JUDGMENT
Ruma Pal, J.
1. The facts in this case are undisputed. The petitioner manufactures millboard from waste paper and board cuttings. The mill board manufactured by the petitioner was excisable under Item 17 of the First Schedule to the Central Excises & Salt Act, 1944 (referred to as the Act). The dispute centres around the interpretation of millboard under Exemption Notification Nos. 44/83 and 45/83 (hereinafter referred to as the said Notifications).
2. Notification No. 44/83-C.E. was issued on 1-3-1983 under Section 8(1) of the Central Excise Rules, 1944 (referred to as the Rules). This notification provided for exemption of diverse items of paper and paperboard of the description specified in column 2 of the Table to the Notification from so much of the duty of excise as was in excess of the amount calculated at the rates specified in the corresponding entry in column (3) of the said Table. Item No. 12 of the said Notification reads as under:
(1) (2) (3) (4)
12. Millboard & Straw-board. Ten per cent ad valorem plus five
hundred twenty-five rupees per
metric ton.
The said Notification contains an explanation which states that for the purpose of the Notification,
“Millboard means any unbleached homogeneous board having a thickness exceeding 0.50 millimetre and made out of waste papers with or without screening and mechanical pulp but without any colouring material being added thereto.”
3. Notification No. 45/83 also issued under Rule 8(1) of the Rules granted further concession in respect of millboard. In this notification also millboard has the identical definition as in Notification No. 44/83.
4. Between 1st April, 1983 and 31st October, 1985 the petitioner submitted six classification lists. In each classification list the petitioner claimed concession under the said two Notifications and also disclosed that the raw material used was mixed wastepaper. The classification lists were approved. The respondents also tested the millboard of the petitioner for the purpose of determining whether wastepaper, board cuttings, straw, jute are contained as raw material in the product. The petitioner cleared the millboard on payment of Excise Duty at the concessional rates. Monthly returns were filed and assessments were completed.
5. On 22nd December, 1986 the Collector of Central Excise issued a show cause notice to the petitioner as to why differential Central Excise Duty of Rs. 38,34,536.94 leviable on the millboard manufactured and cleared by the petitioner should not be recovered from the petitioner under Section 11A of the Act and penalty imposed. The basis of the show cause notice was that the goods were not eligible to the concession under Notification Nos. 44/83 and 45/83 as the mechanical pulp was not used by the petitioner for their manufacture. This notice has been impugned in this proceeding.
6. The grounds upon which the show cause notice dated 22-12-1986 have been challenged by the petitioner are
(a) It was not necessary under the two Notifications Nos. 44/83 and 45/83 that the millboard must contain mechanical pulp for obtaining concession. Reliance has been placed on
(i) a decision of the Government of India relating to the similarly worded notifications No. 70/76-C.E., dated 16-3-1976 and 311/77-C.E., dated 2-11-1977.
(ii) a decision of the Government of India on the interpretation of the definition of millboard as used in the said notifications.
(iii) an unreported decision of this Court in C.O. No. 18439 (W) of 1985 – Nayek Associates and Anr. v. Union of India [Since ] wherein similarly phrased notifications were considered.
The impugned notice and proceedings initiated thereunder were barred by limitation having been issued more than six months after the relevant date. There was no question of any misstatement/suppression or fraud as the petitioner had never contended that the millboard produced by the petitioner had any mechanical pulp. Reliance has been placed on
(i) Collector of Central Excise v. Chemphar Drugs & Liniments
(ii) Padmini Products v. Collector of C. Ex. .
The respondents have contended that
(1) The application is pre-mature as only a show cause notice had been issued. The petitioner could only challenge the show cause notice if it was issued without jurisdiction or did not disclose any liability under the Act on the basis of the facts contained in this show cause notice itself. The petitioner was not entitled to rely upon other documents for negativing the question of liability. It has been argued that in any event the petitioner had an alternative remedy under the Act and therefore this court should not interfere with the proceedings at this stage. The respondents have relied upon Geep Flashlight Industries Ltd. v. Union of India Garware Plastics and Polyester Ltd. and Anr. v. Union of India , I.T.C Ltd. v. Union of India
(2) The mere approval of the classification lists did not mean that the respondents could not question the utilisation of the concession as there could be no estoppel against statute. Reliance has been placed on Elson Machines Pvt. Ltd. v. Collector of Central Excise .
(3) On a plain reading of the Notification it could not be said that the interpretation given in the show cause notice was perverse. The applicability of the decision of the Government, the Board as well as of this court to the case would be properly decided at the time of adjudication. Reliance has been placed on Hansraj Gordhandas v. H.H. Dave .
(4) There was misdeclaration in fact justifying issuance of the show cause notice after the period of six months. The misdeclaration was that the millboard manufactured by the petitioner confirmed to the specification of millboard as contained in the Notification bearing Nos. 44/83 and 45/83 whereas it did not in fact. Reliance has been placed on the decision of Nayek Associates v. Collector of Central Excise .
7. That a show cause notice may be challenged in proceeding under Article 226 in appropriate circumstances has not been disputed by the respondents. It has only been argued that the circumstances in this case do not warrant interference under Article 226. The cases relied upon by the parties indicate some of the circumstances under which the Court will interfere with a show cause notice under Article 226.
8. In the case of Garware Plastics and Polyester Ltd. (supra) the Bombay High Court has stated:
“The petitioner has not been able to canvass at the Bar that the show cause notices ex facie or read in the context of the other plethora of admitted facts point out to one and only one conclusion, namely, that the petitioner has been granted a right to avail of or not to avail of the exemption granted by the earlier Notifications and hence the show cause notices should be quashed.”
In I.T.C. Ltd. (supra) this Court has held:
“A preliminary objection was taken on behalf of the Revenue as to the maintainability of the writ application against the show cause notice and that such a preliminary objection has to be disposed of before I can proceed on to the merits of the case. Ordinarily a writ petition is not maintainable against a show cause notice inasmuch as, when a show cause notice is issued, the party gets an opportunity to place his case before the authority concerned and there are elaborate procedures by way of an appeal and/or revision against such order passed in such proceedings. But when a case is made out that the show cause notice was issued without the authority of law or that the show cause notice on the basis of the admitted facts is not maintainable in law, the writ petition would be maintainable and the writ court can undertake a limited scrutiny on the points raised in the petition to find out whether there was any jurisdictional error and/or any legal infirmity in the proceeding”. . .
“if the writ court can decide the question on the basis of the admitted facts, in that event, the writ petition could be held to be maintainable. If it appears to the writ court that the proceeding suffers from a legal infirmity which goes into the root of the case and is not curable during the proceeding, in my view, the party cannot be directed to submit to the jurisdiction of the authority concerned and to undergo the proceeding which would ultimately fail.”
9. In Geep Flashlight Industries Ltd. (supra) the Supreme Court held:
“The appellant’s prayers for writs of certiorari and mandamus are misconceived. There is no order either judicial or quasi-judicial which can attract certiorari. No mandamus can go because there is nothing which is required to be done or forborne under the Act. The issue of the notice in the present case requires the parties to represent their case. There is no scope for mandamus to do any duty or act under the statute. A writ of prohibition cannot be issued for the obvious reason that the Central Government has jurisdiction to revise.”
10. In that case an appellate order directed refund of monies to the petitioners. The Commissioner sought to revise the order of refund. It was in that context that the Supreme Court made the observation noted above. This case is not an authority for the proposition that the Court in exercise of its powers under Art. 226 will never interfere with a show cause notice.
11. The decisions cited by the petitioner virtually reiterate the principles determined in the cases cited by the respondents.
12. In the case of Gonterman Peipers (supra) this Court had held:
“It is the contention of the Department that in view of the amendment to provisions of Central Excise Act, the proceedings must be deemed to have been transferred from 11th October, 1982 to the Tribunal and therefore, it will be open to the petitioner to agitate the matter before the Tribunal to decide the jurisdiction and validity of the Notice. However, this contention is not acceptable for more than one reason. Firstly, there is a decision of the Patna High Court already on the identical question and secondly, there are several decisions of the Tribunal taking the same view on this question on fact and law. Therefore, it will be idle formality to ask the petitioner to go before the Tribunal and then again come to this Court when there is no material which would justify the issuance of the show cause notice in this case.”
13. In the case of Duncan Agro Industries Ltd. (supra) this Court held:
“But where there is no question of any further investigation of facts and on the undisputed facts, the notice or the order of the Revenue Authorities appears to be illegal, the High Court can interfere in such a case under Article 226 of the Constitution.”
14. In the case of East India Commercial Co. the Supreme Court held:
“If on a reading of the said notice, it is manifest that on the assumption that the facts alleged or allegations made therein were true, none of the conditions laid down in the specified sections was contravened, the Collector would have no jurisdiction to initiate proceedings pursuant to that notice. In such a case the Collector can be prohibited from proceeding with the same.”
15. On the basis of the decisions cited it appears that the court in exercise of its jurisdiction under Art. 226 of the Constitution will interfere with a show cause notice in the following circumstances:
(1) When the show cause notice ex facie or on the basis of admitted facts does not disclose the offence alleged to be committed;
(2) When the show cause notice is otherwise without jurisdiction;
(3) When the show cause notice suffers from an incurable infirmity;
(4) When the show cause notice is contrary to judicial decisions or decisions of the Tribunal;
(5) When there is no material justifying the issuance of the show cause notice.
16. It will therefore have to be considered whether any of such circumstances is prevalent in this case justifying interference with the impugned Notice by this Court.
17. As far as the second contention of the respondents is concerned it will be assumed, without deciding the issue, that the respondents had the jurisdiction to take a different view from the approved classification lists and were not estopped from doing so.
18. This brings us to the third contention. It is contended by the respondents that the notifications granted concessions to millboard which by definition had to contain mechanical pulp. In other words it is contended that the words “with” or “without” qualify “screenings” and not “mechanical pulp”. According to the respondents if the inclusion of mechanical pulp, like screening, was optional the definition of “millboard” would have read as “made out of waste paper with or without screening or mechanical pulp” instead of “and mechanical pulp”.
19. The identical definition of millboard occurred in an earlier notification issued under the Act. The definition has been considered technically, departmentally at the Government level, by the Central Board of Excise & Customs and by this Court.
20. On 1-3-1979 a letter was addressed by the Indian Standard Institution to the Ministry of Finance, Government of India, Department of Revenue in which it has been stated :
According to the present definition of Millboard given in IS: 2617-1967 Millboard, greyboard and strawboard (first revision) the millboard is a homogeneous board made usually of mixed waste papers and may or may not contain either screening or mechanical pulps. It is not sine qua non for the board to contain mechanical pulp.”
21. On 9-4-1979 the Law Ministry submitted Advice No. 21988/79 to the following effect:
“The definition ‘Millboard’ extracted at ‘A’ at page 10 ante, liberally interpreted, does not support the contention that a board to qualify as a ‘Millboard’ for the purposes of Explanation under Notification in question must be made out of mixed waste papers and mechanical pulp. According to the definition, presence of both screenings ____ and mechanical pulp in the mixed waste papers is optional and not compulsive while the absence of colouring metal is a must.”
(5) “Accordingly, the stand taken by the C.B.E.C. that for the purpose of the said Explanation, a ‘Millboard’ need not necessarily include mechanical pulp, is confirmed to be legally in order.”
22. On 2-6-1979 the Central Board of Excise and Customs issued a circular which insofar as it is material reads as follows:
“Notifications 70/76-C.E., dated 16-3-1976 and 311/77-C.E., dated 2-11-1977 under which concessional rate of duty is applicable to ‘Millboard’. For the purposes of Central Excise Millboard means ‘any unbleached homogeneous board, having a thickness exceeding 0.50 millimetres and made out of mixed waste papers with or without screening and mechanical pulp but without any colouring matter being added thereto.”
“2. It has been brought to the Board’s notice that the above Explanation is sought to be interpreted in a restrictive manner. According to this interpretation the presence of mechanical pulp is a sine qua non in order for millboard to be entitled to the benefit under the above Notifications.” “It is not a sine quo non that millboard should contain mechanical pulp. Law Ministry is also of the view that for the purpose of the above Explanation, millboard need not necessarily be made out of mixture of waste papers and mechanical pulp.”
23. These clarifications much preceded the notifications which are the subject matter of this case. Therefore, it can be assumed that when the identical definition of millboard was used again in the same statute dealing with the same subject matter it was intended that the definition would bear the meaning so attributed to it. It has not been shown by the respondents that the context is different justifying a different meaning being given to the definition of millboard.
24. In Webb v. Outrim reported in (1907) A.C. 81 the Privy Council approved the following statement of the law:
“When a particular form of legislative enactment which has received authoritative interpretation, whether by judicial decision or by long course of practice, is adopted in the framing of a later statute, it is a sound rule of construction to hold that the words so adopted were intended by the legislature to bear the meaning which had been so put upon them.”
25. Furthermore it may also be contended by the petitioners that the circular dated 2-6-1979 is binding upon the respondents having been issued by an authority superior to the respondent issuing the impugned Show Cause Notice. It may be noted that under Section 37B of the Act instructions issued in the matter of classification by the Central Board of Excise & Customs is binding on all Excise Officers. Section 37B was inserted in the statute in 1985 i.e. before the impugned show cause notice was issued.
26. Finally no reason has been put forward for differing with the view taken by a learned Single Judge of this Court in respect of the identical definition in another notification under the Act. In the unreported decision of Nayek Associates v. Union of India [C.O. No. 18439(W) of 1985 Judgment delivered on 1-9-1990 since ] B.P. Banerjee J. held that a plain reading of the notification indicated that the millboard made out of waste papers with or without mechanical pulp should be granted exemption. It is noteworthy that the respondents have not preferred any appeal from the judgment.
27. There could therefore be no question of the respondents in this background to again proceed on the basis that millboard in order to attract the concessional rate of duty under the said Notifications must contain mechanical pulp.
28. Even assuming there was any persisting ambiguity in the said Notifications, it is a well-settled principle that when two views of a notification are possible it should be construed in favour of the subject as the notification is part of a fiscal enactment and that while interpreting an exemption clause, a liberal interpretation [should be imparted to the language thereof, provided (sic)] no violence is done to the language employed [See: Collector of Central Excise v. Park Exports (P) Ltd. ].
29. In my view therefore even if the facts as stated in the Show Cause Notice are assumed to be correct no offence has in fact been disclosed.
30. The petitioner had therefore correctly claimed the concessional rate under the said notifications and there was no justification for the respondents to initiate proceedings against the petitioner for that reason. The Show Cause Notice is thus liable to be quashed on this ground.
31. However, I do not wish to rest my decision on this finding alone. Assuming that mechanical pulp was a necessary ingredient for millboard to qualify for the benefit under the said notifications, in my view the impugned show cause notice had also been issued beyond the period of limitation prescribed under Section 11A of the Act. Section 11A of the Act reads as follows :
“11 A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded
(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:
Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words “Central Excise Officer”, the words “Collector of Central Excise”, and for the words “six months”, the words “five years” were substituted.
(3) For the purposes of this section,
(i) …
(ii) “relevant date” means,
(a) in the case.of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid.
(A) Whereunder the rules made under this Act a monthly return, showing particulars of the duty paid on the excisable goods removed during the month to which the said return relates, is to be filed by a manufacturer or producer or a licensee of a warehouse, as the case may be, the date on which such return is so filed.”
32. Admittedly, the monthly returns for the period in question were filed between 1-4-1983 and 31-10-1985. The impugned notice was issued on 22-12-1986.
33. From the copies of the classification lists it appears that the petitioner had explicitly described the raw material used. This did not include mechanical pulp. Yet the respondents approved the petitioner’s claim for the concessional rates of duty under the said notifications in the said classification lists. The respondents also had the millboard manufactured by the petitioner tested. All this is not in keeping with any question of fraud or collusion or wilful misstatement or suppression of facts (See Collector of Central Excise v. Chemphar Drugs & Liniments and Tata Iron & Steel v. Union of India ; and Nat Steel Equipment Pvt. Ltd. Nor can it be said that the alleged “construction of the provisions of the Act” was with an intent to evade duty. That the petitioner was acting on a possible interpretation of the said notifications cannot be disputed. The possible interpretation is justified in view of the opinions of the Government and the Central Board of Excise and Customs and the Indian Standard Institution noted above. In such a situation when there is scope for doubt the Supreme Court in Padmini Products v. Collector of Customs has held that the provisions of Section 11A would not be attracted.
34. The impugned show cause notice has in the circumstances been issued beyond the time limit set under Section 11A of the Act and is liable to be quashed on this ground also.
35. For all the aforesaid reasons the application is allowed. The Rule Nisi is made absolute, the impugned Show Cause Notice and all proceedings thereunder are quashed. There will be no order as to costs.
36. All parties to act on a signed copy of the operative part of this judgment and order on usual undertaking.