ASSISTANT COLLECTOR OF CENTRAL EXCISE AND CUSTOMS AT SURAT Vs. J C SHAH JAYANTILAL BALUBHAI AND MANI SHANKER MAGATRAM

JUDGEMENT

(1.) [Judgment per : ]

(2.) THE short question of law which arises in these three appeals is whether the respondents in the three respective appeals who carry on business in the manufacture of art silk fabrics, are entitled to claim exemption from the excise duty under item 12A(v) which was inserted in First Schedule to the central Excises and Salt Act, 1944 (No. 1 of 1944) by the Finance Act, 1954 (No. 17 of 1954). Item 12A prescribes for the payment of duty on rayon or artificial silk fabrics including all varieties of fabrics manufactured either wholly or partly from the product commercially known as rayon or artificial silk; it, however, grants exemption from the said duty in respect of articles covered by clauses (i) to (v) thereof. Clause (v) deals with cases of rayon or artificial silk fabrics produced or manufactured in one or more factories by or on behalf of the same person in which less than 25 powerlooms in all are installed. THE respondents in the three appeals claimed that the artificial silk fabrics which they produced or manufactured were produced or manufactured in factories owned by them in which less than 25 powerlooms are installed. This plea has been rejected by the tax authorities and notices were issued against them calling upon them to pay the duty at the rate prescribed by item 12A. THE validity of the notices thus issued against them was challenged by the respondents by their Writ Petition filed in the Bombay High court under Articles 226 and 227 of the Constitution. THE writ petition filed by J.C. Shah who is the respondent in Civil No. 394 of 1962, first came to be considered and decided by the said High court, and the said High court allowed his writ petition and directed that the order passed by the Assistant Collector of Excise and Customs holding that the respondent was liable to pay the duty in question should be quashed. THE High court has also quashed the notice of demand issued against the respondent on the 30/10/1957. THE amount sought to be recovered from the respondent is Rs. 10,954.80 nP. THE two other Writ Petition filed by the respondents in Civil Nos. 395 and 396/1962 were dealt with in accordance with the view taken by the High court in the writ petition filed by J.C. Shah. In the result, the three Writ Petition filed respectively by the three respondents were allowed and notices of demand served on them were quashed. It is against these three orders that the Assistant Collector of central Exsiccated Customs at Surat and the Inspector, central Excise Sector III of the relevant Range as well as the Union of India have brought these appeals to this court by special leave. That is how the only question which arises in all the three appeals is whether the respondents' claim for exemption from payment of duty under item 12A(v) is justified or not. THE answer to this question depends on a fair and reasonable construction of the relevant clause.

(3.) IT has been urged by Mr. Prem on behalf of the appellants that the duty is levied not against the individual who produces the artificial silk fabrics, but against the artificial silk fabrics themselves, and since it is the production of the fabrics which in the subject matter of the duty, the expression "same person" should be liberally construed to include cases like the present. This argument appears to us to be misconceived. If a partnership consists of 10 persons on Mr. Prem's argument the articles produced by the factory belonging to such a partnership may become the subject-matter of duty in respect of each one of the partners. In fact, in Civil No. 395/1962 that is what the taxing authorities have purported to do. In the partnership M/s. Arun Textiles with which the said appeal is concerned, there were two partners who were also partners in M/s. M. Kantilal & Co. and notices have been served on both the partnerships in respect of the artificial silk fabrics manufactured in factories belonging to the partnership. The view taken by the taxing authorities was that both the art silk factories, namely, Arun Textiles and M. Kantilal & Co. of Surat which had common partners and had an aggregate potential loomage of more than 24 powerlooms and were producing rayon or art silk fabrics in 320 both these factories, are treated as a collective entity for the central Excise purposes for the period in question.