Judgment

GOSWAMI, J.:- This appeal is by special leave from the judgment of the Delhi High Court in a writ application there under Article 226 of the Constitution. The respondent manufactures amongst various other items hot rolled finished steel products in rectangular cross-section of thickness varying between 1.7 mm & 6.55 mm and width varying between 16.2 mm & 311.2 mm and rolled in coils which it supplies to the Indian Tube Company Ltd. at Jamshedpur for making tubes and also to others. This article is subjected to Central Excise Duty under the Central Excises and Salt Act, 1944 (hereinafter called the Act. The dispute between the respondent and the appellants is that while the farmer describes the said manufactured product as strip the appellants classify it as skelp. This diffrerence in classifying the product differently results in fiscal misfortune to the respondent since skelp is subjected to a higher Central Excise Duty than strip.

2. It may be stated that during the period from April 24, 1962 to February 28, 1962, the respondent described its product as skelp and it was subjected then to a lower rate of duty. From February 29, 1964 the respondent claimed that the aforesaid product be classified as strip since there had been a levy of higher duty for skelp. The Assistant Collector, Central Excise, Jamshedpur, who is the primary taxing authority, the Collector of Central Excise, Patna, in appeal, and the Central Government in revision rejected the contention of the respondent by successive orders, each authority upon its own test of the definition of the product as skelp. That led to the successful writ application of the respondent in the High Court resulting in this appeal.

3. In the forefront of his argument the learned Additional Solicitor General for the appellants relying upon two decisions of this Court, namely, Collector of Customs, Madras v K. Ganga Setty, (1963) 2 SCR 277 and V. V. Iyer of Bombay v. Jasjit Singh, Collector of Customs, (1873) 1 SCC 148 submitted that "it is primarily for the taxing authorities to determine the head or entry under which any particular commodity fell; but that if in doing so, these authorities adopted a construction which no reasonable person could adopt i. e., if the construction was perverse then it was a case in which the Court was competent to interfere. In other words if there were two constructions which an entry could reasonably bear, and one of them which was in favour of Revenue was adopted, the Court has no jurisdiction to interfere merely because the other interpretation favourable to the subject appeals to the Court as the better one to adopt". On the other hand with equal emphasis Mr. Palkhivala for the respondent submitted that an assessment without the application of an identifiable test is nothing but perverse and arbitrary. He submits that in the present case there was no identifiable test before the taxing: authorities by which the product of the respondent could be held to be skelp and not strip subjecting the respondent to a heavier duty. According to the learned counsel there is no difference between skelp and strip, the two items being interchangeable.

4. It may be noted for our purpose that under Section 3 of the Act Central Excise Duties are leviable on all excisable goods which are produced or manufactured in India at the rates set out in the first Schedule. Item No. 26-AA in that Schedule relates to iron and steel products and mentions in sub-item (iii) therein flats, skelp and strips showing the rate of duty in the third column. Under Rule 8 of the Central Excise Rules, 1944 made under Section 37 of the Act, the Central Government may from time to time by notification in the official gazette exempt, subject to such conditions as may be specified in the notification, any excisable goods from whole or any part of the duty leviable on such goods. In exercise of the power under this rule the Central Government has made such exemptions in the rates of duty a