judgement:
Civil Appeal No. 692 & 693 of 1981.
From the Judgment and Order dated 19.5.1980 of the Delhi High Court in W.P. Nos.
883 of 1978 and 1079 of 1979.
R.K. Habbu, R.B. Hathikhanwala and B.R. Aggarwala for the Appellants.
Soli J. Sorabjee, Attorney General (NP), Kapil Sibal, Additional Solicitor General, Ms. Indu Malhotra, P. Parmeshwaran and C.V.Subba Rao for the Respondent.
The Judgment of the Court was delivered by RANGANATHAN J.
These two appeals involve a common question and can be disposed of by a common judgment.
The question is whether the appellant companies (hereinafter referred to as the 'assessees ') are entitled to full "draw back ' of the customs duty which they had paid on the import of di methyl terephthalate (shortly referred to as 'DMT ') for manufacture of polyester staple fibre yarn.
The assessees converted the DMT into polyester staple fibre in their factory at Thane and then sent it to Bhilwara in Rajasthan where the Rajasthan Spinning and Weaving Mills blended it with indigenous viscose staple fibre to spin out certain varieties of blended yarn.
It is common ground that the product manufactured by this process was exported by the assessees to Imperial Chemical Industries Pvt.
Ltd. Singapore, who had supplied the DMT free of charge to the assessees.
The answer to the question revolves around the interpretation of Section 75 of the read with the Customs and Central Excise Duty Draw Back Rules, 1971.
291 Section 75 of the empowers the Central Government, by notification in the official gazette, to direct, in respect of goods of any class or description manufactured in India and exported to any place outside India, that draw back should be allowed of the duties of customs chargeable under the Act on any imported materials of a class or description used in the manufacture of such goods, in accordance with and subject to the rules framed under sub section (2) of the said section.
Sub section 2, which confers a rule making power, enacts that such rules may, among other things, provide: "(a) for the payment of draw back equal to the amount of duty actually paid on the imported materials used in the manufacture of the goods or as is specified in the rules as the average amount of duty paid on the materials of that class or description used in the manufacture of export goods of that class or description either by manufacturers generally or by any particular manufacturer;" There is a similar provision in section 37 of the Central Excises & Salt Act, 1944 enabling grant of draw back of the excise duty paid in relation to such manufacture.
The Central Government framed the Customs and Central Excise Duties Drawback Rules, 1971 (hereinafter referred to as 'the rules '), in exercise of the powers conferred on it under these two statutes.
These are composite rules under the above two provisions and enable drawback being availed of in relation to customs duty as well as in relation to duties of central excise.
Some relevant provisions of these rules may be quoted here.
Rule 3, in so far as it is relevant for our present purposes, reads as follows: Rule 3: Drawback: (1) Subject to the provisions of (a) the (52 of 1962) and the rules made thereunder.
(b) the (1 of 1944) and the rules made thereunder, and (c) these rules, (a) drawback may be allowed on the export of goods specified in Schedule II at such amount, or at such rates, as 292 may be determined by the Central Government.
xxx xxx xxx (2) In determining the amount or rate of drawback under this rule, the Central Government shall have regard to: (a) the average quantity or value of each class or description of the materials from which a particular class of goods is ordinarily produced or manufactured in India.
(b) the average quantity or value of the imported materials or excisable materials used for production or manufacture in India of a particular class of goods.
(c) the average amount of duties paid on imported materials or excisable materials used in the manufacture of semis, components, and intermediate products which are used in the manufacture of goods.
(d) the average amount of duties paid on materials wasted in the process of manufacture and catalytic agents: Provided that if any such waste or catalytic agent is used in any process of manufacture or is sold, the average amount of duties on the waste or catalytic agent so used or sold shall also be deducted.
(e) the average amount of duties paid on imported materials or excisable materials used for containing or packing the exported goods.
(f) the average amount of duties of excise paid on the goods specified in Schedule 1: and (g) any other information which the Central Government may consider relevant or useful for the purpose.
Rule 4.
Revision of rates: The Central Government may revise the amounts or rates determined under rule 3.
xxx xxx xxx 6.
Cases where amount or rate of drawback has not been determined: 293 (1)(a) Where no amount or rate of drawback has been determined in respect of any goods, any manufacturer or exporter of such goods may, before exporting such goods, apply in writing to the Central Government for the determination of the amount or rate of drawback therefor stating all relevant facts including the proportion in which the materials or components are used in the production or manufacture of goods and the duties paid on such materials or components.
(b) On receipt of an application under clause (a) the Central Government shall after making or causing to be made such inquiry as it deems fit, determine the amount or rate of drawback in respect of such goods.
Cases where amount or rate of drawback determined is low (l) Where in respect of any such goods, the manufacturer or exporter finds that the amount or rate of drawback determined under rule 3 or, as the case may be, revised under rule 4 for that class of goods is less than three fourths of the duties paid on the materials or components used in the production or manufacture of the said goods, he may make an application in writing to the Central Govermment for fixation of the appropriate amount or rate of drawback stating all relevant facts including the proportion in which the materials or components are used in the production or manufacture of the goods and the duties paid on such materials or components.
(2) On receipt of the application referred to sub rule (1) the Central Government may, after making or causing to be made such inquiry as it deems fit, allow payment of drawback to such exporter at such amount or at such rate as may be determined to be appropriate if the amount or rate of drawback determined under rule 3 or, as the case may be, revised under rule 4, is in fact less than three fourth of such amount or rate determined under this sub rule.
Schedule II to the notification by which the rules were promulgated listed the items the export of which entitles an assessee to avail of the drawback facility.
Item 25 of the list reads thus: "Synthetic and regenerated fibre, textile yarn, thread, twines, cords and ropes 294 It is common ground that the goods exported by the assessees fall under item 25 above.
There is also no controversy that the DMT imported by the assessees was used for the manufacture of the above commodity and that, on the import of the DMT, the assessees have paid customs duty.
The rates of drawback available in respect of various goods were notified by the Central Government in due course.
Against serial no 25, the notification set out the rates of drawback as follows: Serial Sub Si.
Description of Rate of No. No. goods Drawback 25.
SYNTHETIC AND REGENERATED FIBRES AND/TEXTILE YARN/ THREAD, TWINES, CORDS AND ROPES Brand rate to be 2501 Synthetic and regenerated fixed on an fibre and textile yarn, application from thread, twines, cords and the individual ropes not elsewhere manufacturer specified.
exporter.
2502 (a) Yarn of above 21 BWS Counts or above 14 n.f. counts, spun wholly out of either viscose rayon fibre or acetate fibre or polyster fibre, polyamide fibre or acrylic fibre or wool, or from a combination of two and not more than two of the above mentioned fibres, or a combination of any one of the above mentioned fibres with either cotton or silk (but excluding yarn spun out of fibres obtained from fibre wastes, yarn waste or fabric wastes, by gernetting or by any other process: (a) Cellulosic fibre content: Rs. 1.80 (Rupees one and paise eighty only) per kg.
295 (b) Polyester fibre content: Rs.43.15 (Rupees forty three and paise fifteen only) per kg.
(c) Acrylic fibre content: Rs.37.75 (Rupees thirty seven and paise seventy five only) per kg.
(d) Polyamide fibre content: Rs. 16.40 (Rupees Sixteen and paise forty only) per kg.
(e) Wool contents: (i) in the worsted yarn of Rs. 18.95 (Rupees Weaving quality made wool Eighteen and paise top.
ninety five only) per kg.
(ii) in the worsted yarn of Rs. 13.55 (Rupees weaving quality not made from Thirteen and paise fifty wool top.
five only) per kg.
(iii) in the worsted Hosiery Rs. 16.65 (Rupees Sixteen yarn and worsted hand knitting and paise sixty five yarn made from wool top.
only) per kg.
(iv) in the worsted hosiery yarn Rs.11.25 (Rupees Eleven and worsted hand knitting yarn and Paise twenty five not made from wool top.
only) per kg.
(v) Bye content if the yarn is Rs.0.85 (Eighty five dyed paise only) per kg.
xxx xxx xxx It will be seen from the above table that the assessees are entitled to a drawback of Rs.43.15 per kg.
of the polyester fibre content of the yarn exported by them.
We are informed that this is the rate of central excise duty payable in respect of the manufacture of yarn having polyester fibre content.
For reasons to be stated presently, the assessees had to pay no central excise duty for the manufacture and hence there was admittedly no question of the assessee getting a drawback to this extent.
The point raised by the assessee is that, having paid customs duty on the DMT , it was entitled to a drawback in respect of the customs duty paid by it on the DMT.
Since this was not included in the notification of the Central Government, the assessees made an application to the Ministry of Finance on 23.3.1977 requesting that drawback of the entire customs duty may be sanctioned.
This request, 296 however, was rejected by the Central Government by a communication dated 12.3.1978.
This communication was in the following terms: "Under Rule 3 of the Customs and Central Excise Duties Drawback Rules 1971, all industry rates of drawback on polyester viscose blended yarn have been determined and announced under serial No. 2502 of the Drawback Schedule.
The said rates have been determined at the material time, after taking into consideration: (a) duty incidence of raw materials used in the manufacture of viscose fibre, plus the Central Excise duty on viscose fibre and (b) the Central Excise duty on polyester fibre in respect of polyester yarn.
However, no raw material duty for manufacture of polyester yarn was taken into account, as the same (DMT) is available indigenously and is exempted from Central Excise Duty.
For the rates determined effective from 18.8.1977 however the duty incidence on DMT has also been taken into consideration on the basis of weighted average of imported and indigenous material.
" The assessees, dissatisfied with this decision of the Central Government, preferred a writ petition in the Delhi High Court, which was dismissed by the High Court on 19.5.80.
Hence the present appeals.
At this stage, it may be necessary to outline some facts which may be relevant for appreciating the background in which the assessees ' counsel urged strongly the equitable, if not also legal, claims of the appellant for the drawback of the customs duty.
Counsel claims that the assessees were almost the first group of entrepreneurs in India to manufacture polyester fibre yarn.
They had been fortunate enough to obtain a contract from the Imperial Chemical Industries, Singapore.
By a letter dated 2.4.75 this concern agreed to supply free of cost the DMT required for the manufacture of blended yarn consisting of 67 per cent polyester and 33 per cent viscose fibre.
The DMT was to be converted in polyester fibre, blended with viscose indigenously and shipped to a customer of the ICI in Sri Lanka.
Thereupon, on 2.6.75, the assessees obtained customs clearance permits for import of 392 tons of DMT and also of 178 tons of viscose staple fibre.
Eventually, however, the viscose staple fibre was obtained indigenously and the import permit, to this extent, was not utilised by the assessee.
At the 297 time of obtaining this permit, the assessees also obtained permission to convert the imported DMT into polyester fibre under customs bond.
The condition attached to the Customs Clearance permit was in the following terms: "The firm will convert the imported DMT into polyester fibre under Customs bond.
The firm will then move the polyester fibre so manufactured and the imported viscose staple fibre under bond to the bonded warehouse of Rajasthan Spinning and Weaving Mills, Bhilwara Messrs. Rajasthan Spinning and Weaving Mills will then manufacture under bond polyester viscose yarn on behalf of the firm.
The polyester viscose fibre yarn will then be exported by the firm to the overseas buyers who have supplied the DMT and viscose staple fibre on CCP basis or their nominees. .
If these conditions had been fulfilled the assessees would have had no problems.
The polyester fibre would have been manufactured under customs bond and this would have obviated payment of customs duty by the assessees.
So also, the production of the blended yarn at the Rajasthan Spinning and Weaving Mills would have been under Central excise supervision and no excise duty would have been payable on the manufacture.
Unfortunately, however, the customs authorities were not in a position to permit the conversion of the DMT into polyester fibre under customs bond for reasons which are not at present relevant and which are not being challenged in these proceedings.
The assessees 's request for the manufacture of polyester fibre under: customs bond was declined by the customs authorities on 2.4.1976.
Perhaps anticipating this difficulty, the Association of Polyester Staple Fibre Manufacturers at Bombay made an application to the Central Government on 26.3.1976 praying for exemption from customs duty on DMT required for the manufacture of polyester staple fibre.
This letter points out: "Members of this Association manufacture polyester staple fibre.
One of our members has received an advance licence for the import of DMT, a photostat copy of which we attach herewith.
This DMT is to be used for manufacture in polyester fibre and the polyester fibre then converted into yarn to be supplied against export orders.
Our members wish to explore possibility of larger export business in this manner.
Indigenous supplies of both DMT and glycol are 298 insufficient to meet the domestic market requirements and export business can only be done by import of the two materials.
Fulfilling export orders by using advance licences as the one issued to our member poses certain problems because the licence stipulated manufacture under Customs Bond.
You will appreciate the difficulty in manufacturing under bond when the fibre for export constitutes only a portion of the total manufacture of the factory.
If DMT and glycol could be included in the schedule to the customs Notification GSR 183, the procedural difficulties in manufacturing under Bond will not apply.
Exports of yarn made from raw materials obtained against advance licences could earn considerable foreign exchange because of the value added during processing.
One of the assessees also made a similar request and, eventually, a notification was issued on 2nd August, 1976 under section 25 of the exempting DMT from customs duty.
The Government of India also wrote to one of the present appellants on 9.9.76 drawing attention to the said notification and stating that with the issue of this notification.
The assessees ' problem would appear to have been solved.
This, however, was not correct.
The notification exempted future imports of DMT from customs duty but the assessees, having imported the DMT earlier, had to clear the same after paying customs duty thereon.
Hence their request for a drawback of the customs duty already paid by them, the refusal of which has led to the present litigation.
On behalf of the appellants, it is contended that the contains provisions enabling thd Government either to exempt goods under section 25 from the levy of Customs duty at the time of import or failing this, to permit a drawback of customs duty paid in the event of the conditions set out in section 75 being fulfilled.
In the present case, an exemption under section 25 of the was in fact notified but unfortunately this happened only in August, 1976.
By this time, the assessees had already imported the DMT.
This they were obliged to do because of a time bound programme for export of the manufactured fibre to Sri Lanka.
Counsel states that, from the very outset, the assessees had proceeded on the footing that they would be obtaining exemption from customs and excise duty because, apart from getting some conversion charges from the ICI, their own margin of profit on the transaction was not substantial.
That is why even at the time of obtaining the customs clearance permit they had sought for permission to convert DMT into polyester under customs bond.
If that had been 299 done, there would have been no necessity to pay customs duty at all.
Unfortunately, because the department lacked facilities to supervise such an operation, the attempt of the assessees was only partially successful in that they were able to get only the production of the blended fibre done under Central Excise supervision.
The initial stage of conversion from DMT to polyester fibre could not be done under customs bond.
It is pointed out that the Government of India had exempted DMT from customs duty only on the basis of the representations made by the assessees and it is urged that the refusal to grant drawback of customs duty to assessees is wholly unjustified.
The object of section 75 of the , read with section 27 of the Central Excise Act, is obviously to provide that in cases where certain goods are imported for complete utilisation in the manufacture of goods which are exported, the importer should be able to obtain relief in respect of customs and excise duties.
In the present case there is no controversy that the D.M.T. imported by the assessee was utilised for the manufacture of polyester staple fibre and that the final product was fully exported to Sri Lanka.
The notification made under the rules framed for this purpose, however, provides only for a drawback in respect of the excise duty involved in the manufacture of polyester staple fibre but not the customs duty on the raw material actually imported.
Sri Habbu, learned counsel, contends that this notification, in fact, is contrary to the provision contained in rule 3 which obliges the Government, in determining the amount or rate of drawback, to have regard, among other things, to the amount of duties paid on imported or excisable material used in the manufacture of the exported goods.
He submits that, in so far as the rates prescribed by the Central Government do not take into account the element of import duty on DMT, the fixation is not in accordance with the rule.
According to him, therefore, this case 'falls under rule 6 which enables an assessee to apply to the Central Government to determine a drawback where none has been determined.
The Central Government, he submits, was in error in rejecting the assessees ' application as one falling under rule 7 and, therefore not maintainable both in law and equity.
Having heard the learned counsel for the assessees at some length, we are of opinion that the High Court was right in rejecting the assessees contentions.
We think that the assessees ' arguments are based on a basic misapprehension that, under the Acts and rules, a manufacturer is automatically entitled to a drawback of the entire customs and excise duties paid by him if the terms and conditions of 300 section 75 are fulfilled.
Though section 75 of the and section 37 of the Central Excises & Salt Act empower the Government to provide for the repayment of the customs and excise duties paid by individual manufacturers also, the rules as framed (rule 3 in particular) provides only for a refund of the "average amount of duty paid on materials" of any particular class or description of goods used for the manufacture of export goods of that class or description by manufacturers generally, except to the extent prescribed under rule 7 (to be noticed presently).
The rules do not envisage a refund of an amount arithmetically equal to the customs duty or central excise duty which may have been actually paid by an individual importer cum manufacturer.
If that had been the statutory intendment, it would have been simple to provide that in all cases where imported raw materials are fully used in the manufacture of goods which are exported, the assessee would be entitled to a drawback of the customs or excise duties paid by him for the import or on the manufacture.
On the other hand, section 75(2) requires the amount of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and the fact situation relevant in respect of each of various classes of goods imported and manufactured.
The need for providing an elaborate process of determination as envisaged in rule 3 is this.
There may be different manufacturers of a particular manufactured item.
Some of them may be using indigenous material and some may be importing some of the raw material.
Similarly, in the process of manufacture also, there may be difference between manufacturer and manufacturer.
That is why the drawback rules provide for a determination of the drawback after taking into account the "average" amount in respect of each of the various items specified in rule 3 in relation to each type of goods listed in Schedule II.
The notification issued also determines the composite drawback available in respect of both customs and excise duties to importers cum manufacturers in respect of various categories of goods.
In other words, the amount of drawback is not intended to be the amount of the duties that may have been paid by individual manufacturers; it is to be determined by considering the overall position prevalent in the country in respect of each of the categories of trade in the goods specified in Schedule II.
We think that, if this basic principle is understood, the decision of the Govermment would become intelligible and rational.
There is no controversy that, in this case, the goods exported fall under item 25.
Learned counsel sought to contend that the goods here fall under sub item 2501 but this is clearly untenable.
Sub item 2501 represents a residuary category which will not be attracted to the 301 goods here which clearly fall under sub item 2502.
The notification prescribes different amounts of drawback under this it@m depending on the composition of the yarn and the nature of its contents.
It specifies an amount of Rs.43.15 per Kg.
as the relief by way of drawback available against the goods with which we are concerned which fall under clause (b) of item 2502.
This much indeed, was conceded before the High Court.
Once we understand the principles on which and the scheme according to which the rates of drawback are to be and are determined as explained earlier, the plea of the appellants, that the amount of drawback determined is nothing more than the excise duty payable on manufacture of blended fibre with polyester fibre, content and that the notification has erred in overlooking the customs duty paid on imported DMT, is wholly untenable.
We say this for two reasons.
First, the rates prescribed constitute a composite rate of drawback fixed having regard to the liabilities under the as well as the Central Excises & Salt Act.
It would not be correct, in principle, to bifurcate the amount so fixed into its two constituents and to say, merely because the amount fixed is equal to one of the duties, that the other has not been taken into account.
In theory, the drawback determined could have taken into account both sets of duties in part only.
It cannot be said to be merely the customs duty drawback or central excise duty drawback.
Though it does appear that the various rates of drawback prescribed under item 2502 are equal to the rates of excise duty payable on the manufacture of the various items referred to therein, the nature of exemption granted is one of relief under both enactments.
It is immaterial whether this quantum of relief benefits the assessee in respect of one or other or both of the levies which he has to discharge.
The attempt to identify and correlate the rebate granted to the central excise duty paid does not therefore appear to be correct in principle.
But, this ground apart, we think there is force in the point made by the learned counsel for the Union of India and accepted by the High Court that at the time when these drawback rates were fixed, the Government of India took into account both the import duty as well as the excise duties which would be payable on the manufacture of the goods the export of which was intended to be encouraged.
After examining the condition in the trade, it was found that D.M.T. was easily available in India at that time and that, therefore, it would not be necessary to grant any relief in respect of drawback of customs duty on the imported material because that would only result in assessees 302 attempting unnecessarily to import a raw material which was available in the country itself.
In fact, this is the aspect on which the Delhi High Court has laid considerable emphasis.
Learned counsel for the appeallants contends that this is factually and that this is clearly shown by the very fact that Government of India itself, in August, 1976, decided to grant exemption in respect of customs duty for the import of D.M.T. He submits that if D.M.T. had been easily available indigenously at that time, the question of granting exemption under section 25 would not have appealed to the Government at all.
He, therefore, submits that, in fixing the rate of drawback the Central Government had proceeded on the footing that no import duty would be payable on the DMT and that it will be sufficient to grant relief in respect of Central excise duty alone.
We find that, on this aspect, the position is not so simple as submitted by the learned counsel for the appellants.
We have already extracted reply of the Government of India to the assessees ' representation which clearly mentions that DMT is available indigenously and that, therefore, no duty in manufacture of polyester yarn was taken into account.
This is a statement of fact and there is no material placed before us to contradict the same except for the cor respondence referred to earlier.
If one looks carefully at the corres pondence, one will find that it does not support the assessees 'case.
For one thing the memorandum submitted by the Association of March 1976 itself proceeds on the footing that DMT is available locally but not sufficient to meet the domestic market requirments.
This, clearly, is a reference to something which happened after the present appellants had imported their goods and started the manufacture.
Indeed, it is their claim that they were fore runners in this field.
Fol lowing up on the assessees ' attempt to obtain imports of DMT and exporting the goods manufactured, other polyester staple fibre manufacturers also proposed to explore the possibilities of such imports and exports and what the letter says would only appear to be that the indigenous supplies of DMT and Glycol may not be enough to meet the domestic market requirements if the business is so expanded.
By the time the notification fixing the rates was issued, import duty on DMt had been removed and, therefore, there was no purpose in granting a drawback of customs duty.
In these circumstances, the customs duty was rightly not taken into account in fixing the rate of drawback.
The letter of the Government dated 9.9.76 is only an answer to the assessees ' prayer that its problem may be solved by granting an exemption for DMT from customs duty and refers only to the position after the notification of exemption.
It is not reply to the assessees ' representation in respect of the past which was filed only much later in 1977.
The correspondence in the case is, therefore, of no 303 help to the assessees.
It may also be pointed out that the assessees appear to have imported DMT not because it was not locally available but only because it was able to get it free of cost from the ICI which was a benefit which other manufacturers, if any, could not have enjoyed.
We are, therefore, of opinion that High Court was right in concluding that the rate of drawback in respect of the goods in ques tion was fixed after taking into consideration the aspect of customs duty payable in respect of DMT and that a conscious decision was taken that no relief in this respect should be granted as DMT was available in the Country itself.
It cannot,therefore, be said that this is a case where the fixation is contrary to the terms of rule 3 and that the assessees ' application for determination of a rate in his case should be taken as an application under rule 6.
Rule 6 is also inapplicable for the reason that an application under rule 6 should be made before the export of the manufactured goods which does not seem to be the case here.
The assessees ' reliance on rule 6, therefore, fails.
It is true the fixation of rates of drawback on the average basis indicated in rule 3 could work hardship in individual cases.
Provi sion for this contingency is made in rule 7.
The assessees ' application was rightly treated as one made under this rule and they could, if at all seek relief only if their case fell within its terms.
This rule, unfortu nately does not provide for relief in every case where an individual manufacture has to pay customs and excise duty to a larger extent than that determined for his class of goods.
Relief is restricted only to cases when the margin of difference is substantial and to the extent specified in rule 7.
The High Court has discussed this point at length and demonstrated, by giving necessary figures, how the assessees ' case does not fulfill the term of the rule and this conclusion is not, in fact, challenged by the learned counsel for the appellants.
The Government was, therefore, right in rejecting the appellants ' request made under section 7 of the Drawback Rules.
For the reasons above mentioned, we agree with the High Court that the order of the Central Government rejecting the assessees 'application was well founded and cannot be interfered with.
Learned counsel for the appellants brings to our notice a manual published by the Directorate of Publication.
Ministry of Finance, Department of Revenue explaining the scope of the rules as well as two notifications issued by the Government on 9.6.1978 and 1.2.1982 respectively and submits that the present case falls within the terms of these notifica tions.
We are constrained to point out that these are notifications issued subsequent to the period of the controversy before us: also this 304 is material which was not placed before the authorities or the High Court.
We, therefore, find ourselves unable to permit the assessee to rely upon them at this late stage.
However, having regard to the circumstances and the subsequent policy in the above rules, we think it is a fit case in which the Central Government could consider whether, on equitable grounds, the assessee can be given relief in respect of the customs duty on DMT paid by it.
In this context, it is worthwhile noting that the assessee saved foreign exchange for the country by importing DMT free of cost.
The entire manufactured product has also been exported and earned foreign exchange.
The appellants also apparently gave impetus to other manufacturers for the export of blended fibre on large scale.
If only the appellants had imported the DMT a few months later, they would have been entitled to exemption from customs duty and would not have suffered the present handicap.
They also did obtain the permission of the Government to convert DMT into polyester fibre under customs bond but this could not be implemented for reasons beyond their control.
Having regard to all these circumstances, it would seem only just and fair that the assessees should not be denied a benefit of which all other persons have since availed of.
We, therefore, think that this is a fit case in which the Government should consider, in case the assessees make an application within two months from today, whether the assessees could be granted the relief prayed for, if only on equitable grounds, and pass appropriate orders on such applications.
With the above observations, these appeals are dismissed.
But in the circumstances, we make no order as to costs.
Y. Lal Appeals dismissed.

summary:
The appellants are manufacturers of Polyester fibre yarn.
They obtained a contract from the Imperial Chemical Industries, Singapore for the supply of the said yarn and the said concern had agreed to supply to the appellants free of cost the di methyl terephthalate (DMT) D required for the manufacture of Polyester staple fibre yarn.
The DMT was required to be converted into polyester fibre, blended with viscose indigenously and shipped to a customer of the ICI in Sri Lanka.
The appellant assessees obtained customs clearance permits for import of 392 tons of DMT and also of 178 tons of viscose stable fibre.
The appellants also obtained permission to convert the imported DMT into polyester fibre under customs bond.
The appellants imported the DMT and paid the customs duty in respect thereof Section 75 of the empowers the Central Government to allow the drawback of the duties of customs chargeable under the Act on any imported materials of a class or description in the manufacture of such goods in accordance with and subject to the rules under sub section (2).
There is an identical provision in section 37 of the Central Excises & Salt Act, 1944 enabling grant of draw back of the excise duty paid in relation to such manufacture.
The Central Government framed the Customs and Central Excise Duties Drawback Rules 1971 enabling drawback being availed of in relation to customs as well as in relation to duties of central excise.
Schedule II to the notification listed the items the export of which entities an assessee to avail of the drawback facility.
DMT as such was not included in the notification in respect of which drawback could have been availed of by the assessees.
The assessee therefore made an application to the Ministry of Finance on 23.3.1977 requesting that since it had paid customs duty on DMT, it was entitled to its drawback, more 289 particularly when its request for the manufacture of the polyester fibre under customs bond had been declined by the customs authorities.
The application filed by the appellants was rejected bY the Central Government on 12.3.1978, though on a representation made by the Members of the Association of manufacturers of Polyester staple fabric a notification had been issued on 2.8.76 under Section 25 of the Customs Act B exempting DMT from Customs duty.
The appellant thereupon filed writ petition in the Delhi High Court which was dismissed by the High Court.
Hence these appeals.
Dismissing the appeals, but recommending to the Central Government to consider the case of the appellants on equitable grounds whether the relief could be granted to it, this Court, HELD: Though Section 75 of the and Section 37 of the Central Excises & Salt Act 1944 empower the Government to provide for the repayment of the customs and excise duties paid by individual manufacturers also, the rules as framed (rule 3 in particular) provide only for a refund of the 'average amount of duty paid on materials, of any particular class or description of goods used for the manufacture of export goods of that class or description by manufacturers generally, except to the extent prescribed under rule 7.
[30OA B].
The rules do not envisage a refund of an amount arithmeticaly equal to the customs duty or central excise duty which may have been actually paid by an individual importer cum manufacturer.
If that had been the statutory intendment, it would have been simple to provide that in all cases where imported raw materials are fully used in the manufacturers of goods which are exported, the assessee would be entitled to a draw back of the customs or excise duties paid by him for the import or on the manufacture.
[300C] There is no controversy that, in this case, the goods exported fall under item 25.
R was sought to be contended that the goods fall under sub item 2501, but this is clearly untenable.
Sub item 2501 represents a residuary category which will not be attracted to the goods which clearly fall under sub item 2502.
The notification prescribes different amounts of drawback under this item depending on the composition of the yarn and the nature of its contents.
It specifies an amount of Rs.43.15 per kg.
as the relief by way of drawback available against the goods with which we are concerned which fall under clause (b) of item 2502.
[30OH 301B] 290 The High Court was right in concluding that the rate of drawback in respect of the goods in question was fixed after taking into consideration the aspect of the customs duty payable in respect of DMT and that a conscious decision was taken that no relief in this respect should be granted as DMT was available in the country itself.
It cannot therefore, be said that this is a case where the fixation is contrary to the terms of rule 3, and that the assessee 's application for determination of a rate in his case should be taken as an application under rule 6.
[303B) Rule 6 is also inapplicable for the reason that an application under rule 6 should be made before the export of the manufacturer 's goods which does not seem to be the case here.
[303C]


judgement:
ivil Appeal Nos.
160 63 of 1990.
From the Order dated 25.9.89 of the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal No. E/1883/85 C, E/2031/85 C, E/ 1468/88 C and E/ 1986/88 C (Order No. 543 546 of 1989 C).
M.L. Lahoty, Mrs. Meeta Sharma and P.S. Jha (NP) for the Appellant.
M. Chander Sekaran, Additional Solicitor General (N.P.).
M. Gouri Shanker Murthy, G. Venkatesh Rao and P. Parameshwaran for the Respondent.
The Judgment of the Court was delivered by 320 S.C. AGRAWAL, J.
These appeals raise for consideration the question as to whether egg trays and other similar products manufactured by the appellant can be regarded as 'Containers ' under the relevant entries in the Central Excise Tariff.
Till February 28, 1986 the excise tariff was contained in the First Schedule to the (hereinafter referred to as 'the old Tariff ') and with effect from March 1, 1986, the excise tariff is contained in the Schedule to the (hereinafter referred to as 'the new Tariff).
The relevant entry in the old Tariff was Item 17.
During the period March 1, 1982 to February, 1983, the said Item 17 read thus: "Paper and paper board, all sorts (including paste board, mill board, straw board, cardboard and corrugated board) and articles thereof specified below, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power (1) Uncoated and coated printing and writing paper (other than poster paper) (2) Paper board and all other kinds of paper (including paper or paper boards which have been subjected to various treatments such as coating, impregnating, corrugation, creping and design printing), not elsewhere specified.
(a) All sorts of paper commonly known as Kraft paper, including paper and paper board of the type known as Kraft liner or corrugating medium, of a substance equal to or exceedings 65 gram per square metre in each case.
(b) Others.
(3) Carbon and other copying papers (including duplicator stencils) and transfer papers, whether or not cut to size and whether or not put up in boxes.
(4) Boxes, cartons, bags and other packing containers (including flattened or folded cartons, whether or not printed and whether in cartons), whether or not printed and whether in assembled or unassembled conditions." 321 Item 68 of the old Tariff was in the nature of residuary entry.
By notification No. 66/82 CE dated February 28, 1982, the Central Government, in exercise of the powers conferred by sub rule (1) of rule 8 of the Central Excise Rules, 1944, exempted articles of paper or paper board falling under sub item (4) of item 17 of the old Tariff from the whole of the duty of excise leviable thereon.
The said exemption was, however, not applicable to printed boxes and printed cartons (including flattened or folded printed boxes and flattened or folded printed cartons) whether in assembled or unassembled condition.
With effect from March 1, 1983, Item 17 was substituted and during the period March 1, 1983 to February 28, 1986, it read as under: c "Paper and Paper board, all sorts (including pasteboard, mill board, strawboard, cardboard and corrugated board), and articles thereof specified below, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power (1) Paper board and all other kinds of paper (including paper or paper boards which have been subjected to various treatments such as coating, impregnating, corrugation, creping and design printing), not elsewhere specified.
(2) Carbon and other copying papers (including duplicator stencils) and transfer papers, whether or not put up in boxes.
(3) Boxes, cartons, bags and 'Other packing containers (including flattened or folded boxes and flattened or folded cartons), whether or not printed and whether in assembled or unassembled conditions.
" In the new Tariff, the relevant entry under Heading 48.18 in Chapter 48 is as follows: G "48.18 OTHER ARTICLES OF PAPER PULP, PAPER.
PAPERBOARD, CELLULOSE WADDING OR WEES OF CELLULOSE FIBRES: Cartons, boxes, containers and cases (including flattened or folded boxes and flattened or folded cartons), whether in assembled or unassembled condition: 322 4818.11 Intended for packing of match sticks 4818.12 Printed cartons, boxes, containers and cases, made wholly out of paper or paper board of heading No. or sub heading No. 48.04, 4805.11, 4806.19, 4807.91, 4807.92, 48.08 or 4811.10, as the case may be 4818.13 Other printed cartons, boxes and cases 4818.19 Other" 4818.20 Toilet tissues, handkerchiefs and cleansing tissues of paper 4818.90 Other." On products falling under sub Heading 4818.19, the excise duty was nill whereas on products falling under sub Heading 4818.90, the excise duty was payable at the rate of 12%.
M/s. G. Claridge & Company Ltd. the appellant herein manufactures (i) egg filler flats, (ii) egg cartons, (iii) tube light packing trays, (iv) duck egg trays and (v) apple trays.
It filed a classification list for the above goods effective from April 1, 1981 classifying the products under Item 68 of the old Tariff and it was paying duty at the prevailing rate under Item 68.
After the introduction of the revised Item 17 with effect from February 28, 1982/March 1, 1982, the said appellant filed a revised classification list effective from March 1, 1982 for the aforesaid five products seeking classification under Item 17(4) and claiming full exemption from central excise duty under notification dated February 28, 1982.
This classification list was approved by the Assistant Collector of Central Excise, Pune Division on March 11, 1982, but on re examination Department felt that the said products did not merit classification under Item 17(4) but under Item 68 of the old Tariff and a show cause notice dated May 4, 1984 was issued.
After considering the reply of the appellant to the said show cause notice, the Assistant Collector of Central Excise, Pune Division passed an order dated January 28, 1985 whereby he held that 'egg trays ' manufactured by the appellant were correctly classifiable under Item 68 of the old Tariff and not under Item 17(4) and the appellant was required to pay central excise duty at the appropriate rate leviable on all types of egg trays manufactured and cleared from its unit during the period of six months prior to the notice dated May 4, 1984.
The Assistant Collector was of the view that the articles manufactured by the appellant were articles manufactured directly from the pulp and were, therefore, classifiable as 'articles of pulp ' under Item 68.
The said order of the Assistant Collector was reversed in appeal by the Collector of Central Excise 323 (Appeals) by his order dated April 30, 1985 on the view that the products manufactured by the appellant were made out of waste paper and they were classifiable under Item 17(4) as 'articles of paper and paper board '.
Feeling aggrieved by the said order of the Collector (Appeals), the Department filed appeals Nos.
E/1883/85 C and E/2031/85 C before the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as 'the Appellate Tribunal ').
After the introduction of the new Tariff with effect from March 1, 1986, the appellants filed a classification list classifying their products as 'containers ' falling under sub heading 4818.19 of the new Tariff and since no duty was payable under the said sub heading, the appellants claimed exemption from payment of excise duty on their products.
The said classification list was approved provisionally but subsequently the Assistant Collector, Central Excise issued a show cause notice dated October 16, 1986 proposing to classify the goods under sub heading 4818.90 chargeable to duty @ 12% ad valorem.
After considering the reply to the said show cause notice, the Asstt.
Collector, Central Excise, by his orders dated April 15, 1987 and July 1, 1987 held that the products manufactured by the appellant were not 'containers ' but were 'articles of pulp ' falling under sub heading 4818.90.
The said orders were set aside by the Collector of Central Excise (Appeals) by his orders dated March 22, t988 and June 6, 1988.
The Collector (Appeals) held that the products manufactured by the appellant were 'packing containers ' and classifiable under sub heading orders of the Collector (Appeals), 4818.19.
Feeling aggrieved by the Department filed appeals before the Appellate Tribunal which were registered as Appeals Nos.
E/1468/88 C and E/1986/88 C.
All the above four appeals were disposed by the Appellate Tribunal by a common order whereby the said appeals were allowed.
The Appellate Tribunal held that the products manufactured by the appellant cannot come within the sub classification below containers and were not classifiable under sub heading 4818.19 but were classifiable under sub head ing 4818.90 of the new Tariff and similarly they were not classifiable under item 17(4) or 17(3) of the old Tariff.
The Appellate Tribunal was also of the view that the products manufactured by the appellant are articles of paper because starting raw materials is waste paper.
The Appellate Tribunal has held that the duty demanded by the Assistant Collector for six months prior to the issue of show cause notice dated May 4, 1984, i.e., from November 4, 1983 is legally sustainable and with regard to recovery of the duty for the earlier period from March 1, 1982 by invoking the proviso to Section 11 A(l) of the , the Appellate Tribunal remanded the matter to the Collector (Appeals) for considering the said question.
324 The question which arises for consideration in these appeals is whether the egg trays and other similar products manufactured by the appellants are 'containers ' falling under Item 17(4) of 17(3) of the old Tariff and sub heading 4818.19 of the new Tariff.
The learned counsel for the appellant has urged that the products manufactured by it are 'containers ' and in support of this submission the learned counsel has invited our attention to the meaning of the term 'container ' as contained in the Dictionaries and the Indian Standard Glossary of Terms relating to paper or paper board, packaging materials, Glossary of Packaging Terms (USA) and Glossary of Packaging Terms (Australia).
The submission of the learned counsel is that a 'container ' is a receptacle which holds, restrains or encloses the item to be stored or transported and that the egg tray and other similar products manufactured by the appellant are 'containers ' because they are receptacles for holding, storing and transporting the things kept in them.
It has been urged that a 'tray ' is a shallow lidless container and merely because an egg tray is described as a tray does not mean that it is not a 'container '.
It is contended that egg trays are so designed as to protect the eggs from breakage and that egg trays provide the best mode for storage and transport of eggs.
The learned counsel has submitted that the Appellate Tribunal was in error in proceeding on the basis that egg tray and other similar products manufactured by the appellant cannot be regarded as 'containers ' because when a single egg tray is reversed or turned upside down or tilted sideways vertically at 90% angle, the contents would fall down.
The submission of the learned counsel is that it is not required that a container should be closed from all sides and that a container can also be open.
The expression 'container ' has been thus defined in the dictionaries and Glossaries of Packaging Terms: "Container: One that contains; a receptacle or flexible covering for shipment of goods.
(Abstract from Webster 's New Collegiate Dictionary, 1975) "Container: that which contains that in which goods are enclosed for transport.
(Abstract from Chambers ' 20th Century Dictionary) "Containers Any receptacle which holds, restrains or 325 encloses any article or commodity or articles or commodities to be stored or transported.
(Abstract from Indian Standard Glossary of Terms: 1.8. 4261 1967) "Container.
(1) In general, any receptacle or enclosure used in packaging and shipping.
(2) Relatively large, reusable enclosures to be filled with smaller packages and discrete objects, to consolidate shipments and allow transport on railway flat cars, flatbed trailers, aircraft, in ships ' holds or as deckloads, etc.
(See CARGO TRANSPORTER; CONTAINERIZATION).
(3) Any receptacle for holding a product." [Abstract from Glossary of Packaging Terms (USA)] "Container.
A large box for intermodal transport, containing many smaller boxes of different shapes and sizes as well as individual articles.
[Abstract from Glossary of Packaging Terms (Australia)] The above definitions would show that the expression 'container ' is used in three different senses: in a broad sense, it means a receptacle which contains; in a narrower sense, it means a receptacle in which articles are covered or enclosed and transported; and in a more limited sense, it means enclosure used in shipping or railway for transport of goods.
If used in a broad sense, 'container ' would include a tray because it is a receptacle which contains articles and, therefore, an egg tray would be a 'container '.
But an egg tray would not be a 'container ' in a narrower sense because articles placed in it are not covered or enclosed and they cannot be transported as such.
It is,therefore, necessary to ascertain whether the expression 'container ' in Item 17 of the old Tariff and Heading 48.18 of the new Tariff has been used in the broad sense to include all receptacles or in a narrower sense to mean those receptacles in which the articles are covered or enclosed and transported.
For this purpose, the context in which the word 'container ' has been used in these entries has to be examined.
In Item 17 of the old Tariff, the word 'containers ' is preceded by the words 'boxes, cartons, bags and other packing ' and in Heading 48.18 of the new Tariff, the word 'containers ' is preceded by the words cartons, boxes ' and is followed by the words 'and cases '.
It is a well accepted canon of statutory construction that when two or more words which are susceptible of analogous meaning are coupled together they 326 are understood to be used in their cognate sense.
It is based on the principle that words take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general.
[See: Dr. Davendra M Surti vs State of Gujarat, ; at p. 240].
Considering the expression 'containers ' in the context in which it is used in the relevant tariff items, we are of the opinion that the said expression has to be construed to mean 'packing containers ' which are analogous to boxes and cartons, that is, an enclosed receptacle which can be used for storage and transportation of articles.
Egg trays being receptacles which are not covered or enclosed cannot be used for transportation of articles and, therefore, they cannot be regarded as 'containers ' under the abovementioned entries in the Excise Tariff.
According to the New Encyclopaedia Britannica, the practice followed in the various countries for the packaging of eggs for transport is as follows: "Packaging.
For retail use in the United States, eggs are repackaged in dozen and half dozen paperboard cartons.
In some other countries they are packed with straw or excelsior in long wooden boxes.
In many parts of the world, they are marketed in baskets or boxes and the individual eggs are sold by weight.
Several European countries stamp each egg with a date and number to meet the import restrictions of other nations." [p. 444, Vol. 6, 1974 edition] The Glossary of Packaging Terms (USA) also shows that moulded pulp egg trays are put in a standard case which indicates that the egg trays containing the eggs are put in a case for the purpose of transport.
In other words, the case in which the egg trays are put are `containers ' and not the 'egg tray ' itself.
For the reasons aforesaid, we are of the opinion that the Appellate Tribunal was right in taking the view that the egg trays and other similar products manufactured by the appellant cannot be regarded as `containers ' under the relevant items of the Excise Tariff.
The appeals, therefore, fail and are accordingly dismissed.
There will be no orders as to costs.
R. P. Appeals dismissed.

dataset_name: IN-Abs

summary:
The appellant was a manufacturer of egg trays and other similar items.
Before the introduction of (new Tariff) effective from 1.3.1986, Central Excise and Salt Act, 1944 (old Tariff) was applicable to the relevant products.
The appellant, classifying its product under Item 68 of the old Tariff, was paying duty accordingly.
By Notification dated February 28, 1982, issued under Rule 8(1) of the Central Excise Rules, 1944, the Central Government exempted articles of paper and paper board falling under Item 17(4) of the old Tariff.
The appellant filed a revised classification list for its products seeking classification under item 17(4).
The Asstt.
Collector, Central Excise held the products classifiable as 'articles of pulp ' under Item 68 of the old Tariff, and the appellant was required to pay excise duty accordingly.
On appeal, the Collector (Appeals) reversed the order of the Asstt.
Collector, and held that the products were made out of waste paper and were classifiable under Item 17(4) as 'articles of paper and paper board '.
The Revenue filed appeals before the Customs, Excise and Gold (Control) Appellate Tribunal.
On introduction of the new Tariff, the appellant classified the relevant products as 'containers ' under sub heading 4818.19 and claimed exemption.
The Asstt.
Collector held that the products were not 'containers ' but were 'articles of pulp ' falling under sub heading 4819.90 and accordingly chargeable to duty.
Setting aside the order in 318 appeal, the Collector held that the products were 'packing containers ' and classifiable under sub heading 4818.19.
The Revenue appealed before the Appellate Tribunal, which allowed all the appeals by a common judgment, but remanded the matter to the Collector (Appeals) with regard to the recovery for a certain period.
In the assessee 's appeal to this Court it was contended that the `egg trays ' manufactured by the appellant were 'containers ' under Item 17 and Heading 48.18 of the respective Tariffs; that merely because the egg tray was described as a tray does not mean that it was not a container; and that it was not required that a container should be closed from all sides.
On the question whether: egg trays and other similar products manufactured by the appellant are 'containers ' falling under Item No. 17(4) or 17(3) of the First Schedule to the and Heading 48.18 of the .
Dismissing the appeals, this Court, HELD: 1. 1 'Egg trays ' being receptacles which are not covered or enclosed cannot be used for transportation of articles and cannot be regarded as 'containers ' under Item 17 of the First Schedule to Central Excise and Salt Act, 1944 and Heading 48.18 of the Schedule to .
[326B] 1.2 Moulded pulp egg trays containing the eggs are put in a standard case for the purpose of transport.
The case in which the egg trays are put, are 'containers ' and not the 'egg trays ' itself.
[326E F] 1.3 The expression 'container ' is used in three different senses: in a broad sense, it means a receptacle which contains; in a narrower sense, it means a receptacle in which articles are covered or enclosed and transported; and in a more limited sense, it means enclosures used in shipping or railway for transport of goods.
If used in a broad sense, `container ' would include a tray because it is a receptacle which contains articles and, therefore, an egg tray would be a 'container '.
But an egg tray would not be a 'container ' in a narrower sense because articles placed in it are not covered or enclosed and they cannot be transported as such.
[325D F] 319 1.4 In item 17 of the First Schedule to the word 'containers ' is preceded by the words 'boxes, cartons, bags and other packing ' and in Heading 48.18 of the Schedule to , the word 'containers ' is preceded by the words 'cartons, boxes ' and is followed by the words 'and cases '.
Considering the expression 'containers ' in the context in which it is used in the relevant tariff items, the said expression has to be construed to mean 'packing containers ' which are analogous to boxes and cartons, that is, an enclosed receptacle which can be used for storage and transportation of articles.
[325G, 326A B] Webster 's New Collegiate Dictionary, 1975 Chambers ' 20th Century Dictionary Indian Standard Glossary of Terms Glossary of Packaging Terms (USA) Glossary of Packaging Terms (Australia) New Encyclopedia Britannica, referred to. 2.
It is a well accepted canon of statutory construction that when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense.
It is based on the principle that words take as it were their colour from each other, that is, more general is restricted to a sense analogous to a less general.
[325G H, 326A) Dr. Devendra M. Surti vs State of Gujarat, ; , relied on.


judgement:
n Nos.11757 & 11758 of 1984.
(Under Article 32 of the Constitution of India).
WITH Civil Appeal No. 1124 of 1985.
P.P. Rao, K. Jagan Mohan Rao and Raju Ramachandran for the Petitioners.
V.C. Mahajan, Ms. A Subhashini and R.B. Mishra for the Respondent.
The Judgment of the Court was delivered by KASLIWAL, J.
The above writ petitions and appeal are disposed of by one single order as identical question of law are involved in these cases.
In order to appreciate the controversy we would narrate the facts of the writ petitions.
Shri Des Raj Bhatnagar, Petitioner DES No. 1 and Shri Ved Pal Seth, Petitioner No.2 were employees of the 359 Central Government.
The petitioner No. 1 after serving in various capacities in the Department of food of the Central Government from 24.10.1941 to 31.8.1971 (29 years and 10 months) was permanently absorbed in Food Corporation of India as Assistant on 1st September, 1971 and retired from the Government service.
The petitioner No. 2 after serving the Government in various capacities for the period from 5.11.1947 to 8.2.1972 (20 years and 3 months) was permanently absorbed on 9.2.1972 in Food Corporation of India as Sr. Asstt.
Manager and retired from the Government service.
On absorption in the Food Corporation of India, the petitioners were required to exercise either of the following two options: (a) Receiving the pro rata monthly pension and death cum retirement gratuity as admissible under the rules; and (b) Receiving the pro rata gratuity and a lumpsum amount in lieu of pension worked out with reference to commutation table obtaining on the date from which the pension was to be admissible and under the option order.
The office of the Pay and Accounts Officer, Ministry of Food and Agriculture determined the original pension payable to the petitioners per mensem.
The petitioners were sanctioned original pensions in accordance with the provisions of the Central Civil Service (Pension) Rules, 1972.
In case of petitioner No. 1 the original pension was determined at Rs. 240 per mensem payable from 1st September, 1971.In case of petitioner No. 2 the original pension admissible was determined at Rs.287 per mensem payable from 9.2.1972.
The petitioner No. I received his pension @ Rs.240 per mensem for the period from 1.9.1971 to 29.10.1972.
Petitioner No. 2 received his pension @ Rs.287 per mensem for the period from 9.2.1972 to 16.8.1972.
Under the above Rules maximum of one third of the amount of admissible pension could be commuted.
However, in the case of Government officers including Industrial Management Pool Officers who were opting for permanent absorption in Public Sector Undertakings, an option was given to commute the full amount of their original pension.
The petitioner No. I and petitioner No. 2 commuted their original pensions for a lumpsum of Rs.35,568 and Rs.43,601 on 30.10.1972 and 17.8.1972 respectively.
360 The Third Central Pay Commission was required to make its recommendations in the matter of providing relief to Government pensioners.
The Pay Commission, in order to secure Government pensioners against the continuing erosion in the value of the rupees and to recommend appropriate measures for protecting the pension of Government servants from such erosion on account of the possible increase in the case of living in future and after having considered the matter, recommended that irrespective of the amount of pension drawn by them, pensioners should be given relief at the rate of 5% of their pension subject to a minimum of Rs.5 per mensem and a maximum of Rs.25 per mensem.
The relief at those rates were recommended to be given to the Government pensioners as and when there was a 16 point rise in the 12 months average of the All India Working Class Consumer Price Index ( 1960 100).
The relief for the first time, at these rates was to be paid when the 12th monthly average of this index reached 216.
The said recommendation made by the Pay Commission was duly accepted by the Central Government.
The Ministry of Finance Office Memorandum No. F. 22(8) EV(A)/75 dated 13.2.1976 inter alia, provided that where an officer on his retirement commutes a portion of his pension he is eligible for relief and ad hoc reliefs in pension on the full amount of original pension as admissible to him.
Under the said O.M. the term 'Pension ' includes for the purposes of ad hoc relief the commuted portion of pension, if any.
The case of the petitioners is that according to these Rules, an officer who has commuted any part of this pension and an officer who has not opted for any commutation both receive the full quantum of relief and ad hoc relief on full amount of original pension.
It has thus been contended that for the purposes of grant of the full benefit of relief or ad hoc relief the Rules do not make any distinction between an officer who has sought commutation of his original pension and one who has not sought any such commutation.
The petitioner and other Government servants who opted for commutation of their original pension in accordance with the Rules are being arbitrarily and without just and reasonable cause are deprived of the relief and ad hoc relief on commutation in pursuance of the Office Memorandum dated 13.2.1976.
Though, an officer who commutes one third of his pension gets relief and ad hoc relief on the basis of original amount of his pension but whereas an officer commutes whole of his original pension is deprived of the entire amount of the relief or ad hoc relief.
The petitioners have thus contended that aforesaid Office Memorandum dated 13.2.1976 is vitiated by an inherent discrimination and is violative of Articles 14 and 16 of the Constitution.
361 The petitioners have further submitted that they are entitled to the aforesaid reliefs granted to all other Government pensioners, and the amount of relief to which pensioners are entitled and has been denied to them under the impugned Office Memorandum dated 13.2.
1976 works out to Rs. 13,592 and Rs. 15,040 in case of petitioner No. 1 and petitioner No. 2 respectively upto 29.2.1984.
The Ministry of Finance in their Office Memorandum No. 2(8)/EV/82 dated 10.10.1983 has sanctioned the grant of relief and ad hoc reliefs to Government servants who retired prior to 10th September, 1979 @ 92.5% of their original pension subject to minimum of Rs.93 and maximum of Rs.463 with effect from 1st July, 1983.
This has been done by taking in view the decline in the purchasing power of the rupee and the original sanction being insufficient and meagre to sustain the pensioners.
Apart from the above the petitioners have submitted that they are also entitled to the benefit of Liberalised Pension Formula of 1979,which was introduced vide the Finance Ministry 's Office Memorandum No. F. 19(37)/EV/79 dated 25.5 1979, in respect of the approved pensionable service rendered by them in the Central Government as admissible to other pensioners who retired from Government service between 17.4.1950 to 31.3.1979.
The said Memorandum was made applicable only to those Government servants who retired from service on or after 31.3.1979.
However, this Court in D.S. Nakara & Others vs Union of India, ; held that all Central Government pensioners governed by the Central Civil Service (Pension) Rules, 1972 were entitled to pension w.e.f.
1.4.1979 as computed under the Liberalised Pension Formula irrespective of the date of their retirement.
Placing reliance on the above decision it has been claimed that there should be no discrimination between the applicability of the Liberalised Pension Formula to pre 31.3.1979 pensioners and there is no just and reasonable cause in denying such benefit to the petitioners under the impugned Office Memorandum No. F. 1(3)/EV/83 dated 22.10.1983.
Clause 5 of the Office Memorandum dated 22.10.1983 reads as under: "Central Government employees, who got themselves absorbed under Central Public sector undertaking/autonomous bodies prior to 1.4.1979 and have received/or opted to receive commuted raise for 1/3rd of pension as well as terminal benefit equal to the commuted value of the 362 balance amount of pension left after commuting 1/3rd, of pension, are not entitled to any benefit under these orders as they were not Central Government pensioners as on 1.4.79.
In cases where only a portion of pension has been commuted the pension will have to be enhanced in accordance with these orders with effect from 1.4.1979".
The above clause makes it clear that such Central Government employees, who got themselves absorbed under Central Public Sector Undertakings prior to 1.4.1979 and opted to receive commuted raise for 1/3rd of pension as well as terminal benefit equal to the commuted value of the balance amount of pension left after commuting 1/3rd of pension were not entitled to any benefit as they were not Central Government pensioners as on 1.4.1979.
An identical writ petition No. 1068/1987 under article 32 of the constitution was filed on behalf of the Welfare Association of absorbed Central Government Employees in Public Enterprises and this Court dismissed the said writ petition on April 12, 1990.
In the said writ petition benefit of Judgment of this Court in "Common Cause" a Registered Society & Ors.
vs Union of India, [ ; was claimed but the same was negatived by making a distinction that the Writ Petition "Common Cause" was on behalf of the Government servants who had commuted their pension partially and this Court for the reasons indicated in the judgment came to hold that on the expiry of 15 years from the date of commutation the entire pension revived.
The petitioners were persons who had, at the time of retirement from Government service and entering into public sector had taken the advantage of commuting the entire pension.
They certainly belong to a class different from those whose case was before this Court at the instance of the common cause in Writ Petition Nos.
1955 61 of 1983.
It was further held in the above case that the commutation does bring certain advantages to the committees and the class of Government officers whom the petitioner seeks to represent have derived such benefits. ' We find no reason to take a different view.
The commutation brings about certain advantages.
The commuting pensioner gets a lumpsum amount which ordinarily he would have received in the course of his spread over period subject to his continuing to live.
Thus, two advantages are certainly forthcoming out of commutation (1) availability of a lumpsum amount, and (2) the risk factor.
In the present case the petitioners had not only got 1/3rd of their pension commuted but exercised the option of getting the entire pension commuted and in lieu thereof got a lumpsum.
Such persons cannot fall in 363 the category of Central Government pensioners for the purposes of getting benefit of Liberalised Pension Rules which can be made applicable only to Central Government Pensioners.
It is no doubt correct that the family pension has been allowed in case of the persons like the petitioners but that does not make them entitled to get any benefit given to the pensioners on account of the liberalised Pension Rules taking note of the fallen value of the rupee.
It was contended by Mr. Rao on behalf of the petitioners that the petitioners are not claiming any pension but their contention is that the Liberalised Pension Rules which given benefit to those pensioners who had got their 1/3rd pension commuted should be granted to the petitioners by awarding lumpsum after increasing their pension and calculating such amount in proportion to the increased pension.
We find no force in this contention as the petitioners fall in a different class altogether and are not entitled to claim any benefit granted to Central Government pensioners.
After getting a lumpsum in lieu of entire pension, they do not fall in the class of Central Government pensioners and are not entitled to any benefit granted to Central Government pensioners.
The case of such Central Government pensioners who got their 1/3rd pension commuted also fall in a different class in as much as they get 2/3rd pension, and after 15 years of such commutation or having attained the age of 70 years whichever was later they become entitled to full pension.
Petitioners on the other hand were not entitled to any pension after having received the lumpsum amount in lieu of pension being commuted and having opted to receive such amount in lumpsum at the time of entering the service in Public, Sector Undertaking.
In the above mentioned civil appeal the legal question is identical except that the appellant in this case became a pensioner of the Central Government w.e.f.
1.4.1977 and the pension determined as payable to him was Rs.609 per month and the same was got commuted by the appellant for a lumpsum amount on and from 7.8.1978.
The appellant had exercised the option for absorption in Steel Authority of India Limited (SAIL) a Public Sector Enterprise.
The Writ Petition filed by him before the High Court of Delhi was dismissed on 25.8.1982.
The appellant then filed a S.L.P. against the said order.
This Court had granted special leave on 25.3.1985 and had given a direction to hear the appeal alongwith the writ petition Nos. 11757 & 11758 of 1984.
In the result we find no force in all these cases and the same are dismissed with no order as to costs.
R.P. Petitions and Appeal dismissed.

summary:
The petitioners, who were Central Government employees, on their absorption in a Central Public Sector Undertaking, retired from Central Government service on different dates prior to 31.3.1979, and commuted their original pension for a lump sum as permissible under the Civil Service (Pension) Rules, 1972.
The Central Government issued O.M. dated 13.2.1976, enabling an officer who commuted a portion of his pension to be eligible for relief and ad hoc reliefs on the full amount of his original pension, but persons who got themselves absorbed in Public Sector Undertakings were not eligible to the said benefits.
Taking note,of the erosion in the value of the rupee, the Government, by O.M. dated 25.5.1979, introduced the Liberalised Pension Formula, benefit of which, by this Court 's decision in D.S. Nakara 's case was extended to all Central Government pensioners irrespective of the dates of their retirement.
In order to implement the said decision, the Government issued O.M. dated 22.10.1983, but the benefit was not given to those persons who got them selves absorbed in Central Public Sector Undertakings and received/opted to receive commuted raise of 1/3rd of pension as well as 357 terminal benefits equal to the commuted value of the balance amount of pension left after such commutation.
The petitioners challenged the validity of the aforesaid O.Ms.
dated 13.2.1976 and 22.10.1983 and contended that for the purposes of grant of the full benefit of relief or ad hoc relief, the Rules do not make any distinction between an officer who has sought commutation of a portion of his original pension and one who has not sought any such commutation; and as the petitioners who opted for commutation of their original pension in accordance with the Rules were being arbitrarily and without just and reasonable cause deprived of the relief, the aforesaid Office Memoranda were vitiated by an inherent discrimination and were violative of Articles 14 and 16 of the Constitution.
The facts of the appeal were identical to those of the petitions except that the appellant came before this Court in appeal against the order of the High Court which dismissed his writ petition.
On the question: whether the petitioners/appellants fell in the category of Central Government pensioners for the purpose of entitlement to the benefit of the Liberalised Pension Formula or did they fall in a different class altogether and were not entitled to get any such benefit, Dismissing the writ petitions and the appeal, this Court, HELD: 1. Clause 5 of O.M. dated 22.10 1983 is clear that such Central Government employees who got themselves absorbed under Central Public Sector Undertakings prior to 1.4.1979 and opted to receive commuted raise for 1/3rd of pension as well as terminal benefit equal to the commuted value of the balance amount of pension were not entitled to any benefit as they were not Central Government Pensioners as on 1.4 1979.
[362B C] 2.Commutation brings about certain advantages.
The person who commutes his pension gets a lump sum which ordinarily he would have received in the course of his spread over period subject to his continuing to live The two advantages of the commutation are the availability of a lump sum and the risk factor.
The allowance of Family Pension to such person does not however make them entitled to get any benefit that is given to the pensioners on account of Liberalised Pension Rules taking note of the fallen value of the rupee.
[362F G, 363A B] 3.1 In the instant case, the petitioners had not only got 1/3rd of 358 their pension commuted but exercised the option of getting the entire pension commuted and in lieu thereof got a lump sum.
Such persons cannot fall in the category of Central Government pensioners for the purposes of getting benefit of the Liberalised Pension Rules which can be made applicable only to Central Government pensioners.
[362G H, 363A] 3.2 The petitioners fell in a different class altogether and were not entitled to claim any benefit granted to the Central Government Pensioners.
After getting a lump sum in lieu of entire pension, they did not fall in the class of Central Government pensioners and were not entitled to any benefit granted to such pensioners.
The case of the Central Government pensioners who got their 1/3rd pension commuted also fail in a different class inasmuch as they got 2/3rd pension, and after 15 years of such commutation or having attained the age of 70 years whichever was later, they became entitled to full pension.
[363C D] "Common Cause" a Registered Society & Ors.
vs Union of India, ; , distinguished.
D.S. Nakara & Ors.
vs Union of India, ; , referred to.


judgement:
Appeal Nos. 936 (NT), 937, 2339 & 2340 of 1988.
From the Judgments and Orders dated 12.8.1987, 3.7.1986, and 22.8.1988 of the Sales Tax Tribunal, Punjab in Misc.
Reference No. 60 of 1986 87, First Appeal No. 379 of 1986 and in Appeal Nos. 46 and 47 of 1987 88.
B V.M.
Tarkunde, R.C. Misra and Ms. Meera Aggarwal for the Appellant.
H.S. Munjral and C.M. Nayar for the Respondent.
c The Judgment of the Court was delivered by AHMADI, J.
the assessee appellant M/s. Mukerian Papers Ltd., is a company engaged in the manufacture of paper at Mukerian in the State of Punjab and is a registered dealer under the Punjab General Sales Tax Act, 1948 ( 'The Act ' hereinafter).
The assessee despatched some part of the manufactured goods outside the State of Punjab for sale on consignment basis.
However, the assessee had not paid the taxes on the taxable raw material consumed in the manufacture of such goods.
A show cause notice was, therefore, issued by the Assessing Authority under section 10(6) of the Act for the assessee 's failure to pay the taxes along with the return as required by section 4B of the Act.
Interest on the tax amount which the assessee had failed to pay was also claimed under Section 11D of the Act.
The assessee disputed its liability to pay penalty and interest on the amount of tax withheld on the plea that there was no wilful or intentional default on the part of the assessee to pay the taxes due under section 4B of the Act as the assesee was under a bona fide belief that no tax was to be paid on the raw material purchased for the manufacture of paper which was ultimately sent outside the State on consignment basis.
This impression,based on the language of the statute, stood confirmed by the subsequent decisions of the Punjab & Haryana High Court in the case of Goodyear India Ltd., 53 STC 163 and Bata India Ltd., 54 STC 226 till those decisions were overruled by the Full Bench decision in Des Raj Pushpak Kumar 's case 58 STC 393.
The assessee further contended that it had acted on legal advice that it was not liable to pay any purchase tax and, therefore, in the absence of a clear intention to avoid the payment of tax, there could be no question of imposition of penalty and demand for interest.
On the other hand it was contended on behalf of the revenue that the two decisions on which the assessee 350 placed reliance were subsequent to the date on which the liability to pay the tax had arisen and hence the assessee could not take shelter under the said two decisions.
The submissions made on behalf of the assessee did not find favour with the Revenue.
The assessee thereupon sought a reference under section 22(1) of the Act but the Presiding Officer of the Tribunal by its order dated 12th August, 1987 rejected the application as he saw no point of law to make a reference to the High Court.
Civil Appeals Nos. 936 and 937 of 1988 arise out of the said order of ]2th August, 1987.
In the other two appals Nos. 2239 and 2240 of 1988 the appellants have come to this Court directly from the Tribunal 's order in appeal without going through the formality of seeking a reference under section 22(1) of the Act in view of the rejection of a similar request by the impugned order of 12th August, 1987.
This Court granted special leave to appeal without insisting on the appellant assessee approaching the High Court in view of the Full Bench decision of that Court in Des Raj 's case.
As the facts are identical and common questions of law arise we have thought it proper to dispose of all the four appeals by this common judgment.
Counsel for the assessee appellant contended that the main question of law involved in this case is concluded by the decision of this Court in M/s. Goodyear India Ltd. vs State of Haryana; , which was an appeal arising from the High Court 's decision in the case of the same assessee reported in (1983) 53 STC 163 to which reference is made hereinabove.
He further pointed out that while deciding the true scope of section 9 of the Haryana General Sales Tax Act, 1974, which, says counsel, is in pari materia with section 4B of our Act, this Court affirmed the High Court 's view expressed in Goodyear India Ltd., 53 STC 163 and Bata India Ltd., 54 STC 226 and disapproved the Full Bench view in Des Raj 's case 58 STC 393.
Counsel for the Revenue, however, placed strong reliance on this Court 's decision in State of Tamil Nadu vs M.K. Kandaswami etc.
, [19761 1 SCR 38 and submitted that the assessee 's case falls within the ratio of the said decision.
But counsel for the assessee pointed out that this Court had considered the ratio of Kandaswami 's case in the subsequent decision and had pointed out that in that case this Court was not concerned with the actual argument with which it was concerned in the subsequent case and, therefore, the decision in the former case is not an authority for the question of law involved in the subsequent case.
In order to appreciate the rival submissions it would, we think, be appropriate to examine the language of section 4B of the Act, which reads as under: "4B. Levy of Purchase tax on certain goods 351 Where a dealer who is liable to pay tax under this Act purchases any goods other than those specified in Schedule B from any source and (i) uses them within the State in the manufacture.
of goods specified in Schedule B, or B (ii) uses them within the State in the manufacture,of any goods, other than those specified in Schedule B,and sends the goods so manufactured outside the State in any manner other than by way of sale in the course of inter State trade or commerce or in the course of export out of the territory of India; or (iii) uses such goods for a purpose other than that of resale within the State or sale in the course of inter State trade or commerce or in the course of export out of the territory of India, or D (iv) sends them outside the State other than by way of sale in the course of inter State trade or commerce or in the course of export out of the territory of India, and no tax is payable on the purchase of such goods under any other provision of this Act, there shall be levied a tax on the purchase of such goods at such rate not exceeding the rate specified under sub section (1) of section 5 as the State Government may direct.
We may first read the plain language of the section bearing in mind the contextual setting and the objective of the law.
The section seeks to provide for the levy of purchase tax on certain goods specified in to levy a tax on the purchase of goods, other than those Schedule B, which are used in the manufacture of goods specified in Schedule B or in the manufacture of goods, other than those specified in Schedule B and sent outside the State in any manner other than by way of sale in the course of inter State trade or commerce or in the course of export out of Indian territory provided of course no tax is payable on the purchase of such goods under any provision of the Act.
Where a dealer purchases raw material other than the goods referred to in Schedule B and uses the said raw material within the State in the manufacture of goods specified in Schedule B, he becomes liable to purchase tax at the rate specified by the State Government not exceed 352 ing the maximum fixed under section 5(1) provided no tax is paid on such goods under any other provision of the Act.
However, when the raw material is used within the State in the manufacture of goods under than the one specified in Schedule B and the manufacturer 'sends ' the goods so manufactured outside the State in any manner (other than by way of sale in the course of inter State trade or commerce or in the course of export out of India) he becomes liable to pay purchase tax at the rate specified.
To attract this provision the revenue must show that (i) the manufacturer is a dealer liable to pay tax under the Act (ii) he has purchased goods other than those specified in Schedule B from any source (iii) he has used the said goods within the State in the manufacture of any goods other than those specified in Schedule B and (iv) he has sent the goods so manufactured outside the State in any manner other than the one excepted.
Before this provision can be invoked the above requirements must be strictly proved.
The first requirement identifies the tax payer, the second and the third requirements identify the goods liable to tax in the event the fourth requirement of the goods so manufactured being sent outside the State takes place.
Thus the liability to pay purchase tax does not accrue on the purchase of the raw material within the State or its use in the manufacture of goods other than those specified in Schedule B but falls on the dealer when the goods so manufactured are sent outside the State.
To avoid a duplication of the levy the charging clause provides that the purchase tax will be leviable under Section 4B provided it is not leviable on the said goods under any other provision of the Act.
Although the purchase tax is levied on the raw material purchased by the manufacturer, the actual levy is postponed till after the said raw material is consumed in the manufacture of another commercially distinct commodity having its own separate identity and character and is actually sent outside the State.
The relevant date is the date on which the goods are sent outside the State.
The taxable event takes place when the taxable goods are sent outside the State and not before that date notwithstanding the fact that the raw material was purchased and converted into a new commodity long before that date.
In the present case since it is not disputed that the demand of purchase tax is based on the fact that the goods manufactured within the State from raw material purchased earlier had been sent outside the State of sale on consignment basis, we are concerned only with clause (ii) of Section 4B whereunder the tax liability accrues on the date the goods are sent outside the State.
Under Section 4B of the Act the tax becomes exigible not on the purchase of the raw material or on the use thereof in the manufacture 353 of a new and distinct commodity but only after the goods so manufactured are despatched to a place outside the State.
Once the goods are sent outside the State the purchaser is made liable to pay the tax at the rate prescribed on the purchase of such goods provided no tax is payable on the purchase thereof under any other provision of the Act.
It is, therefore, obvious that the tax though described as purchase tax is in effect a tax on consignment since it becomes effective on the happening of an event which has nothing to do with the actual purchase.
Even if the raw material is used in the manufacture of any taxable goods, the purchaser does not become liable to pay tax on the raw material until the manufactured item is sent out of the State.
And between the manufacture of the goods out of the purchased raw material and their actual despatch outside the State there may be a long time gap.
There is, therefore.
no room for doubt that the liability of tax falls only after despatch of the manufactured goods outside the State and that event may have no relation to the actual purchase or manufacture.
That being so, the conclusion is inescapable that the tax though described as a purchase tax is actually a tax on the consignment of the manufactured goods.
Therefore, even though the language of section 4B of the Act is not identical with the relevant part of section 9( 1) of the Haryana Act, it is in substance similar in certain respects.particularly in respect of the point of time when the liability to pay tax arises.
Under that provision, as here, the liability to pay purchase tax on the raw material purchased in the State which was consumed in the manufacture of any other taxable goods arose only on the despatch Of the goods outside the State.
We are, therefore, of the opinion that the ratio of the said decision of this Court in Goodyear India Ltd. (supra) applies on all fours to the main question at issue in this case.
In the case of Goodyear India Ltd. (supra), this Court was concerned with the interpretation of section 9(1) and section 24(3) of the Haryana Act.
The facts revealed that the assessee company, which was engaged in the manufacture of automobile tyres and tubes at its factory at Ballabgarh in Haryana, had purchased raw materials from within and outside the State for the manufacture of the said products.
After manufacturing the same, the assessee company despatched some part of the manufactured products to its depots outside the State The revenue sought to recover purchase tax on the raw material purchased in the State and consumed in the manufacture of such goods under section 9(1) of the Haryana Act.
The action of the revenue was challenged in the High Court of Punjab & Haryana.
The High Court held that both on principle and on precedent, a mere despatch of goods to various depots of the assessee company outside the State did 354 not fall within the ambit of the phrase "disposes of the manufactured goods in any manner otherwise than by way of sale" employed in section 9(l)(a)(ii) of the Haryana Act.
The High Court also held that the decision of this Court in Kandaswami (supra) was not an authority for the proposition that a mere despatch of goods outside the State fell within the ambit of the said provision.
This Court while upholding the final order passed by the High Court came to the conclusion that as the tax levied was a tax on consignment of goods, the provisions imposing the said tax were beyond the competence of the State Legislature as the power to impose such tax vested in Parliament by virtue of clause (h) of Article 269(1) of the Constitution read with Entry 92B in Schedule 7.
List I, inserted by the 46th Amendment to the Constitution.
This Court also clarified that even before the amendments introduced by the 46th Amendment came into effect, Entry 54, in List 11 of the 7th Schedule read with Article 246(3) of the Constitution conferred power on the State Legislature to impose a tax on sale or purchase of goods and not on the mere consignment of goods, since consignment of goods simpliciter is neither a sale nor purchase or disposal of goods.
Holding that in substance the levy was sought on the consignment of goods, this Court held that it was not liable to tax since the State 's power to tax did not extend that far.
Counsel for the revenue placed reliance on an earlier decision of this Court reported in the case of Kandaswami (supra) which dealt with Section 7A of the Tamil Nadu Act which though not identical was similar to Section 9(1) of the Haryana Act.
The decision in Kandaswami though rendered in the context of an analogous provision was distinguished by this Court in Goodyear India Ltd. on the ground that it did not touch the core of the question at issue in the latter case.
This aspect of the matter is elaborately dealt with in paragraphs 31 to 34 at page 796 of the Report.
We need not dilate on this any more since the correctness of the judgment in Goodyear India Ltd, is not canvassed before us.
This Court, therefore, affirmed the High court 's view in Goodyear India Ltd., 53 STC 163 and Bata India Ltd, 54 STC 226 and disapproved of the Full Bench decision in the case of Des Raj 58 STC 393.
Once it is found that the revenue was not entitled to levy the tax which it purported to levy as purchase tax on the raw material, there can be no question of imposition of penalty or interest on the unpaid amount of tax.
Therefore, the action taken in exercise of power under section 10(6) and section 11D of the Act cannot be allowed to stand and must be set aside.
355 In the result these appeals succeed.
We allow all these appeals and set aside the decision of the Sales Tax Tribunal, Punjab, in each case.
Any recovery made under the impugned orders will be refunded within a period of three months from today.
Having regard to the facts and circumstances of the case, we make no order as to costs.
B G. N. Appeals allowed.

summary:
The appellant, a registered dealer under the Punjab General Sales Tax Act, 1948 despatched some part of the manufactured goods outside the state, without paying the tax on the taxable raw material consumed in the manufacture of such goods.
The assessing authority issued a show cause notice for the assessee 's failure to pay the said tax.
Interest was also demanded on the tax amount.
The assesses disputed its liability to pay penalty and interest on the amount of tax withheld on the plea that there was no wilful default on its part, as it was under a bona fide belief that no tax was to be paid on the raw material used in the manufactured goods sent outside State.
The assesses further stated that it had acted on legal advice that it was not liable to pay any Purchase Tax and, therefore, in the absence of a clear intention to avoid the payment of tax, there could be no question of imposition of penalty and demand for interest.
The assessee 's submissions did not find favour with the Revenue, as also the Tribunal, and the assesses sought a reference to the High Court under section 22(1) of the Act.
But the Tribunal rejected application for reference.
Thereafter the assesses preferred appeals to this Court, against the Tribunal 's rejection of reference as also the Tribunal 's order in appeal.
On behalf of the appellants, it was contended that the main question involved in this case is concluded by several decisions of this Court, and it was not liable to pay the tax, as demanded by the Revenue.
On behalf of the Revenue it was contended that the assesses was liable to pay the tax on the raw materials used in the manufactured goods sent outside the State.
Allowing the appeals, this Court, 348 HELD: 1.1 Under Section 4B of the Punjab General Sales Tax Act, 1948 the tax becomes exigible not on the purchase of the raw material or on the use thereof in the manufacture of a new and distinct commodity but only after the goods so manufactured are despatched to a place outside the State.
Once the goods are sent outside the State the purchaser is made liable to pay the tax at the rate prescribed on the purchase of such goods provided no tax is payable on the purchase thereof under any other provision of the Act.
It is obvious that the tax though described as purchase tax is in effect a tax on consignment since it becomes effective on the happening of an event which has nothing to do with the actual purchase.
Even if the raw material is used in the manufacture of any taxable goods, the purchaser does not become liable to pay tax on the raw material until the manufactured item is sent out of the State.
And between the manufacture of the goods out of the purchased raw material and their actual despatch outside the State there may be a long time gap.
The liability of tax only after despatch of the manufactured goods outside the State and that event may have no relation to the actual purchase or manufacture.
That being so, the tax though described as a purchase tax is actually a tax on the consigmment of the manufactured goods, the levy of which is beyond the competence of the State as the power to impose such tax is vested in Parliament by virtue of clause (h) of Article 269(1) of the Constitution read with Entry 92B in Schedule 7, List 1.
[352H; 353A E; 354B] 1.2.
Even though the language of section 4B of the Act is not identical to section 9(1) of the Haryana Sales Tax Act, it is in substance similar in certain respects, particularly in respect of the point of time when the liability to pay tax arises.
Under that provision also the liability to pay purchase tax on the raw material purchased in the State which was consumed in the manufacture of any other taxable goods arose only on the despatch of the goods outside the State.
[353D E] M/s. Goodyear India Ltd. vs State of Haryana, ; ; applied.
State of Tamil Nadu vs M. K. Kandaswami etc., [ 19761 1 SCR 38; referred to.
Since the Revenue was not entitled to levy the tax which it purported to levy as purchase tax on the raw material, there can be no question of imposition of penalty or interest on the unpaid amount of tax.
Therefore, the action taken in exercise of power under section 10(6) and section 11D of the Act cannot be allowed to stand.
[354G H] 349