K.S Hegde, J. - (1.) The only question for decision in this appeal by special leave is whether the coils of cotton yarn cleared out of the appellant's factory during the period from 17th August, 1962 to 14th November, 1962 are exempt from excise duty in view of Exts. P. 2 and P. 3 which exempt from payment of excise duty cotton yarn of 17 counts or more but less than 35 counts, if cleared out of factory in 'hanks'.
(2.) The appellant is a company engaged in the manufacture and sale of cotton yarn. It has been manufacturing cotton yarn of varying counts ranging from 20 to 32. Under the provisions of the Central Excises and Salt Act, 1944, cotton yarn is liable to excise duty at the rate prescribed in the Sch. to the said Act. By section 13 (j) of the Finance Act, 1961 (Act XIV of 1961) all cotton yarns less than 35 counts were subject to excise duty at the rate of 10 Np. per Kg. This provision took effect from 1st March, 1961; but the Government by its notification dated 24th April, 1962 under rule 8 of the Central Excise Rules, 1944 granted exemption to the cotton yarn falling under item 18A of the 1st Sch. to the Act from so much of the duty leviable thereon as was in excess of the duty specified in the corresponding entry in column (3) thereof. In view of this notification, the appellant became liable to pay duty at the rate of 3.5 paise per Kg. on cotton yarn produced by it and cleared out of the factory in 'hanks'. On 13th June, 1962 yet another notification was issued by the Government under rule 8 (1) (Exh. P-2) under which single cotton yarn between 17 to 35 counts whether grey or bleached and grey multiple fold yarn cleared out of the factory in hanks were totally exempt from the payment of duty w.e.f. July 24, 1962. In view of this notification, the appellant did not pay any excise duty on the yarn produced by it and cleared out of the factory in coils during the period from 17th August, 1962 to 14th November, 1962.
(3.) The appellant's factory was inspected by the Dy. Superintendent of Central Excise Cannanore sometime in November, 1962. He wrote to the appellant on November 14, 1962 as follows: "On a verification at your mill premises it was noticed that the single yarn produced are double the length of a standard hank of 840 yards.As the exemption of duty on yarn applies only to standard hanks of 840 yards in length, the double hanks produced by you will not be eligible for exemption." In reply to that letter, the appellant informed the Dy. Superintendent, Central Excise that it may be supplied any notification defining 'hanks'. Thereafter as per his communication dated January 1, 1963, the Deputy Superintendent called upon the appellant to pay a sum of Rs. 46,647.85 nP. as excise duty in respect of the single yarn produced by it and cleared out of the factory in coils. A further communication was sent to the appellant by the same Deputy Superintendent in respect of the same demand on January 2, 1963. The appellant objected to the demand but the appellant's objected to the demand but the appellant's objections were rejected by the Assistant Collector on April 14, 1963. Thereafter the appellant unsuccessfully appealed to the Collector of Central Excise. During the pendency of the proceedings, the Government of India by its notification dated February 16, 1963 issued in exercise of its powers under R. 8 (1), amended its earlier notification of September 15, 1962 by adding one more Explanation to that notification to the effect that for the purpose of that notification the term 'hank' means 'hank' "which does not contain more than 768 metres of yarn in plain (straight) reel". It further stated that that notification shall be deemed to have taken effect from the 17th day of August, 1962. As per its notification dated September 28, 1963 a further amendment was made to the notification issued on September 21, 1963. That amendment reads: "Notwithstanding anything contained in explanations 1 and 2, the term 'hanks' shall mean from 1st day of October, 1963, hanks which do not contain more than 1000 metres of yarn in plain (straight) reel." In the notification issued under rule 8 (1) either on June 13, 1962 or on September 15, 1962 (Exts. P-2 and P-3), the word 'hank' was not defined. One of the dictionary meanings given to the word 'hank' is 'circular loop or coil'. The stand taken by the department is that the word 'hank' had acquired a special meaning in commercial circles i.e. a circular loop or coil of cotton yarn 850 yards in length and we must give that meaning to the word 'hank' in Exts. P-2 and P-3.;