TaxTMI 
TaxTMI 
1981 (9) TMI 134
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....id materials in combination with old and used re-reliable scrap. 'The finished product manufactured by the plaintiff is an excisable item under Tariff Item 26AA (ia) of the First Schedule to the Central Excises and Salt Act, 1944, (hereinafter referred to as 'the Act'). However, on and with effect from Dec. 1, 1963, by virtue of the Notification No. 206/63, dated Nov. 30, 1963, the products manufactured by the plaintiff were exempt from payment of the whole of the excise duty. The specific case of the plaintiff was that it had purchased second class rejected rails which were offered by Hindustan Steel Ltd., Bhillai F.O.R. destination and that out of such rails, different products were manufactured and sold in open market. The rails purchased accordingly were old and used re-rollable scrap within the meaning of Notification No. 206/63 and, therefore, the products manufactured by the plaintiff were exempt from the payment of the whole of the excise duty leviable on such products. However, the excise authorities took the view that the products manufactured by the plaintiff were not entitled to any exemption and, therefore, by the impugned demand notice, dated April 4, 1967, issued und....
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....f Tariff Item 26AA(ia) of the First Schedule. Though such products were manufactured from untested second class rails supplied by Hindustan Steel Ltd., such rails could not be termed as old and used re-reliable scrap within the meaning of the Exemption Notification No. 206/63. In the opinion of M.C. Trivedi, J., there was no evidence to support such claim on the part of the plaintiff and the rails supplied by Hindustan Steel Ltd. were, in fact, fresh, unused re-rollable scrap. In order to claim exemption where the end product is manufactured out of fresh unused re-rollable scrap, it was necessary for the plaintiff to satisfy that appropriate amount of excise duty was already paid on such scrap. Since the plaintiff had failed to satisfy that an appropriate amount of excise duty was already paid on the fresh unused re-rollable scrap utilised by it in the manufacture of its end-product, it was not entitled to exemption under Notification No. 206/63. In the result, the appeal was allowed and the decree passed by the trial Court was set aside. 6. Be it noted at this stage that so far as the present Letters Patent Appeal is concerned, the sole question which was debated before the Cou....
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....t of the rails purchased from Hindustan Steel Ltd. were exempt from the payment of the whole of the excise duty leviable under Tariff Item 26AA(ia) by virtue of the Exemption Notification No. 206/63. The answer to the question depends upon the true and proper interpretation of the Exemption Notification No. 206/63, dated Nov. 30, 1963 (Ex. 49) read in the light of the evidence on record. The exemption notification is set out in extenso hereunder : "In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 131/62, Central Excise, dated 13th June, 1962, the Central Government hereby exempts Iron or Steel Products falling under Sub-item (ia) of Item No. 26AA of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) made from any of the following materials or combination thereof, namely :- (i) Fresh unused re-rollable scrap on which the appropriate amount of duty of excise has already been paid; (ii) Semi-finished steel including blooms, billets, slabs, sheet bars, tin bars and hoe bars, on which the a....
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....refore, the end products were entitled to exemption from the payment of the whole of the excise duty. 13. Turning now to the question of the construction of the exemption notification, it is not in dispute between the parties that at the material time, the exemption notification together with the explanation as stated above was in force. Therefore, for the purpose of construing the phrase "old and used re-rollable scrap" used in the exemption notification, it would be permissible to invoke the aid of the explanation which is a part and parcel of the exemption notification. It hardly needs to be mentioned that an explanation is sometimes added to include something within, or to exclude something from, the ambit of the main enactment or to add to or detract from the connotation of some word occurring in the main enactment. 14. The exemption notification exempts from the payment of the whole of the excise duty leviable on iron and steel products, which are otherwise excisable under Tariff Item 26AA(ia), provided such products were made from materials or combination of materials specified in the exemption notification. Three types of materials are specified in the notification....
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....used re-rollable scrap", they would be treated as having been comprised within the same. 15. Next, we must consider what is meant by "unserviceable rails". The word "unserviceable" occurs in the notification which is issued under a taxing statute. The word is not defined either in the Act or the rules or the notification itself. However, it is a word of every day use and it must be construed in its popular sense, that is to say, that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it." (see Ramavatar v. Asstt. Sales Tax Officer, AIR 1961 SC 1325). We shall presently deal with the question as to when persons dealing in rails would consider them unserviceable. However, we may also at this stage consider the technical or etymological meaning of the word "unserviceable". 16. In order to understand the true import of the word "unserviceable", it would be necessary to ascertain the true meaning of the word "serviceable". The said word has many meanings. The appropriate meaning in the context must be found out. In the Oxford English Dictionary, Vol. IX, page 518, the meaning of the word "Serviceable" when used in the context....
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....erence which can be drawn on the basis of the pleadings of the parties and the logical effect of the evidence led at the trial is that the materials in the shape of second class rails, which were rejected by the railway and purchased by the plaintiff and which were used in the manufacture of its end products, were unserviceable rails. Such unserviceable rails would, therefore, be "old and used re-rollable scrap" within the meaning of the exemption notification. Since such unserviceable rails were used by the plaintiff in the manufacture of its end products, the products were exempt from the payment of the whole of the excise duty leviable on them. 18. M.C. Trivedi, J., with respect, failed to consider the effect of the explanation, and, he, therefore, took the view that untested rails supplied by Hindustan Steel Ltd. to the plaintiff could never be said to be "old and re-rollable scrap". In his opinion, those rails were "fresh unused re-rollable scrap" and since the plaintiff had failed to satisfy the excise authorities that an appropriate amount of duty of excise had already been paid on such rails, the products manufactured by the plaintiff were not entitled to exemption. As e....