TMI Blog1982 (6) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... cture of the synthetic fibre are dimethyl terephthalate and ethylene glycol shortly called DMT and ethylene glycol. These raw materials arc initially reacted in an pester interchange vessel in the presence of a catalyst and heat in order to form a monomer. After the monomer is formed, a delustrant titanium dioxide is added to import to the said monomer opaqueness. The delustered monomer is then polymerised in a vessel known as an autoclave under the effect of heat, catalyst and vacuum until the desired viscosity is reached, after which the said molten polymer is solidified into a ribbon with water sprays and then cut into polymer chips. These polymer chips are the product in question, which are polyester chips, and the petitioners describe them as polymer chips fibre grade. Admittedly no material known as plasticisers are added at any stage in the manufacture of the polymer chips. The polymer chips are then dried, moulded and spun through spinnerets and finally processed into polyester staple fibre or tops which are used exclusively for the manufacture of blended fabrics and garments in the textile industry. 3. We are not concerned in this petition with the process by which the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 15A was as follows :- "15A. Plastics, all sorts Twenty per (i) Moulding powders, granules and flakes (thermosetting and thermosplastic). cent ad valorem (ii) Polythene films, lay-flat tubings and P.V.C. sheets (that is to say, Polyvinyl Chloride sheets). (iii) Not otherwise specified." 5. According to the petitioners, the polymer chips textile grade manufactured by them do not fall within Item 15A end no excise duty could, therefore, be levied in respect of the product manufactured by them. According to them, polymer chips produced by them in the course of manufacture of polyester fibre are not plastics or artificial or synthetic resins within the meaning of Item 15A. The petitioners allege that the polymer chips manufactured by them are not understood nor known as plastics or artificial or synthetic resins or as raw materials for such plastics, in the trade or market or by people who regularly deal in plastics. 6. After the petitioners had commenced manufacture of polyester staple fibre in January 1965 and the Excise Authorities in Bombay informed the petitioners that excise duty was also leviable on polymer chips, the petitioners wrote to the Central Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary, 1972 to the respondents pointing out that no duty was payable by them and that the respondents should desist from collecting such duty in respect of the polyester chips. The respondents were also intimated by the Advocates' letter that if the requisition made by them in the same letter was not complied with within a period of 15 days from the receipt of the letter, the petitioners would approach a competent court for enforcement of their rights. According to the petitioners, from January 1965 to 24th April, 1972 an aggregate amount of Rs. 586 lacs has been paid by them as and by way of excise duty on polymer chips. This recovery, according to the petitioners, was without authority of law and without jurisdiction and ultra vires and they were, therefore, entitled to a refund of the said amount. The petitioners, therefore, ask for a writ directing the respondents to forbear and refrain from collecting any excise duty from the petitioners in respect of polymer chips produced by them in the course of manufacture of polyester staple fibre and further directing them to refund to the petitioners the sum of Rs. 586 lacs which has been illegally recovered as excise duty. 10. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondents denied that the petitioners were entitled to rely on the two decisions referred to above. 11. Affidavits have been filed in both sides to show the use to which the polymer chips in question can be put and to show how they are recognised in the market. To these affidavits we shall refer later. 12. It is necessary at the outset to ascertain the nature and the scope of Item 15A and the nature of the product polymer chips fibre grade in question. Item 15A is in substance a virtual reproduction of the heading in Chapter 39 in Brussels Tariff Nomenclature. The heading in Chapter 39 is "Artificial Resins and Plastic Materials, Cellulose Esters and Ethers; Articles thereof". Under the heading "Chapter Notes" in that Chapter, item 2 reads as follows:- "2. Heading Nos. 39.01 and 39.02 are to be taken to apply only to goods of a kind produced by chemical synthesis answering to one of the following descriptions:- (a) "Artificial plastics including artificial resins." Similarly clause (1) in item 15A is also a virtual reproduction of item 39.01 in the said Nomenclature which reads as follows:- "Condensation, polycondensation and polyaddition products, whether or not modi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts application to natural organosoluble, hydrocarbon-based products derived from trees and shrubs. But in view of the tendency of inappropriate terminology to 'gel' irreversibly, it seems like a losing battle to attempt to replace 'synthetic resin' with the more precise 'synthetic polymer'. See also note under gum. natural." This note will indicate that the current terminology of synthetic resin was sought to be replaced by more scientific synthetic polymer, but the efforts met with no success. ' The January 1978 Edition of Brussels Tariff Nomenclature contains the following:- "Artificial resins and plastic materials are products of various kinds and different constitution having the common characteristic of plasticity, that is of being capable, or of having been capable at some stage, of being formed under external influence (usually heat and pressure, if necessary with a solvent or plasticisers) into shapes which are retained on the removal of the external influences. The shaping processes used include moulding, casting, extruding, rolling, etc." 14. It is not in dispute that the product in question known, according to the petitioners, as polymer chips fibre grade is a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. It refers to the several trade marks of polyethylene terephthalate fibres in different countries. It is also stated in that chapter that concurrently with its role as a fibrous material, polythylene terephthalate has come into use as a source of high strength biaxially drawn films (e g. Melinex in the United Kingdom, Mylar in the United States) which are noted for their high transparency and dimensional stability. These are used extensively as electrical insulators; for photographic and drawing-office use; as bases for magnetic recording tapes and typewriter ribbons; in decorative laminates and panelling; and as a vacuum-formable crating and packaging material. A polyester is a high polymer and includes a variety of materials having properties ranging from hard and brittle to soft and elastic. Addition of such modifying agents as fillers, colorants, etc., yields an almost infinite number of products collectively called plastics High polymers are the primary constituents of synthetic fibres, coating materials (paints and varnishes), adhesives, sealants, etc. (See 'polymer, high in Condensed Chemical Dictionary). A polymer has been described as a compound formed by the reaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) in Item 15A. 19. The learned Counsel for the petitioners has then contended that the only question which requires to be determined is whether the polyester chips of the petitioners are plastic materials or synthetic resins and this question, according to the learned Counsel, has to be determined on the basis of how the said chips are regarded in the trade and we must disregard the technical meaning of the words "Artificial or plastic resins and plastic materials". Now, it may be stated, at the outset, that it is not the case of the respondents, who have to justify the levy, that the polyester chips are plastic materials and the arguments before us have proceeded on the footing that polyester chips are artificial or synthetic resins and are a product of a polycondensation process as contemplated by clause (i) of Item 15A(1). 20. Before we consider the question as to whether the polyester chips which are admittedly a product of polycondensation process, fall within the category of artificial or synthetic resins, it is necesary to consider the argument of the learned Counsel for the petitioners that we must wholly disregard the technical meaning of the words "artificial o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from taxation. 23. Sales Tax Commissioner, Indore v. Messrs J. Singh, A.I. R. 1967, S.C. 1454, was a case under the M.P. General Sales Tax Act and the question was whether charcoal was covered by the entry: "Coal, including coke in all its forms-2 per cent." or whether charcoal would fall in the residuary entry: "All other goods not included in Sch. I or any other part of this Schedule-4 per cent." While holding that charcoal was covered by the entry 'Coal', the Supreme Court observed as follows:- "Now, there can be no dispute that while coal is technically understood as a mineral product, charcoal is manufactured by human agency from products dike wood and other things. But it is now well-settled that while interpreting items in statutes like the Sales Tax Acts, resort should be had not to the scientific or the technical meaning of such terms but to their popular meaning or the meaning attached to them by those dealing in them, that is to say, to their commercial sense." We may point out that while taking this view, the Supreme Court has referred to a decision of Cameron J. in His Majesty the King v. Planters Nut and Chocolate Co. Ltd., 1951 C.L.R. (Ex.) 122, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sense', that sense which people conversant with the subject matter with which the statute is dealing would attribute to it". But "if a word in its popular sense and read in an ordinary way is capable of two constructions, it is wise to adopt such a construction as is based on the assumption that Parliament merely intended to give so much power as was necessary for carrying out the objects of the Act and not to give any unnecessary powers. In other words, the construction of the words is to be adopted to the fitness of the matter of the statute". On the other hand, as Fry, J. said in Holt and Co. v. Collyer, (1881) 16 Ch D 718 at p. 720, "If it is a word which is of a technical or scientific character then it must be construed according to that which is its primary meaning, namely, its technical or scientific meaning." Now, it is clear from the above observations that the rule that the words should be construed in a popular sense is not a rule which will be applicable in all cases and cannot be said to be all pervasive. This rule is, in our view, a qualified rule and could only apply, as Pollock, J. pointed out, if the statute contains language which is capable of being construe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expressions must be understood in the sense in which they have been defined. In paragraph 4, the Supreme Court observed as follows:- "It is well settled that interpreting items in statutes like the Excise Tax Acts or Sales Tax Acts, whose primary object is to raise revenue and for which purpose they classify diverse products, articles and substances resort should be had not to the scientific and technical meaning of the terms or expressions used but to their popular meaning that is to say, the meaning attached to them by those dealing in them. It any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted." On the basis of this decision it was contended that Item 15A does not contain any definition of artificial or synthetic resins or plastic materials and, therefore, the respondents must show that polymer chips are known as synthetic resins in the market. 27. Now, it is no doubt true that if what is contended by the learned Counsel is that Item 15A does not say that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consider. Even otherwise what is stated in the note that the object of recasting the tariff description was to make the scope of the item relating to 'Plastics' more precise does not run contrary to the view which we have taken because it is clear that the mode adopted to make precise the scope of the tariff description more precise was by describing the products specifically with reference to the processes which yielded those products. 30. It is not, therefore, possible for us to accept the contention of the learned Counsel for the petitioners that the words in Item 15A must be construed by giving the words their popular meaning and unless the respondents are able to establish that the polyester chips in question are known as synthetic or artificial resins in the market, they will not be entitled to levy excise duty on the polyester chips. 31. It is no doubt true that a large number of documents have been produced before us to show that the product required by the petitioners for manufacturing fibre is polyester chips textile grade and these documents are in the form of orders and invoices. It is also true that nowhere do we find that in any order forms or in any bills or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plastic grades. 34. There is some discrepancy with regard to entry No. 415 in the list of banned items in the Import Policy Books. In the Import Policy Book with the petitioners, the entry is "Polyamide/Polyester resins, and chips of textile grade." In the Import Policy Book, as amended up to 31st October, 1978, given by the respondents, the entry is "Polyamide/Polyester resins, and chips of textile grade". The difference lies in the fact that while in one there is no comma after chips, in the other there is a comma after chips. That, however does not make much difference, but it is clear that the entry in both the books will indicate that the qualification "textile grade" will govern both polyester resins and polyester chips. The fact that in that year there was a complete ban on polyester resins and chips of textile grade is not inconsistent with restricting the import of polyester metallised film or polyester film other than electrical grade. The inclusion of polymer or polyester resins in the list of banned items in 1979-80 will, in our view, clearly indicate that polyester resins are themselves recognised as commodities which are marketable and recognised by trade. If " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade as plastics and these chips would not be suitable as raw materials for the manufacture of plastics. To the same effect is the affidavit of one K.R. Viswanathan, who is a Managing Partner of Messrs Venus Moulders carrying on business of plastic moulding and fabrication jobs from various raw materials such as nylon, acetal, polypropylene, ABS, low density polyethylene, high density polyethylene, polystyrene, etc. He has stated that the polymer chips produced by the petitioners are not known in the trade as plastics and the chips would not be suitable as raw materials for the manufacture of plastics. There is also the affidavit of one Chidanand Bhomkar, who is an M.Sc. (Tech.) with Plastic from the Department of Chemical Technology, Bombay University, and is employed with Asian Paints as Technical Manager and he says that the polyester chips in question cannot be used or regarded as raw materials for the manufacture of plastic goods as the polymer chips are totally unfit for the manufacture of plastic articles. The last affidavit is of one Mahaveer Prasad Taparia. who is a Managing Director of Supreme Industries Ltd., which is a firm manufacturing and dealing in plastic injectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a at page 544 was produced to indicate that mylar (trade mark of E.I. du Pont do Nemours Co. Inc.) is prepared from polymer formed by the condensation reaction between ethylene glycol and terephthalic acid. 39. It was also contended on behalf of the respondents that the use of a delustrant, namely, titanium dioxide does not affect that usability of the polyester for making films and that there is no change in the chemical character of the polyester by the addition of the delustrant and the polyester resulting from the process of polycondensation, during which process the delustrant is added, is still a resin. In support of the contention that by the addition of titanium dioxide, which is admittedly a delustrant, no chemical reaction takes place, reference was made to a passage from The Encyclopaedia of Basic Materials for Plastics by Simonds and Church at page 473 where in reference to titanium dioxide pigment, the following is stated :- "Because of its physical stability and lack of chemical reactivity, titanium dioxide pigment is compatible with virtually all of the resins available-natural rubber and natural resins, the synthetics from ABS and acrylics, to cellulosic, phen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at resins which he is manufacturing such as alkyd resins, maleic resins and phenolic resins, which are used in the manufacture of paints and varnishes are not used for manufacturing plastic articles. He also states that polyester polymer is imported in India, and in the countries from which they are imported, they are known to the trade as resins. 40. The entire argument of the learned Counsel for the petitioners is founded on the basis that synthetic resins must be construed as synonymous with plastic materials. It is no doubt true that this contention finds some support from the Chapter on "Plastics and Resins" in Encyclopaedia Britannica, Vol. 14, where it is observed as follows:- "Plastics, in the modern meaning of the word, are synthetic materials that are capable of being formed into useable products by heating, milling, moulding, and similar processes. The term is derived from the Greek plastikos, "to form". By some interpretations of the word, rubber and other natural products are said to be plastic, but the modern definition, especially in relation to industry, excludes natural rubber and also such other natural products as wood, leather, and metals. Resins are both na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of sub-item (2) 'plastics' means the various artificial or synthetic resins or plastic material included in sub-item (1). The effect of the Explanation is that articles made of artificial or synthetic resin is now equated with plastics only for the purpose of sub-item (2) of Item 15A. When the Legislature has used the words "Artificial or synthetic resins" and has separately used the words "plastic materials" and further the word 'plastics' has been specifically used in sub-item (2), it would be wholly improper to proceed to decide the scope of the products covered by Item 15A by equating artificial synthetic resins with plastics. We must, therefore, reject the argument advanced on behalf of the petitioners that artificial or synthetic resins must be taken to have been used synonymously with plastics. In view of this, the further contention that the plastics are materials which can be moulded or made into films and that the polyester chips in question cannot be moulded or that they are unsuitable for making films because of the addition of delustrants is not required to be considered. 42. It is no doubt true that in the Nirlon Synthetic Fibre Chemicals Ltd.'s case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n unjust enrichment of the petitioners because, according to the learned Counsel for the respondents, the burden of excise duty must have been passed on by the petitioners to the consumers or the purchasers of the fibre. We will, however, proceed to deal with this contention because a decision on the question as to whether the petitioners would be entitled to any refund would become necessary in case we are wrong in our view that there was no invalidity or illegality in the recovery of excise duty. 45. The petitioners in the instant case have filed the petition in April 1972. They had been paying excise duty under protest from 1965 to 1969 and thereafter according to them, they were compelled to discontinue the protest and the payments were made without any protest, though at the instance of the respondents. Now, it appears that the claim for refund made is founded on the decision in the Nirlon Synthetic Fibres Chemicals Ltd.'s case which was rendered on 30th April, 1970, though the petition itself was filed in 1964. There is no explanation whatsoever in the petition as to why the petitioners did not think it worthwhile to approach this Court independently and challenge the lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Division Bench of that Court has taken the view that even if the High Court is satisfied in a petition under Article 226 of the Constitution that the petitioner is entitled to refund of the tax, the petitioner may still not be granted this discretionary relief if it results in retention of the sales tax collected by the petitioner from the public and imposes the burden on the State of refunding the tax which it had collected under a valid assessment order. It is no doubt true that the Division Bench in that case has taken the above view. But it will appear from the reading of the judgment that on facts it was found that the sales tax, refund of which was sought, was not found to have been paid under a mistake common to both the parties. The following observations in that context are material :- "To sum up, in entitling the petitioners to refund of tax, the tax must have been collected by the State and paid by them under a mistake common to both the parties. But the petitioners would not be entitled to refund of tax as a matter of course merely because it has been paid under a mistake. The right to such refund is subject to questions of estopple, waiver, limitation and the like ..... X X X X Extracts X X X X X X X X Extracts X X X X
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