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Goods Agro Chemicals and ors. Vs. Assistant Collector of Customs - Court Judgment

SooperKanoon Citation
SubjectExcise;Constitution
CourtKerala High Court
Decided On
Case NumberO.P. Nos. 2345, 2367 to 2371, 2377 to 2379, 2641 to 2653, 2656, 2799 to 2801, 3169 and 3530 of 1981
Judge
Reported in1986(10)ECC178; 1986LC218(Kerala); 1987(32)ELT565(Ker)
ActsCentral Excise Tariff Act; Customs Act, 1962 - Sections 2(15), 12, 12(1) and 28; Finance Act, 1961 - Sections 13; Customs Tariff Act, 1975 - Sections 2, 3 and 3(1); ;Central Excise Act, 1944; Finance (Amendment) Act, 1981; Constitution of India - Article 226
AppellantGoods Agro Chemicals and ors.
RespondentAssistant Collector of Customs
Appellant Advocate G. Sivarajan, Adv.
Respondent AdvocateCentral Government Pleader
Cases ReferredUnion of India v. Tata Iron and Steel Co. Ltd.
Excerpt:
customs - additional duty--central excise--tariff items--central excise tariff item 26a(1) specifying 'copper in crude form'--does not cover scrap--amendment of entry with effect from 1-4-1981 to tax copper scrap--import of copper scrap--additional duty under item 26a(1) cannot be levied till 1-4-1981--open to department to consider assessability under item 68--words and phrases--'copper in crude form', 'copper scrap', meanings of---copper scrap has distinct identity from crude raw material ---construction of statutes--legislature made its intention clear whenever it wanted to tax scrap--non-inclusion of words 'scrap and waste' in entry 26a(1)--showed intention not to tax scrap till 1-4-1981--central excises and salt act (1 of 1944), schedule i, items 26a, 68--customs act (52 of.....v. bhaskaran nambiar, j.1. these writ petitions raise common questions of law and are, therefore, disposed of by a common judgment. we shall briefly refer to the facts in one writ petition, o.p. no. 2641 of 1981 as the facts in others are practically similar.2. the petitioner is a public limited company manufacturing copper fungicides and other industrial chemicals. these fungicides are used for prophylactic spraying against fungal diseases in coffee, rubber, tea, areca, cardamom estates and in field crops like paddy, cotton, chillies, turmeric tobacco, betel vine, etc. the petitioner imported 'copper scrap' conforming to 'birth' variety as per nari specifications, from singapore, middle east, united states and united kingdom. they have been importing this scrap from 1956 onwards and it.....
Judgment:

V. Bhaskaran Nambiar, J.

1. These writ petitions raise common questions of law and are, therefore, disposed of by a common judgment. We shall briefly refer to the facts in one writ petition, O.P. No. 2641 of 1981 as the facts in others are practically similar.

2. The petitioner is a public limited Company manufacturing Copper fungicides and other industrial chemicals. These fungicides are used for prophylactic spraying against fungal diseases in coffee, rubber, tea, areca, cardamom estates and in field crops like paddy, cotton, chillies, turmeric tobacco, betel vine, etc. The petitioner imported 'copper scrap' conforming to 'Birth' variety as per NARI specifications, from Singapore, Middle East, United States and United Kingdom. They have been importing this scrap from 1956 onwards and it is said that the petitioner Company requires about 1,000 Metric Tonnes per year. It is not disputed that the 'copper scrap' imported consisted of scrap derived from old, used and condemned, defective, non-standard, wires, which had only its value in its metal content. The department did not collect any additional customs duty in respect of the 'copper scrap' imported by the petitioner from 1956 till 1979. In March, 1979, the respondent, the Assistant Collector of Customs began demanding a duty of 8% under entry 68 of the Central Excise Tariff Act. The petitioner objected to this levy. However, as they required these materials urgently for their factory, they cleared the goods after execution of a bond for duty at 8% under protest. In a few cases they were also allowed to clear the goods without levy of any additional or countervailing duty and without any objection from he authorities. Thus, it is said that the petitioner cleared without levy of additional duty in 14 instances from 24-2-1979 to 13-7-1979. Thereafter, purporting to act under Section 28 of the Customs Act, 1962, the respondent informed the petitioner by notice dated 20-11-1979 that the goods so cleared are leviable to countervailing duty under entry 68 of the Central Excise Tariff at 8% ad valorem and as this duty was not paid there was short levy and therefore required the petitioner to show cause within 15 days as to why the amount specified in the notice should not be paid. The petitioner filed his objections dated 23-11-1979 stating that no duty was leviable on 'copper scrap' as it was not an item which fell within Tariff entry 68. It was also contended that 'copper scrap' was not liable to any excise and additional customs duty and that in any case, the proceedings were time barred. They also prayed for a personal hearing and stated that they were prepared to produce documentary evidence in support of their contentions. There was no enquiry with notice to the petitioner; but an order was passed in May, 1981, in which it was stated that the goods imported were leviable to countervailing duty under Entry 26A(1)at Rs. 3,000/- per Metric Tonne. However, 'the enforcement was restricted to the amount already demanded' namely, under entry 68.

3. The petitioner, therefore, filed this writ petition challenging the demand so made. It is contended that 'copper scrap' was not exigible to customs duty under Tariff entry 26A, that the procedure adopted violated the principles of natural justice and that in view of the definite stand taken by the higher authorities including the Government of India, the alternate remedy available was ineffective and therefore the jurisdiction under Article 226 has to be invoked.

4. The main question and possibly the only question that would arise for determination is whether 'copper scrap' is copper in crude form falling within Tariff entry 26A.

5. The counter affidavit reiterated the stand already taken that the items imported were liable to duty under Tariff entry 26A(1) and as a pre-assessment notice was admittedly issued there was no violation of any principle of natural justice. It was asserted that the 'copper scrap' was 'copper in crude form' and thus satisfied the requirement of Tariff Item 26A. It was admitted that there was conflict of opinion among the Customs and the Central Excise Officers as to whether excise duty was payable on 'copper scrap'. Prior to 1-3-1975, it was assumed that no excise duty was payable on 'copper scrap'. After this date, with the insertion of a new entry 68, the residuary entry, divergent views with still entertained as to whether 'copper scrap' would come within this entry also. This point was discussed in the South Zone Tariff Conference held at Madras on 10th May, 1979, in the 13th North Zone Conference held at Jaipur in October, 1980, the 10th and 11th East Regional Conference held at Calcutta in December 1980 and January 1981. Divergent views were expressed and eventually the Ministry of Law was inclined to take the view that 'copper scrap is copper in crude form'. Subsequently the 1981 amendment of the Finance Act set at rest all conflict by inserting a new specific provision 'copper scrap and waste'. This, it is said, is clarificatory or declaratory in nature and hence copper scrap imported by the petitioner was rightly assessed under entry 26A though the actual demand was restricted to the lesser claim under entry 68. It is, therefore, said that the petitioner only stands to gain by the impugned orders and no cause to issue a writ has been made out.

6. The tariff entries in the Central Excise Act describe the classes of goods which attract duty and specify the rates at which the tax has to be levied. It is the duty of the assessing authority, and it is also his primary duty to determine whether the goods in question would fall under one tariff entry or another. We would not have, therefore, considered this aspect in these writ proceedings and would have relegated the parties to agitate this question before the authorities under the Act, but for the fact that it is admitted before us that the Ministry of Law has taken a decision that 'copper scrap' is copper in crude form falling within entry 26A and the department has thus taken the same view consistently thereafter. If so, a direction now to the same authorities would be a futile exercise. Moreover, the counsel for the petitioner and the Central Government Pleader submitted that this question may be decided in these proceedings itself so that at least, at this distance of time, there is some finality to these problems which arose as early as 1979.

7. We, therefore, propose to decide this limited question as to whether 'copper scrap' is copper in crude form exigible to duty under Tariff entry 26A of the Act and leave all other questions to be decided by the authorities constituted under the Act. It is necessary for this purpose to refer to the relevant statutory provisions and also to take notice of the legislative history.

8. The Customs Act of 1962 defines in Section 2(15) 'duty' to mean a duty of customs leviable under the Act. Section 12(1) of the Act provided for levy of certain duties and fixed the rates as may be specified under the Customs Tariff Act, 1975 or under any other law, for the time being in force. Section 2 of the Tariff Act provided that the rates at which duties of Customs shall be levied under the Customs Act are specified in the first and second schedule.

9. There is a levy of additional duty equal to excise duty under Section 3 of the Act. Section 3(1) of the Customs Tariff Act, 1975 and the Explanation to the section, relevant for our purpose is extracted below :-

'3. Levy of additional duty equal to excise duty. - (1) Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article.

Explanation. - In this section, the expression 'the excise duty for the time being leviable on a like article if produced or manufactured in India' means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India or, if a like article is not so produced or manufactured, which would be leviable on the class or description of articles to which the imported article belongs and where such duty is leviable at different rates, the highest duty'.

10. The position, therefore, is that customs duty is levied under the Customs Act, Section 12 of that Act is the charging section when the statutory liability to customs duty is imposed, when import or export is made the taxable event and the rate of levy is also indicated. The rate is prescribed under the Tariff Act. Section 2 of the Tariff Act is thus not an independent charging section. And Section 3 provides for an enhancement of the duty, 'a supplementary levy' and enables imposition of an additional duty. This statutory construction has the full support of the Supreme Court in the decision in Khandelwal Metal & Engg. Works v. Union of India, AIR 1985 S.C. 1211, wherein it is held thus :-

'...We are unable to accept the argument of the appellants that Section 3(1) of the Tariff Act is an independent charging section or that, the 'additional duty' which it speaks of is not a duty of customs but is a countervailing duty'.

'...The levy specified in 3(1) of the Tariff Act is a supplementary levy, in enhancement of the levy charged by 12 of the Customs Act and with a different base constituting the measure of the impost. In other words, the scheme embodied in Section 12 is amplified by what is provided in Section 3(1). The Customs duty charged under Section 12 is extended by an additional duty confined to imported articles in the measure set forth in Section 3(1). Thus, the additional duty which is mentioned in Section 3(1) of the Tariff Act is not in the nature of countervailing duty'.

11. Under Section 3 of the Tariff Act, the import of goods into India attracts not only the customs duty leviable under Section 2 but also to an additional duty equal to 'the excise duty for the time being leviable on a like article if produced or manufactured in India'.

12. As the quantum of additional customs duty is geared to the excise duty for the time being leviable on a like article produced or manufactured in India, it is necessary to refer to the excise duty leviable under the Central Excises and Salt Act, 1944 (Act I of 1944), for short the Act. The description of goods and the rate of duty are set forth in the first schedule of the Act. The schedule was amended from time to time by the various Finance Acts.

13. Section 13 of the Finance Act 14 of 1961 inserted Item 26A with effect from 1-4-1961 reading thus :-

'26A. Copper and copper alloys containing not less than fifty per cent by weight of copper -(1) Manufactures, the following, namely, Three hundred plates, sheets, circles, strips and foils rupees per metric in any form or size. tonne. (2) Pipes and tubes rupees per metric tonne. Ten per cent ad valorem.'

14. Item 26A(1) and (2) were substituted with effect from 29-4-1962 under the Finance Act 20 of 1962 as follows :-

'(1) In any crude form including ingots, bars, One hundred ru-blocks, slabs, billets, shots and pillets. pees per metrictonne.(2) Manufactures, the following namely, plates, Three hundredsheets, circles, strips and foils in any rupees per metricform or size. tonne.XXX XXX

15. Item 26A as it stood in 1979 read thus :-

---------------------------------------------------------------------------Tariff Description of goods Rate of duty Item No. Basic ---------------------------------------------------------------------------(1) (2) (3)---------------------------------------------------------------------------26A Copper and copper alloys containingnot less than fifty per cent by weight of copper(1) In any crude form including ingots, Rs. 4,000/- perbars, blocks, slabs, billets, shots Metric Tonne.and pellets(a) Wire bars, wire rods and cast- Rs. 4,000/- perings, not otherwise specified Metric Tonne.(2) Manufactures, the following name- ly, plates, sheets, circles, strips Rs. 4,500/- perand foils in any form or size Metric Tonne.(3) Pipes and tubes 20 per cent ad valorem---------------------------------------------------------------------------

16. Finance Act 16 of 1981 inserted 1(b) to Item 26A with effect from1-4-1981 reading thus :-

--------------------------------------------------------------------------- Tariff Description of goods Rate of duty BasicItem No. Basic ---------------------------------------------------------------------------(1) (2) (3)---------------------------------------------------------------------------26A Copper xxx xxx xxx(1b) Waste and scrap Rs. five thousandsix hundred per Metric tonne.xxx xxx xxx Explanation II : 'Waste and scrap' means waste and scrap of copperfit only for the recovery of metal or for use in the manufacture of chemicals, but does not include slag, dross, scalings, ash and other cuprous residues.---------------------------------------------------------------------------

17. Dispute in this case is for the period prior to 1-4-1981 when there was no specific item as 'copper scrap' or copper waste in the tariff entries. There is no dispute thus regarding the import of copper scrap after 1-4-1981. If copper scrap was copper in crude form, it was exigible to excise duty from 1962 and thus attracted additional customs duty as well. We shall, therefore, proceed to consider this aspect.

18. According to New Webster's Dictionary, scrap is 'material which has been manufactured, used and discarded as being fit only for reworking : as, scraps of iron.'

19. According to Shorter Oxford English Dictionary, scrap is a 'remnant; a fragmentary portion; Remnants of metal produced in cutting up or casting-scrap iron'.

20. According to Webster's Third New International Dictionary, scrap means 'small pieces, cuttings, or chips of stock removed1 in the process of making any product; manufactured articles or parts rejected for imperfection or discarded because of excessive wear or lack of demand and useful only as raw material for reprocessing (metal scrap - rubber scrap)'.

21. Encyclopedia Americana, 1970 International Edition, Vol. 7, page 760 describes the sources of copper thus :-

'...The primary sources of copper for the mining industry are the mineral copper sulfides (chalcocite, chalcopyrite, bornite), oxides (such as cuprite), and to a lesser extent carbonates (malachite, azurite) that are found in igneous rock'.

'Another important source of copper is secondary copper, or copper obtained from scrap material. This refers not only to material obtained from reclaimed articles but also to such by-products of copper production as 'trimmings', 'sweepings', and 'drosses'.'

22. On 'brass scrap', the Supreme Court observed in Khandelwal Metal & Engg. Works v. Union of India AIR 1985 SC 1211 thus :-

'...As stated above, damaged goods of brass, which are compendiously called 'brass scrap', can come into existence during the process of manufacturing brass articles and such brass scrap has an established market in India....'

23. On the source of scrap and its utilisation in manufacture, the counter affidavit of the officer states thus :-

'It is not disputed by the petitioner that what is imported is copper in the form of scrap and that it was imported as raw material. The only question therefore is whether the scrap in question is copper in a crude form. The expression 'crude' according to Black's Law Dictionary is a very flexible term depending largely on the context. It may mean inter alia 'in normal state, raw, unrefined, not artificially altered, unfinished'. It is submitted that copper scrap is certainly copper in a raw form. The expression 'raw' only signifies something from which a final product is made, not necessarily something in its natural state. This is the meaning that the term 'raw' bears when used in the expression 'raw material'. It is submitted that in the context of the admission of the petitioner himself that the copper scrap has been imported as raw material for the manufacture of some chemical, it is clear that the copper scrap in question is copper in a raw form and not in a finished form. Copper in raw form is copper in crude form, xxx xxx. As has already been submitted, it seems to have been assumed prior to the introduction of item 68 that copper scrap was not leviable to Central Excise duty. It is also submitted that even on the averments contained in the Original Petition, the scrap imported by the petitioner has lost its identity as copper wire and that it could not be viewed only as a raw material in the place of copper. Even according to the petitioner its value is solely on account of the face that it happens to be the metal 'copper'.'

'If at a given moment the article could only be used as raw-material for the manufacture of other items and the article has lost all commercial identity as any other article than the metal called Copper, it could properly be called as copper in crude form. The article is not in a refined form. Its previous identity as wire or as any other article has been totally lost and its only identity now is as Copper. The contention that copper which once was brought upon could never thereafter become copper in crude form is also unsustainable in law'.

'The contention of the petitioner that the description 'crude form' can be given to a material only in the shape in which it occurs in nature is not entirely accurate. Of course, an article which retains its shape in which it occurs in nature could certainly be stated to be in crude form. Even according to the petitioner, the term 'crude form' would apply even when the Copper is put in the first commercial forms in which the material is manufactured. If copper could be called to be in 'crude form' after it is melted and cast, there is no reason why it could not said to be in crude form when it is fit to be used only for the same purposes for which it could be put when it is converted to first commercial forms. Copper in the first commercial forms could only be used as a raw material for the manufacture of various articles. And it is in this sense that it could be called as copper in crude form. On parity of reasoning, copper scrap which is fit only to be used as a raw material could also be called as copper in crude form.'

'...It is not correct to say that copper scrap is only a waste. Copper scrap is a very valuable item which has got a commercial identity and which is purchased and sold in very large quantities because of its use as a raw material for the production of a variety of articles and chemicals.... As has already been submitted the question is not whether Copper Scrap is a manufactured item or not. Copper scrap may be produced either in the course of a manufacturing process or by some other process but the fact remains that an article known to trade is produced by some process or other and on such article coming into existence, it is leviable to duty'.

'Copper Scrap can come into existence as waste when other articles like wire rods, castings etc. are manufactured with copper. Copper scrap can also come into existence on vessels, containers, castings, wires and other manufactured articles of copper became nusable and such articles got condemned. However, the important fact is that the scrap which come into existence in either of the above mentioned ways, is imported into the country solely for the purpose of being used as the raw material of copper in the manufacture of other articles and chemicals.... The identity of the metal ailed copper is the only reason for the import of the articles in question into the country. The petitioner himself admits that what is imported is to serve as the raw material i.e. copper in the manufacture of various chemicals..... Whatever may be the processes to which the copper in question might have been subjected, the fact remains that what has been imported into the country are pieces of the metal copper in crude form.... Even assuming that this scrap imported by the petitioner consists of scrap derived from old, used and condemned defective non-standard wires and accumulates generated in engineering and electrical industries, the article would still be dutiable under Entry 26A(1) of the Central Excise Tariff. Even according to the petitioner, the article becomes identifiable as scrap when a copper wire is condemned and is held to have only the value of its metal content'.

24. With this background and after giving our serious consideration to all the aspects highlighted before us at the time of arguments, we have come to the irresistible conclusion that 'copper scrap' is not copper in crude form and was not liable to excise duty or additional customs duty prior to 1-4-1981. Our reasons are many.

25. Taxability postulates the unerring element of certainty and the taxing event can never be left in doubt. The fiscal legislation has therefore to declare and describe the dutiable goods in clear unmistakable terms. These goods are normally understood in its popular sense or as they are known in common parlance. Outside this sphere, the taxing statute will have to provide for identifiable standards or tests for reasonably distinguishing one item from another. These principles have been laid down by the Supreme Court in Union of India v. Tata Iron and Steel Co. Ltd. 1975 Cen-Cus 62C S.C. thus :-

'...A particular type of strip may according to certain definitions be skelp and according to others not skelp. This, however, cannot be permitted in a fiscal legislation which by all standards should adopt a clear definition of an excisable item which is incapable of giving rise to a confounding controversy as in this case unless the ...matter is beyond doubt in view of the popular meaning or meaning ascribed in the term in commercial parlance.... It is only when a taxing law provides for a clear and unequivocal test for determination as to whether a particular product would fall under strip or skelp it may be possible for the authorities to address itself to the evidence submitted by the parties in order to come to a decision on the basis of the test. This is, however, not possible in this case in view of the fact that there is no identifiable standard. The best way is to define the product for the purpose of excise duty in appropriate terms demarcating clearly the distinction between the two terms.

The absence of any identifiable standard would, therefore, naturally give rise to the scope for arbitrary assessment at the hands of different authorities'.

26. In the present case, the Act described the dutiable item as 'copper in crude form'. It was a vague description which gave rise to sharp differences of opinion in the Department. Discussion at various levels and at conferences held in several regions could not reach any decision among the officers themselves. In fact, the Appellate Collector of Bombay and Calcutta held in favour of the assessees and against the department. There was 'confounding controversy' as to whether 'copper scrap' was dutiable or not. There was no identifiable standard to distinguish 'copper in crude form'. There was scope for arbitrary assessment at the hands of different authorities. The law did not provide for- any clear and unequivocal test to determine whether the product was copper in crude form or whether 'scrap is copper in crude form'. The benefit of doubt in such cases has to be in favour of the assessee. There is thus no necessity to strain the language and strive to sight a taxable entry and thus decide that copper scrap is copper in crude form.

27. It is an admitted fact that the Department did not impose duty on copper scrap from 1962 when copper in crude form was dutiable under item 26A(1), till 1981 when a specific new item 'waste and scrap' was inserted as item 26A(b). If for nineteen years, the Department thought that copper scrap was not dutiable, there is no reason why this court, now, with the materials available should hold that copper scrap was dutiable from 29-4-1962 when, for the first time copper in any crude form was included as an item.

28. The fact that the respondent was not sure about the taxable item is clear from the fact that while the preassessment notice referred to the residuary entry, item 68, the assessment order was made under entry 26A(1). At the preassessment stage, the department thus proposed to assess only at the lower rate of 8% fixed under the residuary entry. They had no intention to assess at the higher rate under entry 26A(1). But what is surprising is that when the assessment was made under entry 26A(1), and the petitioner was liable to pay at the higher rate at Rs. 4,000/- per metric tonne, the respondent has shown kindness and consideration when the amount was reduced and restricted to the amount required to be paid only under entry 68. The averments in the counter affidavit is revealing :-

'The total amount of duty payable under Tariff Item 26A(1) was Rs. 2,70,073.50. The special Excise duty payable was Rs. 13,503.67. The difference actually demanded from the petitioner under Ext. P2 being only Rs. 1,89,775.70 the demand under Ext. If has been restricted to the amount shown in Ext. P2. Thus the petitioner is actually saving a sum of Rs. 93,801.47 on the basis of the error in Ext. P2 in citing item 68 rather than item 26A(1).'

Then the goods are exigible to duty under a particular entry, the department is bound to levy under that entry and there is no scope to show any favoured treatment to any assessee including the petitioner. It is thus clear that whatever be the attempt, in effect the department has assessed in these cases only under entry 68 on the ground that copper scrap does not fall under entry 26A(1).

29. The Government had issued a trade notice (Ext. R1) on 17-10-1967. We shall extract the relevant portions :-

'Doubts have, however, been expressed whether articles of copper and copper alloys which are neither the manufacture (specifically enumerated in item 26A(2) nor pipes and tubes covered by them 26A(3) and are, the same time, not in any crude form would be liable to pay Central Excise duty. Though in the case of indigenous production, articles of the type would have paid the crude stage duty under item 26A(1), the question arises about the liability of countervailing duty in respect of such articles. The whole question has been carefully examined in consultation with the Directorate General of Technical Development and the Ministry of Law. The D.G.T.D. have confirmed that the words 'ingots, bars, blocks, slabs, billets, shots and pellets' as used in sub-item (1) of Item No. 26A of the Central Excise Tariff, refer in the metallurgical sense, to be crude form only. It is accordingly clarified that the governing factor to determine the liability of any particular articles to pay Central Excise duty under item 26A(1) in that it should be in crude form i.e. all unwrought forms which have not been subjected to mechanical working such as hot working, cold working, rolling, forging, extruding, piercing and drawing, and that the articles, even though known in the trade by the name of bar or 'rod', if precision-machined or rolled/drawn extruded to certain specifications with close tolerances, shall not be deemed to be covered by the said sub-item. Similarly slotted, drilled or otherwise worked bars which can easily be distinguished from 'bars in crude form' or are recognisable as components/parts of machinery or finished products shall not attract Central Excise 'duty under the said item 26A(1). Therefore, no countervailing duty on such imported articles becomes chargeable.'

Crude form was described as all 'unwrought forms which have not been subjected to mechanical working such as hot working, cold working, rolling, forging, extruding, piercing and drawing'. Even if this administrative clarification can be pressed into service to understand the scope of a taxable entry, it seems to be clear that the copper scrap is not in wrought unwrought form. The scrap imported was only the remnant and waste in the manufacturing process and could not be said to be in unwrought form, without being 'worked'.

30. It is also significant to note that whenever the legislature thought that scrap should be an item to be taxed, it said so in express terms. Thus as early as 1964, so far as the entry regarding iron was concerned, it stated 'iron in any crude form including scrap iron'. In the Schedule to the Customs Tariff Act, Copper and articles thereof are mentioned Chapter I of the First Schedule under the Heading 74.01.02 thus :-

'Copper matte : unwrought copper (refined or not); Copper waste and scrap; master alloys'.

The duty on scrap under Section 2 of the Tariff Act is not in challenge. It is only the additional duty claimed under Section 3 that is questioned. It is for that purpose the entries in the Excises and Salt Act, 1944, are referred; and in that Act, scrap was omitted. The legislature was aware of the existence of copper scrap. The legislature included copper scrap in the relevant entries whenever it thought it was liable to duty. Non-inclusion of the words 'scrap and waste' in item 26A(1) itself indicated that these items were not intended to be treated as dutiable till those words were inserted.

31. As stated already, scrap and waste were expressly included only by the 1981 amendment to be effective after 1-4-1981. It was contended by the Central Government Pleader that this amendment was only clarificatory or declaratory in character and he relied on a Budget speech made by the Hon'ble Minister for Finance in 1981 thus :-

'The other major area where rationalisation of the tariff entries has been proposed, is in regard to non-ferrous metals under the respective entries in the Central Excise Tariff. There has been considerable debate and dispute on the question of assessment of waste and scrap of these metals. To set this at rest, it is proposed to specifically cover waste and scrap of these metals under the respective tariff entries.'

Whatever be the use to which the speech of a Minister can be put, to understand the true meaning of the specific provisions in a statute, the speech in the instant case does not expressly or impliedly state that the amendment was clarificatory. The speech refers not to doubts expressed earlier; but to debates which ensued. The counter affidavit stated thus :-

'It is significant that the question whether copper scrap was dutiable under Central Excise Tariff Item No. 26A(1) or under Item No. 68 was a point on which divergent views were being expressed not only by different assessing authorities but also in various conferences where the issue was debated in depth. Having regard to the opinion expressed by the Law Ministry, the legislature itself has, by amending item 26A by the Finance Act, 1981, specifically included copper scrap within the entry.'

Under the circumstances, it is difficult to accept the contention that the amendment was clarificatory or declaratory of the existing law. It stopped a debate for the future when in 1981, scrap and waste were expressly included as taxable item in entry 26A(1b).

32. Copper scrap is not copper ore. It is not copper in its natural or raw state. It may come into existence during the process of manufacture or it may be material defective, condemned and discarded. It may be manufactured articles or parts rejected because of excessive wear. It may be used for reprocessing or for reworking. The metal content in scrap can be the secondary source for copper. With these characteristic features, it is idle to contend that copper scrap has no separate identity. Scrap in common parlance is distinct from the crude raw material. Copper in crude form as described in item 28A(1) before 1-4-1981 cannot thus include copper scrap or waste.

33. We, therefore, hold that the respondent committed a patent error and in fact, exercised a jurisdiction not vested in law when it assessed the petitioner for additional duty under entry 26A(1) of the Central Excises and Salt Act, 1944. Copper scrap was not liable to additional customs duty under entry 26A(1) till 1-4-1981. The assessment made relying on this entry cannot be sustained. The orders so made, Ext. P4 in O.P. Nos. 2641, 2642, 2643, 2644, 2645, 2646, 2647, 2648, 2649, 2650, 2651, 2652, 2653, and 2656 of 1981, the bills, Ext. PI in O.P. Nos. 2345, 2367, 2368, 2369, 2370, 2371, 2377, 2378, 2379, 2799, 2800, 2801, 3169 and 3530 of 1981, are therefore quashed. It is, however, open to the respondent to consider the petitioners' liability to be assessed under item 68 of the Act. For that purpose, the respondent will give a personal hearing to the petitioners in these Original Petitions, if they so require, and decide, with reference to the statutory provisions, the exemption notifications, the question of bar of limitation and all other relevant factors, whether the petitioners were liable to pay duty under that item 68 for the relevant periods.

The Original Petitions are disposed of as above. No costs.


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