Case: J.K. Steel Ltd Vs. Union Of India

duty of excise as is equivalent to the duty payable on the said article. Notifications Nos. 70, 77 and 89 exempted payment of excise duty on an article to the extent duty had been paid on the law material used in the manufacture of the article dutiable under entry 26AA. All these Notifications proceeded on the basis that the second limb of the levy in column 3 of entry 26AA refers to the duty payable on the Pig Iron or Steel Ingot, as the case may be used in the manufacture of an article dutiable under 26AA.41. But the above notifications do not deal with the countervailing duty levied under Entry 63 (36) of the First Schedule to the Tariff Act. This was clearly an omission. To make good that omission the Government amended Notification No. 89/62 by its order dated December 29, 1962. The amended Notification in addition to the exemption already given under Notification No. 89/62 also exempted from the payment of duty any article falling within any of the sub-items in Items 26AA if made from an article on which countervailing duty has been paid under Item 63(36) of the First Schedule to the Tariff Act from so much of the duty of excise as is equivalent to the countervailing custom duty payable on the said article. This Notification clearly shows that the countervailing duty in question was levied on the basis that the excise duty contemplated by entry 26AA will not apply to articles made out of imported Pig Iron or Steel Ingot. Further if the legislature intended the duty under entry 63(36) to be an additional duty, the exemption granted would nullify the legislative mandate.42. To summarise the effect of the Finance (No. 2) Act of 1962 and the various Notifications issued for the purpose of implementing the scheme under that Act is that excise duty is leviable at the rate mentioned in column 3 of Item 26AA on pig iron or steel ingot used in the production of the article on which duty under entry 26AA is sought to be levied but to the extent any excise duty or countervailing custom duty had been paid on any of the material used in the manufacture of any of that article, the same is exempt. From this scheme it is clear that when Item 26AA speaks of "the excise duty for the time being leviable on Pig Iron or Steel Ingots as the case may be" it refers to the excise duty payable on the Pig Iron or Steel Ingots used in the production of the article dutiable under that item.43. Form the above discussion, it follows that the wires which are the subject matter of the levy impugned in this case are not liable to pay the duty in dispute in this case.44. At one stage it was contended on behalf of the assessee that the levy under sub-item (1) of Item 26-AA comes into effect only when an article is made directly form out of Pig Iron or Steel Ingot as the case may be and not otherwise. It is not necessary to examine the correctness of this contention because at no stage the assessee had challenged his liability to pay ad valorem duty under Item 26-AA. He paid the same without objection not had he claimed refund of the same.45. I shall now take up the question of limitation. The written demand made on March 21, 1963 purports to have been made under Rule 9 (2) of the rules. Therein the assessing authority demanded steel ingot duty which according to it the assessee had failed to pay. Quite clearly Rule 9 (2) inapplicable to the facts of the case. Admittedly the assessee had cleared the goods from the warehouse after paying the duty demanded and after obtaining the permission of the concerned authority. Hence there is no question of any evasion. Despite the fact that the assessee challenged the validity of the demand made on him, both the Assistant Collector as well as the Collector ignored that contention; but when the matter was taken up to the Government it treated the demand in question as a demand under Rule 10. The Government confined the demand to clearance effected after December 21, 1962. The demand so modified is in conformity with Rule 10. But the contention of the assessee is that the demand having been under Rule 9 (2) and there being no indication in that demand that it was made under Rule 10, the Revenue cannot now change its position and justify the demand under R. 10; at any rate by the time the Government amended the demand, the duty claimed became barred even under Rule 10. We are unable to accept this contention as correct. There is no dispute that the officer who made the demand was competent to make demands both under Rule 9 (2) as well as under Rule 10. If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. This is a well-settled proposition of law. In this contention reference may usefully be made to the decision of this Court in P. Balakotaiah v. The Union of India, 1958 SCR 1052 = (AIR 1958 SC 232 ) and Afzal Ullah v. State of U. P. 1964-4 SCR 991 = (AIR 1964 SC 264 ). Further a common from is prescribed for issuing notices both under Rule 9 (2) and Rule 10. The incorrect statements in the written demand could not have prejudiced the assessee. From his reply to the demand, it is clear that he knew as to the nature of the demand. Therefore, I find no substance in the plea of limitation advanced on behalf of the assessee.46. For the reasons mentioned above, this appeal is allowed and the Revenue is directed to refund the excess duty paid under protest.ORDER

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]29. For the purpose of interpreting the clause in question, reference may also be made to entry 63 (36) in the First Schedule to the Tariff Act. It may be remembered that that entry as well as entry 26AA in the First Schedule of the Act were enacted simultaneously under Finance (No. 2) Act, 1962. Both these entries came into force on the same day namely on 24th April 1962.The Act and the Tariff Act are cognate legislations. In other words they are legislations which are pari materia. They form one code. They must be taken together as forming one system and as interpreting and enforcing each other. It is proper to assume from the surrounding circumstances, that these two entries were introduced in pursuance of a common purpose, that purpose being that the articles listed in entry 26AA whether produced out of indigenous Pig Iron or Steel Ingot or made out of imported Pig Iron or Steel Ingot must bear the same amount of duty. If the interpretation placed on entry 26AA by the learned Counsel for the assessee is accepted then it would be seen that that entry by itself would not impose the duty contemplated by the second part of the clause in col. 3 of entry 26AA on imported Pig Iron or Steel Ingot. Evidently in order to equalise the duty on articles made out of indigenous material as well as imported material entry 63(36) of the First Schedule to the Tariff Act was enacted. In other words that entry imposes countervailing duty and not additional duty. It was conceded by the learned Counsel for the Revenue that the duty levied under entry 63 (36) of the First Schedule of the Tariff Act is only a countervailing duty. If that be so, that duty cannot be considered as an additional duty over and above the duty imposed under entry 26AA of the First Schedule of the Act. But it would be an additional duty if the interpretation of entry 26AA canvassed on behalf of the Revenue is accepted because according to the Revenue the rate prescribed in that entry is equally applicable to all articles mentioned therein whether manufactured from indigenous or imported material.If that be so the duty collected under duty 63(36) of the First Schedule under the Tariff Act will be an additional duty and not a countervailing duty.It is true that despite entry 26AA of the First Schedule to the Act and entry 63(36) of the First Schedule of the Tariff Act if pig iron or steel ingot imported before April 24, 1962 is used in the manufacture of an article dutiable under entry 26AA only the ad valorem duty prescribed under that entry can be levied on that article. It may be that the legislature intended it to be so or there is a lacuna in the provision. In either case the effect is the same.From the above decisions, it is clear that several judges in England have referred to the subordinate legislation made under a statute for the purpose of interpreting that statute though for the limited purpose of knowing how the department which was entrusted with the task of implementing that statute, had understood that statute. In the case of fiscal statutes it may not be inappropriate to take into consideration the exemption granted in interpreting the nature and the scope of the impost. In the matter of fiscal legislation the initiative is in the hands of the executive. Under Article 112 (1) of our Constitution the President shall in respect of every financial year cause to be laid before both the Houses of Parliament a statement of the estimated receipts and expenditure for that year. Under sub-article (3) of Article 110 no demand for a grant shall be made except on the recommendation of the President.In the matter of taxation very large powers are left in the hands of the executive. Generally speaking the question of exemption is left to the discretion of the Government. It ought to be so because the exercise of that power depends on various circumstances some of which cannot be anticipated in advance. But yet the levy and exemption are parts of the same scheme of taxation. The two together carry into effect the purpose of thedo not think it is necessary for me to decide in this case the general question whether subordinate legislation can be used for interpreting a provision in the parent Act. I am not unaware of the danger in accepting that it could be so done.But for the present purpose, it is sufficient to hold that for finding out the scope of a particular levy, notifications issued by the executive Government providing for exemption form that levy can be looked into as they disclose the overall scheme.38. Even according to the learned Counsel for the Revenue the notifications referred to earlier were issued with a view to avoid double taxation. If that is so, the exemption granted under those notifications provide a clue as to the scope of the levy made under Item 26AA.39. We have earlier seen that on the very day, the levy came into force the Government had issued two notifications i. e. Notifications Nos. 70 and 77 of 1962. Under Notification No. 70 it exempted Iron and Steel products falling under item 26AA if made from pig Iron or Steel Ingots on which the appropriate amount of duty has already been paid, from so much duty of the excise leviable thereon as is equivalent to the duty leviable under item 25 or as the case may be under Item 26. Under Notification No. 77, it exempted Iron and Steel Products falling under sub-item Nos. 2, 3, 4 and 5 of Item 26AA,if made from articles which have already paid appropriate duty of excise under sub-item (1) of the said item from so much of the duty of exercise as is equivalent to the duty payable under the said sub-item (1). These Notifications clearly indicate that under Item 26AA, there was no intention to levy double excise duty on the same material. The intention appears to be that if one article is made out of another article both of which are subject to excise duty, the excise duty paid on the raw material should be deducted in computing the excise duty payable on the finished product. In addition these Notifications clearly show that the Pig Iron and Steel Ingot mentioned in Cl. 3 of entry 26AA are those used in the manufacture of the article on which duty is sought to be levied under that entry.40. In this connection we may also refer to Notification No. 89/62. Notification No. 77/62 referred merely to Iron and Steel Products falling under sub-items 2, 3, 4, and 5 of item 26AA manufactured out of articles falling under sub-item (1) thereof. That Notification by itself was not all comprehensive. It did not take in other articles made out of Pig Iron or Steel Ingot. It is for that reason Notification No. 89/62 was issued on May 10, 1962 under which exemption was given with effect from April 24, 1962 to all Iron and Steel Products falling under Item 26AA if made from another article falling under the said item and having already paid appropriate amount of duty from so much of the duty of excise as is equivalent to the duty payable on the said article. Notifications Nos. 70, 77 and 89 exempted payment of excise duty on an article to the extent duty had been paid on the law material used in the manufacture of the article dutiable under entry 26AA. All these Notifications proceeded on the basis that the second limb of the levy in column 3 of entry 26AA refers to the duty payable on the Pig Iron or Steel Ingot, as the case may be used in the manufacture of an article dutiable under 26AA.41. But the above notifications do not deal with the countervailing duty levied under Entry 63 (36) of the First Schedule to the Tariff Act. This was clearly an omission. To make good that omission the Government amended Notification No. 89/62 by its order dated December 29, 1962. The amended Notification in addition to the exemption already given under Notification No. 89/62 also exempted from the payment of duty any article falling within any of the sub-items in Items 26AA if made from an article on which countervailing duty has been paid under Item 63(36) of the First Schedule to the Tariff Act from so much of the duty of excise as is equivalent to the countervailing custom duty payable on the said article. This Notification clearly shows that the countervailing duty in question was levied on the basis that the excise duty contemplated by entry 26AA will not apply to articles made out of imported Pig Iron or Steel Ingot. Further if the legislature intended the duty under entry 63(36) to be an additional duty, the exemption granted would nullify the legislative mandate.42. To summarise the effect of the Finance (No. 2) Act of 1962 and the various Notifications issued for the purpose of implementing the scheme under that Act is that excise duty is leviable at the rate mentioned in column 3 of Item 26AA on pig iron or steel ingot used in the production of the article on which duty under entry 26AA is sought to be levied but to the extent any excise duty or countervailing custom duty had been paid on any of the material used in the manufacture of any of that article, the same is exempt. From this scheme it is clear that when Item 26AA speaks of "the excise duty for the time being leviable on Pig Iron or Steel Ingots as the case may be" it refers to the excise duty payable on the Pig Iron or Steel Ingots used in the production of the article dutiable under thatthe fact that the assessee challenged the validity of the demand made on him, both the Assistant Collector as well as the Collector ignored that contention; but when the matter was taken up to the Government it treated the demand in question as a demand under Rule 10. The Government confined the demand to clearance effected after December 21, 1962. The demand so modified is in conformity with Rule 10. But the contention of the assessee is that the demand having been under Rule 9 (2) and there being no indication in that demand that it was made under Rule 10, the Revenue cannot now change its position and justify the demand under R. 10; at any rate by the time the Government amended the demand, the duty claimed became barred even under Rule 10. We are unable to accept this contention as correct. There is no dispute that the officer who made the demand was competent to make demands both under Rule 9 (2) as well as under Rule 10. If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. This is a well-settled proposition of law.For the reasons mentioned above, this appeal is allowed and the Revenue is directed to refund the excess duty paid under protest.