under Chapter 55. 05 to the Schedule to the Central Excise Tariff Act, 1985 when higher rate of excise duty was made chargeable on yarn containing synthetic textile material as the yarn of the petitioner falls under Chapter 55. 05 blended with synthetic textile materials. The department has also setforth that there is contradiction in pleading inasmuch as the petitioner had at one point of time placed reliance on the Notification No. 53/91 and also is calling in question its applicability in a different way without taking note of the difference between waste and fibre. Various other statements have been made to justify the stand taken by the Department. ( 10. ) IT is pertinent to state here that when this matter was taken up a serious contention was raised by Mr. J. P. Sanghi, learned Senior Counsel that the Notification issued in the year 1988 was not placed before both the houses of Parliament. Keeping the aforesaid stand in view this Court directed the learned Counsel for the Union of India to apprise this Court whether the later notification purported to be passed under Section 5-A of the Act was placed before the Parliament. It is clarified that the aforesaid direction was confined to the Notifications which are in issue. In pursuance of the same an affidavit was filed indicating that the Notifications were laid before both the houses of the Parliament. An Additional affidavit has been filed in that regard. ( 11. ) MR. J. P. Sanghi, learned Senior Counsel appearing along with mr. In pursuance of the same an affidavit was filed indicating that the Notifications were laid before both the houses of the Parliament. An Additional affidavit has been filed in that regard. ( 11. ) MR. J. P. Sanghi, learned Senior Counsel appearing along with mr. Aditya Sanghi has raised four fold contentions, namely, (i) the Notifications under challenge were not placed before both the Houses of Parliament in accordance with Section 38 of the Central Excise and Salt Act, 1944 (as the act was entitled as such then) and hence, the Notification do not have the force of law; (ii) that assuming the Notifications have been laid before both the Houses of Parliament the explanations which have been added in the notification No. 23 of 1992 run beyond the provisions of the parent Act and, therefore, impermissible; (iii) that even if the explanation is in consonance with the parent statute, the same being unreasonable and arbitrary invites the wrath of Article 14 of the Constitution; and (iv) that when the notifications relate to the availing of exemption there can not be inclusion of duty by incorporation of any provision in the said notifications as that would violate the very purpose for which the notifications are issued. ( 12. ) MRS. Indira Nair, learned Senior Counsel appearing for the department, per contra, has contended that the explanation incorporated in the Notification does not contravene any of provisions of the statute and hence, in the absence of any kind of transgression the same can not be declared to be invalid. It is also canvassed by her that the explanation has been incorporated to curtail the modus operandi or the method taken recourse to by the unscrupulous businessmen and, therefore, it can not be lanceted on the ground of arbitrariness, unreasonableness or discrimination and it does not suffer from the vice of arbitrariness. It is urged by her that in the exemption notification when a bifurcation has taken place, the duty which has been laid would come within the ambit and sweep of permissibility being clarificatory in nature, and hence, beyond assail. ( 13. It is urged by her that in the exemption notification when a bifurcation has taken place, the duty which has been laid would come within the ambit and sweep of permissibility being clarificatory in nature, and hence, beyond assail. ( 13. ) TO appreciate the rival submissions raised at the Bar it is appropriate to reproduce the Section 5-A of the Act: "5-A. Power to grant exemption from duty of Excise.- (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the Notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon: provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured- (1) in a free trade zone and brought to any other place in india; or (ii) by a hundred per cent export-oriented undertaking and allowed to be soled in India. Explanation : In this proviso, "free trade zone" and "hundred per cent export-oriented undertaking" shall have the same meaning as in Explanation 2 to sub-section (1) of Section 3. (2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from the payment of duty of excise, under circumstances of an exceptional nature to be stated in such order, any excisable goods on which duty of excise is leviable. (3) An exemption under sub-section (1) or sub-section (2) in respect of any excisable goods from any part of the duty of excise leviable thereon (the duty of excise leviable thereon being hereinafter referred to as the statutory duty) may be granted by providing for the levy of a duty on such goods at a rate expressed in a form or method different from the form or method in which the statutory duty is leviable and any exemption granted in relation to any excisable goods in the manner provided in this sub-section shall have effect subject to the condition that the duty of excise chargeable on such goods shall in no case exceed the statutory duty. Explanation: "form or method", in relation to a rate of duty of excise means the basis, namely, valuation, weight, number, length, area, volume or other measure with reference to which the duty is leviable. (4) Every Notification issued under sub-rule (1), and every order made under sub-rule (2), of Rule 8 of the Central Excise Rules, 1944, and in force immediately before the commencement of the customs and Central Excises Laws (Amendment) Act, 1987 shall be deemed to have been issued or made under the provisions of this section and shall continue to have the same force and effect after such commencement until it is amended, varied, rescinded or superseded under the provisions of this section. " ( 14. ) SUBMISSION of Mr. Sanghi, learned Counsel is that explanation which has been added to the Notification No. 23/92 runs counter to the provisions of the parent Act and there being transgression of the parent enactment the Notification is unconstitutional. ( 15. ) UPON careful perusal of the main provisions of the enactment and the explanation added to the notification we are of the considered opinion that there is no transgression in the notification. We have scrutinised the relevant portion of the explanation in detail. It is perceptible that the terms man made, synthetic, artificial would be given same meaning in relation to the textile material and this is what has been incorporated by way of explanation. What has been introduced by incorporating the words not containing in synthetic textile material, in our considered opinion can not by anything but clarificatory. The term yarn is a genus and when various species fit into the genus it is inappropriate to say that there is disharmony and anomaly. It is well settled in law that the terms used in the statute or notifications of this nature should obtain the meaning from language used in common parlance or popular sense. This view of ours gets support from the decisions rendered in the cases of Indian Aluminium Cables Ltd. Vs. Union of India and others, 1985 (21)E. L. T. 3 (SC), Rohit Pulp and Paper Mills Ltd. Vs. Collector of Central Excise, 1990 (47) E. L. T. 491 (SC) and Union of India Vs. Aflon Engineering Corporation, 2000 (122) E. L. T. 334 (SC ). ( 16. ) WE may hasten to state here that the classification under Tariff act 55. Collector of Central Excise, 1990 (47) E. L. T. 491 (SC) and Union of India Vs. Aflon Engineering Corporation, 2000 (122) E. L. T. 334 (SC ). ( 16. ) WE may hasten to state here that the classification under Tariff act 55. 05 has been upheld by the Apex Court in the case of Collector of C. Ex. , hyderabad Vs. Priyadarshan Spg. Mills Ltd. , 1997 (94) E. L. T. 287, wherein it has been held as under:- "the question involved for decision is the classification of yarn manufactured from viscose staple fibre and non cellulosic soft waste (pollster waste ). The controversy is whether the classification has to be made under Heading No. 55. 05 or 55. 06 of the central Excise Tariff. In the present case, the Tribunal has held that the raw materials used in the disputed yarn were not synthetic staple fibre and, therefore, the proper classification was under Heading No. 55. 05 of the Central Excise Tariff. This view of the Tribunal in the present case has been clearly accepted by the revenue and a Circular No. 23/90, dated 1-11-1990 has been issued by the Board accepting this classification. There is thus no occasion to interfere in this appeal. ( 17. ) IN this context we may refer to the decision rendered in the case of Collector of Central Excise, Shilong Vs. Wood Craft Products Limited, 1995 (77) E. L. T. 23, wherein it has been held as under :- "we are of the view that the Tribunal as well as the High Court fell into the error of overlooking the fact that the structure of the Central Excise Tariff is based on the internationally accepted nomenclature found in the HSN and, therefore, be resolved with reference to the nomenclature indicated by the HSN unless there be an express different intention indicated by the Central excise Tariff Act, 1985 itself. The definition of a term in the ISI glossary, which has a different purpose can not, in case of a conflict, override the clear indication of the meaning of an identical expression in the same context in the HSN. In the HSN, block board is included within the meaning of the expression similar laminated wood in the same context of classification of block board. In the HSN, block board is included within the meaning of the expression similar laminated wood in the same context of classification of block board. Since the Central Excise Tariff Act, 1985 is enacted on the basis and pattern of the HSN, the same expression used in the Act must, as far as practicable, be construed to have the meaning which is expressly given to it in the HSN when there is no indication in the Indian Tariff of a different intention. " ( 18. ) IN the case of Rohit Pulp and Paper Mills Ltd. (supra), it has been held as under :- "when an exemption does not exclude from its purview only one item but a group of items. If the items mentioned in the group are totally dissimilar and it were impossible to see any common thread running through, it may be permissible to give the exceptions their widest latitude but when majority of them - undoubtedly, at least many of them can be brought under an intelligible classification then the rest of the items, would be looked with reference to logical restriction based on other restricted items. " ( 19. ) IN view of this we are of the considered opinion that the challenge on the score of excessive delegation does not merit consideration. ( 20. ) IT is next contended by Mr. Sanghi that even if the notification is in consonance with the language of the statute yet it is arbitrary as it invites the frown of the said Article in its second limb. Submission of the learned counsel is that there is excessive and exorbitant. Per contra, it is submitted by mrs. Nair that tariff rate of the duty has been fixed at Rs. 15/- per k. g. has been reduced to Rs. 8/- per k. g. and such reduction is in general public interest. If the petitioner has been affected in some manner or other, it can not be said to be violative of Article 14 of the Constitution. In this context we may refer with profit to the observation made by the Apex Court in the case of MA. Vrajlal manilal and Co. and another Vs. State of M. P. and another, 1986 (Supp.)Supreme Court Cases 201: "it is in the discretion of the legislature to decide the rate of tax to be imposed. In this context we may refer with profit to the observation made by the Apex Court in the case of MA. Vrajlal manilal and Co. and another Vs. State of M. P. and another, 1986 (Supp.)Supreme Court Cases 201: "it is in the discretion of the legislature to decide the rate of tax to be imposed. Sales and purchases of all raw materials need not be taxed at the same rate. Merely because the legislature has classified a class of goods or raw material for the purpose of imposition of higher rate of tax, Article 14 is not attracted if the classification has some reasonable basis. " ( 21. ) IT is well settled in law that when a larger public interest is served a lesser individual or even lesser collective interest has to succumb. Quite apart from the above the rate fixed is not so exorbitant to invite the wrath of Article 14 being arbitrary. Hence, we are of the considered opinion that the Notification is not hit by Article 14 of the Constitution of India. ( 22. ) THE next aspect that requires consideration is whether the petitioner is entitled to any exemption. Submission of Mr. Sanghi is that even if the notifications are accepted and the amended notification are considered there has been no proper adjudication by the competent authority. In this regard we may refer with profit to the decision rendered in the case of Aflon engineering Corporation (supra), wherein Their Lordships have held as under:- "10. In the matters of taxation it is not a right of any one to claim exemption. Rule 8 gives the discretion to the Central government to grant such exemption and to such items as it may think proper. . . . . " ( 23. ) BEFORE we part with the case we would like to observe though we have held the notifications to be intra vires however, liberty is granted to the petitioners to raise all possible contentions before the authority concerned that their product is still not covered by the impugned notification and they are entitled to the benefits. ( 24. ) WITH the aforesaid observations the both writ petitions stand dismissed without any order as to costs. Misc. Petitions dismissed.