PETITIONER: <ORG>. Vs. RESPONDENT: UNION OF INDIA DATE OF JUDGMENT: 18/10/1968 BENCH: <NAME>, S.M. BENCH: <NAME>, S.M. BACHAWAT, R.S. HEGDE, K.S. CITATION: 1970 AIR 1173 1969 SCR (2) 481 CITATOR INFO : R 1971 SC2039 (14,26) RF 1977 SC1884 (26) R 1980 SC1255 (11) RF 1986 SC1682 (17) ACT: Central Excise and Salt Act , First Schedule, item 25 AA, Indian Tariff Act , First Schedule, entry 63(36) and Finance Act --Steel wires made from imported steel rods--Whether excise duty is leviable. Central Excise and Salt Rules, 1944. rr. 9(2) and 10--Wrong rule mentioned--No prejudice to assessee--If could be justified under the correct rule. HEADNOTE: The appellant was a manufacturer of iron and steel products.It was importing steel rods from which steel wires were manufactured. On.April 24, 1962 Finance Act (No. 2) 1962 imposed excise duty on iron and steel products by introducing item 26AA in the Central Excise and Salt Act , 1944. Under that item, on wires, 5% ad valorem plus the excise duty for the time being leviable on pig iron and steel ingots as the case may be was payable. Pig iron 'and steel ingots were already subject to excise duty under items 25 and 26 respectively. On the same day, the first Schedule of the Tariff Act 1934 was amended and two Notifications Nos. 70 and 77 were issued in exercise of the powers conferred by r. 8(1) of the rules framed under the Excise Act . In the Tariff Act item 63(36) which deals with imported iron and steel products was added to the First Schedule by. Finance Act (No. 2),. 1962.The items included therein are the very items set out in item 26AA of the Excise Act. The standard rule of duty is mentioned as 'the excise duty for the time being leviable on like articles if produced or manufactured in India... and the duty so leviable shall be in addition to the duty which would have been levied if this entry had not been inserted.Under Notification 70, <ORG> exempted iron and steel products falling under item 26AA if made from pig iron or steel in gots on which the appropriate amount of excise duty has already been paid,from so much of the excise duty leviable thereon as is equivalent to the duty leviable under item 25 or 26 as the case may be. Under Notification 77, <ORG> exempted other iron and steel products falling under sub-items (2), (3), (4) and (5) of item 26 AA if made from articles which have already paid the 'appropriate. excise duty under sub-item (1) of item 26AA, from so much of the excise duty as is equivalent to the duty payable under sub-item (1). This notification was later superseded by another Notification No. 89. by, which the <ORG> exempted with effect from April, 24, 1962, iron and steel products falling under 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 excise duty as is equivalent to the duty payable on the said article. On and after April 24, 1962, the appellant cleared from its warehouse wires produced from the imported steel rods. The required permission from the excise authorities was obtained and the duty assessed was paid', At that time the excise authorities proceeded on the basis that only ad valorem duty had to be levied and not 'excise duty for the time leviable on pig iron or steel ingots.' On March 21, 1963, the assessing authority issued a written demand under r. 9(2) demanding steel ingot duty which, according to the authority the appellant had evaded to pay. The appellant paid the duty demanded under protest 482 and appealed to higher authorities. The <ORG>, in revision. treated the demand as one under r. 10, because, there was no question of any evasion by the appellant, and confined the demand to clearances effected after December 21, 1962. In appeal to this Court against the order of <ORG>, the. appellant contended that: (1) The clause 'excise duty for the time being leviable under the Act on pig iron or steel ingots' is attracted only when any pig iron or steel ingot dutiable under the Act is Used in the manufacture of any article dutiable under item 26AA (1), and, as the steel bars used in the manufacture of wire were imported and were not made out of steel ingots dutiable under the Act, that loan of the levy was not attracted to the wires; and (2) The demand by <ORG> was barred by limitation under r. 10. HELD: (1) (Per <NAME> and <NAME>, JJ.) The excise duty was levied correctly as determined by <ORG>. Item 26AA prescribes a rate of duty as the heading of its column 3 indicates. The rate consists of two parts, one part is the ad valorem duty and the other excise duty. The context indicates that the words 'as the case may be' denote the excise duty leviable on pig iron under item 25 is to be charged if the product is an iron product; if it is a steel product then the excise duty leviable on steel ingots under item 26 is to. be levied. The weight to be taken into consideration for determining the excise duty would be the weight of the products made out of iron steel ingots and not that of the pig iron or steel ingot out of which they were made. That is, the duty will be the duty leviable on the hypothetical piece of pig iron or steel ingot 'as the case may be of the same weight as the particular products to be assessed. The duty is not -concerned with the actual price of pig iron or steel ingot out of which other articles are made, and it is not concerned with whether any excise duty or countervailing duty was paid on the pig iron or steel ingot used. Therefore it is irrelevant whether the article out of which the assessed article was manufactured was imported or not. [486 A B; F--H; 487 B--E] The effect of item 63(36) in the Tariff Act , is to levy a countervailing duty as an additional custom duty equivalent to the prevalent .excise duty on like articles produced and manufactured. The manufacturer in India, who used steel rods made in India and made wires from them was given a certain relief under Notification 77, but the manufacturer who used steel rods made abroad was not given this exemption. Later by Notification 89, and suitable amendments, he was also given a similar exemption. But the item in the Tariff Act does not throw any light on item 26AA(1) of the Excise Act . [487 H; 488 A B] Assuming that it is permissible to look at the notifications issued by the. Central <ORG> for interpreting item 26AA, they proceed on the interpretation of the item that it refers to a rate. The Notifications do not exempt an article from the levy of duty; they give relief which may in a particular case be the excise duty or the countervailing duty levied on the article out of which the assessed article has been manufactured. The rule that a fiscal enactment should be strictly construed does not mean that close reasoning should not be employed to arrive at the true meaning of a badly drafted entry in an Excise Act . [487 A-C] Per Hegde, J. (dissenting): The expression leviable of pig iron and steel ingots as the case may be' has reference to pig iron or steel ingots dutiable under the Excise Act . Therefore. the wires which 'are the subject matter of the impugned levy in the present case, are not liable to pay the duty in dispute as they were made out of imported steel rods and hence not dutiable under the Excise Act . [495 A-B; 505 B] 403 If the item 26AA refers to a rate <ORG> would have conveyed such intention without any ambiguity as it has done in item 5. The words used are 'the excise duty'. If the clause refers to a rate the article 'the' has no place in the context. The expression 'the excise duty for the time being leviable' by necessary implication refers to an article dutiable under the Act That must necessarily be the 'article which is one of the components of the article on which duty is sought to be levied, that is, in the instant case, the steel ingot used in the production of wires. Moreover pig iron is the intermediate form through which iron must pass in the manufacture of steel. Therefore, every steel product is also an iron product. If the clause in item 26AA refers to a rate and not to the duty leviable on the material used in the manufacture of the dutiable article, then the question would be whether the rate is that at which duty is leviable on steel ingot or that leviable on pig iron. If it merely depends on the practice prevailing in the trade then the power of the assessing authorities to determine the nature of an. article would be an arbitrary power, and the legislature is not likely to have conferred such an arbitrary power on the authorities. If on the other hand. the item refers to the material from which the article on which duty is sought to be levied is made--the proximate, raw material and not the material from which that raw material is made, then there is definiteness for the purpose of finding out the amount. [495 A--C, E--F; 496 E--G; 497 A-B] Observations in <CITATION>  2 S.C.R. 765, 771; <CITATION> ,  3 S.C.R. 727, 742; <ORG> v. Duke of West minister  A.C. 1, 24 and Partington v. The Attorney-General, (1869) 4 H.L 100, 122, applied Entry 63(36) in the Tariff Act and item 26AA in the Excise Act were enacted simultaneously, came into force on the same day from one code and are pari materia. They were introduced in pursuance of a common purpose, namely, that the articles listed in item 26AA, whether produced out of indigenous pig iron or steel ingot or made of imported pig iron or steel ingot must bear the same amount of duty. The duty levied under item 63(36) being a countervailing duty it cannot be considered as an additional duty over and above the duty imposed under item 26AA of the Excise Act. [497 C--E, F---G] For finding out the scope of a particular levy, notifications issued by the executive <ORG> providing for exemption from levy can be looked into as they disclose the overall scheme. The notifications Nos. 70, 77 and 89 were issued with a view to avoid double taxation, and the exemption granted provides a clue to the scope of item 26AA. The effect of Finance Act (2), 1962, and the various Notifications is that excise duty is leviable at the rate mentioned in item 26-AA on pig iron or steel ingot used in the production of the article on which duty under item 26AA is sought to be levied but. to the extent any excise duty or countervailing custom duty has been paid on any of the material used in the manufacture of the article, the same is exempt. Therefore, when item 26AA speaks of 'the excise duty for the time being leviable on pig iron or steel ingots as the case may be' it refers to the excise duty payable on pig iron or steel ingots used in the production of the article dutiable under that item. [503 C--E; 504 G--H] <NAME> v. State of U.P.A.I.R. 1957 S.C. 790, followed. (2) (By <ORG>): If the exercise, of a power can be traced to a legitimate source, the fact that it was purported to have been exercised under a different power does not vitiate the exercise of the power. In 484 the present case, a common form is prescribed for issuing notices under rr. 9(2) and 10 and the incorrect statements in the written demand did not prejudice the appellant as shown from its answer to the demand: Therefore, though the demand was made under r. 9(2), the <ORG> could change its position and justify the demand under r. 10. [484 E; 505 D--H; 506 A--B] B. Balakotaiah v. <ORG>  S.C.R. 1052 and <CITATION> .  4 S.C.R. 991, referred to JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1263 of 1968.

Appeal by special leave from the order, dated November 2, 1967 of <ORG>, <ORG>, <ORG>, New Delhi in Central Excise Revision Application No. 1323 of 1967. <NAME>, <NAME>, <NAME>, <NAME> and <NAME>, for the appellant.

<NAME> and <NAME>, for the respondents. [ <NAME>, J. delivered the majority Judgment on behalf of himself and <NAME>, <NAME>, J. gave a dissenting Opinion].

<NAME>, <NAME> I have had the advantage of reading the draft judgement prepared by <NAME>, <NAME>, but, while I agree with him that there is no force in the plea of limitation advanced on behalf of the assessee, in my opinion the appeal should fail on the ground that the excise duty was levied correctly as determined by <ORG> in its order, dated November 2, 1967.

The facts are fully set out in the judgment of <NAME>, 21'. It is only necessary to mention a few facts in order to make this judgment readable. The assessee manufactures iron and steel products. It manufactured wires out of steel rods, which had been imported by it prior to April 24, 1962. Item 26AA was added to the First Schedule of the Central Excises and Salt Act , 1944 (I of 1944)-hereinafter referred to as the Excise Act--by Finance Act (No. 2), 1962 (XX of 1962) with effect from April 24, 1962. This reads as under: "26-AA.IRON OR STEEL PRODUCTS, THE FOLLOWING, NAMELY :--

(i)Bars,rods,coils,wires,joi- Five per cent. ad volorem pl- sts, girders, angles,channa- us excise duty for the time ls,tees,flats,beams,zeds,tr- being leviable on pig iron ough,pilling and all other or steel ingots,as the case rolled forced or extruded may be.

shapes and sections,not other-

wise specified.

(ii) Plates and sheets, other Seven and a half per cent.ad than plates and sheets inten- valorem plus the excise duty ded for for tinning and hoops, and str- the time being leviable on ipe, all sorts,including pig iron or steel ingots as galvanised or corrugated the case may be. and sheets.

(iii) Uncoated plates and Seven and a half per cent.

sheets intended for tin- ad valorem plus the excise ning. duty for the time being le- viable on pig or iron steel (iv) Pipes and tubes ingots, as the case may be. (including blanks there- fore)all sorts, whether Five per cent.ad valorem rolled,forged,spun,cast plus the excise duty for drawn,annealed,welded or the time being leviable extruded. on pig iron or steel ingots as the case may be. (v) All other steel Five per cent.ad valorem castings,not otherwise sp- plus the excise duty for ecified. the time being leviable on steel ingots.'

The short point that arises is this: What is the duty leviable on the wires manufactured by the assessee out of steel rods which had already been imported ? For the time being I will ignore notifications issued under r. 8 (1) of the rules made under the Excise Act , and the amendments made by the Finance Act (No. 2) of 1962, and Indian Tariff (Amendment Act) 1963 (III of 1963) to the Indian Tariff Act, 1934. ' "Wires". are mentioned in item No. 26AA(i).Therefore we have to scrutinize the third column of item 26AA(i) for the rate of duty. Three points need clarification:

(a) What is the meaning of or inference derivable from the word 'plus'?

(b) What iS the meaning of the formula "the excise duty for the time being leviable on pig iron or steel ingots"?

(c) What is the import of the words"as the case may be"?

The word 'plus' in the context indicates that the rate of duty consists of 2 parts: one part is ad valorem duty and the other is the excise duty calculated according to the formula given. In other words, both duties have to be levied. I will presently discuss what the formula means but this is clear that the third column contemplates one duty, consisting of two parts, being levied.

Before I discuss the meaning of the formula it will clarify matters if the import of the words "as the case may be" is first ascertained. These words indicate that a choice has to be made between two types of excise duties--excise duty leviable on pig iron or excise duty leviable On steel ingots, Sub-items (ii), (iii) and (iv) of item 26AA use the same set of words. In sub-item (v) excise duty leviable on steel ingots is only mentioned. This sub- item consists of steel casting. This indicates that the duty is being calculated thus because steel castings have been made from steel ingots. Item 26AA deals with iron 'and steel products. It seems to me that the context indicates that the words "as the case may be" denote that the excise duty leviable on pig iron is to be charged of the product is an iron product; if it is a steel product then the excise duty leviable on. steel ingots is to be levied. In other words, this decides the choice whether item 25 (pig iron) or item 26 (steel ingots) is to be looked at. Although 1 was not enlightened on the point by counsel during the course of the hearing, I have no doubt that <ORG> and the trade know how to distinguish a steel product from an iron product. If there is a dispute on the point it will have to be resolved in the future.

Now to come to the formula "the excise duty for the time being leviable on pig iron or steel ingots." Let me give a simple problem in order to illustrate the points which' arise under this head of inquiry. "A" manufactures a steel ingot 'X' in May 1961 in Jamshedpur. He pays excise duty on it in May 1961 as he removes it out of the factory. Its value is determined at the wholesale cash price at the time of removal in accordance with s. 4 of the Excise Act. Steel ingot 'X' is sold to a manufacturer "B" in Faridabad who manufactures steel rods ('Y' & 'Z') out of it in May 1962 and removes them in May 1962. What is the excise duty payable on steel rods ('Y' & 'Z') ? Ad valorem duty is easy to calculate. What about the additional duty ? We know that the steel ingot 'X' has paid excise duty. But this does not make any difference. The additional duty has still to be calculated under the formula. It is also plain that no excise duty is strictly leviable under ss. 3 and 4 of the Excise Act on steel ingot 'X' as such. Not only that it does not exist any longer but duty on it has already been paid and further no duty would be leviable under s. 4 for it was removed from the factory long time ago in May 1961. Therefore, it is clear that the formula cannot be concerned with the particular ingot 'X' at all.' It seems to me that what it is concerned with is the duty leviable on a hypothetical steel ingot if it had been manufactured or removed at the same time as the steel rods ('Y' & 'Z') were manufactured or removed. In the example given above, under the formula the excise duty leviable under item 26 in May 1962 would have to be charged, i.e., 39.35 per metric tonne. The weight to be taken into consideration would be the weight of steel rods 'Y' & 'Z', and not of the steel ingot 'X' out of which they were made.

It seems to me that this is the true interpretation of column 3 of items 26AA(i). It simply prescribes a rate of duty as the heading of column indicates. It is not concerned with actual ingots out of which other articles are made. It is not concerned with whether that steel ingot has paid excise duty or countervail-

ing duty or not. It is a simple formula perhaps inartistically formulated. It is said that the item should be strictly construed, it being a taxing enactment. But no rule or principle ,of construction requires that close reasoning should not be employed to arrive at the true meaning of a badly drafted entry in an Excise Act . I believe I am not stretching the language of the entry against the subject, but it, appears to me that in the context of scheme of the Excise Act this is the only reasonable construction to give to the entry. If it is permissible to look at the notifications issued by <ORG> which have given reliefs of various kinds, they seem to me to proceed on the interpretation which I have given above. It will be noted that they do not exempt the article from the levy of duty; they give relief which may in a particular case be the excise duty or countervailing duty levied on the article out of which the assessed article has been manufactured.

To revert to the example given by me above, notification No.70/62, dated April 24, 1962, would exempt manufacturer B'"from so much of the duty of excise leviable on steel rods as is equivalent to .the duty leviable under item 26." Therefore, reading entry 26AA(i) with this notification, manufacturer 'B' does not pay the whole of the duty leviable on steel rods ('Y' & 'Z') under col. 3 (item 26AA) because the steel ingot which he has used had already paid the appropriate amount of duty.

I am not able to appreciate how the insertion of item No. 63 (36) in the First Schedule of the Tariff Act or the subsequent amendment of the Indian Tariff Act, 1934, by Indian Tariff (Amendment Act) 1963 throw any light on .the interpretation of item 26-AA(i). Item No. 63(36) is in respect of the same iron and steel products as are mentioned in item 26AA. Column 4 (standard rate of duty) reads:

"The excise duty for the time being leviable on like articles if produced or manufactured in India, and where such duty is leviable at different rates the highest duty; and the duty so leviable shall be in addition to the duty which would have been levied 'if this entry had not been inserted."

The effect of this entry is to levy an additional customs duty equivalent to the prevalent excise duty on like articles produced and manufactured. In other words, if the customs duty leviable under other entries in the Second Schedule on steel rods is 'D', an additional duty 'E' has to be levied equal to the excise duty leviable on steel rods, i.e., under item 26AA. This has been called countervailing duty.

The manufacturer India, who used steel rods made in India, and made wires from them was given a certain relief by notification No. 77 of 1962, but the manufacturer in India who used steel rods made abroad to make wires was not first given this exemption. Later by amendments he was given a similar exemption. The' Central Excise Manual (Seventh Edition) at p. 123 states the position thus:

"26AA(2) Iron or Steel products falling under item No. 26AA, if made from another article falling under the said item or item No. 63 36) of the First Schedule to the Indian Tariff Act, 1934 (32 of 1934) and having already paid the appropriate amount of excise or countervailing customs duty, as the case may.be, are exempt with effect from 24th April, 1962, from so much of the duty of excise as is equivalent to the excise or countervailing customs duty payable on the said article '--vide Government of India, <ORG> (Department of Revenue) Notification No. 89/62-Central Excise, dated 10th May, 1962 (issued in supersession of Notification No. 77/62-Central Excises, dated 24th April, 1962, as further amended by Notifications No. 93/62-Central Excises, dated 26th May, 1962, and No. 225/62-Central Excises,dated 29th December, 1962."

The only light thrown by these amendments. and the notifications referred to above is that it is not the idea to levy excise duty at various stages of manufacture of certain articles and this is achieved by issuing notifications giving appropriate reliefs. But if there is no relief given by notifications the full duty at the rate mentioned in col. 3 of entry (i) of item 26-AA has to be paid.

In the result the appeal fails and is dismissed with costs. <NAME>, J. I agree with <NAME>, J.

<NAME> This is an appeal by special leave. It is directed against the order of <ORG> in No. 1323 of 1967, dated November 2, 1967 rejecting the appellant's application for refund of the excise duty paid by him under protest.

In order to appreciate the controversy between the parties it is necessary to set out the material facts. The appellant is a Company having a factory at Rishara in the State of West Bengal. It manufactures, among other items, Iron and Steel Products such as Jute Baling Hoops, Wire Ropes, Cold Rolled Strips, Chain Pulley Blocks, Electric Hoists.etc. Between December 1961 and January 1962 the appellant received various consignments of imported High Carbon Steel Wire Rods. Its opening stock of imported High Carbon Steel Wire Rods on April 24, 1962 was 2,788.401 metric tons. As before, the appellant manufactured wires from those steel rods even after April 24, 1962.

Finance (No. 2) Act 1962 (Act No. 20 of 1962) imposed for the first time excise duty on the Iron and Steel Products; and by sub-el. (S) of sub-s. (2) of s. 16 of the said Act an amendment was made to the First Schedule of the Central Excise and Salt Act , 1944 (hereinafter referred to as the Act) incorporating after item 26A item 26AA. The relevant portion of that entry reads thus: Iron or Steel Products.

The following namely:

(1) Bars, rods,coils,wires 5% ad valorem plus the ex- joists girders,angels,channels cise duty for the time tees,flats beam,zeds,trough, being leviable on pig iron piling and all other rolled and Steel Ingots as the forged or extruded shapes and case may be. section not otherwise specified.

Pig Iron and Steel Ingots were already subject to excise duty under Items Nos. 25 and 26 in the First Schedule of the Act. The rate of duty in the case of the former at the material time was Rs. 10 per metric tonne and that of the latter Rs. 39/35 per metric tonne. The newly imposed duty under Item 26AA came into force on April 24, 1962. The Collector of <ORG>, West Bengal, Calcutta by a Trade Notice, <ORG> No. 32--Iron and Steel Products 2/62 dated Calcutta the 16th May 1962 notified the procedure to be followed.

By Notification No. 70/62, dated April 24, 1962 issued in exercise of the powers conferred by rule 8 (1 ) of the rules framed under the Act (to be hereinafter referred to as the rules), <ORG> exempted Iron and Steel Products falling under Item 26AA, if made from Pig Iron or Steel Ingots on which the appropriate amount of excise duty has already been paid, from so much of the duty of the excise leviable thereon as is equivalent to the duty leviable under Item 25 or 26 as the case may be. On the same day as per Notification No. 77 of 1962, <ORG> exempted Iron and Steel Products falling under sub-items (2), (3), (4) and (5) of Item 26AA, if made from articles which have already paid the appropriate duty of excise under sub item (1 ) of the said Item, from so much of the duty of excise as is equivalent to the duty payable under the sub item (1). <ORG> (Act No. 2) of 1962 by s. 15 amended the First Schedule of the Tariff Act by adding Item No. 63 (36) which deals with imported Iron and Steel Products. The second column of that entry mentions the various Iron and Steel Products included therein. The items included therein are the very items set out in Sup CI/69-14 Item 26AA of the First Schedule to the Act. The third column of that Item which specifies the levy reads thus:

"The excise duty for the time being leviable on like articles if produced or manufactured in India, and where such duty is leviable at different rates the highest duty so leviable shall be in addition to the duty which would have been levied if this entry had not been inserted."

On May 10, 1962, the Government issued a fresh Notification (No. 89 of 1962) under rule 8(1) of the rules in supersession of the Notification No. 77/62 dated April 24, 1962. By that Notification, the Government exempted with effect from April 24, 1962, Iron and Steel Products falling under 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. On the same day namely May 10, 1962, the Government issued yet another Notification (Notification No. 90 of 1962) under rule 8 (1) under which it exempted Iron and Steel Products falling under Item 26AA specified in column 2 of the table annexed to the Notification if made from Pig Iron or Steel Ingots on which appropriate amount of excise duty has already been paid, from so much of the duty of excise leviable on such products as in excess of the duty corresponding entry in column 3 of the said table. (Wire) the product with which we are concerned in this case is also included in the table. That Notification contains a proviso which says:

"Provided that if the products are made from pig iron and steel ingots on which appropriate amount of duty has not been paid the excise duty for the time being leviable on pig iron or steel ingots as the case may be shall be payable in addition to the duties specified in the appropriate entry in column 3 of the table."

On December 29, 1962, the Government issued yet another Notification under rule 8(1) amending the Notification No. 89 of 1962 issued on May 10, 1962. In the place of words "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.", the following was substituted:

"if made from another article falling under the said Iterm or Item No. 63(36) of the First Schedule to the Indian Tariff Act 1934 (32 of 1934) and having already paid the appropriate amount of excise or court-

tervailing custom duty as the case may be from so much of the duty of excise as is equivalent to the excise or countervailing custom duty payable on the said article."

By Indian Tariff (Amendment Act 1963) (Act No. 3/63) effective from the 25th January 1963, the Indian Tariff Act 1934 was amended and after s. 2 , the following section was inserted namely:

2(a) (1).--Any article which is imported into India shall be liable to custom duty equal to the excise duty for the time being leviable on a like article if produced or manufactured in India.

Explanation: In this sub-sec. the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India" means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India or if a like article is not so produced or manufactured, which would be leviable on the class or description of articles to which the' imported article belongs and where. such duty is leviable at different rates, the highest duty. (2) The customs duty referred to in sub- section (i) shall be in addition to any duty imposed under this Act or under any other law for the time being in force."

On or after April 24, 1962, the appellants cleared from their warehouse wires produced from the aforementioned imported Steel Rods after obtaining the required permission from the excise authorities and after paying the duty assesse. d. On those wires, duty was assessed without taking into consideration "the excise duty for the time being leviable on Pig Iron and Steel Ingots as the case may be." At that time the Central Excise authorities proceeded on the basis .that on the stock of wire in question only ad valorem duty had to be levied and not "excise duty for the time being leviable on Pig Iron or Steel Ingots as the case may be." On March 21, 1963, the Inspector of Central Excise attached to <ORG>, Rishara issued the following notice:

"COLLECTORATE OF CENTRAL EXCISE WEST BENGAL No. 6 Range RIS. I.

Date: 21-3-1963. Circle-CGR.

Notice of Demand for duty under rule 9(2) of C.E. Rules, 1944.

To <ORG>, Rishara, Hooghly.

Take notice that on behalf of <ORG>, I hereby demand payment by you of the sum of Rs. 4,18,801/30 N.P. (Rupees four lacs eighteen thousand eight hundred one and paise thirty only) within ten days from the date hereof.

Particulars of Demands

Quantity Rate of duty Amount of duty involved

----------------------------------------------------------- Steel Ingot Duty on 6932.964 Rs.39.36 NP Rs.2,72,812/13 M.T.Hoops Per M.T.

Steel Ingot Duty on 921.937 Rs.39.36 NP Rs. 36,278/22 M.T.Strips Per M.T.

Steel Ingot Duty on 2788.00 Rs.39.36 NP Rs.1,09,710/95 Wire. -------------- Total Rs.4,18,801/30

No. VI/5A/I&S/JKS/CE/63/183, dated 21-3-1963.

Sd/-

Inspector I/C Central Excise M/s. 1. K. Steel Ltd., Rishara."

The appellants objected to the demand in question as per their letter of March 24, 1963. They contended that they had not contravened rule 9(2) of the rules nor was there any short levy. As per his letter of August 26, 1963, the Assistant Collector of <ORG> confined the demand to that made under serial No. 3 of the notice. The appellants paid' the same under protest and thereafter took up the matter in appeal to the Collector of <ORG> who dismissed their appeal as per his order of March 19, 1964, with these observations: "The crucial point of this appeal is whether counter vailing import duty was paid by the appellants on the imported steel rods from which steel wires were manufactured. The appellants could not produce any documents in support of their argument that either import duty or countervailing duty equivalent to steel ingot rate was paid by them on the iron rods from which steel wires were drawn. Such duty is leviable on steel rods under tariff item No. 26AA. As no such duty on steel rods was paid by the appellants, countervailing duty equivalent to steel ingot duty has, therefore, to be paid."

As against the order of the Collector, the appellants went up in revision to <ORG>. <ORG> allowed the revision petition to some extent. This is what <ORG> ordered:

"The Government of' India have carefully considered all the points raised by the petitioners but see no reason to interfere with the Collectors stated that the Steel Wires manufactured out of steel wire rods imported prior to 24-4-1962 on which no countervailing duty was paid, and cleared during the period, from 24-4-1962 to 10-8-1963 were subject to full duty as then leviable under Item 26AA (1) of Central Excise Tariff. However the demand for differential duty initially made on 2-3-1963 and subsequently amended vide the Asstt. Collector's order, dated 26-8-1963 shall be restricted to the clearance effected during the 3 months period prior to the initial service of demand on 21- 31963 that is to say, up to 21,12-1962 only as per the provisions of Rule 10 of Central Excise Rules, 1944 which was applicable to this case. The demand in respect of clearances effected prior to 21-12-1962 is hereby set aside and consequential refund shall be granted to the petitioners.

Subject to the above modifications, the revision application is otherwise rejected."

Aggrieved by that order, the appellants have brought this appeal. The questions that arise for decision in this appeal are:

(1) What is the true scope of entry No. 26AA of the First Schedule to the Act ?

(2) In considering the scope of the said entry, can the Notifications issued by the Government on or after April 24, 1962 be taken into consideration?

(3) Is the demand barred by limitation under rule 10 of the rules ?

One other question had been raised in the grounds of appeal namely that the order of <ORG> is vitiated as it had contravened the principles of natural justice. That contention was not pressed at the hearing. In the context of this case that contention loses much of its significance If we accept the appellant's contention as regards the scope of entry 26AA then' the fact that the <ORG>'s illegal is immaterial illegal is immaterial. If on the other hand we accept the interpretation placed by the <ORG> on that entry remand of the case to Central <ORG> serves no purpose.

I shall now proceed to consider the questions earlier formulated for decision.

According to the assessee the true import of the clause in column 3 of entry 26AA is that goods mentioned in column 2 of that entry are dutiable at 5 per cent ad valorem plus the excise duty for the time being leviable under the Act on pig iron or steel ingot used in the production of those goods. <NAME>, the learned Counsel for the assessee urged that the expression leviable in that clause means leviable under the Act; in other words dutiable under the Act; the words 'Pig Iron' and 'Steel Ingots' referred to therein is the Pig Iron or the Steel Ingot used in manufacture of the articles on which duty is sought to be levied; otherwise the word leviable becomes inappropriate. In other words according to him the second limb of the levy under that clause is attracted only when any pig iron or steel ingot dutiable under the Act is used in the manufacture of any article dutiable under sub-cl. (1) of entry 26AA. As the steel bars used in manufacturing the 'wires' with which we are concerned in tiffs case were not made out of steel ingot dutiable under the Act, as they were imported bars, that part of the levy is not attracted on those wires.

The contention for the <ORG> is that the expression "the excise duty for the time being leviable on Pig Iron or Steel Ingot as the case may be" sets out only a measure; the rate at which the duty is leviable; it has no reference to any particular material; it is merely a yardstick. The argument of Dr. <NAME>, learned Counsel for the <ORG> proceeded thus:

The entry in question deals with two classes of products i.e., iron products and steel products. The assessing authority has first to decide whether a particular article is an iron product or steel product. If he comes to the conclusion that it is a steel product then he should assess the duty payable firstly by determining the ad valorem duty payable on it, thereafter he must find out its weight in metric tons and add to the ad valorem duty the amount payable as excise duty under entry 26 of the First Schedule on steel ingot of that weight.

If the intention of the <ORG> was as suggested by the learned Counsel for the <ORG> then column 3 should have read thus:

"5 per cent ad valorem plus excise duty at the rate for the time being leviable on pig iron or steel ingots as the case may be."

It is difficult to interpret the words "for the time being leviable" as indicating a rate. The expression "leviable on pig iron and steel ingots as the case may be" in my opinion has reference to pig iron or steel ingots dutiable under the Act. In fiscal legislation the terms "rate" is a familiar term.In fact entry 5 of the First Schedule dealing with salt speaks of "rate fixed annually by a Central Act ". Therefore it would have been the easiest tiring for the <ORG> to convey its intention without ambiguity. At this stage it may also be noted that the clause in question refers to "the excise duty" and not excise duty in general. The definite article "the" has considerable significance. It refers to some particular excise duty. If the second part of the clause merely refers to a rate than the article "the" has no place in that context.

It was urged on behalf of the <ORG> that to accept the contention of the assessee and to hold that the second part of the. clause refers to the steel ingot used in the production of the "wires" is .to read into the clause the words "used in the production of the article in question." It was said that such a construction is impermissible. Therefore we should not accede to that contention. I am not prepared to accept that reasoning. In fact in my opinion to accept the construction contended for on behalf of the <ORG>, it would be necessary for us to include the words "at the rate" after the words "excise duty" and before the words "for the time being". No such difficulty arises if we accept the interpretation placed by the assessee on that clause. The expression "the excise duty for the time being leviable" by necessary implication refers to an. article dutiable under the Act. That must necessarily be the article which is one of the components' of the article on which duly is sought to be levied. In the instant case that must be the steel ingot used in the production of the "wires" with which we are concerned in this case.

As laid down by this. <ORG> in <CITATION> .(1) "In interpreting a fiscal statute the <ORG> cannot proceed to make good deficiencies if there may be any; the court must interpret the statute as it stands and in case of doubt in a manner favourable to the tax payer."

This Court also laid down in <CITATION> (2) that if there is any ambiguity of language in a fiscal statute, benefit of that ambiguity must be given to the assessee. At this. stage I am tempted to recall to my mind the well known observations of Lord Russel of Killowen in <ORG> v. Duke of Westminister(3) viz.:

(1) [1961] 2 S.C.R. 765:A.I.R.1961 S.C.607,612 (2) [1960] 3 S.C.R. 727, 742.

(3) [1936] A.C.1, 24.

"I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if in accordance with a <ORG>'s view of what it considers the substance of the transaction, the <ORG> thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case."

About a century ago Lord <NAME> in <NAME> v. <NAME>) observed:

"As I understand the principle of all fiscal legislation it is.tiffs: If the person sought to be taxed comes within the letter of the law he must be taxed however great the hardship may appear to the judicial mind to be. On the other hand, if the <ORG>, seeking to recover the tax cannot bring the subject within the letter of the law, the subject is. free, however apparently within the spirit of the law the case might otherwise appear to be."

Unless I am satisfied that the only reasonable interpretation that can be placed on the clause in col. 3 of entry 26AA is that placed by the <ORG>, it is not possible to justify the impugned levy.

There is yet another difficulty in accepting the interpretation tried to be placed by the <ORG> on entry 26AA. According to books on steel making pig iron is the intermediate form through which almost all iron must pass in the manufacture of steel (see "The Making, Shaping and Treating of Steel" edited by <NAME> at p. 384). Therefore every steel product is also. an iron product. If the second part of the clause in column 3 of entry 26AA refers to .a rate and not the duty leviable on the material used in the manufacture of the dutiable article under that entry then the question arises whether the rate in question is that at which duty is leviable on steel ingot or that leviable on pig iron. That part of the clause refers to two different materials dutiable at different rates. If on the other hand it refers. to the material from which the article on which duty is sought to be levied is made-the proximate raw material and not the material from which that raw material is made, then there is no difficulty in finding out the amount.

Dr. <NAME> was not able to tell us how the assessing authorities classify articles into iron products and steel products. It is not his case that there is any recognised basis for doing so. It is also not his case that there is any prescribed procedure for deciding that question. His explanation that it is done on the basis of the practice prevailing in the trade is far from satisfactory.

(1) [1869] 4, H.L. 100, 122.

He was not able to tell us how we can ascertain that practice or what that practice is. If his contention is correct then the power of the assessing authorities to determine the nature of an article is an arbitrary power. It is undefined and unguided. The determination may vary from officer to officer. It is doubtful whether such a power is a valid power. That apart legislature is not likely to have conferred such an arbitrary power on the authorities. That difficulty will not arise if the duty under the second limb of the levy in column 3 of entry 26AA is determined on the basis of the actual material used. For the purpose of interpreting the clause in question, reference may also be made to entry 63(36) in the First Schedule to the Tariff Act . It may be remembered that entry as well as entry 26AA in the First Schedule of the Act were enacted simultaneously under Finance (No. 2) Act, 1962. Both these entries came into force on the same day namely on 24th April 1962 The Act and the Tariff Act are cognate legislations. In other words they are legislations which are pari materia. They form one code. They must be taken together as forming one system and as interpreting and enforcing each other. It is proper to assume from the surrounding circumstances, that these two entries were introduced in pursuance of a common purpose, that purpose being that the articles listed in entry 26AA whether produced out of indigenous Pig Iron or Steel Ingot or made out of imported Pig Iron or Steel Ingot must bear the same amount of duty. If the interpretation placed on entry 26AA by the learned Counsel for the assessee is accepted then it would be seen that entry by itself would not impose the duty contemplated by the second part of the clause in col. 3 of entry 26AA on imported Pig Iron or Steel Ingot. Evidently in order to equalise the duty on articles made out of indigenous material as well as imported material entry 63 (36) of the First Schedule to the Tariff Act was enacted. In other words that entry imposes countervailing duty and not additional duty. It was conceded by the learned Counsel for the <ORG> that the duty levied under entry 63(36) of the First Schedule of the Tariff Act is only a countervailing duty. If that be so, that duty cannot be considered as an additional duty over and above the duty imposed under entry 26AA of the First Schedule of the Act. But it would be an additional duty if the interpretation of entry 26AA canvassed on behalf of the <ORG> is accepted because according to the <ORG> the rate prescribed in that entry is equally applicable to all articles mentioned therein whether manufactured from indigenous or imported material. If that be so the duty collected under entry 63(36) of the First Schedule under the Tariff Act will be an additional duty and not a countervailing duty. It is true that despite entry 26AA of the First Schedule to the Act and entry 63(36) of the First Schedule of the Tariff Act if pig iron or steel ingot imported before April 24, 1962 is used in the manufacture of an article dutiable under entry 26AA only the ad valorem duty prescribed under that entry can be levied on that article. It may be that the legislature intended it to be so or there is a lacuna in the provision. In either case the effect is the same.

I now come to the question whether in interpreting a taxing entry I can take any aid from the various steps taken by the <ORG> in implementing that levy, I have earlier referred to a large number of Notifications issued under rule 8 (1 ) of the rules. The parties have also produced before us the instructions issued by the <ORG> on May 16, 1962 in the matter of implementation of entry 26AA. I have now to see whether any aid can be taken from these instructions as well as the Notifications for finding out the true scope of entry 26AA.

So far as the instructions issued by the <ORG> are concerned there is hardly any doubt that the same are wholly irrelevant. In Craies on Statute Law Sixth Edn. at page 131 it is stated:

"Explanatory notes regarding the working of an Act issued by a government department for the assistance of their officials are inadmissible for the purpose of construing the Act." .

The same conclusion was arrived at by this Court in <CITATION> .(1) At pages 502-503 of that report it is observed:

"He,(learned Counsel for the assessee), however, drew our attention to the directions contained in the Income-tax Manual in force for a number of years and contended that the department itself placed on sub-sections (3) and (4) of section 25 the same construction as was placed on them by the senior Judge in <ORG> and that was the true construction of these two sub-sections. This argument in our opinion, has no validity. The department changed its view subsequently and amended the manual. The interpretation placed by the department on these sub-sections cannot be considered to be a proper guide in a matter like this when the construction of a statute is involved."

Therefore I have to exclude from consideration the instructions issued by the Government. This takes me to the Notifications issued by the Government under rule 8(1) of the rules. Under s. 38 of the Act all rules (1)  S.C.R. 486, 502-503.

made and notifications issued under the Act shall be made and issued by publication in the official <ORG>. All such rules and notifications shall thereupon have effect as if enacted in the Act. The rules made have to be placed on the table of the <ORG>. The <ORG> can amend those rules. Section 3  8 is of no assistance. to us in the present case because the notifications referred to earlier are not those issued under the Act. They are notifications issued under rule 8 (1) of the rules. Therefore their relevance has to be considered without taking any assistance from s.

38. In Halsbury's Laws of England 3rd edn. vol. 36 at page 401 it is observed:

"Where a statute provides that subordinate legislation made under it is to have effect as if enacted in the statute, such legislation may be referred to for the purpose of construing a provision in the statute itself. Where a statute does not contain such a provision, and does not confer any power to modify the application of the statute by subordinate legislation, it is clear that subordinate legislation made under the. statute cannot alter or vary the meaning of the statute itself where it is unambiguous, and it is doubtful whether such legislation can be referred to for the purpose of construing an expression in the statute, even if the meaning of the expression is ambiguous."

No decision of this <ORG> or of any of the High <ORG>s in this country dealing with tiffs aspect has been brought to my notice. Even the Counsel for the parties were not definite about the stand that they should take. They were changing their position again. and again. On this question the opinion in English courts is not unanimous. That question came up for consideration as early as in 1871 in Ex Parte Wier In re Wier.(1). Sir <NAME> L.J. delivering the judgment of the <ORG> observed:

"We do not think that any other section of the Act throws any material light upon the proper construction of this section,. and if the question had depended upon the Act alone we should have had great doubt what the proper construction was; but we are of opinion that, where the construction of the Act is ambiguous and doubtful on any point, recourse may be had to the rules which have been made by the Lord Chancellor under the authority of the Act, and if we find that in the rules any particular construction has been put on the Act, that it is our duty to adopt and follow that construction."

(1) Ch. Appeal Cases (Vol. 6) p. 879.

In Re: <ORG> (1) Lord Esher,M.R.Observed:

"It was urged that we ought to hold the Act to be retrospective by reason of the rules and forms which have been made under it, and which have a statutory force; and it is said that shew that that the trustee must go back in his accounts to matters which happened before the Act came into operation. But, when we look at the forms, we see that they are in express terms headed so as to relate to transactions taking place after the coming into operation of the Act; and, therefore, they supply no reason why we should depart from the ordinary rule that an Act is not retrospective."

From these observations, it is clear that Lord <NAME> did take into consideration the subordinate legislation in considering the principal Act.

In <NAME> v. Reed,(2) Lord Greene stated that:

"The fact that the object .of this Act was in substance what I have suggested can be seen from a consideration of the way in which the scheme has been framed pursuant to the Act itself and with the tacit approval of <ORG> as provided in the Act. At any rate, we are entitled to look at the scheme for the purpose of seeing the kind of practical treatment of these questions which <ORG> has authorised."

From this observation, it is seen that the learned Judge did look into the subordinate legislation in finding out the object of the Act.

In <NAME> v. <ORG>,(8) <ORG> observed:

"The county court judge was referred, as we were, to various paragraphs in the regulations made under the Act of 1946. He took the view that these regulations could not affect the construction of the Act. The regulation making power is conferred by s. 89 , sub-s. 1, proviso (b), and is as follows: 'regulations may make such transitional 'or consequential provisions as appear to the Minister to be necessary or expedient, having regard to the repeal of the said enactments in relation to diseases and to injuries not caused by accident, including provision for modifying or winding up any scheme made thereunder.' We agree that these regulations could not contradict the Act. (1)  2 Q.B.D. 369, 373:.

(2) [1945] K.B. 11.

(3) [1950] K.B. 493, 505.

They might, we think, properly be referred to as working out in detail the provisions of the Act consistently with its terms."

In <NAME> v. <NAME> and .Anr.(1) <NAME> observed:

"I cannot, of course, have recourse to these schemes as a guide to the correct interpretation of the Act under which they were made, but I am, I think, entitled to consider them for certain limited purposes.

In <NAME> v. Reed(1) Lord <NAME>, .said, in reference to a scheme made under the Act: 'The fact that the object of this Act was in substance what I have suggested can be seen from a consideration of the way in which the scheme has been formed pursuant to the Act itself and with the tacit approval of <ORG> as provided in the Act. At any rate we are entitled to look at the scheme for the purpose of seeing the kind of practical treatment of these questions which <ORG> has authorized. It is abundantly clear from the wording of the various schemes made under the Act that the Minister, with the tacit consent of <ORG> has throughout considered that 'war injuries' may be sustained outside the United Kingdom ............ "

The decision in <NAME> v. <ORG>) to which references has been made earlier was taken in appeal to <ORG>. The judgment of <ORG> is reported in [1951] A.C.p. 531. Dealing with the question whether subordinate legislation could be taken into consideration in interpreting the principal Act lord <NAME> said:

"I much doubt whether I am entitled. to look to the regulations for guidance on the eaning of the word in sub-s. (1), but I will say something on this point later."

Reverting back to that topic again (at p. 541 of the report) the learned Judge observed:

"First, if I may look at the regulations made under s. 55 , sub-s. (4), to assist in the interpretation of the word, I agree with my noble and learned friend <NAME>, in thinking that they assist or at least are consistent with this interpretation."

Lord Normand one of the other Judges who heard the appeal observed:

"The National Insurance (Industrial Injuries) (Prescribed Diseases) Regulations, 1948, were made under (1) [1951] 1 K.B. 265, 274.

(2) [1945] K.B. 11.

(3) [1950] K.B. 493. 505.

s. 55, sub-s. 4, and though in my opinion they cannot control the construction of the Act, it is yet of some importance to consider whether they fit into the construction which I think the Act properly hears."

Lord <NAME> in the same case was positive that the regulations could be looked into for certain limited purposes. This is what observed:

"I agree with your Lordships in thinking that the regulations themselves (National Insurance) (industrial Injuries) (Prescribed Diseases) (Regulations 1948) cannot alter the meaning of the words of the statute, but they may, I think, be looked at as being an interpretation placed by the appropriate <ORG> department on the words of the statute."

Therein Lord <NAME> also took the assistance of the regulations while considering the statute. Lastly we come to the decision of <ORG> in <ORG> v. <ORG>). <ORG> in that case referred to the regulations made under the Housing Act , 1936 while construing the provisions of the Act.

From the above decisions, it is clear that several judges in England have referred to the subordinate legislation made under a statute for the purpose of interpreting that statute though for the limited purpose of know how the department which was entrusted with the task of implementing that statute had understood that statute. In the case of fiscal statutes, it may not be inappropriate to take into consideration the exemptions granted in interpreting the nature and the scope of the impost. In the matter of fiscal legislation the initiative is in the hands of the executive. Under Art. 112(1) of our Constitution, the President shall in respect of every financial year. cause to be laid before both the <ORG> of Parliament a statement of the estimated receipts and expenditure for that year. Under sub Art. (3) of Art. 113 no demand for a grant shall be made except on the recommendation of the President. In the matter of taxation very large powers are left in the hands of the executive. Generally speaking the question of exemption is left to the discretion of the Government. It ought to be so because the exercise of that power depends on various circumstances some of which cannot be anticipated in advance. But yet the levy and exemptions are parts of the same scheme of taxation. The two together carry into effect the purpose of the legislation. For finding out the true scheme of a taxing measure we have to take into consideration not merely the levy but also (1)  Ch. D. 386.

the exemptions granted. This Court in <CITATION> . (1) held that the exemption granted in pursuance of a notification issued under the.U.P. Sales Tax Act must be considered as having been contained in the parent Act itself. This is what this Court stated therein:

"This notification having been made in accordance with the power conferred by the statute has statutory force and validity and, therefore, the exemption is as if it is contained in the parent Act itself."

I do not think it is necessary for me to decide in this case the general question whether subordinate legislation can be used for interpreting a provision in the parent Act. I am not unaware of the danger in accepting that it could be so done. But for the present purpose, it is sufficient to hold that for finding out the scope of a particular levy, notifications issued by the executive Government providing for exemption from that levy can be looked into as they disclose the overall scheme.

Even according to the learned Counsel for the <ORG> the notifications referred to earlier were issued with a view to avoid double taxation. If that is so, the exemption granted under those notifications provide a clue as to the scope of the levy made under Item 26AA.

We have earlier seen that on the very day, the levy came into force the Government had issued two notifications i.e., Notifications Nos. 70 and 77 of 1962. Under Notification No. 70 it exempted Iron and Steel Products falling under item 26AA if made from Pig Iron or Steel Ingots on which the appropriate amount of duty has already been paid, from so much duty of the excise leviable thereon as is equivalent to the duty leviable under Item 25 or as the case may be under Item 26. Under Notification. No. 77, it exempted Iron and Steel Products falling under subitems Nos. 2, 3, 4 and 5 of Item 26AA, if made from articles which have already paid appropriate duty of excise under subitem (1) of the said item from so much of the duty of excise as is equivalent to the duty payable under the said sub-item (1). These Notifications clearly indicate that under Item 26AA, there was no intention to levy double excise duty on the same material. The intention appears to be that if one article is made out of another article both of which are subject to excise duty, the excise duty paid on the raw material should be deducted in putting the excise duty payable on the finished product. In addition these Notifications clearly show that the Pig Iron and Steel Ingot mentioned in el. 3 of entry 26AA are those used in the manufacture of the article on which duty is sought to be levied under that entry. (1) A.I.R. 1957 S.C.790.

In this connection we may also refer to Notification No. 89/62. Notification No. 77/62 referred merely to Iron and Steel Pro,ducts falling under sub items 2, 3, 4 and 5 of item 26AA manufactured out of articles falling under sub- item (1) thereof. That Notification by itself was not all comprehensive. It did not take in other articles made out of Pig Iron or Steel Ingot. It is that reason Notification No. 89/62 was issued on May 10, 1962 under which exemption was given with effect from April 24, 1962 to all Iron and Steel Products falling under Item 26AA if made from another article falling under the said item and having already paid appropriate amount of duty from so much of the duty of excise as is equivalent to the duty payable on the said article. Notifications Nos. 70, 77 and 89 exempted payment of excise duty on an article to the extent duty had been paid on the raw material used in the manufacture of the article dutiable under entry 26AA. All these Notifications proceeded on the basis that the second limb of the levy in column 3 of entry 26AA refers to the duty payable on the Pig Iron or Steel Ingot, as the case may be used in the manufacture of an article dutiable under 26AA. But the above Notifications do not deal with the countervailhag duty levied under entry 63(36) of the First Schedule to the Tariff Act . This was clearly an omission. To make good that omission the Government amended Notification No. 89/62 by its order, dated December 29, 1962. The amended Notification in addition to the exemption already given under Notification No. 89/62 also exempted from the payment of duty any article falling Within any of the sub-items in item 26AA if made from an article on which countervailing duty has been paid under item 63(36) of the First Schedule to the Tariff Act from so much ,of the duty of excise as is equivalent to the countervailing custom .duty payable on the said article. This Notification clearly shows that the countervailing duty in question was levied on the basis that the excise duty contemplated by entry 26AA will not apply to articles made out of imported Pig Iron or Steel Ingot. Further if the legislature intended the duty under entry 63(36) to be an additional duty, the exemption granted would nullify the legislative mandate.

To summarise the effect of the Finance (No. 2) Act of 1962 and the various Notifications issued for the purpose of implementing the scheme under that Act is that excise duty is leviable at the rate mentioned in column 3 of Item 26AA on pig iron or steel ingot used in the production of the article on which duty under entry 26AA is sought to be levied but to the extent .any excise duty or countervailing custom duty had been paid on any of the material used in the manufacture of any of that article, the ,same is exempt. From this scheme it is clear that when Item 26AA speaks of ,'the excise duty for the time being leviable on Pig Iron or Steel Ingots: as 'the case may be" it refers to the excise duty payable on' the Pig Iron or Steel Ingots used in the production of the article dutiable under that item.

From the above discussion, it follows that the wires which are the subject matter of the levy impugned in this case are not liable to pay the duty in dispute in this case. At one Stage it was contended on behalf of the assessee that the levy under sub item (1) of Item 26AA comes into effect only when an article is made directly from out of Pig Iron or Steel Ingot as the case may be and not otherwise. It is not necessary to examine the correctness of this contention because at no stage the assessee had challenged his liability to pay ad valorem duty .under Item 26AA. He paid the same without objection nor had he claimed refund of the same.

I shall now take up the question of limitation. The written demand made on March 21, 1963 purports to have been made under rule 9 (2) of the rules. Therein the assessing authority demanded steel ingot duty which according to it the assessee had failed to pay. Quite clearly rule 9(2) is inapplicable to the facts of the case. Admittedly the assessee had cleared the goods from the warehouse after paying the duty demanded and after obtaining the permission of the concerned authority. Hence there is no question of any. evasion. Despite the fact that the assessee challenged the validity of the demand made on him both the Assistant Collector as well as the Collector ignored that contention; but when the matter was taken up to the Government it treated the demand in question as a demand under rule 10. The Government confined the demand to clearances effected after December 21, 1962. The demand so modified is in conformity with rule 10. But the contention of the assessee is that the demand having been made under rule 9 (2) and there being no indication in that demand that it was made under rule 10, the <ORG> cannot now change its position and justify the demand under rule 10; at any rate by the time the Government amended the demand, the duty claimed became barred even under rule 10. We are unable to accept this contention as correct. There is no dispute that the officer who made the demand was competent to make demands both under rule 9(2) as well as under rule 10. If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercise under a different power does not vitiate the exercise of the power in question. This is a well settled proposition of law. In this connection reference may usefully be made to the decisions of this Court in <CITATION> . (1) and (1)  S.C.R. 1052.

3sup.CI/69-15 Afzal UIlah v. State of U.p.(1). Further a common form is prescribed for issuing notices both under rule 9(2) and rule

10. The incorrect statements in the written demand could not have prejudiced the assessee. From his reply to the demand, it is clear that he knew as to the nature of the demand. Therefore I find ass suesseeance in the plea of <ORG> advanced on behalf of the For the reasons mentioned above, this appeal is the <ORG> is directed to refund the excess duty paid under protest.

ORDER In accordance with the opinion of the appeal is dismissed with costs.

V.P.S.

(1) [1964] 4 S.C.R. 991.


JUDGMENT <NAME>, J.

1. In this reference under section 66(2) of the Indian Income-tax Act, 1922, made at the instance of the revenue, the following two questions of law arise for decision :

"(1) Whether, on the facts and in the circumstances of the case, there was any evidence before the Tribunal to justify the finding that there was no market for sugarcane produced by the assessee ? and (2) Whether, on the facts and in the circumstances of the case, the income received by the assessee was agricultural income within the meaning of the Indian Income-tax Act ?"

2. The short facts leading to the above reference may be summarised as follows :

For a number of years prior to the assessment year 1952-53, the respondent-assessee, being the owner of about 93 acres of land situated at Phaltan on th southern and/or right bank of river Nira, cultivated sugarcane on his lands. He owned three heavy horse power engines for crushing sugarcane and converted sugarcane into jaggery for sale in the market. He was assessed to income-tax in respect of the income from the sales of jaggery under the Income-tax Act , and had not claimed exemption in respect of this income on the footing that it was agricultural income. In respect of the income from sales of jaggery for the assessment years 1952-53 and 1954-55, being the accounting years S. Y. 2007 and S. Y. 2009, he claimed that the income was agricultural income; and that he was entitled to exemption from income-tax in respect thereof having regard to the provisions in section 2(1) (b) (iii) read with section 4(3) (viii). This exemption was refused to him and in Appeals Nos. 1591 and 1592 of 1956, <ORG> by its order dated August 10, 1956, had that proper attempt had not been made to ascertain the truth whether there was in fact a market for the sale of sugarcane grown by the assessee. The <ORG> remanded the case to the Income-tax Officer for further investigations and report with particular reference to the above assessment years on 11 points formulated by the <ORG> in its order. The assessee was given opportunity to tender further evidence in support of his case that his income was agricultural income and that he was entitled to exemption having regard to the above provisions in the Act. The case of the assessee was in great particulars mentioned in the affidavit dated August 9, 1956, which was made the part of the record before the <ORG>'s order of remand. Before the Income-tax Officer further evidence was taken on the record in a large way. The Income-tax Officer issued a questionnaire on the Phaltan Sugar Works being a factory which carried on business of manufacturing sugar and was situated approximately at a distance of 7 miles from the fields of the assessee. A questionnaire was also served on <ORG> and <ORG> which were situated at a long distance from the fields of the assessee and the transactions were not relevant to the question which had arisen to be decided by the Appellate <ORG>. The Income-tax Officer received correspondence and/or certificates in respect of the inquiries forwarded by him from the above three factories as also from the Registrar of <ORG>, Poona, the <NAME> and Prant Officer, <NAME>, the Executive Engineer, <ORG>, <NAME>, the Executive Engineer, <ORG>, Phaltan, and the Marketing Inspector, Satara District, Sangli. On behalf of the assessee, oral evidence of about 33 witnesses was tendered and recorded. The assessee filed his own further affidavit dated April 1, 1957. Having gathered information from the above sources, the Income-tax Officer made his remand report dated January 28, 1957. The remand report is annexure "B" to the statement of the case and includes the whole of the evidence recorded by the Income-tax Officer as mentioned above including the correspondence and certificates. Apart from his above report, he filed his own affidavit dated April 1, 1957, before the <ORG> in connection with the evidence that he had recorded and the conclusions he had mentioned in his report. Now, what appears to be the findings made by the Income-tax Officer in this report and in his affidavit may be shortly stated as follows :

On the southern bank of river Nira, within a radius of 15 miles from the Phaltan Sugar Factory, there were in all 419 sugarcane cultivators, big and small. These cultivators owned 5,253 cultivable acres, 3,109 acres from sugarcane blocks and on a rotation basis only 1,036 acres were utilised for growing sugarcane. The above acreage excluded farms taken on lease by <ORG> (hereinafter referred to as "the factory"). This factory cultivated on its own at an average sugarcane on about 2,000 acres of an. The factory was situated at a distance only of 7 miles from the assessee's lands and there were trolley line put up by the factory which were passing from the distance of about one mile from the assessee's factory. The factory had made purchases between 1946 and 1955 of different quantities of sugarcane - about 11,000 tons for five of the above years, about 36,000 tons in 1948 and 1951 and 24,000 tons in 1953. In the above 10 years the factory had by itself cultivated and produced sugarcane which approximately varied between 65,000 tons and 88,000 tons. The factory had crushed sugarcane in the above 10 years in the quantities which were approximately between 85,000 tons and 1,00,000 tons. It was further found that the capacity of the factory was to absorb about 850 tons per day and that the factory worked in year approximately for the season which lasted for about 184 days. On the basis of these figures relating to the sugarcane produced, purchased and crushed by the factory in the above 10 years, the Income-tax Officer reported that the factory was in a position to purchase and absorb every year at least about 35,000 tons of sugarcane from outsiders. A very small part of the sugarcane was purchased by the factory from two cultivators who were not with in the distance of 15 miles radius from the premises of the factory. The Income-tax Officer further reported that, on account of the recalcitrant attitude of the cultivators, the factory had been compelled to purchase sugarcane from on <NAME> who was cultivating its crops in Poona and from <ORG> farms in Padegaon. His reading of the evidence of the assessee was that he grew sugarcane of the quantity of 60,419 tons for manufacture of jaggery. He maintained three power crushers for the above purpose. In certain past years the assessee had sold sugarcane worth Rs. 1,00,000 to the factory.

3. Now, the case of the assessee in the oral and documentary evidence tendered on his behalf was that the quality of the sugarcane that was produced by him was such as could not be chewed and must be used for conversion into jaggery or sugar. There was no demand by merchants and others in respect of the sugarcane of the quality that he produced for consumption thereof as sugarcane. By its very nature, the sugarcane was heavy in weight and perishable in quality and there was no practice to send sugarcane to any distant places for sale. The finding of the Income-tax Officer himself was to the above effect. On the left north bank of river Nira on 5,000 acres of lands, sugarcane was not available for sale to the above factory. He relief upon instances where cultivators on the left bank of the river had so sugarcane to the factory. According to him, the total sugarcane available for purchase (if so desired) by the factory and cultivated on fields within the radius of 15 miles from the factory on the left and right banks of river Nira was the quantity grown on 6,000 acres of lands. The factory had refused in the past to purchase sugarcane from the assessee himself and neighbouring farmers. He relied upon the letters brought on record in the above connection. His case was that the factory had been purchasing sugarcane only from sugarcane cultivators within the factory areas under contracts and by mutual arrangements with <ORG> farms in Padegaon and one Radheshyam Agarwal. He pointed out that according to the tariff report and the facts mentioned therein the season for the working of the factory would only be of 120 days and 20 days thereof would be holidays. According to him, the average yield of sugarcane per acre was not 30 tons as found by the Income-tax Officer, but far exceeded even 45 tons. He gave figures of produce disclosed by different factories in his affidavit. He also pointed out that in spite of the crushing capacity being high, a sugarcane factory cannot purchase outside sugarcane in excess, as outside cane as well as factory cane is required to be cut before the 15th February each year. He pointed out several facts in that connection. He further pointed out :

"If nearness would have been a major factor, <ORG> would have purchased sugarcane from all neighbouring cultivators year after year regularly. <ORG> purchases outside sugarcane from contract bagaitdars of 300 acres, <ORG> of 100 acres, from Radheshyam Agarwal 100 acres, on agreed basis, from <NAME> of Phaltan 50 acres and other 100 acres, which make a total of 650 acres producing sugarcane 32,500 tons or more...."

4. Now, it is not possible in this judgment to recite the findings of the Income-tax Officer completely nor the case made by the assessee in connection with these findings completely. The substance of the case on behalf of the revenue through the report of the Income-tax Officer and otherwise appears to have been that, since the above factory was a purchaser of sugarcane grown in the areas of 15 miles radius from the site of its premises, there was a market where sugarcane in its natural condition was saleable. The sugarcane cultivated by the assessee was, therefore, marketable. In so far as under the above circumstances the assessee converted his sugarcane crop into jaggery, he was not covered by the provisions in section 2(1) (b) (iii) read with section 4(3) (viii). The contrary submissions on behalf of the assessee was that, having regard to the facts brought on the record by way of evidence both by the revenue and the assessee, it was clear that the sugarcane crop of the assessee was not marketable and conversion of this crop into jaggery having been made by process ordinarily employed by a cultivator to make sugarcane fit to be taken to market, his earnings from sale of jaggery were agricultural income and he was entitled to exemption in accordance with the provisions of the above sections.

5. On the record of evidence of the above nature, <ORG> by its judgment and order accepted the case made by the assessee and in that connection recorded the following reasoning :

"The sugarcane grown by the assessee in his farm cannot be used for chewing. The only other use to which it can be put is the production of sugar..." Sugarcane is a crop which has certain peculiarities. If sugarcane after being cut is not crushed within 48 hours, it starts losing its sugar content. Mills buy sugarcane near the mills as far as possible... If no mill buys sugarcane, an agriculturist has to convert it into gur. There is no market as such where sugarcane of this quality can be sent and sold. The mills buy their requirements at prices fixed by the <ORG> or at such other prices at which sugarcane can be purchased according to their requirements. The existence of a mill, in our opinion, does not mean that there is a market for the sale of sugarcane. A market indicates a number of purchasers and sellers. Sugarcane is not like wheat or rice which can be sent to the market and kept there for months. As we have stated hereinabove, that sugarcane loses it content if it is kept for even a few days. The only manner in which sugarcane can be sent to market is, in our opinion, to convert it into gur. This has been the method ordinarily employed by a cultivator in this country from times immemorial. We have examined the evidence on record.... If the mills would refuse to buy sugarcane, the poor agriculturist has no other alternative but to convert it into gur. Whether he does so at a profit or loss is of no consideration to him. That is the only manner in which he can keep his crop in a saleable condition for any reasonable length of time."

6. Mr. <NAME> for the revenue has challenged the correctness of the above findings and has submitted that there was no evidence before the <ORG> to justify the finding that there was no market for sugarcane produced by the assessee. The total substance of his submission was that, since the Phaltan Sugar Works was situated within a distance of 7 miles from the fields of the assessee and since in connection with the business of manufacturing sugar this factory required to purchase sugarcane of the quality produced by the assessee from the outsiders to the extent found by the Income-tax Officer, the sugarcane crop of the assessee must be held to be marketable in its natural condition. That was the effect of the evidence on record and, therefore, there was no evidence to justify the finding of the <ORG> that there was no market for the sugarcane produced by the assessee. His second contention was that the <ORG>'s approach in connection with the question of existence of a market where the crops of the assessee could be marketable was prime facie wrong and the consequent findings were such as no reasonable <ORG> could have arrived at, having regard to the evidence on record. He, accordingly, submitted that for the above two reasons the findings should be set aside and the question raised should be answered in favour of the revenue.

7. In reply, Mr. <NAME> for the assessee submitted that the findings of the <ORG> have been arrived at after all relevant evidence was brought on the record on behalf of the parties. The submission that the findings have been made without evidence on record is totally unjustified and misconceived. In that connection, he emphasised that the jurisdiction of this court in a reference under section 66 is restricted and limited in the manner decided by <ORG> in the cases of <CITATION> and <CITATION> , as further explained in the case of <CITATION> . The submission was that on questions of fact, like existence of a market, findings of the <ORG> cannot be set aside by this court. The question of existence of market was not a question of law at all. The argument that findings have been made without any evidence on record is a device adopted to fall into the ratio of the above decisions. He submitted that in that connection it was not permissible for this court to scrutinize the effect of the evidence on record and to make a finding that a market existed for sale of the sugarcane crops of the assessee.

8. He altogether denied the second contention made on behalf of the revenue and in that connection largely relied upon the reasoning of the <ORG> which we have quoted above. He further submitted that the contention is made beyond the scope of the questions raised in the reference. If this question had been raised before it, the <ORG> could have recorded its own explanation in connection with the contention. He repeatedly drew our attention to various pieces of evidence which could all have been included in the judgment of the <ORG> so as to explain in a better manner the recorded reasoning for the finding that the factory was not a market available for sale of the sugarcane crops of the assessee.

9. The question of the true construction and effect of section 2(1) (b) (iii) read with section 4(3) (viii) arose in the case of <CITATION> . The first contention made on behalf of the respondent in that case was that <ORG> under section 66 had no right to go behind the findings of fact made by <ORG>. The court observed :

"The question whether the requirements of the section are made out is a question of law to be deducted from the facts. The court can go into that question. But the question whether the conclusions of the <ORG> on pure questions of fact are justified, whether there is sufficient evidence to come to those conclusions, is not a matter for inquiry by the court. On that point the court has only to ask the question whether there is any evidence to justify the conclusion of fact....

We have therefore to decide in this case whether the findings of fact recorded by the <ORG> are based on any evidence."

10. Now, having regard to the above observations in the case and also the observations of <ORG> in the cases of <CITATION> and <CITATION> , as also the observations of <ORG> in the case of <NAME> (H. M. Inspector of Taxes) v. <NAME> & <NAME>, the questions raised by the parties in this case will have to be decided on the footing that the only question which this court has jurisdiction to consider is to find whether the findings recorded by the Tribunal are based on "No" evidence. Apparently, immediately upon a finding being made that there is relevant evidence on record in connection with the findings made by <ORG>, it will not be competent for us to hold that the findings were unwarranted having regard to the inadequacy of the evidence on record. The material observations of <ORG> in the cases of <CITATION> tax and <CITATION> , run as follows :

"As this court observed in <CITATION> , a finding of fact does not alter its character as one of fact merely because it is itself an inference from other basic facts; but a finding on a question of fact is open to attack under section 66 as erroneous in law when there is no evidence to support it or if it is perverse or has been reached without due consideration of the several matters relevant for such a determination."

11. The observations in the case of <NAME> (H. M. Inspector of Taxes) v. <NAME> & Harrison was :

"It is therefore a case in which, whether it be said of the Commissioner that their finding is preserves or that they have misdirected themselves in law by a misunderstanding of the statutory language or otherwise, their determination cannot stand."

12. Lord Justice <NAME> observed :

"If the case contains anything ex facie which is bad law and which bears upon the determination, it is, obviously, erroneous in point of law. But, without any such misconception appearing ex faces, it may be that the facts found are such that no person acting judicial and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene. It has no option but to assume that there has been some misconception of the law and that this has been responsible for the determination. So there, too, there has been error in point of law. I do not think that it much matters whether this state of affairs is described as one in which there is no evidence to support the determination or as one in which the evidence is inconsistent with and contradictory of the determination, or as one in which the true and only reasonable conclusion contradicts the determination."

13. Relying upon the above observations, Mr. <NAME> for the revenue has with some emphasis submitted that the finding of <ORG> that there was no market for the sale of the sugarcane produce of the assessee is based on such misconception of law that it must be held to be a finding which no reasonable person could have arrived at. The submission was made in the above manner apparently because it was pointed out to the learned counsel that there was overwhelming evidence on the record which was tendered on both sides in support and/or denial of the assessee's case that his sugarcane produce was during the relevant assessment years not saleable, because there was no market for sale thereof.

14. Before considering the details of the contentions, it may at once be stated that in the case of <CITATION> , on a true construction of the provisions in section 2(1) (b) (iii), it was held that in connection with the claim for exemption made by an assessee under the above section, the first condition required to be satisfied was that the process employed by the assessee must be one which is ordinarily employed by a cultivator for making his agricultural produce marketable. The second condition required to be satisfied was :

"..... the produce must retain its original character in spite of the process unless there is no market for selling it in that condition."

15. The further observation was :

"If there is no market to sell the produce then any process which is ordinarily employed to render it fit to reach the market, where it can be sold, would be covered by the definition."

16. Now, there can be no dispute and it is admitted that the sugarcane produce of the assessee had not retained its original condition or character when it was converted by the ordinary process employed into jaggery (gur) for rendering it marketable. The whole of the dispute raised by the parties in this case centre round the question whether the case of the assessee that of the sale of his sugarcane produce in its natural condition there was no market was true or otherwise. The contention made by the revenue that there was no evidence on record in this connection must, prima facie, be rejected, because, if one may so describe it, there is plethora of evident entered on behalf of the assessee, written and oral, in support of his case the there was no market for selling his sugarcane produce during the assessment years in its natural condition, i.e., as sugarcane. In that connection, there is no dispute between the parties the quality of the sugarcane produced by the assessee was such as was not fit for chewing. This must lead to the conclusion, as observed in the case of <CITATION> , that this variety of sugarcane was not usable in its natural form. Apparently, this variety of sugarcane can only be sold if there was a purchase who wanted to sue it for converting it into sugar and/or jaggery by applying manual and/or mechanical process. Having regard to the above situation, the whole of the burden of evidence tendered on behalf of the revenue was that a purchaser in the shape of <ORG> was always available for sale of the sugarcane produce of the assessee in its natural condition. The whole of the effort of the assessee in tendering evidence on his side was to prove that this single purchaser was useless to him for sale of his sugarcane produce in the assessment years. As already mentioned, a plethora of evidence was recorded on both sides towards supporting their cases as mentioned above. The first contention made by Mr. <NAME> that there was no evidence on record on the basis whereof a finding could be made by the <ORG> for accepting the above case of the assessee must accordingly be rejected. It requires to be recorded that in this connection it is not competent for this court to scrutinies the details of the evidence available to both sides to ascertain whether the findings made by the <ORG> are justified or incorrect. The question which arose in the above manner for decision was a question of fact.

17. The question is whether the relevant contents of the order of the <ORG> disclose materials on the basis whereof it can be held in favour of the revenue that the <ORG> was not aware of the true effect of the relevant provisions of law and/or its finding that the sugarcane produce of the assessee in the two assessment years was not saleable in its original condition because there was no market for selling it in that condition is so unreasonable that no person with reason could make it. Mr. <NAME> submits in that connection that contrary to the above legislative provisions, the <ORG> assumed that to make the sugarcane produce of the assessee marketable and saleable in its original condition, it was necessary that a market place where buyers and seller collected for sale and purchase of sugarcane produce must exist. He specifically in that connection relies upon the following contents in the order of the <ORG> :

"There is no market as such where sugarcane of this quality can be sent and sold.... A market indicates a number of purchaser and sellers."

18. Now, if these were the only contents and/or if this was the basic reasoning in the order of the <ORG>, there would be some justification in the submissions made by Mr. <NAME>. The contents of the <ORG>'s order, however, are not liable to be read disjointedly by extracting therefrom the above two sentences. Very material reasoning other than the above is contained in the order of the <ORG> which goes to show that the <ORG> was throughout aware the in law it was not necessary that a market place must exist and should have existed for the marketability of the sugarcane produce of the assessee. The <ORG> has, by mentioning certain facts, disclosed that it applied its mind to the basic fact that the only purchaser who was available for sale of the sugarcane produce of the assessee was one single mill-factory. The <ORG> has indicated several facts relating to this single available purchase which induced the <ORG> to hold as a matter of fact that on the evidence on record a finding could not be made in favour of the revenue that the sugarcane produce of the assessee was saleable to its purchaser. Now, it is true that the <ORG>'s order is compact and short in its compass and, therefore, all this has not been discussed in a large way for the benefit of a person who might critically desire to read it. To a large extent, the <ORG>'s order, in its shortness, is admirable as it contains so much of reasoning in a few words as it would be difficult to draw up ordinarily. The <ORG> has indicated the following relevant facts :

"The sugarcane grown by the assessee in his farm cannot be used for chewing. The only other use to which it can be put is the production of sugar....

Sugarcane is a crop which has certain peculiarities. If sugarcane after being cut is not crushed within 48 hours, it starts losing its sugar content..."

19. Now, each of theses facts is mentioned to indicate that the produce of the assessee was such as could not be stored and retained for a long period of time. If the assessee attempted to do so, the produce would lose its sugar content and accordingly its value in a large way. The further statements are :

"Mills buy sugarcane near the mills as far as possible... If no mill buys sugarcane, an agriculturist has to convert it into gur."

20. Now, these statements obviously were in reference to the questions raised about <ORG> and to indicate that this was only a single mill who might have been a purchaser. It was also accordingly indicated that if this mill did not make purchases from the assessee he had no alternative but to convert its sugarcane produce into gur. Towards the fact that other purchasers could not be available the sentence relied upon by Mr. <NAME> was included the sentence being "there is not market as such where sugarcane of this quality can be sent and sold". As regards the factory in question the text sentence ran as follows :

"The mills buy their requirements at prices fixed by the Government or at such other prices at which sugarcane can be purchased according to their requirements."

21. Apparently, this observation was made in connection with the evidence on record about the quantities of sugarcane that <ORG> and purchased from outsiders. The <ORG> seems to have emphasised the fact that the factory would not make purchases in excess of its requirements on the particular days in the season in which it made purchases from outsiders. In connection with the above observations the <ORG> found it unnecessary to discuss in detail the times when and the quantities of sugarcane that the factory had purchased during the assessment years in question. It is not impossible to imagine that the <ORG> indicated the evidence had not disclosed that the factory had desired to purchase quantities other than it crushed from outsiders like the assessee or had not been able to produce quantities it needed for its requirements. The <ORG> found in unnecessary to include all such details in its order. It is with reference to the evidence on record that the <ORG> used the next sentence : "The existence of a mill in our opinion does not mean that there is a market for the sale of sugarcane." It is only in this connection that the <ORG> made the second observation on which <NAME> relied i.e., "a market indicates a number of purchasers and sellers". The <ORG> we apprehend desired to indicate that in twist case here was a single purchase and it had crushed such quantities of sugarcane in the assessment years as it desired and it had not been proved that the larger and better quantities were desired to be purchased by this purchaser and had not been sold to it by outsiders like the assessee. Now, the arguments advanced by Mr. <NAME> therefore by culling out the sentences of quoted above on which he relied do not represent the true effect of the reasoning of the <ORG>. In this very connection the <ORG> pointed out the fact that sugarcane produced could not be stored for a long number of months like wheat and rice and the only alternative to the failure of purchaser to be made by the factory in question for a cultivator like assessee was to convert its sugarcane produce into gur. Apparently, the <ORG> was not satisfied that the single purchaser factory indicated by the revenue was in a position to absorb and purchase produce of sugarcane available from the sugarcane plantation situated on the north and south banks of the river Nira and/or even the south bank of the river Nira. The burden that the revenue had undertaken was to prove that the factory was a willing purchaser of the whole of the sugarcane produce available in the adjacent localities and fields and in any event from the fields situated on the southern bank of the river Nira. The <ORG> considered all the evidence on its record on which reliance could be placed by the revenue. For the reasons contained in its order it rejected the contentions made on behalf of the revenue. Not we find it extremely difficult having regard to the above position to accept the contention made by Mr. <NAME> that the <ORG>s filings are arrived at a result of a total misconception of law and/or that the findings are such as no reasonable <ORG> could have reasonably arrived at at any time. We do not accept the contention that the approach of the <ORG> to the question which arose before it was utterly unreasonable and the findings of the <ORG> should for that reason be set aside.

22. Under the circumstances, our answers to the questions are :

Question No. 1 : In the affirmative.

Question No. 2 : In the affirmative.

23. The Commissioner will pay costs.