1. This is an appeal against Order No. C-27/Misc/3/81-Cus. dated 9-12-1981 of the Collector of Customs (Appeals), Madras, in which he has upheld the decision of the Assistant Collector of Customs, Cochin, in his Order No. CDR. 17o/77-Ap(X) dated 17-12-1980, confirming a demand for export duty amounting to Rs. 5,62,500 on 9 consignments of tapioca chips exported by the appellants.
2. The question involved in this appeal is whether at the relevant time the tapioca chips exported by the appellants were liable to export duty as "Animal feed" under Item 21 of the Second Schedule to the Customs Tariff Act, 1975, otherwise referred to as the "Export Tariff Schedule".
3. Appearing before us for the appellants, Shri K.L. Arora stated that in June 1977 a contract for the supply of tapioca chips for industrial use was entered into between the appellants and the foreign buyer in West Germany through the State Trading Corporation of India (STC). In August/September, 1977, 9 consignments of tapioca chips were exported from Cochin under 9 separate shipping bills but by the same vessel. At the time of export samples were drawn from each of the 9 consignments and tested by the customs laboratory at Cochin and they were all reported as not conforming to the Indian Standard Specification for tapioca meant for livestock feed. The goods were declared in each of the 9 shipping bills as 'tapioca chips (for industrial use)", and all these shipping bills were passed without levy of export duty.
Subsequently, a show cause notice dated 9-7-77/3-10-77 was issued to the appellants to show cause why export duty should not be levied on the above consignments. The appellants duly showed cause. In his order dated 17-12-1980, the Assistant Collector confirmed the demand. As already stated, their appeal to the Collector of Customs (Appeals) was also rejected by the order of the latter dated 9-12-81. [It has been stated by the appellants, and not controverted by the Department, that although the order of the Collector (Appeals) was dated 9-12-81, it was received by them only on 15-7-1982, as a result of late despatch of the order. Accordingly they filed an appeal to the Tribunal instead of a revision petition to the Government of India as would otherwise have been the case].
4. Shri Arora referred to a previous Order No. D-49/1983 dated 10-2-1983 passed by the same Bench of the Tribunal in a case of export of tapioca chips by M/s Ramnath & Co. In that order the Tribunal had rejected the appeal of M/s Ramnath & Co., on certain grounds. Shri Arora submitted that the case of the present appellants could be clearly distinguished from that of M/s Ramnath & Co., with reference to those grounds. He also relied on a finding in the order under reference on a question of interpretation of the Export Tariff Schedule. Since this finding has a material bearing on the appeal before us, the relevant paragraph in our previous order is reproduced below '- "For the Department, Shri Chatterjee supported the findings of the Appellate Collector and argued that the Government of India notification dated 18-5-1978 was a clear indication that the tapioca chips were classifiable as "animal feed" under Item 21 of the Export Tariff Schedule and that they were exempt from duty only with effect from 18-5-1978, the date of that notification. As regards this latter argument, it must be observed that unless any goods are liable to duty under the law, they cannot be charged to duty. The Export Tariff Schedule, unlike the Import Tariff Schedule, is selective and not comprehensive. It does not contain a residuary or "not elsewhere specified" item. Therefore goods can be charged to export duty only if they fall within one of the specific entries in the Export Tariff Schedule. The exemption notification dated 18-5-1978 no doubt exempts tapioca chips falling within the category of "animal feed", but if the particular tapioca chips exported by the appellants were not liable to be treated as animal feed at all, as contended by them, the fact that tapioca chips were specifically exempted only from 18-5-1978 would not make any difference, and their tapioca chips should not have been charged to duty even in the absence of the notification. What has to be decided therefore is whether the appellants are right in their contention that the particular tapioca chips exported by them could not be considered as animal feed." 5. Shri Arora cited authorities to show that tapioca chips are not used only as animal feed but have well-established alternative uses. One of these was Webster's New International Dictionary, Volume III, Page 2339, wherein one of the meanings of tapioca has been given as follows :- "A preparation of cassava starch processed into granular, flake, pellet, or flour form and used as a food in bread or as a thickening agent in liquid foods, as puddings, soups, or juices, or industrially as a size or adhesive." Shri Arora further quoted page 2130 of the same Dictionary to show that the word "Size" refers to any of various glutinous materials used for various industrial purposes. He also quoted from the publication "The Wealth of India" wherein the uses of tapioca chips and tapioca waste has been given (page 292 et seq). He pointed out that according to this work tapioca chips and tapioca flour are in demand for production of glues and adhesives, while tapioca waste is used in food for cattle and pigs and as raw materials for the production of adhesives.
6. Shri Arora also referred to the Indian Standard Specifications for tapioca for different uses. He filed copies of the Indian Standard Specification No. IS-1317-1969 relating to "Edible Tapioca Chips", and No. IS-1509-1972 relating to "Tapioca as Livestock Feed". He stated that it had been ascertained that the Indian Standards Institution had not framed any specification for tapioca to be used for industrial purposes.
7. Shri Arora also filed photostat copies of quadruplicates (exporters' copies) of the 9 shipping bills covering the 9 consignments in question. He stated that through courtesy of the learned SDR he had been furnished with the photostat copies of the originals (Customs copies) of the same 9 shipping bills, on each of which there was an endorsement showing that it had been tested by the Customs laboratory and declared as not conforming to the Indian Standard Specification No.IS-1509-1972 for tapioca as livestock feed. Shri Chandramouli furnished the Bench with photostat copies of the original shipping bills. Since the endorsements on the shipping bills relating to chemical test could not be clearly made out Shri Chandramouli filed copies of the test report relating to one such consignment covered by shipping bill No.1485 dated 19-4-77. In this report the goods have been described as "tapioca chips (dry)", and the remarks given are as follows :- "The sample is dry tapioca in the form of lumps and pieces exceeding the thickness of 15 mm specified in IS : 1509/1972 Specification for Tapioca as Livestock feed It does not conform to the IS specification for Tapioca meant for Livestock feeding." As we considered this to be a material point, we asked both Shri Arora and Shri Chandramouli whether each one of the 9 shipping bills contained an endorsement to the effect that the goods did not conform to ISI-1509/1972, and this was confirmed by both of them.
8. As already pointed out it is difficult to read from the photocopies of the 9 original shipping bills the endorsement made regarding chemical test. However, in some of the copies it can be clearly read that "the sample is in the form of lumps and pieces exceeding the thickness of 15 mm specified in 1S-1509/1972 specification for tapioca as livestock feed. It does not conform to the specification of tapioca as livestock feed". All the endorsements, though not equally legible, appear to be to the same effect, and this can also be inferred from the fact that all the 9 shipping bills were passed without payment of export duty. (We have considered it necessary to mention this in some detail because a copy of the test report which was furnished to us by Shri Chandramouli, and which was taken to pertain to one of these consignments, actually seems to pertain to an export made earlier by another exporter and by a different vessel).
9. Shri Arora referred to the letter dated 12-8-77 addressed to the exporters by the State Trading Corporation of India, in which it has been stated as under : - "This is to confirm that the importer in West Germany for the above-mentioned quantity of Tapioca Chips has confirmed that the Tapioca Chips being purchased under the referred contract, are for use as industrial products and not as cattle-feed".
Shri Arora stressed that the exports were being made through the S.T.C.on the basis of a "back-to-back" agreement, and that the statement obtained by the S.T.C. from the foreign buyer could be relied upon as authoritative, and as proving beyond doubt 'that the tapioca chips under consideration were intended for use as industrial products.
10. Shri Arora pointed the following features which distinguished the present case from that of M/s Ramnath & Co., where the levy of duty on tapioca chips as animal feed had been upheld : - (a) The test report which was submitted in that case did not refer to the size of the chips. In the present case there was a clear reference to the size of the chips, which were above 15 mm in thickness and consequently in excess of that permitted by the Indian Standard Specification for Tapioca as Livestock Feed; (b) In that case, the appellants had submitted that tapioca chips could be used for purposes other than as animal feed. They had not however placed before the Tribunal any specifications relating to the alternative uses. In the present case the specifications for edible tapioca chips had been placed before the Bench and it had also been ascertained and submitted that there were no Indian Standard Specifications for tapioca for industrial use ; and (c) In that case no evidence, whether by way of correspondence with the foreign buyers or otherwise, had been submitted to indicate the purpose for which the tapioca chips were proposed to be used. In the present case, there was authoritative evidence to show that the goods were intended to be used for industrial purposes.
11. On behalf of the Department, Shri Chandramouli stated that the appellants had no doubt declared the goods on the shipping bill as for industrial use. The Department did not dispute that these consignments might have been made for industrial use. The Department did not also dispute that tapioca chips could be used for industrial purposes.
According to Shri Chandramouli, however, the expression "animal feed" was comprehensive enough to cover tapioca chips even if not used as animal feed. In this connection Shri Chandramouli cited the judgment of the Bombay High Court in the case of Commissioner of Sales Tax v. M/s.
Aggarwal & Co., reported in 1983 ECR 65D. In this judgment, it has been observed that while interpreting a general term used for describing any commodity in any fiscal legislation, the general term so used covers that commodity in all its forms and varieties. Shri Chandramouli also referred to Explanatory Notes to the CCC Nomenclature at page 160a. In this publication there is a reference to "Other preparations of a kind used in animal feeding", falling within heading No. 23.07 of the CCCN, and different varieties of these preparations have been described. Shri Chandramouli also referred to the McGraw Hill Encyclopaedia of Science and Technology, Volume I, page 457, where reference has been made to the composition of various animal feeds.
12. In conclusion, Shri Ghandramouli stated that he placed reliance on the Tribunal's previous order in the case of M/s Ramnath & Co. and that, following that order, the present appeal should be rejected.
13. We have carefully considered the arguments advanced by both sides, with particular reference to the reasons that guided our decision in the case of M/s Ramnath & Co. We find considerable weight in the arguments advanced by Shri Arora, both with reference to this case by itself and to distinguish it from the case of M/s Ramnath & Co. The salient features of the present case can be summarised as follows :- (a) Standard publications such as Webster's Dictionary, "Wealth of India" and Indian Standard Specifications have been cited to show that tapioca chips have established uses other than as animal feed; (b) Test reports carried out by Customs House laboratories have been cited to show that these very consignments were tested and found not to conform to the I SI specifications for the livestock feed; and (c) There is a definite statement from the foreign buyers that the goods were intended for industrial use.
13a. In the case of M/s Ramnath & Co. we have already held that the mere issue of an exemption notification subsequently, exempting or purporting to exempt tapioca chips from export duty, would not make any difference, if the goods in question could not be considered as animal feed falling under Item 21 of the Export Tariff Schedule. There are judicial authorities to the effect that in order to levy duty under a particular tariff item, the onus is on the Department to show that the goods can be brought within the scope of that item. There is substance in Shri Arora's argument that the show cause notice gave no indication as to the specific grounds on which the goods were held as falling under Item 21 of the Export Tariff Schedule (particularly in the light of the fact that they had earlier been tested and regarded as not covered by that item), and that the Order-in-Original of the Assistant Collector did not also contain any reasoning or justification in this regard, apart from the fact that tapioca chips were specifically exempted subsequently. (We may observe in passing that the reply of the appellants to the show cause notice is dated 7-10-77, the last notice of personal hearing was given in February or March 1979, and the Order-in-original was passed in December 1980, that is, more than one and half years after the date fixed for personal hearing. It could well have been expected that after taking so much time the Assistant Collector would have passed a reasoned order instead of a brief and almost cryptic one as he has done).
14. There is also force in the grounds advanced by Shri Arora to distinguish the present case from that of M/s Ramnath & Co. In that case the test report was by a private organization, although a reputed one, namely M/s General Superintendence of India Ltd. It contained no reference to the size of the chips. It also appears that there was no categorical statement in the analysis certificate that the goods did not conform to the Indian Standard Specification for livestock feed. In contrast, in the present case the test reports are from the Customs laboratory. They mention the thickness of the chips, which is clearly above the maximum laid down in the ISI specifications for Tapioca as Livestock Feed. There is also a categorical statement by the Customs laboratory that the goods did not conform to those specifications.
Again, in the case of M/s Ramnath & Co., the appellants had referred to other alternative uses for tapioca, but did not submit any authorities to show that these were established uses. In contrast, in the present case authorities to this effect have been submitted. Again, whereas in the previous case there was no evidence as to the purpose for which the goods were to be used, in the present case a specific certificate to that effect has been furnished.
15. Summing up the case for the appellants, the position is as follows :- (a) Item 21 of the Export Tariff Schedule covers "Animal feed", and in order to be dutiable under that item it has to be considered whether the particular goods conformed to the specifications or requirements generally recognized for tapioca for use as animal feed; (b) The Custom House test reports clearly showed that the goods did not conform to the Indian Standard Specifications for tapioca for use as animal feed; (c) The fact that there are alternative uses for tapioca chips has been established by reference to authorities; (d) It has been submitted that there are no Indian Standard Specifications for tapioca to be used for industrial purposes, and accordingly there is nothing to show that the tapioca chips were not suitable for use for industrial purposes; and (e) There is evidence that these particular goods were intended for use for industrial purposes. While the use to which a yarticular consignment of goods is put would not be decisive in regard to its classification, it is certainly relevant as an indication of its suitability for one or another purpose. Taken with the other circumstances of the case, this would also indicate that the tapioca chips under consideration could more appropriately be considered as for industrial use than as animal feed.
16. As against the weighty arguments advanced by Shri Arora, we do not find in the arguments advanced on behalf of the Department any substantial justification of the view taken by the lower authorities.
With reference to the judgment of the Bombay High Court cited by Shri Chandramouli, the observations he has relied upon would not effect the present case, because, as we pointed out to Shri Chandramouli, the expression "Animal feed" is not a general description of a particular commodity but refers to goods having a specific utility. If the description had read as "Tapioca chips" Shri Chandramouli would have been justified in arguing that it would cover tapioca chips whatever might be the purpose for which they were to be used. Since, however, it refers to "Animal feed", the expression must be interpreted as covering such tapioca chips as were particularly suited for use as animal feed in contrast to the other established uses of tapioca chips. The reference to the CCCN and the McGraw Hill Encyclopaedia given by Shri Chandramouli do not help the Department's case, because they refer to preparations of a kind used in animal feeding, or to compound animal feeds, and tapioca chips by themselves would obviously not fall under either of these descriptions.
17. In the result, we consider that having regard to the nature and specifications of the particular goods under consideration they could not appropriately be termed as "Animal feed" falling under Item 21 of the Export Tariff Schedule. We accordingly allow this appeal and set aside the demands for export duty confirmed by the Assistant Collector and uphold by the Collector (Appeals).