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Calcutta Chemical Co. Ltd. Vs. the Assistant Collector of Customs and ors. - Court Judgment

LegalCrystal Citation
CourtKolkata High Court
Decided On
Case NumberCivil Revn. No. 1898 of 1955
Reported inAIR1958Cal694
ActsConstitution of India - Article 226; ;Customs Act, 1878 - Section 189
AppellantCalcutta Chemical Co. Ltd.
RespondentThe Assistant Collector of Customs and ors.
Appellant AdvocateR. Chaudhuri and ;Sachindra Sen, Advs.
Respondent AdvocateP.K. Ray and ;Amiya Kumar Mukherjee, Advs.
Cases ReferredGeneral v. Brown
- the import trade controller, a license for the purpose of importing divers chemicals including wood-naptha. in fact, the said license is in renewal of an earlier license dated 7-12-1950. it appears that sometime in january 1951 an order was placedwith messrs. bayer and company of germany, a famous manufacturer of chemicals, for a quantity of wood-naptha. the correspondence makes it clear that what was indented was wood-naptha, 'to be used as a solvent under the trade name 'calsol' (solvent) which was the factory name of wood naptha used by the petitioner company. it is against this order that 7 drums of wood naptha, were imported from germany per s. s. 'ceram' and forwhich customs duty had already been paid. it was found that there had been a short levy. a demand was therefore made.....

Sinha, J.

1. The petitioner before me is Messrs. Calcutta Chemical Company Ltd, which as its name signifies, is a public limited company carrying on business as manufacturer of chemical and pharmaceutical products. It is stated in the petition that for over 30 years the petitioner has been using Wood-Naptha as a chemical solvent in connection with the petitioner's business of manufacture of chemicals and pharmaceutical products. On the 25-5-1951 the petitioner was granted by the Import Trade Controller, a license for the purpose of importing divers chemicals including Wood-Naptha. In fact, the said license is in renewal of an earlier license dated 7-12-1950. It appears that sometime in January 1951 an order was placedwith Messrs. Bayer and Company of Germany, a famous manufacturer of chemicals, for a quantity of Wood-Naptha. The correspondence makes it clear that what was indented was Wood-Naptha, 'to be used as a solvent under the trade name 'Calsol' (solvent) which was the factory name of Wood Naptha used by the petitioner company. It is against this order that 7 drums of Wood Naptha, were imported from Germany per S. S. 'Ceram' and forwhich customs duty had already been paid. It was found that there had been a short levy. A demand was therefore made under Section 39 of the Sea Customs Act 1878 for the deficiency amounting to Rs. 48457/3/- which should be paid within 15 days from the receipt of the notice. The petitioner company thereupon made an objection on 21-1-1952 maintaining that the imported goods being a solvent used in industrial and research purposes and unfit for human consumption had been correctly assessed at 37.8 per cent, at the time of clearance. It was alleged that there was no short levy. On 5-2-1952 another communication was received from the Assistant Collector stating that on chemical test of samples drawn from the consignment of 'Calsol' (solvent) valued at Rs. 1229/- C. I. F. Imported per S. S Ceram from Germany, it appeared that the article in question was Methyl-Alcohol which was correctly assessable to duty under item 22 (4) (b) Indian Customs Tariff, at the rate of Rs. 95/10/-per I. G. whereas the petitioner, company had declared the same as a chemical, with the result that the article had been assessed under item 28 of the Tariff Schedule, at the rate of 37.8 per cent, ad valorem. The petitioner was called upon to pay the deficiency and also to show cause why a penalty should not be imposed under Section 167(8) of me Sea Customs Act for misdeclaration of goods. Cause was again shown. The petitioner again took the objection that the article in question was impure Methyl-Alcohol absolutely unfit for human consumption and as such was not assessable to duty under item 22(4) (b) of the Indian Tariff Schedule. The petitioner company offered to have the drums, except one denatured by a suitable chemical. On 9-4-1952 the Assistant Collector intimated to the petitioner that penal action under Section 167(37) of the Sea Customs Act has been waived as a special case but the extra duty of Rs. 48,457/3/- must be paid within a fortnight. It was pointed out that if the petitioner company felt aggrieved, it may prefer an appeal to the Collector after depositing the extra duty. An appeal was preferred but it is stated that it was preferred after the time provided for under the Sea Customs Act. I shall refer to this aspect later on. In or about 14-8-1952 an intimation was given to the petitioner that it was not permissible to denature the goods after they have left the Custom's custody but as a special case the authorities were agreeable to have the goods denatured after a test was made to show as to whether the goods were the same. To this the answer was that three drums had already been used up and the remaining four drums could be tested. Samples were drawn from the remaining four drums. However, until November 1952 the result of the test was not communicated to the petitioner. On 23-12-1953 the Assistant Collector of Appraisement wrote to the petitioner's lawyer that the samples tested show that the four drums contained impure Methyl-Alcohol and so it was not possible to denature the same by acetone. However, the question of denaturalisation, it was stated, had been referred to the Board. The appeal was decided on 6-5-1954. The Collector of Customs held that, the decision of the Assistant Collector was dated 9-4-1952 but the appeal was received on 30-7-1952 after the expiry of the prescribed time limit. It was also pointed out that under the provisions of Section 189 of the Sea Customs Act, the entire duty that had been assessed had to be deposited before an appeal could be heard, but no such deposit had been made. On these two grounds the appeal was dismissed. I must mention here that in their petition of appeal, the petitioner company, inter alia, stated that the value of the goods imported was only Rs. 1229/- and it was very hard for the petitioner to deposit the large amount of Rs. 48,457/3/- immediately before the hearing of the appeal and requested that the payment may be waived as a special case. Against the order of the Collector of Customs, a revision petition was made to the Government of India but by its order dated 22-3-1953 the Government of India declined to interfere.

2. This Rule was issued on 14-6-1955 calling upon the opposite parties to show cause why a Writ in the nature of Certiorari should not issue quashing and/or setting aside the decision or order to levy extra or additional duty complained of in the petition, and/or why a Writ in the nature of Mandamus should not issue directing the opposite parties to forbear from giving effect to the said decision and for other reliefs.

3. The first point that is taken by the respondent is in the nature of a preliminary objections namely, that the petitioner had an alternative remedy but it did not avail itself of it and therefore this application is incompetent. It is not accurate to say that the petitioner company did not avail itself of the alternative remedy. It did avail itself of the alternative remedy but the appeal was dismissed on two grounds, namely, limitation and failure to deposit the entire sum demanded under Section 189 of the Sea Customs Act. Under that section, where a decision or order appealed against relates to any duty or penalty, then pending the appeal, the appellant must deposit in the hands of the Customs Collector the whole amount demanded from him. Now if the matter was dismissed only on the ground that there was an alternative remedy but the petitioner had allowed it to become barred, that would be another matter. But in this matter, whether it was barred by limitation or not, an appeal could only have been filed after depositing the entire amount. It will be remembered that the value of the goods was in the neighbourhood of Rs. 1000/- whereas the amount of duty demanded was in the neighbourhood of half a lac of rupees, and the petitioner company made it clear in their petition of appeal that it was not in a position to make the deposit. In my opinion, the alternative remedy was not adequate, as has been laid down in the case of State of U. P. v. Mohammad Nooh, (1958) SCA 73: (AIR 1958 SC 86) (A). It was held there that where a person has to put in the entire amount as a condition precedent for filing an appeal, or for maintaining it, an appeal cannot be said to be an adequate alternative remedy. In view of this I do not go into the disputed question as to whether an appeal was filed in time or not. As I have mentioned above, even if the appeal was filed in time, it was bound to be thrown out on the ground of the absence of the required deposit under Section 189.

4. The whole point to be determined therefore is as to whether the goods in question fall under item 22(4)(b) of the Indian Tariff Schedule under which it has been assessed. According to the petitioner, the correct item is item 28 under which it was first assessed and which the respondents describe as a provisional assessment. Item 22(4) appears in section IV of the Tariff Schedule which is entitled 'Products of the food-preparing industries; beverages, alcoholic liquors and vinegars; tobaco.' Item 28 is in section VI which deals with chemical and pharmaceutical products etc. I think it would be convenient to set out the two items side by side.

22(4).Spirits (other than denatured spirit) --28.Chemicals Drues and Medicines, all sorts not otherwiseSpecified.

(a) Brandy, gin, whisky and other sorts of spirits not Otherwisespecified, including wines containing more than 42 per cent, of proof spirit.

(b)Liquors, cordials, mixtures and Other preparations containingspirit not otherwise specified --

(i)entered in such a manner as to indicate that the strength isnot to be tested. (ii)not so entered.

5. Under item 22(4), the rate is Rs. 95/10/- per imperial gallon. Under item 28, as it had been first valued, the rate is 37.8 per cent, ad valorem. The question is whether the authorities are correct in trying to appraise the goods under item 22(4)(b) of the Tariff Schedule. The first question that arises is as to whether the assessment having been madeby the Customs Authorities, this Court ought, to interfere. The authorities, acting as they did, were primarily an administrative body, but in so far as sought to revise the assessment or impose penalty for an alleged 'misdeclaration, after giving the petitioner an opportunity of being heard, they performed their functions as a quasi-judicial body. This has now been decided by the Supreme Court and the position is not disputed before me. If the respondents acted as a quasi-judicial body, then they are subject to this Court's supervisory jurisdiction, Since it is an action by a quasi-judicial body of administrative nature, the Court will not easily interfere, because it must be presumed that the officials, who perform their duties in connection with appraisement or assessment of revenue are experts on the subject, or in any event so familiar with it, that interference by the Court may prove to be undesirable. On the other hand, there cannot be a total immunity from interference. It is not open to an administrative tribunal exercising quasi-judicial functions to perform its duties and functions in an arbitrary way. Where there are disputed questions of fact, which this Court cannot conveniently determine, the Court will refuse to interfere. But if there is an attempt to assess the duty under a wrong heading, in an arbitrary manner, and if this is clear upon the admitted facts, the Court has ample jurisdiction to interfere. It will therefore have to be seen whether the assessment that has been made in this case is plainly arbitrary, or whether it can be justified, or whether there are such disputed questions of fact as cannot be conveniently determined in this jurisdiction, so that the determination of such a tribunal should be left alone. In my opinion, the respondents, in making the appraisement or assessment have acted under a considerable degree of confusion. As I nave stated above, the license that was issued was for the import of certain chemicals including Wood-Naptha. The petitioner company imported from a Very well-know German Firm of manufacturing chemist, a certain article which has been described as best quality Wood-Naptha, and which has been indented under the description 'Calsol' (solvent) for the professed object of using the same as an industrial solvent. At first it was appraised as Wood Naptha under item 28, that is to say, as a chemical. It has been stated that it was a provisional assessment. But even so, it is clear that according to the provisional assessment, it was possible to treat Wood-Naptha as a chemical. Then there seems to have been a chemical test. In fact, in this case there have been, several chemical tests, and if I may say so, with differing results. In the first official test, it was declared that the sample was not of Wood Naptha but of impure Methyl-Alcohol. As stated above, at a subsequent stage there was a second test in which four samples were taken. The result of the second test was a declaration that all the four samples were absolute Methyl-Alcohol and not denatured. In-spite of this declaration, which by the way is dated 23-9-1952, I find that on 23/12/1952 the Assistant Collector writes to say that the samples tested show that the four drums contained 'impure Methyl Alcohol.' Also in the appellate order we find mention of the fact that the article in question was impure Methyl-Alcohol. I find a further chemical report dated 24-9-1953 although it is not clear how-this came into existence, and here the result is that the sample was found to be of impure Methyl-Alcohol. There is a fourth report by Messrs. M. V. Briggs and Co. Ltd., but this is not an official test and the respondents have refused to take notice of it. The result of this test shows that the sample contained 98.8 per cent. Methyl-Alcohol. I think that there can be very little doubt that the authorities were confused as to the real position. The affidavit in opposition filed by M. A. Rangaswami on 9-2-1956 annexure 'Q' is supposed to be the specification for Wood Naptha (impure Methyl Alcohol)-It is stated that as the goods in question did not come up to the specification mentioned therein, it was not treated as Wood-Naptha. In this affidavit again there seems to be considerable confusion, because at one place the goods are described as 'impure Methyl Alcohol' and in another place it is said that the goods are 'Methyl Alcohol and not Wood-Naptha. The specifications that have been referred to are really borrowed from certain notifications which have been issued and are contained in a supplement to the Indian See Customs Manual. It is not quite clear whether the particular rule therein which has been brought to my attention is a rule framed under some Act or not, but nevertheless it clearly shows that the specification referred to in annexure 'Q', is a specification for Wood Naptha when it would be considered as denatured spirit. In other words, Wood-Naptha, in order to be considered as denatured spirit will have to be of that specification. It is nobody's case here that the article in question was denatured spirit. Hence the question of being in terms of the specification set out in annexure ' Q' does not arise at all. Certain authorities were placed before me, and having gone into the matter, I think that the position is as follows : There is a kind of alcohol known as the alkyl-group, consisting of many well-known forms of alcohol, e.g., Methyl-Alcohol, Ethyl-Alcohol, Propyl Alcohol and Iso-propyl Alcohol. These, under the Tariff Schedule are considered as spirits. Besides these, there are Butyl Alcohol, Amyl Alcohol and other kinds of Alcohol with which we are not concerned. As a matter of fact, it will be sufficient to consider two main items namely Methyl and Ethyl-Alcohol. Methyl-Alcohol is obtained by the dry distillation of wood at a low temperature. The product is known as wood-spirit. The product of the distillation is a colourless liquid besides which there are other by-products. The crude wood-spirit is called Wood-Naptha, but contains a very small percentage of Methyl-Alcohol. There is a number or other substances, the chief being Acetic acid. This is neutralised with lime and the methyl Alcohol is extracted. Methyl Alcohol has the well-known property of being mixable with water and is used for denaturing other spirits, that is to say, for rendering them unfit for human consumption, that is to say, for the purposes of drinking. Methyl Alcohol is poisonous. As a matter of fact, given internally even 60 minims has caused permanent blindness and one fluid ounce has proved fatal. Methyl Alcohol is used industrially as a solvent. I find the following passage from Holleman's Text-Book of Organic Chemistry :

'On account of the extensive use of alcohol for manufacturing processes, some industries would be paralysed if the necessary spirit were subject to the same excise duty as alcohol intended for consumption. The alcohol used in manufactures in some countries is accordingly made unfit for drinking (denatured or methylated) by the addition of materials which impart to it a nauseous taste, and is sold duty-free. On the Continent of Europe crude wood-spirit is employed for this purpose, and in Great Britain this is supplemented by the addition of a small quantity of paraffin-oil. The sale of denatured alcohol is also permitted in the United States.'

6. While Methyl-Alcohol is a poison, and is only used for the purpose of denaturing spirit and as an industrial solvent, Ethyl Alcohol or ordinary alcohol is a preparation which is used for manufacturing potable alcohol, that is to say, from which drinks and beverages are made. The position therefore is as follows : Wood Naptha is a distillation of wood and in its crude stage contains only a small percentage of Methyl-Alcohol. From this is prepared Mediyl Alcohol of different degrees of purity. In other words, pure Methyl Alcohol may be prepared from impure methyl alcohol containing acetone and other impurities. But in any event, whether it is pure or impure, methyl alcohol is not drinkable or potable and is supposed to be poisonous. In fact, it is used as a denaturing agent itself. In this particular case, we start by having the goods described as Wood-Naptha. As I have pointed out above there is a great deal of difference between the crude wood-naptha and pure methyl alcohol. However, it is clear from the papers before me that the article indented was not crudewood-naptha but one having a high percentage of methyl-alcohol but nevertheless it was not pure methyl alcohol. It is quite true that the respondents have been trying to bring the matter under the specification set out in annexure 'Q' to the affidavit in opposition. But as I have stated above,, that is only a specification of wood-naptha when denatured. Strictly speaking, I do not see on what basis the provisions for denaturing wood-naptha. came into existence, because it is never potable. But assuming that it is a technical specification, the fact, is that no attempt has been made to find out whether the goods in question did answer the specification set out in annexure 'Q' or not. None of the reports of chemical analysis, has attempted to do so. On the basis that the article is impure methyl-alcohol, the question is. whether impure methyl-alcohol can come under item 22 (4) of the Tariff' Schedule. I have already set out above the said item and stated under what heading it finds a place in the Tariff Schedule. It is argued by Mr. Roy appearing on behalf of the respondents that item 22 (4) is a general item and when it speaks about 'Brandy, gin, whisky and other sorts of spirits not otherwise specified' or 'liquors, cordials, mixtures and other preparations containing spirit not other-wise specified,' that would include all kinds of spirits not specified, whether potable or not. He has also drawn iny attention to section 21 of the Sea Customs. Act, which lays down that if there is no: express, provision under which an article can be assessed, then if the goods contain any article which is liable to duty under the Act, then it must be assessed; as if the whole of it was composed of that article and at the highest rate. It is however not the case of the petitioner company that the article did not come under an express heading. According to them, it comes under item 28. The whole point resolves itself into an interpretation of item 22 (4). Are the words so general in import that all kinds of spirits including non-potable spirits are included within the words other sorts of spirit not otherwise specified' or 'other preparations containing spirit not otherwise Specified'? In my opinion, it cannot be read in such a general way As I have pointed out above, item 22 (4) appears under section IV and this section is headed in a particular way confining itself to the products of food-preparing industries, beverages, alcoholic liquors, vinegars and tobacco. Similarly, the other groups are also headed in a particular manner showing the nature of the items contained therein. For example, section II is headed 'Products of the Vegetable Kingdom' and Section I is headed 'Live Animals and Products of the Animal Kingdom' and so on. Coming to section IV, we find well-known items like confectionery, biscuits, vegetable products, chutneys, sausage etc.. Item 22 is 'all sorts of drink not otherwise specified.' 22 (2) is 'ale, beer, porter, cider and other fermented liquors.' Item 22 (3) is 'wines, not containing more than 42 per cent, of proof spirit.' The very next item 22 (4) is 'spirits (other than denatured spirits).' If the items stopped there, then there could have been argued that it includes all kinds of spirits, but 22 (4) (a) and (b) make it abundantly clear that what these items are dealing with are potable spirits, that is to say, beverages and alcoholic liquors which are drinkable by human beings. All the items that are mentioned, namely, Brandy, gin whisky, cordials etc., are potable. If this is so, then plainly the rule of interpretation, namely the rule of ejusdem generis comes into play. Here we have certain items under a particular section, which does not indicate that it deals with things generally. Coming to the wordings of the items itself, we find that the general words are preceded by a series of specified spirits which are all potable. Under the circumstances I must hold that whatever comes under 22 (4) (a) or (b), must be potable spirit. It is unnecessary to multiply authorities but Mr. Chaudhury appearing on behalf of the petitioner has referred me to an English decision, Attorney-General v. Brown (1920)1 K. B. 773 (B). That was a case under the Customs Consolidation Act 1876. Section 43 of the Act provided that 'The importation of arms, ammunition, gunpowder or any other goods may be prohibited by Proclamation or Order in Council.' In that case a certain quantity of pyrogallic acid which had been imported had been seized. This acid is a well-known constituent of gunpowder and ammunition generally. Nevertheless, it was held that the words 'any other goods,' must be deemed to be restricted to things of the same class as those previously specified, and therefore the seizure was illegal. Let us examine item 22 (4) (b), under which it is said that the matter would fall. The item starts by an enumeration of certain potable spirits, namely, liquors, cordials. Then there is mention of mixtures and other preparations containing spirits. In my opinion, the rule of ejusdem generis should be applied, and the other preparations must be in the nature of liquors and cordials. Both of them are potable drinks. The same result would follow if we apply item 22 (4) (a). The three items mentioned there are all potable drinks, and the 'other sorts of spirits' mentioned therein must relate to similar kind of potable drinks, and not to spirits which are not potable. As a matter of fact, if we come to 22 (5), we again find the mention of potable spirits, drugs and medicines containing spirit which also are capable of being imbibed: Some arguments have been made with regard to the word 'perfumed spirits' but as Mr. Chaudhury assures me that there are in existence potable spirits which may be called 'perfumed spirit.' Coming to 22 (6) we find mention of 'denatured spirit' which of course has been explained above as a well-known form by which potable spirit is rendered impotable. It seems to me that the whole scheme of this part of the tariff schedule is to deal with beverages and alcoholic liquors and also to deal with potable spirits, as with potable spirits which are rendered impotable. If that be the true interpretation of 22 (4), then the respondents have made a mistake in bringing it within this item. The question of course remains as to under what item it should be appraised. It would be sufficient for my purpose to hold that it does not come under item 22 (4). Tt will be the duty of the respondents to find out the proper item under which it should be appraised. I do not see however why it should not come under item 28. Methyl-Alcohol pure or impure is a well-known chemical and in this case has been manufactured by one of the World's best known manufacturing chemists, and it is not alleged that the petitioner company is engaged in manufacturingpotable spirits. However that would be for the respondents to consider.

7. The result is that this Rule must be madeabsolute and the order of the Assistant Collector ofCustoms calling upon the petitioner company topay the deficiency of Rs. 48457/8/- and the appellate orders therefrom must be quashed and/or setaside. There will be a Writ in the nature of Mandamus directing the respondents not to give effectto the said orders. This however will not preventthe respondents from proceeding in accordancewith law. There will be no order as to costs.

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