1986 (8) TMI 60 - SC - Central Excise

Notifications under Rule 8(1) Central Excise Rules, 1944 exempt only basic excise duty, not special or additional duties

UNION OF INDIA AND OTHERS Versus MODI RUBBER LIMITED AND OTHERS

The SC allowed the appeals and dismissed the writ petition, holding that notifications issued under Rule 8(1) of the Central Excise Rules, 1944 without ... Levy of special duty - manufacture of tyres - Item 16 in the First Schedule reads 'Tyres and Tubes'​​​​​​​ - Whether this expression 'duty of excise' is limited in its connotation only to basic duty of excise levied under the Central Excises and Salt Act, 1944 or it also covers special duty of excise levied under various Finance Bills and Acts, additional duty of excise levied under the Additional Duty of Excise (Goods of Special Importance) Act, 1957, and any other kind of duty of excise levied under a Central enactment? Held that:- In the present notifications, the words `duty of excise leviable under the Central Excises and Salt Act, 1944' do not find a place as in the other notifications relied upon by the respondents. But, that does not necessarily lead to the inference that the expression `duty of excise' in these notifications was intended to refer to all duties of excise including special and auxiliary duties of excise. The absence of these words does not absolve us from the obligation to interpret the expression `duty of excise' in these Notifications. We have still to construe this expression what is its meaning and import and that has to be done bearing in mind the context in which it occurs. We have already pointed out that these notifications having been issued under Rule 8(1), the expression `duty of excise' in these notifications must bear the same meaning which it has in Rule 8(1) and that meaning clearly is excise duty payable under the Central Excises and Salt Act, 1944 as envisaged in Rule 2 clause (v). The respondents have in fact produced several notifications granting exemption in respect of special duty of excise or additional duty of excise and in each of these notifications, we find that the source of power is described as sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 read with the relevant provision of the statute levying special duty of excise or additional duty of excise by which the provisions of the Central Excises and Salt Act, 1944 and the Rules made thereunder including those relating to exemption from duty are made applicable. Moreover the exemption granted under all these notifications specifically refers to special duty of excise or additional duty of excise, as the case may be. It is, therefore, clear that where a notification granting exemption is issued only under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 without reference to any other statute making the provisions of the Central Excises and Salt Act, 1944 and the Rules made thereunder applicable to the levy and collection of special, auxiliary or any other kind of excise duty levied under such statute, the exemption must be read as limited to the duty of excise payable under the Central Excises and Salt Act, 1944 and cannot cover such special, auxiliary or other kind of duty of excise. The notifications in the present case were issued under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 simpliciter without reference to any other statute and hence the exemption granted under these two notifications must be construed as limited only to the duty of excise payable under the Central Excises and Salt Act, 1944. The argument of the respondents in the appeals was that the exemption granted under this notification was not limited to the duty of excise payable under the Central Excises and Salt Act, 1944 but it also extended to special duty of excise, additional duty of excise and auxiliary duty of excise leviable under other enactments. This argument plainly runs counter to the very language of this notification. It is obvious that the exemption granted under this notification is in respect of 'so much of the duty leviable thereon under Item 16 of the First Schedule to the Central Excises and Salt Act, 1944 as is in excess of 15%' and these words describing the nature and extent of the exemption on their plain natural construction, clearly indicate that the exemption is in respect of duty of excise leviable under the Central Excises and Salt Act, 1944 and does not cover any other kind of duty of excise. No more discussion is necessary in regard to this question beyond merely referring to the language of this notification. Thus, we must hold that the Central Excise Laws (Amendment and Validation) Act, 1982 is merely declaratory of the existing law and hence its constitutional validity cannot be assailed. We accordingly, allow the appeals and dismiss the writ petition. We set aside the judgment of the High Court and hold that under the Notifications dated 8th November, 1967, 1st August, 1974 and 1st March, 1981 the respondents in the appeals and the petitioners in the writ petition are entitled to exemption only in respect of the basic duty of excise leviable under the Central Excises and Salt Act, 1944 and are not entitled to claim any exemption in respect of special duty of excise or additional duty of excise or auxiliary duty of excise. The respondents in the appeals and the petitioners in the writ petition will pay the costs of the Union of India. Issues Involved:1. Interpretation of the term 'duty of excise' in Notifications No. 123/74-C.E. and No. 27/81-C.E.2. Constitutional validity of the Central Excise Laws (Amendment and Validation) Act, 1982.Detailed Analysis:1. Interpretation of the term 'duty of excise' in Notifications No. 123/74-C.E. and No. 27/81-C.E.The primary issue in these appeals and writ petition was the interpretation of the term 'duty of excise' in the two notifications issued under Rule 8(1) of the Central Excise Rules, 1944. The question was whether this term referred exclusively to the basic duty of excise levied under the Central Excises and Salt Act, 1944, or if it also encompassed special duty of excise, additional duty of excise, and any other kind of excise duty levied under various Finance Acts and other Central enactments.The court noted that the term 'duty' in the Central Excise Rules is defined in Rule 2(v) to mean 'the duty payable under Section 3 of the Act.' Therefore, the exemption granted under Rule 8(1) could only apply to the duty of excise payable under the Central Excises and Salt Act, 1944. The court emphasized that the language of the notifications must be interpreted in the context in which it appears. Since the notifications were issued under Rule 8(1), the term 'duty of excise' must be interpreted as referring to the duty of excise payable under the Central Excises and Salt Act, 1944.The court also considered the historical context, noting that when the first notification was issued on 1st August 1974, there was no special duty of excise on tyres. Special duty of excise was introduced later in 1978 through various Finance Acts. Therefore, it would be unreasonable to assume that the Central Government intended to grant exemptions for duties that did not exist at the time the notification was issued.Furthermore, the court observed that when the Central Government intended to grant exemptions from duties other than the basic duty of excise, it explicitly mentioned such intentions in the notifications. The absence of such specific language in the notifications in question indicated that the exemptions were intended only for the basic duty of excise.2. Constitutional validity of the Central Excise Laws (Amendment and Validation) Act, 1982The second issue was the constitutional validity of the Central Excise Laws (Amendment and Validation) Act, 1982. This Act was enacted to provide statutory rules for interpreting the term 'duty of excise' in exemption notifications and to limit the term to the basic duty of excise levied under the Central Excises and Salt Act, 1944.The court held that the Central Excise Laws (Amendment and Validation) Act, 1982, was merely declaratory of the existing law. Since the court had already interpreted the term 'duty of excise' in the notifications as referring only to the basic duty of excise, the Act did not introduce any new principles but merely clarified the existing legal position. Therefore, its constitutional validity could not be challenged.Conclusion:The appeals were allowed, and the writ petition was dismissed. The court set aside the judgment of the High Court and held that under the Notifications dated 8th November 1967, 1st August 1974, and 1st March 1981, the respondents were entitled to exemption only in respect of the basic duty of excise levied under the Central Excises and Salt Act, 1944. They were not entitled to claim any exemption in respect of special duty of excise, additional duty of excise, or auxiliary duty of excise. The respondents were ordered to pay the costs of the Union of India.