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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1978 OF 2007

M/S. SPENTEX INDUSTRIES LTD. ...APPELLANT

VERSUS

COMMISSIONER OF CENTRAL EXCISE  & ORS.

...RESPONDENTS

W I T H

CIVIL APPEAL NOS. 2025-2026 OF 2013 CIVIL APPEAL NO. 2027 OF 2013

AND CIVIL APPEAL NO. 10534 OF 2013

J U D G M E N T

A.K. SIKRI, J.

In all these appeals, the basic question of law which arises

for consideration is as to whether or not the manufacturer/exporter is

entitled to rebate of the excise duty paid both on the inputs and on the

manufactured  product,  when  excise  duty  is  paid  on  a  manufactured

product and also on the inputs which have gone into manufacturing the

product and such manufactured product is exported?   

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2) We may point out at the outset that, as per the scheme provided by the

relevant Rules framed under the Central Excise Act, 1944 (hereinafter

referred  to  as  the  'Act')  two  options  are  admissible  in  respect  of

exemption  from  excise  duty  which  is  to  be  given  when  the  goods

manufactured  are  meant  for  export  and  are  actually  exported.  A

manufacturer/exporter can either export the said goods without payment

of duty by executing a bond to the effect that goods are meant for export

and would  be actually  exported  and also  undertakes  to  satisfy  other

stipulated conditions,  to  earn the exemption from payment  on excise

duty.  Other option is to pay the duty on intermediate products and/or

final products and thereafter claiming rebate from the Government once

the  goods  are  actually  exported.  When  the  manufacturer/exporter

exercises  first  option,  admittedly  no  duty  is  to  be  paid  either  on

intermediate products or on final products.  However, the dispute has

arisen when second option is executed. In such a case, the Department

has  taken  the  stand  that  as  per  the  relevant  rules,  the  rebate  is

admissible in  respect  of  one duty alone,  i.e.,  either  on the duty paid

excisable goods or duty paid on materials used in the manufacture or

processing  of  such  goods  but  not  on  both  the  final  as  well  as

intermediate products. The authorities below, as would be noticed, in all

these cases have accepted the version of the Revenue.  Therefore, in

these four appeals, assessees are the appellants.

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3) After  giving  the  aforesaid  preliminary  background thereby  putting  the

issue in perspective, that has arisen for consideration we may take note

of the factual background. For the purpose of convenience, it would be

sufficient if we traverse through the facts that emerge from Civil Appeal

No. 1978 of 2007.  

The appellant/assessee, in this appeal, is engaged in the manufacturing  

of polyester cotton blended yarn and polyester viscose blended yarn and

both these products fall under Chapter 55 of the Schedule to the Central  

Excise Tariff Act, 1985.  For manufacture of the aforesaid product, the  

assessee had used the raw material which was an intermediate product  

and paid excise duty thereupon.  The final products were also cleared on

payment of excise duty on those finished products.  The assessee had  

exported these goods on payment of central excise duty in the CENVAT  

account  and,  thereafter,  filed  as  many  as  forty-five  rebate  claims   

amounting to ₹1,46,90,995/- (₹75,42,487/-+ ₹71,48,508/-) in the months

of November and December, 2004 respectively.  These rebate claims   

were filed under the provisions of Rule 18 of the Central Excise Rules,  

2002 (hereinafter referred to as the 'Rules').

4) On receipt of the aforesaid rebate claims, the Department issued show

cause notice dated January 11, 2005 whereby the assessee was called

upon to show cause as to why the rebate claimed by the assessee be not

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rejected as it was contrary to the provisions of Rule 18 of the Rules read

with Section 11B of the Act and the Notification issued thereunder, i.e.,

Notification  No.  19/2004-CE(NT)  dated  September  06,  2004.   After

considering  the  reply  that  was  given  by  the  assessee,  the  Deputy

Commissioner of Central Excise, Division-II, Nagpur rejected the rebate

of duty paid on the final product exported as well as the claim of rebate of

duty paid on inputs contained therein by passing Order-in-original dated

January 28, 2005.  Aggrieved by this order, the assessee filed the appeal

before  the  Commissioner  of  Central  Excise  (Appeals),  Nagpur.  This

appeal was decided by orders dated March 15, 2005 holding that in terms

of Rule 18 of the Rules, the assessee is entitled to one of the two claims

for rebate, i.e., either rebate of duty paid on exported goods or the duty

paid on inputs used in the exported goods, and not on both of them. He,

thus, remitted the case back to the Deputy Commissioner to decide the

claim of the assessee after granting personal hearing to the assessee

and taking its option as to which of the two claims assessee wanted to

prefer.   

5) Still  not  satisfied  with  this  partial  relief  given  by  the  Commissioner

(Appeals), as the assessee wanted rebate on both types of excise duties

paid, the assessee challenged the order of the Commissioner (Appeals)

by  filing  Revision  Application  before  the  Joint  Secretary  to  the

Government  of  India  under  Section  35EE  of  the  Act.   This  Revision

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Application  of  the  assessee  was  decided  in  its  favour  as  the  Joint

Secretary  held  that  the  assessee  was  entitled  to  rebate  both  on  the

exported goods as well as inputs used in the exported goods. It was now

the turn of the Department to feel dissatisfied with the aforesaid outcome

and, therefore, it  challenged the aforesaid revisional order by filing the

writ petition in the High Court of Bombay, Nagpur Bench. This writ petition

has been decided in favour of the Revenue whereby the view taken by

the Joint Secretary to the Government of India is reversed and that of

Commissioner  (Appeals)  is  upheld  holding  that  out  of  the  two  excise

duties, Rule 18 of the Rules permits rebate only qua one of them and not

on the both duties.   

6) Special Leave Petition against this judgment of the Bombay High Court

was preferred by the assessee in which leave was granted. That is how

present appeal comes up for hearing to decide the question of law that

has arisen for consideration.

7) Before  embarking  on  the  case  that  is  pleaded by  both  sides  on  the

interpretation of  the relevant  provisions of  the Act  and Rules,  and in

particular Rule 18 of the Rules, it is imperative to scan through those

provisions.  First of all, we take note of the relevant statutory provision in

the Act which is Section 11B thereof.  That portion of this long provision,

which is relevant for us, is extracted below:

“S. 11B.  Claim for refund of duty and interest, if any,

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paid on such duty.—  (1) Any person claiming refund of any duty of excise and interest, if any, paid on such duty may  make  an  application  for  refund  of  such  duty  and interest  if  any,  paid  on  such  duty  to  the  Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant  date  in  such  form  and  manner  as  may  be prescribed and the application shall  be accompanied by such  documentary  or  other  evidence  including  the documents referred to in section 12A as the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from or paid by him and the  incidence of  such duty  and interest  if,  any, paid  on such duty had not been passed on by him to any other person:”

8) Thereafter,  Central  Excise  Rules,  2002  were  framed  by  the  Central

Government in exercise of powers contained in Section 37 of the Act. As

mentioned above, the scheme of the relevant Rules or the subject matter

of  the issue  at  hand provides  for  two  options  insofar  as  payment  of

excise duty on the products meant for exports are concerned.  Under

Rule  18,  an exporter  has the option to  pay the duty  and then claim

rebate thereof and under Rule 19, export can be made without payment

of duty on execution of a bond.  Both these rules are given below.  

“Rule  18.   Rebate  of  duty.— Where  any  goods  are exported,  the  Central  Government  may,  by  notification, grant rebate of duty paid on such excisable goods or duty paid on materials used in the manufacture or processing of such  goods  and  the  rebate  shall  be  subject  to  such conditions  or  limitations,  if  any,  and  fulfillment  of  such procedure, as may be specified in the notification.  

Rule 19.  Export without payment of duty.—  (1)  Any excisable goods may be exported without payment of duty from a factory of the producer or the manufacturer or the warehouse or any other premises, as may be approved by the Commissioner.

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(2)  Any material may be removed without payment of duty from a factory of the producer or the manufacturer or the warehouse  or  any  other  premises,  for  use  in  the manufacture or processing of goods which are exported, as may be approved by the Commissioner.

xxx xxx xxx”

9) Obviously, the controversy that arises is  qua interpretation that is to be

accorded to Rule 18.  The Rule stipulates that the Central Government

may, by notification, grant rebate of duty paid on such excisable goods

OR duty paid on material  used in the manufacturing or processing of

such goods.  The word 'OR' which is used in between the two kinds of

duties  in  respect  of  which  rebate  can  be  granted  is  the  bone  of

contention and it is to be interpreted whether it postulates grant of one of

the two duties or both the duties can be claimed.  It is also to be noted at

this  stage  itself  that  Rule  18  is  only  an  enabling  provision  which

empowers the Central  Government to issue a notification for grant  of

these rebates and prescribes the procedure for claiming such rebate(s).

10) As is clear from the bare reading of Rule 18, the manner of getting the

rebate under the said Rule has to be as per the procedure that may be

specified in the notification.

11) The Central  Government  has issued Notification No.  19/2004-CE(NT)

dated September 06, 2004 which deals with grant of rebate of whole of

duty  on  excisable  goods  exported.  The  opening  portion  of  this

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Notification, which needs to be taken note of, is as under:  

“In  exercise  of  the  powers  conferred  by  rule  18  of  the Central  Excise  Rules,  2002  and  in  supersession  of  the Ministry of  Finance, Department of  Revenue, notification No.  40/2001-Central  Excise  (N.T.),  dated  the  26th June 2001, [G.S.R. 469(E), dated the 26th June, 2001] insofar as it relates to export to the countries other than Nepal and Bhutan, the Central Government hereby directs that there shall be granted rebate of the whole of the duty paid on all excisable  goods falling  under  the  First  Schedule  to  the Central Excise Tariff Act, 1985 (5 of 1986) exported to any country other  than  Nepal  and  Bhutan,  subject  to  the conditions,  limitations  and  procedures  specified hereinafter-

xxx xxx xxx”

12) It also lays down conditions and limitations for claiming such rebate as

well as procedure which needs to be fulfilled.  The provision, inter alia,

prescribes the time limit within which claim for rebate to Central Excise is

to be presented.  What is relevant for the purposes of present case is the

Form, as per which application for removal of excisable goods for export

is to be made and the same is prescribed in  Annexure 2 to the Rules.

Column 3 thereof reads as under:   

“xxx xxx xxx

3.   I/We hereby certify  that  the above-mentioned goods have been manufactured.

(a) availing  facility/without  availing  facility  of  Cenvat credit under Cenvat Credit Rules, 2002.

(b) availing  facility/without  availing  facility  under Notification No. 21/2004-Central  Excise (N.T.),  dated the 6th September,  2004  issued  under  rule  18  of  Central Excise Rules, 2002.

(c) availing  facility/without  availing  facility  under

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Notification No. 43/2001-Central  Excise (N.T.),  dated the 26th June,  2001 issued under  rule  19  of  Central  Excise (No. 2) Rules, 2001.

xxx xxx xxx”

13) The aforesaid Notification, as is evident from the reading thereof, deals

with grant of rebate of duty paid on the finished goods, that are ultimately

exported. There is yet another Notification No. 21/2004-CE(N.T.); dated

September 06, 2004 issued by the Government for claiming rebate of

whole of the duty paid on excisable goods used in the manufacture or

processing  of  exported  goods,  as  is  clear  from  the  reading  of  the

opening para thereof:

“In  exercise  of  the  powers  conferred  by  rule  18  of  the Central  Excise  Rules,  2002  and  in  supersession  of  the Ministry of  Finance, Department of  Revenue, notification No.  41/2001-Central  Excise (N.T.),  dated the 26th June, 2001  [G.S.R.  470(E)  dated  the  26th  June  2001],  the Central Government hereby, directs that rebate of whole of the duty paid on excisable goods (hereinafter referred to as 'materials')  used in the manufacture or processing of export goods shall, on their exportation out of India, to any country except Nepal and Bhutan,  be paid subject to the conditions and the procedure specified hereinafter.”  

14) This Notification also prescribes, inter alia, the procedure for export in

the specified format which is Form ARE2 appended as Annexure 2B's

Rules and envisages filing of combined application for removal of goods

for export under the claim for rebate of duty paid on excisable material

used in the manufacture and packing [i.e., intermediate product used as

raw material] as well as duty paid on the final product for export.  This

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form,  thus,  enables the manufacturer of  the final  product  exported to

claim rebate of both kinds of duties paid.  That becomes evident from the

following portion of the said form:   

“Form A.R.E. 2

Combined  application  for  removal  of  goods  for  export  under claim for rebate of duty paid on excisable materials used in the manufacture and packing of such goods and removal of  dutiable  excisable  goods  for  export  under  claim  for rebate of finished stage Central Excise Duty or under bond without  payment  of  finished  stage  Central  Excise  Duty leviable on export goods.

To The Superintendent of Central Excise, (Address) …...............(full postal address) 1. Particulars  of  the  Assistant  Commissioner  of  Central

Excise or the Deputy Commissioner of Central Excise from whom rebate shall be claimed/with whom bond is executed and his complete postal address__________

2.  I/We_________of  _____  propose  to  export  the  under mentioned goods  (details  of  which  are given in  Table  1 below) to ____ (country of destination) by air/sea/land/post parcel  under  claim for  rebate of  duty  paid  on excisable materials  used in  the  manufacture  and packing  of  such goods.

3. *The finished goods being exported are not dutiable.                                          Or We intended to claim the rebate of Central Excise Duty paid on

clearances  of  goods  for  export  under  notification  No. 19/2004-Central  Excise  (N.T.),  dated  the  6th September, 2004 issued under Rule 18 of Central Excise Rules, 2002.”

15) The argument of learned counsel for the appellant is that it has always

been the policy of the Central Government to exempt the goods from

payment of excise duty both on the final excisable products as well as

on material used in the manufacturing of goods for payment of duty if

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the goods are meant for export outside India.  Moreover, Rule 18 is

only an enabling provision and in exercise of powers contained in this

Rule, the Central Government has also issued notification for grant of

rebate or duty paid on excisable goods as well as duty paid on material

used  in  the  manufacture  of  goods.   Even  the  notifications  which

prescribe the procedure contemplate a situation where duty may have

been paid not only on the excisable goods but on the material used in

the  manufacture  of  goods  and  provide  for  claiming  the  rebate  in

respect of duty paid on both these goods.  It was also argued that the

order of the  Joint Secretary, Government of India further shows the

mind  of  the  Government  itself,  disclosing  that  both  the  duties  are

eligible for grant of rebate.  On that basis, it is argued that Rule 18 has

to be interpreted keeping in view the overall scheme of the statute and

the Rules and the manner in which the Government itself operated the

said Rule.   Learned counsel for  the respondent, on the other hand,

predicated his arguments on the plain and grammatical meaning that

needs to be accorded to Rule 18 of the Rules by arguing that the word

'OR' used therein clearly signifies that it  is one of the two duties to

which  the  rebate  can  be  granted  and  not  both.   For  this  purpose,

reasoning given by the High Court was adopted with the submission

that it was in accord with the cardinal principle of literal interpretation

and, therefore, the view of the High Court was correct in law.

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16) After giving due consideration to the respective submissions, in the light

of statutory scheme envisaged for grant of rebate in the Act and Rules,

we are constrained to hold that the High Court has not taken correct

view, which we feel is a myopic view and ignores the overall scheme

pertaining to grant of rebate in respect of goods exported out of India.

There  are  multiple  reasons  for  arriving  at  this  conclusion  which  are

discussed hereinafter.

(i) Historical perspective of the statutory scheme:  Central Excise

Rules under the Act were first framed in the year 1944. Rule 12 thereof

provided for rebate of duty and Rule 13 enabled exporter to export the

goods without payment of duty.  Relevant portion of these Rules was as

under:

“Rule  12.   Rebate  of  duty.—  The Central  Government may,  from  time  to  time,  by  notification  in  the  Official Gazette, grant rebate of -

(a) duty paid on the excisable goods; (b) duty paid on materials used in the manufacture of goods; if such goods are exported outside India or shipped as provision or stores for use on board a ship proceeding to a foreign port, or supplied to a foreign going aircraft to such  extent  and  subject  to  such  safeguards,  conditions and  limitations  as  regards  the  class  or  description  of goods,  class  or  description  of  materials  used  for manufacture  thereof,  destination,  mode of  transport  and other allied matters as may be specified in the notification.

xxx xxx xxx

Rule 13.  Export in bond of goods on which duty has not been paid.—(1) The Central Government may, from time to time, by notification in the Official Gazette -

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(a) permit export of specified excisable goods in bond without payment of duty, in the like manner, as the goods regarding which the rebate is granted under sub-rule (i) of rule 12 from a factory of manufacture or warehouse or any other premises as may be approved by the Commissioner of Central Excise;

(b) specify  materials,  removal  of  which  without payment of duty from the place of manufacture or storage for use in the manufacture in bond of export goods may be permitted by Commissioner of  Central Excise;

(c)  Allow removal of excisable material without payment of duty  for  the  manufacture  of  export  goods,  as  may  be specified,  to  be  exported  in  execution  of  one  or  more export orders; or for replenishment of duty paid materials used  in  the  manufacture  of  such  export  goods  already exported for the execution of such orders, or both;

subject to such safeguards, conditions and limitations as regards  the  class  or  description  of  goods,  class  or description  of  materials  used  for  manufacture  thereof, destination, mode of transport and other allied matters as may  be  specified  in  the  notification  which  the  exporter undertakes to abide by entering into a bond in the proper form with such surety or sufficient security, and under such conditions as the Commissioner approves.

xxx xxx xxx ”

17) It is manifest from the reading of the aforesaid Rules that from the very

beginning, two alternative methods were provided enabling an exporter

of  goods to get  rid of the burden of  paying the excise duty;  both on

excisable goods as well  as on materials  used in  the manufacture of

goods.  The exporter could either claim rebate when the duty was paid.

Or else, he was free not to pay excise duty at all on both types of goods

by executing a bond in the prescribed form and fulfilling the conditions

prescribed in this behalf.  The grant of rebate, in either of the options,

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has always been in respect of both kinds of excise duties, i.e. on the

final product that is exported as well as on the intermediate product on

which excise duty is paid/payable and the same is used as raw material

in the manufacture of goods.  Under these Rules also, Notification No.

41/94-CE(NT),  dated  September  12,  1994  and  Notification  No.

42/94-CE(NT),  dated  September  21,  1994  were  issued  for  grant  of

rebate of duty on export of all excisable goods, except minerals oils and

ship  stores  and  rebate  on  materials  used  in  manufacture  of  goods

exported out of India, respectively.

18) The aforesaid Rules of 1944 were replaced by Central Excise Rules,

2001.  In these rules, relevant provisions were Rules 18 and 19. It is not

necessary to reproduce these Rules which are same as Rules 18 and

19 of the existing Rules.  Under these Rules also similar Notifications

were issued, i.e., Notification No. 40/2001-CE(NT) dated June 26, 2001

and Notification No. 41/2001-CE(NT) dated June 26, 2001 providing for

rebate of whole of duty on excisable goods when exported as well as

rebate  of  inputs  used  in  manufacture/processing  of  export  goods.

Likewise,  Notifications  40  and  41  dated  June 26,  2001 were  issued

under Rule 19 of these Rules.

19) Central Excise Rules, 2001 were superseded by the present Rules, viz.

Central  Excise  Rules,  2002  and  the  exact  provisions  thereof  have

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already been quoted.  The aforesaid historical narration of the relevant

provisions  from time  to  time  depict  one  common  theme,  namely,  to

provide rebate of duty paid on the excisable goods as well as the duty

paid on material used in the manufacture of goods.

(ii) Scheme of the Rules :  A cumulative reading of the scheme enshrined

in Rules 18 and 19 of the Rules, 2002 has already been pointed out

above. These Rules provide two alternatives to the exporter  enabling

him to get the benefit of exemption from paying the excise duty. Under

Rule 19, exporter is not required to pay any excise duty at all.  At the

time of removal of these goods from the factory gate of the producer or

the  manufacturer  or  the  warehouse  or  any  other  premises,  he  is

supposed to comply with the conditions, safeguards and procedure, as

may be notified by the Board. Such a procedure provides for execution

of a bond which, inter alia, lays down the condition that the goods which

are cleared are actually meant for export and he is to furnish the proof

that those goods are actually exported.  What is important is that when

the exporter opts for this method, with the approval of the Commissioner,

he  is  not  required  to  pay  duty  either  on  the  final  product,  i.e.,  on

excisable goods or on the material  used in the manufacture of  those

goods.  The intention is loud and clear, namely, the goods which are

meant for exports are free from any excise duty.  It extends not only to

the material which is used in the manufacture of goods but also on the

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goods that are produced and ultimately exported.  Once we keep in mind

this  scheme,  it  cannot  be  the  intention  of  the  Legislature  to  provide

rebate only on one item in case a particular exporter/manufacturer opts

for other alternative under Rule 18, namely, paying the duty in the first

instance and then claiming the rebate.  Giving such restrictive meaning

to Rule 18 would not only be anomalous but would lead to absurdity as

well.  In fact, it would defeat the very purpose of grant of remission from

payment of excise duty in respect of the goods which are exported out of

India.   It may also lead to invidious discrimination and arbitrary results.

Let  us  visualize  another  situation.   A particular  exporter  may opt  for

scheme under Rule 18, i.e., for claim of rebate insofar as, say, excise

duty on material used in manufacture of goods is concerned.  He would

pay that duty and claim rebate.  When it comes to payment of duty of

export of excisable goods, he exercises the option under Rule 19 and

executes a bond which enables him not to pay any duty on excisable

goods.  In this scenario, the exporter will still be able to get the benefit of

not paying any excise duty on both final product as well as intermediate

product.

(iii) Government's  own  perception:  As  mentioned  above,  Rule  18  is

enabling provision which authorises the Central Government to issue a

notification for grant of these rebates. Exercising powers under this Rule,

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the Central Government has issued necessary notifications for rebate in

respect of both the duties, i.e., on intermediate product as well as on the

final product. Further, and which is more significant, these notifications

providing detailed procedure for  claiming such rebates contemplate a

situation where excise duty may have been paid both on the excisable

goods and on material  used in  the manufacture  of  those goods and

enables the exporter to claim rebate on both the duties.  This kind of

procedure and format  of  prescribed Forms,  already described above,

becomes a clincher insofar as understanding of the Government of Rule

18 of the Rules is concerned.

20) It  is to be borne in mind that it  is the Central Government which has

framed  the  Rules  as  well  as  issued  the  notifications.  If  the  Central

Government itself is of the opinion that the rebate is to be allowed on

both the forms of excise duties the government is bound thereby and the

rule in-question has to interpreted in accord with this understanding of

the rule maker itself.  Law in this respect is well settled and, therefore, it

is  not  necessary  to  burden  this  judgment  by  quoting  from  various

decisions.   Our  purpose  would  be  served  by  referring  to  one  such

decision in the case of R & B Falcon (A) Pty Ltd. v. Commissioner of

Income Tax1 wherein interpretation given by the Central Board of Direct

Taxes  (CBDT)  to  a  particular  provision  was  held  binding  on  the  tax

1 (2008) 12 SCC 466

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authorities.  The Court explained this principle in the following manner:

“33. CBDT has  the  requisite  jurisdiction  to  interpret  the provisions of the Income Tax Act. The interpretation of the CBDT being in the realm of executive construction, should ordinarily be held to be binding, save and except where it violates  any  provisions  of  law  or  is  contrary  to  any judgment  rendered by the courts.  The reason for  giving effect to such executive construction is not only same as contemporaneous which would come within the purview of the  maxim  temporania  caste  pesto,  even  in  certain situation  a  representation  made  by  an  authority  like Minister presenting the Bill before Parliament may also be found bound thereby.

34.  Rules of executive construction in a situation of this nature  may  also  be  applied.  Where  a  representation  is made by the maker of legislation at the time of introduction of the Bill or construction thereupon is put by the executive upon  its  coming  into  force,  the  same  carries  a  great weight.

35.   In this regard,  we may refer  to the decision of  the House  of  Lords  in  R.  (Westminster  City  Council) v. National  Asylum Support  Service  (2002)  1  WLR 2956 : (2002)  4  All  ER  654  (HL)  and  its  interpretation  of  the decision in  Pepper v.  Hart 1993 AC 593 : (1992) 3 WLR 1032  :  (1993)  1  All  ER  42  (HL)  on  the  question  of “executive estoppel”.  In  the former  decision,  Lord Steyn stated: (WLR p. 2959, para 6) “6. If exceptionally there is found in the Explanatory Notes a clear assurance by the executive to Parliament about the meaning  of  a  clause,  or  the  circumstances  in  which  a power  will  or  will  not  be  used,  that  assurance  may  in principle be admitted against the executive in proceedings in which the executive places a contrary contention before a court.”

36.  A similar interpretation was rendered by Lord Hope of Craighead  in  Wilson v.  First  County  Trust  Ltd.  (No.  2) (2004) 1 AC 816 : (2003) 3 WLR 568 : (2003) 4 All ER 97 (HL), wherein it was stated: (WLR p. 600, para 113) “113. ...As I understand it [Pepper v. Hart  1993 AC 593 : (1992)  3  WLR  1032  :  (1993)  1  All  ER  42  (HL),  it recognised  a  limited  exception  to  the  general  rule  that resort  to  Hansard  was  inadmissible.  Its  purpose  is  to prevent  the  executive  seeking  to  place  a  meaning  on words used in legislation which is different from that which

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ministers  attributed  to  those  words  when  promoting  the legislation in Parliament.”

37. For a detailed analysis of the rule of executive estoppel useful reference may be to the article authored by Francis Bennion  entitled  “Executive  Estoppel:  Pepper v.  Hart Revisited”,  published  in  Public  Law,  Spring  2007,  p.  1 which throws a new light on the subject-matter.”

21) We are  also  of  the  opinion  that  another  principle  of  interpretation  of

statutes,  namely, principle  of  contemporanea  expositio  also  becomes

applicable which is manifest from the act of the Government in issuing

two notifications giving effect to Rule 18.  This principle was explained by

the Court in Desh Bandhu Gupta and Co. and others v. Delhi Stock

Exchange Association Ltd.2 in the following manner:

“9.  It may be stated that it was not disputed before us that these two documents which came into existence almost simultaneously with the issuance of the notification could be  looked  at  for  finding  out  the  true  intention  of  the Government  in  issuing  the  notification  in  question, particularly in regard to the manner in which outstanding transactions were to be closed or liquidated.  The principle of contemporanea expositio (interpreting a statute or any other  document  by  reference  to  the  exposition  it  has received  from  contemporary  authority)  can  be  invoked though  the  same  will  not  always  be  decisive  of  the question of construction.  (Maxwell 12th Edn. p. 268).  In Crawford on Statutory  Construction  (1940 Edn.)  in  para 219 (at pp. 393-395) it has been stated that administrative or  executive  officers  charged  with  executing  a  statute) generally should be clearly wrong before it is overturned; such  a  construction  commonly  referred  to  as  practical construction  although  not  controlling,  is  nevertheless entitled to considerable weight it is highly persuasive.  In Baleshwar Bagarti  v. Bhagirathi Dass (1908) ILR 35 Cal 701 at 713 the principle which was reiterated in Mathura Mohan Saha v. Ram Kumar Saha, ILR 43 Cal. 790: (AIR 1916 Cal. 136) has been stated by Mukerjea J. thus:

2 (1979) 3 SCR 373

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“It is a well-settled principle of construction that courts in construing  a  statute  will  give  much  weight  to  the interpretation put upon it, at the time of its enactment and since,  by  those  whose  duty  it  has  been  to  construe, execute and apply it. I do not suggest for a moment that such interpretation has by any means a controlling effect upon  the  Courts;  such  interpretation  may,  if  occasion arises have to be disregarded for cogent and persuasive reasons,  and  in  a  clear  case  of  error,  a  Court  would without hesitation refuse to follow such construction.”

Of course, even without the aid of these two documents which  contain  a  contemporaneous  exposition  of  the Government's intention, we have come to the conclusion that on a plain construction of the notification the proviso permitted the closing out or liquidation of all  outstanding transactions  by  entering  into  a  forward  contract  in accordance with the rules, bye-laws and regulations of the respondent.”   

22) In  this  hue,  we may now advert  to  the reasoning given by the Joint

Secretary itself in the order passed in Revision Petition wherein he has

discussed the issue in the following perspective:

“.....Govt. notes that as a principle and a policy measure, Govt. has accepted that export of goods from India should be relieved of domestic levies (both customs and Central Excise) in order to promote export  of  domestic products from India and to make then internationally competitive.  In order  to  achieve  this  objective,  two  schemes  operate, namely, export under bond and export under payment of duty and both are comparable, as objectives of both the schemes are same i.e. to neutralize the burden of internal levies on goods exported.  In case of former, export goods are  exempted  from  payment  of  duty,  subject  to conditions/restrictions etc. and in the case of latter export goods are cleared on payment of  duty which is rebated subject to production of proof of export.  For export under bond Rule 19 provides for excisable goods to be exported without payment of duty, subject to conditions etc. which are  detailed  in  Notfn.  No.  42/2001  –  CE(NT)  dt. 26.06.2001  and  Notification  No.  43/2001-CE(NT)  dtd. 26.06.2001 further relieves the burden of  duty on inputs

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used to manufacture such goods by obtaining them duty free under bond. Thus, export goods are relieved of the burden of excise duty both on finally exported goods as well the inputs used vide these legislative and machinery provisions.  As both schemes are comparable as objective to  serve  the  common  goal  of  relieving  the  burden  of domestic taxation, the other scheme provides for similar dispensation in case goods are exported on payment of duty  by way of  rebating central  excise duty suffered on such export goods. Rule 18 provides for rebate of duty on such  export  goods  or  duty  paid  on  material  used  in manufacture of such export goods. While Notification No. 40/2001 – Central Excise (NT) dtd. 26.6.2001 as amended deals with details provisions for rebate on finishing goods, Notfn.  No.  41/201  C.E.  (NT)  as  amended  deals  and provides the detailed procedural provisions for input stage rebate also. Similar provisions and export relief existed for export on payment of duty and under bond in the erstwhile Rule 12 and 13 of Central Excise Rules. The fundamental objective of existing rules and the earlier ones is the same i.e. to neutralise the duty element on the goods exported and hence no other interpretation denying the relief sought appears  possible.  Circular  No.  129/40/95  dt.  29.09.95, para 1.5 of Chapter 8 of Part V of CBEC Manual further leaves no room for any other interpretation.”

(iv) Interpretation  of  word  'OR'  occurring  in  Rule  18:   The  aforesaid

discussion leads us to the only inevitable consequence which is this : the

word 'OR' occurring in Rule 18 cannot be given literal interpretation as

that  leads  to  various  disastrous  results  pointed  out  in  the  preceding

discussion and, therefore, this word has to be read as 'and' as that is

what was intended by the rule maker in the scheme of things and to

carry out the objectives of the Rule 18 and also to bring it at par with

Rule 19.

23) We  are  conscious  of  the  principle  that  the  word  'or'  is  normally

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disjunctive  and  'and'  is  normally  conjunctive  (See  Union  of  India  v.

Kamlabhai Harjiwandas Parekh and others3).  However, there may be

circumstances where these words are to be read as vice-versa to give

effect  to  manifest  intention  of  the  Legislature  as  disclosed  from  the

context.   

24) Of course, these two words normally 'or' and 'and' are to be given their

literal meaning in unless some other part of same Statute or the clear

intention of it requires that to be done.  However, wherever use of such a

word, viz., 'and'/'or' produces unintelligible or absurd results, the Court

has power to read the word 'or' as 'and' and vice-versa to give effect to

the intention of the Legislature which is otherwise quite clear.  This was

so done in the case of  State of Bombay v. R.M.D. Chamarbaugwala4

and while doing so, the Court observed as under:

“...Considering  the  nature,  scope  and  effect  of  the impugned Act, we entertain no doubt whatever that the first category  of  prize  competitions  does  not  include  any innocent prize competitions.  Such is what we conceive to be the clear intention of the Legislature as expressed in the impugned Act read as a whole and to give effect to this obvious intention as we are bound to do, we have perforce to read the word “or”  appearing in the qualifying clause after  the  word  “promoter”  and  before  the  word  “or”  as “and”.  Well-known  canons  of  construction  of  statutes permit us to do so.  (See Maxwell on the Interpretation of Statutes, 10th edition, page 238)”

25) In  J.  Jayalalitha  v.  Union  of  India5,  provisions  of  Section  3  of  the

3 (1968) 1 SCR 463 4 (1957) 1 SCR 874 5 (1999) 5 SCC 138

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Prevention  of  Corruption  Act,  1988  empowers  the  Government  to

appoint as many special judges as may be necessary for such area or

areas  or  for  such case or group of case, as may be specified in the

notification.  Construing the italicised 'or' it was held that it would mean

that the Government has the power to do either or both the things, i.e.,

the Government may, even for an area for which a special judge has

been appointed, appoint a special judge for a case or group of cases.

26) Likewise,  in  Mazagaon Dock Ltd.  v.  The Commissioner of Income

Tax and Excess Profits Tax6, word 'or' occurring under Section 42(2) of

the Income Tax Act, 1922 was construed as 'and' when the Court found

that the Legislature 'could not have intended' use of the expression 'or' in

that  Section.   We  have  already  explained  the  statutory  scheme

contained in the Act and Rules which express manifest intention of the

Legislature which provide for  granting of both kinds of rebates to the

assessee.  In  Mazagaon Dock Ltd. (supra),  this aspect was explained

in the following manner:  

“10.   The word  “or”  in  the  clause  would  appear  to  be rather inappropriate as it is susceptible of the interpretation that when some profits are made but they are less than the normal profits, tax could only be imposed either on the one or on the other, and that accordingly a tax on the actual profits earned would bar the imposition of  tax on profits which might have been intended, and the word “or” would have to  be read in  the  context  as  meaning “and”.  Vide Maxwell's Interpretation of Statutes, Tenth Edition, pages 238-239.  But that, however, does not affect the present question which is whether the word “derived” indubitably

6 (1959) 1 SCR 848

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points  to  the  business  of  the  non-resident  as  the  one taxable under S. 42(2) and for the reasons already given the answer must be in the negative.”

27) The aforesaid discussion leads us to inevitable conclusion, namely, that

the exporters/appellants are entitled to both the rebates under Rule 18

and not one kind of rebate.  The impugned judgments are, accordingly,

set aside allowing these appeals.

.............................................J. (A.K. SIKRI)

.............................................J. (ROHINTON FALI NARIMAN)

NEW DELHI; OCTOBER 09, 2015.

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