Supreme Court of India
M/S. SPENTEX INDUSTRIES LTDversusCOMMISSIONER OF CENTRAL EXCISE & ORS.
- Citation
- 2015 INSC 756
- Decided
- 9 October 2015
- Disposal
- Appeal(s) allowed
- Bench
- A K SIKRI
Holding
Exporters are entitled to claim rebate of excise duty on both the final product and the inputs used in its manufacture under Rule 18 of the Central Excise Rules, 2002.
Summary
The appellant, Spentex Industries Ltd., manufactured polyester yarns, paid excise duty on both the raw materials and the finished products, and exported the goods. It claimed rebate of duty on both inputs and final goods under Rule 18 of the Central Excise Rules, 2002, filing 45 rebate applications. The Revenue rejected the claim, holding that only one of the two duties could be rebated. The Supreme Court examined the historical development of the excise rebate scheme, the purpose of Rules 18 and 19, the Government's notifications (Nos. 19/2004‑CE(NT) and 21/2004‑CE(NT)), and the interpretation of the word "or" in Rule 18. It concluded that the legislature intended exporters to obtain rebates on both the excise duty paid on inputs and on the final product, and that "or" must be read as "and" to avoid absurdity. Consequently, the Court set aside the lower courts' orders and allowed the appeals.
Issues considered
- Whether Rule 18 of the Central Excise Rules, 2002 permits an exporter who has paid excise duty on both inputs and the final product to claim rebate on both duties.
- How the word "or" in Rule 18 should be interpreted in the context of the statutory scheme.
Legislation cited
- Central Excise Act, 1944s. 11B
- Central Excise Rules, 2002s. Rule 18, s. Rule 19
- Central Excise Tariff Act, 1985
Subjects
Central Exciserebate of dutyRule 18exportexcise duty on inputsexcise duty on final productstatutory interpretationword "or" vs "and"
Judgment
[2015] 11S.C.R.487
M/S. SPENTEX INDUSTRIES LTD. A
v.
COMMISSIONER OF CENTRAL EXCISE & ORS.
(Civil Appeal No.1978 of 2007) B
OCTOBER 09, 2015
[A.K. SIKRI AND R. F. NARIMAN, JJ.]
Central Excise Rules, 2002 - rr. 18, 19 - Rebate of duty C
- Claim. of, by exporter of manufactured product - Excise
duty paid on a manufactured product and also on the inputs
which have gone into manufacturing the product - Held:
Exporters are entitled to both the rebates u/r. 18 and not one
kind of rebate - Notification No. 1912004-CE(NT) dated D
September 06, 2004 and Notification No. 21/2004-CE(NT)"
dated September 06, 2004.
Allowing the appeals, the Court
E
HELD: 1.1 The High Court did not take correct view,
which is a myopic view and ignores the overall scheme
pertaining to grant of rebate in respect of goods exported
out of India. The exporters-appellants are entitled to both
the rebates under Rule 18 of the Central Excise Rules, F
2002 and not one kind of rebate. The impugned
judgments are set aside. [Para 16, 27] [500-H; 501-A;
512-F-G]
1.2 the multiple reasons for arriving at the said G
. conclusion are as follows:
(i) Historical perspective of the statutory
scheme:The historical narration of the relevant
provisions from time to time depict one common theme,
H
487
488 SUPREME COURT REPORTS [2015] 11 S.C.R.
A namely, to provide rebate of duty paid on the excisable
goods as well as the duty paid on material used in the
manufacture of goods. [Paras 16, 19] [ 501-B; 503-G]
(ii) Scheme of the Rules: Rules 18 and 19 of the
B Rules, 2002 provide two alternatives to the exporter
enabling him to get the benefit of exemption from paying
the excise duty. Under Rule 19, exporter is not required
to pay any excise duty_ at all. At the time of removal of
these goods from the factory gate of the producer or the
C manufacturer or the warehouse or any otlier premises,
he is supposed to comply with the conditions,
safeguards and procedure, as may be notified by the
Board. Such a procedure provides for execution of a
bond which, inter alia, lays down the condition that the
D goods which are cleared are actually meant for export
and he is to furnish the proof that those goods are
actually exported. What is important is that when the
exporter opts for this method, with the approval of the
Commissioner, he is not required to pay duty either on
E the final product, i.e., on excisable goods or on the
material used in the manufacture of those goods. The
intention is loud and clear, namely, the goods which are
meant for exports are free from any excise duty. It
F extends not only to the material which is used in the
manufacture of goods but also TO the goods that ate
produced and ultimately exported. Once this scheme is
kept in mind, it cannot be the-intention of the Legislature
to provide rebate only on one item in case a particular
G exporter/manufacturer opts for other alternative under
Rule 18, namely, paying the duty in the first ins"tance and
then claiming the rebate. Giving such restrictive meaning
to Rule 18 would not only be anomalous but would lead
to absurdity as well. In fact, it would defeat the very
H purpose of grant of remission from payment of excise
SPENTEX INDUSTRIES LTD.v. COMMISSIONER OF 489
CENTRAL EXCISE
duty in respect of the goods which are exported out of A
India. It may also lead to invidious discrimination and
arbitrary results. [Para 19] [503-H; 504-A-H]
(iii) Government's own perception: Rule 18 is
enabling provision which authorises the Central 8
Government to issue a notification for grant of these
rebates. Exercising powers under this Rule, the Central
Government has issued necessary notifications for
rebate in respect of both the duties, i.e., on intermediate
product as well as on the final product. Further, these c
notifications providing detaiJed procedure for claiming
such rebates contemplate a situation where excise duty
may have been paid both on the excisable goods and
on material used in the manufacture of those goods and
enables the exporter to claim rebate on both the duties. D
This kind of procedure and format of prescribed Forms
becomes a clincher insofar as understanding of the
Government of Rule 18 is concerned. It is to be borne in
mind that it is the Central Government which has framed
the Rules as well as issued the notifications. If the Central E
Government itself is of th~ opinion that the rebate is to
be allowed on both the forms of excise duties the
government is bound thereby and the rule in-question
has to interpreted in accord with this understanding of
the rule maker itself. Another principl~ of interpretation F
of statutes, principle of contemporanea expositio also
becomes applicable which is manifest from the act of
the Government in issuing two notifications giving effect
to Rule 18. [Paras 19, 20, 21] [505-D-H; 506-A; 507-H; G
508-A]
(iv) Interpretation of word 'OR' occurring in Rule 18:
The word 'OR' occurring in Rule 18 cannot be given literal
interpretation as that leads to various disastrous results
and, therefore, this word has to be read as 'and' as that H
490 SUPREME COURT-REPORTS [2015] 11 S.C.R.
A is what was intended by the rule maker in the scheme of
things and to carry out the· objectives of the Rule 18 and
also to bring it at par with Rule 19. The word 'or' is
normally disjunctive and 'and' is normally conjunctive
However, there may be circumstances where these
B words are to be read as vice-versa to give effect to
manifest intention of the Legislature as disclosed from
.the context. These two words normally 'or' and 'and' are
to be given their literal meaning in unless some other
part of same Statute or the clear intention of it requires
C that to be done. However, wherever use of su~h a word,
viz., 'and'/'or' produces unintelligible or absurd results,
the Court has power to read the word 'or' as 'and' and
vice-versa to give effect to the intention of the Legislature
which is otherwise quite clear. [Paras 22, 23, 24] [510;0-
0
H; 511-A] .
R & B Falcon (A) Pty Ltd. v. Commissioner of
Income Tax 2008 (7) SCR 804: (2008) 12 SCC
466; Desh Bandhu Gupta and Co. and others v.
E Delhi Stock Exchange Association Ltd (1979) 3
SCR 373; State of J?ombay v. R.M.D.
Chamarbaugwala (1957) 1 SCR 874; J.
Jayalalitha v. Union of India 1999 (3) SCR 653:
(1999) 5 SCC 138; Mazagaon Dock Ltd. v. The
F Commissioner of Income Tax and Excess Profits
·Tax (1959) 1 SCR 848 - referred to.
Case Law Reference
2008 (7) SCR 804 referred to Para 20
G
(1979) 3 SCR 373 referred to Para 21
(1957) 1 SCR 874 referred to Para 24
1999 (3) SCR 653 referred to Para 25
H (1959) 1 SCR 848 referred to Para 26
SPENTEX INDUSTRIES LTD. v. COMMISSIONER OF ' 491
CENTRAL EXCISE
CIVIL APPELLATE JURISDICTION: Civil Appeal No. A
1978 of2007
From the Judgment and Order dated 19.04.2006 and
03.05.2006 of the High Court of Bombay at Nagpur in WP No.
683 of2006
B
wrtH
C.A.Nos. 2025-2026, 2027 & 10534 of2013
V. Sridharan, Ravinder Narain, Ajay Aggarwal, Mallika
Joshi, Ruchika, Rajan Narain, M. P. Devanath, Vivek Sharma, C
R. Ramachandran, Hemant Bajaj, Anandh K., Aditya
Bhattacharya, L. Charnaya for the Appellant.
K. Radha Krishnan,Arijit Prasad, R. Malhotra, B. Krishna
Prasad for the Respondents. · ·
D
The Judgment of the Court was delivered by
A.K. SIKRI, J. 1. In all these appeals, the basic question
of law which arises for consideration is as to whether or not
the manufacturer/exporter is entitled to rebate of the excise
duty paid both on the inputs and .on the manufactured product, E
when excise duty is paid on a manufactured product and also
on the inputs which have gone into manufacturing the product
and such manufactured product is exported?
2 . We may point out at the outset that, as per the scheme F
provided by the relevant Rules framed under the Central Excise
Act, 1944 (hereinafter referred to as the 'Act') two options are
admissible in respect of exemption from excise duty which is
to be given when the goods manufactured are meant for export
and are actually exported. A manufacturer/exporter can either G
export the said goods without payment of duty by executing a
bond to the effect that goods are meant for export and would
be· actually exported and also undertakes to satisfy other
stipulated conditions, to earn the exemption from payment on
excise duty. Other option is to pay the duty on intermediate H
492. SUPREME COURT REPORTS [2015) 11 S.C.R.
A products and/or final products and thereafter claiming rebate
from the Government once the goods are actually exported.
When the manufacturer/exporter exercises first option,
admittedly no duty is to.be paid either on intermediate products
or on final products. However, the dispute has arisen when
B second option is executed. In such a case, the Department
has taken the stand that as per the relevant rules, the rebate is
admissible in respect of one duty alone, i.e., either on the duty
paid excisable goods or duty paid on materials used in the
manufacture or processing o.f such goods but not on both the
C final as well as intermediate products. The authorities below,
as would be noticed, in all these cases have accepted the
version of the Revenue. Therefore, in these four appeals,
assessees are the appellants.
D 3. After giving the aforesaid preliminary background
thereby putting the issue in perspective, that has arisen for
consideration we may take note of the factual background.
For the purpose of convenience, it would be sufficient if we
traverse through the facts that emerge from Civil Appeal No.
E 1978 of2007.
The appellant/assessee, in this appeal, is engaged in
the manufacturing of polyester cotton blended yarn and
polyester viscose blended yarn and both these products fall
F under Chapter 55 of the Schedule to the Central Excise Tariff
Act, 1985. For manufacture of the aforesaid product, the
assessee had used the raw material which was an
intermediate product and paid excise duty thereupon. The
final products were also cleared on payment of excise duty on
G those finished products. The assessee had exported these
goods on payment of central excise duty in the CENVAT
account and, thereafter, filed as many as forty-five rebate
claims amounting to ~ 1,46,90,995/- (~ 75,42,487/- +
H ~ 71,48,508/-) in the months of November and December,
SPENTEX INDUSTRIES LTD. v. COMMISSIONER OF 493
CENTRAL EXCISE [AK. SIKRI, J.]
2004 respectively. These rebate claims were filed under the A
provisions of Rule 18 of the Central Excise Rules, ·2002
(hereinafter referred to as the 'Rules').
4. On receipt of the aforesaid rebate claims, the
Department issued show cause notice dated January 11, 2005 B
whereby the assessee was called upon to show cause as to
whythe rebate claimed by the assessee be not rejected as it
was contrary to the provisions of Rule 18 of the Rules read
with Section 11 B of the Act and the Notification issued
thereunder, i.e., Notification No. 19/2004-CE(NT) dated C
September 06, 2004. After considering the reply that was given
by the assessee, the Deputy Commissioner of Central Excise,
Division-II, Nagpur rejected the rebate of duty paid on the final
product exported as well as the claim of rebate of duty paid on
inputs contained therein by passing Order-in-original dated D
January 28, 2005. Aggrieved by this order, the assessee filed
the appeal before the Commissioner of Central Excise
(Appeals), Nagpur. This appeal was decided by orders dated
March 15, 2005 holding that in terms of Rule 18 of the Rules,
the assessee is entitled to one of the two claims for rebate, E
i.e., either rebate of duty paid on exported goods or the duty
paid on inputs used in the exported goods, and not on both of
them. He, thus, remitted the case back to the Deputy
Commissioner to decide the claim of the assessee after
F
granting personal hearing to the assessee and taking its opticm
as to which of the two claims assessee wanted to prefer.
5. Still not satisfied with this partial relief given by the
Commissioner (Appeals), as the assessee wanted rebate on
both types of excise duties paid, the assessee challenged the G
order of the Commissioner (Appeals) by filing Revision
Application before the Joint Secretary to the Government of
India under Section 35EEoftheAct. This RevisionApplication
of the assessee was decided in its favour as the Joint
H
494 SUPREME COURT REPORTS [2015] 11 S.C.R.
A Secretary held that the assessee was entitled to rebate both
on the exported goods as well as inputs used in the exported
goods. It was now the turn of the Department to feel dissatisfied
with the aforesaid outcome and, therefore, it challenged the
aforesaid revisional order by filing the writ petition in the High
B Court of Bombay, Nagpur Bench. This writ petition has been
decided in favour of the Revenue whereby the view taken by
the Joint Secretary to the Government of India is reversed and
that of Commissioner (Appeals) is upheld holding that out of
the two excise duties, Rule 18 of the Rules permits rebate only
C qua one of them and not on the both duties.
6. Special Leave Petition against this judgment of the
Bombay High Court was preferred by the assessee in which
leave was granted. That is how present appeal comes up for
D hearing to decide the question of law th9t has arisen for
consideration.
7. Before embarking on the case that is pleaded by both
sides on the interpretation of the relevant provisions of the Act
E and Rules, and in particular Rule 18 of the Rules, it is imperative
to scan through those provisions. First of all, we take note of
the relevant statutory provision in the Act which is Section 11 B
thereof. That portion of this long provision, which is relevant
for us, is extracted below:
F
"S. 11 B. Claim for refund of duty and interest, if any,
paid on such duty.-(1)Anyperson claiming refund of
any duty of excise and interest, if any, paid on such duty
may make an application for refund of such duty and
G interest if any, paid on such duty to the Assistant
Commissioner of Central Excise or Deputy
Commissioner of Central Excise before the expiry of one
year from the relevant date in such form and manner as
may be prescribed and the application shall be
H
SPENTEX INDUSTRIES LTD. v. COMMISSIONER OF 495
CENTRAL EXCISE [A.K. SIKRI, J.]
accompanied by such documentary or other evidence A
including the documents referred to in section 12A as
the applicant may furnish to establish that the amount of
duty of excise and interest if any, paid on such duty in
relation to which such refund is claimed was collected
from or paid by him and the incidence of such duty and B
interest if; any, paid on such duty had not been passed
on by him to any other person:"
8. Thereafter, Central Excise Rules, 2002 were framed
by the Central Government in exercise of powers contained in C
Section 37 of the Act. As mentioned above, the scheme of the
r~levant Rules or the subject matter of the issue at hand
provides for two options insofar as payment of excise duty on
the products meant for exports are concerned. Under Rule
18, an exporter has the option to pay the duty and then claim D
rebate thereof and under Rule 19, export can be made without
payment of duty on execution of a bond. Both these rules are
given below.
"Rule 18. Rebate of duty.- Where any goods are E
exported, the Central Government may, by notification,
grant rebate of duty paid on such excisable goods or
duty paid on materials used in the manufacture or
processing of such goods and the rebate shall be subject
to such conditions or limitations, if any, and fulfillment of F
such procedure, as may be specified in the notification.
Rule 19. Export without payment of duty.- (1) Any
excisable goods may be exported without payment of
duty from a factory of the producer or the manufacturer G
or the warehouse or any other premises, as may be
approved by the Commissioner.
(2) Any material may be removed without payment of
duty from a factory of the producer or the manufacturer H
496 SUPREME COURT REPORTS [2015] 11 ~.C.R.
A or the warehouse or any other premises, for use in the
manufacture or processing of goods which are exported,
as may be approved by the Commissioner.
xxxxxxxxx"
8
9. Obviously, the controversy that arises is qua
interpretation that is to be accorded to Rule 18. The Rule
stipulates that the Central Government may, by notification,
grant rebate of duty paid on such excisable goods OR duty
c paid on material used in the manufacturing or processing of
such goods. The word 'OR' which is used in between the two
kinds of duties in respect of which rebate can be granted is
the bone of contention and it is to be interpreted whether it
postulates grant of one of the two duties or both the duties can
D be claimed. It is also to be noted at this stage itselHhat Rule
18 is only an enabling provision which empowers the Central
Government to issue a notification for grant of these rebates
and prescribes the procedure for claiming such rebate(s).
E 10. As is clear from the bare reading of Rule 18, the
manner of getting the rebate under the said Rule has to be as
per the procedure that may be specified in the notification.
11. The Central Government has issued Notification No.
F 19/2004-CE(NT) dated September 06, 2004 which deals with
grant of rebate of whole of duty on excisable goods exported.
The opening portion of this Notification, which needs to be
taken note of, is as under: ·
"In exercise of the powers conferred by rule 18 of the
G Central Excise Rules, 2002 and in supersession of the
Ministry of Finance, Department of Revenue, notification
No. 40/2001-Central Excise (N.T.), dated the 261h June
2001, [G.S.R. 469(E), dated the 26 1h June, 2001] insofar
as it relates to export to the countries other than Nepal
H
SPENTEX INDUSTRIES LTD. v. COMMISSIONER OF 497
CENTRAL EXCISE [A.K. SIKRI, J.]
and Bhutan, the Central Government hereby directs that A
there shall be granted rebate of the whole of the duty
paid on all excisable goods falling under the First
Schedule to the Central .Excise Tariff Act, 1985 (5 of 1986)
exported to any country other than Nepal and Bhutan,
subject to the conditions, limitations and procedures B
specified hereinafter-
xxxxxxxxx"
12_. It also lays down conditions and limitations for
claiming such rebate as well as procedure which needs to be C
fulfilled. The provision, inter alia, prescribes the time limit within
which claim for rebate to Central Excise is to be presented.
What is relevant for the purposes of present case is the Form,
as per which application for removal of excisable goods for D
export is to be made and the same is prescribed in Annexure
2 to the Rules. Column 3 thereof reads as under:
"xxxxxxxxx
3. I/We hereby certify that the above-mentioned goods E
have been manufactured.
(a) availing facility/without availing facility of Cenvat credit
under Cenvat Credit Rules, 2002. ·
(b) availing facility/without availing facility under F
Notification No. 21/2004-Central Excise (N.T.), dated the
61h September, 2004 issued under rule 18 of Central
Excise Rules, 2002.
(c) availing facility/without availing facility under G
Notification No. 43/2001-Central Excise (N.T.), dated the
26 1h June, 2001 issued under rule 19 of Central Excise
(No. 2) Rules, 2001. ·
xxxxxxxxx" H
498 SUPREME COURT REPORTS [2015] 11 S.C.R.
A 13. The aforesaid Notification, as is evident from the
reading thereof, deals with grant of rebate of duty paid on the
finished goods, that are ultimately exported. There is yet another
Notification No. 21/2004-CE(N.T.); dated September06, 2004
issued by the Government for claiming rebate of whole of the
B duty paid on excisable goods used in the manufacture or
processing of exported goods, as is clear from the reading of
the opening para thereof: ·
"In exercise of the powers conferred by rule 18 of the
c Central Excise Rules, 2002 and in supersession of the
Ministry of Finance, Department of Revenue, notification
No. 41/2001-Central Excise (N.T.), dated the 26th June,
2001 [G.S.R. 470(E) dated the 26th June 2001], the
Central Government hereby, directs that rebate of whole
D of the duty paid on excisable goods (hereinafter referred
to as 'materials') used in the manufacture or processing
of export goods shalL on their exportation .out of India, to
any country except Nepal and Bhutan, be paid subject to
the conditions and the procedure specified hereinafter."
E
14. This Notification also prescribes, inter alia, the
procedure for export in the specified format which is Form
ARE2 appended asAnnexure 2B's Rules and envisages filing
of combined application for removal of goods for export under
F the claim for rebate of duty paid on excisable material used in
the manufacture and packing [i.e., intermediate product used
as raw material] as _well as duty paid on the final product for
export. This form, thus, enables the manufacturer of the final
product exported to claim rebate of both kinds of duties paid.
G That becomes evident from the following portion of the said
form:
"FormA.R.E. 2
H Combined application for remova: of goods for export
SPENTEX INDUSTRIES LTD. v. COMMISSIONER OF 499
CENTRAL EXCISE [A.K. SIKRI, J.]
under claim for rebate of duty paid on excisable materials A
used in the manufacture and packing of such goods and
removal of dutiable excisable goods for export under
claim for rebate of finished stage Central Excise Duty or
under bond without payment of finished stage Central
Excise Duty leviable on export goods. B
To
The Superintendent of Central Excise,
(Address) c
.................. (full postal address)
1. Particulars of the Assistant Commissioner of
Central Excise or the Deputy Commissioner of Central D
Excise from whom rebate shall be claimed/with whom
bond is executed and his complete postal
address- - - - -
2. I/We of propose to export the E
under mentioned goods (details of which are given in
Table 1 below) to _ _ (country of destination) by air/
sea/land/post parcel under claim for rebate of duty paid
on excisable materials used in the manufacture and
packing of such goods. F
3. *The finished goods being exported are not
dutiable.
Or
We intended to claim the rebate of Central Excise Duty G
paid on clearances of goods for export under notification
No. 19/2004-Central Excise (N.T.), dated the 6 1h
September, 2004 issue~ under Rule 18 of Central Excise
Rules, 2002."
H
500 SUPREME COURT REPORTS [2015] 11 S.C.R.
A 15. The argument of learned counsel for the appellant is
that it has always been the policy of the Central Government to
exempt the goods from payment of excise duty both on the
final excisable products as well as on material used in the
manufacturing of goods for payment of duty if the goods are
B meant for export outside India. Moreover, Rule 18 is only an
enabling provision and in exercise of pqwers contained in this
Rule, the Central Government has also issued notification for
grant of rebate or duty paid on excisable goods as well as
dufy paid on material used in the manufacture of goods. Even
C the notifications which prescribe the procedure contemplate
a situation where duty may have been paid not only on the
excisable goods but on the material used in the manufacture
of goods and provide for claiming the rebate in respect of duty
paid on both these goods. It was also argued that the order of
0
the Joint Secretary, Government of India further shows the
mind of the Government itself, disclosing that both the duties
are eligible for grant of rebate. On that basis, it is argued that
Rule 18 has to be interpreted keeping in view the overall
E scheme of the statute and the Rules and the manner in which
the Government itself operated the said Rule. Learned counsel
forthe respondent, on the other hand, predicated his arguments
on the plain and grammatical meaning that needs to be
accorded to Rule 18 of the Rules by arguing that the word 'OR'
F used therein clearly signifies that it is one of the two duties to
which the rebate can be granted and not both. For this purpose,
reasoning given by the High Court was adopted with the
submission that it was in accord with the cardinal principle of
literal interpretation and, therefore, the view of the High Court
G was correct in law.
16. After giving due consideration to the respective
submissions, in the light of statutory scheme envisaged for
grant of rebate in the Act and Rules, we are constrained to
H hold that the High Court has not taken correct view, which we
SPENTEX INDUSTRIES LTD. v. COMMISSIONER OF 501
CENTRAL EXCISE [A.K. SIKRI, J.]
feel is a myopic view and ignores the overall scheme pertaining A
to grant of rebate in respect of goods exported out of India.
There are multiple reasons for arriving at this conclusion which
are discussed hereinafter.
..
(i) Historical perspective of the statutory scheme: B
Central Excise Rules under the Act were first framed in
the year 1944. Rule 12 thereof provided for rebate of
duty and Rule 13 enabled exporter to export the goods
without payment of duty. Relevant portion of these Rules
was as under: C
"Rule 12. Rebate of duty.- The Central Government
may, from time to time, by notification in the Official
Gazette, grant rebate of -
D
(a) duty paid on the excisable goods;
(b) duty paid on materials used in the manufacture of
goods; if such goods are exported outside India or
shipped as provision or stores for use on board a ship
proceeding to a foreign port, or supplied to a foreign E
going aircraft to such extent and subject to such
safeguards, conditions and limitations as regards the
class or description of goods, class or description of
materials used for manufacture thereof, destination, F
mode of transport and other allied matters as may be
specified in the notification.
. xxxxxxxxx
Rule 13. Export in bond of goods on which duty G
has not been paid.-(1) The Central Government may,
from time to time, by notification in the Official Gazette -
(a) permit export of specified excisable g~ods in bond
without payment of duty, in the like manner, as the goods H
502 SUPREME COURT REPORTS [2015] 11 S.C.R.
A regarding which the rebate is granted under sub-rule (i)
of rule 12 from a factory of manufacture or warehouse or
any other premises as may be approved by the
Commissioner of Central Excise;
B "(b) specify materials, removal of which without payment
of duty from the place of manufacture or storage for use
in the manufacture in bond of export goods may be
permitted by Commissioner of Central Excise;
c (c) Allow removal of excisable material without payment
of duty for the manufacture of export goods, as may be
specified, to be exported in execution of one or more
export orders; or for replenishment of duty paid materials
used in the manufacture of such export goods already
D exported for the execution of such orders, or both;
subject to such safeguards, conditions and limitations
as regards the class or description of goods, class or
description of materials useJ for manufacture thereof,
E destination, mode of transport and other allied matters
as may be specified in the notification which the exporter
undertakes to abide by entering into a bond in the proper
form with such surety or sufficient security, and under such
conditions as the Commissioner approves.
F
xxx xxx xxx ''
17. It is manifest from the reading of the aforesaid Rules
that from the very beginning, two aiternative methods were
provided enabling an exporter of goods to get rid of the burden
G of paying the excise duty; both on excisable goods as well as
on mater:als used in the manufacture of goods. The exporter
could either claim rebate when the duty was paid. Or else, he
was free not to pay excise duty at all on both types of goods by
H executing a bond in the prescribed form and fulfilling the
SPENTEX INDUSTRIES LTD. v. COMMISSIONER OF 503
CENTRAL EXCISE [A.K. SIKRI, J.]
conditions prescribed in this behalf. The grant of rebate, in A
either of the options, has always been in respect of both kinds
of excise duties, i.e. on the final product that is exported as
well as on the intermediate product on which excise duty is
paid/payable and the same is·used as raw material in the
manufacture of goods. Under these Rules also, Notification ~
•No. 41/94-CE(NT), dated September 12, 1994 and Notification
No. 42/94-CE(NT), dated September 21, 1994 were issued
for grant of rebate of duty on export of all excisable goods,
except minerals oils and ship stores and rebate on materials
used in manufacture of goods exported out of India, ·c
respectively.
18. The aforesaid Rules of 1944 were replaced by
Central Excise Rules, 2001. In these rules, relevant provisions
were Rules 18 and 19. It is not necessary to reproduce these D
Rules which are same as Rules 18 and 19 of the existing Rules.
Under these Rules also similar Notifications were issued, i.e.,
Notification No. 40/2001-CE(NT) dated June 26, 2001 and
Notification No. 41/2001-CE(NT) dated June 26, 2001
providing for rebate of whole of duty on excisable goods when E
exported as well as rebate of inputs used in manufacture/
processing of export goods. Likewise, Notifications 40 and
41 dated June 26, 2001 were issued under Rule 19 of these
Rules.
F
19. Central Excise Rules, 2001 were superseded by the
present Rules, viz. Central Excise Rules, 2002 and the exact
provisions thereof have already been quoted. The aforesaid
historical narration of the relevant provisions from time to time
depict one common theme namely, to provide rebate of duty G
paid on the excisable goods as well as the duty paid on
material used in the manufacture of goods.
(ii) Scheme of the Rules·: A cumulative reading of the
H
504 SUPREME COURT REPORTS (2015] 11 S.C.R.
A scheme enshrined in Rules 18 and 19 of the Rules, 2002
has already been pointed out above. These Rules provide
two altematives to the exporter enabling him to get the
benefit of exemption from paying the excise duty. Under
Rule 19, exporter is not required to pay any excised uty
B at all. At the time of removal of these goods from the
factory gate of the producer or the manufacturer or the
warehouse or any other premises, he is supposed to
comply with the conditions, safeguards and procedure,
as may be notified by the Board. Such a procedure
c provides for execution of a bond which, inter alia, lays
down the condition that the goods which are cleared are
actually meant for export and he is to furnish the proof
that those goods are actually exported. What is important
is that when the exporter opts for this method, with the
D
approval of the Commissioner, he is not required to pay
duty either on the final product, i.e., on excisable goods
or on the material used in the manufacture of t'.lose goods.
The intention is loud and clear, namely, the goods which
E are meant for exports are free from any excise duty. It
extends not only to the material which is used in the
manufacture of goods but also on the goods that are
produced and ultimately exported. Once we keep in mind
this scheme, it cannot be the intention of the Legislature
F to provide rebate only on one item in case a particular
exporter/manufacturer opts for other alternative under
Rule 18, namely, paying the duty in the first instance and
then claiming the rebate. Giving such restrictive meaning
to Rule 18 would not only be anomalous but would lead
G to absurdity as well. In fact, it would defeat the very
purpose of grant of remission from payment of excise
duty in respect of the goods which are exported out of
India. It may also lead to invidious discrimination and
arbitrary results.
H
SPENTEX INDUSTRIES LTD. v. COMMISSIONER OF 505
CENTRAL EXCISE [A.K. SIKRI, J.]
Let us visualize another situation. A particular exporter A
may opt for scheme under Rule 18, i.e., for claim of rebate
insofar as, say, excise duty on material used in
manufacture of goods is concerned. He would pay that
duty and claim rebate. When it comes to payment of
duty of export of excisable goods, he exercises the B
option under Rule 19 and executes a bond which enables
him not to pay any duty on excisable goods. In this
scenario, the exporter will still be able to get the benefit
of not paying any excise duty on both final product as
well as intermediate product. C
(iii) Government's own perception: As
mentioned above, Rule 18 is enabling provision which
authorises the Central Government to issue a notification
for grant of these rebates. Exercising powers under this D
Rule, the Central Government has issued necessary
notifications for rebate in respect of both the duties, i.e.,
on intermediate product as well as on the final product.
Further, and which is more significant, these notifications
providing detailed procedure for claiming such rebates E
contemplate a situation where excise duty may have been
paid both on the excisable goods and on material used
in the manufacture of those goods and enables the
exporter to claim rebate on both the duties. This kind of F
procedure and format of prescribed Forms, already
described above, becomes a clincher insofa,r as
understanding of the Government of Rule 18 of the Rules
is concerned.
20. It is to be borne in mind that it is the Central G
Government which has framed the Rules as well as issued the
notifications. If the Central Government itself is of the opinion
that the rebate is to be allowed on both the forms of excise
duties the government is bound thereby and the rule in-question H
506 SUPREME COURT REPORTS [2015) 11 S.C.R.
A has to interpreted in accord with this understanding of the rule
maker itself. Law in this respect is well settled and, therefore,
it is not necessary to burden this judgment by quoting from
various decisions. Our purpose would be served by referring
to one such decision in the case of R &B Falcon (A) Pty Ltd.
B v. Commissioner of Income Tax1 wherein interpretation
given by the Central Board of Direct Taxes (CBDT) to a
particular provision was held binding on the tax authorities.
The Court explained this principle in the following manner:
C "33. CBDT has the requisite jurisdiction to interpret the
provisions of the Income Tax Act. The interpretation of the
CBDT being in the realm of executive construction, should
ordinarily be held to be binding, save and except where it
violates any provisions of law or is contrary to any judgment
D rendered by the courts. The reason for giving effect to such
executive construction is not only same as contemporaneous
which would come within the purview of the maxim temporania
caste pesto, even in ce·rtain situation a representation made
by an authority like Minister presenting the Bill before
E Parliament may also be found bound thereby.
34. Rules of executive construction in a situation of this
nature may also be applied. Where a representation is
made by the maker of legislation at the time of
F introduction of the Bill or construction thereupon is put by
the executive upon its coming into force, the same carries
a great weight.
35. In this regard, we may refer to the decision of the
G House of Lords in R. (Westminster City Council) v.
National Asylum Supporl Service (2002) 1 WLR 2956 :
(2002) 4 All ER 654 (HL) and its interpretation of the
H 1
(2008) 12 sec 466
SPENTEX INDUSTRIES LTD. v. COMMISSIONER OF 507
CENTRAL EXCISE [A.K. SIKRI, J.]
decision in Pepperv. Hart 1993AC 593: (1992) 3 WLR A
1032 : (1993) 1 All ER 42 (HL) on the question of
"executive estoppel". In the former decision, Lord Steyn ·
stated: (WLR p. 2959, para 6)
"6. If exceptionally there is found in the Explanatory Notes B
a clear assurance by the executive to Parliament about
the meaning of a clause, or the circumstances in which a
power will or will not be used, that assurance may in
principle be admitted against the executive in
proceedings in which the executive places a contrary C
contention before a court."
36. A similar interpretation was rendered by Lord Hope
of Craighead in Wilson v, First County Trust Ltd. (No. 2)
(2004) 1AC816: (2003) 3 WLR 568: (2003) 4All ER D
97 (HL), wherein it was stated: (WLR p. 600, para 113)
"113 .... As I understand it [Pepperv. Hart 1993 AC 593 :
(1992) 3 WLR 1032 : (1993)" 1 All ER 42 (HL), it
recognised a limited exception to the general rule that E
resort to Hansard was inadmissible. Its purpose is to
prevent the executive seeking to place a meaning on
words used in legislation which is different from that which
ministers attributed to those words when promoting the
legislation in Parliament." F
37. For a detailed analysis of the rule of executive
estoppel useful reference may be to the article authored
by Francis Bennion entitled "Executive Estoppel: Pepper
v. Hart Revisited", published in Public Law, Spring 2007, G
p. 1 which throws a new light on the subject-matter."
21. We are also of the opinion that another principle of
interpretation of statutes, namely, principle of contemporanea
expositio also becomes applicable which is manifest from the H
508 SUPREME COURT REPORTS [2015) 11 S.C.R.
A act of the Government in issuing two notifications giving effect
to Rule 18. This principle was explained by the Court in Desh
Sandhu Gupta and Co. and others v. Delhi Stock
Exchange Association Ltd. 2 in the following manner:
B "9. It may be stated that it was not disputed before us
that these two documents which came into existence
almost simultaneously with the issuance of the notification
could be looked at for finding out the true in.tention of the
Government in issuing the notification in question,
c particularly in regard to the manner in which outstanding
transactions were to be closed or liquidated. The
principle of contemporanea- expositio (interpreting a
statute or any other document by reference to the
exposition it has received from contemporary authority)
D can be invoked though the same will not always be
decisive of the question of construction. (Maxwell 121h
Edn. p. 268). In Crawford on Statutory Construction
(1940 Edn.) in para 219 (at pp. 393-395) it has been
stated that administrative or executive officers charged
E with executing a statute) generally should be clearly wrong
before it is overturned; such a construction commonly
referred to as practical construction although not
controlling, is nevertheless entitled to considerable weight
it is highly persuasive. I~ Baleshwar Bagarti v. Bhagirathi
F
Dass (1908) ILR 35 Cal 701 at 713 the principle which
was reiterated in Mathura Mohan Saha v. Ram Kumar
Saha, ILR 43 Cal. 790: (AIR 1916 Cal. 136) has been
stated by Mukerjea J. thus:
G '1t is a well-settled principle of construction that courts in
construing a statute will give much weight to the
interpretation put upon it, at the time of its enactment and
H . 2 (1979) 3 SCR 373
SPENTEX INDUSTRIES LTD. v. COMMISSIONER OF 509
CENTRAL EXCISE [A.K. SIKRI, J.]
since, by those whose duty it has been to construe, A
execute and apply it. I do not suggest for a moment that
such interpretation has by any means a controlling effect
upon the Courts; such interpretation may, if occasion
arises have to be disregarded for cogent and persuasive
reasons, and in a clear case of error, a. Court would B
without hesitation refuse to follow such construction."
Of course, even without the aid of these two documents
which contain a contemporaneous exposition of the
Government's intention, we have come to the conclusion C
that on a plain construction of the notification the proviso
permitted the closing out or liquidation of all outstanding
transactions by entering into a forward contract in
accordance with the rules, bye-laws and regulations of
the respondent." D
· 22. In this hue, we may now advert to the reasoning given
by the Joint Secretary itself in the order passed in Revision
Petition wherein he has discussed the issue in the following
perspective: E
"..... Govt. notes that as a principle and a policy measure,
Govt. has accepted that export of goods from India should
be relieved of domestic levies (both customs and Central
Excise) in order to promote export of domestic products F
from India and to make then internationally competitive.
In order to achieve this objective, two schemes operate,
namely, export under bond and export under payment of
duty and both are comparable, as objectives oJ both the
schemes are same i.e. to neutralize the burden of internal G
levies on goods exported. In case of former, export
goods are exempted from payment of duty, subject to
conditions/restrictions etc. and in the case of latter export
goods are cleared on payment of duty which is rebated
H
510 SUPREME COURT REPORTS [2015] 11 S.C.R.
A as amended deals and provides the detailed procedural
provisions for input stage rebate also. Similar provisions
and export relief existed for export on payment of duty
and under bond in the erstwhile Rule 12 and 13 of Central
Excise Rules. The fundamental objective of existing rules
B and the earlier ones is the same i.e. to neutralise the
duty element on the goods exported and hence no other
interpretation denying the relief sought appears possihle.
Circular No. 129/40/95 dt. 29.09.9?, para 1.5 of Chapter
8 of Part V of CBEC Manual further leaves no room for
c any other interpretation."
(iv) Interpretation of word 'OR' occurring in Rule 18:
The aforesaid discussion leads us to the only inevitable
consequence which is this : the word 'OR' occurring in
D Rule 18 cannot be given literal interpretation as that leads
to various disastrous results pointed out in the preceding
discussion and, therefore, this word has to be read as
'and' as that is what was intended by the rule maker in
the scheme of things and to carry out the objectives of
E the Rule 18 and a·lso to bring it at par with Rule 19·,
23. We are conscious of the principle that the word 'or'
is normally disjunctive and 'and' is normally conjunctive (See
Union of India v. Kam/abhai Harjiwandas Parekh and others3 ).
F However, there may be circumstances where these words are
.to be read as vice-versa to give effect to manifest intention of
the Legislature as disclosed from the context.
24. Of course, these two words normally 'or' and 'and'
G are to be given their literal meaning in unless some other part
of same Statute or the clear intention of it requires that to be
done. However, wherever use of such a word, viz., 'and'/' or'
produces unintelligible or absurd results, the Court has power
H 3 (1968) 1 SCR 463
SPENTEX INDUSTRIES LTD. v. COMMISSIONER OF 511
CENTRAL EXCISE [A.K. SIKRI, J.]
to read the word 'or' as 'and' and vice-versa to give effect to A
the intention of the Legislature which is otherwise quite clear.
This was so done in the case of State of Bombay v. R.M.D.
Chamarbaugwala4 and while doing so, the Court observed
as under:
B
"... Considering the nature, scope and effect of the
impugned Act, we entertain no doubt whatever that the
first category of prize competitions does not include any
innocent prize competitions. Such is what we conceive
to be the clear intention of the Legislature as expressed C
in the impugned Act read as a whole and to give effect to
this obvious intention as we are bound to do, we have
perforce to read the word "or'' appearing in the qualifying
clause after t,he word "promoter" and before the word
"or" as "and". Well-known canons of construction of D
statutes permit us to do so. (See Maxwell on the
Interpretation of Statutes, 1Qth edition, page 238)"
25. In J. Jayalalitha v. Union of lndia 5 , provisions of
Section 3 of the Prevention of Corruption Act, 1988 empowers E
the Government to appoint as many special judges as may be
necessary for such area or areas orfor such case or group of
case, as may be specified in the notification. Construing the
italicised 'or' it was held that it would mean that the Government
has the power to do either or both the things, i.e., the F
Government may, even for an area for which a special judge
has been appointed, appoint a special judge for a case or
group of cases. ·
26. Likewise, in Mazagaon Dock Ltd. v. The G
Commissioner of Income Tax and Excess Profits Tax6,
' (1957) 1 SCR 874
' (1999) 5 sec 138
6
(1959) 1 SCR 848 H
512 SUPREME COURT REPORTS [2015] 11 S.C.R.
A word 'or' occurring under Section 42(2) of the Income TaxAct,
1922 was construed as 'and' when the Court found that the
Legislature 'could not have intended' use of the expression
'or' in that Section. We have already explained the statutory
scheme contained in the Act and Rules which express manifest
B intention of the Legislature which provide for granting of both
kinds of rebates to the assessee. In Mazagaon Dock Ltd.
(supra), this aspect was explained in the following manner:
"10. The word "or" in the clause would appear to be
c rather inappropriate as it is susceptible of the
interpretation that when some profits are made but they
are less than the normal.profits, tax could only be imposed
either on the one or on the other, and that accordingly a
tax on the actual profits earned would bar the imposition
D of tax on profits which might have been intended, and
the word "or" would have to be read in the context as
meaning "and". Vide Maxwell's Interpretation of Statutes,
Tenth Edition, pages 238-239. But that, however, does
not affect the present question which is whether the word
E "derived" indubitably points to the business of the non-
resident as the one taxable under S. 42(2) and for the
reasons already given the answer must be in the
negative."
F 27. The aforesaid discussion leads us to inevitable
conclusion, namely, that the exporters/appellants are entitled
to both the rebates under Rule 18 and not one kind of rebate.
The impugned judgments are, accordingly, set aside allowing
these appeals.
G
Nidhi Jain Appeals allowed.
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