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Judgment
V.C. Daga, J.—In the present petition, filed under Article 226 of the Constitution of India, the petitioners have challenged the validity of the order dated 14th December, 1990 (Exh.A) and virus of the second proviso appended to paragraph 4(b) of the Notification No. 175/86 C.E., which was inserted by amendment Notification No. 174/89 C.E. dated 1st September 1989, contending that the interpretation sought to be placed thereon by the Revenue renders the notification as unjust, unreasonable, arbitrary, discriminatory and violative of Article 14 of the Constitution of India.
Facts in Brief:
Facts in brief reveal that the petitioners filed a classification list of their product in 1989 claiming exemption under the Notification No. 175/86. The classification list was provisionally approved in the month of November 1989. On 2nd March, 1990 a show cause notice was issued purporting to deny the benefit of Notification No. 175/86 as amended by Notification No. 174/89 for want of compliance of conditions stipulated in proviso to Para 4(b) of the amended notification since it had commenced production for the first time in the month of June, 1989 and that it had not availed of the exemption under Notification No. 175/86 during the financial year 1986-87 as required. The petitioners, on 31st March, 1990, filed their reply (Exhibit F) (page 31) to the show cause notice. Written submissions were subsequently filed on 8th May, 1990 (Exhibit G) (page 34). The Assistant Commissioner, vide his order dated 14th December, 1990, held that in view of the proviso to Para 4(b) of the amended notification, the petitioners were not entitled to the benefit of the notification as they had not availed the benefit under the unamended subject notification in the year 1986-87.
Not satisfied with the above order and the interpretation put on the Notification No. 175/86, the petitioners have invoked writ jurisdiction of this Court as stated hereinabove contending that the interpretation placed by the Excise Authorities on Notification No. 175/86 as amended by Notification No. 174/89 dated 1 September, 1989, depriving the units registered under the Industries (Development and Regulations) Act, 1951 with the Directorate General for Technical Development (DGTD) in the Ministry of Industry, which did not avail exemption under Notification No. 175/86 during the financial year 1986-87, renders the notification ultra vires the Articles 14 and 19(1)(g) of the Constitution of India. In other words, since it discriminates similarly circumstanced unit i.e. the unit, which has availed benefit in the year 1986-87, is held to be entitled to the benefit of the notification; whilst another unit like the petitioners'', which came into existence only in June 1989 who had no opportunity to avail benefits of the unamended notification for want of their birth/existence, is deprived of the benefit of the notification without there being intelligible criteria with the object sought to be achieved.
The text of the relevant exemption notification:
Before recapitulating the rival submissions made by the parties to the petition, it is necessary to turn to the relevant part of the basic Notification No. 175/86 C.E. Dated 1st March, 1986 as amended from time to time.
GENERAL EXEMPTIONS - CENTRAL EXCISE TARIFF GENERAL EXEMPTION NO. 1
Exemption to first clearances of specified goods upto the value of rupees fifteen lakh and concessional duty on subsequent clearances in the case of manufacture having clearances not exceeding rupees one and a half crores in the preceding year.
(Notification No. 175/86 C.E. Dated 1.3.1986)
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. 85/85 -Central Excise, dated 17th March 1985, the Central Government hereby exempts the excisable goods of the description specified in Tariff Act, 1985 (5 of 1986), (hereinafter referred to as the ''specified goods''), and cleared for home consumption on or after the 1st day of April in any financial year, by a manufacturer from one or more factories,
....
Nothing contained in this notification shall apply if the aggregate value of clearances of all excisable goods for home consumption,-
(a) by a manufacturer, from one or more factories, or
(b) from any factory, by one or more manufacturers, had exceeded rupees one hundred and fifty lakhs in the preceding financial year.
The Exemption contained in this notification shall be applicable only to a factory which is an undertaking registered with the Director of Industries in any State or the Development Commissioner (Small Scale Industries) as a small scale industry under the provision of the Industries (Development & Regulation) Act, 1951:
Provided that nothing contained in this paragraphs shall be applicable
(a) in a case where the value of clearance from a factory during the preceding financial year or the current financial year did not exceed or is not likely to exceed rupees seven and a half lakhs or
(b) in a case where manufacturer who is manufacturing specified goods in a factory, other than a factory which is registered under the Industries (Development & Regulation) Act, 1951 with the Directorate General of Technical Development in the Ministry of Industry and has been availing the exemption under this notification, or any of the notifications specified below, during the preceding financial year.
The aforesaid para4 of the Notification was amended by Notification No. 244/87 C.E., dated 30th October, 1987. After amendment, Para 4 read as under:
The Exemption contained in this notification shall be applicable only to a factory which is an undertaking registered with the Director of Industries in any State or the Development Commissioner (Small Scale Industries) as a small scale industry under the provision of the Industries (Development & Regulation) Act, 1951:
Provided that nothing contained in this paragraphs shall be applicable
(a) in a case where the value of clearances from a factory during the preceding financial year or the current financial year did not exceed or is not likely to exceed rupees seven and a half lakhs or
(b) in a case where manufacturer who is manufacturing specified goods in a factory, other than a factory which is registered under the Industries (Development & Regulation) Act, 1951 (65 of 1951) with the Directorate General of Technical Development in the Ministry of Industry, and has been availing of the exemption under this notification during the preceding financial year or the exemption in terms of Section 39 of the Table annexed to the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 53/88 Central Excises, dated the 1st March, 1988.
The aforesaid para4 was further amended by another Notification No. 96/89C. E., dated 1st March, 1989 whereby the proviso to para4, Clause (b) was substituted to read as under:
Provided that nothing contained in this paragraphs shall be applicable
(a) in a case where the value of clearances from a factory during the preceding financial year or the current financial year did not exceed or is not likely to exceed rupees seven and a half lakhs or
(b) in a case where manufacturer who is manufacturing specified goods in a factory, other than a factory which is registered under the Industries (Development & Regulation) Act, 1951 (65 of 1951) with the Directorate General of Technical Development in the Ministry of Industry, and has been availing of the exemption under this notification during the preceding financial year or the exemption in terms of S. No. 39 of the Table annexed to the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 53/88Central Excises, dated the 1st March, 1988.
The aforesaid clause was further amended by another notification bearing No. 174/89 C.E., dated 1st September, 1989 whereby after the proviso in paragraph4, the following proviso was inserted:
Provided further that nothing contained in Clause (b) of the 1st proviso shall apply in a case where a manufacturer who is manufacturing specified goods in a factory and is registered under the Industries (Development and Regulation) Act, 1951 (65 of 1951), with the Directorate General of Technical Development, and has availed of the exemption under this notification during the financial year 1986-87 and the aggregate value of clearances of all excisable goods during the financial years 198788 and 198889 did not exceed rupees one hundred and fifty lakhs
The validity of the aforesaid clause is a subject matter of challenge in this petition.
Rival Submissions:
Mr. Shroff, learned senior counsel for the petitioners submits that Notification No. 175/86 was issued on 1st March, 1986. This notification fully exempted specified goods cleared for home consumption on or after the 1st day of April in any financial year, in the case of 1st clearances of specified goods up to an aggregate value not exceeding Rs. 30 lakh and on payment of duty at the rate of 10% for the next Rs. 60 lakh clearances. The aggregate value of clearances permitted were not exceeding Rs. 200 lakh. That as per para4 of the notification the exemption contained was applicable only to a factory or undertaking registered with the Director of Industries in any State or the Development Commissioner (SSI) as a small-scale industry under the provisions of the Industries (Development and Regulations) Act, 1951. That the petitioners'' factory was registered with the Director General of Technical Development in July 1987. However, manufacture of oxygen and nitrogen liquid/gas commenced only in June, 1989. That since the petitioners were not registered as the Small Scale Industries (SSI) unit the Petitioners were not entitled to the benefit of the aforesaid notification.
In the submission of Mr. Shroff, the first proviso to para4, as was in existence prior to the amendment of 1st September, 1989, provided that:
Nothing contained in this paragraph would be applicable:
(a) in a case of where the value of clearances from a factory during the preceding financial year or the current financial year did not exceed was not likely to exceed Rs 7.5 Lacs or
(b) in a case where the manufacturer who is manufacturing specified goods in a factory, other than a factory which is registered under the Industries (Development and Regulations) Act, 1951 (65 of 1951) with the Directorate General of Technical Development in the Ministry of Industry, and has been availing of the exemption under this notification during the preceding financial year or the exemption in terms of S. No. 39 of the Table annexed to the notification of the Government of India in the Ministry of Finance (Dept of Revenue) No. 53/88 Central Excise, dated 1st March 1988.
The benefits in the aforesaid notification were not available till 1st March, 1989 to a factory registered with the Directorate General of Technical Development in the Ministry of Industry under the Industries (Development and Regulations) Act, 1951. The Clause (b) of para4 of the subject notification was amended vide Notification No. 174/89 dated 1st September 1989 and the words "or the exemption in terms of S. No. 39 of the Table annexed to the notification of the Government Of India in the Ministry of Finance (Dept of Revenue) No. 53/88 central excise, dated 1st of March 1988" occurring therein were omitted; and following proviso after Clause (b) of para4 was added:
Provided further that nothing contained in Clause (b) of the 1st proviso shall apply in a case where a manufacturer who is manufacturing specified goods in a factory and is registered under the Industries (Development and Regulation) Act, 1951 (65 of 1951), with the Directorate General of Technical Development and has availed of the exemption under this notification during the financial year 1986-87 and the aggregate value of clearances of all excisable goods during the financial year 198788 and 198889 did not exceed rupees one hundred and fifty lakhs.
(emphasis supplied)
Mr. Shroff submits that according to Revenue by virtue of the word "and", appearing in the added proviso a unit which was registered with the Directorate General of Technical Development (DGTD) availing the benefit of the notification in the financial year 1986-87 was only entitled to the benefit of the notification. In other words, units which came into existence after the financial year 1986-87, but, who were otherwise entitled to avail the benefit of Notification No. 175/86, like the petitioners, were not entitled to reap the benefits of the notification. While illustrating further, Mr. Shroff submits that a unit manufacturing the same specified goods, but established prior to 1st April, 1987 and availing of the benefit of the notification during the year 1986-87 is made eligible to claim benefits of the notification, provided its aggregate clearances did not exceed the prescribed limit, whilst other similarly circumstanced unit, whose aggregate clearances did not exceed the stipulated limits, manufacturing the same goods is deprived of the benefits of the notification, merely because it came into existence after 1st April, 1987. Consequently, the petitioners'' unit could not avail of the exemption during the financial year 1986-87.
Mr. Shroff, thus, submits that the said amendment, as interpreted by the Department, seeks to classify factories in two categories; one that were established prior to 31st March, 1987 availing of the benefit of Notification No. 175/86 and another that were established after 31st March, 1987 and not availed the benefits of Notification No. 175/86 during the year 1986-87. The factories falling in the former category have been allowed to avail of the benefit of the notification whilst the latter has been disallowed the benefit of the notification only by virtue of the fact that they were established after 31st March, 1987 for which, according to Mr. Shroff, no rational is to be found.
According to Mr. Shroff, the interpretation placed by the Excise Authorities on Notification No. 175/86 as amended by Notification No. 174/89 dated 1 September 1989, namely, that "nothing in paragraph 4 of the notification would apply to unit which is registered under the Industries (Development and Regulations) Act 1951 with the DGTD in the Ministry of Industry provided the unit had been availing of the exemption under Notification No. 175/86 during the financial year 1986-87", renders the notification totally ultra vires of Articles 14 and 19(1) (g) of the Constitution of India as it would discriminate between similarly circumstanced units registered with the DGTD that manufacture the same specified goods. One unit would be entitled to the benefit of the notification only because it had availed of the benefit in the year 1986-87 whilst another unit like the petitioners'' which came into existence only in June, 1989 would not be entitled to the benefit of the notification No. 175/86 since it did not avail benefits of the said notification. In his submission, one cannot expect any unit or factory to avail benefits of any notification much less Notification No. 175/86 prior to its birth or establishment.
Mr. Shroff submits that it is now well settled that the subordinate legislation, a notification can be read down in a manner which would uphold the vires of the notification. In his submission, if the conditions in the proviso to sub clause (b) are read disjunctively, i.e., the word "and" is read as "or" the object sought to be achieved by notification could be fulfilled, i.e., giving the benefit of this notification even to unit that are registered with the DGTD provided it was manufacturing the specified goods and was in the small scale sector. Thus, if the amended notification is purposefully interpreted so as to give effect to the object of the notification the notification would not be rendered ultra virus Article 14 of the Constitution of India.
Mr. Shroff submits that by allowing the benefit of Notification No. 175/86 to a factory that has availed of the exemption under Notification No. 175/86 during the financial year 1986-87 and denying the benefit to a new similarly situated factory that came into existence after 31st March 1987 between person similarly situated and between person falling within the same class or genus is manifestly arbitrary and discriminatory and violative of Article 14 of the Constitution of India.
Mr. Shroff, thus, submits that the interpretation of the amended proviso by the respondents be held to be incorrect and/or the amended proviso should be read down so that no discrimination is caused between manufacturers manufacturing the same goods and being otherwise similarly situated, except that one factory came into existence prior to 31st March, 1987 while the other did not, as that could never have been the object of the notification.
Per contra, Mr. Jetly, learned Counsel appearing for the Revenue tried to put his own interpretation on the Notification No. 175/86 amended from time to time but could not justify classification sought to be made spelling out legal rationale behind it with the object sought to be achieved. He found it difficult to justify the categorisation of the factories in two sets on the touchstone of Article 14 of the Constitution of India. He, ultimately, left it to the Court to assign proper meaning to the subject notification amended from time to time.
Consideration:
Having heard rival parties and having gone through the subject notification amended from time to time, it is clear that benefits under Notification No. 175/86CE dated 1 March 1986 were not available to the manufacturers like petitioners right upto 31st August, 1989 for want of registration as SSI units with the Director of Industries or the Development Commissioner in any State since they were registered only under the Industries (Development and Regulation) Act 1951.
It was only by virtue of the amendment of 1st September, 1989, the subject Notification No. 175/86 became applicable to the manufacturers manufacturing specified goods in the factories even though they were registered under the Industries (Development and Regulations) Act 1951 with the DGTD. In other words, the units, which were registered with DGTD, had no occasion to avail the benefits of Notification No. 175/86 prior to 1st September, 1989 i.e. during the financial year 1986-87. On this canvas, the literal meaning sought to be assigned by the Revenue to the amended part of the notification has an effect of producing an unintelligible or absurd result defeating the very purpose of the amendment to the subject notification with effect from 1st September, 1989, whereunder the DGTD registered units were also made eligible to avail of the benefits of the subject notification. In the circumstances, the interpretation given by the Revenue in reading two conjunctive conditions into the amended proviso, namely; that the unit should be registered with the DGTD and that it should have availed the exemption during the financial year 1986-87 destroys the very object of the notification and/or the intention of Government. The condition which was not capable of compliance cannot be read in the amended part of the notification.
The Government undoubtedly has the power to impose conditions for the purposes of extending benefits under a notification. However, in the present case the interpretation placed upon the amended notification renders the notification otiose and nugatory. DGTD registered factories could not have availed the benefits of the notification as they were not registered as SSI units and were, therefore, not entitled to avail of the benefits of the notification. It was only in 1989, that DGTD registered factories could avail of the benefits of the subject notification in view of amendment. Further, it also discriminates between factories that have come into existence before and after 1986-87. This could never be the intention of Government. In such a situation the interpretation placed by the department that such DGTD registered factories must also have availed of the benefits of the notification in the year 1986-87 is manifestly absurd and untenable. Such an interpretation renders the notification totally arbitrary, discriminatory, untenable and unworkable and can never be sustained on the touchstone of Article 14 of the Constitution of India.
In the case of Tirath Singh Vs. Bachittar Singh and Others, , the Apex Court held that where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence. In case of Commissioner of Income Tax, Central, Calcutta Vs. National Taj Traders, , Apex Court held that literal construction can be departed from when it would lead to manifestly absurd or anomalous results not intended by legislature.
At this juncture, it is relevant to observe that, in order to give proper meaning, provide harmonious, just and reasonable interpretation and construe it within the constitutional limits, the principle of reading down the provisions of the Statute needs to be invoked. In All Saints High School, Hyderabad and Others Vs. Government of Andhra Pradesh and Others, (at page 533), the Apex Court observed as under:
This Court has in several cases adopted the principle of reading down the provisions of the statute. The reading down of a provision of a statute puts into operation the principle that so far as is reasonably possible to do so, the legislation should be construed as being within its proper....
Keeping the above principle of reading down in mind, the word "and" in the amended proviso if read as "or" then some meaning could be assigned to the notification and it can be saved from the vice of Article 14 of the Constitution of India. Reading the word "and" as "or" does not produce any grammatical distortion rather it will give effect to the clear intention of the Government. On the contrary, reading word "and" as "and" would make no sense and result in an unintelligible and absurd result.
It is needless to mention that the word ''or'' and the word ''and'' are often used interchangeably. There are occasions when the Court, through construction, may change one to the other. This cannot be done, if the meaning of the statute is clear. A departure from natural and plain meaning of the word ''and'' can be made whenever context justifies it or makes it necessary so do; but the departure ought not to be made, except for good and sufficient reason.
In Section 7 of the Official Secrets Act, 1920, which reads: "Any person who attempts to commit any offence under the principal Act or this Act, or solicits or incites or endeavours to persuade another person to commit an offence, or aids or abets and does any act preparatory to the commission of an offence", the word ''and'' printed in Italics was read as ''or'' for by reading ''and'' as ''and'' the result produced was unintelligible and absurd and against the clear intention of the Legislature. (see R. v. Oakes (1959) 2 All ER 92. Thus, to give effect to the manifest intention of the Government as disclosed from the context the word ''and'' appearing in proviso after Clause (b) to para4 needs to be read as ''or'' to save the notification from the vice of Article 14 of the Constitution of India.
In the result, petition is allowed. Rule is made absolute in terms of this order with no order as to costs.