Supreme Court of India
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARHversusM/S. DOABA STEEL ROLLING MILLS.
- Citation
- 2011 INSC 470
- Decided
- 6 July 2011
- Bench
- D K JAIN
Holding
Rule 5 applies to the re‑determination of annual capacity under Rule 4(2) when the capacity is computed using the formula in Rule 3(3), and Section 3A overrides Section 3, so the Commissioner’s determination stands.
Summary
Doaba Steel Rolling Mills, a manufacturer of hot re‑rolled steel, was initially assigned an annual capacity of 7,683.753 MT using the formula in Rule 3(3) of the 1997 Rules, but the Commissioner applied Rule 5 to fix the capacity at 11,961.135 MT based on actual production in 1996‑97. After the mill altered its machinery, it sought a re‑determination under Rule 4(2); the Commissioner again used the formula (yielding 7,328.435 MT) but still invoked Rule 5 to retain the higher capacity. The Tribunal held that Rule 5 did not apply, but the revenue appealed. The Supreme Court examined the interplay of Rule 5, Rule 4(2), and Section 3A of the Central Excise Act, emphasizing that Section 3A is a non‑obstante provision that overrides Section 3 and that Rule 5 must be applied whenever capacity is determined or re‑determined using the Rule 3(3) formula. The Court also rejected the argument that the revenue was barred from appealing due to prior inaction. Consequently, the revenue’s appeal was allowed, the Tribunal’s orders were set aside, and the Commissioner’s determination was restored.
Issues considered
- Whether Rule 5 of the Hot Re‑rolling Steel Mills Annual Capacity Determination Rules, 1997 applies when a manufacturer seeks re‑determination of annual capacity under Rule 4(2) after altering its machinery.
- Whether Section 3A of the Central Excise Act, 1944, being a non‑obstante provision, overrides Section 3 and the Rules in determining annual capacity for excise duty.
- Whether the revenue is precluded from challenging a Tribunal or High Court order on the same issue because it had not previously appealed similar orders.
Legislation cited
- Central Excise Act, 1944s. 3, s. 35H, s. 3A
- Central Excise Tariff Act, 1985
Subjects
Central ExciseAnnual capacity determinationRule 5Section 3ATax statute interpretationRe‑determination of capacityHot re‑rolling steel millsRevenue appeal
Judgment
[2011] 7 S.C.R. 934
A COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH
v.
M/S. DOABA STEEL ROLLING MILLS.
(Civil Appeal Nos. 3400 of 2003)
JULY 6, 2011
B
[D.K. JAIN AND H.L. DATTU, JJ.]
HOT REROLL/NG STEEL MILLS ANNUAL CAPACITY
DETERMINATION RULES, 1997:
c
Rule 5 read with rr. 4(2), 3(2), 3(3)-Re-determination of
annual capacity of production of specified goods-
Applicabi/ity of r.5-HELD: Rule 5 will be attracted for
determination of annual capacity of production of th~ factory
0 when any change in the installed machinery or part thereof
is intimated to Commissioner of Central Excise in terms of r.
4(2)-Central Excise Act, 1944-s.3(A) (2).
CENTRAL EXCISE ACT, 1944:
E Section 3A-Power of Central Government to charge
excise duty on the basis of capacity of production in respect
of notified goods-Purpose of.-Explained - Held: Section 3A
is an exception to s. 3, the charging section, and being in
nature of a non obstante provision, provisions of s.3A override
F those of s.3 - Determination of annual capacity of production
of specified goods is to be done as per specific formula
prescribed in r.3(3) of the 1997 Rules- That being so, it must
logically follow that r. 5 cannot be ignored in relation to a
situation arising on account of an intimation under r. 4(2) of
G the 1997 Rules.
Section 3A(2)-Re-determination of annual production-
Held: Second proviso to sub-s. (2) of s. 3A contemplates re-
determination of annual production in a case when there is
an alteration or modification in any factor relevant to
H 934
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 935
v. DOABA STEEL ROLLING MILLS.
production of specified goods, but such re-determination has A·
again to be as per the formula in r.3(3) of the 1997 Rules.
INTERPRETATION OF STATUTES:
Tax statute - Interpretation of - Held: A taxing statute
should be strictly construed-Intention of legislature is B
primarily to be gathered from the words used in the statute.
APPEAL:
Appeal by revenue-;Held: It cannot be said that merely C
because in some cases revenue has not questioned the
correctness of an order on the same issue, it would operate
as a bar for revenue to challenge the order in another case--
However, it is high time when Central Board of Direct and
Indirect Taxes comes out with a uniform policy laying down
strict parameters for guidance of field staff for filing appeals. D
The Assessee (respondent in Civil Appeal N o. 3400
of 2003) was engaged in the manufacture of hot re-rolled
steel products of non-alloy steel in a hot steel rolling mill,
classifiable. und~r- Chapter 72 of the Central Excise Tariff E
Act, 1985. On 5.1.1998, the Commissioner, Central Excise,
determined the annual capacity of production of the
respondent at 7683.753 MT, as per the formula laid down
in sub-r. (3) of r. 3 of the Hot Re-rolling Steel Mills Annual
Capacity Determination Rules, 1997. However, keeping in F
view r. 5, the annual capacity was fixed at 11961.135 MT.
on the basis of actual production of the mills during the
financial year 1996-97. At the request of the respondent,
the Commissioner, by order~dated 27.1.2000 re-
determined the annual capacify'of the mill af7328.435 llilT, G
applying the formula as laid down under r. 3(3), but relying
on r. 5, he again computed the annual capacity at
11961.135 MT. The appeal filed by the assessee: was
allowed by the Customs Excise and Gold (Control)
Appellate Tribunal holding that r. 5 of the Rules could not H
936 SUPREME COURT REPORTS [2011] 7 S.C.R.
A be applied in view of the change in technical parameters
of the rolling mills. The Commissioner made an
application to the High Court uls. 35-H of the Central
Excise Act, 1944 seeking a direction to the Tribunal to
refer the question of law which according to him arose
B from the order of the Tribunal. The High Court rejected
the application.
In the instant appeals filed by the revenue, .the
question for consideration before the Court was: whether
r. 5 of the 1997 Rules would apply in a case where a
C manufacturer proposes to make some change in the
installed machinery or any part thereof and seeks the
approval of the Commissioner of Excise in terms of r. 4(2)
of the said Rules?
D Allowing the appeals, the Court
HELD: 1.1. Rule 5 of the Hot Rerolling Steel Mills
Annual Capacity Determination Rules, 1997 will be
attracted for determination of the annual capacity of
E production of the factory when any change in the
installed machinery or any part thereof is intimated to the
Commissioner of Central Excise in terms of r. 4(2) of the
said Rules. [para 23] [952-F-G]
Sawanmal Shibumal Steel Rolling Mills Vs. C.C.E.,
F Chandigarh-I 2001 (127) E.L. T. 46 (Tri.-LB) Commr. of
Central Excise, Belgaum Vs .. Bel/ary Steel Rolling Mills, 2009
(245) E.L.T. 114 (Kar)· Cited.
1.2. It is clear from a bare reading of s.3A of the
G Central. Excise Act, 1944 as inserted by Act 26 of 1997,
that the reason which persuaded the Legislature to
introduce this provision was attributed to large scale
evasion of payment of Excise duty by certain sectors, like
induction furnaces, steel re-rolling mills etc., where
H
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 937
v. DOABA STEEL ROLLING MILLS.
evasion of Excise duty on goods produced in such mills A
was rampant. [para 5) [942-F·G]
1.3. Section 3A was inserted in the Act to enable. the
Central Government to levy Excise duty on manufacture
or production of certain notified goods on the basis of 8
annual capacity of production to be determined by the
Commissioner of Central Excise in terms of the Rules to
be framed by the Central Government. Section 3A is an
exception. to s. 3 of the Act - the charging Section and
being in the nature of a .non obstante provision, the C
provisions contained in the said Section override those
of s. 3 of the Act. Rule 3 of 1997 Rules framed in terms of
s. 3A(2) of the Act lays down the procedure for
determining the annual capacity of production of the
factory. Sub-r. (3) ofthat Rule contains a specific formula
for determination of annual capacity of production of hot D
re-rolled products. This is the only formula whereunder
the annual capacity of production of the factory, for the
purpose of charging the duty in terms of s. 3Aof the Act,
is to be determined. [para 18] [949-G-H; 950-A-D]
E
1.4. Second proviso to sub.s. (2) of s. 3A of the Act
contemplates re-determination of annual production in a
case when there is alteration or modification in any factor
relevant to the production of the specified goods but such
re-determination has again to be as per the formula F
prescribed in r. 3(3) of the 1997 Rules. It is clear that sub-
r. (2) of r. 4, which, in effect, permits a manufacturer to
make a change in the installed machinery or part thereof
which tends to change the value of either of the
parameters, referred to in sub-r. (3) of r. ·3, on the basis G
whereof the annual capacity of production had already
been det~rmined, vvould obviously require re-
determination of annual capacity of production of the
factory/mill, for the purpose oflevy of duty. It is plain that
in the absence of any other Rule, providing for any H
938 SUPREME COURT REPORTS [2011] 7 S.C.R.
A alternative formula or mechanism for re-determination of
production capacity of a factory, on furnishing of
information to the Commissioner as contemplated in r.
4(2) of the 1997 Rules, such determination has to be in
terms of sub-r. (3) of r. 3. That being so, it must logically
B follow that r. 5 cannot be ignored in relation to a situation
arising on account of an intimation under r. 4(2) of the
1997 Rules. Moreover, the language of r. 5 being clear
and unambiguous, in the sense that in a case where
annual capacity is determined/re-determined by applying
c the formula prescribed in sub-r. (3) of r. 3, r. 5 springs into
action and has to be given full effect to. [para 18] [950-D-
H; 951-A-B]
1.5. The principle that a. taxing statute should be
strictly construed is well settled. It is equally trite that the
D intention of the Legislature is primarily to be gathered
from the words used in the statute. Once it is shown that
an assessee falls within the letter of the law, he must be
taxed however great the hardship may appear to the
judicial mind to be. [para 19] (951-B-C]
E
Commissioner of Sales Tax, Uttar Pradesh vs. The Modi
Sugar Miffs Ltd. (1961) 2 SCR 189; Mathuram Agrawal Vs.
State of Madhya Pradesh (1999)8 SCC 667, referred to.
Cape Brandy Syndicate Vs. Inland Revenue
F Commissioners 1921 (1) KB 64, 71 - referred to.
Commissioner of Customs, Bangalore Vs. ACER India
(PJ Ltd, 2007(11) SCR 558= (2008) 1 sec 382· - cited.
G 1.6. All the orders impugned in the instant appeals are
set aside and those of the Commissioners of Central
Excise restored. [para 25) [953-F]
2. It cannot be said that merely because in some
cases revenue has not questioned· the correctness of an
H order on the same issue, it would operate as a bar for the
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 939
v. DOABA STEEL ROLLING MILLS.
revenue to challenge the order in another case. There can A
be host of factors, like the amount of revenue involved,
divergent views of the Tribunals/High Courts on the
issue, public interest etc. which may be a just cause,
impelling the revenue to prefer an appeal on the same
view point of the Tribunal which had been accepted in B
the past. However, it is high time when the Central Board
of Direct and Indirect Taxes comes out with a uniform
policy, laying down strict parameters for the guidance of
the field staff for deciding whether or not an appeal in a
particular case is to be filed. This Court is constrained to C
observe that the existing guidelines are followed more in
breach, resulting in avoidable allegations of malafides
etc. on the part of the officers concerned. [para 24) [953-
B-E]
D
C.K. Gangadhatan & Anr. Vs. Commissioner of Income
Tax, Cochin 2008 (11) SCR52 = (2008) 8 SCC 739 - cited.
Case Law Reference:
2007 (11) SCR 558 cited Para 13 E
2001 (127) E.L.T. 46 (Tri.-LB) cited Para 14
2009. (245)
•,
E.L.T. 114 (Kar) cited para 14
2008 (11) SCR 52 cited Para 15
F
1921 (1) KB 64, 71 referred to Para 20
(1961)·2 SCR 189 referred to Para 21
1999 (4) Suppl. SCR 195 referred to. Par:a 22
CIVIL APPELLATE JURISDICTION : Civil Appeal No. G
3400 of 2003. ·
From the Ju_dgment & Order dated 17.10.2001 of the High
Court of Punjab & Haryana at Chandigarh in C.C.E.S. No. 4 of
2001. H
940 SUPREME COURT REPORTS [2011] 7 S.C.R.
A WITH
C.A. Nos. 8342-8344 & 8345 of 2004 & C.A. No. 4992-4993
of 2011.
B. Bhattacharya, ASG, Harish Chander, R. Nanda, Arti
B Singh, B.K. Prasad,Anil Katiyar, P. Parrneswaran, D.S. Mahra,
Balbir Singh, Rajesh Kumar, Rupinder Sinhmar, Deepak
Sinhmar, Abhishek Singh Baghel, Sharad Sharma, Rajesh
Kumar, Krishnakumar R.S., K.S. Mahadevan, Manjula Gupta for
the appearing parties.
c
The Judgment of the Court was delivered by
O.K. JAIN, J. 1. Leave granted in SLP (C) Nos. 35323-
35324 of 2010.
D 2. This batch of appeals, by grant of leave, arises out of
judgements and orders dated 17th October 2001 in
C.C.E.S.No.4 of 2001, 21st October, 2003 in C.E.C. 11, 12,
13 of 2003 and C.E.C. No.122 of 2003 passed by the High
Court of Punjab & Haryana; 6th November 2009 in Review
E application No.29356 of 2008 and 8th July 2010 in C.E.
Reference application No.113 of 2000 both passed by the High
Court of Judicature at Allahabad. By the impugned judgements,
in the main reference applications, filed by the Commissioner
of Central Excise, under Section 35H of the Central Excise Act,
F 1944 (for short "the Act"), the questions referred by the
Customs, Excise and Gold (Control) Appellate Tribunal, as it
then existed, (for short "the Tribunal") have been answered in
favour of the assessee and the review applications preferred
by the Commissioner against the said judgments have been
G dismissed.
3. Since all the appeals involve a common question of law,
these are being disposed of by this common judgment.
However, to appreciate the controversy, the facts emerging from
C.A.No.3400 of 2003 are being adverted to. These are as
H follows:
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 941
v. DOABA STEEL ROLLING MILLS. [D.K. JAIN, J.]
4. Section 3A of the Act, which has a chequered history A
of insertions and omissions in the Act, was inserted in the Act
for the second time by Act 26 of 1997, with effect from 14th
May, 1997, the provision relevant for the purpose of these
appeals. The Section has again been omitted by Act 14 of
2001, with effect from 11th May, 2001. Section 3A of the Act B
enables the Central Government to charge Excise duty on
goods on the basis of annual capacity of production of mills etc.
in respect of the notified goods.
The relevant part of the Section reads as follows:
c
"3A. Power of Central Government to charge excise duty
on the basis of capacity of production in respect of
notified goods.- (1) Notwithstanding anything contained
in section 3, where the Central Government, having regard
to the nature of the process of manufacture or production D
of excisable goods of any specified description, the extent
of evasion of duty in regard to such goods or such other
factors as may be relevant, is of the opinion that it is
necessary to safeguard the interest of revenue, specify, by
notification in the Official Gazette, such goods as notified E
goods and there shall be levied and collected duty of
excise on such goods in accordance with the provisions
of this section.
(2) Where a notification is issued under sub-section (1),
the Central Government may, by rules,- F
(a) provide the manner for determination of the annual
capacity of production of the factory, in which such
goods are produced, by an officer not below the
rank of Assistant Commissioner of Central Excise G
and such annual capacity shall be deemed to be
the annual production of such goods by such factory;
or
· (b) · (i) specify the factor relevant to the production of H
942 SUPREME COURT REPORTS [2011] 7 S.C.R.
A such goods and the quantity that is deemed to be
produced by use of a unit of such factor; and
(ii) provide for the determination of the annual
capacity of production of the factory in which such
goods are produced on the basis of such factor by
B
an officer not below the rank of Assistant
Commissioner of Central Excise and such annual
capacity of production shall be deemed to be the
annual production of such goods by such factory:
c Provided that where a factory producing notified
goods is in operation during a part of the year only, the
annual production thereof shall be calculated on
proportionate basis of the annual capacity of production:
D Provided further that in a case where the factor
relevant to the production is altered or modified at any time
during the year, the annual production shall be re-
determined on a proportionate basis having regard to such
alteration or modification.
E "
5. It is clear from a bare reading of the Section that the
reason which persuaded the Legislature to introduce this
provision was attributed to large scale evasion of payment of
F .Excise duty by certain sectors. Thus, the insertion of the Section
in the Act was with a view to safeguard the interest of revenue
in the sectors, like induction furnaces, steel re-rolling mills etc.,
where evasion of Excise duty on goods produced in such mills
was rampant. The provision authorises the Central Government
G to notify certain goods, for levy and collection of duty of Excise
on such goods, in accordance with the provision of the said
Section, having regard to the extent of evasion of duty as also
other relevant factors. The scheme evolved under this provision,
envisages the determination of annual capacity of production
H of such factory by an officer not below the rank of Assistant
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 943
v. DOABA STEEL ROLLING MILLS. [D.K. JAIN, J.]
Commissioner of Central Excise in terms of the rules to be A
framed by the Central Government under sub-section (2) of
Section 3A of the Act. The annual capacity of production of the
factory is deemed to be the annual production of such goods
by such factory, on which an assessee is liable to pay duty. The
two provisos to sub-section (2) of Section 3A of the Act, B
provide for determination/re-determination of annual capacity
of production in the event of operation of the factory during a
part of the year or alteration or modification in any of the factors
relevant to the production of the factory.
6. In exercise of the powers conferred by Section 3A(2)
c
of the Act, by Notification No. 23/97-CE (NT) dated 25th July,
1997, the Central Government framed and notified Hot Re-
rolling Steel Mills Annual Capacity Determination Rules, 1997
(for short "the 1997 Rules"), to be effective from 1st August,
1997, for determination of annual capacity of production of a D
factory producing re-rolled products as contained in the said
notification. The Rules prescribed the formulae for
determination of the annual capacity of production of a hot re-
rolling mill, on the basis of the information to be furnished by
the mill to the Commissioner of Central Excise; on the E
parameters referred to in Rule 3(3) of the 1997 Rules. The rate
and the manner of payment of Excise duty under Section 3A
of the Act was also indicated in the notification. Subsequently,
another Notification No.. 32/97-CE (NT) was issued on 1st
August, 1997 making the said Rules effective from the even F
date. For the sake of ready reference, Rules 3 and 4, in so far
as they are relevant for'these appeals, .are extracted. below:
"3. The annual capacity of production referred to in rule 2
shall be determined in the following manner, namely:-
G
(1) a hot re-rolling mill shall declare the values of 'd' 'n'
'I' and 'speed of rolling', the parameters referred to
in sub-rule (3), to the Commissioner of Central
Excise (hereinafter referred · to as the
H
944 SUPREME COURT REPORTS [2011) 7 S.C.R.
A Commissioner) with a copy to the Assistant
Commissioner of Central Excise:
(2) on receipt of the information referred to in sub-rule
(1), the Commissioner shall take necessary action
to verify their correctness and ascertain the correct
8
value of each of the parameters. The Commissioner
may, if so desires, consult any technical authority
for this purpose;
(3) the annual capacity of production of hot re-rolled
c products of non-alloy steel in respect of such factory
shall be deemed to be as determined by applying
the following formula :- ·
Annual Capacity =1.885x10-4 x d x n xix ex w x Number
0 of utilised hours (in metric tonnes) Where :
d = Nominal diameter of the finishing mill in millimetres
n = Nominal revolutions per minute (RPM) of the drive
E i = Reduction ratio of the gear box
w =Weight in Kilogramme per metre of the re-rolled
product.
value of 'e' in the formula shall be deemed to be 0.30 in
F case of low speed mills, and 0.75 in case of high speed
mills the value of 'w' factor in the formula for the high speed
mills shall be deemed to be 0.45 and for the low speed
mills shall be deemed to be as under, -
G
4. the Commissioner of Central Excise shall, as soon as
may be, after determining the total capacity of the hot re-
rolling mill installed in the factory as also the annual
capacity of production, by an order, intimate to the
H manufacturer.
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 945
v. DOABA STEEL ROLLING MILLS. [D.K. JAIN, J.]
Provided that the Commissioner may determine the annual A
capacity of the hot re-rolling unit on provisional basis
pending verification of the declaration furnished by the hot
re-rolling mills and pass an order accordingly. Thereafter.
the Commissioner may determine the annual capacity, as
soon as may be, and pass an order accordingly. B
4 (1) The capacity of production for any part of the year,
or any change in the total hot re-rolling mill capacity, shall
be calculated pro rata on the basis of the annual capacity
of production determined in the above manner stated in C
Rule 3.
(2) In case a manufacturer proposes to make any change
in installed machinery or any part thereof, which t~nds to
change the value of either of the parameters 'd' 'n' 'e' 'I'
and 'speed of rolling' referred to in sub-rule (3) of sub-rule D
· 3, such manufacturer shall intimate about the proposed
·change to the Commissioner of Central Excise in writing,
with a copy to Assistant Commissioner of Central Excise,
at least one month in advance of such proposed change,
and shall obtain the written approval of the Commissioner E
before making such change. Thereafter the Commissioner
of Central Excise shall determine the date from which the
change in the installed capacity shall be deemed to be
effective."
7. However, by Notification No. 45/97-CE (NT} dated 30th
F
August, 1997, 1997 Rules were amended with effect from 1st
September, 1997. By reason of the said amendment, apart
from substituting a fresh sub-rule (3) of Rule 3, prescribing a
new formulae to determine the annual capacity of production.
not very relevant for the purpose of the present appeals, Rule G
5 was inserted after sub-rule (2) of Rule 4, which reads as
follows:
"5. In case. the annual capacity determined by the formula
in sub-rule (3) of rule 3 in respect of a mill, is less than the H
946 SUPREME COURT REPORTS [2011] 7 S.C.R.
A actual production of the mill during the financial year 1996-
97, then the annual capacity so determined shall be
deemed to be equal to the actual production of the mill
during the financial year 1996-97."
B 8. The respondent-assessee is engaged in the
manufacture of hot re-rolled steel products of non-alloy steel in
a hot steel rolling mill, classifiable under Chapter 72 of the
Central Excise Tariff Act, 1944, for the purpose of levy of Excise
duty etc. On 5th January, 1998 the Commissioner, Central
C Excise, Chandigarh determined the annual capacity of
production of the respondent at 7683.753 MT, as per the
formula laid down in sub-section (3) of Rule 3 of 1997 Rules.
However, keeping in view Rule 5, the annual capacity was finally
fixed at 11961.135 MT on the basis of actual production of the
mill during the financial year 1996-97.
D
9. Vide letter dated 13th September, 1999, the
respondent requested the Commissioner for re-determination
of annual production capacity of their unit in terms of Rule 4(2)
of the 1997 Rules on the ground that they have changed some
E of the parameters of their mill. The request was acceded to and
vide order dated 27th January 2000, the Commissioner,
applying the formula as laid down under Rule 3(3), determined
the annual capacity of the mill at 7328.435 MT but relying on
Rule 5, he again computed the annual capacity at 11961.135
F MT, being equal to the actual production of the mill during the
financial year 1996-97.
10. Aggrieved by the said order of the Commissioner, the
respondent filed an appeal before the Tribunal. The Tribunal,
vide order dated 6th April, 2000, allowed the appeal and held
G that Rule 5 of the 1997 Rules cannot be applied in view of
change in technical parameters of the rolling mill.
11. Dissatisfied with the said order, the Commissioner
made an application to the High Court under Section 35H of
H the Act, seeking a direction to the Tribunal to refer the question
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 94 7
v. DOABA STEEL ROLLING MILLS. [D.K. JAIN, J.]
of law, which according to him, arose from the order of the A
Tribunal. Vide order dated 17th October, 2001, the High Court
rejected the reference petition holding that no question of law
arose from the order of the Tribunal. The High Court has held
that the provisions of Rule 5 cannot be invoked in a case where
the annual capacity of the mill is to be determined in terms of s
Rule 4(2) of the. 1997 Rules on account of change in
parameters, observing· thus:
"It is the admitted position that the capacity for the year
1996-97 was fixed on the basis of the parameters adopted
by the respondent at the relevant time. Subsequently, the C
· parameters were altered. In view of the change in
parameters, it is admitted position that the capacity was
·considerably reduced. In fact, it has not been disputed that
the annual production had come down from 11961.135
Metric Tons to 7328.435 Metric Tons. This having D
happened, the Revenue could not have claimed excise
duty for the capacity which was not in existence. The
provisions of Rule 5 cannot be invoked in a case where
after determination of the capacity for the year 1996-97,
the Unit makes a change in the capacity and the production E
actually comes down. If such a course were permitted, the
result would be grossly unfair."
Additionally, the High Court has also noted that a similar view
had been taken by the Tribunal in the case of M/s Awadh Alloys. F
(P) Ltd., since reported in 1999 (112) ELT 719 (Tri.), against
the revenue but despite opportunity no information was furnished
whether the said decision had been challenged by the revenue
or not. We may however, note at this juncture itself that the
finding of the High Court to the effect that on account of change G
in parameters, the annual production had come down from
11961.135 MT to 7328.435 MT is factually incorrect. The actual
annual production determined initially as per the formula laid
down in Rule 3(3) had worked out to 7638. 753 MT, which on
change in parameters now worked out at 7328.435 MT i.e. a
difference approx. 300 MT only. H
948 SUPREME COURT REPORTS [2011) 7 S.C.R.
A 12. Hence, the Commissioner has preferred the present
appeals against the orders of the High Courts, noted in para 2
(supra).
13. Mr. B. Bhattacharya, learned Additional Solicitor
B General of India, appearing for the revenue, had strenuously
urged that the view taken by the High Court to the effect that
once the technical parameters, as stipulated in Rule 3(3) of the
1997 Rules, are altered in terms of Rule 4(2) of the said Rules,
resulting in reduction in the production capacity, Rule 5 cannot
be invoked, is clearly fallacious. According to the learned
C counsel, for the purpose of Rule 4(2), the production capacity
of the rolling mill has to be determined under the said Rule 3(3)
as there is no other rule to take care of such a situation. It was
argued that when the production capacity of a factory is to be
determined under the said Rule, Rule 5 will automatically come
D into play. Relying on the clarification issued by the Board vide
Circular dated 26th February 1998, learned counsel argued that
since reference to previous year's production in Rule 5 of the
1997 Rules is to the actual production of the mill and does not
relate to the technical parameters of the machinery, the actual
E production of the year 1996-97 would be relevant for
determining the current year's duty liability under Section 3A
of the Act, even when parameters of the machinery are altered.
It was thus, asserted that since re-determination of capacity of
production under Rule 4(2) has to be done by the formulae
F prescribed in the said Rule 3(3), the provisions of Rule 5 cannot
be disregarded. Commending us to the decision of this Court
in Commissioner of Customs, Bangalore Vs. ACER India (P)
Ltd1., learned counsel contended that the Rules relating to
determination of capacity of production have to be strictly
G construed.
14. Per contra, learned counsel appearing for the
respondents, led by Mr. Balbir Singh, submitted that when there
is any change in the parameters of a rolling mill, which are
H 1. (2008) 1 sec 382.
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 949
v. DOABA STEEL ROLLING MILLS. [D.K. JAIN, J.]
different from the rolling mill in the financial year 1996-97, Rule A
. 5 has no application. Highlighting the fact that the decision of
a Full Bench of the Tribunal in Sawanmal Shibuma/ Steel
Rolling Mills Vs. C.C.E., Chandigarh-12 as also the decision
of the High Court of Karnataka in Commr. of Central Excise,
Belgaum Vs. Bellary Steel Rolling Mills, 3 wherein it has been B
held that when there are alterations in the parameters, referred
to in Rule 3(3) of the 1997 Rules, Rule 5 does not apply,
learned counsel stressed that the revenue having accepted
these decisions on the very same point, it is debarred from
taking a contrary stand in these appeals.
c
15. In rejoinder, Mr. Bhattacharya, cited the decision of this
Court in C.K. Gangadharan & Anr. Vs. Commissioner of
Income Tax, Cochin4 in support of his submission that the
revenue is not precluded from questioning the correctness of
the decision of the authorities below in these appeals despite D
the fact that orders/decision in the afore-mentioned cases have
not been challenged.
16. Thus, the short question for consideration is whether
Rule 5 of the 1997 Rules will apply in a case where a E
manufacturer proposes to make some change in the installed
machinery or any part thereof and seeks the approval of the
Commissioner of Excise in terms of Rule 4(2) of the said
Rules?
17. Before addressing the contentions advanced by F
learned counsel for the parties, it is essential to note at the
outset that in all these appeals, there is no challenge to the
validity of Rule 5 of the 1997 Rules, inserted vide Notification
dated 30th August, 1997 and, therefore, we are only required
to interpret it and examine the width of its application. G
18. As noted above, Section 3A was inserted in the Act
2. 2001 (127) E.L.T. 46 (Tri.-B).
3. 2009 (245) E.L.T. 114 (Kar).
4. {2008) s sec 739. H
950 SUPREME COURT REPORTS [2011) 7 S.C.R.
A to enable the Central Government to levy Excise duty on
manufacture or production of certain notified goods on the basis
of annual capacity of production to be determined by the
Commissioner of Central Excise in terms of the Rules to be
framed by the Central Government. Section 3A of the Act is an
8 exception to Section 3 of the Act - the charging Section and
being in nature of a non obstante provision, the provisions
contained in the said Section override those of Section 3 of
the Act. Rule 3 of 1997 Rules framed in terms of Section 3A(2)
of the Act lays down the procedure for determining the annual
C capacity of production of the factory. Sub-rule (3) of that Rule
contains a specific formula for determination of annual capacity
of production of hot rolled products. This is the only formula
whereunder the annual capacity of production of the factory, for
the purpose of charging duty in terms of Section 3A of the Act,
is to be determined. Second proviso to sub-section (2) of
D Section 3A of the Act contemplates re-determination of annual
production in a case when there is alteration or modification in
any factor relevant to the production of the specified goods but
such re-determination has again to be as per the formula
prescribed in Rule 3(3) of the 1997 Rules. It is clear that sub-
E rule (2) of Rule 4, which, in effect, permits a manufacturer to
make a change in the installed machinery or part thereof which
tends to change the value of either of the parameters, referred
to in sub-rule (3) of Rule 3, on the basis whereof the annual
capacity of production had already been determined, would
F obviously require re-determination of annual capacity of
production of the factory/mill, for the purpose of levy of duty. It
is plain that in the absence of any other Rule, providing for any
alternative formula or mechanism for re-determination of
production capacity of a factory, on furnishing of information to
G the Commissioner as contemplated in Rule 4(2) of the 1997
Rules, such determination has to be in terms of sub-rule (3) C>f
Rule 3. That being so, it must logically follow that Rule 5 cannot
be ignored in relation to a situation arising on account of an
intimation under Rule 4(2) of the 1997 Rules. Moreover, the
H language of Rule 5 being clear and unambiguous, in the sense
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 951
v. DOABA STEEL ROLLING MILLS. (O.K. JAIN, J.]
that in a case where annual capacity is determined/ A
redetermined by applying the formula prescribed in sub-rule (3)
of Rule 3, Rule 5 springs into action and has to be given full
effect to.
19. The principle that a taxing statute should be strictly 8
construed is well settled. ltis equally trite that the intention of
the Legislature is primarily to be gathered from the words used
in the statute·. Once it is shown that an assessee falls within the
letter of the law, he must be taxed however great the hardship
may appear to the judicial mind to be.
c
20. On the principles of interpretation of taxing statutes, the
following passage from the opinion of Late Rowlatt, J. in Cape
Brandy Syndicate Vs. Inland Revenue Commissioners5 has
become the locus classicus and has been quoted with
approval in a number of decisions of this Court: D
" ... Jn 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 E
only look fairly at the language used."
21. In Commissioner of Sales Tax, Uttar Pradesh Vs. The
Modi Sugar Mills Ltd., 6 J.C. Shah, J. observed thus:
"In interpreting a taxing statute, equitable considerations F
are entirely out of place. Nor can taxing statutes be
interpreted on any presumptions or assumptions. The court
must look squarely at the words of the statute and interpret
them. It must interpret a taxing statute in the light of what
is clearly expressed: it cannot imply,anything which is not G
expressed; it cannot import provisi9ns in the statutes so
as to supply any assumed deficiency."
5. 1921 (1) KB 64, 71.
6. (1961) 2 SCR 189.
H
952 SUPREME COURT REPORTS [2011] 7 S.C.R.
A 22. In Mathuram Agrawal Vs. State of Madhya Pradesh, 7
D.P. Mohapatra, J. speaking for the Constitution Bench, stated
the law on the point in the following terms:
"The intention of the legislature in a taxation statute is to
8 be gathered from the language of the provisions
particularly where the language is plain and unambiguous.
In a taxing Act it is not possible to assume any intention
or governing purpose of the statute more than what is
stated in the plain language. It is not the economic results
sought to be obtained by making the provision which is
c relevant in interpreting a fiscal statute. Equally
impermissible is an interpretation which does not follow
from the plain, unambiguous language of the statute.
Words cannot be added to ore substituted so as to give a
meaning to the statute which will serve the spirit and
D intention of the legislature. The statute should clearly and
. unambiguously convey the three components of the tax law
i.e. the subject of the tax, the person who is liable to pay
the tax and the rate at which the tax is to be paid. If there
is any ambiguity regarding any of these ingredients in a
E taxation statute then there is no tax in law. Then it is for
the legislature to do the needful in the matter."
23. We do not find any reason to depart from these well
' settled principles to be applied while interpreting a fiscal statute.
F Therefore, bearing in mind these principles and the intent and
effect of the statutory provisions, analysed above, the conclusion
becomes inevitable that Rule 5 of the 1997 Rules will be
attracted for determination of the annual capacity of production
of the factory when any change in the installed machinery or any
G part thereof is intimated to the Commissioner of Central Excise
in terms of Rule 4(2) of the said Rules.
24. As regards the argument of learned counsel for the
respondents that having not assailed the correctness of some
H 7. (1999) s sec 667.
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 953
v. DOABA STEEL ROLLING MILLS. [D.K. JAIN, J.)
of the orders passed by the Tribunal and a decision of the High A
Court of Karnataka, the revenue cannot be permitted to adopt
the policy of pick and choose and challenge the orders passed
in the cases before us, it would suffice to observe that such a
proposition cannot be accepted as an absolute principle of law,
although we find some substance in the stated grievance of the B
assessees before us, because such situations tend to give rise
to allegations of malafides etc. Having said so, we are unable
to hold that merely because in some cases revenue has not
questioned the correctness of an order on the same issue, it
would operate as a bar for the revenue to challenge the order c
in another case. There can be host of factors, like the amount
of revenue involved, divergent views of the Tribunals/High
Courts on the issue, public interest etc. which may be a just
cause, impelling the revenue to prefer an appeal on the same
view point of the Tribunal which had been accepted in the past.
0
We, may however, hasten to add that it is high time when the
Central Board of Direct and Indirect Taxes comes out with a
uniform policy, laying down strict parameters for the guidance
of the field staff for deciding whether or not an appeal in a
particular case is to be filed. We are constrained to observe
E
that the existing guidelines are followed more in breach,
resulting in avoidable allegations of malafides etc.; on the part
of the officers concerned.
25. For the foregoing reasons, the orders impugned in
these appeals cannot be sustained. All these orders are set F
aside and that of the Commissioners of Central Excise are
restored. The appeals are allowed accordingly with costs,
quantified at '50,000/- in each set of appeals.
R.P. Appeals allowed.
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Central Excise"Sign in to search