judgement:
Appeal No. 87 of 1957.
Appeal from the judgment and decree dated December 1, 1955, of the Allahabad High Court in Special Appeal No. 18 of 1955, arising out of the judgment and order dated November 30, 1954, of the ' said Court in Civil Misc.
Writ No. 355 of 1952.
H. N. Sanyal, Additional Solicitor General of India, G. C. Mathur and C. P. Lal, for the appellants.
P. R. Das and B. P. Maheshwari, for the respondent.
B. P. Maheshwari, for Agra Bullion Exchange (Intervener).
K. Veeraswami and T. M. Sen, for the State of Madras (Intervener).
R. C. Prasad, for the State of Bihar (Intervener).
H. N. Sanyal, Additional Solicitor General of India, B. Gopalakrishnan and T. M. Sen, for the Union of India (Intervener).
September 23.
The Judgment of the Court was delivered by BHAGWATI J.
The facts leading up to this appeal lie within a narrow compass.
The respondent is a firm registered under the Indian Partnership Act dealing in Bullion, Gold and Silver ornaments and forward contracts in Silver Bullion at Banaras in the State of Uttar Pradesh.
For the assessment years 1948 49, 1949 50 and 1950 51 the Sales Tax Officer, Banaras, the appellant No. 1 herein assessed the respondent to U. P. Sales Tax on its forward transactions in Silver Bullion.
The respondent had deposited the sums of Rs. 150 12 0, Rs. 470 0 0 and Rs. 741 0 0 for the said 1352 three years which sums were appropriated to wards the payment of the sales tax liability of the firm under the respective assessment orders passed on May 31, 1949, October 30, 1950 and August 22, 1951.
The levy of sales tax on forward transactions was held to be ultra vires, by the High Court of Allahabad by its judgment delivered on February 27, 1952, in Messrs. Budh Prakash Jai Prakash vs Sales Tax Officer, Kanpur (1) and the respondent by its letter dated July 8, 1952, asked for a refund of the amounts of sales tax paid as aforesaid.
The appellant No. 2, the Commissioner of Sales Tax, U. P., Lucknow, however, by his letter dated July 19, 1952, refused to refund the same.
The respondent thereafter filed in the High Court of Allahabad the Civil Misc.
Writ Petition No. 355 of 1952 under article 226 of the Constitution and asked for a writ of certiorari for quashing the aforesaid three assessment orders and a writ of mandamus requiring the appellants to refund the aforesaid amounts aggregating to Rs. 1,365 12 0.
The judgment of the Allahabad High Court was confirmed by this Court on May 3, 1954, in Sales Tax Officer, Pilibhit vs Budh Prakash Jai Prakash () and the writ petition aforesaid was heard by Chaturvedi J.
The learned judge by an order dated November 30, 1954, quashed the said assessment orders in so far as they purported to assess the respondent in respect of forward contracts in silver and also issued a writ of mandamus directing the appellants to refund the amounts paid by the respondent.
The appellants filed a Special Appeal No. 18 of 1955 in the High Court of Allahabad against that order of the learned Judge.
A Division Bench of the said High Court heard the said appeal on December 1, 1955.
It was argued by the Advocate General on, behalf of the appellants that the amounts in dispute were paid by the respondent under a mistake of law and were therefore irrecoverable.
The Advocate General also stated categorically that in that appeal he did not contend that the respondent ought to have (1) (1952) A.L.J 332.
(2) [I955] 1 S.C.R. 243.
1353 proceeded for the recovery of the amount claimed otherwise than by way of a petition Under article 226 of the Constitution.
The High Court came to the conclusion that section 72 of the applied to the present case and the State Government must refund the moneys unlawfully received by it from the respondent on account of Sales Tax.
It accordingly dismissed the appeal with costs.
The appellants then applied for a certificate under article 133(1)(b) of the Constitution which certificate was granted by the High Court on July 30, 1956, on the Advocate General 's giving to the Court an undertaking that the State will, in any event, pay the costs, charges and expenses incurred by or on behalf of the respondent as taxed by this Court.
This appeal has accordingly come up for hearing and final disposal before us at the instance of the Sales Tax Officer, Banaras, appellant No. 1, the Commissioner, Sales Tax, U.P., Lucknow, appellant No. 2 and the State of U.P., appellant No. 3.
The question that arises for our determination in this appeal is whether section 72 of the applies to the facts of the present case.
The learned Additional Solicitor General appearing for the appellants tried to urge before us that the procedure laid down in the U.P. Sales Tax Act by way of appeal and/or revision against the assessment orders in question ought to have been followed by the respondent and that not having been done the respondent was debarred from proceeding in the civil courts for obtaining a refund of the monies paid as aforesaid.
He also tried to urge that in any event a writ petition could not lie for recovering the monies thus paid by the respondent.
Both those contentions were, however, not available to him by reason of the categorical statement made by the Advocate General before the High Court.
The whole matter had proceeded on the basis that the respondent was entitled to recover the amount claimed in the writ petition which was filed.
No such point had been taken either in the grounds of appeal or in the statement of case filed before us in this Court and we did not feel justified in allowing the 1354 learned Additional Solicitor General to take this point at this stage.
Section 72 of the is in the following terms: " A person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return it.
" As will be observed the section in terms does not make any distinction between a mistake of law or a mistake of fact.
The term " mistake " has been used without any qualification or limitation whatever and comprises within its scope a mistake of law as well as a mistake of fact.
It was, however, attempted to be argued on the analogy of the position in law obtaining in England, America and Australia that money paid under a mistake of law could not be recovered and that that was also the intendment of section 72 of the .
The position in English law is thus summarised in Kerr on " Fraud and Mistake " 7th Edn., at p. 140: " As a general rule it is well established in equity as well as at law, that money paid under a mistake of law, with full knowledge of the facts, is not recoverable, and that even a promise to pay, upon a supposed liability, and in ignorance of the law, will bind the party.
" The ratio of the rule was thus stated by James L. J. in Rogers vs Ingham(1) : " If that proposition were trite in respect of this case it must be true in respect to every case in the High Court of Justice where money has been paid under a mistake as to legal rights, it would open a fearful amount of litigation and evil in the cases of distribution of estates, and it would be difficult to say what limit could be placed to this kind of claim, if it could be made after an executor or trustee had distributed the whole estate among the persons supposed to be entitled, every one of them having knowledge of all the facts, and having given a release.
The thing has never been done, and it is not a thing which, in my opinion, is to be encouraged.
Where people have a (1) ,356.
1355 knowledge of all the facts and take advice, and whether they get proper advice or not, the money is divided and the business is settled, it is not for the good of mankind that it should be reopened. " (See also National Pari Mutual Association Ltd. vs The King (1) and Pollock on Contract, 13th Edn., at pp.
367 & 374).
The American doctrine is also to the same effect as appears from the following passage in Willoughby on the Constitution of the United States, Vol. 1, p. 12: " The general doctrine that no legal rights or obligation can accrue under an unconstitutional law is applied in civil as well as criminal cases.
However, in the case of taxes levied and collected under statutes later held to be unconstitutional, the tax payer cannot recover unless he protested the payment at the time made.
This, however, is a special doctrine applicable only in the case of taxes paid to the State.
Thus, in transactions between private individuals, moneys paid under or in pursuance of a statute later held to be unconstitutional, may be recovered, or release from other undertakings entered into obtained.
" The High Court of Australia also expressed a similar opinion in Werrin vs The Commonwealth (2) where Latham C. J. and MacTiernan J. held that money paid voluntarily under a mistake of law was irrecoverable.
Latham C. J. in the course of his judgment at p. 157 relied upon the general rule, as stated in Leake on Contracts, 6th Edn.
(1911), p. 63 " that money paid voluntarily, that is to say, without compulsion or extortion or undue influence and with a knowledge of.
all the facts, cannot be recovered although paid without any consideration.
" It is no doubt true that in England, America and Australia the position in law is that monies paid voluntarily, that is to say, without compulsion or extortion or undue influence and with a knowledge of all facts, cannot here covered although paid without any consideration.
Is the position the same in India ? (1) (2) 172 1356 It is necessary to observe at the outset that what we have got to consider are the plain terms of section 72 of the as enacted by the Legislature.
If the terms are plain and unambiguous we cannot have resort to the position in law as it obtained in England or in other countries when the statute was enacted by the Legislature.
Such recourse would be permissible only if there was any latent or patent ambiguity and the courts were required to find out what was the true intendment of the Legislature.
Where, however, the terms of the statute do not admit of any such ambiguity, it is the clear duty of the courts to construe the plain terms of the statute and give them their legal effect.
As was observed by Lord Herschell in the Bank of England vs Vagliano Brothers (1) : " I think the proper course is in the first instance to examine the language of the statute and to ask what is its natural meaning uninfluenced by any considerations derived from the previous state of the law, and not to start with enquiring how the law previously stood, and then, assuming that it was probably intended to leave it unaltered, to see if the words of the enactment will bear an interpretation in conformity with this view. " "If a Statute, intended to embody in a code a particular branch of the law, is to be treated in this fashion, it appears to me that its utility will be almost entirely destroyed, and the very object with which it was enacted will be frustrated.
The purpose of such a statute surely was that on any point specifically dealt with by it, the law should be ascertained by interpreting the language used instead of, as before, by roaming oyer a vast number of authorities in order to discover what the law was, extracting it by a minute critical examination of the prior decision. . .
This passage was quoted with approval by their Lordships of the Privy Council in Narendranath Sircar vs Kamal Basini Dasi (2) while laying down the proper mode of dealing with an Act enacted to codify a particular branch of the law.
(1) , 144.
(2) Cal.
563, 571.
1357 The Privy Council adopted a similar reasoning in Mohori Bibee vs Dhurmodas Ghose (1) where they had to interpret section 11 of the .
They had before them the general current of decisions in India that ever since the passing of the the contracts of infants were voidable only.
There were, however, vigorous protests by various judges from time to time; and there were also decisions to the contrary effect.
Under these cir cumstances, their Lordships considered themselves at liberty to act on their own view of the law as declared by the Contract Act, and they had thought it right to have the case reargued before them upon this point.
They did not consider it necessary to examine in detail the numerous decisions above referred to, as in their opinion the " whole question turns upon what is the true construction of the Contract Act itself ".
They then referred to the various relevant sections of the and came to the conclusion that the question whether a contract is void or voidable presupposes the existence of a contract within the meaning of the Act and cannot arise in the base of an infant who is not " competent to contract.
" In Satyabrata Ghose vs Mugneeram Bangur & Co. (2), section 56 of the came up for consideration by this Court.
B. K. Mukherjea J. (as he then was) while delivering the judgment of the Court quoted with approval the following observations of Fazl Ali J. in Ganga Saran vs Ram Charan (3): " It seems necessary for us to emphasise that so far as the courts in this country are concerned, they must look primarily to the law as embodied in sections 32 and 56 of the .
and proceeded to observe : " It would be incorrect to say that section 56 of the Contract Act applies only to cases of physical impossibility and that where this section is not applicable, recourse can be had to the principle of English law on the subject of frustration.
It must be held also that to the extent that the deals (1) (1902) L.R. 30 I.A. 114.
(2) ; (3) ; , 52. 1358 with a particular subject, it is exhaustive upon the same and it is not permissible to import the principles of English law dehors these statutory provisions.
The decisions of the English courts possess only a persuasive value and may be helpful in showing how the courts in England have decided cases under circumstances similar to those which have come before our courts.
" It is, therefore, clear that in order to ascertain the true meaning and intent of the provisions, we have got to turn to the very terms of the statute itself, divorced from all considerations as to what was the state of the previous law or the law in England or elsewhere at the time when the statute was enacted.
To do otherwise would be to make the law, not to interpret it.
(See Gwynne vs Burnell (1) and Kumar Kamalranjan Roy vs Secretary of State (2).
The courts in India do not appear to have consistently adopted this course and there were several decisions reached to the effect that section 72 did not apply to money paid under a mistake of law, e.g., Wolf & Sons vs Dadyba Khimji & Co. (3) and Appavoo Chettiar vs section 1.
Co. (4).
In reaching those decisions the courts were particularly influenced by the English decisions and also provisions of section 21 of the which provides that a contract is not voidable because it was caused by a mistake as to any law in force in British India.
On the other hand, the Calcutta High Court had decided in Jagdish Prasad Pannalal vs Produce Exchange Corporation Ltd. (5), that the word " mistake " in section 72 of the included not only a mistake of fact but also a mistake of law and it was further pointed out that this section did not conflict with section 21 because that section dealt not with a payment made under a mistake of law but a contract caused by a mistake of law, whereas section 72 dealt with a payment which was either not under a contract at all or even if under a contract, it was not a cause of the contract.
(1) (2) L. R. 66 I. A. 1, 10.
(3) Bom.
631, 649.
(4) A.I.R. 1929 Mad.
(5) A.I.R. 1946 Cal.
1359 The Privy Council resolved this conflict in Shiba Prasad Singh vs Srish Chandra Nundi(1).
Their Lordships of the Privy Council observed that the authorities which dealt with the meaning of " mistake " in the section were surprisingly few and it could not be said that there was any settled trend of authority.
Their Lordships were therefore bound to consider this matter as an open question, and stated at p. 253: " Those learned judges who have held that mistake in this context must be given a limited meaning appear to have been largely influenced by the view expressed in Pollock and Mulla 's commentary on section 72 of the , where it is stated (Indian Contract & Specific Relief Acts, 6th Edn., p. 402): " Mistake of law is not expressly excluded by the words of this section; but section 21 shows that it is not included ".
For example, Wolf & Sons vs Dadyaba Khimji & Co. (2).
Macleod J. said referring to section 72 " on the face of it mistake includes mistake of law.
But it is said that under section 21 a contract is not voidable on the ground that the parties contracted under a mistaken belief of the law existing in British India, and the effect of that section would be neutralized if a party to such a contract could recover what he had paid by means of section 72 though under section 21 the contract remained legally enforceable.
This seems to be the argument of Messrs. Pollock and Mulla and as far as I can see it is sound.
" In Appavoo Chettiar vs South Indian Rly. (3), Ramesam and Jackson JJ. say: " Though the word ' mistake ' in section 72 is not limited it must refer to the kind of mistake that can afford a ground for relief as laid down in sections 20 and 21 of the Act. .
Indian law seems to be clear, namely, that a mistake, in the sense that it is a pure mistake as to the law in India resulting in the payment by one person to another and making it equitable that the payee should return the money is no ground for relief." Their Lordships have found no case in which an opinion that ',mistake" in section 72 must be given a limited meaning has been based on any other ground.
In their (1) (1949) L.R. 76 I.A. 244.
(2) Bom.
(3) A.I.R. 1929 Mad.
1360 Lordships ' opinion this reasoning is fallacious.
If a mistake of law has led to the formation of a contract, section 21 enacts that that contract is not for that reason voidable.
If money is paid under that contract, it cannot be said that that money was paid under mistake of law ; it was paid because it was due under a valid contract, and if it had not been paid payment could have been enforced.
Payment " by mistake " in section 72 must refer to a payment which was not legally due and which could not have been enforced ; the " mistake " is thinking that the money paid was due when, in fact, it was not due.
There is nothing inconsistent in enacting on the one hand that if parties enter into a contract under mistake in law that contract must stand and is enforceable, but, on the other hand, that if one party acting under mistake of law pays to another party money which is not due by contract or otherwise, that money must be repaid.
Moreover, if the argument based on inconsistency with section 21 were valid, a similar argument based on incon sistency with section 22 would be valid and would lead to the conclusion that section 72 does not even apply to mistake of fact.
The argument submitted to their Lordships was that section 72 only applies if there is no subsisting contract between the person making the payment and the payee, and that the does not deal with the case where there is a subsisting contract but the payment was not due under it.
But there appears to their Lordships to be no good reason for so limiting the scope of the Act.
Once it is established that the payment in question was not due, it appears to their Lordships to be irrelevant to consider whether or not there was a contract between the parties under which some other sum was due.
Their Lordships do not find it necessary to examine in detail the Indian authorities for the wider interpretation of " mistake " in section 72.
They would only refer to the latest of these authorities, Pannalal vs Produce Exchange Corp. Ltd. (1), in which a carefully reasoned judgment was given by Sen J.
Their Lordships agree with this judgment.
It may be well to add that their (1) A.I.R. 1946 Cal.
1361 Lordships ' judgment does not imply that every sum paid under mistake is recoverable, no matter what the circumstances may be.
There may in a particular case be circumstances which disentitle a plaintiff by estoppel or otherwise.
" We are of opinion that this interpretation put by their Lordships of the Privy Council on section 72 is correct.
There is no warrant for ascribing any limited meaning to the word I mistake ' as has been used therein and it is wide enough to cover not only a mistake of fact but also a mistake of law.
There is no Conflict between the provisions of section 72 on the one hand and sections 21 and 22 of the on the other and the true principle enunciated is that if one party under a mistake, whether of fact or law, pays to another party money which is not due by contract or otherwise that money must be repaid.
The mistake lies in thinking that the money paid was due when in fact it was not due and that mistake, if established, entitles the party paying the money to recover it back from the party receiving the same.
The learned Additional Solicitor General, however, sought to bring his case within the observations of their Lordships of the Privy Council that their judgment did not imply that every sum paid under mistake is recoverable no matter what the circumstances might be and that there might be in a particular case circumstances which disentitle a plaintiff by estoppel or otherwise.
It was thus urged that having regard to the circumstances of the present case, (i) in so far as the payments were in discharge of the liability under the U.P. Sales Tax Act and were voluntary payments without protest and also (ii) inasmuch as the monies which had been received by the State of U. P. had not been retained but had been spent away by it, the respondent was disentitled to recover the said amounts.
Here also, we may observe that these contentions were not specifically urged in the High Court or in the statement of case filed by the appellants in this court; but we heard arguments on the same, as they were necessarily involved in the question whether section 72 of 1362 the applied to the facts of the present case.
Re: (i): The respondent was assessed for the said amounts under the U. P. Sales Tax Act and paid the same; but these payments were in respect of forward transactions in silver.
If the State of U. P. was not entitled to receive the sales tax on these transactions, the provision in that behalf being ultra vires, that could not avail the State and the amounts were paid by the respondent, even though they were not due by contract or otherwise.
The respondent committed the mistake in thinking that the monies paid were due when in fact they were not due and that mistake on being established entitled it to recover the same back from the State under section 72 of the .
It was, however, contended that the payments having been made in discharge of the liability under the U. P. Sales Tax Act, they were payments of tax and even though the terms of section 72 of the applied to the facts of the present case no monies paid by way of tax could be recovered.
We do not see any warrant for this proposition within the terms of section 72 itself.
Reliance was, however, placed on two decisions of the Madras High Court reported in (1) Municipal Council, Tuticorin vs Balli Bros. (1) and (2) Municipal Council, Rajahmundry vs Subba Rao (2).
It may be noted, however, that both these decisions proceeded on the basis that the payments of the taxes there were made under mistake of law which as understood then by the Madras High Court was not within the purview of section 72 of the .
The High Court then proceeded to consider whether they fell within the second part of section 72, viz., whether the monies had been paid under coercion.
The court held on the facts of those cases that the payments had been voluntarily made and the parties paying the same were therefore not entitled to recover the same.
The voluntary payment was there considered in contradistinction to payment under coercion and the real ratio of the decisions was that there was no coercion or duress exercised by the authorities for (1) A.I.R. 1934 Mad.
(2) A.I.R, 1937 Mad.
1363 exacting the said payments and therefore the payments having been voluntarily made, though under mistake of law, were not recoverable.
The ratio of these decisions, therefore, does not help the appellants before us.
The Privy Council decision in Shiba Prasad Singh vs Srish Chandra Nandi (1) has set the whole controversy at rest and if it is once established that the payment, even though it be of a tax, has been made by the party labouring under a mistake of law the party is entitled to recover the same and the party receiving the same is bound to repay or return it.
No distinction can, therefore, be made in respect of a tax liability and any other liability on a plain reading of the terms of section 72 of the , even though such a distinction has been made in America vide the passage from Willoughby on the Constitution of the United States, Vol. 1, p. 12 opcit.
To hold that tax paid by mistake of law cannot be recoverd under section 72 will be not to interpret the law but to make a law by adding some such words as " otherwise than by way of taxes " after the word " paid ".
If this is the true position the fact that both the parties, viz., the respondent and the appellants were labouring under a mistake of law and the respondent made the payments voluntarily would not disentitle it from receiving the said amounts.
The amounts paid by the respondent under the U. P. Sales Tax Act in respect of the forward transactions in silver, had already been deposited by the respondent in advance in accordance with the U. P. Sales Tax Rules and were appropriated by the State of U. P. towards the discharge of the liability for the sales tax on the res pective assessment orders having been passed.
Both the parties were then labouring under a mistake of law, the legal position as established later on by the decision of the Allahabad High Court in Messrs. Budh Prakash Jai Prakash vs Sales Tax Officer, Kanpur (2) subsequently confirmed by this Court in Sales Tax Officer, Pilibhit vs Budh Prakash Jai Prakash (3) not having been known to the parties at the relevant (1) (1949) L. R. 76 1.
A. 244.
(2) (3) [1955] I S.C.R. 243.
173 1364 dates.
This mistake of law became apparent only on May 3, 1954, when this Court confirmed the said decition of the Allababad High Court and on that position being established the respondent became entitled to recover back the said amounts which had been paid by mistake of law.
The state of mind of the respondent would be the only thing relevant to consider in this context and once the respondent established that the payments were made by it under a mistake of law, (and it may be noted here that the whole matter proceeded before the High Court on the basis that the respondent had committed a mistake of law in making the said payments), it was entitled to recover back the said amounts and the State of U. P. was bound to repay or return the same to the respondent irrespective of any other consideration.
There was nothing in the circumstances of the case to raise any estoppel against the respondent nor would the fact that the payments were made in discharge of a tax liability come within the dictum of the Privy Council above referred to.
Voluntary payment of such tax liability was not by itself enough to preclude the respondent from recovering the said amounts, once it was established that the payments were made under a mistake of law.
On a true interpretation of section 72 of the the only two circumstances there indicated as entitling the party to recover the money back are that the monies must have been paid by mistake or under coercion.
If mistake either of law or of fact is established, he is entitled to recover the monies and the party receiving the same is bound to repay or return them irrespective of any consideration whether the monies had been paid voluntarily, subject however to questions of estoppel, waiver, limitation or the like.
If once that circumstance is established the party is entitled to the relief claimed.
If, on the other hand, neither mistake of law nor of fact is established.
, the party may rely upon the fact of the monies having been paid under coercion in order to entitle him to the relief claimed and it is in that position that it becomes relevant to consider whether the payment has been a voluntary payment or a payment under coercion.
The 1365 latter position has been elaborated in English law in the manner following in Twyford vs Manchester Corporation (1) where Romer J. observed: " Even so, however, I respectfully agree with the rest of Walton J. 's judgment, particularly with his statement that a general rule applies, namely, the rule that, if money is paid voluntarily, without compulsion, extortion, or undue influence, without fraud by the person to whom it is paid and with full knowledge of all the facts, it cannot be recovered, although paid without consideration, or in discharge of a claim which was not due or which might have been successfully resisted.
" The principle of estoppel which has been adverted to by the Privy Council in Shiba Prasad Singh vs Srish Chandra Nandi (2) as disentitling the plaintiff to recover the monies paid under mistake can best be illustrated by the decision of the Appeal Court in England reported in Holt vs Markham (3) " here it was held that as the defendant had been led by the plaintiffs ' conduct to believe that he might treat the money as his own, and in that belief had altered his position by spending it, the plaintiffs were estopped from alleging that it was paid under a mistake; and this brings us to a consideration of point No. 2 above stated.
Re: (ii): Whether the principle of estoppel applies or there are circumstances attendant upon the transaction which disentitle the respondent to recover back the monies, depends upon the facts and circumstances of each case.
No question of estoppel can ever arise where both the parties, as in the present case, are labouring under the mistake of law and one party is not more to blame than the other.
Estoppel arises only when the plaintiff by his acts or conduct makes a representation to the defendant of a certain state of facts which is acted upon by the defendant to his detriment; it is only then that the plaintiff is estopped from setting up a different state of facts.
Even if this position can be availed of where the representation is in regard to a position in law, no (1) , 241.
(2) [1949] L. R. 76 I. A. 244.
(3) 1366 such occasion arises when the mistake of law is common to both the parties.
The other circumstances would be such as would entitle a court of equity to refuse the relief claimed by the plaintiff because on the facts and circumstances of the case it would be inequitable for the court to award the relief to the plaintiff.
These are, however, equitable considerations and could scarcely be imported when there is a clear and unambiguous provision of law which entitles the plaintiff to the relief claimed by him.
Such equitable considerations were imported by the Nagpur High Court in Nagorao vs G. G. in Council where Kaushalendra Rao J. observed: " The circumstances in a particular case, disentitle the pltf.
to recover what was paid under mistake." " If the reason for the rule that a person paying money under mistake is entitled to recover it is that it is against conscience for the receiver to retain it, then when the receiver has no longer the money with him or cannot be considered as still having it as in a case when he has spent it on his own purposes which is not the case here different considerations must necessarily arise.
" We do not agree with these observations of the Nagpur High Court.
No such equitable considerations can be imported when the terms of section 72 of the are clear and unambiguous.
We may, in this context, refer to the observations of their Lordships of the Privy Council in Mohori Bibee vs Dhurmodas Ghose (2) at p. 125.
In dealing with the argument which was urged there in regard to the minor 's contracts which were declared void, viz., that one who seeks equity must do equity and that the minor against whom the contract was declared void must refund the advantage which he had got out of the same, their Lordships observed that this argument did not require further notice except by referring to a recent decision of the Court of Appeal in Thurstan vs Nottingham Permanent Benefit Building Society (3) (1) A.I.R. 1951 Nag.
372,374.
(2) [19O2] L. R. 30 I. A. 114.
(3) [I9O2] 1 Ch.
1. 1367 since affirmed by the House of Lords and they quoted with approval the following passage from the judgment of Romer L. J., at p. 13 of the earlier report: " The short answer is that a Court of Equity cannot say that it is equitable to compel a person to pay moneys in respect of a transaction which as against that person the Legislature has declared to be void.
" That ratio was applied by their Lordships to the facts of the case, before them and the contention was negatived.
Merely because the State of U. P. had not retained the monies paid by the respondent but had spent them away in the ordinary course of the business of the State would not make any difference to the position and under the plain terms of section 72 of the the respondent would be entitled to recover back the monies paid by it to the State of U.P. under mistake of law.
The result, therefore, is that none of the contentions urged before us on behalf of the appellants in regard to the non applicability of section 72 of the to the facts of the present case avail them and the appeal is accordingly dismissed with costs.
Appeal dismissed.

summary/full:
Under section 72 of the : " A person to whom money has been paid . by mistake or under coercion must repay or return it ".
The respondent, a registered firm, paid sales tax in respect of its forward transactions in pursuance of the assessment orders passed by the sales tax officer for the years 1949 51, but in 1952, the Allahabad High Court having held in Messrs. Budh Prakash jai Prakash vs Sales Tax Officer, Kanpuy, , that the levy of sales tax on forward transactions was ultra vires, the respondent applied for a refund of the amounts paid, by a writ petition under article 226 of the Constitution.
It was contended for the sales tax authorities that the respondent was not entitled to a refund because (1) the amounts in dispute were paid by the respondent under a mistake of law and were therefore irrecoverable, (2) the payments were in discharge of the liability under the Sales Tax Act and were voluntary payments without protest, and (3) inasmuch as the monies which had been received by the Government had not been retaine but had been spent away by it, the respondent was disentitled to recover the said amounts.
Held, that the term " mistake " in section 72 Of the Indian Con tract Act comprises within its scope a mistake of law as well as a mistake of fact and that, under that section a party is entitled to recover money paid by mistake or under coercion, and if it is established that the payment, even though it be of a tax, has been made by the party labouring under a mistake of law, the party receiving the money is bound to repay or return it though it might have been paid voluntarily, subject, however, to questions of estoppel, waiver, limitation or the like.
Shib Prasad Singh vs Maharaja Srish Chandra Nandi, (1949) L.R. 76 I.A. 244, relied on.
Where there is a clear and unambiguous provision of law which entitles a party to the relief claimed by him, equitable considerations cannot be imported and, in the instant case, the fact that the Government had not retained the monies paid by the respondent but had spent them away in the ordinary course 1351 of business of the State would not make any difference, and under the plain terms of section 72 Of the Act the respondent was entitled to recover the amounts.
Observations in Nagorao vs Governor General in Council, A. 1.
R. , 374, to the effect that where a party receiving money paid under a mistake has no longer the money with him, equitable considerations might arise, disapproved.


judgement:
CTION: Civil Appeal No. 398890 of 1988.
From Order No. 590 592/1988 dated 18.8.1988 of the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal Nos.
E 375/84 D, S.A. No. 991/88 D & 992/88 D with C.O. No. 283/ 84 D. V. Lakshmikumaran, Madhava Rao and V. Balachandran for the Appellant.
A.K. Ganguli and P. Parmeshwaran for the Respondent.
Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. This is an appeal under section 35L of the Central Excises & Salt Act, 1944 (hereinafter referred to as 'the Act ') against the judgment and order dated 18th August, 1988 passed by the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi (hereinafter re ferred to as 'the tribunal ').
The appellant was at all relevant times engaged in the manufacture, inter alia, of polyester fibre (man made) failing under tariff item 18 of the erstwhile Central Excise Tariff.
In the manufacture of the aforesaid, the appellant was using, amongst other inputs, ethylene glycol and DMT (Dimethyl Tetraphthalate) duty paid ethylene glycol falling under tariff item No. 68 of the erstwhile Central Excise Tariff received by the appellant and used in the manufac ture.
The notification No. 201/79 dated 4.6.79, mentioned hereinafter, exempted, according to the appellant, all excisable goods on which duty of excise was leviable and in the manufacture of which any goods falling under tariff item 68 had been used, from so much of the duty of excise as was equivalent to the duty of excise paid on the inputs.
The appellants claimed set off of duty on ethylene glycol used in the manufacture of polyester fibre under notification No. 201/79 dt.
23.6.1979.
In response to the appellant 's seeking set off the duty paid on ethylene glycol, they received a letter from the Assistant Collector of Central Excise, Ghaziabad, dated 6th August, 1980 by which the Asstt.
Col lector held that no proforma credit was allowable in respect of ethylene glycol for the following: (a) Methanol which is not excisable and is cleared without pay 266 ment of duty; (b) Glycol residual waste which was being destroyed by the appellants by throwing in the field; and (c) Polyester fibre waste which was used in the recovery of DMT and exempt from payment of duty under Central Excise Notification dt.
19th May, 1976.
The appellants were further directed to furnish the exact percentage of ethylene glycol content used/consumed in the methanol, the ethylene glycol residual waste and polyes ter fibre waste; and that not to utilise the proforma credit or set off credit till the data was furnished and the same was authenticated by the Chemical Engineer.
The classifica tion list submitted by the appellants was modified in terms of the said letter.
Thereafter, classification list was filed claiming set off of duty on ethylene glycol falling under tariff item 68 under exemption notification No. 201/79 as amended by noti fication No. 102/81 dt.
13th May, 1981.
By this amended notification, a second proviso was added which provided that the credit of the duty allowed in respect of inputs could not be denied or varied on the ground that part of thee input was contained in any waste, refuge or by product arising during the manufacture, irrespective of the fact that such waste, refuse or byproduce was exempt from the whole of duty of excise leviable thereon or was chargeable to nil rate of duty.
Hence, it is the case of the appellants that from 11th April, 1981 even though some part of the input may be con tained in any waste, refuge or by product which is charge able to nil rate of duty, the credit of the duty paid on the inputs could not be denied.
By this order the set off of duty in respect of duty paid ethylene glycol was allowed from 11th April, 1981 onwards except in the case of ethylene glycol used/ consumed in polyester waste used for recovery of DMT on the ground that this polyester waste was charge able to nil rate of duty.
Similarly, duty paid on ethylene glycol which was used for recovery of DMT was held not to be allowable while paying duty on polyester fibre.
Aggrieved thereby, an appeal against the said order to the Collector of Central Excise, Ghaziabad was filed.
The main contentions of the appellants were that the ethylene glycon received in the factory after payment of duty was consumed in the manufacture of polyester fibre only.
During the course of manufacture of polyester fibre, two basic raw materials DMT and Glycol interact and thereby certain waste comes into existence.
This 267 waste is recycled with glycol for the recovery of DMT in DMT recovery plant, within the factory.
Hence, the entire set off of duty was to be allowed since no part of DMT produced was diverted for any other use other than production of polyester fibre nor was it taken outside the factory.
The appellants contended that in case of proforma credit proce dure under rule 56 A of the Central Excise Rules, clarifica tion had been issued by the Collector of Central Excise, under trade notice No. 72 CE/80 dt.
1980 to the effect that proforma credit is permissible even where at an in termediate state of manufacture, a final product which is fully exempt from duty comes into being, provided that the fully exempted product is consumed in the production or manufacture of the finished product.
This trade notice categorically states that this clarification would also be applicable to exemption notification No. 201/79.
By an order dated 17th November, 1981 the Asstt.
Collec tor held that the appellants were entitled to credit of duty paid on the ethylene glycol only to the extent of the per centage content as determined by the Chief Chemical Engi neer, CRCL, New Delhi.
The order covered the period from 17.7.1979 to 10.4.
As mentioned before, the notification was amended from 11th April, 1981 whereby the credit of the duty on any inputs was not to be denied to any waste, refuse or by product arising during the manufacture of the output irre spective of whether the waste, refuse or by product was chargeable to nil rate of duty or not.
By a letter dated 27th November, 1981 the appellants were informed that set off for Rs. 15,41,673.60 was inadmis sible.
By a subsequent letter of the Superintendent of Central Excise, Ghaziabad, dated 17th December, 1981 it was stated to the appellant that they had received Rs. 15,42,740.16 as set off which was inadmissible.
The period mentioned was 17.7.1979 to 10.4.1981.
The appellants case was that this related only to ethylene glycol content in methanol.
There was a second appeal preferred to the Collector of Central Excise, Delhi, against the order dated 17.11.1981 of the Asstt.
Collector disallowing the set off of duty credit paid on ethylene glycol content in methanol and ethylene glycol waste and polyester fibre waste.
A third appeal was filed before the Collector (Appeals) against the duty demand of Rs. 15.42,740.16.
Thereafter, the appellants received a letter dated 23rd April, 268 1983 from the Superintendent of Central Excise which stated that the stand of the appellants that the ethylene glycol contribute only H positive and not OH negative, has been accepted by the Chief Chemical Engineer, CERL, New Delhi.
Consequently, since the ethylene glycol content in the methanoi, wherein the ethylene glycol contribute only H positive and not OH negative ions, the amount of inadmissi ble set off would stand reduced to Rs.90,749,76.
The aforesaid three appeals were decided by the 'Collec tor of Central Excise (Appeals), by passing a single order dated 15th December, 1983, wherein he observed that the procedure under notification No. 20 1/79 was materially the same as the procedure under rule 56A and in the circum stances allowed all the appeals and set aside the Asstt.
Collector 's order and the demands.
Aggrieved thereby, the revenue went up in appeal before the tribunal.
The tribunal after examining the aforesaid contentions noted the contention of the parties.
It was the case of the revenue that prior to 1 Ith April, 1981 there was no provision in notification No. 201/79 entitling the manufacturer to obtain credit of the duty of excise already paid on the inputs resulting in waste or by product or refuge which arose in the manufacture of excisable products which used the inputs.
Hence, it was argued that the duty element in the quantity of glycol which was contained in the glycol residual waster, polyester fibre waste and methanoi (by product) which was non excisable, did not qualify for credit which could be subsequently used for discharging duty liability on dutiable finished product.
The provision con tained in notification No. 102/81 was not available prior to 11th April, 1981 it was submitted on behalf of revenue.
It was further submitted that the trade notice issued by Pune Collectorate pertained to rule 56 A only and not to the notificaion.
It was further submitted that the rule and notifications are different enactments and the provisions of one cannot be read into another even after 11th April, 1981 and the exemption was only in respect of duty on inputs in the manufacture of excisable goods and their waste, by product or refuge.
It was submitted that since methanol was not excisable, it was not eligible for set off of duty on the glycol content in its manufature.
On behalf of the appellants, however, it was contended that glycol is used totally in the production of polyester fibre.
methanol results out of the reaction of DMT and glycol; and that the Government always maintained parity between rule 56 A and notification No. 201/79, hence, the appellants were eligible to full set off.
On behalf of the appellants reliance was placed on the decision of the High Court of Bombay in Indian Aluminium Co. 269 Ltd. & Anr.
vs A.K. Bandyopadhyay & Ors., The question that the tribunal had to decide was whether the set off of duty paid on inputs was admissible only if the finished excisable goods manufactured therefrom, was not exempted from duty.
The process of manufacture and the out come of ethynol are not in dispute.
The tribunal was of the view that the judgment of the Bombay High Court had held that dross skimmings thrown off in the process of manufac ture and aluminium sheets were not end products or finished or by products merely because such refuge might fetch some price in the market.
The High Court had further held that proviso to sub rule 56 A will have no application and the skimmings cannot be said to be finished excisable goods.
These were not exempted from the whole of duty of excise or chargeable to nil rate of duty whereas the sub rule pre scribed that the credit is admissible if the material is used in the manufacture of finished goods which are exempt from duty or are chargeable to nil rate of duty.
The Tribu nal was of the opinion that the factual background 'of the case before the Bombay High court was different and there fore, it was of the opinion that the said decision was not applicable in the instant case.
The Tribunal was of the opinion that the revenue was right that rule 56A and notification No. 201/79 were differ ent enactments and the amendment to one could not be read into the other.
In that view of the matter, the Tribunal was of the view that the Collector 's observation that the proce dure under notification No.201/79 was materially the same as the procedure under rule 56A and consequently the amending notification deemed to have retrospective effect was not, in the absence of any such indication, acceptable.
In the premises, the Tribunal allowed the appeals and rejected the cross objection.
The question involved in these appeals, is whether the Tribunal was right.
On behalf of the appellants, Shri V. Lakshmikumaran contended that the Tribunal failed to appre ciate that the provisions of rule 56A and notification No. 201/79 were para materia.
It appears to us that the provi sions of rule 56A and the notification No. 201/79 are iden tical.
The relevant provisions of Rule 56A are as follows: "56A(1) . . 56A(2) The Collector may, on application made in this behalf and subject to the conditions mentioned in sub rule (3) and such other conditions as may, from time to time, be prescribed by the Central Government, permit a manu 270 facturer of any excisable goods specified under sub rule (1) to receive material or component parts of finished product (like Asbestos Cement), on which the duty of excise or the additional duty under section 3 of the (51 of 1975) (herein after referred to as the countervailing duty), has been paid in his factory for the manufac ture of these goods or the more convenient distribution of finished product and allow a credit of the duty already paid on such mate rial or component parts or finished product, as the case may be: Provided that no credit of duty shall be allowed in respect of any material or compo nent parts used in the manufacture of finished excisable goods (i) if such finished excisable goods produced by the manufacturer are exempt from the whole of the duty of excise leviable thereon or are chargeable to 'nil ' rate of duty, and (ii) . . Explanation.
Credit of the duty allowed in respect of any material or component parts shall not be denied or varied on the ground that part of such material or component parts is contained in any waste, refuse or by product arising during the process of manufac ture of the finished excisable goods irrespec tive of the fact that such waste, refuse or by product is exempt from the whole of the duty of excise leviable thereon or is charge able to nil rate of duty or is not notified under sub rule ( 1): Provided . .
The notification No. 20 1/79 prior to 1 Ith April, 1981 in so far as relevant for the present purpose was as follows: "Set off of duty on all exciseable goods on use of duty paid goods falling under Item 68 (Tariff Items I to 68): In exercise of the powers conferred by sub rule (1) of rule 8 of the Central Excise Rules, 1944, and in supersession of the notification of the Gov ernment of India in the Ministry of Finance (Department of Revenue) No. 178/77 Central Excise, dated the 18th June, 1977, the Central Government 271 hereby exempts all excisable goods (hereinaf ter referred as "the said goods"), on which the duty of excise is leviable and in the manufacture of which any goods falling under Item No. 68 of the first Schedule to the (1 of 1944) (hereinafter referred as "the inputs") have been used, from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs: Provided that the procedure set out in the Appendix to this notification is followed: Provided further that nothing contained in this notification shall apply to the said goods which were exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty." The amending notification No. 102/81 dated 11th April, 1981 is as follows: "Provided also that credit of the duty allowed in respect of the inputs shall not be denied or varied on the ground that part of such inputs is contained in any waste, refuse or by product arising during the process of manufacture of the said goods, irrespective of the fact that such waste, refuse or by product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty or is not mentioned in the declaration referred to in the Appendix to this notifica tion." Central Board of Excise & Customs issued Circular No. 6/81CX.
6, dated 31st January, 1981, which reads as follows: "Central Excise Rule 56A Proforma Credit of duty paid on material/component parts con tained in waste, refuse or by product arising during the process of manufacture regarding.
A doubt has been raised whether proforma credit of duty paid on material/component parts used in manufacture of the finished excisable goods notified under rule 56A of the Central Excise Rules, 1944, is to be denied to the extent such material or component parts are contained in any 272 waste, refuse or by product arising during the process of manufacture of the notified fin ished excisable goods on the grounds that such waste, refuse or by product is either fully exempt from duty or not notified under sub rule (1) of rule 56A. 2.
Since the Government 's intention has been not to deny the benefit of proforma credit in such situation, an Explanation has been added to sub rule (2) of rule 56A, so as to remove the ambiguity in the rule.
Notification No. 8/8 I CE dated 31.1.
1981 amending rule 56 A is enclosed.
It may, however, be noticed that such credit cannot be utilised for payment of duty leviable on such waste, refuse or by product.
" On an analysis and comparison of aforesaid, it is clear that the clarification in the form of trade notice issued by the Pune Collectorate in respect of rule 56A was as much applicable to that rule as to notification No. 20 1/79.
In the premises, it is clear that the Tribunal should have held that even though a part of the ethylene glycol was contained in the by product methanoi, yet the credit of duty could not be reduced to the extent of the ethylene gIycol contained in the mathanoi as ineligible.
It is true that when in a fiscal provision, if benefit of exemption is to be considered, this should be strictly considered.
But the strictness of the construction of exemption notification does not mean that the full effect to the exemption notification should not be given by any circuitous process of interpretation.
After all, exemption notifications are meant to be implemented and trade notices in these matters clarify the stand of the Government for the trade.
It is clear, therefore, that the Tribunal failed to interpret the words of the exemption notification No. 201/79 properly and fully.
The said notifi cation exempted all excisable goods on which the duty of excise was leviable and in the manufacture of which any goods falling under Tariff Item 68 (i.e. inputs) had been used from so much of the duty of excise leviable thereon as was equivalent to the duty of excise already paid on the inputs.
It is clear, however, that ethylene glycol was used in the manufacture of polyester fibre.
It appears that methanoi arises as a part and parcel of the chemical reac tion during the process of manufacture when ethylene glycol interacts with DMT to produce polyester fibre.
It is not possible to use a lesser quantum of the ethylene glycol to prevent methanoi from arising for producing a certain quan tity of polyester fibre.
Thus, the quantity of ethylene glycol required to produce a certain quantum of polyester fibre is determined 273 by the chemical reaction.
It may be mentioned herein that it is not as if the appellants have used excess ethylene glycol wantonly to produce the methanol.
It is clear that the appellants are not engaged in the production of methanol but in the production of polyester fibre.
That position is undisputed.
Therefore, it appears that the Tribunal erred when it held that the appellants were not entitled to a part of the credit of duty since ethylene glycol when it inter acts with DMT also gives rise to methanoi.
This construction would frustrate the object of exemption if something which evidently arises out of the interaction is denied Credit.
Even prior to amendment to notification No. 201/79 with effect from 1 Ith April, 1987, the only situation where the credit of the duty paid on the inputs could be denied was only where the final products were wholely exempt from the duty of excise or chargeable to nil rate of duty.
In the present case, the excisable goods, namely, polyester fibre were not wholely exempt from duty nor chargeable to nil rate of duty.
It cannot be read in the notification that the notification would not be available in case non excisable goods arise during the course of manufacture.
In fact, the Tribunal seems to have erred in not bearing in mind that exemption notification was pressed in service in respect of polyester fibre which is excisable goods and not in respect of methanoi which arises as a by product as a part and parcel of chemical reaction.
It appears further on a com parison of the rule 56A and the notification No. 20 1/79 that these deal with the identical situation.
In this connection, reference may be made to the deci sion of the Bombay High Court in Indian Alurninium Co. and Anr. 's case (supra).
In that case, the High Court came to the conclusion that dross and skimmings were merely the refuge, scum or rubbish thrown out in the process of manu facture of aluminium sheets and could not be said to be the result of treatment, labour or manipulation whereby a new and different article emerged with a distinctive name, character or use which can ordinarily come to the market to be bought and sold.
The High Court further held in that case that merely because such refuse or scum may fetch some price in the market does not justify it being called a by product, much less an end product or a finished product.
In the light of that fact, the High Court was of the view that in that case the end product was aluminium sheets manufactured from aluminium ingots and dross or skimmings.
Therefore, the High Court was of the view that these were neither 'goods ' nor 'end products ' nor 'finished products ' liable to duty under item 27 of Central Excise Tariff.
The High Court was of the view that under proviso to section 56 A (2) proforma credit was not admissible if the material is used in the manufac ture of finished excisable goods which are exempt from duty 274 or chargeable to nil rate of duty.
Since dross and skimmings are mere 'ashes ', these could not be said to be finished excisable goods, nor they were exempt from the whole of duty of excise or chargeable to 'nil ' rate of duty.
Therefore, proviso to sub rule (2) of rule 56A would not have any application.
The High Court was of the view that refuse or skum thrown off during the process of manufacture could not by any stretch of imagination be considered as a by product and merely because such refuse or scum may fetch some price in the market they could not be said to be 'finished excisa ble goods '.
Under rule 56A, the High Court was of the view, if the material is used in the manufacture of any finished excisable goods, and during the course of manufacture any non excisable by product emerged, then it could not be said that the raw material was not used in the manufacture of the finished excisable goods.
In our opinion, the same analogy and reasoning would apply when the methanoi arises as a result of chemical reaction and not as a result of any by product.
In the instant case, the methanoi was nonexcisable.
Just because methanoi arises as a part and parcel of the chemical reac tion during the process of manufacture, it cannot be said that methanoi was not used in the manufacture of polyester fibre.
The intention of the Government is evident further more, from the trade notice of Pune Collectorate No. 31/81.
The Tribunal, therefore, should have taken into considera tion the trade notice for interpretation of exemption noti fication No. 201/79, which was para materia with rule 56A.
In the aforesaid view of the matter, we are of the opinion that the Tribunal was in error in coming to the conclusion it did.
The appeals are, therefore, allowed and the order and the judgment of the Tribunal are set aside and the combined orders of the Collector (Appeals) Nos.
284 286/CE/MT/83 dated 15th December, 1983 are restored.
In the facts and the circumstances of the case, there will be no order as to costs.
R.S.S. Appeals allowed.

dataset_name: IN-Abs

summary/full:
The appellant was engaged in the manufacture of polyes ter fibre (man made) falling under tariff item 18 of the erstwhile Central Excise Tariff.
In its manufacture, the appellant was using, among other things, ethylene glycol and DMT (Dimethyle Tetraphthalate) duty paid ethylene glycol falling under tariff item No. 68.
During the course of manufacture of polyester fibre, two basic raw materials DMT and Glycol interact and thereby certain waste comes into existence.
This interaction also gave rise to methanol, a by product.
Notification No. 201/79 dated 4.6.1979 exempted all excisable goods on which duty of excise was leviable and in the manufacture of which any goods failing under tariff item 68 had been used, from so much of the duty of excise as was equivalent to the duty of excise paid on the imputs.
Exemption notification No. 201/79 was amended by notifi cation No. 102/81 with effect from 11th April, 1981.
By this amended notification, a second proviso was added which provided that the credit of the duty allowed in respect of inputs could not be denied or varied on the ground that part of the inputs was contained in any waste, refuse or by product arising during the manufacture, irrespective of the fact that such waste, refuse or by product was exempt from the whole of duty of excise leviable thereon or was charge able to nil rate of duty.
Earlier, in the case of proforma credit procedure under rule 56 A of the Central Excise Rules, clarification had been issued by the Collector of Central Excise, under trade notice dated 19.7.1980 to the effect that proforma credit was permissible even where at an intermediate state of manufacture, a final product which was fully exempt from duty came into being, provided that the fully exempted product was consumed in 263 the production or manufacture of the finished product.
This trade notice categorically stated that the clarification would also be applicable to exemption notification No. 201/79.
The appellant claimed set off of duty paid on ethylene glycol used in the manufacture of polyester fibre under notification No. 201/79.
The Assistant Collector of Central Excise held on 6.8.1980 that no proforma credit was allowa ble in respect of ethylene glycol used/consumed in the methanol, the ethylene glycol residual waste and polyester fibre waste.
The Collector of Central Excise (Appeals), however, allowed the appeals filed by the appellant and set aside the Assistant Collector 's order and the demands.
The Collector observed that the procedure under notification No. 201/79 was materially the same as the procedure under rule 56A of the Central Excise Rule.
The revenue went up in appeal before the Customs, Excise was contended on behalf of the revenue that prior to 11th April, 1981 there was no provision in notification No. 201/79 entitling the manufacturer to obtain credit of the duty of excise already paid on the inputs resulting in waste or by products or refuse which arose in the manufacture of excisable products which used the inputs; that the trade notice issued pertained to rule 56 A and not to the notifi cation; that the rule and notifications were different enactments and the provisions of one could not be read into another even after 11th April, 1981; that the exemption was only in respect of duty on inputs in the manufacture of excisable goods and their waste, by product or refuse; and that since methanol was not excisable, it was not eligible for set off of duty on the glycol content in its manufac ture.
On behalf of the appellant, however, it was contended that glycol was used totally in the production of polyester fibre; that methanol resulted out of the reaction of DMT and glycol; and that the Government always maintained parity between rule 56 A and notification No. 201/79.
The Tribunal was of the opinion that the Collector 's observation that the procedure under notification No. 201/79 was materially the same as the procedure under rule 56 A and consequently the amending notification deemed to have retro spective effect was not, in the absence of any such indica tion, acceptable.
In the premises, the Tribunal allowed the appeals, of the Revenue.
264 Allowing the appeals, this Court, HELD: (1) On an analysis and comparison of the notifi cations No. 201/79, No. 102/81 and the circulars, it is clear that the clarification in the form of trade notice issued in respect of rule 56 A was as much applicable to that rule as to notification No. 201/79.
[272D] (2) It is true that when in a fiscal provision, is benefit of exemption is to be considered, this ' should be strictly considered.
But the strictness of the construction of exemption notification does not mean that the full effect to the exemption notification should not be given by any circuitous process of interpretation.
After all, exemption notifications are meant to be implemented and trade notices in these matters clarify the stand of the Government for the trade.
[272E F] (3) The quantity of ethylene glycol required to produce a certain quantum of polyester fibre is determined by the chemical reaction.
It is not possible to use a lesser quan tum of the ethylene glycol to prevent methanol from arising for producing a certain quantity of polyester fibre.
It is not as if the appellants have used excess ethylene glycol wantedly to produce the methanol.
It is also clear that the appellants are not engaged in the production of methanol but in the production of polyester fibre.
[272H; 273A] (4) The Tribunal, in the instant case, failed to inter pret the words of the exemption notification No. 201/79 properly and fully.
The said notification exempted all excisable goods on which the duty of excise was leviable and in the manufacture of which any goods falling under Tariff Item No. 68 (i.e. inputs) had been used from so much of the duty of excise already paid on the inputs.
The excisable goods, namely, polyester fibre, were not wholly exempt from duty nor chargeable to nil rate of duty.
It cannot be read in the notification that the notification would not be available in case non excisable goods arise during he course of manufacture.
In fact, the Tribunal seems to have erred in not bearing in mind that exemption notification was pressed in service in respect of polyester fibre which is excisable goods and not in respect of methanol which arises as a by product as a part and parcel of chemical reaction.
It ap pears further on a comparison of the rule 56 a and the notification No. 201/79 that these deal with identical situations.
[272F; 273C D] Indian Aluminium Co. Ltd. & Anr.
A.K. Bandyopadhyay & Ors., , referred to.


judgement:
ivil Appeal No. 469 of 1975.
From the Order dated 31.5.1974 of the Government of India, Ministry of Finance, Department of Revenue and Insur ance, New Delhi, in Order No. 615 of 1974 on Central Excise Revision Application.
Dr. Y.S. Chitale, Ms. M. Ray and H.K. Dutt for the Appel lant.
V.C. Mahajan, (N.P.), P. Parmeshwaran and R.P. Srivasta va for the Respondents.
K .R. Nambiar for the Intervener.
372 The Order of the Court was delivered by RANGANATHAN J.
The appellant assessee manufactures goods known in the market as cushion repair compound, tread repair compound and cover.
compound.
These materials, ac cording to the assessee, are used to mend injured and defec tive sections of tyres and are not meant to be used either in the resoling or in retreading of tyres.
Under the Cen tral Excise & Salt Act, 1944, ( 'the Act '), the above goods were normally dutiable under tariff item No. 15A (2).
Howev er, the assessee claimed exemption from duty under notifica tion No. 71 of 1968 dated 1.4.1968.
By this notification under section 8 of the Act, the Central Government exempted "all rubber products, in the form of plates, sheets and strips unhardened, whether vulcanised or not, and whether combined with any textile material or otherwise (other than the products which are made either wholly or partly of rubber and which are used for the resoling or retreading of tyres, including the products commonly known as tread rub ber, camel back, cushion compound, cushion gum, tread gum and tread packing strips) falling under sub item (2) of this item, from the whole of the duty of excise leviable thereon".
The Superintendant of Central Excise having re jected the claim for exemption and charged the goods in question to duty at 20% (basic) under the tariff item above mentioned, the assessee preferred an appeal to the Collector of Central Excise, West Bengal.
The Collector also rejected the claim observing that there was no evidence that the goods in question could not be used for the resoling or retreading of tyres.
The assessee thereupon preferred a revision to the Central Government under section 36 of the Act as it then stood.
In the revision petition, it was pointed out that tread repair compound and cushion repair compound were primarily meant for and also used as repair material only with reference to the treads and cushions of tyres and that since they were designed to serve the limited purpose of mending small sections of tyres it would be grossly erroneous to hold that these repair materials could be used in place of tread rubber or camel back which only have the necessary physical dimensions and technical proper ties to serve as retreading and resoling material.
Similarly cover compound, it was said, was material which was used only for repairing conveyor belting and was also marketed by the assessee solely for the purpose of repairing damaged sections of the conveyor belting.
It was not meant for use in retreading and resoling of tyres since their sole intend ed use was to repair conveyor belts.
The Central Government, however, dismissed the revision petition by its order dated 21.5.1974.
The Government referred to the fact that the 373 notification of exemption specifically excluded cushion compound, cushion gum and tread gum and observed that, in view of this, cushion repair compound and tread repair compound would also be assessable to duty under item No. 16A. So far as cover compound was concerned, it was observed that its composition was such that its use for repair of conveyor belts was indistinguishable from the other use of resoling of tyres.
The present appeal has been preferred from the order of the Central Government.
On behalf of the appellant it is pointed out that the whole purpose of the exemption notification was to exclude products which were used for the resoling and retreading of tyres.
The Government has overlooked that while tread rub ber, cushion compound and tread gum are all items used for resoling or retreading of tyres, that was not the use to which the articles manufactured by the assessee were put.
The statement of the assessee that the goods manufactured by it were employed only for repairing tyres and conveyor belts has not been disbelieved.
It is therefore submitted that the Government erred in holding that the goods produced by the assessee are not eligible for the exemption in question.
In support of his contention, learned counsel for the appellant relied on two important circumstances.
One is that by a notification No. 27 of 1973 dated 1.3.1973, notifica tion No. 71 of 1968 was amended and the words "used for resoling, retreading or repairing of tyres" was substituted for the words "used for the resoling or retread~ ing of tyres".
This amendment was not effective for the period with which we are concerned and it is therefore argued that the compounds used for repairing as against resoling or retread ing will not be covered by the exclusion in the exemption notification.
The second circumstances relied upon by the learned counsel for the appellant is this.
Earlier, there was a notification No. 31 of 1964 under which the duty leviable in respect of latex foam sponge as well as products commonly known as tread rubber or camel back including cushion compound, cushion gum, tread gum, and tread packing strips were subjected to a concessional rate of duty while other rubber products falling under item 16A were granted an exemption from the levy of duty.
In the context of that notification, a question arose as to whether rubber products which are capable of being used for retreading or resoling of tyres but are only used for repairs would attract duty or not.
The position was clarified by the Central Board of Excise and Customs in its circular No. Rubber 1/66 dated 7.2.1966.
The relevant part of the circular reads as fol lows: 374 "2.
Those rubber products which are not 'latex foam sponge ' may be excisable under the said tariff item No. 16A but would not attract Central Excise duty unless commonly known as per description given in Column 2 against section No. 2 of the table to the above cited notifi cation.
While the scope of the levy on the rubber products thus gets very much restrict ed, it may so happen that different brand names are given by different manufactures to the same or similar product giving rise to the question whether or not a particular product can be deemed to be commonly known as 'tread rubber ', 'camel back ', 'cushion compound ', 'cushion gum ' etc., so as to attract duty.
Doubts of the above nature should not in fact arise in view of para 6 to the 1962 Budget instructions.
It was made quite explic it therein that 'item is . fairly comprehen sive as to wording but the intention . is to subject only 'latex foam sponge ' and the rubber products popularly known as 'tread rubber ' or camel back ' used for the resoling or retreading of tyres to duty.
That being the intention a rubber product which is neither 'latex foam sponge ' nor used for the resoling or retreading of tyres is classifiable as 'all other products ' and therefore exempt from whole of the duty leviable thereon under section No. 3 of the Table to the above cited notifi cation.
It is possible that some of the rubber products are capable of being used for re treading or resoling of tyres.
Mere capacity does not, however, attract duty in the absence of normal usage in that manner being estab lished it would not be appropriate to hold that the products are dutiable.
Rubber products used for repair of tubes or tyres also, in view of what has been stated above, does not attract duty.
Pending cases regarding assessment of rubber products may be finalised accordingly".
Learned counsel submits that the above interpretation is equally applicable in the context of notification No. 71 of 1968.
375 We are of opinion that the appellant 's contention is well founded.
The notification of 1978 only reproduces with some modifications the notification of 1964; however, the broad purport of both the notifications is to exempt rubber products other than those which are commonly sold under certain descriptions and are used for the resoling or re treading of tyres.
The circular of 1966, which can be con sidered as a contemporaneous exposition of the understanding of the Government while issuing the exemption notification of 1964, makes it clear that, at that time, it was not intended to deny exemption to rubber products used merely for repair purposes.
The notification of 1973 was one in which various amendments were carried out to a series of notifications relating to various items and does not contain anything to suggest that it was only a clarification that was intended to be given and not a prospspective amendment of the previous notification.
As already mentioned, the fact that the appellant is using or marketing the products for use, only for repairing tyres and conveyor belts is not controverted.
In these circumstances, we are of opinion that the appellant assessee was entitled to exemption under the notification.
In one sense, any rubber compound has a compo sition which theoretically permits it to be used either for repair purposes or for resoling or retreading of tyres.
But the assessee 's contention is that the product marketed by it ' has not the physical dimensions or technical properties to be capable of use for retreading or resoling.
Also, the notification talks of products "used for" resoling and retreading of tyres and that is not the case here.
The notification thus imports a limitation on the exclusion from the exemption specified in the paranthetical clause of the notification.
That exclusion is only in respect of compound used for resoling or retreading.
For the reasons mentioned above we allow this appeal and set aside the order of the Central Government under section 36 of the Central Excise Act as well as the orders of the subordinate authorities and hold that the assessee is enti tled to the exemption prayed for.
The concerned assessment will be modified accordingly.
We however make no order as to costs.
G.N. Appeal allowed.

summary/full:
The appellant assessee has been manufacturing cushion repair compoud, tread repair compound and cover compound.
According to the assessee, these were not meant either for resoling or retreading of tyres, but for mending injured and defective sections of tyres.
Though normally these goods are dutiable under tariff item No. 16A(2), the assessee claimed exemption from duty under Notification No. 71 of 1968 dated 1.4.68.
The Superintendent rejected the claim.
On appeal by the assessee, the Collector observed that there was no evidence that the goods in question should not be used for the resoling or retreading of tyres and rejected the claim.
The assessee preferred a revision to the Central Govt.
The Central Govt.
while rejecting the Revision Peti tion, referred to the fact that the notification specifical ly excluded cushion compound, cushion gum and tread gum.
As regards cover cushion compound, it observed that the compo sition was such that its use for repair of conveyor belts was indistinguishable from the other use of resoling of tyres.
This appeal has been filed against the order of the Central Govt.
The appellant contended that the Government had overlooked the fact that while tread repair, cushion compound and tread gum are items used for resoling or re treading of tyres, that was not the use to which the arti cles manufactured by the assessee were put.
Since the fact that the goods manufactured by it were employed only for repairing tyres and conveyor belts was not disbelieved, it was argued, the assessee was eligible for the exemption claimed by it.
Allowing the appeal, this court, HELD: 1.
The notification of 1978 only reproduces with some 371 modifications the notification of 1964.
The broad purport of both the notifications is to exempt rubber products other than those which are commonly sold under certain descrip tions and are used for the resoling or retreading of tyres.
The circular of 1966, which can be considered as a contempo raneous exposition of the understanding of the Government while issuing the exemption notification of 1964, makes it clear that at that time, it was not intended to deny exemp tion to rubber products used merely for repair purposes.
The notification of 1973 was one in which various amendments were carried out to a series of notifications relating to various items and does not contain anything to suggest that it was only a clarification that was intended to be given and not a prospective amendment of the previous notifica tion.
[375A C] 2.1 The fact that the appellant is using or marketing the products for use, only for repearing tyres and conveyor belts is not controverted.
Hence the appellant assessee was entitled to exemption under the notification.
In one sense, any rubber compound has a composition which theoretically permits it to be used either for repair purposes or for resoling or retreading of tyres.
But the assessee 's claim is that the product marketed by it has not the physical dimen sions or technical properties to be capable of use for retreading or resoling.
Also, the notification talks of products "used for" resoling and retreading of tyres; and it is not so in the instant case.
[375C E] 2.2 The notification imports a limitation on the exclu sion from the exemption specified in the paranthetical clause of the notification.
That exclusion is only in re spect of compounds used for resoling or retreading.
[375E]


judgement:
vil Appeal No. 2 15 152 (NM) of 1986 etc.
From the Order dated 8.5.1984 of the Customs Excise and Gold Control/Appellate Tribunal, New Delhi in Appeal No. 2530/83 D & Cross objections 27/84, Order No. 258/84 D and Misc.
Order No. 67 84 D. A.K. Ganguli, P. Parmeswaran and Hemant Sharma for the Appellant.
Gobinda Mukhoty and P.N. Gupta for the Respondent.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
This is an appeal under section 35L(b) of the Central Excises & Salt Act, 1944 (hereinafter referred to as 'the Act ') against the judgment and order of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (hereinafter referred to as 'the Tribunal ') dated 8th May, 1984.
The appeal is by the revenue.
The respondent, Decent Dyeing Co., was dyeing acrylic yarn on job charges.
The acrylic yarn was being received by the respondent from traders in the market or from the manufacturers of hosiery goods and were returning the same to them after completing the required process.
The respondent was paying duty at the rate of Rs. 10 per kg.
in terms of notification No. 125/75 CE dated 12th May, 1975 on the presumption that base yarn had discharged duty liability before it was received for dyeing.
A show cause notice requiring the respondent to show cause to the Assistant Collector of Central Excise as to why central excise duty amounting to Rs.4,300 at Rs.24 per Kg.
leviable on 180 kgs.
(as applicable to base yarn under tariff item 18(i) of the Central Excise Tariff) should not be demanded under rule 9(2) of the Central Excise Rules, 1944, was issued to the respondent.
The Assistant Collector of Central Excise directed the respondent to deposit an amount of Rs.4,300 on the basis 432 of the demand of duty at Rs.24 per kg.
on 180.00 kgs.
and directed the respondent to deposit the said amount under the proper head.
On appeal, the Appellate Collector of Central Excise confirmed the said demand.
There was an appeal and the Appellate Tribunal upheld the contention of the respondent.
The Appellate Tribunal found that the case related to a demand for payment of differential duty for the period May, 1976 to July, 1976 with reference to texturing of base acrylic yarn received by the respondent from the manufacturers of such base yarn.
The respondent, the Tribunal held, had cleared such textured yarn on payment of duty at Rs. 10 per kg.
claiming the benefit of notification No. 125/75.
The differential duty payment was Rs.24 per kg.
leviable on the base yarn.
,The respondent denied theft liability but it was upheld as mentioned 'hereinbefore.
It was contended on behalf of the appellant before the Tribunal.that duty on base yarn was payable by the manufacturers of the base yarn only and the burden of showing that the said duty had not been paid by the manufacturers was on the revenue.
The authorities had, however, held that the appellant was liable to.
pay the differential duty since the appellant had failed to prove the payment of duty on the base yarn and, therefore, the said orders were bad.
On the other hand, on behalf of the revenue, it was contended that it was for the respondent to prove that the duty had been paid on the base yarn and if the appellant was paying the duty of Rs. 10 per kg.
Only under notification relied upon and in the absence of proof of payment of duty, the base yarn, the orders of the lower authorities making the respondent liable to pay the duty were correctly passed.
The Tribunal found that the respond ent was not the manufacturer of base acrylic yarn.
The work done by the respondent on the base yarn was by way of textu rising the same.
In respect of the, same, the duty payable on the textured yarn produced out of base yarn is the duty for the time being leviable on the base yarn, if not al ready, paid plus Rs.20 per kg.
Under notification No. 125/75, the duty was reduced to the duty for the time being leviable on the base yarn, if not already paid, plus Rs. 10 per kg.
In this connection, it is relevant to refer to notifi cation No. 125/ 75.
The notification, which was issued under sub rule (1) of rule 8 of the Central Excise Rules, 1944, stated that the Government exempted the texturised yarn of the description specified in column (3) of the Table annexed thereto and falling under sub items of item No. 18 of the First Schedule to the Act as are specified in the corre sponding entries in column (2) of the said Table, from so much of the duty of 433 excise leviable thereon as is in excess of the duty speci fied in the corresponding entries in column (4) of the said Table.
The relevant portion of the Table annexed to the said notification reads as follows: section No. Sub Item No. Description Rate of duty 1.
(ii) Textured Yarn produced The duty for the out of base yarn time being leviable on the base yarn,if not already paid plus ten Rupees per kilogram.
Admittedly, the respondent had paid duty at Rs. 10 per kg.
and had been allowed to clear the goods.
The demand for differential duty by way of duty payable on the base yarn was not in dispute.
On the base yarn, the Tribunal held, the manufacturer was liable to pay duty only since purchasers of the base yarn from the market could naturally assume that duty on the base yarn would have been paid by the manufac turer before removal and that it was for the department to verify the fact of such payment and take action against the manufacturer if base duty had not been paid.
Under the relevant tariff item, the duty, as mentioned before, was fixed as the duty for the time being leviable on the base yarn, if not already paid, plus Rs.20 per kg.
(reduced to Rs. 10 per kg.
under the notification).
The notification does not change the basic position so far as base duty is concerned from the aforesaid stand.
The Tribunal held that the revenue was entitled to claim duty inclusive of the duty paid on base yarn only on proof that the duty on the base yarn had not been already paid, unless otherwise, in the normal course, the presumption inevitable, in view of the nature of the business, be that the duty on base yarn had been paid.
If that is so, that cannot be the responsibility or the burden of the respondent to prove that the duty on base yarn had already been paid.
It further appears that when the appeal was filed before the Collector, the respond ent had disclosed the names of the persons from whom they had received the yarn as also the names of the manufacturers enclosing the copies of the relevant record.
But even then the revenue had not chosen to verify these facts and the Collector (Appeals) had passed his order on the basis that it was for the respondent to prove the actual payment of base duty.
This approach is not proper approach.
It is not correct to state that the respondent alone should have special knowledge of the fact of payment of base duty and it was therefore for the respondent to prove the said fact.
In that view of the matter, the 434 Tribunal held in favour of the respondent.
We are of the opinion that the Tribunal was right.
Excise is a duty on manufacture.
The liability of pay ment of this duty is on the manufacturer.
The language of the notification referred to hereinbefore indicates that only the duty for the time being leviable on the base yarn, if not already paid plus ten rupees per kg.
was the liabili ty.
The description of manufacture was textured yarn pro duced out of base yarn.
We are clearly of the opinion that in view of the facts and the circumstances of the case, the Tribunal was right in the view it took.
In this connection, it is instructive to refer to rule 49 of the Central Excise Rules, 1944, which deals with duty chargeable only on the removal of the goods from the factory premises or from an approved place of storage.
Reference was also made before the Tribunal and our attention was also drawn to the deci sion of the Delhi High Court in Sulekh Ram & Sons vs Union of India & Ors., [1978] ELT J 525, where under rule 9 of the Central Excise Rules, it was held by the Delhi High Court that under excise system, no goods can be removed from the place of manufacturer without first paying the excise duty, therefore, a purchaser can presume that goods are duty paid.
It would be intolerable if the purchasers were required to ascertain whether excise duty had already been paid as they have no means of knowing it.
It has to be borne in mind that duty of excise is primarily a duty levied on a manufacturer or a producer in respect of the commodity manufactured or produced.
See the observations of Lord Simonds in Governor General in Council vs Province of Madras, 72 Indian Appeals 91.
In a situation of this nature, the Delhi High Court held that the processor was in the similar position as a purchas er of the goods.
In that view of the matter, we are of the opinion that the Tribunal was right in the view it took.
We have heard learned counsel for the appellant and considered the matter.
We find no merit in the appeal for the reasons mentioned above.
In that view of the matter, this appeal must fail and is accordingly dismissed without any order as to costs.
Appeals dismissed.
435 CIVIL APPEAL NOS.
214 1 42 (NM) OF 1986.
Collector of Central Excise, Chandigarh Versus 1.
M/s Navrang Dyeing Co. & Ors.
M/s Capital Dyeing Co This is an appeal under section 35L(b) of the Act from the judgment and order of the Tribunal dated 17th April, 1984.
For the reasons in civil Appeals Nos. 2151 52, these appeals must also fail and are accordingly dismissed without any order as to costs.

summary/full:
The Respondent Company was in the business of dyeing acrylic yarn received from traders and manufacturers of hosiery goods on job basis.
It was paying duty at the rate of Rs. 10 per K.G. in terms of Notification No. 125/75 CE dated 12.5.1975 on the presumption that base yarn had dis charged duty liability before it was received for dyeing.
A show cause notice under section 9(2) of the Central Excise Rules, 1944 was issued by the Assistant Collector of Central Excise demanding an amount of Rs.4,300 as central excise duty (C) Rs.24 per K.G. on 180 Kgs.
for the period May 1976 to July 1976.
The demand was resisted by the Respondent Company contending that duty on base yarn was payable by the Manufacturers and the burden of showing that this had not been paid by the Manufacturers was on the Revenue which was not accepted and on appeal by the Assessee the Appellate Collector of Central Excise confirmed the demand.
On further appeal, however, the Appellate Tribunal upheld the conten tion of the Respondent holding that the Manufacturer was liable to pay duty on the base yarn since purchasers could naturally assume that the duty on base yarn would have already been paid by the Manufacturer and that it was for the Department to verify the fact of such payment and take action against the manufacturer, if duty had not been paid particularly when in this case the Assessee had disclosed the names of persons/manufacturers from whom it had received the yarn for dyeing while the matter was pending before the Collector.
Dismissing the appeals preferred by the Revenue, this Court, HELD: Excise is a duty on manufacture.
The liability of payment of this duty is on the manufacturer.
The language of the Notification No. 125/75 dated 12th May 1975 indicates that only the duty for the time being leviable on the base yarn, if not already paid, plus ten rupees per kg.
was the liability.
The description of manufacture was textured yarn produced out of base yarn.
[434B] 431 It would be intolerable if the purchasers were required to ascertain whether excise duty had already been paid as they have no means of knowing it.
It has to be borne in mind that duty of excise is primarily a duty levied on a manufac turer or a producer in respect of the commodity manufactured or produced.
A processor is in the similar position as purchaser of the goods.
[434D E] Sulekh Ram & Sons vs Union of India & Ors., [1978] ELT J 525 and Governor General in Council vs Province of Madras, 72 Indian Appeals 91, referred to.