Tamil Nadu Small Industries Corporation Ltd. v. The Collector of Central Excise

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 04-02-2008CORAMTHE HONOURABLE MR. JUSTICE P.K. MISRAANDTHE HONOURABLE MR. JUSTICE K.K. SASIDHARANWRIT APPEAL NO.2970 OF 2003andWAMP.NO.4691 OF 2003Tamil Nadu Small Industries Corporation Ltd.,Rep. by its General Manager,Thiru-Vi-Ka Industrial Estate,Guindy, Chennai 600 032... Appellant/PetitionerVs.1. The Collector of Central Excise, Chennai.2. The Customs Excise & Gold (Control) Appellate Tribunal, New Delhi... Respondents/RespondentsAppeal filed under Clause 15 of the Letters Patent against the orderof the learned single Judge in W.P.No.2255 of 1995 dated 16.8.2002.WP.2255 of 1995 : to issue a writ of certiorari to call for the recordspertaining to the order of the CEGAT, order of the 2nd respondent dated14.9.93 in E-appeal No.886/89 B. covered by final ordered No.E-265/93-B1and quash the same.For Appellant: Mr.Arvind Datar Senior Counsel for Ms. Pushya SitaramanFor Respondent-1: Mr.P. Wilson Asst.Solicitor General Respondent-2: Mr.K. Ravindranath for Customs Excise https://hcservices.ecourts.gov.in/hcservices/ J U D G M E N TP.K. MISRA, JThe present appeal is filed against the decision of the learnedsingle Judge in W.P.No.2255 of 1995, whereunder the present appellant hadchallenged the order passed by the present Respondent No.2. The questionrelates to availability of exemption under Notification 175/86-CE dated1.34.1986.2. For appreciating the aforesaid question, it is necessary tonotice the facts.The appellant was registered as a Company under the Indian CompaniesAct as per G.O.Ms.No.4704/Ind.Spl. dated 1.10.1965. All the shares of thecompany are held by the Government or the officials of the Government intheir official capacity. The first Board of Directors of the Companyconsisted of the Secretary to Government, Industries, Labour and Co-operation as the Chairman, Director of Industries & Commerce, Secretary toGovernment, Finance Department, Deputy Secretary, (Small Industries)Industries, Labour & Co-operation Department, Special Officer, Office ofthe Director of Industries & Commerce Department as the Managing Directorby virtue of G.O.Ms.No.4704 dated 1.10.1965. Notification:175/86 is thenotification issued under the Central Excise Act relating to exemption.Explanation V to such Notification is as follows:-"Explanation V. - For the purposes of this notification,where the specified goods are manufactured in a factory,belonging to or maintained by the Central Government or by aState Government, or by the Khadi and Village IndustriesCommission, then the value of excisable goods cleared from suchfactory alone shall be taken into account."3. The contention of the appellant is to the effect that sinceall the shares of the Company are held by the Government or its officersin official capacity, the benefit of the exemption should be madeavailable. This contention having been rejected by the Respondents 1 & 2,the writ petition was filed.4. The learned single Judge rejected the writ petition byobserving:"2. ... Though the Company like the present one may beregarded as an instrumentality of the State Government for thepurpose of Article 12 of the Constitution, the Companynevertheless remains a distinct and separate legal entity, withcapacity to sue and to be sued, to contract, as also to enforcethe obligations arising from such contracts. The Company cannot,therefore, be regarded as an integral part of the StateGovernment and exemptions granted to the State Government cannot https://hcservices.ecourts.gov.in/hcservices/ be regarded as encompassing the Companies in which the StateGovernment holds all the shares, or the majority of the paid upshare capital of the Company."For the aforesaid purpose, the learned single Judge has relied uponthe decision of the Supreme Court in (1999) 4 SCC 458 (ELECTRONICSCORPORATION OF INDIA LTD. v. SECRETARY, REVENUE DEPARTMENT).5. Learned Senior Counsel appearing for the appellant, whileassailing the decision of the learned single Judge, submitted that theratio of the decision of the Supreme Court in (1999) 4 SCC 458 (citedsupra) is not applicable to the facts of the present case and on the otherhand the decision of the Supreme Court reported in (1998) 5 SCC 738(INDIAN OIL CORPORATION LTD. v. CHIEF INSPECTOR OF FACTORIES AND OTHERS)is applicable. It is further submitted by him that the intention underthe Notification is to give encouragement to Government enterprises and apurposive interpretation is to be adopted to effectuate the intention ofthe notification. It has been further submitted that in fact subsequentlyby way of amendment to the notification it has been made clear that theintention was to give benefit to the Government owned Corporations and theamendment was only clarificatory. 6. Learned counsel appearing for the Respondents, on the otherhand, supported the decision of the learned single Judge and has submittedthat the very fact that the amendment to the notification had been madesubsequently would only indicate that such amendment had been made toincorporate such new provision.7. The fact that the present appellant is a Government ownedCorporation where all the shares are either hold by the Government or thedesignated officers of the Government, is not in dispute. Explanation-Vof the Notification, which has been extracted, refers to specified goodsmanufactured in a factory " belonging to or maintained by the CentralGovernment or by a State Government, or by the Khadi and VillageIndustries Commission". The amendment effected by Notification:47/88-CEwith effect from 1.3.1988 refers to State Industries Corporation and StateSmall Industries Corporation. It is no doubt true that such amendment hasnot been made specifically retrospective. However, as contended by thelearned Senior Counsel for the appellant it can be safely concluded thatsuch amendment, whereunder reference has been made to State IndustriesCorporation and State Small Industries Corporation, can be said to beclarificatory. In other words, this amendment can be said to only clarifywhat was the original meaning and the intention of the notification.8. Law is now well settled that at times the amendments are madewhich are clarificatory in nature which only emphasise the meaning whichwas originally intended. For the aforesaid purpose, reference can be madeto the decision of the Bombay High Court in (1988) 36 ELT 479 (SUN EXPORTCORPORATION, BOMBAY v. COLLECTOR OF CUSTOMS, BOMBAY AND ANOTHER), whichwas specifically approved by the Supreme Court in (1997) 6 SCC 564. https://hcservices.ecourts.gov.in/hcservices/

9. It is no doubt true that the learned single Judge has reliedupon the decision of the Supreme Court in (1999) 4 SCC 458 (cited supra)to come to a conclusion that the Company has got a separate and distinctidentity from its shareholders. The aforesaid decision was rendered in acontext of the provisions relating to Land Ceiling. In the present case,as already observed, the intention of the exemption notification is toencourage the Central Government or the State Governments. Keeping inview the purpose for which such notification had been issued, in ouropinion, a purposive interpretation is required to be adopted toeffectuate the main intention of the exemption notification. In fact, forthe subsequent period, there is no doubt that such exemption being madeapplicable to Small Industries Corporation under the control of the StateGovernment. In our opinion, the ratio of the Supreme Court decision givenin an entirely different context cannot be made applicable to the peculiarfacts and circumstances of the present case. On the other hand, asrightly contended by the learned Senior Counsel for the appellant, theratio of the decision of the Supreme Court in (1998) 5 SCC 738 (citedsupra) can be made applicable. It is also interesting to note that in asubsequent decision, the CEGAT has given the benefit of such exemption tothe very same appellant as it is apparent from the decision reported in2001(131) E.L.T. 131 (TANSI v. COMMISSIONER OF CENTRAL EXCISE, CHENNAI).In such decision, the CEGAT has accepted the contention that amendment isclarificatory and has given the benefit of exemption. It is also assertedby the appellant and not refuted by the Counsel for the Department thatsuch subsequent decision of the CEGAT has not been challenged by theDepartment. As a matter of fact, similar decision was also made by CEGATin an earlier decision reported in (1999 (82) ECR 330 (TANSI v. CCE,Madras), wherein the benefit of the exemption was made available to TANSI.10. Having regard to these decisions and particularly keeping inview the intention of the notification, we are inclined to accept thecontention of the learned Senior Counsel for the appellant and hold thatbenefit of the exemption is available to the appellant.11. Learned counsel for the Respondents has contended that areading of the order of the learned single Judge indicates as if suchdecision was rendered on the basis of the fair concession made by thecounsel for the present appellant before the learned single Judge. Wehave carefully gone through the observations made by the learned singleJudge. It appears that the decision relied upon by the learned singleJudge was brought to the notice of the learned single Judge by the counselfor the appellant. It does not mean that any concession has been given.Even assuming that any concession has been given, on an erroneous view, ona question of law such a concession is not binding on the parties and itis always open to the appellate court to take a different view on thequestion of law. https://hcservices.ecourts.gov.in/hcservices/

12. For the aforesaid reasons, the appeal is allowed and theorder passed by the learned single Judge is set aside and the orderspassed by the Respondents 1 and 2 are quashed and it is made clear thatbenefit of the exemption under Notification 175/86 can be availed by thepresent appellant for the relevant year. No costs. Consequently,WAMP.No.4691 of 2003 is closed.dpkSd/-Asst.Registrar/true copy/ Sub Asst.RegistrarTo1. The Collector of Central Excise, Chennai.2. The Customs Excise & Gold (Control) Appellate Tribunal, New Delhi.+1 cc to Mr.P.Wilson, Advocate Sr.No.5542.+1 cc to Mr.Pushya Sitaraman, Advocate Sr.No.5726.ASM(CO)DCP/8.2WA.NO.2970/2003