TMI Blog1980 (5) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner No. 1 company has factories at Hyderabad and Ballabhgarh and manufactures asbestos cement products like-cement sheets and pipes. The main constituent for the production of asbestos sheets and pipes is asbestos fibre. Before 1962 the supply of asbestos was dependent completely on imports, thereafter the petitioner took on lease certain mines in the state of Bihar under the Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter to be called the 1957 Act). Section 9 of the 1957 Act provides for payment of royalties in respect of mining lease at the rate specified in Second Schedule to the Excise Act. Second Schedule specifies the mineral and Entry 30 relates to asbestos and reads as follows :- * * * * "ASBESTOS (a) Chrysotile of superior quality i.e. AS, A. B. and C. Two hundred and fifty rupees per tonne. (b) Chrysotile of inferior quality i.e. other than A, AS, B C. Fifty rupees per tonne (c) Amphibole Twelve rupees per tonne" But this meets a very minimal demand of the trade which is 60,000 tonnes per annum. Out of this India imports about 57,000 tonnes of chrysotile asbes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to pay the excise duty and also ipso facto no additional duty of Customs under the Customs Tariff Act. This however, was not accepted and the Collector, Central Excise, Hyderabad issued a trade notice on August 3, 1977 in which he took the view that asbestos fibre as processed and graded has a distinct character differing from asbestos rock and that the said item was covered within Tariff Item 22 (f) of the Excise Act and was liable to pay duty of excise. The petitioners were also informed by the letter from the Government of India, Ministry of Finance dated August 19, 1977 that the process by which asbestos fibre is obtained is a process of manufacture and that the said item correctly falls within Tariff Item No. 22(f) of the First Schedule to the Excise Act. It is thereafter that the petitioners filed these writ petitions. Their main grievance being that in the asbestos mined by them and the asbestos fibre that they ultimately use there is no process of manufacture and therefore no duty is payable under the Excise Act. The further consequential argument urged is that if there is no duty under the Excise Act on asbestos fibre automatically no additional duty of Customs can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the ore after blasting and adhering rock is removed with a pick. The resulting chunks of ore called crudes, which may contain as much as 30% water, are then dried in preparation for the next stage - separation into fibres. Fibre separation is accomplished mainly by a series of shaking screens, special separators called cyclones, and additional crushers or fiberizers. At each shaking screen the liberated fibres are sucked off by an airstream and collected for grading and packaging. The larger pieces of ore which are retained by the screen are recycled for further crushing. Smaller pieces, which pass through the screen and are called throughs, are sent to the next crushing or fiberizing sequence. The extremely small pieces that fall through the screens following the final fiberizer are discarded, [vide Encyclopaedia Americana, Vol. II (1970) pages 427, 428.1 9. Similarly, the Encyclopaedia of Natural Chemical Analysis, Vol II gives the processing of asbestos fibre as follows : "Asbestos fibre is recovered by open pit or underground mining operations. In the open pit operation, the ore is taken from the top of the deposit and in underground method, the ore is removed from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners have obtained permission from the Collector of Central Excise, Patna as communicated by Assistant Collector dated December 14, 1977 to remove in bond semi-finished goods under Rule 56(b) from the mining place at Roro to the factory at Hyderabad for further processing after the pieces of rock are brought to Hyderabad they are crushed to smaller size with the aid of power and the resultant is subject to series of screening surfaces so that the asbestos fibre which is very much lighter is removed and separated from the dust and the grit. The fibre, however, still contains rock particles and specules. The fibre is then pressed through a Hurricane Mill where rapidly rotating rotors pulverise the stones and specules without damaging the fibre. It is in this process that ultimately the asbestos fibre free of all dust and stone particles is produced. 10. The petitioners were argued by their learned Counsel Mr. Ray who was also followed by Mr. A.K. Sen, Mr. Soli J. Sorabjee and Dr. Chitley and on behalf of Union of India by Mr. S.N. Chopra and Mr N.K. Jaggi. The first contention raised by the Counsel for the petitioners was that the whole process from the mining of the asbestos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d so as to entitle deduction in respect of the calls made by him in contributing to the shares of the company. At page 44 Latham, C.J. conceded that moil or minerals severed from the freehold are chattels and that the primary meaning of the word 'mine' is a cubtorrancan excavation for the purpose of getting minerals but the Judge relied on the definition of 'mine' in the Mines Act, 1928 which included a place wherein any operation for or in connection' with mining purposes is carried on upon Crown land. There was also the evidence of mining export that mining includes not only excavation of material by digging mechanical methods, or hydraulic methods but also treatment by a battery or otherwise and by a chemical process when carried out at the place where the gold bearing material was obtained, though it was nevertheless accepted that a teatment at a place other than from where the dump was removed would not be described as a mining operation. It will be clear that the case was decided on the peculiar definition of the Mines Act. It is also significant to note that even in the extended meaning of the mining it was recognised that if concentrates are removed from the place where it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld mean a bodily removal of the rock from the bottom to the pit. 'Mine' is defined in Chambers's Twentieth Century Dictionary as 'a place from which minerals are dug, to excavate'. Mining is defined in Stroud's Judicial Dictionary as `a commercial work done on a mineral bearing property and preparation for or as ancillary to the actual winning of the material and work done on the property subsequently. The expression defined is understood to what is really the chief objective. A man employed at the pithold of a colliery was held not engaged in the process of mining in the sense in which that word was used in relation to industrial disease [Stroud's Page 1677 (4), 4th Edition]. 14. In American Jurisprudence, Vol. 54, II edition, page 190, "Mining", as it is effected by governmental controls, includes surface evacuation of ore and minerals and of sand and gravel by the "open pit" and "trip mining" methods. But then it is also described in Article 5 (at page 189 of 54 Am. Jur. 2d) as an operation consisting of sinking shafts to the productive level, digging or blasting put the minerals, and elevating them to the surface for processing. This insistence to give a meaning in a particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t thus covered by Excise Act as such. 15. The next question is whether the process of obtaining asbestos fibre amounts to manufacture. This in fact was the most strongly, hotly contested point. The argument of the Counsel for the petitioners is that unless it can be held that the process of obtaining asbestos fibre amounts to manufacture, the Parliament would have no legislative competency to include the Item 22(f) in the Excise Act and therefore Section 35 of the Finance Act, 1976 to that extent must be held to be invalid and unconstitutional. 'The court ought not to interpret statutory provisions unless compelled by their language in such a manner as would involve its constitutionality because the Legislature is presumed to enact a law which does not contravene or violate the constitutional provisions.' [See MK. Balakrishnan Menon v. Asst. Collector of Estate Duty-cum-Income Tax Officer, (1971) 2 SCC 909]. If certain provisions of law construed in one way would make them consistent with the Constitution, and another interpretation would render them unconstitutional, the Court would lean in favour of the former construction. Vide (1962) supp. SCR 769) Kedarnath Singh v. State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to excise duty must be the bringing into existence of a new substance known to the market, and that to become 'goods' an article must be something which can ordinarily come to the market to be bought and sold, and further that mere process is not manufacture. This was reiterated in [AIR 1963 SC 922 = 1978 E.L.T. (J 336)] South Bihar Sugar Mills Ltd and another etc. v. Union of India and others etc. It is now, therefore, not open to challenge that before excise duty can be leviable on the goods there must be brought into existence goods, which can be bought and sold and are known to the market i.e., to say that if by process of treatment, labour certain raw material is converted to an article which is saleable in the market as goods it would amount to manufacture of goods on which excise duty would be leviable. 20. Applying that test to the present case it is not open to doubt that asbestos fibre is a marketable commodity and is known to the market and is saleable as such. It is also not disputed that asbestos rock which is mined by the petitioner is as such not saleable in the market. Great and intensive process is required before the asbestos rock which is mined by the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut circles. The uncut circles are trimmed and then converted into utensils and sold as such in the market. Item 26(2) under which excise was levied reads as under:- (2) "manufactures the following, namely plates, sheets, circles, strips foils in any form or size......" Apparently the excise was levied on the basis that at the stage when billets were rolled into circles the process of manufacturing circles was complete and these circles became liable to excise duty under Item 26A(2). The High Court had accepted the owner's plea that he was not liable to pay excise duty as circles were prepared without undergoing any such change as could be held to amount to manufacture, so that circles at that stage were not liable to excise duty under this item. Reliance was placed before the Supreme Court on the earlier two cases (AIR 1963 SC 791 and AIR 1968 SC 922) (supra) to urge that billets when rolled into circles no process of manufacturing was carried and consequently no excise duty was payable. Rejecting the owner's contention the court held that rolling of billets into circles is certainly a process in the course of completion of manufactured products i.e., circles. They laid speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case i.e., asbestos fibre under a particular item, (i.e. 22F) in Schedule to the Excise Act yet it should be held to be invalid on the ground that notwithstanding the understanding of Parliament that asbestos fibre is a manufactured product it should be held that obtaining asbestos fibre does not involve any process amounting to manufacture. The only case in which the said challenge was made was AIR 1971 SC 2333 (supra.) but the same was rejected. This will be clear if a reference is made to the various authorities cited. In AIR 1963 SC 791 (supra) the petitioner who was a manufacturer of vanaspati, which was an excisable item were paying excise duty under vegetable product under Item 23. The Excise authorities demanded excise on the ground that petitioners who purchased groundnut oil from the market manufactured at an intermediate stage 'refined oil' within clause 12 of entry in Schedule. The court accepted the plea if the substance known as refined oil came into existence then it would have to bear excise duty. It then went on to examine whether at any intermediate stage before vanaspati comes into existence the petitioner-produced refined oil as is known to the market. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the agricultural produce from the subject matter of sales tax. The question arose whether the assessee who had tea garden and sold tea leaves was dealing in agricultural produce and was not therefore covered under the Sales Tax Act. The court found that the tea leaves were crushed and then roasted for 15 minutes and then passed through process of screening with sieves of various sizes and thereafter packed in packets and taken to the market for sale. The court held that the process was so minimal that it did not substantially change the character of tea leaves because they still remained the tea leaves. The court also found that the process was necessary for the purpose of preparing and making them fit for transporting and marketing them. It may be mentioned that the emphasis was on the minimal process. Now admittedly the tea leaves were agricultural produce and obviously did not become a different article by the minimal process that was applied to tea leaves. This was emphasised by Untwalia, J. when he noticed a case of Bombay High Court which had held that Gur prepared out of sugarcane still remained agriculture produce and commented that if the agriculturist who produces whea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess is not manufacture. It is of significance to note that in American case it was observed that "cleaning and ginning cotton does not make the resulting cotton a manufacture of cotton" runs contrary to AIR 1969 SC 1073 at 1076 (supra) where it was held that "ginning process is a manufacturing process". Similarly, it has been held that rice and paddy are two different things and when paddy is dehusked and rice produced, there has been a change in the identity of goods (See AIR 1974 SC 1362, AIR 1979 SC 1475). Similarly the next case of 75 Lawyers Edition, page 801 is of no assistance to the petitioners. In that case the orange had been impregnated with borax, through immersion in a solution and it was held that this did not amount to a manufacture. Evidently as was said by the court there was no change in the name, appearance, or general character of the fruit. It remained a fresh orange fit only for the same beneficial uses as theretofore. Obviously by applying even borax the orange remained a fresh orange. 23. The next case of 100 Lawyers Edition 917 is equally of no avail to the petitioners. In that case the agricultural commodities (not including manufacturing products) we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is primarily for the import control authority to determine the head or the entry in tariff Schedule under which any particular commodity fall, and that if there are 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: see Collector of Customs, Madras v. K. Ganga Setty (AIR 1963 SC 1319) and V.V. Iyer of Bombay v. Jasjit Singh, Collector of Customs and another (AIR 1973 SC 194). If therefore the opinion of the government is to be accepted unless it is said that no reasonable person could adopt it, surely a declaration by the Parliament declaring that mineral fibre and manufacture therefrom shall be deemed to include asbestos fibre, is entitled at least to the same presumption. After all it is on the facts of each case that one has to find whether the manufacturing process is involved to bring a different article in existence. Legislature having determined that asbestos fibre is obtained by the process of manufacture it would, I feel, be usually extremely hazardo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture" in the sense that raw material should be used to turn out something different and "produce" appearing in the same entry to mean an expenditure of some human skill and labour in bringing the goods concerned into the condition as would attract the duty. It was strongly contended by the counsel for the petitioner that these observations which make the distinction between the word "manufacture" and "produce" was not supportable in law and that the reasoning that the excise will be applicable merely by the application of some expenditure of human skill and labour is not supportable in view of the latter decisions of the Supreme Court. It was in that connection that Mr. Sorabjee, one of the counsels for the petitioners referred us to 36 Federal Suppl. 792 to emphasise that the term 'manufacture' or 'produce' are synonymous and that 'manufacture' means creation or production of a product from raw material or by combining two or more products to form a new and different one. Apart from the distinguishing fact that the meaning was given in the cantext of statute there, reference to 55 Corpus Juris Secundum 671(4) will show that it has been also held to be interchangeable or synonymou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Bench of Calcutta High Court was unnecessary hesitant in not holding that the coal was a manufactured product and hence excisable article. As a matter of fact coal was specifically mentioned in Item 11I D in Schedule I to the Excise Act as being subjected to excise levy. This again is legislative recognition and declaration that even though coal is obtained from the mines it is still manufactured within the meaning of the Excise Act. Similar consideration must apply to asbestos fibre, found at Item 22F in Schedule I. 29. Counsel for the petitioner has placed great reliance on Minerals anti Metals Trading Corporation of India Ltd. v. Union of India and others (A.I.R 197t SC 2551). That case is of no assistance to the petitioner. In that case the petitioner imported wolfram concentrate. One of the component was WO 3 the minimum percentage being 65%. The petitioner was charged the duty by the Customs Authorities under item No. 87 namely 'All other articles not otherwise specified'. Item No. 26 provided that metallic ores all sorts except ochres and other pigment ores and antimony ore will not be liable to pay any duty. The Assistant Collector however imposed duty of customs on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gitting and screening is done not amounting to manufacture even if presumed, will not still help the petitioners because in that case one must hold that the petitioners mined asbestos fibre. There is no inherent contradiction that if an article is mined it cannot be excisable. That Legislature has treated coal which is mined as a fit item for duty of excise is apparently from the fact that by Finance Act, 1970 Entry 11D namely coal (excluding lignite) and coke not elsewhere specified was incorporated in Schedule I of Excise Act. Thus coal was specifically treated as an excisable Item. (Of course for reasons of price consideration this item was deleted in about May, 1979). The point to note is that as asbestos fibre is included at item 22F of First Schedule, the petitioners will be liable to pay the duty even if their argument that they mine asbestos fibre was to be accepted on the short ground that the goods is specifically covered by Schedule I. If there was no specific item of asbestos fibre in the First Schedule then naturally in order to make the petitioners liable it will have to be found whether the process by which asbestos fibre was obtained from the asbestos rock was manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional duty which amount they have already recovered from the consumers when asbestos fibre was disposed of. This is on the equitable plea that if there is illegal levy and some refund is due the same should be disbursed to the buyers from whom the excise duty and additional duty was realised and not appropriated by the petitioners who in equity are not entitled to it. Had the levies been held invalid all these questions may have had to be considered and the appropriate directions issued in the light of a decision dated 10-7-1975 given by V.R. Krishna Iyer, J. of the Supreme Court in Special Leave Petition (No. 1330 of 1975) M/s. L.H. Sugar Factories and Oil Mills, v. Union of India where it was observed that the benefit of illegally levied price really belongs to actual consumer and not to the manufacturer. But again in view of my finding that the levies have been validly imposed above question does not arise here and need not be pursued any further. 33. The result is that the wr:it petitions are without any merit and the same are therefore dismissed with costs. At the time of admission of the petitions this court had stayed the recovery of excise duty and customs duty on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
