Bombay Woollen Mills Pvt. Ltd. and another vs Union of India and others

The 1st petitioner is a limited company engaged in the manufacture of, among other things, woollen yarn which includes hand-knitting yarn. The 2nd petitioner is a Director of the 1st petitioner company. The petitioners have approached this Court under Article 226 of the Constitution of India, challenging the view taken by the respondents who are the authorities under the Central Excises and Salt Act, 1944. The view taken by the said authorities is that the hand-knitting wool which the petitioners are manufacturing does not get the benefit of the exemption granted by Notification No. 27/75 issued on 1st of March, 1975 by the Department of Revenue in the Ministry of Finance. That notification says that various types of yarn spun out of synthetic staple fibres falling under Item No. 18(1) of the First Schedule to the Central Excises and Salt Act and of the description specified in column No. (2) of the table to the said Schedule shall stand exempted from so much of the duty of excise leviable thereon as is in excess of the duty specified in the corresponding entry in column No. (3) thereof. In other words, the effect of this notification was the exemption from the whole of excise duty on items covered by Entry No. 18(i). In the said notification, hand-knitting yarn (manufactured on worsted system) has also been mentioned. If the product manufactured by the 1st petitioners is yarn spun out of acrylic fibre and partly of any natural fibre, the fibre content of which yarn does not exceed 10 per cent, it would be covered by this notification.

However, the authorities have taken the view that the hand-knitting yarn, which is being manufactured by the 1st petitioners is not covered by Item No. 18(i) of the First Schedule to the Central Excise Act. It is only when any item is covered by this entry that the exemption notification of 1st of March, 1975 applies. That is the explicit wording of the notification itself.

Now, one must turn to Item No. 18, which reads as follows :-

"Rayon and synthetic fibres and yarn including textured yarn, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power."

Under this heading, there are several items mentioned. Sub-item No. (i) relates to fibres and yarn, other than textured yarn. It is in respect of this item that the exemption notification has been issued. The petitioners insist that the hand-knitting yarn manufactured by the 1st petitioners is covered by this item. However, on the facts found by the three authorities below after examining the process of manufacture employed by the 1st petitioners, it has been held that the hand-knitting yarn is not a yarn other than textured yarn. In fact, it has been held to be a textured yarn because of the explanation which has been added to Item No. 18. That explanation is as follows :-

"''Textured yarn'' means yarn that has been processed to introduce crimps, coils, loops or curls along with the length of the filaments and shall include bulked yarn and stretch yarn."

The authorities, whose view has now been challenged in this petition, have taken the view that the product manufactured by the 1st petitioners is a bulked yarn because it is subjected to certain process which converts it into bulked yarn.

This view has been challenged in this petition. Mr. Jagdish Prem, the learned Advocate appears in support of the petition and he has taken up several contentions. The first of the contentions is that merely because a product becomes bulked as a result of certain treatment, it does not become a bulked yarn as mentioned in Explanation 2 to Item No. 18. Mr. Prem suggests that unless the yarn has been processed to introduce crimps, coils, loops or curls, it cannot become a bulked yarn. It is only if the yarn is processed in the manner mentioned in the Explanation and if thereafter it acquires bulked character, then alone it would be textured yarn within the meaning of Explanation 2 to Item No. 18.

It is not possible to accept this contention. Under the well-known rules of interpretation of statutes, whenever legislature uses the words "means and includes", it necessarily means that what is included after the word "includes" does not normally form part of what is expressed by the word "means". What is introduced by the second half of the definition clause by adding the word "includes" is normally not a part of the first part. So taking resort to the first part of the definition is wholly irrelevant. Maybe, the legal fiction it has been so. Maybe. This is what the legislature thought should also be included apart from the other items which are included in the earlier part of the definition. In my view, therefore, if it is found, as it has been found by the authorities below, that the hand-knitting yarn, which the petitioners are manufacturing, after a particular process becomes bulked yarn, then it must be held to be texturised yarn. If it is texturised yarn, then it will not be covered by Item No. 18(i). If it is not so covered, then the benefit of the exemption notification will not be available to the petitioners.

Mr. Prem invited my attention to an order of the Appellate Collector dated 28th of March, 1978 given in the case of Kashmilon Processing Industries. According to him, the view taken by the Appellate Collector is contrary to the one taken in these proceedings. I have, with the assistance of Mr. Prem, gone through this order and I find, as pointed out by Mr. Deodhar appearing for the respondents, that the Appellate Collector took the view on the peculiar facts before him. The Appellate Collector noted, probably on the facts which were before him, that the manufacturers before him had not subjected their product to steam in any of the operations. The product, therefore, had not become bulked yarn. On the other hand, from the process of manufacture described by the petitioners themselves in the instant case, it is seen that their product becomes a bulked yarn.

It may not be out of place to refer to a judgment of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) in 1986 (10) ECC 63 wherein a similar product was examined and it was found that the product fell under Item No. 18(ii). In paragraph 12 of the judgment, note is taken of the fact that the tariff makers it abundantly clear that the textured yarn shall include bulked yarn and stretch yarn. It was noticed in the case of the appellants before the Tribunal that after the acrylic fibre of different compositions is spun, doubled and reeled into hank form, such yarn is subjected to the processes of steaming and dyeing. These two processes admittedly gave the yarn, in the words of the appellants themselves, bulky or fluffy appearance. In other words, it was practically admitted that the yarn was bulky yarn.

The petitioners themselves have in their petition mentioned that in their case the grey ''yarn is subjected to a process of dyeing with the help of steam which ensures fast colour to the yarn, which grey acrylic yarn is subject to the process of dyeing because, by reason of the natural properties of acrylic yarn coming in contact with water or steam, it shrinks longitudinally and correspondingly expands. On a careful examination of the process of manufacture involved in the petitioner''s case, the authorities below have arrived at their findings, which findings are not liable to be interfered with by this Court under Article 226 of the Constitution. No error apparent is disclosed.

In the result, the petition must fail. Rule is accordingly discharged with no order as to costs.