S.S. Chadha, J.
1. This petition under Article 226 of the Constitution of India seeks a writ of certiorari quashing the tariff advice No. 35 of 1972 relating to Beta Naphthol issued by the Central Board of Excise and Customs and further to restrain the respondents from levying any countervailing duty on Beta Naphthol imported by the petitioner under item No. 14D of the First Schedule to the Central Excises and Salt Act, 1944 read with the provisions of Section 2A of the Indian Tariff Act, 1934. The petitioner further seeks a writ of mandamus directing the respondents to refund a sum of Rs. 58,233.50 paid under protest as countervailing duty.
2. The petitioner is a Company carrying on business, inter alia, as manufacturers of paints, caustic soda, chlorine, plastics, Chemicals including rubber Chemicals at its factory at Rishra in the State of West Bengal. For the manufacture of the said rubber Chemicals the petitioner, inter alia, uses as intermediate raw material known as Beta Naphthol. Beta Naphthol is a coal tar derivative. It is not manufactured in India in sufficient quantity and the same is required to be imported into India from abroad. From April, 1971, the Government of India decided to canalise the import of Beta Naphthol through a public sector agency, namely, State Trading Corporation of India Ltd. The import licensing policy has laid down a procedure by which actual users such as the petitioner place release order issued by the Import Trade Control Authorities with the State Trading Corporation of India Ltd. for the import of Beta Naphthol. A consignment containing 50 tonnes of Beta Naphthol which had been shipped to India from Poland on board the vessel known as the s.s. 'Pulkownik Dubek' was allowed to the petitioner. The petitioner paid the purchase price amounting to Rs. 1,70,000 to the State Trading Corporation and the consignment thereafter became the property of the petitioner. The petitioner was responsible for the clearance of the same, though the necessary documents thereforee were signed by State Trading Corporation. For the clearance of the said consignment, the bill of entry dated February 23, 1973 was filed. The Customs Authorities of the Government of India in Bombay assessed the said consignment for the purpose of custom duty under item 28(41) of the Indian Custom Tariff and in pursuance of the impugned tariff advice (additional countervailing duty equal to that livable under item 14D of the Central Excise Tariff in view of the fact that the product does find use, though restricted, in dyeing processes), also purported to impose countervailing duty on the said consignment under item 14D of the Central Excise Tariff amounting to Rs. 58,233.50. The decisions of the Customs Authorities were taken on or about March 7, 1973. The petitioner paid the countervailing duty under protest. The petitioner then filed the present writ petition on May 24, 1973. Rule Nisi was issued. As an interim relief, the petitioner was granted stay of recovery of the countervailing duty on Beta Naphthol provided the petitioner furnished bank guarantee to the satisfaction of the Assessing Office concerned. The subsequent consignments of Beta Naphthol have been cleared by the petitioner on furnishing bank guarantees for the amount of the countervailing duty on Beta Naphthol.
3. At the relevant time and before, an item in the Schedule to the Indian Tariff Act, 1934, bearing No. 30(1) had been in force reading as follows :-
'30(1) Dyes derived from coal tar, and coal tar derivatives used in any dyeing process, all sorts, not otherwise specified :-
(a) Vat dyes (paste)
(b) Coupling dyes of the Naphthol groups
(ii) fast colour bases
(iii) bases other than at (ii) above.
There was also in force at the relevant time an item in the Schedule to the Indian Tariff Act, 1934 bearing No. 28 which read as follows :-
'28. Chemicals, drugs and medicines, all sorts not otherwise specified.'
4. Under Section 2A of the Indian Tariff Act, 1934, any article which is imported into India is liable to additional Customs duty (countervailing duty) equal to the excise duty for the time being livable on a like article if produced or manufactured in India. At the relevant time, an item in the tariff to the Central Excise and Salt Act, 1944, bearing No. 14D read as follows :-
'14D. Synthetic Organic Dyestuffs (including Pigment dyestuffs) and Synthetic Organic Derivatives used in any dyeing process.'
5. Before the impugned tariff advice No. 35 of 1972, Beta Naphthol was ruled to fall under item 30(1)(c) of the Indian Customs Tariff which covers dyes derived from coal tar and coal tar derivatives used in any dyeing process, all sorts, not otherwise specified. This is also clear from the report of the Tariff Commission on the Review of Protection of Dyestuff Industry published in 1963. The report shows that Beta Naphthol was then mainly used as intermediate for the manufacture of B.O.N. Acid and some are dyes and pigment colours; that in addition, Beta Naphthol served as a starting material for various other intermediates such as Tobias Acid, Phenyl-J-Acid, Rheduline Acid, J-Acid, Urea Crosein acid, Gama Acid and G-Salt, when the schemes for manufacture of these intermediates (which are now under various stages of implementation) materials and that in view of that, Beta Naphthol has become a misfit under the category of 'others'. The stand of the petitioner in the writ petition is also that the said item No. 14D only applies either to a synthetic organic dye-stuff or a synthetic organic derivative used in a dyeing process and that Beta Naphthol is neither synthetic organic or is the same used in the dyeing process. There is substance in this submission of Prof. Ved Vyas, the learned counsel for the petitioner for the reasons detailed below.
6. It is the admitted case disclosed in the supplementary affidavit of Shri A. Bordia, Under Secretary in the Ministry of Finance that the importers of Beta Naphthol including the petitioner had always been paying customs duty on the import of Beta Naphthol under item No. 30(1)(c) of the Indian Tariff Act prior to May 24, 1972. Beta Naphthol was ruled to fall under item 30(1)(c) of the Indian Customs Tariff which covered dyes derived from coal tar, and coal tar derivatives used in any dyeing process, all sorts, not otherwise specified. Even under the impugned tariff advice No. 35 of 1972, there is an implied admission that the dyeing technology has changed considerably during the past 30 years and the use of Beta Naphthol is mainly as an intermediate for the manufacture of other dyes, rubber Chemicals etc. and as such its classification under item 28 I.C.T. as a Chemical. Thus, even the Central Board of Excise and Customs has acknowledged that Beta Naphthol is now mainly used as an intermediate for the manufacture of dyestuff, rubber Chemicals etc.
7. The statement in the impugned tariff advice the Beta Naphthol continues to have a restricted use in the dyeing process, even if correct, shows that Beta Naphthol is not generally, substantially, or primarily used in the dyeing process. It is not permissible for the purpose of classification to take into account isolated or specialised uses and the goods are required to be classified according to their general or substantial use. The petitioner has placed on record trace notice No. 61 relating to the classification of Aniline Oil for the purpose of CE tariff. A decision is taken that Aniline Oil which is being used substantially by industries for purposes other than dyeing in textile industry should be treated as a 'Chemical' falling outside the purview of item 14D of the Central Excise Tariff. The countervailing duty on Aniline Oil is not being levied and is admitted by the respondents in the counter-affidavit. They have also placed on record a letter from Central Board of Excise and Customs dated May 15, 1972 issued to all authorities. This also contains an admission that Aniline Oil is being used substantially by industries for purposes other than dyeing in textile industry and that Aniline Oil is appropriately assessable under item No. 28 of the Indian Customs Tariff and that accordingly, for purposes of levy of excise duty also it has been decided to treat Aniline Oil as a Chemical falling outside the purview of item No. 14D of the Central Excise Tariff. The standard applied by the respondents is the substantial use by the industry and there is no justification for the different and contrary standard to be adopted in case of the Beta Naphthol.
8. There is also a clear distinction between a substance used as an intermediate for the manufacture of dyes and a substance used in dying process itself. It is the case of the petitioner that Beta Naphthol is not used in any dyeing process and it could not be classified under the said item 14D. The Indian Tariff (Amendment) Act, 1972 has added entries in the first Schedule to the Indian Tariff Act, 1934. The Legislature has enacted item No. 28(41) as a result of which Beta Naphthol has been classified as a dye intermediate. This clearly establishes that Beta Naphthol is not used in dyeing process. The classification made by the Legislature of Beta Naphthol being dye intermediates is binding upon the respondents. It is significant to note that in the affidavit dated August 5, 1977 filed by Shri A. Bordia, Under Secretary, Ministry of Finance, it is stated that Beta Naphthol is used and is also capable of being used as dyeing process 'but at the present moment it is more predominently used as dye-intermediate of coal tar.' This admission is significant and binding on the respondents. The contrary view is clearly vitiated.
9. The question whether Beta Naphthol should be assessable to duty (countervailing) was examined by the 5th Conference of the Collectors of Central Excise held at Bombay on 13th and 14th of March, 1978. 5th Conference referred to above after examining the opinions tendered by various Departments and Experts opined that Beta Naphthol is not in use in dyeing processes and that as of that date the appropriate classification for Beta Naphthol for assessment to duty be under tariff item No. 68. The petitioner moved C.M. 502 of 80 praying for production of certain documents and record of the proceedings preparatory to the decision arrived and the copies of the opinion tendered by various Departments and experts and the recommendation of the 5th conference of the Collectors. I directed the respondents to produce the record at the time of hearing of the writ petition and also afford an inspection to the counsel for the petitioner on March 26, 1980. On a request of the counsel for the respondents, time for inspection was extended on or before April 14, 1980. Neither the inspection of the record has been allowed nor records have been produced for the perusal of the Court. The supplementary affidavit contains an admission that Beta Naphthol from July 22, 1978 when the public notice incorporating the recommendation of the 5th Conference of Collectors of Central Excise as accepted by the Central Board of Excise & Customs was issued, was assessable under the Tariff item No. 68 of the Central Excise Tariff and thereforee, as from the said date in so far as the levy of countervailing duty was concerned, the same had to be levied at the same rate at which the duty was livable for Beta Naphthol manufactured or if manufactured in India under item 68 of the Central Excise Tariff. The affidavit further says that the letter dated July 22, 1978 which brought a change only from the said date, does not further the case of the petitioner in so far as the levy of countervailing duty for Beta Naphthol imported prior to 1978 was concerned.
10. An adverse inference has to be drawn against the respondent for not allowing the inspection of the proceedings of the 5th Conference of Collectors of Central Excise and also not producing the same for the perusal of the Court. The records, if produced, would have shown the justification or otherwise of the levy of the countervailing duty under the said item 14D for the period between May 24, 1972 and July 22, 1978.
11. An inference has to be drawn against the respondents that the records, if produced, would have gone against the case set up by the respondents in the counter-affidavit.
12. For the above reasons, the impugned levy of the countervailing duty under item 14D of the Central Excise Tariff amounting to Rs. 58,233.50 levied on the consignment of bill of entry dated April 23, 1973 is held as illegal. I would not have interfered in the proceedings under Article 226 of the Constitution of India if the conclusion reached by the authorities under the said Act had adopted any reasonable view in interpreting the entries. The view of the respondents is wholly perverse and against their own interpretations and stand as pointed above.
13. The writ petition is allowed. The subsequent consignments have been cleared by giving bank guarantees for the countervailing duty on Beta Naphthol and the relief to the petitioner can be granted by directing the Assessing Officers to release those bank guarantees. So far as the relief for the refund is concerned, the petitioner should move an application with the Competent Authority within one month for the refund of the illegal recovery of the countervailing duty and the respondents will make the refund thereafter by disposing of the application within six months. I make no orders as to costs.