Civil Apptal Nos
1285 1296 of 1970
Appeals by Special Leave from the Judgment and order dated 6 3 1969 of the Mysore High Court in WP Nos
2560 6166 and 46 47 50 51 975 1718 1719 1921 1979 and 198067
G L Sanghi M N Shroff and Miss A Subhashini for the Appellants
R B Datar for the Respondent
The Judgment of the Court was delivered by BHAGWATI J
These appeals by special leave are directed against the judgment of the Karnataka High Court allowing 12 writ petitions filed by different respondents
Each of the respondents owned at the material time not more than 4 powerlooms and carried on business of manufacturing cotton fabrics on those powerlooms
The case of the respondents was that each of them acquired his powerlooms from person who were or had been licensees and started manufacturing cotton fabrics on those powerlooms prior to 1st April 1961
The respondents claimed that since each of them had not more than 4 powerlooms in his factory no excise duty was payable on the cotton fabrics manufactured by him and this claim for exemption was based on a notification dated 5th January 1957 issued by the Government of India in exercise of the powers conferred upon it by Rule 81 of the Central Excise Rules 1944
The Superintendent of Central Excise however
rejected the claim for exemption on the ground that though the powerlooms owned by each of the respondents were not more than 4 manufacture of cotton fabrics on them had started after 1st April 1961 and none of the respondents was therefore entitled to exemption from payment of excise duty on the cotton fabrics manufactured by him
The excise duty was accordingly levied on each of the respondents by the Superintendent of Central Excise and this levy was confirmed in appeal by the Assistant Collector and in further appeal by the Collector of Central Excise
Each of the respondents thereupon preferred a writ petition in the Karnataka High Court challenging the levy of excise 516 duty and praying that a writ of mandamus may be issued against the Excise Authorities directing them not to enforce the notice demanding excise duty
The writ petitions were allowed by the High Court and hence the Union of India preferred the present appeals after obtaining special leave from this Court
Before we proceed to examine the rival contentions of the parties in regard to the controversy arising in these appeals it is necessary to set out briefly the relevant provisions of law having a bearing on this controversy
The Central Excise and Salt Act 1944 by section 3 read with Item 19 provided for levy of excise duty on all varieties of cotton fabrics including cotton fabrics manufactured on powerlooms
Section 37 sub section 2 of the Act conferred power on the Central Government to make Rules providing for a number of matters including inter alia clause xvii which was in the following terms Exempt any goods from the whole or any part of duty imposed by this Act
 The Central Government in exercise of this rule making power made the Central Excise Rules 1944 of which Rule 8 clause 1 provided that the Central Government may from time to time by notification in the official Gazette exempt subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of the duty leviable on such goods
 In exercise of this power of exemption conferred under Rule 8 clause 1 the Central Government issued a notification dated 5th January 1957 exempting certain varieties of cotton fabrics from the whole of the excise duty leviable thereon and one of such varieties set out in Item 7 was as under Cotton fabrics produced in factories commonly known as powerlooms without spinning plants provided that the number of powerlooms producing cotton fabrics in such factories does not exceed four This item was later substituted by another item by a notification of the Central Government dated 19th January 1957 and the substituted item was as follows Cotton fabrics manufactured by or on behalf of the same person in one or more factories commonly known as powerlooms without spinning plants in which less than 5 powerlooms in all are installed
 The scope of the exemption granted under this item was restricted by the addition of the following proviso by a Central Government notification dated 26th November
1960 517 Provided that this exemption shall not be applicable to a manufacturer who commences production of the said fabrics for the first time on or after the 1st December 1960 by acquiring powerlooms from any other person who is
or has been a licensee of powerloom factory
 There was a further change made by a notification issued by the Central Government on 1st March 1961 and the then existing Item 7 was substituted by the following Item 7 Cotton fabrics manufactured by or on behalf of the same person in one or more factories commonly known as powerlooms without spinning plants in which less than 3 powerlooms in all but not roller locker machine are installed
 The result was that the exemption granted under Item 7 was considerably narrowed down and the proviso taking away the exemption in certain cases was deleted
But again by a notification dated 1st April 1961 the Central Government introduced the following proviso under Item 7 Provided that this exemption shall not be applicable to a manufacturer who commences production of the said fabrics for the first time on or after the 1st April 1961 by acquiring powerlooms from any other person who is or has been a licensee of powerloom factory Thus from 1st March 1961 the benefit of the exemption from excise duty was available only to those manufacturers who had not more than 2 powerlooms in all in their factories and from and after 1st April 1961 even this limited exemption was withdrawn from manufacturers who commenced production of cotton fabrics for the first time on or after 1st April 1961 by acquiring powerlooms from any person who was or had been a licensee of powerloom factory
Now in the present appeals each of the respondents owned admittedly not more than 4 powerlooms but it does not appear from the record before us as to whether any of them owned more than 2 powerlooms
If it is found that any of the respondents owned more than 2 powerlooms he would not be within the exemption granted under Item 7 of the amended Notification dated 5th January
1957 and excise duty would be payable on the cotton fabrics manufactured by him
But even if any of the respondents owned not more than 2 powerlooms and was therefore within the exemption granted under item 7 of the amended notification dated 5th January 1957 the question would still arise whether he forfeited the exemption by reason of the proviso to Item 7 introduced by the notification dated 1st 518 April 1961
The answer to this question would depend upon the true construction of the proviso and we shall presently consider this question but before we do so it is necessary to refer to some other notifications issued by the Central Government under the Central Excise Rules 1944
On 1st March 1961 the Central Government in exercise of the power conferred upon it under Rule 96 J of the Central Excise Rules 1944 issued a notification providing for a compounded levy scheme for payment of excise duty on cotton fabrics
By this notification the Central Government fixed different rates per shift per month per powerloom employed by or on behalf of the same person in the manufacture of cotton fabrics depending upon the number of powerlooms employed by such person
The rates prescribed for a case where more than 2 but not more than 24 powerlooms were employed were Rs 20 where medium andor coarse fabrics were manufactured and Rs 25 where the powerlooms were employed in the manufacture of superfine andor fine fabrics
There was a proviso at the foot of the notification hereinafter referred to as the first proviso which laid down as to how the computation should be made where roller locker machines were employed
The rates prescribed for a case where more than 2 but not more than 24 powerlooms were employed were partially modified with retrospective effect by a subsequent notification issued by the Central Government on 18th March 1961 and the new rates were Rs 10 and Rs 1250 in respect of the first 4 powerlooms and Rs 20 and Rs 25 in respect of the balance
The first proviso dealing with the case where roller locker machines were employed however remained unchanged
Then came another notification of the Central Government dated 1st April 1961 by which the notification dated 18th March 1961 was amended by substituting the words where more than 2 but not more than 24 powerlooms are employed by the words where not more than 24 powerlooms are employed and adding a further proviso hereinafter referred to as the third proviso after the existing first proviso Provided also that where a person commences manufacture of the said fabrics for the first time on or after the 1st April 1961 by acquiring powerlooms from any other person who is or has been
a licensee of powerloom factory the rate per shift per month per powerloom shall be the next higher rate if any
 This was followed by a notification dated 20th April 1961 issued by the Central Government by which after the first proviso the following proviso hereinafter referred to as the second proviso was inserted in the notification dated 18th March 1961 519 Provided further that where a person employs not more than four powerlooms and the said powerlooms are worked in not more than one shift no duty shall be payable in respect thereof
 The result was that from 18th March 1961 upto 1st April 1961 a manufacturer having more than two but not more than 24 powerlooms was liable to pay excise duty at the rates set out in the amended notification dated 18th March 1961 and from 1st April 1961 to 21st April 1961 the position was that if such a manufacturer was found to have commenced manufacture of cotton fabrics for the first time on or after 1st April 1961 by acquiring powerlooms from another person who was or had been a licensee of powerloom factory the rate at which excise duty would be payable by him would be the next higher rate specified in the amended notification dated 18th March 1961
So far as a manufacturer having two or less powerlooms was concerned he was during the period from 18th March 1961 upto 1st April 1961 exempt from excise duty by reason of the notification dated 5th January 1957 but from 1st April 1961 to 21st April 1961 this exemption stood with drawn if it was found that the manufacturer had commenced manufacture of cotton fabrics for the first time on or after 1st April 1961 by acquiring powerlooms from another person who was or had been a licensee of powerloom factory and in such a case a manufacturer would be liable to pay excise duty at the next higher rate prescribed in the amended notification dated 18th March 1961
This was the position which obtained upto 20th April 1961 when the second proviso was introduced exempting a manufacturer employing not more than 4 powerlooms and working even in not more than one shift from payment of excise duty
Each of the respondents had admittedly not more than 4 powerlooms and it was the case of the respondents that these powerlooms were worked in not more than one shift and hence the respondents claimed that they were exempted from liability for payment of excise duty by virtue of the second proviso
But the answer made on behalf of the Revenue was that the third proviso carved out an exception from the second proviso and since each of the respondents commenced manufacture of cotton fabrics for the first time after 1st April 1961 he was not exempt from payment of excise duty but was liable to pay the same at the next higher rate provided in the amended notification dated 18th March 1961
Now going back to the proviso under Item 7 of the notification dated 5th January 1957 we find that the language of this proviso is clear and explicit and does not admit of any doubt or equivocation
It says in so many terms that the exemption under Item 7 shall not be applicable to a manufacturer who has commenced his production 520 of cotton fabrics for the first time on or after 1st April 1961 by acquiring powerlooms from another person who is or has been a licensee of powerloom factory
There are two conditions which must exist before the mischief of the proviso is attracted
One is that the manufacturer must have commenced production of cotton fabrics for the first time on or after 1st April 1961 and the other is that the powerlooms on which he manufactures cotton fabrics must have been acquired by him from a person who is or has been a licensee of powerloom factory
It is clear on a plain grammatical construction that the prescription of the date 1st April 1961 has reference only to commencement of production of the cotton fabrics and not to the acquisition of the powerlooms
What is required is that the production of cotton fabrics must have been commenced by the manufacturer for the first time on or after 1st April 1961 and not that the powerlooms also must have been acquired by him on or after that date
It is immaterial as to when the manufacturer acquired the powerlooms he may have acquired them prior to 1st April 1961 that is totally irrelevant
The only attribute that the powerlooms must satisfy is that they must have been acquired from a person who is or has been a licensee of powerloom factory and if this attribute is present then it is of no consequence as to when the powerlooms were acquired by the manufacturer
The event which then attracts the applicability of the proviso is that the manufacturer should have commenced production of cotton fabrics on these powerlooms for the first time on or after 1st April 1961
If this condition is satisfied the proviso comes into play and withdraws the exemption which would otherwise have been available to the manufacturer under the main Item 7
If the intention of the Central Government in framing the proviso was that not only the production of cotton fabrics on the powerlooms should have commenced on or after 1st April 1961 but that the powerlooms also should have been acquired by the manufacturer on or after that date the Central Government could have easily expressed such intention by using appropriate language in the proviso
The Central Government could have transposed the words on or after the 1st April 1961 and put them at the end of the proviso
That would have clearly conveyed the intention of the Central Government that the powerlooms must be acquired by the manufacturer on or after 1st April 1961 and if the powerlooms are acquired on or after 1st April 1961 it must follow a fortiorari that the production of cotton fabrics on the powerlooms by the manufacturer would necessarily commence on or after that date
But the Central Government advisedly placed the words on or after the 1st April 1961 after the clause referring to commencement of production and before the clause relating to acquisition of powerlooms
It is a 521 well settled rule of interpretation applicable alike to the rule making authority as to the legislature that where there are two expressions which could have been used to convey a certain intention but one of these expressions conveys that intention less clearly than the other it is proper to conclude that if the draftsman used that one of the two expressions which would convey the intention less clearly he does not intend to convey that intention at all
Moreover here the dictates of grammar as well as language compel us to take the view that the date 1st April 1961 has reference only to commencement of production and not to acquisition of the powerlooms
It is to our mind clear that if a manufacturer is found to have commenced production of cotton fabrics on powerlooms for the first time on or after 1st April 1961 he would fall within the mischief of the proviso and it would be entirely immaterial as to when he acquired the powerlooms whether before or after 1st April 1961 so long as the powerlooms are acquired from a person who is or has been a licensee of powerloom factory
The High Court was therefore clearly in error in construing the language of this proviso to mean that the powerlooms also must have been acquired by the manufacturer on or after 1st April 1961 in order to attract the applicability of the proviso
The same construction must obviously be placed on the third proviso introduced in the notification dated 18th March 1961 by the notification of 1st April 1961
The language and structure of the third proviso are identical with the language and structure of the proviso under Item 7 of the notification dated 5th January 1957 and the same view must therefore govern the interpretation of the third proviso
It is unnecessary to repeat what we have said in the foregoing paragraph because what we have said there applies fully and completely in regard to the interpretation of the third proviso and therefore in order to determine whether this proviso is applicable to any of the respondents we have to consider whether the respondent concerned commenced manufacture of cotton fabrics on the power looms for the first time on or after 1st April 1961 irrespective whether he acquired the powerlooms before or after that date
The only relevant inquiry necessary to be made is as to when the manufacturer of cotton fabrics on the powerlooms was commenced for the first time by the respondent
If it was on or after 1st April 1961 the mischief of the third proviso would be attracted and the respondent would be liable to pay excise duty at the next higher rate
Of course the second proviso introduced in the notification dated 18th March 1961 with effect from 20th April 1961 provided that where a person employs not more than 4 powerlooms and these powerlooms are worked in not more than one shift no excise duty shall be payable in respect thereof 522 but the third proviso on its proper interpretation enacts a substantive provision for payment of excise duty at the next higher rate in the cases therein specified and this substantive provision overrides the second proviso
The second proviso exempts a manufacturer employing not more than 4 powerlooms and working not more than one shift from payment of excise duty in those cases which do not fall within the third proviso and where a case is covered by the third proviso the second proviso would be inapplicable and the manufacturer would be liable to pay excise duty at the next higher rate
This is the only way in which the two provisos can be harmoniously construed in a manner which would give effect to both
We are therefore of the view that even though each of the respondents in the present case owned not more than four powerlooms he would be liable to pay excise duty at the next higher rate under the third proviso to the notification dated 18th March 1961 if he started manufacture of cotton fabrics on his powerlooms for the first time on or after 1st April 1961 irrespective whether he acquired the powerlooms from the licensee before or after that date
We must therefore set aside the judgment of the High Court and send the matter back to the High Court so that the High Court may decide the writ petitions of the respondents in accordance with law and in the light of the observations contained in this judgment
We accordingly allow the appeals set aside the judgment of the High Court and remand the writ petitions to the High Court for disposal in accordance with the law
Though the appellants have succeeded they will pay the costs of the respondents as provided in the order granting special leave
NKA Appeals allowed


Summary:
Exercising the power of exemption conferred under rule 81 of the Central Excise Rules 1944 the Central Government by a notification dated January 5 1957 exempted certain varieties of cotton fabrics from the whole of the excise duty leviable thereon
Item 7 set out one of such varieties as under Cotton fabrics produced powerlooms provided that the number of powerlooms producing cotton fabrics in such factories does not exceed four
 By a notification dated November 26 1960 a proviso was added to this item stating that this exemption shall not be applicable to a manufacturer who commences production for the first time on or after the December 1 1960 by acquiring powerlooms from any other person who is or has been a licensee of a powerloom factory
 From March 1 1961 item 7 was substituted and from April 1 1961 a proviso was added to item 7 the effect of both of which was that while from March 1 1961 the benefit of exemption from excise duty was available only to those manufacturers who had not more than two powerlooms in their factories from and after April 1 1961 even this limited exemption was withdrawn from manufacturers who commenced production for the first time on or after April 1 1961 by acquiring powerlooms from any person who was or had been a licensee of powerloom factory
From March 18 1961 a second proviso to item 7 was added which provides where a person employs not more than four powerlooms and the said powerlooms are worked in not more than one shift no duty shall be payable in respect thereof
From April 1 1961 a third proviso was added stating where a person commences manufacture of the said fabrics for the first time on or after April 1 1961 by acquiring powerlooms from any other person who is or has been a licensee of powerloom factory the rate per shift per month per powerloom shall be the next higher rate if any
The respondents had acquired powerlooms after April 1 1961 from persons who were or had been licensees and were manufacturing cotton fabrics on those powerlooms prior to April 1 1961
They claimed that since each of them had not more than four powerlooms which worked in not more than one shift he was exempt from payment of excise duty by virtue of the second proviso to item 7
The Superintendent of Central Excise on the other hand contended that the third proviso carved out an exception from the second proviso and since 514 each of the respondents commenced manufacture of cotton fabrics for the first time after April 1 1961 he was not exempt from payment of excise duty but was liable to pay duty at the next higher rate provided in the amended notification of March 18 1961
Appeals of the respondents having been rejected by the Assistant Collector and the Collector they filed writs in the High Court challenging the levy of excise duty
Their writ petitions were allowed by the High Court
Allowing the appeals  HELD1 It is a well settled rule of interpretation applicable alike to the rule making authority as to the legislature that where there are two expressions which could have been used to convey a certain intention but one of these expressions conveys that intention less clearly than the other it is proper to conclude that if the draftsman used that one of the two expressions which would convey the intention less clearly he does not intend to convey that intention at all
523 A It is clear on a plain grammatical construction of the proviso under Item 7 of the Notification dated 5th January 1957 that the prescription of the date 1st April 1961 has reference only to commencement of production of the cotton fabrics and not to the acquisition of the powerlooms
What is required is that the production of cotton fabrics must have been commenced by the manufacturer for the first time on or after 1st April 1961 and not that the powerlooms also must have been acquired by him on or after that date
520 C D 2 a Even though each of the respondents owned not more than four powerlooms he would be liable to pay excise duty at the next higher rate under the third proviso to the notification dated March 18 1961 if he started manufacture of cotton fabrics on his powerlooms for the first time on or after April 1 1961 irrespective whether he acquired the powerlooms from a licensee before or after that date
522 C D b The exemption under item 7 is not applicable to a manufacturer who has commenced his production of cotton fabrics for the first time on or after April 1 1961 by acquiring powerlooms from another person who is or has been a licensee of a powerloom factory
Two conditions which must exist before the mischief of the proviso is attracted are 1 the manufacturer must have commenced production of cotton fabrics for the first time on or after April 1 1961 and 2 the powerlooms on which he manufactures cotton fabrics must have been acquired by him from a person who is or has been a licensee of a powerloom factory
The event which attracts the applicability of the proviso is that the manufacturer should have commenced production of cotton fabrics on these powerlooms for the first time on or after April 1 1961
If this condition is satisfied the proviso comes into play and withdraws the exemption which would otherwise have been available to the manufacturer under item 7
519H 520B E 3 The language and structure of the third proviso being identical with the language and structure of the proviso under item 7 of the notification dated 5th January 1957 the same view must govern the interpretation of the third proviso
521 E 515 The third proviso on its proper interpretation enacts a substantive provision for payment of excise duty at the next higher rate in the cases therein specified and this substantive provision overrides the second proviso which exempts a manufacturer employing not more than four powerlooms and working not more than one shift from payment of excise duty in those cases which do not fall within the third proviso and where a case is covered by the third proviso the second proviso would be inapplicable and the manufacturer would be liable to pay excise duty at the next higher rate
522 A B