# J. K. STEEL LTD v. UNION OF INDIA

- **Citation:** [1969] 2 S.C.R. 481
- **Court:** Supreme Court of India
- **Decided:** 1968-10-18
- **Case number:** Civil Appeal No. 1261 of 1968
- **Bench:** S. M. SrKRI, R. S. Bachawat, K. S. Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/j-k-steel-ltd-v-union-of-india-4518
- **Pages:** 26

## Headnote

Central Excise and Salt Act (I of 1944), First Schedul.e, item 25AA,
Indian Tariff Act (32 of 1934), First Schedule, entry 63(36) and Finance
Act (20 of 1962)-Steel wires made from imported steel rods-Whether
excise duty is Ieviable.
Central Excise and Salt Rules, 1944. rr. 9(2) and 10---Wrong rule
mentioned-No prejudice to assessee-Jj could be justified under the
correct rule.
The appellant was a manufacturer of iron and steel products. It
was importing steel rods from which steel wires were manufactured.
On
April 24, 1962 Finance Act (No. 2) 1962 imposed excise duty on iron
and steel products by introducing item 26AA in the Central Excise and
Salt Act, 1944. Under that item, on wires, 5% ad valorem plus
the
excise duty for the time being lcviable on pig iron and steel ingots as
the case may be was payable.
Pig iron and steel ingots were already
subject to excise duty under items 25
and
26
respectively.
On the
same day, the first Schedule of the Tariff Act 1934 was amended and
two Notifications Nos. 70 and 77 were issued in exercise of the powers
conferred by r. 8 (I) of the rules framed under the E~cise Act.
In the
Tariff Act item 63 (36) which deals with imported iron and steel products was added to the First Schedule by Finance Act (No. 2), 1962.
The items included therein are the very items set out in item 26AA of
the Excise Act.
The standard rule of duty is mentioned as 'the excise
duty for the tin1e being leviable on like articles if produced or manufactured in India. . . and the duty so leviable shall be in addition to the
duty which would have been levied if this entry had not been inserted.'
Under Notification 70,
the Central Govc.rnment exempted iron
and
steel products fall.ing under item 26AA if made from pig iron or steel ingots on which the appropriate amount of excise duty has already been paid,
from so much of the excise duty leviable thereon as is equivalent to the
duty leviable under item 25 or 26 as the case may be. Under Notification
77, the Central Government exempted other iron and steel
products
falling under sub-items (2). (3), (4) and (5) of item 26AA if made
from articles which have already paid the appropriate, excise duty under
sub-item ( 1) of item 26AA. from so much of the excise
duty
as
is
equivalent to the duty payable under sub-item (I). This
notification
was later superseded by another
Notification No. 89.
by which the
Government exempted with effect from April, 24, 1962, iron and steel
products falling under item 26AA if made from another article falling
under the said ite.m and havin.g already paid the appropriate amount of
duty, from so much of the
excise 'duty as is equivalent
to the duty
payable on the said article.
On and after April 24, 1962, the appellant cleared from its warehouse wires produced from the imported steel·
rods.
The required permission from the excise authorities was obtained
and the duty assessed was paid.
At that time the excise authorities proceeded on the basis that only ad valorem duty had to be levied and not
'excise duty for the time leviable on pig iron or steel ingots.'
On March
21, 1963, the assessing authority issued a written demand under r. 9(2)
demanding steel ingot duty which, according to the authority the appellant
had evaded to pay. The appellant paid the duty demanded under protest
482
SUPREME COURT REPORTS
[1969) 2 S.C.R
and appealed to higher authoritie·s.
The Government, in revision. treated
the demand as one under r. 10, because, there was no qnestion of any
evasion by the appellant, and confined the demand to clearances effected
after December 21, 1962.
In appeal to this Court against the order of the Central Government,
the appellant contended that : (I) The clause 'excise duty for the time
being leviable under the Act on pig iron or steel
ingots'
is
attracted
only when any pig iron or steel ingot dutiable under the Act is Used
in the manufacture of any article dutiable under item 26AA (I), and,
as the steel bars used in
the manufacture of wire

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J. K. STEEL LTD.
v.
UNION OF INDIA
October 18, 1968
[S. M. SrKRI, R. S. BACHAWAT AND K. S. HEGDE, JJ.)
Central Excise and Salt Act (I of 1944), First Schedul.e, item 25AA,
Indian Tariff Act (32 of 1934), First Schedule, entry 63(36) and Finance
Act (20 of 1962)-Steel wires made from imported steel rods-Whether
excise duty is Ieviable.
Central Excise and Salt Rules, 1944. rr. 9(2) and 10---Wrong rule
mentioned-No prejudice to assessee-Jj could be justified under the
correct rule.
The appellant was a manufacturer of iron and steel products. It
was importing steel rods from which steel wires were manufactured.
On
April 24, 1962 Finance Act (No. 2) 1962 imposed excise duty on iron
and steel products by introducing item 26AA in the Central Excise and
Salt Act, 1944. Under that item, on wires, 5% ad valorem plus
the
excise duty for the time being lcviable on pig iron and steel ingots as
the case may be was payable.
Pig iron and steel ingots were already
subject to excise duty under items 25
and
26
respectively.
On the
same day, the first Schedule of the Tariff Act 1934 was amended and
two Notifications Nos. 70 and 77 were issued in exercise of the powers
conferred by r. 8 (I) of the rules framed under the E~cise Act.
In the
Tariff Act item 63 (36) which deals with imported iron and steel products was added to the First Schedule by Finance Act (No. 2), 1962.
The items included therein are the very items set out in item 26AA of
the Excise Act.
The standard rule of duty is mentioned as 'the excise
duty for the tin1e being leviable on like articles if produced or manufactured in India. . . and the duty so leviable shall be in addition to the
duty which would have been levied if this entry had not been inserted.'
Under Notification 70,
the Central Govc.rnment exempted iron
and
steel products fall.ing under item 26AA if made from pig iron or steel ingots on which the appropriate amount of excise duty has already been paid,
from so much of the excise duty leviable thereon as is equivalent to the
duty leviable under item 25 or 26 as the case may be. Under Notification
77, the Central Government exempted other iron and steel
products
falling under sub-items (2). (3), (4) and (5) of item 26AA if made
from articles which have already paid the appropriate, excise duty under
sub-item ( 1) of item 26AA. from so much of the excise
duty
as
is
equivalent to the duty payable under sub-item (I). This
notification
was later superseded by another
Notification No. 89.
by which the
Government exempted with effect from April, 24, 1962, iron and steel
products falling under item 26AA if made from another article falling
under the said ite.m and havin.g already paid the appropriate amount of
duty, from so much of the
excise 'duty as is equivalent
to the duty
payable on the said article.
On and after April 24, 1962, the appellant cleared from its warehouse wires produced from the imported steel·
rods.
The required permission from the excise authorities was obtained
and the duty assessed was paid.
At that time the excise authorities proceeded on the basis that only ad valorem duty had to be levied and not
'excise duty for the time leviable on pig iron or steel ingots.'
On March
21, 1963, the assessing authority issued a written demand under r. 9(2)
demanding steel ingot duty which, according to the authority the appellant
had evaded to pay. The appellant paid the duty demanded under protest
482
SUPREME COURT REPORTS
[1969) 2 S.C.R
and appealed to higher authoritie·s.
The Government, in revision. treated
the demand as one under r. 10, because, there was no qnestion of any
evasion by the appellant, and confined the demand to clearances effected
after December 21, 1962.
In appeal to this Court against the order of the Central Government,
the appellant contended that : (I) The clause 'excise duty for the time
being leviable under the Act on pig iron or steel
ingots'
is
attracted
only when any pig iron or steel ingot dutiable under the Act is Used
in the manufacture of any article dutiable under item 26AA (I), and,
as the steel bars used in
the manufacture of wire were imported and
were not made out of steel ingots dutiable under the Act, that part of
the levy was not att'racted to the wires; and (2) The demand by the
Central Government was barred by limitation under r. 10.
HELD: (!) (Per Sikri and Bachawat, JJ.) The excise duty
was
le.vied correctly as determined by the Central Government.
Item 26AA prescribes a rate of duty as the heading of its column 3
indicates.
The rate consists of two parts, one part is the ad valoreni
duty and the other excise duty. The context indie~tes that the words 'as
the case may be' denote the excise duty leviable on pig iron und~r ite1n
25 is to be charged if the product is an iron product; if it is a steel product then the excise dulty leviable on steel ingots under item 26 ts to
be levied.
The weight to be taken into consfderation for
determining
the excise duty would be the weight of the products made out of iron
or steel ingots and not that of the pig iron or steel ingot out of which
they were made.
That is, the duty will be the dut;! leviable on the
hypothetical piece of pig iron or stee,J ingot as the case may be of the
same weight as the particular products to be assessed.
The duty is not
concerned with the actual price of pig iron or steel ingot out of which
other articles are made. and it is not concerned \Vith \vhether any excise
duty or countervailing duty was paid on the pig iron or steel ingot used.
Therefore it is irrelevant whether the article out of which the assessed
article was manufactured was imported• or not.
[486
A-B; F-H;
487 B-EJ
The effect of item 63(36) in the Tariff Act. is to levy a countervailing duty as an additional custom duty equivalent to the
prevalent
excise duty on Like articles produced and manufactured.
The manufacturer in India, who used steel rods made in India and n1ade wires from
them was given a certain relief under Notification 77, but the manufacturer who used steel rods made abroad was not given this exemption.
Later by Notification 89, and suitable an1endments. he was also given a
similar exemotion.
But the item in the Tariff Act does not throw any
light on item 26AA(I) of the Excise Act. [487 H; 488 A-BJ
Assuming that it is permissible to look at the notifications issued by
the. Central Government for interpreting item 26AA, they proceed on
the interpretation of the item that it refers to a rate.
The Notifications
do not exempt an article from the Jevy of duty; they give relief which
mav in a particular case be the excise duty or the countervailin.g: duty
leviea on the. article out of which the assessed article has been manufactured. The rule that a fiscal enactment should be strictly construed does
not mean that close reasoning should not be employed to arrive at the
true meaning of a badly drafted entry in an Excise Act. [487 A-CJ
Per Hegde, J. (dissenting) : The expression 'le~ia~lc of pig iroi:i and
'Steel ingots as the case may be' has 'reference to pig iron or steel ingots
dutiable under the Excise Act.
Therefore, the wires which ·are the subject matter .of the impugned levy in the present case,
are
not liable
to pay the duty i": dispute as they w~re made out of iinported steel rods
'1nd hence not duhable under the Excise Act. [495 A-B; 505 Bl
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J. K. STEEL v. UNION
483
If the item 26AA refers to a rate Parliament would have conveyed
such intention witlwut any ambiguity as it has done in item 5. The words
used are 'the excise duty'. If the clause refers to a rate the article
'the' has no place in the context. The expression 'the exc;ise duty for the time
being leviable• by necessary implication refers to an article dutiable under
the Act. That must necessarily be the article which is one of the components of the article on which duty is sought to be levied, that is, in
the instant
case, the steel ingot used in the production of wires.
More~ ·
over pig iron is the intermediate form through which iron must pass
in
the manufacture of steel. Therefore, e.very steel product is also an iron
product. If the clause in item 26AA refers to a rate and not to the duty
leviable on the mate.rial used in the manufacture of the dutiable article,
then the question would be whether the rate is that at which duty is
leviable on steel ingot or that leviable on pig iron. If it merely depends
on the practice prevailing in the tracle then the power of the assessing
authorities to determine the nature of an article would be an arbitrary
power, and the legislature is not likely to have conferred such an arbitrary power on the authorities. If on the other hand, the item refers to
the material from which the article on which duty is sought to
be
levied Js made-the proximate, raw material and not the material from
which that
raw material is made, then there is definiteness for
the
purpose of finding out the amount. [495 A-C, E-F; 496 E-G; 497
A-BJ
Observations in C. A. Abraham v, /. T. 0. Kottayam [1961] 2 S.C.R.
765, 771; C.I.T. v. Karamchand Premchand,
Ahmedabad,
[1960]
3
S.C.R. 727, 742; Inland Revenue Commissioners v. Duke
of
West·
m1n;.1er [1936] A.C. 1, 24 and Partington v.
The
Attorney-General,
{1869) 4 H.L 100, 122, applied
Entry 63(36) in the Tariff Act and item 26AA in the Excise Act
were enacted simultaneously, came into fo'rci;! on the same day from one
code and are pari materia.
They were introduced in
pursuance
of a
common purpose, namely, that the articles listed in item 26AA, whether
produced out of indigenous pig iron or steel ingot or made of imported
pig iron or steel ingot must bear the same ·amount of duty.
The duty
levied under item 63(36) being a countervailing duty it cannot be considered as an additional duty over and above the duty imposed under item
26AA of the Excise Act. [497 C-E, F-G]
For finding out the scope of a particular levy, notifications issued by
the executive Government providinz for exemption from levy can be
looked
into as they
disclose the overall
scheme. The
notifications
Nos. 70, 77 and 89 were issued with a view to avoid double taxation, and
the exemption granted provides a clue to the scope of item 26AA. The
effect of Finance Act (2), 1962, and the various Notifications is that
excise duty is leviable at the tate mentioned in item 26~AA on pig iron
or steel ingot used in the production of the article on which duty under
item 26AA is sought to be levied but, to the extent any excise duty or
countervailing custom duty has been paid on any of the material used
in the manufacture of the article, the same is exempt.
Therefore, 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 pig iron or steel ingots used in the production of the
article
dutiable undoer that item. [503 C-E; 504 G-H]
Kai/ash Nath v. State of U.P. A.1.R. 1957 S.C. 790, followed .
(2) (By Full Court) : If the exercise. of a power can be traced to a
legitimate source, the fact that it was purported to have been exercised
under a different power does not vitiate the exercise of the power.
In
484
SUPREME COURT REPORTS
[1969] 2 S.C.R.
the present case, a common form is prescribed for issuing notices under
rr. 9(2) and 10. and the incorrect statements in the written demand did
not prejudice the appellant as shown from its answer to the demand.
Therefore, though the demand was made under r, 9(2), the Revenue
could change its position and justify the demand under r. 10.
[484 E;
505 D-H; 506 A-Bl
B. Balakotaiah v. Union of India [19581 S.C.R. 1052 and Afzc/ Ulah y;
State of U.P. [!9641 4 S.C.R. 991; referred to
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1261 of
1968.
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Appeal by spedal leave from the order, dated November 2;
1967 of the Government of India, Ministry of Finance, Department of Revenue & Insurance, New Delhi in
Central Excise
C
Revision Application No. 1323 of 1967.
A. K. Sen, S. V. Gupte, Rameshwar Nath, Mahinder Narain
and Ravinder Nath, for the appellant.
·
V. A. Seyid Muhammad and S. P. Nayar, for the respondents.
[SrKRI, J. delivered the majority Judgment on behalf of himself
and BACHAWAT, J. HEGDE, J. gave a dissenting Opinion].
SOOi, J. I have had the advantage of reading the draft judgment prepared by Hegde, J., but, while I agree with him that there
is no force in the plea of limitation advanced on behalf of the
assessee, in my opinion the appeal should fail on the ground that
the excise duty was levied correctly as determined by the Central
Government in its order, dated November 2, 1967.
The facts are fully set out in the judgment of Hegde, J. It is
only ioocessary to mention a few facts in order to make this judgment readable.
The assessee manufactures iron and steel products. It manufactured wires out of steel rods, which had been
imported by it prior to April 24, 1962. Item 26AA was added
to the First Schedule of the Central Excises and Salt Act, 1944
(I of 1944 )-hereinafter referred to as
the Excise Act-by
Finance Act (No. 2), 1962 (XX of 1962) with effect from
April 24, 1962. This reads as under :
"26-AA. IRON OR STEEL PRODUCTS, THE
FOLLOWING, NAMELY :- .
(j) B.1rs, rods, coils, wires, joists,
girders,
angles, channels, tees,
flats, beams, zeds,
trough, piling
and all other rolled, fored or
extruded shapes and sections, not
otherwise specified.
Five per cent. ad va/orem plus
the excise duty for the time being
leviable en pig iron or steel i&.~
gots, as tl:e caEe may te.
(ii) Plates and sheets, other than Seven and a half
per cent. ad
pla1es and sheets intended for
va/orem plus the exci~e Cuty fer
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J; K. STEEL V. UNION (Sikri, J.)
485
tinnirig, and hoops, and stripe, all
sorts, iQ.cluding galvan.ised or corrugated plates and sheets.
(iii) U.1co1ted plates and sheets intended for tinning.
(iv) p,pos a1d tu'>" (inoluding blanks
therefor) all sJrts, w:1ether rolled,
f .Jfg3d, spJn, c1st, draw,1, anne1led,
WJlded or exJruded.
(v) All other steel castings, not otherwise specified. 'j
the time being lcviable on pig iron
or steel ingots, as the case may be.
Seven and a half per cent. ad
valorem plus the excise duty for
the time being leviable on pig
iron or steel ingots, as the case
maybe.
Five per cent. ad valorem plus
the excise duty for the time
b~ing leviable on pig iron or steel
ingots, as the case may be.
Five per cent. ad velorem plus the
excise duty for the time being
leviable on steel ingots."
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The short point that arises is this : What is the duty leviable
on the wires manufactured by the assessee out of steel rods which
had already been imported ? For the time being I will ignore
notifications issued under r. 8 ( 1) of the rules made under the
Excise Act, and the amendments made by the Finance Act (No. 2)
of 1962, and Indian Tariff (Amendment Act) 1963 (III of 1963)
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to the Indian Tariff Act, 1934.
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"Wires" are mentioned in item No. 26AA(i). Therefore we
have to scrutinize the third column of item 26AA(i) for the rate
of duty. Three points need clarification :
(a) What is the meaning of or inference derivable from
the word 'plus' ?
(b) What is the meaning of the formula "the excise duty
for the time being leviable on pig iron or steel
ingots"?
( c) What is the import of the words "as the case may
be"?
The word 'plus' in the context indicates that the rate of duty
consists of 2 parts : one part is ad valorem duty and the other is
the excise duty calculated according to the formula given. In
other words, both duties have to be levied. I will presently discuss what the formula means but this is clear that the third column
contemplates one duty, consisting of two parts, being levied.
Before I discuss the meaning of the formula it will clarify
matters if the import of the words "as the case may be" is first
ascertained. These words indicate that a choice has to be made
between two types of excise duties-excise duty leviable on pig
iron or excise duty leviable on steel ingots· Sub-items (ii), (iii)
and (iv) of item 26AA use the same set of words. In sub-item
(v) excise duty leviable on steel ingots is only mentioned. This
sub-item consists of steel casting.
This indicates that the duty
is being calculated thus because steel castings have been made
486
SUPREME COURT REPORTS
[1969] 2 S.C.R.
from steel ingots. Item 26AA deals with iron and sieel products.
It seems to me that the context indicates that the words "as the
case may be" denote that the excise duty leviable on pig iron is
to be charged if the product is an iron product; if it is a steel
product then the excise duty leviable on steel ingots is to be levied.
In other words, this decides the choice whether item 25 (pig iron)
or item 26 (steel ingots) is to be looked at. Although I was not
enlightened on the point by counsel during the course of the hearing, 1 have no doubt that the Excise Department and the trade
know how to distinguish a steel product from an iron product.
If there is a dispute on the point it will have to be resolved in the
future.
Now to come to the formula "the excise duty for the time
being leviable on pig iron or steel ingots." Let me give a simple
problem in order to illustrate the points which arise under this
head of inquiry. "A'? manufactures a steel ingot 'X' in May 1961
in J amshedpur. He pays excise duty on it in May 1961 as he
removes it out of the factory.
Its value is determined at the
wholesale cash price at the time of removal in accordance with
s. 4 of the Excise Act. Steel ingot 'X' is sold to a manufacturer
"B" in Faridabad, who manufactures steel rods ('Y' & 'Z') out of
it in May 1962 and removes them in May 1962. What is the
excise duty payable on steel rods ('Y' & 'Z') ? Ad va/orem duty
is easy to calculate. What about the additional duty ? We know
that the steel ingot 'X' has paid excise duty· But this does not
make any difference.
The additional duty has still to be calculated under the formula.
It is also plain that no excise duty
is strictly leviable under ss. 3 and 4 of the Excise Act on steel
ingot 'X' as such. Not only that it does not exist any longer but
duty on it has already been paid and further no duty would be
leviable under s. 4 for it was removed from the factory long time
ago in May 1961. Therefore, it is clear that the formula cannot
be concerned with the particular ingot 'X' at all.
It seems to
me that what it is concerned with is the duty leviable on a hypothetical steel ingot if it had been manufactured or removed at the
same time as the steel rods ('Y' & 'Z') were manufactured or
removed.
In the example given above, under the formula the
excise duty leviable under item 26 in May 1962 would have to be
charged, i.e., 39.35 per metric tonne. The weight to be taken into
consideration would be the weight of steel rods 'Y' & 'Z', and not
of the steel ingot 'X' out of which . they were made.
It seems to me that this is the true interpretation of column 3
of items 26AA (i). It simply prescribes a rate of duty as the
heading of column indicates.
It is not concerned with actual
in~ots out of which other articles are made. It is not concerned
with whether that steel ingot has paid excise duty or countervailA
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J. K. STEEL V. UNION (Sikri, J.)
487
ing duty or not. It is a simple formula perhaps
inartistically
formulatedIt is said that the item should be strictly construed,
it being a taxing enactment.
But no rule or principle of construction requires that close reasoning should not be employed .to
arrive at the true meaning of a bad1y drafted entry in an Exc!Se
Act.
I believe I am not stretching the language of the entry
against the subject, but it appears to me that in the context of
the scheme of the Excise Act this is the only reasonable construction to give to the entry.
If it is permissible to look at the notifications issued by the
Central Government which have given reliefs of various kinds,
they seem to me to proceed on the interpretation which I have
given above. It will be noted that they do not exempt the article·
from the levy of dnty; they give relief which may in a particular
case be the excise duty or countervailing duty levied on the
article out of which the assessed articl~ has been manufactured.
To revert to the example given by me
above,
notification
No. 70/62, dated April 24, 1962, would exempt manufacturer
'B' "from so much of the duty of exdse leviable on steel rods as
is equivalent to the duty leviable under item 26."
Therefore,
reading entry 26AA(i) with this notification, manufacturer 'B'
does not pay the whole of the duty leviable on steel rods ('Y' &
'Z') under col. 3 (item 26AA) becam.e the steel ingot which he
has used had already paid the appropriate amount of duty.
I am not able to appreciate how the insertion of item No. 63
(36) in the First Schedule of the Tariff Act or the subsequent
amendment of the Indian Tariff Act, J 914, by Indian
Tariff
(Amendment Act) 1963 throw any light on the interpretation of
item 26-AA(i). Item No. 63(36) is in respect of the same iron
F
and steel products as are mentioned in item 26AA.
Column 4
(standard rate of duty) reads :
G
H
"The excise duty for the time being leviable on like
articles if produced or manufactured in India, and where
such duty is leviable at different rates the highe5t duty;
and the duty so leviable shall be in addition to the duty
which would have been levied if this entry had not
been inserted."
The effect of this entry is to levy an additional customs duty
equivalent to the prevalent excise duty on like articles produced
and manufactured. In other words, if the customs duty !eviable
under other entries in the Second Schedule on steel rods is 'D', an
additional duty 'E' has to be levied equal to the excise duty leviable on steel rods, i.e., under item 26AA. This has been called
countervailing duty.
488
SUPREME COURT REPORTS
(1969] 2 S.C.R.
The manufacturer in India, who used steel rods made in India,
.and made wires from them was given a ce11ain relief by notification No. 77 of 1962, but the manufacturer in India who used
steel rods made abroad to make wires was not first given this
exemption. Later by amendments he was given a similar exemption. · The Central Excise Manual (Seventh Edition) at p. 123
states the position thus :
''26AA(2) Iron or Steel products falling under item
No. 26AA, if made from another article falling under
the said item or item No. 63 (36) of the First Schedule
to the Indian Tariff Act, 1934 (32 of
1934)
and
having already paid the appropriate amount of excise
or countervailing customs duty, as the case may be, are
exempt with effect from 24th April, 1962, from so much
of the duty of excise as is equivalent to the excise or
countervruling customs duty· payable on the said article
-vide Government of India, Ministry of Finance (De~
partment of Revenue) Notification No. 89/62-Central
Excise, dated 10th May, 1962 (issued in supersession
of Notification No. 77 /62-Central Excises, dated 24th
April, 1962, as further amended by Notifications No.
93/62-Central
Excises, dated 26th May, 1962, and
No. 225/62-Central Excises, dated 29th December,
1962."
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The only light thrown. by these amendments and the notifications
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referred to above is that it is not the idea to levy excise duty at
various stages of manufacture of certrun articles
and
this
is
achieved by issuing notifications giving appropriate reliefs. But
if there is no relief given by notifications the full duty at the rate
mentioned in col. 3 of entry (i) of item 26-AA has to be paid.
In the result the appeal fails and is dismissed with costs.
F
Bachawat, J. I agree with Sikri, J.
Hegde, J.
This is an appeal by special leave. It is directed
agrunst the order of the Government of India in No. 1323 of
1967, dated November 2, 1967 rejecting the appellant's application for refund of the excise duty prud by him under protest.
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Jn order to appreciate the controversy between the parties it
is necessary to set out the material facts.
The appellant is a
Company having a factory at Rishara in the State of West Bengal.
It manufactures, among other items, Iron and Steel Pro_ducts su~h
as Jute Baling Hoops, Wire Ropes, Cold Rolled Stnps, Cham
Pulley Blocks, Electric Hoists etc. Between December 1961 and
H 1
January 1962 the appellant received various consignments of
imported High Carbon Steel Wire Rods.
Its opening stock of
imported High Carbon Steel Wire Rods on April 24, 1962 was
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J. K. STEEL v. UNION (Hegde., J.)
489
2,788 .401 metric tons. As before, the appellant manufactured
wires from those steel rods even after April 24, 1962.
B
Finance (No. 2) Act 1962 (Act No. 20 of 1962) imposed
for the first time excise duty on the Iron and Steel Products; and
by sub-cl. (S) of sub-s. (2) of s. 16 of the said Act an amendment was made to the First Schedule of the Central Excise and
Salt Act, 1944 (hereinafter referred to as the Act) incorporating
after item 26A item 26AA. The relevant portion of that entry
reads thus:
c
Iron or Steel Products.
The following namely
(1) Bars, rods, coils, wires, joists girders, angles, channels, tees, fiats
beams, zeds,
trough, piling and
all other rolled, forged or extruded
• shapes and section not otherwise
specified.
5 % ad valorem plus the excise
duty for the time being Jeviable
on Pig Iron and Steel Jngcts as
the case may be.
D
Pig Iron and Steel Ingots were already subject to excise duty under
Items Nos. 25 and 26 in the First Schedule of the Act. The rate
of duty in the case of the former at the material time was Rs. 10
per metric tonne and that of the latter Rs. 39/35 per metric tonne.
The newly imposed duty under Item 26AA came into force on
April 24, 1962. The Collector of Central Excise, West Bengal,
Calcutta by a Trade Notice, Central Excise No. 32-Iron and
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Steel Products 2/62 dated Calcutta the 16th May 1962 notified
the procedure to be followed.
By Notification No. 70/62, dated April 24, 1962 issued in
exercise of the powers conferred by rule 8 ( 1) of the rules framed
under the Act (to be hereinafter referred to as the rules), the
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Central Government exempted Iron and Steel Products falling
under Item 26AA, if made from Pig Iron or Steel Ingots on which
the appropriate amount of excise duty has already been paid, from
so much of the duty of the excise Ieviable thereon as is equivalent
to the duty leviable under Item 25 or 26 as the case may be.
On the same day as per Notification No. 77 of 1962,
the
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Central Government exempted Iron and Steel Products falling
under sub-items (2), (3), (4) and (5) of Item 26AA, if made
from articles which have already paid the appropriate duty of
excise under sub item ( 1) of the said Item, from so much of the
duty of excise as is equivalent to the duty payable under the subitem (1). Finance (Act No. 2) of 1962 bys. 15 amended the
H
First Schedule of the Tariff Act by adding Item No. 63 (36) which
deals with imported Iron and Steel Products. The second column
of that entry mentions the various Iron and Steel Products included
therein. The items included therein a,re the very items set out in
3 Sip Cl/69-14
490
SUPREME COURT REPORTS
[1969] 2 S.C.R.
Item 26AA of the First Schedule to the Act. The third column
of that Item which specifies the levy reads thus :
"The excise duty for the time being leviable on like
articles if produced or manufactured in India,
and
where such duty is leviable at different rates the highest
duty so leviable shall be in addition to the duty which
would have been levied if this entry had not been
inserted."
On May 10, 1962, the Government issued a fresh Notification
(No. 89 of 1962) under rule 8(1) of the rules in supersession of
the Notification No. 77 /62 dated April 24, 1962.
By that Notification, the Government exempted with effect from April 24, 1962,
Iron and Steel Products falling under Item 26AA if made from
another article falling under the said Item and having already paid
the appropriate amount of duty from so much of the duty of excise
as is equivalent to the duty payable on the said article.
On the same day namely May 10, 1962, the Government
issued yet another Notification (Notification No. 90 of 1962)
under rule 8 ( 1) under which it exempted Iron and Steel Products
falling under Item 26AA specified in column 2 of the table annexed
to the Notification if made from Pig Iron or Steel Ingots on which
appropriate amount of excise duty has already been paid, from
so much of the duty of excise leviable on such products as in
excess of the duty corresponding entry in column 3 of the said
table.
(Wire) the product with which we are concerned in this
case is also included in the table.
That Notification contains a
proviso which says :
"Provided that if the products are made from pig
iron and steel ingots on which appropriate amount of
duty has not been paid the excise duty for the time being
leviable on pig iron or steel ingots as the case may be
shall be payable in addition to the duties specified in the
appropriate entry in column 3 of the table."
On December 29, 1·962, the Government issued yet another
Notification under rule 8 (1) amending the Notification No. 89
of 1962 issued on May 10, 1962. In the nlace of words "if made
from another article falling nnder the said Item and having already
paid the anpropriate amount of duty from so much of the duty of
excise as is equivalent to the duty payable on the said article.",
the following was substituted :
·
"if made from another article falling under the said
Item or Item No. 63(36) of the First Schedule to the
Indian Tariff Act 1934 (32 of 1934)
and having
. already paid the appropriate amount of excise or counA
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J. K. STEEL v. UNION (Hegde, J.)
tervailing custom duty as the case may be from so much
of the duty of excise as is equivalent to the excise or
countervailing custom duty payable on the said article."
491
By Indian Tariff (Amendment Act 1963) (Act. No. 3/63)
effective from the 25th January 1963, the Indian Tanff Act 1934
was amended and after s. 2, the following section was inserted
namely:
2(a)(l).-Any article which is iniported into India
shall be liable to custom duty equal to the excise duty
for the time being leviable on a like article if produced
or manufactured in India.
Explanation : In this sub-sec. the expression "the
excise duty for the time being leviable on a like article
if produced or manufactured in India" means the excise
duty for the time being in force which would be leviable
on a like article if produced or manufactured in India
or if a like article is not so produced or manufactured,
which would be leviable on the class or description of
articles to which the imported article belongs and where
such duty is leviable at different rates, the highest duty.
(2) The customs duty referred to in sub-section (i)
shall be in addition to any duty imposed under this Act
or under any other law for the time being in force."
On or after April 24, 1962, the appellants cleared from their
warehouse wires produced from the aforementioned imported Steel
Rods after obtaining ·the required permission from
tj:ie excise
authorities and after paying the duty assessed.
On those wires,
duty was assessed without taking into consideration "the excise
duty for the time being leviable on Pig Iron and Steel Ingots as
the case may be." At that time the Central Excise authorities
proceeded on the basis that on the stock of wire in question only
ad valorem duty had to be levied and not "excise duty for the
time being leviable on Pig Iron or Steel Ingots as the case may
be." On March 21, 1963, the Inspector of Central Excise
att~ched to M/s. J. K. Steel Ltd., Rishara issued the following
nonce:
"COLLECTORA TE OF CENTRAL EXCISE
WEST BENGAL
No. 6
Range RIS. I.
Date: 21-3-1963.
Circle-CGR.
Notice of Demand for duty under rule 9(2) of C.E.
Rules, 1944.
492
SUPEREME COURT. REPORTS
To
M/s. J. K. Steel Ltd., Rishara,
Hooghly.
[1969] 2S.C.R.
Take notice that on behalf of the Central Government, I hereby demand payment by you of the sum of
Rs. 4,18,801/30 N.P. (Rupees four
lacs
eighteen
thousand eight hundred one and paise thirty only)
within ten days from the date hereof.
Particulars of Demands
Quantity
Steel Ingot Duty on 6932 ·964 M.T.
Hoops
Steel Ingot Duty on
921 ·937 M.T.
Strips.
Steel Ingot Duty on 2788 ·00
Wire.
Rate of duty
Rs. 39 ·36 NP
per M.T.
Rs. 39 ·36 NP
per M.T.
Rs. 39 ·36 NP
per M.T.
TOT4.L
Amount of
duty involved
Rs.
2,72.812/13
Rs.
36,278/22
Rs.
1,09,710/95
Rs.
4,18,801 /30
No. Vl/SA/l&s/JKS/CE/63/183, dated 21-3-1963.
Sd/-
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B
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Inspector I/C
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Central Excise
M/s. J. K. Steel Ltd., Rishara."
\
The appellants objected to the demand in question as per
their letter of March 24, 1963. They contended that they had
not contravened rule 9 (2) of the rules nor was there any short
levy. As per his letter of August 26, 1963, the Assistant Collector of Central Excise Calcutta 4th Division confined the demand
to that made under serial No. 3 of the notice. The appellants paid
the same under protest and thereafter took up the matter in appeal
to the Collector of Central Excise who dismissed their appeal
as per his order of March 19, 1964, with these observations :
"The crucial point of this appeal is whether countervailing import duty was paid by the appellants on the
imported steel rods from which steel wires were manufactured.
The appellants could not produce any documents in support of their argument that either import
duty or countervailing duty equivalent to steel ingot
rate was paid by them on the iron rods from which steel
wires were drawn. Such duty is leviable on steel rods
under tariff item No. 26AA.
As no such duty on
steel rods was paid by the appellants, countervailing
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duty equivalent to steel ingot duty has, therefore, to be
paid."
~93
As against the order of the Collector, the appellants went up in
revision to the Central Government.
The Central Government
allowed the revision petition to some extent.
This is what the
Central Government ordered :
"The Government of India have carefully considered
all the points raised by the petitioners but see no reason
to interfere with the Collectors stated that the Steel
Wires manufactured out of steel wire rods imported
prior to 24-4-1962 on which no 'countervailing duty was
paid, and cleared during the period, from 24-4-1962 to
10-8-1963 were subject to full duty as then Jeviable
under Item 26AA ( 1) of Central Excise Tariff.
However the demand for differential duty initially
made on 2-3-1963 and subsequently amended vide the
Asstt. Collector's order,
dated 26-8-1963 shall be
restricted to the clearance effected during the 3 months
period prior to the initial service of demand on 21-31963 that is to say, up to 21-12-1962 only as per the
provisions of Rule 10 of Central Excise Rules, 1944
which was applicable to this case. The demand in respect
of clearances effected prior to 21-12-1962 is hereby
set aside and consequential refund shall be granted to
the petitioners.
Subject to the above modifications,
the revision
application is otherwise rejected."
Aggrieved by that order, the appellants have brought this appeal.
The questions that arise for decision in this appeal are :
( 1) What is the true scope of entry No. 26AA of
the First Schedule to the Act ?
(2) In considering the scope of the said entry, ~an
the Notifications issued by the Government on or
after April 24, 1962 be taken into consideration?
( 3) Is the demand barred by limitation under rule 1 O
of the rules ?
One other question had been raised in the grounds of appeal
namely that the order of the Central Government is vitiated as it
~ad contravened the principles of natural justice. That contention was no! pressed at the hearing. In the context of this case
that contention loses much of its significance. If we accept the
appellant's contention as regards the scope of entry 26AA then
the fact that the Government's order is illegal is immaterial. If
494
SUPREME COURT REPORTS
(1969] 2 S.C.R.
on the other hand we accept the interpretation placed by the
Revenue on that entry remand of the case to Central Government
serves no purpose.
I shall now proceed to consider the questions earlier formulated for decision.
According to the assessee the true import of the clause in
column 3 of entry 26AA is that goods mentioned in column 2
of that entry are dutiable at 5 per cent ad valorem plus the excise
duty for the time being leviable under the Act on pig iron or steel
ingot used in the production of those goods. Shri A. K. Sen, the
learned Counsel for the assessee urged that the expression leviable
in that clause means leviable under the Act; in other words dutiable under the Act; the words 'Pig Iron' and 'Steel Ingots' referred
to' therein is the Pig Iron or the Steel Ingot used in manufacture
of the articles on which duty is sought to be levied; otherwise the
word leviable becomes inappropriate. In other words according
to him the second limb of the levy under that clause is attracted
only when any pig iron or steel ingot dutiable under the Act is
used in the manufacture of any article dutiable under sub-cl. (I)
of entry 26AA. As the steel bars used iu manufacturing the
'wires' with which we are concerned in this case were not made
out of steel ingot dutiable under the Act, as they were imported
bars, that part of the levy is not attracted on those wires.
The contention for the Revenue is that the expression "the
excise duty for the time being leviable on Pig Iron or Steel Ingot
as the case may be" sets out only a measure; the rate at which
the duty is leviable; it has no reference to any particular material;
it is merely a yardstick. The argument of Dr. Syed Muhammad,
learned Counsel for the Revenue proceeded thus :
A
B
c
D
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The entry in question deals with two classes of products i.e,,
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iron products and steel products. The assessing authority has first
to decide whether a particular article is an iron product or steel
product. If he comes to the conclusion that. it is a steel product
then he should assess the duty payable firstly by determining the
ad valorem duty payable on it, thereafter he must find out its
weight in metric tons and add to the ad valorem duty the amount
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payable as excise duty under entry 26 of the First Schedule on
steel ingot of that weight.
If the intention of the Parliament was as suggested by the
learned Counsel for the Revenue then column 3 should have read
thus:
"5 per cent ad valorem plus excise duty at the rate
for the time being leviable on pig iron or steel ingots
as the case may be."
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J. K. STEEL v. UNION (Hegde, l.)
495
It is difficult to interpret the words "for the time being !eviable"
as indicating a rate.
The expression "leviable on pig iron and
steel ingots as the case may be" in my opinion has reference to
pig iron or steel ingots dutiable under the Act. In fiscal legislation the terms "rate" is a familiar term.
In fact entry 5 of the
First Schedule dealing \\~th salt speaks of "rate fixed annually
by a Central Act".
Therefore it would have been the easiest
thing for the Parliament to convey its intention without ambiguity.
At this stage it may also be noted that the clause in question refers
to "the excise duty" and not excise duty in general.