PETITIONER: <ORG> & <ORG>. Vs. RESPONDENT: UNION OF INDIA & ORS. DATE OF JUDGMENT30/10/1987 BENCH: <NAME>, <NAME>: <NAME>, <NAME>, <NAME> (CJ) MISRA RANGNATH CITATION: 1988 AIR 191 1988 SCR (1) 700 1987 SCC Supl. 350 JT 1987 (4) 421 1987 SCALE (2)903 ACT: Levy of excise duty on yarn obtained at an intermediate stage in the process of manufacture of fabrics-Amended rules 9 and 49 of the <ORG> Rules, 1944 1nterpretation thereof. HEADNOTE: % The appellant No. 1, <ORG>, has a composite mill wherein it manufactures fabrics of different types, for which yarn is obtained at an intermediate stage, and the yarn is processed in an integrated process in the said composite mill for weaving the same into fabrics. <ORG> issued a Circular dated September 24, 1980, purporting to interpret the rules 9 and 49 of the <ORG> Rules, 1944 (the Rules) and directing the subordinate excise authorities to levy and collect excise duty in accordance therewith. The Board further directed vide the said Circular that the use of the goods in the manufacture of another commodity even within the place premises specified in this behalf by the <ORG> officers in terms of the powers conferred under rule 9 of the Rules, would attract duty. As the implementation of the Circular worked to the prejudice of the appellants, they filed a writ petition in <ORG>, challenging the validity of the Circular. During the pendency of the said writ petition, <ORG> issued a Notification dated February 20, 1982, amending the rules 9 and 49 of the Rules, with section 51 of the Finance Act, 1982, providing that the amendments in the rules 9 and 49 shall be deemed to have, and to have always had, the effect with retrospective effect from the date on which the Rules came into force i.e. February 28, 1944. Upon the amendments of the rules 9 and 49, with retrospective effect of the amendments, the appellants amended their writ petition above-said to challenge the constitutional validity of Section 51 of the Finance Act abovementioned and the amendments to the rules 9 and 49. 701 <ORG> allowed the writ petition in part. It held (i) that section 51 and the rules 9 and 49 as amended were valid, (ii) the retrospective effect allowed by section 51 would be subject to the provisions of sections 11A and 11B of the <ORG>s and Salt Act , 1944 (the Act), (iii) the yarn produced at an intermediate stage in the mill of the appellants and subjected to the integrated process of weaving into fabrics, would be liable to payment of excise duty in view of the amended provisions of the rules 9 and 49, but the sized yarn actually put into the integrated process would not again attract excise duty. The appellants then filed this appeal (Civil Appeal No. 297 of 1983) before this <ORG> by certificate. Dismissing the Appeal, the <ORG>, ^ HELD: The decisions of various High <ORG>s cited, deal with the rules 9 and 49 of the <ORG> Rules, 1944, as they stood before they were amended by the Government Notification dated February 20, 1982. In this case, what is involved is the interpretation of the said two rules after their amendment and the constitutional validity of the rules as amended. The amendments to the rules 9 and 49 are quite legal and valid. Section 51 of the Finance Act, 1982, giving retrospective effect to the said amendments is also legal and valid. The apprehension of the appellants that the amendments to rules 9 and 49 having been made retrospective from the date the rules were framed, that is, February 28, 1944, the appellants may be called upon to pay enormous amounts of duty in respect of the intermediate goods which have come into existence and again consumed in the integrated process of manufacture of another commodity, is not right. In view of section 11A of the Finance Act, there is no cause for such an apprehension. Under Section 11A(1) , the excise authorities cannot recover duties not levied or not paid or short-levied or short-paid or erroneously refunded beyond the period of six months, the proviso to section 11A not being applicable in the present case. Thus though section 51 has given retrospective effect to the amendments of rules 9 and 49, it must be subject to the provision of section 11A of the Act. Section 51 does not contain any non-obstante clause, nor does it refer to the provision of section 11A , and it is difficult to hold that section 51 overrides the provision of section 11A . [712F-H; 714D-F] The appellants are liable to pay excise duty on the yarn obtained at an intermediate stage and, thereafter, further processed in an integrated process for weaving the same into fabrics. Although it has been alleged that the yarn is obtained at an intermediate stage of an 702 integrated process of manufacture of fabrics, it appears to be not so. After the yarn is produced, it is sized, and thereafter, subjected to a process of weaving the same into fabrics. As the <ORG> has held that the commodity which is obtained at an intermediate stage of an integrated process of manufacture of another commodity, is liable to the payment of excise duty, the yarn that is produced by the appellants is also liable to payment of excise duty. [720G- H: 721A-B] <ORG> has rightly held that the appellants are not liable to pay excise duty on the yarn after it is sized for the purpose of weaving the same into fabrics. No distinction can be made between unsized yarn and sized yarn, for the unsized yarn when converted into sized yarn does not lose its character as yarn. The judgment of <ORG> affirmed. [721B-C] In view of the decision of the <ORG> in the Civil Appeal No. 297 of 1983, the Civil Appeals Nos. 2658 and 4168 of 1983 also dismissed. [721D] <CITATION> -AIR 1942 F.C. 33; Caltex oil <CITATION> .  E.L.T. 581, <CITATION> ,  E.L.T. 121; <CITATION> ,  E.L.T. 320; <CITATION> ,  E.L.T. 675, <CITATION> ,  E.L.T. 33; <CITATION> ,  E.L.T. 327, <CITATION> ,  E.L.T. 927, <CITATION> ,  E.L.T. 618; <CITATION> ; Assistant Collector & Ors. In Misc. 491 of 1964, unreported judgment of Bombay High <ORG>, dated April 30, 1970, <CITATION> .,  1 S.C.R. 890; <CITATION> ,  1 S.C.R. 897, <CITATION> officer, Ernakulam,  1 S.C.R. 629 and <CITATION> ,  3 S.C.R. 146, referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 297 of 1983. Etc.

From the Judgment and order dated 11 1.1983 of <ORG> in C.W No 1858 of 1981 <NAME>, <NAME>, <NAME>.

<NAME> and Appellant-in-person (in C.A. No. 2658 of 1983) for the Appellants <NAME>, Attorney General, <NAME>, <NAME> and <NAME> for the Respondents The Judgment of the Court was delivered by <NAME>, J. This appeal is directed against the judgment of <ORG> allowing in part only the petition of the appellants under Article 226 of the Constitution of India The appellant No. 1, <ORG>, has a composite mill wherein it manufactures fabrics of different types. In order to manufacture the said fabrics, yarn is obtained at an intermediate stage. The yarn so obtained is further processed in an integrated process in the said composite mill of the appellant No. 1 for weaving the same into fabrics. The appellants do not dispute that the different kinds of fabrics which are manufactured in the mill are liable to payment of excise duty on their removal from the factory. They also do not dispute their liability in respect of yarn which is also removed from the factory. It is the contention of the appellants that no duty of excise can be levied and collected in respect of yarn which is obtained at an intermediate stage and, thereafter, subjected to an integrated process for the manufacture of different fabrics. Indeed, on a writ petition of the appellants, <ORG> by its judgment dated October 16, 1980 held that yarn obtained and further processed within the factory for the manufacture of fabrics could not be subjected to duty of excise. It is the case of the appellants that in spite of the said decision of <ORG>, <ORG> has wrongly issued a circular dated September 24, 1980 purporting to interpret rules 9 and 49 of the <ORG> Rules, 1944 (hereinafter referred to as 'the Rules') and directing the subordinate excise authorities to levy and collect duty of excise in accordance therewith. In the said circular, the Board has directed the subordinate excise authorities that "use of goods in manufacture of another commodity even within the place/premises that have been specified in this behalf by the <ORG> officers in terms of the powers conferred under rule 9 of the Rules, will attract duty". As the said circular was being implemented to the prejudice of the appellants, they filed a writ petition before <ORG>, inter alia, challenging the validity of the circular.

During the pendency of the writ petition in <ORG>, <ORG> by a Notification No . 20/82- C. dated 20.2.1982 amended rules 9 and 49 of the Rules. Section 51 of the Finance Act, 1982 provides that the amendments in rules 9 and 49 of the Rules shall be deemed to have, and to have always had the effect on and from the date on which the Rules came into force i.e. February 28, 1944. After the said amendments of the Rules with retrospective effect, the appellants amended the writ petition and challenged the constitutional validity of section 5  1 of the Finance Act, 1982 and of the amendments to rules 9 and 49 of the Rules.

<ORG> came to the conclusion that section S I and rules 9 and 49 of the Rules, as amended, were valid. It has, however, been held that the retrospective effect given by section S I will be subject to the provisions of sections 11A and 11B of the Central Excises and Salt Act , 1944 (hereinafter referred to as 'the Act') Further, it has been held that the yarn which is produced at an intermediate stage in the mill of the appellants and subjected to the integrated process of weaving the same into fabrics, will be liable to payment of excise duty in view of the amended provisions of rules 9 and 49 of the Rules. But the sized yarn which is actually put into the integrated process will not again be subjected to payment of excise duty for, the unsized yarn, which is sized for the purpose, does not change the nature of the commodity as yarn. The writ petition was, accordingly, allowed in part. Hence this appeal by the appellants upon a certificate granted by <ORG>. F At this stage, we may refer to rules 9 and 49 before and after amendment of the same. The relevant portion of rule 9 before the same was amended is as follows:-

"Rule 9. Time and manner of payment of duty.-(1) No excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf whether for consumption, export, or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may require, and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form: " [The remaining provisions of rule 9 which are not relevant for our purpose are omitted. ] By a Notification No. 20/82 C.B. dated 20.2.1982 of <ORG>, rule 9 was amended by the addition of the following A Explanation thereto:-

"Explanation.-For the purposes of this rule excisable goods produced, cured or manufactured in any place and consumed or utilised-

(i) as such or after subjection to any process or processes; or

(ii) for the manufacture of any other commodity, whether in a continuous process or otherwise, in such place or any premises appurtenant thereto, specified by the Collector under sub-rule (1), shall be deemed to have been removed from such place or premises immediately before such consumption or utilisation."

Rule 49 before its amendment was as follows:-

"Rule 49. Duty chargeable only on removal of goods from the factory premises or from an approved place of storage.-(1) Payment of duty shall not be required in respect of excisable goods made in a factory until they are about to be issued out of the place or premises specified under rule 9 or are about to be removed from a store-room or other place of storage approved by the Collector under rule 47:" [The remaining provisions of rule 49 which are not relevant for our purpose are omitted . ] By the said Notification rule 49 was amended by the addition of an Explanation thereto as follows:-

"Explanation.-For the purposes of this rule, excisable goods made in a factory and consumed or utilised-

(ii) for the manufacture of any other commodity, whether in a continuous process or otherwise, in such factory or place or premises specified under rule 9 or store-

room or other place of storage approved by the Collector under rule 47, shall be deemed to have been issued out of, or removed from such factory, place, premises, store-room or other place of storage, as the case may be, immediately before such consumption or utilisation."

It has been already noticed that by section 5  1 of the Finance Act, 1982, amendments made to rules 9 and 49 have been given retrospective effect from the date on which the Rules came into force, that is to say, from February 28, It is not disputed before us that under section 3(1) of the Act, the taxing event is the production or manufacture of the goods in question. Indeed, section 3 provides that there shall be levied and collected in such manner as may be prescribed, duties of excise on all excisable goods other than salt which are produced or manufactured in India and at the rates set forth in the First Schedule. It is, therefore, clear that as soon as the goods in question are produced or manufactured, they will be liable to payment of excise duty.

While section 3 lays down the taxable event, rules 9 and 49 provide for the collection of duty. There is a distinction between levy and collection of duty. <CITATION> , A.I.R. 1942 FC 33 it has been observed by <ORG> as follows:-

"There is in theory nothing to prevent <ORG> from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed or given away. A taxing authority will not ordinarily impose such a duty, because it is much more convenient administratively to collect the duty (as in the case of most of the Excise Act s) when the commodity leaves the factory for the first time, and also because the duty is intended to be an indirect duty which the manufacturer or producer is to pass on to the ultimate consumer, which he could not do if the commodity had, for example, been destroyed in the factory itself. It is the fact of manufacture which attracts the duty, even though it may be collected later."

Relying upon the aforesaid observation of <ORG>, it has been urged by Mr. <NAME>, learned Counsel appearing on behalf of the appellants, that although it is true that as soon as the commodity is manufactured or produced it is liable to the payment of excise duty, the duty will not, however, be collected unless the commodity leaves the factory. It is submitted by him that the commodity must be removed from one place to another either for the purpose of consumption in the factory or for sale outside it before excise duty an be claimed. Counsel submits that rules 9 and 49, as they stood before they were amended, and even the main part of these two rules after amendment, indicate in clear terms that so long as the goods which are manufactured in the factory are not removed, there is no question of payment of excise duty on the goods.

Several decisions have been cited on behalf of the appellants to show that <ORG> also have taken the view that removal is the main criterion for the collection of excise duty on the commodity produced or manufactured inside the factory or the place of manufacture. We shall presently refer to these decisions. It may, however, be noticed that the decisions are not also uniform on the interpretation of rules 9 and 49, as they stood before amendment. We are, however, really concerned with the interpretation of these two rules after amendment, but as much submissions have been made by the parties in the light of the decisions of <ORG> on the interpretation of these two rules, we would like to refer to the same.

In <ORG> oil <CITATION> ,  E.L.T. 581 it has been held by <ORG> that there can be removal only if the product goes out of one stream of production into another stream of production or if the product is issued out of or taken out or consumed if no further processing of that product is to be done. Further, it has been observed that there can be no removal of a product within the plant itself so long as the product is in the process of manufacture. According to this decision, if the product, which is obtained at an intermediate stage of an integrated and uninterrupted process of manufacture, there is no removal of such product. But, if the intermediary product is transferred from one plant to another for the manufacture of another commodity, there will be removal for the purpose of collection of duty.

In an earlier decision in <CITATION> ,  E.L.T. 121 <ORG> had taken a different view. In that case calcium carbide manufactured in the factory in one plant was used to generate acetylene gas by the transfer of the article from one plant to another in the same factory. The question that came up for consideration of <ORG> was whether there was removal of calcium carbide for the purpose of levy and collection of excise duty. <ORG> relied upon the definition of 'factory' under section 2(e) of the Act and took the view that the definition was not restricted to only the part in which the excisable goods were manufactured. It was, accordingly, held that it could not, therefore, be said that calcium carbide made by the petitioner-Company was removed from the factory in which it was produced. This decision lays down that so long as a commodity is not removed from the factory premises, there is no removal within the meaning of rules 9 and 49. A similar view has been taken by <ORG> in a later decision in <CITATION> ,  E.L.T. 320 where <ORG> has expressed the view that o excise duty can be levied and recovered on 'sliver' obtained by the petitioners, if it is consumed within the very premises in which it is manufactured because in such cases there is no removal of sliver from the place of manufacture as envisaged by rules 9 and 49 More or less a similar view has been taken by <ORG> in another decision in <CITATION> , [19801 E.L.T. 675. In that case, the petitioner manufactured Bentol, a mixture of Benzene and Toluene, in the factory, which was again used for the manufacture or rubber <ORG> took the view that it was not a case of removal under rules 9 and 49 and, as such, no excise duty was payable on Bentol.

We may notice another decision of <ORG> in <CITATION> , [ 1982] L.T 33 In that case it has been held that since the impugned resins (polyester or phenolic resins) are not removed from the place of manufacture but are used for the manufacture of end product (Varnish) within the plant itself, there is no removal of goods within the meaning of rule 9 read with rule 49 of the Rules.

Thus it appears that there is a conflict of opinion in the decisions of <ORG> as to what is meant by the word 'removal' for the purpose of payment of excise duty. Two views have been expressed by <ORG>. One view is that so long as any product manufactured in the factory is not actually removed from the factory premises, there is no removal and, accordingly, no excise duty is payable on the product, even if the product is used for the manufacture of another commodity inside the factory. The other view is that if at one stage a commodity known to the market is produced and is transferred, within the factory for the manufacture of another commodity, there is removal within the meaning of rules 9 and 49.

<NAME>

Apart from the above two views, there is a third view which has A also been expressed by <ORG>, namely, that if an intermediate product is obtained in an integrated process of manufacture of a commodity, there is no removal and, therefore, such intermediate product although known to the market and comes under a particular tariff item yet, as there is no removal, there will be no question of payment of excise duty on such intermediate product.

The Nagpur Bench of <ORG> in <CITATION> , [ 1980] L.T. 327 has adopted the second and third views. It has been held that if the purpose of removal of excisable goods is consumption in the same place where the excisable goods are manufactured or cured or if such excisable goods are used in the manufacture of any other goods in the same place, this cannot be done without payment of excise duty at the place and in the manner prescribed. Further, it has been held that where the plant of production is treated as a composite plant and where the process of manufacture is an integrated, continuous and uninterrupted process, a transfer of a produce which is a component of the final produce from one part of the plant to another, does not amount to removal as contemplated by rule 9. According to this decision, a process of onward movement of a component for being converted into a final product is not covered by the concept of removal contemplated by the provision of rule 9 of the Rules.

<CITATION> ,  E.L.T 927 <ORG> has taken more or less the same view as that of <ORG>. It has been observed that an intermediate product which by itself is goods known to the market and is used in captive consumption for bringing out altogether a new goods not by an integrated process, but by a distinct and separate process, is liable to excise duty before its removal.

So far as captive consumption is concerned, <ORG> has taken the same view as that of <ORG> in <CITATION> ,  E.L.T. 618 where it has been held by <ORG> that excise duty is payable when yarn is removed from the spinning department to the weaving department for the manufacture of fabrics All the above decisions relate to rules 9 and 49 before they were amended. Leaving aside the question of specification for the time being. rule 9 before its amendment prohibits the removal of excisable goods whether for consumption, export or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid. It is manifestly clear from rule 9 that it contemplates not only removal from the place where the excisable goods are produced, cured or manufactured or any premises appurtenant thereto, but also removal within such place or premises for captive consumption or 'home consumption', as it is called. Thus if a commodity which is manufactured in such place or premises and is used for the manufacture of another commodity, then it will be a case of removal for the purpose of payment of excise duty. This view which we take clearly follows from the expression "whether for consumption, export or manufacture of any other commodity in or outside such place". Thus consumption of excisable goods may be within such place or outside such place. The decisions which have taken the view that if a commodity manufactured within the factory in one plant is transferred to another plant for the purpose of production of another commodity will be removal for the purpose of payment of excise duty are, in our opinion, correct. It is not easily understandable why the definition of expression 'factory' under section 2(e) of the Act has been taken resort to in some of the decisions for the purpose of interpretation of rule 9. There can be no doubt that if a commodity is taken outside the factory it will be removal, but rule 9 does not, in any manner, indicate that it is only when the goods are removed from the factory premises it will be removal and when the excisable goods manufactured within the factory is removed from one plant to another it will not be a case of removal. On the contrary, as noticed already, rule 9 clearly embraces within it captive consumtion of excisable goods, that is to say, when excisable goods manufactured in the factory are used for production of another commodity.

Now the question is whether rule 9 before it was amended also envisaged a case of an intermediate product obtained in an integrated and continuous process of manufacture of another commodity, that is, the end product. It must be admitted that prima facie rule 9 does not show that it also covers a case of integrated, continuous and uninterrupted process of manufacture producing a commodity at an intermediate stage which again is utilised in such continuous process for the manufacture of the end product The learned Attorney General, appearing on behalf of <ORG>, submits that rule 9 and rule 49 also envisaged such a case of integrated process of manufacture of the end product using a product produced at an intermediate stage In support of his contention he has placed reliance on an unreported decision of <ORG> in Misc. 491 of 1964, dated April, 30, 1970 (<ORG> v. Shri <NAME>, Assistant Collector & Ors.) The learned Single Judge of <ORG> took the view that a continuous or integrated process of manufacture was not initially contemplated by rule 9 or rule 49, but after the addition of a new set of rules being rules 173A to 173K to the Rules by the Notification dated May 11, 1968 a continuous and integrated process of manufacture came to be contemplated by the scheme of the Act and the Rules. Reliance has been placed by the learned Judge on the Explanation to rule 173A as added by the said Notification dated May 11, 1968. The Explanation is as follows:-

"Explanation-The expression 'home use' means the consumption of such goods within India for any purpose and includes use of such goods in the place of production or manufacture or any other place or premises (whether by continuous process or not), for manufacture of any commodity.

Reliance has also been placed on rule 173G which provides for the procedure to be followed by an assessee who is a manufacturer of matches or cigarettes or cheroots. The relevant portion of rule 173G is a proviso thereto which is as follows:-

"Provided that the duty due on the goods consumed within the factory in a continuous process may be so paid at the end of the factory day."

From the above provisions of the Explanation to rule 173A and the proviso to rule 173G, the learned Judge has taken the view that a continuous or integrated process of manufacture has come to be contemplated by the scheme of the Act and the Rules framed thereunder for the first time only in May, 1968, the scheme having been brought into force with effect from June 1, 1968 and prior thereto such a continuous or integrated manufacturing process was never contemplated by the Act or the Rules.

The. learned Attorney General gets inspiration from the said unreported case of <ORG> and submits that atleast since after May, 1968, rule 9 and rule 49 envisage the case of an integrated and continuous process of manufacture involving the use or utilisation of a commodity produced at an intermediate stage of such process for the manufacture of an end product or commodity. It is submitted by him that if the interpretation as given by the learned Single Judge of <ORG> in the above unreported decision is accepted, in that case, it will not be necessary to consider the effect of amended rule 9 or rule 49, that is to say, the Explanations that have been added to these two rules.

It may be that the concept of continuous or integrated process of manufacture has been recognised in the Explanation to sub-rule (2) of rule 173A and in the proviso to rule 173G but we do not think that rule 9 or rule 49 should be interpreted in the light of provisions of the Explanation to sub-rule (2) of rule 173A or the proviso to rule 173G Moreover, we are not concerned with the interpretation of rule 9 and rule 49, as they stood before the amendment. In the instant case, the appellants have challenged rule 9 and rule 49 as amended by the Notification dated February 20, 1982 We are, therefore, concerned with the interpretation of these rules as amended, particularly the question of validity of these rules.

Before we proceed to consider the contentions made on behalf of the parties, it may be stated that in view of the divergence of judicial opinions as to the interpretation of rules 9 and 49, before they were amended, the Explanations to rules 9 and 49 have been added so as to obviate any doubt. The Explanations to rule 9 and rule 49, inter alia, provide that commodity obtained at an intermediate stage of manufacture in a continuous process shall be deemed to have been removed from such place or premises as mentioned in sub-rule (1) of rule 9 This deeming provision has been given retrospective effect by virtue of section S l of the Finance Act 1982.

It is urged by Mr. <NAME>, learned Counsel for the appellants, that the amended rule 9 and rule 49 are arbitrary and unreasonable inasmuch as the goods which, in fact, are not removed from the factory and which are incapable of removal because of the nature and construction of the plant or the nature and character of the manufacturing process, are fictionally treated as having been removed. It is submitted that as a result of the amendment of these rules the appellants are exposed to excessive hardship for not complying with the statutory provisions In view of the length of the retrospective operation of the amendments, namely 38 years from the date of the commencement of the Act, that is, February 28, 1944 the appellants would be called upon to pay enormous amount of duty in respect of the entire quantity of goods which have come into existence and have been captively consumed within the factory premises. The appellants will not, however, be able to pass on this burden to consumers and will have to bear the same themselves It is submitted that in view of the arbitrariness and unreasonableness of the amendments and the hardships that will be caused to the appellants and other manufacturers of excisable goods, the amendments should be struck down as violative of the provisions of Article 14 and Article 19(1)(g) of the Constitution of India.

It is not disputed that the <ORG> is competent to make laws both prospectively and retrospectively But, as pointed out by this Court in <CITATION> , [ 19661 I S.C. R. 890, the cases may conceivably occur where the court may have to consider the question as to whether excessive retrospective operation prescribed by a taxing statute amounts to the contravention of the citizens' fundamental rights; and in dealing with such a question the court may have to take into account all the relevant and surrounding facts and circumstances in relation to the taxation. Again in <CITATION> , [ 1964] I S C.R 897 this Court has pointed out that if the retrospective feature of a law is arbitrary and burdensome, the statute will not be sustained and the reasonableness of each retrospective statute will depend on the circumstances of each case; and the test of the length of time covered by the retrospective operation cannot, by itself, necessarily be a decisive test.

The apprehension of the appellants is that the amendments to rules 9 and 49 having been made retrospective from the date the Rules were framed, that is from February 28, 1944, the appellants and others similarly situated may be called upon to pay enormous amounts of duty in respect of intermediate goods which have come into existence and again consumed in the integrated process of manufacture of another commodity There can be no doubt that if one has to pay duty with retrospective effect from 1944, it would really cause great hardship but, in our opinion, in view of section I IA of the Act, there is no cause for such apprehension. Section I IA(I) of the Act provides as follows:-

"Section l1A.-(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short- paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:

Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words "six months", the words "five years ' were substituted.

Explanation.-Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of six months or five years, as the case may be "

Under section 11A ( I) the excise authorities cannot recover duties not levied or not paid or short-levied or short-paid or erroneously refunded beyond the period of six months, the proviso to section l IA not being applicable in the present case. Thus although section 5 l of the Finance Act , 1982 has given retrospective effect to the amendments of rules 9 and 49, yet it must be subject to the provision of section 11A of the Act. We are unable to accept the contention of the learned Attorney General that as section 5  1 has made the amendments retrospective in operation since February 28, 1944, it should be held that it overrides the provision of section 11A . If the intention of the <ORG> was to nullify the effect of section 11A , in that case, the <ORG> would have specifically provided for the same Section 5  1 does not contain any non-obstante clause nor does it refer to the provision of section 1 IA. In the circumstances it is difficult to hold that section 5 l overrides the provision of section 1 IA.

It is, however, contended by the learned Attorney General that as the law was amended for the first time on February 20, 1982, the cause of action for the excise authorities to demand excise duty in terms of the amended provision, arose on that day, that is, on February 20, 1982 and, accordingly, the authorities are entitled to make such demand with retrospective effect beyond the period of six months. But such demand, though it may include within it demand for more than six months, must be made within a period of six months from the date of the amendment.

There is no provision in the Act or in the Rules enabling the excise authorities to make any demand beyond the periods mentioned in section 11A of the Act on the ground of the accrual of cause of action. The question that is really involved is whether in view of section 5  1 of the Finance Act, 1982, section 11A should be ignored or not. In our view section S I does not, in any manner, affect the provision of section 11A of the Act. In the absence of any specific provision overriding section 1 IA, it will be consistent with rules of harmonious construction to hold that section 51 of the Finance Act, 1982 in so far as it gives retrospective effect to the amendments made to rules 9 and 49 of the rules, is subject to the provision of section 11A .

In the circumstances, there is no question of the amended provision of rule 9 and rule 49 being arbitrary, unreasonable or violative of the provision of Article 14 and Article 19(1)(g) of the Constitution of India.

We may now deal with the challenge made to the retrospective operation of amendments of rules 9 and 49 on another ground. In order to appreciate the ground of such challenge, we may once more refer to section 51 of the Finance Act, 1982. The Explanation to section 5  1 provides as follows:-

"Explanation.-For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force."

Under the Explanation, although rules 9 and 49 have been given retrospective effect, an act or omission which was not punishable before the amendment of the Rules, will not be punishable after amendment. The Explanation does not however, provide for the penalties and confiscation of goods. It is the contention of the appellants that as the appellants had not complied with the requirements of the amended rules 9 and 49, they would be subjected to penalties and their goods would be confiscated under the amended rules 9 and 49 read with rule 173Q of the Rules with retrospective effect. It is, accordingly, submitted on behalf of the appellants that the amendment of these two rules with retrospective effect is arbitrary and unreasonable and should be struck down as violative of Article 14 of the Constitution.

Attractive though the argument is, we regret we are unable to accept the same. It is true that the Explanation to section 51 has not mentioned anything about the penalties and confiscation of goods but H we do not think that in view of such non-mention in the Explanation excluding imposition of penalties for acts or omissions before amendment. such penalties can be imposed or goods can be confiscated by virtue of the amended provisions of rules 9 and 49. It will be against all principles of legal jurisprudence to impose a penalty on a person or to confiscate his goods for an act or omission which was lawful at the time when such act was performed or omission made, but subsequently made unlawful by virtue of any provision of law. The contention made on behalf of the apellants is founded on the assumption that under the Explanation to section 5  1 , the penalties can be imposed and goods can be confiscated with retrospective effect. In the circumstances, the challenge to the amendments of rules 9 and 49, founded on the provision of the Explanation to section 51 of the Finance Act, 1982, is without any substance and is rejected The appellants have also challenged the prospective operation of the Explanation to rules 9 and 49 introduced by amendments of the same. It is strenuously uged by Mr. <NAME>, learned Counsel for the appellants, that even after amendment there must be removal of the goods from one place to another for the purpose of collection of excise duty. Our attention has been drawn on behalf of the appellants to clause (b) of sub-section (4) of section 4 of the Act, which defines "place of removal" as follows:-

"Sub-section (4)-For the purpose of this section,-

(a).....................................

(b) "place of removal" means-

(i) a factory or any other place or premises of production or manufacture of the excisable goods; or

(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed.

It is submitted on behalf of the appellants that the Explanations to rule 9 and rule 49 are ultra vires the provision of clause (b) of sub-section (4) of section 4 of the Act inasmuch as "place of removal" as defined therein, does not contemplate any deemed removal, but a physical and actual removal of the goods from a factory or any other place or premises of production or manufacture or a warehouse etc. A This contention is unsound and also does not follow from the definition of "place of removal . Under the definition "place of removal" may be a factory or any other place or premises of production or manufacture of the excisable goods etc The Explanation to rules 9 and 49 do not contain any definition of "place of removal", but provide that excisable goods produced or manufactured in any place or premises at an intermediate stage and consumed or utilised for the manufacture of another commodity in a continuous process, shall be deemed to have been removed from such place or premises immediately before such consumption or utilization. Clause (b) of sub-section (4) of section 4 has defined "place of removal", but it has not defined 'removal'. There can be no doubt that the word 'removal contemplated shifting of a thing from one place to another. In other words, it contemplates physical movement of goods from one place to another It is well settled that a deeming provision is an admission of the non-existence of the fact deemed. Therefore, in view of the deeming provisions under Explanations to rules 9 and 49, although the goods which are produced or manufactured at an intermediate stage and, thereafter, consumed or utilised in the integrated process for the manufacture of another commodity is not actually removed, shall be construed and regarded as removed. The <ORG> is quite competent to enact a deeming provision for the purpose of assuming the existence of a fact which does not really exist. It has been already noticed that the taxing event under section 3 of the Act is the production or manufacture of goods and not removal The Explanations to rules 9 and 49 contemplate the collection of duty levied on the production of a commodity at an intermediate stage of an integrated process of manufacture of another commodity by deeming such production or manufacture of the commodity at an intermediate stage to be removal from such place or premises of manufacture. The deeming provisions are quite consistent with section 3 of the Act As observed by <ORG> in <NAME>'s case (supra) there is in theory nothing to prevent the central legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it after- wards, whether it be sold, consumed or destroyed or given away. It is for the convenience of the taxing authority that duty is collected at the time of removal of the commodity. There is, therefore, nothing unreasonable in the deeming provision and, as discussed above, it is quite in conformity with the provision of section 3 of the Act The contention that the amendments to rules 9 and 49 are ultra vires clause H

(b) of sub-section (4) of section 4 of the Act, is without substance and is overruled.

It is next contended on behalf of the appellants that even assuming that there can be fictional removal as provided in the Explanation to rules 9 and 49, there cannot be such fictional or deemed removal without the specification of the place where the excisable goods are produced, cured or manufactured or any premises appurtenant thereto. Rule 9(1), inter alia provides that no excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf until the excise duty leviable thereon has been paid. The Explanations to rules 9 and 49 refer to the specification that has been made by the Collector under sub- rule (1) of rule 9. It is submitted on behalf of the appellants that as no specification has been made by the Collector of such place or premises appurtenant thereto, the provision of deemed removal with regard to the commodity produced at the intermediate stage and consumed or utilised in the continuous process of manufacture of the end product, is inapplicable. It is contended that so long as such specification is not made by the Collector of the place of manufacture or of any premises appurenant thereto, the provision of deemed removal as contained in the Explanations to rule 9 and 49 cannot be given effect to.

On the other hand, it is contended by the learned Attorney General that specification of the place of manufacture and other places for the storage of the goods, is made in the licence which is required to be obtained under rule 174 of the Rules. Rule ]78 provides for the form. of licence. Clause (b) of rule 178(1) provides that every licence granted or renewed under rule 176 shall have reference only to the premises, if any, described in such licence. Form A L.-IV is the form of an application for licence under rule 176. In the Schedule to the Form, description of the premises intended to be used as a factory and of each main division or sub-division of the factory has to be given. Further, the detailed description of store-room or other place of storage and the purpose of each has also to be given in the application form for the grant of licence for the manufacture of excisable goods. Again under rule 44 of the Rules, the Collector may require any manufacturer to make a prior declaration of factory premises and its equipments. Such a declaration has to be given in Form D-2 in respect of buildings, rooms, vessel, etc. In view of the particulars which are required to be given by a licensee for the manufacture of excisable goods, it is submitted by the learned Attorney General that the specification that is required to be made under rule 9(1), is made in the licence and in the declaration that has to be furnished by the manufacturer in Form D-2.

It is true that under rule 9(1) there is a provision for specification by the Collector, but the question is what has to be specified by the Collector. It is the contention of the appellants that the Collector has to specify the place of manufacture and also any premises appurtenant thereto. We are, however, unable to accept this contention. The place where the goods are to be manufactured by a manufacturer, that is to say, the site of the factory cannot be specified by the Collector. It is for the manufacturer to choose the site or the place where the factory will be constructed and goods will be manufactured. Rule 9(1), in our opinion, does not require the Collector to specify the place where the excisable goods are produced, cured or manufactured. The words "which may be specified by the Collector in this behalf" occurring in rule 9(1) of the Rules do not qualify the words "any place where they are produced, cured or manufactured', but relate to or qualify the words "any premises appurtenant thereto". In other words, if the place of removal is not the place where the goods are produced, cured or manufactured, but any premises appurtenant to such place, in that case, the Collector has to specify such premises for the purpose of collection of excise duty. Thus the contention of the appellants that the Collector has to specify the place of manufacture and also any premises appurtenant thereto under rule 9(1) of the Rules, is without any substance.

Our attention has, however, been drawn to the impugned circular dated September 24, 1980 issued by <ORG>. In clause 3 of the circular, it is stated as follows:-

"Mere approval of the ground plan in a routine manner will not suffice for purposes of rule 9 as under the said rule the place of production etc. Or premises appurtenant thereto have also to the specified separately "

Under the circular, the Collector is required to specify under rule 9(1) both the place of production and premises appurtenant thereto, if any. In view of this direction given in the circular, the learned Counsel for the appellants submits that it is not only binding on the Collector and the other officers of <ORG>, but also the circular is in the nature of contemporanea exposito rendering useful aid in the construction of the provision of rule 9(I) of the Rules. This contention finds support from the decision of this Court in K.P. Var-

ghese v. The Income-Tax officer, Ernakulam, [1982] I S.C.R. 629 relied on by the learned Counsel of the appellants. Indeed, it has been observed in that case that the rule of construction by reference to contemporanea exposito is a well established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the 13 statute is plain and unambiguous. In our opinion, the language of rule 9(1) admits of only one interpretation and that is that the specification that has to be made by the Collector is of any premises appurtenant to the place of manufacture or production of the excisable goods. The specification is not required to be made and, in our view, cannot be made of the place of manufacture or production of the excisable goods. Apart from that, as observed by <NAME>, upon a review of all the decisions on the point, in an earlier decision of this Court in the <CITATION> ,  3 S.C.R. 146, the maxim contemporanea exposito as laid down by <NAME> was applied to construing ancient statutes but not to interpreting Acts which are comparatively modern. Further, it has been observed that in a modern progressive society it would be unreasonable to confine the intention of a <ORG> to the meaning attributable to the word used at the time the law was made and, unless a contrary intention appears, an interpretation should be given to the words used to take in new facts and situations, if the words are capable of comprehending them. Most respectfully we agree with the said observation of <NAME> In the circumstances, we do not agree with the direction of <ORG> given in the impugned circular that both the place of manufacture and the premises appurtenant thereto must be specified by the Collector under rule 9 1(1) of the Rules. Thus, there being no question of specification of the place of manufacture, the contention of the appellants that without such specification there cannot be any deemed removal, fails.

In view of the discussion made above, we hold that the amendments to rules 9 and 49 are quite legal and valid. Further, section S 1 of this Finance Act , 1982 giving retrospective effect to the said amendments is also legal and valid.

In the instant case, the appellants are liable to pay excise duty on the yarn which is obtained at an intermediate stage and, thereafter, further processed in an integrated process for weaving the same into fabrics. Although it has been alleged that the yarn is obtained at an intermediate stage of an integrated process of manufacture of fabrics, it appears to be not so. After the yarn is produced it is sized and, thereafter, subjected to a process of weaving the same into fabrics. Be that as it may, as we have held that the commodity which is obtained at an intermediate stage of an integrated process of manufacture of another commodity, is liable to the payment of excise duty, the yarn that is produced by the appellants is also liable to payment of excise duty. In our view, <ORG> by the impugned judgment has rightly held that the appellants are not liable to pay any excise duty on the yarn after it is sized for the purpose of weaving the same into fabrics. No distinction can be made between unsized yarn and sized yarn, for the unsized yarn when converted into sized yarn does not lose its character as yarn.

For the reason aforesaid, the judgment of <ORG> is affirmed and this appeal is dismissed. There will. however, be no order as to costs.

Civil Appeal Nos. 2658 and 4168 of 1983.

In view of the judgment passed in Civil Appeal No. 297 of 1983, these appeals are also dismissed. There will, however, be no order as to costs.

S.L. Appeals dismissed.


JUDGMENT <NAME>, Acting C.J.

1. This is a reference under Section 51 of the Indian income Tax Act , 1918, which is in these terms:

(1) If in the course of any assessment under this Act, or any proceeding in connection therewith, other than a proceeding under Chapter VII, a question has arisen with reference to the interpretation of any of the provisions of this Act or of any rule there under, <ORG> may, either on its own motion or on reference from any Revenue Officer subordinate to it, draw up a statement of the case and, refer it, with its own opinion thereon, to <ORG>, and shall so refer any such question on the application of the assesses unless it is satisfied that the application is frivolous or that a reference is unnecessary.

(2) If <ORG> is not satisfied that the statements contained in the case are sufficient to enable it to determine the questions raised thereby, the <ORG> may refer the case back to <ORG> by which it was stated, to make such additions thereto, or alterations therein, as the <ORG> may direction that behalf.

(3) <ORG> upon the hearing of any such case shall decide the questions raised thereby, and shall deliver its judgment thereon containing the grounds on which such decision is bounded, and shall send to <ORG> by which the case was stated, a copy of such judgment under the seal of the <ORG> and the signature of the Registrar; and <ORG> shall dispose of the case accordingly, or if the case arose on reference from any Revenue Officer subordinate to it, shall forward a copy of such judgment to such officer who shall dispose of the case conformably to such judgment.

(4) Where a reference is made to <ORG> on the application of an assessee, costs shall be in the discretion of the Court.

2. The question for determination is whether <ORG> are liable to be assessed on their annual profits under the income Tax Act .

3. When the Reference was taken up for consideration, a question of procedure was raised as to who should begin. We ruled that Counsel for the Company was entitled to begin. This ruling is in accordance with the decision in <NAME> of Chandos v. <ORG> (1851) 6 Ex. 464 : 2 L.M. & P. 311 : 20 L.J. Ex. 269 : 165 E.R. 624. The practice settled by that decision was followed in Stamp Duty on Gill's Conveyance, In re (1853) 8 Ex. 376 at p. 380 : 155 B.R. 1393 : 22 L.J. Ex. 188 : 91 K.R. 543, Mickletkwait, In re (1855) 11 Ex. 452 at p, 453 : 25 L.J. Ex. 19 : 105 R.R. 614 : 156 E..R. 908, Trustees of Earl of Uglington v. Commissioners of Inland Revenue (1865) 3 H. & C. 871 at p. 880 : 34 L.J. Ex. 225 : 11 Jur. (N.S.) 676 : 13 W.R. 902 : 12 L.T. 70T : 159 E.R. 777, Cowley (Earl), In re (&), <NAME> (Lord) v. Commissioners of Inland Revenue (1868) 3 Ex. 263 : 18 L.T. 725 : 37 L.J. Ex. 109 : 16 W.R. 1055 and <ORG> v. <NAME> (1905) 2 K.B. 612 : 74 L.J.K.B. 934 : 54 W.R. 9 : 93 L.T. 63 : 21 T.L.R. 578. The distinction suggested in <NAME>, In re (1863) 4 Ex. 327 : 39 L.J. Ex. 30 : 21 L.T. 25 : 17 W.R. and Be Lancey, In re (186B) 4 Ex. 327n, between cases where right to assessment is admitted and the whole question is as to the quantum, and cases where the question is one of complete exemption and not of quantum, does not appear to have been recognised in subsequent cases. The view that the objector who questions the assessment should begin and should have the right to reply, is well founded on principle and is supported by the decision of <ORG> in <NAME> v. Attorney-General (1843) 10 Ci & F. 257 : 52 R.R. 122 : 8 E.R. 739. The further question which was raised in <NAME> of Chandos v. <ORG> (1851) 6 Ex. 464 : 2 L.M. & P. 311 : 20 L.J. Ex. 269 : 165 E.R. 624, as to the right of the Attorney General as suCh to a general reply need not be considered here.

4. The provisions of the Indian income Tax Act material for the determination of the question referred are contained in Section 3 , Sub-section (1) and Section 4 . Section 3 , Sub-section (1) is in the following terms:

Save as hereinafter provided, this Act shall apply to all income from whatever source it is derived, if it accrues or arises or is received in British India, or is, under the provisions of this Act, deemed to accrue or arise or to be received in British India." Section 4 provides that agricultural income shall not be chargeable to income tax." Section 2 gives a definition of the expression "agricultural income." The portion of the definition material for the determination of the question before us may be stated as follows:

In this Act, unless there is anything repugnant in the subject or context, agricultural income means any income derived from.

(i) agriculture, or.

(ii) the performance by a cultivator or receiver of rent in kind of any process ordinarily employed by a cultivator or receiver of rent in kind to render the produce raised or received by him fit to be taken to market.

4. It cannot be disputed that Section 3 , Sub-Section (I) makes the profits of the <ORG> liable to assessment, unless such profits constitute "agricultural income" within the meaning of Section 4 , read with Section 2 , Clause (1). The income-tax authorities have held that the profits do not constitute agricultural income, The <ORG> maintain the opposite conclusion. We are of opinion that both the contentions are erroneous.

5. The process employed by the Company for the cultivation of tea bushes and manufacture of tea as a commercial commodity are thus described in their statement of case:

After the tea bush has been planted and has arrived at a proper state of maturity, the young green leaf is selected and plucked by hand from the bush. It is then dried or withered and rolled, dried and stored. The actual dried and rolled leaf, the produce of the tea bush, is then sent to the market. In the very early days of tea cultivation, the green leaf was dried or withered in the sun and was then rolled by hand. This primitive method was replaced by machinery. The effect of these processes being carried out by machinery in no way alters the processed or affects the result, it only leads to a quicker manipulation of the leaf. The types of machinery at present in use are those which have been in use for the past fifty years, or thereabouts. The actual leaf of the tea plant, without the addition thereto of the processes above described, is of no value as a market commodity.

6. The counter-statement on behalf of the <ORG> is expressed in the following terms:

It is contended on behalf of <ORG> that the manufacturing processes carried out in a modern tea factory, with scientific appliances and up to date machinery, are different from those ordinarily employed by a cultivator to render the produce raised by him fit to be taken to market. In former timer, the process of manufacturing tea was very simple and primitive. The leaf was rolled by hand and was then fried in an iron pan over an open fire. It is understood that this method was introduced from China where it was the ordinary method employed by the cultivators in making tea. The process employed in a morden tea factory goes far beyond this. The factory is driven by steam or electrical power throughout; the tea is first withered; it is then passed through a machine which rills it and is left for a short time to ferment, this process being repeated two or three times; it is then placed in another machine where it is fried' by means of hot air from a furnace which is forced through by technically driven fans; and, finally, it is sorted into grades by machinery and packed for export or sale in the Calcutta market. It is submitted on behalf of <ORG> that this process is different from the method described above by which the Chinese cultivator prepared his tea for market and which was the original method of tea making in India, The present day method is a process of manufacture and not merely a process ordinarily employed by a cultivator to render the produce raised by him fit to be taken to market.

7. It appears to us to be clear, from the respective cases just set out, that the process in its entirety cannot be appropriately described as agriculture. The earlier part of the operation, when the tea bush is planted and the young green leaf is selected and plucked may well be deemed to be agriculture. But the later part of the process is really manufacture of tea, and cannot, without violence to language, be described as agriculture. Counsel for the <ORG> appreciated this' difficulty, and made an endeavour to bring the case under the second Clause of the definition. That clause, in our opinion, cannot be applied to the case before us. The manufacture of tea as a marketable commodity from the green leaves cannot be held to be the performance by a cultivator of a process ordinarily employed by a cultivator to render the produce raised by him fit to be taken to market. The assertion of the <ORG> that the actual leaf of the tea plant is of no value as a marketable commodity must be taken with a qualification. The green leaf is not a marketable commodity for immediate use as an article of food; but it is a marketable commodity to be manufactured, by people who possess the requisite machinery, into tea fit for human consumption. We must further observe, in view of the expression used in the definition, that the manufacturing process cannot properly be said to be employed to render the tea leaves fit to be taken into the market. The means employed for the cultivation and manufacture of tea are well-known and are succinctly stated in an article on tea by Mr. <NAME>, in Volume XXVI of the Eleventh Edition of the Enoyolopmlia Brittanica: they are described in fuller detail in the standard works on cultivation and manufacture of tea by Lieutenant-Colonel <NAME> and <NAME>. There can be no doubt, in our opinion, that the entire process is a combination of agriculture and manufacture.

8. The principle applicable to cases of this character is now well settled. In the case of <ORG> v. <NAME> (1918) 2 K.B. 709 : 119 L.T. 369 : 34 T.L.R. 533 the respondents, who were <ORG>, carrying on business as manufacturing chemists and growers of medicinal and other herbs, owned a factory where the manufacture and distillation of herbs were carried on, and they also occupied a farm on which they grow herbs for treatment in the factory. The respondents were assessed to excess profits duty. On appeal by them against the assessment, it was ruled that the occupation of the farm was the business of husbandry and that the profits of the farm should consequently be excluded for the purpose of excess profits duty under Section 36 of the Finance Act, 1915, so that what remained as the profits of the factory could alone be assessed. This view was supported by reference to the dictum of Lord <NAME> in <NAME> v. <ORG> (1915) A.C. 1022 at p. 1039 : 84 L.J.K.B. 1772 : 6 Tax Cas. 542 59 S.J. 649 : 31 T.L.B. 546, that there was no reason why a corporation, any less than an individual, should not be engaged in more than one trade or business at the same time. The same question of apportionment arose in <ORG> v. <NAME> (1919) 1 X.B. 647 : 88 L.J.K.B. 752 : 120 L.T. 680 : 63 S.J. 429 : 35 T.L.R. 348 where <ORG> reversed the decision of <NAME>, J., in <ORG> v. <NAME> (1918) 2 K.B. 715 : 119 L.T. 371 : 31 T.L.M. 541, and ruled that the proper course, when a trade or business liable to duty is carried on in connection with a trade or business not so liable, is to sever the profits of the two businesses and assess accordingly. The appellant was the sole proprietor, editor, and publisher of <ORG> and was assessed on the profits of this publication. <ORG> held that the appellant was exempt from the duty, as he was the chief contributor to the <ORG> and thus carried on the profession of a journalist, the profits of which depended mainly on his personal qualifications within the meaning of Section 39(c) of the Finance Act, 1915. On appeal, <NAME>, J, set aside the order for exemption as, in his opinion, the appellant was not in the position of an ordinary journalist receiving remuneration for articles contributed to the press, but derived his profits from the sale of a commodity, thereby carrying on an ordinary commercial business. <ORG> reversed this decision and directed that the profits should be apportioned, even though the apportionment might be a difficult operation. The truth was, as Warrington, L.J., pointed out, that the profits were derived from two businesses, one of which was a profession exempt from duty, while the other was not so exempt and was assessable with duty. See also <ORG>, In the matter of 53 Ind. Cas.301 : (1919) Pat. 377 (F.B.) The <ORG> had obviously this class of cases in view, as is clear from" the provincials of Section 43 , Sub-section (2), which embodies the following rule:

Without prejudice to the generality of the foregoing power, (that is, power to make rules for carrying out the purposes of the Act and for the ascertainment and determination of any class of income), such rules may, when income is derived in part from agriculture and in part from business, prescribe the manner, whether with reference to a class or in particular cases, by which the taxable income shall be arrived at.

9. No rules, such as would be applicable to the case before us, have yet been framed. When they are framed and operate as statutory rules, an assessment may be made on such portion of the profits of the Company as do not fall within the description "agricultural income.

10. But although we hold that the profits of the <ORG> are not entirely exempt from assessment, it is plain that the assessment which has actually been made cannot be sustained, as it stands; for that assessment is in excess of the sum which may be lawfully levied, and the extent of the excess is yet unknown; see the observations of <NAME>, M. R., in <NAME>, Revenue Commissioners v. <NAME> (1919) 1 K.B. 647 : 88 L.J.K.B. 752 : 120 L.T. 680 : 63 S.J. 429 : 35 T.L.R. 348.

11 .Great stress has naturally been laid by Sir <NAME>, who appeared on behalf of the Company, on the important fast that no attempt was ever made to assess the Company to income tax under the corresponding provisions of the Indian Income Tax Act , 1886, which have been, so far as the present question is concerned, reproduced with no substantial variation in the Indian Income Tax Act , 1918. This is no doubt a circumstance to be taken into consideration, for an interpretation which has long been acted on, will not be disregarded be <ORG>: <ORG> v. Mayor etc. of Borough of Bury Corporation (1889) 14 App. Cas. 417 at p. 422 : 59 L.J.Q.B. 85 : 61 L.T. 417 : 54 J.P. 197, <ORG>, v <ORG> (1890) 15 App. Cas. 125 at p. 141 : 62 L.T. 738, and the <ORG> should have regard to the construction put upon a Statute when it first eanie into force Morgan v. <NAME> (1871)5 H.L. 304 at p. 315 : 40 L.J. M.C. 202 : 24 L.T. 889 : 20 W.R. 554, Fermoy Peeragi Claim (1856) 5 H.L.C. 716 at p. 747 : 101 R.R. 342 : 10 K.B. 1089, <ORG> v. <NAME> (1905) 2 K.B. 586 at p. 693 : 74 L.J.K. B. 822 : 93 L.T. 515 : 21 T.L.R. 654 But as <NAME>, J., observed in the case last mentioned, where the <ORG> is nailed upon to construe an Act of Parliament expressed in unambiguous language, it ought to put its own construction upon it, regardless of the construction that has been commonly put upon it; the fact that a mistaken interpretation has been generally put upon it cannot alter the law. To the same effect are the observations in <NAME> v. <NAME> 35 C.701 at p. 713 : 7 C.L.J. 563 : 12 C.W.N. 657. It is 8 well-settled principle of interpretation that <ORG>, in construing a Statute, will give much weight to the interpretation put upon it, at the time of its enactmenfr and since by those whose duty it has been to construe, execute and apply it. I do not suggest for a moment that such interpretation has by any means a controlling effect upon the <ORG>; such interpretation may, if occasion arises, have to be disregarded for cogent and persuasive reasons, and, is a clear case of error, a <ORG> would without hesitation refuse to follow such construction." This view is supported by the dictum of Sir <NAME> in Mvanturel v. Evanturel (1839) 2 P.C. 432 at p. 483 : 6 Moore P.C. (N.S.) 75 : 38 L.J.P.C.41 : 21 L.T. 4 : 17 W.B. 641 : 16 E.R. 655 and has been applied in the cases of <CITATION> 7 Ind. Cas. 890 : 13 C.L.J 476 : 15 C.W.N. 81 and <CITATION> 35 Ind. Cas. 305 : 43 C. 790 at p. 820 : 23 C.L.J. 26 : 20 C.W.N. 370. We may add that it was stated by the Advocate-General that there has been some divergence of opinion among successive legal advisers of the <ORG> and that the assessment has been made in this in-stance with a view to obtain a judicial determination of the true meaning of the legislative provisions on the subject. Clearly, we cannot, in such circumstances, allow our decision to be controlled by the conduct of the Revenue Authorities in the past. We have finally been pressed to apply the elementary rule that taxing Statute's must, be construed strictly: <CITATION> for India 34 C. 257 : 5 C.L.J. 148, <CITATION> 31 M. 408 : 3 M.L.T. 400 : 18 M.L.J 349, <NAME> v. <NAME> (1892) A.C. 150 : 61 L.J.P.C. 11 : 66 L.T. 327 : 56 J.P. 596, <NAME> v. Inland Revenue Commissioners (1914) A.C. 877 at p. 897 : 84 L.J.K. B. 45 : 58 S.J. 738 : 30 T.L.R. 673, Attorney General v. <NAME> (1914) A.C. 765 : 83 L.J.K.B, 1083 : 111 L.T. 343 : 58 S.J. 577 : 30 T.L.B. 476. Now, there is no room for controversy that the <ORG>, seeking to recover the tax, must bring the subject within the letter of the law, otherwise the subject is free, however much within the spirit of the law the case might appear to be. There can be no equitable construction admissible in a fiscal Statute; the benefit of the doubt is the right of the Subject; Partington v. Attorney General (1869) 4 H.L. 100 at p. 122 : 38 L.J. Ex. 205 : 21 L.T. 370, <NAME> v. <ORG> (1879) 4 App. Cas. 197 at p. 202 : 49 L.J. Ex. 130 : 40 L.T. 630 : 27 W.R. 666 Bearing all these principles in mind, we hold that the Company must be taxed to the limited extent indicated, because they come within the letter of the law to that extent.

12. As the contentions of both sides have succeeded only in part, we make no order as to costs of this reference under Section 51 , Sub-section (4), Lot a copy of this judgment be transmitted to <ORG> under Section 51 , Sub-section (3).

Fletcher, J.

13. I agree.

Chaudhori, J.

14. I agree.


PETITIONER: <NAME> Vs. RESPONDENT: STATE TRANSPORT AUTHORITY, U.P. & ANR. DATE OF JUDGMENT: 26/09/1967 BENCH: <NAME>, S.M. BENCH: <NAME>, S.M. SHAH, J.C. SHELAT, J.M. CITATION: 1968 AIR 410 1968 SCR (1) 635 ACT: Motor Vehicles Act , ss. 47(3) and 64A -Regional Transport Authority if should consider representations of existing operator before passing order under s. 47(3) -Order under s. 47(3) if revisable under s. 64A . Constitution of India, 1950, Art, 136--Discretion under. HEADNOTE: <ORG>, by an order under s. 47(3) of the Motor Vehicles Act, 1939, fixed the number of stage carriages, by increasing their number on a particular route. The appellant, an existing operator, filed a revision against that order to <ORG>, under s. 64A, but <ORG> held that a revision did not lie. The appellant then filed a writ petition in <ORG> and <ORG> dismissed it, holding that: (1) at the stage of s. 47(3), existing operators were not entitled to be heard by <ORG>, and (2) since the order of <ORG> was good on merits, it was not necessary to decide whether a revision lay to <ORG>. In appeal to this Court, HELD: (1) Unlike s. 47(1) , s. 47(3) does not say expressly that representations could be made by existing operators and others. The expression in s. 47(3) that '<ORG> may, having regard to the matters mentioned in sub-s. (1)', only means that the Authority shall have regard to the matters mentioned in sub- cls. (a) to (f) of s. 47(1) and has nothing to do the right of making representations. [638F-H] (2) But whether or not an existing operator has an implied right to be heard before an order under s. 47(3) is made he can be aggrieved by an order made under that section increasing or decreasing the number of stage carriages depending on the circumstances of the case, and has therefore a right of revision under s. 64A , the only condition for filing a revision being that it should be against an order made by <ORG> against which no appeal lies. [639C- <CITATION> ,  3 S.C.R. 523, re- ferred to. (3) Since a revision could be filed under s. 64A against the order under s. 47(3) the aggrieved operator need not approach <ORG> first to review its order. [640B-C] (4) The High Court should have directed <ORG> to dispose of on merits the revision petition against the order under s. 47(3) , and not gone into its merits itself, but, in view of the time that lapsed since the order was passed (five years, during which the demand for stage carriages must have increased), this Court would not interfere in the exercise of its jurisdiction under Art. 136. [640C-E] 636 JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 636 of 1967. Appeal by special leave from the judgment all order dated November 11. 1966 of <ORG>, Lucknow Bench in Writ Petition No. 226 of 1963.

<NAME>, <NAME>, <NAME> and <NAME> the appellant.

<NAME> and <NAME>, for the respondents. Judgment of the Court was delivered by <NAME>, J. This appeal by special leave is directed against the judgment, dated November 11, 1966, of <ORG> of tile <ORG> dismissing the writ petition filed by tile appellant seeking to quash tile order of <ORG>. dated March 20/21. 1963. <ORG> had by this order rejected the appellant's revision petition against the decision of <ORG> oil the ground that a mere decision of <ORG> limiting the number of stage carriages under S. 47(3) of the Motor Vehicles Act, 1939 (IV of 1939) hereinafter referred to as the Act could not form the subject matter of a revision application'. It was of the view that "when <ORG> actually proceeds to fill Lip the vacancies, which it has decided to create, then the persons whose interests would be adversely affected, would have a right of representation before <ORG>, and in the case of their representation being rejected by <ORG> the will have a right of appeal before <ORG>."

<ORG> was of the view that an existing operator had no say in the matter of determination of the strength on a route under sub-s. (3) of s. 47 , and, it was in the discretion of <ORG> to determine the strength on a route, after considering various matters enumerated in cls. (a) to (f) of sub-s. (1) of S. 47 . <ORG> further observed that is the order passed under S. 47(3), to revise which the appellant had filed a revision tinder s. 64-A , was a good order and did not call for any interference, it did not consider it necessary to decide whether a revision lay against such an order under s. 64-A of the Act.

The learned counsel for the appellant, Mr. <NAME>, con- tends that an order under S. 47(3) of the Act, whether it is quasijudicial or administrative, does affect the existing operators on the route and their representations must be considered by <ORG> before passing an order tinder s. 47(3) . He further submits that a revision lay under S. 64-A of the Act and the same should not have been dismissed on the ground that no revision lay.

The relevant statutory provisions are s. 47 and s. 64-A , of the Act, and read thus;

"47. Procedure of <ORG> in considering application for stage carriage permit:-

(1) <ORG> shall, in considering an application for a stage carriage permit, have regard to the following matters, namely:---

(a) the interests of the public generally',

(b) the advantages to the public of the set- vice to be provided, including the saving of time likely to be effected thereby and any convenience arising from journeys not being broken;

(c) the adequacy of other passenger transport services operating or likely to operate in the near future, whether by road or other means, between the places to be served;

(d) the benefit to any particular locality or localities likely to be afforded by the service;

(e) the operation by the applicant of other transport services. including those in respect of which applications from him for permits are pending;

(f) the condition of the roads included in the proposed route or area;

and shall also take into consideration any representations made by persons already providing passengers transport facilities by any means along or near the proposed route or area. or by any association representing persons interested in the provision of road transport facilities recognised in this behalf by <ORG>, or by any local authority or police authority within whose jurisdiction any part of the proposed route or area lies:

Provided that other conditions being equal, an application for a stage carriage permit from a co-operative society registered or deemed to have been registered under any enactment in force for the time being shall, as far as may be, be given preference over applications from individual owners.

(2) <ORG> shall refuse to grant a stage carriage permit if it appears from any time table furnished that the provisions of this Act relating to the speed at which vehicles may be driven are likely to be contravened:

provided that before such refusal an opportunity shall be given to the applicant to amend the time table so as to conform to the said provisions.

(3) <ORG> may, having regard to the matters, mentioned in sub-section (1), limit the number of stage carriages generally or of any specified type for which stage carriage permits may be granted in the region or in any specified area or on any specified route within the region." "64-A. Revision---<ORG> may, either on its own motion or on an application made to it, call for the record of any case in which an order has been made by <ORG> and in which no appeal lies, and if it appears to <ORG> that the order made by <ORG> is improper or illegal, <ORG> may pass such order in relation to the case as it deems fit:

Provided that <ORG> shall not entertain any application from a person aggrieved by an order of <ORG>, unless the application is made within thirty days from the date of the order:

Provided further that <ORG> shall not pass an order under this section prejudicial to any person without giving him a reasonable opportunity of being heard."

It would be noticed that sub-s. (3) of s. 47 does not expressly say whether any representations can be made by persons already providing transport facilities or by associations representing persons interested in the provision of the transport facilities or by any local authority or police authority within whose jurisdiction the route or area lies. This is expressly mentioned in s. 47(1) . The learned counsel contends that the expression "matters mentioned in sub-section (1)" occurring in sub-s. (3) refers back not only to matters mentioned in sub-cls.

(a) to (f) to sub-s. (1) in S. 47 but also the right of representation mentioned in sub-s. (1). We are unable to accept this line of reasoning as being sound. Even under s. 47(1) , <ORG> can only have regard to the matters mentioned in sub-cls. (a) to (f), and those matters may be brought to the notice of <ORG> by representations. It could not have been the intention that representations would contain matters which <ORG> could not take into consideration under s. 47(1) . This is not to say that the matters mentioned in sub-cls. (a) to (f) are exhaustive, but this point does not arise and we need not say anything as to this. Therefore, this line of reasoning does not assist the appellant.

This Court in <CITATION> (1) held that "where a limit has been fixed under s. 47(3) by <ORG>, and thereafter the said authority proceeds to consider applications for permits under s. 48 read with s. 57 , <ORG> must confine the number of permits issued by it to those limits and on an appeal or revision by an aggrieved person, <ORG> or <ORG> must equally be confined to the issue of permits within the limits fixed under s. 47(3) ". But this Court did not feel it necessary to decide whether under s. 64-A , inserted by Motor Vehicles (Amendment) Act No. 100 of 1956, it was open to <ORG> to vary a general order passed under s. 47(3) . If we look at the section, it would be noticed that s. 64-A is very wide in terms; the only condition necessary for filing a revision is that it should be against an order made by <ORG> and against which no appeal lies. The word "order" is wide, and there is no doubt that an order made under s. 47(3) is an order within s. 64-A because, as held by this Court in <CITATION> (1) it binds <ORG> and <ORG> in dealing with applications under s. 48 . read with s. 57 , of the Act.

Mr. <NAME>, the learned counsel for the <ORG>, con- tends that no revision lies at the instance of an existing operator because he cannot be called an aggrieved person, and secondly, that even if a revision lies, the appellant is not entitled to any relief on the facts of this case, under Art. 136 of the Constitution, because the appellant never approached <ORG> in the first instance. We are unable to say that no existing operator can be aggrieved by an order made under s. 47(3) , increasing or decreasing the number of stage carriages; it would depend on the facts and circumstances of each case. In a particular case it may be to his advantage and he then would not file a revision against it, but if he files a revision when an order made under s. 47(3) is prejudicial to his interests, there is no ground for denying him the right to approach the revisional authority and seeking its order. An order under s. 47(3) affects the future working on a route and we are of the view that such an order would have repercussion on the working of the existing operators, whether for their good or not. <ORG>, as stated above, was of the view that at the stage of s. 47(3) existing operators would- not be entitled to be heard by the Regional (1)  3 S.C.R. 523.

<ORG>. But assuming that it is so, this does no affect the right of revision conferred by s. 64-A . We need not in this case decide whether it is implied that existing operators would be entitled to be heard by the Regional <ORG> before an order under s. 47(3) is made.

The learned counsel for the respondent further contends that a decision under s. 47(3) is a tentative decision and can be revised. But assuming that it can be revised by <ORG>, till the order is in operation it is binding on everybody and if a revision can be filed against the order under s. 64-A , the aggrieved operator cannot be compelled to approach <ORG> first to revise its order. 'This argument, in a way, concedes that an operator can be a person aggrieved by an order under s. 47(3) .

The learned counsel for the appellant contends that if it is held that a revision lies under s. 64-A against an order passed under s. 47(3) of the Act, <ORG> should be directed to hear the revision on merits. He says that <ORG> had no right to go into the merits of the order itself. Ordinarily what Mr. <NAME> contends is correct, but here the facts are that the order under s. 47(3) was passed as long ago as November. 17. 1962. During the last five years demand for stage carriages on this route would have, in the ordinary course, increased by now. and further it has not been shown that <ORG> has made any glaring mistake. For the aforesaid reasons. in exercising our discretion under Art. 136 of the Constitution we consider that we should not interfere with the order passed by <ORG>. In the result the appeal fails and is dismissed. Under the circumstances there will be no order as to costs.

<ORG> dismissed.