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

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 asff Item Description of Goods Rate of>37 Cinematograph Films Exposed of a width below 3030 mm. in) 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. perItem 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.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>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 anature 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 Judge

Court's reasoning:
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.