Tulsiani Builders and Textiles Vs. Commr. of C. Ex. - Court Judgment

Excerpt:
1. the appellants manufactured textured yarn. for clearance of the waste of such yarn, they availed of the benefit of notification no.214/79, dated 23-6-1979. at a later stage, on the basis of the statement of an officer of the appellants that they were engaged in texturising yarn and not crimping yarn, a show cause notice was issued denying the benefit of exemption and seeking to charge differential duty short levied. the deputy collector, in his findings interpreted the notification. he observed that whereas the term 'texturised yarn' appeared in the tariff by way of explanation to tariff item no. 18(ii), the word 'crimping' was not specifically referred. referring to the same definition, he observed that crimping was one method of texturising the yarn. he, therefore, held that the benefit of the subject notification was available to the waste produced by the assessees. in his discussions, he also observed that if this benefit was to be denied, the assessee would end up by paying duty at a rate higher than the rate at which the good yarn was cleared. he also observed that denial of the benefit would result in waste of texturised yarn being assessed at two different rates of duty - one for waste of crimp yarn and the other for waste arising out of any process other than crimping. with these observations, the deputy collector dropped proceedings against the assessees. in dealing with the application filed by the deputy commissioner under section 35e(4) of the act, in connection with this order, the commissioner (appeals) held that crimped yarn was distinguishable from texturised yarn and therefore, the benefit of the notification would not be available to waste produced by the assessee. the present appeal is against this order. the appellants have waived personal appearance and have requested for decision on merits.2. we have heard sh. g.d. sharma, ld. d.r. and have carefully perused the appeal memorandum.3. in the appeal memorandum, the grievance was made that the collector had not given them adequate opportunity of hearing. it was claimed that crimping waste was nothing, but texturising waste in terms of the explanation to the tariff item. it was claimed that the notification 239/83 which had superseded the relevant notification 214/79 had corrected the anomaly and had extended the benefit to texturising waste as was ... that crimping was an essential process in texturising.5. the issue involved is that of interpretation of notification no.214/79. for ease of reference, the text is reproduced below : "in exercise of the powers conferred by sub-rule (1) of rule 8 of the central excise rules, 1944, the central government hereby exempts wastes arising during the manufacture of crimped yarn and falling under sub-item (iv) of item no. 18 of the first schedule to the central excises and salt act, 1944 (1 of 1944), from so much of duty of excise leviable thereon as is in excess of two rupees per kilogram." 6. it is the claim of revenue that the wording 'crimped yarn' should be so interpreted as to exclude yarn texturised by any other method. it is the claim of the appellants that such a restrictive interpretation is not warranted.7. the explanation, occurring in the subject tariff item, defined texturised yarn as that has been processed to introduce crimps, coils, loops or curls along with the length of the filaments. the deputy collector extended the benefit of the notification on the observation that crimped yarn was not separately described, but was merely a part of the extensive definition of textured yarn.8. the law regarding interpretation of exemption notification is well settled. the common ratio is that the notification has to be interpreted strictly in accordance with the language used therein without meanings or omissions imputed to it. a caution has, however, been added by a number of judgments to the effect that the strict interpretation should not result in the provisions being rendered otiose or 9. the supreme court in their judgment in the case of collector of central excise, bombay-1 and anr.v. park exports (p) ltd. reported in 1988 (38) e.l.t. 741 (sc) advised the officers to read the notification in the context of the provisions under which it was issued. the supreme court permitted liberal interpretation to be made of a notification provided no violence was done to the language employed. the court, further, held that where two views of notification were possible, the interpretation should be in favour of the assessee.10. it is correct that crimping is a method of texturisation. there is a mention in deputy commissioner's order of a statement of the officer of the appellants that they were not undertaking crimping of yarn. if interpretation of the notification is to be made in the manner as to deny the benefit to waste of crimped yarn, but to extend it to looped, yarn waste or yarn waste of texturised in any other method, then the two wastes would attract different rates of duty although their physical properties and their end-use would be exactly alike. the strict interpretation of this notification would result in absurdity.this, according to the supreme court, is not permissible. a liberal interpretation will necessarily have to be placed on this notification.11. shri g.d. sharma, ld. d.r. in his arguments made a mention that by an arithmetical calculation, it can be established that the absurdity, namely, the good yarn attracting less rate of duty than waste yarn in the absence of the benefit of the notification, does not exist at all.even if it were so, the ... anomaly mentioned above... still exist.12. with these observations, we set aside the order of the commissioner and allow this appeal with consequential relief, if any.

Judgment:
1. The appellants manufactured textured yarn. For clearance of the waste of such yarn, they availed of the benefit of Notification No.214/79, dated 23-6-1979. At a later stage, on the basis of the statement of an officer of the appellants that they were engaged in texturising yarn and not crimping yarn, a show cause notice was issued denying the benefit of exemption and seeking to charge differential duty short levied. The Deputy Collector, in his findings interpreted the notification. He observed that whereas the term 'texturised yarn' appeared in the tariff by way of Explanation to Tariff Item No. 18(ii), the word 'crimping' was not specifically referred. Referring to the same definition, he observed that crimping was one method of texturising the yarn. He, therefore, held that the benefit of the subject notification was available to the waste produced by the assessees. In his discussions, he also observed that if this benefit was to be denied, the assessee would end up by paying duty at a rate higher than the rate at which the good yarn was cleared. He also observed that denial of the benefit would result in waste of texturised yarn being assessed at two different rates of duty - one for waste of crimp yarn and the other for waste arising out of any process other than crimping. With these observations, the Deputy Collector dropped proceedings against the assessees. In dealing with the application filed by the Deputy Commissioner under Section 35E(4) of the Act, in connection with this order, the Commissioner (Appeals) held that crimped yarn was distinguishable from texturised yarn and therefore, the benefit of the notification would not be available to waste produced by the assessee. The present appeal is against this order. The appellants have waived personal appearance and have requested for decision on merits.

2. We have heard Sh. G.D. Sharma, ld. D.R. and have carefully perused the appeal memorandum.

3. In the appeal memorandum, the grievance was made that the Collector had not given them adequate opportunity of hearing. It was claimed that crimping waste was nothing, but texturising waste in terms of the Explanation to the Tariff Item. It was claimed that the Notification 239/83 which had superseded the relevant Notification 214/79 had corrected the anomaly and had extended the benefit to texturising waste as was ... that crimping was an essential process in texturising.

5. The issue involved is that of interpretation of Notification No.214/79. For ease of reference, the text is reproduced below : "In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts wastes arising during the manufacture of crimped yarn and falling under sub-item (iv) of Item No. 18 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from so much of duty of excise leviable thereon as is in excess of two rupees per kilogram." 6. It is the claim of Revenue that the wording 'crimped yarn' should be so interpreted as to exclude yarn texturised by any other method. It is the claim of the appellants that such a restrictive interpretation is not warranted.

7. The Explanation, occurring in the subject tariff item, defined texturised yarn as that has been processed to introduce crimps, coils, loops or curls along with the length of the filaments. The Deputy Collector extended the benefit of the notification on the observation that crimped yarn was not separately described, but was merely a part of the extensive definition of textured yarn.

8. The law regarding interpretation of exemption notification is well settled. The common ratio is that the notification has to be interpreted strictly in accordance with the language used therein without meanings or omissions imputed to it. A caution has, however, been added by a number of judgments to the effect that the strict interpretation should not result in the provisions being rendered otiose or 9. The Supreme Court in their judgment in the case of Collector of Central Excise, Bombay-1 and Anr.v. Park Exports (P) Ltd. reported in 1988 (38) E.L.T. 741 (SC) advised the officers to read the notification in the context of the provisions under which it was issued. The Supreme Court permitted liberal interpretation to be made of a notification provided no violence was done to the language employed. The court, further, held that where two views of notification were possible, the interpretation should be in favour of the assessee.

10. It is correct that crimping is a method of texturisation. There is a mention in Deputy Commissioner's order of a statement of the officer of the appellants that they were not undertaking crimping of yarn. If interpretation of the notification is to be made in the manner as to deny the benefit to waste of crimped yarn, but to extend it to looped, yarn waste or yarn waste of texturised in any other method, then the two wastes would attract different rates of duty although their physical properties and their end-use would be exactly alike. The strict interpretation of this notification would result in absurdity.

This, according to the Supreme Court, is not permissible. A liberal interpretation will necessarily have to be placed on this notification.

11. Shri G.D. Sharma, ld. D.R. in his arguments made a mention that by an arithmetical calculation, it can be established that the absurdity, namely, the good yarn attracting less rate of duty than waste yarn in the absence of the benefit of the notification, does not exist at all.

Even if it were so, the ... anomaly mentioned above... still exist.

12. With these observations, we set aside the order of the Commissioner and allow this appeal with consequential relief, if any.