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Gujarat High Court · body

2018 DIGILAW 520 (GUJ)

Bharat Vijay Mills v. Union of India

2018-02-16

AKIL KURESHI, B.N.KARIA

body2018
JUDGMENT : AKIL KURESHI, J. 1. The petitioners have challenged the corrigenda issued by the Government of India dated 15th January 1997 and 21st September 2000. They have also challenged a bunch of show cause notices produced at Annexure “E” collectively issued by the respondent no. 3-Deputy Commissioner of Central Excise, Kalol during the period between November 1996 to February 1999. The petition arises in the following background : 2. The petitioner no. 1 is a Company registered under the Companies Act, 1956 and is engaged in the manufacture of man-made fabric, popularly known as Corduroy, classified under the Heading 58.01 of Chapter 58 of the Schedule to the Central Excise Tariff Act, 1985 [“Tariff Act” for short]. The Cotton fabrics are admittedly classified under sub-headings 5801.22 and 5801.21 of the Tariff respectively; depending upon the fact that the fabric is processed or unprocessed. Till the passing of Budget for the Financial Year 1996-97, these items - whether processed or unprocessed fabrics, invited basic duty @ 20% ad valorem. For the unprocessed fabric, additional rate of duty was Nil and for the processed fabric, additional rate of duty was 20%. 3. The entire controversy started with passing of the Budget in September 1996 by the Parliament, which eventually became the Finance Act of 1996. The case of the Government of India is that initially, the Finance Bill which was presented by the Finance Minister proposed slashing of the rates of Excise duty to 10% basic duty for both kinds of fabrics, and to 10% of additional duty for processed fabric; while maintaining Nil rate of additional duty for unprocessed fabric. However, before the Finance Bill became an Act, a proposal was moved to make amendments in the Bill itself which would ensure that the unprocessed fabric would attract basic duty @ 12% and no additional duty. Whereas, in the case of processed fabric, the basic duty would be increased to 12% from 10% and the additional duty would be reduced from 10% to 8%, thereby still maintaining total collection of duty on processed fabric at the rate of 20% ad valorem. Such Budget proposals were accepted by the Parliament and the Finance Act, 1996 passed by the Parliament contained such amendments in the Schedule to the Tariff Act. Such Budget proposals were accepted by the Parliament and the Finance Act, 1996 passed by the Parliament contained such amendments in the Schedule to the Tariff Act. However, when the draft of the Act was sent for printing, there were certain inadvertent errors due to which the basic rate of duty prescribed for both processed and unprocessed fabric was printed as 10% ad valorem. It appears that the published rate of additional duty for processed fabric was also 10%. 4. According to the Union of India, realizing that such a printing error has crept-in in the Gazetted Finance Act, a corrigendum came to be issued on 15th January 1997 correcting such printing errors and specifying that the actual basic rate of duty for such fabric would be 12% - whether processed or unprocessed. On the basis of such publication, the respondent no. 3 started issuing show cause notices to the petitioners for collection of Excise duty @ 12% instead of 10%, which the petitioners were paying. First such notice was issued on 21st July 1997. In this notice, the respondent no. 3 pointed out that under the Budget for FY 1996-97, the total duty prescribed for processed fabric was 20% by prescribing 10% basic duty and 10% additional duty. Such rates were revised with effect from 11th September 1996 in which while retaining overall rate of duty @ 20% for processed fabric, its bifurcation was changed to 12% basic duty and 8% additional duty, and 12% basic duty on unprocessed fabric. He pointed out that the petitioners were paying basic duty in both the cases at the rate of 10% whereas it was paying additional duty of excise at the rate of 8% on processed fabric, and thus, there was short levy of duty of Rs. 10,25,625/- during the period from March 1996 to May 1997. He called upon the petitioners to show cause why such demand of duty not be confirmed with interest and penalty. 5. Similar notices were periodically issued upto February 1999 for different periods. 6. Case of the petitioners, however, is that whatever be the deliberations before the Parliament and ultimate decision by the Parliament, what was published in the Official Gazette was that under the Finance Act of 1996, manufacturers of unprocessed and processed fabrics would pay basic duty at the rate of 10% ad volarem. 6. Case of the petitioners, however, is that whatever be the deliberations before the Parliament and ultimate decision by the Parliament, what was published in the Official Gazette was that under the Finance Act of 1996, manufacturers of unprocessed and processed fabrics would pay basic duty at the rate of 10% ad volarem. The petitioners had collected such duty from the customers and discharged their liability towards Department by depositing the same in the form of Excise duty. The petitioners contended that the corrigendum dated 15th January 1997 was never made available to the public at large. Even, the Departmental authorities were in dark. The petitioners in their representations to the higher authorities ie., the Commissioner and the Chief Commissioner had asked for copy of such publication which was never supplied. In any case, even the said corrigendum dated 15th January 1997 did not correctly clarify the issue. There were printing mistakes in such corrigendum also. Going by corrigendum also, no intention could be discerned that the correct rate of basic duty on unprocessed and processed fabric would be 12%. The petitioners also pointed out that large number of authentic publishers of the Central Excise Manuals had printed 10% rate of duty in both cases. If at all, it was only by virtue of the later corrigendum dated 21st September 2000 that the situation got sufficiently cleared. Such corrigendum cannot be applied retrospectively to cover clearances of the petitioners which were made long before. 7. We would refer to the detailed materials on record, while dealing with the contentions of advocates from both the sides. For the present, in the background of above controversy, we may record their contentions. 8. Learned counsel Shri Dave for the petitioners submitted that all official publications of the Government of India, post-budget of 1996, prescribe 10% basic duty for unprocessed and processed fabrics. It is not clear what were the budgetary proposals placed before the Parliament. In any case, the applicable rates would be those which are made part of the law passed by the Parliament. In the present case, the official publications indicate that the Parliament had prescribed fresh rate of basic duty @ 10% on both kinds of fabric. The petitioners were therefore justified in carrying the belief that this was the correct rate of duty to be collected and paid to the Government. In the present case, the official publications indicate that the Parliament had prescribed fresh rate of basic duty @ 10% on both kinds of fabric. The petitioners were therefore justified in carrying the belief that this was the correct rate of duty to be collected and paid to the Government. Counsel further submitted that even if there was a typographical error, the same cannot be corrected with retrospective effect long after the Act was passed by the Parliament. First attempt was made by the Government by issuing a Corrigendum dated 15th January 1997. Copy of this corrigendum was never made available to the petitioners or similarly situated other industries. The entire purpose of publishing the revised rate of Excise duty, on the basis of which the public at large would manage the affairs, thus failed. Even when the petitioners requested the authorities to supply a copy of such corrigendum, the same was not supplied. Counsel for the petitioners submitted that even the corrigendum dated 15th January 1997 did not have desired effect, since corrections were not ordered to be made at the correct place. 9. In support of above contentions, counsel relied upon the following decisions : [a] Mahendra Lal Jaini v. State of UP & Ors., reported in AIR 1963 SC 1019 ; [b] State of Kerala & Ors. v. P.J Joseph, reported in AIR 1958 SC 296 ; [c] Union of India v. Ganesh Das Bhojraj, reported in 2000 [116] ELT 431 (SC); and [d] Pankaj Jain Agencies v. Union of India, reported in 1994 [72] ELT 805 (SC). 10. On the other hand, learned counsel Shri PY Divyeshvar and Dhaval D Vyas appearing for the Revenue and the Customs authorities strongly opposed the petition contending that mere printing error would not change the rate of duty prescribed by the Parliament under the law. All that these corrigenda did was to correct the printing errors and the same would therefore relate back to the date when the law was passed by the Parliament and therefore, what became the effective rate of duty. Shri Vyas in particular submitted that the petitioners were well aware of such development especially when the respondent no. 3 issued notices pointing out such facts to the petitioners. They cannot claim ignorance of the change in the prescribed rate of duty. Shri Vyas in particular submitted that the petitioners were well aware of such development especially when the respondent no. 3 issued notices pointing out such facts to the petitioners. They cannot claim ignorance of the change in the prescribed rate of duty. The petitioners had in fact paid additional duty on processed fabric at the rate of 8%. They therefore cannot avoid payment of basic rate of duty at 12%. He submitted that it is within the power of the Parliament to prescribe collection of duty with retrospective effect. The manufacturers cannot argue that on account of such retrospective levy of duty, it would not be possible for them to pass on the burden to the ultimate customers, and that therefore, any such law with retrospective effect should be held ultra vires. Counsel relied upon Full Bench judgment of the Bombay High Court in the case of Mohan Meakin Limited & Anr. vs. State of Maharashtra & Anr., reported in 1993 Mh.L.J 13. 11. To resolve the controversy, we may have a closer look at the materials on record. 12. As noted, before promulgation of the Finance Act, 1996 under sub-heading 5801.21 of Heading 5801 of Chapter 58, the Tariff Act prescribed 20% of the basic rate of duty on the processed fabric and Nil rate of additional duty. Likewise, under sub-heading 5801.22, on processed fabric, the basic as well as additional duty would be collected @ 20% each. In the Finance Bill which was initially presented before the Parliament on 22nd July 1996, the amendments proposed in these entries was that the basic rate of duty would be reduced to 10% and in case of processed fabric, rate of additional duty would also be brought down to 10%, whereas, Nil rate of additional duty would be maintained in case of unprocessed fabric. From the replies filed by the Government of India, however, we find that there was a re-think on these rates and the Finance Bill itself was amended. An amendment was moved on 9th September 1996 before the Parliament under which manufacturing of both kinds of fabrics would invite basic duty @ 12% and in case of processed fabric, additional duty would be levied @ 8%. According to these replies, Parliament eventually accepted such proposals in the Finance Act 1996. 13. In the affidavit dated 6th May 2005 filed on behalf of the respondent no. According to these replies, Parliament eventually accepted such proposals in the Finance Act 1996. 13. In the affidavit dated 6th May 2005 filed on behalf of the respondent no. 1, it has been further clarified that - “...The salient features of the modifications of the proposals contained in the Finance Bill 1996 which are relevant for the purpose of this case were as follows : [i] The cut-off point for concessional rates of AED [ST] and BED, both at 5%, applicable to 100% cotton fabrics has been increased to Rs. 30/- sqm. [ii] The rate of BED in respect of other fabrics has been increased from 10% to 12% but that of AED reduced from 10% to 8%. In terms of the notifications Nos. 26/96-CE and 27/96-CE dated 3rd September 1996, a manufacturer of textile articles of description as contained in Chapter sub-heading 5801.21 and 5801.22 was required to pay BED/AED at 10%/Nil and 10%/8% respectively with effect from 4.09.1996. A copy of the Circular dated 3.09.1996 and the copies of the notifications referred to therein are annexed as Annexure-II. 7. The above proposals to modify the original proposals contained in the Finance Bill 1996 were introduced through an official amendment to the Bill on the 9th September 1996 and the Parliament passed the Finance Bill with this amendment. Hence, the tariff rate for these headings of Chapter 58 became 12% on passage of the Bill and subsequent assent to it by the President of India. 8. It is respectfully submitted that the Gazette of India, Extraordinary published in Part II Section 1 on the 28th September 1996 by the Ministry of Law and Justice, Legislative Department contained the Act of Parliament which received the assent of the President on that date and titled it as, “The Finance [No. 2] Bill, 1996, 33 of 1996 dated 28th September 1996. Apart from the above error in printing, the said publication in the Official Gazette carried several other clerical errors which were corrected by a Corrigenda dated 15th January 1997 published by the Ministry of Law and Justice, Legislative Department. Apart from the above error in printing, the said publication in the Official Gazette carried several other clerical errors which were corrected by a Corrigenda dated 15th January 1997 published by the Ministry of Law and Justice, Legislative Department. The said publication did not cure all the mistakes pointed out at the time of publication of the Finance Act, 1996 and hence, a Corrigenda was subsequently issued on 21st September 2000 to incorporate the following changes, namely; at page 52, in line 39, for 10%, read “12%”; at page 59, in line 9, for “6.M.M”, read “6MM”. In the corrigendum dated the 15th January 1997, the line 39 of the Finance Bill, 1996 in page 52 was wrongly quoted as line 31. Thereafter, the corrections as set out hereinabove were carried out during the year 2000, to correct the error with regard to identification of the line in which the correction was carried out.” 14. The stand of the Government thus clearly is that the intention of the Parliament always was to revise the basic rate of duty for both – processed and unprocessed fabrics to 12% and that is how, the Act itself was passed. However, in the Gazetted Notification, published on 28th September 1996, there were certain printing errors. These were sought to be corrected through corrigendum dated 15th January 1997. The publication of rate of 10% of the basic duty was to be read as 12%. The Government also admits that even this corrigendum contained certain errors, in particular where the corrigendum refers to line 31 of page 52 of the Finance Act to be read as 12% instead of 10%. It is now admitted that even this reference to line 31 was erroneous and had a reference to line 39 of page 52. To correct this error, further corrigendum dated 21st September 2000 was issued. 15. We have no hesitation in accepting these explanations of Union of India. We do not have for a moment any doubt that all along what was presented before the Parliament, after the amendment in the Finance Bill and what was accepted by the Parliament was the prescription of basic rate of duty at 12% for unprocessed as well as processed fabric. The affidavits filed by the responsible officers of the Union of India need not be doubted. The affidavits filed by the responsible officers of the Union of India need not be doubted. We have therefore no reason to believe that the budgetary proposals did not carry such amendment or that the Parliament did not accept such proposals; as is stated before us. 16. Inevitable conclusion therefore one would reach is that the Finance Act, 1996 revised the rate of basic duty for unprocessed and processed fabric @ 12% ad valorem. Correspondingly, the structure of additional Nil rate of duty for unprocessed fabric was maintained and additional duty @ 8% for the processed fabric was prescribed. However, the question is whether the petitioners can be asked to pay basic duty @ 12%, in the facts of the present case. 17. This peculiar question of ascertaining the rate of duty to be collected from the manufacturer different from what the Parliament prescribed under the Finance Act, arises on account of various errors committed by the respondents in publication of such rate of duty. What has come on record as undisputed, or at any rate indisputable position is that after the Finance Act 1996 was passed, it received ascent of the President and thereby became a law, the official publications printed 10% as basic rate of duty for unprocessed as well as processed fabric. In fact, the same error also continued while printing the additional rate of duty for processed fabric at 10% instead of 8%; as per the amendments. As noted, first attempt to correct this error was made through corrigendum dated 15th January 1997. This corrigendum could be of no great assistance to the respondents – firstly, it was made part of an Ordinance called, “The Depositories Related Laws [Amendment] Ordinance, 1997.” This Ordinance was promulgated by the President since the Parliament was not in session and there was a need to take immediate action. This Ordinance was a common ordinance to amend various Acts, such as, the Indian Stamp Act, 1899; the State Bank of India Act, 1955; the Companies Act, 1956; the State Bank of India [Subsidiary Banks] Act, 1959; the Industrial Development Bank of India Act, 1964, the Banking Companies [Acquisition & Transfer of Undertakings] Act, 1970; the Banking Companies [Acquisition & Transfer of Undertakings] Act, 1980 and the Depositories Act, 1996. The Ordinance thus aimed at amending various laws principally concerning the Banking Institutions. The Ordinance thus aimed at amending various laws principally concerning the Banking Institutions. At the end of the ordinance, the said corrigendum dated 15th January 1997 was appended. Thus, the corrigendum was published as a part of an ordinance. Whereas, the Ordinance pertains to completely unrelated subjects and Acts and had nothing to do with the Central Excise Act, or Central Excise [Tariff] Act. Further, this corrigendum also failed to achieve its desired object. The object of the corrigendum was to prescribe 12% as the correct rate of basic duty for processed and unprocessed fabric. The corrigendum made many corrections in the published Finance Act, 1996. One of them was, “in page 52, in line 31 for 10% read 12%”. It is an admitted position that line 31 had no reference to the rate of duty for fabric in question. Any manufacturer of the product, even if therefor had chanced upon this corrigendum and had a reason to pursue the same, would not be in any manner wiser that the correct rate of duty prescribed by the Parliament under the Finance Act, 1996 for his manufacturing activity was 12% and not 10%. No reasonable person can be expected to inquire further and collect information as to which line this corrigendum refers to, if not line 31 of the document in question. The duty of the manufacturer would be to be reasonably careful, apprise himself of all publications and notifications of the Government of India concerning his product and prescribed rate of duty. Such reasonable duty to take care would not travel beyond as to expect him to extrapolate a corrigendum in the nature of correction by correctly reading the line in the corrigendum as to fit the correct place in the document and than modify and read for himself. What the respondents expected the petitioner and other similarly situated manufacturers to do was to make self correction in the corrigendum dated 15th January 1997 and read the reference to line 31 as the reference to line no. 39. We have perused page-52 of the document in question where the corrections are sought to be made. It is impossible to deduce that in the corrigendum dated 15th January 1997, the reference to the rate of duty was with respect to line no. 39 and not 31; as printed. This page contains various entries. 39. We have perused page-52 of the document in question where the corrections are sought to be made. It is impossible to deduce that in the corrigendum dated 15th January 1997, the reference to the rate of duty was with respect to line no. 39 and not 31; as printed. This page contains various entries. These are in the nature of amendments in the Schedule to the Central Excise Tariff Act. Varying rates of duty are prescribed under the new prescriptions. At atleast at one more place, the revised rate of duty prescribed under the said Act is 10%. There is no warrant or any indication in the said corrigendum to presume that the reference is only with respect to various fabrics referred to in the concerned para pertains to line no. 39. 18. This entire confusion was cleared by the subsequent corrigendum dated 21st September 2000, which even the petitioners would not be in a position to argue that it did not refer to the correct entry, or did not make required corrections. However, such corrections made in the year 2000, long after the rate of duty was published by the Government of India in its official publications, which was also carried by several authentic publishers in their Excise Manuals cannot be applied with retrospective effect. By the time this corrigendum was issued, the entire issue had become academic. The dispute survived only till February 1999, but what the Department now wishes to do is to apply such correction made in September 2000 for clearances made by the petitioners between November 1996 to February 1999. If we permit the Department to do so, we would be breaching the basic principle of collection of duty or Cess by the Government at the rate other than the published rates. Publication of the rate of duty has an important purpose of making the manufacturers aware about the prevailing rate of duty which they would be required to deposit and manage their affair accordingly. It is undoubtedly true that the complex economic structure of the modern economies require periodical adjustment of tax rates. Rate of duty can be changed abruptly, or even if there are sufficient reasons, with retrospective effect. Such changes would be notified in the official Gazette. It is undoubtedly true that the complex economic structure of the modern economies require periodical adjustment of tax rates. Rate of duty can be changed abruptly, or even if there are sufficient reasons, with retrospective effect. Such changes would be notified in the official Gazette. Main object of such publication being to put the public at large and the affected tax payers/manufacturers in particular to notice about such changes through official source. However, the duty in the present case is sought to be collected at rates higher than the published rates by making correction nearly three years after the rates were published and erroneously re-published. Had the time gap between the incorrect publication and the correction made by the Government of India being brief; had the correction been made promptly and such corrections given wide publicity, the issue perhaps would stand on slightly different footing. Present is the case of series of errors which had every possibility of misguiding the manufacturer into believing that as per the Finance Act, 1996, the rate of duty prescribed is 10%. 19. This last conclusion would not change in any manner simply because the respondent no. 3-Deputy Commissioner had issued notice to the petitioners. Firstly, the proposals in the show cause notice need not necessarily be always sustainable. Secondly, the show cause notice did not contain any information or declaration which the petitioners now claim that they were not aware about. The show cause notice merely asserted that the correct rate of duty was 12% and not 10%. Further, the show cause notice did not supply any material or document to the petitioners which would with reasonable certainty show that the publication of 10% of duty by the Government of India was an error and the same was corrected through proper mechanism. In other words, the respondents had not produced a copy of the corrigendum dated 15th January 1997 so as to impute its knowledge to the petitioners. Even if it was produced; as noted, this corrigendum did not in any manner have the desired effect of correcting the publication of rate of duty from 10% to 12%, if it at all had compounded the confusion. 20. The contention that corrigendum dated 21st September 2000 must relate back to the original publication of rate of duty and that in any case the Parliament has power to make law with retrospective effect cannot be accepted. 20. The contention that corrigendum dated 21st September 2000 must relate back to the original publication of rate of duty and that in any case the Parliament has power to make law with retrospective effect cannot be accepted. Firstly, the corrigendum is in the nature of a publication required since the original publication carried a wrong figure. The corrigendum is not a piece of legislation. The question of retrospective effect of such correction cannot be equated with exercise of the power of the Parliament to make a law with retrospective effect. If the corrigendum was needed to apprise the public at large about the correct rate of duty, applying it from the original date of prescription of the revised rate of duty would frustrate the purpose. As correctly pointed out by Shri Dave, subsection 1 of Section 38 of the Central Excise Act provides that all rules made and notifications issued under the Act shall be published in the Official Gazette. 21. In case of Mahendra Lal Jaini v. State of U.P & Ors. [Supra], the Supreme Court observed that a Notification which was issued superseding the earlier notification was never published in the Official Gazette, and therefore, would have no effect. 22. In case of State of Kerala & Ors. v. P.J Joseph [Supra], it was observed that the fees cannot be collected for license without publication thereof. 23. In case of Union of India v. Ganesh Das Bhojraj [Supra], it was observed that the exemption notification would take effect as soon as it is published in the Government Gazette. Publication in the Government Gazette is recognized as an established practice of bringing a rule or subordinate legislation to the notice of the persons concerned. It was observed that thereafter individual notices to members of public would not be necessary and the interested persons can acquaint himself with the contents of the notification published in the Gazette. Similar view was expressed in the case of Pankaj Jain Agencies v. Union of India [Supra]. 24. Before closing, we may add two important peripheral grounds. First is that, in the representations the petitioner made to the Departmental authorities, they had been harping upon non supply of Corrigendum dated 15th January 1997. It appears that the Departmental authorities did not readily have copies thereof. In any case, the same were never supplied. 24. Before closing, we may add two important peripheral grounds. First is that, in the representations the petitioner made to the Departmental authorities, they had been harping upon non supply of Corrigendum dated 15th January 1997. It appears that the Departmental authorities did not readily have copies thereof. In any case, the same were never supplied. Secondly, the petitioners in such representations had argued that they have been singled out and other manufacturers are clearing goods with the knowledge of the Department by paying 10% basic duty. This would be additional reason why we would not allow the respondents to confirm the duty at higher rate. However, we notice that this last allegation is not made in the writ petition. The respondents therefore cannot be faulted for not responding to such allegation. These are only additional and peripheral reasons and not the foundation of our judgment. 25. In the result, show cause notices, copies of which are collectively produced at Annexure “E”, are setaside. Petition is allowed and disposed of accordingly.