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Sahney Kirkwood Private Ltd. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtMumbai High Court
Decided On
Case NumberPetition No. 717 of 1977
Judge
Reported in1991(34)LC406(Bombay)
AppellantSahney Kirkwood Private Ltd.
RespondentUnion of India (Uoi) and ors.
DispositionPetition dismissed
Excerpt:
classification - micanite is covered by 'mica' in the customs tariff as it is a kind of manufactured mica. cess--mica (built-up) and micanite fall in the range of 'mica in whatever state as it is fundamentally made of mica splittings', hence it is liable to cess. cta export tariff item 8; export cess scedule : item 7. - - 1978 and have taken certain preliminary objections to the maintainability of the petition on merits the respondents rely upon the wordings of section 2 of the mica mines labour welfare fund act, 1946. they submit that micanite has all along been treated as a form or a shape or a sort of mica and has been so understood both by the authorities as well at the trade. according to the respondents, this clearly demonstrates that micanite is regarded as a mica in the trade in.....r.l. aggarwal, j.1. the petitioners in this writ petition are seeking a writ of mandamus, directing the union of india and the collector of customs, bombay, to forbear from levying and collecting any cess in the form of customs duty under the mica mines labour welfare fund act, 1946 read with the customs act, 1962 and secondly for a writ of mandamus, directing the respondents to refund to the petitioners rs. 89,801.33, which have been illegally collected as cess in the form of duty from the petitioners in respect of the export of mica-nite products.2. the petitioners are a manufacturing company and are licensed, amongst others, to manufacture micanite products under an industrial licence dated 4th march, 1972 issued by the ministry of industrial development, government of india.3. from.....
Judgment:

R.L. Aggarwal, J.

1. The petitioners in this writ petition are seeking a writ of mandamus, directing the Union of India and the Collector of Customs, Bombay, to forbear from levying and collecting any cess in the form of customs duty under the Mica Mines Labour Welfare Fund Act, 1946 read with the Customs Act, 1962 and secondly for a writ of mandamus, directing the respondents to refund to the petitioners Rs. 89,801.33, which have been illegally collected as cess in the form of duty from the petitioners in respect of the export of mica-nite products.

2. The petitioners are a manufacturing company and are licensed, amongst others, to manufacture micanite products under an Industrial Licence dated 4th March, 1972 issued by the Ministry of Industrial Development, Government of India.

3. From August, 1975, the petitioners commenced manufacturing of micanite products which, according to the petitioners, are highly capital intensive and technologically oriented products and are engineered products. They are manufactured by feeding natural mica through automatic sorters and classifiers, laid through continuous laying machines with different types of binding materials. This binding material then passes through a controlled heating, pressing and curing cycle. The material is ground to very close tolerances and is eventually released in large sheets of approximately 1 metre x 1/2 metre or 1 metre or 1 metre x 1 metre sizes. The quantity of mica in the production of micanite products varies between 45% to 95% in weight. According to the petitioners, some of the technical characteristics of micanite products are that it has density of (gm/cm)31.85 to 2 6 and thickness up to 2 mm to 2 mm, minimum and maximum operating temperature is from 130C to 180C depending on various binders, inorganic bounded material can withstand temperature up to 600C. The material can be moulded and formed. Thus, according to the petitioners, micanite is an entirely new product with new set of characteristics depending mainly on the type of binder used. Neither technologically nor in the popular or in the trade sense, micanite products are known or could be called mica or fabricated mica or mica of any sort. In contrast to micanite products, mica and fabricated mica are normally a manual production with a little added value due to labour and low cost equipment.

4. From about August 1975, the petitioners started exporting micanite products and, on the exports of the same, the petitioners were required to pay an export cess of 3-1/2% ad valorem under Notification No. M-2201 7/2/72M III dated 3rd July, 1974. According to the petitioners, during the period August, 1975 to November 1976, they paid the exports cess of 3-1/2% ad valorem under a mistake of fact and law bona fide believing that the said products were liable to payment of duty. In the beginning of November 1976, the petitioners realised that duty prescribed for mica was not payable in respect of the said products In these circumstances, the petitioners wrote to the Assistant Collector of Customs, Bombay, on 9th November 1976, pointing out that cess was erroneously levied and that they were entitled to the refund of the same.

Thursday, the 2nd October, 1980

5. By another letter dated 15th November, 1976, addressed to the Assistant Collector of Customs, Bombay, the petitioners pointed out that the Customs had been mixing up Mica with Micanite Electrical insulating materials. Whereas mica is a mined product and fabricated mica is a product manufactured by cutting, punching or stamping of mica, micanite is an entirely different product and, in support of this, the petitioners gave a comparative statement of the differences between Micanite Electrical insulating material and Mica and fabricated mica. This was followed by another letter dated 30th of November, 1976 also addressed to the Assistant Collector of Customs, Bombay. Obviously, the petitioners placed on record the fact that their Finance Manager P. G. Parikh had discussions with the Customs Officer to whom it was pointed out that the Notification No. M-2201 7/2/72M III dated 3rd July, 1974 applies only to Mica in all forms and that Micanite it not Mica. The petitioners also gave a further comparative statement of natural mica and fabricated mica and Micanite products and stated that value of mica in exported products it normally less than 20% of the f.o.b. price.

6. Ultimately, the petitioners' attorneys, by their letter dated 16th December, 1976 addressed to the Assistant Collector of Customs, Bombay, inter alia, pointed out that, 'under the second Schedule to the Indian Tariff Act, 1934 item 25 deals with mica of all sorts and the rate of export duty is 40% ad valorem. By a notification issued by the Government of India, Ministry of Finance (Department of Revenue and Insurance) bearing No. 141 Customs dated 12th July 1966 the Central Government have exempted mica-nite falling under the said item 25 when exported from the whole of the Customs duty leviable thereon. The Ministry of Commerce have also clarified that exports of amongst others micanite electrical insulating products are licensed freely for export and the same are not canalised through the Mica Trading Corporation.' Since August 1975, the petitioners had been exporting micanite products and the Customs authorities required the petitioners to pay a cess which was collected at the rate of 3-1/2% ad valorem and that in the beginning of November 1976, the petitioners realised that they had made a mistake in paying the cess as demanded from them and, accordingly, called upon the Customs authorities to refund the amount of Rs. 56,953.70 and to refrain from levying the cess on the micanite electrical insulating materials exported by the petitioners and, if duty is sought to be levied, the same would be paid without prejudice to their contention that no cess was levied at all.

7. It appears that all these letters and the subsequent letters addressed in the months of December 1976 and January 1977 went unheard as there was no response from the Bombay Customs. In the circumstances, the petitioners, by their letter dated 6th of December, 1976, wrote to the Government of India, Ministry of Finance, New Delhi, on the subject. The Central Board of Excise & Customs, by their letter dated 7th February, 1977 addressed to the petitioners in reply to the said letter dated 6th December, 1976, informed the petitioners that the matter was under examination in consultation with the Collectors of Customs and that further communication would follow in due course. Thereafter, the Central Board of Excise & Customs, by their letter dated 10th May, 1977, informed the petitioners that the issue was considered by the Collectors of Customs of the major ports in conference in March 1977 and that the petitioners could contact the Collector of Customs of the port of Export for details.

8. In the meantime, the Collector of Customs, Bombay, issued Public Notice Tariff dated 2nd May, 1977 for the information and guidance of importers, clearing agents and others concerned that micanite would be classified under the Customs Tariff Act, 1975 under heading No. 8 of the Second Schedule with levy of export cess under item 7 of the Cess Schedule.

9. While the correspondence was going on, the petitioners started making payments of the exports cum/duty under protest and also made applications in Form-A in respect of five consignments for refund of duty already collected in respect of the past exports claiming a refund of Rs. 89,801.33.

It is in these circumstances that the petitioners have sought the said relief by a writ of mandamus.

10. The respondents - the Union of India and the Customs authorities - have filed an affidavit in reply dated 13th December. 1978 and have taken certain preliminary objections to the maintainability of the petition on merits The respondents rely upon the wordings of Section 2 of the Mica Mines Labour Welfare Fund Act, 1946. They submit that Micanite has all along been treated as a form or a shape or a sort of Mica and has been so understood both by the authorities as well at the trade. 'Mica' is subject to duty under item 8 of the Second Schedule of the Customs Tariff Act, 1975. However, by a notification dated 2nd August, 1976, the Central Government had exempted certain goods falling under the said item 8 from export duty as specified therein and Micanite was one of the goods exempted under the said notification. From this, it is clear that, for the purposes of the Customs Tariff Act, 1975, Micanite was regarded as a product falling under the heading 'Mica'. Further, Micanite is also classified under the heading of 'Mica' in the Brussels Tariff Nomenclature under heading No. 25.26 thereof. From the said nomenclature, it is evident that Micanite is only a built-up Mica and is definitely a sort or a shape of mica itself. Micanite has also been classified as a manufactured Mica in the commodity study report on Fabricated and Manufactured Mica prepared by the Mica Export Promotion Council (March 1968). The respondents also rely upon a communication from the Assistant Director (Chem) of the Export Inspection Council of India (Ministry of Commerce), Calcutta, dated 2bth March, 1978, stating that Micanite is a product consisting of mica splittings bonded with varnish. In fact, the petitioners themselves treated Micanite as Mica as is evident from the fact that they exported the same from August 1975 to Nov. 1976. There has been no representation from the trade against such duty on the ground that Micanite is not some state of Mica. According to the respondents, this clearly demonstrates that Micanite is regarded as a Mica in the trade in both commercially and popularly understood as Mica. In any event, Micanite aptly falls within the meaning of the words 'Mica in whatever state' as contained in Section 2 of the Mica Mines Labour Welfare Fund Act and it is for the petitioners to conclusively show that Micanite is not Mica in whatever state. The respondents also point out that the petitioners had not produced any proof that the normal trade understanding of Micanite is that it is not Mica.

11. The petitioners have made an affidavit in rejoinder dated 24th of October, 1979. whereby the petitioners have relied upon certain affidavits of traders showing the proper meaning which is being given to the word 'Mica' in the trade. The respondents had objected to the affidavit in rejoinder being taken on file but the objection was overruled. The said affidavit was furnished to the respondents in due course and the respondents had sufficient opportunity to put in their say as well as to rely upon the affidavits of the trade if they were so minded. Shri Andhyarujina, the learned Counsel appearing for the petitioners, referred to the comparative table of the characteristics of natural Mica and Fabricated Mica on the one hand and Micanite products on the other hand, which was submitted to the Assistant Collector of Customs, Bombay, with the petitioners' letter dated 30th of November, 1976 and the same is reproduced below:

Natural Mica & FabricatedMica Micanite Products1. Mica is the name given to 1. Micanite is an engineered product,a group of minerals of It is manufactured by feeding related composition and natural mica through automaticsimilar physical properties. sorters and classifiers, laid throughMicas are mined. They are continuous laying machines, wherecomplex silicates of different types of bonding materiAluminium with Potassium, als are introduced. This bonded Magnesium, Iron, Sodium, material then passes through a con-Lithium, Fluorine and trolled hearing, pressing and curingtraces of some other cycle. The material is ground to elements. very close tolerances and is eventu-Fabricated Mica is made ally released in large sheets of ap-out of pure mica by proximately. (sic)punching, splitting, shearing 1 mtr. x I mtr. sizes.or any such mechanicaloperation.2. Some of the technical 2. Some of the technical characte-characteristics are given here- ristics are given hereunder:under:(a) Density = (a) Density=(gm/cm3) 2.6 to 3.2 (gm/cms) 1.85 to 2.2(b) Thickness= (b) Thickness=up to 0127 mm up to 2 mm minimumminimum(c) Maximum operating (c) Maximum operating tempera-temp'rature='600oC. temperature From 130C to 180C,depending on various binders,inorganic bonded material canwithstand temperatures up to600C.3. Always retains their mined 3. Entirely a new product with newcharacteristics. No change set of characteristics, dependingtakes place. mainly on the type of binder used.By varying the percentage of bondand treatment cycles, specificationschange.4. It is always 100% natural 4. The quantity of mica varies between mica. 45% to 95% in weight. Howeveris much less in value.5. Value of mica almost 100% 5. Value of mica normally less thanwith minimal processing 20% of f.o.b. value of micanite ex-charges. ported.6. Normally a manual 6. Highly capital intensive production.production with a little added The entire equipment and techno-value due to labour and logy has to be imported. Our plant,low cost equipment. as well as plant being used byBharat Heavy Electricals Ltd, Bhopal, has been entirely imported.7. Traditional material of 7. New item of production and ex-mining and export. Has port.been exported for several decades.8. Not imported into the 8. As per I.T.O. Control Book, it iscountry. allowed to be imported freely underPart II 38 Such large GovernmentOrganisations as Chittaranjan Locomotive Works and Bharat Heavy Electricals Ltd. Hyderabad and Hardwar still import their majorrequirements.

12. Secondly, it was emphasised that micanite products are not canalised through the Mica Trading Corporation. Thirdly, the petitioners are registered with the Engineering Export Promotion Council and not with Mica Export Promotion Council. Fourthly, reliance was placed on the Import Trade Control Policy for the year April 1975 to March 1976, which shows that goods of the description of micanite sheets and tubes fall in Serial No. 38 of the I.T.C. Schedule and goods with the description of Mica appearing at page 38 are at serial No 122 of the I.T.C. Schedule. Reference was also made to the Import Trade Control Policy for the licensing period April 1978-March 1979, which makes provisions for incentive in Appendix 17 which contains statement of import policy for registered exporters. Appendix 17 contains the description of export products covered by import policy for registered exporters, the percentage of import replenishment and materials permitted for import against each product as well as other conditions relating thereto. At Serial No. Section 4, under the main heading 'S Miscellaneous Export Products', export product Micanite Insulating materials bonded with synthetic resins is shown carrying the import replenishment percentage of 2% and the materials permitted for import against the same (page 120 of Appendix 17). Fifthly, reliance was placed on the Tariff Schedule of the Customs Tariff Act, 1975. Mineral Products in Chapter 25 (page 24) of the 1st Schedule-Customs Tariff deals with mineral products. Note No. 3 shows that mica splittings and waste are to be classified in Chapter 25. Chapter 68 (page 77) deals with articles of stone, of plaster, of cement, of asbestos, of mica and of similar materials. The note indicates that Chapter 68 does not cover goods falling within Chapter 25. Reference to these provisions was made in order to show that the Brussels Nomenclature, which came into force from 1st of April, 1976, makes a distinction between mica and micanite and, correspondingly, the Customs Tariff Act, 1975 also makes similar distinction as available from the reading of Chapter 25 and Chapter 26. Sixthly, reliance was placed on Chapter 25 covering mineral products on page 133, item No. 25.26 relating to Mica, including splittings; mica waste and articles of stone, of plaster, of cement, of asbestos, of mica and of similar material under chapter 68 at page 145 under item No. 68.15 (column 1) relating to worked mica and articles of mica, including bonded mica splittings on a support of paper or fabric (for example, micanite and micafolium) (column 2). The note to Schedule I in which the said Chapters 25 and 68 fall, states that each heading number in Column (1) corresponds to the respective Chapter and heading number of the First Schedule to the Customs Tariff Act, 1975 and each entry in Column (2) has the same scope and meaning as the corresponding Chapter and heading of the said First Schedule. The Explanatory Note to the Brussels Nomenclature, Volume 1, second edition, page 180, covering Section V, item 25.26 is as follows:

25.26-MICA, INCLUDING SPLITTINGS:

MICA WASTE.

Mica (muscovite, phlogopile, biotite, etc.) constitutes a group of natural complex Aluminium silicates characterised by the fact that they are readily split into glistening, transparent, flexible sheets of varied colour.

The present heading includes:

(A) Crude mica, which consists of mica crystals, of irregular shape, size and thickness, covered with earth ('books').

(B) Mica sheets, obtained by rifting cubed and trimmed books. The sheets take the shape of irregular polygons like the crystals from which they were obtained, and their edges are roughly trimmed and bevelled. Their thickness usually varies from 200 to 750 microns.

(C) Mica splittings, obtained by rifting sheet mica. Like the sheets from which they have been rifted, they have the shape of irregular polygons. Their edges are roughly trimmed. They are marked as:

(1) Condenser film, usually of a thickness between 25 and 200 microns; or

(2) Splittings, usually of a thickness between 12 and 30 microns, used solely for the manufacture of built-up mica (e.g., mica-nite).

The present heading excludes products obtained by cutting-out or die-stamping from mica sheets or splittings (heading 68.15 or Chapter 85), and products made from bonded (built-up) splittings (e.g., mica-nite, micafolium) or from pulped (reconstituted) mica (heading 68.15).

The present heading includes mica waste and powder.

Secondly, reference was also made to the different specifications for mica and built-up mica for electrical purposes as laid down by the Indian Standards Institution. Relying upon this material, Shri Andhyarujina submitted that mica is distinct from micanite and the trade use is different for mica and micanite. Micanite has distinct properties.

13. In order to show that what meaning is to be attached to the words of the physical statute relating to recovery of the Customs duty, reliance was placed on six decisions of the Supreme Court. They are:

1. Dunlop India Ltd.; Madras Rubber Factory Ltd. v. Union of India and Ors. A.I.R. 1977 SC 597 : ECR C 476 SC. (2) State of Uttar Pradesh and Anr. v. Kores (India) Ltd. : [1977]1SCR837 , (3) Minerals and Metals Trading Corporation of India Ltd. v. Union of India and Ors. : 1973ECR23(SC) , (4) Ganesh Building Co. Karnal etc. etc. v. State of Haryana and Anr. etc. : AIR1974SC1362 , (5) South Bihar Sugar Mills Ltd. and Anr. etc. v. Union of India and Anr. etc. : 1973ECR9(SC) and (6) The Deputy Commissioner of Sales Tax (Law) Board of Revenue (Taxes), Ernakulam v. G.S. Pai and Co. : [1980]1SCR938 . Shri Andhyarujina also referred to the affidavit of Basudeo Goenka, annexed to the affidavit in rejoinder dated 24th October, 1979, to show that in trade mica and micanite are considered to be two separate products. Learned Counsel also submitted that the reasons given by the Customs authorities in paragraph 5 of the affidavit in reply dated 13th December, 1978 are totally irrelevant considerations and that no reasonable person could take that view and the same is wholly inconsistent with the guidelines prescribed by the Supreme Court in the said cases.

14. Shri Shah raised two preliminary objections as to the maintainability of the petition. He pointed out that the petitioners have made applications for refund of the duty and these applications are not yet disposed of. The Customs Tariff Act, 1975 makes provisions for appeal and revision. In this connection, he gave references of the decisions in T. R. Sharma v. Prithvi Singh and Anr. : [1976]2SCR716 and Bata Shoe Co. Ltd. v. Jabalpur Corporation and vice versa : [1977]3SCR182 . On the other hand, Shri Andhyarujina pointed out that there is an purpose in pursuing the application as the Central Board of Excise and Customs, in consultation with the Collectors of Customs, have already taken a decision as reflected in the public notice tariff dated 2nd May, 1977 classifying micanite under the Customs Tariff Act, 1975 and, therefore, the petitioners are not likely to get any relief as the lower authorities are bound to follow the decision taken at the highest level. Secondly, preliminary objection is that, several disputed questions are raised. When the petitioners addressed their letter dated 8th of December, 1976 to the Government of India, not a word was mentioned as to how micanite was known in the trade, nor was it mentioned that under the Import Policy it was mentioned differently. At no stage, bad the petitioners produced evidence by affidavits. Shri Shah also made reference to the provisions of Section 2 of the Mica Mines Labour Welfare Fund Act, 1946, which provides for imposition and collection of a cess on all mica in whatever state exported. Section 3 of the said Act shows that the fund is to be applied by the Central Government to meet expenditure incurred in connection with the measures to be taken to promote the welfare of labour employed in the mica mining industry. The Second Schedule--Export Tariff, item No. 8 provides for mica, including fabricated mica and the rate of duty. By a notification No. 329-Cus., dated 2nd August, 1976, duty of Customs leviable on the goods specified therein was exempted. The said notification reads as follows:

THE GOODS specified in column (2) of the Table annexed are exempt from so much of the duty of Customs leviable thereon under the Second Schedule to the Customs Tariff Act, 1975, as is in excess of the rate of duty specified in the corresponding entry in column (3) of the said Table. TABLE_________________________________________________________________________________Sl.No. Description of goods Rate of duty_________________________________________________________________________________(1) (2) (3)_________________________________________________________________________________1. Micanite Nil2. Fabricated mica 10 per centad valorem3. Processed mica powder Nil4. Mica flakes of 2 mesh and above but below Nil6 mesh.5. Mica loose splittings of grades numbers 5-1 /2 and 15 per cent 6, and Mica mixed torn loose grades numbers 5 ad valoremand 5-1/2.6. Mica splittings of all grades other than those 20 per cent specified against serial number 5 above ad valorem7. Mica blocks and condenser films of grade number 30 per cent2 and grades superior thereto ad valorem8. Mica blocks and condenser films of all grades 20 per centother than those specified against serial number ad valorem7 above.__________________________________________________________________________________

According to Shri Shah, to understand the meaning of item No. 8, i.e., of mica, including fabricated mica, the said notification is to be taken into account. The said Act, creating a fund for the welfare of the mica mine workers, the said Second Schedule and the said exemption notification should be read together and together they provide a guideline as to what is meant by mica. Shri Shah farther submitted that the exporters have taken the benefit of the said exemption notification and claimed exemption and conceded that micanite is covered by item No. 8, i.e., mica, including fabricated mica. Therefore, it is not open to an exporter now to say that he is not liable to pay cess because micanite is not included in item No. 8. In these circumstances, the petitioners cannot appropriate and reappropriate, submitted Shri Shah. Shri Shah also referred to page 805 of the Customs Tariff dealing with cesses leviable on certain articles on import or otherwise and placed reliance on entry No. 7 at page 812 relating to 'Mica in whatever state', which attracts a cess of 3 1/2% ad valorem. By these entries, submitted Shri Shah, it is to be understood that micanite is included in the entry 'mica'. The petitioners had also so understood and in that way they exported from 1975 to November 1975 and paid the Cress at the rate of 3 1/2% ad valorem. All this shows that micanite is nothing but a sort of mica. The trade has not made any representation that micanite is not mica, except the petitioners. Shri Shah also placed reliance on part (C) reproduced above. Shri Shah also referred to Encyclopaedia of Chemical Technology Second Edition, Volume 13 p. 414 on 'built-up Mica':

'Built-up mica is a sheet or board made from mica splittings held together by a bonding agent. Heat and pressure are used to consolidate the sheet. Temperature of up to 300F or more, and pressures from 50 to over 1000 psi, are usual. Micanite (3M Co.) is a well-known trade mark.

Overlapping layers of splittings are obtained by ingenious suction devices or by hand. When a sufficient thickness is obtained, the binder, which is usually shellac or a resin in a solvent, is applied. After removal of the solvent, the sheet is cured by heat and pressure. Some success has been obtained by simultaneously depositing both splittings and dry, powdered binder. Silicones and inorganic binders such as borate-phosphate or borate-aluminates glasses are sometimes used.

Reliance was also placed on the study report prepared by the Mica Export Promotion Council, according to them, 'Micanite-also known as built-up mica-is made by sticking together mica splittings with a binding material, such as shellac varnish and other synthetic resin, etc. Micanite, developed originally to avoid the relatively high cost of using pure mica, is manufactured in various forms such as flexible micanite, commentator micanite and moulding and heat resisting micanite.' Further, reliance was placed on the letter dated 25th March, 1978 from the Export Inspection Council of India (Ministry of Commerce, Government of India), Calcutta, addressed to the Assistant Collector of Customs for Export-II, Calcutta, wherein it is stated that 'Micanite' is a product consisting of mica splittings bonded with varnish. Shri Shah also relied upon a literature on Built-up mica or micanite prepared by M/s. Mica . The relevant portion relating to Built-up mica insulation is as follows:

By far the largest use of natural mica has so far been in the form of Built-up mica, commonly known as Micanite. It comprises of 'mica splittings' cemented together with a suitable insulating binder and formed into composite sheets and/or a variety of shapes under adequate heat and pressure. During formation the sheets are heated at temperature of about 300F (or 142C) and then pressed for several minutes at 1000 lbs. per square inch. Finally, they are ground to a smooth surface and exact thickness. The kind of mica splittings used, the amount and the nature of the binder applied and the nature of the reinforcement provided at the back, if any, actually determine the end properties and applications of built-up mica insulation

Shri Shah also referred to the following extract in the case of 'Cress on Micanite' of Departmental Tariff Advice based on the view of the Collectors in Conference on the Tariff classifications matter held at Madras on 24th and 25th March, 1977 and issued for guidance of all concerned:

A firm of exporters of Micanite has represented to the Board that the levy of a Cress of 3 1/2% on Micanite was incorrect. The Board desired that the conference should examine the question of correctness of classification of Micanite under amended heading No. 8 of the Second Schedule of the Customs Tariff Act and of levy of Cress at 3 1/2% and also the question whether Notification No. 329-Cus. dated 2.8.1976 exempting Micanite from payment of export duty was redundant.

The representative of D.G.T.D. who was present in the conference explained that Micanite was obtained by bonding together layers of mica with shellac, synthetic resins, etc. and that Micanite was not mica as such. The conference observed that as Micanite was built-up mica or fabricated mica which was specifically covered by serial No. 8 of the Second Schedule to the Customs Tariff Act, as amended, Notification No 329-Cus. dated 2.8.1976 partially exempting Micanite from export duty was not redundant. The fact that the same notification also specifically mentions fabricated mica along with Micanite for purpose of partial exemption did not also alter this position. As regards the export Cress under Item 7 of the Cress Schedule, the conference noted that Item 7 of the Cress Schedule covers 'mica in whatever state'. The conference therefore observed exports of Micanite would be liable to a Cress of 3 1/2% in terms of Serial No. 7 of the Cress Schedule and that if the levy of Cress on the product will affect the export effort, the Commerce Ministry may consider granting suitable incentive to compensate for this levy.

15. This is the broad base of the voluminous material pressed into service by the parties to succeed in their respective view points. The Encyclopaedia of Chemical Technology (hereafter called 'ECT') throws a great deal of light on micas which are a series of silicate minerals characterized physically by a perfect basal cleavage; they yield, with ease, thin tough famines that have a high degree of flexibility. Splittings with uniform thickness of 1.0 to 0.1 mm are readily obtainable.

16. All micas crystallize in the form of flat, six sided monoclinic crystals Characteristic is the nearly perfect basal cleavage, which permits the crystals, or 'books' to be split into films. Strength and elasticity of the film are characteristics of commercial varieties of mica.

Muscovite and phlogopite are two natural micas. Fluoro phlogopite is the synthetic mica most widely used in electrical industry. Muscovite can be used for electrical purposes up to 1000F and phlogopite up to 1850F.

Mica is initially unaffected by fire, water, acids, alkalis or electricity.

Block mica is sheet mica 0.007 in. in thickness or in greater in thickness whereas film mica is a thin sheet or sheets split from better qualities of block mica.

Splittings are thin pieces of irregularly shaped mica with maximum thickness of 0.0012 in. splitting are usually, although not necessarily, made from lower qualities and smaller sizes of mica, both muscovite and phlogopite.

Scrap mica is all the mica not usable as sheet, block, film or splitting.

Scrap mica is, therefore, the raw material used for the manufacture of ground mica.

Ground mica is made from scrap by either dry or wet grinding methods.

17. The Brussels Nomenclature also mentions mica as muscovite, phlogopite, biotite, etc., as constituting a group of natural complex Aluminium silicates wherein see Item 25.26 -Mica, including splitting; Mica Waste includes crude mica, mica sheets and mica splitting and what they are and how they are obtained and that mica splitting are marketed for being used solely for the manufacture of built-up mica for example Micanite.

18. ECT mentions of special products of micas, namely, 'built-up mica' glass-bounded mica, Phosphate which mica, reconstituted mica sheet or paper, etc. The full text of the meaning given to 'built-up mica' in ECT has been quoted above. It is not in dispute that 'built-up mica' is called 'Micanite', the product in question. Brussels Nomenclature also mentions of 'products made from bonded (built-up) splitting (e.g., micanite, mica-folium).'

19 At page 421 of ECT, we get to know the uses of the various types of micas noted above Built-up mica (i.e. micanite) products cut or stamped from built-up mica are used as an insulating material in electric motors, generators and transformers. Types of built-up mica used are moulding plate, segment plate, heater plate, flexible sheet and tape.

20. The above extracts from ECT, Brussels Nomenclature, the Indian Standard; 2464-1963 pamphlet, the comparative table prepared by the petitioners and quoted above and the literature prepared by M/s. Mica . relied by the respondents, when considered in juxtraposition, go to show that built-up mica, i.e., Micanite is of a particular kind thing produced by a certain manufacturing or engineering process which can be called as urged by Shri Andhyarujina, as a new product. Though ECT styles it as a special product. Furthermore, built-up mica, i.e., Micanite goes by our trade mark and among the uses to which it can be applied is as an electrical insulating material. Micanite has, therefore, a trade name, a distinctive character and use.

Monday, the 6th October, 1980.

21. Turning to the Customs Tariff, the Second Schedule-Export Tariff against item No. 8, we have 'Mica, including Fabricated Mica'.

The exemption notification No. 329-Cus, dated 2nd August, 1976 speaks of Micanite, Fabricated Mica, Processed Mica powder, Mica flakes, Mica loose splitting, Mica splitting of all grades, Mica blocks and condenser films of a certain grade and Mica blocks and condenser films of all grades.

22. Thus, mica in the world of Customs Tariff taken in its range various kinds forms and varieties of Mica including fabricated, manufactured, processed or engineered mica, all called by various names, all having their own sources and obtain ability and all having their particular utility commercially or otherwise The nomenclature found in the Customs Tariff adds to the richness of nomenclature found in ECT and Brussels Nomenclature. But basically they all are natural mica. Even built-up mica, i.e., Micanite is in the form of mica though it ii made by a certain process of manufacturing or engineering but, nevertheless, Micanite is made of mica splitting. Built-up mica is made from mica splitting held together by a bonding agent. When certain temperature and pressure is applied to such mica splitting, they are consolidated into a sheet or board. Even according to Article 3.1 of the Indian Standard : 2464-1963, built-up mica for electrical purposes it made of muscovite mica splitting phlogopite mica splitting both of which are natural mica. The point sought to be made out that 19-20% mica is used in the making of Micanite is immaterial. The percentage of mica is not decisive of the question. Ultimately it is the mica splitting which are used for the manufacturing of micanite for a particular use or application. The fact that in Brussels Nomenclature 'products made from bonded (built-up) splitting e.g. micanite, micafolium)' are excluded from the heading, 'Mica, including splitting : mica waste' cannot dislodge the placing of micanite, i.e., built-up mica in the Customs notification dated 2nd August, 1976. Even otherwise built-up mica is a kind of manufactured mica and should be covered by mica.

23. With this background and the analysis of the said material, we next go to the statute under which the Cress is leviable. This is the Mica Labour Welfare Fund Act, 1946, an enactment to constitute a fund for the financing of activities to promote the welfare of labour employed in mica mining industry. The object of having a fund to meet the expenditure incurred by the Central Government in connection with the welfare schemes for mica-mining labour is sought to be achieved by the imposition of an ad valorem duty on all exports of mica Section 2 provides for levy and collection of Cress, on all mica, in whatever state, exported from India (except the mica of Jammu and Kashmir) a duty of customs at such rate, not exceeding 6 1/2% ad valorem, as the Central Government may from time to time fix. Accordingly, the Central Government had imposed Cress at the rate of 3 1/2% ad valorem on MICA IN WHATEVER STATE, Now, does or does not built-up mica, i.e., micanite fall in the sweep of 'mica in whatever state'? In the light of the above discussion about natural mica and the numerous forms in which mica is categorised and dealt with in ECT, Brussels Nomenclature, the Customs Tariff, Indian Standard No. 2464 of 1963 and other material on the subject I am of the opinion that it is reasonable to place built-up mica or micanite within the range of 'mica in whatever state', built-up mica is nothing but basically mica splitting transformed into a particular shape by the application of shellac or resin to hold together the loose splitting at temperatures upto 300F and pressure from 50 to over 1000 psi (Greek letter : ps). The new product is a sheet or a board or a tube and is marketed commercially under the trade name of Micanite (BM Co.). Because mica splitting undergo a change in the form or outward appearance by a certain process for a particular purpose we cannot alienate the new product from the sweep of the expression 'mica in whatever state'. It seems that the Legislature being mindful of the fact that the mica circulates in the trade circle, the various names, forms, shapes was transformed into new or special products to meet the requirements of the industry, that it thought of using an unrestricted diction 'in whatever state'. By such boundless words (in whatever state) an emphasis on mica in an indefinite sense (in whatever state) the legislature did not intend to keep out mica, in any condition in which it be, when exported. Therefore, built-up mica or micanite, being a product fundamentally made of mica splitting would fall in the range of 'mica in whatever state' and be liable to Cress.

24. Coming to cases cited by Shri Andhyarujina, in the latest case of Deputy Commissioner of Sales Tax v. G.S. Pai : [1980]1SCR938 , the Supreme Court had to consider the question whether the ornaments and other articles of gold purchased by the assessee fell within the description of 'Bullion' and the other 'specie'. Their Lordships refer to the cardinal rule of interpretation which has always to be borne in mind while interpreting entries in Sales-tax legislation and that rule is that words used in the entries must be constituted not in any technical sense nor from the scientific point of view but as understood in common parlance. We must give the words used by the legislature their popular sense meaning that sense which people conversant with the subject matter with which the statute is dealing would attribute to it. The word 'bullion' in the popular sense cannot include ornaments or other articles of gold.

25. In Dunlop India Ltd. v. Union of India and Ors. A.I.R. 1977 SC 597. Their Lordships have referred to the large variety of material relied upon by both sides from different sources, texts and authorities which is mentioned in several paragraphs of the judgment After referring to various cases including Minerals and Metals Trading Corporation of India Ltd. v. Union of India and Ors. : 1973ECR23(SC) and South Bihar Sugar Mills Ltd. v. Union of India : 1973ECR9(SC) , the Supreme Court reiterated the golden rule that in interpreting the meaning of words in a taxing statute, the acceptance of a particular word by the trade and its popular meaning should commend itself to the authority. The meaning given to articles in a fiscal statute must be as people in trade and commerce conversant with the subject generally treat and understand them in the usual course. But, once an article is classified and put under a distinct entry, the basis of classification is not open to question. Technical and scientific texts offer guidance only within limits.

26. Shri Andhyarujina laid great stress on the observations in paragraph 14 of the judgment in S.B. Sugar Mills v. Union of India : 1973ECR9(SC) to the effect there must be such a transformation that a new and different article must emerge having a distinctive name, character or use. Relying upon these observations, it was urged that, in our case also, the new product is micanite having a distinctive name, character and use and, therefore, it cannot attract Cress, in my view, the cases cited on behalf of the petitioners are not of much relevance and are not applicable to the facts of our case. In our case, Section 2 of the Mica Labour Welfare Fund Act, 1946 is the charging section. The levy of Cress is on export of 'mica in whatever state'. We should not confuse the issue by trying to understand the popular meaning of the commodity-'micanite' in contrast to 'mica'. It is one thing that the product micanite made out of mica splitting has a definite trade name and a particular character or a specific use but it is entirely another thing to consider whether 'micanite' would fall in the sweep of 'mica in whatever state'. We are concerned with the export of mica in whatever state. Looking to the expression 'mica in whatever state' as discussed above, in my judgment, we do not have to ask the Trade as to what they understand by the word 'micanite' nor have we to look out as to how it is understood in common parlance or popular sense That approach in our case would definitely give a restricted meaning to the expression 'mica in whatever state', which is not the intention of the legislature as is evident from the use of the simple phrase 'in whatever state'. We cannot put out of consideration this diction which runs with the word mica. We do not need any assistance from commercial circles in interpreting the said expression. The illustration in S.B. Sugar Mills' case that if kiln gas were to be offered in discharge of a contract to supply carbon dioxide, it would certainly be rejected on the ground that it is not carbon dioxide but this illustration is of doubtful application in our case, because if micanite were to be offered in discharge of a contract to supply 'mica in whatever state', it could certainly be not rejected on the ground that micanite was not mica in whatever state. It could be argued with success that the trade name 'Micanite' is, after all, built-up mica out of natural mica and comprises of 'mica splitting' bonding together with appropriate insulating binder and formed into variety of shapes, like sheets or tubes to suit the requirements of the trade. The concerned trade or importer cannot plead ignorance that built-up mica is not fabricated from mica.

27. In Ganesh Trading Co. v. State of Haryana : AIR1974SC1362 , the question was whether it could be said that, when paddy was dehusked and rice produced, its identity remained. The answer was that rice is not known as paddy and they are two different things in ordinary parlance. This was possibly because rice is produced out of paddy but paddy did not continue to be paddy after dehusking. Now, if the question was, whether the expression 'rice in whatever state* includes paddy, the answer would be in the affirmative because rice rests in undehu sked paddy. Therefore, when we think of rice in whatever state it be, we are not to be guided by as to what it is known in ordinary parlance or understood in popular sense. Such a test is likely to confuse the issue, the reason being that we have to look to the basic fact that undehusked rice, though called paddy, is nevertheless rice in that state.

28. We may once again recall that in Brussels Nomenclature, Micanite is but an example of mica splitting being marketed for being used for the manufacture of built-up mica. I am pinpointing this from the Brussels Nomenclature itself because Shri Andhyarujina seemed to heavily depend upon this literature for influencing my mind.

29. Coming next to the various types of material relied upon on behalf of the petitioners like the I.T.C. classification in the index to the Import Trade Control Policy Vol. 1, for the year April 1975 to March 1976, the same does not advance the case of the petitioners. Reliance upon Appendix 17 p. 120 of import policy for the year April 1978-March 1979 showing that the Registering Authority is the Engineering Export Promotion Council in respect of export of Micanite Insulating materials bonded with synthetic resins for the purpose of import replenishment of specified material at fixed percentage has no impact on the issue before us. So also the work appeared to have been done by the Mica Sectional Committee for the Indian Standards Institution is of no help to the petitioners. This work of I.S.I. relates to methods for grading and classifications of Muscovite Mica Blocks, Thins and Films. We have noticed that muscovite Mica is natural mica. Film mica is a thin sheet from better qualifies of block mica. The second pamphlet of Indian Standard: 2454-1963 relates to specification for built-up mica used as an electrical insulating material. Beyond showing the use of built-up mica, i.e., micanite as an electrical insulating material, its relevance was not material for the petitioners' purpose. According to the Standard Institution, built-up mica shall be made either out of muscovite mica splitting or phlogopite (amber) mica splitting. Reliance was also placed on behalf of the petitioners on the explanation of the representative of D.G.T.D. to the effect 'that Micanite was obtained by bonding together layers of mica with shellac, synthetic resins, etc. and that Micanite was not mica as such' contained in the Collectors Conference held in Madras on 24th-25th March, 1977. There is no dispute about the obtaining or fabrication or manufacturing or engineering of Micanite. Micanite may not be mica in the sense understood by D.G.T.D's representative. But the point at issue is whether micanite would be covered in the sweep or range of 'mica in whatever state'. I think I have answered this question more than once.

30. A good deal of study put in by learned Counsel and the manner.in which they explained (sic)

In view of the above discussion, the petition is dismissed. Rule discharged. No order as to costs.

Interim order dated 19th July, 1977 to continue for a further period of four weeks from today.


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