Hyderabad Industries vs Union Of India

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1999 Supreme(SC) 637

1999(5) Supreme 528
Supreme Court of India
(From Delhi High Court)
S.P. Bharucha, B.N. Kirpal, S. Rajendra Babu S.S. Mohammed Quadri and M.B. Shah, JJ.
Hyderabad Industries Ltd. & Anr. -Appellants
versus
Union of India & Ors. -Respondents
Civil Appeal No. 1354 of 1980
With Civil Appeal Nos. 1355-58/80, 5032/93, 4641/85, 2871/86, 1937/87, 2413-16/87 2160-61/88
Decided on 11-5-1999
Per B.N. Kirpal, S.P. Bharucha & S.S. Mohammed Quadri, JJ.-
Counsel for the Parties :
For the Appearing Parties : C.S. Vaidyanathan, Additional Solicitor General, H.N. Salve, D.A. Dave, A.K. Ganguli, V.A. Bobde, Sr. Advocates, T. Vinod Kumar, Ms. Gauri Rasgotro, Ajay Bhargava, Ms. Purnima Singh, Ms. Rohina Nath, U.K. Khaitan, Suman J. Khaitan, R.N. Paul, Rahul Roy, Ms. Purnima Bhat, Ashok H. Desai, P.H. Parekh, Krishna Mahajan, Ravinder Narain, Ms. Monica Singhal, Sanjeev Sen, Ms. Urmila Sirur, N.K. Bajpai, Dilip Tandon, Shivram, T.A. Khan, P. Parmeswaran, V.K. Verma, A. Subba Rao, Ms. Praveena Gautam, P.B. Agarwala, Ms. R. Deepmala, Advocates.

Headnote:(i) Customs Act, 1975-Section 3(1)-Tariff Item 22(F)-Appellants imported asbestos fibre into India-On imports made prior to year 1986-Department raised demand of additional duty of Custom under Section 3 of the Act-Appellants represented that no duty was payable as asbestos fibre imported had not been manufactured or produced but a natural mineral-Appellant informed by Ministry that process by which asbestos fibre obtained was process of manufacture-Said item correctly fell within Tariff Item 22(F) of First Schedule-Writ Petitions-Dismissed by High Court-Appeal - On asbestos fibre imported into India appellants not liable to pay any duty under Section 3 of the Act-High Court errored in discussing writ petitions filed by appellants-(Khandelwal Metal & Engineering Works case not correct law) (1985(3) SCC 620)-Demand of additional duty quashed -Respondents not liable to refund any additional duty realised from appellants.
       Held : As a result of the aforesaid discussion it follows that on the asbestos fibre imported into India the appellants were not liable to pay any duty under Section 3 of the Customs Tariff Act. The High Court, therefore, erred in discussing the writ petitions filed by the appellants. (Para 18)
       The decision in Khandelwal Metal & Engineering Works v. Union of India, (1985) 3 SCC 620 does not lay down the correct law as indicated in this judgment. Having come to this conclusion about fourteen years after the decision in Khandelwal Metal & Engineering Works case was rendered it would not be equitable to require the refund of additional duty paid into the public exchequer. At the same time the appellants having succeeded in these appeals cannot be asked to pay an additional amount towards the illegal demand. (Para 20)
       Per Rajendra Babu, J.-
       (ii) Customs Act, 1975-Section 3(1)-Tariff Item 22(F)-Supreme Court Rules, 1966-Order VII-View expressed by learned brother Kirpal J. that separation of asbestos fibre from parent rock not result of process of manufacture-Not a new commercial article liable to excise duty under Tariff Item 22-F in order of reference conclusive- Cannot be re-agitated-To answer question whether goods imported attract additional duty several facets to be considered-Each one of those facets cannot become separate issue which has to be considered in that case-Two decisions cannot be there-One by smaller Bench and other by larger Bench- Smaller Bench bound by decision of larger Bench-S. Rajendra Babu J. have serious reservation that view expressed in order of reference as to nature of goods become final-On merit he entirely agreed with view expressed in order of reference and order proposed by learned brother Kirpal J. subject however to reservations. (Paras 22 to 25)
       Per Shah, J. -
       (iii) Customs Act, 1975-Section 3(1)-Tariff Item No. 22(F) -Shah J. agreed with reasons recorded that ratio laid down in case of Khandelwal Metal and Engineering Works v. Union of India, (1985) 3 SCC 620 not correct law -Question whether separation of asbestos fibre from parent rock excavated from mines a manufacturing process within meaning of Section 2(f) read with Tariff Item 22(F) of First Schedule to Excise Act not dealt with in reference-Asbestos fibre brought out by various processes including mechanical process after using power-A different substance known to market from raw rock-Shah J. had serious reservation on said question but as said question treated by parties to have been finally decided at time of reference-It is not dealt with or considered at time of deciding reference. (Paras 27 and 28)

Judgment

Kirpal, J.-Levy of additional duty of customs under Section 3(1) of the Customs Act, 1975 on import of asbestos fibre is challenged by the appellants in these appeals by special leave.

2. The appellants, who use asbestos fibre as a raw material, imported the same into India. We are in these cases concerned with the imports made prior to the year 1986. On the import so made the department sought to raise a demand of additional duty of customs under Section 3(1) of the said Act. The appellants represented that on a correct interpretation no duty was payable inasmuch as asbestos fibre which was imported had not been manufactured or produced but was a natural mineral and thus no duty was leviable. The Collector, Central Excise, Hyderabad, however, issued a trade notice on 3rd August, 1997 taking the view that asbestos fibre as processed and graded had a distinct character differing from asbestos rock and the said item was covered within Tariff Item 22(F) of the Excise Act and on the same there was a liability to pay the duty of excise. The Government of India and the Ministry of Finance also informed the appellants, namely, Hyderabad Asbestos Cement Products vide Ministry of Finance’s letter dated 17th August, 1997 that the process by which the asbestos fibre was obtained was a process of manufacture and the said item correctly fell within Tariff Item 22(F) of the 1st Schedule to the Excise Act. The consequence of this was that the demand under Section 3(1) of the said Act was raised because the imported item, namely, asbestos fibre was regarded as an article which was liable to duty of excise under the Excise Act.

3. The appellants then filed various writ petitions before the High Court of Delhi. The main contention of the appellants was that the asbestos fibre which was imported had not been manufactured or produced and, under Section 3(1) of the Customs Tariff Act, additional duty of customs could be levied only if the article which is imported is one which is produced and manufactured in India and is liable to payment of excise duty. The submission was that asbestos fibre had not undergone any manufacturing or other process and, therefore, no additional duty could be charged.

4. The High Court dismissed the writ petitions by accepting the contention of the respondents that extracting or removing the asbestos fibre from the rock amounted to manufacturing process being undertaken and, therefore, excise duty was leviable and, as a result thereof, additional duty under Section 3(1) of the Tariff Act could be imposed on the import of the asbestos fibre into India.

5. These appeals by special leave were first heard by a Bench of three Judges. After examining the material relied upon by the High Court and also by referring to Encyclopedia of Natural Chemical Analysis, Vol. II and Brussels’ Nomenclature the bench in its decision reported as Hyderabad Industries Ltd. and Another v. Union of India & Ors.1 at page 342 observed as follows:

“We are satisfied upon the material placed before us, as indicated in the judgment under appeal quoted above, that all that the appellants in Civil Appeal No. 1354 of 1980 do is to separate the asbestos fibre from the rock in which it is embedded by manual and mechanical means. The asbestos that is so removed from the parent rock is in every respect the asbestos that was embedded in it. No process of manufacture can be said to have been employed by the appellants nor is a new or a distinct commodity realised therefrom.”

The bench also referred to the judgment of this Court in Minerals & Metals Trading Corpn, of India Ltd. v. Union of India2 and Moti Laminators (P) Ltd. v. CCE3 and held as follows:

“Assuming that Tariff Item 22-F, when it refers to “asbestos fibre and yarn”, covers asbestos fibre that has been separated from its parent rock in the manner aforementioned, such asbestos fibre is not the result of a process of manufacture, it is not a new and commercially identifiable article and it

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1999 Supreme(SC) 637

Cases Referred (5)