Holding

The amendment was intended to have prospective effect; the word ‘now’ indicates operation henceforth and no retrospective effect.

Summary

Jay Mahakali Rolling Mills challenged the recovery of excise duty and penalty on the ground that bars and rods made from ship‑breaking scrap were exempt under Notification No.101/87‑CE dated 27 March 1987. The issue before the Supreme Court was whether the amendment, communicated through a circular dated 31 March 1987, was intended to operate retrospectively or prospectively. The Court examined the language of the circular, particularly the use of the word “now”, and held that it signified that the exemption would apply henceforth, not to past periods. Consequently, the amendment was deemed to have prospective effect and could not be said to merely clarify an earlier notification. The Supreme Court dismissed both Civil Appeal No. 5109 of 2002 and Civil Appeal No. 855 of 2006, upholding the decisions of the CEGAT and the Gujarat High Court.

Issues considered

Whether the amendment effected by the circular dated 31‑March‑1987 operates retrospectively or prospectively.
Whether the word ‘now’ in the circular indicates prospective application.
Whether the amendment merely clarifies the earlier notification or introduces a new exemption.

Legislation cited

Central Excise and Salt Act, 1944s. 6
Central Excise Rules, 1944s. Rule 173-B, s. Rule 173-F(3), s. Rule 173-G(1), s. Rule 173-G(2), s. Rule 174, s. Rule 174-F, s. Rule 49, s. Rule 52-A, s. Rule 53, s. Rule 54, s. Rule 9(2), s. Section 11-A

Subjects

central exciseexemptionprospective effectretrospective effectstatutory interpretationcircularnotificationexcise dutypenaltyship breaking scrap

Judgment

JAY MAHAKALI ROLLING MILLS A
v.
UNION OF INDIA AND ORS.

AUGUST 6, 2007

[DR.ARIJITPASAYAT ANDLOKESHWARSINGHPANTA,JJ.] B

Central Excise-Circular issued with regard to amendment relatable
to Central Excise Notification whereby bars and rods made from ship breaking
scrap were exempted from excise duty-Word "now" used as prefix before the C
word "exempt"-Held: Effect of the word "now" is that it is to operate
henceforth-Amendment was intended to have prospective effect.

Words and Phrases-Words 'now' and 'retrospective '-Meaning of

Interpretation of Statutes-Retroactive statute-Held: Means a statute,
which creates a new obligation on transactions or considerations or destroys D
or impairs vested rights.

Circular dated 31-3-1987 was issued with regard to amendment relatable
to Central Excise Notification No.101/87-CE, dated 27-03-1987 whereby bars
and rods made from ship breaking scrap were exempted from excise duty. E
The question which arose for consideration in the present appeals is
whether the amendment was intended to have prospective effect or retrospective
effect

Dismissing the appeals, the Court
F
HELD: 1.1. A bare reading of the circular clearly shows that it was
intended to have prospective effect. [Para 71 )858-E)

1.2. In the Circular dated 31.3.1987 it has been stated that the "products
like bars and rods made from such ship breaking scrap would "now" exempt G
from excise duty". The effect of the word "now" is that it is to operate
hencef~ rth. If the intention was to give retrospective effect, it would have t een
stated to be so specifically. tpara 8) f858-F)

2. "Retrospective" means looking backward, contemplating what is past,
855 H
856 SUPREME COURT REPORTS (2007) 8 S.C.R.

A having reference to a statute or things existing before the Statute in question.
Retrosp«tive law means a law which looks backward or contemplates the past; ,--
one, which is made to affect acts or facts occurring, or rights occurring,
before it comes into force. Retroactive statute means a statute, which creates
a new obligation on transactions or considerations or destroys or impairs
B vested rights. (Para 9) (858-G-H; 859-A)

3. By the amendment relatable to Notification on 27.3.1987, items which
were earlier not included were specified as inputs and have been included.
That being so, the contention that the amendment merely clarified the
notification as it stood prior to the amendment, is untenable.
(Para 10) (859-A-B)
c
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5109 of2002.

From the Judgment and Order dated 15.1.2002 of the High Court of
Gujarat, at Ahmedabad in S.C.A. No. 2816 of 200 l.
--
D WITH

Civil Appeal No. 855 of2006.

A.n Maru, Bhargava V. Desai, Rahul Gupta, Reema Shanna for the
Appellant.
E B. Krishna Prasad for the Respondent.

The Judgment of the Court was delivered by

DR. ARIJIT PASA VAT, J. 1. Challenge in these appeals is to the order
F passed by the Division Bench of the Gujarat High Court dismissing the writ
petition filed against the orders of the Cus.toms, Excise & (Gold) Control .-<
AppeUateTribunal, West Regional Bench, at Mumbai (in short 'CEGAT).

2. Background facts in Civil Appeal No.5109 of 2002 in a nutshell are
as follows:

G A s~ow-cause notice was issued to the appellant alleging that the
appellant was not entitled to the exemption un.der Notification No.208/83-CE
dated l.8.1983 on the final product falling under Tariff Item No.25(9)(ii).
Allegation was that the appellant M/s Jay Mahakali Rolling Mills had
contravened the provisions of Rule 174 of the Central Excise Rules, 1944 (in
H short the 'Rules') read with Section 6 of the Central Excise and Salt Act, 1944
JAY MAHAKALI ROLLING MILLSv. U.0.1. [PASAVAT, J.] 857

(in short the 'Act) and Rules 173-B; 53 read with 173-G(4); 9( 1), 49, 52-A read A
with 173-G(l), 173-G(2)and 174-F; 54 read with 173-F(3) of the Rules and
thereby committed the offence of the nature described in clauses (a), (b), (c)
& (d) of sub rule (1) of Rule 173(Q) of the Rules by reasons of wilful
misstatement, suppression of facts with intent to evade payment of central
excise duty. The appellant was, therefore, asked to show-cause as to why
Central Excise Duty amounting to Rs.12,67,006.19, on 3473.705.2.2 MT excisable B
goods i.e. rolling products manufactured and cleared by it without payment
of duty for the period 23.8.1984 to 31.8.1987 should not be recovered from it
under Rule 9(2) of the Rules read with proviso to sub-section(l) of Section
11-A of the Act. They were also required to show-cause•as to why penalty
should not be imposed under clauses (a), (b), (c) and (d) of sub Rule (1) of C

- Rule 173-Q and Rule 9(2) of the Rules. In response, appellant submitted that ·
in Notification No.101/87-C.E. dated 27.3.1987 materials were specified as
inputs in view of the amendment. It was submitted that there was no ill-
intention or suppression of facts and/or intention to evade duty. Therefore,
penalty cannot be imposed. The Adjudicating Authority rejected the contention
and held that duty and penalty were leviable. The order was challenged D
before the CEGAT which dismissed the appeal. It was held that the amendment
made to the notification on 27.3 .1987 has prospective application and has no
retrospective application as contended by the appellant. It was further held
that items which were earlier included were specified. Therefore, the stand
that the amendment was merely clarificatory is without any substance. It was E
held that duty liable was to be reduced by the duty payable from 27 .3.1987
to 31.8.1987 amounting to Rs.2,28.898.80. The penalty was reduced to Rs.75,000/
-.
3. In the appeal before the High Court stands taken before the
Adjudicating Authority and CEGA T were reiterated. The High Court by the f
impugned order held that there was no basis to accept the contention that
the notification was intended to be given retrospective effect. The writ petition
was dismissed. · ·

4. In support of the appeal, learned counsel for the appellant submitted
that the view of the authority, the CEGAT and High Court cannot be maintained. G
The amendment brought about by Notification No. IO 1/87-C.E. dated 27.3.1987
was merely clarificatory. The CEGA T wrongly held that the said notification
was operating with prospective effect. Material on record pointed to the
contrary. Learned counsel for the respondents supported the orders of the
courts below and the High Court. H
858 SUPREME COURT REPORTS (2007] 8 S.C.R.

A 5. Circular dated 31.3 .l 987 reads as follows:

"C.B.S.E.
CIRCULARS & CLARIFCATIONS ON
EXCISE & CUSTOMS

B CUSTOMS CIRCULARS

F.No.374/71/86-TRU Dated: 31.3.1987
M.O. Fin. (Deptt. Of Rev.)

Subject: Changes in the customs duty structure in respect of ships for
C breaking up falling under heading No.89.08 and tne excise
duty structure in respect of ship breaking scrap falling under
heading Nos. 72.15 and 73.09 regarding.

In accordance with the customs Notifications Nos. 142/87 to 143/87 and
central excise Notification Nos: 101/87 and 103/87, all dated the 27th March,
D 1987 certain changes have been made in the customs duty structure relating
to ships-for breaking and excise duty structure in respect of ship breaking
scrap.

xxx

E 6. Thus, various products like bars and rods made from such ship
breaking scrap would now be exempt from excise duty.

7. A bare reading of the circular clearly shows that it was intended to
have prospective effect.

F 8. It is to be noted that in the Circular dated 31.3.1987 it has been stated
that the "products like bars and rods made from such ship breaking scrap
would "now" exempt from excise duty". The effect of the word "now" is that
it is to operate henceforth. If the intention was to give retrospective·effect,
it would have been stated to be so soecifically.
G 9. "Retrospective" means looking backward, contemplating what is ·past,
having reference to a statute -or things existing before the Statute in question.
Retrospective law means a law which looks backward or contemplates the )
past; one, which is made to affect acts or facts occurring, or rights occurring,
before it comes into force. Retroactive statute means a statute, which creates
H a new obligation on transactions or considerations or destroys or impairs
JAY MAHAKALI ROLLING MILLS v. U.0.1. [PASAYAT, J.] 859
vested rights. A
10. By the amendment relatable to Notification on 27.3.1987, items which
were earlier not included were specified as inputs have been included. That
being so, the contention that the amendment merely clarified the notification
as it stood prior to the amendment, is untenable.
B
I I. Looked at from any angle the High Court order does not suffer from
any infirmity to warrant interference. The appeal is dismissed.

12. In view of dismissal of Civil Appeal No.5109 of2002, Civil Appeal
No.855 of 2006 is dismissed.
c
B.B.B. Appeals dismissed.