Holding

The phrase "this notification" in the 9 November 1984 notification refers only to the 24 April 1981 notification, and the exemption granted to paperboard from 2 April 1984 is valid and not arbitrary or discriminatory.

Summary

ITC Paper Boards Ltd. appealed against the CEGAT order denying it full exemption from excise duty on paperboard manufactured since 1979. The exemption was granted to printing and writing paper by a 24 April 1981 notification and later extended to paperboard by a 2 April 1984 notification, with a clarifying 9 November 1984 notification that the five‑year exemption period would be measured from the later of the first clearance date or the publication date of the notification. The appellant argued that the phrase "this notification" in the 9 November 1984 notice should be read to include the 2 April 1984 amendment, thereby entitling it to exemption from 1979. The Supreme Court held that the phrase refers only to the original 24 April 1981 notification, that the differential treatment of paperboard is a policy decision of the Government, and that there is no arbitrariness, irrationality or violation of Article 14. Consequently, the appeal was dismissed.

Issues considered

The proper referent of the phrase "this notification" in the 9 November 1984 notification.
Whether denying exemption to paperboard units that commenced production before 2 April 1984 is arbitrary, discriminatory or violative of Article 14.
Whether the Court may enlarge the statutory scope of exemption beyond the legislative intent.

Legislation cited

Central Excise Rules, 1944s. Rule 8(1)
Constitution of Indias. Article 14

Subjects

Excise dutyExemptionStatutory interpretationArticle 14DiscriminationPolicy decisionPaperboardCentral Excise Rules

Judgment

ITC BHADRACHALAM PAPER BOARDS LTD. A
v.
COLLECTOR OF CENTRAL EXCISE, HYDERABAD.
J APRIL 15, 1994

[B.P. JEEVAN REDDY AND B.L. HANSARIA, JJ.] B
~
'
Central Excise Rules, 1944: Rule 8 ( 1)-Exemption from excise duty on
paper for five yea1'"from date of first clearance or of notification, later extended
by an1endn1ent to paperboard in 1984-Held, the expression "this notification 11
in the amendment notification refers to the original notification of April 24,
1981 only.
c
Constitution of India, Article 14-Exemption from duty on paper from
1981 ownwards extended to paperboard from 198'f-Held, not discriminatory,
arbitrary or irrational.
D
Interpretation of Statutes-Beneficial constructiort-Held, scope of ex-
emption from duty being extended to paperboard only from 1984 is one of
policy for the Govemment to decide and the Court cannot by interpretation
enlarge the scope of the exemption.

By a notification dated April 24, 1981 fifty per cent exemption on E
excise duty was made available on printing and writing paper provided the
clearances were not effected "after the expiry of live years from the date
of first clearance of the said goods". By a subsequent notification dated
April 2, 1984, the exemption was extended to paperboards and by a third
notification dated November 9, 1984 it was clarified that the exemption
• F
would not be available to clearances effected after the expiry of live years
from the date of first clearance from the factory "or the date of publication
of this notification whichever was later."

The Appellant claimed the exemption from 1979 when it started
manufacturing paperboard but it was given the benefit only from April 24, G
1981. The CEGAT rejected the Appellant's plea. Hence this appeal.

Dismissing the Appeal, this Court

HELD : 1. The expression "this notification" appearing in the
notification dated November 9, 1984 has to refer to the notification of April H
531
532 SUPREME COURT REPORTS [1994] 3 S.C.R.

A 24, 1981. The contention that the word "this" in the notification dated
November 9, 1984 refers to the notification dated April 2, 1984 cannot be
accepted on the plain language of the notification dated November 9, 1984.
(535-A-B]
2.1. There was no irrationality in exemption of printing and writing
B paper from April 1981 while giving the benefit of the same to paper board
for the first time from April 1984. Insofar as utility of the product is
concerned, paper board does stand on a footing different from printing and
writing paper. If it is borne in mind that the concerned notification was
issued on representation of the Paper Industry that confining the exemp-
tion to printing and writing paper alone was not achieving the object, the
C rationality of the notification becomes apparent and acceptable. (538-A-B]

Shri Sitaram Sugar Co. Ltd. v. Union of India, JT (1990) 1 SC 462,
referred to.

D 2.2. There is no discriminatory treatment in denying full benefit to
those units which started production prior to 1.4.84, as for dlfferent
purposes different cut off dates may be fixed having regard to the pur-
poses to be achieved. (538-B-C]

2.3. The differential treatment given to the paper board is not even
E arbitrary as good reasons exist for treating it differently and exempting
it from dlfferent dates. (538-C]

3.1. Why exemption to paper board was given by notification of April
1984 and not by April 1981 notification is really a question of policy, the
scope and width of which is for the Government to decide and not for this
F Court. (536-H, 537-AJ

3.2. The view taken here cannot be said to be unduly restricted
interpretation of the notification of April, 1984. An endorsement of the
appellant's contention would amount to enlarging the scope of exemption
which the Court cannot. (537-A-B]
G
K.P. Varghese v. Income Tax Officer, (1982] 1 SCR 629; Union of
India v. Suksha Intemational and Nutan Gems, [1989] 1 SCR 1; Union of
India v. Wood Paper Ltd., [1990] 2 SCR 659 and Collector of Central Excise
v. Newo/i Sugar Factory, (1993] Supp. 3 SCC 69, referred to.

H Indian Express Newspaper v. Union of India, (1985] 2 SCR 287;
ITC PAPER BOARDS LTD. v. CC.E. [HANSARIA.J.] 533

Collector of Central Excise v. Parley Exp01ts (P) Led., [1988] Supp. 3 SCR A
933 and Tata Oil Mills v. Collector of Central Excise, [1989] 3 SCR 839,
distinguished.

CIVIL APPELLATE JURISDICTION Civil Appeal No. 4990
(NM) of 1991.
B
From the Judgment and Order dated 14.11.91 of the Customs, Excise
and Gold (Control) Appellate Tribunal, New Delhi in Appeal No.
E/25.75.87-C.

H.N. Salve, Mrs. Alpana Poddar and Kailash Vasdev for the Appel-
!ant. c
K.T.S. Tulsi, Additional Solicitor General V.K. Verma and
G.Prakash for the Respondent.

The Judgment of the Court was delivered by
D
HANSARIA, J. The only point for determination in this appeal
against the judgment of the Customs, Excise and Gold (Control) Appellate
Tribunal (CEGAT) is whether the appellant is entitled to the exemption
from such portion of excise duty as has been spelt out in Notification No.
108/81 Central Excises dated 24.4.81 read with Notification Nos. 83/84 E
Central Excises dated 2.4.84 and 214/84 Central Excise dated 9.11.84.
(Though there is yet another Notification bearing No. 139/84 dated 2.6.84
that however is not material for our purpose.)

2. All the aforesaid notifications owe their origin to the Central
Government's decision to attract investment in industries manufacturing F
• paper, the bulk of which relating to writing and printing was being im-
ported at the relevant lime. On this subject Minister of State for Industries
made a speech on the floor of the House on 24th April, 1981 regarding
incentives, inter alia, to paper industry and stated about the excise duty
concession to the extent of 50% to those industries which had commenced G
clearance for the first time during the period from 1.4.79 lo 31.3.84.

3. This policy statement saw the first of the aforesaid notifications
which was issued on 24.4.81 itself and exempted printing and writing paper
from so much of duty of excise leviable thereon as was in excess of the
duty calculated at the rate of 50% of the rate of duty leviable on the said H
534 SUPREME COURT REPORTS [1994] 3 S.C.R.

A goods. That notification was issued in exercise of power conferred by Rule
8(1) of the Central Excise Rules, 1984. It had three provisos. The first of
these stated, inter alia, that exemption would be available to the aforesaid
goods which were manufactured in a factory whose clearance had com-
menced from 1.4.79. The second proviso is important for our purpose
which read as below :·
B
"Provided further that the exemption contained in this notifica-
tion shall not apply to clearances of the said goods effected after
the expiry of a period of five years from the date of first clearance
of the said goods from such factory."
c 4. On the matter being taken up with the Government, an amend-
ment was issued on 2.4.84 to the notification of 24.4.81 by substituting the
words 'paper and paper board' for the words 'printing and writing paper'
in the first notification. This apart, the rate of exemption was enhanced to
80%. By the 2nd June, 1984 notification referred in parenthesis earlier, the
D rate was brought down to 50%. Finally came the notification of 9th Novem-
ber, 1984 which substituted the second proviso in the first notification as
below:

"Provided further that the exemption contained in this notifica-
tion shall not apply to clearances of the said goods affected after
E
the expiry of a period of five years from the date of first clearance
of the said goods from such factory or the date of publication of
this notification in the Official Gazette, whichever is later."

(Emphasis supplied)
F
5. Despite exemption of excise duty having been given to the paper
board also by the notification of 2.4.84, the appellant could not get full
benefit of the same because it had started manufacturing paper board in
1979 and the Department is said to have given benefit from 24.4.81 (which
date is irrelevant according to the appellant as stated in the written
G submissions filed on 5th April), and so benefit from 1979 till 1.4.81 got
denied. The contention of the appellant however is that the notification of
9th November, 1984 which stated that the period of exemption would be
from the "date of first clearance of the said goods" or "the date of the
publication of this notification'', whichever is later, would require exemp-
H tion to be given to the appellant from 1979 as the word "this" is in the
ITC PAPER BOARDS LTD. v. CCE [HANSARIA, J.] 535

notification refers not only to the first nolificalion of 24th April, 1981 but A
also the second notification of 2nd April, 1984.

6. On the plain language of the last notification which has been
quoted above, the aforesaid contention cannot be accepted in as much as
the last notification clearly speaks of substitution of the second proviso in
the first notification which is of 24.4.81; and therefore the expression "this
B
notification" appearing in the last notification has to refer to the notifica-
tion of April 1981. Even if these words were to relate to the notification of
November 1984 that cannot helps the appellant in claiming exemption as
notification of November 1984 had not granted any exemption.
c
7. Faced with the aforesaid position as emerging from the literal
interpretation of the notifications at hand, Shri Salve, learned counsel
appearing for the appellant, has strenuously contended that the entire
object behind the exemption and more particularly one sought to be
achieved by the last notification would be only partially achieved if benefit D
were. not to be given to the appellant's clearance of paper board from 1979.
According to the learned counsel the notification of November, 1984 was
required to be issued to take care of an anomaly which would have arisen
in case clearance had started from say from August, 1979 in which event
the five year period would have come to end of August, 1984, because of
which the concession would have really been available for 40 months, that E
is, from April 1981 to August, 1984, as the first notification was issued in
April, 1981 as a result of which the concession could not have been
available for five years to the clearance of the aforesaid type, whereas in
those cases where clearance was from April 1981, full five year exemption
would have been available. It is correct that the notification of November F
1984 takes care of this anomaly by making the terminus a quo relatable to
the date whichever is later.

8. Nothing, however, turns on the aforesaid contention. The appellant
would not be entitled to the exemption as claimed unless we were to agree
that what has been stated in notification of November, 1984 were really to G
take within its fold the notification of April, 1984 also. The strained
submission of Shri Salve in this connection is that though the April, 1984
notification speaks about amendment of the April 1981 notification, that
notification in fact is a substantive one given exemption to paper board and
what has been stated in notification of April, 198l should be read by H
536 SUPREME COURT REPORTS [1994] 3 S.CR.

A reference in the notification of April, 1984. To put it differently, according
to the learned counsel, April 1984 notification re-enacts the contents of
April, 1981 notification in so far as paper board is concerned; and so, the
words "this notification" in November 1984 notification would take within
its fold notification of April, 1984 also. Shri Salve would say that if his
contentions were nol to be accepted the object behind granting of exemp-
B tion, if not frustrated totally, would be made Jame.

9. To persuade us to agree with him, Shri Salve urges and strenuously
that in a case of present nature object must be kept in view; and to support
him, we are referred to a number of decisions of this Court to wit, K.P.
C Varghese v. Income Tax Office1; [1982] 1 SCR 629; Indian Express
Newspaper v. Union of India, [1985] 2 SCR 287; Collector of Central Excise
v. Parley Exports (P) Ltd., [1988] Supp. 3 SCR 933; Union of India v. Suksha
International and Nutan Gems, [1989] 1 SCRl; Tata Oil Mills v. Collector
of Central Excise, [1989] 3 SCR 839; Shri Sitaram Sugar Co. Ltd. v. Union
D of India, J.T. (1990) 1 SC 462; Union of India Y. Wood Paper Ltd., [1990]
2 SCR 659 and Collector of Central Excise v. Newoli Sugar Factory, [1993]
Supp 3 SCC 69. A persual of these decisions show that a Court should
apply its mind to the object and purpose if literal interpretation were inter
alia to give rise to manifest absurdity, which would have been the result in
Varghese and Newoli Sugar Factory cases. The present is apparently not
E such a case. As to the decision in Parley Exports case it may be stated that
there the question was whether benefit of exemption of the concerned
notification which stated about "all kinds of food products and food
preparations" could be extended to non-alcoholic beverages, in trying to
find out which the purpose of exemption was taken not of. The present is
F a case different in nature. The judgment in Indian Express Newspaper's case
(which was mentioned in the written submission of 5th April) is not
relevant as that case deals basically with the scope of Article 19(1) (a) of
the Constitution and has spelt out as to when tax on newspaper industry
would be violative of the freedom protected by the aforesaid clause.

G 10. In Suksha International case, this Court, while concerned with a
beneficial provision of statute opined that the same should not be inter-
preted so as to unduly restrict the beneficial scope of the policy. By
disagreeing with Shri Salve, we would not be doing anything of such nature
inasmuch as to why exemption to paper board was given by the notification
H of April, 1984 and not by April, 1981 notification is really a question pf
ITC PAPER BOARDS LTD. v. C.C.E.[HANSARIAJ.J 537

policy, the scope and width of which ·is for the Government to decide and A
not for this Court. Indeed, by agreeing with Shri Salve we would be
extending the benefit to the appellant though the policy of the Government
as incorporated in April, 1984 notification did not visualise the same. So,
the view taken by us is not one about which it could reasonably be said
that we are interpreting the April 1984 notification with undue restriction.
Indeed, our endorsement of Shri Salve's contention would amount to
B
enlarging the scope of exemption which we cannot.

11. The decision in Tata Oil Mills' case too has no cutting edge,
because there the question for consideration was whether rice brand oil
converted into hydrogenated oil used in manufacturing of soap was entitled C
to rebate. This Court was called upon there to decide whether rice bran
fatty acid is different from rice brand oil, as what had been exempted was
11
such soap as is made from indigenous rice bran oil." This Court took the
view that the Tribunal proceeded on too narrow an interpretation, as while
interpreting the notification of the type which came for consideration, D
Court should apply its mind to the object and purpose of exemption. The
facts of the present case are much different from those which had con-
fronted this Court in Tata Mills' case.

12. The Wood Paper's case (referred in the written submission of 5th
April} supports the broad contention of Shri Salve only partially, as, while E
stating that inequitable and incongruous result flowing from an exemption
notification should be avoided, it has also held that such a notification must
be strictly construed insofar as subject of exemption is concerned. Of
course after ambiguity about applicability of the exemption is removed full
play must be given and at that stage liberal construction would be called F
for.

13. The decision in Shri Sitaran1 Sugar Company's case was con-
cerned with the question of price fixation and it was stated in paragraph
58, which alone is pressed into service by Shri Salve, that the judicial
function in respect of such matter is exhausted when is found to be rational G
basis for the conclusions reached by the concerned authority. Though Shri
Salve has contended that there is no rational basis for granting exemption
from excise duty for full five years to those industries manufacturing paper
board which had started clearance from 2nd April, 1984. Indeed, this
would be discriminatory as highlighted in the aforesaid written submission H
538 SUPREME COURT REPORTS [1994] 3 S.C.R.

A as units which commenced production from 1.4.79 to 1.4.84 would not get
exemption for full five years. If it is borne in mind that the concerned
notification was issued on representation of the Paper industry that con-
fining of the exemption to printing and ivriting paper alone was not
achieving the object, the rationality of the notification becomes apparent
and acceptable. It may be mentioned that in so far as utility of the product
B is concerned, paper board does stand on a footing different from printing
and writing paper. There was therefore no irrationality in exemption of
printing and writing paper from April, 1981 while giving the benefit of the
same to the paper board for the first time from April, 1984. We do not
also read any discriminatory treatment in denying full benefit to those units
C which started production prior to 1.4.84, as, for different purposes dif-
ferent cut off dates may be fixed having regard to the purpose to be
achieved. So, the differential treatment given to the paper board is not even
arbitrary, as good reasons exist for treating it differently and exempting it
from a different date. We do not, therefore, read any vice discrimination
D as submitted.

14. In view of the above, we would hold that what had been stated
in the notification of 9th November, 1984 cannot relate to the notification
of April, 1984. We would add that granting of exemption to the paper
board from 2nd April, 1984 does not suffer from any irrationality or
E discriminatory treatment. So, no case for our interference with the im-
pugned judgment of CEGAT, in exercise of power under Article 136 of
the Constitution, has been made out. The appeal is, therefore, dismissed.
In the facts and circumstances, we leave the parties to bear their own costs.

S.M. Appeal dismissed.