Case: Assistant Collector of Central Excise And Customs Vs. J.C. Shah

known as Saurashtra Mills at Surendranagar, which manufactures the same fabrics on 24 looms. In this firm, there are 12 partners and the respondents share is two annas. The respondent is a partner in another firm Sunlight Textile Mills which owns 19 powerlooms at Bhandup and produces silk fabrics on them. In this last partnership the respondent has eight annas share. His contention is that on a fair and reasonable construction of Item 12A(v) it should be held that the silk fabrics which are produced by him are produced in factory in which less than 25 powerlooms in all are installed. On the other hand, the appellants contention is that in considering the question as to whether in the factories where artificial silk fabrics are produced by or on behalf of the respondent, it will be necessary to add up the powerlooms in all the three factories. According to the appellants, the fact that the respondent owns only one factory in which nine powerlooms are working would not be decisive, because since he is a partner in two other firms which own 24 and 19 powerlooms respectively, these powerlooms must be added to the powerlooms that are working in the factory owned by the respondent alone, and that inevitably takes his case outside the exemption prescribed by Item 12A(v).3.The question which these contentions raise is one of construction. Item 12A(v) refers to cases where artificial silk fabrics are produced or manufactured in one or more factories by or on behalf of the same person in which less than 25 powerlooms in all are installed. Can it be said that the powerlooms which work in the two partnership in which the respondent is a partner are worked by or on behalf of the same person, viz., the respondent. It is quite true that under the law of partnership each partner is an agent of the other partners, but when clause refers to the same person, does it take in cases like the present where a person is working a factory of his own and has joined other partners in working other factories belonging to the said partnership? Under Section 3(42) of the General Clauses Act, 1897 (No. 10 of 1897), a person shall include any company or association or body of individuals, whether incorporated or not; and so, it may be conceded that a partnership is a person within the meaning of Item 12A(v). But are the two partnerships of which the respondent is a partner the same person as the respondent? In other words, is the test that the production of artificial silk fabrics must be attributable to the same person, satisfied in a case like the present? The Bombay High Court has answered this question in the negative and in our opinion, the view taken by the High Court is right. The contention of the appellants that every partner of a firm is in law the same person as the firm within the meaning of Item 12A(v) seems to us plainly inconsistent with the content of the said item and the object intended to be served by it in granting exemption to cases covered by it.4.It has been urged by Mr. Prem on behalf of the appellants that the duty is levied not against the individual who produces the artificial silk fabrics, but against the artificial silk fabrics themselves, and since it is the production of the fabrics which in the subject-matter of the duty, the expression "same person" should be liberally construed to include cases like the present. This argument appears to us to be misconceived. If a partnership consists of 10 persons on Mr. Prems argument the articles produced by the factory belonging to such a partnership may become the subject-matter of duty in respect of each one of the partners. In fact, in Civil Appeal No. 395/1962 that is what the taxing authorities have purported to do. In the partnership M/s. Arun Textiles with which the said appeal is concerned, there were two partners who were also partners in M/s. M. Kantilal & Co. and notices have been served on both the partnerships in respect of the artificial silk fabrics manufactured in factories belonging to the partnership. The view taken by the taxing authorities was that both the art silk factories, namely, Arun Textiles and M. Kantilal & Co. of Surat which had common partners and had an aggregate potential loomage of more than 24 powerlooms and were producing rayon or art silk fabrics in both these factories, are treated as a collective entity for the Central Excise purposes for the period in question.5.Apart from this consideration, however, on a plain construction of the relevant clause, the context seems to require that the words "the same person" cannot receive the liberal construction for which the appellants contend. The respondent Shah owns a factory in which there are 9 powerlooms. He is a partner in two other factories in which there are 24 and 19 powerlooms respectively; but the production of artificial silk fabrics attributable to these two factories cannot be said to be production or manufacture by or on behalf of the same person. The production in the first factory is by or on behalf of the respondent himself, while the production or manufacture in the other two factories is by or on behalf of two separate partnership of which the respondent happens to be one partner. We, therefore, feel no difficulty in holding that for the purpose of Item 12A(v) the three persons cannot be said to be the same person as claimed by the appellants. If it was the intention of the legislature to exclude cases like the present from the purview of the exemption clause, then it must be held that the legislature has failed to use appropriate words to carry out that intention. We were told that for subsequent years, the relevant item in the Schedule has been suitably modified and the present question is, therefore, not likely to arise in future.

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

Explanation:
0[ds]Item 12A(v) refers to cases where artificial silk fabrics are produced or manufactured in one or more factories by or on behalf of the same person in which less than 25 powerlooms in all are installed. Can it be said that the powerlooms which work in the two partnership in which the respondent is a partner are worked by or on behalf of the same person, viz., the respondent. It is quite true that under the law of partnership each partner is an agent of the other partners, but when clause refers to the same person, does it take in cases like the present where a person is working a factory of his own and has joined other partners in working other factories belonging to the said partnership? Under Section 3(42) of the General Clauses Act, 1897 (No. 10 of 1897), a person shall include any company or association or body of individuals, whether incorporated or not; and so, it may be conceded that a partnership is a person within the meaning of Item 12A(v). But are the two partnerships of which the respondent is a partner the same person as the respondent? In other words, is the test that the production of artificial silk fabrics must be attributable to the same person, satisfied in a case like the present? The Bombay High Court has answered this question in the negative and in our opinion, the view taken by the High Court is right. The contention of the appellants that every partner of a firm is in law the same person as the firm within the meaning of Item 12A(v) seems to us plainly inconsistent with the content of the said item and the object intended to be served by it in granting exemption to cases covered byargument appears to us to be misconceived. If a partnership consists of 10 persons on Mr. Prems argument the articles produced by the factory belonging to such a partnership may become theof duty in respect of each one of the partners. In fact, in Civil Appeal No. 395/1962 that is what the taxing authorities have purported to do. In the partnership M/s. Arun Textiles with which the said appeal is concerned, there were two partners who were also partners in M/s. M. Kantilal & Co. and notices have been served on both the partnerships in respect of the artificial silk fabrics manufactured in factories belonging to the partnership. The view taken by the taxing authorities was that both the art silk factories, namely, Arun Textiles and M. Kantilal & Co. of Surat which had common partners and had an aggregate potential loomage of more than 24 powerlooms and were producing rayon or art silk fabrics in both these factories, are treated as a collective entity for the Central Excise purposes for the period in question.5.Apart from this consideration, however, on a plain construction of the relevant clause, the context seems to require that the words "the same person" cannot receive the liberal construction for which the appellantsrespondent Shah owns a factory in which there are 9 powerlooms. He is a partner in two other factories in which there are 24 and 19 powerlooms respectively; but the production of artificial silk fabrics attributable to these two factories cannot be said to be production or manufacture by or on behalf of the same person. The production in the first factory is by or on behalf of the respondent himself, while the production or manufacture in the other two factories is by or on behalf of two separate partnership of which the respondent happens to be one partner. We, therefore, feel no difficulty in holding that for the purpose of Item 12A(v) the three persons cannot be said to be the same person as claimed by the appellants. If it was the intention of the legislature to exclude cases like the present from the purview of the exemption clause, then it must be held that the legislature has failed to use appropriate words to carry out that intention. We were told that for subsequent years, the relevant item in the Schedule has been suitably modified and the present question is, therefore, not likely to arise in future.