Case Summary
| Citation | Oswal Agro Mills Ltd. v. CCE 1993 Supp (3) SCC 716 |
| Keywords | ejusdem generis, toilet soaps, Central Excise and Salt Act, soap |
| Facts | Oswal Agro Mills Ltd. manufactured toilet soaps (bathing soaps) and claimed that their product should be classified under Item 15(1) of the Central Excise Tariff, which includes “Soap, household and laundry” and attracts a lower rate of excise duty. However, the Central Excise authorities classified their product under Item 15(2), which pertains to “Soap, other sorts,” thus imposing a higher rate of duty. Initially, the Assistant Collector categorized the product as “other sorts,” but the Collector (Appeals) determined it to be “household” soap. The Tribunal later overturned the Collector’s order, leading to an appeal before the Supreme Court. |
| Issues | Whether “toilet soap” (bathing soap) should be classified under “Soap, household and laundry” (Item 15(1)) or “Soap, other sorts” (Item 15(2)) for the purpose of excise duty under the Central Excises and Salt Act, 1944, as amended in 1964? |
| Contentions | |
| Law Points | The Court reiterated the principle that when interpreting a statutory provision, nothing should be added or deleted; the intention of the legislature must be discerned from the language employed. There is no place for assumptions or presumptions in a taxing statute. Before the 1964 amendment, “toilet soap” was categorized separately with its own tariff rate. The amendment removed this distinct category, grouping soaps instead into “household and laundry” and “other sorts.” The Court emphasized the importance of understanding terms in their common and commercial usage. It argued that “toilet soap” is primarily used by households for bathing. When someone goes to the market and requests toilet soap, they are typically looking for soap intended for personal bathing. The Court concluded that the term “household” in Item 15(1) should be interpreted broadly to encompass soaps used for personal bathing within a household. While household soaps may also be used for cleaning utensils or laundry, toilet soap specifically serves the family’s bathing needs. The Court dismissed the argument that “household” soap should be limited to soaps used solely for cleaning items and laundry. It noted that the elimination of the separate category for toilet soap, along with its omission from “other sorts,” indicated that it should be classified under the broader category of “household” in commercial terms. Although the Court recognized the legislative history in which toilet soap had been treated as a separate category, it focused on interpreting the amended provision based on the language used and its common understanding. In the context of the amended Item 15 of the Central Excises and Salt Act of 1944, “toilet soap” (bathing soap), based on its common and commercial understanding, falls under the category of “Soap, household and laundry” (Item 15(1)). Therefore, it is subject to the lower rate of excise duty applicable to that category. The term “household” is to be understood broadly, including soaps used for personal bathing within a household. |
| Judgement | The Supreme Court allowed the appeals filed by Oswal Agro Mills and held that “toilet soap” should be classified under “Soap, household and laundry” (Item 15(1)). |
| Ratio Decidendi & Case Authority |
Full Case Details
K. RAMASWAMY, J. – Common questions of law which arose for decision in these 8 appeals need disposal by this judgment. The question relates to classification of “toilet soap” in Excise Item 15 of the First Schedule to the Central Excises and Salt Act 1 of 1944 as amended in 1964 for short ‘the Act’. In addition, in C.A. Nos. 813 of 1986, 3632-34 of 1988 and 1102 of 1989 sequel to its finding, they claim refund of excess excise duty. The facts in C.A. Nos. 2702 and 2785 of 1984 are sufficient for disposal. The appellants laid before Assistant Collector classification list claiming “toilet soaps” Kalpa and Oasis, in other appeals Jai, O.K., Moti, Rain drop, Gold and Ria as bath soaps under tariff Item 15(1) of the First Schedule (Household). By notice dated August 31, 1982, the Assistant Collector called upon the appellants to show cause as to why they cannot be classified under tariff Item 15(2) ‘other sorts’ and be levied excise duty at 15 per cent ad valorem (as then stood). The appellants after filing their reply thereto and having had personal hearing, by proceedings dated November 27, 1982, the Assistant Collector classified toilet soaps as “other sorts” under tariff Item 15(2) of the Schedule. On appeal the Collector by order dated January 21, 1983 classified them under tariff Item No. 15(1) “household”. On second appeal, the CEGAT by its order dated June 20, 1984 reversed the appellate order and upheld the Assistant Collector’s order. Same is the case with regard to all other appeals except resultant claim for refund. In 1954 tariff Item No. 15-A was introduced in the First Schedule of the Act thus:
“15-A. ‘Soap’ means all varieties of the product known commercially as soap –
I. Soap, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power or of steam for heating:
(1) Soap, household and laundry –
(a) Plain bars of not less than one pound in weight (b) other sorts
(2) Soap toilet
Rupees five & annas four per cent. Rupees six & annas two per cent. Rupees fourteen per cent.
Rupees fourteen per cent.”
(3) Soap, other than household and laundry or toilet.
2. This entry as amended in 1964 reads thus:
“15. ‘Soap’ means all varieties of products known commercially as soap:
(1) Soap, household and laundry 20 per cent ad valorem (2) Other sorts 20 per cent ad valorem
(Ad valorem rate of tariff varies from time to time as per amendments).”
Later it was amended in the year 1979 empowering the Government to grant exemption under Section 8 of the Act. The details thereof are not material for the purpose of these cases. It is seen that in 1954 in tariff entry 15-A “soap” means all varieties of the product known commercially as soap. Item I provided that soap in relation to its manufacture with the aid of power or of steam for heating, they were classified as plain bars, other sorts, toilet soaps and soap, other than household or laundry or toilet. While amending the entry in 1964 the language
couched therein as seen earlier is thus: ‘soap’ means all varieties of products known commercially as soap: (1) Soap, household and laundry (2) “Other sorts” and graded ad valorem tariff has been prescribed. It is seen that household and laundry soap was subjected to levy of tariff at a lesser rate than “other sorts” ad valorem. The contention of Shri Ganguli, the learned senior counsel for the Union is that statute always kept distinction between soap “household and laundry” and “other sorts”. Toilet soap was kept in the packet of other sorts. Household and laundry soaps are being used for cleaning household articles and utensils and washing the clothes while toilet soaps are for bathing purpose. The latter compose of diverse varieties, based on personal liking and taste, which are being used. They are commercially known as other sorts but not household. The legislative history furnishes unimpeachable evidence that soaps used for household and laundry are compendiously treated as a class and are subjected to imposition of lesser tariff. They receive their colour from each other as compendiously known in the commercial parlance that the former are meant for use for household purposes while toilet soap are for use for bath and are subject to higher rate of tariff at par with soap for commercial and industrial purposes. They bear higher rate of tariff. The explanatory note appended to the Finance Bill, 1964 would furnish the legislative intendment to amend the tariff item and the treatment meted out to toilet soap for tariff purpose. It is accordingly understood by the department and also by the trade circles. The appellants too initially treated toilet soap as other sorts but later, on legal opinion, they claimed them as household soaps. The construction adopted by the Tribunal is consistent with the standard works on soaps. M/s Harish Salve and Ashok Desai, contended that in 1954 toilet soap was treated as an independent tariff sub-item and household and laundry soaps were treated as separate entity and separately subjected to varied rates of tariff. On amendment in 1964 toilet soap was omitted as a separate entity and was brought as part of the genus, namely, “soap household”, as toilet soap is always a household soap. Therefore, the reliance by Revenue on varied rates of duty or departmental contemporanea expositio have no bearing. The object of classification does not show that toilet soap is not part of the genus “soap household” unless it is established otherwise.
3. The question, therefore, emerges whether “toilet soap” would be household soap within the meaning of tariff Item 15(1) of the Schedule. Undoubtedly true, as contended by Shri Ganguli, that preceding the amendment toilet soap was classified separately under sub-item (2) and assessed to duty accordingly. But by amendment the distinction was wiped out and toilet soap was brought into common hotchpotch. So the contention that the variety of products known commercially as soaps have been enumerated or included compendiously, retaining their original colour even after the amendment made in the Finance Act, 1964 and falls into “other sorts” same genus, prima facie, though attractive, on consideration from proper perspective and in its setting in common commercial parlance, soap “toilet” appears to fall in household in sub-item 1 of tariff Item 15 of the Schedule. It is true that the heading “soaps” are commercially known to be of diverse variety.
4. The provisions of the tariff do not determine the relevant entity of the goods. They deal whether and under what entry, the identified entity attracts duty. The goods are to be identified and then to find the appropriate heading, sub-heading under which the identified goods/products would be classified. To find the appropriate classification description employed in the tariff nomenclature should be appreciated having regard to the terms of the headings read
with the relevant provisions or statutory rules or interpretation put up thereon. For exigibility to excise duty the entity must be specified in positive terms under a particular tariff entry. In its absence it must be deduced from a proper construction of the tariff entry. There is neither intendment nor equity in a taxing statute. Nothing is implied. Neither can we insert nor can we delete anything but it should be interpreted and construed as per the words the legislature has chosen to employ in the Act or rules. There is no room for assumption or presumptions. The object of the Parliament has to be gathered from the language used in the statute. The contention that toilet soap is commercially different from household and laundry soaps, as could be seen from the opening words of Entry 15, needs careful analysis. It is well, at the outset, to guard against confusion between the meaning and the legal effect of an expression used in a statute. Where the words of the statute are plain and clear, there is no room for applying any of the principles of interpretation which are merely presumption in cases of ambiguity in the statute. The court would interpret them as they stand. The object and purpose has to be gathered from such words themselves. Words should not be regarded as being surplus nor be rendered otiose. Strictly speaking there is no place in such cases for interpretation or construction except where the words of statute admit of two meanings. The safer and more correct course to deal with a question of construction of statute is to take the words themselves and arrive, if possible, at their meaning, without, in the first place, reference to cases or theories of construction. Let us, therefore, consider the meaning of the word soap “household”. The word household signifies a family living together. In the simplistic language toilet soap being used by the family as household soap is too simplification to reach a conclusion. Therefore, one has to gather its meaning in the legal setting to discover the object which the Act seeks to serve and the purpose of the amendment brought about. The task of interpretation of the statute is not a mechanical one. It is more than mere reading of mathematical formula. It is an attempt to discover the intention of the legislature from the language used by it, keeping always in mind, that the language is at best an imperfect instrument for the expression of actual human thoughts. It is also idle to expect that the draftsman drafted it with divine prescience and perfect and unequivocal clarity. Therefore, court would endeavour to eschew literal construction if it produces manifest absurdity or unjust result. In Manmohan Das v. Bishun Das [AIR 1967 SC 643], a Constitution Bench held as follows:
“The ordinary rule of construction is that a provision of a statute must be construed in accordance with the language used therein unless there are compelling reasons, such as, where a literal construction would reduce the provision to absurdity or prevent the manifest intention of the legislature from being carried out.”
5. In Ramavatar Budhaiprasad v. Assistant STO [AIR 1961 SC 1325], another Constitution Bench was to consider whether “betel leaves” are “vegetable” within the meaning of Item 6 of Second Schedule to the M.P. Sales Tax Act. It was contended that betel leaves are vegetable and, therefore, they are exempted from the payment of sales tax. While construing Item 6, this Court held that the words must be construed not in any technical sense nor from the botanical point of view but as understood in common parlance. It has not been defined in the Act and being a word of every day use it must be construed in its popular sense meaning “that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it”. It is to be construed as understood in common language. Therefore, betel leaves
were held to be not vegetable.The term ‘vegetables’ is to be understood as commonly understood denoting those classes of vegetable matter which are grown in kitchen gardens and are used for the table. In Porritts & Spencer (Asia) Ltd. v. State of Haryana [(1979) 1 SCR 545], this Court held that ‘Dryer felts’ are not textiles. In that context the principle of understanding the meaning of the word in common parlance was adopted. In Indo International Industries v. CST [(1981) 3 SCR 294, 297], this Court held:
“It is well-settled that in interpreting items in statutes like the Excise Tax Acts or Sales Tax Acts, whose primary object is to raise revenue and for which purpose they classify diverse products, articles and substances resort should be had not to the scientific and technical meaning of the terms or expression used but to their popular meaning, that is to say, the meaning attached to them by those dealing in them. If any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted.”
In that case the clinical syringes manufactured and sold by the assessee were not considered as ‘glassware’ falling within Entry 39 of the First Schedule of the Act. In commercial sense glassware would never comprise of articles like clinical syringes etc., or specialised significance and utility.
6. In Shri Bharuch Coconut Trading Co. v. Municipal Corpn. of the City of Ahmedabad [1992 Supp (1) SCC 298], this Court applied the test as “would a householder when asked to bring some fresh fruits or some vegetables for evening meal, bring coconut too as vegetable? Obviously the answer is in the negative”. Again when a person goes to a commercial market ask for coconuts, “no one will consider brown coconut to be vegetable or fresh fruit, no householder would purchase it as a fruit. Therefore, the meaning of the word brown coconut, whether it is a green fruit has to be understood in its ordinary commercial parlance”. Accordingly it was held that brown coconut was not green fruit. In interpreting the statute the individual appraisal of the wisdom or unwisdom of a particular course consciously selected by the legislature is to be put aside. In Hansraj Gordhandas v. H.H. Dave, Asstt. Collector of Central Excise & Customs [AIR 1970 SC 755], this Court held that the operation of the statutory notification had to be judged not by the object which authority had in mind but by the words it had employed to effectuate the legislative interest. The question whether the cotton textiles manufactured by handlooms are entitled to exemption, this Court held in the positive. It may be noted that marketability of the product is an essential facet to attract dutiability of the goods under the Act. The general purpose or common use of the product though may not be conclusive but may be relevant to classify it in a tariff entry when it was not specifically enumerated in a particular entry or sub-entry. The construction of the word must yield in favour of promoting and effectuating the object and purpose of the Act. In Dunlop India Ltd. v. Union of India [(1976) 2 SCR 98], this Court found the entry not in residuary but placed in the parentage and relieved it from orphanage. In Anant B. Timbodia v. Union of India [(1992) 1 SCALE 527], this Court was to consider whether imported cloves fell within Item 169 in List 8 of Appendix 6 or para 167 of Chapter 8 of Import and Export Policy 1990-93. Para 167 of
Chapter 8 of Import Policy clearly provided the heading – Import of Spices includes cloves, cinnamon/cassia, nutmeg and mace. Therefore, it was held that import permit is necessary. The doctrine of popular sense or trade or its use in making medicine as crude drug was not accepted. Dictionary meaning or meaning given in Indian Pharmaceutical Codex was not accepted as given in view of specific enumeration. In Superintendent of Central Excise, Surat v. Vac Metal Corpn. Ltd. [AIR 1986 SC 1167], when the Revenue contended that metallised yarn fell within general tariff Entry 18 “yarn and synthetic fibres”, this Court held that Entry 15-A(2), First Schedule of Central Excises and Salt Act’s specific entry relating to articles made of plastics of “all sorts” and metallised yarn was exigible to lesser tariff duty.
7. The contention of the Revenue which finds favour with the Tribunal that the legislative history and memorandum appended to the Finance Bill would furnish aid to the construction of the word “household” soap is not apposite to the fact situation. When there is ambiguity in the word, statement of objects, the legislative history, the memorandum appended to the Bill and the speech of the mover of the Bill are relevant material to discover the intention of the legislature. In Shashikant Laxman Kale v. Union of India [(1990) 4 SCC 366, 376], this Court held that “for determining the purpose or object of the legislation, it is permissible to look into the circumstances which prevailed at the time when the law was made, the Statement of Objects and Reasons of the Bill which actuated the step to provide a remedy for the then existing malady can be used for the limited purpose of appreciating the background and the antecedent state of affairs leading to the legislation. The memorandum explaining the provisions in the Finance Bill which were not part of the ‘notes on clauses’ appended to the Statement of Objects and Reasons of the Bill cannot be used to draw support therefrom as it is not an accurate guide of the final Act. Ajoy Kumar Banerjee v. Union of India [(1984) 3 SCC 127] relied on by Shri Ganguli in this behalf renders no assistance to the Revenue. Therein the question was the object of delegated legislation. Therein the memorandum appended to the Bill incorporating Section 16 of the General Insurance Business (Nationalisation) Act, 1972 was considered in the context of fixation of the pay scales of the employees. The doctrine of reading down, placing reliance on Utkal Contractors and Joinery Pvt. Ltd. v. State of Orissa [(1987) 3 SCC 279], also is of no assistance to the Revenue. The doctrine of reading down has been applied only to sustain the constitutionality of the statute which question is not before us. There is no quarrel with the proposition that in ascertaining the meaning of the word or a clause or sentence in the statute in its interpretation, everything which is logically relevant should be admissible. It is no doubt true that the doctrine of noscitur a sociis, meaning thereby, that it is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them i.e. when two or more words which are susceptible of analogous meaning are clubbed together, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general is restricted to a sense analogous to a less general. The philosophy behind it is that the meaning of the doubtful words may be ascertained by reference to the meaning of words associated with it. This doctrine is broader than the doctrine of ejusdem generis. This doctrine was accepted by this Court in a catena of cases but its application is to be made to the context and the setting in which the words came to be used or associated in the statute or the statutory rule. Equally the doctrine of contemporanea expositio is also being invoked to cull out the intendment by
removing ambiguity in its understanding of the statute by the executive. This Court in a latest case Indian Metals & Ferro Alloys Ltd. v. Collector of Central Excise[1991 Supp (1) SCC 125], cited all the decisions up to date and applied the doctrine to the understanding by the Revenue of the provisions in Income Tax Act. In Desh Bandhu Gupta & Co. v. Delhi Stock Exchange Assn. Ltd. [(1979) 3 SCR 373], this Court held that this principle can be invoked, though the same will not always be decisive on the question of construction. But the contemporaneous construction placed by administrative or executive officers charged with executing the statute, although not controlling, is nevertheless entitled to considerable weight as highly persuasive. We may also add that if the interpretation is erroneous, court would without hesitation refuse to follow such construction. This Court also equally expressed the view that its application was in restricted sense to ancient legislation in J.K. Cotton Spinning and Weaving Mills Ltd. v. Union of India [1987 Supp SCC 350] and in Doypack Systems Pvt. Ltd. Case [Doypack Systems (P) Ltd. v. Union of India (1988) 2 SCR 962, 1000]. In State of M.P. v. G.S. Dall and Flour Mills [1992 Supp (1) SCC 150, 153], this Court doubted the application of the doctrine of contemporanea expositio as given to the construction or its applicability to a recent statute that too in the first few years of its enforcement. In this case also the question whether toilet soap is a household soap had arisen within a short period after the Amendment Act, 1964 came into force. Therefore, the understanding by the executive and its interpretation in bringing toilet soap in sub-item (2) “other sorts” instead of item (1) “household” being of formative period of statutory operation the doctrine became inapplicable.
8. The ratio in Indian Metal case therefore, is inapplicable. As rightly contended by Shri Ganguli that the doctrine of placement of a particular goods in a particular tariff item or residuary i.e. parentage or orphanage i.e. in placement of toilet soaps in either sub-items is not attracted to the facts as it is not a case of residuary items but of sub-classification within the same item.
9. Thus considered in the legal setting and commercial parlance we are of the considered view that “toilet soap” being of everyday household use for the purpose of the bath and having removed its separate identity which it enjoyed preceding amendment and having been not specifically included in “other sorts”, it took its shelter in commercial parlance under “household”. As stated if anybody goes to the market and asks for toilet soap he must ask only for household bathing purpose and not for industrial or other sorts. Even the people dealing with it would supply it only for househo purpose. It may be true that household consists of soap used for cleaning utensils, laundry used for cleaning soiled clothes and soap toilet is used for bathing but household is compendiously used, toilet soap is used only by the family for bathing purpose. Individual preference or choice or taste of a particular soap for bath is not relevant. The soap “toilet” would, therefore fall within the meaning of the word “household” in sub-item (1) of Item 15 of the Schedule. The classification shall accordingly be adopted. The appeals are accordingly allowed. The cases are remitted to the primary authority to deal with the matters accordingly. We do not propose to go into the question of refund as it is a matter to be dealt with by the authorities concerned in accordance with the law. The appellants shall have to apply for refund and the authorities shall be required to deal with it in accordance with law. It is for the authority, therefore, to decide the question as per law.
