The term 'cycles' as occurring in item 35 of the First Schedule of the Central Excise and Salt Act, 1944, before amendment by Act 66 of 1976, means only fully assembled cycles and not cycles in unassembled condition or 'CKD' condition.

MOHAN, J.

The facts leading to the Writ Petition are as follows : The Petitioner is the manufacture of cycles at its factory at Ambattur. It clears and supplies cycles in fully assembled condition from the factory to dealer in Madras and nearby places, while for dealers in other places the factory clears and supplies cycles in completely knocked down condition (hereinafter referred to as CKL condition) i.e. instead of assembling the cycles in the factory itself, the manufacture clear and supplies to dealer, all parts of the cycle and the actual assembling of the cycle is done at the destination by the dealer.

2. Prior to the introduction of the Finance Bill of 1975, under item 35 of the First Schedule of the Central Excise and Salt Act, 1944 (hereinafter referred to as Act) only two arts of the cycle, viz. (1) free wheels and (2) rims were liable to excise duty. However, the effective rate of duty on these parts was 'nil' in view of the exemption notification issued by the Government of India. In the Finance Bill of 1975 a new item was added to the First Schedule under item 68. That reads :

"All other goods, not elsewhere specified manufactured in a factory one per cent ad valorem. The effect of this is all parts manufactured in a factory but not coming within the purview of any of the other item in the First Schedule of Act is liable to levy of one per cent for Central Excise under Item 68 w.e.f. 1st March, 1975. This payment of duty was continued till 25th March, 1975 and thereafter it was discontinued on fully assembled cycles on the ground that these to items were covered by item 68 and they are therefore not liable to excise duty." *

3. The company challenged the levy of duty at one per cent on all parts of completed cycles cleared from the factory in unassembled condition, which the company termed as 'CKD' condition. Certain trade notices were issued but ultimately the Department took the view that cycles under item 35 would mean only fully assembled cycles and not cycles in 'CKD' condition. It is that which is challenged in the Writ Petition.

4. The counter-affidavit takes the stand that the essential character of a cycles is that it moves as a means of transport. Part of cycle is an unassembled condition cannot move, nor can they be used as a means of transport. They do not, therefore, have the essential character of a cycle.

5. A reply affidavit has also been filed reiterating the allegations contained in the affidavit.

6. Having regard to the above, the short question that arises for my determination is :

What exactly is the interpretation to be placed on the word 'Cycles' as occurring in item 35 of the first Schedule, before amendment by Act 66 of 1976 ?

7. Mr. K. K. Venugopal, learned counsel for the petitioner raises the following contentions in support of his submission :-

(1) Cycles in unassembled condition or 'CKD' condition would undoubtedly fall within the word 'cycles' as occurring under item 35. Having regard to the development of trade, the various parts of cycles, all of which if assembled would constitute one cycle as an integral whole or sent separately in convenient small packing. Therefore, to state that only fully assembled cycles are covered by this item 35 is totally incorrect. In maters like this, how the trade understand is essential as laid down in Union of India vs. Delhi Cloth & General Mills. In the instant case, the trade understand even the unassembled cycle in 'CKD' condition as the cycle.

(2) the Department itself was not sure of the position is clear from the three public notices issued in May, 1975 and February, 1976. Therefore, in maters like this, a construction beneficial to the assessee must be made.

(3) If a comparison is made with item 29-A dealing within refrigerating and air-conditioning appliances, it would be clear that wherever individual parts are sought to be taxed, the is specifically mentioned. Likewise, when comparison is made to item 33, certainly it cannot be said tha