REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1978 OF 2007
|M/S. SPENTEX INDUSTRIES LTD. |...APPELLANT |
|VERSUS | |
|COMMISSIONER OF CENTRAL EXCISE & ORS. |...RESPONDENTS |
W I T H
CIVIL APPEAL NOS. 2025-2026 OF 2013
CIVIL APPEAL NO. 2027 OF 2013
AND
CIVIL APPEAL NO. 10534 OF 2013
J U D G M E N T
A.K. SIKRI, J.
In all these appeals, the basic question of law which arises
for consideration is as to whether or not the manufacturer/exporter is
entitled to rebate of the excise duty paid both on the inputs and on the
manufactured product, when excise duty is paid on a manufactured product
and also on the inputs which have gone into manufacturing the product and
such manufactured product is exported?
We may point out at the outset that, as per the scheme provided by the
relevant Rules framed under the Central Excise Act, 1944 (hereinafter
referred to as the 'Act') two options are admissible in respect of
exemption from excise duty which is to be given when the goods manufactured
are meant for export and are actually exported. A manufacturer/exporter can
either export the said goods without payment of duty by executing a bond to
the effect that goods are meant for export and would be actually exported
and also undertakes to satisfy other stipulated conditions, to earn the
exemption from payment on excise duty. Other option is to pay the duty on
intermediate products and/or final products and thereafter claiming rebate
from the Government once the goods are actually exported. When the
manufacturer/exporter exercises first option, admittedly no duty is to be
paid either on intermediate products or on final products. However, the
dispute has arisen when second option is executed. In such a case, the
Department has taken the stand that as per the relevant rules, the rebate
is admissible in respect of one duty alone, i.e., either on the duty paid
excisable goods or duty paid on materials used in the manufacture or
processing of such goods but not on both the final as well as intermediate
products. The authorities below, as would be noticed, in all these cases
have accepted the version of the Revenue. Therefore, in these four
appeals, assessees are the appellants.
After giving the aforesaid preliminary background thereby putting the issue
in perspective, that has arisen for consideration we may take note of the
factual background. For the purpose of convenience, it would be sufficient
if we traverse through the facts that emerge from Civil Appeal No. 1978 of
2007.
The appellant/assessee, in this appeal, is engaged in the
manufacturing of polyester cotton blended yarn and polyester viscose
blended yarn and both these products fall under Chapter 55 of the
Schedule to the Central Excise Tariff Act, 1985. For manufacture of
the aforesaid product, the assessee had used the raw material which was an
intermediate product and paid excise duty thereupon. The final products
were also cleared on payment of excise duty on those finished products.
The assessee had exported these goods on payment of central excise
duty in the CENVAT account and, thereafter, filed as many as forty-five
rebate claims amounting to ?1,46,90,995/- (?75,42,487/-+ ?71,48,508/-)
in the months of November and December, 2004 respectively. These rebate
claims were filed under the provisions of Rule 18 of the Central
Excise Rules, 2002 (hereinafter referred to as the 'Rules').
On receipt of the aforesaid rebate claims, the Department issued show cause
notice dated January 11, 2005 whereby the assessee was called upon to show
cause as to why the rebate claimed by the assessee be not rejected as it
was contrary to the provisions of Rule 18 of the Rules read with Section
11B of the Act and the Notification issued thereunder, i.e., Notification
No. 19/2004-CE(NT) dated September 06, 2004. After considering the reply
that was given by the assessee, the Deputy Commissioner of Central Excise,
Division-II, Nagpur rejected the rebate of duty paid on the final product
exported as well as the claim of rebate of duty paid on inputs contained
therein by passing Order-in-original dated January 28, 2005. Aggrieved by
this order, the assessee filed the appeal before the Commissioner of
Central Excise (Appeals), Nagpur. This appeal was decided by orders dated
March 15, 2005 holding that in terms of Rule 18 of the Rules, the assessee
is entitled to one of the two claims for rebate, i.e., either rebate of
duty paid on exported goods or the duty paid on inputs used in the exported
goods, and not on both of them. He, thus, remitted the case back to the
Deputy Commissioner to decide the claim of the assessee after granting
personal hearing to the assessee and taking its option as to which of the
two claims assessee wanted to prefer.
Still not satisfied with this partial relief given by the Commissioner
(Appeals), as the assessee wanted rebate on both types of excise duties
paid, the assessee challenged the order of the Commissioner (Appeals) by
filing Revision Application before the Joint Secretary to the Government of
India under Section 35EE of the Act. This Revision Application of the
assessee was decided in its favour as the Joint Secretary held that the
assessee was entitled to rebate both on the exported goods as well as
inputs used in the exported goods. It was now the turn of the Department to
feel dissatisfied with the aforesaid outcome and, therefore, it challenged
the aforesaid revisional order by filing the writ petition in the High
Court of Bombay, Nagpur Bench. This writ petition has been decided in
favour of the Revenue whereby the view taken by the Joint Secretary to the
Government of India is reversed and that of Commissioner (Appeals) is
upheld holding that out of the two excise duties, Rule 18 of the Rules
permits rebate only qua one of them and not on the both duties.
Special Leave Petition against this judgment of the Bombay High Court was
preferred by the assessee in which leave was granted. That is how present
appeal comes up for hearing to decide the question of law that has arisen
for consideration.
Before embarking on the case that is pleaded by both sides on the
interpretation of the relevant provisions of the Act and Rules, and in
particular Rule 18 of the Rules, it is imperative to scan through those
provisions. First of all, we take note of the relevant statutory provision
in the Act which is Section 11B thereof. That portion of this long
provision, which is relevant for us, is extracted below:
“S. 11B. Claim for refund of duty and interest, if any, paid on such
duty.— (1) Any person claiming refund of any duty of excise and interest,
if any, paid on such duty may make an application for refund of such duty
and interest if any, paid on such duty to the Assistant Commissioner of
Central Excise or Deputy Commissioner of Central Excise before the expiry
of one year from the relevant date in such form and manner as may be
prescribed and the application shall be accompanied by such documentary or
other evidence including the documents referred to in section 12A as the
applicant may furnish to establish that the amount of duty of excise and
interest, if any, paid on such duty in relation to which such refund is
claimed was collected from or paid by him and the incidence of such duty
and interest if, any, paid on such duty had not been passed on by him to
any other person:”
Thereafter, Central Excise Rules, 2002 were framed by the Central
Government in exercise of powers contained in Section 37 of the Act. As
mentioned above, the scheme of the relevant Rules or the subject matter of
the issue at hand provides for two options insofar as payment of excise
duty on the products meant for exports are concerned. Under Rule 18, an
exporter has the option to pay the duty and then claim rebate thereof and
under Rule 19, export can be made without payment of duty on execution of a
bond. Both these rules are given below.
“Rule 18. Rebate of duty.— Where any goods are exported, the Central
Government may, by notification, grant rebate of duty paid on such
excisable goods or duty paid on materials used in the manufacture or
processing of such goods and the rebate shall be subject to such conditions
or limitations, if any, and fulfillment of such procedure, as may be
specified in the notification.
Rule 19. Export without payment of duty.— (1) Any excisable goods may be
exported without payment of duty from a factory of the producer or the
manufacturer or the warehouse or any other premises, as may be approved by
the Commissioner.
(2) Any material may be removed without payment of duty from a factory of
the producer or the manufacturer or the warehouse or any other premises,
for use in the manufacture or processing of goods which are exported, as
may be approved by the Commissioner.
xxx xxx xxx”
Obviously, the controversy that arises is qua interpretation that is to be
accorded to Rule 18. The Rule stipulates that the Central Government may,
by notification, grant rebate of duty paid on such excisable goods OR duty
paid on material used in the manufacturing or processing of such goods.
The word 'OR' which is used in between the two kinds of duties in respect
of which rebate can be granted is the bone of contention and it is to be
interpreted whether it postulates grant of one of the two duties or both
the duties can be claimed. It is also to be noted at this stage itself
that Rule 18 is only an enabling provision which empowers the Central
Government to issue a notification for grant of these rebates and
prescribes the procedure for claiming such rebate(s).
As is clear from the bare reading of Rule 18, the manner of getting the
rebate under the said Rule has to be as per the procedure that may be
specified in the notification.
The Central Government has issued Notification No. 19/2004-CE(NT) dated
September 06, 2004 which deals with grant of rebate of whole of duty on
excisable goods exported. The opening portion of this Notification, which
needs to be taken note of, is as under:
“In exercise of the powers conferred by rule 18 of the Central Excise
Rules, 2002 and in supersession of the Ministry of Finance, Department of
Revenue, notification No. 40/2001-Central Excise (N.T.), dated the 26th
June 2001, [G.S.R. 469(E), dated the 26th June, 2001] insofar as it relates
to export to the countries other than Nepal and Bhutan, the Central
Government hereby directs that there shall be granted rebate of the whole
of the duty paid on all excisable goods falling under the First Schedule to
the Central Excise Tariff Act, 1985 (5 of 1986) exported to any country
other than Nepal and Bhutan, subject to the conditions, limitations and
procedures specified hereinafter-
xxx xxx xxx”
It also lays down conditions and limitations for claiming such rebate as
well as procedure which needs to be fulfilled. The provision, inter alia,
prescribes the time limit within which claim for rebate to Central Excise
is to be presented. What is relevant for the purposes of present case is
the Form, as per which application for removal of excisable goods for
export is to be made and the same is prescribed in Annexure 2 to the Rules.
Column 3 thereof reads as under:
“xxx xxx xxx
3. I/We hereby certify that the above-mentioned goods have been
manufactured.
(a) availing facility/without availing facility of Cenvat credit under
Cenvat Credit Rules, 2002.
(b) availing facility/without availing facility under Notification No.
21/2004-Central Excise (N.T.), dated the 6th September, 2004 issued under
rule 18 of Central Excise Rules, 2002.
(c) availing facility/without availing facility under Notification No.
43/2001-Central Excise (N.T.), dated the 26th June, 2001 issued under rule
19 of Central Excise (No. 2) Rules, 2001.
xxx xxx xxx”
The aforesaid Notification, as is evident from the reading thereof, deals
with grant of rebate of duty paid on the finished goods, that are
ultimately exported. There is yet another Notification No. 21/2004-
CE(N.T.); dated September 06, 2004 issued by the Government for claiming
rebate of whole of the duty paid on excisable goods used in the manufacture
or processing of exported goods, as is clear from the reading of the
opening para thereof:
“In exercise of the powers conferred by rule 18 of the Central Excise
Rules, 2002 and in supersession of the Ministry of Finance, Department of
Revenue, notification No. 41/2001-Central Excise (N.T.), dated the 26th
June, 2001 [G.S.R. 470(E) dated the 26th June 2001], the Central Government
hereby, directs that rebate of whole of the duty paid on excisable goods
(hereinafter referred to as 'materials') used in the manufacture or
processing of export goods shall, on their exportation out of India, to any
country except Nepal and Bhutan, be paid subject to the conditions and the
procedure specified hereinafter.”
This Notification also prescribes, inter alia, the procedure for export in
the specified format which is Form ARE2 appended as Annexure 2B's Rules and
envisages filing of combined application for removal of goods for export
under the claim for rebate of duty paid on excisable material used in the
manufacture and packing [i.e., intermediate product used as raw material]
as well as duty paid on the final product for export. This form, thus,
enables the manufacturer of the final product exported to claim rebate of
both kinds of duties paid. That becomes evident from the following portion
of the said form:
“Form A.R.E. 2
Combined application for removal of goods for export under claim for rebate
of duty paid on excisable materials used in the manufacture and packing of
such goods and removal of dutiable excisable goods for export under claim
for rebate of finished stage Central Excise Duty or under bond without
payment of finished stage Central Excise Duty leviable on export goods.
To
The Superintendent of Central Excise,
(Address)
…...............(full postal address)
1. Particulars of the Assistant Commissioner of Central Excise or the
Deputy Commissioner of Central Excise from whom rebate shall be
claimed/with whom bond is executed and his complete postal
address__________
2. I/We_________of _____ propose to export the under mentioned goods
(details of which are given in Table 1 below) to ____ (country of
destination) by air/sea/land/post parcel under claim for rebate of duty
paid on excisable materials used in the manufacture and packing of such
goods.
3. *The finished goods being exported are not dutiable.
Or
We intended to claim the rebate of Central Excise Duty paid on clearances
of goods for export under notification No. 19/2004-Central Excise (N.T.),
dated the 6th September, 2004 issued under Rule 18 of Central Excise Rules,
2002.”
The argument of learned counsel for the appellant is that it has always
been the policy of the Central Government to exempt the goods from payment
of excise duty both on the final excisable products as well as on material
used in the manufacturing of goods for payment of duty if the goods are
meant for export outside India. Moreover, Rule 18 is only an enabling
provision and in exercise of powers contained in this Rule, the Central
Government has also issued notification for grant of rebate or duty paid on
excisable goods as well as duty paid on material used in the manufacture of
goods. Even the notifications which prescribe the procedure contemplate a
situation where duty may have been paid not only on the excisable goods but
on the material used in the manufacture of goods and provide for claiming
the rebate in respect of duty paid on both these goods. It was also argued
that the order of the Joint Secretary, Government of India further shows
the mind of the Government itself, disclosing that both the duties are
eligible for grant of rebate. On that basis, it is argued that Rule 18 has
to be interpreted keeping in view the overall scheme of the statute and the
Rules and the manner in which the Government itself operated the said Rule.
Learned counsel for the respondent, on the other hand, predicated his
arguments on the plain and grammatical meaning that needs to be accorded to
Rule 18 of the Rules by arguing that the word 'OR' used therein clearly
signifies that it is one of the two duties to which the rebate can be
granted and not both. For this purpose, reasoning given by the High Court
was adopted with the submission that it was in accord with the cardinal
principle of literal interpretation and, therefore, the view of the High
Court was correct in law.
After giving due consideration to the respective submissions, in the light
of statutory scheme envisaged for grant of rebate in the Act and Rules, we
are constrained to hold that the High Court has not taken correct view,
which we feel is a myopic view and ignores the overall scheme pertaining to
grant of rebate in respect of goods exported out of India. There are
multiple reasons for arriving at this conclusion which are discussed
hereinafter.
(i) Historical perspective of the statutory scheme: Central Excise Rules
under the Act were first framed in the year 1944. Rule 12 thereof provided
for rebate of duty and Rule 13 enabled exporter to export the goods without
payment of duty. Relevant portion of these Rules was as under:
“Rule 12. Rebate of duty.— The Central Government may, from time to time,
by notification in the Official Gazette, grant rebate of -
(a) duty paid on the excisable goods;
(b) duty paid on materials used in the manufacture of goods; if such
goods are exported outside India or shipped as provision or stores for use
on board a ship proceeding to a foreign port, or supplied to a foreign
going aircraft to such extent and subject to such safeguards, conditions
and limitations as regards the class or description of goods, class or
description of materials used for manufacture thereof, destination, mode of
transport and other allied matters as may be specified in the notification.
xxx xxx xxx
Rule 13. Export in bond of goods on which duty has not been paid.—(1) The
Central Government may, from time to time, by notification in the Official
Gazette -
(a) permit export of specified excisable goods in bond without payment of
duty, in the like manner, as the goods regarding which the rebate is
granted under sub-rule (i) of rule 12 from a factory of manufacture or
warehouse or any other premises as may be approved by the Commissioner of
Central Excise;
(b) specify materials, removal of which without payment of duty from the
place of manufacture or storage for use in the manufacture in bond of
export goods may be permitted by Commissioner of Central Excise;
(c) Allow removal of excisable material without payment of duty for the
manufacture of export goods, as may be specified, to be exported in
execution of one or more export orders; or for replenishment of duty paid
materials used in the manufacture of such export goods already exported for
the execution of such orders, or both;
subject to such safeguards, conditions and limitations as regards the class
or description of goods, class or description of materials used for
manufacture thereof, destination, mode of transport and other allied
matters as may be specified in the notification which the exporter
undertakes to abide by entering into a bond in the proper form with such
surety or sufficient security, and under such conditions as the
Commissioner approves.
xxx xxx xxx ”
It is manifest from the reading of the aforesaid Rules that from the very
beginning, two alternative methods were provided enabling an exporter of
goods to get rid of the burden of paying the excise duty; both on excisable
goods as well as on materials used in the manufacture of goods. The
exporter could either claim rebate when the duty was paid. Or else, he was
free not to pay excise duty at all on both types of goods by executing a
bond in the prescribed form and fulfilling the conditions prescribed in
this behalf. The grant of rebate, in either of the options, has always
been in respect of both kinds of excise duties, i.e. on the final product
that is exported as well as on the intermediate product on which excise
duty is paid/payable and the same is used as raw material in the
manufacture of goods. Under these Rules also, Notification No. 41/94-
CE(NT), dated September 12, 1994 and Notification No. 42/94-CE(NT), dated
September 21, 1994 were issued for grant of rebate of duty on export of all
excisable goods, except minerals oils and ship stores and rebate on
materials used in manufacture of goods exported out of India, respectively.
The aforesaid Rules of 1944 were replaced by Central Excise Rules, 2001.
In these rules, relevant provisions were Rules 18 and 19. It is not
necessary to reproduce these Rules which are same as Rules 18 and 19 of the
existing Rules. Under these Rules also similar Notifications were issued,
i.e., Notification No. 40/2001-CE(NT) dated June 26, 2001 and Notification
No. 41/2001-CE(NT) dated June 26, 2001 providing for rebate of whole of
duty on excisable goods when exported as well as rebate of inputs used in
manufacture/processing of export goods. Likewise, Notifications 40 and 41
dated June 26, 2001 were issued under Rule 19 of these Rules.
Central Excise Rules, 2001 were superseded by the present Rules, viz.
Central Excise Rules, 2002 and the exact provisions thereof have already
been quoted. The aforesaid historical narration of the relevant provisions
from time to time depict one common theme, namely, to provide rebate of
duty paid on the excisable goods as well as the duty paid on material used
in the manufacture of goods.
(ii) Scheme of the Rules : A cumulative reading of the scheme enshrined
in Rules 18 and 19 of the Rules, 2002 has already been pointed out above.
These Rules provide two alternatives to the exporter enabling him to get
the benefit of exemption from paying the excise duty. Under Rule 19,
exporter is not required to pay any excise duty at all. At the time of
removal of these goods from the factory gate of the producer or the
manufacturer or the warehouse or any other premises, he is supposed to
comply with the conditions, safeguards and procedure, as may be notified by
the Board. Such a procedure provides for execution of a bond which, inter
alia, lays down the condition that the goods which are cleared are actually
meant for export and he is to furnish the proof that those goods are
actually exported. What is important is that when the exporter opts for
this method, with the approval of the Commissioner, he is not required to
pay duty either on the final product, i.e., on excisable goods or on the
material used in the manufacture of those goods. The intention is loud and
clear, namely, the goods which are meant for exports are free from any
excise duty. It extends not only to the material which is used in the
manufacture of goods but also on the goods that are produced and ultimately
exported. Once we keep in mind this scheme, it cannot be the intention of
the Legislature to provide rebate only on one item in case a particular
exporter/manufacturer opts for other alternative under Rule 18, namely,
paying the duty in the first instance and then claiming the rebate. Giving
such restrictive meaning to Rule 18 would not only be anomalous but would
lead to absurdity as well. In fact, it would defeat the very purpose of
grant of remission from payment of excise duty in respect of the goods
which are exported out of India. It may also lead to invidious
discrimination and arbitrary results.
Let us visualize another situation. A particular exporter may opt
for scheme under Rule 18, i.e., for claim of rebate insofar as, say, excise
duty on material used in manufacture of goods is concerned. He would pay
that duty and claim rebate. When it comes to payment of duty of export of
excisable goods, he exercises the option under Rule 19 and executes a bond
which enables him not to pay any duty on excisable goods. In this
scenario, the exporter will still be able to get the benefit of not paying
any excise duty on both final product as well as intermediate product.
(iii) Government's own perception: As mentioned above, Rule 18 is enabling
provision which authorises the Central Government to issue a notification
for grant of these rebates. Exercising powers under this Rule, the Central
Government has issued necessary notifications for rebate in respect of both
the duties, i.e., on intermediate product as well as on the final product.
Further, and which is more significant, these notifications providing
detailed procedure for claiming such rebates contemplate a situation where
excise duty may have been paid both on the excisable goods and on material
used in the manufacture of those goods and enables the exporter to claim
rebate on both the duties. This kind of procedure and format of prescribed
Forms, already described above, becomes a clincher insofar as understanding
of the Government of Rule 18 of the Rules is concerned.
It is to be borne in mind that it is the Central Government which has
framed the Rules as well as issued the notifications. If the Central
Government itself is of the opinion that the rebate is to be allowed on
both the forms of excise duties the government is bound thereby and the
rule in-question has to interpreted in accord with this understanding of
the rule maker itself. Law in this respect is well settled and, therefore,
it is not necessary to burden this judgment by quoting from various
decisions. Our purpose would be served by referring to one such decision
in the case of R & B Falcon (A) Pty Ltd. v. Commissioner of Income Tax[1]
wherein interpretation given by the Central Board of Direct Taxes (CBDT) to
a particular provision was held binding on the tax authorities. The Court
explained this principle in the following manner:
“33. CBDT has the requisite jurisdiction to interpret the provisions of the
Income Tax Act. The interpretation of the CBDT being in the realm of
executive construction, should ordinarily be held to be binding, save and
except where it violates any provisions of law or is contrary to any
judgment rendered by the courts. The reason for giving effect to such
executive construction is not only same as contemporaneous which would come
within the purview of the maxim temporania caste pesto, even in certain
situation a representation made by an authority like Minister presenting
the Bill before Parliament may also be found bound thereby.
34. Rules of executive construction in a situation of this nature may also
be applied. Where a representation is made by the maker of legislation at
the time of introduction of the Bill or construction thereupon is put by
the executive upon its coming into force, the same carries a great weight.
35. In this regard, we may refer to the decision of the House of Lords in
R. (Westminster City Council) v. National Asylum Support Service (2002) 1
WLR 2956 : (2002) 4 All ER 654 (HL) and its interpretation of the decision
in Pepper v. Hart 1993 AC 593 : (1992) 3 WLR 1032 : (1993) 1 All ER 42 (HL)
on the question of “executive estoppel”. In the former decision, Lord Steyn
stated: (WLR p. 2959, para 6)
“6. If exceptionally there is found in the Explanatory Notes a clear
assurance by the executive to Parliament about the meaning of a clause, or
the circumstances in which a power will or will not be used, that assurance
may in principle be admitted against the executive in proceedings in which
the executive places a contrary contention before a court.”
36. A similar interpretation was rendered by Lord Hope of Craighead in
Wilson v. First County Trust Ltd. (No. 2) (2004) 1 AC 816 : (2003) 3 WLR
568 : (2003) 4 All ER 97 (HL), wherein it was stated: (WLR p. 600, para
113)
“113. ...As I understand it [Pepper v. Hart 1993 AC 593 : (1992) 3 WLR 1032
: (1993) 1 All ER 42 (HL), it recognised a limited exception to the general
rule that resort to Hansard was inadmissible. Its purpose is to prevent the
executive seeking to place a meaning on words used in legislation which is
different from that which ministers attributed to those words when
promoting the legislation in Parliament.”
37. For a detailed analysis of the rule of executive estoppel useful
reference may be to the article authored by Francis Bennion entitled
“Executive Estoppel: Pepper v. Hart Revisited”, published in Public Law,
Spring 2007, p. 1 which throws a new light on the subject-matter.”
We are also of the opinion that another principle of interpretation of
statutes, namely, principle of contemporanea expositio also becomes
applicable which is manifest from the act of the Government in issuing two
notifications giving effect to Rule 18. This principle was explained by
the Court in Desh Bandhu Gupta and Co. and others v. Delhi Stock Exchange
Association Ltd.[2] in the following manner:
“9. It may be stated that it was not disputed before us that these two
documents which came into existence almost simultaneously with the issuance
of the notification could be looked at for finding out the true intention
of the Government in issuing the notification in question, particularly in
regard to the manner in which outstanding transactions were to be closed or
liquidated. The principle of contemporanea expositio (interpreting a
statute or any other document by reference to the exposition it has
received from contemporary authority) can be invoked though the same will
not always be decisive of the question of construction. (Maxwell 12th Edn.
p. 268). In Crawford on Statutory Construction (1940 Edn.) in para 219 (at
pp. 393-395) it has been stated that administrative or executive officers
charged with executing a statute) generally should be clearly wrong before
it is overturned; such a construction commonly referred to as practical
construction although not controlling, is nevertheless entitled to
considerable weight it is highly persuasive. In Baleshwar Bagarti v.
Bhagirathi Dass (1908) ILR 35 Cal 701 at 713 the principle which was
reiterated in Mathura Mohan Saha v. Ram Kumar Saha, ILR 43 Cal. 790: (AIR
1916 Cal. 136) has been stated by Mukerjea J. thus:
“It is a well-settled principle of construction that courts in construing a
statute will give much weight to the interpretation put upon it, at the
time of its enactment and since, by those whose duty it has been to
construe, execute and apply it. I do not suggest for a moment that such
interpretation has by any means a controlling effect upon the Courts; such
interpretation may, if occasion arises have to be disregarded for cogent
and persuasive reasons, and in a clear case of error, a Court would without
hesitation refuse to follow such construction.”
Of course, even without the aid of these two documents which contain a
contemporaneous exposition of the Government's intention, we have come to
the conclusion that on a plain construction of the notification the proviso
permitted the closing out or liquidation of all outstanding transactions by
entering into a forward contract in accordance with the rules, bye-laws and
regulations of the respondent.”
In this hue, we may now advert to the reasoning given by the Joint
Secretary itself in the order passed in Revision Petition wherein he has
discussed the issue in the following perspective:
“.....Govt. notes that as a principle and a policy measure, Govt. has
accepted that export of goods from India should be relieved of domestic
levies (both customs and Central Excise) in order to promote export of
domestic products from India and to make then internationally competitive.
In order to achieve this objective, two schemes operate, namely, export
under bond and export under payment of duty and both are comparable, as
objectives of both the schemes are same i.e. to neutralize the burden of
internal levies on goods exported. In case of former, export goods are
exempted from payment of duty, subject to conditions/restrictions etc. and
in the case of latter export goods are cleared on payment of duty which is
rebated subject to production of proof of export. For export under bond
Rule 19 provides for excisable goods to be exported without payment of
duty, subject to conditions etc. which are detailed in Notfn. No. 42/2001 –
CE(NT) dt. 26.06.2001 and Notification No. 43/2001-CE(NT) dtd. 26.06.2001
further relieves the burden of duty on inputs used to manufacture such
goods by obtaining them duty free under bond. Thus, export goods are
relieved of the burden of excise duty both on finally exported goods as
well the inputs used vide these legislative and machinery provisions. As
both schemes are comparable as objective to serve the common goal of
relieving the burden of domestic taxation, the other scheme provides for
similar dispensation in case goods are exported on payment of duty by way
of rebating central excise duty suffered on such export goods. Rule 18
provides for rebate of duty on such export goods or duty paid on material
used in manufacture of such export goods. While Notification No. 40/2001 –
Central Excise (NT) dtd. 26.6.2001 as amended deals with details provisions
for rebate on finishing goods, Notfn. No. 41/201 C.E. (NT) as amended deals
and provides the detailed procedural provisions for input stage rebate
also. Similar provisions and export relief existed for export on payment of
duty and under bond in the erstwhile Rule 12 and 13 of Central Excise
Rules. The fundamental objective of existing rules and the earlier ones is
the same i.e. to neutralise the duty element on the goods exported and
hence no other interpretation denying the relief sought appears possible.
Circular No. 129/40/95 dt. 29.09.95, para 1.5 of Chapter 8 of Part V of
CBEC Manual further leaves no room for any other interpretation.”
(iv) Interpretation of word 'OR' occurring in Rule 18: The aforesaid
discussion leads us to the only inevitable consequence which is this : the
word 'OR' occurring in Rule 18 cannot be given literal interpretation as
that leads to various disastrous results pointed out in the preceding
discussion and, therefore, this word has to be read as 'and' as that is
what was intended by the rule maker in the scheme of things and to carry
out the objectives of the Rule 18 and also to bring it at par with Rule 19.
We are conscious of the principle that the word 'or' is normally
disjunctive and 'and' is normally conjunctive (See Union of India v.
Kamlabhai Harjiwandas Parekh and others[3]). However, there may be
circumstances where these words are to be read as vice-versa to give effect
to manifest intention of the Legislature as disclosed from the context.
Of course, these two words normally 'or' and 'and' are to be given their
literal meaning in unless some other part of same Statute or the clear
intention of it requires that to be done. However, wherever use of such a
word, viz., 'and'/'or' produces unintelligible or absurd results, the Court
has power to read the word 'or' as 'and' and vice-versa to give effect to
the intention of the Legislature which is otherwise quite clear. This was
so done in the case of State of Bombay v. R.M.D. Chamarbaugwala[4] and
while doing so, the Court observed as under:
“...Considering the nature, scope and effect of the impugned Act, we
entertain no doubt whatever that the first category of prize competitions
does not include any innocent prize competitions. Such is what we conceive
to be the clear intention of the Legislature as expressed in the impugned
Act read as a whole and to give effect to this obvious intention as we are
bound to do, we have perforce to read the word “or” appearing in the
qualifying clause after the word “promoter” and before the word “or” as
“and”. Well-known canons of construction of statutes permit us to do so.
(See Maxwell on the Interpretation of Statutes, 10th edition, page 238)”
In J. Jayalalitha v. Union of India[5], provisions of Section 3 of the
Prevention of Corruption Act, 1988 empowers the Government to appoint as
many special judges as may be necessary for such area or areas or for such
case or group of case, as may be specified in the notification. Construing
the italicised 'or' it was held that it would mean that the Government has
the power to do either or both the things, i.e., the Government may, even
for an area for which a special judge has been appointed, appoint a special
judge for a case or group of cases.
Likewise, in Mazagaon Dock Ltd. v. The Commissioner of Income Tax and
Excess Profits Tax[6], word 'or' occurring under Section 42(2) of the
Income Tax Act, 1922 was construed as 'and' when the Court found that the
Legislature 'could not have intended' use of the expression 'or' in that
Section. We have already explained the statutory scheme contained in the
Act and Rules which express manifest intention of the Legislature which
provide for granting of both kinds of rebates to the assessee. In Mazagaon
Dock Ltd. (supra), this aspect was explained in the following manner:
“10. The word “or” in the clause would appear to be rather inappropriate
as it is susceptible of the interpretation that when some profits are made
but they are less than the normal profits, tax could only be imposed either
on the one or on the other, and that accordingly a tax on the actual
profits earned would bar the imposition of tax on profits which might have
been intended, and the word “or” would have to be read in the context as
meaning “and”. Vide Maxwell's Interpretation of Statutes, Tenth Edition,
pages 238-239. But that, however, does not affect the present question
which is whether the word “derived” indubitably points to the business of
the non-resident as the one taxable under S. 42(2) and for the reasons
already given the answer must be in the negative.”
The aforesaid discussion leads us to inevitable conclusion, namely, that
the exporters/appellants are entitled to both the rebates under Rule 18 and
not one kind of rebate. The impugned judgments are, accordingly, set aside
allowing these appeals.
.............................................J.
(A.K. SIKRI)
.............................................J.
(ROHINTON FALI NARIMAN)
NEW DELHI;
OCTOBER 09, 2015.
-----------------------
[1]
(2008) 12 SCC 466
[2] (1979) 3 SCR 373
[3] (1968) 1 SCR 463
[4] (1957) 1 SCR 874
[5] (1999) 5 SCC 138
[6] (1959) 1 SCR 848
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1978 OF 2007
|M/S. SPENTEX INDUSTRIES LTD. |...APPELLANT |
|VERSUS | |
|COMMISSIONER OF CENTRAL EXCISE & ORS. |...RESPONDENTS |
W I T H
CIVIL APPEAL NOS. 2025-2026 OF 2013
CIVIL APPEAL NO. 2027 OF 2013
AND
CIVIL APPEAL NO. 10534 OF 2013
J U D G M E N T
A.K. SIKRI, J.
In all these appeals, the basic question of law which arises
for consideration is as to whether or not the manufacturer/exporter is
entitled to rebate of the excise duty paid both on the inputs and on the
manufactured product, when excise duty is paid on a manufactured product
and also on the inputs which have gone into manufacturing the product and
such manufactured product is exported?
We may point out at the outset that, as per the scheme provided by the
relevant Rules framed under the Central Excise Act, 1944 (hereinafter
referred to as the 'Act') two options are admissible in respect of
exemption from excise duty which is to be given when the goods manufactured
are meant for export and are actually exported. A manufacturer/exporter can
either export the said goods without payment of duty by executing a bond to
the effect that goods are meant for export and would be actually exported
and also undertakes to satisfy other stipulated conditions, to earn the
exemption from payment on excise duty. Other option is to pay the duty on
intermediate products and/or final products and thereafter claiming rebate
from the Government once the goods are actually exported. When the
manufacturer/exporter exercises first option, admittedly no duty is to be
paid either on intermediate products or on final products. However, the
dispute has arisen when second option is executed. In such a case, the
Department has taken the stand that as per the relevant rules, the rebate
is admissible in respect of one duty alone, i.e., either on the duty paid
excisable goods or duty paid on materials used in the manufacture or
processing of such goods but not on both the final as well as intermediate
products. The authorities below, as would be noticed, in all these cases
have accepted the version of the Revenue. Therefore, in these four
appeals, assessees are the appellants.
After giving the aforesaid preliminary background thereby putting the issue
in perspective, that has arisen for consideration we may take note of the
factual background. For the purpose of convenience, it would be sufficient
if we traverse through the facts that emerge from Civil Appeal No. 1978 of
2007.
The appellant/assessee, in this appeal, is engaged in the
manufacturing of polyester cotton blended yarn and polyester viscose
blended yarn and both these products fall under Chapter 55 of the
Schedule to the Central Excise Tariff Act, 1985. For manufacture of
the aforesaid product, the assessee had used the raw material which was an
intermediate product and paid excise duty thereupon. The final products
were also cleared on payment of excise duty on those finished products.
The assessee had exported these goods on payment of central excise
duty in the CENVAT account and, thereafter, filed as many as forty-five
rebate claims amounting to ?1,46,90,995/- (?75,42,487/-+ ?71,48,508/-)
in the months of November and December, 2004 respectively. These rebate
claims were filed under the provisions of Rule 18 of the Central
Excise Rules, 2002 (hereinafter referred to as the 'Rules').
On receipt of the aforesaid rebate claims, the Department issued show cause
notice dated January 11, 2005 whereby the assessee was called upon to show
cause as to why the rebate claimed by the assessee be not rejected as it
was contrary to the provisions of Rule 18 of the Rules read with Section
11B of the Act and the Notification issued thereunder, i.e., Notification
No. 19/2004-CE(NT) dated September 06, 2004. After considering the reply
that was given by the assessee, the Deputy Commissioner of Central Excise,
Division-II, Nagpur rejected the rebate of duty paid on the final product
exported as well as the claim of rebate of duty paid on inputs contained
therein by passing Order-in-original dated January 28, 2005. Aggrieved by
this order, the assessee filed the appeal before the Commissioner of
Central Excise (Appeals), Nagpur. This appeal was decided by orders dated
March 15, 2005 holding that in terms of Rule 18 of the Rules, the assessee
is entitled to one of the two claims for rebate, i.e., either rebate of
duty paid on exported goods or the duty paid on inputs used in the exported
goods, and not on both of them. He, thus, remitted the case back to the
Deputy Commissioner to decide the claim of the assessee after granting
personal hearing to the assessee and taking its option as to which of the
two claims assessee wanted to prefer.
Still not satisfied with this partial relief given by the Commissioner
(Appeals), as the assessee wanted rebate on both types of excise duties
paid, the assessee challenged the order of the Commissioner (Appeals) by
filing Revision Application before the Joint Secretary to the Government of
India under Section 35EE of the Act. This Revision Application of the
assessee was decided in its favour as the Joint Secretary held that the
assessee was entitled to rebate both on the exported goods as well as
inputs used in the exported goods. It was now the turn of the Department to
feel dissatisfied with the aforesaid outcome and, therefore, it challenged
the aforesaid revisional order by filing the writ petition in the High
Court of Bombay, Nagpur Bench. This writ petition has been decided in
favour of the Revenue whereby the view taken by the Joint Secretary to the
Government of India is reversed and that of Commissioner (Appeals) is
upheld holding that out of the two excise duties, Rule 18 of the Rules
permits rebate only qua one of them and not on the both duties.
Special Leave Petition against this judgment of the Bombay High Court was
preferred by the assessee in which leave was granted. That is how present
appeal comes up for hearing to decide the question of law that has arisen
for consideration.
Before embarking on the case that is pleaded by both sides on the
interpretation of the relevant provisions of the Act and Rules, and in
particular Rule 18 of the Rules, it is imperative to scan through those
provisions. First of all, we take note of the relevant statutory provision
in the Act which is Section 11B thereof. That portion of this long
provision, which is relevant for us, is extracted below:
“S. 11B. Claim for refund of duty and interest, if any, paid on such
duty.— (1) Any person claiming refund of any duty of excise and interest,
if any, paid on such duty may make an application for refund of such duty
and interest if any, paid on such duty to the Assistant Commissioner of
Central Excise or Deputy Commissioner of Central Excise before the expiry
of one year from the relevant date in such form and manner as may be
prescribed and the application shall be accompanied by such documentary or
other evidence including the documents referred to in section 12A as the
applicant may furnish to establish that the amount of duty of excise and
interest, if any, paid on such duty in relation to which such refund is
claimed was collected from or paid by him and the incidence of such duty
and interest if, any, paid on such duty had not been passed on by him to
any other person:”
Thereafter, Central Excise Rules, 2002 were framed by the Central
Government in exercise of powers contained in Section 37 of the Act. As
mentioned above, the scheme of the relevant Rules or the subject matter of
the issue at hand provides for two options insofar as payment of excise
duty on the products meant for exports are concerned. Under Rule 18, an
exporter has the option to pay the duty and then claim rebate thereof and
under Rule 19, export can be made without payment of duty on execution of a
bond. Both these rules are given below.
“Rule 18. Rebate of duty.— Where any goods are exported, the Central
Government may, by notification, grant rebate of duty paid on such
excisable goods or duty paid on materials used in the manufacture or
processing of such goods and the rebate shall be subject to such conditions
or limitations, if any, and fulfillment of such procedure, as may be
specified in the notification.
Rule 19. Export without payment of duty.— (1) Any excisable goods may be
exported without payment of duty from a factory of the producer or the
manufacturer or the warehouse or any other premises, as may be approved by
the Commissioner.
(2) Any material may be removed without payment of duty from a factory of
the producer or the manufacturer or the warehouse or any other premises,
for use in the manufacture or processing of goods which are exported, as
may be approved by the Commissioner.
xxx xxx xxx”
Obviously, the controversy that arises is qua interpretation that is to be
accorded to Rule 18. The Rule stipulates that the Central Government may,
by notification, grant rebate of duty paid on such excisable goods OR duty
paid on material used in the manufacturing or processing of such goods.
The word 'OR' which is used in between the two kinds of duties in respect
of which rebate can be granted is the bone of contention and it is to be
interpreted whether it postulates grant of one of the two duties or both
the duties can be claimed. It is also to be noted at this stage itself
that Rule 18 is only an enabling provision which empowers the Central
Government to issue a notification for grant of these rebates and
prescribes the procedure for claiming such rebate(s).
As is clear from the bare reading of Rule 18, the manner of getting the
rebate under the said Rule has to be as per the procedure that may be
specified in the notification.
The Central Government has issued Notification No. 19/2004-CE(NT) dated
September 06, 2004 which deals with grant of rebate of whole of duty on
excisable goods exported. The opening portion of this Notification, which
needs to be taken note of, is as under:
“In exercise of the powers conferred by rule 18 of the Central Excise
Rules, 2002 and in supersession of the Ministry of Finance, Department of
Revenue, notification No. 40/2001-Central Excise (N.T.), dated the 26th
June 2001, [G.S.R. 469(E), dated the 26th June, 2001] insofar as it relates
to export to the countries other than Nepal and Bhutan, the Central
Government hereby directs that there shall be granted rebate of the whole
of the duty paid on all excisable goods falling under the First Schedule to
the Central Excise Tariff Act, 1985 (5 of 1986) exported to any country
other than Nepal and Bhutan, subject to the conditions, limitations and
procedures specified hereinafter-
xxx xxx xxx”
It also lays down conditions and limitations for claiming such rebate as
well as procedure which needs to be fulfilled. The provision, inter alia,
prescribes the time limit within which claim for rebate to Central Excise
is to be presented. What is relevant for the purposes of present case is
the Form, as per which application for removal of excisable goods for
export is to be made and the same is prescribed in Annexure 2 to the Rules.
Column 3 thereof reads as under:
“xxx xxx xxx
3. I/We hereby certify that the above-mentioned goods have been
manufactured.
(a) availing facility/without availing facility of Cenvat credit under
Cenvat Credit Rules, 2002.
(b) availing facility/without availing facility under Notification No.
21/2004-Central Excise (N.T.), dated the 6th September, 2004 issued under
rule 18 of Central Excise Rules, 2002.
(c) availing facility/without availing facility under Notification No.
43/2001-Central Excise (N.T.), dated the 26th June, 2001 issued under rule
19 of Central Excise (No. 2) Rules, 2001.
xxx xxx xxx”
The aforesaid Notification, as is evident from the reading thereof, deals
with grant of rebate of duty paid on the finished goods, that are
ultimately exported. There is yet another Notification No. 21/2004-
CE(N.T.); dated September 06, 2004 issued by the Government for claiming
rebate of whole of the duty paid on excisable goods used in the manufacture
or processing of exported goods, as is clear from the reading of the
opening para thereof:
“In exercise of the powers conferred by rule 18 of the Central Excise
Rules, 2002 and in supersession of the Ministry of Finance, Department of
Revenue, notification No. 41/2001-Central Excise (N.T.), dated the 26th
June, 2001 [G.S.R. 470(E) dated the 26th June 2001], the Central Government
hereby, directs that rebate of whole of the duty paid on excisable goods
(hereinafter referred to as 'materials') used in the manufacture or
processing of export goods shall, on their exportation out of India, to any
country except Nepal and Bhutan, be paid subject to the conditions and the
procedure specified hereinafter.”
This Notification also prescribes, inter alia, the procedure for export in
the specified format which is Form ARE2 appended as Annexure 2B's Rules and
envisages filing of combined application for removal of goods for export
under the claim for rebate of duty paid on excisable material used in the
manufacture and packing [i.e., intermediate product used as raw material]
as well as duty paid on the final product for export. This form, thus,
enables the manufacturer of the final product exported to claim rebate of
both kinds of duties paid. That becomes evident from the following portion
of the said form:
“Form A.R.E. 2
Combined application for removal of goods for export under claim for rebate
of duty paid on excisable materials used in the manufacture and packing of
such goods and removal of dutiable excisable goods for export under claim
for rebate of finished stage Central Excise Duty or under bond without
payment of finished stage Central Excise Duty leviable on export goods.
To
The Superintendent of Central Excise,
(Address)
…...............(full postal address)
1. Particulars of the Assistant Commissioner of Central Excise or the
Deputy Commissioner of Central Excise from whom rebate shall be
claimed/with whom bond is executed and his complete postal
address__________
2. I/We_________of _____ propose to export the under mentioned goods
(details of which are given in Table 1 below) to ____ (country of
destination) by air/sea/land/post parcel under claim for rebate of duty
paid on excisable materials used in the manufacture and packing of such
goods.
3. *The finished goods being exported are not dutiable.
Or
We intended to claim the rebate of Central Excise Duty paid on clearances
of goods for export under notification No. 19/2004-Central Excise (N.T.),
dated the 6th September, 2004 issued under Rule 18 of Central Excise Rules,
2002.”
The argument of learned counsel for the appellant is that it has always
been the policy of the Central Government to exempt the goods from payment
of excise duty both on the final excisable products as well as on material
used in the manufacturing of goods for payment of duty if the goods are
meant for export outside India. Moreover, Rule 18 is only an enabling
provision and in exercise of powers contained in this Rule, the Central
Government has also issued notification for grant of rebate or duty paid on
excisable goods as well as duty paid on material used in the manufacture of
goods. Even the notifications which prescribe the procedure contemplate a
situation where duty may have been paid not only on the excisable goods but
on the material used in the manufacture of goods and provide for claiming
the rebate in respect of duty paid on both these goods. It was also argued
that the order of the Joint Secretary, Government of India further shows
the mind of the Government itself, disclosing that both the duties are
eligible for grant of rebate. On that basis, it is argued that Rule 18 has
to be interpreted keeping in view the overall scheme of the statute and the
Rules and the manner in which the Government itself operated the said Rule.
Learned counsel for the respondent, on the other hand, predicated his
arguments on the plain and grammatical meaning that needs to be accorded to
Rule 18 of the Rules by arguing that the word 'OR' used therein clearly
signifies that it is one of the two duties to which the rebate can be
granted and not both. For this purpose, reasoning given by the High Court
was adopted with the submission that it was in accord with the cardinal
principle of literal interpretation and, therefore, the view of the High
Court was correct in law.
After giving due consideration to the respective submissions, in the light
of statutory scheme envisaged for grant of rebate in the Act and Rules, we
are constrained to hold that the High Court has not taken correct view,
which we feel is a myopic view and ignores the overall scheme pertaining to
grant of rebate in respect of goods exported out of India. There are
multiple reasons for arriving at this conclusion which are discussed
hereinafter.
(i) Historical perspective of the statutory scheme: Central Excise Rules
under the Act were first framed in the year 1944. Rule 12 thereof provided
for rebate of duty and Rule 13 enabled exporter to export the goods without
payment of duty. Relevant portion of these Rules was as under:
“Rule 12. Rebate of duty.— The Central Government may, from time to time,
by notification in the Official Gazette, grant rebate of -
(a) duty paid on the excisable goods;
(b) duty paid on materials used in the manufacture of goods; if such
goods are exported outside India or shipped as provision or stores for use
on board a ship proceeding to a foreign port, or supplied to a foreign
going aircraft to such extent and subject to such safeguards, conditions
and limitations as regards the class or description of goods, class or
description of materials used for manufacture thereof, destination, mode of
transport and other allied matters as may be specified in the notification.
xxx xxx xxx
Rule 13. Export in bond of goods on which duty has not been paid.—(1) The
Central Government may, from time to time, by notification in the Official
Gazette -
(a) permit export of specified excisable goods in bond without payment of
duty, in the like manner, as the goods regarding which the rebate is
granted under sub-rule (i) of rule 12 from a factory of manufacture or
warehouse or any other premises as may be approved by the Commissioner of
Central Excise;
(b) specify materials, removal of which without payment of duty from the
place of manufacture or storage for use in the manufacture in bond of
export goods may be permitted by Commissioner of Central Excise;
(c) Allow removal of excisable material without payment of duty for the
manufacture of export goods, as may be specified, to be exported in
execution of one or more export orders; or for replenishment of duty paid
materials used in the manufacture of such export goods already exported for
the execution of such orders, or both;
subject to such safeguards, conditions and limitations as regards the class
or description of goods, class or description of materials used for
manufacture thereof, destination, mode of transport and other allied
matters as may be specified in the notification which the exporter
undertakes to abide by entering into a bond in the proper form with such
surety or sufficient security, and under such conditions as the
Commissioner approves.
xxx xxx xxx ”
It is manifest from the reading of the aforesaid Rules that from the very
beginning, two alternative methods were provided enabling an exporter of
goods to get rid of the burden of paying the excise duty; both on excisable
goods as well as on materials used in the manufacture of goods. The
exporter could either claim rebate when the duty was paid. Or else, he was
free not to pay excise duty at all on both types of goods by executing a
bond in the prescribed form and fulfilling the conditions prescribed in
this behalf. The grant of rebate, in either of the options, has always
been in respect of both kinds of excise duties, i.e. on the final product
that is exported as well as on the intermediate product on which excise
duty is paid/payable and the same is used as raw material in the
manufacture of goods. Under these Rules also, Notification No. 41/94-
CE(NT), dated September 12, 1994 and Notification No. 42/94-CE(NT), dated
September 21, 1994 were issued for grant of rebate of duty on export of all
excisable goods, except minerals oils and ship stores and rebate on
materials used in manufacture of goods exported out of India, respectively.
The aforesaid Rules of 1944 were replaced by Central Excise Rules, 2001.
In these rules, relevant provisions were Rules 18 and 19. It is not
necessary to reproduce these Rules which are same as Rules 18 and 19 of the
existing Rules. Under these Rules also similar Notifications were issued,
i.e., Notification No. 40/2001-CE(NT) dated June 26, 2001 and Notification
No. 41/2001-CE(NT) dated June 26, 2001 providing for rebate of whole of
duty on excisable goods when exported as well as rebate of inputs used in
manufacture/processing of export goods. Likewise, Notifications 40 and 41
dated June 26, 2001 were issued under Rule 19 of these Rules.
Central Excise Rules, 2001 were superseded by the present Rules, viz.
Central Excise Rules, 2002 and the exact provisions thereof have already
been quoted. The aforesaid historical narration of the relevant provisions
from time to time depict one common theme, namely, to provide rebate of
duty paid on the excisable goods as well as the duty paid on material used
in the manufacture of goods.
(ii) Scheme of the Rules : A cumulative reading of the scheme enshrined
in Rules 18 and 19 of the Rules, 2002 has already been pointed out above.
These Rules provide two alternatives to the exporter enabling him to get
the benefit of exemption from paying the excise duty. Under Rule 19,
exporter is not required to pay any excise duty at all. At the time of
removal of these goods from the factory gate of the producer or the
manufacturer or the warehouse or any other premises, he is supposed to
comply with the conditions, safeguards and procedure, as may be notified by
the Board. Such a procedure provides for execution of a bond which, inter
alia, lays down the condition that the goods which are cleared are actually
meant for export and he is to furnish the proof that those goods are
actually exported. What is important is that when the exporter opts for
this method, with the approval of the Commissioner, he is not required to
pay duty either on the final product, i.e., on excisable goods or on the
material used in the manufacture of those goods. The intention is loud and
clear, namely, the goods which are meant for exports are free from any
excise duty. It extends not only to the material which is used in the
manufacture of goods but also on the goods that are produced and ultimately
exported. Once we keep in mind this scheme, it cannot be the intention of
the Legislature to provide rebate only on one item in case a particular
exporter/manufacturer opts for other alternative under Rule 18, namely,
paying the duty in the first instance and then claiming the rebate. Giving
such restrictive meaning to Rule 18 would not only be anomalous but would
lead to absurdity as well. In fact, it would defeat the very purpose of
grant of remission from payment of excise duty in respect of the goods
which are exported out of India. It may also lead to invidious
discrimination and arbitrary results.
Let us visualize another situation. A particular exporter may opt
for scheme under Rule 18, i.e., for claim of rebate insofar as, say, excise
duty on material used in manufacture of goods is concerned. He would pay
that duty and claim rebate. When it comes to payment of duty of export of
excisable goods, he exercises the option under Rule 19 and executes a bond
which enables him not to pay any duty on excisable goods. In this
scenario, the exporter will still be able to get the benefit of not paying
any excise duty on both final product as well as intermediate product.
(iii) Government's own perception: As mentioned above, Rule 18 is enabling
provision which authorises the Central Government to issue a notification
for grant of these rebates. Exercising powers under this Rule, the Central
Government has issued necessary notifications for rebate in respect of both
the duties, i.e., on intermediate product as well as on the final product.
Further, and which is more significant, these notifications providing
detailed procedure for claiming such rebates contemplate a situation where
excise duty may have been paid both on the excisable goods and on material
used in the manufacture of those goods and enables the exporter to claim
rebate on both the duties. This kind of procedure and format of prescribed
Forms, already described above, becomes a clincher insofar as understanding
of the Government of Rule 18 of the Rules is concerned.
It is to be borne in mind that it is the Central Government which has
framed the Rules as well as issued the notifications. If the Central
Government itself is of the opinion that the rebate is to be allowed on
both the forms of excise duties the government is bound thereby and the
rule in-question has to interpreted in accord with this understanding of
the rule maker itself. Law in this respect is well settled and, therefore,
it is not necessary to burden this judgment by quoting from various
decisions. Our purpose would be served by referring to one such decision
in the case of R & B Falcon (A) Pty Ltd. v. Commissioner of Income Tax[1]
wherein interpretation given by the Central Board of Direct Taxes (CBDT) to
a particular provision was held binding on the tax authorities. The Court
explained this principle in the following manner:
“33. CBDT has the requisite jurisdiction to interpret the provisions of the
Income Tax Act. The interpretation of the CBDT being in the realm of
executive construction, should ordinarily be held to be binding, save and
except where it violates any provisions of law or is contrary to any
judgment rendered by the courts. The reason for giving effect to such
executive construction is not only same as contemporaneous which would come
within the purview of the maxim temporania caste pesto, even in certain
situation a representation made by an authority like Minister presenting
the Bill before Parliament may also be found bound thereby.
34. Rules of executive construction in a situation of this nature may also
be applied. Where a representation is made by the maker of legislation at
the time of introduction of the Bill or construction thereupon is put by
the executive upon its coming into force, the same carries a great weight.
35. In this regard, we may refer to the decision of the House of Lords in
R. (Westminster City Council) v. National Asylum Support Service (2002) 1
WLR 2956 : (2002) 4 All ER 654 (HL) and its interpretation of the decision
in Pepper v. Hart 1993 AC 593 : (1992) 3 WLR 1032 : (1993) 1 All ER 42 (HL)
on the question of “executive estoppel”. In the former decision, Lord Steyn
stated: (WLR p. 2959, para 6)
“6. If exceptionally there is found in the Explanatory Notes a clear
assurance by the executive to Parliament about the meaning of a clause, or
the circumstances in which a power will or will not be used, that assurance
may in principle be admitted against the executive in proceedings in which
the executive places a contrary contention before a court.”
36. A similar interpretation was rendered by Lord Hope of Craighead in
Wilson v. First County Trust Ltd. (No. 2) (2004) 1 AC 816 : (2003) 3 WLR
568 : (2003) 4 All ER 97 (HL), wherein it was stated: (WLR p. 600, para
113)
“113. ...As I understand it [Pepper v. Hart 1993 AC 593 : (1992) 3 WLR 1032
: (1993) 1 All ER 42 (HL), it recognised a limited exception to the general
rule that resort to Hansard was inadmissible. Its purpose is to prevent the
executive seeking to place a meaning on words used in legislation which is
different from that which ministers attributed to those words when
promoting the legislation in Parliament.”
37. For a detailed analysis of the rule of executive estoppel useful
reference may be to the article authored by Francis Bennion entitled
“Executive Estoppel: Pepper v. Hart Revisited”, published in Public Law,
Spring 2007, p. 1 which throws a new light on the subject-matter.”
We are also of the opinion that another principle of interpretation of
statutes, namely, principle of contemporanea expositio also becomes
applicable which is manifest from the act of the Government in issuing two
notifications giving effect to Rule 18. This principle was explained by
the Court in Desh Bandhu Gupta and Co. and others v. Delhi Stock Exchange
Association Ltd.[2] in the following manner:
“9. It may be stated that it was not disputed before us that these two
documents which came into existence almost simultaneously with the issuance
of the notification could be looked at for finding out the true intention
of the Government in issuing the notification in question, particularly in
regard to the manner in which outstanding transactions were to be closed or
liquidated. The principle of contemporanea expositio (interpreting a
statute or any other document by reference to the exposition it has
received from contemporary authority) can be invoked though the same will
not always be decisive of the question of construction. (Maxwell 12th Edn.
p. 268). In Crawford on Statutory Construction (1940 Edn.) in para 219 (at
pp. 393-395) it has been stated that administrative or executive officers
charged with executing a statute) generally should be clearly wrong before
it is overturned; such a construction commonly referred to as practical
construction although not controlling, is nevertheless entitled to
considerable weight it is highly persuasive. In Baleshwar Bagarti v.
Bhagirathi Dass (1908) ILR 35 Cal 701 at 713 the principle which was
reiterated in Mathura Mohan Saha v. Ram Kumar Saha, ILR 43 Cal. 790: (AIR
1916 Cal. 136) has been stated by Mukerjea J. thus:
“It is a well-settled principle of construction that courts in construing a
statute will give much weight to the interpretation put upon it, at the
time of its enactment and since, by those whose duty it has been to
construe, execute and apply it. I do not suggest for a moment that such
interpretation has by any means a controlling effect upon the Courts; such
interpretation may, if occasion arises have to be disregarded for cogent
and persuasive reasons, and in a clear case of error, a Court would without
hesitation refuse to follow such construction.”
Of course, even without the aid of these two documents which contain a
contemporaneous exposition of the Government's intention, we have come to
the conclusion that on a plain construction of the notification the proviso
permitted the closing out or liquidation of all outstanding transactions by
entering into a forward contract in accordance with the rules, bye-laws and
regulations of the respondent.”
In this hue, we may now advert to the reasoning given by the Joint
Secretary itself in the order passed in Revision Petition wherein he has
discussed the issue in the following perspective:
“.....Govt. notes that as a principle and a policy measure, Govt. has
accepted that export of goods from India should be relieved of domestic
levies (both customs and Central Excise) in order to promote export of
domestic products from India and to make then internationally competitive.
In order to achieve this objective, two schemes operate, namely, export
under bond and export under payment of duty and both are comparable, as
objectives of both the schemes are same i.e. to neutralize the burden of
internal levies on goods exported. In case of former, export goods are
exempted from payment of duty, subject to conditions/restrictions etc. and
in the case of latter export goods are cleared on payment of duty which is
rebated subject to production of proof of export. For export under bond
Rule 19 provides for excisable goods to be exported without payment of
duty, subject to conditions etc. which are detailed in Notfn. No. 42/2001 –
CE(NT) dt. 26.06.2001 and Notification No. 43/2001-CE(NT) dtd. 26.06.2001
further relieves the burden of duty on inputs used to manufacture such
goods by obtaining them duty free under bond. Thus, export goods are
relieved of the burden of excise duty both on finally exported goods as
well the inputs used vide these legislative and machinery provisions. As
both schemes are comparable as objective to serve the common goal of
relieving the burden of domestic taxation, the other scheme provides for
similar dispensation in case goods are exported on payment of duty by way
of rebating central excise duty suffered on such export goods. Rule 18
provides for rebate of duty on such export goods or duty paid on material
used in manufacture of such export goods. While Notification No. 40/2001 –
Central Excise (NT) dtd. 26.6.2001 as amended deals with details provisions
for rebate on finishing goods, Notfn. No. 41/201 C.E. (NT) as amended deals
and provides the detailed procedural provisions for input stage rebate
also. Similar provisions and export relief existed for export on payment of
duty and under bond in the erstwhile Rule 12 and 13 of Central Excise
Rules. The fundamental objective of existing rules and the earlier ones is
the same i.e. to neutralise the duty element on the goods exported and
hence no other interpretation denying the relief sought appears possible.
Circular No. 129/40/95 dt. 29.09.95, para 1.5 of Chapter 8 of Part V of
CBEC Manual further leaves no room for any other interpretation.”
(iv) Interpretation of word 'OR' occurring in Rule 18: The aforesaid
discussion leads us to the only inevitable consequence which is this : the
word 'OR' occurring in Rule 18 cannot be given literal interpretation as
that leads to various disastrous results pointed out in the preceding
discussion and, therefore, this word has to be read as 'and' as that is
what was intended by the rule maker in the scheme of things and to carry
out the objectives of the Rule 18 and also to bring it at par with Rule 19.
We are conscious of the principle that the word 'or' is normally
disjunctive and 'and' is normally conjunctive (See Union of India v.
Kamlabhai Harjiwandas Parekh and others[3]). However, there may be
circumstances where these words are to be read as vice-versa to give effect
to manifest intention of the Legislature as disclosed from the context.
Of course, these two words normally 'or' and 'and' are to be given their
literal meaning in unless some other part of same Statute or the clear
intention of it requires that to be done. However, wherever use of such a
word, viz., 'and'/'or' produces unintelligible or absurd results, the Court
has power to read the word 'or' as 'and' and vice-versa to give effect to
the intention of the Legislature which is otherwise quite clear. This was
so done in the case of State of Bombay v. R.M.D. Chamarbaugwala[4] and
while doing so, the Court observed as under:
“...Considering the nature, scope and effect of the impugned Act, we
entertain no doubt whatever that the first category of prize competitions
does not include any innocent prize competitions. Such is what we conceive
to be the clear intention of the Legislature as expressed in the impugned
Act read as a whole and to give effect to this obvious intention as we are
bound to do, we have perforce to read the word “or” appearing in the
qualifying clause after the word “promoter” and before the word “or” as
“and”. Well-known canons of construction of statutes permit us to do so.
(See Maxwell on the Interpretation of Statutes, 10th edition, page 238)”
In J. Jayalalitha v. Union of India[5], provisions of Section 3 of the
Prevention of Corruption Act, 1988 empowers the Government to appoint as
many special judges as may be necessary for such area or areas or for such
case or group of case, as may be specified in the notification. Construing
the italicised 'or' it was held that it would mean that the Government has
the power to do either or both the things, i.e., the Government may, even
for an area for which a special judge has been appointed, appoint a special
judge for a case or group of cases.
Likewise, in Mazagaon Dock Ltd. v. The Commissioner of Income Tax and
Excess Profits Tax[6], word 'or' occurring under Section 42(2) of the
Income Tax Act, 1922 was construed as 'and' when the Court found that the
Legislature 'could not have intended' use of the expression 'or' in that
Section. We have already explained the statutory scheme contained in the
Act and Rules which express manifest intention of the Legislature which
provide for granting of both kinds of rebates to the assessee. In Mazagaon
Dock Ltd. (supra), this aspect was explained in the following manner:
“10. The word “or” in the clause would appear to be rather inappropriate
as it is susceptible of the interpretation that when some profits are made
but they are less than the normal profits, tax could only be imposed either
on the one or on the other, and that accordingly a tax on the actual
profits earned would bar the imposition of tax on profits which might have
been intended, and the word “or” would have to be read in the context as
meaning “and”. Vide Maxwell's Interpretation of Statutes, Tenth Edition,
pages 238-239. But that, however, does not affect the present question
which is whether the word “derived” indubitably points to the business of
the non-resident as the one taxable under S. 42(2) and for the reasons
already given the answer must be in the negative.”
The aforesaid discussion leads us to inevitable conclusion, namely, that
the exporters/appellants are entitled to both the rebates under Rule 18 and
not one kind of rebate. The impugned judgments are, accordingly, set aside
allowing these appeals.
.............................................J.
(A.K. SIKRI)
.............................................J.
(ROHINTON FALI NARIMAN)
NEW DELHI;
OCTOBER 09, 2015.
-----------------------
[1]
(2008) 12 SCC 466
[2] (1979) 3 SCR 373
[3] (1968) 1 SCR 463
[4] (1957) 1 SCR 874
[5] (1999) 5 SCC 138
[6] (1959) 1 SCR 848
