Judgment:
ORDER
S. Nainar Sundaram, J.
1. In this batch of writ petitions, the question raised relates to the liability to pay on the 'natural rubber' imported for the petitioners, additional duty under Section 3 of the Customs Tariff Act (51 of 1975), hereinafter referred to as the Act. Itemwise 'natural rubber' bears different names and in the present batch of writ petitions, we are concerned with the natural rubber bearing the name 'smoked sheets'. In some cases, the petitioners have paid the additional duty through the State Trading Corporation, which was the agency for the import of this product, since the said product was a canalised one. The State Trading Corporation, when it collected the price from the petitioners, the additional duty was part and parcel of the price paid by the petitioners. In those cases, the petitioners have asked for refund. The petitioners also apprehending levy and collection of additional duty have asked for writs of mandamus to forbear the respondents from so levying and collecting the additional duty in respect of imports for which such payments were not yet made. In some of the writ petitions, the petitioners have prayed for the issue of declaration that the levy of duty on 'natural rubber' is illegal.
2. In support of the prayers in the writ petitions, Mr. Habibullah Badsha, learned Counsel appearing for the petitioners in majority of the writ petitions, followed by Mr. M. Uttama Reddi, learned Counsel appearing for the petitioners in some of the writ petitions, would advance the following points, which I shall deal with in seriatim.
3. Firstly, it is contended that as per Section 3(1) of the Act, there could be levy of additional duty equal to the excise duty for the time being leviable on a like article and if no excise duty is leviable for the time being, there is no question of levy of additional duty. Learned counsel for the petitioners would submit that the expressions 'for the time being leviable', occurring in that provision, must be construed in the light of the explanation thereto, and if so done, there ought to be levy of excise duty in force and then only the liability to pay the additional duty would arise. Learned counsel would submit that 'natural rubber' is not a product obtained by any manufacturing process, so as to attract levy of excise duty, and when levy of excise duty cannot be imposed and enforced in respect of such a product, there could not be levy of additional duty. To appreciate this submission, it. is necessary to extract Section 3 Sub-section (1) and the explanation thereto as follows:--
Section 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.
Coming to excise duty, it is the admitted case that the First Schedule to the Central Excises and Salt Act, 1944, does not contain any specific item under which there could be levy of excise duty on natural rubber. The revenue wants to have recourse to the residuary item 68. Even with reference to recourse to the residuary item 68, what is contended by the learned Counsel for the petitioners before me is that the natural rubber imported cannot be characterised as an excisable good, which is being produced or manufactured. The fundamental postulate for levy of excise duty is that there should be manufacture of the good in question. In the affidavits filed in support of the writ petitions, the uniform stand taken is that 'natural rubber' does not involve any element of manufacture and hence it cannot attract the levy of excise duty. In the counter-affidavits, filed by the respondents, there is no rebuttal of these specific averments made by the petitioners in their affidavits filed in support of the writ petitions. Hence, it will be proper for this Court to accept the unrebutted case of the petitioners that obtaining natural rubber does not involve any element of manufacture to attract the levy of excise duty. I find that the New Encyclopaedia Britannica defines 'rubber natural' in the following terms:
Rubber natural:--Rubber is produced from a wide variety of plants, especially hevea brasiliensis (family 'Euphorbiaceae') a tall softwood tree native to Brazil, but also from species of Mabea, Manihot, Sapium, Ficus, and others. The milky liquid (latex) found in the inner bark and obtained by tapping (cutting) the bark is coagulated**; the oldest and simplest technique is by smoking over a fire. For plantation rubber, the trees for which are widely cultivated in Southeast Asia, tapping is similar to the method used for wild trees, but coagulation is accomplished chemically. Note** Coagulate to cause (a liquid) to become a soft semi-solid mass; curdle; clot.
It is not possible to spell out from the above definition that any process of manufacture is involved in obtaining 'natural rubber'. In this connection, Mr. Habibullah Badsha, learned Counsel for the petitioners, submitted that the Department of Revenue, Ministry of Finance of the Union Government had no ambiguity in their mind that 'natural rubber' is raw in character and he drew my attention to the exemption granted under Section 25(2) of the Customs Act, 1962, on 28-3-1979 where there is a specific reference to the acute shortage of raw rubber and the decision to exempt raw rubber from the whole of the basic and auxiliary duties of customs leviable thereon. Mr. Habibullah Badsha, learned Counsel for the petitioners, would also refer to the tariff advice, dated 23-6-1981, issued by the Central Board of Excise and Customs that the items of natural rubber enumerated therein, including 'smoked rubber sheets' would be outside the purview of the central excise levy. These proceedings also to a very great extent support the case of the petitioners that 'natural rubber' cannot be stated to be a product which is obtained as a result of any process of manufacture.
4. Secondly, learned Counsel for the petitioners would submit that there were notifications issued under Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, exempting all goods falling under item 68 of the First Schedule to the Central Excises and Salt Act, 1944, and manufactured in any premises other than in a factory, from the whole of the duty of excise leviable thereon; and assuming that 'natural rubber' could be brought within the purview of the residuary item 68, yet in view of the exemption notifications, there was and there could be no levy of excise duty thereon and when there was no levy of excise duty, then there could not be levy of additional duty under the Act. In answer, Mr. P. Narasimhan, Senior Central Government Standing Counsel, appearing for the Union of India and the revenue, would submit that the exemptions regarding excise duty could not be of any avail to the petitioners, with regard to liability for additional duty, because exemptions did not obliterate the factum of the goods being amenable and liable for excise duty and exemptions only suspended such levy and the proper test to be applied is whether the goods are apparently leviable with duty under the excise law; and not whether they stand exempted for the time being under the cover of notifications. This submission cannot be accepted if I take note of certain principles discussed by the Supreme Court in Khandelwal Metal & Engineering Works v. Union of India : 1985(20)ELT222(SC) . The Supreme Court observed that Section 3(1) of the Act provides a measure of the additional duty which has to be 'equal to the excise duty' leviable on a like article if produced or manufactured in India, as defined in the explanation to that section, and the explanation furnishes a dictionary for the interpretation of Section 3(1) and provides a clue to its understanding. The Supreme Court further observed that the explanation provides in so many words that the expression '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'. Hence, there must be an excise duty for the time being in force and which is leviable on the good; then only there could be the levy of additional duty under Section 3(1) of the Act. If no excise duty is in force and could be levied on the good, then there is no question of the levy of additional duty under Section 3(1) of the Act. When there is no excise duty in force and leviable on the good, by virtue of the exemption notifications, it is not possible to bring in a fiction that the good is amenable and liable for levy of excise duty and the exemption notifications have only suspended such levy and on that basis there could be levy of additional duty under Section 3(1) of the Act. When the very measure for the additional duty is not available, it would be doing violence to the express language and implications of Section 3(1) and the explanation thereto, as construed by the Supreme Court, to work out the additional levy on the fictional basis. Hence, I have to eschew the submission of the learned Senior Central Government Standing Counsel that even if the levy could not be made under excise law on account of the exemption notifications, yet the levy must be stated to be attracted and by that fiction the additional duty should be levied under the Act.
5. Thirdly, learned Counsel for the petitioners, would contend that the basic customs duty itself was exempted under Section 25(2) of the Customs Act, 1962, and in such a case, there is no question of levy and collection of additional duty under Section 3(1) of the Act. The notification under Section 25(2) of the Customs Act, 1962, relied on by the learned Counsel for the petitioners, for the relevant period, did not cover in specific terms, the additional duty under the Act. It is not possible to imply something into the notification under Section 25(2) of the Act, which is not expressed therein, to say that it also covered the additional duty. Such is also the view of this Court in its earlier pronouncement. In this view, I am not able to accept this line of thinking projected by the learned Counsel for the petitioners.
6. Fourthly, learned Counsel for the petitioners would submit that there was a notification under Section 11C of the Central Excises and Salt Act, 1944, whereunder there is an unambiguous declaration that there was no levy under the excise law for the specified items of 'natural rubber' including 'smoked rubber sheets' during the period commencing from 1-3-1975 to 7-7-1983, and if this is taken note of, it must be held that there was no levy under the excise law for the time being in force so as to attract the additional duty under the Act. This submission could be tacked on to the second line of submission made by the learned Counsel for the petitioners. The notification under Section 11C of the Central Excises and Salt Act, 1944, presupposes a practice prevalent whereby though duty of excise was leviable, was not being levied; and in that contingency the Central Government by notification has directed the payment of the whole of the duty of excise to be dispensed with. This notification supports the case of the petitioners that there was in fact no levy and collection of duty of excise for the periods in question. In the light of the above discussion, I have to sustain the case of the petitioners that no additional duty can be levied and collected from the petitioners in respect of the 'natural rubber' imported by the State Trading Corporation and allotted to the petitioners through the said Corporation. The ultimate burden of paying the additional duty has either been passed on to the petitioners by the State Trading Corporation or being sought to be passed on to them. In view of that, these writ petitions are allowed in the following terms:--
(1) In respect of cases where there had already been levy and collection of duty in respect of the 'natural rubber' imported by the State Trading Corporation and allotted to the petitioners, the additional duty shall be refunded to the petitioners by the Union of India, represented by the Assistant Collector of Customs, Madras.
(2) In cases where the levy and collection of such additional duty is sought to be enforced, the Union of India through the Assistant Collector of Customs, Madras, is restrained from making such levy and collection in respect of the concerned goods.
I make no order as to costs.
7. Coming to W.P. Nos. 1642 and 1643 of 1983, Mr. M. Uttama Reddi learned Counsel for the petitioners, submits that there was, in fact, a notification under Section 25(2) of the Customs Act, 1962, exempting the levy and collection of the customs duty and the additional duty in respect of 'natural rubber' of the quantity of 400 tonnes. There is no dispute about the same. If so, by the very force of the notification under Section 25(2) of the Customs Act, there could not be levy and collection of additional duty on this quantity. With reference to the residue, the principle discussed above will govern and these writ petitions are allowed as prayed for. No costs. I am told that some of the petitioners have furnished bank guarantees to cover the proposed levy. In view of the fact that the writ petitions have been allowed as above, the bank guarantees, if they are still alive, shall stand cancelled.