TMI Blog1985 (6) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 per cent ad valorem. Since brass scrap is includible in the expression `copper waste and scrap’ and since, brass scrap is not a `Master alloy’, the appellants’ case would fall under this Notification. Accordingly, they would be entitled to exemption from customs duty to the extent of 20 per cent only. - C.A. 338 OF 1983 - - - Dated:- 11-6-1985 - Y.V. Chandrachud, R.S. Pathak and Sabyasachi Mukharji, JJ. Shri Ashok Sen, Shri Soli J. Sorabjee, Shri Bajoria, Shri R.K. Jain, Shri Gobind Dass, Shri L.R. Gupta and Shri K. Parshurampuria, for the Petitioners. Shri K. Parasaran, Attorney General of India, for the Respondents. ORDER This is a group of Civil Appeals and Special Leave Petitions arising out of a judgment dated October 19, 1982 delivered by a Division Bench of the High Court of Delhi in a batch of Writ Petitions filed under Article 226 of the Constitution. Those Writ Petitions having been dismissed by the High Court, the Writ petitioners have filed these Appeals and Special Leave Petitions. 2. The facts of the various Writ Petitions naturally vary from case to case but, such variation has no bearing on the points which arise for our decision. We will me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff Act deals with the levy of additional duty equal to excise duty . Sub-section (1) of Section 3 and the Explanation to that Section, which are relevant for our purpose, read thus :- 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 article to which the imported article belongs, and where such duty is leviable at diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a charging section and imposes a countervailing duty. The Statement of Objects and Reasons says : Clause 3 provides for the levy of additional duty on an imported article to counterbalance the excise duty leviable on the like article made indigenously, or on the indigenous raw materials, components or ingredients which go into the making of the like indigenous article. This provision corresponds to Section 2A of the existing Act, and is necessary to safeguard the interests of the manufacturers in India. This Statement lends prima facie support to the contention of the appellants but, in the absence of any ambiguity in the wording of Section 3(1), we cannot treat the additional duty referred to therein as countervailing duty. Nor, indeed, can we regard that provision as a charging section merely because the Statement says that Section 3 provides for the levy . The Statement of Objects and Reasons errs in being common to sub-sections (1) and (3) of Section 3. It is more apposite to sub-section (3) though, even there, it may not be correct to say that it is a charging provision. Sub-section (3) confers power on the Central Government, in public interest, to levy on any impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 3(1) of the Tariff Act is that indigenous goods belonging to the class of goods which are imported are chargeable to excise duty. The illustrations given are the import of live animals, live trees, burnt-up cables, broken glass or fused bulbs. The argument is that there is and can be no levy of additional duty on these goods if imported because they cannot be and are not manufactured for the simple reason that they are not the result of treatment, labour and manipulation, nor are they the result of one or more processes through which the original commodity is made to pass. Putting it in one sentence, the argument is that if indigenous goods, similar to those which are imported, do not suffer excise duty for the reason that they are not manufactured, the charge leviable under Section 3(1) of the Tariff Act is not attracted. 7. There is no substance in this argument. In the first place, as we have indicated earlier, Sections 2 and 3(1) of the Tariff Act are not charging sections. The charging section is Section 12 of the Customs Act under which, duty is leviable on the taxable event of export of goods from India or the import of goods into India, which is relatable to Entry No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons, we must reject the argument of Mr. Sorabjee and of the other learned counsel for the appellants that Section 3(1) of the Tariff Act is not attracted because, the damaged articles, which are in the nature of brass scrap, are outside the scope of that Act since, such articles are not and cannot be produced or manufactured. 10. Looking at the matter from a different point of view, the brass scrap of the kind imported by the appellants is a by-product of the manufacturing process. Such goods can and do come into existence as waste articles or rejected articles during the process of manufacturing that class of articles. Indeed, brass scrap is known in commercial parlance by that name and is excisable as such. Assuming for the sake of argument that the appellants contention is correct that the duty chargeable under Section 3(1) of the Tariff Act is a countervailing or a counterbalancing duty, the brass scrap imported by the appellants will attract the charge on that basis also. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 97 to the following effect : In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts articles other than copper waste and scrap and unwrought copper (refined or not) falling under Heading Nos. 74.01/02 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) when imported into India, from so much of duty of customs leviable thereon which is specified in the First Schedule as is in excess of 40% ad valorem. Another Notification No. 156, was issued by the Central Government on July 16, 1977 by which copper waste and scrap falling under the same heading were exempted from so much of the duty of customs leviable thereon which is specified in the First Schedule, as is in excess of 80 per cent ad valorem . The upshot of the two notifications is that under the first notification of June 25, 1977, customs duty at the rate of 40 per cent is payable while, under the second notification of July 16, 1977, customs duty at the rate of 80 per cent is payable. In other words, 60 per cent duty is exempted under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that if the appellants were to ask for permission to import `master alloy under the Open General Licence, they could not have been granted that permission since, under the OGL, the import of brass scrap was permissible at the relevant time but, not of any master alloy. One of the three items in Entry 44 of Appendix 10 of the `Import Policy was `Brass Scrap . But, apart from this consideration, it seems to us difficult to accept the appellants contention that brass scrap is a `master alloy . 16. The best part of the argument before us was occupied by this particular question since, the difference between the duty payable by the appellants is quite considerable, depending upon whether the first or the second notification applies. The contention of the various counsel on this point may be summed up thus. Firstly, `brass scrap cannot be classified as `copper scrap because, the context in which Notification No. 97 was issued has to be examined in order to find out whether Note 4 of Section XV of the `Import Tariff is at all applicable. Secondly, two Notification Nos. 96 and 97, were issued simultaneously, one for `copper scrap and the other for `other than copper waste and sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any Heading of the Schedule shall be classified under the Heading appropriate to the goods to which they are most akin cannot apply since, Rule 1 of the Interpretative Rules must take precedence over it. These considerations, according to the learned counsel, lead to the conclusion that brass scrap, as a `copper alloy scrap must be classified with copper as an `alloy scrap of copper or `copper alloy scrap . It cannot be classified as `copper scrap . 18. Arguments advanced by the various learned counsel including Mr. Asoka Sen, Mr. Sorabjee, Mr. Bajoria, Mr. R.K. Jain, Mr. Gobind Dass, Mr. L.R. Gupta and Mr. K. Parshurampuria were an interesting interplay of different facets of forensic presentation. Broadly, the central theme of their argument was the same but, a few of them, who are evidently well-versed in the Import Tariff , dissected with ability many a minute point concerning the composition of metals like brass and copper. 19. The reasons why we are unable to accept the submission of the appellants that brass scrap is a `master alloy , are these. An `Alloy is described in A Dictionary of Metallurgy by A.D. Merriman thus : Alloy It is a substance possessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on s `Metallurgical Dictionary (page 206) `Master alloy is treated synonymously with `Foundry alloy and `Hardener . At page 163 of the book the following statement occurs : Hardener (preliminary alloy; foundry alloy; master alloy; rich alloy) An alloy, rich in one or more alloying elements, that is added to the melt, this procedure permitting closer composition control than is possible with the addition of pure metals; an alloy designed to facilitate adding to a base metal, to make a complete composition, those additive elements that, due to refractoriness or susceptibility to exidation, do not, as pure metals, readily alloy with the base metal." At page 142 of the book, Foundry alloy which is equated with Master alloy is described as an alloy of specific composition as, for example, a ferro-alloy, used for making cupola, ladle, or furnace additions . 22. In Osborne s `Encyclopaedia of the Iron and Steel Industry (page 195) `Hardeners are described as Master alloys prepared for the purpose of adding small quantities of the desired alloying elements to molten metals . 23. According to Encyclopaedia Britannica (Volume 1, pages 649-50), The most common way of prep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the terms of the Headings and any relative Section or Chapter Notes and, provided such Headings or Notes do not otherwise require, according to the provisions contained in the following Rules. By Rule 2(b), the classification of goods consisting of more than one material of substance shall be according to the principles contained in Rule 3. Rule 3, on its own terms, is applicable only when goods are prima facie classifiable under two or more Headings. But by reason of Rule 2(b), the principles contained in Rule 3 will apply to the classification of brass scrap since it consists of more than one material or substance, namely, copper and zinc. That is, of course, if the Rules, apart from Rule 1, are at all attracted. Under clause (a) of Rule 3, the Heading which provides the most specific description shall be preferred to Headings providing a more general description. Under clause (b) of Rule 3, Mixtures and composite goods which consist of different materials or are made up of different components and which cannot be classified by reference to clause (a) shall be classified as if they consisted of the material or component which gives the goods their essential character, in so far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the terms of the relevant Heading do not, by themselves, yield an answer to the question whether copper waste and scrap includes brass scrap. But, the particular Heading does not require or provide that the other rules should be excluded while determining the classification of articles under that Heading. That is how, Rules 2 to 4 become relevant for deciding the question whether `copper waste and scrap includes brass scrap. What is meant by the clause in Rule 1 : and, provided such Headings or Notes do not otherwise require is not that a Heading must require that the provisions contained in the rules following Rule 1 should be applied. What it means is exactly the opposite, namely, that if a Heading does not require the exclusion of the other rules, those other rules must also be applied for determining the classification of an article. Therefore, all the relevant rules of interpretation in the Import Tariff come into play in the classificatory process. Rules 2 to 4 of the Import Tariff are not a mere adornment. Nothing ever is an adornment in an Import Tariff. Therefore, classification has to be determined both according to the terms of the Headings and according to the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and scrap includes `Brass Scrap . 31. The appellant relied upon certain documents issued by the Merchants Association and upon extracts from `Indian Standard Coding and Classification for non-ferrous scrap metals to show that brass scrap and copper scrap are regarded as distinct and separate items for commercial purposes. Such considerations cannot furnish a true answer to the question before us because, the distinguishing feature is that, here, brass and copper are not mentioned as separate items in the Import Tariff. It is because of the absence of such specific, separate specification of these two items that the question arises whether, under Heading No. 74.01/02, `Copper Waste and Scrap , includes `brass scrap . 32. Reliance was also placed by the appellants on certain exemption Notifications, referred to earlier, as affording intrinsic evidence to show the contemporaneous understanding of the framers of such Notifications. True, that such understanding is a legitimate aid to interpretation but, we cannot decide the question of classification of goods under the `Import Tariff by implications, when there are Rules of Interpretation which are specially framed to aid and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 3 only if they are manufactured in India and not otherwise. Entry 26A(1b) of the First Schedule of Act of 1944 cannot be held to be beyond the legislative competence of the Parliament because, the pre-condition of the excisability of the articles mentioned therein, namely, waste and scrap, is in the manufacturability of those articles. Since the production of waste and scrap is an integral part and an inevitable incident of the manufacturing process, Parliament has the legislative competence to make `waste and scrap excisable under Entry 84 of List I of the Seventh Schedule to the Constitution, which relates to Duties of excise on Tobacco and other goods manufactured or produced in India , except certain intoxicants and narcotics. 36. On the question of the legislative competence of the Parliament to incorporate Entry 26A(1b) in the First Schedule to the Act of 1944, it must be added that the proper approach is to determine whether the subject-matter of a legislation falls in List II, the State List, which is the only field which the Parliament cannot enter. If it does not fall in List II, Parliament would have the legislative competence to pass the law by virtue of Article 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... occurs in Section 3(1) of the Tariff Act, 1975 means 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. (7) Even if the duty referred to in Section 3(1) of the Tariff Act, 1975 is regarded as in the nature of a countervailing duty, the brass scrap imported by the appellants would still be liable to the levy of that duty. The reason is that scrap or waste is a by-product of manufacture and, is an integral part and an inevitable incident of the manufacturing process. Brass scrap is manufactured or happens to be manufactured in India. It is well-known as a marketable commodity, both of Indian and foreign origin. The brass scrap produced in India must receive protection by the imposition of a countervailing duty on imported brass scrap. (8) The brass scrap imported by the appellants falls under Exemption Notification No. 97, dated June 25, 1977 and not under Exemption Notification No. 156, dated July 16, 1977. The reason is twofold : one, that within the me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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