Bhagwati, J. - (1.) These appeals by special leave are directed against the judgment of the Karnataka High Court allowing 12 writ petitions filed by different respondents. Each of the respondents owned at the material time not more than 4 powerlooms and carried on business of manufacturing cotton fabrics on those powerlooms. The case of the respondents was that each of them acquired his powerlooms from persons who were or had been licensees and started manufacturing cotton fabrics on those powerlooms prior to 1st April, 1961. The respondents claimed that since each of them had not more than 4 powerlooms in his factory, no excise duty was payable on the cotton fabrics manufactured by him and this claim for exemption was based on a notification dated 5th January, 1957 issued by the Government of India in exercise of the powers conferred upon it by Rule 8 (1) of the Central Excise Rules, 1944. The Superintendent of Central Excise, however, rejected the claim for exemption on the ground that though the powerlooms owned by each of the respondents were not more than 4, manufacture of cotton fabrics on them had started after 1st April, 1961 and none of the respondents was, therefore, entitled to exemption from payment of excise duty on the cotton fabrics manufactured by him. The excise duty was accordingly levied on each of the respondents by the Superintendent of Central Excise and this levy was confirmed in appeal by the Assistant Collector and in further appeal by the Collector of Central Excise. Each of the respondents thereupon preferred a writ petition in the Karnataka High Court challenging the levy of excise duty and praying that a writ of mandamus may be issued against the Excise Authorities directing them not to enforce the notice demanding excise duty. The writ petitions were allowed by the High Court and hence the Union of India preferred the present appeals after obtaining special leave from this Court.
(2.) Before we proceed to examine the rival contentions of the parties in regard to the controversy arising in these appeals, it is necessary to set out briefly the relevant provisions of law having a bearing on this controversy. The Central Excises and Salt Act, 1944 by Sec. 3 read with Item 19 provided for levy of excise duty on all varieties of cotton fabrics including cotton fabrics manufactured on powerlooms. Section 37 sub-sec. (2) of the Act conferred power on the Central Government to make Rules providing for a number of matters including inter alia clause (xvii) which was in the following terms: "Exempt any goods from the whole or any part of duty imposed by this Act." The Central Government in exercise of this rule-making power made the Central Excise Rules, 1944 of which Rule 8, clause (1) provided that "the Central Government may from time to time by notification in the Official Gazette exempt, subject to such conditions as may be specified in the notification, any excisable goods from the whole or any part of the duty leviable on such goods." In exercise of this power of exemption conferred under Rule 8, clause (1), the Central Government issued a notification dated 5th January, 1957 exempting certain varieties of cotton fabrics from the whole of the excise duty leviable thereon and one of such varieties set out in Item 7 was as under: "Cotton fabrics produced in factories commonly known as powerlooms (without spinning plants) provided that the number of powerlooms producing cotton fabrics in such factories does not exceed four." This item was later substituted by another item by a notification of the Central Government dated 19th Jan. 1957 and the substituted item was as follows: "Cotton fabrics manufactured by or on behalf of the same person in one or more factories commonly known as powerlooms (without spinning plants), in which less than 5 powerlooms in all are installed." The scope of the exemption granted under this item was restricted by the addition of the following proviso by a Central Government notification dated 26th November, 1960: "Provided that this exemption shall not be applicable to a manufacturer who commences production of the said fabrics for the first time on or after the 1st December, 1960 by acquiring powerlooms from any other person who is, or has been a licensee of powerloom factory." There was a further change made by a notification issued by the Central Government on 1st March, 1961 and the then existing Item 7 was substituted by the following Item: " (7) Cotton fabrics manufactured by or on behalf of the same person in one or more factories commonly known as powerlooms (without spinning plants) in which less than 3 powerlooms in all but not roller locker machine are installed," The result was that the exemption granted under Item 7 was considerably narrowed down and the proviso taking away the exemption in certain cases was deleted. But again, by a notification dated 1st April, 1961, the Central Government introduced the following proviso under Item 7: "Provided that this exemption shall not be applicable to a manufacturer who commences production of the said fabrics for the first time on or after the 1st April, 1961 by acquiring powerlooms from any other person who is or has been a licensee of powerloom factory." Thus from 1st March, 1961 the benefit of the exemption from excise duty was available only to those manufacturers who had not more than 2 powerlooms in all in their factories and from and after 1st April, 1961 even this limited exemption was withdrawn from manufacturers who commenced production of cotton fabrics for the first time on or after 1st April, 1961 by acquiring powerloom from any person who was or had been a licensee of powerloom factory.
(3.) Now in the present appeals each of the respondents owned admittedly not more than 4 powerlooms, but it does not appear from the record before us as to whether any of them owned more than 2 powerlooms. If it is found that any of the respondents owned more than 2 powerlooms, he would not be within the exemption granted under Item 7 of the amended Notification dated 5th January, 1957 and excise duty would be payable on the cotton fabrics manufactured by him. But even if any of the respondents owned not more than 2 powerlooms and was, therefore, within the exemption granted under Item 7 of the amended notification dated 5th January, 1957, the question would still arise whether he forfeited the exemption by reason of the proviso to Item 7 introduced by the notification dated 1st April, 1961. The answer to this question would depend upon the true construction of the proviso and we shall presently consider this question, but before we do so, it is necessary to refer to some other notifications issued by the Central Government under the Central Excise Rules, 1944.;