COLLECTOR OF CENTRAL EXCISEversusUSHA MARTIN INDUSTRIES

                 COLLECTOR OF CENTRAL EXCISE                                 A
                                     v.
                     USHA MARTIN INDUSTRIES

                            AUGUST 28, 1997
                                                                              B
       [SUHAS C. SEN, B.N. KIRPAL AND K.T. THOMAS, JJ.)

        Excise-Central Excises and Salt Act 194~S. 37-B-Exemption
 Notification dated 30.11.1963 as amended upto 7.4.1981-Assessee, a
 manufacturer of wire rods out of steel products including billets which were
 not subject to dutfBenefit of exemption held to be available to the assessee, C
 as benefit of exemption under the Notification was available in respect of
 commodities made out of raw materials, even when the materials were not
 exigible to duty.

      Issue of Circulars by Central Board of Excise and Customs-Circular D
 No. 125/36/95-CX dated 15.5.95-Binding effect of-Held, binding on
 Revenue even during the period prior to insertion of Section 37-B.

        Principles of Interpretation-Expression "on which appropriate amount
· of duty of excise has already been paid" occuning in Notification dated
  30.11.1963 issued under Central Excises and Salt Act 194~Interpretation. of. E

       The common question involved in all these appeals was as to whether
 the benefit of excise duty exemption could be claimed in respect of com·
 modities made out of raw materials on which no excise duty was payable.

         The respondent in the main appeal was a manufacturer of wire-rods
                                                                              F
  falling under T.I. 26-AA (ia) of the Central Excise Tariff. For the purpose
  of manufacture of these wire-rods, the raw materials used were steel
  products, including billets. The assessee claimed exemption under
  Notification dated 30.11.1963 as amended up to 7.4.1981. The said notifica-
  tion provided that the commodities would be exempted from central excise G
  duty if they were produced from materials on which appropriate amount
· of excise duty was already paid. The Assistant Collector of Central Excise
  upheld the Revenue's stand that exemption was available only if the
  finished goods produced were from raw materials on which duty of excise
  was paid and held that in the present case, duty of excise was Ieviable on H
                                    601
     602                   SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A the wire rods since the billets used for their manufacture were totally
     exempt from duty. However, the said order was reversed by the Collector
     of Central Excise (Appeals) and the Central Excise and Gold Control
     (Appellate) Tribunal which held that the input goods cleared on nil rate
     of excise duty should be treated as goods cleared after payment of ap·
B    propriate amount of duty. In the connected appeals also, the same position
     was adopted by different Benches of the Tribunal, though the notifications
     under which exemption was claimed were different, nevertheless-similar.

           Disposing of the matters, this Court

C          HELD : 1.1. The benefit of exemption from duty is legitimately
     available in respect of those goods referred to in the notification under
     consideration, the raw materials of which were not exigible to any excise
     duty at all. (611-G]

           1.2. The Expression 'on which appropriate amount of duty of excise       '
D    has already been paid' as occurring in the notification cannot be narrowly
     construed as excluding all cases where nil duty was paid for input
     materials. (6116-B, 6118-E]

           1.3. The words 'already paid' occurring in the expression "on which
     the appropriate amount of duty of excise has already been paid" used in
E    the Notification when delinked from the other words employed therein,
     would perhaps lend support to the contention of the Revenue as the said
     combination relates to an antecedent act of payment. But the word
     'already' is not the decisive term in the context because the preceding word
     'appropriate' cannot be sidelined to piffie. (6118-B]
F
          Ahura Chemical Products (P) Ltd. v. Union of India, (1981) ELT 613
     and A11dhra Re-Rolling Works Hyderabad v. Union of llldia & Ors., [1986]
     Supp. SCC 263, distinguished.

           Bidie v. General Accident, Fire and Life Assurance Corporation Ltd.,
G (1948] 2 All ER 995 and Boume v. Norwich Crematorium Ltd., (1967] 2 All
      ER 576, relied on.

           Webste1:I'' New Dictio11a1y; Thesaurus (Concise Edn.) and World
      Book Dictionary, relied on.

 H          1.4. The idea behind granting exemption to the commodities indi-
                  C.C.E. v. USHA MARTIN INDUSTRIES                       603

cated in the notification is two-fold. One reason is that the Central Govern- A
ment wanted to save certain raw materials and the end products made with
them from double duty. Another idea, as could be discerned from it, is that
the reason which prompted the Central Government to absolve one com-
modity from duty must as well be applicable to the other commodity which
is made out of the former. (608-D]
                                                                                B
      2.1. Section 37-B of the Central Excise Act enjoins on the Board a
duty to issue such instructions and directions to the excise officers as the
Board considers necessary or expedient "for the purpose of uniformity in
                               l
the classification of excisable goods or with respect to levy of duty excised
on such goods". The fact that Section 37-B was inserted in the Act only in      C
December 1985 cannot whittle down the binding effect of the circulars or
instructions issued by the Board earlier. Even pre-amendment circulars
were issued for the same purpose of achieving uniformity in imposing
excise duty on excisable goods. A circular, whether issued before December
1985 or thereafter should have the same binding effect on the Department.       D
                                                                  (610-E-G]

      2.2. No doubt the Court has to interpret statutory provisions and
notifications therein as they are with emphasis to the intention of the
Legislature. But when Revenue has understood a Notification in a par-
ticular manner and acted accordingly, it is not permitted to take a stand       E
contrary to the instructions issued by the Board. It is a different matter
that an assessee can contest the validity or legality of a departmental
instruction. But that right cannot be conceded to the Department, more so
when others have acted according to such instructions. The Appellate
authority is also not bound by the interpretation given by the Board but the
Assessing Officer cannot take a view contrary to the Board's interpretation.    F
                                                       (610-D, G·H, 611-B]

      CCE Bombay v. Jayant Dalal P. Ltd., (1996) 88 ELT 638; Ranadey
Micro Nutrients v. CCE, (1996) 87 ELT 19; Poulose and Mathen v. CCE,
(1997) 90 ELT 264 and Blitish Machine1y Supplies Co. v. Union of India,
(1996) 86 ELT 449, relied on.                                                   G

     3. In construing a notification, which is not free from doubt and
where two opinions are possible, the assessee should be given the benefit of
doubt and the opinion which is in its favour should be given effect to.
                                                                 (611-C,G]      H
    604                  SUPREME COURT REPORTS [1997) SUPP. 3 S.C.R.

A        CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2390 of
    1989 Etc.

          From the Judgment and Order dated 5.5.88 of the Customs Excise
    & Gold (Control) Appellate Tribunal, New Delhi in A. No. ED(SB)(T).
    2159/84 with C.O. No. 12 of 1985-B.
B
          M. Gaurishankar Murthy, Ashok Srivastava, V.K. Verma, P. Parmes-
    waran, S.K. Bagaria, Jaideep Gupta, Ajay K. Jain, Pramod Dayal, V.
    Sridharan, R. Nambirajan, V. Balachandran, Vinay Garg for the appearing
    parties.
c         The Judgment of the Court was delivered by

        THOMAS, J. The common question involved in all these appeals is
  whether the benefit of excise duty exemption (granted by the Central
  Government as per certain notifications) can be claimed in respect of
D commodities made out of raw materials on which no excise duty was
  payable. The relevant notifications exempted such commodities from excise
  duty under the Central Excise and Salt Act, 1944 (for short "the Act"), if
  they were produced from materials on which the appropriate amount of
  duty of excise has already been paid. As the Central Excise and Gold
E (Control) Appellate Tribunal (for short the Tribunal) by different orders
  upheld such claims made by certain manufacturers the Revenue has filed
  these appeals through the Collectors of Central Excise concerned.

         Avoiding proliferation with facts in different appeals we think it is
    enough to reproduce the facts in Civil Appeal No. 2390 of 1989 filed by
F   the Collector of Excise, Patna against the respondent- M/s Usha Martin
    Industries Ltd.

        Respondent in that case manufactures wire-rods (which fall under
  Tariff Item 26AA(la) of the Central Excise Tariff). For manufacturing
  such wire-rods the raw materials used were steel products including billets.
G Such steel products were procured from stockyards of manufacturers like
  TISCO etc. The Superintendent of Central Excise concerned, while making
  assessment of the duty payable by the respondent, demanded that excise
  duty should have been paid on wirerods since the billets used for its
  manufacture were totally exempted from duty. The Assistant Collector of
H Central Excise upheld the aforesaid stand of the Superintendent and
          C.C.E.v. USHAMARTININDUSTRIES [1HOMAS,J.]                       605

assessed excise duty on 1721.36 Mt. tones of such wire-rods. However, the A
said order was reversed by the Collector of Central Excise (Appeals) on
the premise that the input goods cleared on nil payment of excise duty
should be treated as goods cleared after payment of appropriate amount
of duty. Revenue did not agree with that premise and hence they ap-
proached the Tribunal in second appeal and the Tribunal passed the B
impugned order confirming the view of the Collector of Appeals.

       In the remaining appeals also the same position has been adopted by
different benches of the Tribunal, though the notifications under which
exemption was claimed were different, nevertheless closely similar. If the
interpretation placed by the Tribunal on the expression in the notification      C
i.e. "on which appropriate amount of duty has been paid" is sustainable the
result would be that all the impugned orders would deserve to be upheld.

      The notification on which both sides placed ·reliance in the case
against M/s Usha Martin Industries Ltd. was dated 30.11.63 but that was
amended from time to time. As the assessment order related to a period D
in 1982 we would reproduce the notification as it stood by the last amend-
ment thereto dated 7.4.D81.

        "Exemption in goods falling under item 26AA(la) made from duty
        paid material:                                      .                    E

            In exercise of the powers conferred by sub-rule (1) of Rule 8
        of the Central Excise Rules, 1944 and in supersession of the
        Notification of the Government of India in the M.F. (D.R.) No.
        131/62-CE., dated 13.6.1962, the Central Government hereby ex-
        empts Iron or Steel Products falling under sub-item (la) of Item         F
        No. 26AA made from any of the following materials or a combina-
        tion thereof namely :-

        (i) fresh unused re-rollable scrap on which the appropriate amount
        of duty of excise has already been paid.
                                                                                 G
        (ii) semi-finished steel including blooms, billets, slabs, sheet bars,
        tin bars and hoe bars, on which the appropriate amount of duty of
        excise has already been paid.

        (iii) old and used re-rollable scrap.                                    H
    606                  SUPREME COURT REPORTS (1997] SUPP. 3 S.C.R.

A           (iv) other iron or steel products falling under sub-item (la) of item
            No. 26AA of the said first schedule 011 which the appropriate duty
            of excise has already been paid, from payment of the whole of the
            duty of excise leviable on such products." (underlines supplied)

          There. is no doubt that as per the above notification if any amount of
B duty has been paid on the raw material, the output product would escape
    from excise duty. The doubt arose was regarding the expression in the
    notification i.e. "on which the appropriate amount of duty of excise has
    already been paid" as to whether it is capable of two interpretations, one
    as claimed by the assessee and the other as put forth by the Revenue."
c       Much reliance was placed by the Revenue on the judgment of this
  Court inAhura Chemical Products Pvt. Ltd. v. Union of India, (1981) ELT
  613. The Tribunal found that the said decision was not relevant for the
  reason that the question before the Supreme Court was whether the goods
  were purchased from open market or from the manufacturer. A two judge
D Bench of this Court has considered the exemption clause in a similar
  notification involved in that case as per which certain "preparations in-
  tended for use in industrial process" were exempted from duty "if in respect
  of surface active agents used in the manufacture of such preparations the
  appropriate amount of the duty of excise or the additional duty has already
E been paid or where such surface active agents are purchased from the open
  market on or after the 20th day of January, 1968." If the surface active
  agents were purchased from open market it was immaterial in that case
  whether the input commodity was exempted from duty or not. The
  assessee's stand in that case was that the raw material was purchased from
  open market. The said stand of the assessee was upheld and hence there
F was no need for this Court in that case to embark on the first limb of the
  exemption clause. So the observations relating to that limb are only obiter.

        Mr. M. Gaurishankar Murthy, learned counsel for the Revenue
  placed reliance on the following observations of this Court in Andhra
G Re-Rolling W01*s, Hyderabad v. Union of India & others, [1986] Supple.
  sec 263:
             "It is only if the appropriate amount of duty had already been paid
             on the article which formed the raw material for manufacture of
             the product covered by item 26AA, that the manufacturer will be
H            entitled to a proportionate remission of the duty on the latter
          C.C.E.v. USHAMARTININDUSTRIES [THOMAS,J.]                       607

        product. Inasmuch as the untested rails were exempt from duty A
        and hence no amount whatever had been paid by way of du_ty on
        the said article from out of which the M.S. Rounds were manufac-
        tured, it is obvious that the benefit of the notification cannot be
        claimed by the appellant."

The said observations were made by this Court while interpreting a               B
notification issued by the Central Government exempting iron and steel
products under tariff Item 26AA "if made from another article falling
under the said item and having already paid the appropriate amount of
duty from so much of the duty of excise as is equivalent to the duty payable
on the said article." (emphasis supplied)                                        C
      Even a glance through the said notification would show that the
exemption envisaged therein was not total but only partial. What it clearly
meant was deduction of duty from the amount of duty already paid and
therefore, that notification is different in content as well as intent and the
ratio therein cannot be taken as sufficient to fit in with the notification D
involved in the present appeals.

      Learned counsel on both sides referred to the meaning of the words
"paid" and "already paid" etc. in the notification under consideration and
they cited some decisions as to how those words were interpreted in other        E
judgments. We must bear in mind that the meaning of a particular English
word used in a particular collocation of words need not be the exact
meaning when used in other permutations. Lord Green has observed in
Bidie v. General Accident, Fire and Life Assurance Co1poration, Ltd., [1948]
2 All E.R. 995 :
                                                                                 F
        "Few words in the English language have a natural or ordinary
        meaning in the sense that they must be so read that their meaning
        is entirely independent of their context. The method of construing
        statutes that I prefer is not to take particular words and attribute
        to them a sort of prima facie meaning which you may have to              G
        displace or modify. It is to read the statute as a whole and ask
        one-self the question in this state, in this context, relating to this
        subject-matter, what is the true meaning of that word."

      In Bourne v. N01wich Crematorium Ltd., (1967) 2 AER 576 Stamp J.
has reminded that "English words derive colour from those which surround H
     608                  SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R.

A them and sentences are not mere collections of words to be taken out of
     the sentence, defined separately by reference of the dictionary or decided
     cases."

         If we take the words "already paid" in the notification delinked from
  other words employed therein, they would, perhaps, lend support to the
B contention of the Revenue as the said combination relates to an antecedent
  act of payment. But the word "already" is not the decisive term in the
  context because the preceding word "appropriate", cannot be sidelined to
  piffle. The word "appropriate" is defined in Websters's New Dictionary and
  Thesaurus (Concise Edition) as "applicable, opposite, appurtenant,
C apropos, apt...." In the World Book Dictionary it is defined as "right for the
  occasion, suitable, proper, fitting ...... "

           What is the idea behind granting exemption to the commodities
     indicated in the notification? One reason is that Central Government
     wanted to save certain raw materials and the end products made with them
D    from double duty. Another idea, as could be discerned from it, is that the
     reason which prompted the Central Government to absolve one commodity
     from duty must as well be applicable to the other commodity which is made
     out of the former. Therefore, we are not disposed to afford a narrow
     interpretation to the expression (i.e. on which the appropriate amount of
E    duty of excise has already been paid) as excluding all easer where nil duty
     was paid for the input materials.

           Sri V. Sridharan, learned counsel for the respondent invited our
     attention to another notification issued by the Central Government (No.
     178/83 CE dated 1.7.83) by which the Government exempted "textured
F    yarn" from excise duty subject to the condition that the appropriate duty
     of excise has already been paid in respect of the filament yarn used in the
     manufacture of such textured yarn. The said exemption was further cir-
     cumscribed through a proviso added to the main exemption clause which
     reads thus :
G             "Provided that nothing contained in this notification shall apply to
              the said textured yarn if such textured yarn has been manufactured
              out of -

              (i) the said filament yarn, other than textured, in respect of which
 H            the exemptions from the whole of the duty of excise under the said
          C.C.E.v. USHAMARTININDUSTRIES [THOMAS,J.]                   609

        Central Excise and Salt Act or from the whole of the additional A
        duty under the Customs Tariff Act, as the case may be, has been
        availed of.. ...."

       On the strength of the above proviso learned counsel advanced an
argument that absence of such a proviso in the notification (with which we
are concerned in these appeals) would clinch the issue. Mr. M. B
Gaurishankar Murthy, learned counsel for the Revenue, on the other
hand, pointed out that the notification involved in the appeal was issued in
1963 and submitted that it was when the manufacturers claimed exemption
even in respect of goods whose raw materials were totally exempted from
duty that the Central Government found it necessary to make appropriate C
clarification in the later notification. Hence he contended that no leverage\
can be given to the respondent on the strength of the proviso employed in)
the 1983 notification.

      Having bestowed our consideration on the rival contentions we are
persuaded to accept the argument of the learned counsel for respondent D
for the main reason that the Central GovernmP-nt could have inserted the
same proviso in the notification now under consideration, by way of
modification or amendment if the Government wanted that meaning to be
adopted to it. We find considerable force in the contention that absence
of any such proviso in the notification (under our consideration) is consis- E
lent with the construction sought to be placed on it by the respondents.

      How the Revenue has understood the notification or made others to
understand this position can be seen from the instructions or circulars
issued by the Central Board of Excise and Customs (for short 'the Board')
from time to time. One such circular is dated 1~.5.1995 No. 125/36/95-CX.   F
The material portion thereof are extracted below :

            "There are a number of notifications which exempt specified
        goods provided such goods have been made from other goods on
        which the appropriate duty of excise has already been paid........ G
        Board has issued instructions from time to time that in such cases,
        even if the inputs are exempted from excise duty, the exemption
        on the finished goods cannot be denied on that ground. Still, cases
        have been brought to notice where exemption is being denied on
        the ground that the inputs did not bear any excise duty....... It was
        clarified by the Board that in the case of S.O. dyes made from H
    610                   SUPREME COURT REPORTS (1997] SUPP. 3 S.C.R.

A            exempted dyes, the exemption cannot be denied on the ground
             that the inputs were exempted from the whole of the duty of excise.
             This logic would apply to other similar cases also where exemption
             has been giv~n on the consideration that the finished products have
             been made from inputs on which appropriate duty of excise has
             already been paid."
B
         Learned counsel for the appellant adopted a contention that the
  circulars issued by the Board cannot take the place of judicial interpreta-
  tion of statutory notifications as those circulars could at best be reflective
  of that line of thinking on the part of the department for a time. He pressed
C into service that judicial interpretation of a statutory provisions or notifica-
  tions thereunder should not be influenced by what the department thought
  it at a particular time.                     /

        No doubt the court has to interpret statutory provisions and notifica-
  tions thereunder as they are with emphasis to the intention of the legisla-
D ture. But when the Board made all others to understand a notification in
  a particular manner and when the latter have acted accordingly, is it open
  to the Revenue to turn against such persons on a premise contrary to such
  instructions?

E           Section 37-B of the Act enjoins on the Board a duty to issue such
    instructions and directions to the excise officers as the Board considers
    necessary or expedient "for the purpose of uniformity in the classification
    of excisable goods or with respect to levy of duty excised on such goods."
    It is true that Section 37-B was inserted in the Act only in December, 1985
    but that fact cannot whittle down the binding effect of the circulars or
F   instructions issued by the Board earlier. Such instructions were not issued
    earlier for fancy or as rituals. Even the pre-amendment circulars were
    issued for the same purpose of achieving uniformity in imposing excise duty
    on excisable goods. So the circular, whether issued before December 1985
    or thereafter should have the same binding effect on the department.
G
        Though a catena of decision this Court has pronounced that Revenue
  cannot be permitted to take a stand contrary to the instructions issued by
  the Board. It is a different matter that an assessee can contest the validity
  or legality of a departmental instruction. But that right cannot be conceded
  to the department, more so when others have acted according to such
H instructions, vide Collector of Ce11tral Excise, Bombay v. Jayant Dalal Private
              C.C.E.v. USHAMARTININDUSTRIES [1HOMAS,J.]                         611

    Ltd., {1996) 88 ELT 638, Ranadey Micronutrients· v. Collector of Central A
    Excise, {1996) 87 ELT 19, Poulose and Mathen v. Collector of Central
    Excise, {1997) 90 ELT 264 and British Machinery Supplies Co. v. Union of
    India, {1996) 86 ELT 449.


-         Of course the appellate authority is also not bound by the interpreta-
    tion given by the Board but the assessing officer cannot take a view
    contrary to the Board's interpretation.
                                                                                       B



          We may observe particularly that a special aspect highlighted by the
    Bench in Poulose and Mathen v. Collector of Central Excise, {1997) 90 ELT
    264 is apposite for fastening the Revenue with binding force as regards the        C
    instructions issued, while constructing a notification which was not free
    from doubt, Learned Judges in that decision have observed thus :

                "One aspect deserves to be noticed in this context. The earlier
            tariff advice No. 83/81 on the basis of which trade notice No. 220/81      D
            was issued by the Collector of Central Excise and Customs is
            binding on the department. It should be given effect to. There is
            no material on record to show that this has been rescinded or
            departed from, and even so to what extent. Even assuming that the
            later tariff advice No. 6/85 has taken a different view - about which
            there is no positive material -the facts point out that the concerned      E
            department itself was having considerable doubts about the matter.
            The position was not free from doubt. It was far from clear. In
            such a case, where 'two opinio11s are possible, the assessee should be
            give11 the be11efit of doubt a11d that opi11io11 which is in its favour
            should be give11 effect to. In the light of the above, it is unnecessary   F
            to adjudicate the other points involved in the appeal on the merits."

                                                             (emphasis supplied)

          Thus, looking from different angles we are inclined to take the view
    that benefit of exemption from duty can legitimately be claimed by the             G
    respondents in respect of those goods referred to in the notifications under
    consideration the raw materials of which were not exigible to any excise
    duty at all. In the result, we dismiss all these appeals.

    R.D.                                                       Appeals dismissed.