M-S. JAI FIBRES LTD. v. COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III

Citation: [2007] 12 S.C.R. 82

Court: Supreme Court of India

Bench: S.B. SINHA, DALVEER BHANDARI

Case summary

M-S. JAI FIBRES LTD. v. COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III.pdf

Judgment text

·- ·~ " MIS. JAI FIBRES LTD. v. COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III NOVEMBER 15, 2007 [S. B. SINHA AND DALVEER BHANDARI, JJ. ) Central Excises and Salt Act, 1944-ss. 37B and I IA-Different High Courts hadbeen taking different views with regardto appropriate classification ofHDPE bags under the TariffAct-Circular issued by CBEC u/s. 37Bfor ensuring uniformity-Use ofword "henceforth" in the circular-Held: Circular was expressly directedto haveprospective application-Differential duty couldnot be recovered on basis ofsaid circular for period prior to date ofits publication-Central Excise Tar! IJAct, 1985-Chapter Heading Nos. 39 and 63. ' • Different High Courts had been taking different views as to whether excise duty in respect ofHDPE bags was payable under Ch? pter Heading 63 or Chapter Heading 39 ofthe Central Excise TariffAct, 1985. The Madhya Pradesh High Court in the Raj Pack Well Ltd.

case* held that HDPE bags should be classified under Chapter Heading 39 and not Chapter Heading 63. While appeal against the aforesaid decision ofthe said High Court was pending before this Court, the Central Board ofExcise and Customs in order to bring about an uniformity in classification, issued a circular dated 24-09-1992 in exercise of powers conferred under Section 37-B of the Central Excises and Salt Act, 1944, in terms ofwhich HDPE strips and tapes of width not exceeding 5 mm were to be "henceforth" classified under sub-heading 3920. 32 and sacks made therefrom under sub-heading 3923. 90 ofthe Tariff. The circular was published on 15-10-1992. Appellant-assessee classified HDPE bags manufactured by it \ ~ under Chapter63 ofthe TariffAct forthe period 1-4-1992to15-10- 1992. Relying on the said circular, Respondents issued a show cause f M/S. JAIFIBRESLTD. v.

COMMISSIONER OF CENTRAL 83 EXCISE, MUMBAI-III '; notice upon the Appellants to pay differential duty under Chapter 39 for the period 1-4-1992 to 15-10-1992. The cause having been shown, the Assistant Commissioner dropped the proceedings. Appeal filed by Revenue before the Commissioner was dismissed. Revenue filed appeal before the Tribunal. Tribunal relying upon a three-Judge Bench decision ofthis Court in /TWSignode case** held that in view of the amendment of Section llA of the Central Excise Act, the validity whereof had been upheld, the Revenue was within its jurisdiction to get the differential duty which had not been recovered. In appeal to this Court, Appellant submitted that the Tribunal failed to take into consideration a decision ofthis Court in HM Eags Manufacturer***, in its correct perspective, wherein it was b. eld that the word "henceforth" used by the Board must lead to the conclusion that only prospective effect thereto could be given and not retrospective effect.

Allowing the appeal, the Court ~ HELD:1. 1. Section llA ofthe Central Excise Act was amended having regard to the Constitution Bench decision of this Court in Cotspun Limited Amendment of Section llA was found in /TW Signode as a validating legislation, retrospective operation whereof, therefore, was held to be permissible. [Para 11) [87-H; 88-A) 1. 2. However, this Court is concerned with a different situation herein. Whereas there cannot be any doubt that the Revenue is entitled to rectify a mistake but implementation thereofwould depend , ' upon the statutory provisions. Section 37B ofthe Central Excise Act confers powers upon the Central Board of Excise and Customs to issue such orders, instructions and directions as the Central Excise Officers may deem fit, if it considers necessary or expedient to do so for the purpose ofuniformity ofclassification ofgoods in a case or with levies of duty of excise on such goods.

It was, therefore, necessary for the Tribunal to construe the said circular dated 24. 9. 1992 in its proper perspective. [Para 12) (89-C-D] 1. 3. The circular refers to the fact that there had been lack of uniform classification ofthe said goods as a result whereof disparity existed in the matter ofpricing ofcommodity by the manufacturer. It is on the aforementioned premise that the decision of the High Court of Madhya Pradesh was referred to and sought to be acted upon. But the Court was not unmindful ofthe fact that only by reason ofthe said judgment, the law cannot be said to have been settled as an appeal had been preferred thereagainstwhich had been pending decision. It was in the aforementioned fact situation that the Board thought it fit and expedient in the interest ofadministration oftaxing statute to bring out uniformity in the assessment practice. [Para 13) [89-E-F] 1. 4. By reason of the said circular, proper classification was made for the first time.

It was done with the purpose of ensuring uniformity therein. It was expressly directed to have prospective application. Although the decision of the Madhya Pradesh High Court was the basis for issuance ofthe said circular, it was to operate independent thereofas it was clearly noticed that the same had not attained finality. The said circular, so far as the Revenue is concerned, was, therefore, to operate irrespective of the decision ofthe Madhya Pradesh High Court. The Board was not unmindful of the consequences which may flow therefrom. It in exercise ofits statutory power, therefore, directed its application from a future date. HM Bags Manufacturer becomes relevant in view of the terminology used by the Board in issuing the aforementioned circular. Therein this Court clearly held that such a circular will have prospective effect, particularly when the word "henceforth" has been used by the Board. HM Bags . Manufacturer, therefore, is a binding precedent.

Ifthe Board itselfdid not intend to classify HDPE bags with retrospective effect no demand for duty prior to issuance of the said notice could be made. [Paras 14, 15and16) [89-G-H; 90-A-C] ** ITW Signode India Ltd. v. Collector. ofCentral Excise, (2003) 158 E. L. T. 403 SC, distinguished. ***HM. Bags Manufacturer v. Collector of Central Excise, (1997) 94 E. L. T. 3 SC, relied on. Collector ofCentral Excise, Baroda v. Cotspun Limited, (1999) 113 E. L. T. 353 SC, referred to. *Raj Pack Well Ltd. v. Union ofIndia, (1990) 50 ELT 201, referred to. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1950 of 2006. From the Impugned Order No. A/48-49/WZB/2005/C-Il/EB dated 09. 08. 2005 passed by the Customs Excise and Service Tax Appellate Tribunal, Mumbai in Appeal No. E/3137/1999-Mum. A. P. Madhav Rao, Monish Panda and M. P. Devanath for the Appellant. R. G. Padia, Neera Gupta and B. Krishna Prasad for the Respondents. The Judgment ofthe Court was delivered by S. B. SINHA, J. 1. Delay condoned.

2. Interpretation of a Circular dated 24. 09. 1992, which was published on 15. 10. 1992 in the Trade Circular by the Central Board of Excise and Customs, is in question in this appeal which arises out of a judgment and order dated 9. 8. 2005 passed by the Central Excise and Service Tax Appellate Tribunal in Appeal No. E/3137/99 (Mumbai) and E/C0/389/99 (Mumbai), whereby and whereunder an appeal preferred by the respondent herein from a judgment and order dated 30th June, ~ 1999 passed by the Commissioner ofCentral Excise (Appeals), Mumbai, was allowed. 3. The basic. fact ofthe matter is not in dispute. The appellant herein manufacture HDPE bags. They used to classify the said bags for the purpose ofpayment ofexcise duty under Chapter 63 ofthe Central Excise Tariff Act (hereinafter referred as 'the Act'). The period for which the excise duty was payable is 1. 4. 1992 to 15. 10. 1992. Excise duty was paid accordingly.

It is also not in dispute that different High Courts took different views as to whether the duty is payable under Chapter Heading 63. 54 ·u or Chapter heading 39 ofthe Act. 4. It is furthennore not in dispute that a Division Bench ofthe High Court of Madhya Pradesh in Raj Pack Well Ltd v. Union ofIndia, (1990) 50 ELT 201, took the view that the HDPE bags should be classified under Chapter heading 39 ofthe Central Excise TariffAct, 1985 and not under Chapter heading 63 thereof Indisputably, again the Central Board of Excise and Customs upon noticing that the appeal against the aforesaid decision of the Division Bench of the High Court is pending before this Court for final decision, issued a circular on 24. 9.

1992, the relevant portion whereof is as under: "Now, therefore, in exercise ofthe powers conferred under Section 37-B of the Central Excises and Salt Act, 1944(1of1944) (henceforth referred to as the Act) and for the purpose of ensuring uniformity in the classification ofthe saidgoods, the Central Board of Excise and Customs hereby orders that HDPE strips and tapes of a width not exceeding 5 mm shall be henceforth classified under sub-heading 3920. 32 and sacks made therefrom under sub-heading 3923. 90 ofthe Tariff. " (Emphasis supplied) 5. Relying on or on the basis ofthe said circular letter, a show cause notice was issued upon the appellants herein by the respondents to pay the differential duty under Chapter 39 for the period 1. 4. 1992 to 15. 10. 1992. 6. The cause having been shown, the Assistant Commissioner of Central Excise by an order dated 21. l0. 1997 dropped the proceedings.

Revenue being not satisfied therewith preferred an appeal thereagainst before the Commissioner of Central Excise under Section 3SE(4) ofthe Central Excise and Salt Act, 1944. By ajudgment and order dated 30th June, 1999 the said appeal was dismissed. Feeling aggrieved, Revenue preferred an appeal before the Tribunal which, as noticed hereinbefore, \ has been allowed by reason ofthe impugned judgment. 7. The Tribunal in its judgment relied upon a three-Judge Bench decision of this Court in ITW Signode India Ltd v. Collector ofCentral / -- M/S. JAIFIBRESLTD. v. COMMISSIONEROFCENTRAL 87 Excise, (2003) 158 E. L. T. 403 SC for arriving at its decision that in view ' ofthe amendment ofSection I IA ofthe Central Excise Act, the validity whereofhad been upheld, the revenue was within its jurisdiction to get the differential duty which has not been recovered. 8. Mr.

Madhav Rao, learned counsel appearing on behalf of the appellant would, in support of its appeal, submit that the Tribunal went wrong in passing the impugned judgment in so far as it failed to take into consideration a decision of this Court in HM Bags Manufacturer v. Collector of Central Excise, (1997) 94 E. L. T. 3 SC, in its correct perspective, wherein it has clearly been opined that the word "henceforth" used by the Board must lead to the conclusion that only prospective effect thereto could be given and not a retrospective effect. 9. Dr. Padia, learned senior counsel appearing on behalf of the revenue, on the other hand, placed strong reliance on the judgment of this Court in ITW Signode India Ltd. (supra). It was submitted by Dr.

Padia that although at one point oftime, classification ofexcisable items might have been approved but if such approval was based on a wrong premise, which was sought to be corrected, Section l lA which has been amended with retrospective effect from 17. 11. 1980, could be brought into service for the purpose ofrecovery ofthe differential amount ofduty. It was urged that for the said purpose, neither penalty is leviable nor the period for which the duty can be demanded exceeded six months and in view ofthe fact that the notice issued by the appellant herein was for period of six months, the decision ofthis Court ITW Signode (supra) is squarely applicable. 10. Drawing our attention to the decision ofthe Madhya Pradesh High Co1trt; relying on or on the basis whereof, the Circular letter dated 24. 10.

1992 has been issued, it was contended that the validity ofthe said circular letter having not been challenged by reason thereof, the mistake committed by the revenue in classifying HDPE bags under Chapter heading 63 came to be known to them in terms ofthe said judgment. 11. It is beyond any pale of doubt that Section llA of the Central Excise Act was amended having regard to the Constitution Bench decision of this Court in Collector of Central Excise, Baroda v. Cotspun Limited, (1999) 113 E. L. T. 353 SC. Amendment of Section 1lA was f found in ITWSignode (supra) as a validating legislation, retrospective operation whereof, therefore, was held to be permissible. In arriving at the said decision, this Court noticed a large number ofbinding precedents operating in the field to hold that as the basis for the decision rendered in Cotspun Limited (supra) has been taken away by reason thereof, the Parliament was entitled to give the same retrospective effect and retroactive operation.

While applying the said law, this Court in 1TWSignode (supra) opined: "Section 11 A deals with a case when inter alia excise duty has been levied or has been, short-levied or short-paid. The word 'such' occurring after the words 'whether or not' refers to non-levy, non-payment, short-levy or short-payment or erroneous refund. It is, therefore, not correct to contend that the word 'such' indicates only such short levy which has been held to be non-existent in Cotspun having regard to Rule 173B. Such short-levy or non-levy may be on the basis of any approval, acceptance or assessment relating to the rate ofduty on or valuation ofexcisable goods. Thus, any approval made in terms ofRule 10, in the event, any mistake therein is detected, would also come within the purview of the expression 'such short-levy or short-payment'. Such notice is to be served on the person chargeable with the duty which inter alia has been short-levy or short-paid.

" It was further held: "Cotspun (supra) was decided when the matters relating to classification, approval thereofas also short-levy or upon detection ofa mistake were governed by the rules. Rule 10 and Rule 173B were to be read in conjunction with each other and the Constitution bench merely followed the said principle ofinterpretation ofstatute. A different situation has arisen now having regard to the fact hat not only the substantive provision dealing with the consequence of \ non-levy, non-payment ofshort levy or short-payment or erroneous refund but also has laid down the procedure therefor. " "A statute, it is trite, must be read as a whole. The plenary power I of legislation ofthe Parliament or the State Legislature in relation ' to the legislative fields specified under Seventh Schedule ofthe Constitution ofIndia is not disputed. Astatutory act may be enacted prospectively or retrospectively.

A retrospective effect indisputably can be given in case of curative and validating statute. In fact curative statutes by their very nature are intended to operate upon and affect past transaction having regard to the fact that they operate " on conditions already existing. However, the scope ofthe Validating Act may vary from case to case. " 12. However, we are concerned with a different situation herein. Whereas there cannot be any doubt that the revenue is entitled to rectify a mistake but implementation thereofwould depend upon the statutory provisions. Section 37B ofthe Central Excise Act confers powers upon the Central Board ofExcise and Customs to issue such orders, instructions and directions as the Central Excise Officers may deem fit, ifit considers necessary or expedient to do so for the purpose of uniformity of classification of goods in a case or with levies of duty ofexcise on such ' goods.

It was, therefore, necessary for the Tribunal to construe the said circular dated 24. 9. 1992 in its proper perspective. 13. The circular refers to the fact that there had been lack ofuniform classification ofthe said goods as a result whereofdisparity existed in the matter of pricing of commodity by the manufacturer. It is on the aforementioned premise that the decision ofthe High Court of Madhya Pradesh was referred to and sought to be acted upon. But the Court was ~ not unmindful of the fact that only by reason ofthe said judgment, the law cannot be said to have been settled as an appeal preferred against the judgment of the Madhya Pradesh High Court had been pending decision. It was in the aforementioned fact situation that the Board thought it fit and expedient in the interest ofadministration oftaxing statute to bring out uniformity in the assessment practice. 14. By reason ofthe said circular, proper classification was made for the first time.

It was done with the purpose of ensuring unifmmity . therein. It was expressly directed to have prospective application. Although the decision ofthe Madhya Pradesh High Court was the basis for issuance ofthe said circular, it was to operate independent thereof as it was clearly noticed that the same had not attained finality. The said f circular, so far as the Revenue is concerned, was, therefore, to operate irrespective ofthe decision ofthe Madhya Pradesh High Court. 15. Having said so, the Board was not unmindful of the consequences which may flow therefrom. It in exercise of its statutory power, therefore, directed its application from a future date. 16. HM Bags Manufacturer (supra) becomes relevant in view of the terminology used by the Board in issuing the aforementioned circular. Therein this Court clearly held that such a circular will have prospective effect, particularly when the word "henceforth" has been used by the Board. H. M.

Bags Manufacturer, therefore, is a binding precedent. Ifthe Board itselfdid not intend to classify HDPE bags ""1th retrospective effect, in our opinion, no demand for duty prior to issuance ofthe said notice could be made. 17. ITW Signode which was rendered in a different fact situation and dod not deal '>'. 1th the proposition oflaw with which we are concerned herein, in our considered view, could not have been applied by the Tribunal for the purpose ofdetermining the issue in question. 18. For the reasons aforementioned, we are ofthe opinion that the impugned judgment caru10t be sustained which is set aside accordingly. The appeal is allowed. However, in the facts and circumstances ofthis case, there shall be no order as to costs. B. B. B. Appeal allowed. \