# CANNANORE SPINNING AND WEAVING MILLS LTD v. COLLECTOR OF CUSTOMS AND CENTRAL COCHIN AND ORS

- **Citation:** [1970] 2 S.C.R. 830
- **Court:** Supreme Court of India
- **Decided:** 1969-10-15
- **Case number:** Civil Appeal No. 2346 of 1966
- **Bench:** J. C. Shah, K. S. Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/cannanore-spinning-and-weaving-mills-ltd-v-collector-of-customs-and-central-4952
- **Pages:** 5

## Headnote

EXCmE
Central Excise & Salt Act, 1944-Excise duty-Notification exem11ting cotton yarn of particular count cleared out in 'honks'.:_Explanalion
added with retrospective effect defining 'hank' to mean any coil of cotton
yarn less than 768 metres length-Whether 'hank' used In th• tochnlcal
sense-Retrospecti've notificati'on, validity of,
The appellant was manufacturing cotton yarn of varyina counts rana·
ing from 20 to 32.
In June, 1962 the government issued a notification
which exempted from payment of excise duty cotton yam of 17 counts
or more but less than 35 counts, if cleared out of the factory in 'hanks'.
In view of the notification the appellant objected to the demand of excise
duty in respect of the single yam produced by it and cleared out of the
factory in coils during the period August 1962 to November 1962. During the pendency of the proceedings, in February 1963, by another noti·
fication an explanation was added to the effect that the term 'hank' meant
-'hank' "which does not contain more than 768 metres of yarn in plain
(straight) reel". The notification was given retrospective effect. After unsuccessfully contesting the demand in departmental proceedings the appellant moved the High Court to quash the demand. The High Court
accepted the contention of the department that the word 'hank' has been
used in the relevant notifications to convey a special meaning i.e. a circular
loop or coil of cotton yarn 840 yards (768 metres) in length and held
that the appellant was not entitled lo the exemption granted under. those
notifications because, the length of the cotton yarn in the 'hanks' cleared
cut of the appellant's factory was admittedly much more than 850 yards.
Allowing the appeal lo this Court,
HELD : The explanation giYen in the notification dated February 1963
does not accord with the meaning given to the word 'hank' in commercial
circles. Any coil of cotton yarn less than 768 metres in length according
to that notification has also Jo be consideied as a 'bank'. But according
to the technical meaning acquired by the word
'hank' in commercial
circles, the length of the cotton yarn in the reel should be neither more
nor Je.ss than 768 metres (840 yards). This notification makes it clear
that when the government issued the notification dated June, 1962 it in·
tended to give the word 'hank' the meaning 'a coil of yarn' and nothing
more.
Further, if the word 'hank' had been used in the way it was understood in commercial circles there was no point in giving retrospective
effect to the explanation added by noti69ation dated February 1963.
[833
F-HJ
(ii) The rule-making authority had not been vested with the power
under the Central Excise and Salt Act to make rules with retrospective
effect.
Therefore, the retrospective effect purported to be given to the
exolanation was beyond the powers of the rulemaking authority.
[834
DJ
.

## Text

830
CANNANORE SPINNING AND WEAVING MILLS LTD.
A
v.
COLLECTOR OF CUSTOMS AND CENTRAL
COCHIN AND ORS.
October 15, 1969
(J. C. SHAH AND K. S. HEGDE, JJ.]
EXCmE
Central Excise & Salt Act, 1944-Excise duty-Notification exem11ting cotton yarn of particular count cleared out in 'honks'.:_Explanalion
added with retrospective effect defining 'hank' to mean any coil of cotton
yarn less than 768 metres length-Whether 'hank' used In th• tochnlcal
sense-Retrospecti've notificati'on, validity of,
The appellant was manufacturing cotton yarn of varyina counts rana·
ing from 20 to 32.
In June, 1962 the government issued a notification
which exempted from payment of excise duty cotton yam of 17 counts
or more but less than 35 counts, if cleared out of the factory in 'hanks'.
In view of the notification the appellant objected to the demand of excise
duty in respect of the single yam produced by it and cleared out of the
factory in coils during the period August 1962 to November 1962. During the pendency of the proceedings, in February 1963, by another noti·
fication an explanation was added to the effect that the term 'hank' meant
-'hank' "which does not contain more than 768 metres of yarn in plain
(straight) reel". The notification was given retrospective effect. After unsuccessfully contesting the demand in departmental proceedings the appellant moved the High Court to quash the demand. The High Court
accepted the contention of the department that the word 'hank' has been
used in the relevant notifications to convey a special meaning i.e. a circular
loop or coil of cotton yarn 840 yards (768 metres) in length and held
that the appellant was not entitled lo the exemption granted under. those
notifications because, the length of the cotton yarn in the 'hanks' cleared
cut of the appellant's factory was admittedly much more than 850 yards.
Allowing the appeal lo this Court,
HELD : The explanation giYen in the notification dated February 1963
does not accord with the meaning given to the word 'hank' in commercial
circles. Any coil of cotton yarn less than 768 metres in length according
to that notification has also Jo be consideied as a 'bank'. But according
to the technical meaning acquired by the word
'hank' in commercial
circles, the length of the cotton yarn in the reel should be neither more
nor Je.ss than 768 metres (840 yards). This notification makes it clear
that when the government issued the notification dated June, 1962 it in·
tended to give the word 'hank' the meaning 'a coil of yarn' and nothing
more.
Further, if the word 'hank' had been used in the way it was understood in commercial circles there was no point in giving retrospective
effect to the explanation added by noti69ation dated February 1963.
[833
F-HJ
(ii) The rule-making authority had not been vested with the power
under the Central Excise and Salt Act to make rules with retrospective
effect.
Therefore, the retrospective effect purported to be given to the
exolanation was beyond the powers of the rulemaking authority.
[834
DJ
.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2346 of
1966.
B
c
D
E
F
G
H
CANNANORE MILLS v. COLLECTOR (Hegde, J.)
831
A
Appeal by special leave from the judgment and order dated
November 22, 1965 o[ the Kerala High Court in Writ Appeal
No. 158 of 1965.
B
c
D
E
F
G
H
M. C. Chagla, Sardar Bahadur, Yougindra Khushalani and
Vishnu B. Saharya, for the appellant.
V. A. Seyid Muhammad, B. Dutta and S. P. Nayar, for the
respondents.
The Judgment of the Court was delivered by
Hegde, J, The only question for decision in this appeal by
Special Leave is whether the coils of cotton yarn cleared out of
the appellant's factory during the period from
17-8-1962
to
14-11-1962 are exempt from excise duty in view of Exts. P. 2
and P. 3 which exempt from payment of excise duty cotton
yarn of 17 counts or more but less than 35 counts, if cleared
out of factory in 'hanks'.
The appellant is a company engaged in the manufacture and
sale of cotton yarn. It has been manufacturing cotton yarn of
varying counts ranging from 20 to 32. Under the provisions of
the Central Excises and Salt Act, 1944, cotton yarn is liable to
excise duty at the rate prescribed in the Sch. to the said Act. By
s 13(i) of the Finance Act, 1961 (Act XIV of 1961) all cotton
yarns leso than 35 counts were subject to excise duty at the rate
of 10 Np. per Kg.
This provision took effect from 1-3-1961;
but the Government by its notification dated 24-4-1962 under
rule 8 of the Central Excise Rules 1944 granted exemption to
the cotton yarn falling under item 18A of tl)e Ist Sch. to the Act
from so much of the duty leviable thereon as was in excess of the
duty specified in the corresponding entry in column (3) thereof.
In view of this notification, the appellant became liable to pay
duty at the rate of·3.5 per paise per Kg. or cotton yarn produced
by it and cleared out of the factory in 'hanks'. On 13-6-1962
yet another notification was issued by the Government under
rule 8(1) (Exh. P-2) under which single cotton yarn between 17
to 35 counts whether grey or bleached and grey multiple fold
yarn cleared out of the fact.ozy in hanks were totally exempt from
the payment of duty w.e..f.•JUly 24, 1962. In view of this notification, the appellant di!l not pay any excise duty on the yarn
produced by it. and clea,i:ed ,out of the factory in coils during the
period from 1 '7-8-1962 to. 14-11-1962.
The appellant's factocy was inspected by the Dy. Superin~n
dent of Central Excise Cannanore sometime in November, 1962.
He wrote to the appellan~ on November 14, 1962 as follows :-
"On a verification ,at your mill premises it was noticed
that the single yam produced are double the length of a
832
SUPREME COURT REPORTS
[1970] 2 S.C.R.
standard hank of 840 yards. As the exemption of duty
on yarn applies only to standard hanks of 840 yards in
length, the double hanks produced by you will not be
eligible for exemption".
In reply to that letters, the appellant informed the Dy. Superintendent, Central Excise that it may be supplied any notification
defining 'hanks'.
Thereafter as per his communication dated
January 1, 1963, the Deputy Superintendent called upon the
appellant to pay a sum of Rs. 46,647.85 np. as excise duty in
respect of the single yarn produced by it and cleared out of the
factory in coils.
A further communication was sent to the appellant by the same Dy. Superintendent in respect of the same demand
on January 2, 1963.
The appellant objected to the demand but
the appellant's objections were rejected by the Asstt. Collector
on April 14, 1963.
Thereafter the appellant unsuccessfully
appealed to the Collector of Central Excise.
During the pendency of the proceedings, the Government of India by its notification dated February 16, 1963 issued in exercise of its powers
under rule 8(1), amended its earlier notification of September 15,
1962 by adding one more Explanation to that notification to the
effect that for the purpose of that notification the term
'hank' means 'hank' "which does not contain more than 768
metres of yarn in plain (straight) reel". It further stated
that that notification shall be deemed to 'have taken effect from
the 17th day of August, 1962.
As per its notification dated
September 28, 1963 a further amendment was made to
the
notification issued on September 21, 1963. That amendment
reads:-
"Notwithstandi11g anything contained
in expianaticn 1 and 2, the term 'hanks' shall mean from 1st day of
October, 1963, hanks which do not contain more than
1000 metres of ya,rn in plain (straight) reel".
In the notifications issued under rule 8(1) either on June 13,
1962 or on September 15, 1962 (Exh. P-2 and P-3), the word
'hank' was not defined.
One of the dictionary meaning given
to the word 'hank' is 'circular loop or coil'.
The stand taken
by the department is that the word 'hank' had acquired a special
meaning in commercial circles i.e. a circular loop or coil of
cotton yarn 850 yards in length and we must give that meaning
to the word 'hank' in Exts. P-2 and P-3.
After unsuccessfully contesting the demands made by the
department in departmental proceedings, the appellant moved
the High Court of Kerala under Art. 226 of the Constitution to
quash the demand refered to earlier. Both the single judge as well
A
B
c
D
E
F
G
H
A
B
c
D
E
F
G
H
CANNANORE MILLS v. COLLECTOR (Hegde, !. )
83 3
as the appellate bench of that High Court rejected the prayer of
the appellant, accepting the contention of the department that
the word 'hank' in Exh. P-2 and p:3 has been used to convey
a special meaning, i.e. a circular loop or coil of cotton yarn 850
yards in length; Hence the appellant was not entitled to the exemption granted under those notifications.
In support of their
conclusion that the word 'hank' has acquired a precise technical
meaning in commercial circles, the learned judges of the High
Court referred to the definition given to the word 'hank' in
Murray's New English Dictionary, "Mercury Dictionary of Texdle
Terms", "American Cotton Hank Book" and to some oi the Government publications.
Thereupon the appellant
btought this
:ippeal.
It may be taken that the word 'hank' has acquired a technical meaning in commercial circles and in the absence of any
evidence to show contrary intention on the part of the authorities
\\ho issued Exts. P-2 and 3 we should have had no difficulty
in accepting the contention of the department.
Admittedly the
length of the cotton yarn in the 'hanks' cleared out of the appellant's factory was much more than 840 yards.
Hence those
'hanks' cannot be considered as 'hanks' as understood in commercial circles.
But then did the authorities who issued Exts.
P-2 and P-3 intend to use the word 'hank' as understood in
commercial circles or did they use the word in accordance with
the dictionary meaning?
We have definite and positive evidence
on record to show that the authorities who issued those notifications did not use the word 'hank' as understood in commercial
circles.
Otherwise ihe )1.0tifica(ion issued by the Government
on February 16, 1963 hcomes meaningless.
That notification
not only explains the term 'hank' as meaning a 'hank' which
does not contain more than 768 metres of yarn in plain (straight)
reel, it goes further and provides that the notification should bt
deemed to have taken effect from the 17th day of October, 1962.
First the explanation given in the notification does not accord
with the meaning given to the word 'hank' in commercial circles.
It says that the word 'hank' means a coil of cotton yarn not
more than 768 metres (840 yards) in length and not of 768
metres length.
Any coil of cotton yar~ less than 768 metres in
length according to that notification has to be considered as a
'hank'.
But according to the technical . meaning acquired by
the word 'hank' in commercial circles, the length of the cotton
yarn in the reel should be neither more nor less than 768 metres
( 840 yards).
This notification makes it clear that when the
Government issued the notification Exh. P-2, it intended to give
the word 'hank' the meaning "a coil of yarn" and nothing more.
Secondly if in Exh. P-2, the word 'hank' has been used in the
way it is understood in commercial circles there was no point in
834
SUPREME COURT REPORTS
[1970]2 S.C.R.
giving retrospective effect to the explanation added to Exh. P-2
by the notification datt!il February 16, 1963. The rule making
authority's intention is made ft.ither clear by the Government's
notification dated September 28, 1963 which explains the word
hank to mean a circular coil which does not contain more than
1000 metres of yarn in plain (straight) reel. It is true that it
was within the competence of the rule making authority to define
the word 'hank' as it though best.
The real question for
our
decision is whether it did use that word 'hank' to convey any
technical ineaning when it issued notification Exts. P-2 and P-3.
For the reasons mentioned, above we are unable to agree with
the department that in those notifications, the word 'hank' had
been used in a technical sense.
B~ Seiyed Muhammad, learned Counsel for the department
did not support the impugned demand on the basis of the retrospective effect purportea to have been given to the explanation
referred to earlier by the notification dated February 16, 1963
(Exh. P-12) for obvious reasons.
The rule making
authority
had not been vested with the power under the Central Excise
and Jalt Act to make rules with 1etrospective effect.
Therefore
the retrospective effect purported to be $iven under Bxh. P-12
was beyond the powers of the rule making authority.
For the reasons mentioned above, we allow this appeal and
quash the impugned demand.
The respondents shall pay the
costs of the appellant both in this. Court as well as in the High
Court.
R.K.P.S.
Appeal allowed
A
B
c
D
E