1. These are two revision applications to the Government of India under Section 131 of the Customs Act, 1962 (as then applicable) which, in accordance with Section 131B(2) ibid, are to be proceeded with as if they were appeals filed before the Tribunal. (These are 'hereinafter' referred to for convenience as "the appeals")- After notice had been duly issued, the appeals were taken up for hearing on 4-3-1983 and the hearing completed on 8-3-1983.
2. The basic facts in these cases are that the appellants imported certain goods which were meant for use in the manufacture of their products. These goods were charged to the basic Customs duty with reference to Section 2 of the Customs Tariff Act, 1975 and also to the additional duty under Section 3(1) ibid. These appeals are against the levy of the additional duty (referred to for convenience as countervailing duty) on the subject goods.
3. In the revision applications and at the hearing before us, two main grounds have been urged. These are that (a) the same or like articles are not produced or manufactured in India, and therefore no countervailing duty was payable under Section 3(1) ; and (b) Item 68 of the Central Excise Tariff Schedule is a residuary item and does not describe any goods or articles or class of goods or articles.
Accordingly, countervailing duty under Section 3(1) could not be payable by applying the rate of duty under Item 68.
4. In addition, two other arguments have been mentioned in the appeal (s). One is that the provisions of Section 3 are ultra vires and beyond the legislative competence of Parliament, and that recovery of countervailing duty in these cases is violative of Articles 265 and 300A of the Constitution. Shri Ansari appreciated that the Tribunal could not appropriately go into the question of the vires of a statutory provision. He did not, therefore, argue the above ground, and stated that the appellants reserved their rights to raise it in the appropriate forum. Similarly, Shri Ansari did not argue another ground, namely, that the notification dated 3-3-1979 withdrawing the facility of "pro-forma credit" for imported raw materials falling under item 68 was a clear discrimination against users of imported raw materials qua users of indigenous raw materials.
5. Regarding the argument that countervailing duty is not leviable if the same or like articles are not manufactured in India, no elaborate discussion appears to be necessary, in view of the specific wording of the relevant provision, namely Sub-section (1) of Section 3 of the Customs Tariff Act, 1975. For convenience, this Sub-section, including the Explanation thereto, is set out below:- "3. (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." 6. The Explanation makes it clear beyond any reasonable doubt that it covers both the case where a like article is being produced or manufactured in India, and a case where a like article is not being produced or manufactured, as would be evident from the words "if a like article is not so produced or manufactured...". We do not, therefore, think it necessary to dwell further on this ground, which is plainly not sustainable.
7. In support of his argument on the second ground, based on the "residuary" character of Item 68, Shri Ansari cited two High Court judgments. One of these was the judgment of the Bombay High Court in the case of Garware Nylons Limited v. Union of India and Ors., in Special Civil Application No. 2974 of 1978, reported in 1980 E.L.T. 249 (Bom.)- The other was the judgment of a Division Bench of the Allahabad High Court in the case of Ashok Griha Udyog Kendra Pvt. Ltd., Kanpur v.Collector of Central Excise and Customs, Kanpur, reported in 1982 E.L.T. 309 (All.). Shri Ansari laid stress on the wording of Section 3(1) of the Customs Tariff Act and particularly on the expression "class or description of articles". He contended that Item 68 could not be said to relate to a class or description of articles. According to him a class could be defined as : a group, division, distinction based on quality or condition ; a division of things according to grade or quality. The wording of Item 68, according to him, did not fulfil these requirements. Therefore Section 3(1) could not be invoked to levy countervailing duty on the subject goods.
8. On behalf of the Department, Shri Kunhikrishnan submitted that Item 68 of the Central Excise Tariff Schedule comprises several classes of goods. It was not unique in this respect, since there were a number of other items in the Central Excise Tariff which also covered more than a single class of goods. The item could not be said to be vague on this account.
9. Referring to the two judgments cited by Shri Ansari, Shri Kunhikrishnan pointed out that in neither case had Item 68 of the Central Excise Tariff Schedule been struck down. Therefore, according to him, they would not support the proposition that this item was vague. He further submitted that the question of fitting imported goods into a particular class or description was relevant for the purpose of deciding the particular rate of duty applicable to them. The liability to duty was itself determined by the wording of Section 3(1) and the Explanation, which were quite clear in this regard.
10. Shri Kunhikrishnan also referred to a judgment of the Supreme Court reported in A.I.R. 1965 Madras 312, relating to P. Orr & Sonsy, Collector of Customs, in support of the proposition that for imposition of countervailing duty it was not necessary that goods should actually be known to be manufactured in India.
11. Shri Kunhikrishnan then referred to a recent judgment of the Delhi High Court in Civil Writ No. 3563/82 in the case of Bharatiya Plastic Udyog v.' Union of India, wherein the validity of Sub-section (2) of Section 3 of the Customs Tariff Act was upheld. As the point at issue in that case was different from the one in the cases before us, it is not necessary to go further into the details of that judgment.
12. We have given our very careful consideration to the points at issue, in the light of the arguments advanced by learned Counsel for the appellants and the learned J.D.R. We need deal only with the two main grounds which were argued before us. We have already dealt with the first of these, namely that countervailing duty could not be charged if goods are not being actually produced or manufactured in India.
13. As regards the second ground, namely that Item 68 does not relate to a class or description of articles, within the meaning of the Explanation to Section 3(1), we have already observed that two High Court judgments have been cited by Shri Ansari. In the case of Garware Nylons' Ltd., a Division Bench of the Bombay High Court had held that the goods in question could be considered as nylon yarn and therefore classified under item 18 of the Central Excise Tariff Schedule, countervailing duty being levied accordingly. In the course of the judgment the Court had occasion to make certain observations regarding Section 3(1) of the Customs Tariff Act. For reason which will be apparent later, we are not here going into details of this judgment.
14. The second decision, that of a Division Bench of the Allahabad High Court, was with reference to the classification of mixed masalas under the Central Excise Tariff Schedule. In this judgment, the Court held that the appropriate item could be Item 68 They also observed that this entry does not suffer from any charge of vagueness or ambiguity on account of lack of specification.
15. It would be useful at this stage to reproduce the relevant parts of the Allahabad High Court judgment, which we do below : - "Reliance was placed on a decision of the Bombay High Court in Garware Nylons Ltd. v. Union of India and Ors. (1980 E.L.T. 249) (Bom.).
Garware Nylons Limited manufactured nylon yarn and nylon twine in its factory at Pimpri in Pune District. Prior to the insertion of Tariff Item 68 Nylon twine was taxed at Rs. 4.00 per kg. under Notification No. 68/71-C.E., dated 29-5-1971. After the introduction of Tariff Item 68, the Department sought to tax nylon twine under it on the view that it was different from nylon yarn specified in Tariff Item 18. The order of the Assistant Collector was confirmed by the Appellate Collector.
The revision petition was also rejected and the matter came up before the Bombay High Court by way of a writ petition. Mrs. Sujata V. Manohar J. was of the view that before any product can be put in the residuary item, it is necessary to establish that the product is not covered by any of the other items which are specified in the First Schedule. They must, therefore, establish that nylon twine is not covered by Item 18 which deals, inter alia, with nylon yarn. After referring to the various definitions and trade enquiries cited at the bar, the learned Judge held that nylon twine could not be considered other than nylon yarn and, therefore, it was covered by Tariff Item 18. Masodkar, J. who delivered a concurring judgment, took the view that it is of utmost importance and it appears to be the clear intention underlying such a fiscal statute that there would be sufficient description with regard to the Item of goods which are subject to excise duty. According to Wider Margin, his Lordship : "When sufficient prescriptive or descriptive details of the goods are not available one would tend to raise, in keeping with the fairness, the liability by applying the principle of benefit to the subject." '"Fiscal statutes, for this reason, should always be specific and leave no manner of doubt in the minds of those who are required to obey the same particularly as to the item that is being subjected to fiscal levy." "To introduce general Entries, like the one at Entry No. 68, may have expedient legislative purpose behind it, but, for the purpose of tariff in the context of Section 2(d) and Section 3, that can hardly be an appreciative exercise of legislative activity for obviously it does not give the definite description of the goods, nor does it disclose the identity of the goods, everything being left to the applicative adjudications by the Authorities concerned as the Entry embraces universally "all other goods", which is too wide and too general without any descriptive details and being always open to doubt and debate." The Tariff Item 68, however, survived the challenge in that case because that was not a case where total exemption from excise liability was sought for. 'he controversy was circumscribed to find out as to whether a particular item escribing the goods or the general item, called the residuary item should hold he field for the purpose of fiscal liability. In the present case, however, the controversy is not so circumscribed. The controversy is as to whether the disputed item calls for total exemption from excise liability or falls in the residuary item. It is correct that Tariff Item No. 68 does not contain he definite description of the goods, nor does it disclose the identity of the goods and the matter is left to the applicative adjudication of the authorities concerned. The entry 68 expressed in words are too wide and too general but here are some guidelines which can serve the purpose and apart from this if we look to the purpose behind the introduction of this Item, the entry cannot be treated as running counter to the letter and spirit of Section 3 of the Act.
We have already referred to the object which the Legislature had in mind while introducing this entry in the First Schedule. The purpose was to widen he coverage of taxable goods and secondly to provide a more dependable information based for future revenue exercises. In order to attract this entry the first condition is that there must be goods and the second is that they must not be elsewhere specified in that Schedule. In other words, if what is sought to be taxed is not goods or in spite of being goods are such as are specified elsewhere, then condition would not fall within this Item. There was yet another condition and it was that only those goods could be chargeable to excise duty which are produced or manufactured in India. The expression 'goods' in itself has not been defined in the Act. Under Article 366(12) of the Constitution this expression has been defined to include all materials, commodities and articles. That is an inclusive definition. The Central Excises Act, however, concerns itself with goods manufactured or produced and without going in detail in the dictionary meanings of this word, suffice it to say that to become goods article must be something which can ordinarily come to the market to be bought and sold. It is not necessary that before an article can be treated as goods it should have been actually brought to the market for being bought or sold but must be one which is capable of being brought to the market for being bought or sold. We may refer in this behalf to the observations made by the Supreme Court in South Bihar Sugar Mills Ltd v. Union of India (A.I R. 1968 S.C. 922)-1978 E.L.T.(J336). It was held : "The duty is levied on goods. As the Act does not define goods, the Legislature must be taken to have used this word in its ordinary dictionary meaning. The dictionary meaning is that to become goods it must be something which must ordinarily come to the market to be bought and sold and is known to the market." Apart from this, the meaning given to an article in a fiscal statute must be as people in trade, commerce, conversant with the subject generally treat and understand in the usual course. The article with which we are concerned in the present petitions is well known in the commercial community and in our opinion it would be goods' under Tariff Item 68.
The next question is whether these goods are elsewhere specified in the First Schedule. There is no controve that they are not elsewhere specified in the Schedule. According to Shri Jagdish Swarup unless goods are specified in the First Schedule they cannot be treated as excisable goods and since these goods are not so specified even in Tariff Item 68 they cannot be subject to levy of excise duty. We do not agree because under Items 1 to 67 certain goods are specified. In other words, they are definitely formulated. This exercise, however, cannot be exhaustive and hence a residuary item has been introduced as a compendious and omnibus item. There was a purpose to do so as mentioned above. Therefore, these articles which are not specified elsewhere in the Schedule and satisfy the requirements contained in Tariff Item 68, would fall under it. Those conditions as noted above are : the articles must be goods ; they must not be specified elsewhere in this Schedule and they are manufactured in a factory. The entry thus does not suffer from any charge of vagueness or ambiguity on this account of lack of specification".
16. We have quoted at some length from the judgment of the Allahabad High Court not only because it has a very direct relevance to the point at issue in this case, but also because it specifically examines and comments on the judgment of the Bombay High Court which has been relied upon by learned Counsel for the appellants. The parts of the judgment which we have emphasized enunciate very clearly that: - (i) even though Item 68 of the Central Excise Tariff Schedule does not contain a definite description of goods, but because of the existence of guidelines and looking to its purpose, it cannot be treated as running counter to the letter and spirit of Section 3 of the Customs Tariff Act; and (ii) the argument that unless goods are specified in the Central Excise Tariff Schedule they cannot be treated as excisable goods, and that since they are not so specified in Item 68, they cannot be subjected to levy of excise duty, does not have substance.
17. It is not clear to us how learned Counsel for the appellants, argues that this judgment supports the appellants' case. On the other hand, it would appear to be a clear authority for the opposite view, which has been taken by the lower authorities in this case. We are in respectful agreement with the observations and conclusions of the Allahabad High Court, which have the effect of negativing the argument that Item 68 cannot be considered as constituting a class or description of goods.
18. Although the terms of this judgment are in our view decisive on the major ground of the appellants, we would like to add a few observations.
19. The argument of the learned Counsel for the appellants tends to suggest that Item 68 is vague because of its wide scope. We think a definite distinction exists between what is wide-ranging and what is vague. No doubt Item 68 has a wide scope, as it comprehends whatever is not contained in the other items of the Central Excise Tariff Schedule : but so long as its scope can be defined by taking away from the class of all goods the classes of goods specified in other Tariff items, it cannot be said to be vague. This has been clearly brought out in the judgment of the Allahabad High Court.
20. We also consider that there is substance in Shri Kunhikrishnan's argument that it is not only Item 68 that covers what could be regarded as a number of distinct classes of articles. Thus, Item 11 covers "Coal (excluding Lignite) and coke all sorts, including calcined petroleum coke; asphalt, bitumen and tar". It is devided into five different sub-items, carrying different rates of duty. Each item might then be termed a "sub-class". These in turn are further differentiated, through exemption notifications. Thus, for asphalt and bitumen, falling under Item 4, different effective rates of duty have been fixed for (1) Straight grade Bitumen/Asphalt and for (2) Cut-back Bitumen/Asphalt.
There is a further differentiation in each case between goods packed in drums and goods in bulk. One could go denoting these as sub-classes and so on, but it is clear that this is a matter of semantics, and that the main tariff item, viz. Item 11, covers a number of "classes" of articles, the material characteristic of a "class" in the present context being that it bears a particular rate of duty. The same is the case with several other items in the Central Excise Tariff Schedule, for instance Item 14, which covers "Pigments, colours, paints, enamels, varnishes, blacks and cellulose lacquers", and contains several divisions and sub-divisions, with varying rates of duty, and Item 18, which covers "Man-made fibres, filament yarns and cellulosic spun yarn". It is thus clear that as between goods covered by the same tariff item there need not be absolute homogeneity either in characteristics or in the applicable rate of duty. There has only to be some common characteristic, which could even be the very fact that the Legislature has included them within the same item of the Central Excise Tariff Schedule. The common characteristic of articles falling under Item 68 is that they are not covered by any other item of the Central Excise Tariff Schedule. This docs not mean that the entry is vague, or that it has less legal force than the other entries in the Central Excise Tariff Schedule, for the purpose of levy of excise duty or countervailing duty.
21. In the result, we hold that the Appellate Collector's orders under appeal were correct. The two appeals are accordingly rejected.