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Bombay Chemicals Pvt. Ltd. Vs. Union of India and 14 Others - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtMumbai High Court
Decided On
Case NumberMisc. Petition No. 708 of 1978
Judge
Reported in1992LC278(Bombay); 1982(10)ELT171(Bom)
ActsCustoms Act, 1962 - Sections 25(1) and 131; Customs Tariff Act, 1975
AppellantBombay Chemicals Pvt. Ltd.
RespondentUnion of India and 14 Others
Excerpt:
classification - pyrethrum flowers crushed classified under chapter 28 by customs who are competent to do so. refund claim admissible on the ground of the goods being held as chemicals. notification once issued is mandatory and cannot be ignored on ground of its issue under mistake. 'error apparent on record' can be interfered with by the high court under article 226. cus. notfn. dt. 1.3.1968, cus. ch. 28. - - soap, candles and the like; 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 chemicals for the manufacture of insecticides, pesticides and fungicides and falling under item 28 of the first schedule to the indian.....1. the petitioners are a private limited company and carry on business as manufacturers and suppliers of insecticides, pesticides and fungicides. for the purpose of manufacture of insecticides, the petitioners import into india pyrethrum flowers and pyrethrum flowers crushed. pyrethrum flowers are a chemical used exclusively for their pyrethrum content which is used in the manufacture of insecticides. the petitioners entered into a large number of contracts with the pyrethrum marketing board, kenya, east africa to import pyrethrum flowers as the same are not available in india. the petitioners had secured actual users import licenses under which the petitioners were required to use pyrethrum flowers and pyrethrum flowers crushed only as raw materials in the manufacture of 'insecticides,.....
Judgment:

1. The petitioners are a Private Limited Company and carry on business as manufacturers and suppliers of insecticides, pesticides and fungicides. For the purpose of manufacture of insecticides, the petitioners import into India Pyrethrum Flowers and Pyrethrum Flowers Crushed. Pyrethrum Flowers are a chemical used exclusively for their pyrethrum content which is used in the manufacture of insecticides. The petitioners entered into a large number of contracts with the Pyrethrum Marketing Board, Kenya, East Africa to import pyrethrum flowers as the same are not available in India. The petitioners had secured actual users import licenses under which the petitioners were required to use Pyrethrum Flowers and Pyrethrum Flowers Crushed only as raw materials in the manufacture of 'insecticides, pesticides and fungicides'.

2. Under the Indian Tariff Act, 1934, the Pyrethrum Flowers and Pyrethrum Flowers Crushed were classified by the Customs Department for the purposes of Customs Duty as a substance falling under Item No. 28 of the Tariff. Item No. 28 is in Section VI of the Schedule which reads as :

'Chemical and Pharmaceutical Products; Colours and Varnishes Perfumery; Soap, Candles and the like; Glues and Celatines; Explosives Fertilisers.'

The articles covered under Item No. 28 are chemicals, drugs and medicines, all sorts not otherwise specified.

3. The petitioners imported Pyrethrum Flowers and Pyrethrum Flowers Crushed during the period commencing from March 1, 1968 till March 15, 1975. The consignments were cleared by the petitioners during the relevant period under Item No. 21 of the First Schedule to the Indian Tariff Act, 1934. After August 1, 1976, when the new Customs Tariff Act, 1975 came into force, the Pyrethrum Flowers are classified under Chapter 12, but it is not necessary for this petition to make reference to the provisions of that Act. The Government of India published a Notification on March 1, 1961 in exercise of the power conferred by sub-section (1) of Section 25 of the Customs Act, 1962 granting exemption to chemicals for the manufacture of insecticides, pesticides and fungicides falling under Item No. 28 of the First Schedule to the Indian Tariff Act, 1934. As the claim in the petition centres round upon the terms of this Notification, it would be convenient to set out the relevant portion at this stage :

'GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(Department of Revenue and Insurance)

New Delhi, the 1st March, 1968

NOTIFICATION

------------

CUSTOMS

O.S.H. No. 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 chemicals for the manufacture of insecticides, pesticides and fungicides and falling under Item 28 of the First Schedule to the Indian Tariff Act, 1934 (32 of 1934) when imported into India-

(i) from so much of that portion of the duty of customs leviable thereon, which is specified in the said schedule, as is in excess of 10 per cent ad valorem where the standard rate of duty is leviable;

(ii) from the whole of the duty of customs leviable thereon which is specified in the said schedule, where the preferential rate of duty is leviable.

2. The exemption referred to in the foregoing paragraph shall be available, if, and only if, the following conditions are fulfilled, namely :-

(i) the importer in each case produce a certificate from the Directorate General of Technical Development or, in the case of importation by firms which are classified as falling in the Small Scale sector, from the Director of Industries of the State concerned to the effect that the chemicals are required for the aforesaid manufacture and are not produced in India.

The Notification gives exemption in payment of excise duty provided the following three conditions are satisfied :-

(1) that the import of chemicals was to be used for the manufacture of insecticides, pesticides and fungicides falling under Item 28,

(2) the chemicals are required in the aforesaid manufacture, and

(3) the chemicals are not produced in India.

4. The Collector of Customs, Bombay, published a public notice on September 25, 1968 inviting the attention of the trade to the exemption Notification and the contents thereof. The petitioners, from time to time, applied for the requisite certificate from the Directorate General of Technical Development in respect of the import of consignment after the date of the Notification. The Office of the Directorate General issued the certificates from time to time and a copy of one of the certificates dated May 9, 1969 is annexed ad Ex. 'H' collectively to the petition. The Directorate General of Technical Development has certified that the chemicals mentioned in the certificate including pyrethrum flowers are required for the manufacture of insecticides and are not produced in India. The Directorate General of Technical Development also issued end-use certificates as required by the Notification from time to time and the copy of the certificate dated May 1, 1970 is annexed as Ex. H. (collectively) to the petition. The said certificate certifies that the chemicals - pyrethrum flowers - was used for the purpose of manufacture of insecticides. There is no dispute that in fact, the entire import of pyrethrum flowers and pyrethrum flowers crushed was used by the petitioners for the manufacture of insecticides. The petitioners executed the required bonds under the Exemption Notification and claimed exemption but the Customs authorities decline to give advantage of the notification and the petitioners were required to pay the full duty under protest. The petitioners thereupon filed 28 refund applications from time to time for refund of the excess duty recovered by the Customs authorities.

5. The 28 refund applications were considered by different Assistant Collectors and were disposed of by three sets of different orders. All the refund applications came to be rejected from time to time and the conclusion recorded by the Assistant Collectors in these three different sets of orders can be summarised. The first set of orders proceeds on the ground that the pyrethrum flowers being insecticides by themselves are not covered by the exemption notification. Further, the notification applies to chemicals falling under Item No. 28 of the I.C.T. and the goods imported are not chemicals but are a plant product. The second set of order proceeds to dispose of the applications on the ground that the goods imported are a natural product and not the chemicals. Secondly, the certificates obtained by the petitioners from the D.G.T.D. recite that the goods are not produced in India but from the two booklets entitled 'Tyro products' and 'Pyre products', it is clear that the goods are grown on hill slopes of Kashmir and Nilgiris and, therefore, the certificates granted by the D.G.T.D. are erroneous and the exemption is not available as the goods are produced in India. The third set of orders proceed on the ground that the end product of the petitioners is a disinfectant and not an insecticide or pesticide and, therefore, the certificate of D.G.T.D. cannot be accepted.

6. The petitioners preferred 28 appeals before the Appellate Collector of Customs, Bombay and these appeals were also heard by different Appellate Collectors exercising appellate powers. One of the appeals came up for hearing before the Appellate Collector on November 22, 1975 and at the hearing, the petitioners produced a copy of the judgment delivered by Shri Justice Bhatt on June 17, 1975 in Miscellaneous Petitions No. 923 of 1969. The exemption notification dated March 1, 1968 came up for consideration before the learned Judge and one of the contentions was that the Customs authorities had no jurisdiction to sit in appeal over the certificates granted by the D.G.T.D. The learned Judge held that the certificates are binding and conclusive upon the Customs authorities save and except where it can be contended that these certificates have been obtained by fraud or under mistake. The Appellate Collector by his order dated February 2, 1976 disposed of 25 appeals, which were consolidated, holding that the petitioners are not entitled to the advantage of the exemption notification. The Appellate Collector held that it is open for the Customs authorities to determine whether the substance imported by the petitioners was a chemical and whether such substance was produced in India and the Customs authorities are not bound to accept the certificates issued by the D.G.T.D. The Appellate authority observed that the product imported does not appear as a chemical in any one of the known technical dictionaries nor is commonly known in trade as a chemical, but on the other hand, it figures in recognised books in Pharmacopoeias like B.P.C.I.P. Patre Pharmacopoea. The Appellate authority further held that the pyrethrum flowers are recognised as a drug under the Drugs Act, 1940. The Appellate authority relied upon the literature produced by the petitioners and held that the certificates of the D.G.T.D. are either obtained by making incorrect representations or were issued under an error or mistake. On these findings, the appeals came to be dismissed.

7. The petitioners preferred Revision Petition to the Government of India, Ministry of Finance (Department of Revenue), New Delhi as provided under Section 131 of the Customs Act on March 2, 1976. In the meanwhile, on February 6, 1976, the petitioners addressed a letter to the D.G.T.D. pointing out that the certificates issued were ignore by the Customs authorities on the ground that they were issued under mistake and requesting to confirm that the same were not issued under mistake. In answer to this letter, the D.G.T.D. by letter dated February 10, 1976, elucidated the grant of certificate and asserted that they were issued as per Public Notice dated March 1, 1968. The copy of the letter of elucidation is annexed as Ex. 'M' (collectively) to the petition and the D.G.T.D. has, inter alia, stated that the import of pyrethrum flowers crushed has been duly certified by the D.G.T.D. as 'chemicals' required for the manufacture of insecticides, pesticides and fungicides and are not produced in India. It further mentions that the insignificant quantity is produced by the Drug Research Laboratory, Jammu/Srinagar, for captive use and not commercially sold and with this knowledge, the D.G.T.D. has issued the certificate. The primary product by the Drug research Laboratory was less than 5% of the requirement of the country and, therefore, the D.G.T.D. has neither put the product in the Restricted List nor in the banned list. Apart from producing the elucidation before the Revenue authority, the petitioners sent the copies of the same to the Appellate Collector in respect of the remaining three pending appeals. In spite of that, the remaining three appeals came to be dismissed by two separate orders dated April 9, 1976 and March 31, 1977 by the Appellate authority. While disposing of one appeal on April 9, 1976, the Appellate authority held that even after considering the elucidation of the D.G.T.D., it is obvious that pyrethrum flowers crushed or otherwise are only natural products and not chemicals. The Appellate authority relied upon the classification under Brussels Tariff Nomenclature and also on publication 'Wealth of India Industrial Products'. The Appellate authority while disposing of the two appeals on March 31, 1977 observed in respect of the certificate produced by the petitioners, that the pyrethrum flowers are not chemicals and reliance was placed on Merck Index, 9th edition (1976) and The British Pharmaceutical India (1934) to conclude that the product imported was a natural product and not chemical. The petitioners preferred revision application against the dismissal of the remaining three appeals also.

8. The revisions were posted for hearing before respondents Nos. 12 and 13 on March 19, 1976. The respondents Nos. 12 and 13 invited the attention of the petitioners to the Dictionary meaning of 'chemicals' and granted time to produce certificates to establish that pyrethrum flowers are chemicals. The petitioners produced three certificates on March 29, 1976 and these certificates were issued by the Director of Agriculture, Maharashtra State, Poona on March 22, 1976; by the Assistant Director (Chemical) of Government of India, Department of Supply on March 27, 1976 and the certificate dated March 29, 1976 by the Director, Central Indian Medicinal Plants Organisation (Council of Scientific & Industrial Research). These three certificate, inter alia, state that the pyrethrum flowers are termed and classified as a chemical and it will be in order to classify them as chemical for the purpose of exemption notification. After considering this material, the revisional authority, by its order dated February 6, 1978, dismissed the revisional applications. The revisional authority came to the conclusion that the certificates obtained by the petitioners from various authorities are not only inconclusive but in some respect, go against the claim made by the petitioners that pyrethrum flowers are chemicals. The certificates issued by the D.G.T.D. were ignored on the ground that it is open for quasi-judicial authority determining whether a substance falls under Item 28 to decide whether the substance imported was a chemical one. The revisional authority took into consideration the provisions of the Customs Tariff Act, 1957 to conclude that pyrethrum flowers are not chemicals but a plant. It was further held that the extract derived from pyrethrum flowers can be treated as chemicals but the flowers by themselves cannot be so regarded. The order of the revisional authority is under challenge in this petition filed under Article 226 of the Constitution of India on May 15, 1978.

9. Shri Taleyarkhan, the learned counsel appearing in support of the petition, submitted that the authorities below were clearly in error in ignoring the certificates issued and the elucidation thereof by the D.G.T.D. and declining the advantage of the exemption notification. The learned counsel urged that the conditions of the exemption notification were more than satisfied by the petitioners and the denial of exemption in payment of duty was totally arbitrary. It was urged that it was not open for the Customs authorities to question the certificate issued by the D.G.T.D., and hold that what was imported was chemical and even otherwise the conclusion recorded that the articles imported were not chemicals but plant, natural product or insecticides is totally incorrect. Shri Taleyarkhan submits that as it was not open for the Department to go behind the certificates and as there was no material whatsoever to assume that the certificates were issued under mistake or error or misrepresentation, the action of the Department in by-passing the certificates was totally erroneous.

10. Shri Chinoy, the learned counsel appearing on behalf of the Department, on the other hand, urges that the Customs authorities have jurisdiction to decide whether the goods were chemicals falling under Item 28 of the Tariff and the jurisdiction cannot be abrogated or deprived by direction of any authority or the certificates issued by any outside agency. The learned counsel urged that the Customs authorities in exercise of the quasi-judicial authority are not bound to accept any certificate as regards the nature of articles. Shri Chinoy, further submits that in claiming advantage of the exemption notification, the onus is always upon the assessee and on material produced by the petitioners and that taken into consideration by the Department, it is difficult to suggest that the conclusion of the Department was either perverse or patently unreasonable so as to warrant interference under Article 226 of the Constitution of India. The learned counsel further urged that it is open for the Department to go behind the certificates if it is established that the same were issued on evident error which could be established from the material on record.

11. In view of these rival contentions, the first question which requires determination is whether it was open for the Customs Authorities to go behind the certificates and determine that the product imported by the petitioners was not a chemical. To appreciate the controversy, it would be convenient at first to refer to the submission of Shri Chinoy that the question of classification is within the exclusive jurisdiction of the Customs Authorities and cannot be concluded by direction of any authority including the Government. There cannot be any quarrel with this proposition as it has been conclusively held by the Supreme Court in the case of Orient Paper Mills Ltd. vs . Union of India reported in : 1973ECR1(SC) that it is exclusive jurisdiction of the Customs authorities to decide whether the goods attract a particular item of the Tariff.

12. In exercise of the jurisdiction, the Customs authorities did levy duty on the goods imported under Item No. 28 of the Tariff. It is not in dispute that Item No. 28 in addition to the chemicals referred to drugs and medicines, but Shri Taleyarkhan is right in his submission that once the Department levied the duty by classifying the article as excisable under Item No. 28 of the Tariff, then for depriving advantage of the exemption notification, it is not open for the authorities to claim that he goods imported were not chemicals. The exemption notification requires three conditions to exist for the grant of relief of payment of duty. The first condition is that the import is of chemicals falling under Item No. 28, while the second and third conditions are that such chemicals are required for manufacture of insecticides and such chemicals are not produced in India. The exemption notification requires the importer to produce the certificate to the effect that the chemicals are required for the manufacture and are not produced in India. Shri Taleyarkhan submits that while granting the certificate, the Directorate General of Technical Development has to determine that what is required for manufacture is the chemical and the same is not produced in India. The grant of the certificate clearly indicates that the Directorate General was satisfied that what was imported was chemicals and the said chemicals were required for the manufacture and were not produced in India.

13. Shri Chinoy also did not seriously dispute that there is implicit admission in the grant of certificate that the goods imported were chemicals but urged that it was not required of the certifying authority to apply mind to the question as to whether the imported goods were chemicals or mere plants. It was urged that the plain reading of paragraph 2(i) of the Notification indicates that the certifying authority was only required to be satisfied that the goods imported were used for the manufacture of end product insecticides and the goods imported are not produced in India. It is difficult to accept this submission. The notification must be read as a whole and it is obvious that what has been exempted are the chemicals falling under Item No. 28 of the Tariff which are used for the manufacture of insecticides and paragraph 2 provides that exemption shall be available only if the conditions are fulfilled, one of the conditions being production of the certificate. Reading the Notification in its proper perspective, it is obvious that the Directorate General has to certify that goods imported are chemicals and they are required for the manufacture of insecticides and are not produced in India. Shri Chinoy urges that the question as to whether the imported goods are chemicals or not is a mixed question of fact and law and such question could not be left for the determination of the Directorate General and must be within exclusive jurisdiction of the Customs authorities. It is not possible to accept this line of reasoning because the Customs authorities were satisfied while levying the duty that the goods imported were liable to duty under Item No. 28 of the First Schedule and by levying the duty accordingly, the Customs authorities had already classified the goods imported.

14. The only question thereafter, which requires determination was whether the conditions set out in the Notification were complied with by the importer. It is not permissible for the Customs authorities to re-open the controversy and enter upon the question of the nature of article imported by bypassing the certificates issued by the Directorate General. Shri Chinoy submits that the goods imported were not chemicals but were the plants or natural products as found by the authorities below. Shri Taleyarkhan very rightly pointed out that if the imported goods were plants, then the Customs authorities would have levied the duty under Item 6 of Section II of the First Schedule. Heading of Section II of the First Schedule is 'Products of the vegetable kingdom' and Item No. 6 refers to 'plants living, not otherwise specified'. The submission of Shri Taleyarkhan that the Customs authorities having found that the goods imported attract Item No. 28 of the First Schedule cannot turn round at a later stage and claim that what was imported was not chemical but was merely plant or the natural product is correct. Shri Chinoy submits that Item No. 28 includes not only chemicals but drugs and medicines not otherwise provided and, therefore, the mere fact that the authorities found that the goods imported were liable under Item No. 28 of the First Schedule could not conclude the controversy. It is difficult to accept this submission.

15. The Customs authorities did not treat nor it is possible to claim that the pyrethrum flowers crushed are a drug or a medicine by itself. Shri Chinoy invited my attention to ground XXIV urged by the petitioners in an appeal filed before the Appellate Collector and submits that the petitioners have suggested that the Customs authorities ought to have considered whether the goods imported were drugs under the Drugs Act and, therefore, entitled to concessional rate of duty under the Notification. The submission is that as the petitioners were themselves claiming at one stage that the goods imported were drugs, there was nothing wrong in the Customs authorities determining whether the goods imported were chemicals or not and not blindly following the certificate issued by the Directorate General. The mere fact that a ground has been raised in the appeal memo filed by the petitioners is not sufficient to hold that the petitioners were claiming that the goods imported were drugs. It is common knowledge that several grounds are taken in the appeal Memo and the draftsman takes an alternate position while lodging and appeal. The grounds urged are always without prejudice to one another and it would be improper to pick up one of the grounds to come to the conclusion that even the petitioners were asserting that the goods imported were not chemicals. In this connection, it would also be necessary to make reference to the claim made by the petitioners in paragraph 5 of the petition. The petitioners have claimed in this paragraph that pyrethrum flowers must be classified as 'chemicals all sorts not otherwise specified'. It is obvious that the petitioners were all along claiming that the goods imported were chemicals and the Customs authorities cannot re-open the question as to whether the goods were chemicals by making reference to one of the ground in appeal Memo. In my judgment, the submission of Shri Taleyarkhan that the certificates produced by the petitioners were conclusive and it was not open for the authorities to go behind them is correct and requires acceptance.

16. Shri Chinoy then urges that even assuming that it was not open for the Customs authorities to determine whether the goods imported were chemicals or not and the certificate was conclusive, still, the Department was justified in going behind the certificate as the same was issued on evident error. The learned counsel urged that in the first instance, the certificate on which reliance is placed by Shri Taleyarkhan does not certify that the pyrethrum flowers are chemicals. The submission is incorrect because the certificate clearly certifies that the chemicals pyrethrum flowers are required in manufacture of the insecticides. In respect of the certificate, the Appellate Authority raised doubts about the accuracy of the same. The petitioners secured elucidation from the Directorate General and the elucidation leaves no manner of doubt that the Directorate General considered the goods imported as chemicals entitled to the advantage under the Notification. In my judgment, the Customs authorities were bound by the contents of the certificate and the same could not have been ignored or by-passed by holding that it was issued under mistake or under misrepresentation. In addition to the certificates, the petitioners have relied upon the three certificates which were produced at the hearing before the revisional authorities. These certificates are issued by the Assistant Director of Government of India, Department of Supply, the Director of Agriculture, Maharashtra State, and the Director of Central Indian Medicinal Plants Organization and there is no reason to discard these certificates. Shri Chinoy urges that all these three certificates are issued without any basis and even otherwise the three certificates merely recite that 'pyrethrins' extracted from pyrethrum flowers crushed are termed as chemicals. The learned counsel urged that what has been termed and classified as chemical is the extract from the flowers and not the flowers themselves. The submission is not very correct because the reference to the certificate issued by the Government of India, Department of Supply, indicates that after Laboratory experiment, it was ascertained that pyrethrum flowers and crushed pyrethrum flowers consist of four different chemicals viz. (1) Fsters-pyrethrin I, (2) Pyrethrin II, (3) Cinerin I and Cinerin II. In my judgment, the certificates produced by the petitioners before the revisional authority support the claim that the goods imported were chemicals. In these circumstances, it was not open for the Customs authorities to ignore the certificates by holding that the same were issued under an error or the D.G.T.D. cannot issue a certificate which has an effect of overriding the substantive part of the Notification in question. The view taken by the authorities below that the quasi-judicial authority is competent to interpret and apply the notification and can ignore the certificates issued by the D.G.T.D. is clearly erroneous. The conclusion recorded by the authorities by ignoring this certificate cannot be accepted.

17. Shri Chinoy submits that the certificate certifying that the goods imported are not produced in India is factually incorrect. It was urged that the appellate authority has very rightly relied upon the literature produced by the petitioners themselves which, inter alia, mentions that the products of the petitioners are 100% Indian and prepared from Indian grown pyrethrum in India. It is no doubt true that the petitioners have issued advertisement claiming that their end product pesticides was prepared by the Indian pyrethrum. The assertion made in this advertisement was clearly incorrect. Shri Chinoy wants to rely upon this assertion and urged that the petitioners deliberately kept back this literature from the Directorate General and obtained the certificate that the goods imported are not produced in India. The submission is not correct. It dos appear that the petitioners have overstated their claim in the advertisement. The Directorate General is a highpowered Officer familiar with the production of various articles in the country and has issued the certificate after ascertaining the requisite fats. That certificate cannot be brushed aside merely because the petitioners have made a tall claim in their advertisement. In the elucidation supplied by the Directorate General, it is made crystal clear that the pyrethrum flowers are grown on the small scale in the country on the hill slopes of Kashmir and Nilgiri and that production is for the purpose of research and is not commercially used. In view of the clarification, it is impossible to accept that the claim made by the petitioners in their advertisement was correct and, therefore, the certificate given by the Directorate General was vitiated. In my judgment, it was not open for the authorities below to ignore the certificate by placing reliance upon what was stated by the petitioners in their advertisement. The Customs authorities were bound to accept the certificate issued by the Directorate General and it is not permissible to go behind it merely because the Customs authorities feel that the contents of the certificate were disproved by some other material. There is a great danger in accepting the submission of the Department that the authorities can brush aside the certificate and determine whether the assessee is entitled to the exemption or not. In case, this principle is accepted, them it would open floodgates of false and frivolous claim by the assessees who have been denied the certificate by the Directorate General by claiming that the Directorate General has ignored certain facts and the Customs authorities should independently consider whether the requirements or the conditions of the Notification are complied with. Surely that could not have been the intention of the Government of India and it is clear that the Government desired that the exemption should be granted once the conditions of the Notification including the condition of a certificate from the Directorate General are complied with. In my judgment, the decision of the Customs authorities to go behind the certificate and determine whether the goods imported were chemicals is incorrect. The Customs authorities were bound and concluded by the certificate and were not justified in refusing the refund claim of the petitioners. Shri Taleyarkhan relied upon the decision of the Supreme Court in the case of M.G. Abrol, Additional Collector of Customs, Bombay and another V/s. M/s. Shantilal Chhotelal and Company reported in : [1966]1SCR284 in support of the submission that the certificate given by D.G.T.D. cannot be challenged by the Customs authorities and, in my judgment, the reliance on this decision is very appropriate.

18. Even assuming that it was open for the Customs authorities to go behind the certificate and consider whether the goods imported were chemicals or otherwise, still in my judgment, the material on record is more than sufficient to hold that what was imported was chemicals. It is no doubt true as urged by Shri Chinoy that the onus to establish that the exemption is available is always on the assessee and the reliance by the learned counsel in this connection on the decision of the Supreme Court in the case of Commissioner of Income-tax, Bihar and Orissa v. Ramakrishan Deo reported in (1959) 35 I.T.R. 313 is appropriate. It would be desirable, therefore, to consider what material was produced by the petitioners in support of the claim that the goods imported were chemicals. The first circumstance on which strong reliance is placed by Shri Taleyarkhan is that the goods were classified under Item No. 28 by the Customs authorities themselves. Secondly, the learned counsel relied upon the certificate issued by the Directorate General and the elucidation furnished on a later occasion. Thirdly, reliance is placed on the three certificates which were produced before the revisional authorities and were issued by the Government or the semi-Government authorities. Fourthly, reliance is placed on the dictionary meaning of expression 'Chemical' as found in Webster's two Dictionaries and Shorter Oxford English Dictionary. The definition of 'pyrethrum flowers' indicates that though it is of botanical origin can be termed as chemicals. Oxford Dictionary defines 'Chemical' as one suitable for use in or used for operations for Chemistry. The 'chemical' has been defined as a substance, such as an acid, alkali, salt synthetic and organic compound obtained by a chemical process prepared for use in chemical manufacture or used for producing a chemical effect. The petitioners relied upon an extract from Encyclopaedia Britannica (1768), Volume 18, page 796. 'Pyrethrum' is regarded as a section of genus chrysanthemum, flowers in the early summer months, and is remarkable for the great variety of colour which it presents. It is considered as an important insecticide ingredient. From these materials, Shri Taleyarkhan urges that the goods imported by the petitioners ought to have been treated as chemicals and I find considerable merit in this submission.

19. On the other and, Shri Chinoy urges that not only the petitioners have claimed in their appeal memo that the goods imported are drugs but it as been classified as a drug under the Notification issued under Drugs Act. The learned counsel placed reliance upon the 'Brussels Tariff Nomenclature' and submitted that 'pyrethrum flowers' are included under Heading 12.07 - Plants and Parts (including Seeds and Fruit). It was urged that the products are not put under heading 'chemicals' under Chapter 28 or 29 of the 'Brussels Nomenclature' and that is indicative of the fact that pyrethrum flowers are not chemicals but plants. Strong reliance was placed on the explanation to be found on Page 68 of the 'Brussels Nomenclature' under heading 12.07 to claim that the goods in question are known in commercial and trade circle as plants and not as chemicals. The explanation reads as under :-

'It should also be noted that vegetable products more specifically described in other headings of the Nomenclature are excluded from the present heading, even if they are suitable for use in perfumery, pharmacy, etc.'

It is difficult from this explanation to conclude that the goods imported are known in trade as plants and not as chemicals.

20. Shri Chinoy also placed reliance on the observation made by the appellate authority to the following effect :

'The product imported does not appear as a chemical in any one of the known technical dictionaries nor is commonly known in trade as a chemical but on the other hand, it figures in recognised books in Pharmacopoea like B.P.C.I.P.'

In the first instance, the Appellate Authority has not bothered to refer to any of the technical dictionaries on which it desired to place the reliance. Secondly, it is difficult to assess how the appellate authority came to the conclusion that the imported goods are not commonly known in trade circle as 'chemical'. Shri Chinoy submits that the appellate authority is familiar as to how the trade circle describes an article. The appellate authority had not claimed that it was relying upon its own knowledge nor it has referred to any material to record a finding that the imported goods are not known in trade circle as a chemical. Shri Chinoy urges that the goods are recognised in books in Pharmacopoeias is an indicator as to how the goods are known in trade circle.

21. Shri Taleyarkhan very seriously challenges this claim and nothing was shown to hold that what was recognised in Pharmacopoeias or 'Brussels Tariff Nomenclature' should be accepted to determine as to how the article is known in the trade circle. In my judgment, on the material produced before the authorities, it is difficult to hold that the goods imported were not chemicals. Shri Chinoy submits that the finding of the authorities below in not so perverse or patently unreasonable that it requires interference. In my judgment, the submission is not correct. The finding in patently unreasonable and it is necessary to disturb the orders of the authorities below in exercise of the jurisdiction under Article 226 of the Constitution of India as an error apparent on the face of record is committed.

22. For he reasons recorded hereinabove, in my judgment, the Customs authorities were clearly in error in brushing aside the certificate issued by the D.G.T.D. and refusing the refund claim of the petitioners. Even otherwise, the conclusion arrived at by the Authorities below that the imported goods were not chemicals and such goods were produced in India is totally unsustainable. It was not disputed on behalf of the Department that the goods imported were used in manufacture of the insecticides and that condition required by the notification was satisfied. In view of this funding, the decisions of the authorities below cannot be sustained. The petitioners have claimed refund of Rs. 14,05375.30 and the Department has not filed any return in answer to the claim made in the petition and has not challenged the correctness of the amount.

23. Accordingly, the petition succeeds and the rule is made absolute in terms of prayer (b) of paragraph 29 of the Petition. The Department shall refund the amount within a period of six weeks from to day. In the circumstances of the case, there will be no order as to costs.


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