Ruma Pal, J.
1. The petitioners carry on business of manufacturing jute. The question involved in this writ petition is whether jute bags with polythene liner are entitled to the benefit of Modification No. 65/87-C.E. dated 1.3.87 (as amended) issued under Rule 8(1) of the Central Excise Rules 1944.
2. The facts of the case are not in dispute. The bags in question have been manufactured by the petitioners for some time past and are classified under Sub-heading No. 6301.00 of Chapter 63, Section XI to the Schedule of the Central Excise Tariff Act 1985 (referred to as the Act). Sub-heading No. 6301.00 relates to textile articles not elsewhere specified including blankets (other than of wool), tarpaulins, tents, sails for boats. The prescribed rate of duty against the subheading is 12% ad valorem. The Notification No. 65/87-CE dated 1.3.87 as amended (referred to as the Notification) exempted various goods described in the notification from so much of the duty of excise leviable thereon as was in excess of the amount laid down in the corresponding entry in column 5 of the Table to the notification. The relevant entry in the table is Entry 06. This Entry reads:
' SI. Heading Description Rate Conditions
No. No. or of goods
sub-head-
ing No.
63.01 Sacks
and
bags Rupees 660
of per tonne
Jute '
In other words, the maximum Excise duty on sacks and bags of jute was Rs. 660/- per tonne.
3. The petitioners submitted Classifications Lists claiming exemption under the said notification in respect of the said polythene lined jute bags. The classification lists gave full particulars of the bags manufactured by the petitioners including inter alia the weight of the jute cloth, weight of the polythene lining and the twine. The classification lists were approved and the petitioner was granted the benefit of the notification. In the same manner the petitioners submitted classification lists effective from 17.2.91, 5.4.91, 8.4.91 and 19.8.91. The last three classification lists were approved by the respondent no. 1. As far as the first classification list was concerned, no approval was granted and on 7th January 1992 the respondent no. 1 issued a notice to show cause to the petitioner in which it was noted that the petitioner no. 1 had submitted a classification list dated 17.2.91 in respect of the bags containing polythene lining under sub-heading 6301.00 claiming assessment of basic excise duty at Rs. 660/- in terms of the said notification. The show cause went on to say that although the bags in respect of which the exemption was claimed by the petitioners were classifiable under subheading no. 6301.00, the petitioners were not entitled to the benefit as the bags had not been manufactured entirely of jute and was not known as sacks or bags of jute in commercial parlance. The petitioner no. 1 was accordingly asked to show cause why excise duty @ 12% ad valorem plus 5% special on basic plus cess at Rs. 132/- per MT should not be realised in respect of the said bags for the relevant period. The petitioners replied to the show cause notice on 12.3.92. They stated that the polythene bags were purchased by the petitioners from outside and were inserted in the jute bags manufactured by the petitioners and stitched in. The weight of the jute bags including the weight of the jute twine used sewing worked out to 453 grams against the weight of the polythene bags the weight of which was 12 grams. According to the petitioners the polythene bags retained their identity and worked out only to 11.18% of the total weight of the bags. The respondent no. l's notice was also drawn to the fact that three classification lists for the period subsequent to the priod covered by the classification list in question had been approved.
4. By an order dated 21.4.92 the respondent no. 1 rejected the contentions of the petitioner. This order has been impugned in these proceedings. The respondent no. 1 has stated that the R.G. 1 point of jute manufacture was at the baling stage. The polythene lining was inserted inside the bag before baling. It is stated in the impugned order that the operation of insertion of the polythene liner was therefore, incidental or ancillary to the completion of the finished product and was covered by Section 2(f) of the Central Excise and Salt Act, 1944. The second ground for rejection of the petitioner's case that though the bags were made out of jute but for marketability of such product the polythene lining was inserted and it was only after the insertion of the polythene lining that the product could be considered as a finished product for marketing. The polythene lining was therefore, according to the respondent no. 1 an essential ingredient for the purpose of completion of manufacture, and the finished product could not be said to be of jute within the meaning of the notification. The respondent no. 1 has further noted in the impugned order that there was no dispute that the product in question confirmed to the description 'made up textile articles not elsewhere' specified under Chapter 63, sub-heading no 6301.00 but, according to the respondent no. 1, for the purpose of levy of duty the bags were required to be made only of jute. The respondent no. 1 rejected the application of the principal that an item is to be classified according to its predominant content because note 2A of Section XI of the Act which laid down the principle of pre-dominance was applicable only to articles classifiable under Chapters 50-55 of the Schedule to the Act and not to Chapter 63 which was the relevant Chapter.
5. On the basis of this reasoning the Collector passed the following order:-
'In view of discussions made hereinabove, I hold that the product as claimed to be assessable at the concessional rate of basic duty prescribed under Notification No. 65/87-CE dated 1.3.87 is not acceptable.
I order the product is assessable at the rate of 12% ad valorem in respect of basic excise duty in addition to other duties like special cess etc.
Further, it is seen that the similar product as declared in the classification list (Range SI. No. 23/D.D. Tarpaulin Bag/91-92 dated 17.5.91) claiming basic excise duty at the rate of Rs. 660/- per m.t. in terms of notification No. 65/97 CE dated 1.3.87 as amended has approved inadvertently as such by the approving authority on 14.10.91. In exercise of the power conferred by Rule 1733(5) of Central Excise Rules '44, I modify the rate of basic excise duty of the product declared in the said classification list and order payment of basic excise duty @ 12% ad valorem in additional to other duties like special cess etc. in view of the discussions made hereinabove relating to classification list No. 34/SR/NCJ/9O-91 dated 17.2.91 (Range SI. No. 182/D.D. Bag/90-91 dated 21.3.91'.
6. Thus, by the impugned order the Respondent No. 1 not only rejected the case of the petitioners relating to the classification in question but also modified the rate relating to classification list dated 17.5.91 which had already been approved on 14.10.91.
7. Subsequent to the passing of the impugned order the petitioner received two further show cause cum demand notices dated 17.2.92 and 31.3.92 respectively, in respect of the period 1.9.91 to 30.11.91 and for the period of 1.12.91 to 31.1.92. The content of their two subsequent show cause notices is substantially identical with the first show cause notice which resulted in the impugned order.
8. On 26th May 1992 the petitioner filed this writ application challenging the order1 dated 21st April 1992 as well as the show cause notices dated 17th February 1992 and 31st March, 1992. The respondents obtained directions and have filed an affidavit-in-opposition. No dispute as to the facts stated by the petitioner has been raised by the respondents in such affidavit.
9. At the hearing the petitioner has contended:-
(1) The language of the notification plainly read would include all bags of jute including jute bags which may have a lining of polythene. The notification did not refer to bags exclusively or wholly made of jute. Reliance has been placed on the following decisions in this connection: Union of India and Ors. v. Tata Iron and Steel Co. Ltd., Jamshedpur, reported in 1977 ELT-J 61; Collector of Central Excise v. Protein Products India, reported in 1988 (38) ELT 749; Bhor Industries Ltd. v. Union of India, reported in 1980 ELT 752; Indian Organic Chemicals Ltd. v. Union of India and Ors., reported in 1983 ELT 34 and Collector of Customs and Central Excise and Anr. v. Oriental Timber Industries, reported in 1985 (20) ELT 202.
(2) Specific rules for interpretation had been provided Under Section 2 of the Central Excise-Tariff Act, 1944 read with Rules 2(b) and 3(b) of the Rules for the interpretation of the Schedule to the Act. This provided for the application of the principle of pre-dominance to determine the description of excisable goods. The respondent no. 1 had incorrectly construed notes 2(A) and 14(A) in Section XI of the said Act. Both these notes related to the principle of classification with relation to the admixture of materials within the Chapters Under Section XI. Neither of the rules related to the admixture between materials which were inter-sectional.
(3) The respondent had all along treated poly-lined jute bags as being bags of jute within the meaning of the notification. There was no reason why there was a sudden change of opinion. No fresh fact or law had emerged justifying the respondent No. 1 in taking a different view. In fact admittedly; the Excise Authorities were still granting the benefit of the notification to other manufacturers of the jute bags with polymer lining. One of such other manufacturers, viz. Naihati Jute Mills Co. Ltd. was within the same Collectorate.
(4) The respondent no. 1 had arbitrarily arrived at the conclusion that in common parlance the bags manufactured by the petitioners were not known as jute bags. There was no evidence whatsoever in support of this view.
(5) The respondent no. 1 in any event did not have the authority to pass any order in respect of the period not covered by the show cause notice. The respondent No. 1 had sought to re-open an approved classification list, which had not been mentioned in the show cause notice. The decision of the respondent No. 1 in this regard was in violation of Natural Justice. It is further submitted that the respondent No. 1 did not have the power to review an earlier decision. Reliance has been placed on the decision reported in 55 ELT 198 in this connection. It is urged that the department could have preferred an appeal from the decision in respect of the earlier approval Under Section 35 read with Section 35-E(2)(4) of the Central Excise and Salt Act 1944. Not having done so it was not open to the respondent No. 1 to exercise any powers under Rule 173-B (5) of the Central Excise Rules.
(6) Finally, it is submitted that the petitioner was justified in making this application under Art, 226 and that the petitioner should not be driven to seeking relief under the Act. There was no dispute as to the facts and it was a pure question of interpretation. The nature of the dispute was recurring, The petitioners had also raised the issue that the respondents were granting the benefit of the notification to other manufacturers of Poly-lined jute bags in violation of Article 14. It is stated that in any event there had been a violation of the principles of Natural Justice by the Respondent No. 1. The Court entertained the application and heard the matter. It is submitted, that for all these reasons it would not be proper for the petitioner to be asked to prefer an appeal at this stage. Reliance has been placed on the decisions reported in 1982 ELT 129; 55 ELT 189 and 59 ELT 522 in this connection.
10. It has been contended by the respondents:
(1) That the phrase 'of Jute' plainly read means 'only of Jute'. It is stated that bags may be only of jute and of jute with lining. The phrase 'bags of jute' must refer to the former and necessarily exclude the latter. It is argued that if bags of pure jute were not sold in the market then the petitioner's case would have some substance. But with both kinds of bags being available in the market, the reference to one kind would not include the second. The benefit of the notification was therefore, limited to pure jute goods. There was no mention of poly-lined jute bags although there was a distinction between poly-lined jute bags and plain jute bags in the market. Reliance has been placed on Entry 07 in the Table to the notification to contend that where a specific benefit was sought to be conferred it was mentioned as such.
As far as the interpretation rules were concerned it is submitted that the rules were limited to the interpretation of the schedule to the Central Excise Tariff Act, 1985 and not to notifications where only general rules of interpretation would apply. It is submitted that the test is whether an order for jute bag simpliciter would be met by a supply of bags with polylining. The attention of the Court has been drawn to one of the orders annexed to the petition which has been relied upon by the petitioner in which the order refers to polylined DW Tarpaulin jute bags. It is therefore submitted that in common parlance the words 'jute bags' simpliciter did not include polylined jute bags.
(2) It is stated that burden was on the petitioner to prove that the polylined jute bags were within the exemption of the notification. Reliance has been placed on the decision in Mysore Metal Industries v. Collector of Customs, 1988 (17) ECR 636. It is contended that if it was the petitioner's case that the polylined jute bags were known as jute bags in common parlance, they should have produced some evidence. No such evidence was produced. In fact the annexures to the petition would show to the contrary.
(3) Classification lists even after approval could be varied by the Excise Authorities. It is stated that this was clear from the utilisation of the phrase 'until further orders' in the approval of the classification lists. It is stated that the petitioner's submission that there was no power to review in the respondent No. 1 was incorrect. Reference has been made to Section 11-A of the 1944 Act. It is argued that the power to rectify the earlier approval was Under Section 11-A read with Rule 173-B (5). It is submitted that the Excise Authorities always retain the power to rectify mistakes in earlier orders. Reliance has been placed on the decisions in Plasmac Machine . v. Collector of Central Excise, 1991 (32) ECR 1; Collector of Customs, Calcutta v. Uday Engineering Enterprises and Ors., AIR 1989 Cal 309 and Collector of Customs v. Hindustan Motors, : 1979(4)ELT313(Cal) .
(4) As far as the question natural justice was concerned it is submitted that no prejudice has in fact been caused to the petitioner as the point in issue was substantially the same both in respect of classification list dated 17.2.91 and the classification list dated 17.5.91.
(5) It is contended that merely because the benefit of the exemption notification might have been given to some other manufacturer of poly-lined Jute Bags by mistake, no right could be claimed by the petitioner. Reference has been made to the decision in Coromandel Fertilisers v. Union of India, AIR 1984 SC 1172.
(6) Finally it is submitted that the petitioner should have availed of the alternative remedy under the Act. It is submitted that the Court exercising jurisdiction under Article 226 was not sitting in appeal and that where two views were possible on the issue in question and the department chose one the Court could not interfere under Article 226 nor even on appeal. Reliance has been placed on the decision in V.V. Iyer v. Jasjit Singh, : AIR1973SC194 and Collector of Central Excise v. Swastik Woollen, : 1988(37)ELT474(SC) . It is stated that the decision cited by the petitioners were not applicable to the facts of this case. In any event, the point of alternative remedy had been raised by the respondent No. 1 at the outset of these proceedings. The dispute would have to be determined on the basis of evidence as to what jute bags would mean in common parlance. It is contended that the department proceedings would be more appropriate if further facts were necessary to be gone into.
11. Before considering the merits of the submissions of the party it is necessary to deal with the preliminary objection raised by the respondents viz. that the writ application should not be entertained at all by reason of the alternative remedy available to the petitioner under the Act.
12. The decisions relied upon by the respondents in support of this objection [V. V. Iyer v. Jasjit Singh; Collector of Customs v. Swastik Pvt. Ltd. (Supra)] are, strictly speaking, inapposite. The principles enunciated in these decisions do not relate to objections as to alternative remedy which should pertain to the entertainment of the writ petition at all. In other words the Court does not embark on any enquiry or come to any decision with regard to the matter under challenge on the ground that the enquiry should be properly conducted or the decision be taken in the forum provided under statute. In the decisions cited the Supreme Court scrutinised the decisions under challenge and came to the conclusion that they were based on material and relevant facts and were in accordance with the correct legal principles. Being so satisfied the Supreme Court then held that merely because the Court would have come to a different conclusion would not justify the Court in interfering with the decision. Thus a duty has been cast on the Court to consider the decision challenged if only to see whether the authorities concerned have deviated from the path of the correct principles and have considered all the relevant factors.
13. The case V. V. Iyer v. Jasjit Singh (Supra) was considered by the Supreme Court in Union of India v. Tata Iron and Steel Co. Ltd., : 1978(2)ELT439(SC) . In that case there was a dispute between the manufacturer and the Excise Authorities as to whether the products manufactured fell within the description of 'strip' or 'skelp'. It was contended by the respondent authorities before the Supreme Court, as has been done in this case, that if there were two constructions which an entry could reasonably bear and the one that was in favour of the revenue was adopted, the Court had no jurisdiction to interfere merely because the other interpretation favourable to the subject appeals to the Court as the better one to adopt. The Supreme Court held that although it was not for the Courts to come to a conclusion of facts as to whether the product could come under the description of skelp, nevertheless when there was no clear criteria to determine what is skelp and not strip, the Court should not permit the confusion to persist in a fiscal legislation which by all standards should adopt a clear definition of an excisable item. The Court further went out to hold:-
'In absence of any clear criterion to determine what is skelp and not strip no useful purpose would be served by even remanding the matter to the Excise authorities for a decision after taking necessary evidence. It is only when a taxing law provides for a clear and unequivocal test for determination as to whether a particular product would fall under strip or skelp it may be possible for the authorities to address itself to the evidence submitted by the parties in order to come to a decision on the basis of the test. This is, however, not possible when there is no identifiable standard. The best way is to define the product for the purpose of excise duty in appropriate terms demarcating clearly the distinction between the two terms.
The absence of any identifiable standard would, naturally give rise to the scope for arbitrary assessment at the hands of different authorities. Since the duties on strip and skelp are not the same, it is absolutely necessary to define the word skelp so that there can be no doubt or confusion in the mind either of the taxing authority or of the tax payer with regard to the tax liability qua skelp as opposed to strip'.
14. Apart from this, Courts have repeatedly held that the availability of an alternative remedy does not affect the jurisdiction of Court under Article 226 but is a fetter imposed by Courts on themselves. Ultimately it is a question of the Court's discretion.
15. The Supreme Court, in the case of L. Hriday Narain v. ITO, : [1970]78ITR26(SC) , has held that ones an application under Article 226 has been entertained and affidavits have been filed, it would not be a proper exercise of judicial discretion to relegate the writ petitioner to the remedy available under the statute.
16. In this case the writ application has not only been entertained by Court but an interim order was passed on 26.5.92 directing the respondents to allow clearance of the goods by the petitioner at the old rate. Directions were also for filing of affidavits. This order was passed after hearing the submissions of the respondents. It is emphasized by the respondents that they had taken the point of alternative remedy at the earliest possible opportunity. Clearly then, the Learned Judge who passed the order on 26th May 1992 had negatived the submission and had considered that the writ application should be entertained and heard by the Court in its jurisdiction under Article 226 of the Constitution. There is no reason therefore, particularly at this stage to refuse to entertain the petition.
17. There is no disputed fact of question involved in this case which would necessitate the Court deciding the matter on evidence. The question is a (sic) question of law namely the interpretation of the exemption notification. The Court will have to consider whether the Excise Authorities have interpretated the notification in accordance with the established norms of interpretation. If they have not, then their action in denying the petitioner the relief under the exemption notification must be held to be without jurisdiction. Accordingly and for these reasons, I reject the preliminary objection of the respondents.
18. Coming to the merits of the case, four methods have been urged by the parties by which the notification should be construed. The first is the plain meaning of the phrase 'made of', the second is the meaning placed on the phrase 'made of' by judicial and other authorities; the third is the meaning placed on the phrase by the trade or in common parlance and the fourth by the specific rules of interpretation provided in the statute.
19. As far as the dictionary meaning is concerned the relevant use of the word 'of' has been construed in the Shorter Oxford English Dictionary (3rd Edition) as 'Indicating the material or substance of which anything is made or consists'. This does not take, the matter any further as it does not clarify whether the material or substance must be the sole ingredient.
20. As far as judicial precedents are concerned in the case of Union of India and Ors. v. Tata Iron and Steel Co. Ltd., Jamshedpur, 1977 ELT J-61 the Supreme Court was called upon to consider a notification which granted excise duty relief in respect of steel ingots produced out of scrap obtained from duty paid pig iron. The manufacturers in that case produced steel ingots in which not only duty paid pig iron was used but also non-duty paid materials. The Government held that the manufacturers were not entitled to the benefit of the exemption notification because they had used duty paid pig iron in conjunction with other non-duty paid pig iron in the manufacture of steel ingots. The decision of the Central Government was challenged under Article 226. The High Court held that the revenue authorities had erred in interpreting the notification by confining the exemption to steel ingots in which 'entirely, exclusively or only' duty paid pig iron was used. The High Court held in favour of the manufacturers by holding that the notification did not say that exemption was granted only when duty paid pig iron is used and that the exemption would not be available if duty paid pig iron was mixed with other non-duty paid materials. The Supreme Court upheld the view of the High Court and said:
'If the intention of the Government were to exclude the exemption to duty paid pig iron when mixed with other materials then the notification would have used the expression 'only' or 'exclusively' or 'entirely' in regard to duty paid pig iron.'
The Supreme Court also noted that the object of the notification was to grant relief by exempting duty paid pig iron.
21. Similarly in the case of Indian Organic Chemicals Ltd. v. Union of India and Ors., 1983 ELT 34, a Learned Single Judge of the Madras High Court had to consider the scope of a notification which granted full exemption on fibre/tops manufactured out of waste on which duty had been paid. The petitioner was manufacturing fibre/tops out of duty paid waste as well as chemical compound. The Court held that the fibre/tops manufactured by the petitioner was entitled to exemption under the notification as the notification merely referred to fibre/tops manufactured out of duty paid waste and it did not say that no other material should be used along with duty paid waste. It was noted that the notification did not use the word 'exclusively' which was normally found in similar notifications.
22. In Aravali Ispat Ltd. v. Collector of Central Excise, Jaipur reported in 1986 (26) ELT 259 the Tribunal had to consider the scope of the benefit of notification 208/83 dated 1.8.83 which related to the manufacture of iron castings. It was contended by the Excise Authorities that the said notification gave the benefit of duty on iron casting if it was made out of raw materials specified in the notification alone. It was the admitted case that the raw materials mentioned in the notification did not include M.S. Scrap which had also been used by the manufacturer in the manufacture of iron castings.
The Tribunal held:
'Notification 208/83 docs not stipulate that the final product must be manufactured wholly or entirely or exclusively out of the raw materials mentioned in col. 2 of the corresponding entry of the table to the said notification. In the absence of these words finding of the adjudicating authority, is not tenable in law.'
23. Finally in Nayak Associates v. Union of India, 1991 (55) ELT 189, a Learned Single Judge of this Court had to construe an exemption notification which granted excise duty relief in respect of mill board made out of mixed waste papers. The petitioner manufactured mill board out of mixed waste paper as well as straw and jute stalk. The respondent authorities held that by using straw and jute stalk in addition to waste paper, the mill board could not be treated as the kind of mill board in respect of which the exemption had been granted. Negativing this stand of the respondents, the Learned Judge held that the mill board manufactured by the petitioner in that case came within the description of the mill board in the exemption notification as the notification did not use any expression such as 'only' or 'exclusively' or 'entirely' as qualifying the input. As against the catena of judicial precedent holding that the phrase 'made of' does not mean 'made exclusively made of, the respondents have not cited a single decision holding to the contrary.
24. In my view the express object of the exemption notification is to grant excise duties relief to manufacturers of jute bags or sacks possibly with a view to grant an incentive to manufacturers of jute bags. There is no dispute that the petitioners manufacture jute bags or sacks. Merely because they have added a polythene /plastic lining to the jute bag cannot deprive them of the relief which was sought to be conferred on manufacturers of jute bags.
To read the word 'only' into the notification before the word 'jute' would be to restrict this object.
25. Thus having regard to the judicial interpretation put of the words 'made of', I have no hesitation in holding that the notification in question must be similarly construed.
26. The third mode of interpretation relates to the manner in which the phrase 'sacks of bags of jute' is understood in common parlance. The submission that the petitioners had not produced any evidence of how this phrase was understood in the market appears to be incorrect. The orders annexed to the petition refer to 'poly-lined D.W. Tarpauline jute bags'. Therefore, irrespective of the nature of the lining the product was still referred to as a jute bag. The more fact that both poly-lined jute bags and bags made only of jute are sold in the market does not even raise a prima facie inference that poly-lined jute bags are not known as bags of jute in the market. A trader marketing for jute bags may be asked whether he wanted a poly-lined jute bag or an unlined jute bag. The query would be necessary only because a poly-lined jute bag would be considered a jute bag. Secondly, the Excise Authorities themselves had all along considered the poly-lined jute bags manufactured by the petitioners as bags/sacks of jute. Presumably the Excise Authorities had taken into consideration the common understanding of the phrase bags/sacks of jute before according approval to the classification lists submitted by the petitioner in respect of poly-lined jute bags. Thirdly, the Excise Authorities are still treating poly-lined jute bags as bags/ sacks of jute as far as other manufacturers are concerned. It cannot be assumed that the Excise Authorities in all these cases are acting on any mis-appreciation or mistaken view of the trade parlance. It is a well known principle of evidence that all acts are presumed to have been done rightly and regularly (Omina praesumuntur rite et soleminiter esse acta) and the burden of showing to the contrary would be on the persons (in this case the respondents) seeking to prove this. There is no evidence relied upon by the respondent authorities which would justify their taking a different view from that taking in the petitioners own case on earlier occassions and in relation to other manufacturers of jute.
27. There is another aspect of the matter, and that is whether the authorities can change their stand with regard to the interpretation of the exemption notification without any new fact or law justifying the change. In my view they cannot. I am supported in this view by the several decisions. In Mercantile Express Co. Ltd. v. Assistant Collector of Customs and Ors., reported in : 1978(2)ELT552(Cal) by P.B. Mukherjee, J. (as his Lordship then was) held;
'The Customs now say that they are not bound by their previous decisions. Whether the doctrine of precedents applies in its full rigour to Administrative Agencies and Officers, and whether a reasonable lititude should be given to them or administrative tribunals to correct or modify their previous decisions may still remain a debatable controversy in the world of law; nevertheless I am clearly of the opinion that neither the Appraiser nor the Collector of Customs can change his mind from time to time in respect of the same articles by assessing them in the case of one importer under one section and then assessing them for another importer under different section. To allow the Customs to do so will lead to utter confusion in the very basis and principles of taxation and grave uncertainty in business and foreign trade of India. Its more serious result will be the most unfair discrimination of Taxes in respect of the same goods with regard to different importers. That cannot be permitted by the Constitution which insists on the equality of law as one of its fundamental guarantees. I am therefore inclined to hold that the Customs are bound by their own precedents in administering taxing statutes involving the very basis of taxation in respect of a particular article and not leave it to them to modify their own previous decisions but to leave it to them to apply to Courts or Parliament or Legislatures as the case may be to put the law beyond doubt.'
28. In Durgasree Stores v. Board of Revenue, West Bengal and Anr. reported in : AIR1963Cal409 P. N. Mookherjee and Amaresh Roy, JJ. held:
'Even apart from the question whether the doctrine of precedents would apply in full vigour to Tribunals of the nature of Board of Revenue, it is certainly a consideration of natural justice that the authorities in the sphere of taxation cannot hold the citizen to their whims and caprices in matters, concerning essential practices of trade and business, allowing deductions Under Section 5(2)(a)(ii) in some cases and disallowing such deductions in some others, although the circumstances, appertaining to both the categories, were exactly similar.
P. B. Mukherji, J. in the case of Mercantile Express Co. Ltd. v. Asst. Collector of Customs, : 1978(2)ELT552(Cal) , where his Lordship held that such change of mind, varying from case to case, will lead to utter confusion in the very basis and principle of taxation and grave uncertainly of business and the most unfair discrimination of taxes'. The grave reason behind the above observations of P. B. Mukherji, J. has full application to the facts of the present case.
We, accordingly, hold that the Board of Revenue acted arbitrarily and in violation of natural justice by not adhering to their own precedents in administering this taxing statute when there was no reason or circumstance to justify any change of mind of that Tribunal. On that ground, also the order of the Additional Member, Board of Revenue, is liable to be set aside'.
29. In Bhor Industries Ltd. v. Union of India, 1980 ELT 752 (Guj); a Division Bench of the Gujarat High Court relied on the decision of P. B. Mukherji, J. in Mercantile Express Co. Ltd. v. Asst. Collector of Customs (Supra) and held:
'In our opinion, the observation which the learned single Judge of the Calcutta High Court has made are very apposite. The central excise authorities cannot go on changing their mind from time to time and cannot be allowed to create uncertainty in the realm of taxation.'
30. In the case of Nayak Associates v. Union of India (Supra), a Learned Single Judge of this Court held:
'Of course there is no estoppel applicable to excise matters but it is well settled that the revenue cannot change its opinion at all at its sweet will. The department should not be permitted to take different stand that there is no good or congent reason for the change of the view. If the facts are different or if further and fresh facts are brought on record or if the process of manufacture has changed or if the relevant entries in the Tariff have undergone a modification of if subsequent to the earlier decision there has been the pronouncement of a High Court or the Supreme Court which necessitates reconsideration of the issue, in that event, undoubtedly the department have power to take a different view of the matter.'
31. The respondents have relied on the decision of a Division Bench of this Court in Collector of Customs, Calcutta and Ors. v. Uday Engineering Enterprises and Ors., : 1987(27)ELT234(Cal) to contend that the authorities could always rectify an earlier decision made erroneously. In the passage relied on the Court held:
'If the goods arc not within the sanction of importation under a particular type of licenses, an error on the part of the appraising authorities on any previous occasion will not confer any right upon the importers to import such goods again on the basis of similar licenses. It is also an accepted principle that if the Customs authorities had been in the error in not appreciating on any previous occasion that some goods not really covered by the license were being imported on the basis of such license they cannot be made to be embeddeed in the error for all transactions in the future. They have every right to correct their own error and if such correction required an adjudication it would not be just and proper for this Court to refuse them an opportunity to do so.'
32. There can be no doubt that an erroneous decision would not bind the authorities to hold similarly in future and perpetuate, the mistake. But there must be some ground for the authorities to consider that the earlier view was a mistaken one. This is clear from a close reading of the judgment relied on by the respondents.
At page 312 of the Report the Court observed:
'The Customs authorities, however, had sufficient materials before them to doubt the correctness of the earlier actions taken by the appraisers. The proceedings disclosed in the supplementary affidavit filed toy the Customs authorities clearly go to show that there exist bona fide grounds for them to doubt the correctness of their previous decision to release similar goods under similar licenses.'
No such ground has been disclosed by the respondent in this case.
33. In fact the Bench considered but did not overrule the finding of P. B. Mukherji, J. in the case of Mercantile Express Co. Ltd. (Supra). They said:
'That was a case where the Court was dealing with interpretation of a taxing statute. This decision again, in our opinion, is clearly distinguishable for the simple reason that in that case unlike the present one there was no dispute about the nature of the goods. There, it was not an issue on fact, the goods being what they were, the issue raised was .one in regard to interpretation of the two entries of the Schedule for deciding which of the entries really covered the goods. But in the case now before us the dispute is with regard to the nature of the goods sought to be imported.'
34. It follows from the authorities therefore that:
(1) Where it is a pure question of interpretation of a fiscal statute an earlier view is binding on the authorities unless a change is necessitated by a change in the law by way of statutory amendment or as a result of judicial interpretation of a higher authority.
(2) Where there is a factual dispute as to the nature of the goods, the authorities are not so bound provided there exists good ground for holding otherwise (See: Plasmac Machine . v. Collector of Central Excise, Bombay, 1991 (32) ECR 1 SC).
34. The other decision cited by the respondents in this connection is the case of Collector of Customs and Central Excise, West Bengal and Ors. v. Hindustan Motors Ltd. and Anr., : 1979(4)ELT313(Cal) . In that case the imported goods had been released Under Section 47 of the Customs Act. There were grounds for the Customs Authorities to hold that the release was by mistake. The Court held that in such circumstances the Customs Authorities could take action against the importer in respect of the wrongful import. At page 377 of the Report, the Court said:
'In the present case the Customs authorities have stated that the appellants were permitted to clear the goods by mistake. It was the duty of the appellants to obey the law. If the allegations of the Customs Authorities be correct they had no right to import goods without a valid licence. They should not be heard to say that because of the order Under Section 47 steps cannot toe taken against them under the other provisions of the Customs Act.'
The case is distinguishable from the one before me. There is no ground, at least no ground has been shown, as to why the earlier view was incorrect.
35. There is therefore no justification for the Respondent No. 1 to take a view contrary to the earlier decisions taken on the identical facts and in respect of the same notification,
36. The respondents have called in aid the principle enunciated in the decision of V.V. Iyer v. Jasjit Singh (Supra) and Collector of Customs, Bombay v. Swastik Woollen (P) Ltd, to the effect that where two views are possible and the authorities adopt one of such views which cannot be termed to be unreasonable, the authorities' finding cannot be interfered with by the High Court. This principle appears to be in direct conflict with the well-known norm of construction that in the event of ambiguity in a fiscal statute the construction beneficial to the assessee should be adopted. The case of Collector of Central Excise, Bombay-I and Anr. v. Parle Exports (P) Ltd., : [1990]183ITR624(SC) is an authority for the latter proposition. There the Supreme Court held 'When two views of a notification are possible, it should be construed in favour of the subject'.
37. The conflict does not need resolution at least for the purpose of this case. The first principle operates when the authorities have adopted a particular interpretation for the first time. In the case before me, the authorities concerned had all along, before the impugned order, adopted a different view regarding the applicability of the notification to the petitioner's bags. The earlier view of the authorities could not be said to be perverse and the interpretation put by the authorities on the earlier classification list was one which could reasonably be taken. There is no evidence before the. Court that it was not arrived at honestly or bona fide or that any correct principle had been overlooked.
38. In my view, where there are two contrary interpretation by the Excise Authorities of the same notification the one which accords with the principle of beneficial construction recognised in Parle's case (Supra) must prevail.
39. It is true that the Supreme Court in Coromandel Fertilisers Ltd. V. Union of India and Ors., : 1984(17)ELT607(SC) held:-
'A wrong decision in favour of any particular party does not entitle any other party to claim the benefit on the basis of the wrong decision.'
40. But this decision has been explained in Pranab Kumar Ray v. Reserve Bank of India and Ors. 1992(2) CLJ 288, 285, as not being applicable to cases where the decision is in favour of several parties. In this case the petitioners have claimed that the Excise Authorities had granted and was still granting the benefit of the Notification to several parties similarly situated as the petitioners. This has not been denied by the respondents. That apart, there is nothing to show that the decision in favour of the other parties was wrong. The treatment of other manufacturers of jute bags with polythene lines may be relied upon not only as evidence of arbitrariness on the part of the Respondent No. 1 in passing the impugned order but also for supporting the interpretation of the notification urged by the petitioners.
41. The fourth mode of interpretation has been urged by the petitioner but resisted by the respondents. The rules in question are Rules 2(b) and 3(b) of the Rules for the interpretation of the Schedule to the Central Excise Tariff Act, 1985.
42. Section 2 of the Central Excise Tariff Act, 1985 provides:
'Duties specified in the Schedule to be levied.-The rates at which duties of excise shall be levied under the Central Excises and Salt Act, 1944 (1 of 1944) arc specified in the Schedule.'
43. THE SCHEDULE which contains the rates of duties in respect of specified items has categorised these items sectionally. Within each section are chapters covering sub-categories of the section. Each section contains specific rules of interpretation in respect of entries in the section and relate to intra-sectional admixtures. The Rules relied upon by the petitioners are the Rules for the interpretation of the schedule itself. There are general rules of interpretation applicable to inter sectional admixtures and like all general rules are to be resorted to when the sectional rule does not provide to the contrary. The item in question is an admixture of Jute and plastic classifiable Under Sections XI and VIII respectively. The specific rules of interpretation provided for those sections do not provide for intersectional admixtures. The general rules of interpretation will thus apply.
44. The rules on which reliance has been placed:
'2. (b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substances with other materials or substance. Any reference taken to include a reference to goods consisting wholly or partly of such material or substance.'
3. When any application of Sub-rule (b) of Rule 2 or for any other reason, goods are prima facie, classifiable under two or more headings, classification shall be effected as follows:
(a) ** ** ** **(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable.'
45. The Rule 3(b) enacts what may be termed as the predominant principle of classification. That is to say an excisable item must be understood with reference to the predominant element in its make-up.
46. The respondents have strongly urged that these Rules are limited to interpretation of the Schedule and cannot serve as guidelines to interpret a notification. The submission is unacceptable.
47. In my view, it is immaterial whether the words in question are used in the Act or in the notification issued under the Act. The notification being issued in exercise of statutory power under the Act forms part of it. It is to be noted that in Parleys case (Supra) the Supreme Court said:
'It is well settled that when two views of a notification arc possible, it should be construed in favour of the subject as notification is part of a fiscal enactment.'
Furthermore, the predominant principle of classification has been followed by the Supreme Court even when construing an exemption notification under the Central Excise and Salt Act, 1944.
48. In the case of Collector of Central Excise v. Protein Products of India, 1988 (38) ELT 749, the petitioners manufactured Ossein and Gelatine from bones. The question was whether these products fell within the description 'crushed bones and bone products' in respect of which exemption from excise had been granted in a notification issued by the Government of India. It was contended by the respondent authorities that as the petitioner used raw-material other than bones in the manufacture of Ossein and Gelatine, the benefit of the exemption was not available. The Supreme Court held that there was no justification for importing any limitation as to the nature of the products that are entitled to exemption and that although other raw-materials were used in the manufacture of Gelatine and Ossein, such other raw-materials were not used to such an extent 'as to completely over-shadow or render insignificant the utilisation of bones in the process'. In other words the nature of the product was to be determined by reference to the predominant material.
49. There is no dispute that in the bags manufactured by the petitioners jute is the predominant component and the real character of the bag is determined thereby.
50. Accordingly on this basis also the poly-lined jute bags manufactured by the petitioner must be described as a jute bag.
51. The respondent authorities admit that the bags produced by the petitioner are assessable to excise duty under tariff sub-heading 6301.00 of the Schedule to the Tariff Act. That sub-heading relates to made up 'Textile articles.' Therefore, the bag of the petitioner, in spite of containing a polythene lining, is still treated as a textile article-in other words with reference to the jute content of the bag.
52. If he principle of predominant ingredient is adopted for classification under the tariff heading there is no reason why it should be discarded for the purposes of the notification.
53. Indeed the Excise Authorities have themselves adopted the principle of predominance with respect to classification under the Schedule to the Tariff Act and extended the benefit of an exemption notification to such a classified article. Bombay-I Collectorate Trade Notice No. 128/88 dated 6.9.1988 reads as follows:
'PLASTICS AND POLYURETHANE FOAM COMPOSITE ARTICLES (CHAPTER 39)
The matter was under consideration-
(i) as to whether composite articles of plastics made out of combination, of plastic and non-plastic material should be treated as 'articles of plastic' of Chapter 39 of the Schedule to the CETA 1985 ;
(ii) whether such articles would be entitled to the exemption under Sr. No. 38 of Notification No. 132/86-C.E., dated 1.3.1986 as amended during the period prior to 1.3.1988 and under Sr. No. 39 of Notification No. 53/88- C.E., dated 1.3.1988 from 1.3.1988, and ;
* * * * * * 2. The matter has been examined. The classification of composite articles of plastics made out of a combination of plastic and non-plastic materials, would depend on the predominancy of weight and value of the component materials which have gone into the manufacture of such composite articles of plastics keeping in view the Rules of interpretations to the Schedule to the Central Excise Tariff Act, 1985. While deciding the classification of such products, due regard should be given to the trade identity of the product, i.e. how the same is known in the commercial/trade parlance. Once a product made out of a combination of plastic and non-plastic materials has been classified as an articles of plastics under sub-heading No. 3922.90 from 1.3.1986 to 9.2.1987, under sub-heading No. 3922.00, 3923.90, 3924.90, 3925.90 or 3926.90 from 10.2.1987 to 29.2.1988 and under Heading number 39.23, 39.24 or 39.26 (other than of polyurethane foam) from 1.3.1988 onwards on the basis of the above guidelines, the benefit of exemption as per Sr. No. 38 of Notification No. 132/86-C.E., dated 1.3.1986, as amended, prior to 1.3.1988 and Sr. No. 39 of Notification No. 53/ 88-C.E., dated 1.3.1988 from 1.3.1988 would be available to such articles of plastics.3.* * * * * *
54. Aside from the four methods of interpretation noted earlier, there is a special principle of interpretation recognized by the Supreme Court in Park's case (Supra) relating to exemption clauses, viz.
'While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed.'
55. It cannot be said that any violence is done to the language employed in the exemption notification in construing it to include poly-lined jute bags.
56. The Respondents have however sought to rely upon another decision of the Supreme Court which predicates a restrictive approach to exemption clauses. That other decision is M/s. Mysore Metal Industries v. The Collector of Customs, Bombay, 1988(17) ECR 636 (SC), in which the Supreme Court held :
'The burden is on the party who claims exemption, to prove the facts that entitled him to exemption.'
57. I do not propose to attempt to synchronize these two apparently divergent views in this case. It is not necessary as I am of the opinion that the principle enunciated in Mysore Metal Industries is not applicable when the authorities concerned had already given the petitioner the benefit of the exemption and were subsequently seeking to negative their earlier stand.
58. Hence, whichever mode of interpretation is applied, the outcome is the same and as such I have no hesitation in holding that the poly-lined jute bags manufactured by the petitioners are bags of jute and are entitled to the benefit of the notification.
59. The last aspect of the matter is whether the respondent No. 1 could have raised the approval classification list dated 17.5.91 which was not the subject-matter of the Show Cause Notice. Strictly speaking, the consideration of this aspect of the matter does not arise as I have held against the respondents on the merits. Nevertheless since arguments were advanced at length by both parties I may briefly deal with the matter.
60. The revision of the approval of the classification list dated 17.5.91 by the Respondent No. 1 was incompetent on the ground that it was done in violation of the principles of natural justice. The petitioners had not been asked to Show Cause in respect of this classification list. To say that no prejudice has been caused thereby as the facts and law in respect thereof were identical with the facts and law relating to the list which was the subject-matter of the Show Cause Notice is no answer. The violation of natural justice is prejudice enough. (See : S.L. Kapoor v. Jagmohan, AIR 1986 SC 136 para 24).
61. Secondly, Courts have decisively held that an Assistant Collector has no power to review an order passed by an earlier incumbent. (See : Nayak Associates v. Union of India (supra)). The law has been succinctly and correctly stated by S. Padmanabhan J. in Indian Organic Chemicals Ltd. v. Union of India and Ors., 1983 ELT 34 (Mad) :
'It is not settled law that there is no inherent power of review in an authority while acting judicially or quasi-judicially. The power of review must be conferred expressly or by necessary implication by the provisions of the statute. The power of the authorities under the Central Excises and Salt Act to review their earlier order has been considered by me in Madras Rubber Factory Ltd. v. Asst. Collector of Central Excise, Madras and Anr. (1981 ELT 565) wherein it has been held that the power of review must be conferred expressly or by necessary implication by the provisions of a statute and that the Central Excises and Salt Act and the rules made there under do not confer upon the authorities any power of review of their own order. It must therefore follow that the respondents have no power to review the earlier order granting unconditional approval to the classification lists.'
62. The impugned order insofar as it relates to the classification list dated 17.5.91 is therefore, even apart from the merits, unsustainable.
63. Having held that the poly-lined jute bags manufactured by the petitioner are exempted articles to the extent specified in the notification, the subsequent show cause notices must be held to be bad. The Excise Authorities do not have the jurisdiction to initiate proceedings to recover excise duty from the petitioners otherwise than at the rates specified in the notification. (See : Collector of Central Excise, Calcutta and Ors. v. Madura Coats Ltd., Serampore, 1982 ELT 129 (Cal) (DB).
64. For the reasons aforesaid the writ petition must be allowed. The impugned order dated 21st April 1992 and the notices dated 17th February 1992 and 31st March 1992 are quashed. The respondents are also directed to allow the Exemption under Notification No. 65/87-CE in respect of the poly-lined jute bags manufactured by the petitioners.
The writ application is disposed of accordingly. There will be no order as to costs.