Collector of C. Ex. Vs. Indian Acrylic Ltd. - Court Judgment

Judgment

Exemption is, however, not available to a factory producing man-made staple fibre and man-made filament yarn of organic polymers by manufacturing process either by (a) polymerisation of organic polymers or (b) chemical transformation of natural organic polymers. The benefit under this Notification was claimed by the respondents on the ground that they were not carrying out the process of polymerisation of organic polymers. During the course of visit of Central Excise officers to the factory premises of the respondents, their Chemical Engineer informed the Department that during the course of manufacture, acrylonitrile (AN) and methyl acrylate (MA) are converted into organic polymer through the process of polymerisation before these are finally processed and converted into synthetic staple fibre and that synthetic fibre waste that arises during the process is itself an organic polymer of basic raw material. officers of the Central Excise Department also found a booklet defining the process of manufacture of acrylic staple fibre, from the scrutiny of which it came to be revealed that the respondents were engaged in the manufacture of acrylic fibre waste through the process of polymerisation of organic polymers prepared by mixing acrylonitrile and other additives. Hence a show cause notice was issued on 29.05.1997 alleging fraudulent availment of the benefit of Notification 85/95 from 01.11.1996 to 30.04.1997 during which period the respondents had generated and cleared acrylic staple fibre waste valued over Rs. 1.53 crores and short paid central excise duty thereon.

The notice raised a demand of differential duty of Rs. 64,87,181/- and also proposed levy of interest under Section 11AB and imposition of penalty under Rule 173Q read with Section AC. After issue of the notice, the matter was referred by the adjudicating authority to the CRCL. Vide letter dated 29.06.1998, the Chief Chemist, CRCL intimated that the process undertaken by the respondents is polymerisation of monomers and not polymerisation of polymers. The Chief Chemist also stated that the wording of the Notification 8/96-CE dated 23.07.1996 as amended by Notification 4/97-CE dated 01.03.1997 (both successors to Notification 85/95-CE) appears to be incorrect because it is not technically feasible to polymerise organic polymers and he suggested that the matter may be referred to the Board for seeking clarification as to whether the expression "polymerisation of organic polymers" is to be interpreted in its literal sense or intention or spirit of the Notification is to be taken into consideration for deciding the case.

The Commissioner held that it is settled law that an exemption Notification in a fiscal statute is to be interpreted strictly without doing any violence to the language, that the adjudicating officer being a quasi judicial authority is not required to take any guidance from any superior authority or the Board in this regard as his order is quasi judicial Applying the language of the Notification, he held that the respondents had correctly availed of the benefit of concessional rate of duty under Notification 85/95, and dropped the demand. Hence this appeal.

2. We have heard Shri Satnam Singh, learned SDR and Shri G.S. Bhangoo, learned Advocate.

3. It is not the case of the Revenue that the respondents carried out the process of polymerisation of organic polymers. The Chief Chemist has clearly opined that the process undertaken by the respondents is polymerisation of monomers. However, the Revenue seeks a departure from the Rule of literal construction of an exemption Notification and urges us to go into the intention and spirit of the Notification viz. denial of benefit of concessional rate of duty to factories where manufacturing process involves polymerisation of organic monomers. The matter will become clear on a reproduction of the grounds of appeal filed by the Revenue : 1. That Commissioner has erred by taking a literal meaning of particular unhappily worded phase in the notification which reading initials not only the intention and spirit of the notification, which is only a theoretical and literal meaning not in tune with the actual manufacturing practices in synthetic textile industry, but which makes certain part of the notification redundant and meaningless. It is not doubt general Rule of interpretation that while taking a view on the disputed words intention of the legislature has primarily to be gathered from the language used and any construction which requires for its support addition or substitution of words for which result in rejection of words as meaningless has generally to be avoided. Thus efforts should be made to give meaning to each and every word used by the legislation. But Commissioner has not appreciated that there are exceptions also, where a different approach may be warranted and justified to do justice and give proper meaning to the statute as a whole.

The Notification inter alia provides that the concessional rate for waste will not apply to units which manufacture fibres by polymerisation of organic polymers. All the evidence brought on record clearly establishes that no fibre can be manufactured by polymerisation of polymers, these are manufactured by polymerisation of monomers only. If we take a very strict and literal view only of the language of the Notification, Commissioner should have appreciated that this particular condition '(a)' in the proviso to the Notification No. 85/95-CE. becomes infructuous and redundant, as no fibre manufacturing unit can manufacture fibres by the process of polymerisation of polymers.

2. Commissioner has not appreciated that there are instances where rejection of words used in the statute may be proper and permissible so that a construction which reduces the stature to a nullity is avoided. Where the alternative lies between either supplying by implication words which appear to have been accidentally omitted or improper words used whose construction deprives certain existing words of all meaning, it is permissible to supply the proper words.

A departure form the Rule of literal construction may be legitimate so as to avoid any part of the statute becoming meaningless.

Therefore, Commissioner should have appreciated that the intention and scope of the part '(a)' to proviso to Notification in this particular case was to be interpreted judiciously by denying the benefit of exemption to the manufacturers producing fibre by polymerisation of monomer the established practice and not polymerisation of polymers which is nowhere undertaken in the industry as also opined clearly by the Chief Chemist. The word polymer instead of monomer used improperly and prima fade inadvertently in part '(a)' of proviso should in the circumstances not have been given its literal meaning. Considering the actual manufacturing process used in the industry i.e. by polymerisation of organic polymer the part (a) to proviso should have been interpreted either be omitting the inadvertently or improperly used words 'of organic polymers' or substituting it by 'of organic monomer', and benefit of notificaiton should have been denied to the unit generating waste of fibres by the process of polymerisation of organic monomers (as admitted and stressed by it).

4. To put it simply, the Revenue seeks us to substitute the expression of "polymerisation of organic monomers" for the expression "polymerisation of organic polymers" in Notification 85/95. However, as rightly held by the Commissioner who has relied upon the Supreme Court judgment in the case of Hansraj Gordhandas v. H.H. Dave, Assistant Collector and HMM v. Collector reported in 1996 (87) E.L.T. 593 (S.C.), that there is no room for any intendment in a taxing statute, and regard must be had to the clear meaning of the words of the Notification and an exemption Notification is to be construed strictly having regard to the language employed therein, we have to go by the language of the Notification. Since it is not disputed that the respondents did not carry out the process of polymerisation of organic polymers, they are not excluded from the purview of Notification 85/95-CE and are eligible to the benefit of concessional rate of duty provided thereunder.

5. The further charge in the show cause notice that the respondents had availed of the benefit of the Notification fraudulently by misdeclaration has also been dropped by the Commissioner on the ground that they had correctly stated in their classification list that they are not polymerising the organic polymers and, therefore, they have not misdeclared any facts to the Department. The appeal memorandum filed by the Revenue does not contest this finding and we, therefore, uphold the same.

6. In the result, we confirm the impugned order of the Commissioner of Central Excise and reject the appeal.