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Judgment
Nainar Sundaram, J.—The petitioner, in respect of the circlips manufactured by it, wanted to take advantage of Notification No. 99/71-
C.E., dated 29-5-1971. That notification reads as follows :
Notification No. 99/71-C.E., dated 29-5-1971.
In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts motor
vehicle parts and accessories, falling under Item No. 34A of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), other than
those specified in the Schedule hereto annexed, from the whole of the duty of excise leviable thereon.
THE SCHEDULE :
Brake linings.
Clutch facings.
Engine valves.
Gaskets.
Nozzles and nozzle holders.
Piston rings.
Shock absorbers.
Sparking plugs.
Thin-walled bearings.
Tie rod ends.
Electric horns.
Item 34A of the First Schedule to the Central Excises and Salt Act, 1944 (Act 1 of 1944), hereinafter referred to as the Act, as it stood at the
relevant point of time, contemplated the levy of ad valorem excise duty on parts and accessories of motor vehicles not otherwise specified. As it
could be seen, Notification No. 99/71, exempted other than the categorised items, numbering 11, of the motor vehicle parts and accessories, from
the whole of the duty of excise leviable thereon. There were other notifications which brought in certain qualifications for entitlement of exemption
with regard to certain motor vehicle parts. Those notifications have not strict relevance with reference to the points raised in this writ petition. By
Notification No. 95/72-C.E., dated 17-3-1972, Item No. 6 of the Notification No. 99/71-C.E. was substituted as follows :-
(a) pistons
(b) piston rings.
By Notification No. 14/75-C.E., dated 1-3-1975, Item No. 6 of Notification No. 99/71 underwent a further change and the substituted Item 6
reads as follows :-
6 (a) Piston.
(b) Piston rings.
(c) Gudgeon pins.
(d) Circlips."".
The specific case of the petitioner with regard to the circlips manufactured by it is as follows :-
One of the customers of the petitioner is M/s. Ideal Jawa (India) Private Limited, Mysore who manufactures motor cycles. The petitioner supplies
circlips of diameters 3.8 mm, 14 mm, 16 mm, 17.8 mm, 28 mm, 42 mm, 52 mm and 62 mm, to the said company and these are used by said Ideal
Jawa in crank shafts and brake assemblies in the motor vehicles manufactured by them. These circlips are not and cannot be used in the piston
assembly of the motor vehicles manufactured by the said Ideal Jawa Private Limited because the circlips that are necessary for the use in the said
piston assembly are of the diameter 15 mm.
The above case of the petitioner is not being disputed by respondents. However, they would express the stand that circlips manufactured by the
petitioner, though not connected with piston or piston assembly, will still come under Item No. 6 and hence the petitioner could not avail of the
exemption, since it is one of the items of Notification No. 99/71, which stood excluded from the purview of exemption. The petitioner would insist
that only if circlips are connected with the piston or piston assembly, then only they will go out of the purview of exemption and since the circlips
manufactured by it have nothing to do with the piston or piston assembly, they must have the benefit of exemption. The petitioner, however, would
concede that the circlips manufactured by it would come under the residuary Item No. 68 introduced into the First Schedule to the Act in March,
1975. This case of the petitioner was negatived by the first respondent and the first respondent imposed penalty of Rs. 100, ordered confiscation
of the concerned circlips, giving the petitioner liberty to pay a fine of Rs. 1,000 in lieu of confiscation, and further directed the petitioner to pay the
difference in duty in respect of clearances effected during the period from 1-3-1975 to 28-6-1976. The petitioner took up the matter by way of an
appeal to the Appellate Collector and the Appellate Collector did not opine differently with regard to the liability of duty on the circlips, but held
that the demand should be confined only to the period of one year prior to the date of issue of show cause notice. The petitioner agitated the
matter further by way of a revision to the second respondent and the second respondent rejected the revision finding no warrant for interference
with the order of the Appellate Collector. The ultimate order of the second respondent and the initial order of the first respondent are being put in
issue in this writ petition.
Mr. S. V. Subramaniam, learned counsel for the petitioner, would submit that Item No. 6 in Notification No. 99/71 has not suffered any
expansion, but has only got expatiated by the subsequent Notifications 99/72 and 14/75 and the clauses which ultimately got introduced in Item 6
would have reference to piston or piston assembly only and hence circlips, if they have no connection with piston or piston assembly, must go out
of the enumerated items in the Notification No. 99/71 and they must have the benefit of exemption as per the said notification.
On a proper construction of the relevant Notifications, viz., 99/71, 95/72 and 14/75, I am inclined to accept the submission of the learned
counsel for the petitioner. Item 34A of the First Schedule to the Act contemplated levy of an ad valorem duty on parts and accessories of motor
vehicles not otherwise specified. By Notification No. 99/71, motor vehicle parts and accessories falling under Item 34A, other than those specified
in the Schedule annexed to the said notification were exempted from the whole of the duty of excise leviable thereon, as could be seen from the
extract of Notification No. 99/71, the items enumerated were eleven in number. We are not concerned with all of them. We are, in the present
case, concerned only with Item No. 6 classified earlier as piston rings. It is only this item which got clarified or expatiated by subsequent
Notifications 95/72 and 14/75. If the intention was to add on any specific item of new category to the already categorised enumerated items,
nothing prevented the Central Government to add on a specific new item as Item 12 instead of expatiating Item 6 itself. I have not heard any
convincing answer on behalf of respondents for this legitimate question. Item 6, after the Notification No. 95/72, specifically refers to ""pistons"" and
piston rings"" as Clauses (a) and (b). Notification No. 14/75 gives a further expatiation to this item by adding two more Clauses as ""(c) gudgeon
pins"" and ""(d) circlips"". If the intention was to make circlips in general as motor vehicle parts to suffer the excise duty or in other words to go out of
the exemption under Notification No. 99/71, it would have been appropriately incorporated as a specific new and separate item and not to append
it to an already existing Item 6. Notifications 95/72 and 14/75 are only notifications of amendments or expatiation to Item No. 6, and nothing
more. Hence, the amendments or expatiation to this item must have meaning and relevance only with reference to the item as it stood at the
relevant point of time. As already noted, the item originally referred to ""piston rings"", and it subsequently became ""pistons"" and ""piston rings"". When
circlips"" were inserted in this item, they could have reference and relationship to piston or piston assembly only. When a specific item is inserted in
a schedule to a notification and when that item gets expatiated by further amendments, the amendments have got to be read only with reference to
the original insertion and not read de hors the same. The general rule of construction is that no word should be read in isolation, and its colour and
content should be derived from the context in which it occurs and it is the right and duty of the Court to examine a particular word occurring in a
statute in its context and when I say ""context"", I mean the context in which it stands located. Clause (d) of Item 6 ""circlips"" cannot be taken out of
Item 6 as such and must be read only in the context and colour of Item 6 as a whole from its inception. It is only in this regard this Court has to
remember that Item No. 6 originally dealt with piston rings and by Notification No. 95/72, the expatiation took its in fold ""(a) pistons"" and ""(b)
piston rings"". The addition of Clause (d) by Notification No. 14/75 should also derive its colour and content, or in other words, the meaning to be
annexed thereto in the context in which it occurs, viz., with reference to Item 6 only; and the history of Item 6 cannot be ignored in this regard.
Even otherwise, it must be remembered that in dealing with a taxing provision, if any ambiguity is felt or if two interpretations are possible, the
Court should lean towards the interpretation which is beneficial to the subject. As already pointed out, if the intention was to make circlips in
general to suffer the excise duty and not to have the benefit of the exemption under Notification No. 99/71, the Central Government could have
certainly had it as a separate new item, instead of tacking it on to Item No. 6 of Notification No. 99/71. The Schedule to the parent Notification
No. 99/71 categorised and enumerated items under each category. Within the schedule, each categorised item must be taken as a whole,
otherwise categorisation will have no meaning at all. If this is the reasoning that should weigh with me and I find I have no hesitation for the same, I
cannot sustain the orders passed by the authorities under the Act. This obliges me to interfere with them in writ powers.
Accordingly, the writ petition is allowed. No. Costs.