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The Orissa Mining Corporation Ltd. and anr. Vs. the Joint Secretary (Revision Application) Ministry of Finance and ors. - Court Judgment

LegalCrystal Citation
CourtOrissa High Court
Decided On
Case NumberOriginal Jurisdiction Case No. 1420 of 1975
Reported inAIR1978Ori96
ActsConstitution of India - Article 226; Tariff Act, 1934
AppellantThe Orissa Mining Corporation Ltd. and anr.
RespondentThe Joint Secretary (Revision Application) Ministry of Finance and ors.
Appellant AdvocateSomnath Chatterjee and ;S.C. Roy, Advs.
Respondent AdvocateStanding Counsel (Central)
DispositionWrit Petitions allowed
Cases ReferredMadhya Pradesh Indore v. Jaswant Singh Charan Singh
.....v smt rita devi, 1997(2) glt 406, approved. new india assurance co. ltd. v birendra mohan de, 1995 (2) gau lt 218 (db) and union of india v smt gita banik, 1996 (2) glt 246, are not good law]. - the best way is to define the product for the purpose of excise duty in appropriate terms demarcating clearly the distinction between the two terms. it is best left to the authorities entrusted with the subject. s 37c (g)-proj 2/69a as well as covering import trade control licence and invoices......rate of duty in terms of notification customs no. 117/65 dated 20-8-65 (annexure 13) which exempts mining machineries coming within the purview of item 72 (18) of the first schedule to the indian tariff act, 1934 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 the rate of 10 per cent ad valorem. but on a mistaken assumption that the said machineries were to be assessed under item 72a of the indian customs tariff, paid customs duty at the rate of 35 per cent plus 10 per cent against a few consignments and at the rate of 271/2 per cent against the rest. later the petitioners realised that the machineries being 'mining machinery' should have been assessed to duty under item 72 (18) at the rate of 10 per cent ad.....

S.K. Ray, J.

1. The petitioner No. 1 is the Orissa Mining Corporation Limited (a Government of Orissa Undertaking) a company having its registered office at Bhubaneshwar and having its Iron Ore Mines at Daitari in the district of Keonjhar. Petitioner No. 2 is the Chairman of the Orissa Mining Corporation Limited. The business of the company, inter alia, is development of the mining prospects of the State of Orissa by introducing mechanised iron ore mining at Daitari and in recovering, selling and exporting commercial grade iron ore from the said mine.

2. Petitioner No. 1 entered into two contracts (original and supplementary) with Messrs. NIKEX Hungarian Trading Company of Budapest for supply and erection of an iron ore dressing plant at Daitari. Under the project Import (Registration of Contract) Regulations, 1965, the two contracts bearing Nos. Section 37C(G) Proj-3/66A and S 37C (G) Proj-269A were registered on February 24, 1966 and February 24, 1969 respectively in the Customs House at Calcutta. Two import licences were granted under the Imports and Exports (Control) Act, 1947, one on 7-12-55 and the other on 18-10-67. Both the licences contained a list particularising the goods to be imported, up to maximum value of Rs. 82,64,200 under the first licence and Rs 23,10,962 under the second licence. Seven consignments were imported under the first contract and six under the second.

3. The petitioners' case is that those consignments contained items of machineries which are covered by item No. 72 (18) of the First Schedule to the Indian Tariff Act, 1934 and they are entitled to the concessional rate of duty in terms of Notification Customs No. 117/65 dated 20-8-65 (Annexure 13) which exempts mining machineries coming within the purview of Item 72 (18) of the First Schedule to the Indian Tariff Act, 1934 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 the rate of 10 per cent ad valorem. But on a mistaken assumption that the said machineries were to be assessed under Item 72A of the Indian Customs Tariff, paid customs duty at the rate of 35 per cent plus 10 per cent against a few consignments and at the rate of 271/2 per cent against the rest. Later the petitioners realised that the machineries being 'mining machinery' should have been assessed to duty under Item 72 (18) at the rate of 10 per cent ad valorem. The petitioners, therefore, further allege that as a result of excess assessment under a wrong Item 72A of Indian Customs Tariff, a sum of Rupees 28,21,985 has been recovered from them in excess of the amount of customs duty lawfully due.

4. The items of machineries to which the present dispute relates are:--

1. Primary section : Two units of Giant crushers (Gyeretory) for crushing the big lumps and boulders into smaller bits. Two vibrating screene for screening the bigger bits out for recrushing. Two magnetic separators for separating the metal particles from the approach of the belt conveyor.

2. Secondary Section : Three units of ore crushers for further reducing the size of iron ore bits. Three vibratory screens for screening the smaller sized ores out for dumping as rejects.

3. Washery Section: Three washing boxes with vibratory screens and water jets for washing out the mud and other smaller particles for impurities. Water jet pumps with necessary pipelines and controls.

4. Stocking Section: Six units of storage hoppers for automatic loading of iron ore into the wagons or trucks with measuring device.

5. Belt Conveyor : The entire stretch from the crusher house on the hill top up to the washery house or the plane base is connected by two parallel belt conveyors for continuous movement of the iron ore from one section to other automatically.

5. Thereafter the petitioner No. 1 duly submitted two applications to respondent No. 4 for refund together with reconciliation statements (Annexures 3 and 3-a) obviously in relation to consignments under the two contracts and all supporting documents for re-assessment of the customs duty. Respondent No. 4 not only rejected the claim for re-assessment of value and rate of duty but also Issued two notices demanding further payment of extra duty of Rs. 2,29,980.80 and Rs. 6,498.76 on the ground that the designing fees should also form part of the assessable value of the consignments under the two notices Nos. S 37C (G) Proj-3/66A dated 3-5-72 and S 37C (G) Proj-2/69A dated 7-6-72 (Annexures 4 and 4-b).

6. The petitioners represented against Annexures 4 and 4-b on June 28, 1972 by two letters Nos. 19207 and 19208 about the assessment of duty under Indian Customs Tariff as also in respect of extra duty for loading. They claimed assessment under Item 72 (18) Indian Customs Tariff and objected to assessment under Item 72A. Respondent No. 4, however, by his letter dated 10-1-73 (Annexure 6) rejected the representations and confirmed his demand for payment of extra duty and refused re-assessment under Item 72 (18) I.C.T.

7. Being aggrieved by Annex. 6 the petitioners preferred two appeals to the Appellate Collector of Customs (respondent No. 2) under Section 128 of the Customs Act, 1962 on 6-3-1973 and 7-5-1973 (vide Annexures 7 and 7-a). Respondent No. 2, the Appellate Collector of Customs, by his impugned orders No. 1788/1973 and No. 1789/1973 dated 9-10-1973 (Annexures 8 and 8-a) held that designing fees were not chargeable to customs duty and allowed a portion of the appeal but in respect of the other portion of the appeal for re-assessment at the rate of 10 per cent ad valorem under Item 72 (18) of the First Schedule to Indian Tariff Act he confirmed the decision of the Assistant Collector of Customs (respondent No. 4). The ground for rejecting the latter part of the appeal was that the petitioners having once opted for assessment under Item 72A had forfeited the right to claim re-assessment under Item 72 (18) of the First Schedule to Indian Tariff Act.

8. The petitioners then filed two revision applications under Section 131 of the Customs Act before the Joint Secretary, Ministry of Finance, Government of India, New Delhi under reference No. 17427/ OMC/73 dated 15-12-73 and No. 17587/OMC/73 dated 21-12-73 (Annexures 9 and 9-a) and submitted a letter dated 18-7-74 from the Director, Central Mining Research Station, Dhanbad clarifying the meaning of 'mining machinery', copy annexed as Annexures 10 and 10-a. The revisional authority rejected the revision applications by one order on the ground that the machineries in question are not 'mining machinery' within the meaning of Item 72 (18) of the First Schedule to Indian Tariff Act, but he, however conceded that the ground of the first appellate authority that the petitioners having once opted for assessment under Item 72A could not claim re-assessment under Item 72 (18) was erroneous. In fact, the petitioners could claim re-assessment of the entire consignments against the contracts under Item 72 (18) provided the consignments were 'mining machineries'. The order of' the revisional authority is Annexure 11 to this application.

9. Being aggrieved by Annexures 6, 6-A, 8, 8-a and 11, order passed by respondents 1, 2 and 4, the present application has been filed for (a) issuance of a writ in the nature of mandamus calling upon the respondents 1, 2 and 4 to cancel, recall and/or rescind and/or withdraw the impugned orders No. S 37C (G) Proj-3/66A dated 10-1-73 (Annexure 6), No. S 37C (G) Proj-2/69A dated 13-2-73 (Annexure 6-a), No. 1758/73 dated 9-10-73 and No. 1789/73 dated 9-10-73 (Annexures 8 and 8-a), Nos. 4533 and 4534/74 dated 24-9-74 (Annexure 11) and to forbear from giving effect thereto; (b) issuance of a writ of certiorari quashing those orders in Annexures 6, 6-a, 8, 8-a and 11; (c) issuance of a writ of mandamus directing the respondents to grant refund of Rs. 26,85,460 realised in excess from the petitioner No. 1, and, if necessary, ascertainment of the amount of refund be made upon re-assessment in accordance with lew.

10. Mr. H. G. Panda for respondents 1 to 5 raises a preliminary objection of lack of jurisdiction of this Court on the ground that since duty was assessed at Calcutta, contracts were registered at Calcutta, orders of the Customs authorities were passed at Calcutta and Central Government's order was passed at New Delhi, no part of cause of action arose within the jurisdiction of this Court,

The main controversy, however, is whether the items of machineries indicated above would be, for the purpose of tariff classification 'mining machineries' coming under the purview of Item 72 (18) of the First Schedule to Indian Tariff Act, 1934. If so, then it is not disputed that the petitioners will get the benefit of concessional rate of duty in terms of the notification Customs No. 117/65 (Annexure 13). It may be noted that the plea of estoppel which found favour with the appellate authority having been overruled by the Revisional authority, is no longer a live issue and was not sought to be pressed here by Mr. Panda for the respondents.

11. The preliminary point may now be considered. Article 226(2) of the Constitution of India provides that--

'(2) The power conferred by Clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories.'

There can, therefore, be no controversy that if a cause of action either wholly or partly arises within the jurisdiction of this Court, the present writ application will be maintainable. 'Cause of action' means every fact which, if traversed, has to be proved by the plaintiff in order to support his right to the judgment of the Court. It is to be seen if any part of the cause of action arises within the jurisdiction of this Court.

This application seeks to quash, inter alia, the demand notices Annexures 6 and 6-a dated 10-1-73 and 13-2-73 respectively and also Annexures 8, 8-a and 11 which are respectively the appellate and revisional orders by which claim for refund of excess customs duty paid has been rejected. Such excess customs duty is refundable to the petitioner No. 1 who paid it under a misconception and when the excess customs duty is not refunded it becomes an amount payable and, in case of dispute, converts the parties, i.e., the Customs authorities and the petitioner into debtor and creditor. By operation of the rule 'the debtor must find his creditor', whereas in this case, there is no place appointed for repayment, the obligation of the debtor to pay the creditor involves the further obligation of finding the creditor so as to pay him. The creditor's known place of residence would be the place at which payment has to be made. The registered office of the petitioner No. 1 being at Bhubane-shwar, he may be deemed to reside there where refund of the excess customs duty is to be made. Thus a part of the cause of action arises within the local limits of jurisdiction of this Court. The disputed demand notices (Annexures 6 and 6-A) were served on petitioner No. 1 at Bhu-baneshwar and the appellate orders (Annexures 8 and 8-a) and also the re-visional order (Annexure 11) were also communicated to the petitioner No. 1 there. Communication of appellate orders was a statutory requirement of Section 131 of the 'Customs Act, 1962. It prescribes a period of six months for making an application in revision to the Central Government from the date of communication to the applicant of the order against which the revision application is being made, that is, from the date of communication of the appellate orders, that is, Annexures 8 and 8-a. The appellate and revisional orders, therefore, become effective and binding on the petitioner No. 1 with effect from the date of their communication to it at its head office at Bhubaneswar and furnishes a further cause of action again within the local limits of jurisdiction of this Court. For these reasons we are of opinion that there is no merit in the preliminary point.

12. We will now proceed to the main controversy. The petitioners classify the machineries and equipments before-mentioned in para 4 above as 'mining machineries' for the purpose of tariff classification under Item 72 (18) of the Indian Customs Tariff and claim certain exemptions of customs duty on the basis of M. F. (D. R.) Notification Customs No. 117/65 dated 20-8-65. These are used for the purpose of recovery of iron ore from ore lumps and boulders by crushing, sizing and washing impurities therefrom and in the manner indicated in the flow sheet attached to the writ application (Annexure 15), and according to the petitioners, all processes incidental to such recovery of iron ores are mining operations. The respondents deny this claim and assert that those were duly assessed for customs duty, under Item 72A of the Indian Customs Tariff, during different periods. According to them, 'mining' means excavation or digging made in the earth for the purpose of extracting metal ores and such machineries which are used in this process of digging a hole in the earth's surface and excavating material from below the surface of the earth would be, in a proper sense, mining machineries. As the machineries in question do not play any part in this operation of the mines but relate to all activities above the surface commencing from pit mouth, those would not come within the purview of the expression 'mining machinery' for tariff classification.

13. Item 72 (18) of the I.C.T. is a provision in a taxation statute. Generally speaking, a writ court not exercising appellate jurisdiction would be slow to interfere with classification of entries in a taxation statute which is primarily the function of the officers who are entrusted with this duty. Interference would be called for only when the finding of the statutory authority is patently and obviously erroneous, or when conclusions arrived at are totally unreasonable, or the decision is based on erroneous construction of the entry concerned or conclusions have been arrived at on the basis of irrelevant facts .and irrelevant considerations or in ignoring relevant facts and relevant materials available on record. There are a number of Supreme Court decisions on this aspect of the matter and we would rest content by referring to only three of them. One of them is the case of Union of India v. Tata Iron and Steel Co. Ltd., AIR 1975' SC 769, where it has been observed as follows (at p. 772) :--

'It is not for the High Court nor for the Supreme Court to come to a conclusion on facts as to whether the product can truly come under the description of sklep. That undoubtedly would require some evidence to be taken at the level of the taxing authority provided, however, there is an identifiable, uniform and determinate test by which ekelp can be properly distinguished from strip. A particular type of strip may according to certain definition be skelp and according to others not skelp. This, however, cannot be permitted in a fiscal legislation which by all standards should adopt a clear definition of an excisable item which is incapable of giving rise to a confounding controversy unless the matter is beyond doubt in view of the popular meaning or meaning ascribed to the term in commercial parlance. In absence of any clear criterion to determine what is skelp and not strip, no useful purpose would be served by even remanding the matter to the Excise authorities for a decision after taking necessary evidence.

It is only when taxing law provides for a clear and unequivocal test for determination as to whether a particular product would fall under strip or skelp, it may be possible for the authorities to address itself to the evidence submitted by the parties in order to come to a decision on the basis of the test. This is, however, not possible when there is no identifiable standard. The best way is to define the product for the purpose of excise duty in appropriate terms demarcating clearly the distinction between the two terms.

The absence of any identifiable standard would naturally give rise to the scope for arbitrary assessment at the hands of different authorities. Since the duties on strip and skelp are not the same, it is absolutely necessary to define the word skelp so that there can be no doubt or confusion in the mind either of the taxing authority or of the tax payer with regard to the tax liability qua skelp as opposed to strip.'

The second one is the case of Union of India v. Security & Finance (P.) Ltd., AIR 1975 SC 2288, where their Lordships have said (at p. 2289):--

'It is primarily for the Import Control Authority to determine the head of entry under which any particular commodity falls. Of course, if a construction adopted by the authority regarding the concerned entry were perverse, or grossly irrational, then the court could and would undoubtedly interfere.'

The third one is the case of Dunlop India Ltd. v. Union of India, AIR 1977 SC 597, where their Lordships have pointed out (at p. 607) :--

'It is not for the Supreme Court to determine for itself under Article 136 of the Constitution under which item a particular article falls. It is best left to the authorities entrusted with the subject. But where the very basis of the reason for including the article under a residuary head in order to charge higher duty is foreign to a proper determination of this kind, the court will be loath to say that it will not interfere.'

14. In the perspective of the aforesaid principles, the expression 'mining machinery' in Item 72 (18) of the First Schedule to the Indian Tariff Act, 1934 is to be construed. There is no definition of 'mining' or 'mining machinery' in the Indian Tariff Act, 1934. 'Mining machinery' would be machinery which is used for the purpose of working the mine. But the word 'mine' which has not been defined is not a definite term and is one susceptible of limitation or expansion according to the intention with which it is used. The original or primary meaning of the word is an underground excavation made for the purpose of getting minerals. In particular contexts, however, the word has been given a number of differing secondary meanings. (See Halsbury's Laws of England, Third Edition, Volume 26, page 317). For instance, an open mine is one when it has been devoted by a person lawfully entitled to do so for the purpose of making a profit by the working and sale of the minerals therein. Whether a mine is open or not is a question of intention and the intention may be evidenced in various ways. If the mine has been worked and the produce sold, it is clear that it is open even if no profits have been made. Thus, mining in a broad and enlarged sense would include, apart from excavation operations, operations of removing the minerals and disposing of them commercially. Thus, when mining operations are carried on in a broad sense, all types of machineries needed for those operations would be mining machineries. Again, 'mine' and 'minerals' are related expressions. As already said, the primary meaning of 'mine' standing alone js an underground excavation made for the purpose of getting minerals. 'Minerals' on the other hand means primarily all substances which may be got for manufacturing or mercantile purposes. The term 'ore' has a definite signification and in its usual acceptance it designates the compound of metal and some other substance. Therefore, to obtain iron in mineral form for marketable purposes, mining operation would include, crushing and washing of ores etc. besides excavating crude ore from the bowels of the earth. In the absence of any identifiable and determinate test, as held by the Supreme Court in the case of Commissioner of Sales Tax, Madhya Pradesh Indore v. Jaswant Singh Charan Singh, (1967) 19 STC 469 : (AIR 1967 SC 1454), it is the settled rule that while interpreting items in taxing statutes, terms which have not been defined in those statutes, resort should be had not to the scientific or technical meaning of such terms but to their popular meaning or the meaning attached to them by those dealing in them, that is to say, to their commercial sense. In other words, if a statute contains language which is capable of being construed in a popular sense, such statute is not to be construed according to the strict or technical meaning of the language contained in it, but is to be construed in its popular sense which means, sense which people conversant with the subject-matter with which the statute is dealing would attribute to it. If a word in its popular sense and read in an ordinary way is capable of two constructions, it is wise to adopt the construction of the word as fits in with the matter of the statute.

The next step is to ascertain the meaning of the word 'mining' in the popular or commercial sense. Evidence has been led by the petitioners of what people in mining world or commercial world understand by 'mining machinery' in connection with the business of recovering, selling and exporting commercial grade iron ore from an iron ore mine, as in the present case. There is no contrary evidence, however, adduced by the respondents. Annexure 10 is a letter from the Director of Central Mining Research Station, Council of Scientific and Industrial Research, Dhanbad (Bihar), India dated, 18th July, 1974 addressed, to the Chairman of the Orissa Mining Corporation Ltd. The Director has categorically stated:--

'...... The installations of the machinery/equipment which have been mentioned by you in your above letter and which are shown in the flow sheet enclosed along with the letter are taken as part and parcel of mining operations, as you described. Under the conditions stated above they are to be regarded as falling under the category of mining machinery, which is your contention.'

Annexure 10-a is an affidavit by one Shri Dev Raj Bharadwaj, a Mining Expert. He is a first class certified mining engineer and has been serving as Adviser/Consultant under the National Industrial Development Corporation, a Government of India Undertaking, for the last four years. He has scrutinised the two contracts of the petitioner company as was registered with Calcutta Customs authorities under No. S 37C (G) Proj-3/ 66A and No. S 37C (G)-Proj 2/69A as well as covering Import Trade Control Licence and invoices. In his opinion all machineries and equipments imported for the said Daitari Iron Ore Project have been correctly termed as mining machineries. According to him, the mining operations in respect of iron ore include all the processes starting from dislodging the ore lumps and boulders from the bowel of earth, crushing, screening, washing, grading and finally conveying and stocking for commercial delivery and, therefore, machineries and equipments required for the aforesaid operation are technically known as mining machineries. The major commercial use of iron ore is for manufacture of steel. For that purpose the minimum size of ores should be 1/4' having a minimum of 58 per cent iron content, and for recovery of such commercial grade iron ore whatever processes are undertaken are commercially known as mining processes. Machineries and equipments required for reducing the ore to its commercial size would come within the purview of such mining processes. Thus, the commercial sense of mining operations is much wider than the restricted meaning of 'mining' confined to digging of mineral ores from underneath the surface. Necessarily, therefore, all types of machineries in question which are used by the petitioner company would come within the purview of Entry 72 (18). The Ministry of Commerce, Government of India, have also construed 'mining machinery' in the same way as is usually understood in the commercial circle by people who usually deal in mining operations. Reference in this connection may be made to Appendix 73 of Import Trade Control Policy, Volume I at page 334. This Appendix is headed 'Import of spare parts of mining machinery'. It will appear therefrom that ore handling and processing equipment, load stations, screening plants, crushing plants etc. have been treated as 'mining machineries'. Some of the equipments for this purpose may have utility for purposes other than mining in its broad sense, but eo long as they are used for mining operations they would constitute 'mining machineries'.

In Mines Act, 1952 'mine' has been defined in Section 2(j) thereof. The definition embraces the broad meaning of 'mine' and not the restricted one. It means any excavation where any operation for the purpose of searching for or obtaining minerals has been or is being carried on, and includes 10 other operations enumerated therein to carry out which all the machineries in question would have their full use. If the expression 'mining' is understood in its extended sense as the definition of the word 'mine' carries, the machineries in question would be mining machineries. Of course, while construing the Entry 72 (1-8), adoption of the definition of 'mine' from the Mines Act is not permitted, as that definition is not made part of the Indian Tariff Act by Incorporation. Though one cannot bodily refer to the definition of 'mine' in the Mines Act for the purpose of interpreting 'mining machinery' in Item 72 (18) I.C.T., it is the context in which the word 'mine' has been defined and the object and the purpose of the Mines Act and the operation of that definition which may be taken into account in appreciating the sense in which 'mining' or 'mining machinery' is understood by people in mining trade and business. The wider inclusive definition of 'mine' in the Mines Act, 1952 may be taken to have been introduced in. recognition of. the commercial sense of 'mining'.

In view of the aforesaid discussion and the evidence led by the petitioner, 'mining machinery' would bring within its sweep all machineries for the purpose of mining operations in the wider sense than mere digging and excavating ores from underneath surface, as understood in common parlance by people who are usually engaged in mining business. The classification made by the Customs authorities and by the Revisio-nal authority, whose orders are impugned in this writ application, which appears to be one which could not be made by any reasonable interpretation of the provision in Item 72 (18) and runs counter to the normal rules of interpretation of fiscal statutes, construction having been made by ignoring the common parlance theory, is patently and obviously erroneous. The demand notices, Anne-xures 4 and 4-B, also for the self-same reason are unsustainable in law. We, therefore, quash Annexures 4, 4-b, 6, 6-a, 8, 8-a and 11.

15. For the aforesaid reasons, payment of excess duty under Item 72A has been made under misconception of the legal requirements. The petitioners cannot be debarred by any rule of estoppel from demanding refund of the excess duty paid erroneously under Item 72A. The Revisional authority has rightly refused to apply the principle of estoppel against the petitioners and to that extent has expressly disagreed with the Customs Appellate Authority. Since an excess amount of duty has been paid, the petitioners are entitled to get refund of the same. As it is not feasible for us to make mathematical computation to work out the actual amount of duty paid in excess, we would direct the Collector of Customs, respondent No. 4, to ascertain the amount of duty paid in excess on the basis that the petitioner company is liable to duty under Item 72 (18) I.C.T. and give a refund of the excess amount so determined by him. The petitioners shall be entitled to costs which is assessed at Rs. 200.

The writ application is, accordingly, allowed with costs.

Mohanti, J.

I agree.

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