Case: D.R. Kohli, Collector of Central Excise, Bombay & Others Vs. Associated Films Industries Private Limited, Tardeo

P.S. SHAH, J.This appeal is directed against the judgment and order dated January 29, 1975. passed by Bhatt, J. allowing the respondents petition under Article 226 of the Constitution of India. 2. The facts which are not in dispute are these :The respondent No. 2, is the Director and a Shareholder of the respondent No. 1 Company, which owns and runs a Division knowns as Film Centre and inter alia carries on the business of printing and processing cinematograph films. The Company has been paying excise duty on such cinematograph films under item No. 37 of the Central Excise and Salt Act, 1944. Prior to April 1, 1969, item No. 37 in the First Schedule to the said Act read as under. CINEMATOGRAPH FILMS EXPOSED Tariff Item Description of Goods Rate of Duty No. Basic Special Excise.--------------------------------------------------------------------------------------------------------------------->37 Cinematograph Films Exposed of a width below 30 mm. of 30 mm. in width or higher.-------------------------------------------------------(1) Newsreels and shorts not 15 paise 10 paise 20 of the basicexceeding 500 Metres. per Mtr. per Mtr. duty chargeable(2) Feature films, advertisement 50 Paise 33 Paise doshorts and films not otherwise per Mtr. per Mtr.specified--------------------------------------------------------------------------------------------------------------------This Item No. 37 was thereafter substituted by a new Item 37 by the Finance Act, 1969, and it read as follows :37. Cinematograph Films :I Unexposed Two Paise Per MetreII Exposed : of a width of 3 mm. below 30 mm inor higher. width.-------------------------- ------------------------1) News reels Fifty Paise Thirty Paiseand shorts per metre per metrenot exceeding500 metres2) Feature films One rupee and fifty One rupeeadvertisement paise per Metre per Metre.shorts and films nototherwise specified.-------------------------------------------------------------------------------------------------------------------->3. Prior to this amendment by the Finance Act, 1969, the excise authorities did not levy any duty upon the censor certificate length of the film However, by a Circular letter dated February 10, 1969, the Central Board of Excise and Customs issued directions that the recovery of the excise duty should be made on the length of the feature film manufactured including the censor certificate length of the film. The reason given for such direction was that no exposed feature film can be exhibited without the certificate issued by the Board of Film Censors and the certificate formed an integral part of the whole exposed film and hence liable to duty under item No. 37. In view of this direction, by a letter dated April 17, 1969, the Senior Grade Inspector of the Central Excise informed the Company that excise duty would be charged on the total length of the film including the censorship certificate length of the film. The Company made payment of excise duty in respect of such length of censorship certificate length of film without any protest for sometime and some correspondence took place. In relation to demand dated July 8, 1969, the Company raised objections contending that the portion of the censorship certificate length of the film annexed to the original film was not liable to duty under Entry No. 37. The appeals preferred by the Company were rejected and, therefore, a revision application was preferred to the Government of India. It was also rejected by its order dated January 31, 1973, and the Company was called upon to make payment of the amount of Rs. 52,205,91p. It may be mentioned that by a Notification issued by the Central Government, the censorship length of the film has been exempted from levy of duty with effect from February 20, 1970. The challenge, therefore, relates to the period prior to February 20,1970. After the revision application was rejected, the petitioners challenged the various orders of demand made to them by filing the petition under Article 226 of the Constitution. Before the learned trial Judge two principal contentions were advanced, viz., 1) that the appellate authorities and the revising authorities were guided in their decisions solely by the directions issued in the Circular dated February 10, 1969, and by reason of such direction the authorities were not in a position to exercise their independent and unfettered mind and have failed to exercise their independent mind in regard to the contentions raised by the Company. It was urged that the powers exercised by the Collector were of a quasi-judicial nature and such power cannot be controlled by the direction issued by the Central Board of Excise and Customs. (2) Secondly, it was urged that the censorship certificate length of the film did not attract levy under item No. 37 of the First Schedule to the Act. The learned trial Judge accepted both these contentions and declared the levy of duty on the censorship length of the film as illegal and set aside the impugned orders and the demand notice. The appellants have, therefore, filed this appeal under clause 15 of the Letters Patent challenging the order of the learned trial Judge4. Mr. Dalal, the learned Counsel appearing for the appellants, did not dispute the correctness of the finding of the learned trial Judge on the first question. He conceded that the authorities could not have passed the orders merely in obedience to the directions issued in the Circular of February 10, 1969. It was, however, argued by Mr. Dalal that the view taken by the learned trial Judge on merits of the case is not correct. He submitted that the censorship certificate length of the film become an integral part of the original film before it is exhibited, and as such, it is clearly covered by Entry No. 37. In any event, he submitted that it would be covered by the expression "films not otherwise specified" in Item No. 37.5. So far as the present case is concerned, there is no material difference made by the amendment as regards the liability or otherwise to the levy of duty on the censorship length of the film is concerned. By the amendment, only the rates of duty are revised. It would be seen that the entry seeks to levy duty on "cinematograph film" as can be seen from the title of Entry No. 37. Regarding the meaning of the word "Film " and the applicability of the entry to censorship length of the film, both sides referred to the provisions of the Cinematograph Act, 1952 as it stood at the material time and the Rules framed thereunder. The preamble to the Act. says that the Act is enacted to make provision for the certification of cinematograph films for exhibition and for regulating exhibitions by means of cinematographs. Section 2(dd) defines the word "film" as a cinematograph film. As defined by section 2(c), "cinematograph" includes any apparatus for the representation of moving pictures or series of pictures. Entry No. 37 also talks of "cinematograph films." Under section 4 any person desiring to exhibit any film has to make an application in a prescribed manner to the Board of Film Censor. Under this section, the Board may (i) sanction the film for unrestricted public exhibition, or (ii) sanction the film for public exhibition restricted to adults; or (iii) direct the applicant to carry out such excisions or modifications in the film as it thinks necessary before sanctioning the film for unrestricted public exhibition or for public exhibition restricted to adults, as the case may be; or (iv) refuse to sanction the film for public exhibition. Section 5, inter alia, provides for appointment of Advisory Panels in relation to the examination of films. Section 5-A deals with certification of films by the Board of Film Censor which is appointed under section 3. Section 5-A inter alia provides that, if after examining a film or having it examined in the manner provided in the Act, the Board considers that the film is suitable for unrestricted public exhibition or that, although not suitable for such exhibition, it is suitable for public exhibition restricted to adults, it shall grant to the person applying for a certificate in respect of a film a "U" certificate in the former case and an "A" certificate in the latter case and shall in either case cause the film to be so marked in the prescribed manner. Sub-section (2) of section 5-A provides that a certificate granted or an order refusing to grant. A certificate in respect of any film shall be published in the Gazette of India. Section 6-A relates to the information and documents to be given to distributors and exhibitors with respect to certified films. Under the said provision, any person who delivers any certified film to any distributor or exhibitor shall in such manner as may be prescribed, notify to the distributor or exhibitor, as the case may be, the title, the length of the film, the number and the nature of the certificate granted in respect thereof and the condition, if any, subject to which it has been so granted, and any other particulars respecting the film which may be prescribed. Section 7 provides penalty for exhibiting films without censorship certificate being obtained. Section 7-A confers power of seizure of a film on the authorities concerned where a film in respect of which no certificate has been granted under the Act, and/or a film certified as suitable for public exhibition restricted to adults is exhibited to any person who is not an adult. The abovementioned provisions clearly talk of a completed film before it is cleared by the Board of Censor and the relevant provisions are intended to provide for issuing necessary censorship certificate for exhibition of films to the public, because the exhibition of a film without such a certificate is made penal. The provisions of the Act mentioned above clearly postulate film being presented to the Board of Censor for the purpose of obtaining a Censor Certificate. The application for a certificate presumes that a complete film is being presented to the Board of Film Censor. The various provisions refer to a film, and this film is obviously a film de hors the censor certificate which is granted in accordance with the provisions of the Act. Section 5-A enjoins the applicant to cause the film to be marked in accordance with the certificate which may be either a "U" certificate or "A" certificate as the case may be. Thus, what is contemplated by section 5-A is the marking of the film. The law has merely found a convenient method of marking a film and exhibiting the grant of censor certificate to the public. 6. Rule-making power has been conferred on the Government under section 8 of the Act, and in exercise of these powers, the Central Government has framed Rules called. "The Cinematograph (Censorship) Rules, 1958" Rule 22 provides for application for examination of films. Under the said rule, every application to certify a film for public exhibition shall be made in writing in Form I or Form II set out in the Schedule according as the film is produced in or imported into India. Form I prescribes the information to be supplied to the Board, such as, the name of the film ; language of the film ; the length of the film in feet; the number of reels; the gauge of the film; the type of the film; whether the film is silent or a talkie; and the colour of the film. Form II also prescribes the same information to be supplied to the Board. This and the other rules indicate that a film is nothing but a completed film and they do not suggest that the film that is to be exhibited remains incomplete till the censorship certificate is annexed. In support of his contention that the censor certificate is made an inseparable part of the main feature film, Mr. Dalal strongly relied on Rule 36 of the said Rules. It runs as under :Certificates.---(1) A Certificate authorising the public exhibition of a film shall be in one of the Forms IV or V set out in the Schedule according as the authorisation is for unrestricted public exhibition or for public exhibition restricted to adults. (2) The certificate shall be signed for and on behalf of the Board by the Chairman or by a Regional Officer for the Chairman.(3) The prescribed mark of the Board shall be a film copy of the certificate. i.e., a trailer certificate, which shall be affixed to the film and always exhibited with it. The length of the trailer certificate will be as laid down in the following table :-TABLE ---------------------------------------------------------------------------------------------------------------------Size of film Length of film Length of the trailer certificate---------------------------------------------------------------------------------------------------------------------35 m.m. Exceeding 2,000 feet 15 feet35 m.m. 2,000 feet or less 10 feet16 m.m. Exceeding 800 feet 6 feet16 m.m. 800 feet or less 4 feet---------------------------------------------------------------------------------------------------------------------Provided that where the length of film does not exceed 400 feet or 160 feet according as the film is in 35 mm or 16 mm, the prescribed mark of the Board shall be the trailer certificate as provided in this sub-rule or the Boards stamp as in Form VII, embossed on the main title card in the lower right hand corner of the title card :Provided further that the film copy of such title card shall be at least 10 feet in length for 35 mm film and 4 feet in length for 16 mm film. (4) A certificate of a film predominantly educational shall be in Form VI.7. It would be relevant to refer to the contents of the Forms of the certificate i.e. Forms IV and V required to be issued as per the certificate. Form No. IV is a certificate for the film for unrestricted public exhibition, while From No. V is the certificate for Public exhibition restricted to adults only. The Forms are similarly worded. It is sufficient to re-produce Form No. IV. It is as follows :- "Form IV(See sub-rule (1) of Rule 36)GOVERNMENT OF INDIA(Symbol)CENTRAL BOARD OF FILM CENSORSThis is to CERTIFY that the film entitled-----------has been passed for UNRESTRICTED public exhibition within the territories of India to which the Cinematograph Act, 1952 extends.ApplicantProduced byLanguage of the FilmGauge of the Film(In the event of a copy of the film being prepared in a gauge other than that mentioned in the certificate, the certified length shall be deemed to be the corresponding length appropriateto that guage").Length of the film ft. REELS. (U)No. of CertificateChairman,Central Board of India Censors.--------------------------------------------------------------------------------------------------------------------8. It is necessary that the certificate must show the length, guage and the language of the film which means that there is film completed in all respects. Sub-rule (3) of Rule 36 clearly provides the manner of prescribing the mark of the Board that it has issued a particular type of certificate. The certificate, thereof, does not lose its character as a mere certificate by reason of the particular manner in which the certificate is to be marked on the film. It is only a convenient way to mark the certificate and the film that it is a prescribed mark and that it should be a film copy of the certificate which has to be affixed to the film and which must be always exhibited with the film. What follows from the consideration of the relevant provisions of the Cinematograph Act as well as the rules framed thereunder is that a particular length of the film is nothing but a certificate issued by the Board of Film Censors. The particular length of the film merely represents the mark as prescribed by the rule that the Board has granted the particular certificate. The Legislature could as well have provided for some other mode of marking the certificate. To mark the certificate by annexing film copy of the certificate does not make it a part of the film, nor can it be said that it becomes a film as defined by the Cinematograph Act. The scheme of the relevant provisions make it plain that a completed film has to be presented before the Boards of Censors for getting the certificate. The Board of Censors on its scrutiny takes a decision as to whether the certificate should be granted or not, and if it decides to grant the certificate, whether it should be of a particular type for public exhibition. The rules prescribe the necessary procedure for making the application. The certificate also is in prescribed form for the particulars to be mentioned in the certificate, one of them being the length of the film, which obviously does not include the censorship certificate length of the film. Sub-Rule (3) of Rule 36 shows that the certificate has to be marked in a particular manner, viz. a copy of the certificate should be affixed to the film. Instead of prescribing this mode, it could as well be provided that the certificate should be exhibited to the public on a board outside the theatre where the film is exhibited. Rule 36 far from supporting the contention of Mr. Dalal clearly shows that the censorship certificate length of the film is nothing but a mark of the certificate which is required to be exhibited in a particular way. In other words, the censorship certificate length of the film does not lose its character of a certificate nor can it be said that a new feature film comes into existence after the certificate is granted, and the film copy of such a certificate is annexed to the original film.9. It is well settled that the meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject generally treat and understand them in the usual course. See (Dunlop India Ltd. v. Union of India)1, A.I.R. 1977 Supreme Court 597. Neither the people in trade nor the spectators who watch the feature film would treat or understand the censorship length certificate of the film as a film or a feature film. It is regard only as a certificate annexed to the feature film in compliance with the legal provisions. We may also usefully refer to the decision of the Gujarat High Court in (Cibatul Ltd. P.O. Atul v. Union of India and others)2, 1978 Excise Law Times at page J. 68, where, the Division Bench of the Gujarat High Court rejected the argument that as a result of affixing of the trade mark, a distinct product known to the market by the name of the trade mark comes into existence as a manufactured product, and therefore, the manufacturing cost must include the cost of affixing the trade mark. In our case also the attempt is to show that the affixing of the censor certificate to the original manufactured film brings about a new and distinct manufactured product. As indicated above, it is only a legal requirement that is complied with by affixing of the censor certificate to the original film. The Legislature has merely prescribed a particular procedure for display of a certificate in compliance with the provisions of the Cinematograph Act and the rules framed thereunder. The argument of Mr. Dalal which assumes that a new manufactured product comes into existence as a result of affixing of the trade mark cannot be accepted. We, therefore, reject the argument of the learned Counsel that the censorship length of the film is liable to duty under Entry No. 37.

Decision:
0[ds]5. So far as the present case is concerned, there is no material difference made by the amendment as regards the liability or otherwise to the levy of duty on the censorship length of the film is concerned. By the amendment, only the rates of duty are revised.The abovementioned provisions clearly talk of a completed film before it is cleared by the Board of Censor and the relevant provisions are intended to provide for issuing necessary censorship certificate for exhibition of films to the public, because the exhibition of a film without such a certificate is made penal. The provisions of the Act mentioned above clearly postulate film being presented to the Board of Censor for the purpose of obtaining a Censor Certificate. The application for a certificate presumes that a complete film is being presented to the Board of Film Censor. The various provisions refer to a film, and this film is obviously a film de hors the censor certificate which is granted in accordance with the provisions of the Act. Sectionenjoins the applicant to cause the film to be marked in accordance with the certificate which may be either a "U" certificate or "A" certificate as the case may be. Thus, what is contemplated by sectionis the marking of the film. The law has merely found a convenient method of marking a film and exhibiting the grant of censor certificate to the public.It is necessary that the certificate must show the length, guage and the language of the film which means that there is film completed in all respects.(3) of Rule 36 clearly provides the manner of prescribing the mark of the Board that it has issued a particular type of certificate. The certificate, thereof, does not lose its character as a mere certificate by reason of the particular manner in which the certificate is to be marked on the film. It is only a convenient way to mark the certificate and the film that it is a prescribed mark and that it should be a film copy of the certificate which has to be affixed to the film and which must be always exhibited with the film. What follows from the consideration of the relevant provisions of the Cinematograph Act as well as the rules framed thereunder is that a particular length of the film is nothing but a certificate issued by the Board of Film Censors. The particular length of the film merely represents the mark as prescribed by the rule that the Board has granted the particular certificate. The Legislature could as well have provided for some other mode of marking the certificate. To mark the certificate by annexing film copy of the certificate does not make it a part of the film, nor can it be said that it becomes a film as defined by the Cinematograph Act. The scheme of the relevant provisions make it plain that a completed film has to be presented before the Boards of Censors for getting the certificate. The Board of Censors on its scrutiny takes a decision as to whether the certificate should be granted or not, and if it decides to grant the certificate, whether it should be of a particular type for public exhibition. The rules prescribe the necessary procedure for making the application. The certificate also is in prescribed form for the particulars to be mentioned in the certificate, one of them being the length of the film, which obviously does not include the censorship certificate length of the film.(3) of Rule 36 shows that the certificate has to be marked in a particular manner, viz. a copy of the certificate should be affixed to the film. Instead of prescribing this mode, it could as well be provided that the certificate should be exhibited to the public on a board outside the theatre where the film is exhibited. Rule 36 far from supporting the contention of Mr. Dalal clearly shows that the censorship certificate length of the film is nothing but a mark of the certificate which is required to be exhibited in a particular way. In other words, the censorship certificate length of the film does not lose its character of a certificate nor can it be said that a new feature film comes into existence after the certificate is granted, and the film copy of such a certificate is annexed to the original film.9. It is well settled that the meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject generally treat and understand them in the usual course. See (Dunlop India Ltd. v. Union of India)1, A.I.R. 1977 Supreme Court 597. Neither the people in trade nor the spectators who watch the feature film would treat or understand the censorship length certificate of the film as a film or a feature film. It is regard only as a certificate annexed to the feature film in compliance with the legal provisions. We may also usefully refer to the decision of the Gujarat High Court in (Cibatul Ltd. P.O. Atul v. Union of India and others)2, 1978 Excise Law Times at page J. 68, where, the Division Bench of the Gujarat High Court rejected the argument that as a result of affixing of the trade mark, a distinct product known to the market by the name of the trade mark comes into existence as a manufactured product, and therefore, the manufacturing cost must include the cost of affixing the trade mark. In our case also the attempt is to show that the affixing of the censor certificate to the original manufactured film brings about a new and distinct manufactured product. As indicated above, it is only a legal requirement that is complied with by affixing of the censor certificate to the original film. The Legislature has merely prescribed a particular procedure for display of a certificate in compliance with the provisions of the Cinematograph Act and the rules framed thereunder. The argument of Mr. Dalal which assumes that a new manufactured product comes into existence as a result of affixing of the trade mark cannot be accepted. We, therefore, reject the argument of the learned Counsel that the censorship length of the film is liable to duty under Entry No. 37.