Tag Archives: Central Excise Act

Taxing Statute – Interpretation of a Word

The principle of statutory interpretation with regard to a word in taxing statutes are well established. In Porritts & Spencer (Asia) Ltd. v. State of Haryana, (1979) 1 SCC 82, it was laid down as under:
“Where a word has a scientific or technical meaning and also an ordinary meaning according to common parlance, it is in the latter sense that in a taxing statute the word must be held to have been used, unless contrary intention is clearly expressed by the Legislature.”
In Union of India v. Delhi Cloth & General Mills Co. Ltd., AIR 1963 SC 791, the question arose as to how the term “refined oil” occurring in tariff was to be construed. There was no competition between the tariff entry with any other, nor was there any need to reconcile and harmonise the said entry with any other provision of the tariff. The Court, therefore, considered the term “refined oil” by applying the commercial meaning or trade nomenclature test and held that only deodorized oil can be considered to be refined oil. The court also referred to the specification of “refined oil” by the Indian Standards Institution and held that:
“This specification by the Indian Standards Institution furnishes very strong and indeed almost incontrovertible support for Dr. Nanji’s view and the respondents’ contention that without deodorization the oil is not “refined oil” as is known to the consumers and the commercial community.”
In Grenfell v. IRC, (1876) LR 1 EX D 242 (DC) it was observed:
“that if a statute contains language which is capable of being construed in a popular sense such statute is not to be construed according to the strict or technical meaning of the language contained in it, but is to be construed in its popular sense, meaning of course, by the words “popular sense”, that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it. But if a word in its popular sense and read in an ordinary way is capable of two constructions, it is wise to adopt such a construction as is based on the assumption that Parliament merely intended to give so much power as was necessary for carrying out the objects of the Act and not to give any unnecessary powers. In other words, the construction of the words is to be adopted to the fitness of the matter of the Statute.”
In Holt & Company v. Collyer, it was held thus:
“If it is a word which is of a technical or scientific character then it must be construed according to that which is its primary meaning, namely, its technical or scientific meaning.”
The Court in K.V. Varkey v. STO, AIR 1956 TC 105 specifically declined to apply the popular or commercial meaning of “Tea” occurring in the sales tax statute holding that the context of the statute required that the technical meaning of “a product of plant life” required to be applied and therefore green tea leaves were tea even though they might not be tea as is known in the market. Parle Agro Private Ltd. v. Commissioner of Commercial Taxes, (2017) 7 SCC 540.

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In a Taxing Statute – There is no room for Intendment

In the case of Hansraj Gordhandas v. CCE and Customs, AIR 1970 SC 755 : (1969) 2 SCR 253, it was held as under:
“It was contented on behalf of the respondent that the object of granting exemption was to encourage the formation of cooperative societies which not only produced cotton fabrics but which also consisted of members, not only owning but having actually operated not more than four power-looms during the three years immediately preceding their having joined the society. The policy was that instead of each such member operating his looms on his own, he should combine with others by forming a society which, through the cooperative effort should produce cloth. The intention was that the goods produced for which exemption could be claimed must be goods produced on his own behalf by the society. On a true construction of the language of the Notifications dated 31.07.1959 and 30.04.1960 it is clear that all that is required for claiming exemption is that the cotton fabrics must be produced on power looms owned by the cooperative society. There is no further requirement under the two notifications that the cotton fabrics must be produced by the cooperative society on the power looms ‘for itself’. It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If the taxpayer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different, but that is not the case here.”
Thus, the aforesaid decision makes it quite clear that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. It has also been held by the Constitution Bench, if the tax payer is within the plain terms of the exemption, it cannot be denied its benefits by calling in aid any supposed intention of the exempting authority. That apart, it has also been stated therein that if different intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different. State of Jharkhand v. Tata Steel Limited, (2016) 11 SCC 147.

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Interpretation of – Taxing Statute

It is trite that the letter of law has to be accorded utmost respect and strictly adhered to especially while interpreting a taxing statute. There ought not exist any scope for impregnating the interpretation by reading equity into taxing statutes. The classic statement of Rowlatt, J., in Cape Brandy Syndicate v. IRC, (1921) 1 KB 64 still holds the field. It reads as under:

“in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look fairly at the language used.”

Further, the three Judge Bench in CIT v. MR. P. Firm Muar, AIR 1965 SC 1216 has authoritatively observed that:

“Equity is out of place in tax law; a particular income is either eligible to tax under the taxing statute or it is not.” Pradip Nanjee Gala v. Sales Tax Officer and Others, (2015) 13 SCC 149.


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Excisable Goods – Place of Removal

Where the price at which goods are ordinarily sold by the assessee is different for different places of removal, then each such price shall be deemed to be the normal value thereof. Clause (b)(iii) is very important and makes it clear that a depot, the premises of a consignment agent, or any other place or premises from where the excisable goods are to be sold after their clearance from the factory are all places of removal. What is important to note is that each of these premises is referable only to the manufacturer and not to the buyer of excisable goods. The depot, or the premises of a consignment agent of the manufacturer are obviously places which are referable only to the manufacturer. Even the expression “any other place or premises” refers only to a manufacturer’s place or premises because such place or premises is stated to be where excisable goods “are to be sold”. The place or premises from where excisable goods are to be sold can only be the manufacturer’s premises or premises referable to the manufacturer. CCE v. Ispat Industries Ltd., (2016) 1 SCC 631.

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Marketability – A decisive test for dutiability

In APSEB v. CCE, (1994) 2 SCC 428, it was held thus:
“marketability is an essential ingredient in order to be dutiable under the Schedule to the Act.”
The marketability is thus essentially a question of fact to be decided on the facts of each case. There can be no generalization.
Marketability is a decisive test for dutiability. It only means ‘saleable’ or ‘suitable for sale’. It need not be in fact ‘marketed’. The article should be capable of being sold or being sold, to the consumers in the market, as it is – without anything more.
In Moti Laminates (P) Ltd. v. CCE, (1995) 3 SCC 23 the court held that an intermediate product, namely, resols, not being marketable would not be exigible to duty. The court held:
“Although the duty of excise is on manufacture or production of the goods, but the entire concept of bringing out new commodity etc, is linked with marketability. An article does not become goods in common parlance unless by production or manufacture something new and different is brought out which can be bought and sold. In Union of India v. Delhi Cloth and General Mills Co. Ltd., (1977) 1 ELT 199, while construing the word ‘goods’, it was held as under:
“These definitions make it clear that to become “goods” an article must be something which can ordinarily come to the market to be bought and sold”. Therefore, any goods to attract excise duty must satisfy the test of marketability. The tariff schedule by placing the goods in specific and general category does not alter the basic structure of leviability. The duty is attracted not because an article is covered in any of the items or it falls in residuary category but it must further have been produced or manufactured and it is capable of being bought and sold.”
In Union of India v. Sonic Electrochem (P) Ltd., (2002) 7 SCC 435, the question whether the plastic body of electro mosquito repellant was excisable goods was decided thus:
“The germane question is whether it has marketability. The plastic body is being manufactured to suit the requirements of EMR of the respondents and is not available in the market for being bought and sold. It is not a standardized item or goods known and generally dealt with in the market. It is being manufactured by the respondents for its captive consumption. It is not a product known in the market with any commercial name.
Marketability of goods has certain attributes. The essence of marketability is neither in the form nor in the shape or condition in which the manufactured articles are to be found, it is the commercial identity of the articles known to the market for being bought and sold. The fact that the product in question is generally not being bought and sold or has no demand in the market would be irrelevant. The plastic body of EMR does not satisfy the aforementioned criteria. There are some competing manufacturers of EMR. Each is having a different plastic body to suit its design and requirement. If one goes to the market to purchase the plastic body of EMR of the respondents either for replacement or otherwise, one cannot get it in the market because at present, it is not a commercially known product. For these reasons, the plastic body, which is a part of EMR of the respondents, is not ‘goods’ so as to be liable to duty as parts of EMR under Para 5 (f) of the said exemption notification. Escorts Ltd. v. CCE, (2015) 9 SCC 109.

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Accessory – Meaning of

The term “accessory” has been defined by lexicographers broadly to mean as something which contributes to or aids in an activity or process.
Oxford Advanced Learner’s Dictionary defines it as – “a thing which can be added to something else in order to make it more useful, versatile or attractive.”
According to Merriam Webster Dictionary it is “something added to something else to make it more useful, attractive or effective.”
Black’s Law Dictionary provides that the term “accessory—Means anything which is joined to another thing as an ornament or to render it more perfect or which accompanies it or is connected with it as an incident or as subordinate to it or which belongs to or with it. Adjunct or accompaniment. A thing of subordinate importance. Aiding or contributing in secondary way or assisting in or contributing to as a subordinate.”
The meaning of the expression “accessory” has been explained by the court in Annapurna Carbon Industries Co. v. State of A.P., (1976) 2 SCC 273, in the light of the question whether “arc carbon” is an “accessory” to cinema projectors or other cinematographic equipment under Item 4 of Schedule I to the Andhra Pradesh General Sales Tax Act, 1957 as follows:
“The term accessories is used in the Schedule to describe goods which may have been manufactured for use as an aid or addition.
Other meanings given there are “‘supplementary or secondary to something of greater or primary importance’, ‘additional’, ‘any of several mechanical devices that assist in operating or controlling the tone resources of an organ’. ‘Accessories’ are not necessarily confined to particular machines for which they may serve as aids. The same item may be an accessory of more than one kind of instrument.” Commissioner of Sales Tax v. AKZO Nobel India Ltd., (2014) 16 SCC 242.

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Valuation of Goods – Point of Sale

The principle of law, thus is crystal clear. It is to be seen as to whether as to what point of time sale is effected, namely, whether it is on factory gate or at a later point of time, i.e., when the delivery of the goods is effected to the buyer at his premises. This aspect is to be seen in the light of the provisions of the Sale of Goods Act by applying the same to the facts of each case to determine as to when the ownership in the goods is transferred from the seller to the buyer. The charges which are to be added have put up to the stage of transfer of that ownership inasmuch as once the ownership in goods stands trabsferred to the buyer, any expenditure incurred thereafter has to be on buyer’s account and cannot be a component which would be included while ascertaining the valuation of the goods manufactured by the buyer. Commissioner, Customs and Central Excise v. Roofit Industries Ltd., (2015) 8 SCC 229.

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